<PAGE>
As filed with the Securities and Exchange Commission on October 15, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
TULARIK INC.
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 8731 94-3148800
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------
Two Corporate Drive
South San Francisco, California 94080
(650) 825-7000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
David V. Goeddel
Chief Executive Officer
Tularik Inc.
Two Corporate Drive
South San Francisco, California 94080
(650) 825-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Suzanne Sawochka Hooper, Esq. David A. Hahn, Esq.
Stephen N. Rosenfield, Esq. Christopher L. Kaufman, Esq.
Cooley Godward LLP Latham & Watkins
Five Palo Alto Square 701 B Street
3000 El Camino Real Suite 2100
Palo Alto, CA 94306-2155 San Diego, CA 92101
(650) 843-5000 (619) 236-1234
</TABLE>
---------------
Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Maximum Aggregate Amount of
Title of Securities Amount to be Offering Price Offering Registration
to be Registered Registered(1) Per Share(2) Price(2) Fee(3)
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 ................ 7,187,500 $13.00 $93,437,500 $25,976
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 937,500 shares of common stock issuable upon exercise of the
underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933.
---------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated October 15, 1999
PROSPECTUS
6,250,000 Shares
[TULARIK INC. LOGO]
Common Stock
- --------------------------------------------------------------------------------
This is our initial public offering of shares of common stock. We are
offering 6,250,000 shares. No public market currently exists for our
shares. We have applied to list our common stock for quotation on the
Nasdaq National Market under the symbol "TLRK." We expect the initial
public offering price to be between $11.00 and $13.00 per share.
Investing in the shares involves risks. "Risk Factors" begin on page 7.
<TABLE>
<CAPTION>
Per
Share Total
----- -----
<S> <C> <C>
Public Offering Price............................................... $ $
Underwriting Discount............................................... $ $
Proceeds to Tularik................................................. $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 937,500
additional shares of common stock solely to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
Lehman Brothers expects to deliver the shares on or about , 1999.
- --------------------------------------------------------------------------------
Lehman Brothers
Hambrecht & Quist
J.P. Morgan & Co.
Warburg Dillon Read LLC
, 1999
<PAGE>
Inside Front Cover Graphic #1
Title: Regulating Gene Expression
Description: Graphic depicting how pills amplify beneficial or block harmful
gene expression.
Inside Front Cover Graphic #2
Title: Gene Regulating Pathways Provide Multiple Drug Targets
Description: Graphic depicting an example of the complex pathways involved in
gene activation and components inside the cell that could be potential drug
targets.
Inside Gatefold Graphic #1
Title: Diverse Program Portfolio
Description: Graphic showing our program portfolio including cancer, CMV,
diabetes, obesity, inflammation, immune disorders, hypercholesterolemia,
bacterial diseases and orphan nuclear receptors and the status of each program
(e.g., lead optimization, preclinical, phase 1, phase 2.)
Inside Gatefold Graphic #2
Title: Product Pipeline
Description: Graphic of our product pipeline depicting discovery and
development stages, including the hits that are derived from high throughput
screening, the number of early leads, leads undergoing medicinal chemistry and
preclinical and clinical candidates.
Inside Back Cover Graphic
Title: Retain Substantial Commercial Rights
Description: Graphic depicting corporate collaboration partners' logos and
collaboration funding received to date.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Consolidated Financial Data..................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 29
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 53
Related Party Transactions................................................. 65
Principal Stockholders..................................................... 67
Description of Capital Stock............................................... 69
Shares Eligible for Future Sale............................................ 71
Underwriting............................................................... 73
Legal Matters.............................................................. 75
Experts.................................................................... 75
Where You Can Find More Information........................................ 75
Index to Financial Statements ............................................. F-1
</TABLE>
----------------
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is not an offer to sell or a
solicitation of an offer to buy our common stock in any jurisdiction where it
is unlawful. The information contained in this prospectus is accurate only as
of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of common stock. This preliminary prospectus is
subject to completion prior to this offering.
Some of the statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are "forward-looking statements." These forward-looking statements
include, but are not limited to, statements about our plans, objectives,
expectations and intentions and other statements contained in the prospectus
that are not historical facts. When used in this prospectus, the words
"anticipates," "believes," "continue," "could," "estimates," "expects,"
"intends," "may," "plans," "seeks," "should" or "will" or the negative of these
terms or similar expressions are generally intended to identify forward-looking
statements. Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking
statements, including our plans, objectives, expectations and intentions and
other factors discussed under "Risk Factors."
"Tularik" and the Tularik logo are trademarks of Tularik Inc. Other
trademarks and trade names appearing in this prospectus are the property of
their holders.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and notes appearing
elsewhere in this prospectus. Unless otherwise indicated, information in this
prospectus assumes that the underwriters do not exercise their over-allotment
option and assumes the conversion of all of our preferred stock into common
stock upon completion of this offering.
Tularik
Tularik is engaged in the discovery and development of a broad range of novel
and superior orally available drugs based on gene regulation. Building on our
scientific strengths, we intend to become a world-class pharmaceutical company.
Our broad range of programs includes cancer, cytomegalovirus, known as CMV,
diabetes, obesity, inflammation, immune disorders, hypercholesterolemia and
bacterial diseases and a class of targets known as orphan nuclear receptors,
all of which represent large commercial markets. We have diversified our drug
discovery and development efforts not only across a large number of diseases,
but also across multiple promising targets and drug candidates for these
diseases. Our product pipeline includes two cancer drug candidates in clinical
testing, one cancer drug candidate for which an investigational new drug
application, known as an IND, has been filed, one preclinical anti-CMV drug
candidate and 14 early and advanced drug leads in our other programs.
Gene regulation is the selective activation and deactivation of genes within
a cell and is fundamental to the development or progression of most diseases.
Our drug discovery approach, which is based on gene regulation, is amenable to
the discovery of small molecule, orally available drugs. These drugs are well
suited for the treatment of chronic diseases requiring the daily administration
of medications over many years. We also selectively pursue drug candidates with
mechanisms of action other than gene regulation.
Our drug discovery and development expertise includes molecular biology,
biochemistry, structural biology, chemistry, pharmacology and clinical
development. To complement our internal capabilities, we collaborate with
world-renowned scientists and clinicians and with leading pharmaceutical
companies. We believe that our integration of biology, chemistry and
pharmacology enhances our ability to find novel gene regulating drugs and that
our drug discovery and development efforts are highly efficient and productive.
To date, we have:
. identified numerous validated targets and other novel proteins that
regulate the expression of disease-causing genes;
. established more than 80 biochemical and cell-based assays for high
throughput screening, known as HTS;
. conducted more than 15 million drug screens using a library of more than
500,000 distinct compounds and natural products;
. identified seven compounds that are early leads, seven compounds that are
being optimized by chemists, one compound that is in preclinical
development, one anti-cancer drug candidate for which we have filed an
IND application and one anti-cancer drug candidate that is in phase 1
clinical trials; and
. obtained a license for an anti-cancer drug candidate that we expect to
enter phase 2 clinical trials in 2000.
We have commenced or are preparing for clinical trials of three cancer drug
candidates, lometrexol, T138067, which we refer to as T67, and T900607, which
we refer to as T607. Our most advanced drug candidate is a novel antifolate
called lometrexol, which we recently licensed from Eli Lilly. The utility of
antifolates as anti-cancer agents has been proven by methotrexate, an
antifolate drug used extensively in the treatment of several tumor types. We
expect to commence phase 2 trials of lometrexol in 2000. T67 acts on
4
<PAGE>
tubulin, the cellular target for known cancer drugs Taxol and vincristine. In
contrast to these agents, T67 retains its activity against tumor cells that are
multiple drug resistant, or MDR, and is able to cross the blood brain barrier.
To date, 23 patients have been enrolled in phase 1 trials of T67. Pending
successful completion of these phase 1 trials, phase 2 trials of T67 will be
initiated in several tumor types, including brain tumors. T607, an analog of
T67, also targets tubulin and is active against MDR positive tumors. Animal
studies indicate that T607 is distinguished from T67 in that T607 has a reduced
ability to cross the blood-brain barrier, which may make it suitable for the
treatment of different tumor types than T67. We recently filed an IND for T607.
We intend to commercialize drugs independently and through collaborations
with pharmaceutical partners. To assist in the commercialization of some of our
products, and to fund research and development activities, we have established
and will continue to pursue collaborations with selected pharmaceutical and
biotechnology companies. We currently have corporate collaborations in six of
our research programs: with Knoll relating to obesity; with Japan Tobacco, or
JT, relating to orphan nuclear receptors; with Roche Bioscience relating to
inflammation; with JT relating to obesity/diabetes; with Taisho relating to
immune disorders; and with Sumitomo relating to hypercholesterolemia. We have
retained significant rights to independently market products resulting from
most of our programs, including worldwide commercialization rights to our
cancer, bacterial diseases and CMV programs and North American
commercialization rights in four of our externally funded programs. As of June
30, 1999, we had received a total of $108.8 million from our current and former
corporate collaborators, including $95.8 million in research funding and $13.0
million from equity purchases.
As of September 30, 1999, 44 U.S. patents based on our discoveries had been
issued or allowed. In addition, as of that date, we had 47 patent applications
pending in the United States and had filed several corresponding foreign patent
applications.
Tularik was incorporated in California in 1991 and reincorporated in Delaware
in 1997. Our principal office is located at Two Corporate Drive, South San
Francisco, California 94080, and our telephone number is (650) 825-7000.
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by Tularik.................... 6,250,000 shares
Common Stock to be outstanding after the offering.. 41,364,401 shares
Use of proceeds.................................... Research and development
and general corporate
purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol............. "TLRK"
</TABLE>
The number of shares of common stock to be outstanding after this offering is
based on the number of shares outstanding as of June 30, 1999 and excludes:
. 6,044,896 shares of common stock underlying options outstanding as of
June 30, 1999 at a weighted average exercise price of $2.22 per share;
. 1,015,091 shares of common stock underlying warrants outstanding as of
June 30, 1999 at a weighted average exercise price of $10.17 per share;
. 496,929 shares available for issuance or future grant under our stock
option plans; and
. 500,000 shares available for issuance under our employee stock purchase
plan.
Since June 30, 1999, we have granted options to purchase an additional
110,500 shares of common stock under our option plans at a weighted average
exercise price of $3.00 per share, which reduced the number of shares available
for future grants under our option plans.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables summarize our consolidated financial data. The pro forma
information contained in the consolidated statements of operations data gives
effect to the automatic conversion of all convertible preferred stock into
common stock upon the completion of this offering. The as adjusted column of
the consolidated balance sheet data reflects the conversion of our preferred
stock into common stock and the sale of 6,250,000 shares of our common stock at
an assumed initial public offering price of $12.00 per share, after deducting
the estimated underwriting discount and offering expenses payable by us.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------------- ----------------
1994 1995 1996 1997 1998 1998 1999
------- ------- ------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OP-
ERATIONS DATA:
Collaborative research
and development
revenue............... $ 5,618 $11,124 $15,297 $ 20,009 $ 21,362 $ 8,962 $11,993
Total operating ex-
penses(1)............. 12,153 15,980 22,252 49,468 38,297 18,424 24,439
Net loss(1)............ (5,898) (3,607) (5,480) (25,374) (10,539) (6,183) (9,879)
Pro forma basic and di-
luted net loss per
share................. $ (0.31) $ (0.29)
Shares used in comput-
ing pro forma basic
and diluted net loss
per share............. 33,687 34,110
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF JUNE 30, 1999
DECEMBER 31, ---------------------
1998 ACTUAL AS ADJUSTED
------------ -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and marketable secu-
rities.................................... $119,324 $111,197 $180,447
Working capital............................ 94,535 95,007 164,257
Total assets............................... 136,778 133,926 203,176
Long-term debt, less current portion....... 4,734 11,171 11,171
Deferred compensation...................... (679) (5,705) (5,705)
Accumulated deficit........................ (61,857) (71,736) (71,736)
Total stockholders' equity................. 110,898 103,336 172,586
</TABLE>
- --------
(1) Total operating expenses in 1997 include a non-cash charge of $18.9 million
for acquired in-process research and development in connection with our
acquisition of Amplicon Corp. You should read Note 6 of notes to
consolidated financial statements for information about this acquisition.
6
<PAGE>
RISK FACTORS
An investment in our common stock is risky. You should carefully consider the
following risks, as well as the other information contained in this prospectus.
If any of the following risks actually occurs, our business could be harmed. In
that case, the trading price of our common stock could decline, and you might
lose all or part of your investment. The risks and uncertainties described
below are not the only ones facing us. Additional risks and uncertainties not
presently known to us, or that we currently see as immaterial, may also harm
our business.
RISKS RELATED TO TULARIK
Our prospective products are in an early state of development, and there is a
high risk of failure.
We have no products that have received regulatory approval for commercial
sale. All of our product candidates are in early stages of development, and we
face the risks of failure inherent in developing drugs based on new
technologies. None of our prospective products, including lometrexol, T67 and
T607, is expected to be commercially available until at least 2004. Two of our
clinical candidates, T67 and T607, operate in a similar manner. Based on
results at any stage of clinical trials, we may decide to discontinue
development of one or both of these compounds. Additionally, even if the
clinical results are favorable for both compounds, we may decide to
commercialize only one of the compounds.
Our products must satisfy rigorous standards of safety and efficacy before
they can be approved by the U.S. Food and Drug Administration, or FDA, and
international regulatory authorities for commercial use. We will need to
conduct significant additional research and preclinical (animal) testing and
clinical (human) trials before we can file applications with the FDA for
product approval. Clinical trials are expensive and have a high risk of
failure. In addition, to compete effectively, our products must be easy to use,
cost-effective and economical to manufacture on a commercial scale. We may not
achieve any of these objectives. Any of our products may not attain market
acceptance. Typically, there is a high rate of attrition for products in
preclinical testing and clinical trials. Also, third parties may develop
superior products or have proprietary rights that preclude us from marketing
our products. If research and testing is not successful or we fail to obtain
regulatory approval, we will be unable to market and sell our future product
candidates.
The progress and results of our preclinical testing and clinical trials are
uncertain.
Commercialization of our product candidates depends upon successful
completion of clinical trials. We must provide the FDA and foreign regulatory
authorities with clinical data that demonstrate the safety and efficacy of our
products before they can be approved for commercial sale. Preclinical testing
and clinical development are long, expensive and uncertain processes. It may
take us several years to complete our testing, and failure can occur at any
stage of testing. Interim results of trials do not necessarily predict final
results, and acceptable results in early trials may not be repeated in later
trials. Success in preclinical testing and early clinical trials does not
ensure that later-stage or large-scale clinical trials will be successful. A
number of companies in the pharmaceutical industry, including biotechnology
companies, have suffered significant setbacks in advanced clinical trials, even
after promising results in earlier trials. We have not developed any product
beyond phase 1 trials.
Any trial may fail to produce results satisfactory to the FDA. Preclinical
and clinical data can be interpreted in different ways, which could delay,
limit or prevent regulatory approval. Negative or inconclusive results or
adverse medical events during a trial could cause a trial to be repeated or a
program to be terminated. We typically rely on third-party clinical
investigators to conduct our clinical trials and other third-party
organizations to perform data collection and analysis, and as a result, we may
face additional delaying factors outside our control.
We do not know whether planned trials will begin on time or whether any of
our clinical trials will be completed on schedule or at all. We do not know
whether any trials will result in marketable products. Our
7
<PAGE>
product development costs will increase if we have delays in testing or
approvals or if we need to perform more or larger trials than planned. If the
delays are significant, our financial results and the commercial prospects for
our products will be harmed.
The length of time necessary to complete clinical trials and to submit an
application for marketing approval for a final decision by a regulatory
authority varies significantly and may be difficult to predict. Clinical
results are frequently susceptible to varying interpretations that may delay,
limit or prevent regulatory approvals. Additional factors that can cause delay
or termination of our clinical trials, or the costs of these trials to
increase, include:
. Slow patient enrollment due to the nature of the protocol, the proximity
of patients to clinical sites, the eligibility criteria for the study or
other factors;
. Inadequately trained or insufficient personnel at the study site to
assist in overseeing and monitoring clinical trials;
. Delays in approvals from a study site's review board;
. Longer treatment time required to demonstrate effectiveness or determine
the appropriate product dose;
. Lack of sufficient supplies of the product candidate;
. Adverse medical events or side effects in treated patients; and
. Lack of effectiveness of the product candidate being tested.
Any drug is likely to produce some toxicities or undesirable side effects in
animals and in humans when administered at sufficiently high doses and/or for
sufficiently long periods of time. Unacceptable toxicities or side effects may
occur at any dose level at any time in the course of studies in animals
designed to identify unacceptable effects of a drug candidate, known as
toxicological studies, or clinical trials of our potential products. The
appearance of any unacceptable toxicity or side effect could cause us or
regulatory authorities to interrupt, limit, delay or abort the development of
any of our product candidates and could ultimately prevent their clearance by
the FDA or foreign regulatory authorities for any or all targeted indications.
Our first three clinical candidates are directed to the treatment of cancer.
Cancer drugs generally have a narrow therapeutic window between efficacy and
toxicity. If unacceptable toxicity is observed in clinical trials, the trials
may be terminated at an early stage. Drug-related deaths may occur in phase 1
trials with anti-cancer drugs, because drugs for the treatment of cancer are
typically dangerous and phase 1 patients are critically ill and heavily pre-
treated. Several deaths occurred during Eli Lilly's phase 1 clinical trials of
lometrexol.
We do not know whether our existing or any future clinical trials will
demonstrate sufficient safety and efficacy necessary to obtain the requisite
regulatory approvals or will result in marketable products. Additionally, we
may not be able to submit a New Drug Application, or NDA, on schedule once
clinical trials are completed. Moreover, we cannot assure you that any NDA will
be reviewed and cleared by the FDA in a timely manner or at all. The length of
time, the level of expenditures and the laboratory and clinical information
required for approval of an NDA are substantial. The failure to adequately
demonstrate the safety and efficacy of our products under development could
adversely affect our operations.
We must obtain regulatory approval to market our products in the United States
and foreign jurisdictions.
We cannot predict whether regulatory clearance will be obtained for any
product we develop. The pharmaceutical industry is subject to stringent
regulation by various federal, state and local authorities. We must obtain
regulatory approval before marketing or selling our future drug products under
the requirements of the FDA and foreign regulatory authorities. Of particular
significance are the requirements covering research and development, testing,
manufacturing, quality control, labeling and promotion of drugs for human use.
A pharmaceutical product cannot be marketed in the United States until it has
completed rigorous preclinical testing and clinical trials and an extensive
regulatory clearance process implemented by the FDA. Satisfaction of these
regulatory requirements typically takes many years depending upon the type,
complexity and novelty of the product and requires the expenditure of
substantial resources.
8
<PAGE>
Before commencing clinical trials in humans, we must submit and receive
approval from the FDA of an IND. Additionally, submission of an IND does not
necessarily result in FDA authorization to commence clinical trials. Clinical
trials are subject to oversight by institutional review boards and the FDA and:
. must be conducted in conformance with the FDA's good laboratory practice
regulations;
. must meet requirements for institutional review board oversight;
. must meet requirements for informed consent;
. must meet requirements for good clinical practices;
. are subject to continuing FDA oversight;
. may require large numbers of test subjects; and
. may be suspended by us or the FDA at any time if it is believed that the
subjects participating in these trials are being exposed to unacceptable
health risks or if the FDA finds deficiencies in the IND or the conduct
of these trials.
Before receiving FDA clearance to market a product, we must demonstrate that
the product is safe and effective on the patient population that will be
treated. Data obtained from preclinical and clinical activities are susceptible
to varying interpretations that could delay, limit or prevent regulatory
clearances. In addition, delays or rejections may be encountered based upon
additional government regulation from future legislation or administrative
action or changes in FDA policy during the period of product development,
clinical trials and FDA regulatory review. Failure to comply with applicable
FDA or other applicable regulatory requirements may result in criminal
prosecution, civil penalties, recall or seizure of products, total or partial
suspension of production or injunction, as well as other regulatory action
against our potential products or us. Additionally, we have limited experience
in conducting and managing the clinical trials necessary to obtain regulatory
approval.
If regulatory clearance of a product is granted, this clearance will be
limited to those disease states and conditions for which the product is
demonstrated through clinical trials to be safe and efficacious. Marketing or
promoting a drug for an unapproved indication is generally prohibited.
Furthermore, clearance may entail ongoing requirements for post-marketing
studies. Even if this regulatory clearance is obtained, a marketed product, its
manufacturer and its manufacturing facilities are subject to continual review
and periodic inspections by the FDA. Discovery of previously unknown problems
with a product, manufacturer or facility may result in restrictions on this
product or manufacturer, including costly recalls or withdrawal of the product
from the market. We cannot assure you that any compound developed by us, alone
or with others, will prove to be safe and efficacious in clinical trials and
will meet all of the applicable regulatory requirements needed to receive
marketing clearance.
Outside the United States, our ability to market a product is contingent upon
receiving a marketing authorization from the appropriate regulatory
authorities. The requirements governing the conduct of clinical trials,
marketing authorization, pricing and reimbursement vary widely from country to
country. At present, foreign marketing authorizations are applied for at a
national level, although within the European Community, or EC, registration
procedures are available to companies wishing to market a product in more than
one EC member state. If the regulatory authority is satisfied that adequate
evidence of safety, quality and efficacy has been presented, a marketing
authorization will be granted. This foreign regulatory approval process
includes all of the risks associated with FDA clearance described above.
Failure to attract, retain and motivate skilled personnel and cultivate key
academic collaborations will delay our product development programs and
adversely affect our research and development efforts.
We are a small company with approximately 200 employees, and our success
depends on our continued ability to attract, retain and motivate highly
qualified management and scientific personnel and on our ability to develop and
maintain important relationships with leading academic institutions and
scientists. In particular, our product development programs depend on our
ability to attract and retain highly skilled chemists and clinical
9
<PAGE>
development personnel. Competition for personnel and relationships is intense.
If we lose the services of any of these personnel, it could impede
significantly the achievement of our research and development objectives. In
particular, the loss of David V. Goeddel, our Chief Executive Officer, would be
detrimental to us. If we fail to negotiate additional acceptable collaborations
with academic institutions and scientists, or if our existing academic
collaborations were to be unsuccessful, our product development programs may be
delayed. In addition, we will need to hire additional personnel and develop
additional academic collaborations as we continue to expand our research and
development activities. We do not know if we will be able to attract, retain or
motivate personnel or maintain relationships.
The drug discovery methods we employ are relatively new and may not lead to
drug products.
The drug discovery methods we employ based upon gene regulation are
relatively new. We do not know if these methods will lead to the discovery of
commercially viable drugs. None of our cancer product candidates undergoing
clinical testing acts by regulating gene expression. There is limited
scientific understanding generally relating to gene expression and the role of
genes in complex diseases and relatively few products based on gene discoveries
have been developed and commercialized by drug manufacturers. Even if we are
successful in identifying the essential cellular pathways that control the
expression of genes associated with specific diseases, these discoveries may
not lead to the development of drugs. Furthermore, our drug discovery efforts
are focused on a number of target genes, the functions of which have not yet
been fully identified. As a result, the safety and efficacy of drugs that alter
the expression of these genes have not yet been established. As a result, we
cannot assure you that our research and development activities will result in
any commercially viable products. We expect to continue to in-license or
acquire additional product candidates to augment the results of our internal
research activities, and in-licensed candidates may not prove to be successful.
If we cannot maintain our current corporate collaborations and enter into new
corporate collaborations, our product development will be delayed.
We rely, to a significant extent, on our corporate collaborators to provide
funding in support of our research and to jointly conduct some research and
preclinical testing functions, and we cannot control the amount and timing of
resources our corporate collaborators devote to our programs or potential
products. In addition, we expect to rely on our corporate collaborators for
commercialization of some of our products. If any of our corporate
collaborators were to breach or terminate their agreement with us or otherwise
fail to conduct the collaborative activities successfully and in a timely
manner, the preclinical or clinical development or commercialization of the
affected product candidates or research programs could be delayed or
terminated.
The continuation of any of our partnered drug discovery and development
programs may be dependent on the periodic renewal of our corporate
collaborations. All of our corporate collaborations have terms of six or fewer
years, which is less than the period required for the discovery, clinical
development and commercialization of most drugs. Each of our corporate
collaboration agreements provides that, upon expiration of a specified period
after commencement of the agreement, the corporate collaborator has the right
to terminate the agreement on short notice, and each corporate collaboration
agreement, other than the agreement with Roche Bioscience, provides that such
termination does not require cause. Our collaboration with Yamanouchi
Pharmaceutical Co. was terminated by Yamanouchi in November 1996, and our
collaboration with Merck & Co. was terminated by Merck in March 1999. Our
existing corporate collaboration agreements also may terminate before the full
term of the collaborations. Moreover, we may not be able to renew these
collaborations on acceptable terms, if at all. We believe that our Sumitomo
collaboration will expire and not be renewed at the end of its five-year term
in January 2000. Additionally, Taisho has the ability to terminate our
collaboration in March 2000. If funding from one or more of our corporate
collaborations were reduced or terminated, including the expected expiration of
the Sumitomo collaboration, we would be required to devote additional internal
resources to product development or scale back or terminate some development
programs or seek alternative corporate collaborators.
10
<PAGE>
There have been a significant number of recent business combinations among
large pharmaceutical companies that have resulted in a reduced number of
potential future corporate collaborators. If business combinations involving
our corporate collaborators were to occur, the effect could be to diminish,
terminate or cause delays in one or more of our corporate collaborations.
Until recently, our corporate collaboration strategy focused on funding
early-stage research in gene regulation. Over the past two years, as we have
moved beyond the research phase for certain of our programs, our corporate
collaboration strategy has evolved. In addition to seeking collaborations for
our research-stage programs, we also seek to enter into later-stage
collaborations for the development of compounds discovered through our research
and development efforts. The timing of these later-stage collaborations may be
linked to clinical results of our product candidates. As a result, we expect
our net spending on research and development to increase significantly and that
our corporate collaborators will fund a smaller percentage of our expenses than
historically.
We may not be able to negotiate additional corporate collaborations on
acceptable terms, if at all, and these collaborations may not be successful.
Our quarterly operating results may fluctuate significantly depending on the
initiation of new corporate collaboration agreements or the termination of
existing corporate collaboration agreements.
If we do not realize value from our retained commercialization rights, we may
not achieve our commercial objectives.
If we do not effectively exploit the commercialization rights we have
retained, we may not achieve profitability. In most of our corporate
collaborations, we have retained various commercialization rights for the
development and marketing of pharmaceutical products, including rights for
specific pharmaceutical indications or in specified geographical regions. For a
description of programs for which we have retained commercialization rights,
see "Business--Corporate Collaborations." We may take advantage of these
currently retained rights directly or may exploit retained rights through
collaborations with others. The value of these rights, if any, will be largely
derived from our ability, directly or with collaborators, to develop and
commercialize drugs, the success of which is also uncertain.
The exploitation of retained commercialization rights requires sufficient
capital; technological, product development, manufacturing and regulatory
expertise and resources; and marketing and sales personnel. We may not be able
to develop or obtain these resources in sufficient quantity or of a sufficient
quality level to enable us to achieve our objectives. To the extent that we are
required to rely on third parties for these resources, failure to establish and
maintain our relationships will affect our ability to realize value from our
retained commercialization rights. If we seek to commercialize products for
which we have retained rights through joint ventures or collaborations, we may
be required to relinquish material rights on terms that may not be favorable to
us. We do not know whether we will be able to enter into any agreements on
acceptable terms, if at all, or that we will be able to realize any value from
our retained commercialization rights.
If we fail to obtain the capital necessary to fund our operations, we will be
unable to successfully develop products.
We expect that significant additional financing will be required in the
future to fund operations. We do not know whether additional financing will be
available when needed, or that, if available, we will obtain financing on terms
favorable to our stockholders or us. We have consumed substantial amounts of
cash to date and expect capital outlays and operating expenditures to increase
over the next several years as we expand our infrastructure and research and
development activities. We may raise this financing through public or private
equity offerings, debt financings or additional corporate collaboration and
licensing arrangements.
We believe that the net proceeds from this offering, existing cash and
investment securities and anticipated cash flow from existing collaborations
will be sufficient to support our current operating plan through at least
11
<PAGE>
the end of 2001. We have based this estimate on assumptions that may prove to
be wrong. Our future capital requirements depend on many factors, including:
. the progress of our research activities;
. the number and scope of our research programs;
. the progress of our preclinical and clinical development activities;
. the progress of the development efforts of our collaborators;
. our ability to establish and maintain current and new collaboration and
licensing arrangements;
. our ability to achieve our milestones and receive funding under
collaboration arrangements;
. the costs involved in enforcing patent claims and other intellectual
property rights;
. the costs and timing of regulatory approvals; and
. the costs of establishing sales, marketing and distribution capabilities.
To the extent we raise additional capital by issuing equity securities, our
stockholders may experience substantial dilution. To the extent that we raise
additional funds through collaboration and licensing arrangements, we may be
required to relinquish some rights to our technologies or product candidates,
or grant licenses on terms that are not favorable to us. If adequate funds are
not available, we will not be able to continue developing our products.
If we continue to incur operating losses for a period longer than anticipated,
we may be unable to continue our operations.
We have generated operating losses since we began operations in November
1991. The extent of our future losses and the timing of profitability are
highly uncertain, and we may never achieve profitable operations. We have been
engaged in discovering and developing drugs since inception, which requires
significant research and development expenditures. To date, we have no products
that have generated any revenue. As of June 30, 1999, we had an accumulated
deficit of approximately $71.7 million. Even if we succeed in developing a
commercial product, we expect to incur losses for at least the next several
years and expect that these losses will increase as we expand our research and
development activities. If the time required to generate product revenues and
achieve profitability is longer than anticipated, we may not be able to
continue our operations. If we fail to obtain the necessary capital, we will
not be able to fund our operations.
The inability to compete successfully will harm our revenues and operating
results.
We face intensifying competition from large pharmaceutical and biotechnology
companies that are pursuing drugs that are competitive with our product
candidates and prospective product candidates. Our commercial opportunity will
be reduced or eliminated if our competitors develop and market products that
are more effective, have fewer side effects or are less expensive than our
product candidates. Our competitors include fully integrated pharmaceutical
companies and biotechnology companies that currently have drug and target
discovery efforts. In addition, companies pursuing different but related fields
represent substantial competition. Many of the organizations competing with us
have substantially greater capital resources, larger research and development
staffs and facilities, greater experience in drug development and in obtaining
regulatory approvals and greater marketing capabilities than we do. These
companies also compete with us to:
. attract qualified personnel;
. attract parties for acquisitions, joint ventures or other collaborations;
. attract academic research institutions as collaborators; and
. license the proprietary technology of these institutions that is
competitive with the technology we are practicing.
If our competitors successfully enter into partnering arrangements or license
agreements with academic research institutions, we will then be precluded from
pursuing those specific opportunities. Since each of these opportunities is
unique, we may not be able to find an acceptable substitute.
12
<PAGE>
Universities and public and private research institutions are also
competitors. While these organizations primarily have educational objectives,
they may develop proprietary technology and acquire patents that we may need
for the development of our drug products. We will attempt to license this
proprietary technology, if available. These licenses may not be available to us
on acceptable terms, if at all. In addition, we compete with a number of these
organizations to recruit personnel, especially scientists and technicians.
With respect to our drug discovery programs, other companies have novel small
molecule drugs in clinical trials to treat each of the diseases for which we
are seeking to discover and develop product candidates. These competing
potential drugs are further advanced in development than are any of our
potential products and may result in effective, commercially successful
products. Even if our collaborators or we are successful in developing
effective drugs, our products may not compete effectively with these products
or other successful products. Our competitors may succeed in developing and
marketing products either that are more effective than those that we may
develop, alone or with our collaborators, or that are marketed before any
products we develop are marketed.
Protecting our proprietary rights is difficult and costly.
Our commercial success will depend in part on obtaining patent protection on
our products and successfully defending these patents against third party
challenges. As of September 30, 1999, 44 U.S. patents based on our discoveries
have been issued or allowed. In addition, as of that date, we had 47 patent
applications pending in the United States and had filed several corresponding
foreign patent applications in multiple countries. The patent positions of
pharmaceutical and biotechnology companies can be highly uncertain and involve
complex legal and factual questions. No consistent policy regarding the breadth
of claims allowed in biotechnology patents has emerged to date. Accordingly, we
cannot predict the breadth of claims allowed in these companies' patents.
The degree of future protection for our proprietary rights is uncertain, and
we cannot assure you that:
. we were the first to make the inventions covered by each of our pending
patent applications;
. we were the first to file patent applications for these inventions;
. others will not independently develop similar or alternative technologies
or duplicate any of our technologies;
. any of our pending patent applications will result in issued patents;
. any patents issued to us or our collaborators will provide a basis for
commercially viable products or will provide us with any competitive
advantages or will not be challenged by third parties;
. we will develop additional proprietary technologies that are patentable;
or
. the patents of others will not have an adverse effect on our ability to
do business.
In addition, we could incur substantial costs in litigation if we are
required to defend against patent suits brought by third parties or if we
initiate these suits.
Others may have filed and in the future are likely to file patent
applications covering genes, gene products or therapeutic products that are
similar or identical to ours. We cannot assure you that any patent application
will not have priority over patent applications filed by us. Any legal action
against our collaborators or us claiming damages and seeking to enjoin
commercial activities relating to the affected products and processes could, in
addition to subjecting us to potential liability for damages, require our
collaborator or us to obtain a license to continue to manufacture or market the
affected products and processes. We cannot predict whether we or our
collaborators would prevail in any of these actions or that any license
required under any of these patents would be made available on commercially
acceptable terms, if at all. We believe that there may be significant
litigation in the industry regarding patent and other intellectual property
rights. If we become involved in litigation, it could consume a substantial
portion of our managerial and financial resources.
We rely on trade secrets to protect technology where we believe patent
protection is not appropriate or obtainable. However, trade secrets are
difficult to protect. We may not be able to adequately protect our trade
13
<PAGE>
secrets or other proprietary information. While we require employees, academic
collaborators and consultants to enter into confidentiality agreements, we
cannot assure you that:
. proprietary information will not be disclosed;
. others will not independently develop substantially equivalent
proprietary information and techniques;
. others will not gain access to our trade secrets or disclose this
technology;
. these obligations of confidentiality will be honored; or
. we can meaningfully protect our rights to proprietary information.
We are a party to various license agreements that give us rights to use
specified technologies in our research and development processes. If we are not
able to continue to license this technology on commercially reasonable terms,
our product development and research may be delayed. In addition, we generally
do not control the prosecution of in-licensed technology, and accordingly are
unable to exercise the same degree of control over this intellectual property
as we exercise over our internally developed technology.
Our research collaborators and scientific advisors have rights to publish
data and information in which we have rights. If we cannot maintain the
confidentiality of our technology and other confidential information in
connection with our collaborations, then our ability to receive patent
protection or protect our proprietary information will be imperiled.
If we are unable to contract with third parties to manufacture our drug
products in sufficient quantities and at an acceptable cost, we may be unable
to meet demand for our products and lose potential revenues.
Completion of our clinical trials and commercialization of our product
candidates require access to, or development of, facilities to manufacture a
sufficient supply of our product candidates. We do not intend to develop or
acquire facilities for the manufacture of product candidates for clinical
trials or commercial purposes in the foreseeable future. We will depend on our
collaborators or third parties for the manufacture of compounds for
preclinical, clinical and commercial purposes in their FDA-approved
manufacturing facilities. Our products may be in competition with other
products for access to these facilities. Consequently, our products may be
subject to delays in manufacture if collaborators or outside contractors give
other products greater priority than our products. For this and other reasons,
our collaborators or third parties may not be able to manufacture these
products in a cost-effective or timely manner. If not performed in a timely
manner, the clinical trial development of our product candidates or their
submission for regulatory approval could be delayed, and our ability to deliver
products on a timely basis could be impaired or precluded. We may not be able
to enter into any necessary third-party manufacturing arrangements on
acceptable terms, if at all. Our current dependence upon others for the
manufacture of our products may adversely affect our future profit margin and
our ability to commercialize products on a timely and competitive basis. In
particular, our current supply of finished product of lometrexol is limited and
may not be sufficient for completion of all phases of clinical development. The
manufacture of lometrexol is complex, and it may be difficult to efficiently
manufacture or to secure an adequate supply of this compound in a timely manner
or on an economical basis.
If we are unable to create a sales, marketing and distribution capability or to
enter into agreements with third parties to do so, our ability to generate
revenues will be diminished.
We currently have no sales, marketing or distribution capability. We intend
to market some products directly and rely on relationships with one or more
pharmaceutical companies with established distribution systems and direct sales
forces to market other products. To market any of our products directly, we
must develop a marketing and sales force with technical expertise and with
supporting distribution capabilities. We may not be able to establish in-house
sales and distribution capabilities or relationships with third parties. To the
extent that we enter into co-promotion or other licensing arrangements, any
revenues we receive will depend upon the efforts of third parties, and these
efforts may not be successful.
14
<PAGE>
If we fail to obtain acceptable prices, or an adequate level of reimbursement,
for our drug products from third-party payors, our ability to generate revenues
will be diminished.
The continuing efforts of government and third-party payors to contain or
reduce the costs of health care through various means will adversely affect our
ability to successfully commercialize products. For example, in some foreign
markets, pricing and profitability of prescription pharmaceuticals are subject
to government control. In the United States, we expect that there will continue
to be a number of federal and state proposals to implement similar government
control. In addition, increasing emphasis on managed care in the United States
will continue to put pressure on the pricing of pharmaceutical products. Cost
control initiatives could decrease the price that any of our collaborators or
we would receive for any products in the future. Further, to the extent that
cost control initiatives have an adverse effect on our collaborators, our
collaborators' ability to commercialize our products, and our ability to
realize royalties from this commercialization, may be adversely affected.
Our ability to commercialize pharmaceutical products, alone or with
collaborators, may depend in part on the extent to which reimbursement for the
products will be available from:
. government and health administration authorities;
. private health insurers; and
. other third-party payors.
Significant uncertainty exists as to the reimbursement status of newly
approved health care products. Third-party payors, including Medicare, are
challenging the prices charged for medical products and services. Government
and other third-party payors increasingly are attempting to contain health care
costs by limiting both coverage and the level of reimbursement for new drugs
and by refusing, in some cases, to provide coverage for uses of approved
products for disease indications for which the FDA has not granted labeling
approval. Third-party insurance coverage may not be available to patients for
any products we discover and develop, alone or with collaborators. If
government and other third-party payors do not provide adequate coverage and
reimbursement levels for our products, the market acceptance of these products
may be reduced.
Our collaborators, advisors and directors may have interests that are adverse
to you.
If conflicts arise between us and our corporate or academic collaborators or
scientific advisors, the other party may act in its self-interest and not in
the interest of our stockholders or us. Some of our corporate or academic
collaborators are conducting multiple product development efforts within each
disease area that is the subject of the collaboration with us. Generally, in
each of our collaborations, we have agreed not to conduct independently, or
with any third party, any research that is competitive with the research
conducted under our collaborations. Our collaborations may have the effect of
limiting the areas of research that we may pursue, either alone or with others.
Our collaborators, however, may develop, either alone or with others, products
in related fields that are competitive with the products or potential products
that are the subject of these collaborations. Competing products, either
developed by the collaborators or to which the collaborators have rights, may
result in their withdrawal of support for our product candidates.
Genentech, Inc. is a potential competitor of ours and is one of our
investors. David V. Goeddel, our Chief Executive Officer and a member of our
Board of Directors, is a consultant to Genentech. Mark J. Levin, a member of
our Board of Directors, is Chairman, President and Chief Executive Officer of
Millennium Pharmaceuticals, Inc., and Grant Heidrich, a member of our Board of
Directors, also serves on the board of directors of Millennium. Millennium has
publicly disclosed that it is pursuing an obesity program that is competitive
with, and may have scientific overlap with, our program.
We may incur significant costs if Year 2000 compliance issues are not properly
addressed.
We use and rely on a wide variety of information technologies, computer
systems and scientific equipment containing computer-related components, such
as programmable logic controllers and other embedded systems.
15
<PAGE>
Some of our older computer software programs and equipment are unable to
distinguish between the year 1900 and the year 2000. As a result, time-
sensitive functions of those software programs and equipment may misinterpret
dates after January 1, 2000 to refer to the twentieth century rather than the
twenty-first century. This could cause system or equipment shutdowns, failures
or miscalculations resulting in inaccuracies in computer output or disruptions
of operations, including inaccurate processing of financial information and/or
temporary inabilities to engage in normal business activities. In addition to
risks associated with our own computer systems and equipment, we have
relationships with, and are to varying degrees dependent upon, a large number
of third parties that provide information, goods and services to us. These
include financial institutions, suppliers, vendors, research partners and
governmental entities.
We have largely completed our assessment of our internal systems affected by
the Year 2000 issue and anticipate that we will not be required to modify or
replace significant portions of our software so that our computer systems will
properly utilize dates past December 31, 1999. We have initiated communications
with our significant suppliers to determine the extent to which we are
vulnerable to those parties' failure to solve their own Year 2000 issues. At
this time, we cannot predict the level of year 2000 readiness with respect to
our significant suppliers. We intend to continue to monitor the progress of
these third parties and will develop contingency plans in the event we become
aware that one or more of these third parties fails to solve their Year 2000
issues in such a way as to materially adversely affect our operations. If
significant numbers of these third parties experience failures in their
computer systems or equipment due to Year 2000 non-compliance, it could affect
our ability to engage in normal business activities.
Year 2000 issues affecting our business, if not adequately addressed by us,
our significant suppliers and our significant service providers could have a
number of "worst case" consequences. These include the loss of historical data
and our inability to continue our research efforts.
If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities.
The testing and marketing of medical products entail an inherent risk of
product liability. An inability to obtain sufficient product liability
insurance at an acceptable cost to protect against potential product liability
claims could prevent or inhibit the commercialization of pharmaceutical
products we develop, alone or with corporate collaborators. We currently carry
clinical trial insurance but do not carry product liability insurance. Our
corporate collaborators or we may not be able to obtain insurance at a
reasonable cost, if at all. While under various circumstances we are entitled
to be indemnified against losses by our corporate collaborators,
indemnification may not be available or adequate should any claim arise. If we
cannot successfully defend ourselves against these claims, we may incur
substantial liabilities and our operations will be harmed.
If we use biological and hazardous materials in a manner that violates laws, we
may be liable for damages.
Our research and development activities involve the controlled use of
potentially harmful biological materials as well as hazardous materials,
chemicals and various radioactive compounds. We are subject to federal, state
and local laws and regulations governing the use, storage, handling and
disposal of these materials and specified waste products. The cost of
compliance with these laws and regulations could be significant. Although we
believe that our safety procedures for handling and disposing of these
materials comply with the standards prescribed by state and federal laws and
regulations, we cannot completely eliminate the risk of accidental
contamination or injury from these materials. In the event of contamination or
injury, we could be held liable for damages that result, and any liability
could exceed our resources.
16
<PAGE>
RISKS RELATED TO THIS OFFERING
If our officers, directors and largest stockholders choose to act together,
they may be able to control our management and operations, acting in their best
interests and not necessarily those of other stockholders.
Following completion of the offering, our directors, executive officers and
principal stockholders and their affiliates will beneficially own approximately
43% of our common stock. Accordingly, they collectively will have the ability
to determine the election of all of our directors and to determine the outcome
of most corporate actions requiring stockholder approval. They may exercise
this ability in a manner that advances their best interests and not necessarily
those of other stockholders. In particular, upon completion of this offering,
PharmaVision 2000 AG, a closed-end mutual fund investing in pharmaceutical
companies such as Roche, Glaxo and Hoechst, will own approximately 20% of our
outstanding common stock. Peter Sjostrand, a member of our Board of Directors,
and David V. Goeddel, our Chief Executive Officer and a member of our Board of
Directors, are members of the board of directors of PharmaVision. PharmaVision
is not a party to any standstill or other agreement limiting its ability to
acquire additional shares of our capital stock and may in the future, through
open market purchases or otherwise, acquire additional shares of our common
stock.
Anti-takeover provisions in our charter documents and under Delaware law may
make an acquisition of us, which may be beneficial to our stockholders, more
difficult.
Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware law, could make it more difficult for
a third party to acquire us, even if doing so would benefit our stockholders.
These provisions:
. establish that members of the board of directors may be removed only for
cause upon the affirmative vote of stockholders owning at least two-
thirds of our capital stock;
. authorize the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
. limit who may call a special meeting of stockholders;
. prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders; and
. establish advance notice requirements for nominations for election to the
board of directors or for proposing matters that can be acted upon at
stockholder meetings.
In addition, until November 2000, Section 203 of the Delaware General
Corporation Law may discourage, delay or prevent a third party from acquiring
us.
Our stock price may be volatile, and your investment in our stock could decline
in value.
Prior to this offering, there has been no public market for the common stock
and an active public market for our common stock may not develop or be
sustained after the offering. The initial public offering price will be
determined by negotiations between the representatives of the underwriters and
us and may not be indicative of future market prices. Among the factors to be
considered in determining the initial public offering price of the common
stock, in addition to prevailing market conditions, will be:
. estimates of our business potential and earnings prospects;
. an assessment of our management; and
. the consideration of the above factors in relation to market valuations
of companies in related businesses.
The market prices for securities of biotechnology companies in general have
been highly volatile and may continue to be highly volatile in the future. The
following factors, in addition to other risk factors described in this section,
may have a significant impact on the market price of our common stock:
. announcements of technological innovations or new commercial products by
our competitors or us;
. developments concerning proprietary rights, including patents;
17
<PAGE>
. developments concerning our collaborations;
. publicity regarding actual or potential medical results relating to
products under development by our competitors or us;
. regulatory developments in the United States and foreign countries;
. litigation;
. economic and other external factors or other disaster or crisis; or
. period-to-period fluctuations in financial results.
Substantial sales of shares may impact market price of our common stock.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, the market
price of our common stock may fall. Such sales also might make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate. After completion of this offering, we
will have outstanding 41,521,375 shares of common stock, assuming no exercise
of outstanding options or warrants after September 30, 1999 and no exercise of
the underwriters' over-allotment option. Of these shares, the following will be
available for sale in the public market as follows:
. the 6,250,000 shares sold in this offering and an additional 2,142,474
shares will be freely tradable upon completion of this offering;
. 424,249 shares will be eligible for sale beginning 90 days after the date
of this prospectus;
. 32,704,652 shares will be eligible for sale upon the expiration of lock-
up agreements, beginning 180 days after the date of this prospectus; and
. 3,709,202 shares will be eligible for sale upon the exercise of vested
options 180 days after the date of this prospectus.
In addition, holders of 26,953,539 shares of common stock, including warrants
to purchase 1,015,091 shares, have contractual rights to have those shares
registered with the SEC for resale to the public. We intend to file a
registration statement on Form S-8 covering an aggregate of 6,371,768 shares
issuable upon exercise of options to purchase common stock and common stock
reserved for issuance under our stock plans within 90 days after the effective
date of the Registration Statement of which this prospectus is a part and upon
filing any shares subsequently issued under these plans will be eligible for
sale in the public market, subject to compliance with Rule 144 in the case of
our affiliates. We are unable to predict the effect that sales may have on the
then prevailing market price of the common stock.
This offering will cause dilution in net tangible book value.
Purchasers in the offering will experience immediate and substantial dilution
in the net tangible book value of the common stock from the initial public
offering price. Additional dilution is likely to occur upon exercise of options
and warrants granted by us.
18
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some statements contained in this prospectus are forward-looking statements
concerning our operations, economic performance and financial condition.
Forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, are included, for example, in the
discussions about:
. our strategy;
. sufficiency of our cash resources;
. revenues from existing and new collaborations;
. product development;
. our research and development and other expenses;
. our operational and legal risks; and
. Year 2000 issues.
These statements involve risks and uncertainties. Actual results may differ
materially from those expressed or implied in those statements. Factors that
could cause these differences include, but are not limited to, those discussed
under "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
19
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the 6,250,000 shares of common stock
in the offering are estimated to be $69,250,000 ($79,712,500 if the
underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $12.00 per share and after deducting the estimated
underwriting discount and offering expenses. We intend to use the net proceeds
for research and development and general corporate purposes. We may also use a
portion of the net proceeds to acquire or invest in businesses, products and
technologies that are complementary to our own, although no acquisitions are
planned or being negotiated as of the date of this prospectus, and no portion
of the net proceeds has been allocated for any specific acquisition. Pending
these uses, the net proceeds will be invested in investment-grade interest-
bearing securities.
The principal purposes of this offering are to increase our capitalization
and financial flexibility, to provide a public market for our common stock and
to facilitate access to public equity markets. As of the date of this
prospectus we cannot specify with certainty all of the particular uses for the
net proceeds we will have upon completion of the offering. Accordingly, our
management will have broad discretion in the application of net proceeds.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain earnings, if any, to support the development of our
business and do not anticipate paying cash dividends for the foreseeable
future.
20
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of June 30, 1999.
Our capitalization is also presented:
. on a pro forma basis to give effect to the automatic conversion of all of
our preferred stock into an aggregate of 26,953,539 shares of common
stock, which will occur upon the closing of this offering; and
. on a pro forma as adjusted basis to reflect our receipt of the net
proceeds from the sale of 6,250,000 shares of common stock in this
offering at an assumed initial public offering price of $12.00 per share,
after deducting the estimated underwriting discount and offering
expenses.
<TABLE>
<CAPTION>
As of June 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
amounts)
<S> <C> <C> <C>
Long-term debt, less current portion........... $ 11,171 $ 11,171 $ 11,171
Stockholders' equity:
Preferred stock, $0.001 par value, 33,000,000
shares authorized, 26,953,539 shares issued
and outstanding, actual, none issued
pro forma and pro forma as adjusted......... 27 -- --
Common stock, $0.001 par value; 55,000,000
shares authorized; 8,160,862 shares issued
and outstanding, actual; 35,114,401 shares
issued and outstanding, pro forma; and
41,364,401 shares issued and outstanding,
pro forma as adjusted....................... 8 35 41
Additional paid-in capital................... 181,224 181,224 250,468
Notes receivable from stockholders........... (482) (482) (482)
Deferred compensation........................ (5,705) (5,705) (5,705)
Accumulated deficit.......................... (71,736) (71,736) (71,736)
-------- -------- --------
Total stockholders' equity................. 103,336 103,336 172,586
-------- -------- --------
Total capitalization..................... $114,507 $114,507 $183,757
======== ======== ========
</TABLE>
The number of shares of common stock to be outstanding after this offering is
based on the number of shares outstanding as of June 30, 1999 and excludes:
. 6,044,896 shares of common stock underlying options outstanding as of
June 30, 1999 at a weighted average exercise price of $2.22 per share;
. 1,015,091 shares of common stock underlying warrants outstanding as of
June 30, 1999 at a weighted average exercise price of $10.17 per share;
. 496,929 shares available for issuance or future grant under our stock
option plans; and
. 500,000 shares available for issuance under our employee stock purchase
plan.
See "Selected Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto included in this prospectus.
21
<PAGE>
DILUTION
The pro forma net tangible book value of the common stock as of June 30, 1999
was $103.3 million or $2.94 per share, after giving effect to the automatic
conversion of all outstanding shares of preferred stock into an aggregate of
26,953,539 shares of common stock, which will occur upon the closing of the
offering. After giving effect to the sale of the common stock pursuant to this
offering at an assumed initial public offering price of $12.00 per share,
assuming that the underwriters' over-allotment option is not exercised, and
after deducting the estimated underwriting discount and offering expenses, the
adjusted pro forma net tangible book value at June 30, 1999, would have been
$172.6 million, or $4.17 per share.
Pro forma net tangible book value per share before the offering has been
determined by dividing pro forma net tangible book value (total tangible assets
less total liabilities) by the pro forma number of shares of common stock
outstanding at June 30, 1999. The offering will result in an increase in pro
forma net tangible book value per share of $1.23 to existing stockholders and
dilution in pro forma net tangible book value per share of $7.83 to new
investors who purchase shares in the offering. Dilution is determined by
subtracting pro forma net tangible book value per share after the offering from
the assumed initial public offering price of $12.00 per share. The following
table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price......................... $12.00
Pro forma net tangible book value per share at June 30, 1999.. $2.94
Increase attributable to new investors........................ 1.23
-----
Pro forma net tangible book value per share after the
offering..................................................... 4.17
------
Dilution in net tangible book value to new investors.......... $ 7.83
======
</TABLE>
If the underwriters' over-allotment option were exercised in full, the pro
forma net tangible book value per share after the offering would be $4.33 per
share, the increase in net tangible book value per share to existing
stockholders would be $1.39 per share and the dilution in net tangible book
value to new investors would be $7.67 per share.
The following table summarizes, on a pro forma basis as of June 30, 1999, the
differences between the total consideration paid and the average price per
share paid by the existing stockholders and the new investors with respect to
the number of shares of common stock purchased from us based on an assumed
public offering price of $12.00 per share:
<TABLE>
<CAPTION>
Shares Total Consideration Average
------------------ -------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
New investors................. 6,250,000 15.1% $ 75,000,000 30.0% $12.00
Existing stockholders......... 35,114,401 84.9 174,683,000 70.0 4.97
---------- ----- ------------ -----
Total....................... 41,364,401 100.0% $249,683,000 100.0%
========== ===== ============ =====
</TABLE>
These tables do not assume exercise of stock options and warrants outstanding
at June 30, 1999 and include 557,880 shares subject to repurchase by us at a
weighted average price of $1.84.
At June 30, 1999, there were 6,044,896 shares of common stock issuable upon
exercise of outstanding stock options at a weighted average exercise price of
$2.22 per share and 1,015,091 shares of common stock issuable upon exercise of
outstanding warrants at a weighted average exercise price of $10.17 per share.
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
This section presents our historical consolidated financial data. You should
read carefully the consolidated financial statements included in this
prospectus, including the notes to the consolidated financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected data in this section is not intended to replace the
consolidated financial statements.
We derived the consolidated statement of operations data for the years ended
December 31, 1996, 1997 and 1998 and the consolidated balance sheet data as at
December 31, 1997 and 1998 from the audited consolidated financial statements
included in this prospectus. Ernst & Young LLP, our independent auditors,
audited these consolidated financial statements. The consolidated statement of
operations data for the years ended December 31, 1994 and 1995 and the
consolidated balance sheet data at December 31, 1994, 1995 and 1996 are derived
from our audited financial statements that are not included in this prospectus.
The consolidated statement of operations data for the periods ended June 30,
1998 and 1999 and the consolidated balance sheet data at June 30, 1999 are
derived from our unaudited consolidated financial statements but have been
prepared on a basis consistent with our audited financial statements and the
notes thereto and include all adjustments (consisting only of normal recurring
adjustments) that we consider necessary for a fair presentation of the
information. Historical results are not necessarily indicative of future
results. See notes to the consolidated financial statements for an explanation
of the method used to determine the number of shares used in computing pro
forma basic and diluted loss per share.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------------------ -----------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenue:
Collaborative research
and development...... $ 5,618 $ 11,124 $ 15,297 $ 20,009 $ 21,362 $ 8,962 $ 11,993
Operating expenses:
Research and
development.......... 9,934 13,473 18,622 26,546 33,264 16,003 20,951
Acquired in-process
research and
development.......... -- -- -- 18,902 -- -- --
General and
administrative....... 2,219 2,507 3,630 4,020 5,002 2,421 2,648
Amortization of
deferred stock
compensation......... -- -- -- -- 31 -- 840
-------- -------- -------- -------- -------- ------- --------
12,153 15,980 22,252 49,468 38,297 18,424 24,439
-------- -------- -------- -------- -------- ------- --------
Loss from operations.... (6,535) (4,856) (6,955) (29,459) (16,935) (9,462) (12,446)
Interest income, net.... 637 1,249 1,475 4,085 6,396 3,279 2,567
-------- -------- -------- -------- -------- ------- --------
Net loss................ $ (5,898) $ (3,607) $ (5,480) $(25,374) $(10,539) $(6,183) $ (9,879)
======== ======== ======== ======== ======== ======= ========
Pro forma basic and
diluted net loss per
share.................. $ (0.31) $ (0.29)
======== ========
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 33,687 34,110
======== ========
<CAPTION>
DECEMBER 31,
------------------------------------------------ JUNE 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash, cash equivalents
and marketable
securities............. $ 22,338 $ 25,181 $ 77,078 $124,406 $119,324 $111,197
Working capital......... 15,236 15,193 69,394 116,527 94,535 95,007
Total assets............ 28,395 29,617 83,409 133,522 136,778 133,926
Long-term debt, net of
current portion........ 2,477 1,712 2,128 3,456 4,734 11,171
Deferred compensation... -- -- -- -- (679) (5,705)
Accumulated deficit..... (16,857) (20,464) (25,944) (51,318) (61,857) (71,736)
Total stockholders' eq-
uity................... 18,435 17,753 72,905 120,856 110,898 103,336
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis in conjunction with the
"Selected Consolidated Financial Data," consolidated financial statements and
related notes included elsewhere in this prospectus.
Overview
Since our founding in November 1991, we have been engaged in the discovery
and development of a broad range of novel, small molecule drugs, most of which
act through the regulation of gene expression. We have incurred net losses
since inception and expect to incur substantial and increasing losses for at
least the next several years as we expand our research and development
activities. To date, we have funded our operations primarily through the sale
of equity securities, non-equity payments from collaborators and interest
income. As of June 30, 1999, our accumulated deficit was approximately $71.7
million. We expect our sources of revenue, if any, for the next several years
to consist primarily of payments under corporate collaborations and interest
income. The process of developing our products will require significant
additional research and development, preclinical testing and clinical trials,
as well as regulatory approval. These activities, together with our general and
administrative expenses, are expected to result in substantial operating losses
for the foreseeable future. We will not receive product revenue unless we or
our collaborative partners complete clinical trials, obtain regulatory approval
and successfully commercialize one or more of our products.
In order to accelerate product commercialization and finance research
activities, we have entered into collaborations with leading pharmaceutical
companies. We have ongoing collaborations with Knoll relating to obesity
(commenced in November 1998); JT relating to orphan nuclear receptors
(commenced in September 1998); Roche Bioscience relating to inflammation
(commenced in July 1997); JT relating to obesity/diabetes (commenced in
September 1996); Taisho relating to immune disorders (commenced in April 1995);
and Sumitomo relating to hypercholesterolemia (commenced in January 1995).
Previously, we also had collaborations with Yamanouchi relating to inflammation
(commenced in November 1993, ended in November 1996) and with Merck relating to
viral disease (commenced in December 1993, ended in March 1999). As of June 30,
1999, we had received $13.0 million in equity investments and $95.8 million in
research funding from our collaborators, including $14.0 million from
Yamanouchi and $20.4 million from Merck.
Acquisition
On October 31, 1997, we acquired Amplicon Corp., a research organization
engaged principally in identifying and characterizing human genes involved in
certain cancers. In connection with the acquisition, we issued 1,622,057 shares
of preferred stock and warrants to acquire an additional 245,456 shares of
preferred stock in exchange for all of Amplicon's outstanding capital stock. In
addition, all outstanding stock options to purchase Amplicon common stock were
replaced with options and warrants to purchase shares of our preferred stock.
The acquisition was recorded using the purchase method of accounting.
Accordingly, we allocated the purchase price to the assets acquired and
liabilities assumed based on their estimated fair values as of the date of
acquisition. The operating results of Amplicon are included in our consolidated
statements of operations data from the effective date of the acquisition.
At the date of the acquisition, Amplicon's activities consisted solely of
performing early-stage research and development to identify relevant genes that
may result in the development of diagnostic and therapeutic products for the
treatment of cancer. To date, no products have been developed and the future
benefits of the technology remain uncertain. To determine the value of the
technology in development, we considered, among other factors, the time and
resources necessary to identify, characterize, develop and obtain regulatory
approval for potential cancer diagnostics and therapeutics, and the related
market size and potential cash flows from developed products. We also
considered the risks associated with the development process, including the
inherent difficulties and uncertainties in successfully developing diagnostic
and therapeutic products, thereby achieving technological feasibility, and the
risks related to changes in target markets. Our analysis, performed
24
<PAGE>
using the income method, resulted in $18.9 million being charged to acquired
in-process research and development, which we believe represented the fair
value of the technology and did not exceed the amount a third party would pay
for the technology. Due to the uncertainties of the discovery process, we are
not able to predict the time and resources that will be necessary to obtain
regulatory approval for a product discovered using the acquired technology.
Stock Compensation
During the year ended December 31, 1998 and the six months ended June 30,
1999, in connection with the grant of stock options to employees, we recorded
deferred stock compensation totaling $6.6 million, representing the difference
between the deemed fair value of our common stock for financial reporting
purposes on the date such options were granted and the exercise price. Such
amount is included as a reduction of stockholders' equity and is being
amortized over the vesting period of the individual options, generally four
years, using the graded vesting method. The graded vesting method provides for
vesting of portions of the overall award at interim dates and results in higher
vesting in earlier years than straight-line vesting. We recorded amortization
of deferred stock compensation of $31,000 for the year ended December 31, 1998
and $840,000 for the six months ended June 30, 1999. At June 30, 1999, we had a
total of $5.7 million remaining to be amortized over the vesting periods of the
stock options. We anticipate that additional deferred compensation will be
recorded for options granted between July 1 and September 30, 1999. You should
read Note 2 of notes to consolidated financial statements.
Results of Operations
Six Months Ended June 30, 1999 and 1998
Collaborative research and development revenue. Collaborative research and
development revenue was $12.0 million for the six months ended June 30, 1999,
compared with $9.0 million during the six months ended June 30, 1998. The
increase in 1999 was principally attributable to revenue from new corporate
collaboration agreements signed in the second half of 1998. These included
agreements with JT in the area of orphan nuclear receptors and with Knoll in
obesity. The effect of these new agreements was partially offset by lower
revenue from the collaboration with Merck, which ended in March 1999. We expect
collaborative research and development revenue to decline for the foreseeable
future as existing collaborations end in accordance with their terms. We
believe that our Sumitomo collaboration will expire and not be renewed at the
end of its five-year term in January 2000. Additionally, Taisho has the ability
to terminate our collaboration with them in March 2000. Until recently, our
corporate collaboration strategy focused on funding early-stage research in
gene regulation. Over the past two years, as we have moved beyond the research
phase for certain of our programs, our corporate collaboration strategy has
evolved. In addition to seeking corporate collaborations for our research-stage
programs, we also seek to enter into later-stage collaborations for the
development of compounds discovered through our research and development
efforts. The timing of these later-stage collaborations may be linked to
clinical results of our product candidates.
Research and development expenses. Research and development expenses were
$21.0 million for the six months ended June 30, 1999, compared with $16.0
million during the six months ended June 30, 1998. This increase was primarily
attributable to increases in employee costs, clinical and preclinical costs and
higher occupancy costs associated with a second building at our South San
Francisco, California facility, which we occupied in January 1999. We expect
research and development expenses to increase significantly in future periods,
particularly as new and existing product candidates advance into later stages
of development. Additionally, we expect that corporate collaborations will fund
a smaller percentage of our research and development expenses than
historically.
General and administrative expenses. General and administrative expenses were
$2.6 million for the six months ended June 30, 1999, compared with $2.4 million
during the six months ended June 30, 1998. This increase was primarily
attributable to higher employee and occupancy costs. We expect that general and
administrative expenses will increase in the future to support continued growth
of our research and development efforts and to accommodate new demands
associated with operating as a public company.
25
<PAGE>
Amortization of deferred compensation. Amortization of deferred stock
compensation was $840,000 for the six months ended June 30, 1999. There was no
amortization of deferred stock compensation for the six months ended June 30,
1998. We recorded aggregate deferred stock compensation of $6.6 million in the
period from July 1, 1998 through June 30, 1999 for options awarded to employees
with exercise prices below the deemed fair value for financial reporting
purposes of our common stock on their respective grant dates.
Interest income, net. Net interest income was $2.6 million for the six months
ended June 30, 1999, compared with $3.3 million during the corresponding period
in 1998. The decrease in net interest income resulted from lower average
interest-bearing balances and higher debt balances during the 1999 period.
Years Ended December 31, 1998, 1997 and 1996
Collaborative research and development revenue. Collaborative research and
development revenue was $21.4 million in 1998, compared with $20.0 million in
1997 and $15.3 million in 1996. The increase in 1998 was principally
attributable to revenue from new collaboration agreements signed in 1998 with
JT in the area of orphan nuclear receptors and Knoll in obesity. The increase
in 1997 compared with 1996 was primarily due to a new collaboration with Roche
Bioscience to provide funding for our inflammation program after the
termination by Yamanouchi and the first full year of our collaboration with
Japan Tobacco in obesity/diabetes. These factors were partially offset by the
termination by Yamanouchi in November 1996 of its collaboration with us in the
inflammation area, which had accounted for $4.7 million of collaborative
research and development revenue during 1996.
Research and development expenses. Research and development expenses were
$33.3 million in 1998, compared with $26.5 million in 1997 and $18.6 million in
1996. The increase in 1998 was primarily attributable to increases in employee
costs and clinical and preclinical development expenses as we added a research
program in the area of orphan nuclear receptors, acquired Amplicon and
increased the level of resources committed to existing research efforts.
Employee costs and development expenses also contributed to the increase in
research and development expenses in 1997 as compared with 1996. In addition,
1997 was our first full year in a new facility in South San Francisco,
California, which we occupied in April 1996 to accommodate our growth. This new
facility led to higher occupancy costs in 1997 than we incurred in 1996.
Acquired in-process research and development of $18.9 million was written-off
during 1997 in connection with our acquisition of Amplicon, which was effective
October 31, 1997. You should read Note 6 of the notes to consolidated financial
statements.
General and administrative expenses. General and administrative expenses were
$5.0 million, $4.0 million and $3.6 million in 1998, 1997 and 1996,
respectively. These increases reflected higher employee costs associated with
growth of most functional areas in support of our expanding research and
development activities. During this three-year period, general and
administrative expenses increased an aggregate 39% compared with 79% growth in
research and development expenses.
Amortization of deferred stock compensation. Amortization of deferred stock
compensation was $31,000 in 1998. There was no amortization of deferred stock
compensation in 1997 and 1996. In 1998, we recorded deferred stock compensation
of approximately $710,000 for options awarded to employees with exercise prices
below the deemed fair value for financial reporting purposes of our common
stock on their respective grant dates.
Interest income, net. Net interest income was $6.4 million, $4.1 million and
$1.5 million in 1998, 1997 and 1996, respectively. These increases were due
primarily to sequentially higher interest-bearing balances as a result of
preferred stock financings in 1997 and 1996.
Liquidity and Capital Resources
Since inception, our primary sources of funds have been the sale of equity
securities, non-equity payments from collaborators and interest income. As of
June 30, 1999, we had raised $159.9 million from the sale of
26
<PAGE>
equity securities, including $13.0 million from collaborators, and received
$95.8 million in non-equity payments from collaborators. Aggregate interest
income earned since our inception was $20.0 million through June 30, 1999.
We had cash, cash equivalents and marketable securities of $111.2 million at
June 30, 1999, a decrease of $8.1 million from December 31, 1998. Cash used in
operations during the six months ended June 30, 1999 was $12.1 million. Cash
used for purchases of equipment and leasehold improvements totaled $5.8 million
during the six months ended June 30, 1999 and cash received from financing
activities, principally equipment financing and stock option exercises, was
$9.8 million. We expect operating spending to increase in the future as we
expand operations to support the development of new and existing product
candidates while capital spending is expected to decrease moderately from 1999
levels now that leasehold improvements in our second building have been
completed.
During the three year period ended December 31, 1998, cash used in operating
and investing activities was $10.5 million and $70.7 million, respectively.
Uses of cash in operating activities were primarily to fund net losses,
excluding noncash charges. Uses of cash in investing activities included $58.9
million used for net purchases of available-for-sale securities, $9.2 million
for capital expenditures, $2.0 million in purchases of long-term investments
and $500,000 related to the acquisition of Amplicon. Financing activities
provided cash of $116.5 million during the three year period ended December 31,
1998. This amount represented primarily proceeds from the sale of equity
securities.
Our forecast of the period of time through which our financial resources will
be adequate to support our operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of
a number of factors. We believe that our existing cash and investment
securities and anticipated cash flow from existing collaborations together with
the net proceeds of this offering will be sufficient to support our current
operating plan through at least the end of 2001. We have based this estimate on
assumptions that may prove to be wrong. Our future capital requirements will
depend on many factors, including:
. the progress of our research activities;
. the number and scope of our research programs;
. the progress of our preclinical and clinical development activities;
. the progress of the development efforts of our collaborators;
. our ability to establish and maintain current and new collaboration and
licensing arrangements;
. our ability to achieve our milestones and receive funding under
collaboration arrangements;
. the costs involved in enforcing patent claims and other intellectual
property rights;
. the costs and timing of regulatory approvals; and
. the costs of establishing sales, marketing and distribution capabilities.
Future capital requirements will also depend on the extent to which we
acquire or invest in businesses, products and technologies. Until we can
generate sufficient levels of cash from our operations, which we do not expect
to achieve for at least several years, we expect to finance future cash needs
through the sale of equity securities, strategic collaborations and debt
financing as well as interest income earned on cash balances. We cannot assure
you that additional financing or collaboration and licensing arrangements will
be available when needed or that, if available, such financing will be obtained
on terms favorable to us or our stockholders. Insufficient funds may require us
to delay, scale back or eliminate some or all of our research or development
programs, to lose rights under existing licenses or to relinquish greater or
all rights to product candidates at an earlier stage of development or on less
favorable terms than we would otherwise choose or may adversely affect our
ability to operate as a going concern. If additional funds are raised by
issuing equity securities, substantial dilution to existing stockholders may
result.
Our cash and investments policy emphasizes liquidity and preservation of
principal over other portfolio considerations. We select investments that
maximize interest income to the extent possible given these two constraints. We
satisfy liquidity requirements by investing excess cash in securities with
different maturities to
27
<PAGE>
match projected cash needs and limit concentration of credit risk by
diversifying our investments among a variety of high credit-quality issuers.
As of December 31, 1998, we had federal net operating loss carryforwards of
approximately $37.9 million to offset future taxable income. We also had
federal research and development tax credit carryforwards of approximately $3.0
million. If not utilized, net operating loss and credit carryforwards will
begin to expire in 2007. Utilization of the net operating losses and credits
may be subject to a substantial annual limitation due to ownership change
limitations provided by the Internal Revenue Code of 1986. The annual
limitation may result in the expiration of our net operating losses and credits
before they can be used. You should read Note 11 of notes to consolidated
financial statements.
Year 2000 Compliance
We use and rely on a wide variety of information technologies, computer
systems and scientific equipment containing computer-related components, such
as programmable logic controllers and other embedded systems. Some of our older
computer software programs and equipment are unable to distinguish between the
year 1900 and the year 2000. As a result, time-sensitive functions of those
software programs and equipment may misinterpret dates after January 1, 2000 to
refer to the twentieth century rather than the twenty-first century. This could
cause system or equipment shutdowns, failures or miscalculations resulting in
inaccuracies in computer output or disruptions of operations, including
inaccurate processing of financial information and/or temporary inabilities to
engage in normal business activities. In addition to risks associated with our
own computer systems and equipment, we have relationships with, and are to
varying degrees dependent upon, a large number of third parties that provide
information, goods and services to us. These include financial institutions,
suppliers, vendors, research partners and governmental entities.
We have largely completed our assessment of our internal systems affected by
the Year 2000 issue and anticipate that we will not be required to modify or
replace significant portions of our software so that our computer systems will
properly utilize dates past December 31, 1999. We have initiated communications
with our significant suppliers to determine the extent to which we are
vulnerable to those parties' failure to solve their own Year 2000 issues. At
this time, we cannot predict the level of Year 2000 readiness with respect to
our significant suppliers. We intend to continue to monitor the progress of
these third parties and will develop contingency plans in the event we become
aware that one or more of these third parties fails to solve their Year 2000
issues in such a way as to materially adversely affect our operations. If
significant numbers of these third parties experience failures in their
computer systems or equipment due to Year 2000 non-compliance, it could affect
our ability to engage in normal business activities.
If we, our customers, our providers of hardware and software, or our third-
party computer network providers fail to remedy any Year 2000 issues, the
reasonably likely worst case scenario would be the loss of historical data and
interruption of our research programs, which could have a material adverse
effect on our business, financial condition and results of operations.
Presently we are unable to quantitatively estimate the duration and extent of
any such interruption, or estimate the effect such interruption may have on our
future revenue.
Disclosure About Market Risk
Our exposure to market risk is principally confined to our cash equivalents
and investments that have maturities of less than two years. We maintain a non-
trading investment portfolio of investment grade, liquid debt securities that
limits the amount of credit exposure to any one issue, issuer or type of
instrument. The securities in our investment portfolio are not leveraged, are
classified as available for sale and are therefore subject to interest rate
risk. We currently do not hedge interest rate exposure. If market interest
rates were to increase by 100 basis points, or 1%, from June 30, 1999 levels,
the fair value of our portfolio would decline by approximately $430,000. The
modeling technique used measures the change in fair values arising from an
immediate hypothetical shift in market interest rates and assumes ending fair
values include principal plus accrued interest.
28
<PAGE>
BUSINESS
Overview
Tularik is engaged in the discovery and development of a broad range of novel
and superior orally available drugs based on gene regulation. Building on our
scientific strengths, we intend to become a world-class pharmaceutical company.
Our broad range of programs includes cancer, CMV, diabetes, obesity,
inflammation, immune disorders, hypercholesterolemia and bacterial diseases and
a class of targets known as orphan nuclear receptors, all of which represent
large commercial markets. We have diversified our drug discovery and
development efforts not only across a large number of diseases, but also across
multiple promising targets and drug candidates for these diseases. Our product
pipeline includes two cancer drug candidates in clinical testing, one cancer
drug candidate for which an IND has been filed, one preclinical anti-CMV drug
candidate and 14 early and advanced drug leads in our other programs.
Background
Small Molecule Drugs. Because small molecule drugs are generally administered
orally, they remain the preferred treatment for most diseases, and are
particularly appropriate for the treatment of chronic diseases requiring the
daily administration of medications over many years. Historically, the
opportunity to commercialize small molecule drugs has been limited by the
difficulty inherent in discovering safe and effective small molecule
therapeutics.
Molecular Biology Revolution. Groundbreaking advances in molecular biology in
the late 1970s expanded the range of drug treatment options beyond small
molecule drugs. Early biotechnology companies, such as Amgen and Genentech,
capitalized on these scientific advances by utilizing the coding elements of
genes to produce protein therapeutics. Unlike many small molecule drugs,
protein therapeutics must be given by injection. Dr. David V. Goeddel, our
Chief Executive Officer, was instrumental in the discovery and
commercialization of numerous therapeutic proteins at Genentech, including
human insulin, growth hormone and tPA. These advances in molecular biology led
to other approaches as well, including monoclonal antibodies, antisense and
gene therapy. More recently, chemistry-based drug development disciplines have
been directed toward finding small molecule drugs that interact with specific
molecular targets to achieve a desired therapeutic effect.
Gene Expression. The human body is composed of specialized cells that perform
different functions and are organized into tissues and organs. All cells in the
human body contain the same set of approximately 100,000 genes, referred to as
the human genome. Approximately 10% of the total number of genes are activated,
or expressed, in an individual human cell, and different subsets of genes are
activated in distinct cell types. Most genes direct the production of specific
proteins through a two-step decoding process, resulting in the production of
approximately 10,000 different proteins in a typical cell. Proteins, such as
hormones, enzymes and receptors, carry out critical biological functions. Gene
activation is known as gene expression, and the selective activation of
different subsets of genes in distinct cell types is referred to as
differential gene expression. All functions of cells, tissues and organs are
controlled by differential gene expression. As an example, cells in the
pancreas known as beta cells make large amounts of the insulin protein, which
is secreted and which circulates throughout the body, regulating glucose
metabolism. The exclusive production of insulin by these cells reflects the
fact that its encoding gene, the insulin gene, is expressed only in these
specialized cells. In all other cells of the body, the insulin gene is not
expressed. Differential gene expression results in the carefully controlled, or
regulated, production of functional proteins, such as insulin.
Regulation of Gene Expression. Central to the process of differential gene
expression are the regulatory elements of genes that are responsible for
determining when and where in the body a gene is expressed, or switched on. The
regulatory elements of genes operate by interacting with a specialized category
of proteins called transcription factors, which are responsible for turning the
genes on and off. In addition, the activities of transcription factors are
themselves controlled by a network of gene regulation pathways composed of
proteins. Transcription factors and the other proteins in this network of gene
regulation pathways represent potential
29
<PAGE>
targets for therapeutic intervention, or drug discovery targets, because of
their potential to switch genes on and off. These protein targets reside inside
the cell.
The Role of Gene Regulation in Disease. When one or more steps in a normal
cellular pathway is upset or blocked, disrupting the normal balance or function
of essential proteins, disease may occur. This disruption can occur because of
an intrinsic defect, a harmful environmental stimulus or a combination of both.
Intrinsic defects arise from mutations in particular genes, which can either
affect the level of gene expression or alter the protein that is produced.
Inappropriate gene regulation, resulting in overexpression or underexpression
of a protein or group of proteins, plays an important role in numerous
diseases, including cardiovascular disease, inflammation and immune disorders
and metabolic diseases such as obesity and diabetes. Furthermore, infectious
agents, such as bacteria and viruses, rely on gene regulation to survive and
proliferate in the human body.
The Regulation of Genes with Small Molecule Drugs. Commencing in the 1970s, a
pioneering group of academic scientists, including Drs. Steven L. McKnight and
Robert Tjian, two of our founders, directed their research towards
understanding the regulatory elements of genes in order to clarify the
mechanisms responsible for turning genes on and off. The results of this
research suggested an approach to discovering novel drugs that target these
intracellular gene regulatory mechanisms. Protein therapeutics are
inappropriate for these targets because they are not small molecules and
therefore cannot penetrate the cell. By contrast, small molecules are ideally
suited for stimulating or inhibiting the function of intracellular targets.
Tularik Advantage
We are a pioneer in the application of gene regulation biology to drug
discovery. Our drug discovery platform is directed toward the discovery of gene
regulating pathways and orally available drugs that act on these pathways. We
believe that our understanding of gene regulation, the strength of our
scientific and management team and the efficiencies captured through our
integrated drug discovery and development platform place us in a leading
position to discover, develop and commercialize novel, orally available drugs.
Advantages of Gene Regulation Approach. Approaches to drug discovery that
seek drug targets through the random sequencing of portions of the human genome
generally do not lead to an understanding of the relevance of discovered genes
as drug targets. Similarly, the identification of genes or proteins without an
understanding of the pathways by which they operate may not permit
identification of the optimal point of pharmaceutical intervention. In
contrast, our approach based on gene regulation permits the identification of
multiple targets within a gene regulatory pathway or subpathway and increases
the likelihood that we will be able to identify the optimal target for
effective therapeutic intervention. The potential to regulate the part of the
pathway that causes a specific disease without impacting other parts of the
same pathway that perform other functions may allow us to develop drugs that
have fewer side effects than less specific drugs. Many intracellular targets
associated with gene regulation pathways are well suited for small molecule,
orally available drugs. In addition, we believe that understanding the
mechanism of action of drug candidates that act by regulating gene expression
may allow us to select clinical indications and design clinical trials that
have more predictable results than has typically been the case. Finally, gene
regulation is fundamental to the development or progression of most diseases
and, therefore, may have broad applicability.
Integrated Drug Discovery and Development Platform. We have developed a drug
discovery and development infrastructure that we believe positions us to become
a leading pharmaceutical company. Our drug discovery and development expertise
includes molecular biology, biochemistry, structural biology, chemistry,
pharmacology and clinical development. Our management team has extensive drug
discovery and development experience with large pharmaceutical companies. To
complement our internal capabilities, we collaborate with world-renowned
scientists and clinicians and with leading pharmaceutical companies. We believe
that our integration of biology, chemistry and pharmacology enhances our
ability to find novel gene regulating drugs and that our drug discovery and
development efforts are highly efficient and productive. To date, we have:
. identified numerous validated targets and other novel proteins that
regulate the expression of disease-causing genes;
30
<PAGE>
. established more than 80 biochemical and cell-based assays for high
throughput screening, known as HTS;
. conducted more than 15 million drug screens using a library of more than
500,000 distinct compounds and natural products;
. identified seven compounds that are early leads, seven compounds that are
being optimized by chemists, one compound that is in preclinical
development, one anti-cancer drug candidate for which we have filed an
IND and one anti-cancer drug candidate that is in phase 1 clinical
trials; and
. obtained a license for an anti-cancer drug candidate that we expect to
enter phase 2 clinical trials in 2000.
Clinical Candidates. We have commenced or are preparing for clinical trials
of three cancer drug candidates, lometrexol, T138067, which we refer to as T67,
and T900607, which we refer to as T607. Our most advanced drug candidate is a
novel antifolate called lometrexol, which we recently licensed from Eli Lilly.
The utility of antifolates as anti-cancer agents has been proven by
methotrexate, an antifolate drug that has been used extensively in the
treatment of several tumor types. We expect to commence phase 2 trials of
lometrexol in 2000. T67 acts on tubulin, the cellular target for the known
cancer agents Taxol and vincristine. In contrast to these drugs, T67 retains
its activity against tumor cells that are multiple drug resistant and is able
to cross the blood brain barrier. To date, 23 patients have been enrolled in
phase 1 trials of T67. Pending successful completion of these phase 1 trials,
phase 2 trials of T67 will be initiated in several tumor types, including brain
tumors. T607, an analog of T67, also targets tubulin and is active against
multiple drug resistant tumors. Animal studies indicate that T607 is
distinguished from T67 because T607 has a reduced ability to cross the blood-
brain barrier, which may make it suitable for the treatment of different tumor
types than T67. We recently filed an IND for T607.
Attractive Commercial Opportunities. Our broad range of programs includes
cancer, CMV, diabetes, obesity, inflammation, immune disorders,
hypercholesterolemia, bacterial diseases and a class of targets known as orphan
nuclear receptors, which offers potential opportunities to develop drugs for
many therapeutic indications. The significant unmet medical and quality-of-life
needs for these diseases represent large commercial markets. We intend to
commercialize drugs independently and through collaborations with
pharmaceutical partners, and to date we have retained significant rights to
independently market products resulting from most of our programs. The breadth
of our current activities and the potential for the application of our platform
to additional diseases reduces the risks associated with drug discovery,
development and commercialization.
Our Strategy
Our objective is to build a world-class pharmaceutical company that
discovers, develops and commercializes novel and superior drugs that act by
regulating gene expression. The key elements of our scientific and business
strategy to achieve our objective are:
Emphasize scientific excellence across our multidisciplinary drug discovery
and development platform. We intend to build on the excellence in biology
embodied in our target discovery, assay development and screening capabilities
by continuing to integrate high quality efforts in structural biology,
chemistry, pharmacology and preclinical and clinical development. We plan to
add management and technical expertise at each stage of our growth. Important
components of our strategy include entering into collaborations with leading
academic scientists and pharmaceutical companies and internally developing and
in-licensing state-of-the-art technologies as needed.
Focus on diseases representing large market opportunities with significant
unmet medical needs. Our drug discovery efforts generally target diseases that
represent large commercial opportunities and that are underserved by available
therapeutic alternatives. Shortcomings of currently available treatments may
include limited efficacy, side effects or method of delivery. In particular, we
believe that orally available drugs that treat disease with a high degree of
specificity without these shortcomings will have strong commercial potential.
31
<PAGE>
Develop orally available small molecule drugs. Our drug discovery and
development efforts focus on orally available small molecule drugs. The major
advantage of small molecule therapeutics is the potential for oral
administration. In addition, these drugs can be manufactured by conventional
methods, resulting in lower manufacturing costs and higher margins than for
other types of drugs, such as protein therapeutics.
Increase likelihood of commercial success through diversification. To reduce
the risks inherent in drug discovery and development and our reliance on any
one of our programs, we have diversified our drug discovery and development
efforts by pursuing a large number of diseases and multiple promising targets
and drug candidates for these diseases. Where appropriate, we intend to pursue
product candidates that act through mechanisms of action other than the
regulation of gene expression.
Sustain a pipeline of drug candidates and accelerate drug development. We
expect our productive and efficient drug discovery and development platform,
coupled with the breadth of our programs, to consistently yield a large number
of drug candidates. We subject each product candidate to rigorous preclinical
scrutiny and determine its mechanism of action before we enter clinical trials.
This enables us to obtain the best drug candidate for each indication and to
focus financial resources only on drug candidates that we believe are the most
likely to become drugs. We may be able to accelerate approval and
commercialization by developing a detailed understanding of our products'
characteristics, which may enable us to select optimal clinical indications and
design the most appropriate clinical trials. We intend to augment our internal
pipeline by obtaining licenses to promising clinical candidates.
Commercialize pharmaceuticals in selected markets. We intend to build a
world-class pharmaceutical company with the objective of bringing to market
novel and superior drugs that are proprietary to us. In North America, we
intend to develop a focused sales force to market products to specialty
physicians. We intend to seek corporate collaborations or joint ventures for
drugs prescribed by general practice physicians or a large number of
specialists. In addition, we also intend to continue to selectively collaborate
with pharmaceutical and biotechnology companies to accelerate product
commercialization in Asia and possibly Europe. Currently, six of our programs
are receiving funding from five corporate partners. We have retained worldwide
commercialization rights to our cancer, bacterial diseases and CMV programs and
North American commercialization rights in four of our externally funded
programs.
32
<PAGE>
Product Development
Our drug discovery and development system is broadly applicable to a wide
range of diseases. We have applied this system to diseases that represent large
medical markets with significant patient populations that are underserved by
current therapeutic products. Our pipeline includes two cancer drug candidates
in clinical testing, one cancer drug candidate for which an IND application has
been filed, one preclinical CMV drug candidate and 14 early and advanced drug
leads in our other programs. The following table summarizes key information in
our nine programs:
<TABLE>
<CAPTION>
Program Status (1) Key Achievements
- -------------------------------------------------------------------------------
<C> <C> <S>
Cancer
Lometrexol Preparing for phase 2 Licensed from Eli Lilly an
antifolate drug candidate
with phase 1 clinical
responses in a range of
human tumors.
T67 Phase 1 Discovered an agent that
binds to tubulin and
inhibits growth of multi-
drug resistant tumors in
animals.
T607 IND application filed Generated second-generation
analog of T67 that may have
advantages for treating
certain types of tumors.
- -------------------------------------------------------------------------------
CMV Preclinical Development Discovered compounds that
are orally active in animal
models of human CMV
infection and plan to file
an IND application in 2000.
- -------------------------------------------------------------------------------
Diabetes Lead Optimization Identified compounds with
activity in animal models
predictive of anti-diabetic
efficacy.
- -------------------------------------------------------------------------------
Obesity Lead Optimization Discovered a series of
compounds that increase the
level of circulating leptin.
- -------------------------------------------------------------------------------
Inflammation Lead Optimization Elucidated key gene
regulation pathways and
discovered numerous proteins
involved in inflammatory
gene regulation by
interleukin-1 and tumor
necrosis factor. Identified
a lead compound that
inhibits expression of
inflammatory response genes
in animal models.
- -------------------------------------------------------------------------------
Immune Disorders Lead Optimization Discovered and validated
human transcription factors
STAT6 and STAT4 as targets
for allergy/asthma and
autoimmune diseases,
respectively. Identified a
series of compounds that
inhibit STAT6.
- -------------------------------------------------------------------------------
Hypercholesterolemia Lead Optimization Identified lead compounds
that lower cholesterol in
animals. Discovered
regulatory pathways involved
in cholesterol metabolism.
- -------------------------------------------------------------------------------
Bacterial Diseases Lead Optimization Identified a series of
compounds that demonstrate
gram-positive antibacterial
activity and confirmed
protein target using genetic
techniques.
- -------------------------------------------------------------------------------
Orphan Nuclear Receptors Lead Optimization Discovered two nuclear
receptors. Developed novel
biochemical screening
technology to identify
nuclear receptor modulators.
Identified lead series and
initiated chemistry.
</TABLE>
- --------
(1) "Lead Optimization"
Ongoing chemistry effort to improve potency, toxicity,
specificity and/or other properties of drug leads.
Evaluation of drug leads in relevant models.
"Preclinical Development"
Pharmacology and toxicology testing in preclinical models
to gather data necessary to comply with applicable
regulatory protocols prior to submission of an IND
application to the FDA.
33
<PAGE>
Cancer
Cancer is a group of diseases characterized by uncontrolled growth and
proliferation of abnormal cells. This growth ultimately invades vital organs
and often results in death. The worldwide market for branded cancer drugs
totaled approximately $7.8 billion in 1998 and is projected to grow at an 8.5%
compound annual growth rate. Cancer is the second leading cause of death in the
United States, exceeded only by cardiovascular disease. In 1999, it is
estimated that 1.22 million people will be diagnosed with cancer, and more than
550,000 patients will die of cancer. The five-year survival rates for patients
with metastatic cancers, or cancers that have spread from the primary tumor,
are poor; for example: 13% for colorectal cancer, 12% for lung cancer and 21%
for breast cancer. These poor survival rates reflect the limitations of current
treatments and the fact that cancers develop resistance to currently available
treatments. In addition, current treatments are often associated with severe
side effects. As a result, there is a medical need for the development of more
effective and less toxic treatments.
We currently have three drug candidates in our cancer program.
Lometrexol. We have licensed an antifolate anti-cancer drug candidate known
as lometrexol from Eli Lilly. Antifolates, which disrupt the synthesis of the
building blocks of deoxyribonucleic acid, or DNA, have been validated for use
in the treatment of cancer. For example, methotrexate, which acts by a
mechanism of action similar to that of lometrexol, has been used extensively in
the treatment of breast, bladder and head and neck cancers. Eli Lilly conducted
phase 1 trials of lometrexol both with and without folic acid supplementation.
Several deaths were observed in phase 1 trials of lometrexol. However, patients
treated with lometrexol who received oral supplementation with folic acid
demonstrated greatly improved tolerance to the drug.
During the course of phase 1 clinical development, a total of five partial
responses and one complete response were observed in different tumor types and
in different centers. Partial responses were noted for patients with melanoma,
breast cancer, soft tissue sarcoma, ovarian cancer and non-small cell lung
cancer. Despite the fact that it is unusual to see complete responses in phase
1 trials because patients enrolling in these trials tend to be heavily pre-
treated and are typically at an advanced stage in the progression of their
disease, a complete response lasting more than 18 months was noted in a patient
with head and neck cancer.
We anticipate that we will commence phase 2 trials of lometrexol in 2000. We
have not yet selected the five or six tumor types to be treated during phase 2
trials, but we expect the trials will include melanoma and soft tissue sarcoma
patients. The primary endpoint of these studies will be efficacy, as assessed
by response rate.
T67. Our scientists have discovered T67, an anti-cancer compound that binds
irreversibly to tubulin, the cellular building block of microtubules, which are
essential to cell division. T67 disrupts microtubule function, causing the cell
to die and potentially resulting in tumor shrinkage. Since cancer cells divide
more rapidly than normal cells and microtubules are essential for cell
division, cancer cells are more sensitive than normal cells to treatment with
T67. This concept has been proven clinically by other tubulin-active agents
such as Taxol and vincristine; however, over time, many tumors become resistant
to these drugs.
T67 causes tumor shrinkage in a variety of human tumors implanted into mice.
T67 retains its activity against those tumors and cell lines that are MDR
positive. In contrast, these MDR positive cells and tumors were resistant to
Taxol and doxorubicin. T67 demonstrates enhanced activity when used in
combination with cisplatin against the MX-1 mammary tumor implanted into mice.
T67 is currently in phase 1 clinical trials. A total of four studies based on
varying dosing regimens are either ongoing or planned at major medical centers
in the United States. To date, 23 patients have been enrolled, and a dose-
limiting toxicity of neuropathy has been observed in one patient at the highest
administered dose. Additional patients will be enrolled at a lower dose level.
This lower dose results in drug levels that are sufficient to induce anti-tumor
activity in animals. Data from the phase 1 studies establishing a phase 2
infusion dose and schedule is expected to be available in
34
<PAGE>
2000. Assuming that a tolerable dose and schedule can be identified for repeat
administration, a number of phase 2 studies will then be initiated to determine
anti-tumor activity. One of these studies will be conducted in glioblastoma, a
type of brain cancer, exploiting the ability of T67 to cross the blood-brain
barrier. In the event that T67 has sufficient activity in refractory tumor
types for which no other treatment exists, T67 would be a potential candidate
for accelerated approval by the FDA.
T607. In September 1999, we submitted an IND application for T607, an analog
of T67. This drug also binds irreversibly to tubulin. Animal studies indicate
that T607 is different from T67 in that T607 may be given by rapid injection,
or bolus, and also has a reduced propensity to cross the blood-brain barrier.
This may be a desirable feature for treatment of peripheral tumors. Three
different dosing schedules of T607 will be evaluated in phase 1 studies.
Cancer Gene Discovery. We seek to discover cancer genes using a proprietary
technique known as representational difference analysis, or RDA. RDA works by
sampling DNA from healthy and diseased cells from the same person, and rapidly
comparing the samples to identify mutant cancer genes. RDA does not require
either prior hereditary clues or an extensive sample collection from high-risk
families that have a history of disease. Prior to the time we obtained a
license to RDA technology, RDA was utilized to isolate two tumor suppressor
genes, BRCA2 and PTEN.
CMV
CMV is a common virus that causes serious infection in patients with
compromised or immature immune systems, particularly transplant recipients,
AIDS patients and infants born to CMV-infected mothers. In the bone marrow and
solid organ transplant population, CMV can cause life-threatening pneumonia. In
the AIDS patient population, retinitis caused by CMV is the primary cause of
blindness. CMV infection in newborns can cause death or severe neurological
damage, typically deafness. In 1997, the incidence of CMV disease worldwide
totaled approximately 31,000 patients, and worldwide revenues for anti-CMV
drugs totaled approximately $143 million and are projected to grow at a 6.5%
compound annual growth rate. Current therapy for CMV disease is associated with
significant toxicity and poor oral bioavailability. These features limit the
utility of the current drugs in preventative therapy in patients at high risk,
such as patients receiving bone marrow transplants, and for treatment of active
infection in newborns.
We have identified a class of potent and orally available anti-CMV compounds
that interfere with the replication machinery of CMV. We believe that this
class of compounds is the first to target a specific CMV-encoded enzyme that is
necessary for initiating the synthesis of viral DNA. This class of compounds is
efficacious against clinical CMV taken from patients who have developed
resistance to current therapies. Animal toxicity studies to date suggest that
this class of compounds will be safer than current therapies. Because they can
be taken orally, our anti-CMV drug candidates may also be practical for use in
preventative settings, such as in transplant patients.
Preclinical testing of several advanced candidates is underway. We anticipate
filing an IND application on a lead compound in 2000. According to the terms of
our previous collaboration, Merck has the option to acquire this compound in
exchange for a fee, reimbursement of our costs incurred in connection with this
compound to date and milestones and royalties on product sales.
Diabetes
Diabetes mellitus is a chronic, progressively debilitating disease that
affected approximately 124 million people worldwide in 1997. Type II diabetes
represents 90% of the total population of people with diabetes, and its
prevalence is increasing as a function of the aging population and the
increasing population of obese people in the world. Worldwide sales for oral
type II diabetes drugs in 1998 totaled approximately $3.0 billion and are
expected to grow at a 35% compound annual growth rate. Type II diabetes usually
develops after the age of 40 and is characterized by the body's inability to
respond to insulin. Recently, a new class of drugs has been
35
<PAGE>
introduced that permit type II diabetics to make better use of the insulin
produced by their bodies or taken by injection. Members of this class,
including the drug Rezulin, have proven to be moderately efficacious for the
treatment of type II diabetes but have also been associated with undesirable
side effects, such as liver toxicity and weight gain. These side effects limit
the number of eligible patients and increase the costs associated with
monitoring for adverse effects after initiation of treatment.
Our scientists have implemented a biochemical assay that employs the same
transcription factor that is targeted by Rezulin. Current efforts are focused
on optimizing a lead series of potent and orally available agents identified in
this assay that improve insulin sensitivity and lower blood glucose in animals.
We believe that this series offers the potential for an anti-diabetes drug with
improved profile relative to existing agents. Animal studies and a chemistry
effort to clarify and exploit these advantages are in progress.
We have collaborated with JT in obesity/diabetes research since September
1996.
Obesity
Body weight is determined and regulated by a variety of genetic and
environmental factors. Weight change is influenced by eating behavior and by
energy utilization as determined by exercise and metabolic rate. Obesity
increases the risk of serious human diseases, including type II diabetes,
coronary artery disease and hypertension. At least 70 million people in the
United States are currently classified as obese. There is a large, unmet need
for a treatment for obesity. Recently, two drugs have been approved for this
disease, Xenical and Meridia, and no other drugs are approved specifically for
obesity. Since the beginning of 1999, these products generated combined
revenues of more than $500 million.
We have a robust program that currently is focused upon three pathways
involved in obesity. The first of these pathways involves the obese, or Ob,
gene. The Ob gene encodes the protein leptin, is expressed exclusively in fat
tissue and is regulated by diverse stimuli. When administered intravenously to
obese mice, the leptin protein results in significant weight loss. Our
scientists have established an assay that uses a genetically altered fat cell
line that is sensitive to stimuli responsible for controlling Ob gene
expression, making it ideally suited for use in assays to identify compounds
that will regulate the Ob gene. We have identified a series of compounds in
this assay that increase leptin in the blood of laboratory animals. Further
studies of the mechanism by which these compounds regulate Ob gene expression
are in progress.
The second pathway we are evaluating involves the family of proteins known as
uncoupling proteins, or UCPs. Studies have shown that there is correlation
between metabolic rate and the ability to turn food calories into heat instead
of storing food calories in fat cells. The ability to dissipate food calories
as heat in turn relies on UCPs. UCPs play a major role in determining metabolic
rate and are an important class of potential targets for the treatment of
obesity. Our scientists have established a panel of biochemical and cell-based
assays directed towards the identification of small molecule compounds that
selectively modulate the activity of UCPs. HTS using these proprietary assays
is ongoing.
A third area of obesity research focuses on pathways involved in preventing
the creation of fat cells. In cell culture experiments using a compound we have
identified, our scientists have demonstrated that inhibiting a transcription
factor known as PPARg prevents the formation of fat cells.
We have collaborated with Knoll in obesity research since November 1998. We
have collaborated with JT in obesity/diabetes research since September 1996.
Inflammation
Under normal circumstances, inflammation is an important defense response to
injury and infection. An early step in the inflammatory response is the
recruitment of white blood cells, or leukocytes, from the circulatory system to
damaged or infected tissue. Excessive or prolonged accumulation of leukocytes
can lead to inflammatory conditions, including asthma, inflammatory bowel
disease, multiple sclerosis, psoriasis,
36
<PAGE>
rheumatoid arthritis and septic shock. In 1998, a total of approximately 28
million individuals in the United States suffered from these diseases.
Worldwide sales of non-steroidal anti-flammatory drugs, or NSAIDs, totaled
approximately $6.0 billion in 1998 and are expected to grow at a 4% compound
annual growth rate. An estimated 400,000 individuals in the United States and
Europe have Crohn's disease, a serious chronic inflammatory disease of the
small and large intestine.
The inflammatory messengers known as tumor necrosis factor, or TNF, and
interleukin-1, or IL-1, act by binding to specific cell surface receptors that,
in turn, set off signaling events culminating in the expression of many
inflammatory response genes. The crucial roles played by TNF and IL-1 in
several inflammatory disease states have been clearly demonstrated by studies
utilizing antibodies and soluble receptors that neutralize TNF and IL-1
activities. The efficacy demonstrated by Enbrel, a soluble TNF receptor, has
validated this concept for the treatment of rheumatoid arthritis. We believe
that an orally available drug of comparable efficacy would represent formidable
competition for drugs that must be injected, such as Enbrel.
Several key inflammatory response genes are regulated by a single
transcription factor, NF-kB. Our scientists have discovered numerous novel
regulatory proteins in the gene regulation pathways leading from the TNF and
IL-1 receptors and have elucidated their roles in NF-kB activation. On the
basis of these landmark discoveries, our scientists are recognized as leaders
in this field of research.
Based upon this research, our scientists have determined that some of these
regulatory proteins appear to be exclusively dedicated to NF-kB activation and
the inflammatory response and therefore represent ideal drug discovery targets.
Several of these targets are being employed in HTS assays, and a lead compound
that inhibits one of the key components involved in NF-kB activation is
currently undergoing optimization. We believe that our discoveries and the
expertise we have developed in this disease area place us in a leading position
to identify the next generation of important anti-inflammatory drugs.
We have collaborated with Roche Bioscience in inflammation research since
July 1997.
Immune Disorders
Many diseases result from defects in the immune system, including allergic
rhinitis, asthma, type I diabetes and rheumatoid arthritis. It is estimated
that a total of approximately 55 million people in the United States suffered
from these common immune disorders in 1998. Respiratory therapies including
anti-asthmatic and allergy relief medications totaled approximately $11.2
billion in worldwide revenues in 1998 and are expected to grow at a 16%
compound annual growth rate.
Our scientists have discovered two human transcription factors, STAT6 and
STAT4, that are key proteins involved in immune regulation. When
overstimulated, these proteins are instrumental in the development of allergy
and asthma in the case of STAT6, and in the development of autoimmune diseases
such as rheumatoid arthritis and inflammatory bowel disease in the case of
STAT4. Experiments in animals have demonstrated that disabling these proteins
is safe and blocks inappropriate immune responses. These results demonstrate
that STAT6 and STAT4 are excellent drug discovery targets. Our goal is to
discover drugs capable of selectively blocking STAT6 or STAT4 function.
Toward this end, we developed cell-based assays for HTS that enable the
identification of compounds that interfere with functions controlled by STAT
proteins. We have also developed biochemical assays for HTS that permit the
identification of compounds that will inhibit STAT protein activation. Finally,
our scientists have identified short peptides, or protein fragments, that
inhibit STAT function. These peptides have served as leads for a chemistry
optimization program and have also enabled the synthesis of a drug candidate
that completely inhibits STAT6 function in cells, validating the underlying
basis of this approach. The structures of several proprietary STAT6 inhibitors
bound to specific sites on the target protein have been determined by X-ray
crystallography and are being utilized to guide our chemistry effort.
We have collaborated with Taisho in immune disorders research since April
1995.
37
<PAGE>
Hypercholesterolemia
Cardiovascular disease is the leading cause of death in the developed world.
The most clinically significant diseases, angina and myocardial infarction, are
causally related to elevated levels of low-density lipoprotein, or LDL,
cholesterol in the blood stream. The risk of death begins to increase when LDL
cholesterol levels rise above 126 mg/dl and progressively worsens with higher
levels. A total of approximately 39 million people in the United States have
LDL cholesterol levels above 168 mg/dl.
To date, statins are the most successful drugs for lowering LDL cholesterol
levels. Worldwide revenues for statins totaled approximately $9.6 billion in
1998 and are expected to grow at a 20% compound annual growth rate. Statins
lower LDL cholesterol levels in the bloodstream by indirectly increasing the
number of LDL receptors on the surface of cells. Despite the success of
statins, there is a significant patient population, particularly those
individuals having substantially elevated blood cholesterol levels, for which
these drugs alone are insufficient to achieve the desired efficacy. We believe
that a drug that either directly increases expression of LDL receptors or
induces cholesterol clearance mechanisms may show improved efficacy relative to
the current agents.
Toward this end, we have established proprietary assays for HTS that utilize
liver cells to measure the compound-induced activity of the LDL receptor gene.
Using this approach, we have identified compounds that lower serum cholesterol
in animal models. This class of compounds is the focus of a chemistry
optimization effort.
Our scientists have also extended the understanding of the mechanism
regulating an important enzyme that is responsible for the body's clearance of
cholesterol. These scientists have discovered important transcription factors
involved in the process. They have also identified a natural receptor for bile
acids, which are the end products of cholesterol metabolism and suppress the
expression of this enzyme. We have established proprietary biochemical assays
for HTS to detect inhibitors of this bile acid receptor and are presently
evaluating the therapeutic potential of early leads derived from the screening
effort.
We have a research collaboration with Professors Michael Brown and Joseph
Goldstein of the University of Texas Southwestern Medical School at Dallas, to
develop a detailed understanding of the intracellular events controlling
cholesterol metabolism. Professors Brown and Goldstein won a Nobel Prize for
their work in this area. This collaboration is currently focused upon
elucidating mechanisms involved in regulation of the transcription factors that
have been shown by Brown and Goldstein to activate the LDL receptor gene.
Efforts in this area have led to the establishment of a unique cell-based assay
for HTS to identify compounds that modulate a novel target discovered by Brown
and Goldstein. Compounds that are active in this assay are expected to lead to
increased expression of the LDL receptor gene. We have also established a
biochemical assay to complement the ongoing cell-based screening efforts. We
have been collaborating with Professors Brown and Goldstein since October 1992
and have the exclusive right to license the results of the Brown and Goldstein
research in this area.
We have collaborated with Sumitomo in hypercholesterolemia research since
January 1995.
Bacterial Diseases
The extensive use of antibiotics during the past three decades has
contributed significantly to the emergence of antibiotic-resistant strains of
bacteria. Worldwide revenues for broad-spectrum penicillins totaled
approximately $3.8 billion in 1998 and are expected to grow at a 4% compound
annual growth rate. Despite the wide variety of classes of antibiotics
currently available for clinical use, patients can die from an infection with
any one of multiple drug-resistant forms of bacteria, including Mycobacterium
tuberculosis, Staphylococcus aureus or Enterococcus faecalis. With an estimated
two million patients developing hospital-acquired infections in the U.S. each
year and 90,000 deaths resulting from those infections, the need to overcome
evolving bacterial resistance is the major driving force behind ongoing efforts
to discover and develop chemical classes of antibacterial agents for clinical
use.
38
<PAGE>
We have focused our efforts on a number of cellular processes essential for
bacterial growth. RNA polymerase is a bacterial enzyme that is a proven
antibacterial target, because the potent antibiotic rifampicin inhibits a
subunit of this enzyme. The clinical utility of rifampicin, however, is
diminished by the rapid emergence of drug resistance. We have identified a
novel class of inhibitors of RNA polymerase that have antibacterial activity
against rifampicin-resistant bacteria. The current focus of this program
involves a lead candidate that is undergoing chemistry optimization.
Orphan Nuclear Receptors
Nuclear receptors are a family of transcription factors that play important
roles in nearly all aspects of development and adult physiology and therefore
have relevance to multiple disease indications. These receptors are activated
by naturally occurring hormones known as ligands, and many have therefore been
discovered to be targets for important orally available drugs, including
Premarin for estrogen replacement, levothyroxine, or Synthroid, for
hypothyroidism, tamoxifen for breast cancer, Pulmicort for asthma and Rezulin
for type II diabetes. Worldwide revenues for these five drugs totaled an
aggregate of more than $4 billion in 1998.
Until the natural ligand corresponding to a nuclear receptor is identified,
members of the nuclear receptor family are classified as orphan nuclear
receptors, or ONRs. Of the nearly 50 nuclear receptors identified to date,
approximately two-thirds are ONRs. Although the exact functions of these ONRs
are not known, the fact that nuclear receptors are biologically important and
are activated by small molecules makes this an attractive opportunity for
discovery of important new medicines. As an example of the commercial potential
of ligands for ONRs, it has recently been discovered that the antidiabetic drug
Rezulin targets the ONR known as PPARg.
Our scientists are using proprietary screens to enable the discovery of both
stimulators and inhibitors for many ONRs and have discovered two novel human
ONRs. We are applying multiple technologies, such as gene knock-out and X-ray
crystallography, to both elucidate function and guide drug discovery in this
area. We have initiated several assays for HTS, and the first leads are
undergoing functional characterization in both cell-based and animal studies.
We have collaborated with JT in ONR research since September 1998.
39
<PAGE>
Drug Discovery and Development
We believe that our integrated drug discovery and development platform places
us in a leading position to discover, develop and commercialize novel, orally
available drugs. The following chart illustrates our drug discovery and
development system:
[FLOW CHART APPEARS HERE]
40
<PAGE>
Target Identification and Validation
A key focus of our scientists is to establish a link between specific genes
and diseases. Following the identification of such a link, we seek to identify
and characterize important proteins and regulatory pathways responsible for the
expression of these genes. Our ability to identify multiple targets within a
gene regulatory pathway or subpathway increases the likelihood that we will be
able to identify the optimal target for therapeutic intervention.
Our scientists use a combination of biochemical, molecular biological and
genetic approaches to discover novel regulatory proteins. Once a regulatory
protein has been identified, we clone and express the gene that encodes that
protein. Cloning the regulatory protein allows us to conduct target validation,
which is the biological evaluation of the protein's specific function in the
disease process. We evaluate the physiological function of potential drug
targets we discover by manipulating their expression in cells, by mapping the
pathways by which they interact with other regulatory proteins to regulate gene
expression and by understanding the cell types in which they are expressed.
This information can be critical to assessing the suitability of a gene
regulatory protein as a target for pharmaceutical intervention.
In our target discovery efforts, we also search publicly available genome
databases, including data derived from the Human Genome Project. In the cancer
area, we seek to discover novel cancer genes using RDA. Some of these cancer
genes may be targets for small molecule intervention.
Where the target validation process indicates that a particular regulatory
protein may not be the most appropriate molecular target for assay development,
we use cellular and molecular biology studies to identify other proteins
involved in the same biochemical pathway(s) that may be better molecular
targets for drug discovery and therapeutic intervention. The target validation
process also provides opportunities to discover additional components of the
cellular pathway that may lead to identification of additional drug discovery
targets.
Primary Assays
Primary assays specific to each target or program are used to rapidly search
our compound screening library for chemical structures that hold promise for
further study, or hits. We design and implement two main types of primary
assays as described below.
Biochemical Assays. Our scientists use the results of target identification
efforts to craft specialized biochemical assays in which one or more target
proteins are reconstituted in a system that closely mimics their native
environment. At this stage, the assay is adapted to an automated format to
allow for HTS. Biochemical assays provide several advantages in the search for
new drugs. In a biochemical assay, the components and mechanism of action of
the drug candidates are already known. This precision minimizes inaccurate
results and false-positive readings, thereby accelerating the discovery
process. Additionally, the identification of lead compounds using biochemical
assays bypasses the potential problems of false-negative readings associated
with the ability of a compound to penetrate a cell or the intrinsic ability of
cells to break down chemicals before they reach a target. Once hits are
identified, these properties can be subsequently manipulated through chemistry.
Since biochemical assays are usually highly amenable to HTS, results can be
obtained rapidly and reproduced consistently. We will perform HTS with
approximately 35 biochemical assays in 1999.
Cell-based Assays. HTS using intact cell-based assays complements and extends
our biochemical screening capabilities. A major advantage of cell-based assays
over biochemical assays is that cell-based assays allow analysis of sample
activity in an environment similar to the one in which a drug would act. In
addition, the toxicity and ability to penetrate into the cell can be assessed.
In contrast to biochemical assays, where the target protein for a drug is
known, cell-based assays offer an additional opportunity to discover drugs
interacting with novel, previously unknown, target proteins. We will perform
HTS with approximately ten cell-based assays during 1999.
41
<PAGE>
High Throughput Screening
We have developed innovative hardware and software systems to automate the
entire drug screening process, from the preparation of solutions of the test
substances for screening to the analysis of the data generated from the assays.
In our robotic screening facility, we can annually generate more than eight
million sample evaluations in our assays. Our robotic systems can be configured
to run a wide variety of assay formats. Our data management system stores the
data for hundreds of thousands of samples, each tested in dozens of assays.
This relationally integrated system manages sample inventories through a bar
code system, configures plates for a wide variety of experiments and
coordinates the screening of large numbers of plates across multiple assays.
The data management system electronically recalls and presents data in formats
that allow rapid recognition of active compounds or extracts. This gives each
of our scientists the ability to analyze the results for a given assay within
the context of the entire drug discovery database, including the results of all
past screening assays.
Screening Library
Access to large libraries of highly diverse molecular structures is an
important aspect of our drug discovery efforts. We currently have a library of
over 500,000 synthetic compounds and natural product extracts. This library
includes in excess of 300,000 individual synthetic compounds. The screening
collection also includes combinatorial chemical libraries that contain in
excess of 200,000 synthetic compounds incorporating desirable molecular
features. Our library includes a natural product collection that currently
numbers in excess of 118,000 independent samples derived from microbial, plant
and marine sources. This library is supplemented with chemical libraries
provided by our collaborators for specific programs.
Secondary Assays
Secondary assays are designed to eliminate those "hits" that lack potency or
specificity, or have unwanted characteristics. If a compound survives the
secondary assay screening process, it is then subjected to further testing and
ultimately chemistry optimization. Generally, hits with promising results in
animal models and desirable chemical characteristics become lead compounds.
Lead Optimization
Regardless of whether a lead compound is obtained from biochemical or cell-
based assays, the pharmaceutical properties of that compound must be improved
before clinical development. This is the process of lead optimization.
Chemistry. We carry out traditional structure-activity relationship studies
of potential lead compounds and conduct lead optimization utilizing chemistry
techniques to synthesize new analogs of a lead compound with improved
properties. Our natural products chemists handle the separation, isolation and
structure elucidation of bioactive components derived from our natural product
extracts. In addition, we have computational chemistry capabilities, including
molecular modeling, to support lead optimization.
We complement this activity with directed combinatorial chemistry, which
enables the synthesis of thousands of chemical analogs of lead compounds
quickly. We continue to expand our efforts in this area as we believe that the
continued development of combinatorial chemistry technology will streamline the
ability of our chemists to improve upon promising lead compounds and facilitate
the expansion of our proprietary screening library.
Structural Biology. Structural biology techniques aid in drug design and
optimization by providing molecular "snapshots" that allow scientists to
visualize the interactions between a drug or lead and its protein target. These
interactions are analogous to the fit between a lock and a key. Nuclear
magnetic resonance, or NMR, spectroscopy and X-ray crystallography comprise the
essential techniques of structural biology. We have
42
<PAGE>
established state of the art laboratories that allow us to readily utilize
these powerful tools for lead optimization. Utilizing structural information,
chemists can design and synthesize new analogs of lead compounds that are
likely to have a better fit with the target protein, and hence have greater
potency. We are applying structural biology broadly and have ongoing efforts in
many of our drug discovery programs.
Pharmacology and Preclinical Development
We believe that the rapid characterization and optimization of lead compounds
identified in HTS will generate high-quality preclinical development
candidates. Our pharmacology and preclinical development group facilitates lead
optimization by characterizing lead compounds with respect to pharmacokinetics,
potency, efficacy and selectivity. The generation of proof-of-principle data in
animals and the establishment of standard pharmacological models with which to
assess lead compounds represent integral components of lead optimization. As
programs move through the lead optimization stage, our pharmacology and
preclinical development group supports our chemists and biologists by
performing the necessary studies, including toxicology, for IND application
submissions.
Clinical Development
We have assembled a team of experts in drug development to design and
implement clinical trials and to analyze the data derived from these studies.
The clinical development group possesses expertise in project management.
Research and Development Expenses
Our research and development expenses were $21.0 million for the six months
ended June 30, 1999, $33.3 million in 1998, $26.5 million in 1997 and
$18.6 million in 1996.
Corporate Collaborations
To assist in product commercialization and fund research and development
activities, we have established and will continue to pursue corporate
collaborations with selected pharmaceutical and biotechnology companies. We
currently have corporate collaborations in six of our research programs: Knoll
relating to obesity; JT relating to orphan nuclear receptors; Roche Bioscience
relating to inflammation; JT relating to obesity/diabetes; Taisho relating to
immune disorders; and Sumitomo relating to hypercholesterolemia. As of June 30,
1999, we had received a total of $108.8 million, including $95.8 million in
research funding and $13.0 million from equity purchases, from these
collaborators as well as under a prior alliance with Yamanouchi that was
terminated by Yamanouchi in November 1996 and a prior alliance with Merck that
was terminated by Merck in March 1999. In addition, we have a number of
scientific collaborations with academic and medical institutions and
biotechnology companies under which we have in-licensed technology. We intend
to pursue further collaborations as appropriate.
Our corporate collaboration agreements generally contain the following terms.
Every corporate collaboration agreement, except the agreement with Knoll,
provides that each party will retain ownership of all inventions and any
related patents made solely by its employees during the course of the
collaboration, except as limited by each party's license rights described
below. In every corporate collaboration agreement, we have agreed not to
conduct research in specified areas, independently or with any commercial third
party, that is in the same field and in the same geographical territory as that
covered by the corporate collaboration agreement.
43
<PAGE>
Set forth below is a table summarizing the economic rights currently held by
us and our corporate collaborators in each of our programs and additional
details relating to specific corporate collaboration agreements.
<TABLE>
<CAPTION>
Economic Rights Holder
---------------------------------------------------------------------------------
Corporate
Program Collaborator North America Europe Asia (2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cancer (1) -- Tularik Tularik Tularik
- -------------------------------------------------------------------------------------------------------------------
CMV Merck (option) Tularik Tularik Tularik
- -------------------------------------------------------------------------------------------------------------------
Diabetes (certain JT Profit split Profit split Profit split
targets)
- -------------------------------------------------------------------------------------------------------------------
Obesity (certain Knoll Knoll (Royalties shared Knoll (Royalties shared Profit split (with JT)
targets) with JT) (3) with JT) (3)
- -------------------------------------------------------------------------------------------------------------------
Obesity (certain JT Profit split Profit split Profit split
targets)
- -------------------------------------------------------------------------------------------------------------------
Inflammation
Inflammatory bowel Roche Bioscience Tularik (Royalties to Tularik (Royalties to Tularik (Royalties to
disease, skin diseases Roche Bioscience) Roche Bioscience) Roche Bioscience)
and eye diseases
Other indications (3) Roche Bioscience Roche Bioscience Roche Bioscience Roche Bioscience
(Royalties to Tularik) (Royalties to Tularik) (Royalties to Tularik)
- -------------------------------------------------------------------------------------------------------------------
Immune Disorders Taisho Tularik Tularik Taisho (Royalties
(certain targets) to Tularik) (3)
- -------------------------------------------------------------------------------------------------------------------
Hypercholesterolemia Sumitomo Tularik Tularik Sumitomo (Royalties
(certain targets) to Tularik)
- -------------------------------------------------------------------------------------------------------------------
Bacterial Diseases -- Tularik Tularik Tularik
- -------------------------------------------------------------------------------------------------------------------
Orphan Nuclear Receptors JT Profit split Profit split Profit split
</TABLE>
(1) We have agreed to pay Eli Lilly a royalty and to make milestone payments on
sales of lometrexol, as described below.
(2) Composition of Asian territory varies by agreement.
(3) Also includes milestone payments.
Knoll AG (Obesity)
Effective November 1998, we established a five-year research collaboration
with Knoll to discover, develop and market compounds that act on specified
obesity-related targets. Under the collaboration agreement, Tularik has
established assays for regulators of gene expression for these target genes.
Knoll and Tularik are each to provide compound libraries, conduct screening and
provide expertise to support biology, pharmacology and chemistry for identified
lead compounds.
Once the parties select a compound for preclinical testing in the treatment
or prevention of obesity, Knoll has the right to enter into a separate license
agreement granting Knoll exclusive rights to develop, manufacture and sell the
compound in countries other than in specified Asian countries for indications
related to obesity. Such license would survive termination of the research
portion of the collaboration, and require Knoll to pay to us milestones and
royalties. Each party has certain rights to develop compounds identified during
the course of performance of the research collaboration for indications and
uses other than obesity, subject to the payment to the other party in certain
circumstances of a royalty on product sales. The collaboration agreement grants
us exclusive rights under collaboration technology and nonexclusive rights
under specified Knoll technology to develop, manufacture and sell obesity
products in specified Asian countries, subject to the payment of royalties
44
<PAGE>
to Knoll on sales of products if we obtain a license under applicable Knoll
technology. Knoll has a right of first refusal to obtain Asian rights in the
event that JT's rights terminate or expire. The rights retained in specified
Asian countries are subject to the JT obesity/diabetes agreement.
Knoll may terminate the collaboration agreement on the third or fourth
anniversary of the effective date upon prior written notice. Either party may
terminate the agreement at any time upon a material breach by the other party
of its obligations under the agreement. When the research collaboration
terminates, each party will retain rights to technology invented by it during
the collaboration or contributed by it to the collaboration, subject to the
rights and licenses described above. The parties would cross license to each
other the right to commercialize products already identified in the program.
Japan Tobacco, or JT (Orphan Nuclear Receptors)
Effective September 1998, we established a five-year collaboration with JT to
discover, develop and market compounds that act by regulating orphan nuclear
receptors. We have developed assays and screened library compounds against a
number of orphan nuclear receptors. Both parties will participate in chemistry
and other preclinical activities for identified lead compounds.
The collaboration is structured as a contractual joint venture in which both
expenses and profits on a worldwide basis will be split between Tularik and JT.
We retain exclusive marketing and sales rights in the United States and Canada.
JT retains exclusive marketing and sales rights in Japan and Korea. JT and we
jointly determine marketing strategy in other countries. JT will be required to
provide funding for our research efforts and to make benchmark payments to us
based on clinical progress.
The research collaboration may be terminated by JT at the end of the third
and fourth years of the five-year research collaboration, on prior written
notice. Either party may elect to terminate its participation in the co-
promotion of products upon prior written notice to the other party, in which
case the other party may exclusively commercialize such product subject to the
payment of a royalty to the party that elects not to participate in co-
promotion. Either party may terminate the agreement at any time upon a material
breach by the other party of its obligations under the agreement.
Roche Bioscience (Inflammation)
We established a five-year research and development collaboration with Roche
Bioscience in July 1997 to discover, develop and market anti-inflammatory gene
regulating drugs.
The agreement provides that we will establish assays for particular targets
within these signaling pathways and conduct HTS of compounds from the Roche
Bioscience and Tularik libraries. Roche Bioscience provides expertise and
funding to support molecular structure validation and chemistry. Roche
Bioscience has exclusive, worldwide manufacturing and marketing rights to
develop and commercialize identified compounds resulting from the research
program for specified indications. Roche Bioscience is obligated to pay us
benchmark payments based on clinical progress and royalties on sales of these
compounds for the Roche Bioscience indications. We have exclusive, worldwide
manufacturing and marketing rights to develop and commercialize other compounds
resulting from the research program for other specified indications. We are
obligated to pay Roche Bioscience royalties on sales of these compounds for
indications we have retained. Our retained indications include inflammatory
bowel disease, as well as eye and skin diseases. Tularik and Roche Bioscience
are responsible for funding preclinical testing and clinical development of
compounds for their respective indications.
Roche Bioscience retains rights of first negotiation and of first refusal to
develop and commercialize various types of compounds identified both within and
outside the scope of the collaboration.
Roche Bioscience may terminate the research collaboration at the end of the
third year of the five-year research collaboration, on prior written notice, if
the then current research plan does not provide opportunities
45
<PAGE>
for new products or if we have not discharged our obligations under the
research collaboration. For a specified period at the conclusion of the
collaboration, either party may commercialize compounds resulting from the
research program for all indications, subject to the payment of royalties on
sales of the compound. The first party to commence preclinical development of a
compound receives exclusive commercialization rights to the compound and must
pay the other party royalties on the compound and, in the case of compounds
commercialized by Roche Bioscience, benchmark payments. After the specified
period, the first party to commence preclinical development of a compound
resulting from the research program receives exclusive commercialization rights
to the compound and may commercialize the compound without paying royalties to
the other party. Either party may terminate the agreement at any time upon a
material breach by the other party or in connection with the other party's
bankruptcy.
JT (Obesity/Diabetes)
We established a five-year collaboration with JT in September 1996 to
research and develop products that regulate expression of genes implicated in
obesity and diabetes. The collaboration was amended in September 1998 and
currently addresses three gene regulatory pathways involved in obesity and
diabetes. We have developed assays and screened library compounds against a
number of obesity and diabetes targets. Both parties will participate in
chemistry and other preclinical activities for identified lead compounds.
The collaboration is currently structured as a contractual joint venture in
which both expenses and profits on a worldwide basis will be split between JT
and us. We retain exclusive marketing and sales rights in the United States and
Canada (with the exception of those obesity targets that have been committed to
Knoll). JT retains exclusive marketing and sales rights in Japan and Korea, and
JT and we will jointly determine a sales and marketing strategy other than for
those countries in which Knoll may have rights to products that are active
against specified targets. JT will be required to provide funding for our
research efforts and to make benchmark payments to us based on clinical
progress.
The research collaboration may be terminated by JT at the end of the fourth
year of the five-year research collaboration, on prior written notice. Either
party may elect to terminate its participation in the co-promotion of products
upon prior written notice to the other party, in which case the other party may
exclusively commercialize such product subject to the payment to the party
electing not to co-promote of a royalty on sales of such product. Either party
may terminate the agreement at any time upon a material breach by the other
party of its obligations under the agreement.
Under the terms of a related stock purchase agreement, JT purchased 600,000
shares of Series F Preferred Stock at $10.00 per share in September 1996, for
an aggregate purchase price of $6.0 million.
Taisho Pharmaceutical Co. (Immune Disorders)
Effective April 1995, we established a five-year research and development
collaboration with Taisho focused on therapeutic modulation of the human immune
function. In January 1998, the parties extended the alliance for an additional
year. The goals of the research collaboration are to identify and develop
compounds that inhibit or promote the activity of STAT6 and STAT4.
Provided the research collaboration continues for the full six-year term,
Taisho will have exclusive rights to manufacture and sell products resulting
from the collaboration for therapeutic modulation of immune function in Japan
and in specified other Asian countries. Taisho will be required to make
benchmark payments to us based on clinical progress and royalty payments based
on sales in Taisho's territory. We will have exclusive rights in the rest of
the world, without any payment obligation to Taisho, unless the research
collaboration terminates prior to the full six-year term for our default under
the agreement or bankruptcy.
Taisho has the right to terminate the collaboration with written notice
before the commencement of the sixth year. In this event, we will have
exclusive, worldwide, royalty-free rights to all products identified in the
46
<PAGE>
collaboration. Either party may terminate the agreement at any time upon a
material breach by the other party of its obligations under the agreement or
upon the other party's bankruptcy.
Sumitomo Pharmaceuticals Co. (Hypercholesterolemia)
Effective January 1995, we established a five-year research and development
collaboration with Sumitomo to discover, develop and market compounds that act
to upregulate the gene encoding the low density lipoprotein, or LDL, receptor
and thereby lower serum LDL cholesterol. Under the collaboration agreement, we
have established assays for upregulators of LDL receptor gene expression.
Sumitomo and Tularik are each to provide compound libraries, conduct screening
and provide expertise to support biology, pharmacology and chemistry for
identified lead compounds.
Sumitomo has the right to enter into a license agreement granting it
exclusive rights to develop, manufacture and sell in specified Asian countries
any compound selected for preclinical testing during the term of the
collaboration or during a specified period after expiration or termination of
the research program. Sumitomo must make benchmark payments to Tularik, and if
it obtains a license, as described above, royalty payments based on sales of
product in specified Asian countries. The collaboration agreement grants us
exclusive rights to develop, manufacture and sell licensed products in the rest
of the world, without payment obligation to Sumitomo. The license to Tularik
and the license to Sumitomo, if any, would survive termination of the research
portion of the collaboration, which we expect to terminate in January 2000 at
the expiration of the five-year term. When the research collaboration
terminates, each party will retain rights to technology invented by it during
the collaboration or contributed by it to the collaboration, subject to the
foregoing licenses. Any compound conceived during the research period and
reduced to practice within a year of termination will revert to us if not
licensed by Sumitomo within the specified period after the termination of the
research collaboration.
Under the terms of a related stock purchase agreement, Sumitomo purchased
400,000 shares of our Series E Preferred Stock at $7.50 per share in February
1995 for an aggregate purchase price of $3.0 million.
Other Agreements
Eli Lilly (lometrexol)
Effective September 24, 1999, we executed a license agreement with Lilly
under which we obtained an exclusive, worldwide, royalty-bearing license to
make, use and sell pharmaceutical products containing a compound known as
lometrexol, and purchased related inventory. We would owe to Lilly milestones
and royalties upon successful commercialization of lometrexol. Lilly filed an
IND application for lometrexol, a treatment for cancer, in August 1988, a
Clinical Trial Exemption for the United Kingdom in June 1991 and conducted
phase 1 trials of lometrexol in cancer patients in the United States and
Europe. Under the agreement, Lilly granted us a license under Lilly's
proprietary technology relating to lometrexol, and also a sublicense under the
exclusive license granted to Lilly by Princeton University relating to
lometrexol. Lilly has specified obligations under the agreement to maintain the
license from Princeton. Lilly has a right to match the material terms of any
offer made by a third party for commercialization of lometrexol products.
We may terminate the agreement with Lilly upon written notice. Lilly may
terminate our license in specified major countries if we fail to use reasonable
diligence to develop lometrexol products in such countries, and may terminate
the agreement if we fail to use appropriate diligence to develop lometrexol
products in a predetermined number of major countries. Each party has the right
to terminate the agreement if the other party becomes insolvent or fails to
cure a breach of the agreement. If Lilly terminates the agreement, Lilly
obtains a nonexclusive, royalty-bearing, worldwide license to our technical
improvements to lometrexol.
Cold Spring Harbor Laboratories, or CSHL (RDA)
Amplicon had been the exclusive licensee of the rights of CSHL in RDA, and we
acquired these rights held by Amplicon when we acquired Amplicon. In connection
with our acquisition of Amplicon, we
47
<PAGE>
established a research collaboration with CSHL. As part of this collaboration,
Dr. Michael Wigler of CSHL supervises research using RDA to search for tumor
suppressor genes and DNA sequences that are amplified in cancer. In addition,
we may elect to obtain licenses under inventions made under the research
collaboration. Either party may terminate the research collaboration for
breach. We may terminate the license agreement after October 2002. We intend to
utilize the results of this research collaboration and new discoveries from
Dr. Wigler's laboratory to develop proprietary HTS for drug discovery.
Merck & Co. (Viral Diseases)
Effective December 1993, we established a five-year collaboration with Merck
to discover and develop compounds for the prevention or treatment of specified
viruses. This research collaboration ended in March 1999. Merck has exclusive,
worldwide manufacturing and marketing rights to develop and commercialize
products resulting from the human immunodeficiency virus, or HIV, program,
subject to obligations to pay to us benchmark payments based on clinical
progress and royalties on sales of anti-HIV products.
Merck retains the option to assume responsibility for the development of our
anti-CMV drug candidate. If Merck exercises the option, Merck will pay to us an
exercise fee and will reimburse us for costs previously incurred by us in the
CMV program on a full-time equivalent basis, in addition to paying milestones
and royalties on products. If Merck does not exercise its option, we will be
free to pursue such program without restriction. We plan to submit information
to Merck in October 1999 to permit them to decide whether or not to exercise
this option. Merck has 90 days from receipt of this information to decide
whether to exercise this option.
Under the terms of a related stock purchase agreement, Merck purchased
400,000 shares of Series D Preferred Stock at $5.00 per share in January 1994
for an aggregate purchase price of $2.0 million.
Patents and Proprietary Rights
We will be able to protect our proprietary rights from unauthorized use by
third parties only to the extent that our proprietary rights are covered by
valid and enforceable patents or are effectively maintained as trade secrets.
Accordingly, patents and other proprietary rights are an essential element of
our business. As of September 30, 1999, 44 U.S. patents based on our
discoveries had been issued or allowed. In addition, as of that date, we had 47
patent applications pending in the United States and had filed several
corresponding foreign patent applications. Our policy is to file patent
applications and to protect technology, inventions and improvements to
inventions that are commercially important to the development of our business.
We seek U.S. and international patent protection for the genes we discover, as
well as therapeutic products and processes, drug screening methodologies,
transgenic animals, diagnostics and other inventions based on these genes. Our
commercial success will depend in part on obtaining this patent protection. We
also intend to seek patent protection or rely upon trade secret rights to
protect other technologies that may be used to discover and characterize genes
and that may be used to develop novel drugs. We seek protection, in part,
through confidentiality and proprietary information agreements. We are a party
to various license agreements that give us rights to use technologies in our
research and development processes.
We believe that we have developed proprietary technology for use in gene
discovery, regulatory pathway identification and assay design and have filed a
number of patent applications in these areas. In addition, an increasing
percentage of our recent patent applications have been related to potential
product candidates, or compounds, that we have discovered.
Competition
We face, and will continue to face, intense competition from organizations
such as large pharmaceutical and biotechnology companies, as well as academic
and research institutions and government agencies. Our major competitors
include fully integrated pharmaceutical companies that have extensive drug
discovery efforts and are developing novel small molecule pharmaceuticals. We
face significant competition from organizations
48
<PAGE>
that are pursuing the same or similar technologies, including the discovery of
targets that regulate gene expression, as the technologies used by us in our
drug discovery efforts and from organizations that are pursuing pharmaceuticals
that are competitive with our potential products.
Many of these companies and institutions, either alone or together with their
collaborative partners, have substantially greater financial resources and
larger research and development staffs than we do. In addition, many of these
competitors, either alone or together with their collaborative partners, have
significantly greater experience than we do in:
. developing products;
. undertaking preclinical testing and clinical trials;
. obtaining FDA and other regulatory approvals of products; and
. manufacturing and marketing products.
Accordingly, our competitors may succeed in obtaining patent protection,
receiving FDA approval or commercializing products before us. If we commence
commercial product sales, we will be competing against companies with greater
marketing and manufacturing capabilities, areas in which we have limited or no
experience.
In addition, any product candidate that we successfully develop may compete
with existing therapies that have long histories of safe and effective use.
Competition may also arise from:
. other drug development technologies and methods of preventing or reducing
the incidence of disease;
. new small molecules; or
. other classes of therapeutic agents.
Developments by others may render our product candidates or technologies
obsolete or noncompetitive. We face and will continue to face intense
competition from other companies for collaborative arrangements with
pharmaceutical and biotechnology companies, for establishing relationships with
academic and research institutions, and for licenses to proprietary technology.
These competitors, either alone or with their collaborative partners, may
succeed in developing technologies or products that are more effective than
ours.
Our ability to compete successfully will depend, in part, on our ability to:
. develop proprietary products;
. develop and maintain products that reach the market first, are
technologically superior to and/or are of lower cost than other products
in the market;
. attract and retain scientific and product development personnel;
. obtain patent or other proprietary protection for our products and
technologies;
. obtain required regulatory approvals; and
. manufacture, market and sell any product that we develop.
Government Regulation
The manufacturing and marketing of our potential products and our ongoing
research and development activities are subject to extensive regulation by
numerous governmental authorities in the United States and other countries.
Before marketing in the United States, any drug developed by us must undergo
rigorous preclinical testing and clinical trials and an extensive regulatory
clearance process implemented by the FDA under the federal Food, Drug and
Cosmetic Act. The FDA regulates, among other things, the development, testing,
manufacture, safety, efficacy, record keeping, labeling, storage, approval,
advertising, promotion, sale and distribution of biopharmaceutical products.
None of our product candidates has been approved for sale in the United States
or any foreign market. The regulatory review and approval process, which
includes preclinical testing and clinical trials of each product candidate, is
lengthy, expensive and uncertain. Securing FDA approval requires the submission
of extensive preclinical and clinical data and supporting information to the
FDA for each indication to establish a product candidate's safety and efficacy.
The approval process takes many years,
49
<PAGE>
requires the expenditure of substantial resources, involves post-marketing
surveillance, and may involve ongoing requirements for post-marketing studies.
Before commencing clinical investigations in humans, we must submit to, and
receive approval from, the FDA of an IND application. We expect to rely on some
of our collaborative partners to file IND applications and generally direct the
regulatory approval process for certain of our products.
Clinical testing must meet requirements for institutional review board
oversight, informed consent and good clinical practices. Clinical testing must
be conducted under FDA oversight. Before receiving FDA clearance to market a
product, we must demonstrate that the product is safe and effective on the
patient population that will be treated. If regulatory clearance of a product
is granted, this clearance will be limited to those disease states and
conditions for which the product is useful, as demonstrated through clinical
studies. However, clearance may entail ongoing requirements for postmarketing
studies. After regulatory clearance is obtained, a marketed product, its
manufacturer and its manufacturing facilities are exposed to continual review
and periodic inspections by the FDA.
Any of our contract manufacturers and we also are required to comply with the
applicable FDA current good manufacturing practice regulations. Good
manufacturing practice regulations include requirements relating to quality
control and quality assurance as well as the corresponding maintenance of
records and documentation. Manufacturing facilities are subject to inspection
by the FDA. Such facilities must be approved before we can use them in
commercial manufacturing of our products. Our contract manufacturers or we may
not be able to comply with the applicable good manufacturing practice
requirements and other FDA regulatory requirements. If our contract
manufacturers or we fail to comply, our business, financial condition and
results of operations may be materially adversely affected.
Outside the United States, our ability to market a product is contingent upon
receiving a marketing authorization from the appropriate regulatory
authorities. The requirements governing the conduct of clinical trials,
marketing authorization, pricing and reimbursement vary widely from country to
country. At present, foreign marketing authorizations are applied for at a
national level, although within the European Community, or EC, registration
procedures are available to companies wishing to market a product in more than
one EC member state. If the regulatory authority is satisfied that adequate
evidence of safety, quality and efficacy has been presented, a marketing
authorization will be granted. This foreign regulatory approval process
involves all of the risks associated with FDA clearance set forth above.
Employees
As of September 30, 1999, we had 204 full-time employees, of whom 94 hold
Ph.D. and/or M.D. degrees and 26 hold other advanced degrees. Of our total
workforce, 173 are engaged in research and development activities and 31 are
engaged in business development, finance and administration. None of our
employees is represented by a collective bargaining agreement, nor have we
experienced work stoppages. We believe that our relations with our employees
are good.
Facilities
Our facilities consist of approximately 146,000 square feet of research and
office space located at Two Corporate Drive, South San Francisco, California
that is leased to us until 2011. We have options to renew these leases for two
additional periods of five years each. We have leased approximately 14,500
square feet of research and office space located at 266 Pulaski Road,
Greenlawn, New York that is leased to us until 2005. We believe that the space
needed to accommodate our growth through the year 2003 is available.
Scientific Advisory Boards
We utilize scientists and physicians to advise us on scientific and medical
matters as part of our Scientific Advisory Board, or SAB, including experts in
human genetics, mouse genetics, molecular biology, biochemistry, cell biology,
chemistry, infectious diseases, immunology and structural biology. Generally,
each
50
<PAGE>
of our scientific and medical advisors and consultants has received our common
stock or an option to purchase our common stock.
Robert Tjian, Ph.D. is one of our founders and has been the Chairman of the
SAB since its inception. Dr. Tjian is an investigator of the Howard Hughes
Medical Institute at the University of California, Berkeley. Dr. Tjian is one
of the world leaders in the field of transcription factor biochemistry and was
the first to clone and characterize a promoter-selective human transcription
factor (Sp1 in 1986). He has been a member of the National Academy of Sciences
since 1991. Dr. Tjian received the California Scientist of the Year Award
in 1994.
The following is a list of our other SAB members, based on their respective
areas of expertise:
James P. Allison, Ph.D. is Professor of Immunology and Co-Chairman of the
Department of Molecular & Cell Biology and an investigator of the Howard Hughes
Medical Institute at the University of California, Berkeley. Dr. Allison is a
leader in the field of cellular immunology. Dr. Allison was elected to the
National Academy of Sciences in 1997.
Paul A. Bartlett, Ph.D. is Professor of the Chemistry Department at the
University of California, Berkeley. Dr. Bartlett is an expert in the field of
bioorganic molecules, medicinal chemistry and combinatorial chemistry. He is
one of the founders of Pharmacopoeia, Inc.
Michael S. Brown, M.D. is Professor of Medicine and Genetics and Joseph L.
Goldstein, M.D. is Professor and Chairman of the Department of Molecular
Genetics at University of Texas Southwestern Medical Center at Dallas. Working
as a team, Drs. Brown and Goldstein pioneered a multidisciplinary approach to
the study of hypercholesterolemia by using a combination of biochemistry,
somatic cell genetics, molecular biology and, most recently, gene regulation
and cell biology. In 1985, Drs. Brown and Goldstein were awarded the Nobel
Prize in Medicine for their work in the regulation of cholesterol metabolism,
and in 1988 they received the National Medal of Science. They were elected to
the National Academy of Sciences in 1980.
E.J. Corey, Ph.D. is Sheldon Emery Professor of Organic Chemistry in the
Chemistry Department at Harvard University. Dr. Corey is a leader in organic
synthetic chemistry, including applications for manufacturing of
pharmaceuticals and applying computers to organic chemical problems. In 1988,
Dr. Corey received the National Medal of Science and in 1990, he was awarded
the Nobel Prize in Chemistry for his development of the theory and methodology
of organic synthesis.
Donald E. Ganem, M.D. is Professor of Microbiology and Medicine at the
University of California, San Francisco. Dr. Ganem is a leader in the area of
human viruses and microbial infectious agents.
Richard M. Losick, Ph.D. is Professor and Chairman of the Department of
Molecular & Cellular Biology at Harvard University. Dr. Losick is a leader in
the field of microbial development and gene regulation. Dr. Losick was elected
to the National Academy of Sciences in 1992 and to the American Academy of Arts
and Sciences in 1996.
Brian W. Matthews, Ph.D., D.Sc. is Professor of Physics and Molecular Biology
and an investigator of the Howard Hughes Medical Institute at the University of
Oregon, Eugene. He is one of the world's leaders in structural biology and
biophysics, with a special expertise in X-ray crystallography and is a pioneer
in the study of protein folding, protein:protein interactions and protein:DNA
interactions. Dr. Matthews was elected to the National Academy of Sciences in
1986.
Kim Nasmyth, Ph.D. is a Professor and Director of the Research Institute of
Molecular Pathology in Vienna. Dr. Nasmyth is an expert in the area of yeast
genetics, cell cycle regulation and cancer biology.
Bruce W. Stillman, Ph.D. is Director of the CSHL on Long Island, New York.
Dr. Stillman is an expert in the area of DNA replication, cell cycle control
and tumor biology. He is a fellow of the Royal Society.
51
<PAGE>
James Wells, Ph.D. is co-founder and chief scientific officer of Sunesis,
Inc. Dr. Wells is a leader in the field of biomolecular design, protein
structure and function as well as molecular biology and phage display
technology. Dr. Wells was elected to the National Academy of Sciences in 1999.
Keith R. Yamamoto, Ph.D. is Chairman of the Department of Cellular and
Molecular Pharmacology at the University of California, San Francisco. Dr.
Yamamoto is a leader in the field of steroid receptors, a special class of
inducible transcriptional regulators. Dr. Yamamoto was elected to the National
Academy of Sciences in 1990.
Oncology Scientific Advisory Board
In addition to our SAB, we utilize a number of scientists and physicians to
advise us on scientific and medical matters as part of our Oncology Scientific
Advisory Board.
David Botstein, Ph.D. is a Professor at Stanford University and is the
chairman of the Stanford Department of Genetics. Dr. Botstein is a member of
the National Academy of Sciences.
Larry Norton, M.D. heads the Division of Solid Tumor Oncology at Memorial
Sloan Kettering Cancer Center. Dr. Norton is a leading clinical oncologist and
an expert in the treatment of breast cancer.
Bruce W. Stillman, Ph.D.--See above.
Michael Wigler, Ph.D. is an Investigator at Cold Spring Harbor Laboratory.
Dr. Wigler focuses his research on cancer genes, such as the ras oncogene and
tumor suppressor genes. Dr. Wigler is a member of the National Academy of
Sciences.
Clinical Oncology Scientific Advisory Board
A global oncology advisory panel guides our clinical oncology program.
Members include:
Dr. Hilary Calvert, University of Newcastle, UK
Dr. Ross Donehower, Johns Hopkins Hospital, Baltimore, USA
Dr. Axel Hanauske, Munich, Germany
Dr. David Newell, University of Newcastle, UK
Dr. Larry Norton, Memorial Sloan Kettering Cancer Center, New York, USA
Dr. Eric Rowinsky, Institute of Drug Development, San Antonio, Texas, USA
52
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth information regarding our executive officers
and directors as of September 30, 1999.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David V. Goeddel, Ph.D............. 48 Chief Executive Officer and Director
Andrew J. Perlman, M.D., Ph.D...... 51 Executive Vice President
Yasunori Kaneko, M.D............... 46 Vice President, Business Development
Corinne H. Lyle.................... 39 Vice President, Chief Financial Officer
William J. Rieflin................. 39 Vice President, General Counsel and Secretary
Terry J. Rosen, Ph.D............... 40 Vice President, Research Operations
Pieter B.M.W.M. Timmermans, Ph.D... 49 Vice President, Pharmacology and Preclinical Development
Robert A. Swanson.................. 51 Chairman of the Board of Directors
A. Grant Heidrich, III............. 47 Director
Mark J. Levin...................... 49 Director
Paul A. Marks, M.D................. 73 Director
Edward R. McCracken................ 55 Director
Steven L. McKnight, Ph.D........... 50 Director
Peter J. Sjostrand, M.D............ 53 Director
</TABLE>
David V. Goeddel, Ph.D. co-founded Tularik in November 1991 and has served as
a member of our board of directors since inception and as our Chief Executive
Officer since April 1996. From April 1996 to December 1997, Dr. Goeddel served
as our President and from inception to March 1996, Dr. Goeddel served as our
Vice President, Research. Dr. Goeddel was the first scientist hired by
Genentech, Inc. and from 1978 to 1993 served in various positions, including
Fellow and Staff Scientist and Director of Molecular Biology. Dr. Goeddel's
pioneering work in the field of gene cloning and expression of human proteins
has been the basis for five significant marketed therapeutics developed by
Genentech, including human insulin, human growth hormone, interferon-alpha,
interferon-gamma and tPA. Based on his contributions in gene cloning and
expression of human proteins, Dr. Goeddel was elected to the National Academy
of Sciences and the American Academy of Arts and Sciences. Since 1998, Dr.
Goeddel has served on the board of directors of PharmaVision 2000 AG, an
investor in Tularik. Dr. Goeddel holds a Ph.D. in Biochemistry from the
University of Colorado and subsequently performed postdoctoral research at
Stanford Research Institute.
Andrew J. Perlman, M.D., Ph.D. has served as our Executive Vice President
since September 1999. From November 1997 to September 1999, Dr. Perlman served
as our Vice President, Medical Research and Corporate Development. From January
1993 to November 1997, Dr. Perlman served as our Vice President of Medical
Research. Prior to joining Tularik, Dr. Perlman held senior clinical research
positions at Genentech, Inc. Previously, Dr. Perlman served as a faculty member
in the Department of Medicine at Stanford University. Dr. Perlman is a director
of SangStat Medical Corporation. Dr. Perlman holds an M.D. degree and Ph.D. in
Physiology from New York University.
Yasunori Kaneko, M.D. has served as our Vice President, Business Development
since June 1992. Dr. Kaneko served as our Chief Financial Officer from June
1992 to October 1996. Prior to joining Tularik, Dr. Kaneko held senior
positions at Isis Pharmaceuticals, Inc., Paribas Capital Markets Limited
(Tokyo, Japan) and Genentech, Inc. Since 1998, Dr. Kaneko has served on the
board of directors of Leukosite Inc. Dr. Kaneko holds an M.D. from Keio
University (Tokyo, Japan) and an M.B.A. from Stanford University.
Corinne H. Lyle has served as our Vice President, Chief Financial Officer
since October 1998. From April 1996 to August 1998, Ms. Lyle was an investment
banker at Warburg Dillon Read LLC. Previously, Ms. Lyle was with PaineWebber
Incorporated and Kidder Peabody & Co. Incorporated as an investment banker.
Ms. Lyle holds an M.B.A. from Harvard Business School.
53
<PAGE>
William J. Rieflin has served as our Vice President, General Counsel and
Secretary since August 1996. From May 1992 to July 1996, Mr. Rieflin worked at
AMSCO International, Inc., serving in various positions, including Vice
President-Human Resources, General Counsel and Secretary. Previously, Mr.
Rieflin was an associate at the law firm of Sidley & Austin. Mr. Rieflin holds
a J.D. from Stanford Law School and an M.B.A. from the University of Chicago
Graduate School of Business.
Terry J. Rosen, Ph.D. has served as our Vice President, Research Operations
since October 1996. From June 1996 to October 1996, Dr. Rosen served as our
Vice President, Medicinal Chemistry and from October 1993 to June 1996 he
served as our Director, Medicinal Chemistry. Prior to joining Tularik, Dr.
Rosen worked at Pfizer Inc and Abbott Laboratories. Dr. Rosen holds a Ph.D. in
Organic Chemistry from the University of California, Berkeley.
Pieter B.M.W.M. Timmermans, Ph.D. has served as our Vice President,
Pharmacology and Preclinical Development since January 1997. From June 1984 to
December 1996, Dr. Timmermans worked at the DuPont Merck Pharmaceutical
Company, and its predecessor, E.I. DuPont de Nemours & Company, serving in
various positions including Vice President of Drug Discovery and Senior Vice
President of Research. While at DuPont, Dr. Timmermans led the team that
discovered the nonpeptide angiotensin II receptor antagonist, Cozaar, which is
currently marketed by Merck. Dr. Timmermans holds a Ph.D. in Pharmacology from
the University of Amsterdam.
Robert A. Swanson has served as our Chairman of the Board since June 1996.
Mr. Swanson, a founder of Genentech, Inc., served as Genentech's Chief
Executive Officer from April 1976 to February 1990 and served as its Chairman
of the Board from February 1990 to December 1996. Previously, Mr. Swanson was a
partner with Kleiner & Perkins and Citicorp Venture Capital Ltd. Mr. Swanson is
a member of the Biology Visiting Committee of, and has served as a Trustee for,
the Massachusetts Institute of Technology. Mr. Swanson is a member of the Royal
Swedish Academy of Engineering Sciences. Mr. Swanson holds an M.S. from the
Sloan School of Management at the Massachusetts Institute of Technology. Mr.
Swanson is currently on a medical leave of absence from our board of directors.
A. Grant Heidrich, III has served as a member of our board of directors since
November 1991. Mr. Heidrich joined Mayfield Fund in 1982 and is currently a
general partner of Mayfield Fund. Mr. Heidrich serves on the board of directors
of Millennium Pharmaceuticals, Inc. and several private companies. Mr. Heidrich
holds an M.B.A. from Columbia University Graduate School of Business.
Mark J. Levin has served as a member of our board of directors since November
1991. From November 1991 to March 1992, Mr. Levin served as our Chief Executive
Officer. Since November 1994, he has served as the Chief Executive Officer of
Millennium Pharmaceuticals, Inc. and has served as a member of its board of
directors since its inception in 1993 and as its Chairman of the Board since
March 1996. Previously, Mr. Levin was a partner at Mayfield Fund. Mr. Levin
serves on the board of directors of CytoTherapeutics Inc. Mr. Levin holds an
M.S. from Washington University in St. Louis.
Paul A. Marks, M.D. has served as a member of our board of directors since
December 1993. Since July 1980, Dr. Marks has served as the President and Chief
Executive Officer of Memorial Sloan-Kettering Cancer Center. Previously, Dr.
Marks was the Vice President for Health Sciences and Director of the Cancer
Center at Columbia University Medical Center. Dr. Marks is a member of the
National Academy of Sciences and the Institute of Medicine and is a Fellow of
the American Academy of Arts and Sciences. Dr. Marks serves on the board of
directors of several Dreyfus Mutual Funds. Dr. Marks holds an M.D. from the
College of Physicians and Surgeons, Columbia University.
Edward R. McCracken has served as a member of our board of directors since
August 1993. From 1984 to 1998, Mr. McCracken served as Chief Executive Officer
of Silicon Graphics, Inc. Before joining Silicon Graphics, Mr. McCracken spent
16 years with Hewlett-Packard Company, where he worked in a variety of senior
management positions. Mr. McCracken serves as Chairman of the Board of The
PRASAD Project, a
54
<PAGE>
charitable foundation, and serves on the board of directors of CustomerCast
Inc., National Semiconductor Corporation and Minnesota Mining and Manufacturing
Company. Mr. McCracken holds an M.B.A. from Stanford University.
Steven L. McKnight, Ph.D. co-founded Tularik in November 1991 and has served
as a member of our board of directors since inception. From September 1992 to
September 1995, Dr. McKnight served as our Director, Biology. Since January
1997, Dr. McKnight has been a consultant to Tularik. Dr. McKnight has served as
Professor and Chairman of the Department of Biochemistry at the University of
Texas Southwestern Medical Center since 1995. Previously, Dr. McKnight was an
investigator at the Howard Hughes Medical Institute at the Carnegie Institution
of Washington. Dr. McKnight is recognized as one of the world leaders in gene
regulation based in part on his discovery of leucine zipper proteins. Dr.
McKnight is a member of the National Academy of Sciences and the American
Academy of Arts and Sciences. Dr. McKnight holds a Ph.D. in Biology from the
University of Virginia.
Peter J. Sjostrand, M.D. has served as a member of our board of directors
since October 1996. Dr. Sjostrand is a partner of the BZ Group of Switzerland.
From 1975 to 1993, Dr. Sjostrand held various senior management positions at
Astra AB, including Executive Vice President, Chief Financial Officer and
Regional Director of the Americas. Dr. Sjostrand serves on the board of
directors of PharmaVision 2000 AG, an investor in Tularik, and AGA AB. Dr.
Sjostrand holds an M.D. from Karolinska Institute in Stockholm, Sweden.
Our executive officers are appointed by our board of directors and serve
until their successors are elected or appointed. There are no family
relationships among any of our directors or executive officers. No director has
a contractual right to serve as a member of our board of directors.
Board Committees
Audit Committee. Our audit committee, consisting of Mr. Heidrich and Mr.
Levin, reviews our internal accounting procedures and the services provided by
our independent auditors.
Compensation Committee. Our compensation committee, consisting of Mr.
Swanson, Mr. Heidrich and Mr. McCracken, reviews and recommends to our board of
directors the compensation and benefits of all our officers and establishes and
reviews general policies relating to compensation and benefits of our
employees. Mr. Swanson is currently on a medical leave of absence from our
board of directors.
Compensation Committee Interlocks and Insider Participation
During 1998, our compensation committee consisted of Mr. Swanson, Mr.
Heidrich and Mr. McCracken. None of the members of our compensation committee
has at any time been an officer or employee of Tularik. No interlocking
relationship exists between our board of directors or compensation committee
and the board of directors or compensation committee of any other company, nor
has any interlocking relationship existed in the past.
Compensation of Directors
We do not provide cash compensation to members of our board of directors for
serving on our board of directors or for attendance at committee meetings.
Members of our board of directors are reimbursed for some expenses in
connection with attendance at board and committee meetings. In April 1998 and
in April 1999, each of our non-employee directors received an option to
purchase 8,000 shares of common stock at an exercise price of $3.00 per share
under our 1997 Non-Employee directors' plan. In consideration for consulting
services, we granted Dr. McKnight additional options to purchase an aggregate
of 50,000 shares of common stock, 25,000 shares in each of June 1998 and in
June 1999, at an exercise price of $3.00 per share. The $3.00 per share
exercise price for these options was equal to the fair market value of the
common stock on the
55
<PAGE>
date of grant as determined by our compensation committee. These options vest
in a series of equal annual installments beginning on the grant date of the
option and extending through the next four years of service. For more
information, see "Benefit Plans--1997 Non-Employee Directors' Stock Option
Plan."
In consideration for consulting services, in addition to the options
described above, we pay Dr. McKnight $85,000 per year. Dr. McKnight spends
approximately 20% of his time providing consulting services to Tularik.
Between January 1995 and February 1998, we forgave $165,968 of the principal
and $24,780 of the interest due on a loan of $240,000 we provided to Dr.
McKnight in June 1992 to cover housing differential costs in connection with
his move to California from another state. In addition, we have paid $153,082
to Dr. McKnight to offset taxable income to him arising as a consequence of our
loan forgiveness. No amounts are due by Dr. McKnight on this loan.
Executive Compensation
The following table sets forth information concerning the compensation that
we paid during 1998 to our Chief Executive Officer and each of the four other
most highly compensated executive officers that earned more than $100,000
during 1998. All option grants were made under our 1997 Equity Incentive Plan.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------------
Securities All Other
Name and Principal Position Salary($) Underlying Options Compensation($)(2)
- --------------------------- ------------ ------------------ ------------------
<S> <C> <C> <C>
David V. Goeddel, Ph.D...... $324,077 150,000 $879
Chief Executive Officer and
Director
John P. McLaughlin(1)....... $275,000 500,000 $663
President
Yasunori Kaneko, M.D. ...... $246,671 50,000 $2,924
Vice President, Business
Development
Andrew J. Perlman, M.D.,
Ph.D....................... $234,231 50,000 $2,988
Vice President, Medical
Research and Corporate
Development
Pieter B.M.W.M. Timmermans,
Ph.D....................... $229,538 50,000 $876
Vice President,
Pharmacology and
Preclinical Development
</TABLE>
- --------
(1) Mr. McLaughlin resigned as President of Tularik effective as of September
30, 1999.
(2) Includes term-life insurance premiums paid by us on behalf of these named
executive officers, wellness benefits and taxable travel reimbursement.
56
<PAGE>
The following table sets forth summary information regarding the option
grants made to our Chief Executive Officer and each of our four other most
highly paid executive officers during 1998. Options granted to purchase shares
of our common stock under our 1997 Equity Incentive Plan are generally
immediately exercisable by the optionee but are subject to a right of
repurchase pursuant to the vesting schedule of each specific grant. In the
event that a purchaser ceases to provide service to Tularik and its affiliates,
we have the right to repurchase any of that person's unvested shares of common
stock at the original option exercise price. The exercise price per share is
equal to the fair market value of our common stock on the date of grant as
determined by our board of directors. The percentage of total options was
calculated based on options to purchase an aggregate of 1,849,700 shares of
common stock granted to employees under our 1997 Equity Incentive Plan in 1998.
The potential realizable value was calculated based on the ten-year term of the
options and assumed rates of stock appreciation of 5% and 10%, compounded
annually from the date the options were granted to their expiration date based
on the fair market value of the common stock on the date of grant. Twenty-five
percent of the initial option vests on the one year anniversary of employment
and the remainder vest in a series of equal monthly installments beginning on
the one year anniversary of employment and continuing over the next three years
of service. Options granted after the one year anniversary of employment vest
in a series of equal monthly installments beginning from the vesting start date
and continuing over the next four years of service. See "Benefit Plans" for a
description of the material terms of these options.
Option Grants in 1998
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of
Number of Percent of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise Option Term
Options Employees in Price Expiration -----------------
Name Granted Fiscal Year (per share) Date 5% 10%
- ---- ---------- ------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David V. Goeddel,
Ph.D................... 150,000 8.1% $3.00 6/17/08 $283,003 $717,185
John P. McLaughlin...... 500,000 27.0% $3.00 1/21/08(1) $149,219 $305,507
Yasunori Kaneko, M.D.... 50,000 2.7% $3.00 6/17/08 $ 94,334 $239,062
Andrew J. Perlman, M.D.,
Ph.D................... 50,000 2.7% $3.00 6/17/08 $ 94,334 $239,062
Pieter B.M.W.M.
Timmermans, Ph.D....... 50,000 2.7% $3.00 6/17/08 $ 94,334 $239,062
</TABLE>
- --------
(1) In connection with Mr. McLaughlin's resignation, the expiration date for
250,001 of these options is December 31, 1999. The potential realizable
value calculations are based upon this expiration date. 249,999 of these
options were not vested as of September 30, 1999 and may not be exercised.
The following table sets forth summary information regarding the number and
value of options held as of December 31, 1998 for our Chief Executive Officer
and each of our four most highly compensated executive officers. Our Chief
Executive Officer and each of our four most highly compensated executive
officers did not acquire any shares upon exercise of options in 1998. Amounts
shown in the value of unexercised in-the-money options at December 31, 1998
column are based on the assumed initial public offering price of $12.00,
without taking into account any taxes that may be payable in connection with
the transaction, multiplied by the number of shares underlying the option, less
the aggregate exercise price payable for these shares.
1998 Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
December 31, 1998 December 31, 1998
------------------------- -------------------------
Name Vested Unvested Exercisable Unexercisable
- ---- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
David V. Goeddel,
Ph.D. ................. 493,750 356,250 $8,937,500 --
John P. McLaughlin...... 125,001 374,999 $4,500,000 --
Andrew J. Perlman, M.D.,
Ph.D. ................. 129,792 105,208 $2,433,750 --
Yasunori Kaneko, M.D. .. 118,750 131,250 $2,587,500 --
Pieter B.M.W.M.
Timmermans, Ph.D. ..... 22,223 61,110 $ 749,997 --
</TABLE>
57
<PAGE>
Benefit Plans
Since 1991, we have established four plans under which employees, officers,
non-employee directors and consultants may purchase or receive common stock
through incentive stock options, nonstatutory stock options, restricted stock
and stock bonuses. These plans are the 1991 Stock Plan, the 1997 Equity
Incentive Plan, 1997 Non-Employee Directors' Stock Option Plan and the 1999
Employee Stock Purchase Plan. In addition, we have established two defined
contribution plans that are intended to be qualified under Section 401(a) of
the Internal Revenue Code, as amended ("Code"). They are the Tularik Salary
Savings Plan and the Tularik Matching Plan.
Long Term Incentive Plans
1991 Stock Plan. In November 1991, we adopted our 1991 Stock Plan. Our board
subsequently amended the 1991 plan in 1991, 1992, 1993, 1994, 1995 and 1996,
and the stockholders approved these amendments. The 1991 plan will terminate in
November 2001 unless it is terminated earlier by our board.
The 1991 plan provides for the grant of stock awards, including:
. incentive stock options, as defined by Section 422 of the Code that may
be granted solely to employees (including officers); and
. nonstatutory stock options (stock options other than incentive stock
options) and restricted stock purchase awards that may be granted to
employees (including officers) and consultants.
Stock Options. Stock options are granted pursuant to stock option agreements.
The exercise price for an incentive stock option cannot be less than 100% of
the fair market value of the common stock on the date of grant. The exercise
price for a nonstatutory stock option cannot be less than 85% of the fair
market value of the common stock on the date of grant. Options granted under
the 1991 plan vest at the rate specified in the option agreement.
In general, the term of stock options granted under the 1991 plan may not
exceed ten years. Unless the terms of an optionee's stock option agreement
provide for earlier termination, in the event an optionee's service
relationship with us, or any affiliate of ours, ceases due to disability or
death, the optionee (or his beneficiary) may exercise any vested options up to
12 months after the date such service relationship ends. If an optionee's
relationship with us, or any affiliate of ours, ceases for any reason other
than disability or death, the optionee may (unless the terms of the stock
option agreement provide for earlier termination) exercise any vested options
up to ninety days from cessation of service.
Acceptable consideration for the purchase of common stock issued under the
1991 plan is determined by our board of directors and may include cash, common
stock previously owned by the optionee, a deferred payment arrangement,
surrender of a portion of the option covering common stock having a fair market
value equal to the exercise price of all of the option, directions to a broker
to sell the common stock and deliver the exercise price from the sale proceeds,
an irrevocable subscription agreement obligating the optionee to pay for the
common stock within twelve months, and such other legal consideration approved
by our board.
Generally, an optionee may not transfer a stock option other than by will or
the laws of descent or distribution. However, an optionee may designate a
beneficiary who may exercise the option following the optionee's death.
Tax Limitations on Stock Option Grants. Under current tax laws, incentive
stock options may be granted only to our employees. The aggregate fair market
value, determined at the time of grant, of shares of our common stock with
respect to incentive stock options that are exercisable for the first time by
an optionee during any calendar year under all of our stock plans may not
exceed $100,000. No incentive stock option (and prior to our stock being
publicly traded, no nonstatutory stock option) may be granted to any person
who, at the
58
<PAGE>
time of the grant, owns or is deemed to own stock possessing more than 10% of
the total combined voting power of Tularik or any affiliate unless the
following conditions are satisfied:
. the option exercise price must be at least 110% of the fair market value
of the stock subject to the option on the date of grant; and
. the term of any incentive stock option award must not exceed five years
from the date of grant.
Restricted Stock Awards. The purchase price for each restricted stock award
granted must be at least 50% of the fair market value of the stock on the date
of the award or at the time the purchase is consummated. The restricted stock
award may be exercised for a period not to exceed 30 days from the date of the
grant of the right. The restricted stock awards may be subject to a right of
repurchase given to Tularik under the terms of the restricted stock award
grant.
Changes in Control. Upon specified changes in control of Tularik as provided
under the 1991 plan, all outstanding options under the 1991 plan either will be
assumed or substituted for by any surviving entity or its parent or subsidiary
corporation, if any. For stock options granted prior to January 4, 1992, if the
surviving entity or its parent or subsidiary corporation, if any, determines
not to assume or substitute the options, the board of directors shall provide
for the options to be fully exercisable for a period of 15 days from the date
of notice. If the board of directors makes the options fully exercisable for
this 15-day period, the options will terminate at the end of this period.
Authorized Shares. An aggregate of 11,576,667 shares of common stock were
authorized for issuance under the 1991 plan. As of September 30, 1999, options
to purchase a total of 1,961,729 shares of our common stock were held by all
participants under the 1991 plan. As of September 30, 1999, a total of
2,100,000 shares of our common stock were purchased under restricted stock
awards. No shares of our common stock remained available for grant. Shares
subject to stock options that have expired or otherwise terminated without
having been exercised in full again become available for the grant of awards
under the 1991 plan. Shares issued under the 1991 plan may be previously
unissued shares or reacquired shares of common stock.
Plan Administration. Our board of directors administers the 1991 plan. Our
board of directors may delegate authority to administer the 1991 plan to a
committee of our board of directors. Subject to the terms of the plan, our
board of directors or its authorized committee determines recipients, the
numbers and types of stock awards to be granted, and the terms and conditions
of the stock awards including the period of their exercisability and vesting.
Subject to the plan limitations, our board of directors or its authorized
committee also determines the exercise price of options granted and the right
to purchase restricted stock.
Our board of directors or its designated committee may, in its sole
discretion, include additional provisions in any option or award granted or
made under the 1991 plan that are not inconsistent with the 1991 plan or
applicable law. Our board of directors or its designated committee may also, in
its sole discretion, accelerate or extend the date or dates on which all or any
particular option or options granted under the 1991 plan may be exercised. In
the event of a decline in the value of our common stock, our board of directors
or its designated committee has the authority to offer optionees the
opportunity to replace outstanding higher priced options with new lower priced
options.
1997 Equity Incentive Plan. In March 1997, we adopted our 1997 Equity
Incentive Plan. The 1997 plan will terminate in March 2007 unless our board of
directors terminates it sooner.
The 1997 plan provides for the grant of stock awards, including:
. incentive stock options, as defined in Section 422 of the Code, that may
be granted solely to employees (including officers); and
. nonstatutory stock options, restricted stock purchase awards and stock
bonuses that may be granted to employees (including officers), non-
employee directors and consultants.
59
<PAGE>
Stock Options. Stock options are granted pursuant to stock option agreements.
The exercise price for an incentive stock option cannot be less than 100% of
the fair market value of the common stock on the date of grant. The exercise
price for a nonstatutory stock option cannot be less than 85% of the fair
market value of the common stock on the date of grant. Options granted under
the 1997 plan vest at the rate specified in the option agreement.
In general, the term of stock options granted under the 1997 plan may not
exceed ten years. Unless the terms of an optionee's stock option agreement
provide for earlier termination, in the event an optionee's service
relationship with us, or any affiliate of ours, ceases due to disability or
death, the optionee (or his beneficiary) may exercise any vested options up to
twelve months (eighteen months in the event of death) after the date such
service relationship ends. If an optionee's relationship with us, or any
affiliate of ours, ceases for any reason other than disability or death, the
optionee may (unless the terms of the stock option agreement provide for
earlier termination) exercise any vested options up to 90 days from cessation
of service.
Acceptable consideration for the purchase of common stock issued under the
equity 1997 plan is determined by our board of directors and may include cash,
common stock previously owned by the optionee, a deferred payment arrangement
and other legal consideration approved by our board of directors.
Generally, an optionee may not transfer a stock option other than by will or
the laws of descent or distribution unless the optionee holds a nonstatutory
stock option that provides otherwise. However, an optionee may designate a
beneficiary who may exercise the option following the optionee's death.
Tax Limitations on Stock Option Grants. Under current tax laws, incentive
stock options may be granted only to our employees. The aggregate fair market
value, determined at the time of grant, of shares of our common stock with
respect to incentive stock options that are exercisable for the first time by
an optionee during any calendar year under all of our stock plans may not
exceed $100,000. No incentive stock option (and prior to our stock being
publicly traded, no nonstatutory stock option) may be granted to any person
who, at the time of the grant, owns or is deemed to own stock possessing more
than 10% of the total combined voting power of Tularik or any affiliate unless
the following conditions are satisfied:
. the option exercise price must be at least 110% of the fair market value
of the stock subject to the option on the date of grant; and
. the term of any incentive stock option award must not exceed five years
from the date of grant.
Section 162(m). When we become subject to Section 162(m) of the Code (which
generally denies a corporate tax deduction to publicly held corporations for
some compensation paid to specified employees in a taxable year to the extent
that the compensation exceeds $1,000,000 and is not paid based on performance),
no person may be granted options under the 1997 plan covering more than
1,000,000 shares of common stock in any calendar year. In the event that our
board of directors exercises its authority to reprice outstanding options or to
offer optionees the opportunity to replace outstanding options with new options
for the same or a different number of shares, then both the original and new
options will count toward the Section 162(m) limitation.
Restricted Stock and Stock Bonus Awards. Prior to our stock being publicly
traded, the purchase price for each restricted stock award granted must be at
least 85% of the fair market value of the stock on the date of the award or at
the time the purchase is consummated. For restricted stock awards made on or
after the date that our stock is publicly traded, the purchase price for such
awards must be at least 50% of the fair market value of the stock on the date
of the award or at the time the purchase is consummated. Rights to acquire
shares under a stock bonus or restricted stock bonus agreement may not be
transferred other than by will or by the laws of descent and distribution and
are exercisable during the life of the optionee only by the optionee. Certain
restricted stock awards made following the completion of this offering may be
otherwise transferable if the stock bonus agreement so provides. Restricted
stock purchase awards granted under the 1997 plan may include a repurchase
option in favor of Tularik that varies according to a service vesting schedule
determined by our board of directors. Stock bonuses may be awarded in
consideration for past services without a purchase payment.
60
<PAGE>
Changes in Control. Under specified changes in control, all outstanding
options under the 1997 plan either will be assumed, continued or substituted
for by any surviving entity. If the surviving entity does not assume, continue
or substitute for these awards, the vesting provisions of these stock awards
will be accelerated and these stock awards will be terminated upon the change
in control if not previously exercised.
Authorized Shares. An aggregate of 4,618,038 shares of common stock currently
are authorized for issuance under the 1997 plan. As of September 30, 1999,
options to purchase a total of 3,824,274 shares of our common stock were held
by all participants under the 1997 plan. A total of 304,112 shares of our
common stock remain available for grant. Shares subject to stock options that
have expired or otherwise terminated without having been exercised in full
again become available for the grant of awards under the 1997 plan. The share
reserve automatically will increase on December 31 every year through 2002 by a
number equal to 3.5% of the issued and outstanding shares of our common stock.
Shares issued under the 1997 plan may be previously unissued shares or
reacquired shares bought on the market or otherwise. No more than 2,000,000
shares of our common stock may be issued on the exercise of incentive stock
options during the term of the 1997 plan.
Plan Administration. Our board of directors administers the 1997 plan. Our
board of directors may delegate authority to administer the 1997 plan to a
committee. Subject to the terms of the plan, our board of directors or its
authorized committee determines recipients, the numbers and types of stock
awards to be granted, and the terms and conditions of the stock awards
including the period of their exercisability and vesting. Subject to the plan
limitations, our board or its authorized committee also determines the exercise
price of options granted and the right to purchase restricted stock.
Our board of directors or its designated committee may, in its sole
discretion, include additional provisions in any option or award granted or
made under the 1997 plan that are not inconsistent with the 1997 plan or
applicable law. Our board of directors or its designated committee may also, in
its sole discretion, accelerate or extend the date or dates on which all or any
particular option or options granted under the 1997 plan may be exercised. In
the event of a decline in the value of our common stock, our board of directors
or its designated committee has the authority to offer optionees the
opportunity to replace outstanding higher priced options with new lower priced
options.
1997 Non-Employee Directors' Stock Option Plan. In January 1997, the
compensation committee of our board of directors adopted the 1997 Non-Employee
Directors' Stock Option Plan to provide for the automatic grant of options to
purchase shares of common stock to non-employee directors of Tularik. Our board
of directors administers the directors' plan, unless it delegates
administration to a committee. The maximum number of shares of common stock
that may be issued following exercise of options granted under the directors'
plan is 300,000.
Initial Grants. Under the terms of the directors' plan, each person serving
as a director of Tularik who is not an employee of Tularik and not already a
holder of one or more options to purchase stock of Tularik, is automatically
granted an option to purchase 25,000 shares of common stock effective on the
later of the approval of the directors' plan by the stockholders or the date
the director first becomes a member of our board.
Annual Grants. In addition, on the date of Tularik's annual meeting of
stockholders, each non-employee director who was a director on the last day of
the prior calendar year will automatically be granted an option to purchase
8,000 shares of common stock.
Vesting and Exercise Terms. Options under the directors' plan vest within
four years from the date of grant. The exercise price of options granted under
the directors' plan must equal the fair market value of the common stock on the
date of grant. No option granted under the directors' plan may be exercised
after the expiration of ten years from the date it was granted. Generally,
options granted under the directors' plan may only be transferable by will, the
laws of descent and distribution or for specified estate planning purposes. The
directors' plan will terminate at the discretion of our board of directors.
61
<PAGE>
Change In Control. Under specified changes in control, all outstanding
options under the directors' plan either will be assumed or substituted for by
any surviving entity. If the surviving entity does not assume or substitute for
such awards, the vesting provisions of the options will be accelerated and the
options will be terminated upon the change in control if not previously
exercised.
1999 Employee Stock Purchase Plan. In October 1999, we adopted our 1999
Employee Stock Purchase Plan, authorizing the issuance of common stock pursuant
to purchase rights granted to our employees or to employees of our affiliates,
if any. The purchase plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Code. As of the date hereof, no
shares of common stock had been issued or purchased under the purchase plan.
The purchase plan provides a means by which employees may purchase our common
stock through payroll deductions. The purchase plan is implemented by offerings
of rights to eligible employees. Generally, all regular employees, including
executive officers, who work at least 20 hours per week and are employed by
Tularik or one of its affiliates for at least 5 months per calendar year may
participate in the purchase plan and may authorize payroll deductions of up to
15% of their earnings for the purchase of common stock under the purchase plan.
Under the plan, we may specify offerings with a duration of not more than 27
months, and may specify shorter purchase periods within each offering. The
first offering will begin on the effective date of this offering and be
approximately 13 months in duration. Subsequent offering periods will begin on
each February 1st and continue for a duration of 24 months. Purchases will
occur each February 1st and August 1st.
Unless otherwise determined by our board of directors, common stock is
purchased for accounts of employees participating in the purchase plan at a
price per share equal to the lower of:
. 85% of the fair market value of a share of our common stock on the date
of commencement of participation in the offering; or
. 85% of the fair market value of a share of our common stock on the date
of purchase.
On the first day of an offering period, we will grant to each eligible
employee who has elected to participate in the purchase plan an option to
purchase shares of common stock as follows: the employee may authorize an
amount (a whole percentage from 1% to 15% of the employee's regular pay) to be
deducted by Tularik from his or her pay during the offering period. On the last
day of the offering period, the employee is deemed to have exercised the
option, at the option exercise price, to the extent of accumulated payroll
deductions.
If an employee is not a participant on the last day of the offering period,
the employee is not entitled to exercise any option, and the amount of the
employee's accumulated payroll deductions will be refunded. An employee's
rights under the purchase plan terminate upon voluntary withdrawal from the
purchase plan at any time, or when this employee ceases employment for any
reason, except that upon termination of employment because of death, the
employee's beneficiary has specified rights to elect to exercise the option to
purchase the shares that the accumulated payroll deductions in the
participant's account would purchase at the date of death.
Limitations. Eligible employees may be granted rights only if the rights,
together with any other rights granted under any other employee stock purchase
plans, do not permit the employee to purchase our common stock at a rate which
exceeds $25,000 of the fair market value of such stock for each calendar year
in which such rights are outstanding. No employee shall be eligible for the
grant of any rights under the purchase plan if immediately after such rights
are granted, the employee has voting power over 5% or more of our outstanding
capital stock (measured by vote or value).
Authorized shares. The purchase plan authorizes the issuance of a total of
500,000 shares of common stock under the purchase plan. This reserve amount
will be increased each January 1 beginning January 1, 2001 by 1% of the number
of shares of common stock outstanding on that date. However, our board of
directors has the authority to designate a smaller number of shares by which
the authorized number of shares of common stock will be increased on that date.
62
<PAGE>
Administration. Our board of directors administers the purchase plan. Our
board of directors may delegate authority to administer the purchase plan to a
committee that shall have the authority of our board of directors to adopt
resolutions governing the purchase plan.
Tax Qualified Plans. We sponsor the Tularik Salary Savings Plan and Matching
Plan as set forth below:
Savings Plan. Our savings plan, effective October 1, 1993, is intended to be
a tax-qualified defined contribution plan under Subsections 401(a) and 401(k)
of the Code. All employees are eligible to participate and may enter the 401(k)
plan as of their date of hire and on the first day of any month thereafter.
Each participant may contribute up to 20% of his or her pre-tax compensation to
the savings plan, subject to statutorily prescribed annual limits. Each
participant's contributions, and the corresponding investment earnings, are
generally not taxable to the participants until withdrawn. Employee
contributions are held in trust and invested by the savings plan trustee as
required by law. Individual participants may direct the trustee to invest their
accounts in authorized investment alternatives.
Matching Plan. Our matching plan, effective January 1, 1998, is intended to
be a tax-qualified defined contribution plan under Subsections 401(a) and
401(m) of the Code. All employees are eligible to participate and may enter the
matching plan as of the date they become eligible to participate in the savings
plan. Each participant who makes pre-tax contributions to the savings plan is
eligible to have a matching contribution in common stock made by Tularik to his
or her matching plan account in an amount up to 50% of the participant's
savings plan contribution with a maximum employee contribution of $1,500 per
year, subject to statutorily prescribed annual limits. We may make additional
discretionary contributions for all participants to the matching plan. Each
participant's contributions, and the corresponding investment earnings, are
generally not taxable to the participants until withdrawn. Participant
contributions are held in trust as required by law. Individual participants may
direct the trustee to invest their accounts in authorized investment
alternatives.
Limitations of Liability; Indemnification of Directors and Officers
In connection with the consummation of this offering, we will adopt and file
an amended and restated certificate of incorporation and amended and restated
bylaws. As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director will be personally liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability:
. for any breach of duty of loyalty to us or to our stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law; or
. for any transaction from which the director derived an improper personal
benefit.
Our certificate of incorporation further provides that we must indemnify our
directors to the fullest extent permitted by Delaware law.
In addition, our amended and restated bylaws provide that:
. we are required to indemnify our directors and officers to the fullest
extent permitted by Delaware law, subject to limited exceptions;
. we may indemnify our other employees and agents to the extent that we
indemnify our officers and directors, unless otherwise prohibited by law,
our amended and restated certificate of incorporation, our bylaws or
agreements;
. we are required to advance expenses to our directors and executive
officers as incurred in connection with legal proceedings against them
for which they may be indemnified; and
. the rights conferred in the bylaws are not exclusive.
63
<PAGE>
We have entered into indemnification agreements with each of our directors
and officers. These agreements, among other things, require us to indemnify
each director and officer to the fullest extent permitted by Delaware law,
including indemnification for expenses such as attorneys' fees, judgments,
fines and settlement amounts incurred by the director or officer in any action
or proceeding, including any action by or in the right of Tularik, arising out
of the person's services as a director or officer of Tularik, any subsidiary of
ours or any other company or enterprise to which the person provides services
at our request. At present, we are not aware of any pending or threatened
litigation or proceeding involving any of our directors, officers, employees or
agents in which indemnification would be required or permitted. We believe that
our charter provisions and indemnification agreements are necessary to attract
and retain qualified persons as directors and officers.
Employment Agreements and Termination of Employment Agreements
At the time of commencement of employment, our employees generally sign offer
letters specifying basic terms and conditions of employment. In general, our
employees are not subject to written employment agreements. Each officer and
employee has entered into a standard form confidential information and
invention assignment agreement that provides that the employee will not
disclose any confidential information of Tularik received during the course of
employment and that, with some exceptions, the employee will assign to Tularik
any and all inventions conceived or developed during the course of employment.
In October 1999, we entered into an agreement with John P. McLaughlin, our
former President. Under the terms of the agreement, Mr. McLaughlin will receive
his salary and health benefits through December 31, 1999 and may receive his
salary and health benefits through June 30, 2000 if he does not secure
alternate employment prior to that date. In addition, the vesting of options to
purchase 37,500 shares of common stock was accelerated. We provided Mr.
McLaughlin with a one-year loan in the principal amount of $787,503 at an
annual interest rate of 5.54%, pursuant to a promissory note secured by a
pledge of 262,501 shares of common stock.
64
<PAGE>
RELATED PARTY TRANSACTIONS
Stock option grants to our executive officers and directors are described in
this prospectus under the heading "Management--Compensation of Directors, --
Executive Compensation and--Employment Agreements."
From January 1, 1996 through September 30, 1999, the following executive
officers, directors and holders of more than 5% of our voting securities
purchased securities in the amounts and as of the dates set forth below.
<TABLE>
<CAPTION>
Series F Series G
Preferred Preferred
Purchaser Common Stock Stock Stock
- --------- ------------ --------- ---------
<S> <C> <C> <C>
Directors and Executive Officers(1)
David V. Goeddel, Ph.D. .................... 550,001 -- --
John P. McLaughlin.......................... -- -- --
Yasunori Kaneko, M.D. ...................... 200,000 -- --
Corinne H. Lyle............................. -- -- --
Andrew J. Perlman, M.D., Ph.D. ............. 100,000 -- --
William J. Rieflin.......................... 183,334 -- --
Terry J. Rosen.............................. 63,000 -- --
Pieter B.M.W.M. Timmermans, Ph.D. .......... 116,667 -- --
Robert A. Swanson........................... 308,000 -- --
A. Grant Heidrich, III...................... -- -- --
Mark J. Levin............................... -- -- --
Paul A. Marks, M.D. ........................ 33,000 -- --
Edward R. McCracken......................... -- -- --
Steven L. McKnight, Ph.D. .................. -- -- --
Peter J. Sjostrand, M.D. ................... -- -- --
Entities Affiliated with Directors(1)
Mayfield Fund(2)............................ -- -- --
PharmaVision 2000 AG(3)..................... -- 3,280,000 5,000,000
Price Per Share(4).......................... $0.40 to $3.00 $ 10.00 $ 10.25
Date(s) of Purchase......................... 1/96-9/99 10/96 12/97
</TABLE>
- --------
(1) See "Principal Stockholders" for more detail on shares held by these
purchasers.
(2) The entities affiliated with Mayfield Fund are Mayfield Associates,
Mayfield Medical Partners and Mayfield VI. Mr. Heidrich, one of our
directors, is a general partner of Mayfield Associates and of Mayfield VI
Management Partners. Mayfield VI Management Partners is the general partner
of Mayfield VI. Mayfield VI is a general partner of Mayfield Medical
Partners. Mr. Levin, one of our directors, is a general partner of Mayfield
Medical Partners.
(3) Dr. Goeddel, our Chief Executive Officer and director, is a director of
PharmaVision. Dr. Sjostrand, a member of our board of directors, is a
director of PharmaVision.
(4) The weighted average price per share for these purchases of our common
stock as of September 30, 1999 was $1.75.
We have entered into an Amended and Restated Registration Rights Agreement
with each of the purchasers of preferred stock set forth above, pursuant to
which these and other stockholders will have registration rights with respect
to their shares of common stock issuable upon conversion of their preferred
stock following this offering.
We have entered into indemnification agreements with our directors and
certain officers for the indemnification and advancement of expenses to these
persons to the fullest extent permitted by law. We also
65
<PAGE>
intend to enter into those agreements with our future directors and officers.
See "Limitation of Liability; Indemnification of Directors and Officers."
In June 1996, we entered into an agreement with Mr. Swanson under which the
1987 Swanson Family Trust, a trust affiliated with Mr. Swanson, purchased
300,000 shares of common stock at a purchase price of $0.75 per share.
According to the terms of the stock purchase agreement, if Mr. Swanson ceases
to serve as a director of Tularik before June 2001, we have the right to
repurchase at the original purchase price a number of shares calculated using a
formula based on the number of days of Mr. Swanson's service as a director to
us over a four-year period.
In May 1997, we loaned Mr. Rieflin $250,000 that he used in connection with
relocating to California from another state. Mr. Rieflin has repaid the full
amount that was due on this loan. The loan was interest free and was secured by
a pledge of Mr. Rieflin's shares of our common stock.
In November 1997, we loaned Mr. Rieflin $94,132 that he used to cover housing
differential costs in his move to California from another state. We have
forgiven $23,533 of the principal of this loan and will forgive an additional
$23,533 each November if Mr. Rieflin continues to provide services to Tularik.
Mr. Rieflin has not repaid any amount due on this loan. The loan bears interest
at a rate of 6.10% per year, is secured by a pledge of Mr. Rieflin's shares of
our common stock and is due on November 14, 2001.
We believe that all of the transactions set forth above were made on terms no
less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including loans, between us and our officers,
directors, principal stockholders and their affiliates will be approved by a
majority of our board of directors, including a majority of the independent and
disinterested directors, and will be on terms no less favorable to us than
could be obtained from unaffiliated third parties.
66
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table provides summary information regarding the beneficial
ownership of our outstanding common stock as of September 30, 1999 for:
. each person or group who beneficially owns more than 5% of our common
stock;
. our chief executive officer;
. each of our four other most highly compensated executive officers whose
compensation exceeded $100,000 during 1998;
. each of our directors; and
. all of our directors and executive officers as a group.
Beneficial ownership of shares is determined under the rules of the
Securities and Exchange Commission and generally includes any shares over which
a person exercises sole or shared voting or investment power. Except as
indicated by footnote, and subject to applicable community property laws, each
person identified in the table possesses sole voting and investment power with
respect to all shares of common stock held by them. Shares of common stock
subject to options currently exercisable or exercisable within 60 days of
September 30, 1999 and not subject to repurchase as of that date are deemed
outstanding for calculating the percentage of outstanding shares of the person
holding these options, but are not deemed outstanding for calculating the
percentage of any other person. Applicable percentage ownership in the
following table is based on 35,271,375 shares of common stock outstanding as of
September 30, 1999, after giving effect to the conversion of all outstanding
shares of preferred stock into common stock upon the closing of this offering,
and 41,521,375 shares of common stock outstanding immediately following the
completion of this offering. Unless otherwise indicated, the address of each of
the named individuals is c/o Tularik Inc., Two Corporate Drive, South San
Francisco, California 94080.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF SHARES BENEFICIALLY OWNED AS OF SEPTEMBER 30,
1999
----------------------------------------------------------------------
PERCENT OF TOTAL
SHARES SUBJECT TO SHARES ISSUABLE OUTSTANDING SHARES
OUTSTANDING A RIGHT OF PURSUANT TO OPTIONS BENEFICIALLY OWNED
SHARES OF REPURCHASE AS OF EXERCISABLE WITHIN --------------------
COMMON SEPTEMBER 30, 60 DAYS OF BEFORE THE AFTER THE
NAME STOCK(1) 1999(2) SEPTEMBER 30, 1999 OFFERING OFFERING
- ---- ----------- ----------------- ------------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
PharmaVision 2000 AG.... 8,280,000 -- -- 23.5 19.9
Spielhof 3
8750 Glarus Switzerland
Entities affiliated with
Mayfield Fund(3)....... 3,966,474 -- -- 11.2 9.6
2800 Sand Hill Road,
Suite 250
Menlo Park, CA 94025
David V. Goeddel,
Ph.D.(4)............... 9,658,125 171,876 549,999 29.0 24.7
John P. McLaughlin...... -- -- 225,001 * *
Yasunori Kaneko,
M.D.(5)................ 395,000 -- 275,000 1.9 1.6
Andrew J. Perlman, M.D.,
Ph.D.(6)............... 270,000 -- 205,000 1.3 1.1
Pieter B.M.W.M.
Timmermans, Ph.D. ..... 77,778 38,889 133,333 * *
Robert A. Swanson(7).... 341,195 109,000 56,000 1.4 1.2
A. Grant Heidrich,
III(8)................. 3,966,474 -- 41,000 11.3 9.6
Mark J. Levin(9)........ 479,818 -- 99,000 1.6 1.4
Edward R. McCracken..... -- -- 89,000 * *
Steven L. McKnight,
Ph.D.(10).............. 784,751 6,249 399,000 3.3 2.8
Paul A. Marks, M.D. .... 64,313 8,687 16,000 * *
Peter J. Sjostrand,
M.D.(11)............... 8,280,000 -- 49,000 23.6 20.0
All executive officers
and directors as a
group (15 people)(12).. 15,775,844 387,827 2,745,999 49.7 42.7
</TABLE>
- --------
* Less than one percent (1%).
(1) Excludes shares of common stock subject to a right of repurchase as of
September 30, 1999.
67
<PAGE>
(2) The unvested portion of the shares of common stock is subject to a right
of repurchase by us, at the original option exercise price, in the event
the holder ceases to provide service to us and our affiliates. The option
exercise prices range from $0.025 to $3.00. See "Management--Executive
Compensation" for more detail on our right to repurchase.
(3) Includes 158,659 shares held by Mayfield Associates, 479,818 shares held
by Mayfield Medical Partners and 3,327,997 shares held by Mayfield VI.
Mayfield VI Management Partners is the general partner of Mayfield VI and
Mayfield VI is a general partner of Mayfield Medical Partners. Mr.
Heidrich is a general partner of Mayfield Associates and of Mayfield VI
Management Partners. Mr. Levin is a general partner of Mayfield Medical
Partners.
(4) Includes 8,280,000 shares held by PharmaVision. Dr. Goeddel is a director
of PharmaVision and disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest in these shares. Does not include
240,000 shares held in trust for Dr. Goeddel's children, for which Dr.
Goeddel is not the trustee and disclaims beneficial ownership.
(5) Includes 200,000 shares held in trust for the Kaneko Family Trust for
which Dr. Kaneko disclaims beneficial ownership. Does not include 40,000
shares held in trust for Dr. Kaneko's minor children, for which Dr. Kaneko
is not the trustee and disclaims beneficial ownership.
(6) Includes 195,000 shares held in trust for the Perlman/Gardner Family Trust
for which Dr. Perlman disclaims beneficial ownership. Does not include
30,000 shares held in trust for Dr. Perlman's minor children, for which
Dr. Perlman is not the trustee and disclaims beneficial ownership.
(7) Includes 300,000 shares held by the 1987 Swanson Family Trust, a trust
affiliated with Mr. Swanson, and 142,195 shares held by the Swanson Family
Fund, Ltd.
(8) Includes 158,659 shares held by Mayfield Associates, 479,818 shares held
by Mayfield Medical Partners and 3,327,997 shares held by Mayfield VI. Mr.
Heidrich is a general partner of Mayfield Associates and of Mayfield VI
Management Partners. Mayfield VI Management Partners is the general
partner of Mayfield VI and Mayfield VI is a general partner of Mayfield
Medical Partners. Mr. Heidrich disclaims beneficial ownership of these
shares except to the extent of his proportionate partnership interest in
these shares.
(9) Includes 479,818 shares held by Mayfield Medical Partners. Mr. Levin is a
general partner of Mayfield Medical Partners and disclaims beneficial
ownership of these shares except to the extent of his proportionate
partnership interest in these shares.
(10) Includes 200,000 shares held in trust for Dr. McKnight's minor children
and 206,000 shares held in trust for the Steven L. McKnight Exempt Family
Trust. Dr. McKnight disclaims beneficial ownership of these shares.
(11) Includes 8,280,000 shares held by PharmaVision. Dr. Sjostrand is a
director of PharmaVision and disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest in these shares.
(12) Includes shares described in the notes above, as applicable.
68
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering and the filing of our amended and restated
certificate of incorporation, our authorized capital stock will consist of 65
million shares of common stock, $0.001 par value, and five million shares of
preferred stock, $0.001 par value.
Common Stock
As of September 30, 1999, there were 35,271,375 shares of common stock
outstanding that were held of record by approximately 374 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
one-to-one ratio. There will be 41,521,375 shares of common stock outstanding
(assuming no exercise of the underwriters' over-allotment option and no
exercise of outstanding options) after giving effect to the sale of the shares
of common stock offered by this prospectus.
The holders of common stock are entitled to one vote per share on all matters
submitted to a vote of our stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that may be applicable to any
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive ratably any dividends out of assets
legally available therefor as our board of directors may from time to time
determine. Upon liquidation, dissolution or winding up of Tularik, holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference of any then outstanding
shares of preferred stock. Holders of common stock have no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable.
Preferred Stock
Pursuant to our amended and restated certificate of incorporation, our board
of directors will have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock, in one or
more series. Our board shall determine the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preferences, sinking
fund terms and the number of shares constituting any series or the designation
of any series. The issuance of preferred stock could adversely affect the
voting power of holders of common stock, and the likelihood that holders of
preferred stock will receive dividend payments and payments upon liquidation
may have the effect of delaying, deferring or preventing a change in control of
Tularik, which could depress the market price of our common stock. We have no
present plan to issue any shares of preferred stock.
Registration Rights of Stockholders
Upon completion of this offering, holders of an aggregate of 26,953,539
shares of common stock and warrants to purchase an aggregate of 1,015,091
shares of common stock will be entitled to rights to register these shares
under the Securities Act. These rights are provided under an Investor Rights
Agreement, dated October 31, 1997, under an Amended and Restated Registration
Rights Agreement, dated August 15, 1999, and under agreements with similar
registration rights. If we propose to register any of our securities under the
Securities Act, either for our own account or for the account of others, the
holders of these shares are entitled to notice of the registration and are
entitled to include, at our expense, their shares of common stock in the
registration and any related underwriting, provided, among other conditions,
that the underwriters may limit the number of shares to be included in the
registration and in some cases, including this offering, exclude these shares
entirely. In addition, the holders of these shares may require us, at our
expense and on not more than two occasions at any time beginning six months
from the date of the closing of this offering, to file a registration statement
under the Securities Act with respect to their shares of common stock, and we
will be required to use our best efforts to effect the registration. Further,
the holders may require us at our expense to register their shares on Form S-3
when this form becomes available.
69
<PAGE>
Anti-Takeover Provisions of Delaware Law and Charter Provisions
Until November 2000, we are subject to Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that the stockholder
became an interested stockholder unless:
. prior to the date, our board of directors approved either the business
combination or the transaction that resulted in the stockholder becoming
an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding those shares owned by persons who
are directors and also officers, and by employee stock plans in which
shares held subject to the plan will be tendered in a tender or exchange
offer; or
. on or subsequent to this date, the business combination is approved by
our board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
. any merger or consolidation involving the corporation and the interested
stockholder;
. any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
. subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; and
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
Our amended and restated certificate of incorporation requires that upon
completion of the offering, any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by a consent in writing. Additionally, our
certificate of incorporation:
. substantially limits the use of cumulative voting in the election of
directors;
. provides that the authorized number of directors may be changed only by
resolution of our board of directors; and
. authorizes our board of directors to issue blank check preferred stock to
increase the amount of outstanding shares.
Our amended and restated bylaws provide that candidates for director may be
nominated only by our board of directors or by a stockholder who gives written
notice to us no later than 60 days prior nor earlier than 90 days prior to the
first anniversary of the last annual meeting of stockholders. The authorized
number of directors is fixed in accordance with our certificate of
incorporation. Our board of directors currently consists of eight members who
will be elected at each annual meeting of our stockholders. Our board of
directors may appoint new directors to fill vacancies or newly created
directorships. Our bylaws also limit who may call a special meeting of
stockholders.
Delaware law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control of our management, which could
depress the market price of our common stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is Norwest Bank
Minnesota N.A.
70
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. Furthermore, since no shares
will be available for sale shortly after this offering because of contractual
and legal restrictions on resale as described below, sales of substantial
amounts of our common stock in the public market after these restrictions lapse
could adversely affect the prevailing market price and our ability to raise
equity capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
41,521,375 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants after
September 30, 1999. Of these shares, all of the shares sold in this offering
will be freely tradable without restriction or further registration under the
Securities Act, unless these shares are purchased by affiliates. The remaining
35,271,375 shares of common stock held by existing stockholders are restricted
securities. Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration described
below under Rules 144, 144(k) or 701 promulgated under the Securities Act.
As a result of the contractual restrictions described below and the
provisions of Rules 144, 144(k) and 701, the restricted shares will be
available for sale in the public market as follows:
. 2,142,474 shares will be eligible for sale upon completion of this
offering;
. 424,249 shares will be eligible for sale beginning 90 days after the date
of this prospectus;
. 32,704,652 shares will be eligible for sale upon the expiration of the
lock-up agreements, described below, beginning 180 days after the date of
this prospectus; and
. 3,709,202 shares will be eligible for sale upon the exercise of vested
options 180 days after the date of this prospectus.
Lock-Up Agreements. All of our officers, directors and some of our
stockholders and option holders have agreed not to transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of our common stock,
for a period of at least 180 days after the date of this prospectus. Transfers
or dispositions can be made sooner only with the prior written consent of
Lehman Brothers Inc.
Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus a person or persons whose shares are
aggregated, who has beneficially owned restricted securities for at least one
year, including the holding period of any prior owner except an affiliate,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
. 1% of the number of shares of our common stock then outstanding, which
will equal approximately 415,214 shares immediately after this offering;
or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of current public information about
Tularik.
Rule 144(k). Under Rule 144(k), a person who is not deemed to have been one
of our affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner except an affiliate, is
entitled to sell these shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. 16,205,022
shares of our common stock will qualify as "144(k) shares" within 180 days
after the date of this prospectus.
Rule 701. In general, under Rule 701 of the Securities Act as currently in
effect, any of our employees, consultants or advisors, other than affiliates,
who purchases or receives shares from us in connection with a
71
<PAGE>
compensatory stock purchase plan or option plan or other written agreement will
be eligible to resell their shares beginning 90 days after the date of this
prospectus, subject only to the manner of sale provisions of Rule 144, and by
affiliates under Rule 144 without compliance with its holding period
requirements.
Registration Rights. Upon completion of this offering, the holders of
26,953,539 shares of our common stock, or their transferees, will be entitled
to rights with respect to the registration of their shares under the Securities
Act. Registration of their shares under the Securities Act would result in
these shares becoming freely tradeable without restriction under the Securities
Act, except for shares purchased by affiliates, immediately upon the
effectiveness of such registration.
Stock Options. Following this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering the shares of common
stock reserved for issuance under our 1991 Stock Plan, 1997 Equity Incentive
Plan and 1999 Employee Stock Purchase Plan that will become effective upon
filing. Accordingly, shares registered under that registration statement will,
subject to Rule 144 volume limitations applicable to affiliates, be available
for sale in the open market after the filing, except those shares subject to
lockup agreements.
72
<PAGE>
UNDERWRITING
Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, each of the underwriters
named below, for whom Lehman Brothers Inc., Hambrecht & Quist LLC, J.P. Morgan
Securities Inc. and Warburg Dillon Read LLC and are acting as representatives,
has agreed to purchase from us the number of shares of common stock shown
opposite its name below:
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ----------
<S> <C>
Lehman Brothers Inc. .............................................
Hambrecht & Quist LLC.............................................
J.P. Morgan Securities Inc........................................
Warburg Dillon Read LLC...........................................
----------
Total...........................................................
==========
</TABLE>
The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement. It also provides that, if any of the
shares of common stock are purchased by the underwriters under the underwriting
agreement, then all of the shares of common stock that the underwriters have
agreed to purchase under the underwriting agreement must be purchased. The
conditions contained in the underwriting agreement include the requirement
that:
. the representations and warranties made by us to the underwriters are
true;
. there is no material change in the financial markets; and
. we deliver to the underwriters customary closing documents.
The representatives have advised us that the underwriters propose to offer
the shares of common stock directly to the public at the public offering price
shown on the cover page of this prospectus. The representatives have also
advised us that the underwriters propose to offer the shares of common stock to
dealers, who may include the underwriters, at the public offering price less a
selling concession not in excess of $ per share. The underwriters may
allow, and the dealers may reallow, a concession not in excess of $ per
share to brokers and dealers. After completion of the offering, the
underwriters may change the offering price and other selling terms.
We have granted the underwriters an option to purchase up to
additional shares of common stock, exercisable solely to cover over-allotments,
if any, at the public offering price less the underwriting discount shown on
the cover page of this prospectus. The underwriters may exercise this option at
any time until 30 days after the date of the underwriting agreement. If this
option is exercised, each underwriter will be committed, so long as the
conditions of the underwriting agreement are satisfied, to purchase a number of
additional shares of common stock proportionate to the underwriter's initial
commitment as indicated in the table above and we will be obligated, under the
over-allotment option, to sell the shares of common stock to the underwriters.
We have agreed that, without the prior consent of Lehman Brothers Inc., we
will not, directly or indirectly, offer, sell or otherwise dispose of any
shares of common stock or any securities that may be converted into or
exchanged for any shares of common stock for a period of 180 days from the date
of this prospectus. All of our executive officers, directors and substantially
all of our stockholders have agreed under lock-up agreements that, without the
prior written consent of Lehman Brothers Inc., they will not, directly or
indirectly, offer, sell or otherwise dispose of any shares of common stock or
any securities that may be converted into or exchanged for any shares of common
stock for the period ending 180 days from the date of this prospectus. See
"Shares Eligible for Future Sale."
Before this offering, there has been no public market for the shares of
common stock. The initial public offering price will be negotiated between the
representatives and us. In determining the initial public offering
73
<PAGE>
price of the common stock, the representatives will consider, among other
things and in addition to prevailing market conditions:
. our capital structure;
. estimates of our business potential and earning prospects;
. an overall assessment of our management; and
. the consideration of the above factors in relation to market valuations
of companies in related businesses.
We have applied for quotation of our common stock on the Nasdaq National
Market under the trading symbol "TLRK."
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
the representations and warranties contained in the underwriting agreement. We
have also agreed to contribute to payments that the underwriters may be
required to make for these liabilities.
Until the distribution of the common stock is complete, rules of the
Securities and Exchange Commission may limit the ability of the underwriters
and selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purposes of pegging, fixing or
maintaining the price of the common stock.
The underwriters may create a short position in the common stock in
connection with the offering. This means that they may sell more shares than
are shown on the cover page of this prospectus. If the underwriters create a
short position, then the representatives may reduce that short position by
purchasing common stock in the open market. The representatives also may elect
to reduce any short position by exercising all or part of the over-allotment
option. The underwriters have informed us that they do not intend to confirm
sales to discretionary accounts that exceed 5% of the total number of shares of
common stock offered by them.
The representatives also may impose a penalty bid on underwriters and selling
group members. This means that, if the representatives purchase shares of
common stock in the open market to reduce the underwriters' short position or
to stabilize the price of the common stock, they may reclaim the amount of the
selling concession from the underwriters and selling group members that sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of these purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.
Neither we nor any of the underwriters makes any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the common stock. In addition, neither we nor
any of the underwriters makes any representation that the representatives will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
the sale is made.
Purchasers of the shares of common stock offered in this prospectus may be
required to pay stamp taxes and other charges under the laws and practices of
the country of purchase, in addition to the public offering price shown on the
cover page of this prospectus.
At our request, the underwriters have reserved up to shares of
the common stock offered by this prospectus for sale to our officers,
directors, employees and their family members and to our business
74
<PAGE>
associates. These shares will be offered at the public offering price shown on
the cover page of this prospectus. These persons must commit to purchase no
later than the close of business on the day following the date of this
prospectus. The number of shares available for sale to the general public will
be reduced to the extent these persons purchase the reserved shares.
LEGAL MATTERS
Cooley Godward LLP, Palo Alto, California, will provide us with an opinion as
to the validity of the common stock offered under this prospectus. Latham &
Watkins, San Diego, California, will pass upon certain legal matters related to
this offering for the underwriters. As of the date of this prospectus, certain
partners and associates of Cooley Godward LLP own an aggregate of 13,514 shares
of our common stock through investment partnerships.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1997 and 1998, and for each of the three
years in the period ended December 31, 1998, as set forth in their report. We
have included our financial statements in this prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given upon
their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-1 under the Securities Act with respect to the
shares of common stock offered under this prospectus. This prospectus does not
contain all of the information in the registration statement and the exhibits
and schedule to the registration statement. For further information with
respect to us and our common stock, we refer you to the registration statement
and to the exhibits and schedule to registration statement. Statements
contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance, we
refer you to the copy of the contract or other document filed as an exhibit to
the registration statement. Each of these statements is qualified in all
respects by this reference. You may inspect a copy of the registration
statement without charge at the SEC's principal office in Washington, D.C., and
copies of all or any part of the registration statement may be obtained from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of fees prescribed by the SEC. The SEC maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the Web site is http://www.sec.gov. The SEC's toll free investor
information service can be reached at 1-800-SEC-0330. Information contained on
our website does not constitute part of this prospectus.
Upon completion of the offering, we will be subject to the information
reporting requirements of the Securities Exchange Act of 1934, as amended, and
we will file reports, proxy statements and other information with the SEC.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent public accountants and
quarterly reports for the first three fiscal quarters of each fiscal year
containing unaudited interim financial information. Our telephone number is
(650) 825-7000.
75
<PAGE>
TULARIK INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.......................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statement of Stockholders' Equity............................. F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Tularik Inc.
We have audited the accompanying consolidated balance sheets of Tularik Inc.
as of December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tularik Inc. at
December 31, 1997 and 1998, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
February 19, 1999
F-2
<PAGE>
TULARIK INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
------------------ June 30, June 30,
1997 1998 1999 1999
-------- -------- -------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 74,545 $ 53,398 $ 36,339
Short-term investments............ 49,861 58,926 70,863
Restricted investment............. -- -- 3,995
Prepaid expenses and other current
assets........................... 881 1,582 2,453
-------- -------- --------
Total current assets............ 125,287 113,906 113,650
Property and equipment, net........ 6,209 11,950 15,940
Other investments.................. 1,000 9,050 2,050
Other assets....................... 1,026 1,872 2,286
-------- -------- --------
$133,522 $136,778 $133,926
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable.................. $ 1,154 $ 1,570 $ 1,185
Accrued compensation and related
liabilities...................... 1,084 1,170 1,274
Accrued liabilities............... 1,052 1,377 2,440
Accrued construction costs........ -- 2,076 --
Current portion of long-term
debt............................. 1,222 2,330 4,471
Deferred revenue.................. 4,248 10,848 9,273
-------- -------- --------
Total current liabilities....... 8,760 19,371 18,643
Long-term debt, net of current
portion........................... 3,456 4,734 11,171
Other non-current liabilities...... 450 1,775 776
Commitments
Stockholders' equity:
Convertible preferred stock,
$0.001 par value; 33,000,000
shares authorized; 26,858,823,
26,903,885, and 26,953,539 shares
issued and outstanding in 1997,
1998 and at June 30, 1999,
respectively, and none pro forma,
issuable in series; aggregate
liquidation preference, $173,424
and $173,542 as of December 31,
1998 and June 30, 1999,
respectively..................... 27 27 27 $ --
Common stock, $0.001 par value;
55,000,000 shares authorized;
7,432,729, 7,560,603, and
8,160,862 shares issued and
outstanding in 1997, 1998 and at
June 30, 1999, respectively, and
35,114,401 shares pro forma...... 7 8 8 35
Additional paid-in capital........ 173,000 174,035 181,224 181,224
Notes receivable from
stockholders..................... (860) (636) (482) (482)
Deferred compensation............. -- (679) (5,705) (5,705)
Accumulated deficit............... (51,318) (61,857) (71,736) (71,736)
-------- -------- -------- --------
Total stockholders' equity......... 120,856 110,898 103,336 $103,336
-------- -------- -------- ========
$133,522 $136,778 $133,926
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
TULARIK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Years ended December 31, Six months ended June 30,
-------------------------------- ---------------------------
1996 1997 1998 1998 1999
--------- --------- ---------- ------------ -------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative research
and development...... $ 15,297 $ 20,009 $ 21,362 $ 8,962 $ 11,993
Operating expenses:
Research and
development.......... 18,622 26,546 33,264 16,003 20,951
Acquired in-process
research and
development.......... -- 18,902 -- -- --
General and
administrative....... 3,630 4,020 5,002 2,421 2,648
Amortization of
deferred stock
compensation......... -- -- 31 -- 840
--------- --------- ---------- ------------ -------------
22,252 49,468 38,297 18,424 24,439
--------- --------- ---------- ------------ -------------
Loss from operations.... (6,955) (29,459) (16,935) (9,462) (12,446)
Interest income, net.... 1,475 4,085 6,396 3,279 2,567
--------- --------- ---------- ------------ -------------
Net loss................ $ (5,480) $ (25,374) $ (10,539) $ (6,183) $ (9,879)
========= ========= ========== ============ =============
Basic and diluted net
loss per share......... $ (1.09) $ (4.19) $ (1.55) $ (0.93) $ (1.37)
========= ========= ========== ============ =============
Weighted average shares
used in computing basic
and diluted net loss
per share.............. 5,033,799 6,062,651 6,790,512 6,654,398 7,198,168
========= ========= ========== ============ =============
Pro forma basic and
diluted net loss per
share.................. $ (0.31) $ (0.29)
========== =============
Weighted average shares
used in computing pro
forma basic and diluted
net loss per share..... 33,686,853 34,110,329
========== =============
</TABLE>
See accompanying notes.
F-4
<PAGE>
TULARIK INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Convertible Notes
Preferred Stock Common Stock Additional Receivable Total
------------------- ----------------- Paid-In From Deferred Accumulated Stockholders'
Shares Amount Shares Amount Capital Stockholders Compensation Deficit Equity
---------- -------- --------- ------- ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1995........... 13,645,132 $ 37,813 4,970,855 $ 535 $ -- $(131) $ -- $(20,464) $ 17,753
Issuance of
Series F
convertible
preferred
stock.......... 6,272,000 59,857 -- -- -- -- -- -- 59,857
Issuance of
common stock
for stock
option and
employee
benefit plans,
net of
repurchases.... -- -- 1,823,712 1,302 -- (571) -- -- 731
Repayment of
notes
receivable..... -- -- -- -- -- 44 -- -- 44
Net loss........ -- -- -- -- -- -- -- (5,480) (5,480)
---------- -------- --------- ------- -------- ----- ------- -------- --------
Balance at
December 31,
1996........... 19,917,132 97,670 6,794,567 1,837 -- (658) -- (25,944) 72,905
Reincorporation
in Delaware.... -- (97,650) -- (2,609) 100,259 -- -- -- --
Issuance of
Series G
convertible
preferred
stock.......... 5,319,634 5 -- -- 54,467 -- -- -- 54,472
Issuance of
Series H
convertible
preferred stock
and warrants
for
Acquisition.... 1,622,057 2 -- -- 18,274 -- -- -- 18,276
Issuance of
common stock
for stock
option and
employee
benefit plans,
net of
repurchases.... -- -- 638,162 779 -- (263) -- -- 516
Repayment of
notes
receivable..... -- -- -- -- -- 61 -- -- 61
Net loss........ -- -- -- -- -- -- -- (25,374) (25,374)
---------- -------- --------- ------- -------- ----- ------- -------- --------
Balance at
December 31,
1997........... 26,858,823 27 7,432,729 7 173,000 (860) -- (51,318) 120,856
Issuance of
Series H
convertible
preferred stock
upon exercise
of stock
options........ 7,802 -- -- -- 6 -- -- -- 6
Conversion of
warrant, net... 37,260 -- -- -- -- -- -- -- --
Issuance of
common stock
for stock
option and
employee
benefit plans,
net of
repurchases.... -- -- 127,874 1 319 80 -- -- 400
Repayment of
notes
receivable..... -- -- -- -- -- 144 -- -- 144
Deferred
compensation... -- -- -- -- 710 -- (710) -- --
Amortization of
deferred
compensation... -- -- -- -- -- -- 31 -- 31
Net loss........ -- -- -- -- -- -- -- (10,539) (10,539)
---------- -------- --------- ------- -------- ----- ------- -------- --------
Balance at
December 31,
1998........... 26,903,885 27 7,560,603 8 174,035 (636) (679) (61,857) 110,898
Conversion of
warrant, net
(unaudited).... 49,654 -- -- -- -- -- -- -- --
Issuance of
common stock
for stock
option and
employee
benefit plans,
net of
repurchases
(unaudited) ... -- -- 600,259 -- 1,323 (6) -- -- 1,317
Repayment of
notes
receivable
(unaudited).... -- -- -- -- -- 160 -- -- 160
Deferred
compensation
(unaudited).... -- -- -- -- 5,866 -- (5,866) -- --
Amortization of
deferred
compensation
(unaudited).... -- -- -- -- -- -- 840 -- 840
Net loss
(unaudited).... -- -- -- -- -- -- -- (9,879) (9,879)
---------- -------- --------- ------- -------- ----- ------- -------- --------
Balance at June
30, 1999
(unaudited).... 26,953,539 $ 27 8,160,862 $ 8 $181,224 $(482) $(5,705) $(71,736) $103,336
========== ======== ========= ======= ======== ===== ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
TULARIK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six months ended
Years ended December 31, June 30,
------------------------------ ------------------
1996 1997 1998 1998 1999
-------- --------- --------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss.................. $ (5,480) $ (25,374) $ (10,539) $ (6,183) $ (9,879)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization............. 2,027 1,918 2,423 1,133 1,808
Amortization of deferred
stock compensation....... -- -- 31 -- 840
Noncash stock
compensation............. -- -- 188 -- 250
Write-off of in-process
research and
development.............. -- 18,902 -- -- --
Changes in assets and
liabilities, net of
Acquisition:
Other assets............. (596) (240) (1,578) (1,185) (1,285)
Accounts payable and
accrued liabilities..... 1,351 1,002 827 18 (1,294)
Deferred revenue......... (3,127) (340) 7,873 1,078 (1,575)
Other liabilities........ -- 141 52 46 (999)
-------- --------- --------- -------- --------
Net cash used in
operating activities... (5,825) (3,991) (723) (5,093) (12,134)
-------- --------- --------- -------- --------
Investing activities
Maturities of available-
for-sale securities...... 8,981 103,693 140,982 71,514 60,876
Purchases of available-
for-sale securities...... (46,374) (109,132) (157,047) (81,788) (69,808)
Capital expenditures...... (1,189) (1,970) (6,057) (2,161) (5,798)
Purchases of long-term
investments.............. -- (1,000) (1,050) (750) --
Acquisition, net of cash
received................. -- (538) -- -- --
-------- --------- --------- -------- --------
Net cash used in
investing activities... (38,582) (8,947) (23,172) (13,185) (14,730)
-------- --------- --------- -------- --------
Financing activities
Proceeds from long-term
debt...................... -- 1,268 3,905 1,749 9,995
Payments of long-term
debt...................... (1,721) (1,490) (1,519) (635) (1,417)
Net proceeds from issuance
of preferred stock........ 59,857 54,472 6 6 --
Proceeds from issuances of
common stock, net......... 775 577 356 143 1,227
-------- --------- --------- -------- --------
Net cash provided by
financing activities... 58,911 54,827 2,748 1,263 9,805
-------- --------- --------- -------- --------
Net increase (decrease) in
cash and cash
equivalents............... 14,504 41,889 (21,147) (17,015) (17,059)
Cash and cash equivalents
at beginning of period.... 18,152 32,656 74,545 74,545 53,398
-------- --------- --------- -------- --------
Cash and cash
equivalents at end of
period................. $ 32,656 $ 74,545 $ 53,398 $ 57,530 $ 36,339
======== ========= ========= ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
1. Basis of Presentation
Organization and Business
Tularik Inc. ("Tularik" or the "Company") was incorporated in the state of
California in November 1991 and reincorporated in the state of Delaware in June
1997. Since its founding, the Company has been engaged in the discovery and
development of a broad range of novel, small molecule drugs, most of which act
through the regulation of gene expression. Tularik has incurred net losses
since inception and is expected to incur substantial and increasing losses for
at least the next several years as research and development activities are
expanded. To date, the Company has funded its operations primarily through the
sale of equity securities, non-equity payments from collaborators and interest
income. Future revenue, if any, for at least the next several years is expected
to consist primarily of payments under corporate collaborations and interest
income. The process of developing products will require significant additional
research and development, preclinical testing and clinical trials, as well as
regulatory approval. These activities, together with general and administrative
expenses, are expected to result in substantial operating losses for the
foreseeable future. Tularik will not receive product revenue unless the Company
or its collaborative partners completes clinical trials, obtains regulatory
approval and successfully commercializes one or more of the Company's products.
In order to accelerate product commercialization and finance research
activities, Tularik has entered into collaborations with leading pharmaceutical
companies. The Company has ongoing collaborations with Knoll relating to
obesity (commenced in November 1998); JT relating to orphan nuclear receptors
(commenced in September 1998); Roche Bioscience relating to inflammation
(commenced in July 1997); JT relating to obesity (commenced in September 1996);
Taisho relating to immune disorders (commenced in April 1995); and Sumitomo
relating to hypercholesterolemia (commenced in January 1995). Previously,
Tularik also had collaborations with Yamanouchi relating to inflammation
(commenced in November 1993, ended in November 1996) and with Merck relating to
viral disease (commenced in December 1993, ended in March 1999). As of June 30,
1999, the Company has received $13.0 million in equity investments and $95.8
million in research funding from its collaborators, including $14.0 million
from Yamanouchi and $20.4 million from Merck.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Tularik and its
wholly owned subsidiary. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments in debt securities with a
remaining maturity from the date of purchase of 90 days or less to be cash
equivalents. Cash equivalents consist of money market funds and corporate debt
securities and exclude demand deposits. The Company's short-term investments
include obligations of governmental agencies and corporate debt securities with
original maturities ranging between three and 12 months. By policy, the Company
limits concentration of credit risk by diversifying its investments among a
variety of high credit-quality issuers.
F-7
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
All cash equivalents and short-term investments are classified as available-
for-sale. Available-for-sale securities are carried at amortized cost, which
approximated fair value at December 31, 1997 and 1998. Material unrealized
gains and losses, if any, are reported in stockholders' equity and included in
other comprehensive loss. Fair value is estimated based on available market
information. The cost of securities sold is based on the specific
identification method. For the years ended December 31, 1997 and 1998, gross
realized gains and losses on available-for-sale securities were immaterial. See
Note 4 for a summary of available-for-sale securities at December 31, 1997 and
1998.
Property and Equipment
Property and equipment is stated at cost. Depreciation and amortization of
equipment is calculated using the straight-line method over the lesser of the
estimated useful lives of the assets, generally three to four years, or the
lease term. Leasehold improvements are amortized over the term of the related
lease, which does not exceed their estimated useful lives.
Long-lived Assets
The Company accounts for its long-lived assets under Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-lived
Assets and for Long-lived Assets to be Disposed Of" ("SFAS 121"). In accordance
with SFAS 121, the Company identifies and records impairment losses, as
circumstances dictate, on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets. No such events have occurred with respect to the
Company's long-lived assets, which consist primarily of machinery and equipment
and leasehold improvements.
Revenue Recognition
Collaborative research and development agreements provide for periodic
payments in support of the Company's research activities. Collaboration revenue
is recognized as earned based on actual costs incurred or as milestones are
achieved. Nonrefundable technology access fees are recognized immediately when
received and when all contractual obligations of the Company relating to the
fees have been fulfilled. Research support payments received in advance of work
performed are recorded as deferred revenue (see Note 3).
Stock-Based Compensation
The Company accounts for grants of stock options and common stock purchase
rights in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related Interpretations ("APB
No. 25"). Pro forma net loss information, as required by Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), is included in Note 9. Any deferred stock compensation calculated
pursuant to APB No. 25 is amortized over the vesting period of the individual
options, generally four years, using the graded vesting method. The graded
vesting method provides for vesting of portions of the overall award at interim
dates and results in higher vesting in earlier years than straight-line
vesting.
Comprehensive Loss
As of January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS
130 establishes new rules for the reporting and
F-8
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net loss or stockholders' equity.
SFAS 130 requires unrealized gains or losses on the Company's available-for-
sale securities, which prior to adoption were reported separately in
stockholders' equity, to be included in comprehensive income, if material. The
Company's comprehensive loss was not materially different from the net loss for
the years ended December 31, 1997 and 1998 and for the six months ended June
30, 1999.
Net Loss Per Share
Net loss per share has been computed in accordance with the Financial
Accounting Standards Board Statement No. 128, "Earnings Per Share," which
requires disclosure of basic and diluted earnings per share. Basic earnings per
share excludes any dilutive effects of options, shares subject to repurchase,
warrants, and convertible securities. Diluted earnings per share includes the
impact of potentially dilutive securities. The Company's potentially dilutive
securities were antidilutive and therefore were not included in the computation
of weighted-average shares used in computing diluted loss per share. Following
the guidance given by the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, common stock and preferred stock that has been issued or
granted for nominal consideration prior to the anticipated effective date of
the initial public offering must be included in the calculation of basic and
diluted net loss per common share as if these shares had been outstanding for
all periods presented. To date, the Company has not issued or granted shares
for nominal consideration.
The following is a reconciliation of the numerator and denominator of basic
and diluted net loss per share (in thousands, except share and per share
amounts):
<TABLE>
<CAPTION>
Year ended Six months ended
December 31, June 30,
----------------------------------- ----------------------
1996 1997 1998 1998 1999
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Basic and diluted:
Net loss.............. $ (5,480) $ (25,374) $ (10,539) $ (6,183) $ (9,879)
========== =========== ========== ========== ==========
Weighted average
shares of common
stock outstanding.... 5,627,770 7,292,476 7,495,576 7,498,130 7,645,886
Less: weighted average
shares subject to
repurchase........... (593,971) (1,229,825) (705,064) (843,742) (447,718)
---------- ----------- ---------- ---------- ----------
Weighted average
shares used in
computing basic and
diluted net loss per
share................ 5,033,799 6,062,651 6,790,512 6,654,398 7,198,168
========== =========== ========== ========== ==========
Basic and diluted net
loss per share....... $ (1.09) $ (4.19) $ (1.55) $ (0.93) $ (1.37)
========== =========== ========== ========== ==========
Pro forma basic and
diluted:
Shares used above..... 6,790,512 7,198,168
Pro forma adjustment
to reflect weighted
average effect of
assumed conversion of
preferred stock...... 26,896,341 26,912,161
---------- ----------
Total weighted average
shares of common
stock outstanding pro
forma................ 33,686,853 34,110,329
========== ==========
Basic and diluted pro
forma loss per
share................ $ (0.31) $ (0.29)
========== ==========
</TABLE>
F-9
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
During all periods presented, the Company had securities outstanding which
could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share, as their effect
would have been antidilutive. Such outstanding securities consist of the
following:
<TABLE>
<CAPTION>
December 31, June 30,
-------------------------------- ---------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Convertible preferred
stock.................. 19,917,132 26,858,823 26,903,885 26,903,885 26,953,539
Outstanding options..... 2,972,750 3,685,108 5,333,347 5,107,002 6,026,934
Warrants................ 702,674 999,235 1,078,382 1,078,382 1,015,091
---------- ---------- ---------- ---------- ----------
Total................. 23,592,556 31,543,166 33,315,614 33,089,269 33,995,564
========== ========== ========== ========== ==========
Weighted average
exercise price of
options................ $ 0.61 $ 1.41 $ 1.99 $ 1.91 $ 2.22
========== ========== ========== ========== ==========
Weighted average
exercise price of
warrants............... $ 7.15 $ 8.88 $ 9.71 $ 9.71 $ 10.17
========== ========== ========== ========== ==========
</TABLE>
Unaudited Financial Statements
The accompanying unaudited financial statements for the six months ended June
30, 1998 and 1999 have been prepared on substantially the same basis as the
audited financial statements and include all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
financial information set forth therein. Results for any interim period are not
necessarily indicative of results for the full fiscal period.
3. Research and Development Collaborations
The Company has entered into multi-year research and development
collaborations in six of its research programs. Tularik received aggregate
research payments, including technology access fees, of $12.5 million, $20.0
million, and $29.2 million and recognized collaboration revenue of $15.3
million, $20.0 million, and $21.4 million in 1996, 1997, and 1998,
respectively. For the six months ended June 30, 1999, Tularik received research
funding of $9.0 million and recognized collaboration revenue of $12.0 million.
Under the terms of existing collaborations at June 30, 1999, the Company's
partners have agreed to provide future research funding of up to approximately
$62.3 million over a five-year period, including $34.4 million subject to
possible cancellation, as well as additional payments upon the achievement of
specific research and development milestones. All research payments are non-
refundable and the Company performs research pursuant to these agreements on a
"best efforts" basis. Costs incurred under research and development
collaborations approximate revenues earned and are included in research and
development expenses. In addition to providing the research funding summarized
above, certain of the Company's collaborators have also purchased equity
investments in Tularik. These equity purchases and other significant terms of
current and prior collaborations are described below.
In November 1998, Tularik and Knoll AG ("Knoll") established a five-year
collaboration to discover, develop and market compounds that act on obesity-
related targets. Once a compound is selected for preclinical development, Knoll
has the right to enter into a separate license agreement granting it exclusive
rights to develop, manufacture and sell the compounds in countries other than
Japan and other specified Asian countries, subject to milestone and royalty
obligations to Tularik. The agreement grants Tularik exclusive rights to
develop, manufacture and sell these products in Japan and other specified Asian
countries, without payment
F-10
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
obligation to Knoll. These retained rights are subject to a collaboration
agreement with JT in the area of obesity. Knoll has the right to terminate the
collaboration at the end of the third or fourth years of the five-year
agreement.
In September 1998, Tularik and Japan Tobacco Inc. ("JT") established a five-
year collaboration to discover, develop and market compounds that act by
regulating orphan nuclear receptors. The collaboration is structured as a joint
venture in which both expenses and profits on a worldwide basis will be split
evenly between Tularik and JT. Tularik retains exclusive marketing and sales
rights in the United States and Canada. JT retains exclusive marketing and
sales rights in Japan and Korea. JT has the right to terminate the
collaboration at the end of the third or fourth years of the five year
collaboration.
In July 1997, Tularik and Roche Bioscience ("Roche") established a five-year
collaboration to discover, develop and market anti-inflammatory therapeutics.
Under the collaboration, Roche has exclusive, worldwide manufacturing and
marketing rights to develop and commercialize drugs resulting from the research
program for specified indications, subject to benchmark and royalty obligations
to Tularik. Tularik has exclusive, worldwide manufacturing and marketing rights
to develop and commercialize other compounds resulting from the research
program, subject to royalty obligations to Roche. Roche has the right to
terminate the collaboration at the end of the third year if the then current
research plan does not provide opportunities for new products or if Tularik has
not discharged its obligations under the agreement.
In September 1996, the Company entered into a five-year collaboration with JT
to discover, develop and market compounds in the fields of obesity and
diabetes. Pursuant to a related stock purchase agreement, JT purchased 600,000
shares of Tularik's Series F preferred stock for $10.00 per share. In September
1998, Tularik and JT agreed to modify the structure of the original
collaboration. The collaboration is currently structured as a joint venture in
which both expenses and profits on a worldwide basis will be split evenly
between Tularik and JT. Tularik retains exclusive marketing and sales rights in
the United States and Canada. JT retains exclusive marketing and sales rights
in Japan and Korea. JT will be required to make benchmark payments to Tularik
based on clinical progress. JT has the right to terminate the collaboration at
the end of the fourth year of the five year collaboration.
In April 1995, Tularik established a five-year collaboration with Taisho
Pharmaceutical Co., Ltd. ("Taisho") focused on therapeutic modulation of the
human immune function. In January 1998, Tularik and Taisho extended the
collaboration for an additional year. The agreement gives Taisho the right to
manufacture and sell products resulting from the collaboration in Japan and in
certain other Asian countries, subject to milestone and royalty payments to
Tularik. The Company retains exclusive rights to manufacture and sell such
products in the rest of the world, without any payment obligation to Taisho.
Taisho has the right to terminate the collaboration prior to the commencement
of sixth year. In the event of early termination by Taisho, Tularik would have
exclusive, worldwide, royalty-free rights to all products identified in the
collaboration.
In January 1995, the Company entered into a five-year collaboration with
Sumitomo Pharmaceuticals Co., Ltd. ("Sumitomo") to fund research and
development in the field of hypercholesterolemia. Pursuant to a related stock
purchase agreement, Sumitomo purchased 400,000 shares of Tularik's Series E
preferred stock in February 1995 for $7.50 per share. Upon the selection of a
lead compound for certain preclinical studies, Sumitomo has the right to enter
into a separate license agreement granting Sumitomo exclusive rights to
develop, manufacture and sell the compound in Japan and in certain other Asian
countries, subject to royalty obligations to the Company. The collaboration
agreement grants Tularik exclusive rights to develop, manufacture and sell such
products in the rest of the world, without payment obligation to Sumitomo.
Sumitomo has the right to terminate the collaboration at any time after three
years of the five-year term.
F-11
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
In December 1993, Tularik established a collaboration with Merck & Co., Inc.
("Merck") to fund research and development in specified fields of human viral
disease. Pursuant to a related stock purchase agreement, Merck purchased
400,000 shares of the Company's Series D preferred stock in January 1994 for
$5.00 per share. In December 1996, the companies amended the original
agreement, extending its term to December 1999. In March 1999, in accordance
with early termination rights under the amended agreement, Merck terminated the
collaboration.
In November 1993, the Company entered into a five-year collaboration
agreement with Yamanouchi Pharmaceutical Co., Ltd. ("Yamanouchi") to fund
research and development in the field of inflammation. Pursuant to a related
stock purchase agreement, Yamanouchi purchased 400,000 shares of Tularik's
Series D preferred stock in February 1994 for $5.00 per share. In November
1996, in accordance with early termination rights under the agreement,
Yamanouchi terminated the collaboration after three years of the five-year
term.
4. Investments
The following is a summary of available-for-sale securities at (in
thousands):
<TABLE>
<CAPTION>
December 31,
----------------- June 30,
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash equivalents:
Money market funds............................ $ 1,624 $ 2,659 $ 2,690
Corporate debt securities..................... 72,905 50,739 33,215
-------- -------- --------
$ 74,529 $ 53,398 $ 35,905
======== ======== ========
Short-term investments:
Obligations of domestic governmental
agencies..................................... $ 10,000 $ 12,999 $ 12,005
Corporate debt securities..................... 39,861 45,927 58,858
-------- -------- --------
$ 49,861 $ 58,926 $ 70,863
======== ======== ========
</TABLE>
As of December 31, 1997 and 1998, the average portfolio duration was
approximately three and five months, respectively.
5. Property and Equipment
Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------- -------
(In thousands)
<S> <C> <C>
Laboratory and office equipment........................... $10,808 $15,063
Leasehold improvements.................................... 1,702 5,376
Construction in progress.................................. 31 235
------- -------
12,541 20,674
Less accumulated depreciation and amortization............ (6,332) (8,724)
------- -------
Property and equipment, net............................... $ 6,209 $11,950
======= =======
</TABLE>
6. Acquisition
On October 31, 1997, the Company acquired Amplicon Corporation ("Amplicon"),
a research organization engaged principally in identifying and characterizing
human genes involved in certain cancers,
F-12
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
whereby Amplicon became a wholly owned subsidiary of Tularik (the
"Acquisition"). Under the related Agreement and Plan of Merger and
Reorganization, Tularik issued a total of 1,622,057 shares of Tularik Series H
preferred stock and warrants to acquire an additional 245,456 shares of Tularik
Series H preferred stock in exchange for all of Amplicon's outstanding capital
stock. In addition, all outstanding stock options to purchase Amplicon common
stock were replaced with options to purchase 27,923 shares of Tularik Series H
preferred stock and warrants to purchase 4,544 shares of Series H preferred
stock. The acquisition was accounted for under the purchase method. The
purchase price was approximately $18.9 million including the fair value of the
Tularik Series H preferred stock and warrants as of the effective date of the
Acquisition, plus direct acquisition costs. The assets and liabilities assumed
by the Company were recorded based on their fair values at the date of
acquisition. The purchase price was allocated $18.9 to in-process research and
development and $24,000 to net tangible assets. The amount allocated to in-
process research and development was expensed at the time of acquisition. The
Company's results of operations include Amplicon's results from October 31,
1997.
In connection with the acquisition of Amplicon, the Company allocated
virtually all of the purchase price to acquired in-process research and
development. The Company estimated the fair value of the in-process research
and development using an income approach. This involved estimating the fair
value of the in-process research and development using the present value of
estimated after-tax cash flows that could be generated by pharmaceutical and
diagnostic products generated from the acquired in-process research and
development, using risk adjusted discount rates and revenue forecasts as
appropriate. The discount rate was selected based on consideration of the early
stage of the research and the risks associated with developing marketable
products from the research. The Company believes that the estimated in-process
research and development amount so determined represented fair value and did
not exceed the amount a third-party would pay for the technology.
At the date of acquisition, the in-process research and development had not
reached technological feasibility and had no alternative future uses. To date,
no products have been developed and the future benefits of the technology
remain uncertain. Accordingly, the value allocated to the research was expensed
at acquisition. If the research is not successful, the Company is unlikely to
realize the financial benefits estimated at the time of acquisition.
7. Long-Term Debt and Leases
At December 31, 1998, the Company's aggregate commitments under long-term
debt and noncancelable lease arrangements are as follows:
<TABLE>
<CAPTION>
Year ended Long-Term Operating
December 31, Debt Capital Leases Leases
------------ --------- -------------- ---------
(In thousands)
<S> <C> <C> <C>
1999...................................... $ 1,154 $ 1,424 $ 4,281
2000...................................... 1,263 1,424 4,662
2001...................................... 1,029 727 4,806
2002...................................... 204 191 4,661
2003...................................... -- -- 4,660
Thereafter................................ -- -- 44,512
------- ------- -------
Total minimum payment required............ 3,650 3,766 $67,582
=======
Less amount representing interest......... (352)
-------
Present value of future payments 3,414
Less current portion...................... (1,154) (1,176)
------- -------
$ 2,496 $ 2,238
======= =======
</TABLE>
F-13
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Equipment and leasehold improvements financed under these arrangements are
included in property and equipment and related amortization is included in
depreciation expense. In 1998, the Company entered into sale and leaseback
agreements covering certain laboratory equipment. No gain or loss was
recognized on these transactions. The leases are classified as capital leases.
The cost of assets under secured financing arrangements was $6.7 million and
$10.2 million and the related accumulated depreciation and amortization was
$3.7 million and $5.0 million at December 31, 1997 and 1998, respectively.
Rent expense, principally for leased facilities under long-term operating
lease commitments, was $2.0 million, $2.3 million, and $2.4 million for 1996,
1997, and 1998, respectively. In connection with the sublease of space in the
Company's facilities, Tularik is entitled to receive minimum lease payments of
$502,000 in 1999, $512,000 in 2000, and $257,000 in 2001. The Company did not
receive sublease income in 1997 and 1998.
8. Convertible Preferred Stock
All series of preferred stock are convertible at the option of the holder at
any time into common stock on a one-for-one basis, subject to adjustment for
antidilution, and carry voting rights equivalent to common stock. Each share of
preferred stock automatically converts into one share of common stock in the
event of an initial public offering of the Company's common stock in which
gross offering proceeds exceed $10.0 million and the offering price is at least
$10.25 per share or upon the vote by holders of at least two-thirds of the
outstanding preferred stock. Holders of convertible preferred stock are
entitled to noncumulative dividends when and if declared by the board of
directors. No dividends have been declared through December 31, 1998.
In the event of a liquidation or winding up of the Company, holders of Series
A, B, C, D, E, F, G and H convertible preferred stock are entitled to a
liquidation preference of $1.00, $2.37, $3.70, $5.00, $7.50, $10.00, $10.25 and
$11.00 per share, respectively, together with any declared but unpaid
dividends. The preferred stock authorized, issued and outstanding at December
31, 1998 is as follows:
<TABLE>
<CAPTION>
Aggregate
Authorized Shares Issued and Liquidation
Shares Outstanding Preference
---------- ----------------- --------------
(In thousands)
<S> <C> <C> <C>
Series A......................... 3,900,000 3,900,000 $ 3,900
Series B......................... 3,375,531 3,312,240 7,850
Series C......................... 5,400,000 5,270,152 19,500
Series D......................... 820,000 800,000 4,000
Series E......................... 440,000 400,000 3,000
Series F......................... 8,500,000 6,272,000 62,720
Series G......................... 7,500,000 5,319,634 54,526
Series H......................... 2,050,000 1,629,859 17,928
---------- ---------- --------
31,985,531 26,903,885 $173,424
========== ========
Undesignated..................... 1,014,469
----------
33,000,000
==========
</TABLE>
F-14
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
A summary of warrants to purchase preferred stock at December 31, 1998 is as
follows:
<TABLE>
<CAPTION>
Term
Number of Exercise in
Description Warrants Price Years Expiration
----------- --------- ------------- ----- ----------
<S> <C> <C> <C> <C>
Lease financing arrangements...... 188,263 $2.37-$7.50 7 1999-2002
Issuance of Series F preferred
stock............................ 253,600 $10.00 10 2006
Acquisition of Amplicon........... 296,949 $10.00-$13.00 10 2007
Facility lease agreement.......... 139,570 $13.00 10 2008
-------
878,382
=======
</TABLE>
9. Common Stock
Warrant
The Company issued a warrant to purchase 200,000 shares of common stock for
$7.50 per share in connection with a facility lease that was executed in 1995.
The warrant expires on the earlier of the five-year anniversary of the
Company's initial public offering or April 20, 2005. The value of the warrant
was determined to be immaterial at issuance. As of December 31, 1998, this
warrant has not been exercised.
Stock Awards
During 1997, the board of directors terminated the 1991 Stock Plan ("1991
Plan") and adopted the 1997 Equity Incentive Plan and the 1997 Non-Employee
Directors' Plan ("1997 Plans"). Termination of the 1991 Plan had no effect on
options outstanding under that plan. The 1997 Plans provide for stock options
and stock purchase rights to be granted to employees, directors and
consultants. Under the Equity Incentive Plan, shares available for grant are
increased by three and one-half percent of the total number of shares
outstanding at the end of each year from 1997 to 2002 up to a maximum of
2,000,000 shares per year. Options granted under the Equity Incentive Plan may
be incentive stock options or nonstatutory stock options. Exercise prices are
determined by the board of directors and may not be less than 100% of the fair
value of the Company's common stock (not less than 85% of fair value for
nonstatutory stock options granted under the Equity Incentive Plan) on the date
of grant. Options and purchase rights are exercisable upon grant, subject to
repurchase by the Company until vested and generally vest over four years. All
options expire no more than 10 years from the date of grant.
The Company has elected to follow APB No. 25 and related Interpretations in
accounting for its stock options and stock purchase rights because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires use of option valuation models that were not developed for use in
valuing employee stock options and rights.
During the year ended December 31, 1998 and during the six months ended June
30, 1999, in connection with the grant of certain share options to employees,
the Company recorded deferred stock compensation of $710,000 and $5.9 million,
respectively, representing the difference between the exercise price and the
deemed fair value of the Company's common stock on the date such stock options
were granted. Deferred compensation is included as a reduction of stockholders'
equity and is being amortized to expense on a graded vesting method. During the
year ended December 31, 1998 and during the six months ended June 30, 1999, the
Company recorded amortization of deferred stock compensation expense of
approximately $31,000 and $840,000, respectively. At June 30, 1999, the Company
had a total of approximately $5.7 million remaining to be amortized over the
corresponding vesting period of each respective option, generally four years.
F-15
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Pro forma net loss and net loss per share information is required by SFAS
123, which also requires that the information be determined as if the Company
had accounted for its employee stock options and rights granted subsequent to
December 31, 1994 under the fair value method. The fair value for these options
and the purchase rights was estimated at the date of grant using the minimum
value method with the following weighted-average assumptions for 1996, 1997 and
1998, respectively: risk free interest rates of 6.6%, 6.0% and 5.5%; no
dividend yield; and a weighted-average expected life of the options of 5 years.
Pro forma information for the years ended December 31 follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- -------- --------
(In thousands, except per
share amounts)
<S> <C> <C> <C>
Net loss:
As reported................................. $(5,480) $(25,374) $(10,539)
======= ======== ========
Pro forma................................... $(5,576) $(25,692) $(11,179)
======= ======== ========
Net loss per share (basic and diluted):
As reported................................. $ (1.09) $ (4.19) $ (1.55)
======= ======== ========
Pro forma................................... $ (1.11) $ (4.24) $ (1.65)
======= ======== ========
</TABLE>
A summary of the Company's stock option activity, and related information
follows:
<TABLE>
<CAPTION>
Number of Weighted-Average
Options Exercise Price
---------- ----------------
<S> <C> <C>
Options outstanding at December 31, 1995...... 2,928,125 $0.44
Granted..................................... 2,186,000 0.91
Exercised................................... (1,851,877) 0.71
Forfeited................................... (289,498) 0.51
----------
Options outstanding at December 31, 1996...... 2,972,750 0.61
Granted..................................... 1,401,300 3.00
Exercised................................... (648,422) 1.21
Forfeited................................... (40,520) 1.40
----------
Options outstanding at December 31, 1997...... 3,685,108 1.41
Granted..................................... 2,065,700 3.00
Exercised................................... (273,894) 1.32
Forfeited................................... (143,567) 2.76
----------
Options outstanding at December 31, 1998...... 5,333,347 1.99
Granted (unaudited)......................... 1,391,000 3.00
Exercised (unaudited)....................... (608,821) 1.93
Forfeited (unaudited)....................... (88,592) 2.59
----------
Options outstanding at June 30, 1999
(unaudited).................................. 6,026,934 2.22
==========
</TABLE>
The weighted-average fair value of options granted during 1996, 1997 and 1998
was $0.27, $0.76 and $0.70, respectively. Exercise prices of options
outstanding as of December 31, 1998 ranged from $0.025 to $3.00 and 2,411,206
of such options were vested with a weighted-average exercise price of $1.39. As
of December 31, 1998, the remaining contractual life of outstanding options
ranged from 3.3 years to 9.9 years with a weighted-average contractual life of
7.9 years.
F-16
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
The information above does not include 13,962 options with exercise price
from $0.70 to $0.95 granted to employees in connection with the Acquisition and
4,000 options with an exercise price of $0.50 granted to a third party outside
of the Company's stock option plans.
Reserved Shares
Shares of common stock reserved for future issuance were as follows:
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------ ----------
<S> <C> <C>
Warrants:
Outstanding warrants.............................. 1,078,382 1,015,091
Reserved for future issuance...................... 3,051 3,051
Stock option plans:
Outstanding options............................... 5,351,447 6,044,896
Reserved for future grants........................ 1,737,772 496,929
Convertible preferred stock:
Issued and outstanding............................ 26,903,885 26,953,539
---------- ----------
35,074,537 34,513,506
========== ==========
</TABLE>
As of December 31, 1998 and June 30, 1999, 472,713 and 557,880 shares,
respectively, of common stock issued and outstanding were subject to the
Company's right of repurchase.
10. Employee Savings Plan
The Company has an employee savings plan, which permits substantially all
employees to participate and to make contributions by salary reductions
pursuant to section 401(k) of the Internal Revenue Code. In 1998, the Company
began matching a percentage of employee contributions up to a specified amount
in the form of Tularik common stock. Under this plan, the Company contributed
34,235 shares of common stock to employee savings accounts and recognized
compensation expense of $188,000 in 1998.
F-17
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
11. Income Taxes
As of December 31, 1998, Tularik had federal net operating loss carryforwards
of approximately $37.9 million. The net operating loss carryforwards will
expire at various dates beginning on 2007 through 2018, if not utilized.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amount used for income tax purposes. Significant components of the
Company's deferred tax assets as of December 31 are as follows:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1998
-------- --------
(In thousands)
<S> <C> <C>
Net operating loss carryforwards........................ $ 8,400 $ 13,200
Research credits (expiring 2007 to 2018)................ 1,700 3,000
Depreciation............................................ 2,500 1,200
Capitalized research and development.................... 700 3,200
Other, net.............................................. 200 --
-------- --------
Total deferred tax assets............................... 13,500 20,600
Valuation allowance for deferred tax assets............. (13,500) (20,600)
-------- --------
Net deferred tax assets................................. $ -- $ --
======== ========
</TABLE>
Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by approximately $1.7 million, $3.0 million and $7.1 million during
the years ended December 31, 1996, 1997 and 1998, respectively.
Utilization of the net operating losses and credits may be subject to a
substantial annual limitation due to ownership change limitations provided by
the Internal Revenue Code of 1986. The annual limitation may result in the
expiration of net operating losses and credits before utilization.
12. Supplemental Cash Flow Information
Selected cash payments and noncash activities were as follows (in thousands):
<TABLE>
<CAPTION>
Years ended December Six months ended
31, June 30,
-------------------- -----------------
1996 1997 1998 1998 1999
------ ------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Interest paid....................... $ 556 $ 549 $ 508 $ 227 $ 437
====== ======= ===== ======== ========
Equipment and leasehold improvements
financed under capital leases...... $2,137 $ 1,185 $ -- $ -- $ --
====== ======= ===== ======== ========
Common stock issued for notes
receivable......................... $ 571 $ 263 $ 149 $ 143 $ 104
====== ======= ===== ======== ========
Issuance of preferred stock and
warrants in connection with
Acquisition........................ $ -- $18,276 $ -- $ -- $ --
====== ======= ===== ======== ========
</TABLE>
F-18
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
13. Subsequent Events (Unaudited)
Initial Public Offering
In October 1999, the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed Initial Public
Offering. If the offering contemplated by this prospectus is consummated, the
preferred stock outstanding as of the closing date will be converted into
shares of the Company's common stock. The pro forma stockholders' equity in the
accompanying consolidated balance sheet as of June 30, 1999 reflects conversion
of the outstanding preferred stock into 26,953,530 shares of common stock. Pro
forma net loss per share is computed as if the outstanding preferred stock has
been converted into common stock on the date of issuance.
Employee Option Grants
From July 1, 1999 to October 12, 1999, options to purchase 85,500 shares of
common stock were granted to employees pursuant to the 1997 Plans with an
exercise price of $3.00 per share. The Company estimates that deferred
compensation of $552,000 will be recorded as a result of these option grants
and amortized to compensation expense in accordance with the Company's policy.
License Agreement
On September 24, 1999, the Company paid $3.0 million to Eli Lilly ("Lilly")
in connection with a license agreement under which Tularik obtained exclusive,
worldwide rights to manufacture and sell lometrexol, a drug candidate that has
completed Phase 1 clinical trials in cancer patients. The Company's rights
under the agreement are subject to future milestone and royalty obligations to
Lilly. The amount paid to Lilly was recorded as in-process research and
development and was expensed at the time of payment.
1999 Employee Stock Purchase Plan
In October 1999, the Company adopted its 1999 Employee Stock Purchase Plan,
authorizing the issuance of common stock pursuant to purchase rights granted to
employees or to employees of affiliates, if any. The purchase plan authorizes
the issuance of a total of 500,000 shares of common stock. This reserve amount
will be increased each January 1 beginning January 1, 2001, by 1% of the number
of shares of common stock outstanding on that date. However, our board of
directors has the authority to designate a smaller number of shares by which
the authorized number of shares of common stock will be increased on that date.
F-19
<PAGE>
6,250,000 Shares
[TULARIK INC. LOGO]
Common Stock
------------
PROSPECTUS
, 1999
------------
Lehman Brothers
Hambrecht & Quist
J.P. Morgan & CO.
Warburg Dillon Read LLC
<PAGE>
Part II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discounts payable by us, in connection with the sale of common
stock being registered. All amounts are estimates except the SEC registration
fee, the NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee..................................................
NASD filing fee.......................................................
Nasdaq National Market listing fee....................................
Blue Sky Fees and Expenses............................................
Transfer Agent and Registrar fees.....................................
Accounting fees and expenses..........................................
Legal fees and expenses ..............................................
Printing and engraving costs .........................................
Miscellaneous expenses ...............................................
-----
Total............................................................... $
=====
</TABLE>
Item 14. Indemnification of Directors and Officers
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
. for any breach of duty of loyalty to us or to our stockholders;
. for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law; or
. for any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify our
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our amended and restated
certificate of incorporation covers negligence and gross negligence on the part
of indemnified parties.
We have entered into indemnification agreements with each of our directors
and certain officers. These agreements, among other things, require us to
indemnify each director and officer for certain expenses including attorneys'
fees, judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of Tularik,
arising out of the person's services as our director or officer, any subsidiary
of ours or any other company or enterprise to which the person provides
services at our request.
The underwriting agreement (Exhibit 1.1) will provide for indemnification by
the underwriters of Tularik, our directors, our officers who sign the
registration statement, and our controlling persons for some liabilities,
including liabilities arising under the Securities Act.
II-1
<PAGE>
Item 15. Recent Sales Of Unregistered Securities
Since September 1, 1996, Tularik has sold and issued unregistered securities
to a limited number of persons, as described below. None of these transactions
involved any underwriters, underwriting discounts or commissions [confirm
noninclusive of fees paid to Peter Svenillson], or any public offering, and
Tularik believes that each transaction was exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof,
Regulation D promulgated thereunder or Rule 701 pursuant to compensatory
benefit plans and contracts relating to compensation as provided under Rule
701. The recipients of securities in each such transaction represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate
legends were affixed to the share certificates and instruments issued in such
transactions. We believe that all recipients had adequate access to information
about Tularik, through their relationships with Tularik.
Since September 1, 1996, Tularik has sold and issued the following
unregistered securities:
(1) From September 1996 to September 1999, we granted incentive stock options
and nonstatutory stock options to purchase an aggregate of 5,544,000 shares of
Tularik's common stock at exercise prices ranging from $1.00 to $3.00 per share
to employees, directors and consultants under the 1991 Stock Plan, 1997 Equity
Incentive Plan and 1997 Non-Employee Directors' Stock Option Plan and issued an
aggregate of 2,445,212 shares upon the exercise of these and previously granted
options. Options to purchase 384,650 shares of common stock have been canceled,
and 18,343 of these options have lapsed without being exercised.
(2) In September 1996, we issued three warrants to purchase an aggregate of
200,000 shares of common stock at an exercise price of $7.50 per share.
Warrants to purchase 20,000 shares were issued to Brittania Investments, LLC,
warrants to purchase 90,000 shares were issued to National Electrical Benefit
Fund and warrants to purchase 90,000 shares were issued to SDK Incorporated.
(3) In September 1996, we sold an aggregate of 1,308,000 shares of Series F
preferred stock to six purchasers at a purchase price of $10.00 per share.
(4) In October 1996, we sold an aggregate of 4,964,000 shares of Series F
preferred stock to 32 purchasers at a purchase price of $10.00 per share.
(5) In October 1996, we issued two warrants to purchase an aggregate of
253,600 shares of Series F preferred stock at an exercise price of $10.00 per
share. Warrants to purchase 126,800 shares were issued to The Magnum Trust and
warrants to purchase 126,800 shares were issued to Broadview Limited.
(6) In September 1997, we sold an aggregate of 32,000 shares of Series G
preferred stock to four purchasers at a purchase price of $10.25 per share.
(7) In October 1997, we issued an aggregate of 1,620,004 shares of Series H
preferred stock to 26 purchasers, who were the former stockholders of Amplicon
Corp., and issued 26 warrants to purchase 295,456 shares of Series H preferred
stock at an exercise price of $13.00 per share to these purchasers. These
shares were issued as consideration for the acquisition of Amplicon.
(8) In October 1997, we issued a warrant to purchase 50,000 shares of Series
H preferred stock to Broadview Limited at an exercise price of $10.00 per
share.
(8) In November 1997, we sold an aggregate of 285,634 shares of Series G
preferred stock to three purchasers at a purchase price of $10.25 per share.
(9) In December 1997, we sold an aggregate of 5,002,000 shares of Series G
preferred stock to two purchasers at a purchase price of $10.25 per share.
(10) In March 1998, we issued an aggregate of 37,260 shares of Series C
preferred stock to Frazier & Company L.P. upon cashless exercise of a warrant
to purchase shares of Series C preferred stock.
II-2
<PAGE>
(11) In June 1999, we issued an aggregate of 49,654 shares of Series B
preferred stock to Comdisco, Inc. upon cashless exercise of a warrant to
purchase shares of Series B preferred stock.
(12) In August 1999, we issued three warrants to purchase an aggregate of
138,927 shares of Series H preferred stock at an exercise price of $13.00 per
share. Warrants to purchase 125,000 shares were issued to Slough Park, Inc.,
warrants to purchase 11,166 shares were issued to Bristow Investments, L.P. and
warrants to purchase 2,791 shares were issued to Laurence Shushan and Magdalena
Shushan, Trustees of the Laurence and Magdalena Shushan Family Trust.
(13) From November 1997 to September 1999, we sold an aggregate of 9,855
shares of Series H preferred stock to 7 purchasers at an exercise price of
$13.00 per share. During this time period, we also issued seven warrants to
purchase 1,493 shares of Series H preferred stock to employees and consultants
upon exercise of outstanding options under Amplicon Corp.'s Stock Option Plan
at exercise prices ranging from $0.70 to $0.95 per share. Options to purchase
1,809 shares of Series H preferred stock have been canceled, and none of these
options have lapsed without being exercised.
Item 16. (a) Exhibits and Financial Statement Schedules
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of Registrant to
be filed upn the closing of the offering made pursuant to this
Registration Statement.
3.2* Amended and Restated Bylaws of Registrant to be filed upon the
closing of the offering made pursuant to this Registration
Statement.
4.1* Specimen Common Stock Certificate.
4.2 Amended and Restated Registration Rights Agreement, dated as August
15, 1999, between Registrant and holders of Registrant's Series A,
Series B, Series C, Series D, Series E, Series F and Series G
preferred stock and holders of warrants to purchase Registrant's
common stock of Series H preferred stock dated August 15, 1999.
4.3 Investor Rights Agreement, dated October 31, 1997, between
Registrant and holders of Registrant's Series H preferred stock.
5.1* Opinion of Cooley Godward LLP.
10.1 Form of Indemnity Agreement.
10.2 1991 Stock Plan and related documents.
10.3* 1997 Equity Incentive Plan and related documents.
10.4* 1997 Non-Employee Directors' Stock Option Plan and related
documents.
10.5* 1999 Employee Stock Purchase Plan.
10.6++ Collaboration Agreement between Registrant and Sumitomo
Pharmaceuticals Co., Ltd., dated January 31, 1995, as amended March
13, 1997.
10.7++ Research, Collaboration and License/Development Agreement between
Registrant and Taisho Pharmaceutical Co., Ltd., dated March 20,
1996, as amended on January 1, 1998 and January 1, 1999.
10.8*++ Amended and Restated Collaboration and License Agreement between
Registrant and Merck & Co., Inc., dated December 22, 1996.
10.9++ Research Collaboration and License Agreement between Registrant and
the Roche Bioscience division of Syntex (U.S.A.) Inc., dated July 8,
1997, as amended on December 19, 1997.
10.10*++ Research Agreement between Registrant and Cold Spring Harbor
Laboratory, dated October 3, 1997.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.11*++ License Agreement between Registrant and Cold Spring Harbor
Laboratory, dated October 3, 1997.
10.12*++ Collaboration Agreement between Registrant and Knoll AG, dated
November 1, 1998.
10.13++ Preliminary Research, Development and Marketing Agreement between
Registrant and Japan Tobacco Inc., dated September 8, 1998.
10.14++ Preliminary Research, Development and Marketing Agreement between
Registrant and Japan Tobacco Inc., dated September 20, 1998.
10.15++ Screening Agreement between Registrant and Japan Tobacco Inc., dated
August 23, 1999.
10.16++ Licensing Agreement between Registrant and Eli Lilly and Company,
dated September 24, 1999.
10.17 Stock Purchase Agreement between Registrant and the 1987 Swanson
Family Trust, dated June 20, 1996, as amended August 17, 1996.
10.18 Sublease between Registrant and AGY Therapeutics, Inc., dated January
25, 1999.
10.19 Sublease between Registrant and Coulter Pharmaceuticals, Inc., dated
May 1, 1999.
10.20 Sublease between Registrant and IGEN International, Inc., dated
August 20, 1999.
10.21 Lease Agreement between Leonard Racanelli and The Rosa Racanelli 1998
Trust, dated July 23, 1998.
10.22 Sublease between Registrant and GeneSoft Inc., dated November 16,
1998.
10.23 Lease Agreement between Registrant and Brittania Developments, Inc.,
dated April 20, 1995.
10.24 Lease Agreement between Registrant and Brittania Developments, Inc.,
dated February 10, 1998.
10.25 Agreement and General Release between Registrant and John P.
McLaughlin, dated September 30, 1999.
22.1 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
++ Confidential treatment requested as to specific portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
(b) Financial Statement Schedules
Independent Auditors' Report on Schedule
Item 17. Undertakings
The registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act, and
II-4
<PAGE>
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered hereunder, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of South San
Francisco, State of California, on the 15th day of October, 1999.
TULARIK INC.
/s/ David V. Goeddel
By:__________________________________
David V. Goeddel
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints David V. Goeddel and Corinne H.
Lyle, and each of them, his or her true and lawful agent, proxy and attorney-
in-fact, with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities, to (i) act
on, sign and file with the Securities and Exchange Commission any and all
amendments (including post-effective amendments) to this registration
statement together with all schedules and exhibits thereto and any subsequent
registration statement filed pursuant to Rule 462(b) under the Securities Act
of 1933, as amended, together with all schedules and exhibits thereto, (ii)
act on, sign and file such certificates, instruments, agreements and other
documents as may be necessary or appropriate in connection therewith, (iii)
act on and file any supplement to any prospectus included in this registration
statement or any such amendment or any subsequent registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv)
take any and all actions which may be necessary or appropriate to be done, as
fully for all intents and purposes as he or she might or could do in person,
hereby approving, ratifying and confirming all that such agent, proxy and
attorney-in-fact or any of his substitutes may lawfully do or cause to be done
by virtue thereof.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ David V. Goeddel Chief Executive Officer October 15, 1999
______________________________________ and Director (Principal
David V. Goeddel Executive Officer)
/s/ Corinne H. Lyle Chief Financial Officer October 15, 1999
______________________________________ (Principal Finance and
Corinne H. Lyle Accounting Officer)
/s/ Robert A. Swanson Chairman of the Board of October 15, 1999
______________________________________ Directors
Robert A. Swanson
/s/ A. Grant Heidrich, III Director October 15, 1999
______________________________________
A. Grant Heidrich, III
/s/ Mark J. Levin Director October 15, 1999
______________________________________
Mark J. Levin
/s/ Paul A. Marks Director October 15, 1999
______________________________________
Paul A. Marks
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Edward R. McCracken Director October 15, 1999
______________________________________
Edward R. McCracken
/s/ Steven L. McKnight Director October 15, 1999
______________________________________
Steven L. McKnight
/s/ Peter J. Sjostrand Director October 15, 1999
______________________________________
Peter J. Sjostrand
</TABLE>
II-7
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made
pursuant to this Registration Statement.
3.2* Amended and Restated Bylaws of Registrant to be filed upon
the closing of the offering made pursuant to this
Registration Statement.
4.1* Specimen Common Stock Certificate.
4.2 Amended and Restated Registration Rights Agreement, dated as
August 15, 1999, between Registrant and holders of
Registrant's Series A, Series B, Series C, Series D, Series
E, Series F and Series G preferred stock and holders of
warrants to purchase Registrant's common stock or Series H
preferred stock.
4.3 Investor Rights Agreement, dated October 31, 1997, between
Registrant and holders of Registrant's Series H preferred
stock.
5.1* Opinion of Cooley Godward LLP.
10.1 Form of Indemnity Agreement.
10.2 1991 Stock Plan and related documents.
10.3* 1997 Equity Incentive Plan and related documents.
10.4* 1997 Non-Employee Directors' Stock Option Plan and related
documents.
10.5* 1999 Employee Stock Purchase Plan.
10.6++ Collaboration Agreement between Registrant and Sumitomo
Pharmaceuticals Co., Ltd., dated January 31, 1995, as amended
March 13, 1997.
10.7++ Research, Collaboration and License/Development Agreement
between Registrant and Taisho Pharmaceutical Co., Ltd., dated
March 20, 1996, as amended on January 1, 1998 and January 1,
1999.
10.8*++ Amended and Restated Collaboration and License Agreement
between Registrant and Merck & Co., Inc., dated December 22,
1996.
10.9++ Research Collaboration and License Agreement between
Registrant and the Roche Bioscience division of Syntex
(U.S.A.) Inc., dated July 8, 1997, as amended on December 19,
1997.
10.10*++ Research Agreement between Registrant and Cold Spring Harbor
Laboratory, dated October 3, 1997.
10.11*++ License Agreement between Registrant and Cold Spring Harbor
Laboratory, dated October 3, 1997.
10.12*++ Collaboration Agreement between Registrant and Knoll AG,
dated November 1, 1998.
10.13++ Preliminary Research, Development and Marketing Agreement
between Registrant and Japan Tobacco Inc., dated September 8,
1998.
10.14++ Preliminary Research, Development and Marketing Agreement
between Registrant and Japan Tobacco Inc., dated September
20, 1998.
10.15++ Screening Agreement between Registrant and Japan Tobacco
Inc., dated August 23, 1999.
10.16++ Licensing Agreement between Registrant and Eli Lilly and
Company, dated September 24, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S> <C>
10.17 Stock Purchase Agreement between Registrant and the 1987
Swanson Family Trust, dated June 20, 1996, as amended August
17, 1996.
10.18 Sublease between Registrant and AGY Therapeutics, Inc., dated
January 25, 1999.
10.19 Sublease between Registrant and Coulter Pharmaceuticals, Inc.,
dated May 1, 1999.
10.20 Sublease between Registrant and IGEN International, Inc., dated
August 20, 1999.
10.21 Lease Agreement between Leonard Racanelli and The Rosa
Racanelli 1998 Trust, dated July 23, 1998.
10.22 Sublease between Registrant and GeneSoft Inc., dated November
16, 1998.
10.23 Lease Agreement between Registrant and Brittania Developments,
Inc., dated April 20, 1995.
10.24 Lease Agreement between Registrant and Brittania Developments,
Inc., dated February 10, 1998.
10.25 Agreement and General Release between Registrant and John P.
McLaughlin, dated September 30, 1999.
22.1 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney (contained on signature page).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
++ Confidential treatment requested as to specific portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
<PAGE>
Exhibit 4.2
================================================================================
TULARIK INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
August 15, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions............................................. 1
2. Requested Registration.................................. 2
3. Company Registration.................................... 4
4. Registration on Form S-3................................ 5
5. Expense of Registration................................. 6
6. Registration Procedures................................. 6
7. Indemnification......................................... 7
8. Information by Holder................................... 9
9. Sale Without Registration............................... 9
10. Rule 144 Reporting...................................... 9
11. Transfer of Registration Rights......................... 10
12. Market Stand-off Agreement.............................. 10
13. Modification Agreement.................................. 10
14. Waiver.................................................. 10
15. Miscellaneous........................................... 11
15.1 Waivers and Amendments............................ 11
15.2 Governing Law..................................... 11
15.3 Successors and Assigns............................ 11
15.4 Entire Agreement.................................. 12
15.5 Severability of this Agreement.................... 12
15.6 Title and Subtitles............................... 12
15.7 Notice............................................ 12
15.8 Counterparts...................................... 12
15.9 Attorneys' Fees................................... 12
</TABLE>
EXHIBITS
EXHIBIT A. Schedule of Rights Holders
EXHIBIT B. Schedule of Warrantholders
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the "Agreement")
is made effective as of August 15, 1999, by and among Tularik Inc., a Delaware
corporation (the "Company"), those individuals and entities set forth on the
Schedule of Rights Holders attached hereto as Exhibit A (collectively, the
"Rights Holders") and the holders of warrants to purchase the Company's Series H
Preferred Stock set forth on the Schedule of Warrantholders attached hereto as
Exhibit B (collectively, the "Series H Warrantholders").
Recitals
Whereas, the Rights Holders desire to amend and restate the provisions of
that certain Amended and Restated Registration Rights Agreement, dated as of
September 30, 1997, as amended, by and among themselves and the Company (the
"Amended Rights Agreement") and to grant the rights set forth herein to the
Series H Warrantholders upon their exercise of the warrants to purchase the
Company's Series H Preferred Stock.
Now, Therefore, in consideration of the foregoing recital and the mutual
covenants and conditions set forth herein, the parties hereto agree as follows:
Agreement
1. Definitions.
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Holder" means any Rights Holder or Series H Warrantholder
holding Registrable Securities (and any person holding Registrable Securities to
whom the registration rights have been transferred pursuant to Section 11
hereof).
(c) The term "Initiating Holders" means any Holder or Holders who in the
aggregate possess more than 50% of the Registrable Securities (including
securities convertible or exercisable into Registrable Securities) then in
existence.
(d) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of the effectiveness of
such registration statement.
(e) The term "Registrable Securities" means (i) the Common Stock issued or
issuable pursuant to (A) the conversion of the shares of the Company's Series A,
Series B, Series C, Series D, Series E, or Series F, or Series G Preferred Stock
or (B) stock issuable upon exercise or conversion of the warrants to purchase
Common Stock to the holders thereof as identified on Exhibit A attached hereto
or stock issuable upon exercise or conversion of warrants to purchase Series H
Preferred Stock to the Series H Warrantholders (collectively, the "Warrants")
and (ii) any Common Stock of the Company issued or issuable in respect of such
Common Stock or other securities issued or issuable pursuant to the conversion
of such shares of Series A, Series B,
1
<PAGE>
Series C, Series D, Series E, Series F, Series G or Series H Preferred Stock or
exercise or conversion of the Warrants upon any stock split, stock dividend,
recapitalization, or similar event, or any Common Stock otherwise issued or
issuable with respect to such shares of Common Stock, Series A, Series B, Series
C, Series D, Series E, Series F, Series G or Series H Preferred Stock or the
Warrants (the "Conversion Stock"). Notwithstanding anything set forth above, the
above described securities shall not be treated as Registrable Securities if and
so long as they (A) have been sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, (B)
have been sold pursuant to Rule 144 promulgated under the Act in a transaction
exempt from the registration and prospectus delivery requirements of the Act so
that all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale, or (C) for purposes of Section 2,
are available for sale in the opinion of counsel to the Company pursuant to Rule
144 in a transaction exempt from the registration and prospectus delivery
requirements of the Act.
(f) The term "SEC" means the Securities and Exchange Commission or any
successor agency thereto.
2. Requested Registration.
(a) In case the Company shall receive from Initiating Holders a written
request that the Company effect any registration, qualification or compliance
with respect to at least 40% of such Initiating Holders' shares of Registrable
Securities (or any lesser number of shares if the anticipated aggregate offering
price would exceed $5,000,000), the Company will:
(1) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(2) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the Act
and any other governmental requirement or regulations) as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 15 days after such Holder or Holders received the written
notice from the Company provided for in Section 2(a)(1) above;
provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 2:
(i) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act;
(ii) Prior to the earlier of (i) December 31, 1996, or (ii) six
months after the effective date of the Company's first registered public
offering of its stock;
2
<PAGE>
(iii) During the period starting with the date 60 days prior to
the Company's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively applying in good faith all reasonable efforts to
cause such registration statement to become effective;
(iv) After the Company has effected one such registration
pursuant to this Section 2(a), and such registration has been declared or
ordered effective (subject to Section 2(b) below); or
(v) If the Company shall furnish to such Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its stockholders for a registration statement to be filed at such time, then the
Company's obligation to register, qualify or comply under this Section 2 shall
be deferred for a period not to exceed 180 days from the date of receipt of
written request from the Initiating Holders.
Subject to the foregoing clauses, the Company shall file a registration
statement covering the Registrable Securities so required to be registered as
soon as practicable after receipt of the request or requests of the Initiating
Holders.
(b) In the event that a registration pursuant to Section 2 is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the notice given pursuant to Section 2(a)(1). In
such event, the right of any Holder to registration pursuant to Section 2 shall
be conditioned upon such Holder's participation in the underwriting arrangements
required by this Section 2, and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall be limited to the
extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders, but subject to the Company's
reasonable approval. Notwithstanding any other provision of this Section 2, if
the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders, and (i) shares which
are not Registrable Securities (or convertible into Registrable Securities)
shall first be excluded from the registration and underwriting and (ii) if such
exclusion is insufficient, the number of shares of Registrable Securities that
may be included in the registration and underwriting shall be allocated among
all Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by such Holders at the time of filing of the
Registration Statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration. To facilitate the allocation of shares in accordance with the
above provision, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest 100 shares. Notwithstanding the above,
such registration shall not count as the one permitted registration pursuant to
Section 2(a) above if the
3
<PAGE>
Holders are unable to register at least 90% of the Registerable Securities
requested to be registered.
If any Holder disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration, and such
Registrable Securities shall not be transferred in a public distribution prior
to 90 days after the effective date of such registration, or such other shorter
period of time as the underwriters may require.
3. Company Registration.
(a) If at any time, or from time to time, the Company shall determine to
register any of its securities, either for its own account or for the account of
a security holder or holders, other than (i) a registration relating solely to
employee benefit plans, (ii) a registration on Form S-4 relating solely to an
SEC Rule 145 transaction, (iii) a registration of convertible debt securities or
(iv) a registration on any other form (other than Form S-l, S-3, S-7 or S-18)
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of Registrable
Securities, the Company will:
(1) promptly give to each Holder written notice thereof; and
(2) include in such registration (and any related qualification
under blue sky law or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in any written request or
requests by any Holder or Holders received by the Company within fifteen (15)
days after such written notice is given on the same terms and conditions as the
Common Stock, if any, otherwise being sold through the underwriters in such
registration.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
3(a). In such event the right of any Holder to registration pursuant to this
Section 3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting (together with the Company and the
other holders distributing their securities through such underwriting) shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
(c) Notwithstanding any other provision of this Section 3, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriters may limit the
Registrable Securities or other securities to be included in the registration,
provided that in all registrations other than the initial public offering, the
number of Registrable Securities to be included in the registration may not be
reduced to less than 25% of the total number of shares to be registered. The
Company shall so advise all Holders and other holders distributing their
securities through such underwriting and (i) shares which are not Registrable
Securities (or convertible into Registrable Securities) shall first be excluded
from the registration and underwriting and (ii) if such exclusion is
insufficient, the number of shares of Registrable Securities that may be
included in the registration and
4
<PAGE>
underwriting shall be allocated among all Holders in proportion, as nearly as
practicable, to the respective amount of Registrable Securities held by such
Holders at the time of filing of the Registration Statement. To facilitate the
allocation of shares in accordance with the above provisions, the Company may
round the number of shares allocated to any Holder or holder to the nearest 100
shares. The Company shall advise all Holders of shares which would otherwise be
registered and underwritten pursuant hereto of any such limitations, and the
number of shares of Registrable Securities that may be included in the
registration. If any Holder or holder disapproves of the terms of any such
underwriting, such Holder or holder may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any securities excluded or withdrawn
from such underwriting shall not be transferred in a public distribution prior
to 90 days after the effective date of the registration statement relating
thereto, or such shorter period of time as the managing underwriter may require.
(d) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 3 prior to the effectiveness of
such registration whether or not any Holder has elected to register securities
in such registration.
4. Registration on Form S-3.
(a) If any Holder or Holders request that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities the reasonably anticipated aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $500,000, and the Company is a registrant entitled to use Form S-3
to register the Registrable Securities for such an offering, the Company shall
use its best efforts offered to cause such Registrable Securities to be
registered for the offering on such form and to cause such Registrable
Securities to be qualified in such jurisdiction as the Holder or Holders may
reasonably request; provided, however, that the Company shall not be required to
effect more than one registration pursuant to this Section 4 in any six month
period. The substantive provisions of Section 4(b) shall be applicable to each
registration initiated under this Section 4.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this Section 4:
(1) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act;
(2) if the Company, within ten days of the receipt of the request of
the Initiating Holders, gives notice of its bona fide intention to effect the
filing of a registration statement with the Commission within 90 days of receipt
of such request (other than with respect to a registration statement relating to
a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities);
(3) during the period starting with the date 60 days prior to the
Company's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a
5
<PAGE>
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
(4) if the Company shall furnish to such Holder a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors it would be seriously detrimental to the Company or its
stockholders for a registration statement to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed 180 days from the receipt
of the request to file such registration by such Holder; or
(5) after the Company has effected four registrations pursuant to
this Section 4.
5. Expense of Registration. All expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2 or 3 and in
connection with one registration pursuant to Section 4, including, without
limitation, all registration, filing and qualification fees, reasonable fees and
disbursements of one counsel for the selling stockholders, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, accounting fees
and expenses, and expenses of any special audits incidental to or required by
such registration, shall be borne by the Company; provided, however, that the
Company shall not be required to pay stock transfer taxes or underwriters' fees,
discounts or commissions relating to Registrable Securities.
6. Registration Procedures. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Securities under the Act, the Company will, as
expeditiously as possible:
(a) Prepare and file with the SEC a registration statement with respect to
such securities and use its best efforts to cause such registration statement to
become and remain effective for such period as may be necessary to permit the
successful marketing of such securities but not exceeding 120 days or until the
Holder or Holders have completed the distribution described in the registration
statement relating thereto, whichever first occurs.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Act, and to keep such
registration statement effective for the period of time specified in Section
6(a) above.
(c) Furnish to each Holder participating in the registration such number
of prospectuses and preliminary prospectuses in conformity with the requirement
of the Act, and such other documents, as such selling Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities being sold by such Holder.
(d) Use its best efforts to register or qualify the Registrable Securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as each such selling Holder shall reasonably request
and do any and all other acts and things which may be necessary or desirable to
enable such Holder to consummate the public sale or other disposition in such
jurisdictions, provided that the Company shall not be required in connection
6
<PAGE>
therewith or as a condition thereto to qualify to do business or file a general
consent to service of process in any such jurisdictions unless the Company is
already subject to service in such jurisdictions and except as may be required
by the Act.
(e) Notify each Holder covered by such registration statement, at any time
when a prospectus relating thereto is required to be delivered under the Act, of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statement therein not misleading in the light of the
circumstances then existing and, at the request of any such Holder, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchaser of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading in the light of the circumstances then
existing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder with
respect to which a registration statement has been filed under the Act pursuant
to this Agreement, each of such Holder's partners, trustees, officers and
directors, and other agents, each underwriter of any of the Registrable
Securities included in such registration statement, and each person, if any, who
controls any such Holder or underwriter within the meaning of the Act
(hereinafter collectively referred to as the "Holder-Underwriters"), as follows:
(1) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement of a
material fact contained in such registration statement (or any amendment
thereto), or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statement therein, in the
light of the circumstances under which they were made, not misleading, unless
such untrue statement or omission or such alleged untrue statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Holder-Underwriter expressly for use in such registration
statement (or any amendment thereto) or such preliminary prospectus or
prospectus (or any amendment or supplement thereto);
(2) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the Company
(which consent shall not be unreasonably withheld); and
(3) against any and all expense (including attorneys' fees)
whatsoever reasonably incurred, as incurred, in investigating, preparing,
settling (with the consent of the Company, which consent shall not be
unreasonably withheld) or defending against any litigation, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
7
<PAGE>
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (1) or (2) above; provided, however, that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any such untrue statement, alleged untrue statement, omission or
alleged omission made in a preliminary prospectus but eliminated or remedied in
the amended prospectus on file with the SEC at the time the registration
statement becomes effective, or in the amended prospectus filed with the SEC
pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any underwriter, or any Holder, if there is no
underwriter, if a copy of the Final Prospectus was not furnished to the person
or entity asserting the loss, liability, claim or damage at or prior to the time
such action is required by the Act.
In no case shall the Company be liable under this indemnity agreement with
respect to any loss, liability, claim, damage or expense with respect to any
claim made against any Holder-Underwriter unless the Company shall be notified
in writing of the nature of the claim within a reasonable time after the
assertion thereof, provided that the Company shall be liable under this
indemnity agreement with respect to any such claim notwithstanding the lack of
such notice within a reasonable time if such lack of notice does not prejudice
the ability of the Company to defend such claim, and provided further that the
failure to so notify the Company shall not relieve the Company from any
liability which it may have otherwise than on account of this indemnity
agreement. In case of any such notice, the Company shall be entitled to
participate at its expense in the defense, or if it so elects within a
reasonable time after receipt of such notice, to assume the defense of any suit
brought to enforce any such claim; but if it so elects to assume the defense,
such defense shall be conducted by counsel chosen by it and approved by the
Holder-Underwriter(s) and other defendant or defendants, if any, in any suit so
brought, which approval shall not be unreasonably withheld. In the event that
the Company elects to assume the defense of any such suit and retain such
counsel, the Holder-Underwriter(s) and other defendant or defendants, if any, in
the suit, shall bear the fees and expenses of any additional counsel thereafter
retained by them; provided, however, that the Company shall bear the expense of
independent counsel for the Holder-Underwriter(s) if the Holder-Underwriter(s)
reasonably determine that representation of it or them and the Company by the
same counsel would be inappropriate due to actual or potential conflicts of
interest.
(b) Each Holder severally, and not jointly, agrees that it will indemnify
and hold harmless the Company, each officer and director of the Company, each
person, if any, who controls the Company within the meaning of the Act, each
underwriter of Registrable Securities included in any registration statement
which has been filed under the Act pursuant to this Agreement, each person, if
any, who controls such underwriter within the meaning of the Act, each other
Holder, each of such other Holder's partners, officers and directors, and each
person controlling such other Holder within the meaning of the Act against any
and all loss, liability, claim, damage and expense, as incurred, described in
clauses (a)(1) through (a)(3), inclusive, of this Section 7, but only with
respect to statements or omissions, or alleged statements or omissions, made in
such registration statement (or any amendment thereto) or any preliminary
prospectus or prospectuses (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
Holder expressly for use in such registration statement (or any amendment
thereto) or such preliminary prospectus or prospectus (or any amendment or
supplement thereto). In any event, the liability of each Holder hereunder shall
be limited to the net proceeds received by the Holder pursuant to the
registration.
8
<PAGE>
In case any action shall be against the Company or any person so indemnified
pursuant to the provisions of this Subsection (b) and in respect of which
indemnity may be sought against any Holder, the Holders from whom indemnity is
sought shall have the rights and duties given to the Company, and the Company
and the other persons so indemnified shall have the rights and duties given to
the person entitled to indemnification, by the provisions of Subsection (a) of
this Section 7.
(c) The obligations of the Company and Holders under this Agreement shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement.
8. Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, and the distribution proposed by such Holder
or Holders, as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
9. Sale Without Registration. If at the time of any transfer of any
Registrable Securities, such Registrable Securities shall not be registered
under the Act, the Company may require, as a condition of allowing such
transfer, that the Holder or transferee furnish to the Company (i) such
information as is necessary in order to establish that such transfer may be made
without registration under the Act, and (ii) (if the transfer is not made in
compliance with Rule 144 other than a transfer not involving a change in
beneficial ownership or a pro rata distribution by a partnership to its
partners) at the expense of the Holder or transferee, an opinion of counsel
satisfactory to the Company in form and substance to the effect that such
transfer may be made without registration under the Act; provided that nothing
contained in this Section 9 shall relieve the Company from complying with any
request for registration, qualification, or compliance made pursuant to the
other provisions of this Agreement.
10. Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times after 90 days
after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public;
(b) File with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Exchange Act of 1934, as amended;
and
(c) Furnish the Holder forthwith upon request (i) a written statement by
the Company as to its compliance with the public information requirements of
said Rule 144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), (ii) a copy of the most recent annual or quarterly report
of the Company, and (iii) such other reports and documents as may be reasonably
requested in availing the Holders of any rule or regulation of the SEC
permitting the sale of any such securities without registration.
9
<PAGE>
11. Transfer of Registration Rights. The rights to cause the Company to register
securities granted by the Company under Section 2 may be assigned in writing by
any Holder (a) to any transferee or assignee of Registrable Securities which
controls, is controlled by or is under common control with such Holder or which
is already a Holder of Registrable Securities, (b) to a partner of the Holder or
to any other transferee or assignee of not less than 200,000 shares of the
Registrable Securities (as appropriately adjusted from time to time for stock
splits and the like), or (c) to any other transferee or assignee of all shares
of Registrable Securities held by such Holder if transferred to a single entity;
provided, that such transfer may otherwise be effected in accordance with
applicable securities laws; and provided further, that the Company is given
written notice by such Holder at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned and provided further, that immediately following such transfer,
the further disposition of such securities by such transferee or assignee is
restricted under the Act.
12. Market Stand-off Agreement. The Holders, if requested by the Company and
an underwriter of Common Stock (or other securities) of the Company, shall agree
not to sell or otherwise transfer or dispose of any securities held by the
Holders during the 180 day period following the effective date of a registration
statement of the Company filed under the Act provided that:
(a) such agreement shall only apply to the first such registration
statement of the Company including shares of Common Stock (or other securities)
to be sold on its behalf to the public in an underwritten offering; and
(b) all Holders holding more than one percent of the outstanding Common
Stock, all officers and directors of the Company and all other holders of
registration rights of the Company (whether or not pursuant to this Agreement)
enter into similar agreements. Such agreement shall be in writing in the form
satisfactory to the Company and such underwriter. The Company may impose stop-
transfer instructions with respect to the securities subject to the foregoing
restriction until the end of said 180 day period.
13. Modification Agreement. Effective upon the execution of this Agreement by
the Company and the record Holders of a majority of the Registrable Securities
outstanding immediately prior to the execution of this Agreement, the September
1996 Rights Agreement shall be null and void and superseded in its entirety by
the terms, conditions, provisions, rights and obligations set forth in this
Agreement. The parties to such prior Agreement forever release, waive and
disclaim any and all rights under such prior Agreement. The parties hereto
further agree that this Agreement constitutes the full and entire understanding
and agreement between the Company, the Warrantholders and the Rights Holders
with regard to the subjects hereof. Any previous agreement, written or oral,
relative to the subject matter hereof is superseded by this Agreement.
14. Waiver. The Rights Holders hereby waive on behalf of all Rights Holders
any rights to notice or to acquire shares of the Company's Series H Preferred
Stock and any Common Stock issuable upon conversion of such Series H Preferred
Stock to which they may be entitled, including but not limited to those rights
provided in Section 6.4 of the Series A Preferred Stock Purchase Agreement,
dated December 18, 1991, among the Company and the Purchasers thereunder;
Section 6.4 of the Series B Preferred Stock Purchase Agreement, dated June 16,
1992, among the Company and the Purchasers thereunder; Section 6.4 of the Series
C Preferred Stock Purchase Agreement, dated March 23, 1993, among the Company
and the Purchasers thereunder; Section 6.4 of the Series D Preferred Stock
Purchase Agreement, dated January 5, 1994, between the Company and the
Purchasers
10
<PAGE>
thereunder; Section 6.4 of the Series D Preferred Stock Purchase Agreement,
dated February 28, 1994, between the Company and the Purchaser thereunder;
Section 6.4 of the Series E Preferred Stock Purchase Agreement, dated February
20, 1995, and Section 6.4; the Series F Preferred Stock Purchase Agreement,
dated September 20, 1996; and the Amended Rights Agreement; and waive any other
rights they may have as necessary to permit the issuance of any shares of Series
H Preferred Stock and of the Common Stock issuable upon conversion of such
shares of such Series H Preferred Stock.
15. Miscellaneous.
15.1 Waivers and Amendments.
(a) With the written consent of the record Holders of a majority of
the Registrable Securities then outstanding, the obligations of the Company and
the rights of the Holders of the Registrable Securities under this Agreement may
be waived (either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely), and
with the same consent the Company, when authorized by resolution of its Board of
Directors, may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement. Neither this Agreement nor any provisions hereof may be
changed, waived, discharged or terminated orally, but only by a signed statement
in writing.
(b) Notwithstanding anything herein to the contrary, the parties agree
that the Company may amend this Agreement at any time after the date hereof,
without obtaining the consent of any Holder, to add as parties to this Agreement
(i) any holders of warrants to purchase up to an aggregate of 10,000 shares of
the Company's Series E Preferred Stock and (ii) Mercury Group Limited as a
holder of a warrant or warrants to purchase up to an aggregate number of shares
of the Company's Common Stock that is equal to five percent (5%) of the equity
securities or interests issued, conferred or granted in connection with the
Series F Preferred Financing pursuant to the terms and conditions of that
certain letter agreement, dated August 21, 1996, between Mercury Group Limited
and the Company. Any persons so added to this Agreement shall become "Holders"
and "Rights Holders" under this Agreement, and shares of Common Stock issuable
upon conversion of or otherwise with respect to shares of Series E Preferred
Stock or Common Stock, as applicable, issuable upon exercise of such warrants
shall be "Registrable Securities" under this Agreement.
15.2 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
15.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executor and administrator of the parties
hereto.
11
<PAGE>
15.4 Entire Agreement. This Agreement constitutes the full and entire
understanding and Agreement between the parties with regard to the subject
matter hereof and terminates and supersedes in its entirety the Amended Rights
Agreement.
15.5 Severability of this Agreement. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
15.6 Title and Subtitles. The titles of the Sections and Subsection of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
15.7 Notice. Any notice or report required in this Agreement or permitted
to be given shall be given in writing and shall be deemed effective upon
personal delivery (including delivery by messenger or by overnight courier or
delivery service) or four (4) days after deposit in the United States certified
or registered mail, postage prepaid and return receipt requested and addressed
(i) if to a Rights Holder, at such Rights Holder's address set forth in the
Company's records, or at such other address as such Rights Holder shall have
furnished to the Company in writing, or (ii) if to a Series H Warrantholder, at
the address as set forth on Exhibit B, or at such other address as the Series H
Warrantholder shall have furnished to the Company in writing, or (iii) if to the
Company, to its address as set forth below and addressed to the attention of the
Corporate Secretary, or at such other address as the Company shall have
furnished to the Holders.
15.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
15.9 Attorneys' Fees. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be entitled to
receive from the non-prevailing party reasonable attorneys fees, costs and
necessary disbursements in addition to any other relief to which such prevailing
party may be entitled.
12
<PAGE>
In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered this 15th day of August, 1999.
Company: Rights Holder:
Tularik Inc. /s/ Rights Holder
-----------------------------------
By: /s/ David V. Goeddel By:
------------------------- --------------------------------
Print Name: David V. Goeddel Print Name:
----------------- -------------------------
Title:
----------------------
Address:
Two Corporate Drive
South San Francisco, CA 94080
[Signature Page For Rights Holders]
S-1
<PAGE>
In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered this 15th day of August, 1999.
Series H Warrantholders:
/s/ Series H Warrantholders
---------------------------
By:------------------------
Print Name:----------------
[Signature Page For Series H Warrantholders]
S-2
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
EXHIBIT A
SCHEDULE OF RIGHTS HOLDERS
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
----- --------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
--------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Britannia Investments, LLC 20,000 -- -- -- -- -- -- --
1939 Harrison Street
Suite 412
Oakland, CA 94612
Slough Park Incorporated 90,000 -- -- -- -- -- -- --
33 West Monroe Street
Suite 2610
Chicago, IL 60303
National Electrical Benefit Fund 90,000 -- -- -- -- -- -- --
1125 15th Street, N.W.
Suite 401
Washington, D.C. 20005
Genentech, Inc. -- 700,000 -- -- -- -- -- --
460 Point San Bruno Blvd.
South San Francisco
Attn: Gary Lyons
Mayfield VI -- 2,517,095 584,136 226,766 -- -- -- --
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Grant Heidrich
Mayfield Associates -- 120,000 27,848 10,811 -- -- -- --
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Grant Heidrich
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
----- --------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mayfield Medical Partners -- 362,905 84,219 32,694 -- -- -- --
2200 Sand Hill Road
Menlo Park, CA 94025
Attn: Grant Heidrich
Thomas D. Kiley -- 100,000 42,195 -- -- -- -- --
986 Baileyana Road
Hillsborough, CA 94010
Swanson Family Fund Ltd. -- 100,000 42,195 -- -- -- -- --
120 Roblar
Hillsborough, CA 94010
Institutional Venture Partners V -- -- 1,184,494 266,216 -- -- -- --
3000 Sand Hill Road
Suite 2-290
Menlo Park, CA 94025
Attn: Samuel D. Colella
Institutional Venture Management V -- -- 18,038 4,054 -- -- -- --
3000 Sand Hill Road
Suite 2-290
Menlo Park, CA 94025
Attn: Samuel D. Colella
Medicus Venture Partners -- -- 445,338 270,271 -- -- -- --
2180 Sand Hill Road
Suite 400
Menlo Park, CA 94025
Attn: John Reher
Frazier & Company L.P. -- -- 10,377 118,341 -- -- -- --
1001 4th Avenue Plaza
Suite 4020
Seattle, WA 98154
Attn: Jon Gilbert
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
----- --------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comdisco, Inc. -- -- 49,654 -- -- --
6111 North River Road
Rosemont, Illinois 60018
Delphi BioVentures, II. L.P. -- -- -- 537,639 -- -- -- --
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attn: Costa Sevastopoulos
Delphi BioInvestments, II. L.P. -- -- -- 2,902 -- -- -- --
3000 Sand Hill Road
Building 1, Suite 135
Menlo Park, CA 94025
Attn: Costa Sevastopoulos
GC&H Investments -- -- -- 13,514 -- -- -- --
c/o Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, CA 94111
Attn: Jeanne Meyer
Andrew T. Ling, -- -- -- 8,108 -- -- -- --
Fuhsi T. Ling (Trustees)
FBO the Ling Family Trust
TR UA February 28, 1990
1909 Via Coronel
Palos Verdes Estates, CA 90274
Shearson Lehman Brothers as -- -- -- 8,108 -- -- -- --
IRA Custodian FBO
Andrew T. Ling
500 Silver Spur Road
Rolling Hill Estates, CA 90274
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Names of
Shares of
Common
Stock
----- -----------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard H. Yen -- -- -- 67,567 -- -- -- --
Fukan T. Yen, Trustees,
Yen Trust
83 Oak Ridge Road
Berkeley, CA 94705
Bin-Lun Ho and Fuhuan Tjian Ho -- -- -- 42,000 -- -- -- --
as Trustee(s) or Successor(s)
in Trust, UTA
dated September 14, 1983
231 Mistletoe Road
Los Gatos, CA 95030
Frank W. Tsai, Fuyun T. Tsai -- -- -- 32,432 -- -- -- --
1842 Alpine Drive
San Marino, CA 91108
MLPF&S Custodian -- -- -- 50,000 -- -- -- --
FBO T.Y. Hans Tjian (IRA Trustee)
290 Baldwin Avenue
San Mateo, CA 94401
Carol Tjian, -- -- -- 27,027 -- -- -- --
Herbert L. Kleinhenz
16371 Matilija Drive
Los Gatos, CA 95030
John N. Myers, -- -- -- 67,567 -- -- -- --
Jane Tjian Myers
50 Riverside Drive
New York, NY 10024
Kenneth Zimmerman -- -- -- 54,054 -- -- -- --
530 Seventh Avenue
New York, NY 10018
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Name and Address
- ------------------- Number of Shares of Preferred Stock
Names of
Shares of
Common
Stock
------- -------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Enterprise Partnership "NIF 9" -- -- -- 136,000 -- -- -- --
Investment Enterprise Partnership "NIF 10-A" -- -- -- 135,000 -- -- -- --
Investment Enterprise Partnership "NIF 10-B" -- -- -- 135,000 -- -- -- --
Investment Enterprise Partnership "NIF 11" -- -- -- 135,000 -- -- -- --
c/o Nippon Investment & Finance Co., Ltd.
Daiwa Securities Kabuto cho Bldg. 2/F
1-9, Kayaba-cho 1-chome, Nihonbashi
Chuo-ku, Tokyo 103 JAPAN
Attn: Ms. Satoko Ishimura
Charter Ventures -- -- -- 135,135 -- -- -- --
525 University Ave., Ste. 1500
Palo Alto, CA 94301
Attn: Mr. David Lundberg
Nam-Hai Chua, Suat-Choo Pearl Chua -- -- -- 45,946 -- -- -- --
32 Walworth Avenue
Scarsdale, NY 10583
Techno VI Nichimen Venture Capital -- -- -- 135,000 -- -- -- --
Investment Partnership
Diamond Plaza Bldg.
25, Ichibancho
Chiyoda-ku, Tokyo 102 JAPAN
Attn: Mr. Ryuzo Kinoshita
Dr. Keiichi Itakura -- -- -- 27,027 -- -- -- --
766 Singing Wood Dr.
Arcadia, CA 91006
Singapore Bio-Innovations, Pte. Ltd. -- -- -- 270,270 -- -- -- --
250 North Bridge Road
#24-00 Raffles City Tower
Singapore 0617
Attn: Mr. Teoh Yong Sea
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Name and Address Name of Shares of Preferred Stock
- ----------------
Names of
Shares of
Common
Stock
------- -------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Artal Belgium S.A. -- -- -- 270,270 -- -- -- --
Aandorenstraat 1
3300 Tienen
Belgium
H&Q Healthcare Investors -- -- -- 270,270 -- -- -- --
H&Q Life Sciences Investors -- -- -- 135,135 -- -- -- --
50 Rowes Wharf
Boston, MA 02110-3328
Attn: Mr. Paul Howard
Richmond Trust Company, Ltd. -- -- -- 68,000 -- -- -- --
Euro-Canadian Center
Marlborough Street
Nassau, Bahamas
Attn: Mr. John Burrows
Ann Fu-an Tjian Geis -- -- -- 135,135 -- -- -- --
Gangolf Joseph Geis
Taurus Bldg., 13th Floor
21 A-B Granville Road
Kowloon Hong Kong
Richard M. Beleson -- -- -- 5,000 -- -- -- --
849 Union Street
San Francisco, CA 94133
Frazier Healthcare Investments, L.P. -- -- -- 405,406 -- -- -- --
1001 Fourth Avenue Plaza, Ste. 4020
Seattle, WA 98154
Attn: Mr. Alan Frazier
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name and Address Name of Shares of Preferred Stock
- ----------------
Names of
Shares of
Common
Stock
------- -------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Vencap Holdings (1992) Pte. Ltd. -- -- -- 67,567 -- -- -- --
c/o Government of Singapore Investment Corp.
255 Shoreline Drive, Suite 600
Redwood City, CA 94065
Attn: Mr. Paul Chau
RS & Co. IV, L.P. -- -- -- 459,459 -- -- -- --
555 California Street
San Francisco, CA 94104
Attn: Dr. M. Kathleen Behrens
Bayview Investors, Ltd. -- -- -- 81,082 -- -- -- --
555 California Street
San Francisco, CA 94104
Attn: Dr. M. Kathleen Behrens
Yamanouchi Pharmaceuticals Co., Ltd. -- -- -- -- 400,000 -- -- --
2-3-11 Nihonbashi-Honcho
Chuo-ku, Tokyo 103
Japan
Sumitomo Pharmaceuticals Co., Ltd. -- -- -- -- -- 400,000 --
2-8 Ooshomachi 2-chome, Chuo-ku
Osaka 541 Japan
Japan Tobacco Inc. -- -- -- -- -- -- 600,000 --
JT Bldg. 2-1, Toranomon 2-chome
Minato-ku, Tokyo 105
Japan
Ryco and Co. -- -- -- 165,676 -- -- 500,000 79,291
Lombard Odier Zurich Ltd.
Toedistrasse 36
CH-8027 Zurich
Switzerland
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
--------- ------------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Svenska Handelsbanken Fonder AB -- -- -- -- -- -- 145,100 --
Blaisieholmtorg 12
S-10670 Stockholm
Sweden
Thomas E. Lundeen, M.D. -- -- -- -- -- -- 25,000 --
18 Carriage Square
Waco, TX 76708
M. Wayne Falcone, M.D. -- -- -- -- -- -- 25,000 --
14 Sugar Creek Place
Waco, TX 76712
Dean Witter Reynolds Custodian -- -- -- -- -- -- 10,000 --
For Eric F. Gould
10 Mirrielees Road
Great Neck, NY 11021
Eric F. Gould M.D. -- -- -- -- -- -- 40,000 --
10 Mirrielees Road
Great Neck, NY 11021
Dr. Juerg (George) F. Geigy -- -- -- -- -- -- 25,000 --
Elisabethenstrasse 44
4051 Basel
Switzerland
Alberville Investments Limited -- -- -- -- -- -- 250,000 146,343
2nd Floor, Queen's House
Don Road
St. Helier, Jersey
British Virgin Islands
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
--------- ------------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Claus Stenbaek -- -- -- -- -- -- 1,500 --
C/o Rakerise LTD
22 A Ives Street
London SW3 2ND
England
Pharma/wHealth Fund -- -- 100,000 -- -- -- 100,000 --
Mehta and Isaly Asset Management,
Inc.
On behalf of: Eaton Vance
Worldwide Health
41 Madison Avenue, 40th Floor
New York, NY 10010
Eaton Vance Worldwide Health -- -- 120,000 -- -- -- 80,000 --
Sciences Fund
Mehta and Isaly Asset Management,
Inc.
O/b/o Eaton Vance Worldwide
Health Sciences F
41 Madison Avenue, 40th Floor
New York, NY 10010
Heritage Finance & Trust Company -- -- -- -- -- -- 51,000 --
12 Cours des Bastions
P.O. Box 3341
1211 Geneva-3
Switzerland
Pedar Wallenberg -- -- -- -- -- -- 50,000 --
C/o Rakerise Ltd.
22A Ives Street
London SW3 2ND
England
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
--------- ------------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Verdad S.A. -- -- -- -- -- -- 100,000 60,000
Calle Aquilino de la Guardia 8
Panama R.P.
Wasa Hjarnfond -- -- -- -- -- -- 15,000 --
WASA Insurance
Lastmakargatan 10
173 81 Stockholm
Sweden
Security Pacific Finance, Ltd. -- -- -- -- -- -- 30,000 --
c/o C.E. Le Bachelet
P.O. Box 79
La Plaiderie
St. Peter Port
Guernsey, Channel Islands GY1 3DQ
S-E-Banken Fonder AB -- -- -- -- -- -- 250,000 --
ST R2 S-10640
Stockholm
Sweden
Quaestus SA -- -- -- -- -- -- 50,000 --
38A Route de Malagnou
CH-1208 Geneve
Switzerland
Pharma Vision 2000 AG -- -- -- -- -- -- 3,280,000 5,000,000
Spielhof 3
8750 Glarus
Switzerland
Celox S.A. -- -- -- -- -- -- 100,000 --
7 Place Flagey - Box 17
B - 1050 Brussels
Belgium
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
----- --------------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aragon Fondkommission -- -- -- -- -- -- 50,000 --
Box 7794
103 96 Stockholm
Sweden
Stena Forvaltning AB -- -- -- -- -- -- 100,000 --
Danish Terminal
S-405 19 Gothenburg
Sweden
S-E-Banken Luxembourg S.A. -- -- -- -- -- -- 50,000 --
c/o Swiss American Securities,
Inc.
100 Wall Street
New York, NY 10005
Lisa och Johan Gronbergs Stiftelse -- -- -- -- -- -- 1,500 --
Stiftelsen Konung Gustaf V -- -- -- -- -- -- 3,000 --
Jubileumsfond
Svenska Sallskapet for -- -- -- -- -- -- 3,000 --
Medicinsk Forskning
H M Konungen -- -- -- -- -- -- 7,500 --
Hovstaternas Gratialkassa -- -- -- -- -- -- 3,000 --
Stiftelse Borgarrattsfonderna -- -- -- -- -- -- 3,000 --
Stiftelsen Gallierafonden -- -- -- -- -- -- 3,000 --
Konung Gustaf VI Adolfs fond for -- -- -- -- -- -- 3,000 --
svensk Kultur
konungens Hospitalfond -- -- -- -- -- -- 1,500 --
Estrid Ericssons Stiftelse -- -- -- -- -- -- 1,500 --
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
----- ------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gunnar Ekstroms Stiftelse for -- -- -- -- -- -- 1,500 --
nummismatik
Incentive Investment (Jersey) Ltd. -- -- 495,000 -- -- -- 200,000 --
c/o Mesco Ltd.
122 East 42nd Street
49th Floor
New York, NY 10168
Mrs. William McCormick Blair Jr. -- -- -- -- -- -- -- 2,000
c/o Jerry Levis
2510 Foxhall Road
Washington, DC 20007
Mr. Kevin Dann -- -- -- -- -- -- -- 10,000
3604 Euclid Ave.
Highland Park, TX 75205
Walter V. and Barbara L. Goeddel -- -- -- -- -- -- -- 2,000
16865 Saint James Drive
Poway, CA 92064-1137
Mrs. Ann B. Marks -- -- -- -- -- -- -- 5,000
4000 North Stanton
El Paso, TX 79902
Mr. J. Alan Marks -- -- -- -- -- -- -- 15,000
240 Valley High S.W.
Albuquerque, NM 87105
Hare & Co. -- -- 15,800 -- -- -- 112,900 --
c/o The Bank of New York
P.O. Box 11203
Attn: Betty Gorecki
New York, NY 10249
Svenska Handelsbanken Stockholm -- -- 142,600 -- -- -- -- --
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares of Preferred Stock
- ----------------
Number of
Shares of
Common
Stock
----- ------------------------------------------------------------------------------------
Series A Series B Series C Series D Series E Series F Series G
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Credit Agricole Indosuez Lausanne -- -- -- 10,000 -- -- --
46-48 Chemin De Beree
Lausanne 1010
Switzerland
Odyssey Ventures Partners, L.P. -- -- -- 67,568 -- -- --
c/o Bermuda Commercial Building
44 Church Street
Hamilton HM 12
Bermuda
Cudd & Co. -- -- -- -- 400,000 -- --
c/o The Chase Manhattan Bank, N.A.
4 New York Plaza, 11th Floor
Attn: Legal Transfer Unit
New York, NY 10004
</TABLE>
13
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
Exhibit B
SCHEDULE OF SERIES H WARRANTHOLDERS
No. of Shares
of Series H
Name and Address Preferred Stock
- ---------------- ---------------
Slough Estates USA Inc. 125,613
33 West Monroe Street, Suite 2000
Chicago, IL 60603
Attn: Randall Rohner
Bristow Investments, L.P. 11,166
Attn: Robert Bristow
1939 Harrison St., Suite 715
Oakland, CA 94612
Laurence Shushan and Magdalena 2,791
Shushan, Trustees, The Laurence and
Magdalena Shushan Family Trust, under
Agreement dated October 8, 1997
1939 Harrison St., Suite 715
Oakland, CA 94612
<PAGE>
Exhibit 4.3
TULARIK INC.
INVESTOR RIGHTS AGREEMENT
October 31, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Certain Definitions............................... 1
2. Demand Registration............................... 3
3. Company Registration.............................. 5
4. Registration on Form S-3.......................... 6
5. Expenses of Registration.......................... 7
6. Registration Procedures........................... 7
7. Indemnification................................... 8
8. Information by Holder............................. 10
9. Sale Without Registration......................... 10
10. Rule 144 Reporting................................ 11
11. Transfer of Registration Rights................... 11
12. Market Stand-off Agreement........................ 11
13. Further Agreements................................ 12
13.1 Financial Statements........................ 12
13.2 Nondisclosure............................... 13
13.3 Cooperation................................. 13
13.4 Right of First Refusal...................... 13
14. Board of Directors................................ 15
15. Miscellaneous..................................... 15
15.1 Waivers and Amendments...................... 15
15.2 Governing Law............................... 15
15.3 Successors and Assigns...................... 16
15.4 Entire Agreement............................ 16
15.5 Severability of this Agreement.............. 16
15.6 Title and Subtitles......................... 16
15.7 Notice...................................... 16
15.8 Counterparts................................ 16
15.9 Attorneys' Fees............................. 16
</TABLE>
EXHIBIT A: Schedule of Investors
<PAGE>
EXHIBIT B: Schedule of Option Holders
<PAGE>
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "Agreement") is entered into as of
October 31, 1997, by and among Tularik Inc., a Delaware corporation (the
"Company"), the investors set forth on the Schedule of Investors attached hereto
as Exhibit A (collectively, the "Investors") and the option holders set forth on
the Schedule of Option Holders attached hereto as Exhibit B (collectively, the
"Option Holders").
Recitals
1. Whereas, the Company desires to issue up to 1,650,000 shares of its
Series H Preferred Stock (the "Series H Preferred Stock") and warrants for the
purchase of up to 250,000 shares of its Series H Preferred Stock to certain
Investors and the Option Holders, pursuant to the terms of that certain
Agreement and Plan of Merger and Reorganization, dated as of October 3, 1997,
among the Company; Tularik Acquisition Corp., a Delaware corporation; Amplicon
Corp., a Delaware corporation ("Amplicon"); and certain stockholders of Amplicon
(the "Reorganization Agreement");
2. Whereas, one other Investor is receiving warrants to purchase up to an
aggregate of 150,000 of the Company's Series H Preferred Stock; and
3. Whereas, the Company has agreed that the Investors and Option Holders,
upon exercise of their options, shall be granted certain registration rights as
set forth herein.
Now, Therefore, in consideration of the recitals and the mutual covenants
and conditions set forth herein, the parties hereto agree as follows:
Agreement
1. Certain Definitions.
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Additional Holder" means a "Holder" of "Registrable
Securities" under the Registration Rights Agreement (as such two terms are
respectively defined in Section 1(c) and Section 1(b) of the Registration Rights
Agreement).
(c) The term "Additional Registrable Securities" means "Registrable
Securities" under the Registration Rights Agreement (as such term is defined in
Section 1(b) of the Registration Rights Agreement).
(d) The term "Holder" means any Investor or Option Holder holding
Registrable Securities (and any person holding Registrable Securities to whom
the registration rights have been transferred pursuant to Section 11 hereof).
<PAGE>
(e) The term "Initiating Holders" means any Holder(s) and/or Additional
Holder(s) that possess(es) more than 50% of the aggregate of the Registrable
Securities (including securities convertible into Registrable Securities) and/or
Additional Registrable Securities.
(f) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of the effectiveness of
such registration statement.
(g) The term "Registrable Securities" means (i) the common stock of the
Company (the "Common Stock") issued or issuable pursuant to the conversion of
the shares of the Series H Preferred Stock issued to the Investors pursuant to
the terms of the Reorganization Agreement, (ii) Common Stock issued or issuable
pursuant to the conversion of the shares of Series H Preferred Stock issued or
issuable to the Option Holders upon exercise of their options pursuant to the
Reorganization Agreement, (iii) Common Stock issued or issuable pursuant to the
conversion of the shares of Series H Preferred Stock issued or issuable to the
Investors and/or the Option Holders upon exercise of the Warrants issued to the
Investors and Option Holders pursuant to the terms of the Reorganization
Agreement, (iv) other securities issued or issuable pursuant to the conversion
of such shares of Series H Preferred Stock upon any stock split, stock dividend,
recapitalization, or similar event, or (v) any Common Stock otherwise issued or
issuable with respect to shares of Common Stock or the Series H Preferred Stock.
Notwithstanding anything set forth above, the above described securities shall
not be treated as Registrable Securities if and so long as they (x) have been
sold to or through a broker or dealer or underwriter in a public distribution or
a public securities transaction, (y) have been sold pursuant to Rule 144
promulgated under the Act ("Rule 144") in a transaction exempt from the
registration and prospectus delivery requirements of the Act so that all
transfer restrictions and restrictive legends with respect thereto are removed
upon the consummation of such sale, or (z) for purposes of Section 2, are
available for sale in the opinion of counsel to the Company pursuant to Rule 144
in a transaction exempt from the registration and prospectus delivery
requirements of the Act.
(h) The term "Registration Rights Agreement" means the Company's Amended
and Restated Registration Rights Agreement, dated September 30, 1997, as
amended.
(i) The term "SEC" means the Securities and Exchange Commission or any
successor agency thereto.
(j) The term "Warrants" means warrants issued to all of the Investors and
the Optionholders.
2. Demand Registration.
(a) In case the Company shall receive from Initiating Holders a written
request that the Company effect any registration, qualification or compliance
with respect to at least 40% of such Initiating Holders' shares of Registrable
Securities and/or Additional Registrable Securities (or any lesser number of
shares if the anticipated aggregate offering price would exceed $5,000,000), the
Company will:
<PAGE>
(1) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(2) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the Act
and any other governmental requirement or regulations) as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within 15 days after such Holder or Holders received the written
notice from the Company provided for in Section 2(a)(1) above;
provided however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 2:
(i) In any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act;
(ii) Prior to the earlier of (i) May 15, 1998, or (ii) six
months after the effective date of the Company's first registered public
offering of its stock;
(iii) During the period starting with the date 60 days prior to
the Company's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively applying in good faith all reasonable efforts to
cause such registration statement to become effective;
(iv) After the Company has effected one such registration
pursuant to this Section 2(a), and such registration has been declared or
ordered effective (subject to Section 2(b) below); or
(v) If the Company shall furnish to such Holder(s) a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed at such
time, then the Company's obligation to register, qualify or comply under this
Section 2 shall be deferred for a period not to exceed 180 days from the date of
receipt of written request from the Initiating Holders.
Subject to the foregoing clauses, the Company shall file a registration
statement covering the Registrable Securities so required to be registered as
soon as practicable after receipt of the request or requests of the Initiating
Holders.
<PAGE>
(b) In the event that a registration pursuant to Section 2 is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the notice given pursuant to Section 2(a)(1). In
such event, the right of any Holder to registration pursuant to Section 2 shall
be conditioned upon such Holder's participation in the underwriting arrangements
required by this Section 2, and the inclusion of such Holder's Registrable
Securities in the underwriting to the extent requested shall be limited to the
extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders, but subject to the Company's
reasonable approval. Notwithstanding any other provision of this Section 2, if
the managing underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Company shall so advise all Holders, and (i) shares which
are not Registrable Securities, Additional Registrable Securities or convertible
into Registrable Securities shall first be excluded from the registration and
underwriting and (ii) if such exclusion is insufficient, the number of shares of
Registrable Securities and Additional Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders and Additional Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities held by such Holders and Additional
Holders at the time of filing of the registration statement. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provision, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares. Notwithstanding the above, such registration shall not count
as the one permitted registration pursuant to Section 2(a) above if the Holders
are unable to register at least 90% of the Registrable Securities requested to
be registered.
If any Holder disapproves of the terms of the underwriting, such Holder may
elect to withdraw therefrom by written notice to the Company, the managing
underwriter and the Initiating Holders. The Registrable Securities and/or other
securities so withdrawn shall also be withdrawn from registration, and such
Registrable Securities shall not be transferred in a public distribution prior
to 90 days after the effective date of such registration, or such other shorter
period of time as the underwriters may require.
3. Company Registration.
(a) If at any time, or from time to time, the Company shall determine to
register any of its securities, either for its own account or for the account of
a security holder or holders, other than (i) a registration relating solely to
employee benefit plans, (ii) a registration on Form S-4 relating solely to an
SEC Rule 145 transaction, (iii) a registration of convertible debt securities or
(iv) a registration on any other form (other than Form S-l, S-3, SB-1 or SB-2)
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of Registrable
Securities, the Company will:
(1) promptly give to each Holder written notice thereof; and
<PAGE>
(2) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in any written request or requests by
any Holder or Holders received by the Company within fifteen (15) days after
such written notice is given on the same terms and conditions as the Common
Stock, if any, otherwise being sold through the underwriters in such
registration.
(b) If the registration for which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
3(a). In such event the right of any Holder to registration pursuant to this
Section 3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting (together with the Company,
Additional Holders and the other holders distributing their securities through
such underwriting) shall enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for such underwriting by the
Company.
(c) Notwithstanding any other provision of this Section 3, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the underwriters may limit the Registrable
Securities or other securities to be included in the registration, provided that
in all registrations other than the initial public offering, the number of
Registrable Securities to be included in the registration may not be reduced to
less than 25% of the total number of shares to be registered. The Company shall
so advise all Holders, Additional Holders and other holders distributing their
securities through such underwriting and (i) shares which are not Registrable
Securities, Additional Registrable Securities or convertible into Registrable
Securities shall first be excluded from the registration and underwriting and
(ii) if such exclusion is insufficient, the number of shares of Registrable
Securities and Additional Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders and
Additional Holders in proportion, as nearly as practicable, to the respective
amount of Registrable Securities and Additional Registrable Securities held by
such Holders and Additional Holders at the time of filing of the registration
statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company may round the number of shares allocated to any Holder,
Additional Holder or other holder to the nearest 100 shares. The Company shall
advise all Holders of shares which would otherwise be registered and
underwritten pursuant hereto of any such limitations, and the number of shares
of Registrable Securities that may be included in the registration. If any
Holder disapproves of the terms of any such underwriting, such Holder may elect
to withdraw therefrom by written notice to the Company and the underwriter. Any
securities excluded or withdrawn from such underwriting shall not be transferred
in a public distribution prior to 90 days after the effective date of the
registration statement relating thereto, or such shorter period of time as the
managing underwriter may require.
(d) The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section 3 prior to the effectiveness of
such registration whether or not any Holder has elected to register securities
in such registration.
<PAGE>
4. Registration on Form S-3.
(a) If any Holders or Additional Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities or Additional
Registrable Securities, the reasonably anticipated aggregate price to the public
of which, net of underwriting discounts and commissions, would exceed $500,000,
and the Company is a registrant entitled to use Form S-3 to register the
Registrable Securities for such an offering, the Company shall use its best
efforts to cause such Registrable Securities to be registered for the offering
on such form and to cause such Registrable Securities to be qualified in such
jurisdictions as such Holder(s) may reasonably request; provided however, that
the Company shall not be required to effect more than one registration pursuant
to this Section 4 within any six-month period. The substantive provisions of
Section 4(b) shall be applicable to each registration initiated under this
Section 4.
(b) Notwithstanding the foregoing, the Company shall not be obligated to
take any action pursuant to this Section 4:
(1) in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Act;
(2) if the Company, within ten days of the receipt of the request of
such holder(s) under this Section 4, gives notice of its bona fide intention to
effect the filing of a registration statement with the SEC within 90 days of
receipt of such request (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities);
(3) during the period starting with the date 60 days prior to the
Company's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan), provided
that the Company is actively employing in good faith all reasonable efforts to
cause such registration statement to become effective;
(4) if the Company shall furnish to such Holder(s) a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its stockholders for a registration statement to be filed in the near future,
then the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed 180 days from the receipt
of the request to file such registration by such Holder(s); or
(5) after the Company has effected four registrations pursuant to
this Section 4.
<PAGE>
5. Expenses of Registration. All expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 2 or 3 and in
connection with one registration pursuant to Section 4, including, without
limitation, all registration, filing and qualification fees, reasonable fees and
disbursements of one counsel for the selling stockholders, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, accounting fees
and expenses, and expenses of any special audits incidental to or required by
such registration, shall be borne by the Company; provided however, that the
Company shall not be required to pay stock transfer taxes or underwriters' fees,
discounts or commissions relating to Registrable Securities. All other expenses
of any registered offerings shall be borne pro rata among the selling
stockholders.
6. Registration Procedures. If and whenever the Company is required by the
provisions of this Agreement to use its best efforts to effect the registration
of any of the Registrable Securities under the Act, the Company will, as
expeditiously as possible:
(a) Prepare and file with the SEC a registration statement with respect to
such securities and use its best efforts to cause such registration statement to
become and remain effective for such period as may be necessary to permit the
successful marketing of such securities but not exceeding 120 days or until the
Holder(s) have completed the distribution described in the registration
statement relating thereto, whichever first occurs.
(b) Prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be
necessary to comply with the provisions of the Act, and to keep such
registration statement effective for the period of time specified in Section
6(a) above.
(c) Furnish to each Holder participating in the registration such number
of prospectuses and preliminary prospectuses in conformity with the requirements
of the Act, and such other documents, as such selling Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities being sold by such Holder.
(d) Use its best efforts to register or qualify the Registrable Securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as each such selling Holder shall reasonably request
and do any and all other acts and things which may be necessary or desirable to
enable such Holder to consummate the public sale or other disposition in such
jurisdictions, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or file a general
consent to service of process in any such jurisdictions unless the Company is
already subject to service in such jurisdictions and except as may be required
by the Act.
(e) Notify each Holder covered by such registration statement, at any time
when a prospectus relating thereto is required to be delivered under the Act, of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing and, at the request of any such Holder, the Company
shall prepare a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchaser of such Registrable Securities, such
prospectus shall not contain an untrue statement of a material
<PAGE>
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances
then existing.
7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Holder with
respect to which a registration statement has been filed under the Act pursuant
to this Agreement, each of such Holder's partners, trustees, officers and
directors, and other agents, each underwriter of any of the Registrable
Securities included in such registration statement, and each person, if any, who
controls any such Holder or underwriter within the meaning of the Act
(hereinafter collectively referred to as the "Holder-Underwriters"), as follows:
(1) against any and all loss, liability, claim, damage and expense
whatsoever arising out of any untrue statement or alleged untrue statement of a
material fact contained in such registration statement (or any amendment
thereto), or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged untrue statement
of a material fact contained in any preliminary prospectus or prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, unless
such untrue statement or omission or such alleged untrue statement or omission
was made in reliance upon and in conformity with written information furnished
to the Company by such Holder-Underwriter expressly for use in such registration
statement (or any amendment thereto) or such preliminary prospectus or
prospectus (or any amendment or supplement thereto);
(2) against any and all loss, liability, claim, damage and expense
whatsoever to the extent of the aggregate amount paid in settlement of any
litigation, commenced or threatened, or of any claim whatsoever based upon any
such untrue statement or omission or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the Company
(which consent shall not be unreasonably withheld); and
(3) against any and all expense (including attorneys' fees)
whatsoever reasonably incurred, as incurred, in investigating, preparing,
settling (with the consent of the Company, which consent shall not be
unreasonably withheld) or defending against any litigation, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under (1) or (2) above; provided however, that the
foregoing indemnity agreement is subject to the condition that, insofar as it
relates to any such untrue statement, alleged untrue statement, omission or
alleged omission made in a preliminary prospectus but eliminated or remedied in
the amended prospectus on file with the SEC at the time the registration
statement becomes effective, or in the amended prospectus filed with the SEC
pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any underwriter, or any Holder, if there is no
underwriter, if a copy of the Final Prospectus was not furnished to the person
or entity asserting the loss, liability, claim or damage at or prior to the time
such action is required by the Act.
<PAGE>
In no case shall the Company be liable under this indemnity agreement with
respect to any loss, liability, claim, damage or expense with respect to any
claim made against any Holder-Underwriter unless the Company shall be notified
in writing of the nature of the claim within a reasonable time after the
assertion thereof, provided that the Company shall be liable under this
indemnity agreement with respect to any such claim notwithstanding the lack of
such notice within a reasonable time if such lack of notice does not prejudice
the ability of the Company to defend such claim, and provided further that the
failure to so notify the Company shall not relieve the Company from any
liability which it may have otherwise than on account of this indemnity
agreement. In case of any such notice, the Company shall be entitled to
participate at its expense in the defense, or if it so elects within a
reasonable time after receipt of such notice, to assume the defense of any suit
brought to enforce any such claim; but if it so elects to assume the defense,
such defense shall be conducted by counsel chosen by it and approved by the
Holder-Underwriter(s) and other defendant or defendants, if any, in any suit so
brought, which approval shall not be unreasonably withheld. In the event that
the Company elects to assume the defense of any such suit and retain such
counsel, the Holder-Underwriter(s) and other defendant or defendants, if any, in
the suit, shall bear the fees and expenses of any additional counsel thereafter
retained by them; provided however, that the Company shall bear the expense of
independent counsel for the Holder-Underwriter(s) if the Holder-Underwriter(s)
reasonably determine that representation of it or them and the Company by the
same counsel would be inappropriate due to actual or potential conflicts of
interest.
(b) Each Holder severally, and not jointly, agrees that it will indemnify
and hold harmless the Company, each officer and director of the Company, each
person, if any, who controls the Company within the meaning of the Act, each
underwriter of Registrable Securities included in any registration statement
which has been filed under the Act pursuant to this Agreement, each person, if
any, who controls such underwriter within the meaning of the Act, each other
Holder, each of such other Holder's partners, officers and directors, and each
person controlling such other Holder within the meaning of the Act against any
and all loss, liability, claim, damage and expense, as incurred, described in
clauses (a)(1) through (a)(3), inclusive, of this Section 7, but only with
respect to statements or omissions, or alleged statements or omissions, made in
such registration statement (or any amendment thereto) or any preliminary
prospectus or prospectuses (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
Holder expressly for use in such registration statement (or any amendment
thereto) or such preliminary prospectus or prospectus (or any amendment or
supplement thereto). In any event, the liability of each Holder hereunder shall
be limited to the net proceeds received by the Holder pursuant to the
registration. In case any action shall be brought against the Company or any
person so indemnified pursuant to the provisions of this Section 7(b) and in
respect of which indemnity may be sought against any Holder, the Holders from
whom indemnity is sought shall have the rights and duties given to the Company,
and the Company and the other persons so indemnified shall have the rights and
duties given to the person entitled to indemnification, by the provisions of
Section 7(a).
(c) The obligations of the Company and Holders under this Agreement shall
survive the completion of any offering of Registrable Securities in a
registration statement under this Agreement.
<PAGE>
8. Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder or Holders, and the distribution proposed by such Holder
or Holders, as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this Agreement.
9. Sale Without Registration. If at the time of any transfer of any
Registrable Securities, such Registrable Securities shall not be registered
under the Act, the Company may require, as a condition of allowing such
transfer, that the Holder or transferee furnish to the Company (i) such
information as is necessary in order to establish that such transfer may be made
without registration under the Act, and (ii) (if the transfer is not made in
compliance with Rule 144 other than a transfer not involving a change in
beneficial ownership or a pro rata distribution by a partnership to its
partners) at the expense of the Holder or transferee, an opinion of counsel
reasonably satisfactory to the Company in form and substance to the effect that
such transfer may be made without registration under the Act; provided, however,
nothing contained in this Section 9 shall relieve the Company from complying
with any request for registration, qualification, or compliance made pursuant to
the other provisions of this Agreement.
10. Rule 144 Reporting. With a view to making available to the Holders the
benefits of certain rules and regulations of the SEC which may permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Act, at all times after 90 days
after the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public;
(b) File with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"); and
(c) Furnish the Holder forthwith upon request (i) a written statement by
the Company as to its compliance with the public information requirements of
said Rule 144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), (ii) a copy of the most recent annual or quarterly report
of the Company, and (iii) such other reports and documents as may be reasonably
requested in availing the Holders of any rule or regulation of the SEC
permitting the sale of any such securities without registration.
11. Transfer of Registration Rights. The rights to cause the Company to
register securities granted by the Company under Section 2 may be assigned in
writing by any Holder (i) to any transferee or assignee of Registrable
Securities which controls, is controlled by or is under common control with such
Holder or which is already a Holder of Registrable Securities, (ii) to a partner
of the Holder or to any other transferee or assignee of not less than 200,000
shares of the Registrable Securities (as appropriately adjusted from time to
time for stock splits and the like), (iii) to any other transferee or assignee
of all shares of Registrable Securities held by such Holder if transferred to a
single entity, or (iv) to any transferee under Section 11 of the Registration
Rights Agreement; provided however, that such transfer may otherwise be effected
in accordance with applicable securities laws; and provided further, that the
Company is given
<PAGE>
written notice by such Holder at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned and provided further, that immediately following such transfer,
the further disposition of such securities by such transferee or assignee is
restricted under the Act.
12. Market Stand-off Agreement. Each Holder hereby agrees that such Holder
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the
registration) for a period specified by the representative of the underwriters
of Common Stock (or other securities) of the Company not to exceed one (1) year
following the effective date of a registration statement of the Company filed
under the Act.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 12 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Rule 145 (under the Act) transaction on Form S-4 or similar forms that may
be promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one-year period.
13. Further Agreements.
13.1 Financial Statements.
(a) For as long as an Investor owns at least 75,000 shares of the
Series H Preferred Stock, or Common Stock issued upon the conversion of the
Series H Preferred Stock (adjusted for stock splits and the like), the Company
shall furnish to such Investor, as soon as available and (i) in any event within
30 days after the end of each month an unaudited balance sheet, income statement
and a statement of changes in financial position for that month prepared in
accordance with generally accepted accounting principles including a comparison
to the Company' operating plan; (ii) in any event within 45 days after the end
of each quarter, unaudited quarterly financial statements; (iii) in any event
within 90 day after the end of each fiscal year of the Company, a balance sheet
of the Company as of the end of such fiscal year, a statement of income of the
Company for such fiscal year, and a statement of changes in financial position
of the Company for such fiscal year, audited by independent public accountants
of national standing selected by the Company; and (iv) no less than 10 days
prior to the end of each fiscal year, a business plan and an annual budget for
the Company's succeeding fiscal year.
(b) The obligations of the Company to provide the Investors with
information as set forth in this Section 13.1 shall terminate on (i) the
effective date of a registration statement filed under the Act by the Company
covering the public offering of its securities, or (ii) the date on which the
Company otherwise becomes subject to the reporting requirements under Section 13
or 15(d) of the Exchange Act, whichever first occurs.
<PAGE>
(c) The rights granted to the Investors under Section 13.1(a) shall
pass to all subsequent transferees of the Series H Preferred Stock until
extinguished pursuant to the terms hereof, provided that, with respect to the
rights set forth in Section 13.1(a), such transferee holds an aggregate of at
least 75,000 shares of the Series H Preferred Stock, or Common Stock issued upon
the conversion of the Series H Preferred Stock (adjusted for stock splits and
the like), and provided further that such transferee agrees to be bound by
Section 13.2.
13.2 Nondisclosure. Each Investor agrees not to use Confidential
Information (as hereinafter defined) of the Company for its own use other than
as permitted by agreement with the Company or for any purpose except to evaluate
its equity investment in the Company. Each Investor agrees not to disclose such
Confidential Information to any third parties or to any of its employees except
employees who are required to have the Confidential Information to evaluate such
Investor's investment in the Company or as permitted under the terms of any
other agreements between the parties; provided however, that an Investor may
report summary financial information concerning the Company to partners of the
Investor in accordance with standard reporting practices of such Investor to its
partners. For purposes of this subsection, "Confidential Information" means any
information, technical data, or know-how, including, but not limited to, the
Company's research, products, software, services, development, inventions,
processes, designs, drawings, engineering, marketing, or finances, disclosed by
the Company either directly or indirectly in writing, orally or by drawings or
inspection of parts or equipment and which the Company has marked
"confidential," "proprietary" or "secret" or has otherwise identified as being
such. Confidential Information does not include information, technical data or
know-how which (i) is in such Investor's possession at the time of disclosure as
shown by such Investor's files and records; (ii) before or after it has been
disclosed to such Investor, is part of the public knowledge or literature, not
as a result of any action or inaction of such Investor; (iii) is approved for
release by written authorization of the Company; (iv) is disclosed to such
Investor by a third party not under an obligation of confidentiality to the
Company; or (v) is independently developed by such Investor.
13.3 Cooperation. The Company shall cooperate with the Investors in
supplying such information as may be reasonably requested by the Investors to
complete and file any information reporting forms presently or hereafter
required by the SEC as a condition to the availability of an exemption,
presently existing or hereafter adopted, from the Act for the sale of the
Registrable Securities.
13.4 Right of First Refusal. The Company hereby grants to each Investor the
right of first refusal to purchase its pro rata share of any New Securities (as
defined in this Section 13.4) which the Company may, from time to time, propose
to sell and issue. An Investor's pro rata share, for purposes of this right of
first refusal, is the ratio of the number of shares of Common Stock into which
such Investor's shares of Series H Preferred Stock have been or are convertible
and which are held by such Investor to the total number of shares of Common
Stock outstanding (including all outstanding securities convertible into,
exchangeable for or exercisable for Common Stock). This right of first refusal
shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock of the Company
whether or not now authorized, the rights, options or warrants to purchase
capital stock and securities of any type whatsoever that are, or may become,
convertible into capital stock; provided that the term
<PAGE>
"New Securities" does not include (i) securities issuable upon exercise or
conversion of currently outstanding securities or securities issued in
compliance with this section; (ii) the shares of Series H Preferred Stock or the
Common Stock into which they are convertible; (iii) securities issued pursuant
to a public offering pursuant to an effective registration statement under the
Act; (iv) securities issued pursuant to the Company's acquisition of another
corporation by merger, purchase of substantially all the assets or other
reorganization; (v) securities issued to employees and consultants of the
Company pursuant to plans and arrangements approved by the board of directors;
(vi) securities issued in connection with equipment lease financing
arrangements, credit agreements, joint ventures or other commercial transactions
approved by the Board of Directors, including but not limited to any commercial
agreement entered into between the Company and another entity pursuant to which
the other entity or its affiliates receives license, distribution or other
rights to specified technology or products of the Company; and (vii) securities
issued in connection with any stock split, stock dividend or recapitalization of
the Company.
(b) In the event the Company proposes to undertake an issuance of New
Securities and after it has received a bona fide offer to purchase such New
Securities, it shall give each Investor written notice of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Investor shall have 20 days
from the date of receipt of any such notice to agree to purchase any amount of
New Securities up to the Investor's pro rata share of such New Securities for
the price and upon the general terms specified in the notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased. Each Investor shall have a right of overallotment such that if any
Investor fails to exercise its right hereunder to purchase all of such
Investor's pro rata portion of New Securities, the Company shall notify the
other Investor(s) and the other Investor(s) may purchase the nonpurchased
portion on a pro rata basis within 10 days from the date of such notice.
(c) In the event an Investor fails to exercise in full the right of
first refusal within said 20-day period (plus 10-day period, if applicable), the
Company shall have 90 days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within 30 days from the date of said agreement) to sell the New
Securities respecting which the Investor's option was not exercised, at the
price and upon the terms specified in the Company's notice. In the event the
Company has not entered into an agreement to sell the New Securities within said
90-day period (or sold and issued New Securities in accordance with the
foregoing within 30 days from the date of said agreement), the Company shall not
thereafter issue or sell any New Securities, without first offering such
securities to the Investors in the manner provided above.
(d) The right of first refusal granted under this Agreement shall
expire upon the first to occur of the following: (i) the closing of a public
offering pursuant to an effective registration statement under the Act or (ii)
as to an Investor if such Investor no longer holds at least 75,000 shares of
Registrable Securities.
<PAGE>
14. Board of Directors. The Company's Bylaws shall provide for a Board of
Directors consisting of a variable number of directors between five and nine
members, currently set at eight (8). As of the date hereof, the Board of
Directors shall consist of David V. Goeddel, Ph.D.; A. Grant Heidrich, III; Mark
J. Levin; Edward McCracken; Steven L. McKnight, Ph.D.; Paul A. Marks, M.D.;
Peter Sjostrand, M.D.; and Robert A. Swanson. Until the closing of the Company's
initial public offering of Common Stock, no more than three (3) of the Company's
directors shall be employees of the Company.
15. Miscellaneous.
15.1 Waivers and Amendments. With the written consent of the record
Holders of a majority of the Registrable Securities then outstanding, the
obligations of the Company and the rights of the Holders of the Registrable
Securities under this Agreement may be waived (either generally or in a
particular instance, either retroactively or prospectively and either for a
specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement.
Neither this Agreement nor any provisions hereof may be changed, waived,
discharged or terminated orally, but only by a signed statement in writing.
15.2 Governing Law.
(a) This Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of Delaware (without
giving effect to principles of conflicts of laws).
(b) Any legal action or other legal proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be brought
or otherwise commenced against Tularik in either the courts of the State of
California, County of San Mateo or the State of New York, County of New York,
or, if it has or can acquire jurisdiction, in either the United States District
Court for the Northern District of California or the United States District
Court for the Southern District of New York. Any legal action or other legal
proceeding relating to this Agreement or the enforcement of any provision of
this Agreement may be brought or otherwise commenced against the Investors in
the courts of the State of New York, County of New York, or, if it has or can
acquire jurisdiction, in the United States District Court for the Southern
District of New York. Each party to this Agreement:
(1) expressly and irrevocably consents and submits to the
jurisdiction of such courts (and the appropriate appellate courts) in connection
with any such legal proceeding;
(2) agrees that such courts shall be deemed to be a convenient
forum; and
(3) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any such state or federal
court, any claim that such party is not subject personally to the jurisdiction
of such court, that such legal proceeding has
<PAGE>
been brought in an inconvenient forum, that the venue of such proceeding is
improper or that this Agreement or the subject matter of this Agreement may not
be enforced in or by such court.
15.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
15.4 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject hereof and thereof.
15.5 Severability of this Agreement. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
15.6 Title and Subtitles. The titles of the Sections of this Agreement
are for convenience of reference only and are not to be considered in construing
this Agreement.
15.7 Notice. Any notice or report required in this Agreement or permitted
to be given shall be given in writing and shall be deemed effective upon
personal delivery (including delivery by messenger or by overnight courier or
delivery service) or four (4) days after deposit in the United States certified
or registered mail, postage prepaid and return receipt requested and addressed
(i) if to a Holder which is not an Option Holder, at such Holder's address set
forth on Exhibit A, or at such other address as such Holder shall have furnished
to the Company in writing, or (ii) if to an Option Holder, at the address as set
forth on Exhibit B or at such other address as the Option Holder shall have
furnished to the Company in writing, or (iii) if to the Company, one copy should
be sent to its address as set forth below and addressed to the attention of the
Corporate Secretary, or at such other address as the Company shall have
furnished to the Holders.
15.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
15.9 Attorneys' Fees. If any action at law or in equity is necessary to
enforce the terms of this Agreement, the prevailing party shall be entitled to
receive from the non-prevailing party reasonable attorneys' fees, costs and
necessary disbursements in addition to any other relief to which such prevailing
party may be entitled.
<PAGE>
In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
Company: Holder:
Tularik Inc. [ ]
By: /s/ David V. Goeddel By: /s/ Holder
--------------------------- ----------------------------
David V. Goeddel, President
Corporate Drive Name:__________________________
South San Francisco, CA 94080
Title:_________________________
Address:_______________________
_______________________________
_______________________________
<PAGE>
INVESTOR RIGHTS AGREEMENT
Exhibit A
SCHEDULE OF INVESTORS
Warrants to Purchase
Series H Preferred Series H Preferred
Name and Address Stock Held Stock
(Number of Shares) (Number of Shares)
- --------------------- --------------------- --------------------
<PAGE>
INVESTOR RIGHTS AGREEMENT
Exhibit B
SCHEDULE OF OPTION HOLDERS
Options to Purchase
Series H Preferred Stock
and Warrants
Name and Address (Number of Shares)
- ----------------------------- -------------------------
<PAGE>
Exhibit 10.1
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement (the "Agreement") is made as of April
---------
28, 1998 by and between Tularik Inc., a Delaware corporation (the "Company"),
-------
and __________________________ (the "Indemnitee").
----------
RECITALS
--------
The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers and key employees, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance. The Company and Indemnitee further recognize
the substantial increase in corporate litigation in general, subjecting
directors, officers and key employees to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and agents of the
Company may not be willing to continue to serve as agents of the Company without
additional protection. The Company desires to attract and retain the services
of highly qualified individuals, such as Indemnitee, and to indemnify its
directors, officers and key employees so as to provide them with the maximum
protection permitted by law.
AGREEMENT
---------
In consideration of the mutual promises made in this Agreement, and
for other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify
-----------------------
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, or, with respect
<PAGE>
to any criminal action or proceeding, that Indemnitee had reasonable cause to
believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
---------------------------------------------
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or proceeding by or in
the right of the Company or any subsidiary of the Company to procure a judgment
in its favor by reason of the fact that Indemnitee is or was a director,
officer, employee or agent of the Company, or any subsidiary of the Company, by
reason of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) and, to the fullest extent permitted by
law, amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), in each case to
the extent actually and reasonably incurred by Indemnitee in connection with the
defense or settlement of such action or suit if Indemnitee acted in good faith
and in a manner Indemnitee reasonably believed to be in or not opposed to the
best interests of the Company and its stockholders, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which Indemnitee shall have been finally adjudicated by court order or judgment
to be liable to the Company in the performance of Indemnitee's duty to the
Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee has
-----------------------------
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. No Employment Rights. Nothing contained in this Agreement is
--------------------
intended to create in Indemnitee any right to continued employment.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all expenses
-----------------------
incurred by Indemnitee in connection with the investigation, defense, settlement
or appeal of any civil or criminal action, suit or proceeding referred to in
Section 1(a) or Section 1(b) hereof (including amounts actually paid in
settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the
<PAGE>
Chief Executive Officer of the Company and shall be given in accordance with the
provisions of Section 12(d) below. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 3 shall be made no later than twenty (20) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within twenty (20) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the
Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a notice of
------------------
a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
--------------------
under Section 3(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ counsel in any such proceeding at
<PAGE>
Indemnitee's expense; and (ii) if (A) the employment of counsel by Indemnitee
has been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense or (C) the Company
shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement,
-----
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute, or
rule which expands the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes shall be deemed to be within
the purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement
--------------
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested members of the Company's Board of
Directors, the General Corporation Law of the State of Delaware, or otherwise,
both as to action in Indemnitee's official capacity and as to action in another
capacity while holding such office. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though he or she may have ceased
to serve in any such capacity at the time of any action, suit or other covered
proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. For example, the Company and Indemnitee
acknowledge that the Securities and Exchange Commission (the "SEC") has taken
---
the position that indemnification is not permissible for liabilities arising
under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit
<PAGE>
the question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
<PAGE>
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(d) Claims under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
or the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company" shall
-------
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
-----------------
shall include employee benefit plans; references to "fines" shall include any
-----
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
-------------------------------------
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries;
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
---
opposed to the best interests of the Company" as referred to in this Agreement.
- --------------------------------------------
11. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
<PAGE>
12. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(d) Notices. Any notice, demand or request required or permitted to
-------
be given under this Agreement shall be in writing and shall be deemed sufficient
when delivered personally or sent by telegram or forty-eight (48) hours after
being deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and inure to the benefit of Indemnitee
and Indemnitee's heirs, legal representatives and assigns.
(g) Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
to effectively bring suit to enforce such rights.
<PAGE>
The parties hereto have executed this Agreement as of the day and year set
forth on the first page of this Agreement.
TULARIK INC.
By: __________________________________
Title: __________________________________
Address: Two Corporate Drive
South San Francisco, California
94080
AGREED TO AND ACCEPTED:
__________________________
(Name of Indemnitee)
__________________________________
(Signature)
Address: ___________________
___________________
<PAGE>
EXHIBIT 10.2
TULARIK INC.
1991 STOCK PLAN
1. Purposes of the plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated there-under. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the
Company.
(f) "Company" means Tularik Inc., a California corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the
Company or any Subsidiary. Continuous Status as an Employee shall
not be considered interrupted in the case of: (i) sick leave; (ii)
military leave; (iii) any other leave of absence approved by the
Board, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such
leave is guaranteed by contract
1.
<PAGE>
or statute, or unless provided otherwise pursuant to Company
policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its
Subsidiaries or its successor.
(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market System of the National Association of Securities Dealers, Inc. Automated
quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported, as quoted
on such system or exchange or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination) as reported in the Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Common Stock or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to
the Plan.
(o) "Optioned Stock" means the Common Stock subject to
an Option.
(p) "Optionee" means an Employee or Consultant who receives an Option.
(q) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
2.
<PAGE>
(r) "Plan" means this 1991 Stock Plan.
(s) "Restricted Stock" means shares of Common Stock acquired pursuant
to a grant of Stock Purchase Rights under Section 11 below.
(t) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(u) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 3,666,667 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and Officers. With
respect to grants of Options or Stock Purchase Rights to Employees who are also
officers or directors of the Company, the Plan shall be administered by (A) the
Board if the Board may administer the Plan in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto ("Rule 16b-3") with
respect to a plan intended to qualify there-under as a discretionary plan, or
(B) a Committee designated by the Board to administer the Plan, which Committee
shall be constituted in such a manner as to permit the Plan to comply with Rule
16b-3 with respect to a plan intended to qualify thereunder as a discretionary
plan. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3,
the Plan may be administered by different bodies with respect to directors, non-
director officers and Employees who are neither directors nor officers.
(iii) Administration With Respect to Consultants and Other
Employees. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which Committee
3.
<PAGE>
shall be constituted in such a manner as to satisfy the legal requirements
relating to the administration of incentive stock option plans, if any, of
California corporate and securities laws and of the Code (the "Applicable
Laws"). Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine when. her and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any waiver of
forfeiture restrictions regarding any Option or other award and/or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator shall determine, in its sole discretion);
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period);
(ix) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted; and
4.
<PAGE>
(x) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights.
(c) Effect of Committee's Decision. Ail decisions, determinations and
interpretations of the Administrator shall be final and binding on all Optionees
and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if he is otherwise eligible, be granted an additional
Option or Options or Stock Purchase Right.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designstions, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are
exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be deter-mined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan..
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
5.
<PAGE>
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(2) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(1) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(2) granted to any person, the per Share exercise price shall
be no less than 85% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised,.(5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement; (8) any combination of the foregoing
methods of payment, (9) or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company (Section 409 of the California Corporation law).
9. Exercise of Option.
6.
<PAGE>
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be avail-able, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the Call may be), such Optionee may, but only within ninety (90)
days (or such other period of time as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding ninety (90) days) after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his Option to the extent
that Optionee was entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
such termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Consulting relationship
or Continuous Status as an Employee as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no
7.
<PAGE>
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise the Option at the date of death. To t-he
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. The Option may not be sold, pledged,-
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which price shall not be less than 50% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator deter-mines otherwise,
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser or such other price as may be set forth in the Purchase Agreement and
may be paid by cancellation of any indebtedness of the purchaser to the Company.
The repurchase option shall lapse at such rate as the Committee may determine.
8.
<PAGE>
(c) Other Provisions. The Restricted Stock purchase agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action.
In the event of a merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
With respect to any Option granted prior to January 4, 1992, in the event that
such successor corporation does not agree to assume such Option or to substitute
an equivalent option, the Board shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise such Option
as to all of the Optioned Stock, including Shares as to which such Option would
not otherwise be exercisable. If the Board makes an Option fully exercisable in
lieu of assumption or substitution in the event of a merger, the Board shall
notify the Optionee that the Option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will terminate
upon the expiration of such period.
13. Time of Granting Options. The date of grant of an Option shall, for
all-purposes, be the date on which the Administrator makes the determination
granting such Option,
9.
<PAGE>
or such other date as is determined by the Board. Notice of the determination
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having Jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
17. Agreement. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
10.
<PAGE>
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
19. Information to Optionees. The Company shall provide to each optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
11.
<PAGE>
TULARIK INC.
NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of Tularik Inc.
(the "Company") as follows:
Grant Number ________________________
Date of Grant ________________________
Option Price Per Share $ ________________________
Total Number of Shares Granted ________________________
Total Price of Shares Granted ________________________
Type of Option: ________ Incentive Stock option
________ Nonstatutory Stock Option
Term/Expiration Date: _________________________________
Exercise Schedule:
This Option may be exercised, in whole or in part, in accordance with the
Vesting Schedule set out below.
* Vesting Schedule:
Date of Vesting Number of Shares
- ---------------------------------- ----------------------------------
Termination Period:
Option may be exercised for days after termination of employment or
consulting relationship except as set out in Sections ? and 8 of the Stock
Option Agreement (but in no event later than the Expiration Date).
______________________
* Note that for California permit plane, vesting must occur at a rate of no
less than 20% per year.
1.
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1991 Stock Plan and the [Incentive/Nonstatutory]
Stock Option Agreement, all of which are attached and made a part of this
document.
OPTIONEE: TULARIK INC.
---------------------------- By:
Signature ---------------------------
---------------------------- Title:
Print Name ------------------------
2.
<PAGE>
TULARIK INC.
STOCK OPTION AGREEMENT
1. Grant of Option. Tularik Inc., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1991 Stock Plan (the "Plan")
adopted by the Company, which is incorporated herein by reference. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:
(a) Right to Exercise.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(i)(c).
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(b) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at
1.
<PAGE>
the time this Option is exercised, Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Option, deliver to
the Company his Investment Representation Statement in the form attached hereto
as Exhibit B, and shall read the applicable rules of the Commissioner of
Corporations attached to such Investment Representation Statement.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of t-he Administrator:
(a) cash; or
(b) check; or
(c) surrender of other shares of Common Stock of the Company which
(A) either have been owned by the Optionee for more than six (6) months on the
date of surrender or were not acquired, directly or indirectly, from the Company
and (B) have a fair market value on the date of surrender equal to the Exercise
Price of the Shares as to which the Option is being exercised; or
(d) delivery of a promissory note (the "Note") of Optionee in the
amount of the Exercise Price together with the execution and delivery by the
Optionee of the Security Agreement attached hereto as Exhibit C. The Note shall
be in the form attached hereto as Exhibit D, shall contain the terms and be
payable as set forth herein, shall bear interest at a rate no less than the
"applicable federal rate" prescribed under the Code and its regulations at time
of purchase, and shall be secured by a pledge of the Shares purchased by the
Note pursuant to the Security Agreement.
5. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the share-holders of the Company, or if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 11 of the Code of Federal Regulations ("Regulation") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee as a result of total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the
date of termination of employment (but in no event later than the date of
expiration of the term of this Option as set forth in Section 10 below),
exercise the Option
2.
<PAGE>
to the extent otherwise so entitled at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee, the Option
may be exercised at any time within twelve (12) months following the date of
death (but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent the Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
11. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and [state] tax consequences of exercise
of this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or California income tax liability
upon he exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of Nonqualified Stock Option. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability and a
state income tax liability upon the exercise of the Option. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price. If Optionee is an employee, the
Company will be required to withhold from Optionee's compensation or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital
3.
<PAGE>
gain for federal and California income tax purposes. In the case of an ISO, if
Shares transferred pursuant to the Option are held for at least one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. If Shares purchased
under an ISO are disposed of within such one-year period or within two years
after the Data of Grant, any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the extent of the
excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price.
(d) Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after transfer of such Shares to the Optionee upon exercise of the ISO, the
Optionee shall immediately notify the Company in writing of such disposition.
Optionee agrees that Optionee may be subject to income tax with-holding by the
Company on the compensation income recognized by the Optionee from the early
disposition.
Tularik Inc.,
a California corporation
By:
----------------------------------------
President
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain information
related thereto and represents that he is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Optionee has reviewed the Plan and this Option in their
entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Option. es hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Board upon any questions arising under the
Plan.
Dated: Optionee:
----------------------------- -----------------------------
4.
<PAGE>
EXHIBIT A
EXERCISE NOTICE AND RESTRICTED
STOCK AGREEMENT [EARLY EXERCISE]
Tularik Inc.
[address]
Attention: Secretary
1. Exercise of Option. Effective as of today, __________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_______ shares of t-he Common Stock (the "Shares") of Tularik Inc. (the
"Company") under and pursuant to the Company's 1991 Stock Option Plan, as
amended (the "Plan") and the [ ] Incentive [ ] Nonqualified Stock Option
Agreement dated ________ (the "Option Agreement"). Of these Shares, Optionee
has elected to purchase _______of those Shares which have become vested under
the Vesting Schedule set out in the Notice of Grant (the "Vested Shares") and
______ Shares which have not yet vested under such schedule (the "Unvested
Shares"). The Purchase Price for the Shares shall be _________, as set out in
the Notice of Grant.
2. Representations of Optionee. Optionee acknowledges that optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be Mound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws. Optionee understands and
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended (the "1933 Act"), and, notwithstanding any other provision
of the Option Agreement to the contrary, the exercise of any rights to purchase
any Shares is expressly conditioned upon compliance with the 1933 Act, all
applicable state securities laws and all applicable requirements of any stock
exchange or over the counter market on which the Company's Common Stock may be
listed or traded at the time of exercise and transfer. Optionee agrees to
cooperate with the Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the
Shares have not been registered under the 1933 Act and therefore cannot be
resold and must be held indefinitely unless they are registered under the 1933
Act or unless an exemption from such registration is available and that the
certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee.
Specifically, Optionee has been advised that Rule 144 promulgated under the 1933
Act, which permits certain resales of unregistered securities, is not presently
available with respect to the Shares and, in any event requires that the Shares
be paid for and then be held for at least two years (and in some cases three
years) before they may be resold under Rule 144.
1.
<PAGE>
5. Company's Repurchase Option. The Company or its assignee(s) shall
have the option to repurchase all or any portion of the Unvested Shares on the
terms and conditions set forth in this section (the "Repurchase Option") if the
Optionee should cease to be employed by the Company for any reason or no reason,
including without limitation death, disability, voluntary resignation or
termination by the Company with or without cause.
(a) Right of Termination Unaffected. Nothing in this Agreement shall
be construed to limit or otherwise affect in any manner whatsoever the right or
power of the Company to terminate Optionee's employment at any time for any
reason or no reason, with or without cause. Optionee shall be considered to be
employed by the Company if Optionee is an officer, director or full-time
employee of the Company or any Parent or Subsidiary of the Company (as defined
in the Plan) or if the Board of Directors determines that Optionee is rendering
substantial services as a part-time employee, consultant or independent
contractor to the Company or any Parent or Subsidiary of the Company (as defined
in the Plan). In case of any dispute, the Board of Directors of the Company
shall have discretion to determine (i) whether Optionee has ceased to be
employed by the Company and (ii) the date on which the employment relationship
ceases (the "Termination Date").
(b) Exercise of Repurchase Option. At any time within 90 days after
Optionee's Termination Date, the Company or its assignee(s) may elect to
repurchase any or all of the Unvested Shares purchased pursuant to the Option
Agreement by giving Optionee (or Optionee's personal representative as the case
may be) written notice of exercise of the Repurchase Option.
(c) Repurchase Price. The Company or its assignee(s) shall have the
option to repurchase from Optionee any or all of the Unvested Shares (or from
Optionee's personal representative as the case may be) at the Exercise Price (as
defined in the Option Agreement), as such price may be adjusted from time to
time to reflect any subsequent stock dividend, stock split, reverse stock split
or recapitalization of the Company (the "Repurchase Price").
(d) Payment of Repurchase Price. The Repurchase Price shall be
payable, at the option of the Company or its assignee(s), by check or by
cancellation of all or a portion of any outstanding indebtedness of Optionee to
the Company (or, in the case of repurchase by an assignee, to the assignee) or
any combination thereof. The Repurchase Price shall be paid without interest
within 90 days after the Termination Date.
(e) Lapse of Repurchase Option. Ail Unvested Shares held by the
Optionee shall be released from the Company's Repurchase Option and cease to be
Unvested Shares according to the Vesting Schedule set out in the Notice of
Grant.
6. Rights as Shareholder. Subject to the terms and conditions of this
Agreement, Optionee shall have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that
Optionee delivers full payment of the Exercise Price until such time
as Optionee disposes of the Shares or the Company and/or its
assignee(s) exercises the Repurchase Option hereunder. Upon such
exercise, Optionee shall have no further rights as a holder of the
Shares so purchased except the right to receive payment for the Shares
so purchased in
2.
<PAGE>
accordance with the provisions of this Agreement, and Optionee shall
forthwith cause the certificate(s) evidencing the Shares so purchased
to be surrendered to the Company for transfer or cancellation.
7. Escrow. As security for the faithful performance of this Agreement,
Optionee agrees, immediately upon receipt of the certificate(s) evidencing the
Shares, to deliver such certificate(s), together with a stock power in the form
of Attachment I attached hereto, executed by Optionee and by Optionee's spouse,
if any (with the date and number of Shares left blank), to the Secretary of the
Company or its designee ("Escrow Holder"), who is hereby appointed to hold such
certificate(s) and stock power in escrow and to take all such actions and to
effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Optionee and the Company agree
that Escrow Holder shall not be liable to any party to this Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent relative thereto. The Escrow Holder may rely upon any letter, notice
.or other document executed by any signature purported to be genuine and may
rely on advice of counsel and obey any order of any court with respect to the
transactions contemplated herein. The Shares shall be released from escrow upon
termination of the Repurchase Option; provided, however, that such release shall
not affect the rights of the Company with respect to any pledge of Shares to the
Company.
8. Tax Consequences.
(a) Tax Consultation. Optionee understands that optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
(b) Section 83(b) Election For Nonqualified Stock Option. Optionee
hereby acknowledges that Optionee has been informed that, with respect to the
exercise of any nonqualified stock option, unless an election is filed by the
Optionee with the Internal Revenue Service and, if necessary, the proper state
taxing authorities, within 30 days of the purchase of the Shares, electing
pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (and
similar state tax provisions if applicable) to be taxed currently on any
difference between the purchase price of the Shares and their fair market value
on the date of purchase, there will be a recognition of taxable income to the
Optionee, measured by the excess, if any, of the fair market value of the
Shares, at the time the Company's Repurchase Option lapses over the purchase
price for such Shares. Optionee represents that Optionee has consulted any tax
consultant(s) Optionee deems advisable in connection with the purchase of the
Shares or the filing of the Election under Section 83(b) and similar tax
provisions. A form of Election Under Section 83(b) is attached hereto as
Attachment 2 for reference. OPTIONEE HEREBY ASSUMES ALL RESPONSIBILITY FOR
FILING SUCH ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR THE
LAPSE OF THE REPURCHASE RESTRICTIONS ON THE SHARES.
(c) Section 83(b) Election For Alternative Minimum Tax for Incentive
Stock Options. Optionee hereby acknowledges that Optionee has been informed
that, with
3.
<PAGE>
respect to the exercise of any incentive stock option, unless an election is
filed by the Optionee with the Internal Revenue Service within 30 days of the
purchase of the Shares, electing pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (and similar state tax provisions if
applicable) to be taxed currently for alternative minimum tax purposes on any
difference between the purchase price of the Shares and their fair market value
on the date of purchase, the Optionee will be required to include (for
alternative minimum tax purposes only) an amount equal to the excess, if any, of
the fair market value of the Shares, at the time the Company's Repurchase Option
lapses over the purchase price for such Shares. Optionee represents that
Optionee has consulted any tax consultant(s) Optionee deems advisable in
connection with the purchase of the Shares or the filing of the Election for
alternative minimum tax purposes under Section 83(b) and similar tax provisions.
A form of Election Under Section 83(b) is attached hereto as Attachment 2 for
reference. OPTIONEE HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING SUCH ELECTION
AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR THE LAPSE OF THE REPURCHASE
RESTRICTIONS ON THE SHARES.
9. Restrictive Legends and Stop-Transfer Order.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER AND RIGHT OF REPURCHASE OPTIONS HELD BY THE ISSUER OR ITS
ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE AND RESTRICTED STOCK AGREEMENT
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
'RESTRICTIONS, RIGHT OF REPURCHASE ARE BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
4.
<PAGE>
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Market Standoff Agreement. Optionee hereby agrees that if so
requested by the Company or any representative of the under-writers in
connection with any registration of the offering of any securities of the
Company under the 1933 Act, Optionee shall not sell or otherwise transfer any
Shares or other securities of the Company during the 180-day period following
the effective date of a registration statement of the Company filed under the
1933 Act; provided, however, that such restriction shall only apply to the first
two registration statements of the Company to become effective under the 1933
Act which include securities to be sold on behalf of the Company to the public
in an underwritten public offering under the 1933 Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such 180-day period.
11. Successors and Assigns. The Company may assign any of its rights
under t-his Agreement to single or multiple assignees, and t-his Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
12. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
13. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
14. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address
5.
<PAGE>
as shown below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.
15. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
16. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
17. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Notice of
Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and is governed by
[state] law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by: OPTIONEE:
TULARIK INC.
By:
--------------------------------------
- ------------------------------- Its:
(Signature) --------------------------------------
Address: Address:
[Company Address]
- -------------------------------
- -------------------------------
6.
<PAGE>
EXHIBIT A
EXERCISE NOTICE
[NO EARLY EXERCISE]
Tularik Inc.
[Address]
Attention: Secretary
1. Exercise of Option. Effective as of today,-_____, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_______ shares of the Common Stock (the "Shares") of Tularik Inc. (the
"Company") under and pursuant to the Company's 1991 Stock Option Plan, an
amended (the "Plan") and the [ ] Incentive [ ] Nonqualified Stock Option
Agreement dated ___________ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws. Optionee understands and
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended (the "1933 Act"), and, notwithstanding any other provision
of the Option Agreement to the contrary, the exercise of any rights to purchase
any Shares is expressly conditioned upon compliance with the 1933 Act, all
applicable state securities laws and all applicable requirements of any stock
exchange or over the counter market on which the Company's Common Stock may be
listed or traded at the rime of exercise and transfer. Optionee agrees to
cooperate with the Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that the
Shares have not been registered under the 1933 Act and therefore cannot be
resold and must be held indefinitely unless they are registered under the 1933
Act or unless an exemption from such registration is available and that the
certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the rimes proposed by Optionee.
Specifically, Optionee has been advised that Rule 144 promulgated under the 1933
Act, which permits certain resales of unregistered securities, is not presently
available with respect to the Shares and, in any event requires that the Shares
be paid for and then be held for at least two years (and in some cases three
years) before they may be resold under Rule 144.
5. Rights as Shareholder. Subject to the terms and conditions of this
Agreement, Optionee shall have all of the rights of a shareholder of the Company
with respect to the Shares from and alter the dare that Optionee delivers full
payment of the Exercise Price until such rime
7.
<PAGE>
as Optionee disposes of the Shares [or the Company and/or its assignee(s)
exercises the Right of First Refusal hereunder. Upon such exercise, Optionee
shall have no further rights as a holder of Shareholder so purchased except the
right to receive patent for the Shares so purchased in accordance with the
provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.]
6. Tax Consultation. Optionee understands that Optionee may suffer
adverse may suffer adverse tax consequences as a result of Optionee's purchase
or disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or deposition of the shares and that Optionee is not relying on the
Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the company shall
cause the Legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by states or federal securities
laws:
THE SECURITIES REPRESENTED HEREBY HEAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH.
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER [AND RIGHT OF FIRST REFUSAL OPTIONS] HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE
OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS ARE
BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
8.
<PAGE>
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal t9 Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Market Standoff Agreement. Optionee hereby agrees that if so
requested by the Company or any representative of the under-writers in
connection with any registration of the offering of any securities of the
Company under the 1933 Act, Optionee shall not sell or otherwise transfer any
Shares or other securities of the company during the 180-day period following
the effective date to a registration statement of the Company filed under the
1933 Act; provided, however, that such restriction shall only apply to the first
two registration statements of the Company to become effective under the 1933
Act which include securities to be sold on behalf of the Company to the public
in an underwritten public offering under the 1933 Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such 180-day period.
9. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
10. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
11. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of [state] excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
12. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon. personal delivery or upon
deposit in the United States mail by certified mail, with postage and feel
prepaid, addressed to the other party at its address as
9.
<PAGE>
shown below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.
13. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
14. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
15. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Notice of
Grant/Option Agreement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of t-he
Company and Optionee with respect to the subject matter hereof, and is governed
by [state] law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by: OPTIONEE:
TULARIK INC.
By:
--------------------------------------
Its:
- --------------------------------- --------------------------------------
(Signature)
Address: Address:
[Company Address]
- ---------------------------------
- ---------------------------------
10.
<PAGE>
ATTACHMENT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
For Value Received and pursuant to that certain Exercise Notice and
Restricted Stock Agreement dated as of _____________, 19__, the undersigned
hereby sells, assigns and transfers unto
________________________________________________________________________
____________ shares of the Common Stock of Tularik Inc., a California
corporation, standing in the undersigned's name on the books of said corporation
represented by Certificate No. _____ delivered herewith, and does hereby
irrevocably constitute the Secretary of said corporation as attorney-in-fact,
with full power of substitution, to transfer said stock on the books of said
corporation.
Dated:____________, 19___
-------------------------------------------------
(Signature)
-------------------------------------------------
(Please Print Name)
-------------------------------------------------
(Spouse's Signature, if any)
-------------------------------------------------
(Please Print Name)
11.
<PAGE>
ATTACHMENT 2
ELECTION UNDER SECTION 83(b) OF
THE INTERNAL REVENUE CODE OF 1986
The undersigned Taxpayer hereby elects, pursuant to the provisions of the
federal income tax law noted above, to include in gross income for the
Taxpayer's current taxable year, as compensation for services, the excess, if
any, of the fair market value of the property described below at the time of
transfer over the amount paid for such property.
16. TAXPAYER'S NAME: ___________________________________
TAXPAYER'S ADDRESS: ___________________________________
___________________________________
SOCIAL SECURITY NUMBER: ___________________________________
17. The property with respect to which the election is made is described
as follows: _______ shares of Common Stock of Tularik Int. a California
corporation (the "Company"), which is Taxpayer's employer or the corporation for
whom the Taxpayer has performed services.
18. The date on which the shares were transferred was __________, 19__,
and this election is made for calendar year 19__.
19. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original purchase
price under certain conditions at the time of Taxpayer's termination of
employment or services.
20. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was $______ per
share at the time of transfer.
21. The amount paid for such shares was $______ per share.
22. The Taxpayer has submitted a copy of this statement to the Company as
the Taxpayer's employer or the corporation for whom the Taxpayer has performed
services.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS") (AT
THE OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS) WITHIN 30 DAYS
AFTER THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE
TAXPAYER'S INCOME TAX RETURNS FOR THE CALENDAR YEAR ABOVE STATED. THE ELECTION
CANNOT BE REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: ________, 19____ ---------------------------------------
Taxpayer's Signature
---------------------------------------
Spouse's Signature (if any)
1.
<PAGE>
ATTACHMENT 2
ALTERNATIVE MINIMUM TAX
ELECTION UNDER SECTION 83(b) OF
THE INTERNAL REVENUE CODE OF 1986
The undersigned Taxpayer hereby elects, pursuant to the provisions of
Sections 55-56 and 83(b) of the Internal Revenue Code of 1986. as amended,
to include in alternative minimum taxable income for the Taxpayer's current
taxable year, as compensation for services, the excess, if any, of the fair
market value of the property described below at the time of transfer over
the amount paid for such property.
1. TAXPAYER'S NAME: _____________________________________
TAXPAYER'S ADDRESS: _____________________________________
_____________________________________
SOCIAL SECURITY NUMBER: _____________________________________
2. The property with respect to which the election is made is described
as follows: _______ shares of Common Stock of Tularik Int. a California
corporation (the "Company"), which is Taxpayer's employer or the corporation for
whom the Taxpayer has performed services.
3. The date on which the shares were transferred was __________, 19__,
and this election is made for calendar year 19__.
4. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original purchase
price under certain conditions at the time of Taxpayer's termination of
employment.
5. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was $_____ per
share at the time of transfer.
6. The amount paid for such shares was $ ________ per share.
7. The Taxpayer has submitted a copy of this statement to the Company as
the Taxpayer's employer or the-corporation for whom the Taxpayer has performed
services.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS") (AT
THE OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS) WITHIN 30 DAYS
AFTER THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE
TAXPAYER'S INCOME TAX RETURNS FOR THE CALENDAR YEAR ABOVE STATED. THE ELECTION
CANNOT BE REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: ________, 19____ -------------------------------------
Taxpayer's Signature
-------------------------------------
Spouse's Signature (if any)
1.
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.6
AMENDMENT NO. 1 TO COLLABORATION AGREEMENT
BETWEEN TULARIK INC. AND
SUMITOMO PHARMACEUTICALS CO., LTD
THIS AMENDMENT NO. 1 (this "Amendment") to the Collaboration Agreement
dated as of January 31, 1995 (the "Collaboration Agreement") by and between
Tularik Inc., a Delaware corporation with its principal office at Two Corporate
Drive, South San Francisco, California 94080 (herein, together with its
successors and assigns, "Tularik"), and Sumitomo Pharmaceuticals Co., Ltd., a
Japanese corporation with its principal office at 2-8, Doshomachi 2-chome Chuo-
ku, Osaka 541, Japan (herein, "Sumitomo"), is entered into as of March 13, 1997;
W I T N E S S E T H:
WHEREAS, the parties previously entered into the Collaboration Agreement;
WHEREAS, the parties desire to modify Appendix A of the Collaboration
Agreement;
WHEREAS, in order to accomplish the foregoing, the parties have agreed to
amend the Collaboration Agreement in part;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements expressed herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound, Tularik and Sumitomo agree as follows:
1. Appendix A of the Collaboration Agreement is hereby amended to add the
following as number 7:
"7. [ * ]
2. Capitalized terms used herein but not otherwise defined herein shall
have the respective meanings assigned to such terms in the Collaboration
Agreement.
3. Except as expressly modified by this Amendment, all of the terms and
conditions of the Collaboration Agreement shall remain in full force and effect.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall be considered one and
the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties have executed, or caused their duly
authorized officer or representative to execute, this Amendment as of the day
and year first above written.
TULARIK INC.
By: /s/ Terry Rosen
----------------------------
Name: Terry Rosen
Title: Vice President, Research Operation
SUMITOMO PHARMACEUTICALS CO., LTD.
By: /s/ Shigeo Ogino
----------------------------
Name: Shigeo Ogino
Title: Managing Director
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Exhibit 10.6
COLLABORATION AGREEMENT
between
TULARIK INC.
and
SUMITOMO PHARMACEUTICALS CO., LTD.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1
DEFINITIONS..................................................................................................... 1
ARTICLE 2
PROGRAM; DEVELOPMENT............................................................................................ 5
2.1 Program....................................................................................... 5
2.2 Research Committee............................................................................ 5
2.3 Term and Termination of Program............................................................... 5
2.4 Sumitomo Scientist............................................................................ 6
2.5 Obligation to Inform.......................................................................... 6
2.6 Due Diligence................................................................................. 6
ARTICLE 3
FINANCIAL SUPPORT............................................................................................... 6
3.1 Program Funding............................................................................... 6
3.2 Manner of Payment............................................................................. 6
ARTICLE 4
FUTURE LICENSES................................................................................................. 7
4.1 License Agreement............................................................................. 7
4.2 Use Limitation................................................................................ 7
4.3 Nonuse of Technology Outside of the Field..................................................... 7
4.4 Use of a Party's Own Substances............................................................... 7
4.5 Grant by Sumitomo to Tularik.................................................................. 7
ARTICLE 5
OWNERSHIP; PATENTS.............................................................................................. 8
5.1 Ownership..................................................................................... 8
5.2 Patents....................................................................................... 8
5.3 Infringement of Patents by Third Parties...................................................... 9
ARTICLE 6
PUBLICATION; PUBLICITY.......................................................................................... 9
6.1 Publication................................................................................... 9
6.2 Publicity..................................................................................... 10
ARTICLE 7
TRANSACTIONS WITH THIRD PARTIES................................................................................. 10
7.1 Reciprocal Arrangements with Third Parties.................................................... 10
7.2 Exclusive Collaboration....................................................................... 10
ARTICLE 8
REPRESENTATIONS AND WARRANTIES.................................................................................. 10
</TABLE>
i.
<PAGE>
<TABLE>
<S> <C>
8.1 Corporate Power............................................................................... 11
8.2 Due Authorization............................................................................. 11
8.3 Binding Agreement............................................................................. 11
8.4 Intellectual Property......................................................................... 11
ARTICLE 9
DISCLAIMER OF WARRANTIES........................................................................................ 11
9.1 Tularik Disclaimer............................................................................ 11
9.2 Sumitomo Disclaimer........................................................................... 11
ARTICLE 10
INDEMNIFICATION................................................................................................. 12
10.1 Indemnification by Tularik.................................................................... 12
10.2 Indemnification by Sumitomo................................................................... 12
ARTICLE 11
CONFIDENTIALITY................................................................................................. 12
11.1 Confidential Information; Exceptions.......................................................... 12
11.2 Financial Terms............................................................................... 13
ARTICLE 12
IMPORT AND EXPORT CONTROLS...................................................................................... 13
12.1 United States Laws............................................................................ 13
12.2 Non-United States Laws........................................................................ 14
ARTICLE 13
TERM; TERMINATION............................................................................................... 14
13.1 Term.......................................................................................... 14
13.2 Termination on Material Breach................................................................ 14
13.3 Surviving Rights.............................................................................. 14
13.4 Accrued Rights; Surviving Obligations......................................................... 14
ARTICLE 14
MISCELLANEOUS................................................................................................... 15
14.1 Waiver........................................................................................ 15
14.2 Assignment.................................................................................... 15
14.3 Notices....................................................................................... 15
14.4 Headings...................................................................................... 16
14.5 Amendment..................................................................................... 16
14.6 Construction of Agreement and Choice of Law, Jurisdiction and Venue........................... 16
14.7 Force Majeure................................................................................. 16
14.8 Independent Contractors....................................................................... 16
14.9 Severability.................................................................................. 17
14.10 Cumulative Rights............................................................................. 17
14.11 Counterparts.................................................................................. 17
14.12 Entire Agreement.............................................................................. 17
</TABLE>
ii.
<PAGE>
<TABLE>
<S> <C>
APPENDIX A...................................................................................................... 18
APPENDIX B...................................................................................................... 19
APPENDIX C...................................................................................................... 20
</TABLE>
iii.
<PAGE>
COLLABORATION AGREEMENT
This Agreement is entered into as of the 31/st/ day of January, 1995 (the
"Effective Date") by and between Tularik Inc., a California corporation
("Tularik"), and Sumitomo Pharmaceuticals Co., Ltd. ("Sumitomo"), a corporation
organized under the laws of Japan.
Recitals
Whereas, Tularik has developed proprietary screening assays and other
proprietary technology useful in the identification of compounds which act
through regulation of the gene encoding Low Density Lipoprotein Receptor; and
Whereas, Sumitomo and Tularik both possess substantial libraries of natural
and synthetic compounds which have potential therapeutic pharmaceutical utility;
and
Whereas, Tularik and Sumitomo desire to establish a cooperative research
relationship where Tularik will screen both company's compound libraries using
the Tularik Assays (as hereinafter defined); and
Whereas, the parties wish to develop and market novel therapeutic products
based on compounds identified during such research;
Now, Therefore, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
Article 1
Definitions
As used herein, the following terms shall have the following meanings:
"Affiliate" shall mean any entity that directly or indirectly Owns, is
Owned by or is under common Ownership, with a party to this Agreement, where
"Own" or "Ownership" means direct or indirect possession of at least fifty
percent (50%) of the outstanding voting securities of a corporation or a
comparable equity interest in any other type of entity.
"Agreement" shall mean this Collaboration Agreement.
"Confidential Information" shall mean, subject to the limitations set forth
in Section 11.1 hereof, all information disclosed to one party by the other
party.
"FDA" shall mean the United States Food and Drug Administration.
"Field" shall mean therapeutic treatment of human disease [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
1
<PAGE>
"IND" or "Investigational New Drug Application" shall mean an application
for regulatory approval by the FDA or its foreign equivalent in the Sumitomo
Territory to commence human clinical testing of a drug, as defined by the FDA or
the equivalent in the Sumitomo Territory.
"Lead Compound" shall mean a Program Compound selected by the Research
Committee, which is [ * ].
"License Agreement" shall mean the License Agreement to be entered into
between the parties in the form attached hereto as Appendix C.
"Low Density Lipoprotein Receptor" ("LDL-R") shall mean that sequence of
amino acids commonly characterized as Low Density Lipoprotein Receptor in the
scientific literature published as of the Effective Date.
"Preclinical Candidate" shall mean a compound which is or is derived from a
Lead Compound which is determined by the Research Committee to be appropriate
for pharmacology, toxicology, ADME, formulation and process development studies
for IND filing in the Sumitomo Territory.
"Product" shall mean any pharmaceutical product, including all
formulations, line extensions or modes of administration thereof, for use within
the Field, which contains a Preclinical Candidate as an active ingredient.
"Program" shall mean the research and development program described in
Appendix A hereto, as amended from time to time by the Research Committee in
accordance with Section 2.2(c).
"Program Compounds" shall mean any Sumitomo or Tularik Substances which
show activity in the screening conducted in the course of the Program, including
Tail End Compounds, and all derivatives, analogues or other improvements thereof
developed in the course of the Program.
"Program Know-How" shall mean all materials and information developed in
the course of the Program.
"Program Patents" shall mean any and all patents and patent applications,
both foreign and domestic, which have not been held invalid or unenforceable by
a court of competent jurisdiction from which no appeal has been or can be taken,
including without limitation, all substitutions, extensions, reissues, renewals,
supplementary protection certificates and inventors' certificates, which cover
inventions or discoveries made by either party or both parties in the course of
the Program or which pertain to Tail End Compounds.
"Program Technology" shall mean all Program Patents and Program Know-How.
"Research Committee" shall mean that committee formed pursuant to Section
2.2 hereof.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
"Research Term" shall have the meaning assigned in Section 2.3.
"Sumitomo Know-How" shall mean all materials and information that Sumitomo
owns, controls or has a license to (with a right to sublicense) (i) as of the
Effective Date or (ii) which arise outside of the Program from time to time
during the Research Term, which in each case are necessary or useful for the
conduct of the Program or the development, manufacture, use or sale of Products.
"Sumitomo Patents" shall mean any and all patents, (other than Program
Patents) both foreign and domestic, which have not been held invalid or
unenforceable by a court of competent jurisdiction from which no appeal has been
or can be taken, including without limitation all substitutions, extensions,
reissues, renewals, supplementary protection certificates and inventors'
certificates, (a) which (i) are issued as of the Effective Date, (ii)
subsequently issue from applications (including divisionals, continuations and
continuations-in-part) pending as of the Effective Date, or (iii) issue from any
such applications subsequently filed on inventions made as of the Effective
Date, (b) which Sumitomo owns, controls or has a license to (with the right to
sublicense), and (c) which would be infringed by the conduct of the Program or
the development, manufacture, use or sale of Products.
"Sumitomo Substances" shall mean those natural extracts, natural compounds
and synthetic compounds which Sumitomo owns or has the right to license or
sublicense as of the Effective Date or from time to time during the Program,
which Sumitomo actually provides to Tularik.
"Sumitomo Technology" shall mean, collectively, the Sumitomo Patents, the
Sumitomo Know-How and the Sumitomo Substances.
"Sumitomo Territory" shall mean Japan, [ * ].
"Tail End Compound" shall mean a compound designated as such by the
Research Committee which [ * ].
"Tularik Assays" shall mean those assays designed to discover Program
Compounds, which, as of the Effective Date and from time to time during the
Research Term, Tularik owns to which it has rights (with a right to sublicense),
as set forth and periodically updated on Appendix B hereto.
"Tularik Know-How" shall mean all materials and information that Tularik
owns, controls or to which it has a license (with a right to sublicense) (i) as
of the Effective Date or (ii) which arise outside the Program from time to time
during the Research Term, which are necessary or useful to the conduct of the
Program or the development, manufacture, use or sale of Products.
"Tularik Patents" shall mean any and all patents (other than Program
Patents), both foreign and domestic, which have not been held invalid or
unenforceable by a court of competent jurisdiction from which no appeal has been
or can be taken, including without limitation all substitutions, extensions,
reissues, renewals, supplementary protection certificates and inventors'
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
certificates, (a) which (i) are issued as of the Effective Date, (ii)
subsequently issue from applications (including divisionals, continuations and
continuations-in-part) pending as of the Effective Date, or (iii) issue from any
such applications subsequently filed on inventions made as of the Effective
Date, (b) which Tularik owns, controls or has a license to (with the right to
sublicense) and (c) which would be infringed by the conduct of the Program or
the development, manufacture, use or sale of Products.
"Tularik Substances" shall mean those natural extracts, natural compounds
and synthetic compounds which Tularik owns or has the right to license or
sublicense as of the Effective Date or from time to time during the Program,
which Tularik actually provides to the Program.
"Tularik Technology" shall mean, collectively, the Tularik Patents, the
Tularik Know-How and the Tularik Assays.
"Tularik Territory" shall mean [ * ].
Article 2
Program; Development
2.1 Program. Tularik and Sumitomo will conduct the Program under the
direction of the Research Committee as set forth in Appendix A hereto, as
amended from time to time by the Research Committee in accordance with Section
2.2(c).
2.2 Research Committee.
(a) Formation of Research Committee. The Research Committee shall
consist of an equal number of members from Sumitomo and Tularik, appointed and
substituted by each party as necessary from time to time. Each member shall
have appropriate technical credentials and knowledge and ongoing familiarity
with the Program. The Chairperson of the Research Committee shall be a Tularik
employee appointed by the Research Committee. All decisions of the Research
Committee shall be unanimous. To the extent that the members of the Research
Committee are unable to reach a unanimous decision on an issue relating to an
activity for which one party is primarily responsible under Appendix A, such
party's appointed members shall finally decide the disputed issue.
(b) Meetings of Research Committee. The Research Committee shall meet
[ * ] at such times as shall be mutually agreed upon by the parties.
(c) Responsibilities of the Research Committee. The Research
Committee shall carry out the following responsibilities during the Research
Term: (1) defining the yearly research and development objectives, (2)
determining which Sumitomo or Tularik Substances or Tail End Compounds have
shown sufficient activity in one or more Tularik Assay to be classified as a
Program Compound, (3) selecting the Lead Compounds, (4) coordinating activities
required to carry out the Program, (5) periodically revising the Program, (6)
monitoring progress of the Program, (7) delegating responsibility for the filing
and prosecution of Program Patents on inventions jointly discovered in the
course of the Program, (8) coordinating activities required to carry out further
development of Program Compounds, (9) allocating the
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
responsibilities for tasks and costs for preclinical studies, [ * ] utilized in
both the Sumitomo Territory and Tularik Territory and (10) selecting the
Preclinical Candidates.
2.3 Term and Termination of Program. The Program shall be carried out for
a period of five years commencing on the Effective Date (the "Research Term");
provided, however, that Sumitomo may terminate the Program at any time after
[ * ] after the Effective Date, upon [ * ] prior written notice to Tularik.
Anything to the contrary in the preceding sentence notwithstanding, the Research
Term shall be continued for the full five (5) years if Sumitomo enters into the
License Agreement.
2.4 Sumitomo Scientist. During the term of the Program, Tularik will
accommodate, at Sumitomo's request and expense, one visiting Sumitomo research
scientist, appointed and substituted by Sumitomo from time to time, to
facilitate collaboration between the parties within the Research Program.
2.5 Obligation to Inform. Each party hereby agrees to keep the other
fully informed on a reasonable basis of the progress of the Program.
2.6 Due Diligence. Each party shall devote the same degree of attention,
resources and diligence to its respective obligations under the Program as it
devotes to other compounds of its own development.
Article 3
Financial Support
3.1 Program Funding. Sumitomo shall support Tularik's costs in conducting
the Program. Tularik will provide Sumitomo regular reports of the costs it
incurs in conducting the Program. In order to assure such support Sumitomo,
subject to its right to terminate the Program as provided in Section 2.3, will
make payments in certain amounts and at certain times as follows:
Amount Due Date
------ --------
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
The total amount of Sumitomo's payments in support of Tularik's costs for the
Program shall not exceed [ * ]. Sumitomo and Tularik may meet from time to time
to review Tularik's costs.
3.2 Manner of Payment. Remittance of payments under Section 3.1 will be
within [ * ] of the Due Date by means of telegraphic transfer to Tularik's
account in a bank in the United States to be designated by Tularik.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5
<PAGE>
Article 4
Future Licenses
4.1 License Agreement.
(a) Sumitomo shall have the right to enter into the License Agreement
attached hereto as Appendix C [ * ].
(b) In the event that Sumitomo decides to develop a Tail End Compound
as a Preclinical Candidate, Sumitomo shall have the right to enter into the
License Agreement, with respect to such Preclinical Candidate within [ * ] after
the end of the Research Term; provided, however, that all rights to Tail End
Compounds shall revert to Tularik if Sumitomo does not enter into the License
Agreement within such [ * ] period.
(c) The License Agreement shall contain an Appendix A listing the
Preclinical Candidates and the patents and patent applications included in the
Tularik Technology and the Tularik-owned and jointly owned Program Technology
licensed thereunder.
4.2 Use Limitation. Each party agrees and acknowledges that use of the
Sumitomo Substances or the Tularik Substances, as the case may be, provided
pursuant to Article 2, is limited solely to those activities contemplated by the
Program, unless otherwise provided for in this Agreement, and are for research
use only and shall not be administered to humans in any manner or form, except
in accordance with the terms of this Agreement, subject to appropriate
Governmental Approval.
4.3 Nonuse of Technology Outside of the Field. Sumitomo covenants and
agrees that it will not use, directly or indirectly, the Tularik Technology,
Tularik's Confidential Information or Tularik's Program Technology for any
purpose other than developing, making, having made, using or selling Products in
the Sumitomo Territory under this Agreement. Tularik covenants and agrees that
it will not use, directly or indirectly, the Sumitomo Technology, Sumitomo's
Confidential Information or Sumitomo's Program Technology for any purpose other
than developing, making, having made, using or selling Products in the Tularik
Territory under this Agreement.
4.4 Use of a Party's Own Substances. Notwithstanding anything to the
contrary in Sections 4.2 or 4.3 above, each party shall retain the right to use
freely its own Sumitomo or Tularik Substances, as the case may be, which are not
classified as Lead Compounds.
4.5 Grant by Sumitomo to Tularik. Subject to the terms of this Agreement,
Sumitomo hereby grants Tularik the right and license, with the right to
sublicense, to develop, make, have made, use and sell Products under the
Sumitomo Technology and the Sumitomo-owned and jointly owned Program Technology.
The license granted herein shall be exclusive, even as to Sumitomo, throughout
the Tularik Territory.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6
<PAGE>
Article 5
Ownership; Patents
5.1 Ownership. Tularik acknowledges and agrees that Sumitomo is and shall
remain the sole owner of the Sumitomo Technology and the Sumitomo Substances and
that Tularik has no rights in or to any of them other than the license and
rights specifically granted herein. Sumitomo acknowledges and agrees that
Tularik is and shall remain the sole owner of the Tularik Technology and the
Tularik Substances and that Sumitomo has no rights in or to any of them other
than the rights specifically granted herein and the license to be granted
pursuant to the License Agreement. Each party shall be the sole owner of any
inventions or discoveries made, or materials or information created, solely by
it in the course of the Program, and the other party has no rights in or to any
such inventions, discoveries, materials or information other than those rights
specifically granted to such other party herein or in the License Agreement.
Inventions or discoveries made, and materials and information created, jointly
by the parties in the course of the Program shall be jointly owned.
Inventorship shall be determined in accordance with the U.S. patent laws.
5.2 Patents.
(a) Patent Prosecution.
(1) Tularik Patents and Sumitomo Patents shall be prosecuted and
maintained by Tularik and Sumitomo, respectively, at such party's option and its
own expense.
(2) Each party shall be responsible for filing, prosecuting and
maintaining those Program Patents covering inventions or discoveries made solely
by it throughout the world, shall consult with the other party as to the
selection of countries in which to file applications for such Program Patents in
the other's Territory and shall cooperate with the other as to the prosecution
of Program Patents in its own Territory. Each party shall be responsible for
bearing the cost of filing, prosecution and maintenance of Program Patents in
its own Territory regardless of which party owns the Program Patent. In the
event that any party decides not to proceed with prosecuting an application for
such a Program Patent, or to pay any annuity for such a Program Patent as it
becomes due, such party shall give the other [ * ] notice before any relevant
deadline, and the other party shall have the right to pursue, at its own
expense, prosecution of such patent application or maintenance of such patent.
(3) The Research Committee shall determine a responsible party or
parties for filing, prosecuting and maintaining patent applications for Program
Patents which cover inventions or discoveries jointly made by the parties as it
sees fit, provided that each party shall be responsible for bearing the cost of
application, prosecution and maintenance of such patent application and/or
patent in its own Territory. In the event that any party decides not to proceed
with prosecuting a patent application filed under this Section 5.2(a)(3) or to
pay any annuity for a jointly owned Program Patent as it becomes due in its own
Territory, such party shall give the other [ * ] notice before any relevant
deadline, and the other party shall have the right to pursue, at its own
expense, prosecution of such patent application or maintenance of such patent.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7
<PAGE>
(4) Each party specifically excludes any representation or
warranty, express or implied, that it will successfully obtain any Program
Patent.
(b) Perfection of Interest. Each party agrees to cooperate with the
other and take all reasonable additional actions and execute such agreements,
instruments, and documents as may be reasonably required to perfect the other's
ownership interest in accordance with the intent of this Agreement including,
without limitation, the execution of necessary and appropriate instruments of
assignment.
(c) Patent Marking. Each party shall mark, if necessary, all Products
manufactured, used or sold under the terms of this Agreement, or their
containers, in accordance with the applicable patent marking laws, as required.
5.3 Infringement of Patents by Third Parties. Infringement of Sumitomo
Patents, Tularik Patents or Program Patents by third parties as well
infringement of third party patents by Sumitomo shall be governed by the
provisions of the License Agreement.
Article 6
Publication; Publicity
6.1 Publication. Each party to this Agreement recognizes that the
publication of papers, including oral presentations and abstracts, regarding the
Program Know-How and the Program Patents, subject to reasonable controls to
protect Confidential Information, will be beneficial to both parties.
Accordingly, each party shall have the right to review and approve any paper
proposed for publication by the other party, including oral presentations and
abstracts, which utilizes data generated from the Program and/or includes
Program Know-How or Confidential Information of the other party. Before any
such paper is presented or submitted for publication, the party proposing
publication shall deliver a complete copy to the other party at least [ * ]
prior to presenting the paper to a publisher. The receiving party shall review
any such paper and give its comments to the publishing party within [ * ] of the
delivery of such paper to the receiving party. With respect to oral
presentation materials and abstracts, the parties shall make reasonable efforts
to expedite review of such materials and abstracts, and shall return such items
as soon as practicable to the publishing party with appropriate comments, if
any, but in no event later than [ * ] from the delivery date thereof to the
receiving party. The publishing party shall comply with the other party's
request to delete references to such other party's Confidential Information in
any such paper and agrees to withhold publication of same an additional [ * ] in
order to permit the parties to obtain patent protection, if either of the
parties deem it necessary, in accordance with the terms of this Agreement.
6.2 Publicity. Except as otherwise provided herein or required by law, no
party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, or stockholders'
reports, or otherwise, relating to the existence of or the performance under
this Agreement, without the prior written approval of the other party, which
approval shall not be unreasonably withheld, but in no case shall be withheld
for longer than [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8
<PAGE>
Article 7
Transactions with Third Parties
7.1 Reciprocal Arrangements with Third Parties. In the event that Tularik
enters in an arrangement with a third party outside the Sumitomo Territory to
utilize the Tularik Assays for the identification of compounds for use within
the Field, Tularik:
(i) shall [ * ];
(ii) shall [ * ];
(iii) may [ * ]; and
(iv) will, [ * ].
7.2 Exclusive Collaboration. Sumitomo and Tularik agree that they shall
collaborate on an exclusive basis hereunder within the Field during the term of
this Agreement with respect to the Sumitomo Territory.
Article 8
Representations And Warranties
Each party hereby represents and warrants:
8.1 Corporate Power. Such party is duly organized and validly existing
under the laws of the state or country of its incorporation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof.
8.2 Due Authorization. Such party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
8.3 Binding Agreement. This Agreement is a legal and valid obligation
binding upon it and is enforceable in accordance with its terms. The execution,
delivery and performance of this Agreement by such party does not conflict with
any agreement, instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or regulation of any
court, governmental body or administrative or other agency having authority over
it.
8.4 Intellectual Property. Such party [ * ].
Article 9
Disclaimer Of Warranties
9.1 Tularik Disclaimer. THE TULARIK TECHNOLOGY, INCLUDING THE TULARIK
SUBSTANCES, PROVIDED HEREUNDER IS PROVIDED "AS IS" AND TULARIK EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9
<PAGE>
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES OR ARISING FROM A COURSE OF
DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO. Without
limiting the generality of the foregoing, Tularik expressly does not warrant (i)
the success of any study or test commenced pursuant to the Program, or (ii) the
safety or usefulness for any purpose of Tularik Technology or the Program Know-
How.
9.2 Sumitomo Disclaimer. THE SUMITOMO TECHNOLOGY, INCLUDING THE SUMITOMO
SUBSTANCES, PROVIDED HEREUNDER ARE PROVIDED "AS IS" AND SUMITOMO EXPRESSLY
DISCLAIMS ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES OR ARISING FROM A COURSE OF DEALING, USAGE OR TRADE PRACTICES, IN ALL
CASES WITH RESPECT THERETO. Without limiting the generality of the foregoing,
Sumitomo expressly does not warrant the safety or usefulness for any purpose of
the Sumitomo Technology or the Program Know-How.
Article 10
Indemnification
10.1 Indemnification by Tularik. Subject to Section 10.2 below, Tularik
hereby agrees to indemnify, hold harmless and defend Sumitomo against any and
all expenses, costs or defense (including without limitation attorneys' fees,
witness fees, damages, judgments, fines and amounts paid in settlement) and any
amounts Sumitomo becomes legally obligated to pay because of any claim or claims
against it [ * ].
10.2 Indemnification by Sumitomo. Sumitomo hereby agrees to indemnify,
hold harmless and defend Tularik against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts Tularik becomes legally
obligated to pay because of any claim or claims against it [ * ].
Article 11
Confidentiality
11.1 Confidential Information; Exceptions. During the term of this
Agreement, and for a period of [ * ] after termination thereof, each party will
maintain all Confidential Information in trust and confidence and will not
disclose any Confidential Information to any third party or use any Confidential
Information for any unauthorized purpose; in particular, Sumitomo shall not use
the Tularik Know-How or the Tularik-owned Program Know-How, and Tularik shall
not use the Sumitomo Know-How or the Sumitomo-owned Program Know-How, for the
manufacture or sale of any products other than the Products, except as expressly
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10
<PAGE>
authorized by this Agreement. Each party may use such Confidential Information
only to the extent required to accomplish the purposes of this Agreement or to
the extent required by law, regulation or government or judicial order.
Confidential Information shall not be used for any purpose or in any manner that
would constitute a violation of any laws or regulations, including without
limitation the export control laws of the United States. Confidential
Information shall not be reproduced in any form except as required to accomplish
the intent of this Agreement. No Confidential Information shall be disclosed to
any employee, agent, consultant, Affiliate, or sublicensee who does not have a
need for such information. Each party will use at least the same standard of
care as it uses to protect proprietary or confidential information of its own to
ensure that such employees, agents, consultants and clinical investigators do
not disclose or make any unauthorized use of the Confidential Information. Each
party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.
Confidential Information shall not include any information which:
(a) is now, or hereafter becomes, through no act or failure to act on
the part of the receiving party, generally known or available;
(b) is known by the receiving party at the time of receiving such
information, as evidenced by its records;
(c) is hereafter furnished to the receiving party by a third party, as
a matter of right and without restriction on disclosure;
(d) is independently developed by the receiving party without any
breach of this Agreement; or
(e) is the subject of a written permission to disclose provided by the
disclosing party.
11.2 Financial Terms. The parties agree that the material financial terms
of the Agreement will be considered Confidential Information of both parties.
Notwithstanding the foregoing, either party may disclose such terms to bona fide
potential sublicensees, if necessary. In connection with any such disclosure,
each party agrees to use its best efforts to secure confidential treatment of
such information. Tularik shall have the further right to disclose the material
financial terms of the Agreement to any potential acquiror, merger partner, or
other bona fide potential financial partner, subject to a requirement of best
efforts to secure confidential treatment of such information.
Article 12
Import And Export Controls
12.1 United States Laws. The parties understand and acknowledge that each
of them is subject to regulation by agencies of the U.S. government, including
the U.S. Department of Commerce, which prohibit export, re-export or diversion
of certain products and technology to certain countries. Any and all
obligations of Sumitomo or Tularik to provide access to or license
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11
<PAGE>
any technology pursuant to this Agreement, as well as any technical assistance
shall be subject in all respects to such United States laws and regulations as
shall from time to time govern the license and delivery of technology and
products abroad by persons subject to the jurisdiction of the United States,
including the Export Administration Act of 1979, as amended, any successor or
interim controlling legislation, and the Export Administration Regulations
issued by the Department of Commerce, International Trade Administration, Bureau
of Export Administration. Both parties also agree to comply with the
requirements of the U.S. Foreign Corrupt Practices Act (the "Act") and shall
refrain from making any payments to third parties which would cause Sumitomo or
Tularik to violate the Act.
12.2 Non-United States Laws. Sumitomo and Tularik shall each provide the
other party with such reasonable assistance as may be required for the party
requesting such assistance to comply with all non-United States laws,
ordinances, rules, regulations and the like of all governmental units or
agencies having jurisdiction pertaining to this Agreement, including without
limitation, obtaining all import, export and other permits, certificates,
licenses or the like required by such non-United States laws, ordinances, rules,
regulations and the like, necessary to permit the parties to perform hereunder
and to exercise their respective rights hereunder.
Article 13
Term; Termination
13.1 Term. Except as provided under Section 13.2 below, (a) the term of
this Agreement shall commence upon the Effective Date and shall expire on the
expiration date of the last to expire patent licensed by Sumitomo to Tularik
hereunder and (b) upon expiration of this Agreement, Tularik shall [ * ].
13.2 Termination on Material Breach. If either party materially breaches
the Agreement, including without limitation [ * ], and the breaching party has
not (i) cured the breach or (ii) initiated good faith efforts to cure such
breach to the reasonable satisfaction of the non-breaching party, within [ * ]
of notice of breach from the non-breaching party, the non-breaching party may
terminate this Agreement upon expiration of such [ * ] period.
13.3 Surviving Rights. The obligations and rights of the parties under
Sections 4.2, 4.3, 4.4 and Articles 5, 6 (for the period specified in Section
4.1(b)), 9, 10, 11 (for the period specified therein) and 12 shall survive
termination. Article 7 shall survive termination and shall continue so long as
the License Agreement shall be in effect.
13.4 Accrued Rights; Surviving Obligations. The termination,
relinquishment or expiration of the Agreement for any reason shall be without
prejudice to any rights which shall have accrued to the benefit of either party
prior to such termination, relinquishment or expiration, including any damages
arising from any breach hereunder. Such termination, relinquishment or
expiration shall not relieve either party from obligations which are expressly
indicated to survive termination or expiration of the Agreement.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12
<PAGE>
Article 14
Miscellaneous
14.1 Waiver. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent or similar breach or default.
14.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns;
provided, however, that neither party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidations,
reorganization, or acquisition of stock or assets affecting substantially all of
the assets or actual voting control of the assigning party, or (ii) to an
Affiliate; provided, however, that in no event shall either party's obligations
under the Program be assigned to an Affiliate without prior written consent of
the other party.
14.3 Notices. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or five (5) days after mailing by registered or certified
mail, postage paid, to the other party at the following address:
In the case of Tularik: Tularik Inc.
270 E. Grand Ave.
S. San Francisco, CA 94080
Fax: (415) 615-4222
Attention: President
with a copy to: Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
Palo Alto, CA 94306
Fax: (415) 857-0663
Attention: Brian C. Cunningham, Esq.
In the case of Sumitomo: Sumitomo Pharmaceuticals Co., Ltd..
2-8, Doshomachi 2-chome Chuo-ku
Osaka 541, Japan
Fax: (06) 202-7370
Attention: Corporate Planning Dept.
Either party may change its address for communications by a notice to the other
party in accordance with this section.
14.4 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
14.5 Amendment. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13
<PAGE>
14.6 Construction of Agreement and Choice of Law, Jurisdiction and
Venue.
(a) This Agreement and its terms and conditions shall be
governed exclusively by and construed according to the laws of California,
U.S.A., excluding its choice of law provisions and also excluding the United
Nations Convention on Contracts for the International Sale of Goods. The
official text of the Agreement and any Notices given or accounts or statements
required hereby shall be in English.
(b) All disputes which may arise between the parties hereto in
relation to the interpretation or administration of this Agreement shall be
first referred to the Research Committee for resolution. Any disputes which the
Research Committee shall be unable to resolve with a reasonable period of time
shall be resolved by the agreement of the Chief Executive Officers of the
respective parties or their delegates. Any disputes which cannot be resolved in
this manner shall be finally resolved [ * ].
14.7 Force Majeure. Any delays in performance by any party under this
Agreement (other than either party's failure to pay money to the other party,
unless such failure results solely from wire transfer failures beyond the
control of the paying party, or the like) shall not be considered a breach of
this Agreement if and to the extent caused by occurrences beyond the reasonable
control of the party affected, including but not limited to acts of God,
embargoes, governmental restrictions, strikes or other concerted acts of
workers, fire, flood, explosion, riots, wars, civil disorder, rebellion or
sabotage. The party suffering such occurrence shall immediately notify the
other party as soon as practicable and any time for performance hereunder shall
be extended by the actual time of delay caused by the occurrence.
14.8 Independent Contractors. In making and performing this Agreement,
Sumitomo and Tularik act and shall act at all times as independent contractors
and nothing contained in this Agreement shall be construed or implied to create
an agency, partnership or employer and employee relationship between Tularik and
Sumitomo. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party.
14.9 Severability. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms,
conditions and provisions of this Agreement shall be deemed valid and
enforceable to the full extent.
14.10 Cumulative Rights. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
14.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
14.12 Entire Agreement. This Agreement and any and all Schedules and
Appendices referred to herein embodies the entire understanding of the parties
with respect to the subject
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14
<PAGE>
matter hereof and shall supersede all previous communications, representations
or understandings, either oral or written, between the parties relating to the
subject matter hereof.
In Witness Whereof, both Sumitomo and Tularik have executed this Agreement,
in duplicate originals, by their respective officers hereunto duly authorized,
as of the day and year hereinabove written.
Tularik Inc. Sumitomo Pharmaceuticals Co., Ltd.
By:/s/ James M. Gower By: /s/ I. Shin
------------------------- ------------------------------
Title: President and Title: President
Chief Executive Officer
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15
<PAGE>
Appendix A
RESEARCH PROGRAM
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Appendix B
TULARIK ASSAYS
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Appendix C
LICENSE AGREEMENT
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Appendix C
LICENSE AGREEMENT
between
TULARIK INC.
and
SUMITOMO PHARMACEUTICALS CO., LTD.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article 1
Definitions................................................................................. 1
Article 2
Grant....................................................................................... 2
2.1 Grant by Tularik to Sumitomo.................................................. 2
Article 3
Commercial Terms............................................................................ 3
3.1 Royalties..................................................................... 3
3.2 Royalty Term.................................................................. 3
3.3 Due Diligence................................................................. 4
3.4 Obligation to Inform.......................................................... 4
3.5 Manner and Time of Royalty Payments........................................... 4
3.6 Date and Place of Sale........................................................ 4
3.7 Further Development Activities................................................ 4
Article 4
Payments; Records; Audit.................................................................... 5
4.1 Payment; Reports.............................................................. 5
4.2 Exchange Rate; Manner and Place of Payment.................................... 5
4.3 Records and Audit............................................................. 5
4.4 Withholding of Taxes.......................................................... 5
Article 5
Ownership; Patents.......................................................................... 6
5.1 Ownership..................................................................... 6
5.2 Patents....................................................................... 6
5.3 Infringement of Patents by Third Parties...................................... 6
5.4 Infringement of Third Party Rights............................................ 7
Article 6
Publication; Publicity...................................................................... 8
6.1 Publication................................................................... 8
6.2 Publicity..................................................................... 8
Article 7
Representations And Warranties.............................................................. 8
7.1 Corporate Power............................................................... 8
7.2 Due Authorization............................................................. 8
7.3 Binding Agreement............................................................. 9
7.4 Intellectual Property......................................................... 9
Article 8
Disclaimer Of Warranties.................................................................... 9
8.1 Tularik Disclaimer............................................................ 9
Article 9
Indemnification............................................................................ 9
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
i
<PAGE>
<TABLE>
<S> <C>
9.1 Indemnification by Tularik............................................ 9
9.2 Indemnification by Sumitomo........................................... 9
Article 10
Confidentiality....................................................................... 10
10.1 Confidential Information; Exceptions.................................. 10
10.2 Financial Terms....................................................... 11
Article 11
Import And Export Controls............................................................ 11
11.1 United States Laws.................................................... 11
11.2 Non-United States Laws................................................ 11
Article 12
Term; Termination..................................................................... 11
12.1 Term.................................................................. 11
12.2 Termination on Material Breach........................................ 12
12.3 Surviving Rights...................................................... 12
12.4 Accrued Rights; Surviving Obligations................................. 12
Article 13
Miscellaneous......................................................................... 12
13.1 Waiver................................................................ 12
13.2 Assignment............................................................ 12
13.3 Notices............................................................... 12
13.4 Headings.............................................................. 13
13.5 Amendment............................................................. 13
13.6 Construction of Agreement and Choice of Law, Jurisdiction and Venue... 13
13.7 Force Majeure......................................................... 14
13.8 Independent Contractors............................................... 14
13.9 Severability.......................................................... 14
13.10 Cumulative Rights..................................................... 14
13.11 Counterparts.......................................................... 14
13.12 Entire Agreement...................................................... 14
Appendix A: Preclinical Candidates
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
ii
<PAGE>
LICENSE AGREEMENT
This Agreement is entered into as of the _____ day of _________, 1994 (the
"Effective Date") by and between Tularik Inc., a California corporation
("Tularik"), and Sumitomo Pharmaceuticals Co., Ltd. ("Sumitomo"), a corporation
organized under the laws of Japan.
Recitals
Whereas, Sumitomo and Tularik have entered into a Collaboration Agreement
dated as of __________, 1994 (the "Collaboration Agreement"); and
Whereas, the parties wish to develop and market novel therapeutic products
based on compounds identified pursuant to the Collaboration Agreement;
Now, Therefore, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
Article 1
Definitions
As used herein, the following terms shall have the following meanings:
"Affiliate" shall mean any entity that directly or indirectly Owns, is
Owned by or is under common Ownership, with a party to this Agreement, where
"Own" or "Ownership" means direct or indirect possession of at least fifty
percent (50%) of the outstanding voting securities of a corporation or a
comparable equity interest in any other type of entity.
"Agreement" shall mean this License Agreement.
"Confidential Information" shall mean, subject to the limitations set forth
in Section 11 hereof, all information disclosed to one party by the other party.
"FDA" shall mean the United States Food and Drug Administration.
"Field" shall mean therapeutic treatment of human disease [ * ].
"Low Density Lipoprotein Receptor" ("LDL-R") shall mean that sequence of
amino acids commonly characterized as Low Density Lipoprotein Receptor in the
scientific literature published as of the Effective Date.
"Net Sales" shall mean, with respect to a Product, and on a country-by-
country basis, the gross invoice price of all quantities of such Product sold by
a party, its Affiliates or sublicensees to an independent third party after
deducting, if not already deducted in the amount invoiced (a) trade, quantity
and cash discounts actually taken, (b) returns, rebates and allowances, (c)
duties, sales and excise taxes and (d) transportation and insurance charges.
With respect to sales of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
1.
<PAGE>
combination products, which shall consist of Products combined with one or more
additional active ingredients, the parties will agree on a method of allocation
in the event the situation arises. Sales among Sumitomo and its Affiliates or
sublicensees shall not be deemed Net Sales; provided, however, that any sales by
Sumitomo, its Affiliates or sublicensees to independent third parties shall be
deemed Net Sales.
"Preclinical Candidate" shall have the meaning given it in the
Collaboration Agreement.
"Product" shall mean any pharmaceutical product, including all
formulations, line extensions or modes of administration thereof, for use within
the Field, which contains an active ingredient which is or is derived from a
Preclinical Candidate listed in Appendix A to this Agreement.
"Sumitomo Territory" shall mean Japan, [ * ].
Each of the following terms shall have the meaning given it, respectively,
in the Collaboration Agreement:
"Program", "Program Compounds", "Program Know-How", "Program Patents",
"Program Technology", "Research Committee", "Research Term", "Sumitomo Know-
How", "Sumitomo Patents", "Sumitomo Substances", "Sumitomo Technology", "Tularik
Assays", "Tularik Know-How", "Tularik Patents", "Tularik Substances", and
"Tularik Technology".
Article 2
Grant
2.1 Grant by Tularik to Sumitomo.
(a) Subject to the terms of this Agreement, Tularik hereby grants
Sumitomo the right and license, with the right to sublicense, to develop
Preclinical Candidates and to make, have made, use and sell Products under the
Tularik Technology and the Tularik-owned and jointly owned Program Technology.
The license granted herein shall be exclusive, even as to Tularik, throughout
the Sumitomo Territory.
(b) Sumitomo may [ * ] and Tularik shall cooperate reasonably with
Sumitomo in [ * ].
(c) Appendix A hereto shall list the Preclinical Candidates and the
patents and patent applications included in the Tularik Technology and the
Tularik-owned and jointly owned Program Technology licensed hereunder.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
<PAGE>
Article 3
Commercial Terms
3.1 Royalties.
(a) Royalty Payments. Sumitomo shall pay to Tularik a royalty of
[ * ] percent [ * ] on Net Sales [ * ].
(b) Third-Party Royalty Credit. In the event that Sumitomo is
required to make payments (including, without limitation, royalties, option fees
or license fees) to one or more third parties to obtain licenses or similar
rights to patent-protected technology necessary to make, use or sell a Product,
by reason of Sumitomo's use of Tularik Technology in such manufacture, use or
sale, Sumitomo may deduct [ * ] percent [ * ] of such payments actually made
from royalties payable to Tularik under this Section with respect to such
Product; provided, however, that in no event shall the royalties due to Tularik
be reduced by more than [ * ] percent [ * ] of the amount of royalties otherwise
owed in any given [ * ] period. Unused royalty credits may be carried over from
one royalty period to the next, subject to the latter [ * ] percent [ * ]
limitation set forth above.
3.2 Royalty Term.
(a) Non-Patented Products. In any country where the manufacture, use
or sale of a Product is not covered by a Program Patent or Tularik Patent,
royalties shall be payable in such country until the expiration of [ * ] from
the date of first commercial sale of such Product in such country.
(b) Patented Products. In any country where the manufacture, use or
sale of a Product is covered by a Program Patent or Tularik Patent, royalties
shall be payable in such country until the later of (i) [ * ] from the first
commercial sale of such Product in such country and (ii) the expiration of the
last to expire of such Program Patent or Tularik Patent.
3.3 Due Diligence. Sumitomo shall devote the same degree of attention,
resources and diligence to its respective obligations under the Program and its
efforts to develop, manufacture, market and sell one Product in the Sumitomo
Territory as it devotes to other compounds of its own development.
3.4 Obligation to Inform. Each party hereby agrees to keep the other
party fully informed on a reasonable basis of the development of all Preclinical
Candidates and Products, including but not limited to periodic written updates
on the progress of each filing with the FDA or its equivalent in its respective
territories.
3.5 Manner and Time of Royalty Payments. All royalty payments due
hereunder shall be made in accordance with the provisions of Article 4 hereof.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3.
<PAGE>
3.6 Date and Place of Sale. Products shall be considered sold when
invoiced by Sumitomo. The obligation to pay royalties on Net Sales of a Product
shall be imposed only once with respect to the same unit of such Product.
3.7 Further Development Activities.
(a) The parties will discuss from time to time as necessary
allocation of responsibility, including costs, for conducting preclinical
development of the Product, including the following tasks:
(i) [ * ]
(ii) [ * ]
(iii) [ * ]
(iv) [ * ]
(v) [ * ]
(vi) [ * ]
(b) Sumitomo shall be responsible for conducting or having conducted
clinical trials in the Sumitomo Territory.
Article 4
Payments; Records; Audit
4.1 Payment; Reports. All amounts payable to Tularik under this Agreement
shall be paid in U.S. Dollars within [ * ] of the end of each [ * ]. Each
payment of royalties shall be accompanied by a statement of the amount of Net
Sales during such period, the amount of aggregate Net Sales to date as of the
end of such period where necessary in determination of royalty rates, and the
amount of royalties due on such sales. Tularik hereby agrees that [ * ].
4.2 Exchange Rate; Manner and Place of Payment. Royalty payments and
reports for the sale of Products shall be made for each [ * ] period ending on
the last day of [ * ]. Exchange conversion for foreign sales into U.S. Dollars
shall be made as necessary at the rate of exchange on the last business day of
the relevant royalty period, established by the [ * ]. All payments owed under
this Agreement shall be made by telegraphic transfer.
4.3 Records and Audit. During the term of this Agreement and for a period
of [ * ] thereafter, Sumitomo shall keep complete and accurate records
pertaining to the sale or other disposition of the Products commercialized by
it, in sufficient detail to permit Tularik to confirm the accuracy of all
payments due hereunder. Tularik shall have the right to cause an independent,
certified public accountant to audit such records to confirm Sumitomo's Net
Sales and royalty payments; provided, however, that such auditor shall not
disclose Sumitomo's confidential information to Tularik, except to the extent
such disclosure is necessary to verify the amount of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4.
<PAGE>
royalties due under this Agreement. Such audits may be exercised once a year,
within [ * ] after the royalty period to which such records relate, upon notice
to Sumitomo and during normal business hours. Tularik shall bear the full cost
of such audit unless such audit discloses a variance of more than [ * ] from the
amount of the Net Sales or royalties previously paid. In such case, Sumitomo
shall bear the full cost of such audit. The terms of this Section 4.3 shall
survive any termination or expiration of this Agreement for a period of [ * ].
4.4 Withholding of Taxes. Any withholding of taxes levied by Japanese tax
authorities on the payments hereunder shall [ * ].
Article 5
Ownership; Patents
5.1 Ownership. Sumitomo acknowledges and agrees that Tularik is and shall
remain the sole owner of the Tularik Technology and the Tularik Substances and
that Sumitomo has no rights in or to any of them other than the license rights
specifically granted herein.
5.2 Patents. Provision is made in the Collaboration Agreement for the
filing, prosecution and maintenance of Program Patents and such matters shall be
governed thereby.
5.3 Infringement of Patents by Third Parties.
(a) Notice. Each party shall promptly notify the other in writing of
any alleged or threatened infringement of the Tularik Patents, the Sumitomo
Patents, or the Program Patents which may adversely impact the rights of the
parties hereunder, of which it becomes aware.
(b) Separately Owned Patents. Tularik shall have the right, but not
the obligation, to bring at its expense an appropriate action against any person
or entity directly or contributorily infringing a Tularik Patent or a Program
Patent owned solely by Tularik in the Sumitomo Territory. In such event,
Sumitomo hereby agrees to cooperate reasonably with Tularik in any such efforts.
Any recovery obtained by Tularik as a result of such action, whether obtained by
settlement or otherwise, shall be disbursed as follows: [ * ]. No settlement,
compromise or other disposition of any such action which compromises Sumitomo's
rights under this Agreement shall be entered into without Sumitomo's prior
consent, which shall not be unreasonably withheld. In the event Tularik fails
to institute an infringement suit or take other reasonable action in the
Territory to protect such relevant Tularik Patent or Program Patent owned solely
by Tularik, Sumitomo shall have the right, but not the obligation, within [ * ]
of notification to Tularik of such alleged infringement, to institute such suit
or take other appropriate action at its own expense in the name of Tularik or
Sumitomo, or both. [ * ]. In such event, Tularik shall cooperate reasonably
with Sumitomo. Any recovery obtained by Sumitomo as a result of such
proceeding, by settlement or otherwise, shall be disbursed as follows: [ * ].
No settlement, compromise or other disposition of any such proceeding which
concerns the validity of any Patent or Program Patent shall be entered into
without the Patent or Program Patent owner's prior consent, which shall not be
unreasonably withheld.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5.
<PAGE>
(c) Jointly Owned Patents. In the event that the parties become aware
of any alleged or threatened infringement of the jointly owned Program Patents
in either party's Territory, the party in whose Territory the infringement is
occurring shall have the right to bring, at such party's expense, an appropriate
action against any person or entity directly or contributorily infringing such
jointly owned Program Patent. In such event, the other party hereby agrees to
cooperate reasonably with the party bringing such action in any such efforts,
including if required to bring such action, the furnishing of a power of
attorney. In the event the party in whose Territory the infringement is
occurring fails to institute an infringement suit or take other reasonable
action to protect the relevant Program Patent, the other party shall have the
right, upon [ * ] of notification of the party in whose Territory the
infringement is occurring, to institute such suit or take other appropriate
action at its own expense in its own name, the joint owner's name, or both. In
such event, the party not bringing such action hereby agrees to cooperate
reasonably with the party bringing such action in any such effort, including if
required to bring such action, the furnishing of a power of attorney.
Regardless of which party brings the action, any recovery obtained by settlement
or otherwise shall be disbursed as follows: [ * ].
5.4 Infringement of Third Party Rights.
(a) Joint Strategy. In the event that any Product manufactured or
sold hereunder becomes the subject of a claim for patent, copyright or other
proprietary right infringement anywhere in the world, and irrespective of
whether Sumitomo or Tularik is charged with said infringement, and the venue of
such claim, the parties shall promptly confer to discuss the claim.
(b) Defense. The party responsible for marketing the Product which is
the subject of the infringement claim shall have the right, but not the
obligation, to assume the primary responsibility for the conduct of the defense
of any such claim. If the party responsible for marketing the Product decides
not to assume responsibility for the conduct of the defense, the other party
shall have the right, but not the obligation, to conduct the defense of the
claim. The party which decides to assume responsibility for such defense shall
bear all costs for the conduct thereof. In such event, the other party shall
have the right, but not the obligation, to participate in any such suit, at its
sole option and at its own expense. Each party shall reasonably cooperate with
the party conducting the defense of the claim, including if required to conduct
such defense, furnishing a power of attorney. Neither party shall enter into
any settlement that affects the other party's rights or interests without such
other party's written consent, which consent shall not be unreasonably withheld.
Article 6
Publication; Publicity
6.1 Publication. Each party to this Agreement recognizes that the
publication of papers, including oral presentations and abstracts, regarding the
Program Know-How and the Program Patents, subject to reasonable controls to
protect Confidential Information, will be beneficial to both parties.
Accordingly, each party shall have the right to review and approve any paper
proposed for publication by the other party, including oral presentations and
abstracts, which utilizes data generated from the Program and/or includes
Program Know-How or
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6.
<PAGE>
Confidential Information of the other party. Before any such paper is presented
or submitted for publication, the party proposing publication shall deliver a
complete copy to the other party at least [ * ] prior to presenting the paper to
a publisher. The receiving party shall review any such paper and give its
comments to the publishing party within [ * ] of the delivery of such paper to
the receiving party. With respect to oral presentation materials and abstracts,
the parties shall make reasonable efforts to expedite review of such materials
and abstracts, and shall return such items as soon as practicable to the
publishing party with appropriate comments, if any, but in no event later than
[ * ] from the delivery date thereof to the receiving party. The publishing
party shall comply with the other party's request to delete references to such
other party's Confidential Information in any such paper and agrees to withhold
publication of same an additional [ * ] in order to permit the parties to obtain
patent protection, if either of the parties deem it necessary, in accordance
with the terms of this Agreement.
6.2 Publicity. Except as otherwise provided herein or required by law, no
party shall originate any publication, news release or other public
announcement, written or oral, whether in the public press, or stockholders'
reports, or otherwise, relating to the existence of or the performance under
this Agreement, without the prior written approval of the other party, which
approval shall not be unreasonably withheld, but in no case shall be withheld
for longer than fifteen (15) days.
Article 7
Representations And Warranties
Each party hereby represents and warrants:
7.1 Corporate Power. Such party is duly organized and validly existing
under the laws of the state or country of its incorporation and has full
corporate power and authority to enter into this Agreement and to carry out the
provisions hereof.
7.2 Due Authorization. Such party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
7.3 Binding Agreement. This Agreement is a legal and valid obligation
binding upon it and is enforceable in accordance with its terms. The execution,
delivery and performance of this Agreement by such party does not conflict with
any agreement, instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor violate any law or regulation of any
court, governmental body or administrative or other agency having authority over
it.
7.4 Intellectual Property. Such party [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7.
<PAGE>
Article 8
Disclaimer Of Warranties
8.1 Tularik Disclaimer. THE TULARIK TECHNOLOGY LICENSED HEREUNDER IS
PROVIDED "AS IS" AND TULARIK EXPRESSLY DISCLAIMS ANY AND ALL WARRANTIES OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES OR ARISING FROM A COURSE OF
DEALING, USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.
Article 9
Indemnification
9.1 Indemnification by Tularik. Subject to Section 9.2 below, Tularik
hereby agrees to indemnify, hold harmless and defend Sumitomo against any and
all expenses, costs or defense (including without limitation attorneys' fees,
witness fees, damages, judgments, fines and amounts paid in settlement) and any
amounts Sumitomo becomes legally obligated to pay because of any claim or claims
against it to the extent that such claim or claims (i) [ * ].
9.2 Indemnification by Sumitomo. Sumitomo hereby agrees to indemnify,
hold harmless and defend Tularik against any and all expenses, costs of defense
(including without limitation attorneys' fees, witness fees, damages, judgments,
fines and amounts paid in settlement) and any amounts Tularik becomes legally
obligated to pay because of any claim or claims against it to the extent that
such claim or claims (i) are [ * ].
Article 10
Confidentiality
10.1 Confidential Information; Exceptions. During the term of this
Agreement, and for a period of [ * ] after termination thereof, each party will
maintain all Confidential Information in trust and confidence and will not
disclose any Confidential Information to any third party or use any Confidential
Information for any unauthorized purpose; in particular, Sumitomo shall not use
the Tularik Know-How or the Tularik-owned Program Know-How, and Tularik shall
not use the Sumitomo Know-How or the Sumitomo-owned Program Know-How, for the
manufacture or sale of any products other than the Products, except as expressly
authorized by this Agreement. Each party may use such Confidential Information
only to the extent required to accomplish the purposes of this Agreement or to
the extent required by law, regulation or government or judicial order.
Confidential Information shall not be used for any purpose or in any manner that
would constitute a violation of any laws or regulations, including without
limitation the export control laws of the United States. Confidential
Information shall not be reproduced in any form except as required to accomplish
the intent of this Agreement. No Confidential Information shall be disclosed to
any employee, agent, consultant, Affiliate, or sublicensee who does not have a
need for such information. Each party will use at least the same standard of
care as it uses to protect proprietary or confidential information of its own to
ensure
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8.
<PAGE>
that such employees, agents, consultants and clinical investigators do
not disclose or make any unauthorized use of the Confidential Information. Each
party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.
Confidential Information shall not include any information which:
(a) is now, or hereafter becomes, through no act or failure to act on
the part of the receiving party, generally known or available;
(b) is known by the receiving party at the time of receiving such
information, as evidenced by its records;
(c) is hereafter furnished to the receiving party by a third party, as
a matter of right and without restriction on disclosure;
(d) is independently developed by the receiving party without any
breach of this Agreement; or
(e) is the subject of a written permission to disclose provided by the
disclosing party.
10.2 Financial Terms. The parties agree that the material financial terms
of this Agreement will be considered Confidential Information of both parties.
Notwithstanding the foregoing, either party may disclose such terms to bona fide
potential sublicensees, if necessary. In connection with any such disclosure,
each party agrees to use its best efforts to secure confidential treatment of
such information. Each party shall have the further right to disclose the
material financial terms of the Agreement to any potential acquiror, merger
partner, or other bona fide potential financial partner, subject to a
requirement of best efforts to secure confidential treatment of such
information.
Article 11
Import And Export Controls
11.1 United States Laws. The parties understand and acknowledge that each
of them is subject to regulation by agencies of the U.S. government, including
the U.S. Department of Commerce, which prohibit export, re-export or diversion
of certain products and technology to certain countries. Any and all
obligations of Sumitomo or Tularik to provide access to or license any
technology pursuant to this Agreement, as well as any technical assistance shall
be subject in all respects to such United States laws and regulations as shall
from time to time govern the license and delivery of technology and products
abroad by persons subject to the jurisdiction of the United States, including
the Export Administration Act of 1979, as amended, any successor or interim
controlling legislation, and the Export Administration Regulations issued by the
Department of Commerce, International Trade Administration, Bureau of Export
Administration. Both parties also agree to comply with the requirements of the
U.S. Foreign Corrupt Practices Act (the "Act") and shall refrain from making any
payments to third parties which would cause Sumitomo or Tularik to violate the
Act.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9.
<PAGE>
11.2 Non-United States Laws. Sumitomo and Tularik shall each provide the
other party with such reasonable assistance as may be required for the party
requesting such assistance to comply with all non-United States laws,
ordinances, rules, regulations and the like of all governmental units or
agencies having jurisdiction pertaining to this Agreement, including without
limitation, obtaining all import, export and other permits, certificates,
licenses or the like required by such non-United States laws, ordinances, rules,
regulations and the like, necessary to permit the parties to perform hereunder
and to exercise their respective rights hereunder.
Article 12
Term; Termination
12.1 Term. Except as provided under Section 12.2 below, (a) the term of
this Agreement shall commence upon the Effective Date and shall expire on the
expiration date of the last to expire royalty obligation, and (b) upon
expiration of this Agreement, Sumitomo shall have a fully paid, nonexclusive
license to use any Program Know-How then being used by Sumitomo and which is
owned by Tularik, for any purpose; provided, however, that [ * ].
12.2 Termination on Material Breach. If either party materially breaches
the Agreement, including without limitation [ * ], and the breaching party has
not (i) cured the breach or (ii) initiated good faith efforts to cure such
breach to the reasonable satisfaction of the non-breaching party, within [ * ]
of notice of breach from the non-breaching party, the non-breaching party may
terminate this Agreement upon expiration of such [ * ] period.
12.3 Surviving Rights. The obligations and rights of the parties under
Sections 4.3, 4.4 and 5.1 and Articles 6, 8, 9, 10 (for the period specified
therein) and 11 shall survive termination.
12.4 Accrued Rights; Surviving Obligations. The termination,
relinquishment or expiration of the Agreement for any reason shall be without
prejudice to any rights which shall have accrued to the benefit of either party
prior to such termination, relinquishment or expiration, including any damages
arising from any breach hereunder. Such termination, relinquishment or
expiration shall not relieve either party from obligations which are expressly
indicated to survive termination or expiration of the Agreement.
Article 13
Miscellaneous
13.1 Waiver. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent or similar breach or default.
13.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns;
provided, however, that neither party shall assign any of its rights and
obligations hereunder except (i) as incident to the merger, consolidations,
reorganization, or acquisition of stock or assets affecting substantially all of
the assets or actual voting control of the assigning party, or (ii) to an
Affiliate; provided, however,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10.
<PAGE>
that in no event shall either party's obligations under the Program be assigned
to an Affiliate without prior written consent of the other party.
13.3 Notices. Any notice or other communication required or permitted to
be given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or five (5) days after mailing by registered or certified
mail, postage paid, to the other party at the following address:
In the case of Tularik: Tularik Inc.
270 E. Grand Ave.
S. San Francisco, CA 94080
Fax: (415) 615-4222
Attention: President
with a copy to: Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square
Palo Alto, CA 94306
Fax: (415) 857-0663
Attention: Brian C. Cunningham, Esq.
In the case of Sumitomo: Sumitomo Pharmaceuticals Co., Ltd..
2-8, Doshomachi 2-chome Chuo-ku
Osaka 541, Japan
Fax: (06) 202-7370
Attention: Corporate Planning Dept.
Either party may change its address for communications by a notice to the other
party in accordance with this section.
13.4 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
13.5 Amendment. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
13.6 Construction of Agreement and Choice of Law, Jurisdiction and Venue.
(a) This Agreement and its terms and conditions shall be governed
exclusively by and construed according to the laws of California, U.S.A.,
excluding its choice of law provisions and also excluding the United Nations
Convention on Contracts for the International Sale of Goods. The official text
of the Agreement and any Notices given or accounts or statements required hereby
shall be in English.
(b) All disputes which may arise between the parties hereto in
relation to the interpretation or administration of this Agreement shall be
first referred to the Research Committee for resolution. Any disputes which the
Research Committee shall be unable to
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11.
<PAGE>
resolve with a reasonable period of time shall be resolved by the agreement of
the Chief Executive Officers of the respective parties or their delegates. Any
disputes which cannot be resolved in this manner shall be finally resolved [ *
].
13.7 Force Majeure. Any delays in performance by any party under this
Agreement (other than either party's failure to pay money to the other party,
unless such failure results solely from wire transfer failures beyond the
control of the paying party, or the like) shall not be considered a breach of
this Agreement if and to the extent caused by occurrences beyond the reasonable
control of the party affected, including but not limited to acts of God,
embargoes, governmental restrictions, strikes or other concerted acts of
workers, fire, flood, explosion, riots, wars, civil disorder, rebellion or
sabotage. The party suffering such occurrence shall immediately notify the
other party as soon as practicable and any time for performance hereunder shall
be extended by the actual time of delay caused by the occurrence.
13.8 Independent Contractors. In making and performing this Agreement,
Sumitomo and Tularik act and shall act at all times as independent contractors
and nothing contained in this Agreement shall be construed or implied to create
an agency, partnership or employer and employee relationship between Tularik and
Sumitomo. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party.
13.9 Severability. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms,
conditions and provisions of this Agreement shall be deemed valid and
enforceable to the full extent.
13.10 Cumulative Rights. The rights, powers and remedies hereunder shall
be in addition to, and not in limitation of, all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
13.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
13.12 Entire Agreement. This Agreement and any and all Schedules and
Appendices referred to herein embodies the entire understanding of the parties
with respect to the subject matter hereof and shall supersede all previous
communications, representations or understandings, either oral or written,
between the parties relating to the subject matter hereof.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12.
<PAGE>
In Witness Whereof, both Sumitomo and Tularik have executed this Agreement,
in duplicate originals, by their respective officers hereunto duly authorized,
as of the day and year hereinabove written.
Tularik Inc. Sumitomo Pharmaceuticals Co., Ltd.
By:________________________________ By:_________________________________
Title: President and Title: President
Chief Executive Officer
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13.
<PAGE>
Appendix A
PRECLINICAL CANDIDATE
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.7
AMENDMENT NO. 2 TO RESEARCH, COLLABORATION
AND LICENSE/DEVELOPMENT AGREEMENT
BETWEEN TULARIK INC. AND
TAISHO PHARMACEUTICAL CO., LTD.
THIS AMENDMENT NO. 2 (this "Amendment") to the Research, Collaboration and
License/Development Agreement dated as of March 20, 1996 (the "Collaboration
Agreement") by and between Tularik Inc., a Delaware corporation with its
principal office at Two Corporate Drive, South San Francisco, California 94080
(herein, together with its successors and assigns, "Tularik"), and Taisho
Pharmaceutical Co., Ltd., a Japanese corporation with its principal office at
24-1, Takata 3-chome, Toshima-ku, Tokyo 171-8633, Japan (herein, "Taisho"), is
entered into as of January 1, 1999;
W I T N E S S E T H:
WHEREAS, the parties previously entered into the Collaboration Agreement
which, inter alia, (i) established a cooperative research and development
----- ----
relationship in order to discover, develop and market novel products whose
action is based upon the regulation of Signal Transducers and Activators of
Transcription ("STATs") involved in [ * ] functions; and (ii) set forth the
terms of licenses to products that resulted from such cooperative research and
development relationship;
WHEREAS, Tularik and Taisho desire to add and include their cooperative
research relationship to develop and market novel therapeutic products whose
action is based upon the regulation of STATs involved in [ * ] function, as
well;
WHEREAS, in order to accomplish the foregoing, the parties have agreed to
amend the Collaboration Agreement in part;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements expressed herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound, Tularik and Taisho agree as follows:
1. Section 1.3 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
"Compound" shall mean (i) a substance which is identified by Tularik or Taisho
during the term of the Research Program as either inhibiting or promoting the
activity of STATs activated by [ * ]; and (ii) any such substance identified by
Tularik within [ * ] after the end of the Research Program if [ * ].
<PAGE>
2. Section 2.1 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
The parties agree to conduct a collaborative Research Program for identification
and development of Compounds intended for use as Drug Candidates, to be
conducted by both parties under the direction of the Research Committee. The
Research Program shall consist primarily of [ * ] to identify specific Compounds
with promising activity for regulation of STAT proteins activated by [ * ] using
Tularik Assays and other technology available to the parties and (ii) each party
endeavoring to work together to fulfill their respective obligations under
Section 2.4 below to develop Compounds through application of medicinal
chemistry and preclinical testing for commercialization of Products. For any
given year of the Research Program, the Research Program will be conducted in
accordance with an annual research plan to be approved by the parties no later
than [ * ] prior to the start of such year, upon recommendation of the Research
Committee pursuant to Section 2.2(c)(1). The initial Annual Research Plan, for
the year commencing on the Effective Date and ending on the day before the first
anniversary of the Effective Date, is attached hereto as Exhibit C. Each Annual
Research Plan may be revised by mutual consent of the parties from time to time.
3. Section 2.5 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
Program Funding. To support Tularik's activities in the Research Program, Taisho
has paid Tularik [ * ] and agrees to pay Tularik, [ * ].
4. Section 2.6 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
Termination of Research Program. Upon not later than [ * ] prior notice Taisho
may terminate the Research Program at the end of the fifth (5th) year of the
Research Program if it shall be dissatisfied, in its sole judgment, with the
progress or results of the Research Program. The Research Committee may
terminate the Research Program any time if it determines the Research Program is
no longer scientifically useful. In case of such an early termination by Taisho
or the Research Committee, Taisho shall be exempt from any payment(s) that would
have become due and payable after such early termination date.
5. Section 2.8 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
During the conduct of the Research Program, Taisho and Tularik agree that they
shall collaborate on an exclusive basis hereunder with respect to the
identification, using the Tularik Assays, of Compounds for use in the Field in
the Taisho Territory. This Section 2.8 shall not restrict either party's rights
to [ * ].
6. Section 3.9 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
(a) Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:
[ * ].
(b) Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:
[ * ]
7. Exhibit B to the Collaboration Agreement is hereby amended to read in
its entirety as follows:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
8. Capitalized terms used herein but not otherwise defined herein shall
have the respective meanings assigned to such terms in the Collaboration
Agreement.
9. Except as expressly modified by this Amendment, all of the terms and
conditions of the Collaboration Agreement and Amendment No. 1 to the
Collaboration Agreement shall remain in full force and effect.
10. This Amendment may be executed in two counterparts, each of which
shall be deemed an original but all of which shall be considered one and the
same instrument.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed, or caused their duly
authorized officer or representative to execute, this Amendment as of the day
and year first above written.
TULARIK INC.
By: /s/ David V. Goeddel
------------------------------------
Name: David V. Goeddel
Title: Chief Executive Officer
TAISHO PHARMACEUTICAL CO., LTD.
By: /s/ Kunihiro Kitamura
------------------------------------
Name: Kunihiro Kitamura, Ph.D.
Title: General Manager
Research Strategy and Planning Section
Medicinal Research Group
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
AMENDMENT NO. 1 TO RESEARCH, COLLABORATION
------------------------------------------
AND LICENSE/DEVELOPMENT AGREEMENT
---------------------------------
BETWEEN TULARIK INC. AND
------------------------
TAISHO PHARMACEUTICAL CO., LTD.
-------------------------------
THIS AMENDMENT NO. 1 (this "Amendment") to the Research, Collaboration
and License/Development Agreement dated as of March 20, 1996 (the "Collaboration
Agreement") by and between Tularik Inc., a Delaware corporation with its
principal office at Two Corporate Drive, South San Francisco, California 94080
(herein, together with its successors and assigns, "Tularik"), and Taisho
Pharmaceutical Co., Ltd., a Japanese corporation with its principal office at
24-1, Takata 3-chome, Toshima-ku, Tokyo 171-0033, Japan (herein, "Taisho"), is
entered into as of January 1, 1998;
W I T N E S S E T H:
WHEREAS, the parties previously entered into the Collaboration Agreement which,
inter alia, (i) established a cooperative research and development relationship
- ----- ----
in order to discover, develop and market novel products whose action is based
upon the regulation of Signal Transducers and Activators of Transcription
("STATs") involved in [ * ]; and (ii) set forth the terms of licenses to
products that resulted from such cooperative research and development
relationship;
WHEREAS, Tularik and Taisho desire to continue their cooperative
research relationship to develop and market novel therapeutic products based on
compounds identified during such research as having immune regulatory
properties;
WHEREAS, in order to accomplish the foregoing, the parties have agreed to amend
the Collaboration Agreement in part;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements expressed herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound, Tularik and Taisho agree as follows:
1. Section 1.3 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
"Compound" shall mean (i) a substance which is identified by Tularik or Taisho
during the term of the Research Program as either inhibiting or promoting the
activity of STATs activated by [ * ] and (ii) any such substance identified by
Tularik within [ * ] after the end of the Research Program [ * ]
2. Section 1.11 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
"Program Know-How" shall mean all tangible or intangible know-how, trade
secrets, inventions (whether or not patentable), data, clinical and preclinical
results, information, and any physical, chemical or biological material,
including cell lines, any replication or any part of such material, all
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
1
<PAGE>
of which is in any way derived from or developed pursuant to activities during
the course of the Research Program. Program Know-How shall not include any
know-how, trade secrets, invention, data, information or material first
developed, reduced to practice or discovered, each after any termination of the
Research Program prior to the completion of the full six (6) year term.
3. Section 1.14 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
"Research Program" shall mean the collaborative program of six (6) years, which
consists of six one (1)-year periods, of research relating to the discovery and
development of one or more Compounds, as such program is defined on Exhibit A
and as the same may be further defined, revised and implemented, from time to
time, by the parties on the recommendation of the Research Committee, and as
further described in Article 2.
4. Section 2.5 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
Program Funding. To support Tularik's activities in the Research Program, Taisho
has paid Tularik [ * ] and agrees to pay Tularik, [ * ].
5. Section 2.6 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
Termination of Research Program. Upon not later than [ * ] prior notice Taisho
may terminate the Research Program at the end of the fourth (4/th/) or the fifth
(5/th/) year of the Research Program if it shall be dissatisfied, in its sole
judgment, with the progress or results of the Research Program. The Research
Committee may terminate the Research Program any time if it determines the
Research Program is no longer scientifically useful. In case of such an early
termination by Taisho or the Research Committee, Taisho shall be exempt from any
payment(s) that would have become due and payable after such early termination
date.
6. Section 7.1 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
Term. This Agreement shall expire on the later of (i) the expiration date of the
last to expire patent licensed from Taisho to Tularik pursuant to Section 3.3(a)
and (ii) the expiration date of the last to expire royalty obligation contained
herein. Notwithstanding the foregoing, if the Research Program is terminated
prior to the completion of its full six (6) year term, this Agreement shall
terminate upon the date on which the Research Program is terminated.
7. Section 7.2 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
Extensions. The parties may extend the term of this Agreement or of the Research
Program on the written agreement of the parties. If the Research Program expires
after the full six (6) year term thereof, Taisho and Tularik shall mutually
determine whether this Agreement should survive or
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
terminate following such expiration based upon an evaluation of the promise of
Compounds identified during such term.
8. Section 12.3 of the Collaboration Agreement is hereby amended to read
in its entirety as follows:
Notices. Any notice or other communication required or permitted to be given to
either party hereto shall be in writing and shall be deemed to have been
properly given and to be effective on the date of delivery if delivered in
person or by facsimile or five (5) days after mailing by registered or certified
mail, postage paid, to the other party at the following address:
In the case of Tularik: Tularik Inc.
Two Corporate Drive
S. San Francisco, CA 94080
Fax: (650) 829-4303
Attention: Chief Executive Officer
In the case of Taisho:
Taisho Pharmaceutical Co., Ltd.,
24-1, Takata 3-chome
Toshimaku, Tokyo, 171-0033 Japan
Attention: Executive Vice President
9. Capitalized terms used herein but not otherwise defined herein shall
have the respective meanings assigned to such terms in the Collaboration
Agreement.
10. Except as expressly modified by this Amendment, all of the terms and
conditions of the Collaboration Agreement shall remain in full force and effect.
11. This Amendment may be executed in two counterparts, each of which
shall be deemed an original but all of which shall be considered one and the
same instrument.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed, or caused their duly
authorized officer or representative to execute, this Amendment as of the day
and year first above written.
TULARIK INC.
By: /s/ David V. Goeddel
-----------------------------------------
Name: David V. Goeddel
Title: Chief Executive Officer
TAISHO PHARMACEUTICAL CO., LTD.
By: /s/ Kunihiro Kitamura
-----------------------------------------
Name: Kunihiro Kitamura
Title: General Manager, Research Strategy and Planning Section,
Medicinal Research Group
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
RESEARCH, COLLABORATION
AND
LICENSE/DEVELOPMENT
AGREEMENT
BETWEEN
TULARIK INC.
AND
TAISHO PHARMACEUTICAL CO., LTD.
RESEARCH, COLLABORATION
AND
LICENSE/DEVELOPMENT AGREEMENT
[*] = Certain confidential information contained in this document, marked by
brackets, is filed with the Securities and Exchange Commission pursuant to Rule
406 of the Securities Act of 1933, as amended.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Article 1. Definitions............................................................ 1
1.1 "Agreement"........................................................... 1
1.2 "Annual Research Plan"................................................ 1
1.3 "Compound"............................................................ 1
1.4 "Confidential Information"............................................ 2
1.5 "Drug Candidate"...................................................... 2
1.6 "Field"............................................................... 2
1.7 "MHW"................................................................. 2
1.8 "NDA"................................................................. 2
1.9 "Net Sales"........................................................... 2
1.10 "Product"............................................................. 2
1.11 "Program Know-How".................................................... 2
1.12 "Program Patents"..................................................... 3
1.13 "Research Committee".................................................. 3
1.14 "Research Program".................................................... 3
1.15 "Taisho Compound Library"............................................. 3
1.16 "Taisho Know-How"..................................................... 3
1.17 "Taisho Licensed Technology".......................................... 3
1.18 "Taisho Patents"...................................................... 3
1.19 "Taisho Territory".................................................... 4
1.20 "Tularik Assays"...................................................... 4
1.21 "Tularik Compound Library"............................................ 4
1.22 "Tularik Know-How".................................................... 4
1.23 "Tularik Licensed Technology"......................................... 4
1.24 "Tularik Patents"..................................................... 4
1.25 "Tularik Territory"................................................... 5
Article 2. Research Program....................................................... 5
2.1 Objectives; Annual Research Plan...................................... 5
2.2 Research Committee.................................................... 6
2.3 Use of Taisho Compound Library........................................ 6
2.4 Research Diligence.................................................... 7
2.5 Program Funding....................................................... 7
2.6 Termination of Research Program....................................... 7
2.7 Right to Conduct Research............................................. 7
2.8 Exclusive Research Collaboration...................................... 7
Article 3. Development; Intellectual Property Rights; Payment Obligations......... 7
3.1 Development........................................................... 7
3.2 License to Taisho of Tularik Licensed Technology...................... 8
3.3 License to Tularik of Taisho Licensed Technology...................... 8
3.4 Sublicenses........................................................... 8
</TABLE>
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
i.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
3.5 Use Limitation of Compound Libraries.................................. 8
3.6 Nonuse of the Other Party's Technology Outside of the Field........... 9
3.7 Use of a Party's Own Substances....................................... 9
3.8 Development and Commercialization Diligence........................... 9
3.9 Benchmark Payments.................................................... 10
3.10 Royalties............................................................. 10
3.11 Payment; Reports...................................................... 11
3.12 Exchange Rate; Manner and Place of Payment............................ 11
3.13 Records and Audit..................................................... 11
3.14 Withholding of Taxes.................................................. 12
3.15 Reciprocal Arrangements with Third Parties............................ 12
3.16 Exclusive Development and Commercialization Collaboration............. 13
Article 4. Publication............................................................ 13
Article 5. Confidentiality........................................................ 13
5.1 Confidential Information; Exceptions.................................. 13
5.2 Financial Terms....................................................... 14
Article 6. Patents And Patent Applications........................................ 14
6.1 Ownership............................................................. 14
6.2 Patents............................................................... 15
6.3 Assignments........................................................... 16
6.4 No Representation..................................................... 16
6.5 Infringement of Patents by Third Parties.............................. 16
6.6 Infringement of Third Party Rights.................................... 18
Article 7. Term And Termination Of Agreement...................................... 19
7.1 Term.................................................................. 19
7.2 Extensions............................................................ 19
7.3 Termination for Material Breach....................................... 19
7.4 Insolvency or Bankruptcy.............................................. 19
7.5 Accrued Rights, Surviving Obligations................................. 19
Article 8. Indemnity.............................................................. 20
8.1 Product Liability Indemnity by Taisho................................. 20
8.2 Product Liability Indemnity by Tularik................................ 20
Article 9. Representations And Warranties......................................... 20
9.1 Taisho Representations, Warranties and Indemnities.................... 20
9.2 Tularik Representations, Warranties and Indemnities................... 21
Article 10. Import And Export Controls............................................ 22
</TABLE>
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
ii.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
10.1 United States Laws.................................................... 22
10.2 Non-United States Laws................................................ 23
Article 11. Limitations Of Liability.............................................. 23
Article 12. Miscellaneous Provisions.............................................. 23
12.1 Waiver................................................................ 23
12.2 Assignment............................................................ 23
12.3 Notices............................................................... 23
12.4 Headings.............................................................. 24
12.5 Amendment............................................................. 24
12.6 Construction of Agreement and Choice of Law, Jurisdiction and Venue... 24
12.7 Force Majeure......................................................... 24
12.8 Independent Contractors............................................... 25
12.9 Severability.......................................................... 25
12.10 Cumulative Rights..................................................... 25
12.11 Entire Agreement...................................................... 25
</TABLE>
Exhibit A Research Program
Exhibit B Tularik Assays
Exhibit C Initial Annual Research Plan
[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
iii.
<PAGE>
RESEARCH, COLLABORATION
AND
LICENSE/DEVELOPMENT AGREEMENT
This Agreement is entered into as of the 20th day of March 1996, ("Effective
Date") by and between Tularik Inc., a California corporation having its
principal place of business at 270 East Grand Avenue, South San Francisco,
California 94080, U.S.A. ("Tularik"), and Taisho Pharmaceutical Co., Ltd., a
Japanese corporation, having its head office at 24-1, Takata 3-chome, Toshima-
ku, Tokyo 171, Japan ("Taisho").
Recitals
Whereas, Tularik is engaged in the research and development of therapeutic
pharmaceutical products based upon the regulation of transcription factors;
Whereas, Taisho is also engaged in the research and development of therapeutic
pharmaceutical products; and
Whereas, Tularik and Taisho desire to establish a cooperative research and
development relationship in order to discover, develop and market novel products
whose action is based upon the regulation of Signal Transducers and Activators
of Transcription ("STATs") involved in [ * ];
Now, Therefore, in consideration of the foregoing and the covenants and promises
contained herein, the parties agree as follows:
Article 1.
Definitions
As used herein, the following terms shall have the following meaning and the
singular shall include the plural and vice versa:
1.1 "Agreement" shall mean this Research, Collaboration and
License/Development Agreement.
1.2 "Annual Research Plan" shall mean the annual plan for conduct of the
Research Program to be approved by the parties pursuant to Section 2.1
hereunder.
1.3 "Compound" shall mean (i) a substance which is identified by Tularik
or Taisho during the term of the Research Program as either inhibiting or
promoting the activity of STATs activated by [ * ] and (ii) any such substance
identified by Tularik within [ * ] after the end of the Research Program [ * ]
1.4 "Confidential Information" shall mean, subject to the limitations set
forth in Article 5 hereof, all information disclosed to one party by the other
party.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
1
<PAGE>
1.5 "Drug Candidate" shall mean [ * ] to be defined by the Research
Committee and is either (i) a Compound or (ii) [ * ].
1.6 "Field" shall mean [ * ].
1.7 "MHW" shall mean the Japanese Ministry of Health and Welfare or such
other agency or instrumentality of Japan to which the responsibilities and
authority of the MHW are given or delegated from time to time.
1.8 "NDA" shall mean a New Drug Application or the equivalent in Japan
for a Product, including all supplements, documents, data and other information
necessary to be included for MHW approval to market such Product, as more
closely defined in the rules and regulations of the MHW.
1.9 "Net Sales" shall mean, with respect to a Product, and on a
country-by-country basis, the gross invoice price of all quantities of such
Product sold by Taisho, its Affiliates or sublicensees to an independent third
party after deducting, if not already deducted in the amount invoiced (a) trade,
quantity and cash discounts actually taken, (b) returns, rebates and allowances,
(c) duties, sales and excise taxes and (d) transportation and insurance charges.
With respect to sales of combination products, which shall consist of Products
combined with one or more additional active ingredients, the parties will agree
on a method of allocation in the event the situation arises. Sales among Taisho
and its Affiliates or sublicensees shall not be deemed Net Sales; provided,
however, that any sales by Taisho, its Affiliates or sublicensees to independent
third parties shall be deemed Net Sales.
1.10 "Product" shall mean a Drug Candidate, when used as an active
ingredient in a pharmaceutical product for use in the Field, including all
indications, formulations, line extension or modes of administration thereof.
1.11 "Program Know-How" shall mean all tangible or intangible know-how,
trade secrets, inventions (whether or not patentable), data, clinical and
preclinical results, information, and any physical, chemical or biological
material, including cell lines, any replication or any part of such material,
all of which is in any way derived from or developed pursuant to activities
during the course of the Research Program. Program Know-How shall not include
any know-how, trade secrets, invention, data, information or material first
developed, reduced to practice or discovered, each after any termination of the
Research Program prior to the completion of [ * ].
1.12 "Program Patents" shall mean all patents, both foreign and domestic,
including without limitation, all applications, provisionals, substitutions,
extensions, reissues, renewals, inventors certificates, divisionals,
continuations and continuations-in-part covering Program Know-How. In each case,
such patents and applications shall include only those that have not been held
invalid, unenforceable or unpatentable by a final decision, un-appealed to a
court or other appropriate body of competent jurisdiction.
1.13 "Research Committee" shall mean that committee to be formed pursuant
to Section 2.2.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
1.14 "Research Program" shall mean the collaborative program of five (5)
years, which consists of [ * ], of research relating to the discovery and
development of one or more Compounds, as such program is defined on Exhibit A
and as the same may be further defined, revised and implemented, from time to
time, by the parties on the recommendation of the Research Committee, and as
further described in Article 2.
1.15 "Taisho Compound Library" shall mean that collection of natural
extracts, natural compounds and synthetic compounds which Taisho owns or has the
right to license or sublicense as of the Effective Date or from time to time
during the Research Program which Taisho in its sole discretion actually
provides to Tularik.
1.16 "Taisho Know-How" shall mean, to the extent Taisho is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all tangible or
intangible know-how, trade secrets, inventions (whether or not patentable),
data, clinical and preclinical results, information, and any physical, chemical
or biological material, including cell lines, any replication or any part of
such material, which Taisho owns, controls or has a license to (with right to
sublicense) on the Effective Date and which Taisho determines in its sole
discretion actually to disclose or provide to Tularik hereunder; provided,
however, that in the event that [ * ].
1.17 "Taisho Licensed Technology" shall mean Taisho's rights in and to (i)
any Taisho Know-How disclosed to Tularik under this Agreement, (ii) the Program
Patents owned by Taisho or jointly by Taisho and Tularik, (iii) the Taisho
Patents and (iv) the Program Know-How owned by Taisho or jointly by Taisho and
Tularik.
1.18 "Taisho Patents" shall mean, to the extent Taisho is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all patents, both
foreign and domestic, including without limitation, all substitutions,
extensions, reissues, renewals and inventors certificates,
(a) issued as of the Effective Date and
(b) issuing from applications (including provisionals, divisionals,
continuations and continuations-in-part) arising out of the above
patents or otherwise in existence as of the Effective Date, which
applications relate to the Research Program or Product and
which Taisho owns, controls or has a license to (with right to sublicense) on
the Effective Date. In each case, such patents and applications shall include
only those that have not been held invalid, unenforceable or unpatentable by a
final decision, un-appealed to a court or other appropriate body of competent
jurisdiction.
1.19 "Taisho Territory" shall mean Japan, [ * ].
1.20 "Tularik Assays" shall mean those assays designed to discover
Compounds, which, as of the Effective Date and from time to time during the
period of the Research Program,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
Tularik owns or to which it has rights (with a right to sublicense), as set
forth and periodically updated on Exhibit B hereto.
1.21 "Tularik Compound Library" shall mean that collection of natural
extracts, natural compounds and synthetic compounds which Tularik owns or has
the right to license or sublicense as of the Effective Date or from time to time
during the period of the Research Program.
1.22 "Tularik Know-How" shall mean, to the extent Tularik is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all tangible or
intangible know-how, trade secrets, inventions (whether or not patentable),
data, clinical and preclinical results, information, and any physical, chemical
or biological material, including cell lines, any replication or any part of
such material, which relate to the Research Program or a Product and which
Tularik owns, controls or has a license to (with right to sublicense) on the
Effective Date; provided, however, that in the event that [ * ].
1.23 "Tularik Licensed Technology" shall mean Tularik's rights in and to
(i) any Tularik Know-How and Tularik Assays disclosed to Taisho under this
Agreement, (ii) the Program Patents owned by Tularik or jointly by Tularik and
Taisho, (iii) the Tularik Patents and (iv) the Program Know-How owned by Tularik
or jointly by Tularik and Taisho.
1.24 "Tularik Patents" shall mean, to the extent Tularik is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all patents, both
foreign and domestic, including without limitation, all substitutions,
extensions, reissues, renewals and inventors certificates,
(a) issued as of the Effective Date and
(b) issuing from applications (including provisionals, divisionals,
continuations and continuations-in-part) arising out of the above
patents or otherwise in existence as of the Effective Date, which
applications relate to the Research Program or Product and
which Tularik owns, controls or has a license to (with right to sublicense) on
the Effective Date. In each case, such patents and applications shall include
only those that have not been held invalid, unenforceable or unpatentable by a
final decision, un-appealed to a court or other appropriate body of competent
jurisdiction.
1.25 "Tularik Territory" shall mean [ * ].
Article 2.
Research Program
2.1 Objectives; Annual Research Plan. The parties agree to conduct
a collaborative Research Program for identification and development of Compounds
intended for
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
use as Drug Candidates, to be conducted by both parties under the direction of
the Research Committee. The Research Program shall consist primarily of [ * ] to
identify specific Compounds with promising activity for regulation of STAT
proteins activated by [ * ], using Tularik Assays and other technology available
to the parties and (ii) each party endeavoring to work together to fulfill their
respective obligations under Section 2.4 below to develop Compounds through
application of medicinal chemistry and preclinical testing for commercialization
of Products. For any given year of the Research Program, the Research Program
will be conducted in accordance with an annual research plan to be approved by
the parties no later than [ * ] prior to the start of such year, upon
recommendation of the Research Committee pursuant to Section 2.2(c)(1). The
initial Annual Research Plan, for the year commencing on the Effective Date and
ending on the day before the first anniversary of the Effective Date, is
attached hereto as Exhibit C. Each Annual Research Plan may be revised by mutual
consent of the parties from time to time.
2.2 Research Committee.
(a) Formation of Research Committee. The Research Committee will
consist of an equal number of members from each of Taisho and Tularik, including
any substitutions as may be needed from time to time, the chairperson of which
will be one of the Tularik members. The parties shall notify each other in
writing of the individuals who will act on such party's behalf as members of the
Research Committee and of any changes in the membership thereof. All decisions
of the Research Committee shall be unanimous.
(b) Meetings of Research Committee. Meetings of the Research
Committee shall be held [ * ] and at such times as shall be mutually agreed upon
by the parties. Additional persons from each party may attend meetings of the
Research Committee without voting rights as the case may be. Minutes of the
meeting shall be confirmed by both parties at each meeting.
(c) Responsibilities of Research Committee. The Research Committee
shall make recommendations to the parties with respect to: (1) establishing each
Annual Research Plan, based upon the research results for the preceding year and
designed to accomplish the goals of the Research Program, (2) defining the
yearly research objectives, (3) allocating tasks and coordinating activities
required to carry out the Research Program, (4) periodically revising the
Research Program, (5) monitoring progress of the Research Program and the
parties' due diligence in carrying out their responsibilities under the Research
Program, (6) developing the criterion and selecting Compounds to be advanced to
Drug Candidate, (7) selecting Drug Candidates and monitoring the progress of
Drug Candidate development and (8) determining the strategy for filing,
prosecution and obtaining Program Patents.
(d) Annual Report. Each party shall submit a brief, written annual
report on its activities under the Research Program to the other within [ * ]
after each anniversary of the Effective Date during the Research Program.
2.3 Use of Taisho Compound Library. Tularik shall have the limited right
to use the Taisho Compound Library only (i) for the Research Program in
accordance with Section 2.7 of this Agreement, (ii) in accordance with Section
3.3(a) and [ * ]. In the event Tularik shall desire to use any of the Taisho
Compound Library for any other purposes, [ * ]. The rights granted in
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
5
<PAGE>
the first sentence of this Section 2.3 shall not survive expiration or
termination of this Agreement. Taisho shall have no obligation to [ * ].
2.4 Research Diligence. Each party shall initiate its performance of the
Research Program promptly and shall continue with at least the same care and
diligence with which it conducts its internal research.
2.5 Program Funding. To support Tularik's activities in the Research
Program, Taisho has paid Tularik [ * ] U.S. Dollars on [ * ], and agrees to pay
Tularik, on [ * ], an [ * ].
2.6 Termination of Research Program. Upon not later than [ * ] prior
notice Taisho may terminate the Research Program at the end of the [ * ] of the
Research Program if it shall be dissatisfied, in its sole judgement, with the
progress or results of the Research Program. The Research Committee may
terminate the Research Program any time if it determines the Research Program is
no longer scientifically useful. In case of such an early termination by Taisho
or the Research Committee, Taisho shall be exempt from any payment(s) which
would have become due and payable after such early termination date.
2.7 Right to Conduct Research. Each party shall have the non-exclusive
worldwide right under the other party's Licensed Technology to carry out its
obligations under the Research Program.
2.8 Exclusive Research Collaboration. During the conduct of the Research
Program, Taisho and Tularik agree that they shall collaborate on an exclusive
basis hereunder with respect to the identification, using the Tularik Assays, of
Compounds for use in the Field in the Taisho Territory. This Section 2.8 shall
not restrict either party's rights to [ * ].
Article 3.
Development; Intellectual Property Rights; Payment Obligations
3.1 Development. After the Research Program, to minimize the expense and
delays of the development by each party, the parties may collaborate in the
development of a Compound under the terms and conditions of an appropriate co-
development agreement to be agreed upon by the parties separately. Such co-
development agreement may incorporate the sharing methods for work, cost and the
results of the development activities.
3.2 License to Taisho of Tularik Licensed Technology.
Tularik hereby grants Taisho:
(a) an exclusive license to make, have made, use, offer to sell, sell
and import Product in the Taisho Territory under the Tularik Licensed
Technology; and
(b) a nonexclusive, royalty-free, worldwide license under Tularik's
rights in and to the Program Know-How and Program Patents for any
purpose outside the Field.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
6
<PAGE>
Except in the event Tularik terminates this Agreement pursuant to Section 7.3 or
7.4, the rights granted under Section 3.2(b) shall survive expiration or
termination of this Agreement. The license granted above in Section 3.2(a) shall
survive after royalties have been paid for the full term described in Section
3.10(c).
3.3 License to Tularik of Taisho Licensed Technology.
Taisho hereby grants Tularik:
(a) an exclusive license to make, have made, use, offer to sell, sell
and import Products in the Tularik Territory under the Taisho Licensed
Technology; and
(b) a nonexclusive, royalty-free worldwide license under Taisho's
rights in and to the Program Know-How and Program Patents for any
purpose outside the Field.
Upon expiration or termination of this Agreement, other than termination by
Taisho pursuant to Sections 7.3 or 7.4, (i) the rights granted under Section
3.3(b) shall survive, and (ii) Taisho shall, and it hereby does, grant Tularik
an exclusive license to make, have made, use, offer to sell, sell and import
Products worldwide under Taisho's rights in and to the Program Patents and the
Program Know-How. Notwithstanding the foregoing, if this Agreement expires after
royalties have been paid for the full term described in Section 3.10(c), the
license granted in clause (ii) of the previous sentence shall [ * ].
3.4 Sublicenses. Each party shall have the right to grant sublicenses
under the licenses set forth in Section 3.2 or 3.3 above, as appropriate,
provided that each such sublicense is subject to substantially the same terms
and conditions as are set forth herein. Subject to Sections 7.3 and 7.4, the
rights granted under this Section 3.4 shall survive expiration or termination of
this Agreement.
3.5 Use Limitation of Compound Libraries.. Each party agrees and
acknowledges that use of the substances contained in the Taisho Compound Library
or the Tularik Compound Library, as the case may be, is limited solely to those
activities contemplated by the Research Program, unless otherwise provided for
in this Agreement, and are for research use only and shall not be administered
to humans in any manner or form, except in accordance with the terms of this
Agreement, subject to appropriate governmental approval.
3.6 Nonuse of the Other Party's Technology Outside of the Field. Taisho
covenants and agrees that it will not use, directly or indirectly, the Tularik
Patents, Tularik Know-How or Tularik's Confidential Information, for any purpose
other than developing, making, having made, using or selling Products in the
Taisho Territory under this Agreement. Tularik covenants and agrees that it will
not use, directly or indirectly, the Taisho Patents, Taisho Know-How or Taisho's
Confidential Information, for any purpose other than developing, making, having
made, using or selling Products in the Tularik Territory under this Agreement.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
7
<PAGE>
3.7 Use of a Party's Own Substances. Notwithstanding anything to the
contrary in Sections 3.5 or 3.6 above, during and following the term of this
Agreement, each party shall retain the right to use freely the substances
contained in its own Compound Libraries which are not classified as Compounds.
3.8 Development and Commercialization Diligence.
(a) Taisho shall devote the same degree of attention and diligence to
the development and marketing of Products in Japan that it devotes to other
compounds and products of its own development. If Taisho fails to use such
diligence, Tularik may notify Taisho of such failure and the parties shall meet
to discuss such matter. Tularik may request that Taisho propose a detailed plan,
with a timeline, for remedying such failure and carrying out further development
and marketing with the degree of diligence described above. If requested, such
plan shall be submitted to Tularik within [ * ] of the date of Tularik's
request. If Tularik determines that such plan provides for the degree of
diligence described above, it shall approve the plan. Tularik's approval shall
not be unreasonably withheld or delayed. If the plan does not provide for the
degree of diligence described above, or if the plan is approved by Tularik but
Taisho later fails to carry out development or marketing as provided in the
approved plan, then Tularik may terminate this Agreement pursuant to Section
7.3. The requirements for diligent development and commercialization set forth
in this Section 3.8 shall in no way be interpreted to modify either party's
respective obligations under the Research Program.
(b) Taisho hereby agrees to keep Tularik informed on a reasonable
basis of the development of each Compound, including but not limited to periodic
written updates on the progress of each filing with MHW or other appropriate
regulatory authorities in Japan.
(c) Notwithstanding the foregoing, any failure by Taisho to fulfill
the development, commercialization and information obligations set forth in this
Section 3.8 with respect to any Compound shall not be deemed a material breach
of this Agreement, to the extent that [ * ].
3.9 Benchmark Payments.
(a) Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:
[ * ].
(b) Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:
[ * ].
3.10 Royalties.
(a) Taisho Royalty Payments to Tularik. Taisho shall pay Tularik a
royalty based on Net Sales equal to [ * ] percent [ * ] of such Net Sales [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
8
<PAGE>
(b) Third-Party Royalty Credit. In the event that Taisho is required
to make payments (including, without limitation, royalties, option fees or
license fees, and any such fees paid by Taisho pursuant to Section 1.22 above)
to one or more third parties to obtain licenses or similar rights to patent-
protected technology necessary to make, use or sell a Product, by reason of
Taisho's use of Tularik Licensed Technology in such manufacture, use or sale,
Taisho may deduct [ * ] percent [ * ] of such payments actually made from
royalties payable to Tularik under this Section with respect to such Product;
provided, however, that in no event shall the royalties due to Tularik be
reduced by more than [ * ] percent [ * ] of the amount of royalties otherwise
owed in any given [ * ] period. Unused royalty credits may be carried over from
one royalty period to the next, subject to the latter [ * ] percent [ * ]
limitation set forth above.
(c) Royalty Term. Royalties shall be payable for each country in the
Taisho Territory until the expiration of the last to expire Program Patent or
Tularik Patent in such country covering the manufacture, use or sale of the Drug
Candidate contained in the Product or, in the case of Products containing only
unpatented technology, [ * ] years from first commercial sale of such Product.
The royalty term shall be adjusted in the event a Product is launched in any
country of the Taisho Territory without such patent protection in such country,
if such patent protection is later obtained. In such event, the above royalty
obligation shall expire not upon expiration of the last such patent, but instead
on [ * ].
3.11 Payment; Reports. All amounts payable to Tularik under this Agreement
shall be paid in U.S. Dollars within [ * ] after the end of each June and
December. Each payment of royalties shall be accompanied by a statement of the
amount of Net Sales during such period, the amount of aggregate Net Sales to
date as of the end of such period where necessary in determination of royalty
rates, and the amount of royalties due on such sales. Tularik hereby agrees that
[ * ].
3.12 Exchange Rate; Manner and Place of Payment. Royalty payments and
reports for the sale of Products shall be made for each [ * ] period ending on
the last day of [ * ]. Exchange conversion for foreign currency into U.S.
Dollars shall be made as necessary at the median of the rates of exchange for
sales and purchases of U.S. Dollars on the last business day of the relevant
royalty period, as established by [ * ]. Once selected, the designated bank may
only be changed by the mutual written agreement of the parties. All payments
owed under this Agreement shall be made by telegraphic transfer.
3.13 Records and Audit. During the term of this Agreement and for a period
of [ * ] thereafter, Taisho shall keep complete and accurate records pertaining
to the sale or other disposition of the Products commercialized by it, in
sufficient detail to permit Tularik to confirm the accuracy of all payments due
hereunder. Tularik shall have the right to cause an independent, certified
public accountant to whom Taisho has no reasonable objection to audit such
records to confirm Taisho's Net Sales and royalty payments; provided, however,
that such auditor shall not disclose Taisho's confidential information to
Tularik, except to the extent such disclosure is necessary to verify the amount
of royalties due under this Agreement. Such audits may be exercised once a
fiscal year, within [ * ] after the royalty period to which such records relate,
upon notice to Taisho and during normal business hours. Tularik shall bear the
full cost of such audit unless such audit discloses a variance of more than
[ * ] from the amount of the Net Sales
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
9
<PAGE>
or royalties previously paid. In such case, Taisho shall bear the full cost of
such audit. The independent, certified public accountant conducting such audit
shall only report the results of its audit and shall not disclose to Tularik the
facts relied upon in making such computation. The terms of this Section 3.13
shall survive any termination or expiration of this Agreement for a period of
[ * ].
3.14 Withholding of Taxes. Any withholding of taxes levied by Japanese tax
authorities on the payments required by Sections 3.9 and 3.10 above shall [ * ].
The parties shall discuss any other withholding taxes imposed on payments made
hereunder in order to find a reasonable solution for minimizing and allocating
the burden of any withholding taxes.
3.15 Reciprocal Arrangements with Third Parties. In the event that Tularik
enters into an arrangement with a third party outside the Taisho Territory to
utilize the Tularik Assays for the identification of compounds for use within
the Field, Tularik:
(i) shall [ * ];
(ii) shall [ * ];
(iii) may [ * ]; and
(iv) will, [ * ].
Tularik agrees that [ * ].
3.16 Exclusive Development and Commercialization Collaboration. Tularik
agrees not to grant to any third party during the term of this Agreement any
rights under the Tularik Licensed Technology to make, have made, use, offer to
sell, sell or import Products in the Taisho Territory, except as may be
permitted under this Agreement (including but not limited to Section 3.8).
Article 4.
Publication
Each party to this Agreement recognizes that the publication of papers,
including oral presentations and abstracts, regarding the results of the
Research Program as embodied in the Program Know-How and Program Patents,
subject to reasonable controls to protect Confidential Information and Program
Know-How, will be beneficial to both parties. Accordingly, each party shall have
the right to review and approve any paper proposed for publication by the other
party, including oral presentations and abstracts, which utilizes data generated
from the Research Program. Before any such paper is presented or submitted for
publication, the party proposing publication shall deliver a complete copy to
the other party at least [ * ] prior to presenting the paper to a publisher. The
receiving party shall review any such paper and promptly give its comments to
the publishing party. The publishing party shall comply with the other party's
request to delete references to such other party's Confidential Information and
any Program
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
10
<PAGE>
Know-How in any such paper and agrees to withhold publication of same an
additional [ * ] in order to permit the parties to obtain patent protection, if
the other party deems it necessary, in accordance with the terms of this
Agreement.
Both parties expressly agree that any information which, express or implied,
suggests the chemical structure of any Compound shall be published only after
the first laid-open or publication of the corresponding patent or patent
application.
Article 5.
Confidentiality
5.1 Confidential Information; Exceptions. During the term of this
Agreement, and for a period of [ * ] after termination thereof, each party will
maintain all Confidential Information in trust and confidence and will not
disclose any Confidential Information to any third party or use any Confidential
Information for any unauthorized purpose; in particular, Taisho shall not use
the Tularik Know-How, and Tularik shall not use the Taisho Know-How, for the
manufacture or sale of any products other than the Products, except as expressly
authorized by this Agreement. Each party may use such Confidential Information
only to the extent required to accomplish the purposes of this Agreement or to
the extent required by law, regulation or government or judicial order.
Confidential Information shall not be used for any purpose or in any manner that
would constitute a violation of any laws or regulations, including without
limitation the export control laws of the United States. Confidential
Information shall not be reproduced in any form except as required to accomplish
the intent of this Agreement. No Confidential Information shall be disclosed to
any employee, agent, consultant, Affiliate, or sublicensee who does not have a
need for such information. Each party will use at least the same standard of
care as it uses to protect proprietary or confidential information of its own to
ensure that such employees, agents, consultants and clinical investigators do
not disclose or make any unauthorized use of the Confidential Information. Each
party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.
Confidential Information shall not include any information which:
(a) is now, or hereafter becomes, through no act or failure to act on
the part of the receiving party, generally known or available;
(b) is known by the receiving party at the time of receiving such
information, as evidenced by its records;
(c) is hereafter furnished to the receiving party by a third party,
as a matter of right and without restriction on disclosure;
(d) is independently developed by the receiving party without any
breach of this Agreement; or
(e) is the subject of a written permission to disclose provided by
the disclosing party.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
11
<PAGE>
5.2 Financial Terms. The parties agree that the material financial terms
of the Agreement will be considered Confidential Information of both parties.
Notwithstanding the foregoing, either party may disclose such terms to bona fide
potential sublicensees, if necessary. In connection with any such disclosure,
each party agrees to use its best efforts to secure confidential treatment of
such information. Tularik and Taisho shall have the further right to disclose
the material financial terms of the Agreement to any potential acquiror, merger
partner, or other bona fide potential financial partner, subject to a
requirement of best efforts to secure confidential treatment of such
information.
Article 6.
Patents And Patent Applications
6.1 Ownership. Tularik acknowledges and agrees that Taisho is and shall
remain the sole owner (or licensee with right to sublicense) of the Taisho
Patents, the Taisho Know-How and the materials and compounds in the Taisho
Compound Library and that Tularik has no rights in or to any of them other than
the license and rights specifically granted herein. Taisho acknowledges and
agrees that Tularik is and shall remain the sole owner (or licensee with right
to sublicense) of the Tularik Patents, the Tularik Know-How, the Tularik Assays
and the materials and compounds in the Tularik Compound Library and that Taisho
has no rights in or to any of them other than the rights specifically granted
herein. Each party shall be the sole owner of any inventions or discoveries
made, or materials, compounds or information created, solely by it in the course
of the Research Program, and the other party shall have no rights in or to any
such inventions, discoveries, materials, compounds or information other than
those rights specifically granted to such other party herein. Inventions or
discoveries made, and materials, compounds and information created, jointly by
the parties in the course of the Research Program shall be jointly owned.
Inventorship shall be determined in accordance with the U.S. inventorship
principles.
6.2 Patents.
(a) Patent Prosecution.
(i) Tularik Patents and Taisho Patents shall be prosecuted and
maintained by Tularik and Taisho, respectively, at such party's option and its
own expense.
(ii) Each party shall be responsible for filing, prosecuting and
maintaining those Program Patents covering inventions or discoveries made solely
by it throughout the world, shall consult with the other party as to the
selection of countries in which to file applications for such Program Patents in
the other's Territory and shall cooperate with the other as to the prosecution
of Program Patents in its own Territory. Each party shall be responsible for
bearing the cost of filing, prosecution and maintenance of Program Patents in
its own Territory regardless of which party owns the Program Patent. In the
event that any party decides not to proceed with prosecuting an application for
such a Program Patent, or to pay any annuity for such a Program Patent as it
becomes due, such party shall give the other [ * ] notice before any relevant
deadline, and the other party shall have the right to pursue, at its own option
and expense, prosecution of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
12
<PAGE>
such patent application or maintenance of such patent. A party's decision not to
prosecute or pay annuities for a Program Patent invented solely by such party
shall not affect either party's rights under this Agreement, particularly those
granted under Sections 3.2 and 3.3.
(iii) The Research Committee shall determine a responsible party or
parties for filing, prosecuting and maintaining patent applications for Program
Patents which cover inventions or discoveries jointly made by the parties,
provided that each party shall be responsible for bearing the cost of
application, prosecution and maintenance of such patent application and/or
patent in its own Territory. In the event that any party decides not to proceed
with prosecuting a patent application filed under this Section 6.2(a)(iii) or to
pay any annuity for a jointly owned Program Patent as it becomes due in its own
Territory, such party shall give the other [ * ] notice before any relevant
deadline, and the other party shall have the right to pursue, at its own option
and expense, prosecution of such patent application or maintenance of such
patent. A party's decision not to prosecute or pay annuities in its own
Territory with respect to a jointly owned Program Patent shall not affect either
party's rights under this Agreement, particularly those granted under Sections
3.2 and 3.3.
(b) Perfection of Interest. Each party agrees to cooperate with the
other and take all reasonable additional actions and execute such agreements,
instruments, and documents as may be reasonably required to perfect the other's
ownership interest in accordance with the intent of this Agreement including,
without limitation, the execution of necessary and appropriate instruments of
assignment.
(c) Patent Marking. Each party shall mark, if necessary, all
Products manufactured, used or sold under the terms of this Agreement, or their
containers, in accordance with the applicable patent marking laws, as required.
6.3 Assignments. Each party which acquires by operation of law ownership
or other interests in any portion of a Compound, Product or Program Know-How in
a manner other than as intended and set forth in this Agreement shall, to the
extent required by the intent or provisions of this Agreement, immediately
assign to the other such right, title, and interest therein. Each party agrees
to cooperate with the other and take all reasonable additional actions and
execute such agreements, instruments, and documents as may be reasonably
required to perfect the other's ownership interest in accordance with the intent
of this Agreement including, without limitation, the execution of necessary and
appropriate instruments of assignment.
6.4 No Representation. Tularik and Taisho each specifically excludes any
representation or warranty, express or implied, that Tularik or Taisho will
successfully obtain any patent, including without limitation any Program Patent.
6.5 Infringement of Patents by Third Parties.
(a) Notice. Each party shall promptly notify the other in writing
of any alleged or threatened infringement of the Tularik Patents, the Taisho
Patents, or the Program Patents which may adversely impact the rights of the
parties hereunder, of which it becomes aware.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
13
<PAGE>
(b) Separately Owned Patents.
(i) Tularik shall have the right, but not the obligation, to bring
at its expense an appropriate action against any person or entity directly or
contributorily infringing a Tularik Patent or a Program Patent owned solely by
Tularik in the Taisho Territory. In such event, Taisho hereby agrees to
cooperate reasonably with Tularik in any such efforts. Any recovery obtained by
Tularik as a result of such action, whether obtained by settlement or otherwise,
shall be disbursed as follows: [ * ]. No settlement, compromise or other
disposition of any such action which compromises Taisho's rights under this
Agreement shall be entered into without Taisho's prior consent, which shall not
be unreasonably withheld. In the event Tularik fails to institute an
infringement suit or take other reasonable action in the Taisho Territory to
protect such relevant Tularik Patent or Program Patent owned solely by Tularik,
Taisho shall have the right, but not the obligation, within [ * ] of
notification to Tularik of such alleged infringement, to institute such suit or
take other appropriate action at its own expense in the name of Tularik or
Taisho, or both. [ * ]. In such event, Tularik shall cooperate reasonably with
Taisho. Any recovery obtained by Taisho as a result of such proceeding, by
settlement or otherwise, shall be disbursed as follows: [ * ].
(ii) Taisho shall have the right, but not the obligation, to bring
at its expense an appropriate action against any person or entity directly or
contributorily infringing a Taisho Patent or a Program Patent owned solely by
Taisho in the Tularik Territory. In such event, Tularik hereby agrees to
cooperate reasonably with Taisho in any such efforts. Any recovery obtained by
Taisho as a result of such action, whether obtained by settlement or otherwise,
shall be disbursed as follows: [ * ]. No settlement, compromise or other
disposition of any such action which compromises Tularik's rights under this
Agreement shall be entered into without Tularik's prior consent, which shall not
be unreasonably withheld. In the event Taisho fails to institute an infringement
suit or take other reasonable action in the Tularik Territory to protect such
relevant Taisho Patent or Program Patent owned solely by Taisho, Tularik shall
have the right, but not the obligation, within [ * ] of notification to Taisho
of such alleged infringement, to institute such suit or take other appropriate
action at its own expense in the name of Taisho or Tularik, or both. [ * ]. In
such event, Taisho shall cooperate reasonably with Tularik. Any recovery
obtained by Tularik as a result of such proceeding, by settlement or otherwise,
shall be disbursed as follows: [ * ].
(iii) No settlement, compromise or other disposition of any such
proceeding which concerns the validity of any Patent or Program Patent shall be
entered into without the Patent or Program Patent owner's prior consent, which
shall not be unreasonably withheld.
(c) Jointly Owned Patents. In the event that the parties become
aware of any alleged or threatened infringement of the jointly owned Program
Patents in either party's Territory, the party in whose Territory the
infringement is occurring shall have the right, but not the obligation, to
bring, at such party's expense, an appropriate action against any person or
entity directly or contributorily infringing such jointly owned Program Patent.
In such event, the other party hereby agrees to cooperate reasonably with the
party bringing such action in any such efforts, including, if required to bring
such action, the furnishing of a power-of-attorney. In the event the party in
whose Territory the infringement is occurring fails to institute an infringement
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
pursuant to Rule 406 of the Securities Act of 1933, as amended.
14
<PAGE>
suit or take other reasonable action to protect the relevant Program Patent, the
other party shall have the right, upon [ * ] of notification of the party in
whose Territory the infringement is occurring, to institute such suit or take
other appropriate action at its own expense in its own name, the joint owner's
name, or both. In such event, the party not bringing such action hereby agrees
to cooperate reasonably with the party bringing such action in any such effort,
including if required to bring such action, the furnishing of a power-of-
attorney. Regardless of which party brings the action, any recovery obtained by
settlement or otherwise shall be disbursed as follows: [ * ].
6.6 Infringement of Third Party Rights.
(a) Joint Strategy. In the event that any Product manufactured or
sold hereunder becomes the subject of a claim for patent, copyright or other
proprietary right infringement anywhere in the world, and irrespective of
whether Taisho or Tularik is charged with said infringement, and the venue of
such claim, the parties shall promptly confer to discuss the claim.
(b) Defense. The party responsible for marketing the Product which is
the subject of the infringement claim shall have the right, but not the
obligation, to assume the primary responsibility for the conduct of the defense
of any such claim. If the party responsible for marketing the Product decides
not to assume responsibility for the conduct of the defense, the other party
shall have the right, but not the obligation, to conduct the defense of the
claim. The party which decides to assume responsibility for such defense shall
bear all costs for the conduct thereof. In such event, the other party shall
have the right, but not the obligation, to participate in any such suit, at its
sole option and at its own expense. Each party shall reasonably cooperate with
the party conducting the defense of the claim, including if required to conduct
such defense, furnishing a power-of-attorney. Neither party shall enter into any
settlement that affects the other party's rights or interests without such other
party's written consent, which consent shall not be unreasonably withheld. In no
event shall the party not conducting the defense of the claim engage in conduct
or make any express or implied representation which may detrimentally affect
such defense.
Article 7.
Term And Termination Of Agreement
7.1 Term. This Agreement shall expire on the later of (i) the expiration
date of the last to expire patent licensed from Taisho to Tularik pursuant to
Section 3.3(a) and (ii) the expiration date of the last to expire royalty
obligation contained herein. Notwithstanding the foregoing, if the Research
Program is terminated prior to the completion of its full five (5) year term,
this Agreement shall terminate upon the date on which the Research Program is
terminated.
7.2 Extensions. The parties may extend the term of this Agreement or of
the Research Program on the written agreement of the parties. If the Research
Program expires after the [ * ] thereof, Taisho and Tularik shall mutually
determine whether this Agreement should
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15
<PAGE>
survive or terminate following such expiration based upon an evaluation of the
promise of Compounds identified during such term.
7.3 Termination for Material Breach. Either party may, in its sole
discretion, terminate this Agreement, effective after the grace periods
described below, by giving notice of such termination to the other party, if the
other party fails to comply with any material obligation of this Agreement,
including [ * ], and the breaching party fails to cure such breach within [ * ]
after written notice thereof by the non-breaching party or [ * ] days if the
breach shall be the breaching party's failure to [ * ], unless otherwise
specified in this Agreement. All licenses granted to the non-breaching party
under this Agreement shall not be affected by termination for material breach.
All licenses granted to the breaching party under this Agreement shall
automatically terminate upon termination under this Section 7.3.
7.4 Insolvency or Bankruptcy. Either party may terminate this Agreement
effective immediately and without liability upon written notice to the other
party if the other party (a) becomes insolvent or declares bankruptcy, (b)
becomes the subject of any proceedings seeking relief, reorganization, or
rearrangement under any laws relating to insolvency, (c) makes an assignment for
the benefit of creditors, (d) commences the liquidation, dissolution, or winding
up of its business. To the extent legally possible, all licenses granted to the
non-breaching party shall not be affected by any termination of this Agreement
under this Section 7.4. All licenses granted to the breaching party under this
Agreement shall automatically terminate upon termination under this Section 7.4.
7.5 Accrued Rights, Surviving Obligations. Termination of this Agreement
shall not affect any accrued rights and obligations of either party.
Article 8.
Indemnity
8.1 Product Liability Indemnity by Taisho. Taisho shall defend, indemnify
and hold Tularik harmless from and against all claims and expenses, including
reasonable attorneys' fees, arising out of the death of or bodily injury to any
person or persons resulting from the manufacture or marketing of Products by
Taisho and its sublicensees (other than the manufacture or marketing of Products
by Tularik or its sublicensees); provided that [ * ].
8.2 Product Liability Indemnity by Tularik. Tularik shall defend,
indemnify and hold Taisho harmless from and against all claims and expenses,
including reasonable attorneys' fees, arising out of the death of or bodily
injury to any person or persons resulting from the manufacture or marketing of
Products by Tularik and its sublicensees (other than the manufacture or
marketing of Products by Taisho or its sublicensees); provided that [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16
<PAGE>
Article 9.
Representations And Warranties
9.1 Taisho Representations, Warranties and Indemnities. Taisho represents
warrants the following:
(a) Corporate Authority. Taisho is a corporation duly organized,
validly existing and in good standing under the laws of Japan, has the power and
authority, corporate and otherwise, to execute and deliver this Agreement and to
perform its obligations hereunder and thereunder, and has by all necessary
corporate action duly and validly authorized the execution and delivery of this
Agreement, and the performance of its obligations hereunder.
(b) Binding Obligation. This Agreement is the valid and legally
binding obligation of Taisho in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.
(c) No Conflicts. The execution, delivery and performance by Taisho
of this Agreement, and each other agreement, document, or instrument now or
hereafter executed and delivered by Taisho pursuant thereto or in connection
herewith will not: (i) conflict with or violate the articles of incorporation or
by-laws of Taisho or any provision of any law, rule, regulation, authorization
or judgement of any governmental authority having applicability to Taisho or its
actions; or (ii) conflict with or result in any breach of, or constitute a
default under, any note, security agreement, commitment, contract or other
agreement, instrument or undertaking to which Taisho is a party or by which any
of its property is bound.
(d) Ownership and Right to Sublicense. Taisho owns (or upon their
creation will own) or has a right to sublicense the Taisho Patents and Taisho
Know-How and all intellectual property rights with respect thereto and has (or
will have) the right and power to grant the rights granted to Tularik under this
Agreement.
(e) Independent Work. Except for the Taisho Patents and Taisho Know-
How licensed to Taisho with a right of sublicense, the Taisho Patents and Taisho
Know-How have been (or upon their creation will have been) independently created
by Taisho's employees, agents and consultants. Use of the Taisho Patents and
Taisho Know-How by Tularik as contemplated herein will not depend on the
acquisition of rights from any third party.
(f) [ * ].
(g) Agreements with Employees and Consultants. Taisho has and will
maintain with all Taisho employees, agents and consultants, written agreements
sufficient to enable Taisho to perform its obligations under this Agreement,
whenever Taisho thinks it is necessary.
9.2 Tularik Representations, Warranties and Indemnities. Tularik
represents and warrants the following:
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17
<PAGE>
(a) Corporate Authority. Tularik is a corporation duly organized,
validly existing and in good standing under the laws of the state of California,
has the power and authority, corporate and otherwise, to execute and deliver
this Agreement, and to perform its obligations hereunder, and has by all
necessary corporate action duly and validly authorized the execution and
delivery of this Agreement, and the performance of its obligations hereunder.
(b) Binding Obligation. This Agreement is the valid and legally
binding obligation of Tularik in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.
(c) No Conflicts. The execution, delivery and performance by Tularik
of this Agreement, and each other agreement, document, or instrument now or
hereafter executed and delivered by Tularik pursuant thereto or in connection
herewith will not: (i) conflict with or violate the articles of incorporation or
by-laws of Tularik or any provision of any law, rule, regulation, authorization
or judgement of any governmental authority having applicability to Tularik or
its actions; or (ii) conflict with or result in any breach of, or constitute a
default under, any note, security agreement, commitment, contract or other
agreement, instrument or undertaking to which Tularik is a party or by which any
of its property is bound.
(d) Ownership and Right to Sublicense. Tularik owns (or upon their
creation will own) or has a right to sublicense the Tularik Patents and Tularik
Know-How and all intellectual property rights with respect thereto and has (or
will have) the right and power to grant the rights granted to Taisho under this
Agreement.
(e) Independent Work. Except for the Tularik Patents and Tularik
Know-How licensed to Tularik with a right of sublicense, the Tularik Patents and
Tularik Know-How have been (or upon their creation will have been) independently
created by Tularik's employees, agents and consultants. Use of the Tularik
Patents and Tularik Know-How by Taisho as contemplated herein will not depend on
the acquisition of rights from any third party.
(f) [ * ].
(g) Agreements with Employees and Consultants. Tularik has and will
maintain with all Tularik employees, agents and consultants, written agreements
sufficient to enable Tularik to perform its obligations under this Agreement,
whenever Tularik thinks it is necessary.
Article 10.
Import And Export Controls
10.1 United States Laws. The parties understand and acknowledge that each
of them is subject to regulation by agencies of the U.S. government, including
the U.S. Department of Commerce which prohibit export or diversion of certain
products and technology to certain countries. Any and all obligations of Taisho
or Tularik to provide access to or license any
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18
<PAGE>
technology pursuant to this Agreement, as well as any technical assistance shall
be subject in all respects to such United States laws and regulations as shall
from time to time govern the license and delivery of technology and products
abroad by persons subject to the Jurisdiction of the United States, including
the Export Administration Act of 1979, as amended, any successor or interim
controlling legislation, and the Export Administration Regulations issued by the
Department of Commerce, International Trade Administration, Bureau of Export
Administration. Both parties also agree to comply with the requirements of the
U.S. Foreign Corrupt Practices Act (the "Act") and shall refrain from any
payments to third parties which would cause Taisho or Tularik to violate the
Act. At Taisho's request and expense, Tularik shall advise Taisho regarding
compliance with the Act.
10.2 Non-United States Laws. Taisho and Tularik shall each provide the
other party with such reasonable assistance as may be required for the party
requesting such assistance to comply with all non-United States laws,
ordinances, rules, regulations and the like of all governmental units or
agencies within any territory having jurisdiction pertaining to this Agreement,
including without limitation, obtaining all import, export and other permits,
certificates, licenses or the like required by such non-United States laws,
ordinances, rules, regulations and the like, necessary to permit the parties to
perform hereunder and to exercise their respective rights hereunder.
Article 11.
Limitations Of Liability
NEITHER TULARIK NOR TAISHO WILL BE LIABLE OR OBLIGATED IN ANY MANNER FOR ANY
SPECIAL INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, UNDER ANY CAUSE OF ACTION
AND EVEN IF INFORMED OF THE POSSIBILITY THEREOF IN ADVANCE, ARISING OUT OF THIS
AGREEMENT OR BY REASON OF BREACH OF THIS AGREEMENT. THESE LIMITATIONS WILL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY HEREIN.
Article 12.
Miscellaneous Provisions
12.1 Waiver. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent or similar breach or default.
12.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns;
provided, however, that neither party shall assign any of its rights and
obligations hereunder except as incident to the merger, consolidations,
reorganization, or acquisition of stock or assets affecting substantially all of
the assets or actual voting control of the assigning party.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
19
<PAGE>
12.3 Notices. Any notice or other communication required or permitted to be
given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or five (5) days after mailing by registered or certified
mail, postage paid, to the other party at the following address:
In the case of Tularik: Tularik Inc.
270 E. Grand Ave.
S. San Francisco, CA 94080
Fax:(415) 615-4222
Attention: President
In the case of Taisho:
Taisho Pharmaceutical Co., Ltd.,
24-1, Takata 3-chome
Toshimaku, Tokyo, 171 Japan
Attention: Executive Vice President
Either party may change its address for communications by a notice to the other
party in accordance with this section.
12.4 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
12.5 Amendment. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
12.6 Construction of Agreement and Choice of Law, Jurisdiction and Venue.
This agreement and its terms and conditions shall be governed exclusively by and
construed according to the laws of California, U.S.A., excluding its choice of
law provisions and also excluding the United Nations Convention on Contracts for
International Sale of Goods. The official text of this Agreement and any notices
given or accounts or statements required hereby shall be in English. In the
event of any dispute concerning the construction or meaning of this Agreement,
reference shall be made only to this Agreement as written in English and not to
any other translation into any other language. All disputes which may arise
between the parties hereto in relation to the interpretation or administration
of this Agreement shall be first referred to the Research Committee for
resolution. Any disputes which the Research Committee shall be unable to resolve
with a reasonable period of time shall be resolved by the agreement of the Chief
Executive Officers of the respective parties or their delegates. Any disputes
which cannot be resolved in this manner shall be finally resolved [ * ].
12.7 Force Majeure. Any delays in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The party
suffering such occurrence
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20
<PAGE>
shall immediately notify the other party and any time for performance hereunder
shall be extended by the actual time of delay caused by the occurrence.
12.8 Independent Contractors. In making and performing this Agreement,
Taisho and Tularik act and shall act all times as independent contractors and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship between Tularik and
Taisho. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party.
12.9 Severability. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.
12.10 Cumulative Rights. The rights, powers and remedies hereunder shall be
in addition to, and not in limitation of all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.
12.11 Entire Agreement. This Agreement, and any and all Exhibits referred
to herein, embodies the entire understanding of the parties with respect to the
subject matter hereof and shall supersede all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof, including without limitation the secrecy
agreement between the parties dated December 2, 1994 and the Letter of Intent
dated March 24, 1995.
In Witness Whereof, both Taisho and Tularik have executed this Agreement,
in duplicate originals, by their respective officers hereunto duly authorized,
as of the day and year hereinabove written.
Tularik Inc. Taisho Pharmaceutical Co., Ltd.
By: /s/ David V. Goeddel By: /s/ Akira Ohira
----------------------- -------------------
David V. Goeddel Akira Ohira
Title: President and Title: Executive Vice President
Chief Executive Officer
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21
<PAGE>
EXHIBIT A
Research Program
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
EXHIBIT B
Tularik Assays
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
EXHIBIT C
Initial Annual Research Plan
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.9
Amendment No. 1 TO Research Collaboration and License Agreement
Between Tularik Inc. and Syntex (U.S.A.) Inc.
This Amendment No. 1 (this "Amendment") to the Research Collaboration
and License Agreement dated as of July 8, 1997 (the "Agreement") by and between
Syntex (U.S.A.) Inc., a Delaware corporation, through its Roche Bioscience
division, having offices at 3401 Hillview Avenue, Palo Alto, California 94304
("Roche Bioscience"), and Tularik Inc., a Delaware corporation having offices
at Two Corporate Drive, South San Francisco, California 94080 ("Tularik"), is
entered into as of December 19, 1997.
Whereas, the parties previously entered into the Agreement, which
provided for a collaboration between Roche Bioscience and Tularik to discover
proprietary Targets to use to identify proprietary compounds for development
into Products;
Whereas, the Parties wish to clarify certain Sections of the Agreement
relating to the disclosure of structural information on Validated Hits and the
transferring of compounds between the Parties;
Whereas, the parties desire to modify Schedule B of the Agreement to
clarify the universe of Tularik Background Patent Rights and Existing Third
Party Agreements;
Whereas, in order to accomplish the foregoing, the parties have agreed
to amend the Agreement in part;
Now, Therefore, in consideration of the premises and the mutual
covenants and agreements expressed herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, and
intending to be legally bound, Tularik and Roche Bioscience hereby agree as
follows:
1. Section 1 of the Agreement is hereby amended by adding the following
Sections:
1.77 "Collaboration Medicinal Chemistry Program" means a program
for the chemical synthesis of structural analogs of a Validated Hit in
order to improve the biological properties of such Validated Hit towards a
Target as part of the Research Collaboration
1.78 "Primary Interest" means a small molecule that (i) is, at
the time of identification of such molecule as a Validated Hit, [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
1.
<PAGE>
1.79 "Roche Medicinal Chemistry Program" means a program
conducted by or on behalf of Roche for the chemical synthesis of structural
analogs of a compound in order to improve the biological properties of such
compound, excluding [ * ].
1.80 "Screening Party" has the meaning set forth in Section 5.7.
1.81 "Transferring Party" has the meaning set forth in Section
5.7.
2. Section 5.5 is hereby amended to read in its entirety as set forth
below:
5.5 Roche Bioscience Screening Library. The Roche Bioscience
Screening Library is not part of the Research Compound Library, but may, in
Roche Bioscience's sole discretion, be used in HTS against the Targets.
Except for the Roche Bioscience Screening License, Tularik shall have no
rights to compounds originating from the Roche Bioscience Screening Library
unless a Library Compound becomes a Development Compound under Section 5.2.
Roche Bioscience shall provide structural information on Validated Hits
from the Roche Bioscience Screening Library; [ * ]. Structural information
on compounds in the Roche Bioscience Screening Library that are not
Validated Hits shall [ * ]. Derivatives made as part of a Collaboration
Medicinal Chemistry Program from compounds originating from the Roche
Bioscience Screening Library shall be considered part of the Roche Compound
Library. The Roche Bioscience Screening Library shall be treated as Roche
Bioscience's Confidential Information. .
3. The penultimate sentence of Section 5.6 of the Agreement is hereby
amended to read as follows:
Derivatives made as part of a Collaboration Medicinal Chemistry Program
from compounds originating from the Tularik Screening Library shall be
considered part of the Research Compound Library.
4. Article 5 of the Agreement is hereby amended by adding a new Section
5.7:
Section 5.7 Transfer of Compounds. If either party (the "Transferring
Party") transfers compounds to the other party (the "Screening Party")
pursuant to the screening licenses set forth in Section 12.2 below, the
Screening Party shall use such compounds solely in accordance with the
terms of this Agreement. Such use must be at the Screening Party's place
of business and in accordance with the Research Plan. Any unused quantities
of the compounds shall be returned to the Transferring Party no later than
the end of the Research Term or, upon written request by Transferring
Party, destroyed according to prescribed federal, state and local
guidelines, including any written instructions received from the
Transferring Party. THE TRANSFERRING PARTY DOES NOT MAKE ANY WARRANTY AS
TO THE IDENTITY, PURITY OR ACTIVITY OF THE COMPOUNDS. The Screening Party
shall bear all risk and liability for all harm arising from its use of the
compounds.
5. Schedule B of the Agreement is hereby amended to read in its entirety
as set forth on Schedule B hereto.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
<PAGE>
6. Capitalized terms used herein but not otherwise defined herein shall
have the respective meanings assigned to such terms in the Agreement.
7. Except as expressly modified by this Amendment, all of the terms and
conditions of the Agreement shall remain in full force and effect.
8. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall be considered one and
the same instrument.
In Witness Whereof, the parties have executed, or caused their duly
authorized officer or representative to execute, this Amendment as of October
__, 1997.
Tularik Inc.
By: /s/ David V. Goeddel
----------------------------------------
Name: David V. Goeddel, Ph.D.
Title: President and Chief Executive Officer
Syntex (U.S.A.) Inc.,
through its Roche Bioscience division
By: /s/ James N. Woody
----------------------------------------
Name: James N. Woody, M.D., Ph.D.
Title: President
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3.
<PAGE>
Schedule B
TULARIK BACKGROUND PATENT RIGHTS AND EXISTING THIRD PARTY
AGREEMENTS
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4.
<PAGE>
Exhibit 10.9
Research Collaboration and License Agreement
This Research Collaboration and License Agreement is entered into on July
8, 1997 (the "Effective Date"), by and between Syntex (U.S.A.) Inc., a Delaware
corporation, through its Roche Bioscience division, having offices at 3401
Hillview Avenue, Palo Alto, California 94304 ("Roche Bioscience"), and Tularik
Inc., a Delaware corporation having offices at Two Corporate Drive, South San
Francisco, California 94080 ("Tularik"). Roche Bioscience and Tularik may be
referred to herein as a "Party" or, collectively, as "Parties."
Whereas, Tularik is a recognized leader in conducting research in
inflammatory pathways with assays available or under development for certain key
targets.
Whereas, Roche Bioscience wishes to collaborate with Tularik to discover
proprietary Targets to use to identify proprietary compounds for development
into Products.
Now, Therefore, the Parties agree as follows:
1. Definitions
As used herein, the following terms shall have the following meanings:
1.1 "Additional Indications" means a medical condition that is not
included within the definition of Roche Bioscience Indication or Tularik
Indication.
1.2 "Adjusted Gross Sales" means the amount of gross sales invoiced by a
Developing Party, its Affiliates (which, with respect to Roche Bioscience, shall
include Genentech for purposes of this Section 1.2 only), or sublicensees for a
Product to Third Parties less deductions of returns (including withdrawals and
recalls), rebates (price reductions, including Medicaid and similar types of
rebates, e.g. chargebacks), volume (quantity) discounts, discounts granted at
the time of invoicing, sales taxes and other taxes (other than income taxes),
all to the extent directly linked to and included in the gross sales amount as
computed on a product by product basis for the countries concerned.
1.3 "Affiliate" means a business entity that owns, is owned by or is under
common ownership with a Party. For the purposes of this definition, the term
"owns" (including, with correlative meanings, the terms "owned by" and "under
common ownership with") as used with respect to any Party, shall mean the
possession (directly or indirectly) of more than fifty percent (50%) of the
outstanding voting securities of a corporation or comparable equity interest in
any other type of entity; provided, however, in any country where the local law
does not permit foreign equity participation of at least fifty percent (50%),
then an "Affiliate" includes any business entity in which a Party owns the
maximum percentage of outstanding stock or voting rights permitted by local law
and of which such Party exercises practical control of the management of such
entity's operations with respect to a Product; provided, further, however,
Genentech, Inc., with offices located at One DNA Way, South San Francisco,
California, 94080,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
1
<PAGE>
shall not be considered an Affiliate of Roche Bioscience (other than for
purposes of Section 1.2 only) unless a duly authorized officer of Roche
Bioscience notifies Tularik in writing that Genentech shall be deemed an
Affiliate.
1.4 "Agreement" means the present agreement together with all appendices
and schedules, including the Research Plan.
1.5 "Application" has the meaning set forth in Section 11.3.2.
1.6 "Compound Libraries" means the Roche Bioscience Screening Library, the
Tularik Screening Library, and the Research Compound Library.
1.7 "Confidential Information" means, subject to the limitations contained
in Section 13.2, all information and materials received by either Party from
the other Party pursuant to this Agreement, including but not limited to the
information disclosed pursuant to Sections 6.3.2, 6.3.3, and 6.3.4.
1.8 "Cover" (including variations thereof such as "Covered, "Coverage", or
"Covering) means that the making, having made, using, offering for sale, selling
or importing of a particular product would infringe a Valid Claim of an issued
patent in the absence of rights under such patent. The determination of whether
a product is Covered by particular patent rights shall be made on a country by
country basis.
1.9 "Developing Party" means the Party whom the Research Management
Committee designates to develop a Research Compound into a Product as provided
in Section 5.2.
1.10 "Development Compound" means a Roche Bioscience Compound or a Tularik
Compound.
1.11 "Effective Date" has the meaning set forth in the first paragraph
hereof.
1.12 "Entry into Portfolio" means the date upon which [ * ].
1.13 "FDA" means the United States Food and Drug Administration.
1.14 "Field" means research, development and commercialization of [ * ],
for use in the treatment of Roche Bioscience Indications, Tularik Indications or
Additional Indications.
1.15 "Filing Party" has the meaning set forth in Section 11.3.1.
1.16 "First Commercial Sale" of a Product shall mean the first sale for use
or consumption of such Product in a country after required marketing and pricing
approval has been granted by the governing health regulatory authority of such
country.
1.17 "First Right of Negotiation" has the meaning set forth in Section 7.1.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
1.18 "FTE" means one full time-equivalent research employee.
1.19 "HTS" means high throughput screening.
1.20 "IND" means an Investigational New Drug application as defined in the
rules and regulations of the FDA.
1.21 "Independent Research" has the meaning set forth in Section 2.5.2.
1.22 "Invention" means any possibly patentable discovery or invention made
during the course of the Research Collaboration and within the scope of the
Research Plan. Determination of inventorship shall be made in accordance with
the patent laws of the United States of America.
1.23 "Inventing Party" means the Party having made an Invention.
1.24 "Joint Inventions" has the meaning set forth in Section 11.1.
1.25 "Joint Patent" means a Patent claiming a Joint Invention.
1.26 "Library Compound" means a compound from a Roche Bioscience Screening
Library or a Tularik Screening Library.
1.27 "Licensee" has the meaning set forth in Section 7.2.
1.28 "Major Market" means [ * ].
1.29 "NDA" means a New Drug Application filed pursuant to the requirements
of the FDA or the equivalent application in any other country.
1.30 "Net Sales" means the amount calculated by [ * ].
1.31 "Offer" has the meaning set forth in Section 7.2.
1.32 "Officers" has the meaning set forth in Section 2.5.3.
1.33 "Patent" means (a) patents (including inventors certificates) that
include one or more Valid Claims, including without limitation any substitution,
extension (including supplemental protection certificate), registration,
confirmation, reissue, reexamination or renewal
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
thereof and (b) pending applications, including provisional applications,
continuations, divisionals, and continuations-in-part of any of the foregoing.
1.34 "Patent Management" has the meaning set forth in Section 11.3.1.
1.35 "Patent Costs" means the fees and expenses paid to outside legal
counsel and other Third Parties, and filing, prosecution and maintenance
expenses, incurred in connection with the establishment and maintenance of
Patent Rights.
1.36 "Patent Rights" means all rights under Patents.
1.37 "Pathways" means the [ * ], as described on Exhibit A, and any
additional pathways added to this Agreement upon the written agreement of the
Parties.
1.38 "Phase I" means that portion of the clinical development program which
generally provides for the first introduction into humans of a product with the
primary purpose of determining safety, metabolism and pharmacokinetic properties
and clinical pharmacology of the product, as more precisely defined by the rules
and regulations of the FDA and corresponding rules and regulations in other
countries.
1.39 "Phase II" means that portion of the clinical development program
which provides for the initial trials of a product on a limited number of
patients for the primary purpose of evaluating safety, dose ranging and efficacy
in the proposed therapeutic indication, as more precisely defined by the rules
and regulations of the FDA and corresponding rules and regulations in other
countries.
1.40 "Phase III" means that portion of the clinical development program
which provides for the continued trials of a product on sufficient numbers of
patients to establish the safety and efficacy of a product for the desired
claims and indications, as more precisely defined by the rules and regulations
of the FDA and corresponding rules and regulations in other countries. Any
trial designed to support a NDA without further clinical studies will be
considered a Phase III trial for purposes of this Agreement.
1.41 "Product" means any product incorporating a Development Compound, in
any formulation, designed for treatment of a Roche Bioscience Indication,
Tularik Indication or an Additional Indication, delivered by any route of
administration.
1.42 "Research Collaboration" means the research conducted by the parties
during the Research Term pursuant to the Research Plan and this Agreement.
1.43 "Research Compound" means any analog or other derivative compound,
including a peptidomimetic, that has been synthesized or acquired pursuant to
the Research Plan or at the direction of the Officers as provided in Section
2.5, and is based upon any Validated Hit.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
1.44 "Research Compound Library" means all Research Compounds.
1.45 "Research Plan" has the meaning set forth in Section 4.1.
1.46 "Research Term" has the meaning set forth in Section 6.1.
1.47 "Responsible Party" means the Party responsible for Patent Management.
1.48 "Right of First Refusal" has the meaning set forth in Section 7.2.
1.49 "RMC or Research Management Committee" has the meaning set forth in
Section 3.1.
1.50 "Roche" means Roche Bioscience together with its Affiliates.
1.51 "Roche Bioscience Compound" means a small molecule from any of the
Compound Libraries which the Research Management Committee designates as a
"Roche Bioscience Compound" pursuant to Section 5.2 or which Roche Bioscience
designates as a "Roche Bioscience Compound" pursuant to Section 6.3.2.
1.52 "Roche Bioscience Indications" means [ * ].
1.53 "Roche Bioscience Invention(s)" has the meaning set forth in Section
11.1.
1.54 "Roche Bioscience Patent" means a Patent claiming a Roche Bioscience
Invention.
1.55 "Roche Bioscience Screening Library" means the library consisting of
compounds that have been synthesized or acquired by or on behalf of either Roche
Bioscience or its Affiliates either (a) prior to the Effective Date or (b)
during the Research Term or the applicable Tail Period, if any, but independent
of the Research Collaboration.
1.56 "Roche Bioscience Screening License" has the meaning set forth in
Section 12.2.2.
1.57 "Royalty Receiving Party" has the meaning set forth in Section 10.1.
1.58 "Royalty Term" means, in the case of any Product, in any country, the
period of time commencing on the First Commercial Sale of such Product and
ending upon the later of (a) [ * ] from the date of First Commercial Sale of
such Product in such country or (b) the expiration of the last to expire of the
Patent Rights Covering such Product in such country. Royalty Term shall be
determined on a Product by Product, country by country basis.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5
<PAGE>
1.59 "Scientifically Reasonable and Diligent Efforts" means, unless the
Parties agree otherwise, those efforts consistent with the exercise of prudent
scientific and business judgment, as applied to other products of similar
scientific and commercial potential within the relevant product lines of the
Developing Party and its Affiliates.
1.60 [ * ]
1.61 "Substantial Competition" means market penetration in a country with
respect to a Product by one or more Third Parties with a product [ * ].
1.62 "Tail Period" has the meaning set forth in Section 6.3.2.
1.63 "Target" means an [ * ] and is either (a) listed as an included target
on Exhibit A or (b) discovered by one or both Parties as part of the Research
Collaboration (excluding any molecule that is subject to prior rights of any
Third Party under an agreement with either Party at the time it is discovered,
which agreement is either listed on Exhibit 2 or is subject to the provisions of
Section 2.5) or (c) licensed by either Party during the Research Collaboration
pursuant to Section 2.5.
1.64 "Target Information" has the meaning set forth in Section 2.4.
1.65 "Third Party" means any entity other than Tularik or Roche Bioscience
or an Affiliate of Tularik or Roche Bioscience.
1.66 "Third Party Technology" has the meaning set forth in Section 2.5.2.
1.67 "Tularik Background Patent Rights" means all rights under Patents
existing as of the Effective Date that Tularik owns or to which it has a license
(with rights to sublicense as provided herein) and which relate to the Field,
and which Patents are set forth on Schedule B.
1.68 "Tularik Compound(s)" means a small molecule from any of the Compound
Libraries which the Research Management Committee designates as a "Tularik
Compound" pursuant to Section 5.2 or which Tularik designates as a "Tularik
Compound" pursuant to Section 6.3.2.
1.69 "Tularik Indications" means [ * ].
1.70 "Tularik Invention" has the meaning set forth in Section 11.1.
1.71 "Tularik Patent" means a Patent claiming a Tularik Invention.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6
<PAGE>
1.72 "Tularik Screening Library" means the library consisting of compounds
that have been synthesized or acquired by or on behalf of either Tularik or its
Affiliates either (a) prior to the Effective Date or (b) during the Research
Term or the applicable Tail Period, if any, but independent of the Research
Collaboration.
1.73 " Tularik Screening License" has the meaning set forth in Section
12.2.1.
1.74 "Valid Claim" means a claim of an issued patent which claim has not
lapsed, expired, been canceled or become abandoned and has not been declared
invalid by an unreversed and unappealable decision or judgment of a court or
other appropriate body of competent jurisdiction, and which has not been
admitted to be invalid or unenforceable through reissue or disclaimer.
1.75 "Validated Hit" means a small molecule that has shown activity against
a Target in primary screening as part of the Research Collaboration.
2. Research Collaboration
2.1 Scope of Research Collaboration. The Research Collaboration will
focus on Targets in the Pathways, both in finding new proprietary Targets as
well as with respect to Targets identified by Tularik prior to the Effective
Date, and the use of Targets for HTS assay development to discover proprietary
drug leads. The Research Collaboration will initially focus on elucidating
proprietary drug discovery Targets in the Pathways and is anticipated to be
restricted to proprietary Targets in the Pathways. Roche Bioscience and Tularik
shall conduct the Research Collaboration on a collaborative basis with the goal
of identifying Research Compounds that are suitable for development into
Products for commercialization. The Research Collaboration is intended to be
flexible to allow for pursuit of unforeseen opportunities in the area of
inflammation biology involving the Targets and the Pathways.
2.2 New Targets. If a Target is discovered as part of the Research
Collaboration, the Party discovering such new Target shall notify the Research
Management Committee. At the next Research Management Committee meeting, the
parties shall discuss such new Target. If the Research Management Committee
decides that the new Target should be included in the Research Collaboration,
then Roche Bioscience shall [ * ]. If the new Target is not [ * ] at such time,
such new Target shall be [ * ]. If the new Target is [ * ] at such time, Roche
Bioscience shall [ * ]. If the Research Management Committee or Roche
Bioscience elects to [ * ], then each Party may [ * ] of the other Party
(including its Affiliates) or any Third Party; provided, however, that the Party
that did not discover such Target shall not [ * ].
2.3 [ * ].
2.4 [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7
<PAGE>
2.5 Exclusivity/Third Party Agreements.
2.5.1 Exclusivity. Neither Tularik (nor any future Affiliates) nor
Roche Bioscience shall, during the Research Term and applicable Tail Period, if
any, enter into an agreement that grants rights in the Field to a Third Party,
without the prior written consent of the other Party, which consent may be
withheld in its sole discretion.
2.5.2 Activities Relating to the Field. Except as provided in this
Section 2.5, neither Tularik (nor any future Affiliates) nor Roche Bioscience
shall, during the Research Term and applicable Tail Period, if any, [ * ].
2.5.3 Joint Decision-Making Process. If either Party wishes to
acquire or use any Third Party Technology or conduct or fund any Independent
Research, it shall present such opportunity to the officers designated in
Section 17.2 (the "Officers"). If the Officers wish to include such Third Party
Technology or Independent Research in the Research Plan, then the Parties shall
mutually agree in writing on the terms under which such Third Party Technology
or Independent Research will be incorporated into the Research Collaboration,
including a reasonable sharing of the costs thereof; provided, however, that
Roche Bioscience shall [ * ]. If a Third Party agreement is relevant to such
decision, it shall be disclosed in full to the other Party. Each Party shall be
bound by the applicable terms and conditions of any Third Party agreement prior
to receiving access to Third Party Technology, including but not limited to any
milestones or royalty payments applicable to any compounds or products developed
by such Party using such Third Party Technology. The Developing Party shall be
responsible for fulfilling all such Third Party financial obligations applicable
to Development Compounds in accordance with Section 9.6. Each Party
acknowledges that any rights that derive from such Third Party agreements are
subject to the terms of such agreements, notwithstanding any provisions of this
Agreement. If the Officers do not agree to include such Third Party Technology
or Independent Research in the Research Plan on mutually-agreeable terms, then
the provisions of Section 2.5.5 shall apply.
2.5.4 Re-Presentation to Officers. If a Party proposes to acquire
Third Party Technology and the Officers do not agree to acquire such Third Party
Technology, then either Party may negotiate such an agreement with such Third
Party; provided however, that the negotiating Party shall re-present such
opportunity to the other Party pursuant to Section 2.5.3 promptly following
execution of such Third Party agreement.
2.5.5 Outside Activities. If the Officers do not agree to include
any particular Third Party Technology or Independent Research in the Research
Plan on mutually-agreeable terms, then, subject to Section 2.5.4, either Party
may conduct or fund such Independent
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8
<PAGE>
Research, or use such Third Party Technology, outside the Research Collaboration
(the "Outside Activities"); provided, however, that [ * ]. Should such [ * ]
occur, the Party conducting the Outside Activities shall indemnify the other
Party for any [ * ]; provided, however, that the other Party takes commercially
reasonable steps, if any are possible or practical, to [ * ]; and provided,
further, that the other Party permits [ * ]. If a Party conducts or funds
Independent Research outside the Research Collaboration, and [ * ], then during
the Research Term such Party may not [ * ], except with the prior written
consent of the other Party, which consent may be withheld in its sole
discretion.
3. Research Management Committee
3.1 Formation of Research Management Committee. The Research
Collaboration shall be managed by the Research Management Committee comprised of
an equal number of members appointed by each of Roche Bioscience and Tularik;
provided that the size of the Research Management Committee shall not exceed a
total of eight members. Either Party may appoint substitute or replacement
members of the Research Management Committee to serve as their representatives.
The initial members of the Research Management Committee shall be appointed by
the Parties within 30 days following the Effective Date. The Research
Management Committee shall have the responsibility and authority to: (a) plan
and monitor the research; (b) assign tasks and responsibilities under the
Research Plan to Tularik and Roche Bioscience; (c) review and modify the
Research Plan as it shall deem appropriate to achieve the Parties' objectives of
developing commercially successful Products; and (d) nominate Research Compounds
for IND-enabling studies (and designate any such Research Compounds as either
Roche Bioscience Compounds or Tularik Compounds prior to the commencement of
such studies); provided that the Research Management Committee may not take any
action in conflict with the express terms of this Agreement.
3.2 Meetings of Research Management Committee. The Research Management
Committee shall initially meet at least four times per year at locations and
times to be determined by the Research Management Committee, with the intent of
meeting at alternating locations in South San Francisco, California and Palo
Alto, California, with each Party to bear all travel and related costs for its
members.
3.3 Decision-Making Process. All decisions made or actions taken by the
Research Management Committee shall be made unanimously by its members with the
Tularik members cumulatively having one vote and the Roche Bioscience members
cumulatively having one vote. Any disagreement which cannot be resolved by the
vote of the Research Management Committee shall be referred to the Officers for
resolution under Section 17.2. [ * ]. It is the intent of the Parties to
resolve issues relating to the Research Collaboration through the Research
Management Committee whenever possible and to refer issues to the Officers only
when resolution through the Research Management Committee cannot be achieved.
4. Conduct of Research
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9
<PAGE>
4.1 Research Plan. The research shall be conducted in accordance with the
initial research plan agreed upon and exchanged by the Parties concurrent with
the execution of this Agreement, as such research plan may be amended from time
to time in writing by the Research Management Committee (the "Research Plan").
The Research Plan defines the key decision points, timing to key decision
points, resource and funding allocation and other details identified by the
Research Management Committee. The Research Plan will be reviewed and approved
annually by the Research Management Committee to ensure adequate resource and
funding allocation to key activities at Tularik and Roche Bioscience [ * ]. If
there is a conflict between the provisions of the body of this Agreement and the
Research Plan, then the provisions of the body of this Agreement shall govern.
4.2 Tularik Responsibilities. Tularik shall provide [ * ]. Tularik shall
be responsible for [ * ]. Tularik shall [ * ]. Tularik shall conduct [ * ].
Tularik shall [ * ]. Based upon resources, Tularik may [ * ]. Tularik shall
conduct [ * ]. Tularik shall be responsible for [ * ]; provided, however, that
Tularik shall [ * ].
4.3 Roche Bioscience Responsibilities. Roche Bioscience may conduct [ *
]. Roche Bioscience (or its Affiliates) shall be responsible for [ * ].
4.4 Research Efforts. Each Party shall use Scientifically Reasonable and
Diligent Efforts to perform the respective responsibilities set forth in Section
4.2 and 4.3 and under the Research Plan; provided that Tularik shall not be
required to allocate more than [ * ] FTEs to the Research Collaboration in any
year. Except as expressly provided in Section 9.2 or as otherwise agreed from
time to time by the Parties, each of Roche Bioscience and Tularik shall bear all
of its own expenses incurred in connection with the Research Collaboration.
4.5 Abandonment. Roche Bioscience shall have the right to abandon one or
more of the Pathways if any of the following circumstances occur: [ * ];
provided however, that the occurrence of such circumstances shall not give rise
to a right to terminate the Research Collaboration or to reduce the research
support below the minimum provided in Section 9.2, provided, further, that the
Parties will use best efforts to substitute alternative inflammation targets or
pathways for further research, upon the mutual written agreement of both
Parties, to fully utilize the funding provided for in Section 9.2.
4.6 Availability of Resources. Each Party shall maintain laboratories,
offices and all other facilities reasonably necessary to carry out the Research
Collaboration. Each Party agrees to make its employees and non-employee
consultants reasonably available at their respective places of employment to
consult with the other Party on issues arising in the course of the Research
Collaboration and in connection with any request from any regulatory agency,
including, without limitation, regulatory, scientific, technical and clinical
testing issues. Representatives of Tularik and Roche Bioscience may, upon
reasonable notice and at times reasonably acceptable to the other Party (a)
visit the facilities where the Research Collaboration is being conducted; and
(b) consult informally, during such visits and by telephone and electronic mail,
with personnel of the other Party performing work on the Research Collaboration.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10
<PAGE>
4.7 Reports. Each Party shall make summary presentations of research
progress at each meeting of the Research Management Committee. Each Party will
also communicate informally and through the Research Management Committee to
inform the other of research done under the Research Collaboration. Each Party
will provide the other with raw data in original form or photocopies thereof for
any and all work carried out under the Research Collaboration as reasonably
requested by the other Party hereto. To avoid potential conflicts of interest,
[ * ]; provided, however, that if the parties cannot agree, [ * ]. To avoid
potential conflicts of interest, [ * ].
5. Compounds and Compound Libraries
5.1 Research Compound Library.
5.1.1 During the Research Term. During the Research Term, (a) each
Party may use Research Compounds in models compatible with their respective
Indications within the Field; (b) all data generated on Research Compounds as
part of the Research Collaboration shall be made available to each Party; and
(c) Roche Bioscience and Tularik shall each provide samples of the Research
Compounds it has synthesized (e.g. aliquots of Research Compounds) to the other
Party at such Party's request.
5.1.2 During and After the Research Term. During and after the
Research Term, (a) a common numbering system shall be maintained for the
Research Compounds; (b) each party may use all Research Compounds in any manner
such party deems appropriate, subject to Sections 5.2, 5.3, 6.3.2, 6.3.3, and
Article 8; (c) each Party shall, immediately prior to the filing of an IND for a
Research Compound outside the Field, disclose such filing, and the research
number of such Research Compound for which it is filed, to the other Party [ *
]; (d) the Parties shall cross-license to each other rights to the Research
Compounds in accordance with Sections 12.3, 12.4, and 12.5, as applicable.
5.2 Designation of Development Compounds. During the Research Term,
immediately prior to the [ * ] by either Party on any Research Compound or
Library Compound that is primarily directed against a Target, such Party shall
take such Research Compound or Library Compound to the Research Management
Committee for review. The Research Management Committee shall designate such
Research Compound or Library Compound as a Roche Bioscience Compound for
development by Roche Bioscience or a Tularik Compound for development by Tularik
based upon [ * ]. Neither Party may commence such studies on any Research
Compound or Library Compound that is primarily directed against a Target until
the Research Management Committee has made such designation. If, based on [ *
], a Research Compound is [ * ], the Research Management Committee shall
designate such Research Compound as [ * ].
5.3 [ * ]. Under no circumstances during the term of this Agreement and
thereafter, shall the [ * ]. If a Research Compound or Library Compound is
designated a Development Compound, or if a Party notifies the other Party that
it is [ * ] for a
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11
<PAGE>
Research Compound pursuant to Section 5.1.2 or Section 6.3.3, [ * ]. However,
during the Research Term and applicable Tail Period, the other Party shall [ *
].
5.4 Additional Indication(s). Assignment of an Additional Indication as
either a Roche Bioscience Indication or a Tularik Indication shall be negotiated
in good faith between the Parties on an as needed basis. Following such
negotiation, such Additional Indication shall become a Roche Bioscience
Indication or a Tularik Indication, as the case may be; provided, however, that
if after such negotiations, the parties cannot agree on the assignment of an
Additional Indication, [ * ].
5.5 Roche Bioscience Screening Library. The Roche Bioscience Screening
Library is not part of the Research Compound Library, but may, in Roche
Bioscience's sole discretion, be used in HTS against the Targets. Except for
the Roche Bioscience Screening License, Tularik shall have no rights to
compounds originating from the Roche Bioscience Screening Library unless a
Library Compound becomes a Development Compound under Section 5.2. Roche
Bioscience shall provide structural information on Validated Hits[ * ].
Derivatives made as a result of HTS as part of the Research Collaboration from
compounds originating from the Roche Bioscience Screening Library shall be
considered part of the Research Compound Library. The Roche Bioscience
Screening Library shall be treated as Roche Bioscience's Confidential
Information.
5.6 Tularik Screening Library. The Tularik Screening Library is not part
of the Research Compound Library, but may be used in HTS against the Targets.
Except for the Tularik Screening License, Roche Bioscience shall have no rights
to compounds originating from the Tularik Screening Library unless a Library
Compound becomes a Development Compound under Section 5.2. Tularik shall
provide structural information to Roche Bioscience on Validated Hits [ * ].
Derivatives made as a result of HTS as part of the Research Collaboration from
compounds originating from the Tularik Screening Library shall be considered
part of the Research Compound Library. The Tularik Screening Library shall be
treated as Tularik's Confidential Information.
6. Research Term
6.1 Research Term. The term of the Research Collaboration shall commence
on the Effective Date and end on the fifth anniversary of such Effective Date
unless it is terminated early in accordance with Section 6.2 or Section 15.2
(the "Research Term").
6.2 Early Termination of Research Term.
6.2.1 Third Anniversary. Roche Bioscience may terminate the Research
Collaboration effective as of the third anniversary of the Effective Date upon
four months' advance written notice if the Research Management Committee decides
that (a) the then current Research Plan does not provide opportunities for new
Products (i.e. the Pathways have been fully exploited and no opportunities
remain within the Field) or (b) Tularik has been unable to meet its obligations
as defined in the Research Plan.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12
<PAGE>
6.2.2 [ * ].
6.3 Impact of Expiration or Termination.
6.3.1 Survival. Upon conclusion of the Research Term or applicable
Tail Period, if any, all terms and obligations of this Agreement shall remain in
full force and effect unless a Development Compound does not exist, in which
case this Agreement shall expire in accordance with Article 15.
6.3.2 Tail Period. Notwithstanding the provisions of Section 6.3.1,
if the Research Collaboration terminates pursuant to Section 6.2.1, then for a
period of [ * ] months following the end of the Research Term or, if the
Research Collaboration continues for five (5) years, for a period of [ * ]
following the end of the Research Term (each period of time, a "Tail Period"),
each Parties' use of compounds from any Compound Library in the Field (other
than Outside Activities pursuant to Section 2.5) shall be subject to the terms
of this Section 6.3.2. Upon initiation of any [ * ] on any such compound that
is [ * ] during the applicable Tail Period, the Party developing such compound
shall notify the other Party that such studies are to commence and, if such
compound is a Research Compound, disclose the research number of such Research
Compound. Thereafter, such compound shall be treated as a Development Compound
of the notifying Party subject to all terms of this Agreement. If the Research
Term terminates early pursuant to Section 15.2, then there shall be no Tail
Period for the non-breaching Party and a [ * ] Tail Period for the breaching
Party as provided in Sections 15.3.2 and 15.3.3.
6.3.3 Post Research Term/Tail Period Notifications. At the end of
the Research Term or the applicable Tail Period, if any, both Parties are free
to use the Research Compound Library within the Field (other than the
Development Compounds) without regard to the terms of this Agreement; provided,
however, that each Party shall, immediately prior to the filing [ * ] for a
Research Compound in the Field, disclose such filing, and the research number of
such Research Compound for which it is filed, to the other Party and the other
Party shall not, in accordance with Section 5.3, develop the same Research
Compound.
6.3.4 Status Reports. Each Party shall prepare and deliver to the
other Party status reports every [ * ] following expiration of the Research
Term. Each such status report shall be a summary of progress with respect to
the Development Compounds. Status reports shall continue to be prepared and
delivered for the longer of (i) the applicable Tail Period or (ii) the period of
time that a Party is developing a Development Compound, to enable the Parties to
ensure that each Party is discharging the obligations contained in Article 8, [
* ], and to ensure that each Party is otherwise in compliance with this
Agreement.
7. First Right of Negotiation and Right of First Refusal
7.1 First Right of Negotiation. Under the terms and conditions set forth
herein, Roche Bioscience shall have a first right to negotiate with Tularik for
an exclusive license,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13
<PAGE>
including the right to grant sublicenses, to develop, make, have made, use,
offer for sale, sell and import certain compounds or products as described in
this Section 7.1 (the "First Right of Negotiation"). Roche Bioscience shall
provide written notice to Tularik if Roche Bioscience wishes to exercise a First
Right of Negotiation and Tularik shall provide written notice to Roche
Bioscience prior to entering into any negotiation in the areas described in this
Section 7.1. During the [ * ] period following any such notice, Roche Bioscience
and Tularik shall negotiate in good faith regarding the terms and conditions of
such agreement. If Roche Bioscience and Tularik are unable to agree upon
mutually acceptable terms for any such agreement by the end of the applicable [
* ] period, Tularik shall be free to grant such rights to a Third Party. The
Right of First Negotiation shall expire upon the termination of the Research
Term or applicable Tail Period.
7.1.1 [ * ] Pathways. Roche Bioscience shall have a First Right of
Negotiation to collaborate with Tularik to discover compounds [ * ], all as
described on Schedule A.
7.1.2 [ * ] Roche Bioscience shall have the First Right of
Negotiation for [ * ].
7.2 Right of First Refusal. Under the terms and conditions set forth
herein, Tularik shall grant Roche Bioscience a right of first refusal for an
exclusive license, including the right to grant sublicenses, to develop, make,
have made, use, offer for sale, sell and import certain compounds or products as
described in this Section 7.2 (the "Right of First Refusal"). Tularik shall
negotiate exclusively with Roche Bioscience for [ * ] for such licenses prior to
Tularik offering such opportunity to any Third Party. If the Parties have not
reached agreement by the end of such [ * ] exclusive negotiation period, Tularik
may negotiate with Third Parties. When Tularik and such Third Party have
reached consensus on the financial terms and general scope of a proposed license
agreement, Tularik must offer Roche Bioscience the opportunity to enter into a
license agreement with Tularik on the same financial terms and general scope of
such proposed license agreement (the "Offer"). Roche Bioscience has [ * ] to
unqualifiedly accept or decline such Offer in writing. If Roche Bioscience
fails to respond within such time period, it shall be deemed to have declined
such Offer. If Roche Bioscience declines the Offer, Tularik has no further
obligation to grant such a Right of First Refusal to Roche Bioscience with
respect to the license opportunity that Roche Bioscience has declined; provided,
however, that if Tularik and any Third Party materially reduce the financial
terms that were offered to Roche Bioscience, Tularik must re-offer the new terms
to Roche Bioscience. Roche Bioscience has [ * ] to unqualifiedly accept or
decline such Offer in writing. If Roche Bioscience fails to respond within such
time period, it shall be deemed to have declined such Offer.
7.2.1 [ * ] Roche Bioscience shall have the Right of First Refusal
[ * ]. If Roche Bioscience declines its Right of First Refusal and Tularik [
* ]. This Right of First Refusal shall expire upon the expiration or
termination of this Agreement.
7.2.2 [ * ] Roche Bioscience shall have the Right of First Refusal
to collaborate with Tularik to develop [ * ]. This Right of First Refusal shall
expire upon the expiration or termination of this Agreement.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14
<PAGE>
7.2.3 [ * ] Roche Bioscience shall have the Right of First Refusal
to collaborate with Tularik to develop [ * ]. This Right of First Refusal shall
commence upon the third anniversary of the Effective Date and expire upon the
expiration or termination of the Research Term or applicable Tail Period.
8. Reversion Rights
8.1 Diligence. The Developing Party shall use Scientifically Reasonable
and Diligent Efforts to develop and commercialize Development Compounds into
Products; provided, however, that either Party may terminate development of a
Development Compound at any time for any reason and, subject to Section 8.4, the
Developing Party may elect in its sole discretion whether to market a Product in
a given country.
8.2 Pre-IND. After a compound has been designated as a Development
Compound and prior to acceptance of an IND for such Development Compound, if a
Developing Party (a) determines to discontinue development of such Development
Compound for any reason or (b) fails to [ * ] of such designation, then the
other Party shall have the right to designate such Development Compound in
writing as its own Development Compound for its own Indications and shall pay
the subsequent applicable milestone(s) (if Roche Bioscience is the other Party)
and royalties to the former Developing Party at the rates set forth in Sections
9.4 and 9.5. If such Party does not designate such Development Compound in
writing as its own Development Compound within [ * ], or if such Party does make
such written designation but subsequently determines to discontinue development
of such Development Compound for any reason, then such Development Compound
shall return to the Compound Library from which it originated (i.e., the
Research Compound Library, the Roche Bioscience Screening Library or the Tularik
Screening Library, as appropriate).
8.3 Post-IND/Pre-NDA. After acceptance of an IND for a Development
Compound but prior to NDA approval for such Development Compound, if a
Developing Party (a) determines to discontinue development of a Development
Compound for any reason or (b) fails to [ * ], then the other Party shall have
the right to designate such Development Compound in writing as its own
Development Compound for its own Indications and shall pay the subsequent
applicable milestone(s) (if Roche Bioscience is the other Party) and royalties
to the former Developing Party at the rates set forth in Sections 9.4 and 9.5.
If such Party does not designate such Development Compound in writing as its own
Development Compound within [ * ], or if such Party does make such written
designation but subsequently determines to discontinue development of such
Development Compound for any reason, then such Development Compound shall return
to the Compound Library from which it originated (i.e., the Research Compound
Library, the Roche Bioscience Screening Library or the Tularik Screening
Library, as appropriate). Any dispute as to whether or not the Developing Party
shall have [ * ] shall be resolved in accordance with Section 17.
8.4 Failure to [ * ] Following approval of an NDA for a Product
containing a Development Compound in a Major Market, if Tularik fails to [ * ],
Roche Bioscience may, at its
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15
<PAGE>
option, [ * ] and have the right to [ * ]. If Tularik licenses or sublicenses a
Development Compound or Product, this Section 8.4 shall not apply to the
licensee or sublicensee.
9. Payments
9.1 Technology Access Fee. Within ten (10) calendar days of the Effective
Date, Roche Bioscience shall pay Tularik a technology access fee equal to [ * ].
Such technology access fee shall be non-refundable and shall not be credited
against royalties payable to Tularik under this Agreement.
9.2 Research Funding. Roche Bioscience shall provide funding to support
Tularik research in the Field during the Research Term in accordance with the
Research Plan. During the Research Term, Roche Bioscience shall [ * ] for an
aggregate cost of [ * ] per year to support the Research Plan. [ * ].
9.3 Development Costs. Roche Bioscience or its Affiliates shall be
responsible for development costs of Roche Bioscience Compounds in Roche
Bioscience Indications. Tularik shall be responsible for development costs of
Tularik Compounds in Tularik Indications.
9.4 Milestones.
9.4.1 Milestones Payments. Roche Bioscience shall pay Tularik the
following amounts within thirty (30) days after each occurrence of the following
events. Each payment under this Section 9.4.1 shall be made for, and only for,
the first Roche Bioscience Compound directed against each particular Target that
achieves such milestone.
Payment Milestone
- ------------------------------------------------------------------------------
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
Roche Bioscience shall notify Tularik of the occurrence of each milestone for
each Roche Bioscience Compound. Such milestone payments shall be non-refundable
[ * ]. Further milestone payments shall not be paid with respect to any
particular Roche Bioscience Compound if it [ * ]. If a Roche Bioscience
Compound is developed for additional Roche Bioscience Indications, [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16
<PAGE>
9.4.2 Additional Clinical Milestones. If Roche Bioscience develops
another Roche Bioscience Compound directed against the same Target for which all
milestones under Section 9.4.1 have previously been paid, and such new Roche
Bioscience Compound is being developed for a different Roche Bioscience
Indication than the original Roche Bioscience Compound for which Roche
Bioscience has previously paid the milestones, then Roche Bioscience shall
[ * ].
Payment Additional Clinical Milestone
- --------------------------------------------------------------------------
[ * ] [ * ]
[ * ] [ * ]
9.4.3 No Milestone Payments by Tularik. Tularik shall not be
obligated to make any milestone payments to Roche Bioscience.
9.5 Royalties.
9.5.1 Reciprocal Royalties. The Developing Party shall owe the other
Party the following royalties based on the Net Sales of each Product during the
Royalty Term.
Royalty Rate Net Sales
- --------------------------------------------------------------------------
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
9.5.2 Royalty Reduction. If the Developing Party is required to pay
royalties to a Third Party to avoid infringing Third Party patent rights [ * ],
then the royalties due to the other Party in any calendar quarter shall be
reduced by [ * ] percent [ * ] of the amount of such Third Party royalties in
such calendar quarter, provided that in no calendar quarter shall the other
Party receive less than the minimum royalty rates set forth in the chart below
by reason of this Section 9.5.2.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17
<PAGE>
Minimum Royalty Rate Net Sales
- --------------------------------------------------------------
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
9.5.3 Further Reduction in Minimum Royalties. If the aggregate Third
Party royalties the Developing Party is required to pay to Third Parties to [ *
], including but not limited to Third Party royalties described in Section 9.5.2
and royalties due to the other Party under Sections 9.5.1 or 9.5.2, exceed an
aggregate of [ * ] of Net Sales of the Product in any calendar year, then the
last two minimum royalty rates set forth in Section 9.5.2 shall be further
reduced as follows. [ * ].
9.5.4 [ * ] If Tularik licenses or sublicenses a Research Compound
to a Third Party to commercialize such [ * ], then Tularik shall pay Roche
Bioscience royalties of [ * ] of the minimum royalty rates set forth in the
table in Section 9.5.2, as adjusted pursuant to Section 9.5.5, on Net Sales of
such Research Compound determined as if such product was a Product, including
the provisions of Article 10.
9.5.5 No Patent Protection. If a Product is not Covered by a Valid
Claim of a Patent and there is Substantial Competition in a country with respect
to such Product in a calendar year, each Royalty Rate, including each Minimum
Royalty Rate, shall be reduced for Net Sales in such country by [ * ].
9.6 Third Party Agreements. The Developing Party shall be responsible for
fulfilling all Third Party obligations, including but not limited to financial
obligations, arising with respect to the development and commercialization of
Development Compounds under agreements either Party has with Third Parties,
including but not limited to agreements for [ * ], subject to Sections 9.5.2 and
9.5.3; provided, however, that such Third Party agreement has been approved by
the Officers in accordance with Section 2.5.
10. Records; Audits; and Reports
10.1 Records. During the term of this Agreement and for a period of [ * ]
thereafter, the Developing Party shall keep complete and accurate records
pertaining to the sale or other disposition of Products in sufficient detail to
permit the other Party (the "Royalty Receiving Party") to confirm the accuracy
of all payments due hereunder.
10.2 Audit
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18
<PAGE>
10.2.1 Independent Audit by Developing Party's Auditors. During the
term of this Agreement and for a period of [ * ]] thereafter, the Developing
Party shall keep complete and accurate records pertaining to the sale or other
disposition of Products in sufficient detail to permit the Royalty Receiving
Party to confirm the accuracy of all payments due hereunder. Upon the request
of the Royalty Receiving Party, the Developing Party shall, at its own expense,
instruct its independent accounting firm to perform, during the Developing
Party's annual audit, such additional auditing and accounting procedures as are
necessary to enable such accounting firm to confirm to the Royalty Receiving
Party the correctness of (a) the amounts stated in any reports provided by the
Developing Party to Royalty Receiving Party and (b) to the extent specifically
and reasonably requested, in a timely manner, by an independent accounting or
audit specialty firm designated by the Royalty Receiving Party, other relevant
details pertaining to the sale of other disposition of Products and of the
royalty and other amounts payable or receivable under this Agreement, including
the relevant details of Adjusted Gross Sales and Net Sales; such additional
accounting and auditing procedures need only to be performed for countries
specifically requested by the Royalty Receiving Party.
10.2.2 Independent Audit by Royalty Receiving Party's Auditors.
Notwithstanding the foregoing, if (a) the Royalty Receiving Party believes that
an additional audit is appropriate after reviewing the information received from
the Developing Party's independent accounting firm, (b) the Developing Party
elects not to have its independent auditors prepare such an audit report for the
Royalty Receiving Party, or (c) a Royalty Receiving Party believes in good faith
that inaccuracies in the reporting have occurred, the Royalty Receiving Party
shall have the right to cause an independent, major certified public accountant
firm reasonably acceptable to the Developing Party to audit such records to
confirm the Developing Party's Net Sales for the preceding three years. Any
information obtained during such audit shall be treated as Confidential
Information of the Developing Party. Such audits may be exercised during normal
business hours once a year upon at least thirty (30) working days' prior written
notice to the Developing Party. The Royalty Receiving Party shall bear the full
cost of such audit unless such audit discloses a variance of more than [ * ]
from the amount of the Net Sales reported by the Developing Party for such
audited period. In such case, the Developing Party shall bear the full cost of
such audit. The terms of this Section 10.2 shall survive any termination or
expiration of this Agreement for a period of two years.
10.3 Payment; Reports. All royalty payments due to either Party under this
Agreement shall be paid within [ * ] of the end of each calendar quarter, unless
otherwise specifically provided herein. Each payment of royalties shall be
accompanied by a report of Net Sales in sufficient detail to permit confirmation
of the accuracy of the royalty payment made.
10.4 Exchange Rate. Royalty payments and reports for the sale of Products
shall be calculated and reported for each calendar quarter. With respect to
each quarter, for countries other than the United States, whenever for the
purpose of calculating royalties conversion from any foreign currency shall be
required, such conversion shall be made as follows:
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
19
<PAGE>
10.4.1 [ * ] When calculating the Adjusted Gross Sales for Roche,
the amount of such sales in foreign currencies shall be converted into [ * ].
When calculating the royalties on Net Sales for Roche, such conversion shall be
at [ * ].
10.4.2 Tularik Exchange Rate. When calculating the Adjusted Gross
Sales for Tularik, the amount of such sales in foreign currencies shall be
converted into United States dollars for the countries concerned, using the [ *
] or such other exchange mechanism as Roche Bioscience shall approve, which
approval shall not be unreasonably withheld or delayed.
10.5 Manner and Place of Payment. All payments owed under this Agreement
shall be made by wire transfer, unless otherwise specified by the receiving
Party.
10.6 Late Payments. In the event that any payment, including royalty,
milestone and research payments, due hereunder is not made when due, the payment
shall accrue interest from the date due until the date paid at the rate of [ * ]
per month; provided that in no event shall such rate exceed the maximum legal
annual interest rate. The payment of such interest shall not limit any Party
from exercising any other rights it may have as a consequence of the lateness of
any payment.
10.7 Taxes. All turnover and other taxes levied on account of the
royalties and other payments accruing to each Party under this Agreement shall
be paid by the Party receiving such royalty or other payment for its own
account, including taxes levied on income of the Royalty Receiving Party. If
provision is made in law or regulation for withholding, such tax shall be
deducted from the royalty or other payment made by the Party making such payment
to the proper taxing authority and a receipt of payment of the tax secured and
promptly delivered to the Royalty Receiving Party. Each Party agrees to assist
the other Party in claiming exemption from such deductions or withholdings under
any double taxation or similar agreement or treaty from time to time in force.
11. Patent Rights and Infringement
11.1 Ownership and Inventorship. Any Invention that is made (a) solely by
one or more representatives of Tularik shall be owned solely by Tularik (a
"Tularik Invention"); (b) solely by one or more representatives of Roche
Bioscience shall be owned solely by Roche Bioscience (a "Roche Bioscience
Invention"); and (c) jointly by one or more representatives of Tularik and one
or more representatives of Roche Bioscience shall be owned jointly by Tularik
and Roche Bioscience (a "Joint Invention"). Determination of inventorship shall
be made in accordance with the patent laws of the United States of America. If
the parties cannot agree on inventorship, determination of inventorship shall be
made by mutually agreed upon patent counsel in accordance with the patent laws
of the United States of America.
11.2 Disclosure. As soon as an Inventing Party determines that an
Invention may have been made, it shall promptly inform the other Party in
writing and then provide a summary of the possible Invention as soon as possible
and in no event no later than the date of filing a priority patent application
for the Invention.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20
<PAGE>
11.3 Patent Management.
11.3.1 Filing Party. Only one Party shall be responsible for the
preparation, filing, prosecution, and maintenance (the "Patent Management") of a
Patent (the "Filing Party"), subject to the provisions of Section 11.3.2. The
Inventing Party shall be initially responsible for the Patent Management of any
Patent Covering an Invention; provided however, that when the Research
Management Committee designates the first Research Compound claimed within such
Patent as a Development Compound and the Developing Party is not the Inventing
Party, responsibility for the Patent Management of such Patent shall be
transferred to the Developing Party. With respect to Joint Patents, the
Research Management Committee shall initially allocate responsibility for Patent
Management in accordance with the relative inventive contributions of the
Parties, with Patent Management responsibility being transferred as described
above if and when a compound Covered in the Joint Patent is designated as a
Development Compound. Subject to Section 11.4, once Patent Management is
transferred as described above, Patent Management shall remain the
responsibility of the Developing Party, subject to Section 11.3.2, even if the
other Party begins to develop a related compound Covered in the Patent. If a
Party begins development of a Research Compound pursuant to Section 5.1.2 or
6.3.3 and such Party is not the Inventing Party, the Inventing Party shall
transfer responsibility for Patent Management for such Patent to the Party
developing such Research Compound; [ * ]. In the event of any disagreement
concerning any Joint Patent, the matter shall be resolved in accordance with
Section 17.2.
11.3.2 Review Procedures. The Filing Party shall provide the other
Party with drafts of any patent application directed to an Invention (the
"Application") prior to filing the Application, with a request for review within
a certain time period. The Filing Party shall endeavor to allow at least [ * ]
but a minimum of [ * ] for review and comment by the other Party. The Filing
Party shall endeavor in good faith to incorporate such comments, particularly if
the other Party is developing a compound that may be Covered in such Patent. If
the other Party fails to respond within the time period specified by the Filing
Party (which shall be at least [ * ], the Filing Party shall not be obligated to
delay the filing of such Application. In addition, the Filing Party shall
promptly provide the other Party with copies of all substantive communications
to and from the United States or any foreign patent office regarding such patent
applications and resulting patents, allowing at least [ * ] for review and
comment by the other Party prior to the due date for the response to the patent
office. Each Party shall maintain any information received from the other Party
relating to a Patent as Confidential Information of the other Party.
11.4 Reversion. If (a) a Development Compound for which an Application has
been filed is returned to the Research Compound Library and the other Party is
either developing a related compound or elects to develop such Research Compound
pursuant to Section 8.2 or 8.3, or (b) the Filing Party elects upon prior
written notice to the other Party (given at least ninety (90) days prior to any
relevant deadline) to (i) discontinue prosecution or maintenance or (ii) not to
file or conduct any further activities (including conducting any interferences,
re-examinations, reissues, or oppositions) with respect to an Application or a
Patent, then the Filing Party shall
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21
<PAGE>
offer to transfer such Application or Patent to the other Party, who may, at its
sole discretion, accept such transfer.
11.5 Patent Costs. Except for Patents Covering Research Compounds, [ * ]
shall be responsible for all Patent Costs for the Patent Rights [ * ]. All
Patent Costs for the Joint Patents shall be divided equally between the Parties,
[ * ]. The Party developing a Research Compound shall pay the Patent Costs for
Patents Covering such Research Compound; provided, however, that if both Parties
are developing compounds claimed in such Patent, then the Patent Costs shall be
divided equally between the Parties.
11.6 Non-Patentable Technology. All non-patentable information and
materials generated or developed in the course of the Research Collaboration
solely by one or more representatives of Roche Bioscience shall be owned solely
by Roche Bioscience. All non-patentable information and materials generated or
developed in the course of the Research Collaboration solely by one or more
representatives of Tularik shall be owned solely by Tularik. All non-patentable
information and materials generated or developed in the course of the Research
Collaboration by one or more representatives of both Roche Bioscience and
Tularik shall be owned jointly by Roche Bioscience and Tularik.
11.7 Foreign Patent Filings. For a given priority Application, the Filing
Party shall provide to the other Party no later than [ * ] after its filing date
in the United States, a list of countries in which it intends to perform
corresponding foreign filing. Upon written request by the other Party, the
Filing Party shall file and prosecute the Application in all other additional
countries requested by the other Party at the sole expense of the other Party
(out-of-pocket expenses only).
11.8 Cooperation of the Parties. Each Party agrees to cooperate fully in
the Patent Management of any Patent Rights under this Agreement. Such
cooperation includes, but is not limited to: (a) turning over to the Party to
whom responsibility for Patent Management has been transferred, all files,
papers and documents relating to such transferred Patent; (b) executing all
papers and instruments, or requiring its employees or agents, to execute such
papers and instruments, so as to effectuate the ownership of Patent Rights set
forth in Section 11.1 and to enable the other Party to apply for and to
prosecute Applications in any country; and (c) promptly informing the other
Party of any matters coming to such Party's attention that may affect the Patent
Management of any such Application.
11.9 Infringement by Third Parties. Each Party shall promptly notify the
other Party in writing of any alleged or threatened infringement by a Third
Party of any Tularik Patent, Roche Bioscience Patent or Joint Patent of which
they become aware and provide the other Party with all evidence in its
possession supporting said infringement. The Parties agree to cooperate in
taking commercially reasonable legal actions to protect the commercial interests
of the Parties in the Research Collaboration, Research Compounds, Development
Compounds or a Product against infringement by Third Parties. The Party having
responsibility for Patent Management shall take the lead in any such action.
If, within [ * ] following learning of the infringement by a Third Party, such
Party fails to take commercially reasonable action against the Third Party to
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
22
<PAGE>
halt such alleged infringement, the other Party shall, in its sole discretion,
have the right to take such action in such country as it deems warranted in its
own name and/or in the name of the other Party; the Party maintaining such
action shall be responsible for [ * ] and shall be entitled to receive [ * ]. If
more than one Party wishes to participate in taking action to protect the
commercial interests of the Parties in the Product against infringement, then an
authorized representative of each Party shall control such action; the costs of
maintaining such action shall be [ * ], and the damages recovered from such
action for the past infringement shall be [ * ]. Each Party shall render such
reasonable assistance as the prosecuting Party may request.
11.10 Third Party Patent Rights. Each Party shall promptly notify the
other if it receives any notice that activities involving the Research
Collaboration or the development or commercialization of Development Compounds
allegedly infringe a Third Party's proprietary rights. The Parties shall consult
concerning the action(s) to be taken. The Developing Party shall have the sole
right and responsibility for addressing such alleged infringement regarding
Development Compounds, and bearing the cost thereof, subject to Sections 9.5.2
and 9.5.3.
12. Licenses and Other Commercial Rights
12.1 Tularik Background Patent Rights
12.1.1 Research License. Tularik hereby grants Roche Bioscience a
non-exclusive, worldwide license (without the right to sublicense) under Tularik
Background Patent Rights to conduct research during the Research Term and the
applicable Tail Period in accordance with the Research Plan.
12.1.2 Non-Infringement. Tularik shall not claim at any time that
[ * ]. The Parties acknowledge that [ * ].
12.2 Screening Licenses
12.2.1 Tularik Screening Library. Subject to Section 5.6, Tularik
hereby grants to Roche Bioscience a non-exclusive, royalty-bearing (in
accordance with Section 9.5) license to use the Tularik Screening Library solely
for HTS and confirmation of "hits" during the Research Term in accordance with
the Research Plan (the "Tularik Screening License").
12.2.2 Roche Bioscience Screening Library. Subject to Section 5.5,
Roche Bioscience hereby grants to Tularik a non-exclusive, royalty-bearing (in
accordance with Section 9.5) license to use those compounds in the Roche
Bioscience Screening Library to which Roche Bioscience permits Tularik access in
Roche Bioscience's sole discretion, which license is solely for HTS and
confirmation of "hits" during the Research Term in accordance with the Research
Plan (the "Roche Bioscience Screening License").
12.3 Tularik Patents. Tularik hereby grants Roche Bioscience (and its
Affiliates in accordance with Section 2.4), a sole and exclusive, worldwide,
royalty-bearing (in accordance with Section 9.5) license (with the right to
sublicense, subject to Section 2.4) under Tularik
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
23
<PAGE>
Patents and under Tularik's interest in any Joint Patents (and if the Product is
from the Tularik Screening Library, any other Tularik Patent Rights claiming
such Library Compound) to develop, make, have made, use, offer to sell, sell or
import Products incorporating Roche Bioscience Compounds for the treatment of
Roche Bioscience Indications during the term of this Agreement.
12.4 Roche Bioscience Patents. Roche Bioscience hereby grants Tularik a
sole and exclusive, worldwide, royalty-bearing (in accordance with Section 9.5)
license (with the right to sublicense, subject to Section 2.4, if applicable)
under Roche Bioscience Patents and under Roche Bioscience's interest in any
Joint Patents (and if the Product is from the Roche Bioscience Screening
Library, any other Roche Bioscience Patent Rights claiming such Library
Compound) to develop, make, have made, use, offer to sell, sell or import
Products incorporating Tularik Compounds for the treatment of Tularik
Indications during the term of this Agreement.
12.5 Cross-License to Research Compounds. Each Party hereby grants to the
other Party a non-exclusive, worldwide, royalty-free license, with the right to
sublicense, under any composition of matter claims in a Tularik Patent or Roche
Bioscience Patent claiming any Research Compound, to develop, make, have made,
use, offer to sell, sell or import any Research Compound Covered by such claims,
subject to the terms of Sections 5.1.2, 5.3, and 6.3.3, except to the extent
that such Research Compounds are already licensed under Section 12.3 or Section
12.4, as applicable.
12.6 [ * ] Products.
12.6.1 [ * ] Products. Except as set forth herein, neither Party may
develop, make and commercialize a [ * ] product for a Development Compound. If a
Developing Party wishes to develop, make and commercialize a [ * ] product that
the Developing Party believes necessary to [ * ], then the Developing Party
shall contact the other Party and the Parties shall negotiate an agreement
providing compensation to the other Party on terms that are commercially
reasonable in the [ * ], as mutually agreed; provided, however, that if such
[ * ] product is being sold at or below the Developing Party's fully-allocated
cost, then such rights shall be royalty-free for so long as such products are
being sold at or below the Developing Party's fully-allocated cost.
12.6.2 Other [ * ] Products. Tularik has the exclusive right to
develop, make and commercialize diagnostic products based upon the [ * ] but,
during the term of this Agreement, Roche Bioscience has the exclusive option to
acquire any or all of such rights [ * ].
12.7 Other Technologies. Subject to the provisions of this Section 12.7
and Section 7.2, Tularik shall have the exclusive right to develop, make and
commercialize therapeutic products incorporating agents that are directed
against Targets but are not [ * ]. For the first [ * ] of the Research Term,
Roche Bioscience shall have the exclusive right to enter into an agreement with
Tularik to develop [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
24
<PAGE>
12.8 Covenant of Non-Use. Neither Party shall practice the Patent Rights
and/or non-patentable information and materials of the other Party other than as
expressly licensed under this Article 12.
13. Confidentiality
13.1 Nondisclosure. During the term of this Agreement and for a period of
[ * ] after termination hereof, neither Party shall disclose any Confidential
Information received from the other Party to any Third Party, or use any such
Confidential Information for any purpose other than accomplishing the purposes
of this Agreement, except as expressly authorized by this Agreement or as
required by any regulatory agency or by any governmental rule, regulation, law
or court order. Each Party may disclose such Confidential Information to its
Affiliates (except as otherwise provided in Section 2.4), employees, agents,
consultants, collaborators, and other representatives with a need to know such
Confidential Information for such authorized purposes. Each Party shall promptly
notify the other upon discovery of any unauthorized use or disclosure of such
Confidential Information. At such time as a Party is no longer licensed under
Article 12 to use certain Confidential Information, such Party shall return to
the other Party promptly upon request any tangible embodiment of such
Confidential Information provided by the other Party; provided, however, that
one copy shall be kept by the receiver Party's legal department for purposes of
interpreting this Agreement.
13.2 Exceptions. Confidential Information shall not include any
information which the receiving Party can prove by competent evidence:
13.2.1 is now, or hereafter becomes, through no act or failure to
act on the part of the receiving Party, generally known or available;
13.2.2 is known by the receiving Party at the time of receiving such
information, as evidenced by its records;
13.2.3 is hereafter furnished to the receiving Party by a Third
Party, as a matter of right and without restriction on disclosure;
13.2.4 is independently developed by the receiving Party without the
aid, application or use of Confidential Information; or
13.2.5 is the subject of a written permission to disclose provided
by the disclosing Party.
13.3 Publications. Each Party to this Agreement recognizes that the
publication of papers regarding results of the Research Collaboration, including
oral presentations and abstracts, may be beneficial to both Parties provided
such publications are subject to reasonable controls to protect Confidential
Information. In particular, it is the intent of the Parties to maintain the
confidentiality of any Confidential Information regarding results of the HTS or
other information regarding the Research Compounds included in any foreign
patent application
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
25
<PAGE>
until such foreign patent application has been published. Accordingly, each
Party shall have the right to review and approve any paper proposed for
publication by the other Party regarding results of the Research Collaboration
hereunder, including oral presentations and abstracts, which utilizes data
generated from the Research Collaboration and/or includes Confidential
Information of the other Party. Before any such paper is submitted for
publication, the Party proposing publication shall deliver a complete copy to
the other Party at least [ * ] prior to submitting the paper to a publisher. The
receiving Party shall review any such paper and give its comments to the
publishing Party within [ * ] of the delivery of such paper to the receiving
Party. With respect to oral presentation materials, the Parties shall make
reasonable efforts to expedite review of such materials, and shall return such
items as soon as practicable to the disclosing Party with appropriate comments,
if any, but in no event later than [ * ] from the date of delivery to the
receiving Party. The disclosing Party shall comply with the other Party's
request to delete references to such other Party's Confidential Information in
any such paper and agrees to withhold publication of same for an additional
[ * ] in order to permit the Parties to obtain patent protection, if either of
the Parties deem it necessary, in accordance with the terms of this Agreement.
If there is a dispute regarding publications, such dispute shall be resolved by
the Research Management Committee or if the Research Management Committee has
been dissolved, by the Officers in accordance with Section 17.2.
14. Representations, Warranties and Covenants
14.1 Corporate Power. Each Party hereby represents and warrants that such
Party is duly organized and validly existing under the laws of the state of its
incorporation and has full corporate power and authority to enter into this
Agreement and to carry out the provisions hereof.
14.2 Due Authorization. Each Party hereby represents and warrants that
such Party is duly authorized to execute and deliver this Agreement and to
perform its obligations hereunder.
14.3 Binding Agreement. Each Party hereby represents and warrants that
this Agreement is a legal and valid obligation binding upon it and is
enforceable in accordance with its terms. The execution, delivery and
performance of this Agreement by such Party does not conflict with any
agreement, instrument or understanding, oral or written, to which it is a Party
or by which it may be bound, nor violate any law or regulation of any court,
governmental body or administrative or other agency having authority over it.
14.4 Disclaimer of Warranties. Neither Party guarantees the safety or
usefulness of any Target, Research Compound or Product. EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO
THE OTHER PARTY OF ANY NATURE, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION
ANY WARRANTY OF NON-INFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
14.5 Mutual Indemnification. Each Party hereby agrees to save, defend and
hold the other Party and its officers, directors, employees, consultants and
agents harmless from and against any and all liabilities, expenses and losses,
including reasonable legal expense and
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
26
<PAGE>
attorneys' fees ("Losses") incurred as a result of Third Party suits, claims,
actions, or demands of personal injury or death resulting from the manufacture,
development, use, handling, storage, sale or other disposition of Products by
such Party, its Affiliates or sublicensees except to the extent such Losses
result from the [ * ] of the Party claiming a right of indemnification under
this Section 14.5. In the event either Party seeks indemnification under this
Section 14.5, it shall inform the other Party of a claim as soon as reasonably
practicable after it receives notice of the claim, shall permit the other Party
to assume direction and control of the defense of the claim (including the right
to settle the claim solely for monetary consideration), and shall cooperate as
requested (at the expense of the other Party) in the defense of the claim.
15. Term and Termination
15.1 Term. The term of this Agreement shall begin on the Effective Date
and terminate at (a) the end of the Research Term (or the applicable Tail
Period, if any), if no Development Compound exists at the end of the Research
Term (or the applicable Tail Period, if any), or (b) so long as there is at
least one Development Compound being developed or commercialized hereunder, at
the end of the Royalty Term for the last Development Compound in the country
with the last to expire royalty obligation, unless terminated earlier in
accordance with the provisions of Section 15.2.
15.2 Termination for Cause. Either Party may terminate this Agreement
upon [ * ] written notice upon the occurrence of any of the following:
15.2.1 Upon or after the bankruptcy, dissolution or winding up of
the other Party (other than dissolution or winding up for the purposes of
reconstruction or amalgamation); or
15.2.2 Upon or after the material breach of this Agreement by the
other Party if the breaching Party has not cured such breach within the [ * ]
following written notice of such termination by the other Party.
15.3 Effect of Expiration or Termination.
15.3.1 Expiration or termination of this Agreement shall not relieve
the Parties of any obligation accruing prior to such expiration or termination.
Except as otherwise specifically set forth in this Section 15 or elsewhere in
this Agreement, the obligations and rights of the Parties under Sections 2.3,
2.5.5 (but only the mutual indemnification provisions contained therein), 5.1.2,
5.3, 6.3.3, 6.3.4, 9.4, 9.5, 12.1.2, 12.5, 12.6, 12.7, 12.8, 14.4, 14.5, and
15.3, and Articles 10, 11,13,16, and 17, shall survive termination or expiration
of this Agreement.
15.3.2 Without limiting any remedies otherwise available to Roche
Bioscience, if Roche Bioscience terminates this Agreement for cause pursuant to
Section 15.2 (a) the license set forth in Section 12.3 shall continue for so
long as Roche Bioscience continues to pay to Tularik the milestone payments and
royalty payments as due in accordance with Sections 9.4 and 9.5; (b) if the
Agreement terminates during the Research Term, the Tail Period shall apply to
Tularik (but not Roche Bioscience) for six months following such termination;
(c) the Rights of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
27
<PAGE>
First Refusal set forth in Section 7.2 shall survive; and (d) any and all claims
and payment obligations that accrued prior to the date of such termination or
expiration shall survive such termination.
15.3.3 Without limiting any remedies otherwise available to Tularik,
if Tularik terminates this Agreement for cause pursuant to Section 15.2, (a) the
license set forth in Section 12.4 shall continue for so long as Tularik
continues to pay to Roche Bioscience the royalty payments as due in accordance
with Section 9.5; (b) if the Agreement terminates during the Research Term, the
Tail Period shall apply to Roche Bioscience (but not Tularik) for six months
following such termination; and (c) any and all claims and payment obligations
that accrued prior to the date of such termination or expiration shall survive
such termination.
16. Publicity
16.1 Publicity Review. Roche Bioscience and Tularik shall jointly discuss
and agree, based on the principles of Section 16.2, on any statement to the
public regarding the execution and the subject matter of this Agreement or any
other aspect of this Agreement, except with respect to disclosures required by
law or regulation. Within fifteen (15) days following the Effective Date, the
Parties shall issue a joint press release. Except with respect to information
disclosed in the joint press release, neither Party shall (a) disclose the
material terms of this Agreement, or (b) use the name of the other Party, in any
public statement, prospectus, annual report, or press release without the prior
written approval of the other Party, which may not be unreasonably withheld or
delayed, provided, however, that both parties shall endeavor in good faith to
give the other Party a minimum of five business days to review such press
release, prospectus, annual report, or other public statement; provided,
further, that either Party may (a) disclose the material terms of this Agreement
or (b) use the name of the other party in any public statement, prospectus,
annual report, or press release without the prior written approval of the other
Party, if such Party is advised by counsel that such disclosure is required to
comply with applicable law.
16.2 Standards. In the discussion and agreement referred to in Section
16.1, the principles observed by Roche Bioscience and Tularik will be accuracy,
the requirements for confidentiality under Section 13, [ * ], the requirements
of disclosure under any securities laws or regulations of the United States,
including those associated with public offerings, and the standards and customs
in the pharmaceutical industry for such disclosures by companies comparable to
Roche Bioscience and Tularik.
17. Dispute Resolution
17.1 Disputes. The Parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement which relate to
either Party's rights and/or obligations hereunder or thereunder. It is the
objective of the Parties to establish procedures to facilitate the resolution of
disputes arising under this Agreement in an expedient manner by mutual
cooperation and without resort to litigation. To accomplish this objective, the
Parties
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
28
<PAGE>
agree to follow the procedures set forth in this Section 17 if and when a
dispute arises under this Agreement between the Parties.
17.2 Dispute Resolution Procedures. If the Parties cannot resolve the
dispute within [ * ] of formal request by either Party to the other, any Party
may, by written notice to the other, have such dispute referred to their
respective officers designated below or their successors, for attempted
resolution by good faith negotiations within [ * ] after such notice is
received. Said designated officers are as follows:
For Roche Bioscience: [ * ]
For Tularik: [ * ]
17.3 Arbitration. Any such dispute arising out of or relating to this
Agreement which is not resolved between the Parties or the designated officers
of the Parties pursuant to the foregoing shall be resolved by final and binding
arbitration conducted in Palo Alto, California under the then current Commercial
Arbitration Rules of the American Arbitration Association ("AAA") at the request
of either Party; provided, however, that depositions shall be permitted as
follows: each Party may take no more than three depositions with a maximum of
six hours of examination time per deposition, and each such deposition shall
take place in Palo Alto, California, unless otherwise agreed by the Parties. The
arbitration shall be conducted by one arbitrator who is knowledgeable in the
subject matter which is at issue in the dispute and who is selected by mutual
agreement of the Parties or, failing such agreement, shall be selected according
to the AAA rules. In conducting the arbitration, the arbitrator shall apply the
California Evidence Code, and shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a preliminary injunction, a permanent injunction, or replevin
of property. The arbitrator shall also be able to award actual or general
damages, but shall not award any other form of damage (e.g., consequential,
punitive damages). The Parties shall [ * ] the arbitrator's fees and expenses
pending the resolution of the arbitration unless the arbitrator, pursuant to its
right but not its obligations, requires the non-prevailing Party to [ * ] the
costs of the prevailing Party. The decision of the arbitrator shall be final and
may be sued on or enforced by the Party in whose favor it runs in any court of
competent jurisdiction at the option of such Party. This Agreement shall be
governed by the laws of the State of California, as such laws are applied to
contracts entered into and to be performed within such state.
18. Assignment and Delegation
18.1 Third Parties. Neither Party may assign or delegate any or all of
its rights or obligations under this Agreement to any Third Party without the
prior written permission of the other Party, except pursuant to Section 18.3.
18.2 Affiliates. Neither Party may assign or delegate any or all of its
rights or obligations under Sections 12.1 and 12.2, or Articles 2, 3, 4, 5
(except for Section 5.1.2), 6, and 13 without the prior written consent of the
other Party which may not be unreasonably withheld
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
29
<PAGE>
or delayed. Except as set forth in the previous sentence, either Party may
assign or delegate any or all of its rights or obligations under this Agreement
to any Affiliate; [ * ].
18.3 Merger. Either Party may also assign all of its rights or
obligations under this Agreement (but not a portion thereof) in connection with
the sale of all or substantially all of its assets relating to the subject
matter hereof, or may otherwise assign all of its rights or obligations under
this Agreement (but not a portion thereof) with the prior written consent of the
other Party. This Agreement shall survive any merger of either Party with or
into another Party and no consent for a merger or similar reorganization shall
be required hereunder; provided, that in the event of such merger or in the
event of a sale of all assets, no intellectual property rights of the acquiring
corporation shall be included in the technology licensed hereunder.
18.4 Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of the successors and permitted assigns of the Parties; provided,
however, that any such permitted assignment or delegation shall not relieve the
assigning Party of its responsibilities for performance of its obligations under
this Agreement. Any assignment not in accordance with this Agreement shall be
void.
19. Additional Terms
19.1 Force Majeure. Neither Party shall lose any rights hereunder or be
liable to the other Party for damages or losses on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the control of the defaulting Party, provided
that the Party claiming force majeure has exerted all reasonable efforts to
avoid or remedy such force majeure.
19.2 Notices. Any notices or communications provided for in this
Agreement to be made by either of the Parties to the other shall be in writing,
in English, and shall be made by prepaid air mail with return receipt addressed
to the other at its address set forth below. Any such notice or communication
may also be given by hand, or facsimile to the appropriate designation. Either
Party may by like notice specify an address to which notices and communications
shall thereafter be sent. Notices sent by mail, facsimile or cable shall be
effective upon receipt and notices given by hand shall be effective when
delivered.
If to Tularik:
Tularik Inc.
Two Corporate Drive
South San Francisco, CA 94080
Fax: (415) 829-4303
Attention: President
If to Roche Bioscience
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
30
<PAGE>
Roche Bioscience
3401 Hillview Avenue
Palo Alto, CA 94304
Fax: (415) 852-2595
Attention: President
with a copy to
Roche Bioscience
3401 Hillview Avenue
Palo Alto, CA 94304
Fax: (415) 852-1338
Attention: Legal Affairs
19.3 Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.
19.4 Severability. If any term, covenant or condition of this Agreement
or the application thereof to any Party or circumstance shall, to any extent, be
held to be invalid or unenforceable, then (a) the remainder of this Agreement,
or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is held invalid or unenforceable,
shall not be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted by law;
and (b) the Parties hereto covenant and agree to renegotiate any such term,
covenant or application thereof in good faith in order to provide a reasonably
acceptable alternative to the term, covenant or condition of this Agreement or
the application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.
19.5 Independent Contractors. It is expressly agreed that Tularik and
Roche Bioscience shall be independent contractors and that the relationship
between the two Parties shall not constitute a partnership or agency of any
kind. Neither Tularik nor Roche Bioscience shall have the authority to make any
statements, representations or commitments of any kind, or to take any action,
which shall be binding on the other, without the prior written authorization of
such other Party to do so.
19.6 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19.7 Entire Agreement. This Agreement sets forth all of the covenants,
promises, agreements, warranties, representations, conditions and understandings
between the Parties hereto and supersedes and terminates all prior agreements
and understanding between the Parties, including the Confidentiality Agreement
dated December 18, 1996. Information disclosed under
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
31
<PAGE>
the Confidentiality Agreement shall be treated as "Confidential Information" of
the disclosing Party subject to this Agreement. There are no covenants,
promises, agreements, warranties, representations conditions or understandings,
either oral or written, between the Parties other than as set forth herein and
therein. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties hereto unless reduced to writing and
signed by the respective authorized officers of the Parties.
In Witness Whereof, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the date and year first above written.
Syntex (U.S.A.) Inc., Tularik Inc.
through its Roche Bioscience division
By: /s/ James N. Woody By: /s/ David V. Goeddel
------------------------- -----------------------------
James N. Woody, M.D., Ph.D. David V. Goeddel, Ph.D.
President President and Chief Executive Officer
Syntex (U.S.A.) Inc. Tularik Inc.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
32
<PAGE>
Schedule A
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Schedule B
TULARIK BACKGROUND PATENT RIGHTS AND EXISTING THIRD PARTY
AGREEMENTS
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Research Collaboration and License Agreement
between
Roche Bioscience
and
Tularik Inc.
July 8, 1997
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
<TABLE>
<CAPTION>
Page
----
TABLE OF CONTENTS
<S> <C>
1. Definitions.............................................. 1
2. Research Collaboration................................... 7
2.1 Scope of Research Collaboration.......................... 7
2.2 New Targets.............................................. 8
2.3 [ * ].................................................... 8
2.4 [ * ].................................................... 8
2.5 Exclusivity/Third Party Agreements....................... 9
2.5.1 Exclusivity.............................................. 9
2.5.2 Activities Relating to the Field......................... 9
2.5.3 Joint Decision-Making Process............................ 9
2.5.4 Re-Presentation to Officers.............................. 10
2.5.5 Outside Activities....................................... 10
3. Research Management Committee............................ 10
3.1 Formation of Research Management Committee............... 10
3.2 Meetings of Research Management Committee................ 11
3.3 Decision-Making Process.................................. 11
4. Conduct of Research...................................... 11
4.1 Research Plan............................................ 11
4.2 Tularik Responsibilities................................. 11
4.3 Roche Bioscience Responsibilities........................ 12
4.4 Research Efforts......................................... 12
4.5 Abandonment.............................................. 12
4.6 Availability of Resources................................ 13
4.7 Reports.................................................. 13
5. Compounds and Compound Libraries......................... 13
5.1 Research Compound Library................................ 13
5.1.1 During the Research Term................................. 13
5.1.2 During and After the Research Term....................... 13
5.2 Designation of Development Compounds..................... 14
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
5.3 [ * ].................................................... 14
5.4 Additional Indication(s)................................. 14
5.5 Roche Bioscience Screening Library....................... 15
5.6 Tularik Screening Library................................ 15
6. Research Term............................................ 15
6.1 Research Term............................................ 15
6.2 Early Termination of Research Term....................... 15
6.2.1 Third Anniversary........................................ 15
6.2.2 [ * ].................................................... 15
6.3 Impact of Expiration or Termination...................... 16
6.3.1 Survival................................................. 16
6.3.2 Tail Period.............................................. 16
6.3.3 Post Research Term/Tail Period Notifications............. 16
6.3.4 Status Reports........................................... 16
7. First Right of Negotiation and Right of First Refusal.... 17
7.1 First Right of Negotiation............................... 17
7.1.1 [ * ].................................................... 17
7.1.2 [ * ].................................................... 17
7.2 Right of First Refusal................................... 17
7.2.1 [ * ].................................................... 18
7.2.2 [ * ].................................................... 18
7.2.3 [ * ].................................................... 18
8. Reversion Rights......................................... 18
8.1 Diligence................................................ 18
8.2 Pre-IND.................................................. 18
8.3 Post-IND/Pre-NDA......................................... 19
8.4 Failure to [ * ]......................................... 19
9. Payments................................................. 19
9.1 Technology Access Fee.................................... 19
9.2 Research Funding......................................... 19
9.3 Development Costs........................................ 20
</TABLE>
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Page
----
9.4 Milestones............................................... 20
9.4.1 Milestones Payments...................................... 20
9.4.2 Additional Clinical Milestones........................... 21
9.4.3 No Milestone Payments by Tularik......................... 21
9.5 Royalties................................................ 21
9.5.1 Reciprocal Royalties..................................... 21
9.5.2 Royalty Reduction........................................ 22
9.5.3 Further Reduction in Minimum Royalties................... 22
9.5.4 [ * ].................................................... 22
9.5.5 No Patent Protection..................................... 22
9.6 Third Party Agreements................................... 23
10. Records; Audits; and Reports............................. 23
10.1 Records.................................................. 23
10.2 Audit.................................................... 23
10.2.1 Independent Audit by Developing Party's Auditors......... 23
10.2.2 Independent Audit by Royalty Receiving Party's Auditors.. 23
10.3 Payment; Reports......................................... 24
10.4 Exchange Rate............................................ 24
10.4.1 [ * ].................................................... 24
10.4.2 Tularik Exchange Rate.................................... 24
10.5 Manner and Place of Payment.............................. 24
10.6 Late Payments............................................ 24
10.7 Taxes.................................................... 24
11. Patent Rights and Infringement........................... 25
11.1 Ownership and Inventorship............................... 25
11.2 Disclosure............................................... 25
11.3 Patent Management........................................ 25
11.3.1 Filing Party............................................. 25
11.3.2 Review Procedures........................................ 26
11.4 Reversion................................................ 26
11.5 Patent Costs............................................. 26
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
iii
<PAGE>
Page
----
11.6 Non-Patentable Technology................................ 26
11.7 Foreign Patent Filings................................... 27
11.8 Cooperation of the Parties............................... 27
11.9 Infringement by Third Parties............................ 27
11.10 Third Party Patent Rights................................ 27
12. Licenses and Other Commercial Rights..................... 28
12.1 Tularik Background Patent Rights......................... 28
12.1.1 Research License......................................... 28
12.1.2 Non-Infringement......................................... 28
12.2 Screening Licenses....................................... 28
12.2.1 Tularik Screening Library................................ 28
12.2.2 Roche Bioscience Screening Library....................... 28
12.3 Tularik Patents.......................................... 28
12.4 Roche Bioscience Patents................................. 29
12.5 Cross-License to Research Compounds...................... 29
12.6 [ * ] Products........................................... 29
12.6.1 [ * ] Products........................................... 29
12.6.2 Other [ * ] Products..................................... 29
12.7 Other Technologies....................................... 29
12.8 Covenant of Non-Use...................................... 30
13. Confidentiality.......................................... 30
13.1 Nondisclosure............................................ 30
13.2 Exceptions............................................... 30
13.3 Publications............................................. 31
14. Representations, Warranties and Covenants................ 31
14.1 Corporate Power.......................................... 31
14.2 Due Authorization........................................ 31
14.3 Binding Agreement........................................ 31
14.4 Disclaimer of Warranties................................. 31
14.5 Mutual Indemnification................................... 32
15. Term and Termination..................................... 32
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
iv
<PAGE>
Page
----
15.1 Term..................................................... 32
15.2 Termination for Cause.................................... 32
15.3 Effect of Expiration or Termination...................... 32
16. Publicity................................................ 33
16.1 Publicity Review......................................... 33
16.2 Standards................................................ 33
17. Dispute Resolution....................................... 34
17.1 Disputes................................................. 34
17.2 Dispute Resolution Procedures............................ 34
17.3 Arbitration.............................................. 34
18. Assignment and Delegation................................ 35
18.1 Third Parties............................................ 35
18.2 Affiliates............................................... 35
18.3 Merger................................................... 35
18.4 Miscellaneous............................................ 35
19. Additional Terms......................................... 35
19.1 Force Majeure............................................ 35
19.2 Notices.................................................. 35
19.3 Waiver................................................... 36
19.4 Severability............................................. 36
19.5 Independent Contractors.................................. 37
19.6 Counterparts............................................. 37
19.7 Entire Agreement......................................... 37
Schedule A....................................................... 39
Schedule B....................................................... 40
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
v
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.13
September 8, 1998
Mr. Masakazu Kakei
Executive Director and Member of Board
Japan Tobacco Inc.
JT Building, 2-1 Toranomon, 2-chome
Minato-ku, Tokyo 105-8422, Japan
Re: Preliminary Research, Development and Marketing Agreement between Tularik
Inc. ("Tularik") and Japan Tobacco Inc. ("JT") (individually, a "Party"
and, collectively, "Parties").
Dear Mr. Kakei:
This Preliminary Research, Development and Marketing Agreement ("Agreement")
sets forth the Parties' preliminary agreement on terms and conditions under
which Tularik and JT will participate in a collaborative program ("Program") to
research, discover, develop, manufacture and market products that agonize or
antagonize Orphan Nuclear Receptors for the treatment of disease in humans
("Field"). Subject to the fourth sentence of this paragraph, "Orphan Nuclear
Receptors" shall mean: [ * ]. The Parties acknowledge and agree that Tularik has
existing collaborative programs with JT (obesity), Merck & Co., Inc. (viral
diseases), Sumitomo Pharmaceuticals Co., Ltd. (hypercholesterolemia), Taisho
Pharmaceuticals Co., Ltd. (immune regulation) and the Roche Bioscience division
of Syntex (U.S.A.), Inc. (inflammation) (collectively, "Third Party Agreements")
[ * ]. Anything in the second sentence of this paragraph to the contrary
notwithstanding, the definition of Orphan Nuclear Receptor shall not
include those orphan nuclear receptors that: [ * ]; provided, however, that
Tularik shall not [ * ]; provided further that Tularik shall within [ * ]. In
the event that a Product is [ * ], Tularik shall [ * ]. All collaborative
programs entered into between Tularik and Third Parties after the Execution Date
shall [ * ]. The Parties intend to express their agreement more fully pursuant
to a definitive agreement ("Collaboration Agreement"). The Parties shall use
their respective commercially reasonable efforts to execute the Collaboration
Agreement [ * ] ("Execution Date").
<PAGE>
1. Committees
a. EC. The goals and progress of the Program shall be the ultimate
responsibility of an Executive Committee ("EC") comprised of the Chief Executive
Officer of Tularik and a senior officer of JT's pharmaceutical business to be
appointed within 10 days after the date on which the Parties sign this Agreement
(the "Agreement Date"). A Party may replace its designee to the EC by written
notice to the other Party. Except as provided herein, all decisions of the EC
shall be unanimous. The EC shall resolve problems and settle disagreements that
are unresolved by the RMC, the JDC or the MC. The EC shall meet as necessary to
resolve disagreements pursuant to this Agreement
b. Research Management Committee. The goals and progress of the
Research Program shall be determined and monitored by a Research Management
Committee ("RMC"), which shall be composed of three members from each of Tularik
and JT, the Chairperson of which shall be named by Tularik. A Party may replace
any designee to the RMC by written notice to the other Party. The RMC shall meet
at least twice annually at a time and place it so designates. The RMC will
periodically review the Research Program and the Parties' progress thereunder,
to the extent set forth in the Research Plan, including all screening results
and new developments regarding the Field, and propose changes to the Research
Plan based upon the results of prior work and new developments in the Field. The
RMC will select the Collaboration Lead Compounds by a unanimous vote pursuant to
Section 3(b). All data and information obtained by either Party pursuant to the
Research Program will be provided to the RMC. The RMC will delegate
responsibility for the filing and prosecution of Program Patents arising from
the Research Program on inventions jointly discovered in the course of the
Research Program Term. The RMC will be responsible for coordinating all aspects
of all activities undertaken to identify and develop a Lead Compound that are
necessary or desirable to determine whether such Lead Compound may be suitable
for designation as a Collaboration Lead Compound pursuant to Section 3(b)(i). In
addition, the RMC will be responsible for coordinating all aspects of all
activities (including, but not limited to: [ * ] that will be undertaken with
respect to a Collaboration Lead Compound that are necessary or desirable to
enable the filing of an IND on Products based upon or incorporating such
Collaboration Lead Compound, including the preparation and filing of an IND
(collectively, "Pre-Clinical Development"). All decisions of the RMC shall be
unanimous.
c. Joint Development Committee. Within thirty (30) days of the date
a Collaboration Lead Compound is designated by the RMC, the Parties shall each
appoint three representatives to a Joint Development Committee
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
<PAGE>
("JDC"). A Party may replace any designee to the JDC by written notice to the
other Party. Such representatives will include individuals with expertise and
responsibilities in the areas of pre-clinical development, clinical development
or regulatory affairs. The JDC will be responsible for coordinating all aspects
of the Development of each Product through the filing of an NDA or equivalent by
unanimous decisions. "Development" shall mean the development of any Product
occurring from and after the filing of an IND, through and including approval of
an NDA and any other governmental approvals required for the commercialization
of such Product in a country.
d. Marketing Committee. Upon recommendation of the JDC in
anticipation of the first commercial launch of one or more Products, but in any
event no later than [ * ] for any Product, the Parties shall each appoint three
representatives to a Marketing Committee ("MC"). A Party may replace any
designee to the MC by written notice to the other Party. Such representatives
will include individuals with expertise and responsibilities in the areas of
sales, marketing, manufacturing or regulatory affairs. The MC will develop a
marketing plan for each Product in the Co-Promotion Territory, shall oversee
quality control of the Product and shall oversee operational aspects of
marketing and sales in the Co-Promotion Territory following launch of each such
Product, in all cases by unanimous decisions. "Tularik Territory" shall mean the
countries, territories and possessions of the United States of America and
Canada. "JT Territory" shall mean Japan and Korea and their territories and
possessions. "Exclusive Territories" shall mean the Tularik Territory and the JT
Territory. "Co-Promotion Territory" shall mean all of the countries and
territories of the world other than the countries and territories within the
Exclusive Territories. "Territory" shall mean the Exclusive Territories and the
Co-Promotion Territory.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3.
<PAGE>
e. Dispute Resolution. Any disputes or disagreements arising in the
RMC, JDC or MC will be referred to the EC if the RMC, JDC or MC, as the case may
be, is unable to resolve such dispute or disagreement [ * ] after submission of
an issue to such committee. In addition, any other disputes or disagreements
between the Parties arising hereunder will first be referred to the EC. If such
dispute is not resolved within [ * ] following submission of such dispute to the
EC and such dispute relates to an alleged breach of this Agreement, then either
Party may propose to refer such dispute to arbitration, and thereafter such
dispute shall be resolved pursuant to Section 19. In the event such dispute is
not resolved within [ * ] following submission of such dispute to the EC and
such dispute does not relate to an alleged breach of this Agreement, such
dispute shall be referred to a Third Party mediator with significant experience
in the pharmaceutical industry acceptable to both parties for resolution. The
costs and expenses of such Third Party mediator shall be shared equally by the
Parties. In the event such dispute is not resolved within [ * ] following
submission of such dispute to the Third Party mediator, then either Party may
propose to refer such dispute to arbitration, and thereafter such dispute shall
be resolved pursuant to Section 19.
2. Research Program
a. Research Program. The Research Program shall be conducted in the
Field pursuant to a detailed Research Plan as set forth in Appendix A ("Research
Plan"). The Parties shall commence the Research Program promptly upon the
Agreement Date.
b. Basic Research. The Parties will jointly undertake, under the
direction of the RMC, basic research towards the objectives of the Research
Program. During the Research Program Term (as defined in Section 2(g)), JT shall
provide the research payments set forth in Section 10(a) to support the [ * ].
The actual [ * ].
c. Screening. Tularik shall develop and perform biochemical and
cell-based assays ("Tularik Assays") to determine (i) [ * ] ("Lead Compounds").
[ * ]. Each Party will provide its proprietary chemical and natural product
libraries to Tularik for screening as directed by the RMC; provided, however,
that a Party shall not be required to provide a compound for screening that [ *
]. Unless otherwise directed by the RMC and except as provided in Section 2(e),
the activities under Sections 2(b) and 2(c) shall be the responsibility [ * ] of
Tularik until such time as [ * ] pursuant to this Section 2(c). If a compound is
designated as a Lead Compound [ * ], such compound shall be removed from the
screening library from which such Lead Compound originated until such time as
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4.
<PAGE>
such Development of such Lead Compound (or Collaboration Lead Compounds or
Products resulting therefrom) shall be terminated by the Parties.
d. Research License. Each Party hereby grants to the other Party a
non-exclusive license to practice (i) inventions claimed in or covered by
patents and patent applications owned or controlled by such Party relating to
the discovery and commercialization of Independent Lead Compounds, Independent
Products, Lead Compounds, Collaboration Lead Compounds or Products made or
discovered during the Research Program Term ("Program Patents"), (ii) other
know-how, information and technology owned or controlled by the other Party and
developed during Research Program Term ("Program Know-How"), (iii) patents and
patent applications owned or controlled by such Party to the extent applicable
to the Field existing as of the Agreement Date (other than Program Patents)
("Patent Rights") and (iv) know-how, information and technology existing as of
the Agreement Date (other than Program Know-How) owned or controlled by such
Party to the extent applicable to the Field ("Know-How") solely for the purpose
of conducting the Research Program. [ * ]. Tularik and JT shall provide numbers
of all relevant patents and patent applications within their respective Patent
Rights following execution of this Agreement.
e. Research Chemists. The Parties recognize that the prompt
allocation of appropriate medicinal chemistry resources to optimize Lead
Compounds will confer a competitive advantage upon the Research Program.
Accordingly, the Parties agree that the RMC, by unanimous decision, shall be
responsible for determining: (i) [ * ]. Each of JT and Tularik shall be
responsible for dedicating to the Research Program [ * ]; provided, however,
that the RMC may decide to [ * ]. In the event that either JT or Tularik is(
unable to [ * ]; provided, however, that the Receiving Party shall, upon written
request by the Paying Party, provide documentation to demonstrate that the [ *
]. In the event that the Receiving Party shall be [ * ], the Paying Party shall
be required to pay the Receiving Party [ * ]. The Parties understand and agree
that: [ * ]. In the event that the RMC is unable to unanimously agree on [ *
], the matter shall be referred to the EC for unanimous resolution. In the
event that the EC is unable to unanimously agree on [ * ], a Party will have the
right to proceed independently to develop such compound as an Independent Lead
Compound under Section 3(m) and to develop Independent Products incorporating or
based on such Collaboration Lead Compound.
f. Exchange of Pre-Clinical Data. JT and Tularik will exchange pre-
clinical data generated during the Research Program for [ * ]. As provided in
Sections 4(a) and 4(b), the Parties may also make such data available
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5.
<PAGE>
to any permitted sublicensees in the Field in a country or countries in the
Territory; provided, however, such data shall not be made available to such
sublicensees until a sublicensee has executed a standard confidentiality
agreement covering disclosure and use of such data.
g. Research Program Term. The Research Program shall be conducted
during the period of five years commencing as of the Agreement Date ("Research
Program Term"). Upon not later than [ * ] prior written notice JT may, in its
sole judgment, terminate the Research Program at [ * ] of the Research Program.
The RMC may terminate the Research Program any time during the Research Program
Term if it unanimously determines the Research Program is no longer
scientifically useful or that all potential Products would not be commercially
viable. In case of such an early termination by JT or the RMC, JT shall be
exempt from any payment(s) under Section 10(a) that would have become due and
payable after the effective date of such early termination. Following any
termination of the Research Program (i) that occurs simultaneously with the
termination of this Agreement in accordance with Section 13 (i.e., no compound
or Lead Compound has been designated previously a Collaboration Lead Compound in
accordance with Section 3(b) and no Independent Lead Compound is being developed
in accordance with Section 3(m)) or (ii) that is followed at some future date by
the termination by JT of Development or co-promotion of any Collaboration Lead
Compound and/or Product pursuant to Sections 3(l) or 5(c), respectively, or
development of an Independent Lead Compound in accordance with Section 3(m) (A)
any licenses granted by Tularik to JT will terminate, (B) [ * ]; provided,
however, that [ * ]; provided further that [ * ]. Tularik will then be free to
pursue clinical development and registration of such compounds, Lead Compounds
and/or Products without obligation to JT except as provided in Section 4(f) or
Section 5(c), as appropriate.
h. Exclusive Collaboration. Except as provided below, the Parties
shall work exclusively with each other in the Field during the Research Program
Term. The research and development program being conducted by JT as of the
Agreement Date to discover and develop compounds having activity against orphan
nuclear receptors (the "JT Program") shall be included as part of the Research
Program; provided, however, that JT shall not be required to contribute (i)
compounds that [ * ] (the orphan nuclear receptors set forth in (i) and (ii)
above, collectively, "Excluded Orphan Nuclear Receptors"). During the Research
Program Term, neither Party shall discuss the terms of, or enter into, an
agreement with any Third Party relating to research, development or
commercialization activities of products in the Field without the express prior
unanimous written consent of the RMC, JDC or MC, respectively, except as
otherwise provided in
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6.
<PAGE>
this Agreement. During the Term, neither Party will develop or commercialize a
product in the Field other than pursuant to this Agreement.
3. Development Program.
a. General Principles. The Parties agree to use commercially
reasonable efforts to develop Collaboration Lead Compounds for use in the Field,
making use of each Party's special expertise as directed by the RMC with the
intent of obtaining all worldwide approvals or authorizations necessary for the
manufacture, distribution, use or sale of a Product in the Territory
("Regulatory Approval") and bringing Products to the market as soon as
reasonably practicable thereafter.
b. Designation of Collaboration Lead Compound. (i) From time to
time either Party may propose to the RMC one or more Lead Compounds suitable for
Pre-Clinical Development. The RMC will promptly determine whether such Lead
Compound is suitable for Pre-Clinical Development by determining whether such
Lead Compound meets the criteria set forth by the RMC for a particular Orphan
Nuclear Receptor from time to time (the "Pre-Clinical Development Criteria").
(ii) If the RMC determines that such Lead Compound meets the Pre-
Clinical Development Criteria, then within [ * ] of such determination each
Party shall provide to the RMC a written notice as to whether it elects to
participate in and, subject to Section 3(f), commit resources to conduct Pre-
Clinical Development of such Lead Compound as a Collaboration Lead Compound
according to the proposed plan and budget. If the RMC determines that such Lead
Compound does not meet the Pre-Clinical Development Criteria, then within [ * ]
of such determination each Party shall provide to the RMC a written notice as to
whether it elects to designate such Lead Compound as a Collaboration Lead
Compound and participate in and commit resources to conduct Pre-Clinical
Development of such Collaboration Lead Compound notwithstanding that such Lead
Compound does not meet the Pre-Clinical Development Criteria. If each Party
makes an affirmative election with respect to any Lead Compound pursuant to
either the first or second sentence of this Section 3(b)(ii), such Lead Compound
shall be designated a "Collaboration Lead Compound" and, if an IND or equivalent
is filed thereon, a "Product." If one Party makes an affirmative election and
the other Party makes a negative election with respect to any Lead Compound
being designated a Collaboration Lead Compound, the Party making an affirmative
election will have the right to proceed independently to develop such
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7.
<PAGE>
compound as an Independent Lead Compound or Independent Product under Section
3(m).
(iii) If neither Party makes an affirmative election with respect to
any Lead Compound being designated a Collaboration Lead Compound under Section
3(b)(i), such Lead Compound shall be neither a Collaboration Lead Compound nor a
compound that may be developed under Section 3(m), and development of such non-
elected Lead Compound (a "Discontinued Compound") may be subsequently initiated
by a Party by notifying the other Party of its interest in initiating
Development of such Discontinued Compound at any time on or before [ * ] of the
date of termination or expiration of the Research Program Term. If the other
Party indicates it is not interested in initiating Development of such
Discontinued Compound, the initiating Party may proceed with development of such
Discontinued Compound as an Independent Lead Compound or an Independent Product
and the initiating Party shall be deemed to be the Independent Party, pursuant
to Section 3(m). At any time after [ * ] of the date of termination or
expiration of the Research Program Term, either Party may, upon written notice
to the other Party, proceed with development of a Discontinued Compound as an
Independent Product and such Party shall be deemed to be the Independent Party,
pursuant to Section 3(m).
(iv) If a Lead Compound is not, at any time, presented to the RMC
pursuant to Section 3(b)(i), such Lead Compound shall be neither a Collaboration
Lead Compound nor a compound that may be developed under Section 3(m), and this
Section 3(b)(iv) shall govern any future development of such non-proposed Lead
Compound (a "Non-Proposed Compound"). If at any time on or before [ * ] of the
date of termination or expiration of the Research Program Term, a Party
hereunder (the "Non-Proposed Compound Interested Party") determines to initiate
Pre-Clinical Development of such Non-Proposed Compound, it shall provide written
notice to the other Party of such interest and the reasons therefor. The other
Party will then have [ * ] to indicate whether it also is interested in the
development of such Non-Proposed Compound. If the other Party is so interested,
the Parties will proceed with Pre-Clinical Development or Development of such
Non-Proposed Compound as a Collaboration Lead Compound pursuant to the terms of
this Agreement. If the other Party is not so interested, the Non-Proposed
Compound Interested Party may proceed with development of such Non-Proposed
Compound as an Independent Product and the Non-Proposed Compound Interested
Party shall be deemed to be the Independent Party, pursuant to Section 3(m). At
any time after [ * ] of the date of termination or expiration of the Research
Program Term, either Party may, upon written notice to the other Party, proceed
with development of a Non-Proposed Compound as an Independent
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8.
<PAGE>
Product and such Party shall be deemed to be the Independent Party, pursuant to
Section 3(m).
c. Pre-Clinical Development. The Parties, under the direction of the
RMC shall conduct Pre-Clinical Development with respect to any designated
Collaboration Lead Compound. The costs of conducting such Pre-Clinical
Development shall be shared by the Parties as set forth in Section 3(f). Under
no circumstances shall either Party conduct studies of any Collaboration Lead
Compound in the Field except as permitted by the RMC.
d. Collaborative Development of Products. The Parties will each
diligently collaborate in the Pre-Clinical Development and Development and use
commercially reasonable efforts to develop and bring Products to the market as
soon as reasonably practicable. The role of each Party in the Development
process will be determined by the JDC, with the Parties intending that each
Party will provide advisory and supporting services with respect to each phase
of the process in which such Party is not actively or primarily involved. [ * ]
shall supply [ * ] for each Product to be promoted or co-promoted by the Parties
in the Territory in the aggregate, as determined by the JDC. A Party's required
Development effort is hereinafter referred to as its ("Required Development
Effort"). The JDC will determine appropriate written standards for measuring
Required Development Efforts and accounting procedures to confirm and document
each Party's performance of its Required Development Effort for any Product
before the Parties commence Development thereof. No clinical trials involving
any Product shall be commenced by or on behalf of either Party without the prior
approval of the JDC. Nothing contained in this Section 3(d) shall be deemed to
preclude either Party from terminating its participation in the collaborative
Development, pursuant to Section 3(l), at such time. Any decision by a Party not
to participate in development pursuant to Section 3(b) or to terminate
participation in the collaborative Development pursuant to Section 3(l) shall
not be deemed a breach of this Agreement.
e. Development Plan and Development Budget. Promptly following the
designation of a Collaboration Lead Compound pursuant to Section 3(b), the JDC
shall initiate preparation of the development plan for the Development (the
"Development Plan") and a budget (the "Development Budget") for proposed
Development Costs (as defined in Section 3(f)). The initial Development Plan
shall set time lines and priorities for the various Development activities
through [ * ] and identify which Party, or whether a Third Party, is to be
responsible for each activity. The budget for each development program shall
include a detailed short-term budget covering all proposed Development Costs of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9.
<PAGE>
the program expected during the subsequent [ * ] (the "Short-Term Budget
Period") of the Development process. Both Parties recognize that the Development
Plan and the Development Budget represent projections only and will be subject
to frequent changes. Each such Development Plan and Development Budget shall be
updated as deemed appropriate by the JDC, but in no event less frequently than
[ * ], and approved by the JDC not later than thirty (30) days prior to each
[ * ] of each applicable calendar year.
f. Funding of Pre-Clinical Development and Development. Tularik
shall be responsible for [ * ] of the Development Costs and JT shall be
responsible for [ * ] of such Development Costs. "Development Costs" shall mean
all costs and expenses [ * ] (as calculated in accordance with GAAP and using
the same allocation methods that the Party incurring such costs uses throughout
its operations, but in all events excluding [ * ] (as defined in Appendix D)),
all as specified in the Development Plan and the Development Budget. Development
Costs shall consist of the costs of [ * ] but shall exclude the costs of [ * ].
Such costs shall include, without limitation: [ * ]. In the event the
Development Costs incurred by a Party during any calendar quarter exceed [ * ]
of the Development Costs set forth in the most recently approved Development
Budget for activities to be conducted by such Party during such quarter (the
"Overage Threshold"), then the other Party shall not be responsible for paying [
* ] of any Development Costs in excess of the Overage Threshold incurred by the
Party triggering such overage unless such overage had been approved in advance,
or is subsequently ratified, unanimously by the JDC (in which case each of the
Parties shall be responsible for [ * ] of all such Development Costs). In the
event such overage has not been approved or ratified unanimously by the JDC, the
Party incurring Development Costs exceeding the Overage Threshold in such
quarter shall be responsible for [ * ] of the Development Costs in excess of the
Overage Threshold.
g. Scientific FTE. In preparing the Development Budget and
determining Development Costs, the Parties will use a rate of [ * ] per
Scientific FTE. "Scientific FTE" means the fully-loaded costs, including [ * ],
but excluding [ * ], of employing a full-time scientific/technical person (or,
in the case of less than a full-time dedicated person, the full-time equivalent
scientific/technical person year) dedicated to the Pre-Clinical Development or
Development for a period of one (1) year, [ * ]. Such rate shall be adjusted
annually (utilizing the cost-breakdown and methodology attached hereto as
Appendix E as the basis for such adjustment) and [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10.
<PAGE>
h. Payment of Development Costs. Each Party shall be responsible for
paying [ * ] Development Costs incurred pursuant to the Development Plan and the
Development Budget as provided in Section 3(f), subject to reimbursement as
provided herein. Within thirty (30) days after each calendar quarter, each Party
shall provide the JDC with detailed information concerning the Development Costs
incurred by such Party during such quarter. Promptly after receipt thereof, the
JDC will determine the amount, if any, which either Party has paid in excess of
the amount to be borne by such Party for such quarter pursuant to Section 3(f)
(an "Overpayment"), and shall so notify the Parties. In the event of an
Overpayment, the other Party shall pay the amount thereof to the Party making
the Overpayment within thirty (30) days after receipt of notice from the JDC
that an Overpayment has occurred.
i. Drug Approval Applications. Consistent with the Development Plan
and Development Budget and as directed by the JDC, the Parties will file
applications for regulatory approval required before commercial sale or use of a
Product as a drug in a country within the Territory ("Drug Approval
Applications") and attempt to obtain regulatory approvals in each country in the
Territory in which the Parties either individually or jointly intend to
commercialize Products. JT will be responsible for filing in its name and shall
own all regulatory submissions relating to Products including, without
limitation, all INDs and NDAs, in each country in the JT Territory, in which
Products will be commercialized. Tularik will be responsible for filing in its
name and shall own all regulatory submissions, including, without limitation,
all INDs and NDAs in each country in the Tularik Territory in which Products
will be commercialized. The JDC will be responsible for designating a Party to
be responsible for filing all regulatory submissions in each country in the Co-
Promotion Territory in which Products will be commercialized. The Party not
responsible for filing regulatory submissions for Products in a country pursuant
to this Agreement shall have a right to cross-reference to all such filings made
by the other Party in any country. The Parties will cooperate in the preparation
of all such regulatory filings and in obtaining Regulatory Approvals under this
Section 3(i).
j. Line Extensions. JT and Tularik may each prepare and submit to
the JDC for consideration plans for development of Product line extensions and
the conduct of clinical trials covering indications other than those for which
Products are being developed or commercialized in the Territory. Any such line
extensions or any additional clinical trials for additional indications will be
subject to the approval and supervision of the JDC as part of the ongoing
Development of such Product.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11.
<PAGE>
k. Compliance. The Parties will comply with all supranational,
federal, state and/or local laws pertaining to the Development and
commercialization of Products.
l. Termination of Participation in Collaborative Development. On a
Collaboration Lead Compound-by-Collaboration Lead Compound basis, either Party
may elect (upon [ * ] written notice following receipt by the Party
contemplating termination of its participation in the Pre-Clinical Development
of any Collaboration Lead Compound or Development of any Product of Development
Termination Documents) to terminate its participation in, or to not to
participate in, the Pre-Clinical Development of any Collaboration Lead Compound
or Development of any Product. "Development Termination Documents" shall mean
the following documents or reports: [ * ]. After receipt of such notice by the
other Party, the Party providing such notice shall no longer be responsible for
bearing further Development Costs for such Collaboration Lead Compound or
Product as specified herein, in which event the other Party will have the right
to proceed independently to develop such Collaboration Lead Compound or Product
as an Independent Lead Compound or Independent Product, pursuant to Section
3(m). In the event a Party gives notice under this Section 3(l), such non-
Independent Party (i) will remain responsible for its share of Development Costs
for such Collaboration Lead Compound or Product until [ * ] from the date the
other Party receives such notice, and (ii) will make its personnel, relevant
data and other resources available to the Independent Party as necessary to
effect an orderly transition of development responsibilities, with the costs of
such personnel, relevant data and resources to be borne by [ * ]. The Parties
each recognize and agree that a non-Independent Party's termination of
participation in Pre-Clinical Development or Development in accordance with this
Section 3(l) will not be considered a breach of its obligations under this
Agreement. In the event of a non-Independent Party's termination of
participation in Development in accordance with this Section 3(l), such non-
Independent Party shall transfer and assign to the Independent Party all
regulatory submissions and Drug Approval Applications relating to such
Collaboration Lead Compound and/or Products based upon or incorporating such
Collaboration Lead Compound, together with all materials and data related
thereto in its possession.
m. Independent Development. (i) In the event (A) a Party, pursuant
to Sections 2(e), 3(b)(ii), (iii) or (iv) elects not to participate in and
commit resources to conduct Pre-Clinical Development of a Collaboration Lead
Compound or the pre-clinical development of a Discontinued Compound or a Non-
Proposed Compound or (B) any Party unilaterally terminates its participation in
the Pre-Clinical Development or Development of a Collaboration Lead
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12.
<PAGE>
Compound or Product pursuant to Section 3(l), then the Party that made an
affirmative election to conduct such pre-Clinical Development or Development of
such Compound pursuant to Sections 2(e), 3(b)(ii), (iii) or (iv), or the Party
continuing Development of a Collaboration Lead Compound or Development of a
Product (in either case, the "Independent Party"), shall have the right to
practice the license granted in Section 4(c) and to undertake pre-clinical
development of a Lead Compound or to continue Pre-Clinical Development and
Development of such Collaboration Lead Compound or Product independently as an
"Independent Lead Compound" or "Independent Product", [ * ]. No Party may
utilize the services of its personnel committed to the Research Program pursuant
to Section 2(a) in performance of research or development of an Independent Lead
Compound or Independent Product.
(ii) Until the earlier of the Re-Engagement Expiration Date (as
defined in Section 3(n)) or the date on which the Independent Party receives a
Re-Engagement Notice (as defined in Section 3(n)) for a Product from the non-
Independent Party, the Independent Party will (A) inform the other Party of all
material information developed in its research and development of each
Independent Lead Compound or Independent Product; (B) allow such other Party to
comment on the direction of such research and development; and (C) provide the
other Party a copy of all proposed regulatory submissions relating to such
Independent Lead Compound or Independent Product at least [ * ] prior to
submitting such filing to the FDA or its foreign equivalent.
(iii) In the event either Party elects to proceed as an Independent
Party, subject to Section 3(n), such Independent Party shall be entitled to
develop such Independent Lead Compound and commercialize such Independent
Product at its sole discretion, alone or with a Third Party, with no obligation
to the other Party.
n. Re-engagement Option. Either Party may elect to resume its
participation in the Pre-Clinical Development or Development of an Independent
Lead Compound or Independent Product in all countries in the Territory by so
notifying the other Party in writing (the "Re-engagement Notice"), at any time
prior to the expiration of the [ * ] period commencing upon receipt by such
Party of the final report summarizing the results of [ * ] ("Re-Engagement
Expiration Date") for such Independent Lead Compound or Independent Product
anywhere in the world. In such event, such Independent Lead Compound or
Independent Product shall be immediately designated a Collaboration Lead
Compound or Product for all purposes under this Agreement, including calculating
each Party's responsibility for paying Development Costs, Co-Promotion Expenses
and
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13.
<PAGE>
Promotion Expenses and receiving the Share of Co-Promotion Profit and
Royalty Payment commencing upon receipt of the Re-engagement Notice. The non-
Independent Party shall pay to the Independent Party [ * ] of the non-
Independent Party's share, based on the allocation set forth in Section 3(f), of
the costs [ * ] of the Independent Lead Compound or Independent Product incurred
by the Independent Party after the date upon which it commenced development or
research of such compound or product as an Independent Lead Compound or
Independent Product and prior to the date of the Re-engagement Notice (the "Re-
Engagement Amount"). The non-Independent Party shall pay the Re-Engagement
Amount in [ * ] beginning on the first day of the calendar quarter following the
date of the election of the non-Independent Party. The Independent Party may
not sublicense intellectual property rights owned or controlled by the
Independent Party that relate to Independent Lead Compound or Independent
Product to any Third Party without the consent of the non-Independent Party
prior to the Re-Engagement Expiration Date for such Independent Lead Compound or
Independent Product. Anything in this Section 3(n) to the contrary
notwithstanding: (i) JT may resume its participation in the Pre-Clinical
Development or Development of an Independent Lead Compound or Independent
Product in the JT Territory (but not the Co-Promotion Territory or the Tularik
Territory) by (a) delivering to Tularik a Re-engagement Notice to that effect
prior to the Re-Engagement Expiration Date; [ * ]; and (ii) Tularik may resume
its participation in the Pre-Clinical Development or Development of an
Independent Lead Compound or Independent Product in the Tularik Territory (but
not the Co-Promotion Territory or the JT Territory) by (a) delivering to JT a
Re-engagement Notice to that effect prior to the Re-Engagement Expiration Date;
[ * ]. In the event a Party resumes participation in the Pre-Clinical
Development or Development of an Independent Lead Compound or Independent
Product in such Party's Exclusive Territory only, such Party shall not receive [
* ].
4. Licenses and Royalties.
a. Grant by Tularik. Subject to the terms and conditions of this
Agreement, Tularik hereby grants and agrees to grant to JT: (i) an exclusive
(except as to Tularik) license (with the right to sublicense as provided in this
Section 4(a)) under the Program Patents, Program Know-How, Patent Rights and
Know-How owned or controlled by Tularik during the Term to the extent necessary
or useful to develop, make, have made, use, import, offer for sale and sell any
Product in the Co-Promotion Territory; and (ii) an exclusive (even as to
Tularik) license (with the right to sublicense as provided in the Section 4(a))
under the Program Patents, Program Know-How, Patent Rights and Know-How owned or
controlled by Tularik to the extent necessary to develop, make, have made, use,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14.
<PAGE>
import, offer for sale and sell any Product in the JT Territory. JT may not
sublicense any rights granted under this Section 4(a) in the Co-Promotion
Territory to any Third Party without the prior written consent of Tularik, not
to be unreasonably withheld. JT may sublicense any rights granted under this
Section 4(a) in the JT Territory to any Third Party without the prior written
consent of Tularik, with any such sublicenses subject to the payments set forth
in this Agreement. JT shall use reasonable efforts to ensure that any
sublicense negotiated by JT pursuant to this Section 4(a)(ii) shall: (A) [ * ];
and (B) provide that any revenues or other consideration received from such
sublicensee as consideration for the grant of such sublicense in the JT
Territory, [ * ], shall be [ * ] and paid directly to each Party by such
sublicensee.
b. Grant by JT. Subject to the terms and conditions of this
Agreement, JT hereby grants and agrees to grant to Tularik: (i) an exclusive
(except as to JT) license (with the right to sublicense as provided in this
Section 4(b)) under the Program Patents, Program Know-How, Patent Rights and
Know-How owned or controlled by JT during the Term to the extent necessary to
develop, make, have made, use, import, offer for sale and sell any Product in
the Co-Promotion Territory; and (ii) an exclusive (even as to JT) license (with
the right to sublicense as provided in this Section 4(b)) under the Program
Patents, Program Know-How, Patent Rights and Know-How owned or controlled by JT
during the Term to the extent necessary to develop, make, have made, use,
import, offer for sale and sell (with the right to sublicense as provided in
this Section 4(b)) any Product in the Tularik Territory. Tularik may not
sublicense any rights granted under this Section 4(b) to any Third Party in the
Co-Promotion Territory without the prior written consent of JT, not to be
unreasonably withheld. Tularik may sublicense any rights granted under this
Section 4(b) to any Third Party in the Tularik Territory without the prior
written consent of JT, with any such sublicenses subject to the payments set
forth in this Agreement. Tularik shall use reasonable efforts to ensure that
any sublicense negotiated by Tularik pursuant to this Section 4(b)(ii) shall:
(A) [ * ]; and (B) provide that any revenues or other consideration received
from such sublicensee as consideration for the grant of such sublicense in the
Tularik Territory, [ * ], shall be [ * ] and paid directly to each Party by such
sublicensee.
c. Independent Products. Each of JT and Tularik hereby grants to
the other Party an exclusive, royalty-bearing (in accordance with Section 4(f)),
worldwide license (with the right to sublicense after the Re-Engagement
Expiration Date shall have passed without the non-Independent Party having given
a Re-Engagement Notice) under the Program Patents and Program Know-How, and a
non-exclusive, royalty-bearing (in accordance with Section 4(f)), worldwide
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15.
<PAGE>
license (with the right to sublicense after the Re-Engagement Expiration Date
shall have passed without the non-Independent Party having given a Re-Engagement
Notice) under the Patent Rights and Know-How owned or controlled by the granting
Party to the extent necessary to develop Independent Lead Compounds and to make,
have made, use, import, offer for sale and sell Independent Products
incorporating an Independent Lead Compound in the event such Party is designated
the Independent Party with respect to such Independent Product (or Independent
Lead Compound) pursuant to Section 3(m). Such licenses under the non-
Independent Party's interest in Program Patents and Program Know-How are
exclusive even as to the granting Party. Any such license with respect to an
Independent Product or Independent Lead Compound shall terminate in the event
such Independent Product or Independent Lead Compound becomes a Collaboration
Lead Compound or Product pursuant to the terms of Section 3(n).
d. Third Party Technology. During the Term, if either Party becomes
aware of (i) an opportunity to participate in research with a Third Party that
could advance the objectives of the Research Program; or (ii) an opportunity to
obtain a license or other right owned or controlled by a Third Party relating to
the manufacture, marketing, import, use or sale of a Product ("Third Party
Rights"), it shall so notify the other Party and the RMC will determine whether
to pursue such opportunity in connection with the Research Program. In the
event that the Parties pursue such opportunity and in connection therewith incur
obligations to make payments to a Third Party, such payments shall [ * ].
e. Use Outside the Field. Each Party hereby covenants to the other
that it will not practice the license granted to it pursuant to Section 4 under
the other Party's interest in Patent Rights, Know-How, Program Patents or
Program Know-How, except as explicitly permitted in this Agreement.
f. Royalties Payable by the Independent Party. Except as provided
in Section 5(c), the Independent Party will pay the non-Independent Party, in
lieu of any Share of Co-Promotion Profits and Royalty Payments, a royalty equal
to: (i) [ * ] of Net Sales of Independent Products by the Independent Party,
its affiliates or sublicensees in the event the non-Independent Party terminates
participation in the Pre-Clinical Development of a Collaboration Lead Compound
pursuant to Section 3(l) prior to [ * ] on such Independent Product; (ii) [ * ]
of Net Sales of Independent Products by the Independent Party, its affiliates or
sublicensees in the event the non-Independent Party terminates participation in
the Pre-Clinical Development of a Collaboration Lead Compound pursuant to
Section 3(l) upon or following [ * ]; or (iii) [ * ] of Net Sales of Independent
Products by the Independent Party, its affiliates or sublicensees in the event
the non-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16.
<PAGE>
Independent Party terminates participation in the Pre-Clinical Development of a
Collaboration Lead Compound or Development of a Product pursuant to Section 3(l)
following [ * ]. Such royalty shall be payable on a quarterly basis in respect
of each country in which sales occur until the later of expiration of all
patents included in the Program Patents and Patent Rights necessary to make,
use, import for sale or sell such Product in such country, or [ * ] years after
first commercial sale of an Independent Product in such country. "Net Sales"
shall mean the gross sales prices of the Product in finished product form,
invoiced by a Party or the Independent Party, as the case may be, its affiliates
and sublicensees from sales to arms'-length Third Party end users, less, to the
extent such amounts are included in the invoiced sales price, taxes, shipping
costs (including freight and insurance) and duties and other governmental
charges paid for and separately identified on the invoice. Additionally, the
following amounts will be subtracted from the gross invoiced sales price: (i)
cash, trade and/or quantity discounts actually allowed; (ii) amounts repaid or
credited by reason of rejection or return of goods; (iii) volume or formal
discount amounts paid or credited to a wholesaler, purchaser, Third Party payor
or other contractee as a result of a contractual arrangement specific to a
Product; (iv) rebates paid or credited to any governmental agency (or branch
thereof) or to any Third Party payor, administrator or contractee; and (v)
discounts mandated by, or granted in response to, applicable state, provincial
or federal law, wholesaler chargebacks or retroactive price reductions. The
Independent Party may offset [ * ] of any royalties it must pay to Third Parties
pursuant to any licenses necessary to commercialize Products against royalties
payable by the Independent Party to the non-Independent Party; provided,
however, that in no event shall the royalties payable by the Independent Party
to the non-Independent Party be reduced to less than [ * ] of the amounts that
would have otherwise been due under the percentages set forth in this Section
4(f).
Section 5. Promotion of Products.
a. Promotion Rights in the Exclusive Territory. JT shall have the
exclusive responsibility for promoting each Product in the JT Territory.
Tularik shall have the exclusive responsibility for promoting each Product in
the Tularik Territory. All information and materials generated by a Party in
the course of the promotion effort within any country in such Party's Exclusive
Territory or in the Co-Promotion Territory shall be provided to the MC for use
in the promotion effort within the other Party's Exclusive Territory and in the
Co-Promotion Territory.
b. Commercialization in the Exclusive Territories. JT shall oversee
and implement all commercialization activities in the JT Territory during
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17.
<PAGE>
the Term, based on the principle of maximizing profits from sales of Products.
Tularik shall oversee and implement all commercialization activities in the
Tularik Territory during the Term, based on the principle of maximizing profits
from sales of Products. The MC shall review a Party's commercialization
activities within its Exclusive Territory to provide suggestions for
facilitating the promotion and commercialization of Products on a global basis.
c. Election or Revocation of Co-Promotion Right. In the Co-
Promotion Alternative (as defined in Section 5(d)(ii)), either Party may
terminate early its participation in the co-promotion of a Product in any
country in the Co-Promotion Territory at any time following [ * ] prior written
notice to the other Party. In such case, the other Party may continue promotion
of such Product, as an Independent Product, either alone or with a Third Party,
in such country in the Co-Promotion Territory, effective as of the date of the
terminating Party's notice hereunder. The Parties shall negotiate in good faith
for a period of [ * ] following the receipt of such notice to determine the
appropriate royalty to be paid on Net Sales of such Independent Product in such
country in the Co-Promotion Territory. In the event the Parties are unable to
agree on the appropriate royalty pursuant to the immediately preceding sentence,
the Independent Party with respect to such Independent Product shall pay to the
other Party a royalty on Net Sales of such Independent Product in such country
in the Co-Promotion Territory pursuant to Section 4(f), except that the
applicable royalty shall equal: [ * ] on the portion of aggregate Net Sales of
such Independent Product in such country up to [ * ] on the portion of aggregate
Net Sales of such Independent Product in such country in excess of [ * ]; and [
* ] on the portion of aggregate Net Sales of such Independent Product in such
country in excess of [ * ]. In the event a Party elects to cease participating
in the co-promotion of a Product of such Independent Product in a country in the
Co-Promotion Territory and the Independent Party proceeds to commercialize such
Product as an Independent Product, the non-Independent Party shall (i) transfer
and assign to the Independent Party all regulatory submissions and Drug Approval
Applications in such country relating to such Collaboration Lead Compound and/or
Products based upon or incorporating such Collaboration Lead Compound, together
with all materials and data related thereto in its possession and (ii) transfer
to the Independent Party all other relevant information that will enable such
Independent Party to promote such product as an Independent Product in such
country. A non-Independent Party may not reinitiate its participation in the
co-promotion of a Product in any given country in the Co-Promotion Territory in
which it relinquished such right hereunder.
d. Promotion Rights in the Co-Promotion Territory. (i) The MC shall
oversee and implement all commercialization activities in the Co-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18.
<PAGE>
Promotion Territory during the Term, based on the principle of maximizing
profits from sales of Products, by unanimous decisions. The MC shall have the
ability to determine whether the objective of maximizing profits from sales of
Products in the Co-Promotion Territory during the Term is best achieved through,
inter alia, [ * ]. In the event the MC determines that the foregoing objective
is best achieved by activities other than as provided in Sections 5(d)(ii), (e),
(f), (g) and (h), the MC shall determine [ * ] the optimal alternative structure
and the duties, responsibilities and economic parameters for the Parties and
Third Parties in such alternative structure. The Parties shall use reasonable
efforts to ensure that any sublicense negotiated by a Party or the Parties
pursuant to Section 4(a)(i) or 4(b)(i) shall: (a) [ * ]; and (b) provide that
any revenues or other consideration received from such sublicensee as
consideration for the grant of such sublicense in the Co-Promotion Territory,
less [ * ], shall be [ * ] and paid directly to each Party by such
sublicensee.
(ii) In the absence of [ * ] by the MC pursuant to Section 5(d)(i) or
in the event of a [ * ] by the MC to retain for the Parties commercialization
rights to a Product in the Co-Promotion Territory (the "Co-Promotion
Alternative"), JT and Tularik shall have the co-exclusive responsibility for
promoting such Product in the Co-Promotion Territory. Tularik and JT shall each
work diligently to perform its respective obligations under the Marketing Plan
and use the same effort such Party puts forth to promote other products of
similar commercial value to co-promote such Product in the Co-Promotion
Territory from initiation of pre-launch activities for such Product in the Co-
Promotion Territory until the expiration of the Term pursuant to the terms and
conditions hereof. The Parties intend that [ * ] shall supply [ * ] of the
total promotional and marketing effort (including details, if determined to be
an appropriate sales activity for a Party by the MC) for each Product being co-
promoted by the Parties in the Co-Promotion Territory, as determined by the MC.
Each Party's required promotional and marketing effort under the Marketing Plan
is hereinafter referred to as its "Required Sales Effort". The MC will
determine appropriate written standards for measuring and accounting procedures
to confirm and document each Party's performance of its Required Sales Effort,
one (1) month after the filing of the NDA for any Product. Nothing contained in
this Section 5(d) shall be deemed to preclude either Party from relinquishing
its right to participate in the co-promotion of Products in the Co-Promotion
Territory pursuant to Section 5(c), at any time. Any failure to provide the
Required Sales Effort shall not be deemed a breach of this Agreement.
e. Marketing Plan and Marketing Budget in the Co-Promotion
Territory. In the Co-Promotion Alternative, no later than one (1)
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
19.
<PAGE>
month after [ * ], the MC shall initiate preparation of a marketing plan
("Marketing Plan") and a marketing budget ("Marketing Budget"). The co-promotion
of a Product in the Co-Promotion Territory will be governed by the Marketing
Plan and Marketing Budget. The Marketing Plan and Marketing Budget will describe
fully, to the extent practicable, the proposed plan for commercialization of the
Product in each country in the Co-Promotion Territory, including [ * ] to be
used in the co-promotion of Products. The Marketing Plan will take into
consideration [ * ] with respect to Products. The Marketing Budget will include
all projected Co-Promotion Expenses for the Product. The initial Marketing Plan
and Marketing Budget shall be prepared by the MC no later than [ * ] for a
Product in any country in the Co-Promotion Territory. Each such Marketing Plan
and Marketing Budget shall thereafter be updated by the MC [ * ].
f. Promotional and Advertising Materials in the Co-Promotion
Territory. In the Co-Promotion Alternative, the Parties shall disseminate in
the Co-Promotion Territory only those promotional and advertising materials that
have been provided or approved for use by the MC, and the cost of producing such
materials shall be a Co-Promotion Expense of the Party incurring such cost. All
such materials shall be consistent with the relevant Marketing Plan and
Marketing Budget approved by the MC and neither Party shall make any claims or
representations in respect of the Products that have not been approved by the
MC. In all written or visual materials related to Products that identify either
of the Parties, the Parties will be presented and described to the [ * ] as
joining in the promotion of the Product as permitted by applicable law. All
such written and visual materials and all documentary information, promotional
material and oral presentations (where practical) regarding the promotion of the
Product will state this arrangement and will display the JT and Tularik names
and logos with equal prominence as permitted by applicable law and as directed
by the MC.
g. Miscellaneous. In the Co-Promotion Alternative, the MC shall by
unanimous decision designate a Party as being primarily responsible in the Co-
Promotion Territory for returns, orders and samples. In addition, the MC shall
by unanimous decision determine the policies and procedures necessary to
implement the foregoing.
Section 6. Determination of Payments.
a. Co-Promotion Expenses. In the Co-Promotion Alternative, Tularik
shall be responsible for paying [ * ] of all Co-Promotion Expenses and JT shall
be responsible for paying [ * ] of all Co-Promotion Expenses. "Co-Promotion
Expenses" shall include, without limitation, the following expenses
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20.
<PAGE>
incurred by a Party to the extent allocable to the co-promotion of Products in
all countries in the Co-Promotion Territory, calculated in accordance with U.S.
Generally Accepted Accounting Practices, consistently applied ("GAAP"): [ * ],
all as defined in Appendix D.
b. Co-Promotion Profits and Losses. In the Co-Promotion
Alternative, profits and losses shall be determined as follows. If Net Sales
during any calendar quarter exceed Co-Promotion Expenses during such quarter,
such excess shall be "Co-Promotion Profit." If the Net Sales during any calendar
quarter does not exceed Co-Promotion Expenses during such quarter, such excess
shall be "Co-Promotion Loss." Subject to adjustment pursuant to Section 10(e), [
* ].
c. Payment and Reporting. In the Co-Promotion Alternative, payments
and reporting shall be made as follows. Within [ * ] after the close of each
calendar quarter in which Products are sold in the Co-Promotion Territory, or
earlier if possible, during the Term (i.e., [ * ]), Tularik shall furnish to JT
a statement containing the Net Sales achieved, and the Co-Promotion Expenses
incurred, by it in such calendar quarter for each country in the Co-Promotion
Territory. Within [ * ] after the close of each calendar quarter in which
Products are sold, or earlier if possible, during the Term (i.e., [ * ]), JT
shall furnish to Tularik a statement (the "P&L Statement") setting forth for
each country in the Co-Promotion Territory, Net Sales of each Product, Co-
Promotion Expenses and all data on which the determination of each Party's Share
of Co-Promotion Profit or Share of Co-Promotion Loss was calculated. If either
Party owes an amount to the other Party pursuant to Section 6(a) or 6(b), it
shall make such payment within [ * ] after receipt of the P&L Statement, but in
no event shall such payment be due earlier than [ * ] after the end of the
relevant quarter. If the Term ends during an accounting quarter, the amounts
due hereunder shall be calculated for such shortened calendar quarter.
d. Promotion Expenses in the Exclusive Territory. "Promotion
Expenses" shall include, without limitation, the following expenses incurred by
a Party to the extent allocable to promotion of the Product in all countries
within such Party's Exclusive Territory in accordance with GAAP: [ * ], as
defined in Appendix D.
e. Royalty Rate. At least [ * ] prior to the commencement of sales
of Product in any country within a Party's Exclusive Territory, such Party
("Marketing Party") shall provide the other Party ("Non-Marketing Party") with
its good faith estimates ("Estimates") of [ * ] expected in all countries within
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21.
<PAGE>
the Marketing Party's Exclusive Territory during the remaining portion of the
fiscal year in which sales of such Product are commenced, on a quarterly basis.
In addition, the Marketing Party shall at the same time provide the Royalty Rate
(as defined in Section 6(f)) calculated pursuant to Section 6(f) using the
Estimates. The Marketing Party shall also provide supporting information
appended to the Estimates, clearly setting forth the assumptions made and
calculations used in deriving the Royalty Rate (the "Supporting Calculations").
At least [ * ] prior to the beginning of each [ * ], the Marketing Party shall
provide the Non-Marketing Party with its Estimates for [ * ], together with the
Supporting Calculations.
f. Calculation of Royalty Rate. The "Royalty Rate" shall be equal
to [ * ]; provided, however, that the Royalty Rate shall be equal to [ * ]
("Pre-Tax Loss").
g. Meetings to Discuss Estimates. The Non-Marketing Party may call
a meeting of the Parties to review and discuss in good faith the Estimates and
the Supporting Calculations (including the resulting Royalty Rate). Such
meeting shall be held at a mutually agreeable time and place not more than [ * ]
after notice is given by the Non-Marketing Party. In the event that the Non-
Marketing Party disagrees with the Estimates, the attending representatives of
both Parties will enter into good faith discussions to resolve the disagreement.
In the event that the attending representatives are unable to reach an
agreement, then the issue shall be referred to the MC for unanimous resolution.
h. Royalty Payments. Within [ * ] of the end of each fiscal quarter
following the commencement of sales of a Product in the Marketing Party's
Exclusive Territory, the Marketing Party shall pay a royalty to the Non-
Marketing Party equal to [ * ] during such quarter (the "Royalty Payment").
i. Audited Report of Actual Net Sales, Cost of Goods and Promotion
Expenses. Within [ * ] following [ * ], or earlier if possible, the Marketing
Party shall provide the Non-Marketing Party with an audited report of actual Net
Sales and Cost of Goods in all countries within the Marketing Party's Exclusive
Territory and Promotion Expenses in all such countries ("Actual Results").
j. Royalty Adjustment. In the event that the Actual Results include
a Pre-Tax Loss in the year of commencement of sales of a particular Product or
in any subsequent fiscal year, [ * ] of such loss shall be deducted from future
Royalty Payments otherwise owed by the Marketing Party to the Non-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
22.
<PAGE>
Marketing Party with respect to such Product pursuant to Section 6(f), until
such loss is fully liquidated.
k. Records. JT and Tularik each shall keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
such Party of all Products and Independent Products in the Territory in
sufficient detail to permit accurate determination of all figures necessary for
verification of royalties, profits, milestone payments and other compensation
required to be paid hereunder. JT and Tularik shall maintain such records for a
period of [ * ]. At such Party's expense, a Party, through a certified public
accountant reasonably acceptable to the other Party, shall have the right to
access the books and records of the other Party for the sole purpose of
verifying amounts due pursuant to this Agreement. Such access shall be
permitted only upon reasonable prior written notice to the other Party during
ordinary business hours and not more frequently than once during each calendar
year.
Section 7. Trademarks. The Parties, through the MC, shall mutually agree
upon the trademark or trademarks (each a "Trademark"). To the extent
commercially reasonable and appropriate, a single Trademark shall be used for
each Product in each country in the Territory. To the extent the MC determines
that the use of a single Trademark is impractical given cultural and other
differences among countries in the Co-Promotion Territory, each Party shall have
the right to designate a different Trademark for use within different countries
within the Territory; provided, however, that in no event shall different
-------- -------
Trademarks be used for the same Product within the same country in the
Territory. Each Party shall have the right to designate a different Trademark
for use within different countries within such Party's Exclusive Territory.
Each Trademark shall be used only in connection with the applicable Product and
shall not be used by either Party on or in connection with any other product.
The MC shall assign responsibility to one or both Parties for searching,
clearing, filing, prosecuting, maintaining and all reasonable steps necessary in
defending each Trademark. The MC shall approve all trade dress, logos, slogans,
designs and copyrights used on and in connection with any Product in the
Territory. During the Term, the MC shall approve all printed materials bearing
each Trademark, including but not limited to business materials, printed
materials, advertising materials, promotional materials and any such other
materials that may reference or incorporate such Trademark. In the event that
any action or proceeding is brought against either or both JT or Tularik, any
alleged infringement of a Third Party's trademark, trade dress or similar
intellectual property rights, each Party shall promptly notify the other and
cooperate in the defense of any such action or proceeding, as applicable. The
MC shall be responsible for the management of such action. In the event
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
23.
<PAGE>
Tularik or JT becomes aware of any actual or threatened violation of any
Trademark in any country in the Territory, that Party shall promptly notify the
other Party and the MC shall promptly discuss how to proceed in connection with
such actual or threatened violation.
Section 8. Supply Of Product.
a. Supply of Product. The JDC shall be responsible for determining
the sources of, and arrangements for, the manufacture and supply of Products
that the JDC believes will result in long-term profit maximization for such
Products. The JDC shall endeavor to [ * ].
b. Specifications for Products. The Parties shall designate one of
the Parties to be responsible for establishing, subject to approval by the MC,
the specifications for bulk and finished Product, and providing any necessary
documentation, certificates of analysis and test results, for the relevant
Product to be manufactured under this Section 8. Copies of all such
specifications and other information and documentation will be provided promptly
to the Parties. In addition, notice of, and results and data from, all FDA (or
its foreign equivalent) audits relating to the manufacture of Product will be
provided to the Parties. The Cost of Goods (including qualification batches for
FDA (or its foreign equivalent) approval) for Products actually used (and not
sold) for all Pre-Clinical Development and Development studies shall be included
in Development Costs.
c. Terms of Manufacture and Supply. The MC shall establish
procedures acceptable to both Parties regarding forecasts of requirements of the
Products.
Section 9. Regulatory Matters.
a. Side Effects and Adverse Events. During the Term, each Party
shall promptly advise the other by telephone, telefax or overnight delivery
service of every serious or unexpected side effect, adverse reaction or injury
that has been brought to that Party's attention and which is alleged to have
been caused by a Product. For each country in the Territory, the Party that has
the responsibility for filing the Drug Approval Application and the IND (or
foreign equivalent) in such country for such Product shall have all rights and
responsibilities to report such side effect, adverse reaction or injury to the
appropriate regulatory authorities as required by applicable law.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
24.
<PAGE>
b. Communication with Regulatory Agencies. If a Party is contacted
by the FDA or any equivalent regulatory agency in any country in the Territory
during the Term pertaining to this Agreement or to a Product, Tularik and JT
shall promptly, but always within [ * ] days, notify and consult with one
another. The Party that has filed the Drug Approval Application in such country
within the Territory or, if no Drug Approval Application has been filed, the
Party which has filed the IND (or foreign equivalent) in such country within the
Territory shall provide an appropriate response to such contact after such
consultation with the other Party.
c. Product Recall. In the event that JT or Tularik determines that
an event, incident or circumstance has occurred that may result in the need for
a recall or other removal of any Product or any lot or lots thereof from the
market in a country within the Territory, it shall promptly advise and consult
with the other Party with respect thereto. Thereafter, on a country-by-country
basis, the owner of the NDA for such Product in a country (or foreign
equivalent) shall, in its sole discretion, have the right to order a recall or
other removal after such consultations and the other Party shall co-operate with
such recall.
10. Financial provisions.
a. Research Payments. In support of Tularik's activities in the
Research Program, JT shall pay Tularik (i) [ * ] and, unless the Research
Program is previously terminated as provided in Section 2(g), [ * ]. Any
payments made by JT to Tularik pursuant to this Section 10(a) shall not affect
in any way the calculation of [ * ].
b. Milestone Payments. JT shall pay to Tularik [ * ] within [ * ]
after the dates upon which JT confirms that Tularik has [ * ]; provided,
however, that [ * ]; provided further that [ * ]. In addition, JT will make the
following payments to Tularik in US Dollars within [ * ] of the occurrence of
each event listed below in [ * ]:
Event Payment
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
25.
<PAGE>
In the event all of the listed events above are not achieved by a Collaboration
Lead Compound or Product, any listed events not achieved by such Collaboration
Lead Compound or Product shall be available to other Collaboration Lead
Compounds or Products until such time as each of the listed events has been
achieved [ * ].
c. Taxes. The burden of all withholding or similar taxes that may
be imposed by any governmental authority on milestone, royalty and profit share
payment amounts set forth in this Agreement shall be [ * ].
d. Reports. Tularik shall provide JT with a quarterly report
describing Tularik's use of the annual payments received from JT pursuant to
Section 10(a) for research purposes. Such report shall include the following
two categories of expenditures: (i) "Personnel Costs" and (ii) "Other Costs."
e. Loans from JT. JT will make available to Tularik, under and
subject to certain additional terms and conditions as provided in a loan
agreement to be executed by the Parties on the Execution Date ("Loan
Agreement"), an irrevocable loan commitment to finance an aggregate amount of up
to [ * ] (the "Aggregate Commitment"); provided, however, [ * ]. The Aggregate
Commitment shall be [ * ] pursuant to this Agreement and the agreement to be
executed between Tularik and JT concerning the Tularik obesity program (the
"Obesity Agreement"), commencing with [ * ] (or equivalent) (the "Eligible
Development Costs"). Such Aggregate Commitment may be drawn in multiple
disbursements in amounts ("Amounts Drawn") and at times ("Funding Dates")
requested by Tularik to: [ * ]; provided, however, that [ * ]; provided further
that [ * ]. Loans made by JT to Tularik pursuant to such Loan Agreement for
[ * ] ("Repayment Dates") commencing on the [ * ] of the first to occur of: [ *
]. Interest on Amounts Drawn shall accrue from the Funding Dates to the
Repayment Dates and shall equal [ * ]. In addition, Tularik's Share of Co-
Promotion Profit and its Royalty Rate with respect to the Tularik Territory for
[ * ] for which Tularik shall have Amounts Drawn pursuant to the Loan Agreement
shall [ * ]. In addition to the foregoing, during the [ * ] period immediately
following the receipt by the Parties of executed reports covering all aspects of
[ * ], JT and Tularik shall negotiate in good faith the terms and conditions
under which [ * ].
11. Intellectual Property. Each Party shall remain the sole owner or
licensee, as applicable, of all technology, compounds, discoveries and
inventions owned or controlled by such Party on the Agreement Date and shall
have no rights in or to those owned by the other Party except as specifically
granted herein. All inventions or discoveries made, and materials and
information created, jointly by employees, agents or consultants of both Parties
in the course of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
26.
<PAGE>
conducting activities pursuant to this Agreement shall be jointly owned, without
regard, in the case of inventions or discoveries relating to Lead Compounds,
Collaboration Lead Compounds and Products, to which Party provided the compound
library from which such invention or discovery was derived. All inventions or
discoveries made, and materials and information created solely by employees,
agents or consultants of one Party in the course of conducting activities
pursuant to this Agreement shall be owned solely by the Party whose employees,
agents or consultants made such invention, without regard, in the case of
inventions or discoveries relating to Lead Compounds, Collaboration Lead
Compounds and Products, to which Party provided the compound library from which
such invention or discovery was derived. Inventorship shall be determined in
accordance with the U.S. patent laws. [ * ].
12. Confidential Information. Each Party agrees that proprietary and
confidential information regarding either Party's technology and intellectual
property, as well as information regarding the Research Program, Lead Compounds,
Collaboration Lead Compounds, Products and other matters material to this
Agreement or to the Collaboration Agreement shall not be disclosed to any Third
Party or used except as permitted hereby during the term hereof and for a period
of [ * ] after its expiration or termination, except to the extent it can be
shown by competent written record that such information is now or subsequently
becomes, without breach of any obligation by the Party receiving such
information hereunder, public knowledge or is lawfully disclosed to or
independently developed by such Party. Any information disclosed to a
Scientific FTE of one Party who is resident with the other Party shall be deemed
the confidential information of the Party with whom such Scientific FTE is in
residence.
13. Term. This Agreement shall expire upon the earlier of the execution
of the Collaboration Agreement or the end the Term. "Term" shall mean the
period from the Agreement Date until the later to occur of (i) the expiration of
all patents on Products; or (ii) [ * ]; provided, however, that [ * ]. Either
Party may terminate this Agreement for material breach by the other Party, if
such breach remains uncured for [ * ] after the breaching Party receives written
notice thereof from the other Party. Except to the extent required by law, the
Parties agree not to disclose the material terms of this Agreement to Third
Parties (other than its affiliates) without the other Party's prior written
consent during its term and after its expiration or termination. In the event
this Agreement expires or terminates and the Collaboration Agreement shall not
have been executed by the Parties, then the provisions of Sections 4, 10, 11 and
12 shall survive such expiration or termination and each Party shall return
promptly any of the other
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
27.
<PAGE>
Party's confidential information and biological or chemical materials provided
to it pursuant to this Agreement.
14. Diligence. Subject to Section 3(c), 3(l) and 3(m), JT and/or Tularik
shall use commercially reasonable efforts to develop the Lead Compounds and
Collaboration Lead Compounds consistent with the efforts such Party expends on
compounds involved in its other research and development programs that have
comparable market potential. Subject to Section 5(c), JT and/or Tularik shall
use commercially reasonable efforts to develop and market Products, consistent
with the efforts it expends on its other products having comparable market
potential. If a Party disagrees on whether the other Party's actions are
commercially reasonable, such disagreement shall be resolved in accordance with
Section 19.
15. Representations and Warranties. Each Party hereby represents and
warrants that such Party has full corporate power and authority under the laws
of the state or country of its incorporation to enter into this Agreement and
carry out the provisions hereunder and that the person executing this Agreement
on each Party's behalf has been duly authorized to do so by all requisite
corporate action.
a. Each Party represents and warrants that, as of the date of this
Agreement, it is not a Party to any agreement, arrangement or understanding with
any Third Party that in any significant way prevents such Party from fulfilling
any of its material obligations under the terms of this Agreement.
b. Each Party covenants that it will not commit any acts or fail to
take any action that would be in material conflict with its obligations under
this Agreement.
c. Each Party represents and warrants to such Party's best knowledge
as of the date of this Agreement: [ * ].
d. Each Party represents and warrants that [ * ].
16. Binding Agreement. Each Party represents this Agreement is a legal
and valid obligation, binding upon it and enforceable in accordance with its
terms. Each Party represents it has not and will not during the term of this
Agreement grant any right to any Third Party that would conflict with the rights
granted to the other Party hereunder.
17. Provisions to be Included. The Collaboration Agreement shall include
the terms specified in this Agreement and other terms customary in the
pharmaceutical industry for agreements governing the research, development and
commercialization of pharmaceutical products including, without limitation,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
28.
<PAGE>
enforcement of Program Patents, defense against Third Party claims of
infringement, payments, information and reports, indemnification, relationship
of the Parties, assignments, notices, amendments, waiver, counterparts, force
majeure, headings, governing law, language, entire agreement and public
announcements.
18. Severability. If any part of this Agreement is declared invalid by
any legal authority having jurisdiction over either Party, then such declaration
shall not affect the remainder of the Agreement, which shall continue in full
force and effect. The Parties shall revise the invalidated part in a manner
that will render such provision valid and closely approximate the Parties'
original intent.
19. dispute resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this agreement, the
Parties shall try to settle their differences amicably between themselves by
referring the disputed matter to the committee(s) provided in Article 1. Any
unresolved disputes arising between the Parties arising out of, relating to, in
connection with or in any way connected with this Agreement or any term or
conditions hereof, or performance by either Party of its obligations hereunder,
whether before or after termination or expiration of this Agreement, shall be
finally resolved by binding arbitration, except that any disputes regarding the
validity, scope or enforceability of patents shall be submitted to a court of
competent jurisdiction. The arbitration shall [ * ]. The arbitration will be
conducted by a panel of three (3) arbitrators with significant experience in the
pharmaceutical industry appointed in accordance with applicable AAA rules. Any
arbitration herewith shall be conducted in the English language to the maximum
extent possible. Each Party shall bear its own costs and attorney's and
witness' fees. Judgment on the award so rendered shall be final and may be
entered in any court having jurisdiction thereof.
20. Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that neither Party shall assign any of its rights and
obligations hereunder without the prior written consent of the other Party
except in connection with the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of the assets or
actual voting control of the assigning Party.
21. Governing Law. This Agreement shall be governed by California law,
notwithstanding its conflicts of laws principles.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
29.
<PAGE>
22. Entire Agreement, Amendment. This Agreement sets forth the principal
terms of the arrangement between the Parties hereto and, except as otherwise set
forth herein, supersedes and terminates all prior agreements and understandings
between the Parties. No subsequent alteration, amendment, change or addition to
this Agreement shall be binding upon the Parties unless reduced to writing and
signed by an authorized officer of each Party.
23. Public Announcements. Each Party agrees that, prior to the execution
of the Agreement, except as may be required by law, it shall not disclose the
existence, substance or details of this Agreement without the prior written
consent of the other Party, such consent not to be unreasonably withheld.
Nothing herein shall prevent either Party from disclosing such information as
reasonably necessary to its affiliates; provided, however, each Party shall take
such steps necessary to ensure that such affiliates agree to be bound to the
provisions of this Section 23. In cases in which disclosure may be required by
law, the disclosing Party, prior to such disclosure to the extent practicable,
shall notify the non-disclosing Party of the contents of the proposed
disclosure. Consistent with applicable law, the non-disclosing Party shall have
the right to propose reasonable changes to the disclosure to protect its
interests, provided that it requests such changes promptly after the potential
disclosure is submitted to it. The disclosing Party shall not unreasonably
refuse to include such changes in its disclosure.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
30.
<PAGE>
If this Agreement correctly sets forth your understanding of the agreement
between JT and Tularik, please confirm by signing and returning the duplicate
copy, addressed to my attention.
Tularik Inc.
By: /s/ John P. McLaughlin
-------------------------
Title: President
AGREED:
Japan Tobacco Inc.
By: /s/ Masakazu Kakio
-------------------------
Title: Executive Director
Date: September 8, 1998
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
31.
<PAGE>
APPENDIX A
RESEARCH PLAN
The details of the Research Program described in this Agreement are as follows:
1. The following tasks will be carried out predominantly at Tularik:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
2. The following tasks will be shared by both parties:
[ * ]
[ * ]
[ * ]
[ * ]
3. Details will be discussed and determined by the RMC. An initial meeting of
the RMC will take place within one month of the date of execution of this
Agreement.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
32.
<PAGE>
APPENDIX B
DESCRIPTION OF TULARIK EXISTING
TECHNOLOGY APPLICABLE TO THE FIELD
I. Summary of Existing Tularik Technology
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
33.
<PAGE>
APPENDIX C
DESCRIPTION OF JAPAN TOBACCO EXISTING
TECHNOLOGY APPLICABLE TO THE FIELD
Summary of JT Patent Applications Relevant to the Orphan Nuclear Receptor
Project
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
34.
<PAGE>
APPENDIX D
Definitions for Calculation of Co-Promotion Expenses, Development Costs
and Promotion Expenses in the Exclusive Territory
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
35.
<PAGE>
APPENDIX E
Description of Scientific FTE Rate
The initial Scientific FTE rate that will be used by the Parties in
preparing the Development Budget and determining Development Costs is [ * ].
Such rate is composed of the following expense categories in the amounts
indicated:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
The Scientific FTE rate shall be adjusted annually such that [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
36.
<PAGE>
APPENDIX F
Excluded Orphan Nuclear Receptors
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
37.
<PAGE>
APPENDIX G
Tularik Scientific FTE
Assigned to the Research Program
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
38.
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.14
September 20, 1998
Mr. Masakazu Kakei
Executive Director and Member of Board
Japan Tobacco Inc.
JT Building, 2-1 Toranomon, 2-chome
Minato-ku, Tokyo 105-8422, Japan
Re: Preliminary Research, Development and Marketing Agreement between Tularik
Inc. ("Tularik") and Japan Tobacco Inc. ("JT") (individually, a "Party" and,
collectively, "Parties").
Dear Mr. Kakei:
This Preliminary Research, Development and Marketing Agreement ("Agreement")
sets forth the Parties' preliminary agreement on terms and conditions under
which Tularik and JT will (i) amend and restate the Collaboration Agreement
dated as of December 31, 1996 between Tularik and JT ("Original Agreement") to
govern the terms pursuant to which the Parties will continue to research,
discover, develop, manufacture and market products that [ * ]; and (ii) expand
the Parties' collaboration under the Original Agreement to include a
collaborative program to research, discover, develop, manufacture and market
products that [ * ]. The [ * ] shall be referenced collectively in this
Agreement as the "Targets". Activities conducted pursuant to subparagraphs (i)
and (ii) of the previous sentence shall be referred to herein, collectively, as
the "Program". "Field" shall mean the therapeutic treatment of human disease by
means of regulation of the Targets. The foregoing definition of "Field" shall
exclude the therapeutic treatment of human disease by means of [ * ]. The
Parties intend to express their agreement more fully pursuant to a definitive
agreement ("Collaboration Agreement"). The Parties shall use their respective
commercially reasonable efforts to execute the Collaboration Agreement prior to
[ * ] ("Execution Date").
<PAGE>
1. Committees
a. EC. The goals and progress of the Program shall be the ultimate
responsibility of an Executive Committee ("EC") comprised of [ * ] to be
appointed within 10 days after September 20, 1998 (the "Agreement Date"). A
Party may replace its designee to the EC by written notice to the other Party.
Except as provided herein, all decisions of the EC shall be unanimous. The EC
shall resolve problems and settle disagreements that are unresolved by the RMC,
the JDC or the MC. The EC shall meet as necessary to resolve disagreements
pursuant to this Agreement
b. Research Management Committee. The goals and progress of the
research component of the Program ("Research Program") shall be determined and
monitored by a Research Management Committee ("RMC"), which shall be composed of
three members from each of Tularik and JT, the Chairperson of which shall be
named by Tularik. A Party may replace any designee to the RMC by written notice
to the other Party. The RMC shall meet at least twice annually at a time and
place it so designates. The RMC will periodically review the Research Program
and the Parties' progress thereunder, to the extent set forth in the Research
Plan, including all screening results and new developments regarding the Field,
and propose changes to the Research Plan based upon the results of prior work
and new developments in the Field. The RMC will select the Collaboration Lead
Compounds by a unanimous vote pursuant to Section 3(b). All data and
information obtained by either Party pursuant to the Research Program will be
provided to the RMC. The RMC will delegate responsibility for the filing and
prosecution of Program Patents arising from the Research Program on inventions
jointly discovered in the course of the Research Program Term (as defined in
Section 2(g)). The RMC will be responsible for coordinating all aspects of all
activities undertaken to identify and develop a Lead Compound that are necessary
or desirable to determine whether such Lead Compound may be suitable for
designation as a Collaboration Lead Compound pursuant to Section 3(b)(i). In
addition, the RMC will be responsible for coordinating all aspects of all
activities (including, but not limited to: [ * ] that will be undertaken with
respect to a Collaboration Lead Compound that are necessary or desirable to
enable the filing of an IND on Products based upon or incorporating such
Collaboration Lead Compound, including the preparation and filing of an IND
(collectively, "Pre-Clinical Development"). All decisions of the RMC shall be
unanimous.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
<PAGE>
c. Joint Development Committee. Within thirty (30) days of the date
a Collaboration Lead Compound is designated by the RMC, the Parties shall each
appoint three representatives to a Joint Development Committee ("JDC"). A Party
may replace any designee to the JDC by written notice to the other Party. Such
representatives will include individuals with expertise and responsibilities in
the areas of pre-clinical development, clinical development or regulatory
affairs. The JDC will be responsible for coordinating all aspects of the
Development of each Product through the filing of an NDA or equivalent by
unanimous decisions. "Development" shall mean the development of any Product
occurring from and after the filing of an IND, through and including approval of
an NDA and any other governmental approvals required for the commercialization
of such Product in a country.
d. Marketing Committee. Upon recommendation of the JDC in
anticipation of the first commercial launch of one or more Products, but in any
event no later than at the [ * ] for any Product, the Parties shall each appoint
three representatives to a Marketing Committee ("MC"). A Party may replace any
designee to the MC by written notice to the other Party. Such representatives
will include individuals with expertise and responsibilities in the areas of
sales, marketing, manufacturing or regulatory affairs. The MC will develop a
marketing plan for each Product in the Co-Promotion Territory, shall oversee
quality control of the Product and shall oversee operational aspects of
marketing and sales in the Co-Promotion Territory following launch of each such
Product, in all cases by unanimous decisions. [ * ]. "Co-Promotion Territory"
shall mean the [ * ]. "Tularik Territory" shall mean the countries, territories
and possessions of the United States of America and Canada. "JT Territory"
shall mean Japan and Korea and their territories and possessions. "Exclusive
Territories" shall mean the Tularik Territory and the JT Territory. "Territory"
shall mean the Exclusive Territories and the Co-Promotion Territory.
e. Dispute Resolution. Any disputes or disagreements arising in the
RMC, JDC or MC will be referred to the EC if the RMC, JDC or MC, as the case may
be, is unable to resolve such dispute or disagreement [ * ] after submission of
an issue to such committee. In addition, any other disputes or disagreements
between the Parties arising hereunder will first be referred to the EC. If such
dispute is not resolved within the [ * ] following submission of such dispute to
the EC and such dispute relates to an alleged breach of this Agreement, then
either Party may propose to refer such dispute to arbitration, and thereafter
such dispute shall be resolved pursuant to Section 19. In the event such
dispute is not resolved within the [ * ] following submission of such dispute to
the EC and such dispute does not relate to an alleged breach of this Agreement,
such dispute shall be referred to a Third Party mediator with significant
experience in the pharmaceutical industry acceptable to both parties for
resolution. The costs and expenses of such Third Party mediator shall be shared
equally by the Parties. In the event such dispute is not resolved within the [
* ] following submission of such dispute to the Third Party mediator, then
either Party may propose to refer such dispute to arbitration, and thereafter
such dispute shall be resolved pursuant to Section 19.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3.
<PAGE>
2. Research Program
a. Research Program. The Research Program shall be conducted in the
Field pursuant to a detailed Research Plan as set forth in Appendix A ("Research
Plan"). The Parties shall commence the portion of the Research Program relating
to [ * ] promptly upon the Agreement Date.
b. Basic Research. The Parties will jointly undertake, under the
direction of the RMC, basic research towards the objectives of the Research
Program.
c. Screening. Tularik shall develop and perform biochemical and
cell-based assays ("Tularik Assays") to determine (i) the effect of compounds,
selected for screening by the RMC, on [ * ] Targets ("[ * ] Compounds") and/or
[ * ]; and (ii) the cytotoxicity and target specificity of such [ * ]
Compounds and/or [ * ], for the purpose of identifying [ * ] Compounds and/or
[ * ] that may be suitable for further development within the Field; provided,
however, that in no event shall Tularik grant to JT rights in those natural
extracts, natural compounds and synthetic compounds contained in the [ * ];
provided further that Tularik may grant to JT rights in compounds derived or
generated as a result of medicinal chemistry undertaken with respect to [ * ].
Designation of [ * ] Compounds ("[ * ] Lead Compounds") and/or [ * ] ([ * ])
for further development within the Field shall be the responsibility of, and
undertaken by, the RMC. A [ * ] Lead Compound or a [ * ] may also be referred
to herein as a "Lead Compound". Multiple Lead Compounds are referred to herein
as "Lead Compounds". Each Party will provide its proprietary chemical and
natural product libraries to Tularik for screening as directed by the RMC;
provided, however, that a Party shall not be required to provide a compound
for screening that [ * ]. Unless otherwise directed by the RMC and except as
provided in Section 2(e), the activities under Sections 2(b) and 2(c) shall be
the responsibility, [ * ], of Tularik until such time as [ * ] pursuant to
this Section 2(c). If a
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4.
<PAGE>
compound is designated as a Lead Compound [ * ], such compound shall be removed
from the screening library from which such Lead Compound originated until such
time as such Development of such Lead Compound (or Collaboration Lead Compounds
or Products resulting therefrom) shall be terminated by the Parties.
d. Research License. Each Party hereby grants to the other Party a
non-exclusive license to practice, solely for the purpose of conducting the
Research Program, (i) inventions claimed in or covered by patents and patent
applications owned or controlled by such Party relating to the discovery and
commercialization of Independent Lead Compounds, Independent Products, Lead
Compounds, Collaboration Lead Compounds or Products made or discovered during
the Research Program Term ("Program Patents"), (ii) other know-how, information
and technology owned or controlled by the other Party and developed during
Research Program Term ("Program Know-How"), (iii) patents and patent
applications (other than Program Patents) owned or controlled by such Party to
the extent applicable to that portion of the Field relating to: (A) [ * ], to
the extent such patents and patent applications exist as of the Agreement Date;
and (B) [ * ] Targets, to the extent such patents and patent applications
existed as of September 20, 1996 ("Preliminary Agreement Date") ((iii)(A) and
(B) herein, collectively, "Patent Rights") and (iv) know-how, information and
technology (other than Program Know-How) owned or controlled by such Party to
the extent applicable to that portion of the Field relating to: (A) [ * ], to
the extent such know-how, information and technology exist as of the Agreement
Date; and (B) [ * ] Targets, to the extent such know-how, information and
technology existed as of the Prelminary Agreement Date ((iv)(A) and (B) herein,
collectively, "Know-How"). JT agrees that Tularik may sublicense to [ * ].
Tularik and JT shall provide numbers of all relevant patents and patent
applications within their respective Patent Rights following execution of this
Agreement.
e. Research Chemists. The Parties recognize that the prompt
allocation of appropriate medicinal chemistry resources to optimize Lead
Compounds will confer a competitive advantage upon the Research Program.
Accordingly, the Parties agree that the RMC, by unanimous decision, shall be
responsible for determining: (i) [ * ]. Each of JT and Tularik shall be
responsible for dedicating to the Research Program [ * ]; provided, however,
that the RMC may decide [ * ]. In the event that either JT or Tularik is unable
to [ * ]; provided, however, that the Receiving Party shall, upon written
request by the Paying Party, provide documentation to demonstrate that [ * ].
In the event that the Receiving Party shall be unable to employ the number of
additional chemistry Scientific FTE
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5.
<PAGE>
that the Paying Party is unable to provide, the Paying Party shall be required
to pay the Receiving Party [ * ]. The Parties understand and agree that: [ * ].
In the event that the RMC is unable to unanimously agree on [ * ], the matter
shall be referred to the EC for unanimous resolution. In the event that the EC
is unable to unanimously agree on [ * ], a Party will have the right to proceed
independently to develop such compound as an Independent Lead Compound under
Section 3(m) and to develop Independent Products incorporating or based on such
Collaboration Lead Compound.
f. Exchange of Pre-Clinical Data. JT and Tularik will exchange pre-
clinical data generated during the Research Program Term for [ * ]. As provided
in Sections 4(a) and 4(b), the Parties may also make such data available to any
permitted sublicensees in the Field in a country or countries in the Territory;
provided, however, such data shall not be made available to such sublicensees
until a sublicensee has executed a standard confidentiality agreement covering
disclosure and use of such data.
g. Research Program Term. The portion of the Research Program
relating to the [ * ] Targets has been conducted since the Preliminary Agreement
Date. The Parties shall continue performing under such portion of the Research
Program, and shall also perform activities relating to the [ * ] under the
Research Program during the period of three years commencing as of the Agreement
Date ("Research Program Term"). Upon not later than [ * ] prior written notice
JT may, in its sole judgment, terminate the Research Program on [ * ] of the
Agreement Date. The RMC may terminate the Research Program any time during the
Research Program Term if it unanimously determines the Research Program is no
longer scientifically useful or that no potential Products would be commercially
viable. In case of such an early termination by JT or the RMC, JT shall be
exempt from any payment(s) under Section 10(a) that would have become due and
payable after the effective date of such early termination. Following any
termination of the Research Program (i) that occurs simultaneously with the
termination of this Agreement in accordance with Section 13 (i.e., no compound
or Lead Compound has been designated previously a Collaboration Lead Compound in
accordance with Section 3(b) and no Independent Lead Compound is being developed
in accordance with Section 3(m)) or (ii) that is followed at some future date by
the termination by JT of Development or co-promotion of any Collaboration Lead
Compound and/or Product pursuant to Sections 3(l) or 5(c), respectively, or
development of an Independent Lead Compound in accordance with Section 3(m) (A)
any licenses granted by Tularik to JT will terminate, (B) [ * ]; provided,
however, that [ * ]; provided further that [ * ]. Tularik will then be free to
pursue
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6.
<PAGE>
clinical development and registration of such compounds, Lead Compounds and/or
Products without obligation to JT except as provided in Section 4(f) or Section
5(c), as appropriate.
h. Exclusive Collaboration. Except as provided below, the Parties
shall work exclusively with each other in the Field during the Research Program
Term. The research and development program being conducted by JT as of the
Agreement Date to discover and develop compounds having activity against Targets
shall be included as part of the Research Program; provided, however, that JT
shall not be required to contribute (i) compounds that [ * ]. During the
Research Program Term, neither Party shall discuss the terms of, or enter into,
an agreement with any Third Party relating to research, development or
commercialization activities of products in the Field without the express prior
unanimous written consent of the RMC, JDC or MC, respectively, except for the
[ * ] except as otherwise provided in this Agreement. During the Term (as
defined in Section 13), except for [ * ], neither Party will develop or
commercialize a product in the Field other than pursuant to this Agreement.
The Parties shall discuss with each other any opportunity available to either
Party to [ * ] that are known, at the time such Party becomes aware of such
opportunity, to regulate one or more Targets. The Parties in good faith shall
negotiate the terms on which any such [ * ] opportunity may be included in
this Agreement. For the avoidance of doubt, the Parties agree that neither
Party shall enter into any [ * ] unless mutually agreed by the Parties during
such good faith negotiations. Tularik shall not enter into any agreement with
any Third Party [ * ] regarding research involving [ * ] or the
commercialization of [ * ] unless such agreement contains provisions [ * ] of
the JT Territory comparable to those described in the highlighted sections of
the letters dated October 9, 1998 and October 14, 1998 from William J. Rieflin
to K. Kiyose attached hereto as Appendix F (the "Kiyose Letters").
3. Development Program.
a. General Principles. The Parties agree to use commercially
reasonable efforts to develop Collaboration Lead Compounds for use in the Field,
making use of each Party's special expertise as directed by the RMC with the
intent of obtaining all worldwide approvals or authorizations necessary for the
manufacture, distribution, use or sale of a Product in the Territory
("Regulatory Approval") and bringing Products to the market as soon as
reasonably practicable thereafter.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7.
<PAGE>
b. Designation of Collaboration Lead Compound. (i) From time to
time either Party may propose to the RMC one or more Lead Compounds suitable for
Pre-Clinical Development. The RMC will promptly determine whether such Lead
Compound is suitable for Pre-Clinical Development by determining whether such
Lead Compound meets relevant criteria set forth by the RMC from time to time
(the "Pre-Clinical Development Criteria").
(ii) If the RMC determines that such Lead Compound meets the Pre-
Clinical Development Criteria, then within [ * ] of such determination each
Party shall provide to the RMC a written notice as to whether it elects to
participate in and, subject to Section 3(f), commit resources to conduct Pre-
Clinical Development of such Lead Compound as a Collaboration Lead Compound
according to the proposed plan and budget. If the RMC determines that such Lead
Compound does not meet the Pre-Clinical Development Criteria, then within [ * ]
of such determination each Party shall provide to the RMC a written notice as to
whether it elects to designate such Lead Compound as a Collaboration Lead
Compound and participate in and commit resources to conduct Pre-Clinical
Development of such Collaboration Lead Compound notwithstanding that such Lead
Compound does not meet the Pre-Clinical Development Criteria. If each Party
makes an affirmative election with respect to any Lead Compound pursuant to
either the first or second sentence of this Section 3(b)(ii), such Lead Compound
shall be designated a "Collaboration Lead Compound" and, if an IND or equivalent
is filed thereon, a "Product." If one Party makes an affirmative election and
the other Party makes a negative election with respect to any Lead Compound
being designated a Collaboration Lead Compound, the Party making an affirmative
election will have the right to proceed independently to develop such compound
as an Independent Lead Compound or Independent Product under Section 3(m).
(iii) If neither Party makes an affirmative election with respect to
any Lead Compound being designated a Collaboration Lead Compound under Section
3(b)(i), such Lead Compound shall be neither a Collaboration Lead Compound nor a
compound that may be developed under Section 3(m), and development of such non-
elected Lead Compound (a "Discontinued Compound") may be subsequently initiated
by a Party by notifying the other Party of its interest in initiating
Development of such Discontinued Compound at any time on or before [ * ] of the
date of termination or expiration of the Research Program Term. If the other
Party indicates it is not interested in initiating Development of such
Discontinued Compound, the initiating Party may proceed with development of such
Discontinued Compound as an Independent Lead Compound or an
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8.
<PAGE>
Independent Product and the initiating Party shall be deemed to be the
Independent Party, pursuant to Section 3(m). At any time after [ * ] of the date
of termination or expiration of the Research Program Term, either Party may,
upon written notice to the other Party, proceed with development of a
Discontinued Compound as an Independent Product and such Party shall be deemed
to be the Independent Party, pursuant to Section 3(m).
(iv) If a Lead Compound is not, at any time, presented to the RMC
pursuant to Section 3(b)(i), such Lead Compound shall be neither a Collaboration
Lead Compound nor a compound that may be developed under Section 3(m), and this
Section 3(b)(iv) shall govern any future development of such non-proposed Lead
Compound (a "Non-Proposed Compound"). If at any time on or before [ * ] of the
date of termination or expiration of the Research Program Term, a Party
hereunder (the "Non-Proposed Compound Interested Party") determines to initiate
Pre-Clinical Development of such Non-Proposed Compound, it shall provide written
notice to the other Party of such interest and the reasons therefor. The other
Party will then have [ * ] to indicate whether it also is interested in the
development of such Non-Proposed Compound. If the other Party is so interested,
the Parties will proceed with Pre-Clinical Development or Development of such
Non-Proposed Compound as a Collaboration Lead Compound pursuant to the terms of
this Agreement. If the other Party is not so interested, the Non-Proposed
Compound Interested Party may proceed with development of such Non-Proposed
Compound as an Independent Product and the Non-Proposed Compound Interested
Party shall be deemed to be the Independent Party, pursuant to Section 3(m). At
any time after [ * ] of the date of termination or expiration of the Research
Program Term, either Party may, upon written notice to the other Party, proceed
with development of a Non-Proposed Compound as an Independent Product and such
Party shall be deemed to be the Independent Party, pursuant to Section 3(m).
c. Pre-Clinical Development. The Parties, under the direction of
the RMC shall conduct Pre-Clinical Development with respect to any designated
Collaboration Lead Compound. The costs of conducting such Pre-Clinical
Development shall be shared by the Parties as set forth in Section 3(f). Under
no circumstances shall either Party conduct studies of any Collaboration Lead
Compound in the Field except as permitted by the RMC.
d. Collaborative Development of Products. The Parties will each
diligently collaborate in the Pre-Clinical Development and Development and use
commercially reasonable efforts to develop and bring Products to the market as
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9.
<PAGE>
soon as reasonably practicable. The role of each Party in the Development
process will be determined by the JDC, with the Parties intending that each
Party will provide advisory and supporting services with respect to each phase
of the process in which such Party is not actively or primarily involved. [ * ]
shall supply [ * ] for each Product to be promoted or co-promoted by the Parties
in the Territory in the aggregate, as determined by the JDC. A Party's required
Development effort is hereinafter referred to as its "Required Development
Effort". The JDC will determine appropriate written standards for measuring
Required Development Efforts and accounting procedures to confirm and document
each Party's performance of its Required Development Effort for any Product
before the Parties commence Development thereof. No clinical trials involving
any Product shall be commenced by or on behalf of either Party without the prior
approval of the JDC. Nothing contained in this Section 3(d) shall be deemed to
preclude either Party from terminating its participation in the collaborative
Development, pursuant to Section 3(l), at such time. Any decision by a Party
not to participate in development pursuant to Section 3(b) or to terminate
participation in the collaborative Development pursuant to Section 3(l) shall
not be deemed a breach of this Agreement.
e. Development Plan and Development Budget. Promptly following the
designation of a Collaboration Lead Compound pursuant to Section 3(b), the JDC
shall initiate preparation of the development plan for the Development (the
"Development Plan") and a budget (the "Development Budget") for proposed
Development Costs (as defined in Section 3(f)). The initial Development Plan
shall set time lines and priorities for the various Development activities
through [ * ] and identify which Party, or whether a Third Party, is to be
responsible for each activity. The budget for each development program shall
include a detailed short-term budget covering all proposed Development Costs of
the program expected during the subsequent [ * ] (the "Short-Term Budget
Period") of the Development process. Both Parties recognize that the
Development Plan and the Development Budget represent projections only and will
be subject to frequent changes. Each such Development Plan and Development
Budget shall be updated as deemed appropriate by the JDC, but in no event less
frequently than [ * ] and approved by the JDC not later than thirty (30) days
prior to each [ * ] of each applicable calendar year.
f. Funding of Pre-Clinical Development and Development. Tularik
shall be responsible for [ * ] of the Development Costs and JT shall be
responsible for [ * ] of such Development Costs. "Development Costs" shall mean
all costs and expenses [ * ] (as calculated in accordance with GAAP and
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10.
<PAGE>
using the same allocation methods that the Party incurring such costs uses
throughout its operations, but in all events excluding [ * ] (as defined in
Appendix D)), all as specified in the Development Plan and the Development
Budget. Development Costs shall consist of the costs of [ * ] but shall exclude
the costs of [ * ]. Such costs shall include, without limitation: [ * ]. In the
event the Development Costs incurred by a Party during any calendar quarter
exceed [ * ] of the Development Costs set forth in the most recently approved
Development Budget for activities to be conducted by such Party during such
quarter (the "Overage Threshold"), then the other Party shall not be responsible
for paying [ * ] share of any Development Costs in excess of the Overage
Threshold incurred by the Party triggering such overage unless such overage had
been approved in advance, or is subsequently ratified, unanimously by the JDC
(in which case each of the Parties shall be responsible for [ * ] of all such
Development Costs). In the event such overage has not been approved or ratified
unanimously by the JDC, the Party incurring Development Costs exceeding the
Overage Threshold in such quarter shall be responsible for [ * ] of the
Development Costs in excess of the Overage Threshold.
g. Scientific FTE. In preparing the Development Budget and
determining Development Costs, the Parties will use a rate of [ * ] per
Scientific FTE. "Scientific FTE" means the fully-loaded costs, including [ * ],
but excluding [ * ], of employing a full-time scientific/technical person (or,
in the case of less than a full-time dedicated person, the full-time equivalent
scientific/technical person year) dedicated to the Pre-Clinical Development or
Development for a period of one (1) year, [ * ]. Such rate shall be adjusted
annually (utilizing the cost-breakdown and methodology attached hereto as
Appendix E as the basis for such adjustment) and [ * ].
h. Payment of Development Costs. Each Party shall be responsible
for paying [ * ] Development Costs incurred pursuant to the Development Plan and
the Development Budget as provided in Section 3(f), subject to reimbursement as
provided herein. Within thirty (30) days after each calendar quarter, each
Party shall provide the JDC with detailed information concerning the Development
Costs incurred by such Party during such quarter. Promptly after receipt
thereof, the JDC will determine the amount, if any, which either Party has paid
in excess of the amount to be borne by such Party for such quarter pursuant to
Section 3(f) (an "Overpayment"), and shall so notify the Parties. In the event
of an Overpayment, the other Party shall pay the amount thereof to the Party
making the Overpayment within thirty (30) days after receipt of notice from the
JDC that an Overpayment has occurred.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11.
<PAGE>
i. Drug Approval Applications. Consistent with the Development Plan
and Development Budget and as directed by the JDC, the Parties will file
applications for regulatory approval required before commercial sale or use of a
Product as a drug in a country within the Territory ("Drug Approval
Applications") and attempt to obtain regulatory approvals in each country in the
Territory in which the Parties either individually or jointly intend to
commercialize Products. JT will be responsible for filing in its name and shall
own all regulatory submissions relating to Products including, without
limitation, all INDs and NDAs, in each country in the JT Territory, in which
Products will be commercialized. Tularik will be responsible for filing in its
name and shall own all regulatory submissions, including, without limitation,
all INDs and NDAs in each country in the Tularik Territory in which Products
will be commercialized by Tularik. The JDC will be responsible for designating
a Party to be responsible for filing all regulatory submissions in each country
in the Co-Promotion Territory in which Products will be commercialized. The
Party not responsible for filing regulatory submissions for Products in a
country pursuant to this Agreement shall have a right to cross-reference to all
such filings made by the other Party in any country. The Parties will cooperate
in the preparation of all such regulatory filings and in obtaining Regulatory
Approvals under this Section 3(i).
j. Line Extensions. JT and Tularik may each prepare and submit to
the JDC for consideration plans for development of Product line extensions and
the conduct of clinical trials covering indications other than those for which
Products are being developed or commercialized in the Territory. Any such line
extensions or any additional clinical trials for additional indications will be
subject to the approval and supervision of the JDC as part of the ongoing
Development of such Product.
k. Compliance. The Parties will comply with all supranational,
federal, state and/or local laws pertaining to the Development and
commercialization of Products.
l. Termination of Participation in Collaborative Development. On a
Collaboration Lead Compound-by-Collaboration Lead Compound basis, either Party
may elect (upon [ * ] written notice following receipt by the Party
contemplating termination of its participation in the Pre-Clinical Development
of any Collaboration Lead Compound or Development of any Product of Development
Termination Documents) to terminate its participation in, or to not to
participate in, the Pre-Clinical Development of any Collaboration Lead Compound
or Development of any Product. "Development Termination
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12.
<PAGE>
Documents" shall mean the following documents or reports: [ * ]. After receipt
of such notice by the other Party, the Party providing such notice shall no
longer be responsible for bearing further Development Costs for such
Collaboration Lead Compound or Product as specified herein, in which event the
other Party will have the right to proceed independently to develop such
Collaboration Lead Compound or Product as an Independent Lead Compound or
Independent Product, pursuant to Section 3(m). In the event a Party gives notice
under this Section 3(l), such non-Independent Party (i) will remain responsible
for its share of Development Costs for such Collaboration Lead Compound or
Product until [ * ] from the date the other Party receives such notice, and (ii)
will make its personnel, relevant data and other resources available to the
Independent Party as necessary to effect an orderly transition of development
responsibilities, with the costs of such personnel, relevant data and resources
to be borne by [ * ]. The Parties each recognize and agree that a non-
Independent Party's termination of participation in Pre-Clinical Development or
Development in accordance with this Section 3(l) will not be considered a breach
of its obligations under this Agreement. In the event of a non-Independent
Party's termination of participation in Development in accordance with this
Section 3(l), such non-Independent Party shall transfer and assign to the
Independent Party all regulatory submissions and Drug Approval Applications
relating to such Collaboration Lead Compound and/or Products based upon or
incorporating such Collaboration Lead Compound, together with all materials and
data related thereto in its possession.
m. Independent Development. (i) In the event (A) a Party, pursuant
to Sections 2(e), 3(b)(ii), (iii) or (iv) elects not to participate in and
commit resources to conduct Pre-Clinical Development of a Collaboration Lead
Compound or the pre-clinical development of a Discontinued Compound or a Non-
Proposed Compound or (B) any Party unilaterally terminates its participation in
the Pre-Clinical Development or Development of a Collaboration Lead Compound or
Product pursuant to Section 3(l), then the Party that made an affirmative
election to conduct such pre-Clinical Development or Development of such
Compound pursuant to Sections 2(e), 3(b)(ii), (iii) or (iv), or the Party
continuing Development of a Collaboration Lead Compound or Development of a
Product (in either case, the "Independent Party"), shall have the right to
practice the license granted in Section 4(c) and to undertake pre-clinical
development of a Lead Compound or to continue Pre-Clinical Development and
Development of such Collaboration Lead Compound or Product independently as an
"Independent Lead Compound" or "Independent Product", [ * ]. No Party may
utilize the services of its personnel committed to the Research Program pursuant
to Section
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13.
<PAGE>
2(a) in performance of research or development of an Independent Lead Compound
or Independent Product.
(ii) Until the earlier of the Re-Engagement Expiration Date (as
defined in Section 3(n)) or the date on which the Independent Party receives a
Re-Engagement Notice (as defined in Section 3(n)) for a Product from the non-
Independent Party, the Independent Party will (A) inform the other Party of all
material information developed in its research and development of each
Independent Lead Compound or Independent Product; (B) allow such other Party to
comment on the direction of such research and development; and (C) provide the
other Party a copy of all proposed regulatory submissions relating to such
Independent Lead Compound or Independent Product at least [ * ] prior to
submitting such filing to the FDA or its foreign equivalent.
(iii) In the event either Party elects to proceed as an Independent
Party, subject to Section 3(n), such Independent Party shall be entitled to
develop such Independent Lead Compound and commercialize such Independent
Product at its sole discretion, alone or with a Third Party, with no obligation
to the other Party.
n. Re-engagement Option. Either Party may elect to resume its
participation in the Pre-Clinical Development or Development of an Independent
Lead Compound or Independent Product in all countries in the Territory by so
notifying the other Party in writing (the "Re-engagement Notice"), at any time
prior to the expiration of the [ * ] period commencing upon receipt by such
Party of the final report summarizing the results of [ * ] ("Re-Engagement
Expiration Date") for such Independent Lead Compound or Independent Product
anywhere in the world. In such event, such Independent Lead Compound or
Independent Product shall be immediately designated a Collaboration Lead
Compound or Product for all purposes under this Agreement, including calculating
each Party's responsibility for paying Development Costs, Co-Promotion Expenses
and Promotion Expenses and receiving the Share of Co-Promotion Profit and
Royalty Payment commencing upon receipt of the Re-engagement Notice. The non-
Independent Party shall pay to the Independent Party [ * ] of the non-
Independent Party's share, based on the allocation set forth in Section 3(f), of
the costs [ * ] of the Independent Lead Compound or Independent Product incurred
by the Independent Party after the date upon which it commenced development or
research of such compound or product as an Independent Lead Compound or
Independent Product and prior to the date of the Re-engagement Notice (the "Re-
Engagement Amount"). The non-Independent Party shall pay the Re-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14.
<PAGE>
Engagement Amount in [ * ] beginning on the first day of the calendar quarter
following the date of the election of the non-Independent Party. The Independent
Party may not sublicense intellectual property rights owned or controlled by the
Independent Party that relate to Independent Lead Compound or Independent
Product to any Third Party without the consent of the non-Independent Party
prior to the Re-Engagement Expiration Date for such Independent Lead Compound or
Independent Product. Anything in this Section 3(n) to the contrary
notwithstanding: (i) JT may resume its participation in the Pre-Clinical
Development or Development of an Independent Lead Compound or Independent
Product in the JT Territory (but not the Co-Promotion Territory or the Tularik
Territory) by (a) delivering to Tularik a Re-engagement Notice to that effect
prior to the Re-Engagement Expiration Date; [ * ]; and (ii) Tularik may resume
its participation in the Pre-Clinical Development or Development of an
Independent Lead Compound or Independent Product based on (A) [ * ] Lead
Compound in the Tularik Territory (but not the Co-Promotion Territory or the JT
Territory); or (B) [ * ]; by (a) delivering to JT a Re-engagement Notice to that
effect prior to the Re-Engagement Expiration Date; [ * ]. In the event a Party
resumes participation in the Pre-Clinical Development or Development of an
Independent Lead Compound or Independent Product in such Party's Exclusive
Territory only, such Party shall not receive [ * ].
4. Licenses and Royalties.
a. Grant by Tularik. Subject to the terms and conditions of this
Agreement, Tularik hereby grants and agrees to grant to JT: (i) an exclusive
(except as to Tularik) license (with the right to sublicense as provided in this
Section 4(a)) under the Program Patents, Program Know-How, Patent Rights and
Know-How owned or controlled by Tularik during the Term to the extent necessary
or useful to develop, use, import, offer for sale and sell any: (A) Product
based on a [ * ] Lead Compound in the [ * ] Co-Promotion Territory; and (B) [ *
]; (ii) an exclusive (even as to Tularik) license (with the right to sublicense
as provided in the Section 4(a)) under the Program Patents, Program Know-How,
Patent Rights and Know-How owned or controlled by Tularik to the extent
necessary to develop, use, import, offer for sale and sell any Product in the JT
Territory; and (iii) a co-exclusive (with Tularik) license (with the right to
sublicense as provided in this Section 4(a)) under the Program Patents, Program
Know-How, Patent Rights and Know-How owned or controlled by Tularik during the
Term solely to the extent necessary or useful to make or have made any Product
in the Territory solely in connection with the practice of the licenses granted
to JT pursuant to Section 4(a)(i) and 4(a)(ii). JT may not sublicense any
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15.
<PAGE>
rights granted under this Section 4(a)(i) and 4(a)(ii) in the Co-Promotion
Territory to any Third Party without the prior written consent of Tularik, not
to be unreasonably withheld. JT may sublicense any rights granted under this
Section 4(a)(i) and 4(a)(ii) in the JT Territory to any Third Party without the
prior written consent of Tularik, with any such sublicenses subject to the
payments and other obligations set forth in this Agreement. JT may sublicense
any rights granted under this Section 4(a)(iii) to any Third Party only with the
prior written consent of the JDC, with any such sublicenses subject to the
payments and other obligations set forth in this Agreement. Except as provided
in Section 6(l) and 10(b)(iv), JT shall use reasonable efforts to ensure that
any sublicense negotiated by JT pursuant to Section 4(a)(ii) shall: (A) [ * ];
and (B) provide that any revenues or other consideration received from such
sublicensee as consideration for the grant of such sublicense in the JT
Territory, less [ * ], shall be [ * ] and paid directly to each Party by such
sublicensee.
b. Grant by JT. Subject to the terms and conditions of this
Agreement, JT hereby grants and agrees to grant to Tularik: (i) an exclusive
(except as to JT) license (with the right to sublicense as provided in this
Section 4(b)) under the Program Patents, Program Know-How, Patent Rights and
Know-How owned or controlled by JT during the Term to the extent necessary to
develop, use, import, offer for sale and sell any: (A) Product based on a [ * ]
Lead Compound in the [ * ] Co-Promotion Territory; and (B) [ * ]; (ii) an
exclusive (even as to JT) license (with the right to sublicense as provided in
this Section 4(b)) under the Program Patents, Program Know-How, Patent Rights
and Know-How owned or controlled by JT during the Term to the extent necessary
to develop, use, import, offer for sale and sell (with the right to sublicense
as provided in this Section 4(b)) any: (A) Product based on a [ * ] Lead
Compound in the Tularik Territory; and (B) [ * ]; and (iii) a co-exclusive (with
JT) license (with the right to sublicense as provided in this Section 4(b))
under the Program Patents, Program Know-How, Patent Rights and Know-How owned or
controlled by JT during the Term solely to the extent necessary or useful to
make or have made any Product in the Territory solely in connection with the
exercise of the licenses granted to Tularik pursuant to Sections 4(b)(i) and
4(b)(ii). Subject to the last sentence of this Section 4(b), Tularik may not
sublicense any rights granted under this Section 4(b)(i) and 4(b)(ii) to any
Third Party in the Co-Promotion Territory without the prior written consent of
JT, not to be unreasonably withheld. Subject to the last sentence of this
Section 4(b), Tularik may sublicense any rights granted under this Section
4(b)(i) and 4(b)(ii) to any Third Party in the Tularik Territory without the
prior written consent of JT, with any such sublicenses subject to the payments
and other obligations set forth in this Agreement. Tularik may
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16.
<PAGE>
sublicense any rights granted under this Section 4(b)(iii) to any Third Party
only with the prior written consent of the JDC, with any such sublicenses
subject to the payments and other obligations set forth in this Agreement.
Except as provided in Section 6(l) and 10(b)(iv), Tularik shall use reasonable
efforts to ensure that any sublicense negotiated by Tularik pursuant to Section
4(b)(ii) shall: (A) [ * ]; and (B) provide that any revenues or other
consideration received from such sublicensee as consideration for the grant of
such sublicense in the Tularik Territory, less [ * ], shall be [ * ] and paid
directly to each Party by such sublicensee. Notwithstanding the foregoing
limitations on Tularik's ability to grant sublicenses under the Program Patents,
Program Know-How, Patent Rights and Know-How owned or controlled by JT, Tularik
may grant sublicenses to [ * ].
c. Independent Products. Each of JT and Tularik hereby grants to
the other Party an exclusive, royalty-bearing (in accordance with Section 4(f)),
license (with the right to sublicense after the Re-Engagement Expiration Date
shall have passed without the non-Independent Party having given a Re-Engagement
Notice) under the Program Patents and Program Know-How, and a non-exclusive,
royalty-bearing (in accordance with Section 4(f)), license (with the right to
sublicense after the Re-Engagement Expiration Date shall have passed without the
non-Independent Party having given a Re-Engagement Notice) under the Patent
Rights and Know-How owned or controlled by the granting Party to the extent
necessary to develop Independent Lead Compounds and to make, have made, use,
import, offer for sale and sell Independent Products incorporating an
Independent Lead Compound in the event such Party is designated the Independent
Party with respect to such Independent Product (or Independent Lead Compound)
pursuant to Section 3(m). Such licenses shall be: (i) worldwide, to the extent
such Independent Lead Compounds or Independent Products shall be based upon
either (A) [ * ] Lead Compounds; or (B) [ * ]; or (ii) in the [ * ] and the JT
Territory following [ * ], to the extent such Independent Lead Compounds or
Independent Products shall be based upon [ * ]. Such licenses under the non-
Independent Party's interest in Program Patents and Program Know-How are
exclusive even as to the granting Party. Any such license with respect to an
Independent Product or Independent Lead Compound shall terminate in the event
such Independent Product or Independent Lead Compound becomes a Collaboration
Lead Compound or Product pursuant to the terms of Section 3(n).
d. Third Party Technology. During the Term, if either Party becomes
aware of (i) an opportunity to participate in research with a Third Party that
could advance the objectives of the Research Program; or (ii) an opportunity to
obtain a license or other right owned or controlled by a Third Party relating to
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17.
<PAGE>
the manufacture, marketing, import, use or sale of a Product ("Third Party
Rights"), it shall so notify the other Party and the RMC will determine whether
to pursue such opportunity in connection with the Research Program. In the event
that the Parties pursue such opportunity and in connection therewith incur
obligations to make payments to a Third Party, such payments shall be [ * ].
e. Use Outside the Field. Each Party hereby covenants to the other
that it will not practice the license granted to it pursuant to Section 4 under
the other Party's interest in Patent Rights, Know-How, Program Patents or
Program Know-How, except as explicitly permitted in this Agreement.
f. Royalties Payable by the Independent Party. Except as provided
in Section 5(c), the Independent Party will pay the non-Independent Party, in
lieu of any Share of Co-Promotion Profits and Royalty Payments, a royalty equal
to: (i) [ * ] of Net Sales of Independent Products by the Independent Party,
its affiliates or sublicensees in the event the non-Independent Party terminates
participation in the Pre-Clinical Development of a Collaboration Lead Compound
pursuant to Section 3(l) prior to [ * ] on such Independent Product; (ii) [ * ]
of Net Sales of Independent Products by the Independent Party, its affiliates or
sublicensees in the event the non-Independent Party terminates participation in
the Pre-Clinical Development of a Collaboration Lead Compound pursuant to
Section 3(l) upon or following [ * ]; or (iii) [ * ] of Net Sales of Independent
Products by the Independent Party, its affiliates or sublicensees in the event
the non-Independent Party terminates participation in the Pre-Clinical
Development of a Collaboration Lead Compound or Development of a Product
pursuant to Section 3(l) following [ * ]. Such royalty shall be payable on a
quarterly basis in respect of each country in which sales occur until the later
of expiration of all patents included in the Program Patents and Patent Rights
necessary to make, use, import for sale or sell such Product in such country, or
[ * ] years after first commercial sale of an Independent Product in such
country. "Net Sales" shall mean the gross sales prices of the Product in
finished product form, invoiced by a Party or the Independent Party, as the case
may be, its affiliates and sublicensees from sales to arms'-length Third Party
end users, less, to the extent such amounts are included in the invoiced sales
price, taxes, shipping costs (including freight and insurance) and duties and
other governmental charges paid for and separately identified on the invoice.
Additionally, the following amounts will be subtracted from the gross invoiced
sales price: (i) cash, trade and/or quantity discounts actually allowed; (ii)
amounts repaid or credited by reason of rejection or return of goods; (iii)
volume or formal discount amounts paid or credited to a wholesaler, purchaser,
Third Party payor or other contractee as a result of a contractual arrangement
specific to a
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18.
<PAGE>
Product; (iv) rebates paid or credited to any governmental agency (or branch
thereof) or to any Third Party payor, administrator or contractee; and (v)
discounts mandated by, or granted in response to, applicable state, provincial
or federal law, wholesaler chargebacks or retroactive price reductions. The
Independent Party may offset [ * ] of any royalties it must pay to Third Parties
pursuant to any licenses necessary to commercialize Products against royalties
payable by the Independent Party to the non-Independent Party; provided,
however, that in no event shall the royalties payable by the Independent Party
to the non-Independent Party be reduced to less than [ * ] of the amounts that
would have otherwise been due under the percentages set forth in this Section
4(f).
Section 5. Promotion of Products.
a. Promotion Rights in the Exclusive Territory. JT shall have the
exclusive responsibility for promoting each Product in the JT Territory.
Tularik shall have the exclusive responsibility for promoting each: (A) Product
based on a [ * ] Lead Compound in the Tularik Territory; and (B) Product based
on a [ * ] in the Tularik Territory prior to [ * ]. All information and
materials generated by a Party in the course of the promotion effort within any
country in such Party's Exclusive Territory or in the Co-Promotion Territory
shall be provided to the MC for use in the promotion effort within the other
Party's Exclusive Territory and in the Co-Promotion Territory.
b. Commercialization in the Exclusive Territories. JT shall oversee
and implement all commercialization activities in the JT Territory during the
Term, based on the principle of maximizing profits from sales of Products.
Except as provided in Section 5(a), Tularik shall oversee and implement all
commercialization activities in the Tularik Territory during the Term, based on
the principle of maximizing profits from sales of Products. The MC shall review
a Party's commercialization activities within its Exclusive Territory to provide
suggestions for facilitating the promotion and commercialization of Products on
a global basis.
c. Election or Revocation of Co-Promotion Right. In the Co-
Promotion Alternative (as defined in Section 5(d)(ii)), either Party may
terminate early its participation in the co-promotion of a Product in any
country in the Co-Promotion Territory at any time following [ * ] prior written
notice to the other Party. In such case, the other Party may continue promotion
of such Product, as an Independent Product, either alone or with a Third Party,
in such country in the Co-Promotion Territory, effective as of the date of the
terminating Party's notice
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
19.
<PAGE>
hereunder. The Parties shall negotiate in good faith for a period of [ * ]
following the receipt of such notice to determine the appropriate royalty to be
paid on Net Sales of such Independent Product in such country in the Co-
Promotion Territory. In the event the Parties are unable to agree on the
appropriate royalty pursuant to the immediately preceding sentence, the
Independent Party with respect to such Independent Product shall pay to the
other Party a royalty on Net Sales of such Independent Product in such country
in the Co-Promotion Territory pursuant to Section 4(f), except that the
applicable royalty shall equal: [ * ] on the portion of aggregate Net Sales of
such Independent Product in such country up to [ * ] on the portion of aggregate
Net Sales of such Independent Product in such country in excess of [ * ] and
[ * ] on the portion of aggregate Net Sales of such Independent Product in such
country in excess of [ * ]. In the event a Party elects to cease participating
in the co-promotion of a Product of such Independent Product in a country in the
Co-Promotion Territory and the Independent Party proceeds to commercialize such
Product as an Independent Product, the non-Independent Party shall (i) transfer
and assign to the Independent Party all regulatory submissions and Drug Approval
Applications in such country relating to such Collaboration Lead Compound and/or
Products based upon or incorporating such Collaboration Lead Compound, together
with all materials and data related thereto in its possession and (ii) transfer
to the Independent Party all other relevant information that will enable such
Independent Party to promote such product as an Independent Product in such
country. A non-Independent Party may not reinitiate its participation in the co-
promotion of a Product in any given country in the Co-Promotion Territory in
which it relinquished such right hereunder.
d. Promotion Rights in the Co-Promotion Territory. (i) The MC shall
oversee and implement all commercialization activities in the Co-Promotion
Territory during the Term, based on the principle of maximizing profits from
sales of Products, by unanimous decisions. The MC shall have the ability to
determine whether the objective of maximizing profits from sales of Products in
the Co-Promotion Territory during the Term is best achieved through, inter alia,
[ * ]. In the event the MC determines that the foregoing objective is best
achieved by activities other than as provided in Sections 5(d)(ii), (e), (f),
(g) and (h), the MC shall determine [ * ] the optimal alternative structure and
the duties, responsibilities and economic parameters for the Parties and Third
Parties in such alternative structure. Except as provided in Section 6(l) and
10(b)(iv), the Parties shall use reasonable efforts to ensure that any
sublicense negotiated by a Party or the Parties pursuant to Section 4(a)(i) or
4(b)(i) shall: (a) run from the Parties to such sublicensee; and (b) provide
that any revenues or other consideration received from such sublicensee as
consideration for the grant of such sublicense in the Co-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20.
<PAGE>
Promotion Territory, less [ * ], shall be [ * ] and paid directly to each Party
by such sublicensee.
(ii) In the absence of [ * ] by the MC pursuant to Section 5(d)(i) or
in the event of [ * ] by the MC to retain for the Parties commercialization
rights to a Product in the Co-Promotion Territory (the "Co-Promotion
Alternative"), JT and Tularik shall have the co-exclusive responsibility for
promoting such Product in the Co-Promotion Territory. Tularik and JT shall each
work diligently to perform its respective obligations under the Marketing Plan
and use the same effort such Party puts forth to promote other products of
similar commercial value to co-promote such Product in the Co-Promotion
Territory from initiation of pre-launch activities for such Product in the Co-
Promotion Territory until the expiration of the Term pursuant to the terms and
conditions hereof. The Parties intend that [ * ] shall supply [ * ] of the total
promotional and marketing effort (including details, if determined to be an
appropriate sales activity for a Party by the MC) for each Product being co-
promoted by the Parties in the Co-Promotion Territory, as determined by the MC.
Each Party's required promotional and marketing effort under the Marketing Plan
is hereinafter referred to as its "Required Sales Effort". The MC will determine
appropriate written standards for measuring and accounting procedures to confirm
and document each Party's performance of its Required Sales Effort, [ * ] after
the filing of the NDA for any Product. Nothing contained in this Section 5(d)
shall be deemed to preclude either Party from relinquishing its right to
participate in the co-promotion of Products in the Co-Promotion Territory
pursuant to Section 5(c), at any time. Any failure to provide the Required Sales
Effort shall not be deemed a breach of this Agreement.
e. Marketing Plan and Marketing Budget in the Co-Promotion
Territory. In the Co-Promotion Alternative, no later than one (1) month after
[ * ], the MC shall initiate preparation of a marketing plan ("Marketing Plan")
and a marketing budget ("Marketing Budget"). The co-promotion of a Product in
the Co-Promotion Territory will be governed by the Marketing Plan and Marketing
Budget. The Marketing Plan and Marketing Budget will describe fully, to the
extent practicable, the proposed plan for commercialization of the Product in
each country in the Co-Promotion Territory, including [ * ] to be used in the
co-promotion of Products. The Marketing Plan will take into consideration [ * ]
with respect to Products. The Marketing Budget will include all projected Co-
Promotion Expenses for the Product. The initial Marketing Plan and Marketing
Budget shall be prepared by the MC no later than [ * ] for a Product in any
country in the Co-Promotion Territory. Each such Marketing Plan and Marketing
Budget shall thereafter be updated by the MC [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21.
<PAGE>
f. Promotional and Advertising Materials in the Co-Promotion
Territory. In the Co-Promotion Alternative, the Parties shall disseminate in
the Co-Promotion Territory only those promotional and advertising materials that
have been provided or approved for use by the MC, and the cost of producing such
materials shall be a Co-Promotion Expense of the Party incurring such cost. All
such materials shall be consistent with the relevant Marketing Plan and
Marketing Budget approved by the MC and neither Party shall make any claims or
representations in respect of the Products that have not been approved by the
MC. In all written or visual materials related to Products that identify either
of the Parties, the Parties will be presented and described to the [ * ] as
joining in the promotion of the Product as permitted by applicable law. All
such written and visual materials and all documentary information, promotional
material and oral presentations (where practical) regarding the promotion of the
Product will state this arrangement and will display the JT and Tularik names
and logos with equal prominence as permitted by applicable law and as directed
by the MC.
g. Miscellaneous. In the Co-Promotion Alternative, the MC shall by
unanimous decision designate a Party as being primarily responsible in the Co-
Promotion Territory for returns, orders and samples. In addition, the MC shall
by unanimous decision determine the policies and procedures necessary to
implement the foregoing.
h. Cross-Border Sales. JT agrees that it shall not, and that it
shall not grant the right to any affiliate or Third Party to, use, sell, offer
for sale or import [ * ] or resulting Products in any country outside of the JT
Territory and [ * ], and that JT shall use reasonable efforts to deter the
importation of [ * ] or resulting Products into any country outside of the JT
Territory and [ * ] by its affiliates and licensees. Tularik agrees that,
during the [ * ], it shall use its reasonable efforts to prevent [ * ] in any
country outside of the Tularik Territory and [ * ], and that Tularik shall use
reasonable efforts to deter [ * ] or resulting Products into any country outside
of the JT Territory and [ * ]. JT and Tularik agree that the JDC shall
determine the country or countries in which Products shall be manufactured. JT
and Tularik recognize that in certain territories, and in particular in free
trade regions, customers or other third parties may import [ * ] or resulting
Products purchased in one country for use in another. [ * ].
Section 6. Determination of Payments.
a. Co-Promotion Expenses. In the Co-Promotion Alternative, Tularik
shall be responsible for paying [ * ] of all Co-Promotion Expenses and JT shall
be responsible for paying [ * ] of all Co-Promotion Expenses. "Co-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
22.
<PAGE>
Promotion Expenses" shall include, without limitation, the following expenses
incurred by a Party to the extent allocable to the co-promotion of Products in
all countries in the Co-Promotion Territory, calculated in accordance with U.S.
Generally Accepted Accounting Practices, consistently applied ("GAAP"): [ * ],
all as defined in Appendix D.
b. Co-Promotion Profits and Losses. In the Co-Promotion
Alternative, profits and losses shall be determined as follows. If Net Sales
during any calendar quarter exceed Co-Promotion Expenses during such quarter,
such excess shall be "Co-Promotion Profit." If Net Sales during any calendar
quarter does not exceed Co-Promotion Expenses during such quarter, such excess
shall be "Co-Promotion Loss." Subject to adjustment pursuant to Section 10(e),
[ * ] Party's "Share of Co-Promotion Profit" shall equal [ * ].
c. Payment and Reporting. In the Co-Promotion Alternative, payments
and reporting shall be made as follows. Within thirty (30) days after the close
of [ * ] in which Products are sold in the Co-Promotion Territory, or earlier if
possible, during the Term (i.e., [ * ]), Tularik shall furnish to JT a statement
containing the Net Sales achieved, and the Co-Promotion Expenses incurred, by it
in such calendar quarter for each country in the Co-Promotion Territory. Within
[ * ] after the close of [ * ] in which Products are sold, or earlier if
possible, during the Term (i.e., [ * ], JT shall furnish to Tularik a statement
(the "P&L Statement") setting forth for each country in the Co-Promotion
Territory, Net Sales of each Product, [ * ] (as defined in Section 6(l)), Co-
Promotion Expenses and all data on which the determination of each Party's Share
of Co-Promotion Profit or Share of Co-Promotion Loss was calculated. If either
Party owes an amount to the other Party pursuant to Section 6(a) or 6(b), it
shall make such payment within [ * ] after receipt of the P&L Statement, but in
no event shall such payment be due earlier than [ * ] after the end of the
relevant quarter. If the Term ends during an accounting quarter, the amounts
due hereunder shall be calculated for such shortened calendar quarter.
d. Promotion Expenses in the Exclusive Territory. "Promotion
Expenses" shall include, without limitation, the following expenses incurred by
a Party to the extent allocable to promotion of the Product in all countries
within such Party's Exclusive Territory in accordance with GAAP: [ * ], as
defined in Appendix D.
e. Royalty Rate. At least [ * ] prior to the commencement of sales
of Product by a Party in any country within such Party's Exclusive Territory,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
23.
<PAGE>
such Party ("Marketing Party") shall provide the other Party ("Non-Marketing
Party") with its good faith estimates ("Estimates") of [ * ] expected in all
countries within the Marketing Party's Exclusive Territory during the remaining
portion of the fiscal year in which sales of such Product are commenced, on a
quarterly basis. In addition, the Marketing Party shall at the same time
provide the Royalty Rate (as defined in Section 6(f)) calculated pursuant to
Section 6(f) using the Estimates. The Marketing Party shall also provide
supporting information appended to the Estimates, clearly setting forth the
assumptions made and calculations used in deriving the Royalty Rate (the
"Supporting Calculations"). At least [ * ] prior to the beginning of each
[ * ], the Marketing Party shall provide the Non-Marketing Party with its
Estimates [ * ], together with the Supporting Calculations.
f. Calculation of Royalty Rate. The "Royalty Rate" shall be equal
to [ * ]; provided, however, that the Royalty Rate shall be equal to [ * ]
("Pre-Tax Loss").
g. Meetings to Discuss Estimates. The Non-Marketing Party may call a
meeting of the Parties to review and discuss in good faith the Estimates and the
Supporting Calculations (including the resulting Royalty Rate). Such meeting
shall be held at a mutually agreeable time and place not more than [ * ] after
notice is given by the Non-Marketing Party. In the event that the Non-Marketing
Party disagrees with the Estimates, the attending representatives of both
Parties will enter into good faith discussions to resolve the disagreement. In
the event that the attending representatives are unable to reach an agreement,
then the issue shall be referred to the MC for unanimous resolution.
h. Royalty Payments. Within [ * ] of the end of each fiscal quarter
following the commencement of sales of a Product in the Marketing Party's
Exclusive Territory, the Marketing Party shall pay a royalty to the Non-
Marketing Party equal to [ * ] during such quarter (the "Royalty Payment").
i. Audited Report of Actual Net Sales, Cost of Goods and Promotion
Expenses. Within [ * ] following the [ * ], or earlier if possible, the
Marketing Party shall provide the Non-Marketing Party with an audited report of
actual Net Sales and Cost of Goods in all countries within the Marketing Party's
Exclusive Territory and all Promotion Expenses in all such countries ("Actual
Results").
j. Royalty Adjustment. In the event that the Actual Results include
a Pre-Tax Loss in the year of commencement of sales of a Product or in
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
24.
<PAGE>
any subsequent fiscal year, [ * ] of such loss shall be deducted from future
Royalty Payments otherwise owed by the Marketing Party to the Non-Marketing
Party pursuant to Section 6(f), on a Product-by-Product basis, until fully
liquidated.
k. Records. JT and Tularik each shall keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
such Party of all Products and Independent Products in the Territory in
sufficient detail to permit accurate determination of all figures necessary for
verification of royalties, profits, milestone payments and other compensation
required to be paid hereunder. JT and Tularik shall maintain such records for a
period of [ * ] after the end of the year in which such records were generated.
At such Party's expense, a Party, through a certified public accountant
reasonably acceptable to the other Party, shall have the right to access the
books and records of the other Party for the sole purpose of verifying amounts
due pursuant to this Agreement. Such access shall be permitted only upon
reasonable prior written notice to the other Party during ordinary business
hours and not more frequently than once during each calendar year.
l. [ * ]. Each Party's share of the [ * ] shall equal [ * ]. Each
Party shall pay to the other Party such other Party's [ * ] share of the [ * ]
within thirty (30) days of receipt of such [ * ]. [ * ] means all royalties
received from [ * ].
Section 7. Trademarks. The Parties, through the MC, shall mutually agree
upon the trademark or trademarks (each a "Trademark"). To the extent
commercially reasonable and appropriate, a single Trademark shall be used for
each Product in each country in the Territory. To the extent the MC determines
that the use of a single Trademark is impractical given cultural and other
differences among countries in the Co-Promotion Territory, each Party shall have
the right to designate a different Trademark for use within different countries
within the Territory; provided, however, that in no event shall different
Trademarks be used for the same Product within the same country in the
Territory. Each Party shall have the right to designate a different Trademark
for use within different countries within such Party's Exclusive Territory.
Each Trademark shall be used only in connection with the applicable Product and
shall not be used by either Party on or in connection with any other product.
The MC shall assign responsibility to one or both Parties for searching,
clearing, filing, prosecuting, maintaining and all reasonable steps necessary in
defending each Trademark. The MC shall approve all trade dress, logos, slogans,
designs and copyrights used on and in connection with any Product in the
Territory. During the Term, the MC
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
25.
<PAGE>
shall approve all printed materials bearing each Trademark, including but not
limited to business materials, printed materials, advertising materials,
promotional materials and any such other materials that may reference or
incorporate such Trademark. In the event that any action or proceeding is
brought against either or both JT or Tularik, any alleged infringement of a
Third Party's trademark, trade dress or similar intellectual property rights,
each Party shall promptly notify the other and cooperate in the defense of any
such action or proceeding, as applicable. The MC shall be responsible for the
management of such action. In the event Tularik or JT becomes aware of any
actual or threatened violation of any Trademark in any country in the Territory,
that Party shall promptly notify the other Party and the MC shall promptly
discuss how to proceed in connection with such actual or threatened violation.
Section 8. Supply Of Product.
a. Supply of Product. The JDC shall be responsible for determining
the sources of, and arrangements for, the manufacture and supply of Products
that the JDC believes will result in long-term profit maximization for such
Products. The JDC shall endeavor to [ * ].
b. Specifications for Products. The Parties shall designate one of
the Parties to be responsible for establishing, subject to approval by the MC,
the specifications for bulk and finished Product, and providing any necessary
documentation, certificates of analysis and test results, for the relevant
Product to be manufactured under this Section 8. Copies of all such
specifications and other information and documentation will be provided promptly
to the Parties. In addition, notice of, and results and data from, all FDA (or
its foreign equivalent) audits relating to the manufacture of Product will be
provided to the Parties. The Cost of Goods (including qualification batches for
FDA (or its foreign equivalent) approval) for Products actually used (and not
sold) for all Pre-Clinical Development and Development studies shall be included
in Development Costs.
c. Terms of Manufacture and Supply. The MC shall establish
procedures acceptable to both Parties regarding forecasts of requirements of the
Products.
Section 9. Regulatory Matters.
a. Side Effects and Adverse Events. During the Term, each Party
shall promptly advise the other by telephone, telefax or overnight delivery
service of every serious or unexpected side effect, adverse reaction or injury
that
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
26.
<PAGE>
has been brought to that Party's attention and which is alleged to have
been caused by a Product. For each country in the Territory, the Party that has
the responsibility for filing the Drug Approval Application and the IND (or
foreign equivalent) in such country for such Product shall have all rights and
responsibilities to report such side effect, adverse reaction or injury to the
appropriate regulatory authorities as required by applicable law.
b. Communication with Regulatory Agencies. If a Party is contacted
by the FDA or any equivalent regulatory agency in any country in the Territory
during the Term pertaining to this Agreement or to a Product, Tularik and JT
shall promptly, but always within [ * ] days, notify and consult with one
another. The Party that has filed the Drug Approval Application in such country
within the Territory or, if no Drug Approval Application has been filed, the
Party which has filed the IND (or foreign equivalent) in such country within the
Territory shall provide an appropriate response to such contact after such
consultation with the other Party.
c. Product Recall. In the event that JT or Tularik determines that
an event, incident or circumstance has occurred that may result in the need for
a recall or other removal of any Product or any lot or lots thereof from the
market in a country within the Territory, it shall promptly advise and consult
with the other Party with respect thereto. Thereafter, on a country-by-country
basis, the owner of the NDA for such Product in a country (or foreign
equivalent) shall, in its sole discretion, have the right to order a recall or
other removal after such consultations and the other Party shall co-operate with
such recall.
10. Financial provisions.
a. Research Payments. In support of Tularik's activities in the
Research Program, JT shall pay Tularik (i)(A) [ * ]; and, unless the Research
Program is previously terminated as provided in Section 2(g), [ * ]. Any
payments made by JT to Tularik pursuant to this Section 10(a) shall not affect
in any way the calculation of [ * ].
b. Milestone Payments. (i) JT will make the following payments to
Tularik in US Dollars within [ * ] of the first occurrence of each event listed
below in any one of [ * ]:
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
27.
<PAGE>
Event Payment
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
(ii) JT will make the following payments to Tularik in US Dollars within [
* ] of the first occurrence of each event listed below in any one of [ * ]:
Event Payment
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
(iii) In the event all of the listed events above are not achieved for a
Collaboration Lead Compound or Product, payments due for any listed events not
achieved for such Collaboration Lead Compound or Product shall be made with
respect to other Collaboration Lead Compounds or Products until such time as
each of the listed events has been achieved.
(iv) In the event that Tularik receives milestone payments from [ * ]
relating to a Program Product (as defined in the [ * ]) or following the
approval of such NDA (or equivalent), Tularik shall remit to JT within thirty
(30) days of the receipt of such milestone payments an amount equal to [ * ] of
the amount received [ * ]. The Parties acknowledge and agree that [ * ].
c. Taxes. The burden of all withholding or similar taxes that may
be imposed by any governmental authority on milestone, royalty and profit share
payment amounts set forth in this Agreement shall be [ * ].
d. Reports. Tularik shall provide JT with a quarterly report
describing Tularik's use of the annual payments received from JT pursuant to
Section 10(a) for research purposes. Such report shall include the following
two categories of expenditures: (i) "Personnel Costs" and (ii) "Other Costs."
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
28.
<PAGE>
e. Loans from JT. JT will make available to Tularik, under and
subject to certain additional terms and conditions as provided in a loan
agreement to be executed by the Parties on the Execution Date ("Loan
Agreement"), an irrevocable loan commitment to finance an aggregate amount of up
to [ * ] (the "Aggregate Commitment"); provided, however, [ * ] The Aggregate
Commitment shall be [ * ] pursuant to this Agreement and the ONR Agreement,
commencing with [ * ] (the "Eligible Development Costs"). Such Aggregate
Commitment may be drawn in multiple disbursements in amounts ("Amounts Drawn")
and at times ("Funding Dates") requested by Tularik to: [ * ]; provided,
however, that [ * ]; provided further that [ * ]; provided further that in [ *
]. Loans made by JT to Tularik pursuant to such Loan Agreement for [ * ]
("Repayment Dates") commencing on the [ * ] of the first to occur of: [ * ].
Interest on Amounts Drawn shall accrue from the Funding Dates to the Repayment
Dates and shall equal [ * ]. In addition, the Share of Co-Promotion Profit and
the Royalty Rate for [ * ] for which Tularik shall have Amounts Drawn pursuant
to the Loan Agreement shall [ * ]. In addition to the foregoing, during the [ *
] period immediately following the receipt by the Parties of executed reports
covering all aspects of [ * ], JT and Tularik shall negotiate in good faith the
terms and conditions under which [ * ].
11. Intellectual Property. Each Party shall remain the sole owner or
licensee, as applicable, of all technology, compounds, discoveries and
inventions owned or controlled by such Party relating to the: (a) [ * ] Targets
on the Preliminary Agreement Date; and (b) [ * ] on the Agreement Date or during
the Term that are created or acquired outside the scope of this Agreement. Each
Party shall have no rights in or to the technology, compounds, discoveries and
inventions owned by the other Party except as specifically granted herein. All
inventions or discoveries made, and materials and information created, jointly
by employees, agents or consultants of both Parties in the course of conducting
activities pursuant to this Agreement shall be jointly owned, without regard, in
the case of inventions or discoveries relating to Lead Compounds, Collaboration
Lead Compounds and Products, to the Party that provided the compound library
from which such invention or discovery was derived. All inventions or
discoveries made, and materials and information created solely by employees,
agents or consultants of one Party in the course of conducting activities
pursuant to this Agreement shall be owned solely by the Party whose employees,
agents or consultants made such invention, without regard, in the case of
inventions or discoveries relating to Lead Compounds, Collaboration Lead
Compounds and Products, to which Party provided the compound library from which
such invention or discovery was
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
29.
<PAGE>
derived. Inventorship shall be determined in accordance with the U.S. patent
laws. [ * ].
12. Confidential Information. Each Party agrees that proprietary and
confidential information regarding either Party's technology and intellectual
property, as well as information regarding the Research Program, Lead Compounds,
Collaboration Lead Compounds, Products and other matters material to this
Agreement or to the Collaboration Agreement shall not be disclosed to any Third
Party, other than [ * ], or used except as permitted hereby during the term
hereof and for a period of [ * ] after its expiration or termination, except to
the extent it can be shown by competent written record that such information is
now or subsequently becomes, without breach of any obligation by the Party
receiving such information hereunder, public knowledge or is lawfully disclosed
to or independently developed by such Party. Any information disclosed to a
Scientific FTE of one Party who is resident with the other Party shall be deemed
the confidential information of the Party with whom such Scientific FTE is in
residence.
13. Term. This Agreement shall expire upon the earlier of the execution
of the Collaboration Agreement or the end of the Term. "Term" shall mean the
period from: (a)(i) the Preliminary Agreement Date with respect to the [ * ];
or (ii) the Agreement Date with respect to the [ * ]; until (b) the later to
occur of (i) the expiration of all patents on Products; [ * ]; provided,
however, that [ * ]. Either Party may terminate this Agreement for material
breach by the other Party, if such breach remains uncured for [ * ] after the
breaching Party receives written notice thereof from the other Party. Except to
the extent required by law, the Parties agree not to disclose the material terms
of this Agreement to Third Parties (other than its affiliates) without the other
Party's prior written consent during its term and after its expiration or
termination. In the event this Agreement expires or terminates and the
Collaboration Agreement shall not have been executed by the Parties, then the
provisions of Sections 4, 10, 11 and 12 shall survive such expiration or
termination and each Party shall return promptly any of the other Party's
confidential information and biological or chemical materials provided to it
pursuant to this Agreement.
14. Diligence. Subject to Section 3(c), 3(l) and 3(m), JT and Tularik
shall use commercially reasonable efforts to develop the Lead Compounds and
Collaboration Lead Compounds pursuant to this Agreement consistent with the
efforts such Party expends on compounds involved in its other research and
development programs that have comparable market potential. Subject to Section
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
30.
<PAGE>
5(c), JT and/or Tularik shall use commercially reasonable efforts to develop and
market Products pursuant to this Agreement, consistent with the efforts it
expends on its other products having comparable market potential. If a Party
disagrees on whether the other Party's actions are commercially reasonable, such
disagreement shall be resolved in accordance with Section 19.
15. Representations and Warranties. Each Party hereby represents and
warrants that such Party has full corporate power and authority under the laws
of the state or country of its incorporation to enter into this Agreement and
carry out the provisions hereunder and that the person executing this Agreement
on each Party's behalf has been duly authorized to do so by all requisite
corporate action.
a. Other than with respect to the [ * ] as provided in the [ * ] and
the [ * ], each Party represents and warrants that, as of the date of this
Agreement, it is not a Party to any agreement, arrangement or understanding with
any Third Party that in any significant way prevents such Party from fulfilling
any of its material obligations under the terms of this Agreement.
b. Other than with respect to the [ * ] as provided in the [ * ] and
the [ * ], each Party covenants that it will not commit any acts or fail to take
any action that would be in material conflict with its obligations under this
Agreement.
c. Other than with respect to the [ * ] as provided in the [ * ] and
the [ * ], each Party represents and warrants to such Party's best knowledge as
of the date of this Agreement: [ * ].
d. Each Party represents and warrants that [ * ].
16. Binding Agreement. Each Party represents this Agreement is a legal
and valid obligation, binding upon it and enforceable in accordance with its
terms. Each Party represents it has not and will not during the term of this
Agreement grant any right to any Third Party that would conflict with the rights
granted to the other Party hereunder.
17. Provisions to be Included. The Collaboration Agreement shall include
the terms specified in this Agreement and other terms customary in the
pharmaceutical industry for agreements governing the research, development and
commercialization of pharmaceutical products including, without limitation,
enforcement of Program Patents, defense against Third Party claims of
infringement, payments, information and reports, indemnification, relationship
of the Parties, assignments, notices, amendments, waiver, counterparts, force
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
31.
<PAGE>
majeure, headings, governing law, language, entire agreement and public
announcements.
18. Severability. If any part of this Agreement is declared invalid by
any legal authority having jurisdiction over either Party, then such declaration
shall not affect the remainder of the Agreement, which shall continue in full
force and effect. The Parties shall revise the invalidated part in a manner
that will render such provision valid and closely approximate the Parties'
original intent.
19. Dispute Resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this agreement, the
Parties shall try to settle their differences amicably between themselves by
referring the disputed matter to the committee(s) provided in Article 1. Any
unresolved disputes arising between the Parties arising out of, relating to, in
connection with or in any way connected with this Agreement or any term or
conditions hereof, or performance by either Party of its obligations hereunder,
whether before or after termination or expiration of this Agreement, shall be
finally resolved by binding arbitration, except that any disputes regarding the
validity, scope or enforceability of patents shall be submitted to a court of
competent jurisdiction. The arbitration shall be [ * ]. The arbitration will
be conducted by a panel of three (3) arbitrators with significant experience in
the pharmaceutical industry appointed in accordance with applicable AAA rules.
Any arbitration herewith shall be conducted in the English language to the
maximum extent possible. Each Party shall bear its own costs and attorney's and
witness' fees. Judgment on the award so rendered shall be final and may be
entered in any court having jurisdiction thereof.
20. Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that neither Party shall assign any of its rights and
obligations hereunder without the prior written consent of the other Party
except in connection with the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of the assets or
actual voting control of the assigning Party.
21. Governing Law. This Agreement shall be governed by California law,
notwithstanding its conflicts of laws principles.
22. Entire Agreement, Amendment. This Agreement sets forth the principal
terms of the arrangement between the Parties hereto and, except as otherwise set
forth herein, supersedes and terminates all prior agreements and
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
32.
<PAGE>
understandings between the Parties, including without limitation the Original
Agreement. No subsequent alteration, amendment, change or addition to this
Agreement shall be binding upon the Parties unless reduced to writing and signed
by an authorized officer of each Party.
23. Public Announcements. Each Party agrees that, prior to the execution
of the Agreement, except as may be required by law, it shall not disclose the
existence, substance or details of this Agreement without the prior written
consent of the other Party, such consent not to be unreasonably withheld.
Nothing herein shall prevent either Party from disclosing such information as
reasonably necessary to its affiliates; provided, however, each Party shall take
such steps necessary to ensure that such affiliates agree to be bound to the
provisions of this Section 23. In cases in which disclosure may be required by
law, the disclosing Party, prior to such disclosure to the extent practicable,
shall notify the non-disclosing Party of the contents of the proposed
disclosure. Consistent with applicable law, the non-disclosing Party shall have
the right to propose reasonable changes to the disclosure to protect its
interests, provided that it requests such changes promptly after the potential
disclosure is submitted to it. The disclosing Party shall not unreasonably
refuse to include such changes in its disclosure.
24. Tularik's Role. [ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
33.
<PAGE>
If this Agreement correctly sets forth your understanding of the agreement
between JT and Tularik, please confirm by signing and returning the duplicate
copy, addressed to my attention.
Tularik Inc.
By: /s/ David V. Goeddel
---------------------------------
Title: Chief Executive Officer
AGREED:
Japan Tobacco Inc.
By: /s/ Masakazu Kakio
---------------------------------
Title: Executive Director, Pharmaceutical Business
Date: October 21, 1998
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
34.
<PAGE>
APPENDIX A
RESEARCH PLAN
The details of the Research Program described in this Agreement are as follows:
1. The parties will jointly undertake, under the direction of the RMC, basic
research towards the objectives of the Research Program.
2. The following tasks will be shared by both parties:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
3. Details will be discussed and determined by the RMC. An initial meeting of
the RMC will take place within one month of the date of execution of this
Agreement.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
APPENDIX B
DESCRIPTION OF TULARIK EXISTING
TECHNOLOGY APPLICABLE TO THE FIELD
[ * ]
[ * ]
1. [ * ]
[ * ]
2. [ * ]
[ * ]
3. [ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
APPENDIX C
DESCRIPTION OF JAPAN TOBACCO EXISTING
TECHNOLOGY APPLICABLE TO THE FIELD
Summary of JT Patent Applications Relevant to the Obesity Project
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
APPENDIX D
Definitions for Calculation of Co-Promotion Expenses, Development Costs
and Promotion Expenses in the Exclusive Territory
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
APPENDIX E
Description of Scientific FTE Rate
The initial Scientific FTE rate that will be used by the Parties in
preparing the Development Budget and determining Development Costs is [ * ].
Such rate is composed of the following expense categories in the amounts
indicated:
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
The Scientific FTE rate shall be adjusted annually such that [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
APPENDIX F
Kiyose Letters
October 9, 1998
Via Facsimile 011 81 3 5572 1449
K. Kiyose, Esq.
Japan Tobacco Inc.
Pharmaceutical Business Development
2-2-1, Toranomon 2-chome
Minato-ku, Tokyo 105-8422 JAPAN
Dear Mr. Kiyose:
Thank you for taking time to speak with me yesterday about the JT/Tularik
Obesity Agreement. I enclose for your review certain changed pages. Due to some
redlining errors in the draft sent to you on September 24, 1998, the attached
changed pages are marked against the draft sent on September 21, 1998. While
this approach may result in your having to re-read some provisions that you have
already reviewed, it will avoid the possibility that changes in the September
24, 1998 draft were not read because they were not marked.
In addition, I set forth below the [ * ].
[ * ].
[ * ].
[ * ]. We trust that you will reach the same conclusion. Please let me know if
I can provide you with any further information that will be of assistance in
your analysis.
Thank you in advance for distributing this to the other members of the JT team
(presumably, Mr. Yoneyama, Mr. Yamada and Mr. Kamiya).
Sincerely yours,
/s/ William J. Rieflin
- ----------------------
William J. Rieflin
Vice President, General Counsel & Secretary
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
October 14, 1998
Via Facsimile 011 81 3 5572 1449
K. Kiyose, Esq.
Japan Tobacco Inc.
Pharmaceutical Business Development
2-2-1, Toranomon 2-chome
Minato-ku, Tokyo 105-8422 JAPAN
Dear Mr. Kiyose:
Thank you for your letter dated October 14, 1998 concerning changes to the
JT/Tularik Obesity Agreement [ * ]. I attach copies of changed pages from the
revised draft sent to you on October 9, 1998 that incorporate your proposed
modifications.
[ * ]
[ * ]
[ * ]
[ * ]
Thank you in advance for distributing this to the other members of the JT team
(presumably, Mr. Yoneyama, Mr. Yamada and Mr. Kamiya).
Sincerely yours,
/s/ William J. Rieflin
- ----------------------
William J. Rieflin
Vice President, General Counsel & Secretary
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.15
SCREENING AGREEMENT
This Screening Agreement (the "Agreement") is made as of August 23, 1999
(the "Effective Date"), by and between Tularik Inc., a Delaware corporation with
its offices at Two Corporate Drive, South San Francisco, California 94080
("Tularik") and Japan Tobacco Inc., a Japanese corporation with its offices at
JT Building, 2-1 Toranomon, 2- Chome, Minato-Ku, Tokyo 105-8422, Japan ("JT").
Recitals
Whereas, Tularik possesses a library (the "Tularik Library") of chemically
diverse, pre-plated compounds acquired from public sources (the "Compounds") and
is able to screen the Tularik Library employing Tularik's proprietary screening
technology (the "Screening Technology"); and
Whereas, JT has certain drug targets (the "JT Targets") and assays
associated therewith (the "JT Assays") against which it desires that Tularik
screen selected Compounds from the Tularik Library; and
Whereas, Tularik desires to apply the Screening Technology to the Tularik
Library in order to identify and supply to JT those Compounds that are most
likely to show activity with respect to the JT Targets and therefore may lead to
candidates for drug development;
Now, Therefore, in consideration of the foregoing premises and the
covenants set forth below, the Parties hereby agree as follows:
1. Definitions.
1.1 "Affiliate" shall mean any corporation or other business entity that
during the term of this Agreement controls, is controlled by or is under common
control with JT or Tularik but only for so long as such entity controls, is
controlled by or is under common control with JT or Tularik. For this purpose,
control means the possession of the power to direct or cause the direction of
the management and the policies of an entity whether through ownership directly
or indirectly of over fifty percent (50%) of the stock entitled to vote, and for
non-stock organizations, the right to receive over fifty percent (50%) of the
profits by contract or otherwise, or if not meeting the preceding requirements,
any company owned or controlled by or owning or controlling JT or Tularik at the
maximum control or ownership right permitted in a country where such company
exists. Notwithstanding the foregoing, [ * ].
1.2 "Compounds" shall have the meaning given in the first recital.
<PAGE>
1.3 "Confidential Information" shall have the meaning given in Section
6.1.
1.4 "Control" or "Controlled" shall mean possession by a Party of the
ability to grant a license or sublicense in accordance with the terms of this
Agreement, and without violating the terms of any agreement by such Party with a
Third Party.
1.5 "Disclosing Party" shall have the meaning given in Section 6.1.
1.6 "Eligible Compounds" shall mean High Activity Compounds or Compounds
that are not High Activity Compounds but for which payments are made by JT
pursuant to Section 4.3.
1.7 "FDA" shall mean the United States Food and Drug Administration, or
any successor organization.
1.8 "Field" shall mean prevention or treatment of human disease.
1.9 "First Commercial Sale" means, with respect to any Product, the first
sale for end use of such Product after receipt of the requisite regulatory
approval.
1.10 "High Activity Compound" shall mean a Compound: (a) identified
pursuant to the Screening Program; and (b) that [ * ].
1.11 "High Throughput-Ready Protocol" shall mean a protocol that describes
the procedure for screening any JT Assay that is consistent with a high
throughput screening format.
1.12 "High Throughput Validation Data" shall mean data with respect to a
JT Assay demonstrating: (a) [ * ], (b) [ * ] and (c) [ * ].
1.13 "IND" shall mean an Investigational New Drug application, as defined
in FDA regulations, as amended from time to time.
1.14 "Initial Compounds" shall have the meaning given in Section 2.2.2.
1.15 "Initial Results" shall have the meaning given in Section 2.2.3.
1.16 "Inventions" shall mean either JT Inventions or Tularik Inventions.
1.17 "Joint Technology" shall have the meaning given in Section 5.1.2.
1.18 "JT Assays" shall have the meaning given in the second recital.
1.19 "JT Inventions" shall have the meaning given in Section 5.1.1.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2
<PAGE>
1.20 "JT Know-How" shall mean all ideas, inventions, data, instructions,
processes, formulas, expert opinion and information, owned or Controlled in
whole or part by JT by license, assignment or otherwise, in each case, necessary
or useful for the screening of the JT Assays that is within the Control of JT
during the Screening Program Term, excluding JT Patent Rights.
1.21 "JT Patent Rights" shall mean Patent Rights owned, licensed or
Controlled by JT (including its Affiliates, licensors or its licensees) that
relate to the JT Targets or the JT Assays.
1.22 "JT Targets" shall have the meaning given in the second recital.
1.23 "JT Technology" shall mean JT Patent Rights and JT Know-How.
1.24 "License Commencement Date" shall mean the date on which a particular
Eligible Compound is identified.
1.25 "License Term" shall mean the period commencing on the License
Commencement Date and ending on a country-by-country and Product-by-Product
basis on the later to occur of: (i) [*] after the First Commercial Sale of such
Product in such country by JT, its Affiliates or Sublicensees; or (ii) the
expiration of the last to expire issued patent within the Tularik Inventions
containing any claim that would be infringed by a Third Party by making, using
or selling the applicable Product in the applicable country.
1.26 "NDA" shall mean a New Drug Application, as defined in FDA
regulations, as amended from time to time.
1.27 "Party" shall mean either Tularik or JT.
1.28 "Patent Rights" shall mean all U.S. or foreign jurisdiction
(including the European Patent Convention) patent applications, including any
regular, or provisional applications and any continuation (in whole or in part),
division, or substitute thereof, or any equivalent of any of the foregoing, and
any patent issuing thereon, including any reissue, re-examination or extension
thereof.
1.29 "Product" shall mean any product for use in the Field containing an
Eligible Compound.
1.30 "Receiving Party" shall have the meaning given in Section 6.1.
1.31 "Screening Data" shall mean a summary report prepared by Tularik for
each JT Assay describing: [ * ].
1.32 "Screening Library" shall have the meaning given in the first
recital.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3
<PAGE>
1.33 "Screening Program" shall mean the program pursuant to which Tularik
will screen Compounds against JT Assays as described in Section 2.2.
1.34 "Screening Program Term" shall have the meaning given in Section 8.1.
1.35 "Screening Supplies" shall mean all biological materials, reagents or
special plates required for the screening of the JT Assay.
1.36 "Screening Technology" shall have the meaning given in the first
recital.
1.37 "Second Round Compounds" shall have the meaning given in Section
2.2.4.
1.38 "Second Round Results" shall have the meaning given in Section 2.2.5.
1.39 "Sublicensee" shall mean a Third Party to whom JT has granted a
sublicense under the Tularik Technology to make, use, develop, manufacture
and/or sell Product(s). As used in this Agreement, it is understood that
"Sublicensee" shall also include any Third Party to whom JT has granted the
right to distribute Product(s), provided that such Third Party has the primary
responsibility for marketing and promotion at its expense of such Product within
the field or territory for which such distribution rights are granted.
1.40 "Third Party" shall mean any person or entity other than Tularik and
JT, and their respective Affiliates.
1.41 "Third Round Compounds" shall have the meaning given in Section
2.2.6.
1.42 "Third Round Results" shall have the meaning given in Section 2.2.7.
1.43 "Tularik Inventions" shall have the meaning given in Section 5.1.1.
1.44 "Tularik Know-How" shall mean all ideas, inventions, data,
instructions, processes, formulas, expert opinion and information, including,
without limitation, biological, chemical, pharmacological, toxicological,
physical and analytical, safety, manufacturing and quality control data and
information, owned or Controlled, in whole or part, by Tularik during the
License Term by license, assignment or otherwise, in each case, necessary or
useful for the development or commercialization of Eligible Compounds, but shall
exclude Tularik Patent Rights.
1.45 "Tularik Library" shall have the meaning given in the first recital.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4
<PAGE>
1.46 "Tularik Patent Rights" shall mean Patent Rights owned, licensed or
Controlled by Tularik during the License Term that relate exclusively to
Eligible Compounds.
1.47 "Tularik Technology" shall mean Tularik Patent Rights and Tularik
Know-How.
2. Screening Activity.
2.1 Meetings. Tularik and JT will meet in person or communicate by
telephone or video conference as necessary during the Screening Program Term.
2.2 Screening.
2.2.1 Designation of JT Assay. Within [ * ] of the Effective Date,
JT shall propose in writing to Tularik at least [ * ] JT Assay for screening by
Tularik pursuant to this Agreement, as further described in the Attachment.
During the Screening Program Term, JT shall propose in writing to Tularik
additional JT Assays for screening by Tularik pursuant to this Agreement for a
total of [ * ] JT Assays per year and possibly [ * ] JT Assays per year if
expanded pursuant to this Section 2.2.1. Each year during the Screening Program
Term, Tularik shall use reasonable efforts to perform screening of [ * ] JT
Assays. During the Screening Program Term, JT may, upon written notice, request
that Tularik perform screening of [ * ] JT Assays per year, and Tularik may
perform such additional screening in its sole discretion. For each proposed JT
Assay, JT will provide Tularik with a written proposal describing such JT Assay.
Such written proposal shall include [ * ]. In addition to such written
proposal, JT shall provide to Tularik, or request Tularik to procure subject to
Section 4.4, at JT's discretion, all Screening Supplies. Within [ * ] following
receipt of such Screening Supplies, Tularik shall determine whether the JT Assay
is suitable for screening in a high throughput format. During such [ * ]
period, Tularik: [ * ]. Within [ * ] of receiving such proposal, and such
further information as Tularik may reasonably request regarding such proposed JT
Assay, Tularik shall notify JT in writing whether Tularik reasonably believes
that performing such JT Assay is [ * ]. In the event that Tularik reasonably
believes that performing such JT Assay is inconsistent with such Tularik
obligations or infeasible for the reasons set forth in the immediately preceding
sentence, Tularik shall not be obligated to accept such JT Assay for screening
pursuant to this Agreement.
2.2.2 Selection of Compounds. Within [ * ] of the Effective Date,
the Parties shall select an initial set of [ * ] Compounds from the Tularik
Library (the "Initial Compounds") that the Parties believe [*]. Anything in this
Section 2.2.2 to the contrary notwithstanding, the Initial Compounds selected by
the Parties shall consist of: [ * ].
2.2.3 Screening of Initial Compounds. Within: (a) [ * ] (in the
case of JT Assays that are [ * ]); or (b) the number of days (between [ * ])
determined by the
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5
<PAGE>
mutual agreement of the Parties (in the case of JT Assays that are [ * ]); of
receipt by Tularik of the payment set forth in Section 4.1(a), Tularik shall (i)
screen each Initial Compound to determine the [ * ] of such Initial Compound
with respect to the JT Target in the associated JT Assay and (ii) provide JT
with the Screening Data resulting therefrom for each of the Initial Compounds
with respect to the JT Target (the "Initial Results"). Within [ * ] of the
commencement of screening with respect to a given JT Target, Tularik will give
JT notice that such screening has commenced.
2.2.4 Initial Results. If JT determines that, based on the Initial
Results for a given JT Target, screening of additional Compounds in the Tularik
Library may be useful in relation to such JT Target, then based upon such
Initial Results, the Parties may select a set of up to [ * ] additional
Compounds from the Tularik Library (the "Second Round Compounds") that the
Parties believe will exhibit the greatest likelihood of an acceptable level of [
* ] in relation to such JT Target. Anything in this Section 2.2.4 to the
contrary notwithstanding, the Second Round Compounds selected by the Parties
shall consist of: [ * ].
2.2.5 Screening of Second Round Compounds. Within: (a) [ * ] (in the
case of JT Assays that are [ * ]); or (b) the number of days (between [ * ])
determined by the mutual agreement of the Parties (in the case of JT Assays that
are [ * ]); of receipt by Tularik of the payment set forth in Section 4.1(b),
Tularik shall: (i) screen each Second Round Compound to determine the level of
[ * ] of such Second Round Compound with respect to each JT Target; and (ii)
provide JT with the Screening Data resulting therefrom for each of the Second
Round Compounds (the "Second Round Results").
2.2.6 Second Round Results. If JT determines that, based on the
Initial Results and the Second Round Results for a given JT Target, screening of
additional Compounds in the Tularik Library may be useful in relation to such JT
Target, then based upon the Initial Results and Second Round Results, the
Parties may select a set of up to [ * ] additional Compounds from the Tularik
Library (the "Third Round Compounds") that the Parties believe will exhibit the
greatest likelihood of an acceptable level of [ * ] in relation to such JT
Target. Anything in this Section 2.2.6 to the contrary notwithstanding, the
Third Round Compounds selected by the Parties shall consist of: [ * ].
2.2.7 Screening of Third Round Compounds. Within: (a) [ * ] (in the
case of JT Assays that are [ * ]); or (b) the number of days (between [ * ])
determined by the mutual agreement of the Parties (in the case of JT Assays that
are [ * ]); of receipt by Tularik of the payment set forth in Section 4.1(c),
Tularik shall: (i) screen each Third Round Compound to determine the level of [
* ] of such Third Round Compound with respect to each JT Target; and (ii)
provide JT with the Screening Data resulting therefrom for each of the Third
Round Compounds (the "Third Round Results"). Subject to Section 3.8, Tularik
shall immediately remove from Tularik's library each Eligible Compound upon
selection thereof by JT.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6
<PAGE>
2.3 Record-Keeping. Tularik shall maintain records, in sufficient detail
and in a good scientific manner, which shall reflect all work performed and
results obtained in performance of JT Assay (including all data in the form
required under all applicable laws and regulations of the United States).
3. Transfer of Rights.
3.1 Rights to JT. Subject to the terms and conditions of this Agreement,
Tularik hereby: (i) assigns to JT all right, title and interest in the Tularik
Patent Rights; (ii) grants to JT an exclusive, worldwide, fully-paid up,
royalty-free license under the Tularik Inventions and the interest of Tularik in
the Joint Technology; and (iii) grants to JT a nonexclusive, worldwide, fully-
paid up, royalty-free license under the Tularik Know-How; to make, have made and
use Eligible Compounds, to develop, make, have made, use, sell, have sold, offer
for sale, import and have imported Products in the Field. Anything in this
Agreement to the contrary notwithstanding, any Eligible Compound for which JT
has not made any required payment pursuant to Section 4.2 and/or 4.3 shall not
be a Eligible Compound for the purpose of the foregoing assignment and licenses;
provided, however, that [ * ].
3.2 License to Tularik. Subject to the terms and conditions of this
Agreement, JT grants to Tularik, on a JT Assay-by-JT Assay basis, a non-
transferable, nonexclusive, license under JT Technology, without the right to
grant sublicenses, to make and use any JT Assay solely in connection with the
conduct of the Screening Program.
3.3 Retained Rights. Except for the licenses expressly provided in
Section 3.1 and 3.2, no right or license in or to any intellectual property
owned or Controlled by JT or Tularik, as the case may be, is granted or implied
hereunder, and each Party shall retain all rights not expressly granted to the
other Party. No license or other right in the Tularik Technology or JT
Technology shall be created hereunder by implication, estoppel or otherwise.
Notwithstanding the licenses and rights granted to JT herein, Tularik retains
the right to make, have made and use all Compounds other than Eligible Compounds
selected by JT pursuant to Section 3.7 for any purpose.
3.4 Sublicenses. Subject to the terms and conditions of this Agreement,
JT shall have the right to sublicense the rights granted in Section 3.1(ii) and
(iii) above. Each such sublicense shall be consistent with all the terms and
conditions of this Agreement and subordinate to this Agreement. Each such
sublicense of the rights granted in: (i) Section 3.1(ii) shall be subject to
the receipt by Tularik of prior written notice from JT; and (ii) Section
3.1(iii) shall be subject to the prior consent of Tularik, which consent shall
not be unreasonably withheld. JT shall remain responsible to Tularik for all of
each such Sublicensee's applicable obligations under the sublicense. Each
sublicense shall provide for the continuation of the license following early
termination of the license rights of JT hereunder.
3.5 Third Party Rights.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7
<PAGE>
3.5.1 Overlapping Rights. It is understood that Tularik is in the
business of providing screening services to Third Parties, and that Tularik will
grant such Third Parties rights after the Effective Date to acquire licenses for
Compounds similar to JT's rights under this Agreement. Notwithstanding the
licenses granted to JT above, it is possible that a Third Party may acquire
rights from Tularik with respect to one or more Compounds of which Tularik is a
sole or joint owner; accordingly, Tularik's grant of rights in this Article 3 is
limited to the extent that a Third Party (either alone or jointly with Tularik)
has filed a patent application with respect to such a Compound prior to the
filing by JT (either alone or jointly with Tularik) of a patent application with
respect to such a Compound. It is further understood that Compounds provided to
Third Parties in the course of Tularik's other business activities may result in
Third Party patent applications and patents that could affect the rights granted
to JT under this Article 3. Notwithstanding the foregoing, JT shall have the
right: [ * ]. In any event, Tularik shall immediately advise JT of any Highly
Active Compounds of which Tularik is aware at any time during the License Term
as being the subject of any patent or patent application of any such Third
Party. Anything in this Section 3.5.1 to the contrary notwithstanding, Tularik
covenants and agrees that it shall not, following the License Commencement Date,
[ * ].
3.5.2 No Liability. It is understood and agreed that, even if
Tularik complies with its obligations under this Agreement, Compounds provided
to Third Parties in the course of Tularik's other business activities may result
in Third Party patent applications and patents, including patent applications
and patents owned by such Third Parties, or owned jointly by Tularik and such
Third Parties, that could conflict with patent applications and patents owned by
JT, or jointly owned by JT and Tularik hereunder. Tularik will use its
reasonable efforts to avoid such conflict and, [ * ] Tularik shall have no
liability under this Agreement with respect to any such conflict, except as set
forth in Section 4.9 hereof.
3.6 No Other Products. Except as otherwise agreed by Tularik in writing,
neither JT nor its Affiliates or Sublicensees shall commercialize (or authorize
the commercialization of) any Eligible Compound other than as a Product in
accordance with this Agreement.
3.7 Limitation on Rights to Eligible Compounds. In the event that the
Screening Program results in a universe of potentially Eligible Compounds that
exceeds [ * ] Eligible Compounds, JT shall have the ability to select from among
such universe those [ * ] Eligible Compounds of greatest interest to JT in its
sole discretion. Such selection shall be made following the receipt by JT of
the Initial Results, the Second Round Results or the Third Round Results, as the
case may be. The license granted, and the rights assigned, pursuant to Section
3.1 shall be [ * ] pursuant to this Section 3.7.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8
<PAGE>
3.8 Removal of Eligible Compounds. Tularik shall remove from the Tularik
Library during the License Term each Eligible Compound that has been selected by
JT pursuant to Section 3.7 up to an aggregate of [ * ] such Eligible Compounds.
3.9 Value of Know-How; Convenience of the Parties. The Parties
acknowledge that Tularik may not own or control patent applications or patents
covering the manufacture, sale or use of a particular Product. However, the
Parties agree that, in addition to the value of the license under Section 3.1
because of such patents (if any), substantial value is contributed by Tularik
under this Agreement in accelerated time to market, enhanced probability of
success and the potential for multiple leads. For the convenience of the
Parties, JT agrees to pay the amount specified herein, regardless of whether a
Product is covered by a patent application or patent owned or Controlled by
Tularik.
3.10 Third Party Royalties. JT shall be responsible for the payment of any
royalties due to Third Parties for the manufacture, use or sale of Products by
JT, its Affiliates or Sublicensees.
4. Payments.
4.1 Screening Payments. In consideration for Tularik's performance of the
Screening Program in accordance with Section 2.2 for each JT Assay, JT will pay
to Tularik (a) [ * ] for the Initial Compounds selected by the Parties for
screening against such JT Assay pursuant to Section 2.2.2; (b) [ * ] for the
Second Round Compounds selected for screening against such JT Assay by the
Parties pursuant to Section 2.2.4; and (c) [ * ] for the Third Round Compounds
selected for screening against such JT Assay by the Parties pursuant to Section
2.2.6. Upon receipt of such payment, Tularik will proceed with testing
Compounds in such Screening Program pursuant to Section 2.2.
4.2 High Activity Compound Payments.
4.2.1 High Activity Compound Fee. Subject to the [ * ] set forth in
Section 4.2.2, for each High Activity Compound for a given JT Target for which
rights are granted to JT pursuant to Section 3.1, JT will pay to Tularik [ * ].
Such payment shall be made by JT to Tularik promptly following JT's independent
confirmation that each High Activity Compound referenced in the Initial Results,
Second Round Results or Third Round Results, as the case may be, exhibits [ * ]
with respect to the relevant JT Target in the JT Assay at the [ * ] specified in
accordance with Section 1.10(b). JT shall endeavor to complete such independent
confirmation within a period of [ * ] commencing on the receipt of such High
Activity Compound from Tularik or another source, as provided herein. JT may
request that Tularik provide JT with such High Activity Compound to accomplish
such independent confirmation. Tularik shall use its reasonable efforts to
provide to JT [ * ] of such High Activity Compound [ * ] for this purpose;
provided, however, [ * ]. In the event Tularik [ * ] such High Activity
Compound pursuant to the foregoing proviso, JT shall [ * ] such High Activity
Compound or give up the rights granted in Section 3.1 in such High Activity
Compound.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9
<PAGE>
In the event JT elects [ * ] such High Activity Compound, JT shall endeavor to
complete such [ * ] within a reasonable time. Tularik shall use its reasonable
efforts to provide JT with such information and/or data requested by JT as is
reasonably necessary to permit JT to perform such [ * ].
4.2.2 [ * ] High Activity Compound License Fee. In the event that
there are more than [ * ] Compounds that are High Activity Compounds for a given
JT Target, JT shall not be obligated to [ * ] under Section 4.2.1 for such JT
Target.
4.3 Payments for Compounds that are not High Activity Compounds. For each
Compound that JT desires to license pursuant to Section 3.1, notwithstanding
that such Compound is not a High Activity Compound, JT will pay to Tularik,
within [ * ] of the date on which each such Compound is selected by JT: (a) [ *
] such Compounds licensed pursuant to this Section 4.3; and (b) [ * ] for each
such Compound in excess of [ * ] Compounds licensed pursuant to this Section
4.3.
4.4 Payments for New Capital Equipment and Screening Supplies. In the event
that new capital equipment [ * ] is required by Tularik in order to screen the
JT Assays, Tularik shall forward to JT in writing the relevant information and
costs therefor in advance. In the event JT agrees to the purchase of such
equipment and/or Screening Supplies, [ * ]. [ * ].
4.5 Payments. Any payments due pursuant to Sections 4.1, 4.2, 4.3 or 4.4
shall be paid within [ * ] of receipt of an invoice therefor.
4.6 Payment Method. All payments due under this Agreement shall be made by
bank wire transfer when due in immediately available funds to an account
designated by Tularik. Any payments that are not paid on the date such payments
are due under this Agreement shall bear interest to the extent permitted by
applicable law at the [ * ] per annum, calculated on the number of days such
payment is delinquent.
4.7 Currency Conversion. All payments outlined in this Agreement are in
U.S. Dollars. If any currency conversion shall be required in connection with
the calculation of any payments hereunder, such conversion shall be made using
the selling exchange rate for conversion of the foreign currency into U.S.
Dollars, quoted for current transactions as reported in The Wall Street Journal
for the last reported day of the calendar quarter to which such payment
pertains.
4.8 Tax Matters. All amounts required to be paid to Tularik pursuant to
this Agreement shall be paid without deduction for withholding for or on account
of any taxes, including any sales, use, value added or transfer tax, or similar
governmental charge imposed by a jurisdiction other than the United States.
Payment of any such tax or similar governmental charge, including any due in
connection with the transfer of the JT Assays hereunder, shall be the sole
responsibility of JT. In the event that Tularik is required to pay any such tax
or other similar charge, JT shall promptly reimburse Tularik for payment of such
amounts.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10
<PAGE>
4.9 Refunds or Credits. Except as expressly provided below, any payment
made to Tularik pursuant to this Agreement shall be non-refundable. Payments
made by JT to Tularik for any Highly Active Compounds pursuant to Section 4.2.1,
or for any Compounds that are not Highly Active Compounds pursuant to Section
4.3, for which [ * ] shall be refunded in full by Tularik to JT and the license
set forth in Section 4.2.1 or 4.3, as the case may be, shall terminate.
5. Ownership of Inventions.
5.1 Ownership.
5.1.1 Sole Ownership. JT shall be the sole owner of all intellectual
property conceived and reduced to practice or otherwise developed solely by its
employees and agents, and all patent applications and patents claiming such
intellectual property arising out of the Screening Program or JT's use thereof
("JT Inventions"). Tularik shall be the sole owner of any intellectual property
conceived and reduced to practice or otherwise developed solely by its employees
and agents and all patent applications and patents claiming such intellectual
property arising out of the Screening Program ("Tularik Inventions"); provided,
however, that any Tularik Invention that relates primarily to the JT Assays
shall be assigned to JT. Each Party agrees to execute, or have its employees,
agents or consultant execute, all paperwork necessary to effectuate any such
assignment necessary to achieve such ownership by Tularik or JT, as the case may
be.
5.1.2 Joint Technology. If, during the Screening Program, one or more
employees or consultants of Tularik, together with one or more employees or
consultants of JT, jointly conceive any intellectual property (the "Joint
Technology"), each of the Parties shall own an undivided one-half interest in
the Joint Technology.
5.1.3 U.S. Law. Inventorship of Tularik Inventions, JT Inventions and
Joint Technology shall be determined in accordance with the patent laws of the
United States.
5.1.4 Retained Rights. Except as otherwise expressly provided in this
Agreement, nothing in this Agreement is intended to convey or transfer ownership
by one Party to the other of any right, title or interest in any Confidential
Information, Inventions or Patent Rights owned or Controlled by a Party. Except
as expressly provided for in this Agreement, nothing in this Agreement shall be
construed as a license or sublicense by one Party to the other of any rights in
any Inventions or Patent Rights owned or Controlled by a Party or its
Affiliates.
5.2 Patent Filing and Prosecution.
5.2.1 Cooperation. JT and Tularik shall consult together upon all
matters relating to the filing, prosecution, and maintenance of patents within
Joint
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11
<PAGE>
Technology. This shall include giving the other Party the opportunity to review
and comment upon the text of any priority application before filing;
consultation about the decision whether or not to foreign file and, if so, in
which countries; and giving the other Party the opportunity, as far in advance
of filing dates as feasible, to fully review and comment on the basic foreign
filing text. Each Party shall provide to the other copies of any search reports
and official actions, including notice of all interferences, reissues, re-
examinations, and oppositions received from the relevant patent offices promptly
after receipt. Each Party shall reasonably cooperate with and assist the other
in connection with activities subject to this Section 5.2.1, at the other's
request. Each Party shall execute, and ensure that its employee inventors shall
execute, all documents reasonably required in connection with the filing,
prosecution or maintenance of patents within the Joint Technology. Patent
counsel designated by each Party will meet in person or by telephone or video
conference as necessary during (i) the Screening Program Term, and (ii) the
pendency of any of the patent applications within the scope of this Section
5.2.1 to coordinate, discuss, review and implement patent filing and prosecution
strategy. In the event that a single patent or patent application within Tularik
Patent Rights contains both Eligible Compounds and other Compounds, Tularik
shall file a divisional application directed exclusively to the Eligible
Compounds in a timely and commercially reasonable manner.
5.2.2 Failure to Prosecute. Either Party may elect upon sixty (60)
days prior notice to discontinue prosecution or maintenance of any patent within
Joint Technology in any or all countries. In such case, the other Party shall
have the right to prosecute and maintain such patent applications and patents in
such countries it deems appropriate, at its sole expense.
5.3 Enforcement. JT and Tularik shall separately have the right, but not
the obligation, to bring proceedings against any Third Party for the
inappropriate use, including patent infringement, of Inventions, trade secrets
or Patent Rights solely owned or Controlled by it, and at its own risk and
expense. Such Party shall be entitled to retain any and all awards or damages
obtained in any such proceeding. At the request and expense of either Party, the
other Party shall give the requesting Party all reasonable assistance required
to file and conduct any such proceeding. For Joint Technology, JT and Tularik
shall use their best efforts to coordinate pursuing a commercially reasonable
action to address inappropriate use, including patent infringement, by Third
Parties of such Joint Technology and to determine how expenses and any recovery
from such action shall be allocated between the Parties.
5.4 Defense of Infringement Claims.
5.4.1 Claims Relating to Products. Tularik will cooperate with JT, at
JT's request and expense, in the defense of any suit, action or proceeding
against Tularik and its Affiliates, or JT and its Affiliates or Sublicensees,
alleging the infringement of the intellectual property rights of a Third Party
by reason of the manufacture, use or sale of a Product by JT, its Affiliates or
Sublicensees. JT shall give Tularik prompt written notice
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12
<PAGE>
of the commencement of any such suit, action, proceeding or claim of
infringement. Tularik shall give to JT all authority, information and assistance
necessary to defend or settle any such suit, action or proceeding; provided,
however, that if Tularik or its Affiliates should be joined in any such suit,
action or proceeding pursuant to this Section 5.4.1 at the request of JT, JT
shall [ * ]. JT shall have the right to control the conduct and settlement of
any such litigation; provided, however, that [ * ].
5.4.2 Claims Relating to Tularik Technology. JT will cooperate with
Tularik, at Tularik's expense, in the defense of any suit, action or proceeding
against Tularik or its Affiliates alleging the infringement of the intellectual
property rights of a Third Party by reason of Tularik's use of any Tularik
Patent Rights and Tularik Technology (other than Products) in performing its
obligations to JT under this Agreement. Tularik shall give JT prompt written
notice of the commencement of any such suit, action, proceeding or claim of
infringement. JT shall give to Tularik all authority, information and assistance
necessary to defend or settle any such suit, action or proceeding; provided,
however, that if JT should be joined in any such suit, action or proceeding
pursuant to this Section 5.4.2 at the request of Tularik, Tularik shall [ * ].
5.5 Indemnity. JT shall indemnify, defend and hold harmless Tularik from
any and all damages, costs or expenses arising out of any: [ * ] (without regard
to the nature of the causes of action alleged or theories of recovery asserted)
arising in connection with the development and/or commercialization of Products
by JT, its Affiliates or Sublicensees; except to the extent caused by [ * ].
6. Confidential Information.
6.1 Nondisclosure Obligations. Subject to the provisions of Section 6.2
below, during the later of Screening Program Term or License Term and for [ * ]
years thereafter, any and all knowledge, know-how, screening results, assay
information, Compound structures, practices, processes or other information
received by one Party to this Agreement (the "Receiving Party") from the other
Party to this Agreement (the "Disclosing Party") pursuant to this Agreement
(hereinafter referred to as "Confidential Information") shall be received and
maintained by the Receiving Party in strict confidence, shall not be disclosed
to any Third Party, and shall not be used by the Receiving Party for any purpose
other than those purposes specified in this Agreement, unless the Receiving
Party can demonstrate by competent written proof that such Confidential
Information:
(a) was already known to the Receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the Disclosing
Party;
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the Receiving Party;
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13
<PAGE>
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act of omission of
the Receiving Party in breach of this Agreement;
(d) was disclosed to the Receiving Party, other than under an
obligation of confidentiality to a Third Party, by a Third Party who had no
obligation to the Disclosing Party not to disclose such information to others;
(e) was independently discovered or developed by the Receiving Party
without the use of Confidential Information belonging to the Disclosing Party;
or
(f) [ * ].
6.2 Authorized Disclosure. Each Party may disclose Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary in the following instances:
(a) filing or prosecuting patents relating to inventions;
(b) prosecuting or defending litigation;
(c) complying with applicable governmental regulations;
(d) disclosure to Affiliates, Sublicensees, employees,
consultants or agents each of whom is bound by similar terms of confidentiality
and non-use at least equivalent in scope to those set forth in this Article 6;
and,
(e) disclosure to investment bankers.
Notwithstanding the foregoing, in the event a Party is required to make a
disclosure of the other Party's Confidential Information pursuant to this
Section 6.2 it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure and use best efforts to take all
reasonable action to avoid disclosure of Confidential Information hereunder.
Further, JT shall have the right to use all information received with respect to
Highly Active Compounds hereunder for purposes relating to such Highly Active
Compounds' development and commercialization.
7. Representations and Warranties.
7.1 By JT. JT represents and warrants to Tularik that it has the right to
provide the JT Assays to be supplied hereunder and that it has not previously
entered and will not enter during the Screening Period Term into any agreement
with a Third Party in conflict with this Agreement.
7.2 By Tularik. Tularik represents and warrants to JT that it has the
right to carry out the activities under Article 2 above and that it has not
previously entered and
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14
<PAGE>
will not enter during the Screening Period Term into any agreement with a Third
Party in conflict with this Agreement.
7.3 Disclaimer Concerning Compounds. THE COMPOUNDS AND ANY CHEMICAL
STRUCTURES DISCLOSED TO JT HEREUNDER ARE BEING PROVIDED WITH NO WARRANTIES OF
ANY KIND, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE OR THAT THEY ARE FREE FROM THE RIGHTFUL CLAIM
OF ANY THIRD PARTY, BY WAY OF INFRINGEMENT OR THE LIKE. NOTWITHSTANDING THE
FOREGOING, TULARIK WARRANTS AND REPRESENTS THAT IT IS NOT, AS OF THE EFFECTIVE
DATE, AWARE OF ANY EXISTING THIRD PARTY CLAIMS AGAINST OR WITH RESPECT TO THE
COMPOUNDS.
8. Term; Termination.
8.1 Term. This Agreement shall become effective as of the Effective Date
and, unless earlier terminated as hereinafter provided, shall continue in force
for a period of two (2) years after the same ("Screening Program Term"). The
Screening Program Term may be extended for additional periods from time to time
upon mutual agreement of the Parties hereto.
8.2 Termination for Default. In the event that either Party to this
Agreement shall be in default of any of its material obligations hereunder and
shall fail to remedy such default within [ * ] after receipt of written notice
thereof, the Party not in default shall have the option of terminating this
Agreement by giving written notice thereof, notwithstanding anything to the
contrary contained in this Agreement.
9. Accrued Rights; Surviving Obligations
9.1 Termination of this Agreement shall not affect any accrued rights of
either Party. The terms of Section 3.1(i), 3.1(iii), 3.5.1, 3.5.2, 11.4 and
Articles 5, 6 and 7 of this Agreement shall survive termination of this
Agreement. Promptly after termination of this Agreement each Party shall return
or dispose of any materials and information of the other in accordance with the
instructions of the other, including without limitation any Compounds and
written materials disclosed hereunder.
10. Governing Law; Dispute Resolution.
10.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of California.
10.2 Dispute Resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this Agreement, the
Parties shall try to settle their differences amicably and in good faith between
themselves first, by
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15
<PAGE>
referring the disputed matter to the respective heads of research of each Party
and, if not resolved by the research heads, by referring the disputed matter to
the respective Chief Executive Officers of each Party.
11. Miscellaneous.
11.1 Notices. All notices required or permitted to be given under this
Agreement shall be in writing and shall be mailed by registered or certified
airmail, postage prepaid, addressed to the signatory to whom such notice is
required or permitted to be given or transmitted by facsimile to the number
indicated below. All notices shall be deemed to have been given when mailed, as
evidenced by the postmark at the point of mailing, or transmitted by facsimile.
All notices to JT shall be addressed as follows:
Japan Tobacco Inc.
Central Pharmaceutical Research Institute
1-1, Murasaki-cho, Takatsuki, Osaka 569-1125
Japan
Fax: 81-726-81-9715
Attn: [ * ]
[ * ]
with a copy to:
Japan Tobacco Inc.
Pharmaceutical Division-
Japan Tobacco Bldg.
2-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8422
Fax: 81-3-5572-1449
Attn: [ * ]
[ * ]
All notices to Tularik shall be addressed as follows:
Tularik Inc.
Two Corporate Drive
South San Francisco, CA 94080 U.S.A.
Attn.: President
Any Party may, by written notice to the other, designate a new addressee,
address or facsimile number to which notices to the Party giving the notice
shall thereafter be mailed or faxed.
11.2 Independent Contractors. The Parties shall perform their obligations
under this Agreement as independent contractors and nothing contained in this
Agreement shall be construed to be inconsistent with such relationship status.
This
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16
<PAGE>
Agreement shall not constitute, create or in any way be interpreted as a joint
venture or partnership of any kind.
11.3 Entire Agreement; Amendment. This Agreement sets forth all the
covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto and supersedes and terminates all
prior agreements and understandings between the Parties hereto with regard to
the subject matter hereof, and there are no covenants, promises, agreements,
warranties, representations, conditions or understandings, either oral or
written, between the Parties hereto other than as set forth herein. No
subsequent alteration, amendment, change or addition to this Agreement shall be
binding upon the Parties hereto unless reduced to writing and signed by the
respective authorized officers of the Parties hereto.
11.4 Arbitration. Any dispute or claim arising out of or related to this
Agreement, or the interpretation, making, performance, breach, validity, or
termination hereof, that has not been resolved by negotiation or mediation as
set forth above, shall be finally settled by binding arbitration in accordance
with the Rules of Conciliation and Arbitration of the International Chamber of
Commerce ("ICOC Rules") by one arbitrator appointed in accordance with the ICOC
Rules. The arbitration proceedings shall be [ * ]. At the request of either
Party, the arbitrator will enter an appropriate protective order to maintain the
confidentiality of information produced or exchanged in the course of the
arbitration proceedings. The judgment of the arbitrator shall be in the form of
a reasoned, written opinion, and shall be issued within sixty (60) days of the
conclusion of the arbitration proceeding. Any award rendered by the
arbitrator(s) shall be conclusive and binding upon the parties, and may be
entered in any court having jurisdiction thereof. The Parties may apply to any
court of competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim relief, as necessary, without breach of this
arbitration provision and without any abridgment of the powers of the
arbitrator. The arbitrator may award to the prevailing Party, if any, as
determined by the arbitrator, its costs and fees, including, without limitation,
ICOC administrative fees, arbitrator fees, travel expenses, out-of-pocket
expenses, witness fees, and reasonable attorneys' fees. In the absence of such
an award, each party shall bear its own costs and fees associated with such
arbitration.
11.5 Affiliates; Assignment. Except as otherwise provided in this Section
11.5, neither Party may assign its rights or obligations under this Agreement
without the prior written consent of the other Party, such consent not to be
unreasonably withheld, except that a Party may assign its rights or obligations
to a Third Party in connection with the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of the assets or
actual voting control of the assigning Party. This Agreement shall be binding
upon the successors and permitted assigns of the Parties. Any attempted
delegation or assignment not in accordance with this Section 11.5 shall be of no
force or effect.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17
<PAGE>
11.6 Headings. The headings used in this Agreement are for convenience of
reference only and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
11.7 Force Majeure. Any delays in performance by any Party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the Party
affected, including but not limited to, acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The Party
suffering such occurrence shall immediately notify the other Party and any time
for performance hereunder shall be extended by the actual time of delay caused
by the occurrence.
11.8 Severability. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided, in order to achieve the intent of the Parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this agreement shall be deemed valid and enforceable to the
full extent.
11.9 Waiver. None of the terms, covenants, and conditions of this
Agreement can be waived except by the written consent of the Party waiving
compliance.
11.10 English Language. This Agreement has been prepared in the English
language and shall be construed in the English language.
In Witness Whereof, the Parties have by duly authorized persons, executed
this Agreement, as of the date first above written.
Japan Tobacco Inc. Tularik Inc.
By: /s/ Y. Inubushi By: /s/ John P. McLaughlin
----------------------------- -------------------------
Title: Vice President, International Development Title: President
Date: September 9, 1999 Date: August 23, 1999
--------------------------- -----------------------
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18
<PAGE>
Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
Exhibit 10.16
LICENSING AGREEMENT
This Licensing Agreement ("Agreement"), effective as of September 24, 1999,
by and between Eli Lilly and Company, an Indiana corporation with its
principal office located at Lilly Corporate Center, Indianapolis, Indiana
46285 ("Lilly"), and Tularik, Inc., a Delaware corporation with its principal
offices located at Two Corporate Drive, San Francisco, California 94080
("Tularik").
RECITALS
1. Whereas, Lilly is engaged, among other things, in the business of
manufacturing, marketing and selling oncolytic pharmaceutical products;
2. Whereas, Lilly has entered into a prior agreement with Princeton
University ("Princeton") establishing a research program relating to
antimetabolite compounds, which has led to a drug candidate known as
lometrexol which is an oncolytic agent in the therapeutic class known as
antifolates;
3. Whereas, Lilly holds an exclusive license, with the right to sublicense,
under certain patents and patent applications held by Princeton relating to
lometrexol and, in addition, Lilly owns certain patents and patent applications,
and has generated certain regulatory filings and related know-know, for
lometrexol; and
4. Whereas, subject to the terms and conditions set forth in this
Agreement, Lilly wishes to exclusively license to Tularik and Tularik wishes
to exclusively license from Lilly rights under patents and patent applications
related to lometrexol; and
5. Whereas, subject to the terms and conditions set forth in this
Agreement, Lilly also wishes to sell to Tularik and Tularik wishes to purchase
from Lilly the regulatory data, know-how and inventory related to lometrexol.
Now Therefore, the Parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions. For purposes of this Agreement, the following terms shall
-----------
have the meanings set forth below:
"Affiliates" shall mean, with respect to a Party to this Agreement, any
----------
Persons directly or indirectly controlling, controlled by, or under common
control with, such other Person. For purposes hereof, the term "controlled"
(including the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the direct or indirect ability or power
to direct or cause the direction of management policies of such Person or
otherwise direct the affairs of such Person, whether through ownership of equity
participation, voting securities,
<PAGE>
beneficial interest, by contract or otherwise. Affiliate shall specifically
exclude third parties to which Tularik has granted a sublicense pursuant to
authority granted by this Agreement where Tularik has no relationship to the
sublicensee other than a licensor-licensee relationship.
"Assumed Liabilities" shall have the meaning set forth in Section 2.3
-------------------
hereof.
"Calendar Quarter" shall mean a calendar quarter (i.e., period of three (3)
----------------
consecutive months) ending on March 31, June 30, September 30 or December 31.
"Calendar Year" shall mean any period of twelve (12) consecutive months
-------------
ending on December 31.
"Compulsory License" means a compulsory license under the Licensed Patents
------------------
obtained by a third party through the order, decree, or grant of a competent
governmental authority, authorizing such third party to manufacture, use, sell,
offer for sale or import the Product in a particular territory.
"Damages" shall mean any and all [ * ] incurred by a Party hereto
-------
(including any interest payments which may be imposed in connection therewith).
"Effective Date" shall be the date set forth in the first paragraph of this
--------------
Agreement.
"EU" shall mean the European Union, including the following countries:
--
Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Luxembourg, Netherlands, Portugal, Spain, Sweden and the United Kingdom.
"FDA" shall mean the United States Food and Drug Administration, or any
---
successor thereto.
"GAAP" shall mean United States generally accepted accounting principles,
-----
consistently applied.
"Indemnified Party" shall have the meaning given in Section 7.2 hereof.
-----------------
"Indemnifying Party" shall have the meaning given in Section 7.2 hereof.
------------------
"Licensed Patents" shall mean all patents, both foreign and domestic,
----------------
including without limitation, all extensions, reissues, renewals,
reexaminations, patents of addition, supplementary protection certificates and
inventors' certificates thereof and pediatric data package or other exclusivity
extensions, and all pending patent applications (including substitutions,
provisionals, divisionals, continuations and continuations-in-part) heretofore
filed or having any legal force in any country together with any patents that
have issued or in the future issue therefrom, which are owned, controlled, or
licensed in (with the right to sublicense and subject to the rights of Third
Parties as of the Effective Date), including, without limitation, the Princeton
Patents, in whole or in part, by Lilly or any Affiliate of Lilly, and which
would be infringed by the developing, making, using, or selling of Product,
absent the license herein, including, without limitation, those patents and
patent applications listed in Exhibit A attached hereto, and any divisionals,
---------
continuations, refilings, extensions, and international counterparts thereof. A
complete description of the patents and patent applications in existence as of
the Effective Date are listed in Exhibit A attached hereto.
---------
"Major Countries" shall mean [ * ].
---------------
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
<PAGE>
"Manufacturing Information" shall mean all existing information in written
-------------------------
and electronic form that relates to: [ * ].
"Net Sales" shall mean, [ * ]
---------
Such amounts shall be determined from books and records maintained in
accordance with GAAP. In the event the Product is sold as part of a combination
product, or as part of bundled products or as part of a delivery system, the Net
Sales from the combination product, bundled product or delivery system, for the
purposes of determining royalty payments, shall be determined by multiplying the
Net Sales (as defined above) of the combination product by the fraction, [ * ],
determined in accordance with the method of accounting normally employed by
Tularik in computing cost of goods.
"Party" or "Parties" shall mean either Lilly or Tularik or both.
----- -------
"Person" shall mean a natural person, a corporation, a partnership, a
------
trust, a joint venture, a limited liability company, any governmental authority
or any other entity or organization.
"Phase III Clinical Trial" shall mean large scale or pivotal human clinical
------------------------
trials conducted in patients in accordance with Good Clinical Practice and
intended to generate data concerning the safety and efficacy of the Product in
the particular indication tested sufficient to support registration of the
Product with health regulatory authorities.
"Princeton Agreement" shall mean the Agreement dated December 19, 1985,
-------------------
pursuant to which Lilly obtained an exclusive license under the Princeton
Patents.
"Princeton Patents" shall mean those patents both foreign and domestic,
-----------------
including, without limitation, all substitutions, extensions, reissues,
renewals, reexaminations, patents of addition, supplementary protection
certificates and inventors' certificates thereof and pediatric data package or
other exclusivity extensions and all pending patent applications (including,
without limitation, all substitutions, provisionals, divisionals, continuations
and continuations-in-part) which have been licensed by Lilly from Princeton, as
indicated in Exhibit A attached hereto.
---------
"Product" shall mean a finished pharmaceutical composition containing the
-------
compound lometrexol, [ * ] which may be included in any supplement, modification
or addition to the filings for Regulatory Approval of the foregoing compound.
"Product Data Package" shall include the following information and data
--------------------
directly related to the Product in the tangible possession or control of Lilly
as of the Effective Date: (a) the Regulatory Documents; [ * ]; and (e) such
other information and data specifically identified in Exhibit B attached hereto.
---------
Exhibit B shall represent a complete listing of the information and data
- ---------
included in Product Data Package, as such term is used in this Agreement.
"Product Inventory" shall mean the Product inventory, in bulk or finished
-----------------
form, which Lilly owns or controls as of the Effective Date, as identified in
Exhibit C attached hereto.
- ---------
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3.
<PAGE>
"[ * ] Diligence" shall mean [ * ] efforts to develop and obtain
---------
Regulatory Approval in the Territory, consistent with accepted business
practices and legal requirements, and [ * ].
"Regulatory Approval" shall mean (a) in the United States, approval by the
-------------------
FDA of an NDA, or equivalent application, for marketing approval and
satisfaction of any related applicable FDA registration and notification
requirements (if any) and (b) in any country other than the United States,
approval by the Regulatory Authority in such country of a single application or
set of applications comparable to an NDA.
"Regulatory Authority" shall mean the FDA in the United States or the
--------------------
equivalent governmental agency having jurisdiction in any other country in the
Territory.
"Regulatory Documents" shall mean the (a) United States investigational new
--------------------
drug application (IND) [ * ], and all amendments and annual reports to same, and
(b) Clinical Trial Exemption for the United Kingdom (CTX) [ * ], and all
amendments related to same.
"Royalty Term" shall mean, with respect to each country in which Product is
------------
sold, the period of time equal to [ * ].
"Territory" shall mean the world, unless Tularik's license terminates with
---------
respect to a Major Country or Major Countries pursuant to Section 6.5, in which
case the Territory shall exclude any Major Country in which Tularik's license so
terminated.
"Transferred Assets" shall mean the Manufacturing Information, the Product
------------------
Inventory and the Product Data Package.
"Tularik Improvements" shall mean any inventions (including, without
--------------------
limitation, [ * ] identified and/or discovered by Tularik), patentable or not,
information and/or data relating to the Product, including, without limitation,
[ * ] necessary for the manufacture, use or sale of the Product, which are
developed or acquired by Tularik during the term of this Agreement and are owned
or controlled (with the ability to grant licenses or sublicenses, as the case
may be) by Tularik.
SECTION 2
GRANT OF LICENSES, TRANSFER OF TRANSFERRED ASSETS AND ASSUMPTION OF LIABILITIES
2.1 Grant of License. During the term of the Agreement and except as
----------------
expressly reserved by Lilly herein, Lilly hereby grants to Tularik an exclusive
sublicense under the Princeton Patents and an exclusive license under the Lilly
Patents to make, have made, use, sell, offer to sell and import the Product in
the Territory. The foregoing exclusive licenses shall be exclusive even as to
Lilly.
2.2 Transferred Assets. As of the Effective Date, Lilly hereby assigns,
------------------
transfers and conveys to Tularik all of Lilly's right, title and interest in and
to the Transferred Assets and Tularik hereby accepts such assignment, transfer
and conveyance. Within [ * ] following the Effective Date, Lilly shall transfer
to Tularik possession of the Transferred Assets. The [ * ] portion of
the Product Data Package shall be provided to Tularik [ * ]. Exhibit C shall
---------
include a notation indicating the format in which all other portions of the
Product Data Package shall be provided. Lilly shall be under no obligation to
[ * ]. In the event that Tularik is
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4.
<PAGE>
unwilling or unable to assume physical possession of the Transferred Assets by
the end of the initial [ * ] period, Lilly shall be entitled to [ * ] beyond
such [ * ] period. Lilly shall ship the Transferred Assets to Tularik F.O.B to
Tularik's designated facilities. Following the receipt by Tularik of the
Transferred Assets, Lilly shall provide technical information or assistance
regarding the Product to Tularik as is reasonably requested by Tularik: (a)
[ * ]. Tularik acknowledges that Lilly makes no representations or warranties
with respect to the Transferred Assets (other than as expressly set forth in
Section 5 below) and that [ * ].
2.3 Liabilities Assumed by Tularik. Except as otherwise provided in this
------------------------------
Agreement, Tularik hereby assumes and agrees to bear and be responsible for and
to perform and satisfy all responsibilities, duties (including, without
limitation, compliance with all applicable laws and regulations), obligations
(including payment obligations), claims, Damages, liabilities, burdens and
problems of any nature whatsoever (collectively, the "Obligations") associated
directly or indirectly with Tularik's licensing and/or practice of the Licensed
Patents from and after the Effective Date and possession, use, ownership and
transport of the Transferred Assets from and after the Effective Date, as well
as those Obligations associated directly or indirectly with the manufacture,
development, marketing and sale of the Products from and after the Effective
Date, including, without limitation, [ * ] arising in connection with Products
on or after the Effective Date, except for (1) those Obligations with respect to
which [ * ] of this Agreement, and (2) the [ * ], which items shall remain the
responsibility of Lilly. All of the foregoing are hereinafter collectively
referred to as the "Assumed Liabilities."
2.4 Liabilities Not Assumed by Tularik. Anything herein to the contrary
----------------------------------
notwithstanding, Tularik shall not be deemed to assume any of the following
(collectively, the "Excluded Liabilities"):
(a) Any Obligations arising out of a claim of any third party relating
to the Product and arising out of or relating to [ * ].
(b) Any Obligations arising out of a claim by a government entity or
regulatory body relating to the Product and arising out of or relating to [ * ];
or
(c) Any Obligations arising out of a claim under the Princeton
Agreement or NCI Agreement arising out of or relating to [ * ].
2.5 Sublicenses. Subject to the terms and conditions herein and Section
-----------
2.6 below, Tularik shall have the right to sublicense the licenses granted to it
by Lilly. Any sublicenses granted by Tularik under this Agreement shall provide
for termination or assignment to Lilly, at the option of Lilly, of Tularik's
interest therein upon termination of this Agreement and contain provisions which
obligate the sublicensee to Tularik to at least the same extent that Tularik is
obligated to Lilly under this Agreement. Lilly shall not terminate any of
Tularik's sublicensees rights pursuant to this section 2.5 without first
conferring in good faith with such sublicensee regarding such sublicensees
desire to continue to practice its sublicense hereunder.
2.6 Lilly Right to Match Offers. In the event that Tularik seeks at any
---------------------------
time to license a third party to market, promote, sell, offer to sell or
otherwise commercialize (any of the foregoing, a "Commercialization
Opportunity") Product in [ * ], whether together with or independent of Tularik,
Lilly shall have the right to match any bona fide offer Tularik receives in
writing from such third party regarding the Commercialization Opportunity (the
"Right to Match"). To ensure that Lilly has adequate time to consider whether it
should match the offer of a third party, Tularik shall provide Lilly written
notification of its intent to sign a letter of intent with respect to such
Commercialization Opportunity with such third party at least [ * ] days before
Tularik actually signs such letter of intent. Tularik agrees that it shall not
execute any
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5.
<PAGE>
letter of intent with any third party until expiration of the [ * ] day period
following Tularik's written notification to Lilly of its intent to execute a
letter of intent with such third party. Such written notice shall set forth all
material terms of the proposed offer, including, without limitation, the [ * ]
that is the subject of the offer, and the financial terms of the offer (for
example, the amount and timing of any milestone payments and the nature and
amount of any royalties to be paid). During the [ * ] day notice period, Lilly
shall have an opportunity to [ * ] with respect to such Commercialization
Opportunity to assess whether Lilly desires to exercise its Right to Match. If
Lilly decides to exercise its Right to Match and in so doing agrees to
incorporate all of the material terms of the third party offer, Tularik shall
[ * ]. If the third party resubmits another offer in response to the offer
submitted by Lilly, then Tularik must provide Lilly, as appropriate, with the
material terms of such revised third party offer and another [ * ] period during
which Lilly shall review the revised offer and determine whether to submit its
own respective revised offer.
2.7 Princeton Rights. Tularik understands and acknowledges that the
----------------
Princeton Patents have been licensed by Lilly from Princeton and that Lilly has
preexisting obligations to Princeton with respect to such Princeton Patents,
which Lilly has separately disclosed to Tularik.
SECTION 3
PAYMENTS
In consideration of the exclusive license granted herein and the transfer
of ownership of the Transferred Assets, Tularik shall pay the following amounts
to Lilly:
3.1 Cash Payment Upon Signing. On the Effective Date, in consideration of
-------------------------
the Transferred Assets, Tularik shall pay to Lilly the non-refundable sum of
[ * ] by Federal Reserve electronic wire transfer in immediately available funds
to an account designated by Lilly.
3.2 Milestone Payments. Within [ * ] of Tularik and/or its sublicensees
------------------
achieving the first to occur of each of the milestone events listed below with
respect to the Product, Tularik shall pay the below specified non-refundable
fees to Lilly by Federal Reserve electronic wire transfer in immediately
available funds to an account designated by Lilly:
Milestone Fee
- --------- ---
. [ * ] [ * ]
. [ * ] [ * ]
. [ * ] [ * ]
. [ * ] [ * ]
3.3 Royalties.
---------
(a) Subject to subsections (b) and (c) below, during the Royalty Term
Tularik shall pay to Lilly running royalties ("Royalty Payments") for the
Product based upon Net Sales of Product in the Territory during a Calendar Year
as follows:
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6.
<PAGE>
Annual Net Sales Royalty Rate (on that
- ---------------- ---------------------
portion of net sales)
---------------------
[ * ] [ * ]
[ * ] [ * ]
**MM - million U.S. Dollars
(b) In the event all Princeton Patents covering the Product in a
country expire during the Royalty Term and Lilly thereby no longer has a royalty
obligation to Princeton for the Product, the royalties otherwise payable to
Lilly for Net Sales of Product under Section 3.3(a) above shall be reduced to
[ * ] of that portion of annual Net Sales of Product less than or equal to
[ * ], or [ * ] of that portion of annual Net Sales of Product greater than
[ * ].
(c) Tularik may credit against Royalty Payments [ * ] of any royalties
it must pay to any third party on the Product: (1) pursuant to any licenses
necessary to practice the licenses set forth in Section 2.1; or (2) resulting
from any litigation (including settlement thereof) under Section 6.11; provided,
--------
however, for purposes of this subsection (c) that the Royalty Payments to Lilly
- -------
shall not be reduced to less than [ * ] of that portion of annual Net Sales of
Product less than or equal to [ * ], or [ * ] of that portion of annual Net
Sales of Product greater than [ * ].
(d) In the event that a generic form of Product receives market
authorization by a Regulatory Authority and is made commercially available in a
country, then the royalties otherwise payable to Lilly for Net Sales of Product
in such country under Section 3.3(a), as adjusted pursuant to subsections (b)
and (c) as applicable at the time of such commercial launch of such generic
form, shall be reduced by [ * ].
(e) Royalty Payments shall be made within [ * ] after the end of each
Calendar Quarter for which royalties are due. All Royalty Payments shall be made
in U.S. Dollars and mailed to the attention of Lilly Royalty Administration,
Lilly Corporate Center, Indianapolis, Indiana 46285.
(f) During the term of this Agreement and after the first sale of the
Product, Tularik shall furnish to Lilly on a quarterly basis a written report
covering each Calendar Quarter (each such Calendar Quarter being sometimes
referred to herein as a "reporting period") showing (1) the Net Sales of Product
in each country by Tularik or its Affiliates or sublicensees, and (2) the
Royalty Payments which have accrued under this Section 3.3 in respect of such
sales and the basis for calculating those royalties. With respect to sales of
the Product invoiced in a currency other than U.S. Dollars, the Net Sales and
amounts due to Lilly hereunder shall be expressed in the U.S. Dollar equivalent
calculated on a monthly basis in the currency of the country of sale and
converted to their dollar equivalent using the official rate of exchange as
determined by the European American Bank (or such other bank as may be regularly
relied upon by Tularik with respect to official exchange rates) in effect on the
last business day of the applicable month of the Calendar Quarter to which the
report relates. Tularik will, at Lilly's reasonable request but not more
frequently than once a year, inform Lilly as to the specific exchange rate
translation methodology used for a particular country or countries. Each
quarterly report shall be due [ * ] following the close of each reporting
period. Amounts shown to have accrued by each sales report shall be due and
payable on the date such sales report is due. Lilly shall have the right to
disclose sales reports to Princeton in compliance with its pre-existing
obligations.
(g) Tularik shall keep accurate records in sufficient detail to enable
the Royalty Payments due to be determined and verified by the audit described in
Section 3.4 for at least [ * ] following the period in which such obligations
arose. Additionally, if laws or regulations require the withholding of taxes,
the taxes will be deducted by Tularik from the Royalty Payments and
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7.
<PAGE>
remitted by Tularik to the proper tax authority. Proof of payment shall be
provided to Lilly within [ * ] after payment. Tularik will reasonably cooperate
in pursuing the refund of such tax, if such refund is appropriate in Lilly's
determination.
3.4 Audits. Tularik and its Affiliates and sublicensees shall keep full
------
and accurate books and records relating to the financial performance of the
Product. During the term plus [ * ] after termination or expiration of this
Agreement, Lilly and/or Princeton shall have the right, during regular business
hours and upon reasonable advance notice, to have such books and records audited
by [ * ] so as to verify the accuracy of the information previously reported to
Lilly. Such information shall be Tularik Proprietary Information and, as such,
subject to confidentiality obligations pursuant to Section 6.3. [ * ] shall keep
confidential any information obtained during such audit and shall report to
Lilly and/or Princeton only the amounts of Royalty Payments due and payable. The
cost of such audit shall be borne by [ * ] Tularik shall include in all
sublicenses granted as permitted under Section 2.5 an audit provision
substantially similar to the foregoing requiring the sublicensee to keep full
and accurate books and records relating to the Product and granting Lilly and
Princeton the right to audit the accuracy of the information reported by the
sublicensee in connection therewith on the same terms as apply to an audit of
Tularik's records hereunder.
3.5 Late Payments. Any amounts not paid by Tularik when due under this
-------------
Agreement shall be subject to interest from and including the date payment is
due through and including the date upon which Lilly has collected immediately
available funds in an account designated by Lilly at a rate equal to [ * ]. No
special notice by Lilly to Tularik of such interest due shall be required.
3.6 No Excuse. Tularik shall not be excused from or relieved of its
---------
obligations to pay the amounts described in this Section 3 by any claimed or
actual event of force majeure, commercial or other impracticability or
impossibility, or frustration of essential purpose, except to the extent
otherwise provided in this Agreement.
3.7 Compulsory License. If in any country a third party obtains a
------------------
Compulsory License, then Lilly shall promptly notify Tularik. If the royalty
rate payable by the grantee of the Compulsory License is less than the royalty
rates applicable in such country set forth in Section 3.3, then such royalty
rates shall be [ * ] for so long as sales are made pursuant to the Compulsory
License.
SECTION 4
TERM OF AGREEMENT
4.1 Term. The term of this Agreement shall begin upon the Effective Date
----
and, unless sooner terminated as hereinafter provided, shall continue in full
force and effect on a country-by-country basis until Tularik, its Affiliates and
sublicensees have no remaining royalty obligations in a country as set forth in
Section 3.3(c), at which time the Agreement shall expire in such country.
SECTION 5
REPRESENTATIONS AND WARRANTIES
5.1 Corporate Existence and Power. As of the Effective Date, each Party
-----------------------------
represents and warrants to the other that it (a) is a corporation duly
organized, validly existing and in good
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8.
<PAGE>
standing under the laws of the state in which it is incorporated, and (b) has
full corporate power and authority and the legal right to own and operate its
property and assets and to carry on its business as it is now being conducted
and as contemplated in this Agreement, including, without limitation, the right
to grant the licenses granted hereunder.
5.2 Authority. As of the Effective Date, each Party represents and
---------
warrants to the other that it (a) has the corporate power and authority and the
legal right to enter into this Agreement and perform its obligations hereunder,
(b) has taken all necessary corporate action on its part required to authorize
the execution and delivery of the Agreement and the performance of its
obligations hereunder, and (c) the Agreement has been duly executed and
delivered on behalf of such Party, and constitutes a legal, valid and binding
obligation of such Party and is enforceable against it in accordance with its
terms.
5.3 Absence of Litigation. As of the Effective Date, each Party represents
---------------------
and warrants to the other that it is not aware of any pending or threatened
litigation (and has not received any communication relating thereto) which
alleges that such Party's activities related to this Agreement have infringed,
or that by conducting the activities as contemplated herein such Party would
infringe, any of the intellectual property rights of any other person. Lilly's
represents and warrants that, to the best of Lilly's knowledge, there is no
material unauthorized use, infringement or misappropriation of any of its
intellectual property rights licensed hereunder.
5.4 No Approvals or Consents. Except as otherwise described in this
------------------------
Agreement, each Party represents and warrants to the other that all necessary
consents, approvals and authorizations of all governmental authorities and other
persons or entities required to be obtained by such Party in connection with
this Agreement have been obtained.
5.5 Patents. Lilly represents and warrants to Tularik that as of the
-------
Effective Date, to the best of its knowledge, it has sufficient legal and/or
beneficial title and ownership under its intellectual property rights necessary
for it to fulfill its obligations under this Agreement and that it is not aware
of any communication alleging that it has infringed, or by conducting its
business as contemplated by this Agreement would infringe, any of the
intellectual property rights of any other person, and that to the best of its
knowledge there is no material unauthorized use, infringement or
misappropriation of any of its intellectual property rights relevant to this
Agreement. As used herein, "intellectual property rights" shall mean all patent
rights, copyrights, trademarks, trade secret rights, chemical and biological
material rights and know-how rights necessary or useful to make, use or sell the
Product.
5.6 No Conflict. Each party represents and warrants to the other that the
-----------
execution and delivery of the Agreement by such Party and the performance of
such Party's obligations hereunder (a) do not conflict with or violate any
requirement of applicable law or regulation or any provision of articles of
incorporation or bylaws of such Party in any material way, and (b) do not
conflict with, violate or breach or constitute a default or require any consent
under, any contractual obligation or court or administrative order by which such
Party is bound.
5.7 Regulatory Documents. Lilly represents and warrants to Tularik that:
--------------------
(a) Lilly has furnished Tularik with access to a complete copy of the United
States Regulatory Documents for the Product, including all material amendments
and supplements thereto; (b) Lilly is and was, at all times prior to the
Effective Date, the lawful holder of all rights under the Regulatory Documents;
(c) [ * ], Lilly has complied in all material respects with all applicable laws
and regulations in connection with the preparation and submission to the
relevant Regulatory Authorities of the Regulatory Documents; (d) the Regulatory
Documents have been accepted by, and nothing has come to the attention of Lilly
which has, or reasonably should have, led Lilly to believe that the Regulatory
Documents are not in good standing with, the relevant Regulatory
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9.
<PAGE>
Authorities; (e) Lilly has filed with the relevant Regulatory Authorities all
required notices, supplemental applications and annual or other reports,
including adverse experience reports, with respect to the Regulatory Documents
which are material; and (f) there is no pending or overtly threatened action by
the relevant Regulatory Authorities which will have a material adverse effect on
the Regulatory Documents. Except for the representations contained in this
Section 5.7, upon which Tularik is relying (which Lilly hereby acknowledges),
[ * ].
5.8 Manufacturing Information. Lilly represents and warrants that it is
-------------------------
transferring to Tularik as part of the Transferred Assets all of the
Manufacturing Information in Lilly's tangible possession as of the Effective
Date that is necessary for development and commercialization of the Product by
Tularik.
5.9 No Debarment. Each Party represents and warrants to the other that it
------------
will comply at all times with the provisions of the Generic Drug Enforcement Act
of 1992 and will upon request certify in writing to the other that neither it,
its employees nor any person providing services to such Party in connection with
the Product have been debarred under the provisions of such Act.
5.10 Year 2000 Compliance. Tularik represents and warrants that, to the
--------------------
best of its knowledge after reasonable investigation, it has taken reasonable
steps to prevent its performance under Section 6.5(a) from being materially
delayed, materially interrupted or otherwise materially adversely affected due
to the failure of Tularik's business systems and/or computer systems to be "Year
2000 Compliant". For purposes of this paragraph, a system shall be considered
"Year 2000 Compliant" only if (1) the occurrence in or use by that system of
dates on or after January 1, 2000 ("Millennial Dates") does not adversely affect
that system's performance, including without limitation performance with respect
to date-dependent data, computations, output, or other functions (including,
without limitation, calculating, comparing and sequencing), and (ii) that system
creates, stores, processes and outputs information (as applicable) related to or
including Millennial Dates without material errors or omissions.
5.11 Product Quality. Lilly hereby represents and warrants that to the
---------------
extent Product manufactured by or for Lilly that will be provided to Tularik
hereunder was required by law to be manufactured and packaged in compliance with
then current Good Manufacturing Practices or equivalent, as established and
revised from time to time by the relevant Regulatory Authority, applicable IND
applications and all other U.S. or other governmental rules and regulations
applicable to the Product and its manufacture, the Product was so manufactured
and packaged.
5.12 No Outstanding Option or License. Lilly hereby warrants that it has
--------------------------------
the unencumbered right to enter into this Agreement and to grant the licenses
contained herein.
5.13 Implied Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 5,
------------------
LILLY MAKES NO REPRESENTATION OR WARRANTY AS TO THE LICENSED PATENTS OR THE
TRANSFERRED ASSETS, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW,
BY STATUTE OR OTHERWISE, AND LILLY SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR
STATUTORY WARRANTIES. Without limiting the foregoing, Tularik acknowledges that
it has not and is not relying upon any implied warranty of merchantability,
fitness for a particular purpose or otherwise, or upon any representation or
warranty whatsoever as to the prospects (financial, regulatory or otherwise), or
the validity or likelihood of success, of the Product after the date of this
Agreement.
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10.
<PAGE>
SECTION 6
ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES
6.1 Governmental Filings. Lilly and Tularik each agree to prepare and file
--------------------
whatever filings, requests or applications are required to be filed with any
governmental authority in connection with this Agreement and to cooperate with
one another as reasonably necessary to accomplish the foregoing. Without
limiting the generality of the foregoing, prior to the assignment, transfer and
conveyance by Lilly to Tularik of the Transferred Assets pursuant to Section
2.2, Lilly shall have submitted to the relevant Regulatory Authorities the
information required of a former owner of regulatory filings with respect to the
Product, and Tularik shall submit to the relevant Regulatory Authorities the
information required of a new owner of regulatory filings with respect to the
Product.
6.2 Compliance with Law. Tularik shall comply with all federal, state and
-------------------
local laws and regulations related to Tularik's manufacture, development,
marketing and selling of the Product. Without limiting the generality of the
foregoing sentence, Tularik shall not promote the Product in any manner in
conflict with any applicable laws or regulations.
6.3 Confidentiality. Tularik shall treat as confidential any unpublished
---------------
applications included in the Licensed Patents and all other information of Lilly
and/or Princeton of which Tularik becomes aware (whether in writing or orally or
by observation during visits to Lilly facilities) in connection with this
Agreement (collectively, "Lilly Proprietary Information"). Tularik shall neither
disclose Lilly Proprietary Information to any third party nor use Lilly
Proprietary Information for any purpose other than as set forth in this
Agreement. Lilly shall treat as confidential all information of Tularik
(including information received by Tularik from its Affiliates or sublicensees)
of which Lilly becomes aware (whether in writing or orally or by observation
during visits to Lilly facilities) in connection with this Agreement
(collectively, "Tularik Proprietary Information"). Lilly shall neither disclose
Tularik Proprietary Information to any third party nor use Tularik Proprietary
Information for any purpose other than as set forth in this Agreement. "Third
party" for purposes of this section shall not include a consultant of either
party with whom a party shares information on a need to know basis and which the
party binds to terms of confidentiality as outlined above. Both Tularik and
Lilly shall each undertake reasonable efforts to ensure that their respective
employees are aware of and comply with the obligations of confidentiality and
non-use set forth herein.
Nothing contained herein will in any way restrict or impair the ability of
a Party to which Proprietary Information is disclosed (the "Using Party") to
use, disclose or otherwise deal with any Proprietary Information of the other
Party which:
(a) at the time of disclosure is known to the public or thereafter
becomes known to the public by publication or otherwise through no fault of the
Using Party;
(b) the Using Party can establish by competent written proof was in
its possession prior to the time of the disclosure and was not obtained directly
or indirectly from the other Party;
(c) is independently made available as a matter of right to the Using
Party by a third party who is not thereby in violation of a confidential
relationship with the other Party; or
(d) is information required to be disclosed by legal requirement or
regulatory process; provided, in each case that the Using Party timely informs
the other Party of such disclosure and uses reasonable efforts to limit the
disclosure and maintain confidentiality to the
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11.
<PAGE>
extent possible and permits the other Party to intervene and contest or attempt
to limit the disclosure.
Tularik shall obtain no right or license of any kind under the Lilly
Proprietary Information except as set forth in this Agreement. Lilly shall
obtain no right or license of any kind under the Tularik Proprietary Information
except as set forth in this Agreement.
6.4 Expenses. Lilly and Tularik shall each bear their own direct and
--------
indirect expenses incurred in connection with the negotiation and preparation of
this Agreement and, except as set forth in this Agreement, the performance of
the obligations contemplated hereby.
6.5 Efforts.
-------
Tularik shall use [ * ] Diligence to develop and obtain Regulatory
Approval for the Product in the Territory and shall be solely responsible for
all related development efforts and costs; provided, however, with respect to
-------- -------
countries in the Territory that are not Major Countries, Tularik shall have [ *
] Tularik shall provide Lilly with written notice of all decisions by Tularik to
not pursue Regulatory Approval in a country for any reason within [ * ] days of
such decision.
(b) In the event Tularik or its sublicensees fail to undertake [ * ]
Diligence in developing and/or obtaining Regulatory Approval of the Product [ *
], such failure shall be considered a material default of this Agreement which
shall (a) automatically cause the license granted to Tularik in Section 2.1 to
terminate with respect to such Major Country(ies); and (b) may entitle Lilly to
terminate this Agreement for cause under Section 8.1(b) if such failure of
diligence applies to [ * ]; provided that Tularik (or its sublicensee) does not
-------- ----
cure such failure within [ * ] days of written notice from Lilly specifying its
belief that such failure has occurred and the reasons therefor. Lilly shall not
be entitled to exercise the foregoing termination rights if [ * ]. If Tularik's
license terminates in part pursuant to this Section 6.5(b), then (1) the Major
Countries in which Tularik has lost its license shall be automatically removed
from the Territory, and (2) Tularik shall and hereby does grant to Lilly a (i)
non-exclusive license, with right to sublicense, under the Tularik Improvements
to make, use, sell, offer to sell or import Product in the Major Country(ies) in
which Tularik's licenses terminate pursuant to this Section 6.5(b), and (ii) a
right to [ * ]. Any license granted to Lilly pursuant to this Section 6.5 shall
be subject to payment of a royalty to Tularik at a rate to be negotiated by the
parties [ * ] (i) if such license is granted to Lilly prior to Regulatory
Approval of Product in the relevant country, [ * ] of Lilly's net sales of
Product in such country; or (ii) if such license is granted to Lilly after
Regulatory Approval of Product in the relevant country, [ * ] of Lilly's net
sales of Product in such country.
(c) Failure by Tularik to meet its [ * ] Diligence obligation under
this Section 6.5 due to [ * ] will not constitute lack of [ * ] Diligence for
purposes of this Agreement.
(d) Lilly and Tularik each agree to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary or proper to make effective the transactions contemplated by
this Agreement, including such actions as may be reasonably necessary to obtain
approvals and consents of governmental Persons and other Persons (including,
without limitation, all applicable drug listing and notifications to the
relevant Regulatory Authority identifying Tularik as the licensee of the
Product); provided that no Party shall [ * ].
--------
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12.
<PAGE>
6.6 Publicity and Disclosure of Agreement. The parties agree that upon
-------------------------------------
execution of this Agreement or shortly thereafter either Party may prepare a
press release, which shall be subject to review and approval by the other Party.
The Parties agree that no future publicity release or announcement concerning
the transactions contemplated hereby shall be issued without the advance written
consent of the other Party, except as such release or announcement may be
required by law, in which case the Party making the release or announcement
shall, before making any such release or announcement, afford the other Party a
reasonable opportunity to review and comment upon such release or announcement
to the extent practicable. Tularik and Lilly recognize that disclosure of this
Agreement (including a copy) to the IRS and other tax authorities is likely to
be required, and each waives the requirements of this Section 6.6 with respect
to disclosure (and copies) to such entities; provided, however, that the
obligations of Section 6.3 continue to apply to any such disclosure to such tax
authorities. Tularik also agrees that Lilly may provide Princeton with a copy of
this Agreement in compliance with Lilly's preexisting obligation and subject to
an obligation of confidentiality and non-use of such copy by Princeton,
comparable in scope to the obligation set forth in Section 6.3. Each Party shall
have the further right to disclose the terms of this Agreement as required by
the rules and regulations promulgated by the Securities and Exchange Commission
and to disclose such information to shareholders or potential investors as is
customary in the industry, provided the disclosing Party provides to the other
Party, to the extent practicable, a copy of the information to be disclosed and
an opportunity to comment thereon prior to such disclosure, and, to the extent
practicable, consults within a reasonable time in advance of the proposed
disclosure with the other on the necessity for the disclosure and the text of
the proposed release. Any copy of this Agreement to be filed with the Securities
and Exchange Commission shall be redacted to the satisfaction of both Parties;
provided, however, in the event that the Securities and Exchange Commission
objects to the redaction of any portion of the Agreement after the initial
submission, the filing Party shall inform the other Party of the objections and
shall in good faith respond to the objections in an effort to limit the
disclosure required by the Securities and Exchange Agreement, but in any event
the filing Party shall be free to disclose any portions of the Agreement it
deems necessary to respond to the objections in any future filings.
6.7 Cooperation. If either Party shall become engaged in or participate in
-----------
any investigation, claim, litigation or other proceeding with any third party,
including any proceeding before a Regulatory Authority, relating in any way to
the Product or any of the Licensed Patents the other Party shall cooperate in
all reasonable respects with such Party in connection therewith, including,
without limitation, using its reasonable efforts to make available to the other
Party such Party's employees who may be helpful with respect to such
investigation, claim, litigation or other proceeding, provided that, for
purposes of this provision, reasonable efforts to make available any employee
shall be deemed to mean [ * ].
6.8 Conflicting Rights. Lilly shall not grant any right to any third
------------------
party relating to the Licensed Patents that would violate the terms of or
conflict with the rights granted to Tularik pursuant to this Agreement.
6.9 Patent Prosecution and Maintenance.
----------------------------------
(a) [ * ] oversee the patent prosecution and maintenance of Licensed
Patents. [ * ].
(b) [ * ] regarding the preparation, filing, prosecution and
maintenance of the Licensed Patents and shall provide [ * ] sufficient
opportunity to comment thereon.
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13.
<PAGE>
(c) Within thirty (30) days of receipt of a reasonably detailed
invoice from [ * ] for all costs incurred after the Effective Date related to
the filing, prosecution, and maintenance of the Licensed Patents for the
Product; provided, however, that [ * ] at least [ * ] for fees required to be
paid to a patent office in connection with maintenance of the Licensed Patents.
(d) Upon receipt of approval to market Product in a country of a
Territory, [ * ] in obtaining patent extensions, supplementary protection
certificates, and the like for the Licensed Patents to the extent the laws of
the country provide it. It is understood that Tularik is responsible for
promptly notifying Lilly of receipt of Regulatory Approval.
6.10 Infringement.
-------------
(a) Notice. Each Party shall promptly notify the other in writing of
------
any alleged infringement by third parties of any Licensed Patent and provide any
information available to that Party relating to such alleged infringement or
misappropriation.
(b) Enforcement of Licensed Patents Which Are Princeton Patents. In
-----------------------------------------------------------
the event that, [ * ] after being notified by Lilly and/or Tularik of
infringement of a Licensed Patent which is a Princeton Patent, [ * ] of such
infringement or to enter suit against the infringer, [ * ] to enforce the
Princeton Patents as provided in Article 11 of the Princeton Agreement, to the
extent the infringement activities relate directly to the Product. To the extent
that Lilly is required by the law of the jurisdiction to be joined as a party,
[ * ] will join as a party plaintiff, in the same manner as [ * ] has agreed to
be joined as a party plaintiff as set forth in Article 11 of the Princeton
agreement. A copy of Article 11 of the Princeton Agreement is attached hereto as
Exhibit D.
- ---------
(c) Allocation of Damages or other Monetary Awards with Respect to the
------------------------------------------------------------------
Princeton Patents. If [ * ] brings action under this Section 6.10, any damages
- -----------------
or other monetary awards recovered by [ * ] shall be the property of [ * ].
If [ * ] fails to bring action with respect to the Princeton Patents and [ * ]
brings action, any damages or other monetary awards recovered by Tularik shall
be applied first to [ * ]. If any balance remains, [ * ] shall second pay to [ *
] a royalty of [ * ] on any such excess. If any balance remains after payment to
[ * ] shall third pay to [ * ] an amount equal to [ * ]. If any balance remains
after payment to [ * ]. If [ * ] fails to bring action with respect to the
Princeton Patents and [ * ] brings action, any damages or other monetary awards
recovered by [ * ] shall be applied first to [ * ]. If any balance remains, [ *
] shall second pay to [ * ] a royalty of [ * ] on any such excess. If any
balance remains after the payment to [ * ], [ * ] shall third retain as its own
property an amount equal to [ * ]. If any balance remains, such balance shall be
the property [ * ].
(d) Enforcement of Licensed Patents Which Are Not Princeton Patents.
---------------------------------------------------------------
Where the infringement of a Licensed Patent involves a patent which is not a
Princeton Patent, [ * ] shall have the primary right, but not the obligation, to
take action to secure the cessation of the infringement or to enter suit against
the infringer. Any such action will be at [ * ] expense, employing counsel of
its own choosing. To the extent any recovery is obtained [ * ]. Notwithstanding
the foregoing, in the event that, [ * ] after being notified by [ * ] of
infringement of a Licensed Patent which is not a Princeton Patent, [ * ] fails
to secure the cessation of the infringement or to enter suit against the
infringer, [ * ] may take action on its own and at its own expense.
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14.
<PAGE>
(e) Procedures. No settlement, consent judgment or other voluntary
----------
final disposition of the suit may be entered into without the consent of each
Party, which consent shall not be unreasonably withheld or delayed. In the event
of any infringement suit against a third party brought by any Party pursuant to
this Section 6.10, the Party so proceeding shall [ * ] in connection with such
action and such other Party shall join in and reasonably cooperate with respect
to such action to the extent necessary to initiate and maintain it (e.g., by
providing relevant documents, witnesses and testimony, etc.). It is further
understood that Lilly will use its reasonable efforts to obtain Princeton's
cooperation to the extent Princeton is a necessary party to the litigation in
any country.
6.11 Infringement of Third Party's Rights. If a third party asserts that a
------------------------------------
patent or other right owned by it is infringed by the practice of the Licensed
Patents pursuant to the license granted to Tularik under Section 2.1, Tularik
may attempt to resolve the problem raised by the asserted infringement. The
matter shall be deemed resolved if Tularik obtains: [ * ]. If the practice of
the Licensed Patents results in a claim for patent infringement against Tularik,
the Party to this Agreement first having notice of that claim shall promptly
notify the other Party in writing. The notice shall set forth the facts of the
claim in reasonable detail. [ * ] shall have the primary right to defend any
such claim. [ * ] shall have the right, but not the obligation, to participate
in any such suit at its sole option and at its own expense. Each Party shall
reasonably cooperate with the Party conducting the defense of the claim. Neither
Party shall enter into any settlement that affects the other Party's rights or
interests without such other Party's written consent, not to be unreasonably
withheld. If [ * ] makes a payment to any third party in the course of
defending or settling any claim brought by a third party pursuant to this
Section 6.11, [ * ] shall be entitled to [ * ].
6.12 Manufacturing. Tularik shall be solely responsible for the manufacture
-------------
of Product following the Effective Date, including without limitation for
clinical trials and commercialization.
6.13 Deemed Breach of Covenant. Neither Lilly nor Tularik shall be deemed
-------------------------
to be in breach of any covenant contained in this Section 6 if such Party's
deemed breach is the result of any action or inaction on the part of the other
Party.
6.14 Use of Names, Logos or Symbols. No Party hereto shall use the name,
------------------------------
trademarks, logos, physical likeness, employee names or owner symbol of the
other Party hereto for any purpose, including, without limitation, in connection
with any private or public securities placements, without the prior written
consent of the affected Party, such consent not to be unreasonably withheld or
delayed so long as such use of name is limited to objective statements of fact,
rather than for endorsement purposes. Nothing contained herein shall be
construed as granting either Party any rights or license to use any of the other
Party's trademarks or tradenames without separate, express written permission of
the owner of such trademark or tradename.
6.15 Princeton License. Lilly expressly warrants and represents that the
-----------------
Princeton Agreement is in full force and effect as of the Effective Date and
that Lilly is not in material breach of the Princeton Agreement and has not
received any notice of termination from Princeton under the Princeton Agreement.
Lilly expressly covenants and agrees that during the term of this Agreement it
shall take all reasonable steps to comply with all material terms and provisions
contained in the Princeton Agreement. In the event Lilly receives notice of an
alleged breach by Lilly of the Princeton Agreement, Lilly shall promptly so
notify Tularik. Tularik may cure any breach of the Princeton Agreement for the
benefit of Tularik if Lilly fails to cure such breach
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15.
<PAGE>
reasonably in advance of the expiration of the cure period thereunder. [ * ].
Lilly shall use reasonable efforts to [ * ].
6.16 Acknowledgement. Lilly acknowledges that [ * ], may work on the
---------------
development of the Product on behalf of Tularik.
SECTION 7
INDEMNIFICATION
7.1 Indemnification.
---------------
(a) Lilly shall indemnify, defend and hold Tularik (and its directors,
officers, employees, consultants, Affiliates or sublicensees) harmless from and
against any and all Damages incurred or suffered by Tularik (and its directors,
officers, employees, consultants, Affiliates or sublicensees) (excluding
incidental or consequential Damages suffered or incurred by Tularik directly (as
opposed to incidental or consequential Damages suffered or incurred by third
parties who are, in turn, seeking the same from Tularik, which shall be covered
by the indemnity set forth herein)) as a consequence of:
(1) any breach of any representation or warranty made by Lilly in
this Agreement, provided that, in the case of a breach of any representation or
warranty made by Lilly in this Agreement, notice of a claim based upon any such
breach is received by Lilly prior to the expiration or termination of the
Agreement;
(2) [ * ];
(3) any failure to perform duly and punctually any covenant,
agreement or undertaking on the part of Lilly contained in this Agreement; and
(4) any Excluded Liabilities.
(b) Tularik shall indemnify, defend and hold Lilly (and its directors,
officers, employees, consultants and Affiliates) harmless from and against any
and all Damages incurred or suffered by Lilly (and its directors, officers,
employees, consultants and Affiliates) (excluding incidental or consequential
Damages suffered or incurred by Lilly directly (as opposed to incidental or
consequential Damages suffered or incurred by third parties who are, in turn,
seeking the same from Lilly, which shall be covered by the indemnity set forth
herein)) as a consequence of:
(1) any breach of any representation or warranty made by Tularik in
this Agreement, provided that, in the case of a breach of any representation or
warranty made by Tularik in this Agreement, notice of a claim based upon any
such breach is received by Tularik prior to the expiration or termination of the
Agreement;
(2) any failure to perform duly and punctually any covenant, agreement
or undertaking on the part of Tularik contained in this Agreement;
(3) Assumed Liabilities; and
(4) any action or inaction by Tularik (and its agents, directors,
officer, employees, consultants, Affiliates and sublicensees) after the
Effective Date related to the making, using, selling, offering for sale or
importing of the Product or the use, sale or import of the Transferred Assets,
[ * ].
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16.
<PAGE>
7.2 Notice and Opportunity To Defend. Promptly after receipt by a Party
--------------------------------
hereto of notice of any claim which could give rise to a right to
indemnification pursuant to Section 7.1, such Party (the "Indemnified Party")
shall give the other Party (the "Indemnifying Party") written notice describing
the claim in reasonable detail. The failure of an Indemnified Party to give
notice in the manner provided herein shall not relieve the Indemnifying Party of
its obligations under this Section, except to the extent that such failure to
give notice materially prejudices the Indemnifying Party's ability to defend
such claim. The Indemnifying Party shall have [ * ], any such matter involving
the asserted liability of the Party seeking such indemnification, except as
provided below. The Indemnifying Party shall promptly (and in any event not less
than [ * ] after receipt of the Indemnified Party's original notice) notify the
Indemnified Party in writing of [ * ], and the Indemnified Party agrees to
cooperate fully with the Indemnifying Party and its counsel [ * ] incurred in
connection with such cooperation shall be borne by the Indemnifying Party. If
the Indemnifying Party elects in writing [ * ] the asserted liability, fails to
notify the Indemnified Party of its election [ * ] as herein provided, fails to
admit its obligation to indemnify under this Agreement with respect to the claim
following a written request of the Indemnified Party, or, if in the reasonable
opinion of counsel to the Indemnified Party, the claim could result in the
Indemnified Party becoming subject to injunctive relief or relief other than the
payment of money damages that could materially adversely affect the ongoing
business of the Indemnified Party in any manner, the Indemnified Party shall
have the right, at its option, to [ * ] such asserted liability by its own
counsel and its reasonable costs and expenses shall be included as part of the
indemnification obligation of the Indemnifying Party hereunder. Notwithstanding
the foregoing, neither the Indemnifying Party nor the Indemnified Party may
[ * ] any claim under this Section 7.2 over the written objection of the other
or any claim that could reasonably result in an adverse effect on the other
Party without such other Party's consent; provided, however, that consent
-------- -------
to [ * ] shall not be unreasonably withheld. In any event, the Indemnified Party
and the Indemnifying Party may participate, at their own expense, in the defense
of such asserted liability. If the Indemnifying Party defends any claim, the
Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense. Notwithstanding anything to the contrary in this Section 7.2,
(a) the Party conducting the defense of a claim shall [ * ], and (b) the
Indemnifying Party shall [ * ] without the prior written consent of the
Indemnified Party (which consent shall not be unreasonably withheld).
7.3 Indemnification Payment Adjustments. The amount of any Damages for
-----------------------------------
which indemnification is provided under this Section 7 shall be reduced to take
account of any net tax benefit and shall be increased to take account of any net
tax detriment arising from the incurrence or payment of any such Damages or from
the receipt of any such indemnification payment and shall be reduced by the
insurance proceeds received and any other amount recovered, if any, by the
Indemnified Party with respect to any Damages; provided, however, that an
Indemnified Party shall [ * ]. If any Indemnified Party shall have received any
payment pursuant to this Section 7 with respect to any Damages and shall
subsequently have received insurance proceeds or other amounts with respect to
such Damages, then such Indemnified Party shall pay to the Indemnifying Party an
amount equal to the difference (if any) between (1) the sum of the amount of
those insurance proceeds or other amounts received and the amount of the payment
by such Indemnifying Party pursuant to this Section 7 with respect to such
Damages and (2) the amount necessary to fully and completely indemnify and hold
harmless such Indemnified Party from and against such Damages; provided,
--------
however, in no event [ * ].
- -------
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17.
<PAGE>
7.4 Indemnification Payment. Upon the final determination of liability and
-----------------------
the amount of the indemnification payment under this Section 7, the appropriate
Party shall pay to the other in immediately available funds, within [ * ] after
such determination, the amount of any claim for indemnification made hereunder.
7.5 Survival. The provisions of this Section 7 shall survive any
--------
termination of this Agreement with respect to actions of the Parties during the
term of the Agreement or the term of any license to Tularik, whichever occurs
later. Each Indemnified Party's rights under this Section 7 shall not be deemed
to have been waived or otherwise affected by such Indemnified Party's waiver of
the breach of any representation, warranty, agreement or covenant contained in
or made pursuant to this Agreement, unless such waiver expressly and in writing
also waives any or all of the Indemnified Party's right under Section 7.
SECTION 8
TERMINATION
8.1 Termination. Anything herein to the contrary notwithstanding, this
-----------
Agreement may be terminated as follows:
(a) Tularik Voluntary Termination. Tularik may terminate this
-----------------------------
Agreement at any time by giving [ * ] written notice of its intention to
terminate.
(b) Lilly Termination for Cause. Lilly may terminate this Agreement in
---------------------------
its entirety upon [ * ] written notice if Tularik breaches its obligation of
[ *] Diligence provided in Section 6.5(a) in [ * ] the Major Countries
concurrently.
(c) Princeton Termination. Tularik understands and acknowledges that
---------------------
Princeton has the right to terminate the exclusive license to the Princeton
Patents granted to Lilly under the Lilly/Princeton Agreement in the event that
[ * ] and, therefore, Princeton also has the right to terminate the sublicense
to the Princeton Patents granted by Lilly to Tularik herein. Nothing in this
Section 8.1(c) shall affect Lilly's obligations under Section 6.15.
(d) Termination for Insolvency. If either Tularik or Lilly (1) makes a
--------------------------
general assignment for the benefit of creditors or becomes insolvent; (2) files
an insolvency petition in bankruptcy; (3) petitions for or acquiesces in the
appointment of any receiver, trustee or similar officer to liquidate or conserve
its business or any substantial part of its assets; (4) commences under the laws
of any jurisdiction any proceeding involving its insolvency, bankruptcy,
reorganization, adjustment of debt, dissolution, liquidation or any other
similar proceeding for the release of financially distressed debtors; or (5)
becomes a Party to any proceeding or action of the type described above in (3)
or (4) and such proceeding or action remains undismissed or unstayed for a
period of more than [ * ], then the other Party may by written notice terminate
this Agreement in its entirety with immediate effect.
(e) Termination for Default.
-----------------------
(1) Tularik and Lilly each shall have the right (except as
otherwise provided in Section 6.5) to terminate this Agreement in its entirety
with respect to the Product for default upon the other Party's uncured failure
to comply in any material respect with the terms and conditions of this
Agreement. At least [ * ] prior to any such termination for default, the Party
seeking to so terminate shall give the other written notice of its intention to
terminate this Agreement in accordance with the provisions of this Section
8.1(e), which notice shall set forth the default(s) which form the basis for
such termination. If the defaulting Party fails to correct such default(s)
within [ * ] after receipt of notification, or if the same cannot reasonably be
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18.
<PAGE>
corrected or remedied within [ * ], then if the defaulting Party has not
commenced curing said default(s) within said [ * ] and is not diligently
pursuing completion of same, then such Party immediately may terminate this
Agreement with respect to such Product.
(2) This Section 8.1(e) shall not be an exclusive remedy and
shall not be in lieu of any other remedies available to a Party hereto for any
default hereunder on the part of the other Party.
(f) Rights Upon Termination.
-----------------------
(1) Lilly Rights Upon Termination. In the event of termination of
-----------------------------
this Agreement by Lilly under Section 8.1(b), 8.1(d) or 8.1(e) or termination by
Tularik under Section 8.1(a), [ * ]. Additionally, the [ * ]. Consequently,
notwithstanding anything else contained in this Agreement to the contrary but
subject to Tularik's rights in the Tularik Improvements, (A) [ * ] and (B)
[ * ].
(2) Tularik Rights Upon Termination. In the event of termination
-------------------------------
of this Agreement by Tularik, Tularik shall [ * ]. In the event of termination
of this Agreement by Tularik under Sections 8.1(d) or 8.1(e), Tularik shall
[ * ].
(3) Assistance Following Termination. In the event of termination
--------------------------------
of this Agreement pursuant to Section 8.1(b) or 8.1(d) and if Lilly so requests,
Tularik shall provide [ * ] to Lilly for a period of [ * ] days following the
date of notice of termination. Additionally, Tularik shall, and hereby does,
(and shall cause any subcontractors under contract with Tularik to) grant to
Lilly a non-exclusive, worldwide license, with the right to sublicense, under
the Tularik Improvements to make, use, sell, offer for sale and import Product.
Any [ * ].
(4) Continuing Obligations. Termination of this Agreement for any
----------------------
reason shall not relieve the Parties of any obligation accruing prior thereto or
any ongoing obligations hereunder with respect to the Product and shall be
without prejudice to the rights and remedies of either Party with respect to any
antecedent breach of the provisions of this Agreement. Without limiting the
generality of the foregoing, no termination of this Agreement, whether by lapse
of time or otherwise, shall serve to terminate the obligations of the Parties
hereto under subsections 3.4, 3.5, 6.3, 6.6, 6.7, 6.14, Section 7 (as provided
in Section 7.5), subsections 8.1(e), 8.1(f) and Section 9 (except for subsection
9.4, which shall expire as provided therein) hereof, and such obligations shall
survive any such termination.
SECTION 9
MISCELLANEOUS
9.1 Successors and Assigns. This Agreement shall be binding upon and
----------------------
shall inure to the benefit of the Parties hereto and their respective successors
and assigns; provided, however, that neither Lilly nor Tularik may assign any of
-------- -------
its rights, duties or obligations hereunder without the prior written consent of
the other, which consent may be withheld in the other's sole discretion, except
that no prior written consent shall be required in the event that a third party
acquires substantially all of the assets or outstanding shares of, or merges
with, Tularik or Lilly, as the case may be. No assignment of this Agreement or
of any rights hereunder shall relieve the assigning Party of any of its
obligations or liability hereunder.
9.2 Notices. All notices or other communications required or permitted to
-------
be given hereunder shall be in writing and shall be deemed to have been duly
given if delivered by hand, prepaid telex, cable, telegram or facsimile and
confirmed in writing, or mailed first class, postage
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
19.
<PAGE>
prepaid, by registered or certified mail, return receipt requested (mailed
notices and notices sent by telex, cable or telegram shall be deemed to have
been given on the date received) as follows:
If to Lilly, as follows:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Facsimile: (317) 277-3354
Attn: Vice President, Oncology Research
With a copy to:
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, Indiana 46285
Facsimile: (317) 276-6221
Attn: General Counsel
If to Tularik, as follows:
Tularik Inc.
Two Corporate Drive
South San Francisco, California 94080
Facsimile: (650) 829-4303
Attn: President
Tularik Inc.
Two Corporate Drive
South San Francisco, California 94080
Facsimile: (650) 829-4392
Attn: Secretary
or in any case to such other address or addresses as hereafter shall be
furnished as provided in this Section 9.2 by any Party hereto to the other
Party.
9.3 Waiver; Remedies. Any term or provision of this Agreement may be
----------------
waived at any time by the Party entitled to the benefit thereof by a written
instrument executed by such Party. No delay on the part of Lilly or Tularik in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either Lilly or Tularik of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
9.4 Survival of Representations. Each of the representations and
---------------------------
warranties made in this Agreement shall survive the expiration or termination of
this Agreement only with respect to activities conducted or events occurring
prior to the expiration or termination of the Agreement.
9.5 Entire Agreement. This Agreement, together with all exhibits,
----------------
constitute the entire agreement between the Parties with respect to the subject
matter hereof and supersedes all prior agreements or understandings of the
Parties relating thereto.
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20.
<PAGE>
9.6 Amendment. This Agreement may be modified or amended only by written
---------
agreement of the Parties hereto.
9.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute a single instrument.
9.8 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the [ * ] excluding any choice of law rules, which
may direct the application of the law of another state.
9.9 Captions. All section titles or captions contained in this
--------
Agreement, in any Exhibit referred to herein and the table of contents, if any,
to this Agreement are for convenience only, shall not be deemed a part of this
Agreement and shall not affect the meaning or interpretation of this Agreement.
9.10 No Third Party Rights or Obligations. No provision of this Agreement
------------------------------------
shall be deemed or construed in any way to result in the creation of any rights
or obligation in any Person not a Party to this Agreement, other than the rights
and obligations contained in the Princeton Agreement.
9.11 Severability. If any provision of this Agreement is found or
------------
declared to be invalid or unenforceable by any court or other competent
authority having jurisdiction, such finding or declaration shall not invalidate
any other provision hereof, and this Agreement shall thereafter continue in full
force and effect. In the event any such provision is so declared invalid or
unenforceable, the Parties shall negotiate an alternative provision that closely
approximates the Parties' intent, to the extent allowable under law.
9.12 Attachments. All Exhibits and other attachments to this Agreement
-----------
are by this reference incorporated herein and made a part of this Agreement.
9.13 Disclaimer of Agency. This Agreement shall not constitute any Party
--------------------
the legal representative or agent of another, nor shall any Party have the right
or authority to assume, create, or incur any third party liability or obligation
of any kind, express or implied, against or in the name of or on behalf of
another except as expressly set forth in this Agreement.
9.14 Interpretation. This Agreement has been jointly prepared by the
--------------
Parties and their respective legal counsel and shall not be strictly construed
against either Party.
9.15 Force Majeure. Each of the parties hereto shall be excused from the
-------------
performance of its obligations hereunder (except the payment of money) in the
event such performance is prevented by force majeure, provided that the
non-performing party promptly provides notice of the prevention to the other
party. Such excuse shall be continued so long as the condition constituting
force majeure continues and the non-performing party makes reasonable efforts to
remove the condition. For the purposes of this Agreement, force majeure shall
mean any [ * ].
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21.
<PAGE>
In Witness Whereof, the parties have caused this Agreement to be duly
executed and delivered on the day and year first above written.
ELI LILLY AND COMPANY TULARIK INC.
By: /s/ August M. Watanabe By: /s/ John P. McLaughlin
---------------------- -----------------------
August M. Watanabe John P. McLaughlin
Executive Vice President President
Tularik/License Agreement
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
22.
<PAGE>
Exhibit A
[ * ]
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
Exhibit C
Product Inventory
[ * ]
[ * ]=Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
<PAGE>
EXHIBIT D
tion, not extends any warranty, express or implied that anything made, used,
sold or otherwise disposed of under this Agreement by LILLY or its sublicensees
is now or hereafter will be free from infringement of patents of third parties.
11. Enforcement
-----------
11.1 Decisions concerning the enforcement of any patent covering Licensed
Products shall be made [ * ]
11.2 In the event [ * ] Shall bring to the attention of [ * ] any
infringement of any patent covering Licensed Products and [ * ] Shall not,
[ * ].
(i) secure cessation of the infringement, or
(ii) enter suit against the infringer, [ * ], Shall have the right
and power to institute and prosecute, at its own expense, a suit with respect
to such infringement and if required by law, [ * ] will join as party plaintiff
in such suit. All expenses in such suits shall be borne entirely by [ * ].
12. Term of License and Termination of Agreement
--------------------------------------------
12.1 The License granted under this Agreement shall remain in full force
and effect until the [ * ].
<PAGE>
EXHIBIT 10.17
STOCK PURCHASE AGREEMENT
This Agreement is made by and between Tularik Inc., a California
corporation (the "Company"), and the 1987 Swanson Family Trust ("Purchaser").
1. Purchase of Shares. Purchaser agrees to purchase from the Company,
and the Company agrees to sell to Purchaser, three hundred thousand (300,000)
shares of the Company's common stock (the "Stock") for Seventy-Five Cents
($0.75) per share.
The shares of Stock which are acquired by Purchaser under this Stock
Purchase Agreement are subject to repurchase by the Company until the date on
which they vest. The unvested shares will be held in escrow under the attached
Joint Escrow Instructions until they are no longer subject to repurchase by the
Company. The Company's Purchase Option (as herein defined) is described in
Section 3 of this Agreement.
2. Closing. The closing under this Agreement (the "Closing") will occur
at the offices of the Company on the date of this Agreement or at such other
time and place as the parties both agree upon in writing.
At the Closing, Purchaser will deliver the following documents:
(i) three (3) signed stock assignments in the form of Exhibit B,
with date and number of shares left blank;
(ii) executed joint escrow instructions in the form of Exhibit C; and
(iii) the Two Hundred Twenty-Five Thousand Dollars ($225,000.00)
purchase price in cash for three hundred thousand (300,000) shares of stock.
At the Closing or as soon thereafter as is practical, the Company will
deliver to the Escrow Agent (as defined in Section 10 below) share certificates
for all of the Stock that is to be subject to the Purchase Option (as defined in
Section 3 below), and will deliver share certificates to Purchaser for all of
the Stock, if any, that is not to be subject to the Purchase Option.
3. Company's Purchase Option. In accordance with the provisions of
Section 408(b) of the California General Corporation Law, the Stock to be
purchased by Purchaser under this Agreement shall be subject to the following
option ("Purchase Option"):
(a) If Robert A. Swanson ("Mr. Swanson") ceases to be a member of the
Board of Directors or an officer of the Company or any parent or subsidiary
corporation of the Company ("Related Company"), the Company will have the right
at any time within sixty (60) days after Mr. Swanson's resignation or
termination as a director or an officer of the Company and all Related Companies
to purchase from Purchaser all unvested shares, at the price per share paid by
Purchaser under this Agreement. The number of shares of Stock which are subject
to the Company's Purchase Option will be determined by reference to the vesting
schedule in the form of Exhibit A.
<PAGE>
(b) In addition, if at any time during the term of the Purchase
Option, there occurs: (i) a dissolution or liquidation of the Company; (ii) a
merger or consolidation involving the Company in which the Company is not the
surviving corporation; (iii) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately before the merger are converted by virtue of the merger into other
property, whether in the form of other securities, cash or otherwise; or (iv)
any other capital reorganization in which more than fifty percent (50%) of the
shares of the Company entitled to vote are transferred from shareholders of the
Company to other shareholders of the Company, then: (x) if there is no successor
to the Company, the Company will have the right to exercise its Purchase Option
to the same extent as if Mr. Swanson's service with the Company (and all Related
Companies) had ceased on the date preceding the date of closing of the event or
transaction described above or (y) the Purchase Option may be assigned to any
successor of the Company, and the Purchase Option will apply if Mr. Swanson
ceases for any reason to be a director or an officer of the successor. In that
case, references in this Agreement to the "Company" will refer to the successor.
(c) The Company is entitled to pay for any shares purchased under its
Purchase Option at the Company's option in cash, by offset against any
indebtedness owing to the Company by Mr. Swanson, or a combination of both.
(d) This Agreement is not an employment contract and nothing in this
Agreement creates in any way whatsoever any obligation on the part of Mr.
Swanson to continue in the employ of or service to the Company, or of the
Company to continue Mr. Swanson in the employ of or service to the Company.
4. Exercise of Company's Purchase Option. The Company's Purchase Option
may be exercised by giving written notice of exercise delivered or mailed as
provided in Section 16. Upon providing of notice and payment of the purchase
price, the Company will become the legal and beneficial owner of the Stock being
purchased and of all rights and interests in the Stock.
5. Changes in Company's Securities. If during the term of the Purchase
Option there is any stock dividend or liquidating dividend or distribution of
cash and/or property, stock split or other change in the character or amount of
any of the outstanding securities of the Company, then, any and all new,
substituted or additional securities or other property to which Purchaser is
entitled by reason of Purchaser's ownership of Stock will be immediately subject
to the Purchase Option with the same force and effect as the shares of Stock
already subject to the Purchase Option. While the total Option Price will
remain the same after each such event, the Option Price per share of Stock upon
exercise of the Purchase Option will be appropriately adjusted.
6. Legends. All certificates representing any shares of Stock of the
Company subject to the provisions of this Agreement will have legends endorsed
on them in substantially the following form:
(i) "The shares represented by this certificate are subject to an
option set forth in an agreement between the corporation and the registered
holder, or such holder's
2
<PAGE>
predecessor in interest, a copy of which is on file at the principal office of
this corporation. Any transfer or attempted transfer of any shares subject to
such option is void without the prior express written consent of the issuer of
these shares."
(ii) "These securities have not been registered under the Securities
Act of 1933. They may not be sold, offered for sale, pledged or hypothecated in
the absence of an effective registration statement as to the securities under
said Act or an opinion of counsel satisfactory to the corporation that such
registration is not required."
(iii) Any legend required to be placed on the share certificates by
the California Commissioner of Corporations.
7. Purchaser Representations. Purchaser acknowledges that Purchaser is
aware that the Stock to be issued to Purchaser by the Company under this
Agreement has not been registered under the Securities Act of 1933, as amended
(the "Act"), on the basis that no distribution or public offering of the Stock
is to be effected, and in this connection acknowledges that the Company is
relying on the following representations. Purchaser warrants and represents
that it is acquiring the Stock for investment for its own account and not with a
view to or for sale in connection with any distribution of the Stock or with any
present intention of distributing or selling the Stock, and Purchaser does not
presently have reason to anticipate any change in circumstances or any
particular occasion or event that would cause Purchaser to sell the Stock.
Purchaser recognizes that the Stock must be held indefinitely unless it is
subsequently registered under the Act or an exemption from registration is
available and, further, recognizes that the Company is under no obligation to
register the Stock or to comply with any exemption from such registration.
8. Restricted Securities. Purchaser is aware that the Stock is treated
as "restricted securities" within the meaning of Rule 144 issued by the
Securities and Exchange Commission under the Act and that the Stock may not be
sold under Rule 144 adopted under the Act unless certain conditions are met and
until Purchaser has held the Stock for at least two (2) years, or such shorter
period specified in Rule 144. Among the conditions for use of Rule 144 is the
availability of specified current public information about the Company.
Purchaser recognizes that the Company presently has no plans to make such
information available to the public.
9. Requirements for Disposition of Stock. Whether or not the Company's
Purchase Option is exercised or has lapsed, Purchaser further agrees not to make
any disposition of any of the Stock until:
(a) At that time there is in effect a registration statement under the
Act covering the proposed disposition and the disposition is made in accordance
with the registration statement; or
(b) (i) Purchaser has notified the Company of the proposed disposition
and furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and (ii) Purchaser has given the Company
an opinion of counsel, satisfactory to the Company, to the effect that the
disposition will not require registration of the Stock under the Act.
3
<PAGE>
10. Escrow. Purchaser agrees, at the Closing (or as soon thereafter as is
practical), to deliver to and deposit with (or have the Company deliver on
Purchaser's behalf) the Secretary of the Company ("Escrow Agent"), as Escrow
Agent in this transaction, three (3) signed stock assignments with date and
number of shares left blank in the form attached to this Agreement as Exhibit B,
together with stock certificate(s) representing all of the Stock subject to the
Purchase Option. These documents are to be held by the Escrow Agent under the
Joint Escrow Instructions of the Company and Purchaser (Exhibit C attached to
this Agreement). These instructions shall also be delivered to the Escrow Agent
at the Closing (or as soon thereafter as is practical).
11. Restrictions on Transfer. Purchaser will not sell or transfer any of
the Stock subject to the Company's Purchase Option as long as the Stock is
subject to the Purchase Option.
12. Company's Shareholder Records. The Company will not be required (i)
to transfer on its books any shares of Stock of the Company which are sold or
transferred in violation of any of the provisions of this Agreement or (ii) to
provide stock ownership rights and privileges to any transferee to whom shares
have been so transferred.
13. Rights as Shareholder. Subject to the provisions of sections 11 and
12 above during the term of this Agreement, Purchaser will have all rights and
privileges of a shareholder of the Company with respect to the Stock.
14. Commissioner's Rules. Purchaser acknowledges receipt of a copy of
Section 260.141.11 of Title 10 of the California Administrative Code, which is
attached to this Agreement as Exhibit D.
15. Further Agreements. The parties agree to execute any further
documents and to take any other action reasonably necessary to carry out the
intent of this Agreement.
16. Notices. Any notice required under this Agreement will be in writing
and will be considered to have been given to the other party upon personal
delivery or upon deposit in any United States Post Office Box, by registered or
certified mail with postage and fees prepaid, addressed to the other party to
this Agreement at the address shown below the party's signature or at such other
address as each party may designate by ten (10) days' advance written notice to
the other party.
17. Binding Agreements. This Agreement shall bind and inure to the
benefit of the successors and assigns of the Company and, subject to the
restrictions on transfer set forth in this Agreement, inure to the benefit of
and be binding upon Purchaser, his or her heirs, executors, administrators,
successors, and assigns.
18. Assignment of Company's Purchase Option. The Company's Purchase
Option is assignable by the Company at any time or from time to time, in whole
or in part. Should the right of repurchase be assigned by the Company, the
assignee shall pay to the Company cash equal to the excess, if any, of the
Option Price over the Stock's Fair Market Value (as defined in the Plan).
4
<PAGE>
19. Headings. Section headings in this Agreement are inserted for
convenience of reference only. They constitute no part of this Agreement.
In Witness Whereof, the parties hereto have executed this Agreement as of
the 20th day of June, 1996.
Tularik Inc.
By /s/ David V. Goeddel
-----------------------------
Address: 270 East Grand Avenue
South San Francisco, CA 94080
1987 Swanson Family Trust
By /s/ Robert A. Swanson
-----------------------------
Address:
---------------------------------
Attachments:
Exhibit A Vesting Schedule
Exhibit B Assignment Separate from Certificate
Exhibit C Joint Escrow Instructions
Exhibit D Cal. Admin. Code, Title 10, Section 260.141.11
5
<PAGE>
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement (the "First
Amendment") is made and entered into as of August __, 1996, by and between
Tularik, Inc., a California corporation (the "Company"), and the 1987 Swanson
Family Trust (the "Purchaser").
Whereas, the parties hereto have previously entered into that certain
Stock Purchase Agreement dated June 20, 1996 (the "Purchase
Agreement"); and
Whereas, the parties hereto desire to amend the Purchase Agreement.
Now, Therefore, in consideration of the foregoing premises and the
mutual covenants and conditions herein, the parties hereby agree as
follows:
SECTION 1. DELETED AND SUBSTITUTED SECTION.
Section 3(b) of the Purchase Agreement is hereby deleted in its
entirety, and the following new Section 3(b) is substituted in its place:
"(b) If at any time during the term of the Purchase Option, there
occurs:
(i) a dissolution or liquidation of the Company; (ii) a transaction in
which the Company directly or indirectly sells, conveys, transfers or
leases all or substantially all of its properties and assets to any
person, entity or group (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended); (iii) a
merger or consolidation involving the Company in which neither the
Company nor an entity that was wholly owned by the Company immediately
prior to such merger or consolidation is the surviving corporation;
(iv) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding
immediately before the merger are converted by virtue of the merger
into other property, whether in the form of other securities, cash or
otherwise; or (v) any transaction or series of related transactions as
a result of which the holders of capital stock of the Company
immediately prior to the transaction or series of related
transactions: (a) hold less than fifty percent (50%) of the aggregate
economic interest of the Company and (b) have combined voting power to
designate less than fifty percent (50%) of the members of the
Company's Board of Directors, then, the Company's Purchase Option
shall terminate."
SECTION 2. OTHER PROVISIONS
All other provisions of the Purchase Agreement shall continue in full
force and effect without amendment.
1.
<PAGE>
In Witness Whereof, the parties hereto have executed this First
Amendment effective as of the date and year set forth above.
TULARIK INC. 1987 SWANSON FAMILY TRUST
By: /s/ David V. Goeddel By: /s/ Robert A. Swanson
---------------------------- -----------------------------
Title: Title:
------------------------- --------------------------
2.
<PAGE>
Exhibit 10.18
SUBLEASE
This Sublease, dated January 25, 1999 and effective as of May 18, 1998, is
entered into by and between Tularik Inc., a Delaware corporation ("Sublessor"),
and AGY Therapeutics, Inc., a Delaware corporation ("Sublessee").
Recitals
A. Sublessor leases certain premises (the "Premises") consisting of
approximately 66,127 rentable square feet of space located in that certain
building located at One Corporate Drive (formerly Two Corporate Drive), South
San Francisco, California (the "Building"). Sublessor is the tenant under that
certain Build-To-Suit Lease dated the 20th day of April, 1995 (the "Master
Lease") with Britannia Developments, Inc., a California corporation, as landlord
("Master Lessor"). An accurate and complete copy of the Master Lease is attached
hereto as Exhibit A. Except as otherwise expressly provided herein, any
capitalized terms herein without definition shall have the same meaning as they
have in the Master Lease.
B. Sublessor desires to sublease to Sublessee, and Sublessee desires to
Sublease from Sublessor, the Initial Subleased Premises during the Initial Term
and the Subsequent Subleased Premises during the Subsequent Term, as more
particularly described herein, pursuant to the terms and provisions hereof.
Now, Therefore, in consideration of the covenants and conditions contained
herein, Sublessor and Sublessee agree as follows:
Agreement
1. Term. The term of this Sublease (the "Term") shall commence on May 18,
1998 (the "Commencement Date") and shall expire, unless sooner terminated or
extended pursuant to the further provisions hereof, at 11:59 p.m. on June 17,
2000, or such earlier date as the Master Lease may be terminated pursuant to the
terms thereof. The initial term of this Sublease (the "Initial Term") shall
commence on the Commencement Date and shall expire at 11:59 p.m. on the date on
which Sublessor occupies the building that will become Two Corporate Drive that
is being constructed immediately adjacent to the Building. The balance of the
Term following the Initial Term is herein referred to as the "Subsequent Term."
2. Subleased Premises. During the Initial Term, Sublessor hereby
subleases to Sublessee, and Sublessee hereby subleases from Sublessor, on the
terms and conditions set forth herein, approximately one thousand (1,000) square
feet of the Premises at the Building, as more particularly described on Exhibit
B-1 hereto and made a part hereof (the "Initial Subleased Premises"). During the
Subsequent Term, Sublessor hereby subleases to Sublessee, and Sublessee hereby
subleases from Sublessor, on the terms and conditions set forth herein,
approximately five thousand four hundred and one (5,401) square feet of the
Premises at the Building in addition to the Initial Subleased Premises for a
total of approximately six thousand four hundred and one (6,401) square feet as
more particularly described on Exhibit B-2 hereto and made a part hereof (the
"Subsequent Subleased Premises") (the Initial Subleased Premises and the
Subsequent Subleased Premises, collectively, the "Subleased Premises").
<PAGE>
3. Rent. (a) The common stock purchased by Sublessor pursuant to the
Common Stock Purchase Agreement executed on even date herewith shall constitute
rent in full for six thousand (6,000) square feet of the Subleased Premises
during the Term. Notwithstanding anything to the contrary contained in the
Master Lease relating to Rent, Sublessee shall pay to Sublessor fixed monthly
rent ("Rent") as provided below. Commencing on January 18, 1999 and continuing
thereafter on the first day of each successive month during the Term, Sublessee
shall pay to Sublessor as monthly Rent for the remaining four hundred and one
(401) square feet of the Subleased Premises, the sum of one thousand four
hundred sixty-three dollars and sixty-five cents ($1,463.65). If the term of
this Sublease commences on a day other than the first day of a calendar month or
if the term of this Sublease terminates on a day other than the first day of a
calendar month, the Rent for such first or last month of the term of the
Sublease, as the case may be, shall be prorated based on the number of days the
term of this Sublease is in effect during such month.
(b) It is the intent of the parties that the Rent and common stock
described in subparagraph (a) above shall constitute rent in full for the
Sublease Premises and Sublessee shall have no obligation to pay any additional
rent or other charges with respect to the Subleased Premises, including but not
limited to insurance, taxes, janitorial, maintenance and utilities, but
excluding actual telephone and internet access charges. Sublessor shall be
responsible for the payment of property taxes, property insurance (Building
only), common area maintenance, janitorial (excluding lab benches in the
Subleased Premises), HVAC (unless such services are requested by Sublessee
during times when such services are not required by Sublessor), utilities on the
Premises, property dues, elevator maintenance, sprinklers, security, garbage,
pest control, earthquake insurance, water treatment, HVAC maintenance,
landscaping and parking lot maintenance. Except as provided in Section 6 below,
Sublessor shall not be responsible for any other services required by Sublessee.
Additional usage or other services required by Sublessee will be billed to
Sublessee at Sublessor's fully-burdened cost for such usage or service.
(c) Rent shall be payable to Sublessor, in advance, in lawful money of the
United States, without prior notice, demand, or offset, on or before the first
day of each calendar month during the term hereof.
(d) In the event of any casualty or condemnation affecting the Subleased
Premises, Rent payable by Sublessee shall be abated hereunder, but only to the
extent that Rent under the Master Lease is abated, and Sublessee waives any
right to terminate the Sublease in connection with such casualty or condemnation
except to the extent the Master Lease is also terminated as to the Subleased
Premises or any portion thereof. In the event of the termination of Sublessor's
interest as "Tenant" under the Master Lease for any reason, then this Sublease
shall terminate coincidentally therewith without any liability of Sublessor or
Sublessee.
(e) Anything in this Sublease to the contrary notwithstanding, Sublessee
shall be liable for and shall pay at least ten (10) days prior to delinquency
all taxes levied against any personal property, fixtures, machinery, equipment,
apparatus, systems and appurtenances or improvements placed by or on behalf of
Sublessee in, about, upon or in connection with the Subleased Premises.
2
<PAGE>
4. Condition of the Subleased Premises/Improvements. Sublessee has
inspected the Subleased Premises and agrees to accept the Subleased Premises "as
is, where is," with all faults, without any obligation on the part of Sublessor
to modify, improve or otherwise prepare the Subleased Premises for Sublessee's
occupancy; provided, however, that Sublessor shall consult with Sublessee on the
-------- -------
design of the Subsequent Sublease Premises; provided further that Sublessee
-------- -------
shall obtain any consents required under the Master Lease with respect to such
design. Sublessor has made no representations or warranties of any kind or
nature whatsoever respecting the Subleased Premises, their condition or
suitability for Sublessee's use.
5. Use. Sublessee may use the Subleased Premises for any use permitted
under the Master Lease and for no other purpose without the approval of the
Master Lessor and Sublessor.
6. Share Access/Facilities. Sublessee acknowledges that the Premises
contains certain facilities, including: (a) the cafeteria; (b) front lobby area;
(c) switchboard and operator; (d) a periodical and monograph library; (e)
general lab equipment (reverse osmosis water system, ice machine, x-ray
processor, scintillation counter (used), centrifuge (Sorvall), electroporator,
phosphoimager, large format (used)); (f) cell culture facility (Laminar flow
safety cabinet, tissue culture incubator, cell centrifuge, Inverted microscope);
(g) radwaste facility; and (h) media prep facility/services; (singly and/or
collectively, the "Shared Facilities") that were installed when the Premises
were wholly occupied by one tenant.
Sublessor has agreed to provide access to and use of the Shared Facilities
as may be reasonably required by Sublessee, its employees, agents and invitees
for the conduct of its business at the Subleased Premises. Sublessor has agreed
to provide to Sublessee access to the Animal Facility of Sublessor ("Animal
Facility") during the Term as follows: (i) Sublessee shall be entitled to
holding space for up to thirty (30) rodents; and (ii) up to two employees of
Sublessee may have access to such thirty (30) rodents as required by protocols
approved by Sublessor. In addition, Sublessor shall discuss in good faith with
Sublessee the possibility that access to the Animal Facility provided to
Sublessee will be increased during the Subsequent Term to the extent that
Sublessor determines, in its sole discretion, that there is excess capacity in
the Animal Facility available for use by Sublessee. Sublessor agrees to provide
to Sublessee access to the Shared Facilities and to the Animal Facility as set
forth above at no charge to Sublessee. In order to allow Sublessee access as
reasonably necessary for such purposes but at the same time protect each party's
privacy, security, confidentiality and proprietary information, Sublessee agrees
as follows:
(a) Sublessee shall only allow access to the Shared Facilities to its
employees, agents, independent contractors and invitees or other persons whose
access is provided via a key or other security device acceptable to Sublessor.
Sublessee shall allow access to the Animal Facility to an employee of Sublessee
in accordance with the foregoing paragraph only.
(b) Sublessee will not allow any agent, independent contractor or other
person access from the Shared Facilities to any other portion of the Premises
without an escort by an employee of Sublessee.
3
<PAGE>
(c) Sublessee acknowledges and agrees that the operation and use of the
Shared Facilities and Animal Facility may require that Sublessee apply for and
receive licenses and/or permits from various federal, state and local
governments. To the extent that Sublessee shall not receive such licenses and/or
permits in the name of Sublessee, Sublessee covenants and agrees that
Sublessee's operation and use of such Shared Facilities and Animal Facility
shall be subject in all respects to compliance with any and all licenses and/or
permits that Sublessor has received respecting such Shared Facilities and Animal
Facility. In the event of any disagreement concerning the interpretation of such
licenses and/or permits, the determination of the employee of Sublessor charged
with ensuring compliance with such licenses and/or permits shall be controlling.
Sublessee shall provide to Sublessor copies of any such licenses and/or permits
to the extent applicable to the Shared Facilities and Animal Facility.
Sublessor agrees to provide to Sublessee access to Sublessor's document
retrieval services at Sublessor's cost for such services.
7. Master Lease. This Sublease shall be subject and subordinate to all of
the terms and provisions of the Master Lease. Except for payments of Rent (which
payments shall be made by Sublessor) and except for those provisions of the
Master Lease excluded by Paragraph 8 below and those provisions of the Master
Lease that are inconsistent with this Sublease, Sublessee hereby assumes and
agrees to perform, during the term of this Sublease, all of Sublessor's
obligations under the Master Lease to the extent such obligations are applicable
to the Subleased Premises pursuant to this Sublease.
8. Incorporation of Master Lease.
(a) Except as otherwise provided herein, all of the terms and
provisions of the Master Lease are incorporated into and made a part of this
Sublease and the rights and obligations of the parties under the Master Lease
are hereby imposed upon the parties hereto with respect to the Subleased
Premises, the Sublessor being substituted for the "Landlord" in the Master
Lease, the Sublessee being substituted for the "Tenant" in the Master Lease, and
this Sublease being substituted for the "Lease" in the Master Lease. The parties
specifically agree that any provisions relating to any construction obligations
of "Landlord" under the Master Lease with respect to construction that occurred
or was to have occurred prior to the Commencement Date hereof, are hereby
deleted. Sublessor shall not be liable to Sublessee for any failure by Master
Lessor to perform its obligations under the Master Lease, nor shall such failure
by Master Lessor excuse performance by Sublessee of its obligations hereunder.
Notwithstanding anything in the Master Lease to the contrary, the liability of
Sublessor for its obligations under this Sublease is limited solely to
Sublessor's interest in the Master Lease, and no personal liability shall at any
time be asserted or enforceable against any other assets of Sublessor or against
Sublessor's stockholders, directors, officers or partners on account of any of
Sublessor's obligations or actions under this Sublease.
(b) Sublessee hereby agrees to indemnify and hold harmless Sublessor
from and against any and all claims, liabilities, losses, damages and expenses
(including reasonable attorneys' fees) incurred by Sublessor arising out of,
from or in connection with (i) the use or occupancy of the Subleased Premises by
Sublessee, (ii) any breach or default by Sublessee under
4
<PAGE>
this Sublease, or (iii) the failure of Sublessee to perform any obligation under
the terms and provisions of the Master Lease assumed by Sublessee hereunder or
required to be performed by Sublessee as provided herein, from and after the
Commencement Date of this Sublease.
(c) Sublessor hereby agrees to indemnify and hold harmless Sublessee
from and against any and all claims, liabilities, losses, damages and expenses
(including reasonable attorneys' fees) incurred by Sublessee arising out of,
from or in connection with (i) Sublessor's breach or default of any provision of
this Sublease or any provisions of the Master Lease not assumed by Sublessee
hereunder, or (ii) acts or omissions of Sublessor under the Master Lease in
connection with the Subleased Premises prior to the Commencement Date of this
Sublease.
(d) Within thirty (30) days after (i) full execution and delivery of
this Sublease, and (ii) Master Lessor's consent to this Sublease has been
obtained, Sublessee shall deliver to Sublessor a certificate of insurance
evidencing that Sublessor and Master Lessor are named as additional insured on
the policy of liability insurance Sublessee shall maintain respecting the
Subleased Premises in the amount of $1,000,000.
(e) Sublessee shall not, without the prior written consent of
Sublessor and Master Lessor, assign or sublease the Sublease Premises.
9. Sublessor's Obligations.
(a) Provided Sublessee is not in default under the terms of this Sublease,
Sublessor agrees to make timely payments of the Rent due under the Master Lease
to the end that the Master Lease shall not be terminated due to the default of
Sublessor.
(b) To the extent that the provision of any services or the performance of
any maintenance or any other act (collectively "Master Lessor Obligations") is
the responsibility of Master Lessor, Sublessor, upon Sublessee's request, shall
make reasonable efforts to cause Master Lessor under the Master Lease to perform
such Master Lessor Obligations; provided, however, that in no event shall
Sublessor be liable to Sublessee for any liability, loss or damage whatsoever in
the event that Master Lessor should fail to perform the same, nor shall
Sublessee be entitled to withhold the payment of Rent or terminate this
Sublease, unless such failure is the result of an event of default on the part
of Sublessor under this Sublease, the Master Lease, or both. It is expressly
understood that Sublessor does not assume Master Lessor Obligations and that the
services and repairs which are incorporated herein by reference, including but
not limited to the furnishing of elevators, utilities, cleaning, janitorial or
other services or maintenance, restoration (following casualty or destruction),
or repairs to the Building, Premises and/or Subleased Premises will in fact be
furnished by Master Lessor and not Sublessor, except to the extent otherwise
provided herein.
(c) Except as provided in this Section 9, Sublessor shall have no other
obligations to Sublessee with respect to the Subleased Premises or the
performance of the Master Lessor Obligations.
10. Assignment and Subletting. Sublessor shall not assign, sublet,
transfer, pledge, hypothecate or otherwise encumber the Subleased Premises, this
Sublease or any interest therein,
5
<PAGE>
or permit the use or occupancy of the Subleased Premises by any other person
other than Sublessee. Any assignment, further subletting, occupancy or use
without the prior consent of Sublessor shall, at the option of Sublessor,
terminate this Sublease.
11. Early Termination of Master Lease. If, without the fault of Sublessor
or Sublessee, the Master Lease should terminate prior to the expiration of this
Sublease, neither party shall have any liability to the other party. To the
extent that the Master Lease grants Sublessor any discretionary right to
terminate the Master Lease, whether due to casualty, condemnation, or otherwise,
Sublessor shall be entitled to exercise or not exercise such right in its
complete and absolute discretion.
12. Consent of Master Lessor. If Sublessee desires to take any action
which requires the consent of Master Lessor pursuant to the terms of the Master
Lease, including, without limitation, making any alterations or entering into a
further sublease or assignment of this Sublease, then, notwithstanding anything
to the contrary herein, (a) Sublessor shall have the same rights of approval or
disapproval as Master Lessor has under the Master Lease, (b) Sublessee shall not
take any such action until it obtains the consent of both Sublessor and Master
Lessor and (c) Sublessee shall request that Sublessor obtain Master Lessor's
consent on Sublessee's behalf, unless Sublessor agrees that Sublessee may
contact Master Lessor directly with respect to the specific action for which
Master Lessor's consent is required.
13. Surrender of Subleased Premises. In lieu of any obligation or
liability set forth in the Master Lease, upon the termination of the Sublease,
Sublessee shall surrender the Subleased Premises to Sublessor broom-clean and in
the same condition as on the Commencement Date, ordinary wear and tear excepted.
In addition, Sublessor may require Sublessee to remove any alterations,
additions and improvements (whether or not made with Sublessor's consent), prior
to the termination of the Sublease and to restore the Subleased Premises to its
prior condition, normal wear and tear excepted, repairing all damage caused by
or related to any such removal, all at Sublessee's expense.
14. No Third Party Rights. The benefit of the provisions of this Sublease
is expressly limited to Sublessor and Sublessee and their respective permitted
successors and assigns. Under no circumstances will any third party be construed
to have any rights as a third party beneficiary with respect to any of said
provisions; provided, however, that Master Lessor shall be entitled to the
benefit of Sublessee's assumption of Sublessor's obligations, as "Tenant" under
the Master Lease, pursuant to Section 9 above.
15. Time of Essence. It is expressly understood and agreed that time is of
the essence with respect to each and every provision of this Sublease.
16. Attorneys' Fees. If any action or proceeding at law or in equity
shall be brought to enforce or interpret any of the provisions of this Sublease,
the prevailing party shall be entitled to recover from the other party its
reasonable attorneys' fees and costs incurred in connection with the prosecution
or defense of such action or proceeding.
17. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Sublessor or Sublessee,
the obligations of such
6
<PAGE>
multiple parties shall be the joint and several responsibility of all persons or
entities named herein as such Sublessor or Sublessee.
18. Approval of Master Lessor. This Sublease shall be conditioned upon,
and shall not take effect until, receipt of the written approval of Master
Lessor thereto. Upon receipt of such approval, this Sublease shall be effective
as of the date first written above.
Executed as of the date first written above.
"Sublessor" "Sublessee"
Tularik Inc. AGY Therapeutics, Inc.
a Delaware corporation a Delaware corporation
By: /s/ John P. McLaughlin By:
----------------------------- -----------------------------
Title: Title:
-------------------------- --------------------------
7
<PAGE>
Consent Of Master Lessor
Britannia Developments, Inc., "Master Lessor" under the Master Lease
identified in that certain Sublease dated for reference purposes, May 18, 1998
to which this Consent is attached, hereby consents to said Sublease. This
Consent shall not be deemed to relieve Sublessor, as Tenant under the Master
Lease, from any obligation or liability thereunder, nor shall this Consent be
deemed Master Lessor's consent to any further subletting or assignment.
Master Lessor:
Britannia Developments, Inc.
By: /s/ [ILLEGIBLE]
---------------------------
Name:
-------------------------
Title: Director, Facilities
------------------------
Date:
-------------------------
8
<PAGE>
Exhibit A
[Master Lease]
<PAGE>
Exhibit B-1
[Initial Subleased Premises]
See attached, plus two carrels in the Sublessor's library.
<PAGE>
Exhibit B-2
[Subsequent Subleased Premises]
<PAGE>
EXHIBIT 10.19
SUBLEASE
This Sublease, dated May 1, 1999, is entered into by and between
Tularik Inc., a Delaware corporation ("Sublessor"), and Coulter Pharmaceuticals,
Inc., a Delaware corporation ("Sublessee").
RECITALS
A. Sublessor leases certain premises (the "Premises") consisting of
approximately 66,127 rentable square feet of space located in that certain
building located at One Corporate Drive (formerly Two Corporate Drive), South
San Francisco, California (the "Building"). Sublessor is the tenant under that
certain Build-To-Suit Lease dated the 20th day of April, 1995 (the "Master
Lease") with Britannia Developments, Inc., a California corporation, as
landlord; Britannia Development, Inc. assigned its interest as landlord under
the Master Lease to Britannia Gateway, LLC pursuant to an Assignment and
Assumption of Lease dated as of May 24, 1995; Britannia Gateway, LLC assigned
its interest under the Master Lease to Britannia Biotech Gateway Limited
Partnership, a Delaware limited partnership ("Master Lessor"), pursuant to an
Assignment and Assumption of Lease dated as of August 8, 1996. An accurate and
complete copy of the Master Lease is attached hereto as Exhibit A. Except as
otherwise expressly provided herein, any capitalized terms herein without
definition shall have the same meaning as they have in the Master Lease.
B. Sublessor desires to sublease to Sublessee, and Sublessee desires to
Sublease from Sublessor, the Subleased Premises during the Term, as more
particularly described herein, pursuant to the terms and provisions hereof.
Now, Therefore, in consideration of the covenants and conditions contained
herein, Sublessor and Sublessee agree as follows:
AGREEMENT
1. Term. The term of this Sublease (the "Term") shall commence on the
later of May 1, 1999 or the date Master Lessor consents to this Sublease (the
"Commencement Date") and shall expire, unless sooner terminated or extended
pursuant to the further provisions hereof, at 11:59 p.m. on April 30, 2001, or
such earlier date as the Master Lease may be terminated pursuant to the terms
thereof. With the advance written consent of the Sublessor, which consent may
be withheld in the sole discretion of Sublessor, Sublessee may extend the Term
on two (2) occasions for a period of six (6) months each at the same rental rate
as shown in Section 3 below following written notice from Sublessee to Sublessor
no later than sixty (60) days prior to the date when this Sublease shall have
otherwise terminated. In no event shall the Term extend beyond 11:59 p.m. on
April 30, 2002.
2. Subleased Premises. During the Term, Sublessor hereby subleases to
Sublessee, and Sublessee hereby subleases from Sublessor, on the terms and
conditions set forth herein, four thousand one hundred ninety one (4,191) square
feet of the Premises in the Building, as more particularly described on Exhibit
B hereto and made a part hereof (the "Subleased Premises").
1.
<PAGE>
3. Rent. (a) Commencing as of the Commencement Date and continuing
thereafter on the first (1/st/) day of each and every month during the Term,
Sublessee shall pay to Sublessor in advance $18,859.50 ($4.50 per square foot)
as rent for the Subleased Premises (the "Rent"). Rent for any period less than
a calendar month shall be a pro rata portion of the monthly installment. Rent
shall be payable to Sublessor, in advance, in lawful money of the United States,
without prior notice, demand, or offset (except as permitted in the Master
Lease), on or before the first day of each calendar month during the Term, at
the address set forth herein below or at such other address as may be designated
in writing from time to time. The first month's Rent payable hereunder shall be
paid by Sublessee upon the Commencement Date. In addition, upon the
Commencement Date, Sublessee shall pay Sublessor the sum of Twenty Thousand
Dollars ($20,000) that shall be held as a security deposit by Sublessor.
(b) Sublessor shall be responsible for the payment of property taxes,
property insurance (Building only), common area maintenance, janitorial (office
area and lavatories in the Subleased Premises, only), HVAC (unless such services
are requested by Sublessee during times when such services are not required by
Sublessor), utilities on the Premises, property dues, elevator maintenance,
sprinklers, security, garbage, pest control, earthquake insurance, water
treatment, HVAC maintenance, landscaping and parking lot maintenance, autoclave
and cagewasher preventive maintenance, or any other costs that Sublessor is
required to pay under the Master Lease pursuant to its terms. Anything in this
Sublease to the contrary notwithstanding, Sublessor shall not be responsible for
any other services required by Sublessee. Other services that are required by
Sublessee may be negotiated between Sublessor and Sublessee and, if appropriate,
billed to Sublessee at Sublessor's actual cost for such service.
(c) In the event of any casualty or condemnation affecting the
Subleased Premises, Rent payable by Sublessee shall be abated hereunder, but
only to the extent that Rent under the Master Lease is abated with respect to
the Subleased Premises, and Sublessee waives any right to terminate the Sublease
in connection with such casualty or condemnation except to the extent the Master
Lease is also terminated as to the Subleased Premises or any material portion
thereof. In the event of the termination of Sublessor's interest as "Tenant"
under the Master Lease for any reason, then this Sublease shall terminate
coincidentally therewith without such termination constituting a default of
Sublessor or Sublessee. In the event of any taking, Sublessee shall have no
claim to any award. In the event of any casualty, Sublessor shall perform such
restoration as is required of Sublessor pursuant to the Master Lease and, to the
extent such casualty is the result of Sublessee's action or inaction, Sublessee
shall restore the Subleased Premises as soon as reasonably practicable.
(d) Anything in this Sublease to the contrary notwithstanding,
Sublessee shall be liable for, and shall pay and deliver evidence of payment
prior to delinquency, all taxes levied against any personal property, fixtures,
machinery, equipment, apparatus, systems and appurtenances or improvements
placed by or on behalf of Sublessee in, about, upon or in connection with the
Subleased Premises.
4. Condition of the Subleased Premises. (a) Sublessor represents and
warrants that, as of the Commencement Date: (i) all systems that are essential
to the operation of the Building (e.g., HVAC, electrical, roof and plumbing
systems) are in good working condition; and (ii) that the Premises are free of
any defects and violations of applicable law. Except as
2.
<PAGE>
expressly set forth in this Section 4(a): (i) Sublessor has made no
representations or warranties of any kind or nature whatsoever respecting the
Subleased Premises, their condition or suitability for Sublessee's use; and (ii)
Sublessee agrees to accept the Subleased Premises "as is, where is," with all
faults, without any obligation on the part of Sublessor to modify, improve or
otherwise prepare the Subleased Premises for Sublessee's occupancy.
(b) Sublessor has not made an independent investigation of the
Premises or determination with respect to the physical and environmental
condition of the Premises including without limitation the existence of any
underground tanks, pumps, piping, toxic or hazardous substances on the Premises.
No investigation has been made by Sublessor to ensure compliance with the
"American With Disabilities Act" ("ADA"). ADA may require a variety of changes
to the Subleased Premises, including potential removal of barriers to access by
disabled persons and provision of auxiliary aids and services for hearing,
vision or speech impaired persons. Sublessee shall rely solely on its own
investigations and/or that of a licensed professional specializing in the areas
referenced in this Section 4(b).
5. Use. Sublessee may use the Subleased Premises as administrative
offices, for research and development purposes and/or as a vivarium to the
extent permitted under the Master Lease and for no other purpose without the
approval of the Master Lessor and Sublessor. Sublessee will not enter, nor
allow any agent, independent contractor or other person access from the
Subleased Premises to any other portion of, the Premises without an escort by an
employee of Sublessor. Sublessor shall have the right to inspect the Subleased
Premises at any time after giving Sublessee twenty-four (24) hours notice;
provided, however, that Sublessor shall have the unrestricted right to access
the Subleased Premises at any time, without notice, in the event of an
emergency. Sublessee acknowledges and agrees that the operation and use of the
Subleased Premises may require that Sublessee apply for and receive licenses
and/or permits from various federal, state and local governments, and Sublessee
covenants and agrees to apply for and receive such licenses and/or permits as
are required. Sublessee shall provide to Sublessor copies of any such licenses
and/or permits to the extent applicable to the Subleased Premises. Sublessee
acknowledges, agrees and covenants that its occupancy, operation and use of such
Subleased Premises and/or its use and handling of animals shall be in accordance
with: (a) all applicable state and federal regulations; (b) all licenses and
permits that either Sublessee or Sublessor has received or receives in the
future respecting such Subleased Premises; and (c) all policies and procedures
Sublessor has reasonably promulgated respecting such Subleased Premises. In the
event of any disagreement concerning the interpretation of such licenses,
permits, policies and/or procedures, the determination of the employee of
Sublessor charged with ensuring compliance with such licenses, permits, policies
and/or procedures shall be controlling.
6. Equipment Repair. Sublessee shall pay for any required: (a)
autoclave and cagewasher repairs to the extent not covered under the preventive
maintenance contracts for such equipment; and (b) repairs to equipment other
than autoclaves and cagewashers. All required repair work for autoclaves and
cagewashers shall be performed by Sublessor's preventive maintenance suppliers.
7. Master Lease. This Sublease shall be subject and subordinate to all
of the terms and provisions of the Master Lease. Except for payments of Rent
(which payments shall be made by Sublessor) and except for those provisions of
the Master Lease excluded by Paragraph 8
3.
<PAGE>
below, Sublessee hereby assumes and agrees to perform, during the Term, all of
Sublessor's obligations under the Master Lease to the extent such obligations
are applicable to the Subleased Premises and accrue after the date hereof
pursuant to this Sublease.
8. Incorporation of Master Lease.
(a) Except as otherwise provided herein, all of the terms and
provisions of the Master Lease are incorporated into and made a part of this
Sublease and the rights and obligations of the parties under the Master Lease
are hereby imposed upon the parties hereto with respect to the Subleased
Premises, the Sublessor being substituted for the "Landlord" in the Master
Lease, the Sublessee being substituted for the "Tenant" in the Master Lease, and
this Sublease being substituted for the "Lease" in the Master Lease. The parties
specifically agree that any provisions relating to any construction obligations
of "Landlord" under the Master Lease with respect to construction that occurred
or was to have occurred prior to the Commencement Date hereof, are hereby
deleted. Sublessor shall not be liable to Sublessee for any failure by Master
Lessor to perform its obligations under the Master Lease, nor shall such failure
by Master Lessor excuse performance by Sublessee of its obligations hereunder;
provided, however, that Sublessor shall use its commercially reasonable efforts
to cause Master Lessor to perform its obligations under the Master Lease.
Anything in the Master Lease to the contrary notwithstanding, the liability of
Sublessor for its obligations under this Sublease is limited solely to
Sublessor's interest in the Master Lease, and no personal liability shall at any
time be asserted or enforceable against any other assets of Sublessor or against
Sublessor's stockholders, directors, officers or partners on account of any of
Sublessor's obligations or actions under this Sublease. The following Sections
of the Master Lease are not incorporated herein: 1.1, 2.1, 2.2, 2.3, 2.4, 2.6,
3.1, 4.1, Article 5, Article 6, Article 7, Article 9, Article 11, Article 12,
Section 13.1, Section 15.1, Article 17, Section 18.1(b) (failure to pay Rent in
accordance with Section 3 of this Sublease shall constitute an event of default
hereunder), Section 20.1, 21.1, 21.15 and Exhibits A-E.
(b) Sublessee hereby agrees to indemnify and hold harmless Sublessor
from and against any and all claims, liabilities, losses, damages and expenses
(including reasonable attorneys' fees) incurred by Sublessor arising out of,
from or in connection with (i) the use or occupancy of the Subleased Premises by
Sublessee, (ii) any breach or default by Sublessee under this Sublease or (iii)
the failure of Sublessee to perform any obligation under the terms and
provisions of the Master Lease assumed by Sublessee hereunder or required to be
performed by Sublessee as provided herein, from and after the Commencement Date
of this Sublease.
(c) Sublessor hereby agrees to indemnify and hold harmless Sublessee
from and against any and all claims, liabilities, losses, damages and expenses
(including reasonable attorneys' fees) incurred by Sublessee arising out of,
from or in connection with (i) Sublessor's breach or default of any provision of
this Sublease or any provisions of the Master Lease not assumed by Sublessee
hereunder or (ii) acts or omissions of Sublessor under the Master Lease in
connection with the Subleased Premises prior to the Commencement Date of this
Sublease.
4.
<PAGE>
9. Sublessor's Obligations.
(a) Provided that Sublessee is not in default under the terms of this
Sublease, Sublessor agrees to make timely payments of the Rent due under the
Master Lease to the end that the Master Lease shall not be terminated due to the
default of Sublessor.
(b) To the extent that the provision of any services or the
performance of any maintenance or any other act (collectively "Master Lessor
Obligations") is the responsibility of Master Lessor, Sublessor, upon
Sublessee's request, shall make reasonable efforts to cause Master Lessor under
the Master Lease to perform such Master Lessor Obligations; provided, however,
that in no event shall Sublessor be liable to Sublessee for any liability, loss
or damage whatsoever in the event that Master Lessor should fail to perform the
same, nor shall Sublessee be entitled to withhold the payment of Rent or
terminate this Sublease, unless such failure is the result of an event of
default on the part of Sublessor under this Sublease, the Master Lease, or both.
It is expressly understood that Sublessor does not assume Master Lessor
Obligations and that the services and repairs that are incorporated herein by
reference, including but not limited to the furnishing of elevators, utilities,
cleaning, janitorial or other services or maintenance, restoration (following
casualty or destruction), or repairs to the Building, Premises and/or Subleased
Premises will in fact be furnished by Master Lessor and not Sublessor, except to
the extent otherwise provided herein.
(c) Except as provided in this Section 9, Sublessor shall have no
other obligations to Sublessee with respect to the Subleased Premises or the
performance of the Master Lessor Obligations.
10. Assignment and Subletting. Sublessor shall not assign, sublet,
transfer, pledge, hypothecate or otherwise encumber the Subleased Premises, this
Sublease or any interest therein, or permit the use or occupancy of the
Subleased Premises by any other person other than Sublessee. Any assignment,
further subletting, occupancy or use without the prior consent of Sublessee
shall, at the option of Sublessee, terminate this Sublease.
11. Early Termination of Master Lease. If, without the fault of Sublessor
or Sublessee, the Master Lease should terminate prior to the expiration of this
Sublease, neither party shall have any liability to the other party. To the
extent that the Master Lease grants Sublessor any discretionary right to
terminate the Master Lease, whether due to casualty, condemnation or otherwise,
Sublessor shall be entitled to exercise or not exercise such right in its
complete and absolute discretion; provided, however, that Sublessor shall use
reasonable efforts to give to Sublessee as much prior notice of its intent to
terminate as practicable.
12. Consent of Master Lessor. If Sublessee desires to take any action
that requires the consent of Master Lessor pursuant to the terms of the Master
Lease, including, without limitation, making any modification, alteration or
improvement of the Subleased Premises or entering into a further sublease or
assignment of this Sublease, and in any event if Sublessee desires to make any
alternation to the Subleased Premises, then, notwithstanding anything to the
contrary herein, (a) Sublessor shall have the same rights of approval or
disapproval as Master Lessor has under the Master Lease, (b) Sublessee shall not
take any such action until it obtains the consent of both Sublessor and Master
Lessor and (c) Sublessee shall request that Sublessor
5.
<PAGE>
obtain Master Lessor's consent on Sublessee's behalf, unless Sublessor agrees
that Sublessee may contact Master Lessor directly with respect to the specific
action for which Master Lessor's consent is required.
13. Surrender of Subleased Premises. In lieu of any obligation or
liability set forth in the Master Lease, upon the termination of the Sublease,
Sublessee shall surrender the Subleased Premises to Sublessor broom-clean and in
as good a condition as on the Commencement Date, ordinary wear and tear
excepted. In addition, Sublessee shall remove any alterations, additions and
improvements (whether or not made with Sublessor's consent), prior to the
termination of the Sublease and restore the Subleased Premises to its prior
condition, ordinary wear and tear excepted, repairing all damage caused by or
related to any such removal, all at Sublessee's expense.
14. No Third Party Rights. The benefit of the provisions of this Sublease
is expressly limited to Sublessor and Sublessee and their respective permitted
successors and assigns. Under no circumstances will any third party be
construed to have any rights as a third party beneficiary with respect to any of
said provisions; provided, however, that Master Lessor shall be entitled to the
benefit of Sublessee's assumption of Sublessor's obligations, as "Tenant" under
the Master Lease, pursuant to Section 9 above.
15. Time of Essence. It is expressly understood and agreed that time is
of the essence with respect to each and every provision of this Sublease.
16. Attorneys' Fees. If any action or proceeding at law or in equity
shall be brought to enforce or interpret any of the provisions of this Sublease,
the prevailing party shall be entitled to recover from the other party its
reasonable attorneys' fees and costs incurred in connection with the prosecution
or defense of such action or proceeding.
17. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Sublessor or Sublessee,
the obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Sublessor or
Sublessee.
18. Approval of Master Lessor. This Sublease shall be conditioned upon,
and shall not take effect until, receipt of the written consent of Master Lessor
thereto. Upon receipt of such consent, this Sublease shall be effective as of
the Commencement Date. Sublessor and Sublessee acknowledge and agree that in
granting such consent, notwithstanding any other provisions contained in or
implied in this Sublease, Master Lessor shall not be deemed or construed (a) to
have released Sublessor from any responsibility for the full and timely
performance of all obligations of Sublessor as Tenant under the Master Lease as
it pertains to the Subleased Premises, nor (b) to have authorized Sublessor to
act on Master Lessor's behalf in exercising or waiving any rights, remedies or
privileges of Master Lessor as Landlord under the Master Lease as it pertains to
the Subleased Premises, nor (c) to have assumed, incurred or undertaken any
obligations or liabilities running directly to Sublessee with respect to the
Subleased Premises, it being the explicit intention and understanding of the
parties that, notwithstanding the incorporation by reference of a portion of the
Master Lease into this Sublease, Master Lessor and Sublessor shall look solely
to one another for the performance of
6.
<PAGE>
their respective obligations with respect to the Premises as Landlord and Tenant
under the Master Lease, and that Sublessor and Sublessee shall look solely to
one another for the performance of their respective obligations with respect to
the Subleased Premises under this Sublease.
EXECUTED as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
"SUBLESSOR" "SUBLESSEE"
TULARIK INC. COULTER PHARMACEUTICALS, INC.
a Delaware corporation a Delaware corporation
By: /s/ Luis Bayol By:
-------------------------------------------- -------------------------------------------
Title: Director, Finance & Administration and Title: Director, Facilities
Assistant Secretary
</TABLE>
7.
<PAGE>
CONSENT OF MASTER LESSOR
Britannia Biotech Gateway, Limited Partnership, "Master Lessor" under the
Master Lease identified in that certain Sublease dated, for reference purposes,
May 1, 1999 to which this Consent is attached, hereby consents to said Sublease.
This Consent shall not be deemed to relieve Sublessor, as Tenant under the
Master Lease, from any obligation or liability thereunder, nor shall this
Consent be deemed Master Lessor's consent to any further subletting or
assignment.
MASTER LESSOR:
BRITANNIA BIOTECH GATEWAY, LIMITED PARTNERSHIP
A Delaware limited partnership
By: /s/ T. J. Bristow
-----------------------------
Britannia Gateway, LLC, a California limited liability company
Managing Partner
Name: T. J. Bristow
-----------------------------
Title: Manager
----------------------------
Date: 5/6/99
-----------------------------
8.
<PAGE>
EXHIBIT 10.20
SUBLEASE
This Sublease, dated as of August 20, 1999, is entered into by and between
Tularik Inc., a Delaware corporation ("Sublessor"), and Igen International,
Inc., a Delaware corporation ("Sublessee").
Recitals
A. Sublessor leases certain premises (the "Premises") consisting of
approximately 66,127 rentable square feet of space located in that certain
building located at One Corporate Drive (formerly Two Corporate Drive), South
San Francisco, California (the "Building"). Sublessor is the tenant under that
certain Build-To-Suit Lease dated the 20th day of April 1995 (the "Master
Lease") with Britannia Developments, Inc., a California corporation, as
landlord; Britannia Development, Inc. assigned its interest as landlord under
the Master Lease to Britannia Gateway, LLC pursuant to an Assignment and
Assumption of Lease dated as of May 24, 1995; Britannia Gateway, LLC assigned
its interest under the Master Lease to Britannia Biotech Gateway Limited
Partnership, a Delaware limited partnership ("Master Lessor"), pursuant to an
Assignment and Assumption of Lease dated as of August 8, 1996. An accurate and
complete copy of the Master Lease is attached hereto as Exhibit A. Except as
otherwise expressly provided herein, any capitalized terms herein without
definition shall have the same meaning as they have in the Master Lease.
B. Sublessor desires to sublease to Sublessee, and Sublessee desires to
sublease from Sublessor, the Subleased Premises during the Term, as more
particularly described herein, pursuant to the terms and provisions hereof.
Now, Therefore, in consideration of the covenants and conditions contained
herein, Sublessor and Sublessee agree as follows:
Agreement
1. Term. The term of this Sublease (the "Term") shall commence on the
date Sublessor delivers possession of the Subleased Premises to Sublessee, as
provided for in Paragraph 4(b) (the "Commencement Date"), subject to the
provisions of Paragraph 18 hereof, and shall expire, unless sooner terminated or
extended pursuant to the further provisions hereof, at 11:59 p.m. on May 31,
2001, or such earlier date as the Master Lease may be terminated pursuant to the
terms thereof. With the advance written consent of the Sublessor, which consent
may be withheld in the sole discretion of Sublessor, Sublessee may extend the
Term on two (2) occasions for a period of six (6) months each at the rental rate
as shown in Section 3 below following written notice from Sublessee to Sublessor
no later than sixty (60) days prior to the date when this Sublease shall have
otherwise terminated. In no event shall the Term extend beyond 11:59 p.m. on May
31, 2002.
2. Subleased Premises. During the Term, Sublessor hereby subleases to
Sublessee, and Sublessee hereby subleases from Sublessor, on the terms and
conditions set forth herein, eight hundred fifty seven (857) square feet of the
Premises in the Building, as more particularly described on Exhibit B hereto and
made a part hereof (the "Subleased Premises").
3. Rent; Security Deposit. (a) Commencing on the Commencement Date and
continuing thereafter on the first (1/st/) day of each and every calendar month
during the Term, Sublessee shall pay to Sublessor in advance Three Thousand One
Hundred Twenty Eight Dollars
1
<PAGE>
and Five Cents ($3,128.05) ($3.65 per square foot) as rent for the Subleased
Premises (the "Rent"). Rent for any period less than a calendar month shall be a
pro rata portion of the monthly installment. Rent shall be payable to Sublessor
in lawful money of the United States, without prior notice, demand, or offset,
at the address set forth herein or at such other address as may be designated in
writing from time to time. In addition, upon the Commencement Date, Sublessee
shall pay to Sublessor the sum of Three Thousand One Hundred Twenty Eight
Dollars and Five Cents ($3,128.05) that shall be held as a security deposit by
Sublessor.
(b) If Sublessee defaults with respect to any provision of this Sublease or
the Master Lease and such default is not cured within the applicable cure
period, if any, Sublessor shall have the right, but shall not be required to,
use, apply, or retain all or any part of the security deposit for the payment of
any amounts due or any amount which Sublessor may spend or become obligated to
spend by reason of such default or to compensate for any other loss or damage
which Sublessor may suffer for any reason thereof. Sublessor shall not be
required to keep the deposit separate from its general funds and Sublessee shall
not be entitled to interest thereon. If Sublessee fully and faithfully performs
every provision of this Sublease to be performed by it, the security deposit
shall be returned to Sublessee within thirty (30) days after the termination of
this Sublease and after Sublessee has vacated the Subleased Premises, less any
amounts due to Sublessor pursuant to this Sublease.
(c) Sublessor shall be responsible for the payment of property taxes,
property insurance (Building only), common area maintenance, janitorial
(excluding lab benches in the Subleased Premises), HVAC (unless such services
are requested by Sublessee during times when such services are not required by
Sublessor), utilities on the Premises, property dues, elevator maintenance,
sprinklers, security, garbage, pest control, earthquake insurance, water
treatment, HVAC maintenance, landscaping and parking lot maintenance, or any
other costs that Sublessor is required to pay under the Master Lease pursuant to
its terms. Anything in this Sublease to the contrary notwithstanding, Sublessor
shall not be responsible for any other services required by Sublessee. Other
services that are required by Sublessee may be negotiated between Sublessor and
Sublessee and, if appropriate, billed to Sublessee at Sublessor's actual cost
for such service.
(d) In the event of any casualty or condemnation affecting the Subleased
Premises, Rent payable by Sublessee shall be abated hereunder, but only to the
extent that Rent under the Master Lease is abated with respect to the Subleased
Premises, and Sublessee waives any right to terminate the Sublease in connection
with such casualty or condemnation except to the extent the Master Lease is also
terminated as to the Subleased Premises or any material portion thereof. In the
event of the termination of Sublessor's interest as "Tenant" under the Master
Lease for any reason, then this Sublease shall terminate coincidentally
therewith without such termination constituting a default of Sublessor or
Sublessee. In the event of any taking, Sublessee shall have no claim to any
award. In the event of any casualty, Sublessor shall perform such restoration
as is required of Sublessor pursuant to the Master Lease and to the extent such
casualty is the result of Sublessee's action or inaction, Sublessee shall
restore the Subleased Premises as soon as reasonably practicable.
(e) Anything in this Sublease to the contrary notwithstanding, Sublessee
shall be liable for, and shall pay prior to delinquency, and shall deliver
evidence of payment prior to delinquency, all taxes levied against any personal
property, fixtures, machinery, equipment, apparatus, systems and appurtenances
or improvements placed by or on behalf of Sublessee in, about, upon or in
connection with the Subleased Premises.
4. Condition of the Subleased Premises. (a) Sublessor represents and
warrants that, as of the Commencement Date: (i) all systems that are essential
to the operation of the Building (e.g., HVAC, electrical, roof and plumbing
systems) are in good working condition;
2
<PAGE>
and (ii) that the Premises are free of any defects and violations of applicable
law. Except as expressly set forth in this Section 4(a): (i) Sublessor has made
no representations or warranties of any kind or nature whatsoever respecting the
Subleased Premises or its condition or suitability for Sublessee's use; and,
except as otherwise provided hereinafter, (ii) Sublessee agrees to accept the
Subleased Premises "as is, where is," with all faults, without any obligation on
the part of Sublessor to modify, improve or otherwise prepare the Subleased
Premises for Sublessee's occupancy.
(b) Sublessor agrees to undertake the following improvements to the
Subleased Premises at Sublessor's cost prior to the Commencement Date: (1)
installation of building standard carpet in Room 155A; (2) installation of
telephone wiring throughout the Subleased Premises (i.e., in Rooms 154, 155 and
155A); (3) installation of locks and entry door to the Subleased Premises and on
doors to Rooms 154, 155A and 156; and (4) installation of Sublessee's
identification sign at the entrance to the Subleased Premises (i.e., exit
passage 167A). Sublessor agrees to undertake the following improvements to the
Subleased Premises at Sublessee's cost prior to the Commencement Date: (1)
addition of a door to Room 155A; (2) extension of the dividing wall between
Rooms 155 and 155A to create a corridor between Rooms 155 and 155A as shown on
Exhibit B.
(c) Sublessor has not made an independent investigation of the Premises or
determination with respect to the physical and environmental condition of the
Premises including without limitation the existence of any underground tanks,
pumps, piping, toxic or hazardous substances on the Premises. No investigation
has been made by Sublessor to ensure compliance with the "American With
Disabilities Act" ("ADA"). ADA may require a variety of changes to the
Subleased Premises, including potential removal of barriers to access by
disabled persons and provision of auxiliary aids and services for hearing,
vision or speech impaired persons. Sublessee shall rely solely on its own
investigations and/or that of a licensed professional specializing in the areas
referenced in this Section 4(b).
5. Use. Sublessee may use the Subleased Premises as administrative
offices and for research and development purposes to the extent permitted under
the Master Lease and for no other purpose without the approval of the Master
Lessor and Sublessor. Sublessor shall have the right to inspect the Subleased
Premises during regular business hours after giving Sublessee not less than
forty-eight (48) hours notice; provided, however, that Sublessor shall have the
right to access the Subleased Premises at any time, without notice, in the event
of an "emergency." Except in the case of an "emergency," Sublessor agrees not
to enter the Subleased Premises unless accompanied by an authorized
representative of Sublessee, unless Sublessee has failed to make available such
a representative after provision of the notice required by this paragraph.
Sublessee acknowledges and agrees that the operation and use of the Subleased
Premises may require that Sublessee apply for and receive licenses and/or
permits from various federal, state and local governments, and Sublessee
covenants and agrees to apply for an receive such licenses and/or permits as are
required. Sublessee shall provide to Sublessor copies of any such licenses
and/or permits to the extent applicable to the Subleased Premises. Sublessee
acknowledges, agrees and covenants that its occupancy, operation and use of such
Subleased Premises shall be in accordance with: (a) all applicable state and
federal regulations; (b) all licenses and permits that either Sublessee or
Sublessor has received or receives in the future respecting such Subleased
Premises; and (c) the Master Lease. In the event of any disagreement concerning
the interpretation of such licenses, permits, or the Master Lease, the
determination of the employee of Sublessor charged with ensuring compliance with
such licenses, permits, and the Master Lease shall be controlling. For purposes
of this Paragraph 5, "emergency" shall mean a condition imposing a threat of
injury to person or property.
3
<PAGE>
6. Shared Access/Facilities. Sublessee acknowledges that the Premises
contains certain facilities, including: (a) the cafeteria; and (b) front lobby
area; (singly and/or collectively, the "Shared Facilities") that were installed
when the Premises were wholly occupied by one tenant. Sublessor has agreed to
provide access to and use of the Shared Facilities as may be reasonably required
by Sublessee, its employees, agents and invitees for the conduct of its business
at the Subleased Premises. In order to allow Sublessee access as reasonably
necessary for such purposes but at the same time protect each party's privacy,
security, confidentiality and proprietary information, Sublessee agrees as
follows:
(a) Sublessee shall only allow access to the Shared Facilities to its
employees, agents, independent contractors and invitees or other persons whose
access is provided via a key or other security device reasonably acceptable to
Sublessor.
(b) Sublessee will not allow any agent, independent contractor or other
person access from the Shared Facilities to any other portion of the Premises
without an escort by an employee of Sublessee, and except as otherwise provided
herein to the contrary and subject to Sublessor's rights under Paragraph 5
above, Sublessor will not allow any agent, independent contractor or other
person access from the Shared Facilities to any portion of the Subleased
Premises without an escort by an employee of Sublessee.
7. Master Lease. This Sublease shall be subject and subordinate to all
of the terms and provisions of the Master Lease. Except for payments of Rent
(which payments shall be made by Sublessor) and except for those provisions of
the Master Lease excluded by Paragraph 8 below, Sublessee hereby assumes and
agrees to perform, during the Term, all of Sublessor's obligations under the
Master Lease to the extent such obligations are applicable to the Subleased
Premises and accrue after the date of this Sublease pursuant to this Sublease.
8. Incorporation of Master Lease.
(a) Except as otherwise provided herein, all of the terms and provisions of
the Master Lease are incorporated into and made a part of this Sublease and the
rights and obligations of the parties under the Master Lease are hereby imposed
upon the parties hereto with respect to the Subleased Premises, the Sublessor
being substituted for the "Landlord" in the Master Lease, the Sublessee being
substituted for the "Tenant" in the Master Lease, and this Sublease being
substituted for the "Lease" in the Master Lease. The parties specifically agree
that any provisions relating to any construction obligations of "Landlord" under
the Master Lease with respect to construction that occurred or was to have
occurred prior to the Commencement Date hereof, are hereby deleted. Sublessor
shall not be liable to Sublessee for any failure by Master Lessor to perform its
obligations under the Master Lease, nor shall such failure by Master Lessor
excuse performance by Sublessee of its obligations hereunder; provided, however,
that Sublessor shall use its commercially reasonable efforts to cause Master
Lessor to perform its obligations under the Master Lease. Anything in the
Master Lease to the contrary notwithstanding, the liability of Sublessor for its
obligations under this Sublease is limited solely to Sublessor's interest in the
Master Lease, and no personal liability shall at any time be asserted or
enforceable against any other assets of Sublessor or against Sublessor's
stockholders, directors, officers or partners on account of any of Sublessor's
obligations or actions under this Sublease. The following sections of the
Master Lease are not incorporated herein: Sections 1.1, 2.1, 2.2, 2.3, 2.4,
---
2.6, 3.1, 4.1, Article 5, Article 6, Article 7, Article 9, Section 10.1, Article
11, Article 12, Section 13.1, Section 14.1, Section 15.1, Article 17, Section
18.2(b), Article 20, Sections 21.1, 21.15, 21.16 and Exhibits A-E.
(b) Sublessee hereby agrees to indemnify and hold harmless Sublessor from
and against any and all claims, liabilities, losses, damages and expenses
(including reasonable
4
<PAGE>
attorneys' fees) incurred by Sublessor arising out of, from or in connection
with (i) the use or occupancy of the Subleased Premises by Sublessee, (ii) any
breach or default by Sublessee under this Sublease or (iii) the failure of
Sublessee to perform any obligation under the terms and provisions of the Master
Lease assumed by Sublessee hereunder or required to be performed by Sublessee as
provided herein, from and after the Commencement Date of this Sublease.
(c) Sublessor hereby agrees to indemnify and hold harmless Sublessee from
and against any and all claims, liabilities, losses, damages and expenses
(including reasonable attorneys' fees) incurred by Sublessee arising out of,
from or in connection with (i) Sublessor's breach or default of any provision of
this Sublease or any provisions of the Master Lease not assumed by Sublessee
hereunder or (ii) acts or omissions of Sublessor under the Master Lease in
connection with the Subleased Premises prior to the Commencement Date of this
Sublease.
9. Sublessor's Obligations.
(a) Provided that Sublessee is not in default under the terms of this
Sublease beyond any applicable period to cure, Sublessor agrees to make timely
payments of the Rent due and timely to perform its obligations under the Master
Lease to the end that the Master Lease shall not be terminated due to the
default of Sublessor.
(b) To the extent that the provision of any services or the performance of
any maintenance or any other act (collectively "Master Lessor Obligations") is
the responsibility of Master Lessor, Sublessor, upon Sublessee's request, shall
make reasonable efforts to cause Master Lessor under the Master Lease to perform
such Master Lessor Obligations; provided, however, that in no event shall
Sublessor be liable to Sublessee for any liability, loss or damage whatsoever in
the event that Master Lessor should fail to perform the same, nor shall
Sublessee be entitled to withhold the payment of Rent or terminate this
Sublease, unless such failure is the result of an event of default on the part
of Sublessor under this Sublease, the Master Lease, or both. It is expressly
understood that Sublessor does not assume Master Lessor Obligations and that the
services and repairs that are incorporated herein by reference, including but
not limited to the furnishing of elevators, utilities, cleaning, janitorial or
other services or maintenance, restoration (following casualty or destruction),
or repairs to the Building, Premises and/or Subleased Premises will in fact be
furnished by Master Lessor and not Sublessor, except to the extent otherwise
provided herein.
(c) Except as provided in this Section 9, Sublessor shall have no other
obligations to Sublessee with respect to the Subleased Premises or the
performance of the Master Lessor Obligations.
10. Assignment and Subletting. Sublessee shall not assign, sublet,
transfer, pledge, hypothecate or otherwise encumber the Subleased Premises, this
Sublease or any interest therein, or permit the use or occupancy of the
Subleased Premises by any other person other than Sublessee. Any such
assignment, further subletting, occupancy or use by Sublessee shall, at the
option of Sublessor, terminate this Sublease. This provision constitutes an
absolute prohibition of any assignment or subletting by Sublessee of any
interest in this Sublease.
11. Early Termination of Master Lease. If, without the fault of Sublessor
or Sublessee, the Master Lease should terminate prior to the expiration of this
Sublease, neither party shall have any liability to the other party. To the
extent that the Master Lease grants Sublessor any discretionary right to
terminate the Master Lease, whether due to casualty, condemnation or otherwise,
Sublessor shall be entitled to exercise or not exercise such right in its
complete and absolute discretion; provided, however, that Sublessor shall use
reasonable efforts to give to Sublessee as much prior notice of its intent to
terminate as practicable.
5
<PAGE>
12. Consent of Master Lessor. If Sublessee desires to take any action
that requires the consent of Master Lessor pursuant to the terms of the Master
Lease, including, without limitation, making any modification, alteration or
improvement of the Subleased Premises or entering into a further sublease or
assignment of this Sublease, and in any event if Sublessee desires to make any
alteration to the Subleased Premises, then, notwithstanding anything to the
contrary herein, (a) Sublessor shall have the same rights of approval or
disapproval as Master Lessor has under the Master Lease, (b) Sublessee shall not
take any such action until it obtains the consent of both Sublessor and Master
Lessor and (c) Sublessee shall request that Sublessor obtain Master Lessor's
consent on Sublessee's behalf, unless Sublessor agrees that Sublessee may
contact Master Lessor directly with respect to the specific action for which
Master Lessor's consent is required.
13. Surrender of Subleased Premises. In lieu of any obligation or
liability set forth in the Master Lease, upon the termination of the Sublease,
Sublessee shall surrender the Subleased Premises to Sublessor broom-clean and in
as good a condition as on the Commencement Date, ordinary wear and tear and
damage by fire or other casualty excepted. In addition, Sublessee shall remove
any alterations, additions and improvements, prior to the termination of the
Sublease and restore the Subleased Premises to its prior condition, ordinary
wear and tear and damage by fire or other casualty excepted, repairing all
damage caused by or related to any such removal, all at Sublessee's expense.
14. No Third Party Rights. The benefit of the provisions of this Sublease
is expressly limited to Sublessor and Sublessee and their respective permitted
successors and assigns. Under no circumstances will any third party be
construed to have any rights as a third party beneficiary with respect to any of
said provisions; provided, however, that Master Lessor shall be entitled to the
benefit of Sublessee's assumption of Sublessor's obligations, as "Tenant" under
the Master Lease, pursuant to Section 8 above.
15. Time of Essence. It is expressly understood and agreed that time is
of the essence with respect to each and every provision of this Sublease.
16. Attorneys' Fees. If any action or proceeding at law or in equity or
any other dispute resolution proceedings shall be brought to enforce or
interpret any of the provisions of this Sublease, the prevailing party shall be
entitled to recover from the other party its reasonable attorneys' fees and
costs incurred in connection with the prosecution or defense of such action or
proceeding, as more fully provided in the Master Lease. Jurisdiction of any
litigation arising hereunder shall be solely in the Superior Court of California
in San Mateo County or in San Francisco City and County or in the U.S. District
Court of Northern California with venue in San Francisco.
17. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Sublessor or Sublessee,
the obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Sublessor or
Sublessee.
18. Approval of Master Lessor. This Sublease shall be conditioned upon,
and shall not take effect until, receipt of the written consent of Master Lessor
thereto. Upon receipt of such consent, this Sublease shall be effective as of
the Commencement Date. Sublessor and Sublessee acknowledge and agree that in
granting such consent, notwithstanding any other provisions contained in or
implied in this Sublease, Master Lessor shall not be deemed or construed (a) to
have released Sublessor from any responsibility for the full and timely
performance of all obligations of Sublessor as Tenant under the Master Lease as
it pertains to the Subleased Premises, nor (b) to have authorized Sublessor to
act on Master Lessor's behalf in
6
<PAGE>
exercising or waiving any rights, remedies or privileges of Master Lessor as
Landlord under the Master Lease as it pertains to the Subleased Premises, nor
(c) to have assumed, incurred or undertaken any obligations or liabilities
running directly to Sublessee with respect to the Subleased Premises, it being
the explicit intention and understanding of the parties that, notwithstanding
the incorporation by reference of a portion of the Master Lease into this
Sublease, Master Lessor and Sublessor shall look solely to one another for the
performance of their respective obligations with respect to the Premises as
Landlord and Tenant under the Master Lease, and that Sublessor and Sublessee
shall look solely to one another for the performance of their respective
obligations with respect to the Subleased Premises under this Sublease.
19. Confidentiality. Except to the extent expressly authorized by this
Sublease or otherwise agreed in writing by the parties, each party agrees that,
for the term of this Sublease and for five (5) years thereafter, it shall keep
confidential and shall not publish or otherwise disclose and shall not use for
any purpose other than as provided for in this Sublease any information
disclosed by a party to the other party under this Sublease or by reason of
Sublessee's occupancy of the Subleased Premises and access to the Premises or by
reason of Sublessor's access to the Subleased Premises, or by reason of use of
the Shared Facilities, and any use, operations or communication in any of the
foregoing places ("Confidential Information") unless the receiving party can
demonstrate by competent proof that such Confidential Information:
(a) was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure by the other party;
(b) was generally available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission of
the receiving party in breach of such agreements;
(d) was disclosed to the receiving party, other than under an obligation
of confidentiality to a third party, by a third party who had no obligation to
the disclosing party not to disclose such information to others; or
(e) was independently discovered or developed by the receiving party
without the use of Confidential Information belonging to the disclosing party.
The obligations set forth in this paragraph 19 shall survive the
termination of this Sublease as set forth above.
20. Insurance. Sublessee shall have issued, pay the premiums therefor,
and maintain in full force and effect during the term of this Sublease (i) a
commercial general liability insurance policy in which Sublessee shall be the
insured and Sublessor shall be an additional insured, protecting the Sublessor
(and such additional persons and/or entities as Sublessor may request) and
Sublessee in the amount of Two Million and No/100 Dollars ($2,000,000.00)
combined, single limit coverage per occurrence for bodily injury, death or
property damage and (ii) all-risk property insurance written at replacement cost
value and with replacement cost endorsement, covering all leasehold improvements
installed in the Subleased Premises by Sublessee, if any, and all of Sublessee's
personal property in the Subleased Premises.
21. Notices. All notices given under this Sublease shall be in writing,
hand-delivered or sent by a recognized courier such as Federal Express or mailed
by United States Certified or
7
<PAGE>
Registered Mail, postage prepaid, return receipt requested. Notices should be
delivered as follows:
(a) To the Sublessor at the business office and mailing address of Tenant
at the Premises.
(b) To the Sublessee at 16020 Industrial Drive, Gaithersburg, Maryland
20877, Attn: Richard J. Massey, Ph.D., President.
Any such notice shall be deemed to be served on the date it is hand-delivered or
delivered by recognized courier, or on the date on which it is received if sent
by U.S. mail (or if the date on which delivery is refused as evidenced by the
signature of the person attempting such delivery). Sublessor and Sublessee
shall each have the right to change the person and/or address to which notices
shall be delivered upon notice thereof to the other party sent pursuant to the
provisions of this Paragraph 21.
Executed as of the date first written above.
"Sublessor" "Sublessee"
Tularik Inc. Igen International, Inc.
a Delaware corporation a Delaware corporation
By: /s/ William J. Rieflin By:
---------------------- ---------------------------------
Title: Title:
-------------------- ------------------------------
8
<PAGE>
Consent Of Master Lessor
Britannia Biotech Gateway, L.P., "Master Lessor" under the Master Lease
identified in that certain Sublease dated, for reference purposes, June 1, 1999
to which this Consent is attached, hereby consents to said Sublease. This
Consent shall not be deemed to relieve Sublessor, as Tenant under the Master
Lease, from any obligation or liability thereunder, nor shall this Consent be
deemed Master Lessor's consent to any further subletting or assignment.
Master Lessor:
Britannia Biotech Gateway, L.P.
a Delaware limited partnership
By: /s/ T. J. Bristow
------------------------------
Britannia Gateway, LLC, a California limited liability company
Managing Partner
Name: T. J. Bristow
-----------------------------
Title: Manager
---------------------------
Date: 9/3/99
----------------------------
9
<PAGE>
EXHIBIT A
[Master Lease]
<PAGE>
EXHIBIT B
[Subleased Premises]
<PAGE>
EXHIBIT 10.21
AGREEMENT
---------
IT IS HEREBY AGREED by and between LEONARD RACANELLI and THE ROSA
RACANELLI 1988 TRUST, that the rental proceeds (base and additional rents)
received from TULARIK, INC., for the rental of a portion of premises known as
266 Pulaski Road, Greenlawn, New York 11740, are to be paid to LEONARD RACANELLI
only.
Dated: July 23, 1998
/s/ Leonard Racanelli
-----------------------------
LEONARD RACANELLI
THE ROSA RACANELLI 1988 TRUST
By /s/ Rosa Racanelli
---------------------------
ROSA RACANELLI - Trustee
STATE OF NEW YORK )
:ss.:
COUNTY OF SUFFOLK )
On the 23rd day of July, 1998, before me personally came LEONARD
RACANELLI and ROSA RACANELLI, to me known to be the individuals described in and
who executed the foregoing instrument, and acknowledged that they executed the
same.
/s/ [ILLEGIBLE]
---------------------------
Notary Public
<PAGE>
EXHIBIT B
BASIC RENT SCHEDULE
MONTHLY ANNUALLY
First Year $ 16,916.66 $ 203,000.00
Second Year 17,593.32 211,119.84
Third Year 18,297.05 219,564.60
Fourth Year 19,028.93 228,347.16
Fifth Year 19,790.08 237,480.96
Sixth Year 20,581.68 246,980.16
Seventh Year 21,404.94 256,859.28
<PAGE>
EXHIBIT C
Tenant Improvements will consist of:
a. Administrative Offices spaces including office furniture and workstations.
b. Molecular Biology Labs including fume hoods, biosafety cabinets, and
casework.
c. Tissue Culture suites.
d. Lab Support Spaces including Photo/Dark Room, PCR room (DNA Mapping), Cold
Room.
e. D.I. Water/Mechanical room.
f. Glassware was room including glass washer and autoclave.
g. Telecom/Network room including telephone switch and networking equipment.
h. Backup generator.
<PAGE>
RIDER TO A.I.R.E.A. STANDARD INDUSTRIAL LEASE -- MULTI-TENANT (MODIFIED NET -
1993) DATED, FOR REFERENCE PURPOSES JULY ________, 1998 BY AND BETWEEN LEONARD
RACANELLI AND THE ROSA RACANELLI 1988 TRUST (COLLECTIVELY, "LESSOR"), AND
TULARIK INC. ("LESSEE").
This Rider is attached to and made a part of the above-referenced typeset lease
(the "Lease"). In the event of any conflict between the typeset portion of the
Lease and this Rider, the terms and provisions of this Rider shall govern. If
any addenda or amendments are also attached to the typeset portion of the Lease,
this Rider shall govern to the extent of any conflict between the terms and
provisions of this Rider and such addenda or amendments. All references in the
following paragraphs or to corresponding paragraphs of the typeset portion of
the Lease, except as otherwise expressly provided herein.
1. Par 1.3: Term:
The Commencement Date shall be that date which is thirty (30) days from the
execution of this Lease. The Commencement Date shall be delayed by one (1) day
for each day of delay in the move into the Premises that is caused by any Force
Majeure Delay or Landlord Delay. No Landlord Delay (as hereinafter defined) or
Force Majeure Delay (as hereinafter defined) shall be deemed to have occurred
unless and until the party claiming such delay has provided written notice to
the other party specifying the action or inaction that such notifying party
contends constitutes a Landlord Delay or Force Majeure Delay, as applicable. If
such action or inaction is not cured within one (l) day after receipt of such
notice, then a Landlord Delay or Force Majeure Delay, as set forth in such
notice, shall be deemed to have occurred commencing as of the date such notice
is received and continuing for the number of days the substantial completion of
the Premises was in fact delayed as a direct result of such action or inaction.
2. Par. 2.2: Condition:
The words "thirty (30) days" which appear in the fifth and sixth lines
of paragraph 2.2 are deleted and the words "one (1) year" are substituted
therefor.
3. Par 2.3: Compliance with Covenants, Restrictions and Codes:
The words and numeral "six (6) months" which appear in the seventh
line of paragraph 2.3 are deleted and the words and numeral "one (1) year" are
substituted therefor.
1.
<PAGE>
4. Par. 2.4: Acceptance of Premises: This paragraph is deleted in it entirety.
5. Par. 2.7: Common Areas - Changes.
Notwithstanding the provisions of Paragraph 2.7, Lessor shall make no
changes to or uses of the Common Areas which materially adversely affect
Lessee's use and occupancy of the Premises, except to the extent reasonable and
necessary for Lessor to comply with its obligations under this Lease.
6. Par. 3.2: Early Possession.
Notwithstanding the provisions of Paragraph 3.2, Lessee shall have the
right to enter the Premises at any time prior to the Commencement Date to
undertake, at its sole cost, those certain tenant improvements set forth in
Exhibit C attached, hereto and incorporated herein by reference, as more
particularly described therein (the "Tenant Improvements") and to take
reasonable preparatory measures for its occupancy of the Premises, including,
without limitation the installation of its trade fixtures, furnishings, and
telephone and computer equipment. Such entry shall be subject to all of the
terms and conditions of this Lease, except that Lessee shall not be required to
pay any Base Rent or Common Area Operating Expenses during such early occupancy
period.
7. Par. 3.3: Delay in Possession.
Notwithstanding the provisions of Paragraph 3.3' if Lessor has not
delivered the Premises to Lessee with Landlord's work substantially completed,
free of occupants and tenants, on or before one (1) month after the Commencement
Date 1998, Lessee shall have the right thereafter, until such possession is
delivered to Lessee, to cancel this Lease. Upon such cancellation, Lessor shall
return to Lessee all sums theretofore deposited by Lessee with Lessor and
neither party shall have any further liability or obligation to the other.
8. Par. 4.2: Common Area Operating Expenses.
2.
<PAGE>
(a) Notwithstanding the provisions of Paragraph 4.2, the following
shall not be included within Common Area Operating Expenses:
(i) Costs of a capital nature, including but not limited to capital
improvements and alterations, capital equipment, and capital tools as determined
in accordance with generally accepted accounting principles.
(ii) Overhead profit increments paid to Lessor's subsidiaries or
affiliates for management or other services on or to the Building or for
supplies or other materials to the extent that the cost of the services,
supplies, or materials exceeds the cost that would have been paid had the
services, supplies, or materials been provided by unaffiliated parties on a
competitive basis.
(iii) All interest, loan fees, and other carrying costs related to
any mortgage or deed of trust on the Building or any capital item, and all
rental and other payable due under any ground underlying lease, or any lease for
any equipment ordinarily considered to be of a capital nature (except janitorial
equipment is not affixed to the Building.)
(iv) Any compensation paid to clerks, attendants, or other persons
in commercial concessions operated by Lessor.
(v) Advertising and promotional expenditures.
(vi) Costs of repairs and other work occasioned by fire, windstorm,
or other casualty of an insurable nature.
(vii) Any costs, fines, or penalties incurred due to violations by
Lessor of any governmental rule or authority, this or any other lease in the
Building, or due to Lessor's negligence or willful misconduct.
(viii) Management costs (which shall be deemed to include salaries,
benefits and other compensation to all management) in excess of three percent
(3%) per annum of the annual Base Rent.
3.
<PAGE>
(ix) Costs for sculpture, paintings, or other objects of art (nor
insurance thereon or extraordinary security in connection therewith).
(x) The cost of monitoring, containing, removing, or otherwise
remediating any contamination of the Premises at the property (including the
underlying land and ground water) by any Hazardous Materials where such
contamination was not caused by Lessee.
(xi) Any other expense that under generally accepted accounting
principles and practice consistently applied would not be considered a normal
maintenance or operating expense.
(b) Lessor shall keep complete and accurate records in accordance
with good bookkeeping and accounting practices regarding all Common Area
Operating Expenses. Lessee shall have the right to audit such records for each
calendar year during the term of this Lease by notifying Lessor within 120 days
following the end of each such calendar year and/or 120 days after Lessor has
furnished Lessee a statement of such actual expenses. If an audit (performed by
a certified public accountant on behalf of Lessee) reveals that Lessor has
overcharged Lessee for common Area Operating Expenses, Lessor shall refund the
amount overcharged within ten days after such determination has been made. If
Lessor has overcharged Lessee by more than 5%, Lessor shall refund the
overcharged amount and, in addition, shall pay the costs of Lessee's audit.
9. Par. 5: Security Deposit.
Notwithstanding the provisions of Paragraph 5, Lessor shall keep the
security deposit in an interest-bearing money market account segregated from
Lessor's funds, with interest to accrue for the benefit of Lessee.
10. Par. 6.1(a): Compliance with Law.
Paragraph 6.1(a) of the Lease is amended by adding the language at the
end of this section:
4.
<PAGE>
Notwithstanding anything to the contrary contained in this Lease,
throughout the term hereof, Lessee shall not be responsible compliance with any
laws, codes, ordinances, rules, regulations governmental directives, including
but not limited to the Americans with Disabilities Act ("ADA"), where such
compliance is related specifically to Lessee's use and occupancy of the
Premises. For example, if any governmental authority should require the building
to be structurally strengthened against earthquake, or should require the
removal of asbestos from buildings, such shall be performed by and at the sole
cost of Lessor.
11. Par. 7.2: Lessor's Obligations.
Notwithstanding the provisions of Paragraph 7.2 if Lessor fails to
timely perform its maintenance and repair obligations hereunder within ten (10)
days after notice from Tenant specifying the action required hereunder, and, as
a consequence, Lessee's use of the Premises is substantially impaired, Lessee
shall have the right to cause such repair or maintenance to be performed at
Lessor's expense and to deduct the costs thereof, together with interest thereon
at the highest rate permitted by law, from the Rent payable to Lessor.
12. Par. 7.3: Alterations and Additions.
Notwithstanding the provisions of Paragraph 7.3:
(a) Lessee shall be entitled to make non-structural alterations,
additions and Utility Installations in or to the Premises, without the prior
consent of Lessor, so long as the same do not affect any structural or exterior
portions of the Building or adversely affect the Building's electrical, plumbing
or HVAC Systems, and provided the Lessee provides the Lessor with a copy of its
construction plan and/or sketch prior to commencement of work.
In addition, Lessor hereby consents to the making of the following
alterations, additions and Utility Installations [See Exhibit C attached
hereto].
(b) With respect to any alterations, additions or Utility
Installations requiring Lessor's consent, Lessor shall not reasonably withhold
its consent thereto.
(c) Lessee shall not be required to remove (but may elect to remove)
(i) any of the initial Tenant Improvements constructed by on behalf of Lessee,
as more particularly described on Exhibit attached hereto and incorporated
herein by reference and (ii) any
5.
<PAGE>
alterations, additions or utility Installations for which Tenant obtained
Lessor's consent, unless Lessor has indicated, at the of granting such consent,
that such removal will be required.
3. Par. 8.7: Indemnity.
(a) Notwithstanding anything to the contrary in Paragraph 8.7 or 8.8,
Lessee shall not be required to indemnify, defend, or hold Lessor harmless from
or against claims, liability, loss, cost or expense arising out of (i) the
breach by Lessor, or Lessor's agents, employees, licensees, invitees, or
independent contractors (collectively "Lessor's Agents"), of any covenant,
representation warranty under this Lease, or (ii) any negligence or willful
misconduct of Lessor or Lessor's Agents.
(b) Lessor shall protect, defend and hold harmless Lessee Lessee's
employees, officers, agents, directors, and shareholders, and the successors and
assigns of each of the foregoing, against and from any and all claims, demands,
losses, liabilities, damages, costs and expenses, (including, without
limitation, attorneys' and consultants' fees and the costs and expenses of
defense) arising or resulting from or in connection with Lessor's or Lessor's
Agents' breach of any covenant, representation or warranty under this Lease,
(ii) Lessor's or Lessors' Agents negligence or willful misconduct, or (iii)
Lessor's ownership, management or operation of the Industrial Center. The mutual
indemnity obligations of Lessor and Lessee under this Lease shall not, however,
release the respective insurers of Lessor and Lessee from such insurers'
obligations under any policies covering their respective insureds.
14. Par. 9: Damage or Destruction.
Notwithstanding anything herein to the contrary,
(a) Lessor shall notify Lessee within 30 days of the date of any
casualty specifying Lessor's architect's or engineer's reasonable estimate as to
the time required to rebuild or restore the Premises;
(b) If in the reasonable opinion of Lessor's architect or engineer,
the Premises will take longer than 180 days to rebuild or restore, Lessee may,
notwithstanding Lessor's obligation or election to rebuild, terminate this Lease
by written notice to Lessor within ten (10) days after Lessee's receipt of
Lessor's notice. Such termination shall be effective thirty (30) days after the
giving of Lessee's notice.
6.
<PAGE>
(c) If Lessor fails to restore the Premises (including reasonable
means of access thereto) within a period which is sixty days longer than the
period stated in Lessor's notice to Lessee as estimated rebuilding period,
Lessee, at any time thereafter until such rebuilding is completed, may terminate
this Lease by delivering written notice to Lessor of such termination, in which
this Lease shall terminate as of the date of the giving of notice.
15. Par. 9.6: Abatement of Rent.
Delete from paragraph 9.6(a) the last sentence of such paragraph and
the words "but not in excess of proceeds from insurance required to be carried
under Paragraph 8.3(b)."
16. Par. 10: Real Property Taxes.
Notwithstanding anything to the contrary in Paragraph 10:
(a) Lessee's obligation to pay any assessments included in Real
Property Taxes shall be calculated on the basis of the amount due if Lessor had
allowed the assessment to go to bond and the same were to be paid over the
longest period available; and
(b) Lessee shall be required to pay any tax based on (1) gross or net
rents, (2) the square footage of the Premises or the Project, (3) this
transaction (or any document relating thereto), (4) the occupancy of Lessee, or
(5) any other tax, fee, or excise, however described, including, without
limitation, a so called "value added tax," as a direct substitution in whole or
in part for, or in addition to, any real property tax, only to the extent that
any such tax is in substitution of any real property tax it would otherwise be
obligated to pay.
17. Par. 12: Assignment and Subletting.
(a) Notwithstanding the provisions of Paragraph 12, the assignment of
rents described in Paragraph 12.3(a) shall apply only during such periods as
Lessee is in default under this Lease (the applicable grace period, if any,
having expired). Furthermore, any notice by Lessor to Lessee's assignee or
sublessee requiring such assignee or sublessee to pay rental
7.
<PAGE>
directly to Lessor shall be sworn to be true by Lessor and Lessor shall
simultaneously deliver a copy of any such notice to Lessee.
(b) Delete paragraph 12.1(d) in its entirety.
18. Par. 13.1 Default; Breach; Remedies.
(a) The three (3) day period provided in Paragraph 13.1(b) is
extended to five (5) business days.
(b) The words "knowingly made and "are added after the word 'was" in
the first line of paragraph 13.1(f).
19. Par. 14: Condemnation.
Notwithstanding anything to the contrary in Paragraph 14, shall be
entitled to any condemnation award, or payment made threat of condemnation, for
loss of goodwill, moving costs, unamortized portion of any tenant improvements
made at the of Lessee, loss of tenant's personal property and Lessee's fixtures,
and loss of Lessee's leasehold interest (including loss of the purchase and
other options granted to Lessee hereunder).
20. Par. 16: Tenancy Statements.
Lessor shall not request financial statements of Lessee pursuant to
Paragraph 16.2 more frequently than once every 12 months during the term hereof.
21. Par. 19: Interest on Past-Due Obligations. This paragraph is deleted in
its entirety.
22. Par. 23: Notices.
8.
<PAGE>
Paragraph 23 is deleted in its entirety and replaced with the
following:
All notices, approvals, consents, and other communications ("Notices") to
be given under this Lease must be in writing and may be given by any method
of delivery which provides evidence or confirmation of receipt including
but not limited to personal delivery, express courier (such as Federal
Express), telecopy, and prepaid certified or registered mail with return
receipt requested. Notices shall be deemed to have been given and received
on the earlier of actual receipt, refusal to accept delivery, or three (3)
business days after the day of deposit into prepaid registered or certified
U.S. mail. Notices shall be given and/or addressed to the respective
parties at the following addresses:
If to Lessor: Leonard Racanelli and The Rosa Racanelli
1988 Trust
1799 Washington Avenue
Seaford, NY 11783
If to Lessee: Tularik Inc.
Two Corporate Drive
South San Francisco, CA 94080
Attn: William Rieflin, General Counsel
Either party may change its address for receipt of notice by giving
notice to the other party in accordance with the provisions hereof.
23. Par. 30: Subordination. Notwithstanding anything to the contrary in
Paragraph 30, Lessee shall not be required to subordinate its interest under
this Lease unless (a) such subordination does not materially increase Lessee's
obligations or materially decrease its rights under this Lease, and (b) Lessor
first obtains from the holder of the mortgage, deed of trust or other instrument
of security to which this Lease is to become subordinated a written agreement
that provides substantially that as long as Lessee performs its obligations
under this Lease, no foreclosure of; deed given in lieu of foreclosure of; or
sale under the encumbrance, and no steps or procedures taken under the
encumbrance, shall affect Lessee's rights hereunder.
9.
<PAGE>
24. Par. 32: Lessor's Access.
Lessor shall give Lessee not less than 24 hours' prior notice of
Lessor's entry onto the Premises pursuant to Paragraph 32. In addition, Lessor
shall be entitled to impose reasonable security restrictions on Lessor and
Lessor' Agents. The foregoing limitations shall not apply in cases of emergency,
where Lessor shall have such rights of access as is reasonable under the
circumstances; provided, however, that Lessor shall use reasonable efforts first
to contact the following person in connection with such emergency: Emergency
contact: Scott Powers phone/day: 516-689-1490; phone/evening and weekends: 516-
754-0448.
25. Par. 34: Signs.
Notwithstanding the provisions of Paragraph 34, Lessor hereby consents
to Lessee's installation of signage, at Lessee's sole cost and expense, at the
locations indicated in Exhibit D, to follow. Lessee shall remove all such
signage at the expiration of the lease term and repair any damage caused by such
removal.
26. Par. 39.5 Options to Extend.
(a) The first paragraph of paragraph 39.5 is hereby deleted and the
following is substituted therefor:
Lessor hereby grants to Lessee two (2) successive options to extend the
term of this Lease, each for a period of five (5) years, commencing at the
expiration of the original lease Term and the first extended Term, as the case
may be (as extended, the 'First Extended Term" and the "Second Extended Term"),
upon each and all of the following terms and conditions:
(b) Paragraph 39.5(i) is hereby deleted and the following is substituted
therefor:
(i) Lessee gives to Lessor, and Lessor actually receives on a date
which is prior to the date that the First or Second Extended Terms, as the case
may be, would commence
10.
<PAGE>
(if exercised) by at least six (6) months, a written notice of the exercise of
the option to extend this Lease for the First or second Extended Term, as the
case may be, time being of the essence. If said notification of the exercise of
said option is not so given and received, the option shall automatically expire,
(c) The language in Paragraph 39.5(vi) is hereby deleted and the following
is substituted therefor:
(v) Notwithstanding anything herein to the contrary, Lessor agrees that
the two (2) Options to Extend are not personal to Lessee but may be exercised by
any assignee or transferee of Lessee hereunder. Lessor further agrees that
provided (a) Lessee is not then in default of its obligations under this Lease
(which default is continuing after notice thereof from Lessor and the expiration
of any applicable grace period provided therefor in the Lease), and (b) Lessee
has exercised its option to extend pursuant to paragraph 39-5 hereof at least
six (6) months prior to the expiration of the original Lease term, or the First
Extended Term, as the case may be, Lessor shall exercise (i) its first "option
to renew', pursuant to the Master Lease, for an additional period of five (5)
years, commencing upon the expiration of the original term, and (ii) its second
five (5) year "option to renew pursuant to the Master Lease, such term
commencing upon the expiration of the First Extended Term.
(d) Paragraph 39.5(iv) is hereby deleted and the following is substituted
therefor:
The monthly rent payable under Paragraph 1.5 ("Base Rent") of the
Lease shall be increased during the First Extended Term and the Second Extended
Term as set forth below:
RENT DURING FIRST EXTENDED TERM
Period Per Annum Per Month
Eighth Year $267,133.68 $22,261.14
Ninth Year 277,819.08 23,151.59
Tenth Year 288,931.80 24,077.65
11.
<PAGE>
Eleventh Year 300,489.12 25,040.76
Twelfth Year 312,508.68 26,042.39
RENT DURING SECOND EXTENDED TERM
Period Per Annum Per Month
Thirteenth Year $325,009.08 $27,084.09
Fourteenth Year 338,009.40 28,167.45
Fifteenth Year 351,529.80 29,294.18
Sixteenth Year 365,590.85 30,465.91
Seventeenth Year 380,214.48 31,684.55
If the First Extended Term or Second Extended Term, as the case may be,
commences on a day or expires on a day other than the last day of a calendar
month, the Rent for such fractional month shall be pro-rated on a daily basis
based upon a thirty (30) day calendar month.
(e) Paragraph 39.5(v) is amended to add the words "First" before the
word "Extended" in the first line of paragraph 39.5(v) and to add the words "and
Second Extended Term" after the word "Term" in the first line of paragraph
39.5(v).
27. Add a new Par. 49 entitled "Lessor's Representations and Warranties".
Lessor represents and warrants that, as of the Commencement Date, (a)
Lessor has full power and authority to enter into this Lease; (b) the Premises
and any improvements constructed or to be constructed thereon by Lessor shall be
free from material structural defects and the Building systems are in good
working order, condition and repair; (c) the Premises and any improvements
constructed by Landlord shall comply with all applicable covenants and
restrictions of record, statutes, ordinances, codes, rules, regulations, orders,
and requirements, including but not limited to the Americans With Disabilities
Act ("ADA"); (d) the Premises and Industrial Center are free from Hazardous
Materials (and for purposes of this subclause (f), the Premises and/or
Industrial Center shall be deemed to include the underlying soil and ground
water); and (6) there are no underground storage tanks at the Premises. In the
event of a breach of the foregoing warranties, Lessor shall promptly rectify
such breach at its sole cost and
12.
<PAGE>
expense. Lessor also shall protect, indemnify, defend, and hold Lessee harmless
from and against any and all liability, loss, suits, claims, actions, costs, and
expense (including, without limitation, attorneys' fees) arising from (i) any
breach of the foregoing warranties and (ii) any contamination of the Premises
and/or Industrial Center (including the underlying land and groundwater) by any
Hazardous Materials, where such contamination was not caused by Lessee. The
provisions of this paragraph shall survive the termination or expiration of this
Lease. Lessee acknowledges that Lessor has made no representation or warranty
respecting the suitability of the Premises for Lessee's intended use.
28. Add a new Par. 50 entitled, Landlord's Work".
Lessor shall at its sole expense, prior to the Commencement Date, construct and
install those certain improvements and equipment, set forth in Paragraph 49 of
the printed Lease form (collectively, "Landlord's Work"). Lessor shall apply for
and obtain the necessary permits and approvals to allow construction of
Landlord's Work. Upon receipt of such approvals and permits, Lessor shall
diligently construct and complete Landlord's work substantially in accordance
with plans and specifications approved by Lessor and Lessee. Such construction
shall be performed in a in a good and workmanlike manner and shall comply with
all applicable governmental codes, laws, ordinances and regulations, and Lessor,
if required, will obtain a building permit and certificate of occupancy or
certificate of completion from the Town of Huntington and deliver a copy of same
to the Lessee.
29. Add a new Par. 51 entitled "Tenant Improvements"
Lessee shall use reasonable efforts to cause, at its sole cost and expense,
the Tenant Improvements to be completed on or before the Commencement Date.
Lessee shall undertake and diligently complete, subject to Landlord Delays and
Force Majeure Delays, construction of Such Tenant Improvements in the Premises
substantially in accordance with plans and specifications to be mutually
approved by Lessor and Lessee, which approval shall not be unreasonably withheld
or delayed. All such work shall be preformed in a good and workmanlike manner,
and shall conform to all applicable governmental codes, laws and regulations in
force at the time such work is completed. Lessor and Lessee shall both use their
best efforts to develop, review and approve all working drawings, final
drawings, specifications, changes (if applicable) and other matters promptly,
diligently and within such time periods set forth below.
Lessor shall approve, deny or request modification of any plans and
specifications for the Tenant Improvements within five (5) days after submission
by Lessee. If Lessor fails to approve,
13.
<PAGE>
deny or modify such plans and specifications within such five (5) day period,
Lessor shall be deemed to have approved the subject plans and specifications.
For purposes of this Lease, Landlord Delay shall mean:
(a) Any delay resulting form Lessor's failure to furnish, in a timely
manner, information requested by Lessee or by the or General Contractor for
Tenant Improvements in connection with the design or construction of Tenant's
Work, or Lessor's failure to approve in a timely manner any matters requiring
approval by Lessor; or
(b) Any delay of any other kind or nature caused by Lessor or
Lessor's contractors, agents, or employees) or resulting from performance of
Landlord's Work.
For purposes of this Lease, Force Majeure Delay shall mean:
Delays due to acts of God, acts of public agencies, labor, strikes,
fires, freight embargoes, rainy or stormy inability to obtain supplies,
materials, fuels or permits, delays of contractors or subcontractors, or other
causes or contingencies beyond the reasonable control of Lessor or Lessee, as
applicable.
30. Add a new Par. 52 entitled "Landlord's Lien:"
Notwithstanding anything herein to the contrary, Lessor waives any and
all rights, title and interest Lessor now has, or hereafter may have, whether
statutory or otherwise, to Lessee's inventory, equipment, furnishings, trade
fixtures, books and records, personal property, and tenant improvements paid for
by Lessee located at the Premises (singly and/or collectively, the
"Collateral"). Lessor acknowledges that Lessor has no lien, right, claim,
interest or title in or to the Collateral. Lessor further agrees that Lessee
have the right, at its discretion, to mortgage, pledge, hypothecate or grant a
security interest in the Collateral as security for its obligations under any
equipment lease or other financing arrangement related to the conduct of
Lessee's business at the Premises. Lessor further agrees to execute and deliver
within three (3) business days any UCC filing statement or other documentation
required to be executed by Lessor in connection with any such lease or financing
arrangement, and any real estate consent or waiver forms submitted by any
vendors, equipment lessors, chattel mortgagees, or holders or owners of
14.
<PAGE>
the Collateral setting forth, interalia that Lessor waives, in favor of such
party any superior lien, claim, interest or other right therein.
The Collateral shall not become the property of Lessor or a part of the realty
no matter how affixed to the Premises and may be removed by Lessee or any
Equipment Lessors at any time and from time to time during the entire term of
this Lease. Lessee shall promptly repair any damage caused by the removal of
such property, whether effected by Lessee or Equipment Lessors.
15.
<PAGE>
"LESSOR" "LESSEE"
THE ROSA RACANELLI 1988 TRUST TULARIK INC.
By: /s/ Rosa Racanelli By:
------------------- --------------------------------
ROSA RACANELLI, as trustee and not
Individually Its:
------------------------------
/s/ Leonard Racanelli
- ------------------------
Leonard Racanelli, an individual
16.
<PAGE>
EXHIBIT 10.22
SUBLEASE
THIS SUBLEASE, dated November 16, 1998, is entered into by and between
Tularik Inc., a Delaware corporation ("Sublessor"), and GENESOFT INC., a
Delaware corporation ("Sublessee").
Recitals
A. Sublessor leases certain premises (the "Premises") consisting of
approximately 80,000 rentable square feet of space located in that certain
building located at Two Corporate Drive, South San Francisco, California (the
"Building"). Sublessor is the tenant under that certain Build-To-Suit Lease
dated the 10/th/ day of February, 1998 (the "Master Lease") with Britannia
Biotech Gateway Limited Partnership, a California limited partnership, as
landlord ("Master Lessor"). An accurate and complete copy of the Master Lease
is attached hereto as Exhibit A. Except as otherwise expressly provided herein,
any capitalized terms herein without definition shall have the same meaning as
they have in the Master Lease.
B. Sublessor desires to sublease to Sublessee, and Sublessee desires to
Sublease from Sublessor, pursuant to the terms and provisions hereof.
Now, Therefore, in consideration of the covenants and conditions contained
herein, Sublessor and Sublessee agree as follows:
AGREEMENT
1. Term. The term of this Sublease (the "Term") shall commence (the
"Commencement Date") on the later to occur of January 2, 1999 and the issuance
of the Certificate of Occupancy for the Premises, and shall expire, unless
sooner terminated or extended pursuant to the further provisions hereof, thirty
(30) months after the Commencement Date, or such earlier date as the Master
Lease may be terminated pursuant to the terms thereof.
2. Subleased Premises. During the Term, Sublessor hereby subleases to
Sublessee, and Sublessee hereby subleases from Sublessor, on the terms and
conditions set forth herein, approximately eleven thousand (11,000) square feet
of the Premises at the Building, as more particularly described on Exhibit B
hereto and made a part hereof (the "Subleased Premises").
3. Option to Extend. In the event Sublessor does not require use of the
Subleased Premises at the end of the Term, Sublessee shall have two options to
extend the Term ("Options to Extend") for a period of six (6) months each at the
same rental rate as is applicable during months 16-30 as set forth below. The
Options to Extend shall be contingent on a determination by Sublessor that
Sublessor shall not require the Subleased Premises during such respective six
(6) month periods. Sublessee shall notify Sublessor of its intent to exercise
its Options to Extend at least six months prior to the expiration of the Term
and the first six (6) month period, if applicable.
1.
<PAGE>
4. Rent.
(a) Commencing as of the Commencement Date and continuing thereafter on
the first (1st) day of each and every month during the Term, Sublessee shall pay
to Sublessor in advance as rent for the Subleased Premises the sums set forth
below (such sums, the "Rent").
Months Rental Rate
------ ------------
1 - 15 $3.80 per square foot per month
16 - 30 $3.90 per square foot per month
Rent for any period less than a calendar month shall be a pro rata
portion of the monthly installment. Rent shall be payable without offset
(except as permitted in the Master Lease) to Sublessee at the address set forth
herein below or at such other address as may be designated in writing from time
to time. The first month's Rent payable hereunder shall be paid by Sublessee
upon mutual execution of the Sublease and written consent of Master Lessor. In
addition, upon mutual execution of the Sublease and written consent of Master
Lessor, Sublessee shall pay Sublessor the sum of Forty One Thousand Eight
Hundred Dollars ($41,800) that shall be held as a security deposit by Sublessor.
(b) Sublessor shall be responsible for the payment of property taxes,
property insurance (Building only), common area maintenance, janitorial
(excluding lab benches in the Subleased Premises), HVAC (unless such services
are requested by Sublessee during times when such services are not required by
Sublessor), utilities on the Premises, property dues, elevator maintenance,
sprinklers, security, garbage, pest control, earthquake insurance, water
treatment, HVAC maintenance, landscaping and parking lot maintenance or any
other costs that Sublessor is required to pay under the Master Lease pursuant to
its terms; provided, however, that Sublessor shall not be responsible for any
other services required by Sublessee. Additional usage or other services
required by Sublessee will be billed to Sublessee at Sublessor's fully-burdened
cost for such usage or service.
(c) In the event of any casualty or condemnation affecting the
Subleased Premises, Sublessee waives any right to terminate the Sublease in
connection with such casualty or condemnation except to the extent the Master
Lease is also. terminated as to the Subleased Premises or any portion thereof.
In the event of the termination of Sublessor's interest as "Tenant" under the
Master lease for any reason, then this Sublease shall terminate coincidentally
therewith without any liability of Sublessor or Sublessee.
(d) Anything in this Sublease to the contrary notwithstanding,
Sublessee shall be liable for and shall pay at least ten (10) days prior to
delinquency alt taxes levied against any personal property, fixtures, machinery,
equipment, apparatus, systems and appurtenances or improvements placed by or on
behalf of Sublessee in, about, upon or in connection with the Subleased
Premises.
5. Condition of the Subleased Premises/Improvements. Sublessor
represents and warrants that the HVAC, plumbing, electrical and roof respecting
the Subleased Premises and existing improvements, fixtures and equipment
contained within the Subleased Premises are in
2.
<PAGE>
operating condition on the Commencement Date. Except as set forth in the
immediately preceding sentence, Sublessor has made no representations or
warranties of any kind or nature whatsoever respecting the Subleased Premises,
their condition or suitability for Sublessee's use. Sublessee has inspected the
Subleased Premises and agrees to accept the Subleased Premises "as is, where
is," with all faults, without any obligation on the part of Sublessor to modify,
improve or otherwise prepare the Subleased Premises for Sublessee's occupancy.
Sublessee may retain a licensed contractor to alter, add to or improve the
Subleased Premises in accordance with the requirements of all laws, ordinances,
codes, orders, rules and regulations of any governmental authority having
jurisdiction over the Subleased Premises and without cost to Sublessor following
receipt by Sublessee of the written approval of Master Lessor and Sublessor to
such alterations, additions or improvements. Any such alterations, additions or
improvements shall become the property of Sublessor upon expiration or
termination of the Term, except for the items described in Schedule 1 attached
hereto. The obligations of Section 13 of this Sublease shall apply to such
alterations, additions and improvements.
6. Use. Sublessee may use the Subleased Premises for any use permitted
under the Master Lease and for no other purpose without the approval of the
Master Lessor and Sublessor.
7. Master Lease. This Sublease shall be subject and subordinate to all
of the terms and provisions of the Master Lease. Except for payments of rent
under the Master Lease (which payments shall be made by Sublessor) and except
for those provisions of the Master Lease excluded by Paragraph 8 below,
Sublessee hereby assumes and agrees to perform, during the term of this
Sublease, all of Sublessor's obligations under the Master Lease to the extent
such obligations are applicable to the Subleased Premises pursuant to this
Sublease except for maintenance and repair obligations on the Subleased Premises
(.unless caused by the negligence or willful misconduct of Sublessee or unless
required to be made to the equipment of Sublessee).
8. Incorporation of Master Lease.
(a) Except as otherwise provided herein, all of the terms and provisions
of the Master Lease are incorporated into and made a part of this Sublease and
the rights and obligations of the parties under the Master Lease are hereby
imposed upon the parties hereto with respect to the Subleased Premises, the
Sublessor being substituted for the "Landlord" in the Master Lease, the
Sublessee being substituted for the "Tenant'" in the Master Lease, and this
Sublease being substituted for the "Lease" in the Master Lease. The parties
specifically agree that any provisions relating to any construction obligations
of "Landlord" under the Master Lease with respect to construction that occurred
or was to have occurred prior to the Commencement Date hereof, are hereby
deleted. Sublessor shall not be liable to Sublessee for any failure by Master
Lessor to perform its obligations under the Master Lease, nor shall such failure
by Master Lessor excuse performance by. Sublessee of its obligations hereunder.
Notwithstanding anything in the Master Lease to the contrary, no personal
liability shall at any time be asserted or enforceable against any other assets
of Sublessor or against Sublessor's stockholders, directors, officers or
partners on account of any of Sublessor's obligations or actions under this
Sublease.
(b) Sublessee hereby agrees to indemnify and hold harmless Sublessor
from and against any and all claims, liabilities, losses, damages and expenses
(including reasonable
3.
<PAGE>
attorneys' fees) incurred by Sublessor arising out of, from or in connection
with (i) the use or. occupancy of the Subleased Premises by Sublessee, (ii) any
breach or default by Sublessee under this Sublease, or (iii) the failure of
Sublessee to perform any obligation under the terms and provisions of the Master
Lease assumed by Sublessee hereunder or required to be performed by Sublessee as
provided herein, from and after the Commencement Date of this Sublease.
(c) Sublessor hereby agrees to indemnify and hold harmless Sublessee
from and against any and all claims, liabilities, losses, damages and expenses
(including reasonable attorneys' fees) incurred by Sublessee arising out of,
from or in connection with (i) Sublessor's breach or default of any provision of
this Sublease. or any provisions of the Master Lease not assumed by Sublessee
hereunder, or (ii) acts or omissions of Sublessor under the Master Lease in
connection with the Subleased Premises prior to the Commencement Date of this
Sublease.
(d) Within thirty (30) days after (i) full execution and delivery of
this Sublease, and (ii) Master Lessor's consent to tills Sublease has been
obtained, Sublessee shall deliver to Sublessor a certificate of insurance
evidencing that Sublessor and Master Lessor are named as additional insured on
the policy of liability insurance Sublessee is required to maintain respecting
the Subleased Premises pursuant to the terms of the Master Lease.
(e) Sublessee shall not, without the prior written consent of
Sublessor, which consent shall not be unreasonably withheld, and Master Lessor,
assign or sublease the Subleased Premises. The consent of Sublessor to any
assignment or sublease of the Subleased Premises to any parent, subsidiary or
affiliate of Sublessee, or any party that acquires all or substantially all of
the assets or stock of Sublessee, shall not be required.
9. Sublessor's Obligations.
(a) Sublessor agrees to make timely payments of the rent due under
the Master Lease to the end that the Master Lease shall not be terminated due to
the default of Sublessor.
(b) To the extent that the provision of any services or the
performance of any act (collectively "Master Lessor Obligations") is the
responsibility of Master Lessor, Sublessor, upon Sublessee's request, shall make
reasonable efforts to cause Master Lessor under the Master Lease to perform such
Master Lessor Obligations; provided, however, that in no event shall Sublessor
be liable to Sublessee for any liability, loss or damage whatsoever in the event
that Master Lessor should fail to perform the same, nor shall Sublessee be
entitled to terminate this Sublease, unless such failure is the result of an
event of default on the part of Sublessor under this Sublease, the Master Lease,
or both. It is expressly understood that Sublessor does not assume Master Lessor
Obligations and that the Master Lessor Obligations will in fact be furnished by
Master Lessor and not Sublessor, except to the extent otherwise provided herein.
(c) Except as provided in this Section 9, Sublessor shall have no
other obligations to Sublessee with respect to the Subleased Premises or the
performance of the Master Lessor Obligations.
10. Assignment and Subletting. Sublessor shall not assign, sublet,
transfer, pledge, hypothecate or otherwise encumber the Subleased Premises, this
Sublease or any interest therein,
4.
<PAGE>
or permit the use or Occupancy of the Subleased. Premises by any other person
other than Sublessee. Any assignment, further subletting, occupancy or use
without the prior consent of Sublessee shall, at the option of Sublessee,
terminate this Sublease.
11. Early Termination of Master Lease. If, without the fault of Sublessor
or Sublessee, the Master Lease should terminate prior to the expiration of this
Sublease, neither party shall have any liability to the other party. To the
extent that the Master lease grants Sublessor any discretionary right to
terminate the Master Lease, whether due to casualty, condemnation, or otherwise,
Sublessor shall be entitled to exercise or not exercise such right in its
complete and absolute discretion.
12. Consent of Master Lessor. If Sublessee desires to take any action
which requires the consent of Master Lessor pursuant to the terms of the Master
Lease, including, without limitation, making any alterations or entering into a
further sublease or assignment of this Sublease, then, notwithstanding anything
to the contrary herein, (a) Sublessor shall have the same rights of approval or
disapproval as Master Lessor has under the Master Lease, (b) Sublessee shall not
take any such action until it obtains the consent of both Sublessor and Master
Lessor and (c) Sublessee shall request that Sublessor obtain Master Lessor's
consent on Sublessee's behalf, unless Sublessor agrees that Sublessee may
contact Master Lessor directly with respect to the specific action for which
Master Lessor's consent is required.
13. Surrender of Subleased Premises. Upon the termination of the
Sublease, Sublessee shall surrender the Subleased Premises to Sublessor broom-
clean and in the same condition as on the Commencement Date, ordinary wear and
tear and damaged caused by Sublessor excepted. In addition, Sublessor may
require Sublessee to remove any alterations, additions and improvements made by
Sublessee (whether or not made with Sublessor's consent), prior to the
termination of the Sublease and to restore the Subleased Premises to its prior
condition, normal wear and tear and damage caused by Sublessor excepted,
repairing all damage caused by or related to any such removal, all at
Sublessee's expense.
14. No Third Party Rights. The benefit of the provisions of this Sublease
is expressly limited to Sublessor and Sublessee and their respective permitted
successors and assigns. Under no circumstances will any third party be
construed to have any rights as a third party beneficiary with respect to any of
said provisions; provided, however, that Master Lessor shall be entitled to the
benefit of Sublessee's assumption of Sublessor's obligations, as "Tenant" under
the Master Lease, pursuant to Section 8 above.
15. Signage. Sublessee shall have the right to place: its sign over the
entrance to the Subleased Premises but only to the extent permitted by the terms
and conditions set forth in the Master Lease; and a sign near the parking lot
directing visitors to the entrance to the Subleased Premises; subject to the
Sublessor's consent, such consent not to be unreasonably withheld, and the
Master Lessor's consent.
16. Time of Essence. It is expressly understood and agreed that time is
of the essence with respect to each and every provision of this Sublease.
5.
<PAGE>
17. Brokers. Sublessor agrees to pay a brokerage commission to Catalyst
Real Estate Group, Sublessor's broker, and Cornish & Carey Commercial Real
Estate, Sublessee's broker, in connection with the consummation of this sublease
in accordance with a separate agreement. Each party represents and warrants
that no other broker participated in the consummation of this sublease and
agrees to indemnify, defend, and hold the other party harmless against any
liability, cost or expense, including, without limitation, reasonable attorneys'
fees, arising out of any claims or brokerage commissions or other similar
compensation in connection with any conversations, prior negotiations, or other
dealings by the indemnifying party with any other broker.
18. Attorneys' Fees. If any action or proceeding at law or in equity
shall be brought to enforce or interpret any of the provisions of this Sublease,
the prevailing party shall be entitled to recover from the other party its
reasonable attorneys' fees and costs incurred in connection with the prosecution
or defense of such action or proceeding.
19. Multiple Parties. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Sublessor or Sublessee,
the obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Sublessor or
Sublessee.
20. Approval of Master Lessor. This Sublease shall be conditioned upon,
and shall not take effect until, receipt of the written consent of Master Lessor
thereto. Upon receipt of such consent, this Sublease shall be effective as of
the date first written above. If such consent shall not be received within
thirty (30) business day's of the date of this Sublease, Sublessee or Sublessor
may terminate this Sublease by providing written notice thereof to the other.
Sublessor and Sublessee acknowledge and agree that in granting such consent,
notwithstanding any other provisions contained in or implied in this Sublease,
Master Lessor shall not be deemed or construed (a) to have released Sublessor
from any responsibility for the full and timely performance of all obligations
of Sublessor as Tenant under the Master Lease as it pertains to the Subleased
Premises, nor (b) to have authorized Sublessor to act on Master Lessor's behalf
in exercising or waiving any rights, remedies or privileges of Master Lessor as
Landlord under the Master Lease as it pertains to the Subleased Premises, nor
(c) to have assumed, incurred or undertaken any obligations or liabilities
running directly to Sublessee with respect to the Subleased Premises, it being
the explicit intention and understanding of the parties that, notwithstanding
the incorporation by reference of substantially all of the Master Lease into
this Sublease, Master. Lessor and Sublessor shall look solely to one another
for the performance of their respective obligations with respect to the Premises
as Landlord and Tenant Under tine Master Lease, and that Sublessor and Sublessee
shall look solely to one another for the performance of their respective
obligations with respect to the Subleased Premises under this Sublease.
6.
<PAGE>
Executed as of the date first written above.
<TABLE>
<CAPTION>
<S> <C>
"Sublessor" "Sublessee"
Tularik Inc. Genesoft Inc.
a Delaware corporation a Delaware corporation
By: /s/ Luis Bayol By:
--------------------------------------- -----------------------
Title: Director, Finance & Administration Title: President & CEO
and Assistant Secretary
</TABLE>
7.
<PAGE>
CONSENT OF MASTER LESSOR
Britannia Biotech Gateway Limited Partnership, "Master Lessor" under the
Master Lease identified in that certain Sublease dated for reference purposes,
November 16, 1998 to which this Consent is attached, hereby consents to said
Sublease. This Consent shall not be deemed to relieve Sublessor, as Tenant
under the Master Lease, from any obligation or liability thereunder, nor shall
this Consent be deemed Master Lessor's consent to any further subletting or
assignment.
Master Lessor:
Britannia Biotech Gateway Limited Partnership
By: /s/ T. J. Bristow
----------------------------------
Name: T. J. Bristow
--------------------------------
Title: President
-------------------------------
Date: 11/12/98
--------------------------------
8.
<PAGE>
EXHIBIT 10.23
BUILD-TO-SUIT LEASE
-------------------
THIS BUILD-TO-SUIT LEASE ("Lease") is made and entered into as of the 20th day
of April, 1995, by and between BRITANNIA DEVELOPMENTS, INC., a California
corporation ("Landlord"), and TULARIK INC., a California corporation ("Tenant").
THE PARTIES AGREE AS FOLLOWS:
1. PROPERTY
--------
1.1 Lease of Property.
-----------------
(a) Landlord leases to Tenant and Tenant hires and leases from Landlord,
on the terms, covenants and conditions hereinafter set forth, the building (the
"Initial Building") to be constructed pursuant to Article 5 hereof and Exhibit C
---------
attached hereto on the real property described in Exhibit A attached hereto (the
---------
"Site"), to consist of a two-story office and laboratory building containing
approximately 66,127 square feet (measured in accordance with the BOMA standard
most closely applicable to a two-story, single-tenant building of this nature).
The location of the Initial Building on the Site is intended to be substantially
as shown for "Building B" on the site plan attached hereto as Exhibit B. The
---------
Initial Building and the other improvements to be constructed, pursuant to
Article 5 hereof and Exhibit C attached hereto, on the portion of the Site
---------
designated as "Phase I" on Exhibit B attached hereto (the "Phase I Site") are
---------
sometimes referred to collectively herein as the "Improvements," and the
Improvements and the Phase I Site are sometimes referred to collectively herein
as the "Property." The parking areas, driveways, sidewalks, landscaped areas
and other portions of the Phase I Site that lie outside the exterior walls of
the Initial Building, as depicted on the site plan attached hereto as Exhibit B,
---------
are sometimes referred to herein as the "Common Areas." The Site is part of The
Britannia Biotechnology Center in South San Francisco, California.
(b) As an appurtenance to Tenant's leasing of the Initial Building
pursuant to Section 1.1(a), Landlord hereby grants to Tenant, for the benefit of
Tenant and its employees, suppliers, shippers, customers and invitees, during
the term of this Lease, the non-exclusive right to use, in common with others
entitled to such use, (i) those portions of the Common Areas improved from time
to time for use as parking areas, driveways, sidewalks, landscaped areas, or for
other common purposes, and (ii) all easements, access rights and similar rights
and privileges relating to or appurtenant to the Property and created or
existing from time to time under any easement agreements, declarations of
covenants, conditions and restrictions, or other written agreements now of
record with respect to the Site, including (but not limited to) the portion of
the Site designated as "Phase II" on Exhibit B attached hereto (the "Phase II
---------
Site"), subject however to any limitations applicable to such rights and
privileges under applicable law and/or under the written agreements creating
such rights and privileges.
-1-
<PAGE>
1.2 Landlord's Reserved Rights. To the extent reasonably necessary to
--------------------------
permit Landlord to exercise any rights of Landlord and discharge any obligations
of Landlord under this Lease, Landlord shall have, in addition to the right of
entry set forth in Section 16.1 hereof, the following rights: (i) to make
changes to the Common Areas, including, without limitation, changes in the
location, size or shape of any portion of the Common Areas and to relocate (but
not materially decrease the number of) parking spaces on the Phase I Site; (ii)
to close temporarily any of the Common Areas for maintenance or other reasonable
purposes, provided that reasonable parking and reasonable access to the Initial
Building remain available; (iii) to construct, alter or add to other buildings
or improvements on the Site (including, but not limited to, construction of a
building in the area designated as "Building A" on the site plan attached hereto
as Exhibit B, and construction of site improvements and common area improvements
---------
in the Phase II Site; (iv) to build adjoining to the Property and/or the Site;
(v) to use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Property, or any portion thereof; and (vi) to do
and perform such other acts with respect to the Common Areas and the Property as
may be necessary or appropriate; provided, however, that notwithstanding
--------
anything to the contrary in this Section 1.2, Landlord's exercise of its rights
hereunder (x) shall not cause any material diminution of Tenant's rights, nor
any material increase of Tenant's obligations, under this Lease or with respect
to the Improvements, (y) shall not authorize Landlord to make any material,
permanent alterations in the Improvements without the prior written consent of
Tenant, which consent shall not be unreasonably withheld or delayed, and (z)
shall be conducted in such a manner as to minimize, to the extent reasonably
possible, any adverse effect on Tenant's business operations on the Phase I Site
(including, but not limited to, reasonable prior notice to Tenant of any pile-
driving or other activities that will cause significant noise or vibration on
the Phase I Site).
2. TERM
----
2.1 Term. The term of this Lease shall commence on the later to occur of
----
(i) the date which is six (6) months after the date Landlord delivers to Tenant
a Structural Completion Certificate pursuant to the Workletter attached hereto
as Exhibit C, subject to any adjustments authorized or required under the
---------
provisions of such Exhibit C, or (ii) February 1, 1996, the later of such dates
---------
being herein called the "Commencement Date," and shall end on the day
immediately preceding the date fifteen (15) years thereafter, unless sooner
terminated or extended (if applicable) as hereinafter provided.
2.2 Early Possession. Tenant shall have the nonexclusive right to occupy
----------------
and take possession of the Phase I Site from and after the date of Landlord's
delivery of the Structural Completion Certificate described in clause (i) of
Section 2.1, even though such date is prior to the Commencement Date determined
under Section 2.1 and even though Landlord will be continuing to construct the
balance of Landlord's Work as contemplated in Exhibit C, for the purpose of
---------
constructing Tenant's Work as contemplated in Exhibit C. Such occupancy and
---------
possession, and any early access under the next sentence of this Section 2.2,
shall be subject to and upon all of the terms and conditions of this Lease and
of the Workletter attached hereto as Exhibit C (including,
---------
-2-
<PAGE>
but not limited to, conditions relating to the maintenance of required
insurance), except that Tenant shall have no obligation to pay minimum rental or
Operating Expenses for any period prior to the Commencement Date as determined
under Section 2.1; such early possession shall not advance or otherwise affect
the Commencement Date or termination date determined under Section 2.1. Tenant
shall also be entitled to have early access to the Phase I Site at all
appropriate times prior to Landlord's delivery of the Structural Completion
Certificate, subject to the approval of Landlord and its contractor (which
approval shall not be unreasonably withheld or delayed), solely for the purpose
of installing fixtures and equipment and other similar work preparatory to the
construction of Tenant's Work and the commencement of Tenant's business on the
Property, and Tenant shall not be required to pay minimum rental or Operating
Expenses by reason of such early access until the Commencement Date otherwise
occurs. Tenant shall not interfere with or delay Landlord's contractors by any
such early access, occupancy or possession under this Section 2.2 prior to
Landlord's delivery of the Structural Completion Certificate, shall coordinate
and cooperate with Landlord and its contractors (who shall similarly coordinate
and cooperate with Tenant and its contractors) to minimize any interference or
delay by either party with respect to the other party's work following
Landlord's delivery of the Structural Completion Certificate, and shall
indemnify, defend and hold harmless Landlord and its agents and employees from
and against any and all claims, demands, liabilities, actions, losses, costs and
expenses, including (but not limited to) reasonable attorneys' fees, arising out
of or in connection with Tenant's early entry upon the Phase I Site hereunder.
2.3 Delay In Possession. Landlord agrees to use its best reasonable efforts
-------------------
to complete promptly its portion of the work described in Section 5.1 and
Exhibit C; provided, however, Landlord shall not be liable for any damages
- ---------
caused by any delay in the completion of such work, nor shall any such delay
affect the validity of this Lease or the obligations of Tenant hereunder.
Notwithstanding any other provision of this Section 2.3, however, if Landlord
fails to deliver the Structural Completion Certificate and tender possession of
the completed structural portions of the Building Shell (i.e., those portions
----
required to be completed as a condition of delivery of the Structural Completion
Certificate) to Tenant by April 30, 1996, then Tenant shall have the right to
terminate this Lease without further liability hereunder by written notice
delivered to Landlord at any time prior to Landlord's delivery of the Structural
Completion Certificate and tender of possession of the completed structural
portions of the Building Shell to Tenant; provided, however, that the deadline
--------
of April 30, 1996 set forth in this sentence shall be extended, day for day, for
a period equal to the length of any delay beyond May 31, 1995 in Tenant's
delivery to Landlord of all information reasonably necessary for Landlord to
complete the preparation of all drawings, designs and specifications for the
Building Shell.
2.4 Acknowledgement Of Lease Commencement. Upon commencement of the term of
-------------------------------------
this Lease, Landlord and Tenant shall execute a written acknowledgement of the
Commencement Date, date of termination and related matters, substantially in the
form attached hereto as Exhibit E (with appropriate insertions), which
---------
acknowledgement shall be deemed to be incorporated herein by this reference.
Notwithstanding the foregoing requirement, the failure of Tenant to execute such
a written acknowledgement shall not affect the determination of the Commencement
Date, date of
-3-
<PAGE>
termination and related matters in accordance with the provisions of this
Lease.
2.5 Holding Over. If Tenant holds possession of the Property or any portion
------------
thereof after the term of this Lease with Landlord's written consent, then
except as otherwise specified in such consent, Tenant shall become a tenant from
month to month at one hundred twenty-five percent (125%) of the rental and
otherwise upon the terms herein specified for the period immediately prior to
such holding over and shall continue in such status until the tenancy is
terminated by either party upon not less than thirty (30) days prior written
notice. If Tenant holds possession of the Property or any portion thereof after
the term of this Lease without Landlord's written consent, then Landlord in its
sole discretion may elect (by written notice to Tenant) to have Tenant become a
tenant either from month to month or at will, at one hundred fifty percent
(150%) of the rental (prorated on a daily basis for an at-will tenancy, if
applicable) and otherwise upon the terms herein specified for the period
immediately prior to such holding over, or may elect to pursue any and all legal
remedies available to Landlord under applicable law with respect to such
unconsented holding over by Tenant. Tenant shall indemnify and hold Landlord
harmless from any loss, damage, claim, liability, cost or expense (including
reasonable attorneys' fees) resulting from any delay by Tenant in surrendering
the Property (except with Landlord's prior written consent), including but not
limited to any claims made by a succeeding tenant by reason of such delay.
Acceptance of rent by Landlord following expiration or termination of this Lease
shall not constitute a renewal of this Lease.
2.6 Option To Extend Term. Tenant shall have the option to extend the term
---------------------
of this Lease, at the minimum rental set forth in Section 3.1(b) and (c) and
otherwise upon all the terms and provisions set forth herein with respect to the
initial term of this Lease, for up to two (2) additional periods of five (5)
years each, the first commencing upon the expiration of the initial term hereof
and the second commencing upon the expiration of the first extended term, if
any. Exercise of such option with respect to the first such extended term shall
be by written notice to Landlord at least nine (9) months prior to the
expiration of the initial term hereof; exercise of such option with respect to
the second extended term, if the first extension option has been duly exercised,
shall be by like written notice to Landlord at least nine (9) months prior to
the expiration of the first extended term hereof. If Tenant is in default
hereunder on the date of such notice or on the date any extended term is to
commence, then the option shall be of no force or effect, the extended term
shall not commence and this Lease shall expire at the end of the then current
term hereof (or at such earlier time as Landlord may elect pursuant to the
default provisions of this Lease). If Tenant properly exercises one or more
extension options under this Section, then all references in this Lease (other
than in this Section 2.6) to the "term" of this Lease shall be construed to
include the extension term(s) thus elected by Tenant. Except as expressly set
forth in this Section 2.6, Tenant shall have no right to extend the term of this
Lease beyond its prescribed term.
-4-
<PAGE>
3. RENTAL
------
3.1 Minimum Rental.
--------------
(a) Tenant shall pay to Landlord as minimum rental for the Property, in
advance, without deduction, offset, notice or demand, on or before the
Commencement Date and on or before the first day of each subsequent calendar
month of the term of this Lease, the following amounts per month:
<TABLE>
<CAPTION>
Months Minimum Rental
------ --------------
<S> <C>
1 - 6 $119,240
7 - 12 132,840
13 - 24 150,770
25 - 36 160,689
37 - 48 164,656
49 - 60 171,930
61 - 72 173,253
73 - 84 149,447
85 - 96 154,076
97 - 108 158,705
109 - 120 163,334
121 - 132 148,786
133 - 144 154,076
145 - 156 159,366
157 - 168 165,318
169 - 180 170,608
</TABLE>
If the obligation to pay minimum rental hereunder commences on other than the
first day of a calendar month or if the term of this Lease terminates on other
than the last day of a calendar month, the minimum rental for such first or last
month of the term of this Lease, as the case may be, shall be prorated based on
the number of days the term of this Lease is in effect during such month. If an
increase in minimum rental becomes effective on a day other than the first day
of a calendar month, the minimum rental for that month shall be the sum of the
two applicable rates, each prorated for the portion of the month during which
such rate is in effect.
(b) If Tenant properly exercises its right to extend the term of this
Lease pursuant to Section 2.6 hereof, the minimum rental during the first
extended term shall be equal to the greater of (i) $144,157 per month or (ii)
ninety-five percent (95%) of the fair market rental value of the Property (as
defined below), including any rental increase provisions then customary in the
relevant market for comparable commercial leases, determined as of the
commencement of such extended term in accordance with this paragraph. Upon
Landlord's receipt of a proper notice of Tenant's exercise of its option to
extend the term of this Lease, the parties shall have sixty (60) days
-5-
<PAGE>
in which to agree on the fair market rental (including any applicable rental
increase provisions) for the Property at the commencement of the first extended
term for the uses permitted hereunder. If the parties agree on such fair market
rental and rental increase provisions (if any), they shall execute an amendment
to this Lease stating the amount of the applicable minimum monthly rental and
any applicable rental increase provisions. If the parties are unable to agree on
such rental (including any applicable rental increase provisions) within such
sixty (60) day period, then within fifteen (15) days after the expiration of
such period each party, at its cost and by giving notice to the other party,
shall appoint a real estate appraiser with at least five (5) years experience
appraising similar commercial properties in northeastern San Mateo County to
appraise and set the fair market rental and any applicable rental increase
provisions for the Property at the commencement of the first extended term. If
either party fails to appoint an appraiser within the allotted time, the single
appraiser appointed by the other party shall be the sole appraiser. If an
appraiser is appointed by each party and the two appraisers so appointed are
unable to agree upon a fair market rental (and any appropriate rental increase
provisions) within thirty (30) days after the appointment of the second, they
shall appoint a third qualified appraiser within ten (10) days after expiration
of such 30-day period; if they are unable to agree upon a third appraiser,
either party may, upon not less than five (5) days notice to the other party,
apply to the Presiding Judge of the San Mateo County Superior Court for the
appointment of a third qualified appraiser. Each party shall bear its own legal
fees in connection with appointment of the third appraiser and shall bear one-
half of any other costs of appointment of the third appraiser and of such third
appraiser's fee. The third appraiser, however selected, shall be a person who
has not previously acted for either party in any capacity. Within thirty (30)
days after the appointment of the third appraiser, a majority of the three
appraisers shall set the fair market rental and any applicable rental increase
provisions for the first extended term and shall so notify the parties. If a
majority are unable to agree within the allotted time, (i) the three appraised
fair market rentals shall be added together and divided by three and the
resulting quotient shall be the fair market rental for the first extended term,
and (ii) the applicable rental increase provision shall be equal to the
mathematical average (or the nearest reasonable approximation thereto) of the
two rental increase provisions that are most closely comparable, which
determinations shall be binding on the parties and shall be enforceable in any
further proceedings relating to this Lease. For purposes of this Section 3.1(b),
the "fair market rental" of the Property shall be determined with reference to
the then prevailing market rental rates for properties in northeastern San Mateo
County with shell and standard office, research and development improvements and
site (common area) improvements comparable to those then existing in the Initial
Building and on the Property; no equipment or laboratory improvements shall be
taken into account in determining such fair market rental.
(c) If Tenant properly exercises its right to a second extended term of
this Lease pursuant to Section 2.6 hereof, the minimum rental during such second
extended term shall be determined in the same manner provided in the preceding
paragraph for the first extended term, except that the determination shall be
made as of the commencement of the second extended term.
(d) The minimum rental amounts specified in this Section 3.1 are based
upon an estimated area of 66,127 square feet for the Initial
-6-
<PAGE>
Building. If the actual area of the Initial Building, when completed, is greater
or less than such estimated area, then the minimum rentals specified in this
Section 3.1 shall be adjusted proportionately to the change in the area of the
Initial Building, measured in accordance with the BOMA standard most closely
applicable to a two-story, single-tenant building of this nature; provided,
--------
however, that the foregoing provision shall not apply to the minimum rental for
months 1 through 12 of the initial term, which rental is based on a negotiated
square footage of less than the full area of the Initial Building and is not
intended to be subject to adjustment under this paragraph (d).
3.2 Late Charge. If Tenant fails to pay when due rental or other amounts
-----------
due Landlord hereunder, such unpaid amounts shall bear interest for the benefit
of Landlord at a rate equal to the lesser of fifteen percent (15%) per annum or
the maximum rate permitted by law, from the date due to the date of payment. In
addition to such interest, Tenant shall pay to Landlord a late charge in an
amount equal to ten percent (10%) of any installment of minimum rental and any
other amounts due Landlord if not paid in full on or before the fifth (5th) day
after such rental or other amount is due. Tenant acknowledges that late payment
by Tenant to Landlord of rental or other amounts due hereunder will cause
Landlord to incur costs not contemplated by this Lease, including, without
limitation, processing and accounting charges and late charges which may be
imposed on Landlord by the terms of any loan relating to the Property. Tenant
further acknowledges that it is extremely difficult and impractical to fix the
exact amount of such costs and that the late charge set forth in this Section
3.2 represents a fair and reasonable estimate thereof. Acceptance of any late
charge by Landlord shall not constitute a waiver of Tenant's default with
respect to overdue rental or other amounts, nor shall such acceptance prevent
Landlord from exercising any other rights and remedies available to it.
Acceptance of rent or other payments by Landlord shall not constitute a waiver
of late charges or interest accrued with respect to such rent or other payments
or any prior installments thereof, nor of any other defaults by Tenant, whether
monetary or non-monetary in nature, remaining uncured at the time of such
acceptance of rent or other payments.
4. STOCK WARRANTS
--------------
4.1 Stock Warrants. Within fifteen (15) days after written request by
--------------
Landlord at any time after execution hereof (but in all events no later than
four (4) months after execution hereof), as a condition to Landlord's
obligations hereunder, Tenant shall deliver to Landlord, subject to compliance
by Tenant and Landlord with all applicable securities laws, a warrant registered
in Landlord's name to purchase two hundred thousand (200,000) shares of Tenant's
common stock. The warrant shall have an exercise price of seven dollars and
fifty cents ($7.50) per share and shall be exercisable only after the closing of
the initial public offering of Tenant's common stock and for a period of five
(5) years thereafter, and shall be on the terms and conditions as set forth
therein.
-7-
<PAGE>
5. CONSTRUCTION
------------
5.1 Construction of Improvements. Landlord shall, at Landlord's cost and
----------------------------
expense (except as otherwise provided herein and in Exhibit C), construct
---------
Landlord's Work as defined in and in accordance with the terms and conditions of
the Workletter attached hereto as Exhibit C (the "Workletter"). Landlord shall
---------
use its best efforts to complete such construction in accordance with the
estimated construction schedule attached hereto as Exhibit D as the same may be
---------
modified or revised from time to time in accordance with the Workletter. Tenant
shall, at Tenant's cost and expense (except as otherwise provided herein and in
Exhibit C), construct Tenant's Work as defined in and in accordance with the
- ---------
terms and conditions of the Workletter.
5.2 Condition of Property. Landlord shall deliver the Building Shell and
---------------------
other Improvements constructed by Landlord to Tenant clean and free of debris,
promptly upon completion of construction thereof, and Landlord warrants to
Tenant that the Building Shell and other Improvements constructed by Landlord
(i) shall be free from material structural defects and (ii) shall be constructed
in compliance in all material respects with any and all applicable
specifications mutually approved by Landlord and Tenant, subject to any changes
implemented in such specifications in accordance with the procedures set forth
in the Workletter. If it is determined that this warranty has been violated in
any respect, then it shall be the obligation of Landlord, after receipt of
written notice from Tenant setting forth with specificity the nature of the
violation, to promptly, at Landlord's sole cost, correct the condition(s)
constituting such violation. Tenant's failure to give such written notice to
Landlord within one hundred eighty (180) days after the Commencement Date shall
give rise to a conclusive presumption that Landlord has complied with all
Landlord's obligations hereunder, except with respect to latent defects.
Landlord shall also assign to Tenant Landlord's rights under all contractor's
and other warranties relating to the Building Shell and other Improvements
constructed by Landlord (provided, however, that Landlord may reserve joint
--------
enforcement rights under such warranties to the extent of Landlord's continuing
obligations or warranties hereunder), and shall cooperate with Tenant in all
reasonable respects in any enforcement of such assigned warranties. TENANT
ACKNOWLEDGES THAT THE WARRANTY CONTAINED IN THIS SECTION IS IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION OF THE
IMPROVEMENTS TO BE CONSTRUCTED BY LANDLORD AND THAT LANDLORD MAKES NO OTHER
WARRANTIES EXCEPT AS EXPRESSLY SET FORTH IN THIS LEASE.
5.3 Compliance with Law. Landlord warrants to Tenant that the Building
-------------------
Shell and other Improvements constructed by Landlord (when constructed), as they
exist on the Commencement Date, but without regard to the use for which Tenant
will occupy the Property, shall not violate any covenants or restrictions of
record or any applicable building code, regulation or ordinance in effect on the
Commencement Date. Tenant warrants to Landlord that the Interior Improvements
and any other improvements constructed by Tenant from time to time shall not
violate any applicable building code, regulation or ordinance in effect on the
Commencement Date or at the time such improvements are placed in service. If it
is determined that this warranty has been violated, then it
-8-
<PAGE>
shall be the obligation of the warranting party, after written notice from the
other party, to correct the condition(s) constituting such violation promptly,
at the warranting party's sole cost and expense. Tenant acknowledges that
neither Landlord nor any agent of Landlord has made any representation or
warranty as to the present or future suitability of the Property for the conduct
of Tenant's business or proposed business thereon.
6. EXPANSION BUILDING
------------------
6.1 Lock-Up Option. The parties acknowledge that Landlord may, subject to
--------------
the terms hereof, construct a building on the Phase II Site, including (but not
limited to) a building in the area designated as "Building A" in Exhibit B
---------
attached hereto. Tenant shall have four consecutive options (each, a "Lock-Up
Option") to prohibit Landlord from entering into an agreement with any party
other than Tenant for the sale or leasing of any such other building then
existing on or planned for the Phase II Site (in either case, the "Expansion
Building"). Upon Tenant's timely and proper exercise of a Lock-Up Option,
Landlord shall refrain from entering into such an agreement for a period of six
(6) months (a "Lock-Up Period"). Failure to exercise a Lock-Up Option on or
before the deadline determined under Section 6.2 shall result in the forfeiture
of that Lock-Up Option and all future Lock-Up Options, if any.
6.2 Exercise. To exercise a Lock-Up Option, Tenant shall provide written
--------
notice to Landlord of such exercise. In the case of the first Lock-Up Option,
Tenant must provide such notice not later than fifteen (15) days after a
certificate of occupancy or equivalent verbal or written permission to occupy
the Initial Building has been given by the City of South San Francisco to Tenant
(or, if the certificate of occupancy or equivalent permission is given to
Landlord, then within fifteen (15) days after Landlord's written notice to
Tenant that such certificate of occupancy or equivalent permission has been
given); the first six-month Lock-Up Period shall begin, retroactively, as of the
date such certificate of occupancy or equivalent verbal or written permission is
given by the City of South San Francisco. In the case of the subsequent Lock-Up
Options, Tenant must provide such notice not later than fifteen (15) days prior
to the final day of the Lock-Up Period then in effect. Within ten (10) days
after such notice, Landlord shall provide Tenant with written notice of
Landlord's estimate of the Carrying Costs (as defined in Section 6.3) for the
upcoming Lock-Up Period. Tenant shall then pay such amount to Landlord within
five (5) days after receipt of such estimate. A Lock-Up Option shall be deemed
validly exercised when and only when Tenant has timely paid such estimated
amount pertaining to the applicable Lock-Up Period to Landlord. If Tenant is in
default hereunder on the date of its exercise notice or on the date any Lock-Up
Period is to commence, then the Lock-Up Option (and any future Lock-Up Options)
shall be of no force or effect.
6.3 Carrying Costs. As compensation for each Lock-Up Option, Tenant shall
--------------
pay or reimburse to Landlord all Carrying Costs incurred by Landlord during or
with respect to the applicable Lock-Up Period, including (i) interest expense on
Landlord's construction financing for any site work, off-site improvements or
other construction (including, but not limited to,
-9-
<PAGE>
construction of the Expansion Building, if any) on the Phase II Site, (ii)
interest expense on Landlord's acquisition financing or refinancing for the
Phase II Site, and (iii) real property taxes, assessments and insurance on or
allocable to the Expansion Building and/or the Phase II Site; provided, however,
--------
that Tenant shall not be obligated to pay Landlord an amount greater than
one hundred fifty thousand dollars ($150,000) for Carrying Costs incurred during
or with respect to any single Lock-Up Period. Tenant shall pay Landlord's
estimated Carrying Costs for each applicable Lock-Up Period in advance as
contemplated in Section 6.2 hereof. Within ten (10) days after the end of each
Lock-Up Period, Landlord shall notify Tenant in writing of Landlord's actual
Carrying Costs for such Lock-Up Period and within ten (10) days after such
notice either (i) Tenant shall pay Landlord the amount by which such actual
Carrying Costs exceeded the estimated Carrying Costs paid by Tenant for such
period, up to the $150,000 maximum set forth in this Section 6.3, or (ii)
Landlord shall pay Tenant the amount by which the estimated Carrying Costs paid
by Tenant exceeded the actual Carrying Costs for such period. If taxes or other
Carrying Costs allocable to any Lock-Up Period are increased or decreased (for
example, by a tax reduction or additional tax assessment) following completion
of the reconciliation process described in the preceding sentence, Landlord
shall promptly notify Tenant in writing of such further increase or decrease and
the parties shall make any further adjustment payments in cash in the same
manner contemplated in the preceding sentence.
6.4 First Negotiation Right and First Refusal Right to Lease.
--------------------------------------------------------
(a) Landlord shall not lease all or any portion of the Expansion
Building at any time during the term of this Lease, except in compliance with
this Section 6.4; provided, however, that the foregoing restriction shall not
apply during any period in which Tenant is in default under this Lease.
(b) As specified in Section 6.1 hereof, during any Lock-Up Period duly
and timely elected by Tenant, Landlord shall have no right to agree to sell or
lease the Expansion Building to anyone other than Tenant, and therefore shall
have no right to invoke the first refusal right provisions in Section 6.4(c).
If, however, during any such Lock-Up Period, Tenant notifies Landlord in writing
of Tenant's desire to lease and occupy the Expansion Building, then Landlord and
Tenant shall negotiate diligently and in good faith concerning such terms,
subject to the following (unless otherwise mutually agreed by Landlord and
Tenant at the time): Tenant shall have the option to have Landlord construct
the building shell for the Expansion Building on substantially the same economic
terms as the Initial Building, adjusted to reflect changes in costs of
construction and in cost of money (determined by reference to changes in the
Bank of America prime rate). At the time the option is exercised, Landlord and
Tenant shall negotiate over tenant improvements and over any additional stock
warrants, but Landlord is not required to agree to construct or fund tenant
improvements and Tenant is not required to agree to have Landlord construct or
fund them. The new lease shall have a primary term of 15 years. Upon the
commencement of the lease term for the Expansion Building, the term of this
Lease for the Initial Building shall be extended, by amendment, to be
coterminous with the primary term of the new lease. The initial rent on the
Expansion Building as of Tenant's occupancy shall take into account,
-10-
<PAGE>
in addition to the cost factors mentioned above, any required construction or
funding of tenant improvements by Landlord, and shall also reflect any changes
in Tenant's financial condition at that time. In any event, however, the initial
rent on the Expansion Building shall be no less than the prevailing rent at that
time on the Initial Building, having regard for the fact that the Initial
Building included a tenant improvement allowance of $105 per square foot.
(c) If, at any time during the term of this Lease after the expiration
of any and all available Lock-Up Periods, Landlord receives and wishes to accept
a bona fide written offer from a person or entity other than Tenant (the
---------
"Offeror") to lease all or any portion of the Expansion Building and if Tenant
is not then in default under this Lease, Landlord shall give written notice of
such offer to Tenant, specifying the material terms on which the Offeror
proposes to lease the Expansion Building or portion thereof (the "Offered
Space"), and shall offer to Tenant the opportunity to lease the Offered Space on
the terms specified in Landlord's notice. For purposes of this Section 6.4(c),
an offer shall be considered bona fide if it is contained in a letter of intent
---------
or other writing signed by the Offeror and specifies the material terms of such
proposed lease. Tenant shall have fifteen (15) business days after the date of
giving of such notice by Landlord in which to accept such offer by written
notice to Landlord. Upon such acceptance by Tenant, the Offered Space shall be
leased to Tenant on the terms set forth in Landlord's notice and on the
additional terms and provisions set forth in this Lease (except to the extent
inconsistent with the terms set forth in Landlord's said notice) and the parties
shall promptly execute an agreement containing the terms of Landlord's said
notice and all other terms and provisions of this Lease not inconsistent with
the terms of said notice, except as the parties may otherwise mutually agree.
If Tenant does not accept Landlord's offer within the allotted time, Landlord
shall thereafter have the right to lease the Offered Space to the Offeror, at
any time within one hundred eighty (180) days after Tenant's failure to accept
Landlord's offer, at a minimum rental and on other terms and conditions not more
favorable to the Offeror than the minimum rental and other terms offered to
Tenant in Landlord's said notice. If Tenant does not accept Landlord's offer and
Landlord does not lease the Offered Space to the Offeror within one hundred
eighty (180) days, this First Refusal Right shall reattach to that space. This
First Refusal Right shall be applicable in the case of either an offer to lease
all or a portion of an already-built Expansion Building or an offer to enter
into a build-to-suit lease for the Expansion Building. Tenant's failure, if
any, to exercise any or all Lock-Up Options shall not affect Tenant's First
Refusal Right under this Section 6.4.
7. FIRST REFUSAL RIGHT TO PURCHASE
-------------------------------
7.1 Sale Restriction. Landlord shall not sell the Site, or any portion
----------------
thereof containing the Initial Building, the Expansion Building or both, at any
time during the term of this Lease, except in compliance with this Article 7;
provided, however, that the foregoing restriction shall not apply during any
period in which Tenant is in default under this Lease. The parties acknowledge
that the sale of any portion of the Site independent of the remainder of the
Site as a separate legal parcel would require a subdivision of the Site. For
purposes of this Article 7, the terms "purchase," "sell" and "sale" shall be
construed to include, without limitation, any exchange transaction in which
-11-
<PAGE>
Landlord transfers or conveys its interest in the Site (or any applicable
portion thereof) in exchange for other real property or other non-cash
consideration. Notwithstanding any other provisions of this Article 7, the
provisions of this Article 7 shall not apply to any sale, transfer or other
conveyance of the Site or any portion thereof by Landlord to any person or
entity which controls, is controlled by or is under common control with
Landlord, but the provisions of this Article 7 shall continue to apply to the
Site in the hands of such affiliated transferee.
7.2 First Refusal Right. If, at any time during the term of this Lease
-------------------
after the expiration of any and all available Lock-Up Periods, Landlord receives
and wishes to accept a bona fide written offer from a person or entity other
---------
than Tenant (the "Offeror") to purchase the Site, or any portion thereof
containing the Initial Building, the Expansion Building or both, and if Tenant
is not then in default under this Lease, Landlord shall give written notice of
such offer to Tenant, specifying the material terms on which the Offeror
proposes to purchase the Site or specified portion thereof (the "Offered
Property"), and shall offer to Tenant the opportunity to purchase the Offered
Property on the terms specified in Landlord's notice, as modified by Section 7.3
(if applicable). For purposes of this Section 7.2, an offer shall be considered
bona fide if it is contained in a letter of intent or other writing signed by
- ---------
the Offeror and specifies the material terms of such proposed purchase. Tenant
shall have twenty (20) days after the date of giving of such notice by Landlord
in which to accept such offer by written notice to Landlord. Upon such
acceptance by Tenant, the Offered Property shall be sold to Tenant on the terms
set forth in Landlord's notice, as modified by Section 7.3 hereof (if
applicable), and the parties shall promptly execute an agreement containing the
terms of Landlord's said notice and such other reasonable and customary terms as
the parties shall agree. If Tenant does not accept Landlord's offer within the
allotted time, Landlord shall thereafter have the right to sell the Offered
Property to the Offeror, at any time within one hundred eighty (180) days after
Tenant's failure to accept Landlord's offer, at a price and on other terms and
conditions not more favorable to the Offeror than the price and other terms of
the original offer specified in Landlord's said notice. If Tenant does not
accept Landlord's offer and Landlord does not sell the Offered Property to the
Offeror within one hundred eighty (180) days, this First Refusal Right shall
reattach to the Offered Property. Tenant's failure, if any, to exercise any or
all Lock-Up Options shall not affect Tenant's First Refusal Right under this
Section 7.2.
7.3 Discount on Purchase Price. If, at the time Landlord is required to
--------------------------
give Tenant a notice specified in Section 7.2, Tenant has at least one class of
equity securities listed on any national stock exchange, the NASDAQ National
Market System or the NASDAQ Small Cap Market, or registered for public trading
pursuant to the Securities Exchange Act of 1934, as amended, and Tenant has
received gross revenues of at least one hundred fifty million dollars
($150,000,000) during Tenant's most recently completed fiscal year, then the
price at which Tenant is entitled to purchase the Offered Property pursuant to
the notice specified in Section 7.2 shall be four percent (4%) lower than the
price specified in the bona fide offer. For purposes of this Section 7.3,
---------
"gross revenues" shall include equity investments, research and development
funding, milestone payments and royalty revenue.
-12-
<PAGE>
8. TAXES
-----
8.1 Personal Property. Tenant shall be responsible for and shall pay prior
-----------------
to delinquency all taxes and assessments levied against or by reason of (a) any
and all alterations, additions and items installed or placed on the Property and
taxed as personal property rather than as real property, and/or (b) all personal
property, trade fixtures and other property placed by Tenant on or about the
Property. Upon request by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of Tenant's payment thereof. If at any time during the
term of this Lease any of said alterations, additions or personal property,
whether or not belonging to Tenant, shall be taxed or assessed as part of the
Property, then such tax or assessment shall be paid by Tenant to Landlord
immediately upon presentation by Landlord of copies of the tax bills in which
such taxes and assessments are included and shall, for the purposes of this
Lease, be deemed to be personal property taxes or assessments under this Section
8.1.
8.2 Real Property. To the extent any real property taxes and assessments on
-------------
the Property (including, but not limited to, the Improvements) are assessed
directly to Tenant, Tenant shall be responsible for and shall pay prior to
delinquency all such taxes and assessments levied against the Property. Upon
request by Landlord, Tenant shall furnish Landlord with satisfactory evidence of
Tenant's payment thereof. To the extent the Property and/or Improvements are
taxed or assessed to Landlord following the Commencement Date, such real
property taxes and assessments shall constitute Operating Expenses (as that term
is defined in Section 9.2 of this Lease) and shall be paid in accordance with
the provisions of Article 9 of this Lease.
9. OPERATING EXPENSES
------------------
9.1 Liability For Operating Expenses.
--------------------------------
(a) Tenant shall pay to Landlord, at the time and in the manner
hereinafter set forth, as additional rental, an amount equal to one hundred
percent (100%) ("Tenant's Operating Cost Share") of the Operating Expenses
defined in Section 9.2.
(b) If Landlord constructs additional buildings on the Phase II Site or
on any other adjacent property owned by Landlord and operated, for common area
purposes, on an integrated basis with the Phase I Site, Landlord and Tenant
shall negotiate in good faith concerning the reasonable and appropriate
treatment of any taxes, insurance or other operating expense items that are
allocable both to the Phase I Site and to any such additional buildings or
properties. To the extent appropriate, except as otherwise agreed in any such
negotiations by Landlord and Tenant, the definition of Operating Expenses in
Section 9.2 shall be expanded to include items attributable to such additional
buildings or properties and Tenant's Operating Cost Share shall be adjusted from
time to time to be equal to the percentage determined by dividing the square
footage of the Initial Building as it then exists by the square footage of all
buildings located on portions of the Site owned by Landlord or on any applicable
adjacent property owned by Landlord as described above.
-13-
<PAGE>
In determining such percentage, a building shall be taken into account from and
after the date on which a tenant first enters into possession of the building or
a portion thereof, and the square footage of any such building shall be measured
or determined in accordance with the same BOMA standard applicable to the
measurement of the Initial Building under Section 1.1(a) hereof.
9.2 Definition Of Operating Expenses. Subject to the exclusions and
--------------------------------
provisions hereinafter contained, the term "Operating Expenses" shall mean the
total costs and expenses incurred by or allocable to Landlord for operation and
maintenance of the Improvements and the Property, including, without limitation,
costs and expenses of (i) operation, repair and maintenance of the roof
(structural portions only), exterior walls and other structural portions of the
Initial Building; (ii) liability, casualty or other insurance (including, but
not limited to, earthquake insurance if Landlord in its discretion elects to
carry such insurance, which it is Landlord's present intention to do, so long as
such insurance is reasonably available in the commercial insurance markets)
carried by Landlord with respect to the Property, the Improvements or any
portion thereof; (iii) real and personal property taxes and assessments or
substitutes therefor levied or assessed against the Property or any part
thereof, including (but not limited to) any possessory interest, use, business,
license or other taxes or fees, any taxes imposed directly on rents or services,
any assessments or charges for police or fire protection, housing, transit, open
space, street or sidewalk construction or maintenance or other similar services
from time to time by any governmental or quasi-governmental entity, and any
other new taxes on landlords in addition to taxes now in effect; (iv) supplies,
equipment, utilities and tools used in operation, repair and maintenance of the
roof (structural portions only), exterior walls and other structural portions of
the Initial Building; (v) capital improvements to the Property or the
Improvements, amortized over their respective useful lives, (aa) which reduce or
will cause future reduction of other items of Operating Expenses for which
Tenant is otherwise required to contribute (but not in excess of the cost
savings realized) or (bb) which are required by law, ordinance, regulation or
order of any governmental authority enacted after the date of this Lease; and
(vi) any other costs (including, but not limited to, any parking or utilities
fees or surcharges) allocable to or paid by Landlord, as owner of the Property
or Improvements, pursuant to any applicable laws, ordinances, regulations or
orders of any governmental or quasi-governmental authority or pursuant to the
terms of any declarations of covenants, conditions and restrictions now or
hereafter affecting either the Property or any other property described in
Section 9.1(b) or over which Tenant has non-exclusive usage rights as
contemplated in Section 1.1(b) hereof. The distinction between items of
ordinary operating maintenance and repair and items of a capital nature shall be
made in accordance with generally accepted accounting principles applied on a
consistent basis. Notwithstanding any other provisions of this Section 9.2,
Operating Expenses shall not include any costs attributable to work for which
Landlord is required to pay under Section 5.1 or Exhibit C; any management fees;
---------
depreciation on buildings (other than depreciation on personal property); costs
of tenants' improvements; interest; capital items (other than as expressly
provided above); payments on debt (principal or interest); leasing commissions;
costs of goods and services (including utilities) for which Landlord is
reimbursed by tenants or occupants other than Tenant; costs incurred to perform
or correct Landlord's Work described in Section 5.1 and Exhibit C; costs of
---------
correcting defects in or inadequacy of the initial design of the structure of
the Initial Building; legal fees; amounts paid to
-14-
<PAGE>
affiliates of Landlord (i.e., persons or companies controlled by, under common
control with, or which control, Landlord) for services on or to the Initial
Building, except to the extent that the costs of such services do not exceed
competitive costs of such services were they rendered by a non-affiliate of
Landlord; expenses in connection with services or other benefits provided to one
or more other tenants but not generally available to Tenant; space planning
fees, architectural fees, engineering fees (other than those relating to the
general operation of buildings or common areas), marketing, advertising or any
other expenses incurred in connection with the development or leasing of any
buildings or improvements; costs associated with the operation of the business
of the legal entity which constitutes Landlord as the same is separate and apart
from the costs and operation of the Initial Building, including legal entity
formation and internal entity accounting; any late fees or penalties or similar
fees incurred by Landlord, except to the extent attributable to Tenant's late
payment or nonpayment of minimum rental or additional rent; any debt losses,
rent losses or reserves for bad debt; the cost of any repairs in accordance with
the provisions of this Lease relating to fire, casualty and/or condemnation;
Landlord's incremental costs incurred by reason of Landlord's breach of any
leases with other tenants, and any costs incurred by reason of the breach by
other tenants of such tenants' leases (to the extent recoverable from such
tenants); or any unrecovered expenses incurred as a consequence of the grossly
negligent operation and maintenance, by Landlord or its employees, of those
portions of the Initial Building required to be maintained by Landlord.
9.3 Determination and Payment Of Operating Expenses.
-----------------------------------------------
(a) Beginning on the Commencement Date and thereafter from time to time
during the term of this Lease, Landlord shall give Tenant written notice of
amounts paid or to be paid by Landlord for insurance premiums, taxes, structural
repair or maintenance costs or any other amount constituting an Operating
Expense under Section 9.2 hereof, accompanied by copies of premium notices, tax
statements, contractor's invoices or other documentation reasonably evidencing
the amount of the applicable Operating Expense payment, and Tenant shall pay to
Landlord Tenant's Operating Cost Share of each such item of Operating Expenses.
Such payment by Tenant shall be due on or before the later to occur of (i) ten
(10) days after delivery of Landlord's written notice to Tenant or (ii) fourteen
(14) days before the date on which the applicable Operating Expense payment by
Landlord is due (in the case of insurance premiums or other payments to private
parties) or would become delinquent (in the case of taxes or assessments). In
the event of any subsequent rebate, refund, adjustment or surcharge with respect
to any item of Operating Expenses allocable to any portion of the term of this
Lease, the amount of such rebate, refund, adjustment or surcharge shall be for
Tenant's benefit or account, as the case may be, and shall be adjusted promptly
by a cash payment from Landlord to Tenant or from Tenant to Landlord, as the
case may be.
(b) Tenant shall be entitled at any time and from time to time, upon
reasonable written notice to Landlord and during normal business hours at
Landlord's office or such other places as Landlord shall designate, to inspect
and examine those books and records of Landlord relating to the determination
and payment of Operating Expenses relating to this Lease, the
-15-
<PAGE>
Property and/or any other properties described in Section 9.1(b). If, after
inspection and examination of such books and records, Tenant disputes the amount
of any such Operating Expenses charged by Landlord and the parties are not able
to resolve such dispute by good faith negotiations within (30) days after Tenant
notifies Landlord in writing of the disputed items, then Tenant may, by written
notice to Landlord, request an independent audit of such books and records. The
independent audit of the books and records shall be conducted by a certified
public accountant acceptable to both Landlord and Tenant or, if the parties are
unable to agree, by a "Big Six" accounting firm designated by Landlord and not
then employed by Landlord or Tenant. The audit shall be limited to the
determination of the amount of Operating Expenses specified by Tenant in its
notice of objection. If the audit discloses that the amount of Operating
Expenses billed to Tenant was incorrect, the appropriate party shall promptly
pay to the other party the deficiency or overpayment, as applicable. All costs
and expenses of the audit shall be paid by Tenant unless the audit shows that
Landlord overstated Operating Expenses covered by the audit by more than five
percent (5%), in which case Landlord shall pay all costs and expenses of the
audit.
9.4 Proration. If the Commencement Date falls on a day other than the first
---------
day of an insurance coverage period, tax fiscal year or other period to which an
Operating Expense is allocable or attributable, or if this Lease terminates on a
day other than the last day of an insurance coverage period, tax fiscal year or
other period to which an Operating Expense is allocable or attributable, then
the amount of Operating Expenses payable by Tenant with respect to such first or
last partial insurance coverage period, tax fiscal year or other period shall be
prorated on the basis which the number of days during such insurance coverage
period, tax fiscal year or other period in which this Lease is in effect bears
to the total number of days in such insurance coverage period, tax fiscal year
or other period.
10. UTILITIES
---------
10.1 Payment. Commencing with the Commencement Date and thereafter
-------
throughout the term of this Lease, Tenant shall pay, before delinquency, all
charges for water, gas, heat, light, electricity, power, sewer, telephone, alarm
system, janitorial and other services or utilities supplied to or consumed in or
upon the Property (including any separately metered costs for water, electricity
or other services or utilities furnished with respect to the Common Areas),
including any taxes on such services and utilities.
10.2 Interruption. There shall be no abatement of rent or other charges
------------
required to be paid hereunder and Landlord shall not be liable in damages or
otherwise for interruption or failure of any service or utility furnished to or
used in the Property because of accident, making of repairs, alterations or
improvements, severe weather, difficulty or inability in obtaining services or
supplies, labor difficulties or any other cause, except to the extent such
interruption or failure of a service or utility is caused by the negligence or
willful misconduct of Landlord or its agents or employees.
-16-
<PAGE>
11. ALTERATIONS; SIGNS
------------------
11.1 Right To Make Alterations. Tenant shall make no alterations, additions
-------------------------
or improvements to the Property without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed, except that Tenant
shall not be required to obtain such consent for interior non-structural
alterations costing less than Seventy-Five Thousand Dollars ($75,000.00) in the
aggregate during any twelve (12) month period. All such alterations, additions
and improvements shall be completed with due diligence in a first-class
workmanlike manner and in compliance with plans and specifications approved in
writing by Landlord and all applicable laws, ordinances, rules and regulations,
and to the extent Landlord's consent is not otherwise required hereunder for
such alterations, additions or improvements, Tenant shall give prompt written
notice thereof to Landlord for purposes of Section 11.2 hereof. Tenant shall
cause any contractors engaged by Tenant for work on the Property to maintain
public liability and property damage insurance, and other customary insurance,
with such terms and in such amounts as Landlord may reasonably require, naming
Landlord and its partners, shareholders, agents and employees as additional
insureds, and shall furnish Landlord with certificates of insurance or other
evidence that such coverage is in effect. Notwithstanding any other provisions
of this Section 11.1, under no circumstances shall Tenant make any structural
alterations or improvements, or any substantial changes to the roof or
substantial equipment installations on the roof, or any substantial changes or
alterations to building systems, without Landlord's prior written consent.
11.2 Title To Alterations. All alterations, additions and improvements
--------------------
installed in, on or about the Property shall be part of the Improvements and the
property of Landlord, unless Landlord elects to require Tenant to remove the
same upon the termination of this Lease, which election shall be made by
Landlord concurrently with its consent to such alterations, additions or
improvements or, if no such consent is required, then within fifteen (15) days
after Landlord is advised in writing of such alterations, additions or
improvements as contemplated in Section 11.1 hereof; provided, however, that the
--------
foregoing shall not apply (i) to Tenant's movable furniture and trade fixtures
not affixed to the Property, or (ii) to any of the Interior Improvements (as
defined in Exhibit C hereto), or any subsequent improvements installed by Tenant
---------
at its own expense, which are readily movable, are not an integral part of the
Initial Building's structure or interior architectural improvements, and are not
an integral part of the Initial Building's HVAC, plumbing or electrical systems
or other standard operating systems. All of such items described in clause (i)
or (ii) of the preceding sentence (in all events including, but not limited to,
lab benches, fume hoods and cold rooms) may (and, if duly elected by Landlord
hereunder, shall) be removed by Tenant upon the termination of this Lease.
Tenant shall promptly repair any damage caused by its removal of any such
improvements.
11.3 Tenant Fixtures. Notwithstanding the provisions of Sections 11.1 and
---------------
11.2, Tenant may install, remove and reinstall trade fixtures without Landlord's
prior written consent, except that any fixtures which are affixed to the
Property or which affect the exterior or structural portions of the Initial
Building or the building systems shall require Landlord's written approval. The
foregoing shall apply to Tenant's signs, logos and insignia, all of which Tenant
shall have the right
-17-
<PAGE>
to place and remove and replace (a) only with Landlord's prior written consent
as to location, size and composition, which consent shall not be unreasonably
withheld or delayed, and (b) only in compliance with all restrictions and
requirements of applicable law and of any covenants, conditions and restrictions
or other written agreements now or hereafter applicable to the Property. Tenant
shall immediately repair any damage caused by installation and removal of
fixtures under this Section 11.3.
11.4 No Liens. Tenant shall at all times keep the Property free from all
--------
liens and claims of any contractors, subcontractors, materialmen, suppliers or
any other parties employed either directly or indirectly by Tenant in
construction work on the Property. Tenant may contest any claim of lien, but
only if, prior to such contest, Tenant either (i) posts security in the amount
of the claim, plus estimated costs and interest, or (ii) records a bond of a
responsible corporate surety in such amount as may be required to release the
lien from the Property. Tenant shall indemnify, defend and hold Landlord
harmless against any and all liability, loss, damage, cost and other expenses,
including, without limitation, reasonable attorneys' fees, arising out of claims
of any lien for work performed or materials or supplies furnished at the request
of Tenant or persons claiming under Tenant.
11.5 Signs. Without limiting the generality of the provisions of Section
-----
11.3 hereof, Tenant shall have the right to display its corporate name and logo
on the Initial Building and in front of the entrance to the Initial Building,
subject to Landlord's prior approval as to location, size and composition (which
approval shall not be unreasonably withheld or delayed) and subject to all
restrictions and requirements of applicable law and of any covenants, conditions
and restrictions or other written agreements now or hereafter applicable to the
Property. Landlord is hereby deemed to have approved, as to location, any
signage the location of which is expressly designated on the site plan attached
hereto as Exhibit B or on any Approved Plan developed pursuant to the Workletter
---------
executed concurrently herewith.
12. MAINTENANCE AND REPAIRS
-----------------------
12.1 Landlord's Work.
---------------
(a) Landlord shall repair and maintain or cause to be repaired and
maintained the roof (structural portions only), exterior walls and other
structural portions of the Initial Building. The cost of all work performed by
Landlord under this Section 12.1 shall be an Operating Expense hereunder, except
to the extent such work (i) is required due to the negligence of Landlord, (ii)
is a capital expense not includible as an Operating Expense under Section 9.2
hereof, or (iii) is required due to the negligence or willful misconduct of
Tenant or its agents, employees or invitees (in which event Tenant shall bear
the full cost of such work pursuant to the indemnification provided in Section
14.6 hereof). Tenant knowingly and voluntarily waives the right to make repairs
at Landlord's expense, except to the extent expressly set forth in Section
12.1(b), or to offset the cost thereof against rent, under any law, statute,
regulation or ordinance now or hereafter in effect.
-18-
<PAGE>
(b) If Landlord fails to perform any repairs or maintenance required to
be performed by Landlord under Section 12.1(a) and such failure continues for
thirty (30) days or more after Tenant gives Landlord written notice of such
failure (or, if such repairs or maintenance cannot reasonably be performed
within such 30-day period, then if Landlord fails to commence performance within
such 30-day period and thereafter to pursue such performance diligently to
completion), then Tenant shall have the right to perform such repairs or
maintenance and Landlord shall reimburse Tenant for the reasonable cost thereof
within fifteen (15) days after written notice from Tenant of the completion and
cost of such work, accompanied by copies of invoices or other reasonable
supporting documentation. Under no circumstances, however, shall Tenant have
any right to offset the cost of any such work against rent or other charges
falling due from time to time under this Lease.
12.2 Tenant's Obligation For Maintenance.
-----------------------------------
(a) Good Order, Condition And Repair. Except as provided in Section
--------------------------------
12.1 hereof, Tenant at its sole cost and expense shall keep and maintain in good
and sanitary order, condition and repair the Property and every part thereof,
wherever located, including but not limited to the Common Areas of the Phase I
Site, the roof (non-structural portions only), signs, interior, ceiling,
electrical system, plumbing system, telephone and communications systems of the
Initial Building, the HVAC equipment and related mechanical systems serving the
Initial Building (for which equipment and systems Tenant shall enter into a
service contract with a person or entity designated or approved by Landlord),
all doors, door checks, windows, plate glass, door fronts, exposed plumbing and
sewage and other utility facilities, fixtures, lighting, wall surfaces, floor
surfaces and ceiling surfaces of the Initial Building and all other interior
repairs, foreseen and unforeseen, with respect to the Initial Building, as
required. If the Expansion Building is constructed by Landlord and is not
occupied by Tenant, then Landlord and Tenant shall negotiate diligently and in
good faith to reach a reasonable arrangement for the maintenance and repair of
the Common Areas of the entire Site and a reasonable allocation of the cost of
such maintenance and repair between the Initial Building and the Expansion
Building.
(b) Landlord's Remedy. If Tenant, after notice from Landlord, fails to
-----------------
make or perform promptly any repairs or maintenance which are the obligation of
Tenant hereunder, Landlord shall have the right, but shall not be required, to
enter the Property and make the repairs or perform the maintenance necessary to
restore the Property to good and sanitary order, condition and repair.
Immediately on demand from Landlord, the cost of such repairs shall be due and
payable by Tenant to Landlord.
(c) Condition Upon Surrender. At the expiration or sooner termination
------------------------
of this Lease, Tenant shall surrender the Property, including any additions,
alterations and improvements thereto, broom clean, in good and sanitary order,
condition and repair, ordinary wear and tear excepted, first, however, removing
all goods and effects of Tenant and all and fixtures and items required to be
removed pursuant to this Lease (including, but not limited to, any such removal
-19-
<PAGE>
required as a result of an election duly made by Landlord to require such
removal as contemplated in Section 11.2), and repairing any damage caused by
such removal. Tenant shall not have the right to remove fixtures or equipment if
Tenant is in default hereunder unless Landlord specifically waives this
provision in writing. Tenant expressly waives any and all interest in any
personal property and trade fixtures not removed from the Property by Tenant at
the expiration or termination of this Lease, agrees that any such personal
property and trade fixtures may, at Landlord's election, be deemed to have been
abandoned by Tenant, and authorizes Landlord (at its election and without
prejudice to any other remedies under this Lease or under applicable law) to
remove and either retain, store or dispose of such property at Tenant's cost and
expense, and Tenant waives all claims against Landlord for any damages resulting
from any such removal, storage, retention or disposal.
13. USE OF PROPERTY
---------------
13.1 Permitted Use. Subject to Sections 13.3 and 13.4 hereof, Tenant shall
-------------
use the Property solely as a laboratory research and development facility,
including (but not limited to) wet chemistry and biology labs, clean rooms,
pilot scale, clinical scale and GMP scale manufacturing, storage and use of
toxic and radioactive materials incidental to such research and development
activities (subject to the provisions of Section 13.6 hereof), storage and use
of laboratory animals, and other lawful purposes related to or incidental to
such research and development use, and for no other purpose without Landlord's
written consent (not to be unreasonably withheld or delayed).
13.2 [Omitted.]
13.3 No Nuisance. Tenant shall not use the Property for or carry on or
-----------
permit upon the Property or any part thereof any offensive, noisy or dangerous
trade, business, manufacture, occupation, odor or fumes, or any nuisance or
anything against public policy, nor interfere with the rights or business of
Landlord in the Initial Building or the Property, nor commit or allow to be
committed any waste in, on or about the Property. Tenant shall not do or permit
anything to be done in or about the Property, nor bring nor keep anything
therein, which will in any way cause the Property to be uninsurable with respect
to the insurance required by this Lease or with respect to standard fire and
extended coverage insurance with vandalism, malicious mischief and riot
endorsements.
13.4 Compliance With Laws. Tenant shall not use the Property or permit the
--------------------
Property to be used in whole or in part for any purpose or use that is in
violation of any applicable laws, ordinances, regulations or rules of any
governmental agency or public authority. Tenant shall keep the Property
equipped with all safety appliances required by law, ordinance or insurance on
the Property, or any order or regulation of any public authority, because of
Tenant's particular use of the Property. Tenant shall procure all licenses and
permits required for use of the Property. Tenant shall use the Property in
strict accordance with all applicable ordinances, rules, laws and regulations
and shall comply with all requirements of all governmental authorities now in
force or which may
-20-
<PAGE>
hereafter be in force pertaining to the use of the Property by Tenant,
including, without limitation, regulations applicable to noise, water, soil and
air pollution, and making such nonstructural alterations and additions thereto
as may be required from time to time by such laws, ordinances, rules,
regulations and requirements of governmental authorities or insurers of the
Property (collectively, "Requirements") because of Tenant's construction of
improvements in or other particular use of the Property. Any structural
alterations or additions required from time to time by applicable Requirements
because of Tenant's construction of improvements in or other particular use of
the Property shall, at Landlord's election, either (i) be made by Tenant, at
Tenant's sole cost and expense, in accordance with the procedures and standards
set forth in Section 11.1 for alterations by Tenant, or (ii) be made by Landlord
at Tenant's sole cost and expense, in which event Tenant shall pay to Landlord
as additional rent, within ten (10) days after demand by Landlord, an amount
equal to all reasonable costs incurred by Landlord in connection with such
alterations or additions. The judgment of any court, or the admission by Tenant
in any proceeding against Tenant, that Tenant has violated any law, statute,
ordinance or governmental rule, regulation or requirement shall be conclusive of
such violation as between Landlord and Tenant.
13.5 Liquidation Sales. Tenant shall not conduct or permit to be conducted
-----------------
any auction, bankruptcy sale, liquidation sale, or going out of business sale,
in, upon or about the Property, whether said auction or sale be voluntary,
involuntary or pursuant to any assignment for the benefit of creditors, or
pursuant to any bankruptcy or other insolvency proceeding.
13.6 Environmental Matters.
---------------------
(a) For purposes of this Section, "hazardous substance" shall mean the
substances included within the definitions of the term "hazardous substance"
under (i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. (S)(S) 9601 et seq., and the regulations
-- ---
promulgated thereunder, as amended, (ii) the California Carpenter-Presley-Tanner
Hazardous Substance Account Act, California Health & Safety Code (S)(S) 25300 et
--
seq., and regulations promulgated thereunder, as amended, (iii) the Hazardous
- ---
Materials Release Response Plans and Inventory Act, California Heath & Safety
Code (S)(S) 25500 et seq., and regulations promulgated thereunder, as amended,
-- ---
and (iv) petroleum; "hazardous waste" shall mean (i) any waste listed as or
meeting the identified characteristics of a "hazardous waste" under the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. (S)(S) 6901 et seq., and
-- ---
regulations promulgated pursuant thereto, as amended (collectively, "RCRA"),
(ii) any waste meeting the identified characteristics of "hazardous waste,"
"extremely hazardous waste" or "restricted hazardous waste" under the California
Hazardous Waste Control Law, California Health & Safety Code (S)(S) 25100 et
--
seq., and regulations promulgated pursuant thereto, as amended (collectively,
- ---
the "CHWCL"), and/or (iii) any waste meeting the identified characteristics of
"medical waste" under California Health & Safety Code (S)(S) 25015-25027.8, and
regulations promulgated thereunder, as amended; and "hazardous waste facility"
shall mean a hazardous waste facility as defined under the CHWCL.
(b) Without limiting the generality of the obligations set forth in
Section 13.4 of
-21-
<PAGE>
this Lease:
(i) Tenant covenants not to cause or permit any hazardous substance
or hazardous waste to be brought upon, kept, stored or used in or about the
Property without the prior written consent of Landlord, which consent shall not
be unreasonably withheld or delayed, except that Tenant, in connection with its
permitted use of the Property as provided in Section 13.1, may keep, store and
use materials that constitute hazardous substances which are customary for such
permitted use, provided such hazardous substances are kept, stored and used in
quantities which are customary for such permitted use and are kept, stored and
used in full compliance with clauses (ii) and (iii) immediately below.
(ii) Tenant covenants that it will comply with all applicable laws,
rules, regulations, orders, permits, licenses and operating plans of any
governmental authority with respect to the receipt, use, handling, generation,
transportation, storage, treatment and/or disposal of hazardous substances or
wastes by Tenant or its agents or employees, and Tenant will provide Landlord
with copies of all permits, licenses, registrations and other similar documents
that authorize Tenant to conduct any such activities in connection with its
authorized use of the Property from time to time.
(iii) Tenant agrees that it shall not (A) operate on or about the
Property any facility required to be permitted or licensed as a hazardous waste
facility or for which interim status as such is required, nor (B) store any
hazardous wastes on or about the Property for ninety (90) days or more, nor (C)
conduct any other activities on or about the Property that could result in the
Property being deemed to be a "hazardous waste facility" (including, but not
limited to, any storage or treatment of hazardous substances or hazardous wastes
which could have such a result).
(iv) Tenant agrees to comply with all applicable laws, rules,
regulations, orders and permits relating to underground storage tanks installed
by Tenant or its agents or employees (including any installation, monitoring,
maintenance, closure and/or removal of such tanks) as such tanks are defined in
California Health & Safety Code (S) 25281(x), including, without limitation,
complying with California Health & Safety Code (S)(S) 25280-25299.7 and the
regulations promulgated thereunder, as amended. Tenant shall furnish to
Landlord copies of all registrations and permits issued to or held by Tenant
from time to time for any and all underground storage tanks.
(v) If applicable, Tenant shall provide Landlord in writing the
following information and/or documentation at the commencement of this Lease and
within sixty (60) days of any change in or addition to the required information
and/or documentation (provided, however, that in the case of the materials
--------
described in subparagraphs (B), (C) and (E) below, Tenant shall not be required
to deliver copies of such materials to Landlord but shall maintain copies of
such materials to such extent and for such periods as may be required by
applicable law and shall permit Landlord or its representatives to inspect such
materials during normal business hours at any time and from time to time upon
reasonable notice to Tenant):
-22-
<PAGE>
(A) A list of all hazardous substances and/or wastes that Tenant
receives, uses, handles, generates, transports, stores, treats or disposes of
from time to time in connection with its operations on the Property.
(B) All Material Safety Data Sheets ("MSDS's"), if any, required to be
completed with respect to operations of Tenant at the Property from time to time
in accordance with Title 26, California Code of Regulations (S) 8-5194 or 42
U.S.C. (S) 11021, or any amendments thereto, and any Hazardous Materials
Inventory Sheets that detail the MSDS's.
(C) All hazardous waste manifests (as defined in Title 26, California
Code of Regulations (S) 22-66481), if any, that Tenant is required to complete
from time to time in connection with its operations at the Property.
(D) A copy of any Hazardous Materials Management Plan required from
time to time with respect to Tenant's operations at the Property, pursuant to
California Health & Safety Code (S)(S) 25500 et seq., and any regulations
-- ---
promulgated thereunder, as amended.
(E) Copies of any Contingency Plans and Emergency Procedures required
of Tenant from time to time due to its operations in accordance with Title 26,
California Code of Regulations (S)(S) 22-67140 et seq., and any amendments
-------
thereto, and copies of any Training Programs and Records required under Title
26, California Code of Regulations, (S) 22-67105, and any amendments thereto.
(F) Copies of any biennial reports required to be furnished to the
California Department of Health Services from time to time relating to hazardous
substances or wastes, pursuant to Title 26, California Code of Regulations, (S)
22-66493, and any amendments thereto.
(G) Copies of all industrial wastewater discharge permits issued to or
held by Tenant from time to time in connection with its operations on the
Property.
(H) Copies of any other lists or inventories of hazardous substances
and/or wastes on or about the Property that Tenant is otherwise required to
prepare and file from time to time with any governmental or regulatory
authority.
(vi) Tenant shall secure Landlord's prior written approval for any
proposed receipt, storage, possession, use, transfer or disposal of "radioactive
materials" or "radiation," as such materials are defined in Title 26, California
Code of Regulations (S) 17-30100, and/or any other materials possessing the
characteristics of the materials so defined, which approval Landlord may
withhold in its sole and absolute discretion; provided, that such approval shall
--------
not be required for any radioactive materials for which Tenant has secured prior
written approval of the Nuclear Regulatory Commission and delivered to Landlord
a copy of such approval. Tenant, in connection
-23-
<PAGE>
with any such authorized receipt, storage, possession, use, transfer or disposal
of radioactive materials or radiation, shall:
(A) Comply with all federal, state and local laws, rules,
regulations, orders, licenses and permits;
(B) Maintain, to such extent and for such periods as may be required
by applicable law, and permit Landlord or its representatives to inspect during
normal business hours at any time and from time to time upon reasonable notice
to Tenant, a list of all radioactive materials or radiation received, stored,
possessed, used, transferred or disposed of from time to time, to the extent not
already disclosed through delivery of a copy of a Nuclear Regulatory Commission
approval with respect thereto as contemplated above; and
(C) Maintain, to such extent and for such periods as may be required
by applicable law, and permit Landlord or its representatives to inspect during
normal business hours at any time and from time to time upon reasonable notice
to Tenant, all licenses, registration materials, inspection reports,
governmental orders and permits in connection with the receipt, storage,
possession, use, transfer or disposal of radioactive materials or radiation from
time to time.
(vii) Tenant agrees to comply with any and all applicable laws,
rules, regulations and orders of any governmental authority with respect to the
release into the environment of any hazardous wastes or substances or radiation
or radioactive materials by Tenant or its agents or employees. Tenant agrees to
give Landlord immediate verbal notice of any unauthorized release of any such
hazardous wastes or substances or radiation or radioactive materials into the
environment, and to follow such verbal notice with written notice to Landlord of
such release within twenty-four (24) hours of the time at which Tenant became
aware of such release.
(viii) Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all claims, losses (including, but not limited to, loss
of rental income and loss due to business interruption), damages, liabilities,
costs, legal fees and expenses of any sort arising out of or relating to (A) any
failure by Tenant to comply with any provisions of this paragraph (b), or (B)
any receipt, use handling, generation, transportation, storage, treatment,
release and/or disposal of any hazardous substance or waste or any radioactive
material or radiation on or about the Property in connection with Tenant's use
or occupancy of the Property or as a result of any intentional or negligent acts
or omissions of Tenant or of any agent or employee of Tenant.
(ix) Tenant agrees to cooperate with Landlord in furnishing Landlord
with complete information regarding Tenant's receipt, handling, use, storage,
transportation, generation, treatment and/or disposal of any hazardous
substances or wastes or radiation or radioactive materials. Upon request,
Tenant agrees to grant Landlord reasonable access at reasonable times to the
Property to inspect Tenant's receipt, handling, use, storage, transportation,
generation, treatment
-24-
<PAGE>
and/or disposal of hazardous substances or wastes or radiation or radioactive
materials, without being deemed guilty of any disturbance of Tenant's use or
possession and without being liable to Tenant in any manner.
(x) Notwithstanding Landlord's rights of inspection and review under
this paragraph (b), Landlord shall have no obligation or duty to so inspect or
review, and no third party shall be entitled to rely on Landlord to conduct any
sort of inspection or review by reason of the provisions of this paragraph (b).
(xi) If Tenant receives, handles, uses, stores, transports, generates,
treats and/or disposes of any hazardous substances or wastes or radiation or
radioactive materials on or about the Property at any time during the term of
this Lease, then within thirty (30) days after termination or expiration of this
Lease, Tenant at its sole cost and expense shall obtain and deliver to Landlord
an environmental study, performed by an expert reasonably satisfactory to
Landlord, evaluating the presence or absence of hazardous substances and wastes,
radiation and radioactive materials on and about the Property. Such study shall
be based on a reasonable and prudent level of tests and investigations of the
Property which tests shall be conducted no earlier than the date of termination
or expiration of this Lease. Liability for any remedial actions required or
recommended on the basis of such study shall be allocated in accordance with
Sections 13.4, 13.6, 14.6 and other applicable provisions of this Lease.
(c) Landlord shall indemnify, defend and hold Tenant harmless from and
against any and all claims, losses, damages, liabilities, costs, legal fees and
expenses of any sort arising out of or relating to (i) the presence on the
Property of any hazardous substances or wastes or radiation or radioactive
materials present on the Property as of the Commencement Date (other than as a
result of any intentional or negligent acts or omissions of Tenant or of any
agent or employee of Tenant), and/or (ii) any unauthorized release into the
environment (including, but not limited to, the Site) of any hazardous
substances or wastes or radiation or radioactive materials to the extent such
release results from the negligence of or willful misconduct or omission by
Landlord or its agents or employees.
(d) In the event of any third-party claims, losses, damages,
liabilities, costs, legal fees and expenses of any sort (including, but not
limited to, costs incurred with respect to any government-mandated remediation),
against either Landlord or Tenant or both, arising out of or relating to (i) the
presence on the Property of any hazardous substances or wastes or radiation or
radioactive materials not present on the Property as of the Commencement Date
(except to the extent the presence thereof is already covered by an express
indemnification obligation under Section 13.6(b)(viii) or Section 13.6(c), as
applicable), and/or (ii) any unauthorized release into the environment
(including, but not limited to, the Site) of any hazardous substances or wastes
or radiation or radioactive materials (except to the extent such release is
already covered by an express indemnification obligation under Section
13.6(b)(viii) or Section 13.6(c), as applicable), then (x) Landlord and Tenant
shall cooperate reasonably and in good faith in the defense of such third-party
claims, liabilities and related matters and (y) Landlord and Tenant shall each
bear fifty percent
-25-
<PAGE>
(50%) of the total claims, losses, damages, liabilities, costs, legal fees and
expenses incurred by Landlord and/or Tenant in connection with matters covered
by this Section 13.6(d). For purposes of the sharing of expenses contemplated in
clause (y) of the preceding sentence, the party directly paying or incurring
such costs or expenses shall be entitled to invoice the other party from time to
time (on a monthly basis or at other appropriate intervals) for such other
party's respective share thereof, which invoice shall be accompanied by copies
of third-party invoices or other reasonable documentation supporting the
invoiced amounts, and the party receiving such invoice shall pay its share as
reflected in the applicable invoice within fifteen (15) days after receipt
thereof, unless the parties agree otherwise. Within three (3) months after
receipt of any such invoice, the party receiving the invoice shall be entitled,
upon reasonable written notice and during normal business hours, to inspect and
examine the books and records of the party submitting the invoice with respect
to the invoiced amounts. Any dispute with respect thereto that the parties are
unable to resolve by good faith negotiations shall be resolved by an independent
audit using the same procedure set forth in Section 9.3(b).
14. INSURANCE AND INDEMNITY
-----------------------
14.1 Liability and Property Insurance.
--------------------------------
(a) Tenant shall procure and maintain in full force and effect at all
times during the term of this Lease, at Tenant's cost and expense, commercial
general liability insurance to protect against liability arising out of or
related to the use of or resulting from any accident occurring in, upon or about
the Property, with combined single limit of liability of not less than Five
Million Dollars ($5,000,000) per occurrence for bodily injury and property
damage. Such insurance shall name Landlord and its partners, shareholders,
agents and employees as additional insureds thereunder. The amount of such
insurance shall not be construed to limit any liability or obligation of Tenant
under this Lease. Tenant shall also procure and maintain in full force and
effect at all times during the term of this Lease, at Tenant's cost and expense,
product liability insurance on terms and in amounts satisfactory to Landlord in
its reasonable discretion.
(b) Landlord shall procure and maintain in full force and effect at all
times during the term of this Lease, at Landlord's cost and expense (but
reimbursable as an Operating Expense under Section 9.2 hereof), commercial
general liability insurance to protect against liability arising out of or
related to the use of or resulting from any accident occurring in, upon or about
the Property, with combined single limit of liability of not less than Five
Million Dollars ($5,000,000) per occurrence for bodily injury and property
damage.
(c) Landlord shall procure and maintain in full force and effect at all
times during the term of this Lease, at Landlord's cost and expense (but
reimbursable as an Operating Expense under Section 9.2 hereof), fire and
extended coverage insurance for the Building Shell (as defined in Exhibit C) and
---------
for the improvements in the Common Areas of the Property on a full replacement
cost basis, and for the Interior Improvements in an amount not less than the
total amount
-26-
<PAGE>
contributed by Landlord toward the payment for the Interior Improvements
pursuant to Exhibit C. Such insurance may include earthquake coverage to
---------
the extent Landlord in its discretion elects to carry such coverage, and shall
have such deductibles and other terms as Landlord in its discretion determines
to be appropriate. Except as expressly set forth in this paragraph (c), Landlord
shall have no obligation to insure the Interior Improvements and shall, in all
events, have no obligation to insure any other alterations, additions or
improvements installed by Tenant on or about the Property.
(d) Tenant shall procure and maintain in full force and effect at all
times during the term of this Lease, at Tenant's cost and expense, fire and
extended coverage insurance for the Interior Improvements in an amount not less
than the full replacement cost thereof, less the amount of coverage required to
be carried on the Interior Improvements by Landlord pursuant to Section 14.1(c),
and shall have sole responsibility for insurance coverage of any other
alterations, additions or improvements installed by Tenant on the Property to
the extent Tenant deems such coverage appropriate. Tenant's insurance under
this paragraph (d) may include earthquake coverage to the extent Tenant in its
discretion elects to carry such coverage, and shall have such deductibles and
other terms as Tenant in its discretion determines to be appropriate.
(e) All policies of property insurance carried under paragraphs (c) and
(d) of this Section 14.1 shall provide protection against "all perils of direct
physical damage" (as defined by the Insurance Services Office) on all insured
property. Each insuring party shall cause the other party to be named as an
additional insured on such policy to the extent of the coverage for the Interior
Improvements. Replacement cost for purposes hereof shall be determined
periodically on such reasonable basis as Landlord and Tenant may determine.
Such insurance policies (i) shall be written by companies rated B+ or better,
with a financial rating of not less than Class VII, in "Best's Insurance Guide,"
and authorized to do business in California; (ii) shall be written to apply to
covered property damage and other covered loss occurring during the policy term,
or the onset of which occurred or arose during such policy term; (iii) shall be
endorsed, in the case of Tenant's property insurance, to name Landlord's lender
("Lender"), if any, holding the lien of a mortgage or deed of trust on the
Building and Interior Improvements from time to time as a loss payee, provided
that a condition of such endorsement shall be that at all times during the
effectiveness of the endorsement there shall be in full force and effect an
agreement among Landlord, Tenant and Lender pursuant to which Lender agrees
that, in the event of an insured occurrence, Lender will make available to
Tenant such part or all of the proceeds of insurance on the Interior
Improvements which are received by Lender as are required for the repair or
replacement of the Interior Improvements, except as otherwise provided in
Section 17.1 hereof in the event of a termination of this Lease; (iv) shall
provide that the respective coverages shall be primary and not contributing with
or in excess of any coverage that the other party may carry; (v) shall be
endorsed to provide the other party with not less than thirty (30) days' notice
of cancellation; and (vi) shall provide for a deductible of not to exceed
$10,000 (except in the case of earthquake coverage). Each party shall deliver
to the other party, on or before the Commencement Date, and thereafter at least
ten (10) days before the expiration dates of expiring policies, certificates of
insurance or other satisfactory evidence of the continuation of such property
insurance coverage for the period indicated therein.
-27-
<PAGE>
If either party fails to procure property insurance or to deliver certificates
or other evidence thereof as required hereunder, the other party may, at its
option and in addition to the other party's other remedies in the event of a
default hereunder, procure the same for the benefit of such party. If, pursuant
to the foregoing sentence, Tenant secures such insurance on Landlord's behalf,
Tenant shall not be entitled to reimbursement of the cost thereof; if Landlord
secures such insurance on Tenant's behalf, Tenant shall reimburse Landlord for
the cost thereof within ten (10) business days after receipt of Landlord's
invoice therefor.
14.2 Quality Of Policies And Certificates. All policies of insurance
------------------------------------
required hereunder shall be issued by responsible insurers and, in the case of
policies carried or required to be carried by Tenant, shall be written as
primary policies not contributing with and not in excess of any coverage that
Landlord may carry. Each party shall deliver to the other party certificates of
insurance showing that the insuring party's required policies are in effect. If
either party fails to acquire, maintain or renew any insurance required to be
maintained by it under this Article 14 or to pay the premium therefor, then the
other party, at its option and in addition to its other remedies, but without
obligation so to do, may procure such insurance, and any sums expended by
Landlord to procure any such insurance on behalf of or in place of Tenant shall
be repaid upon demand, with interest as provided in Section 3.2 hereof. Tenant
shall obtain written undertakings from each insurer under policies required to
be maintained by it to notify all insureds thereunder at least thirty (30) days
prior to cancellation.
14.3 Workers' Compensation. Tenant shall maintain in full force and effect
---------------------
during the term of this Lease workers' compensation insurance covering all of
Tenant's employees working on the Property, with a minimum limit of liability of
not less than Five Hundred Thousand Dollars ($500,000) per accident/disease.
14.4 Waiver Of Subrogation. To the extent permitted by law and without
---------------------
affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against the other
(i) damage to property, (ii) damage to the Property or any part thereof, or
(iii) claims arising by reason of any of the foregoing, but only to the extent
that any of the foregoing damages and claims under subparts (i)-(iii) hereof are
covered, and only to the extent of such coverage, by insurance actually carried
or required to be carried hereunder by either Landlord or Tenant. This
provision is intended to waive fully, and for the benefit of each party, any
rights and claims which might give rise to a right of subrogation in any
insurance carrier. Each party shall procure a clause or endorsement on any
property insurance policy denying to the insurer rights of subrogation against
the other party to the extent rights have been waived by the insured prior to
the occurrence of injury or loss. Coverage provided by insurance maintained by
Tenant shall not be limited, reduced or diminished by virtue of the subrogation
waiver herein contained.
14.5 Increase In Premiums. Tenant shall do all acts and pay all expenses
--------------------
necessary to insure that the Property is not used for purposes prohibited by any
applicable fire insurance, and that Tenant's use of the Property complies with
all requirements necessary to obtain any such insurance. If Tenant uses or
permits the Property to be used in a manner which increases the existing rate of
-28-
<PAGE>
any insurance on the Property carried by Landlord, Tenant shall pay the amount
of the increase in premium caused thereby, and Landlord's costs of obtaining
other replacement insurance policies, including any increase in premium, within
ten (10) days after demand therefor by Landlord.
14.6 Indemnification.
---------------
(a) Tenant shall indemnify, defend and hold Landlord, its partners,
shareholders, officers, directors, agents and employees harmless from any and
all liability for bodily injury to or death of any person, or loss of or damage
to the property of persons, and all actions, claims, demands, costs (including,
but not limited to, reasonable attorneys' fees), damages or expenses arising
therefrom which may be brought or made against Landlord or which Landlord may
pay or incur by reason of the use, occupancy and enjoyment of the Property by
Tenant or any invitees, sublessees, agents or employees of Tenant or holding
under Tenant from any cause whatsoever other than negligence or willful
misconduct or omission by Landlord, its agents or employees. Landlord, its
partners, shareholders, officers, directors, agents and employees shall not be
liable for, and Tenant hereby waives all claims against such persons for,
damages to goods, wares and merchandise in or upon the Property, or for injuries
to Tenant, its agents or third persons in or upon the Property, from any cause
whatsoever other than negligence or willful misconduct or omission by Landlord,
its agents or employees. Tenant shall give prompt notice to Landlord of any
casualty or accident in, on or about the Property.
(b) Landlord shall indemnify, defend and hold Tenant, its shareholders,
officers, directors, agents and employees harmless from liability for bodily
injury to or death of any person, or loss of or damage to the property of
persons, and all actions, claims, demands, costs (including, but not limited to,
reasonable attorneys' fees), damages or expenses arising therefrom which may be
brought or made against Tenant or which Tenant may pay or incur, to the extent
such liabilities or other matters arise by reason of any negligence or willful
misconduct or omission by Landlord, its agents or employees.
14.7 Blanket Policy. Any policy required to be maintained hereunder may be
--------------
maintained under a so-called "blanket policy" insuring other parties and other
locations so long as the amount of insurance required to be provided hereunder
is not thereby diminished.
-29-
<PAGE>
15. SUBLEASE AND ASSIGNMENT
-----------------------
15.1 Assignment And Sublease Of Property. Tenant shall not have the right or
-----------------------------------
power to assign its interest in this Lease, or make any sublease of the Property
or any portion thereof, nor shall any interest of Tenant under this Lease be
assignable involuntarily or by operation of law, without on each occasion
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any purported sublease or assignment of
Tenant's interest in this Lease requiring but not having received Landlord's
consent thereto shall be void. Without limiting the generality of the
foregoing, Landlord may withhold consent to any proposed subletting or
assignment solely on the ground, if applicable, that the use by the proposed
subtenant or assignee is reasonably likely to be incompatible with Landlord's
use of any adjacent property owned or operated by Landlord, unless the proposed
use is within the permitted uses specified in Section 13.1, in which event it
shall not be reasonable for Landlord to object to the proposed use. Any
dissolution, consolidation, merger or other reorganization of Tenant, or any
sale or transfer of the stock of or other interest in Tenant, or any series of
one or more of such events, involving in the aggregate a change of fifty percent
(50%) or more in the beneficial ownership of Tenant or its assets shall be
deemed to be an assignment hereunder and shall be void without the prior written
consent of Landlord as required above. Notwithstanding the foregoing, (i) an
initial public offering of the common stock of Tenant shall not be deemed to be
an assignment hereunder; and (ii) Tenant shall have the right to assign this
Lease or sublet the Premises, or any portion thereof, without Landlord's consent
(but with prior or concurrent written notice by Tenant to Landlord), to any
entity which controls, is controlled by, or is under common control with Tenant,
or to any entity which results from a merger or consolidation with Tenant, or to
any entity engaged in a joint venture with Tenant, or to any entity which
acquires substantially all of the stock or assets of Tenant, as a going concern,
with respect to the business that is being conducted on the Property
(hereinafter each a "Permitted Transfer"). In addition, a sale or transfer of
the capital stock of Tenant shall be deemed a Permitted Transfer if (x) such
sale or transfer occurs in connection with any bona fide financing or
---------
capitalization for the benefit of Tenant, or (y) Tenant becomes a publicly
traded corporation. Landlord shall have no right to terminate this Lease in
connection with, and shall have no right to any sums or other economic
consideration resulting from, any Permitted Transfer. Except as expressly set
forth in this Section 15.1, however, the provisions of Section 15.2 shall remain
applicable to any Permitted Transfer and the transferee under such Permitted
Transfer shall be and remain subject to all of the terms and provisions of this
Lease.
15.2 Rights Of Landlord. Consent by Landlord to one or more assignments of
------------------
this Lease, or to one or more sublettings of the Property or any portion
thereof, or collection of rent by Landlord from any assignee or sublessee, shall
not operate to exhaust Landlord's rights under this Article 15, nor constitute
consent to any subsequent assignment or subletting. No assignment of Tenant's
interest in this Lease and no sublease shall relieve Tenant of its obligations
hereunder, notwithstanding any waiver or extension of time granted by Landlord
to any assignee or sublessee, or the failure of Landlord to assert its rights
against any assignee or sublessee, and regardless of whether Landlord's consent
thereto is given or required to be given hereunder. In the event of a default
by any assignee, sublessee or other successor of Tenant in the performance of
any of the
-30-
<PAGE>
terms or obligations of Tenant under this Lease, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against any
such assignee, sublessee or other successor. In addition, Tenant immediately
and irrevocably assigns to Landlord, as security for Tenant's obligations under
this Lease, all rent from any subletting of all or a part of the Property as
permitted under this Lease, and Landlord, as Tenant's assignee and as attorney-
in-fact for Tenant, or any receiver for Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this Lease; except that, until the occurrence of an act of default by
Tenant, Tenant shall have the right to collect such rent and to retain all
sublease profits.
16. RIGHT OF ENTRY AND QUIET ENJOYMENT
----------------------------------
16.1 Right Of Entry. Landlord and its authorized representatives shall have
--------------
the right to enter the Property at any time during the term of this Lease during
normal business hours and upon not less than twenty-four (24) hours prior
notice, except in the case of emergency (in which event no notice shall be
required and entry may be made at any time), for the purpose of inspecting and
determining the condition of the Property or for any other proper purpose
including, without limitation, to make repairs, replacements or improvements
which Landlord may deem necessary, to show the Property to prospective
purchasers, to show the Property to prospective tenants (but only during the
final year of the term of this Lease), and to post notices of nonresponsibility.
Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of
business, quiet enjoyment or other damage or loss to Tenant by reason of making
any repairs or performing any work upon the Initial Building or the Property or
by reason of erecting or maintaining any protective barricades in connection
with any such work, and the obligations of Tenant under this Lease shall not
thereby be affected in any manner whatsoever, provided, however, Landlord shall
use reasonable efforts to minimize the inconvenience to Tenant's normal business
operations caused thereby.
16.2 Quiet Enjoyment. Landlord covenants that Tenant, upon paying the rent
---------------
and performing its obligations hereunder and subject to all the terms and
conditions of this Lease, shall peacefully and quietly have, hold and enjoy the
Property throughout the term of this Lease, or until this Lease is terminated as
provided by this Lease.
-31-
<PAGE>
17. CASUALTY AND TAKING
-------------------
17.1 Damage or Destruction.
---------------------
(a) If the Initial Building, or the Common Areas of the Property
necessary for Tenant's use and occupancy of the Initial Building, are damaged or
destroyed in whole or in part under circumstances in which (i) repair and
restoration is permitted under applicable governmental laws, regulations and
building codes then in effect and (ii) repair and restoration reasonably can be
completed within a period of one (1) year following the date of the occurrence,
then Landlord, as to the Common Areas of the Property and the Building Shell,
and Tenant, as to the Interior Improvements, shall commence and complete, with
all due diligence and as promptly as is reasonably practicable under the
conditions then existing, all such repair and restoration as may be required to
return the affected portions of the Property to the condition existing
immediately prior to the occurrence. In connection with any such reconstruction
of the Interior Improvements, Landlord shall use its best efforts (including,
without limitation, any necessary negotiation or intercession with Landlord's
Lender, if any) to promptly make any proceeds of Landlord's property insurance
with respect to the Interior Improvements (up to a maximum amount equal to the
amounts originally contributed by Landlord toward the construction of the
Interior Improvements) available to Tenant for such reconstruction, subject only
to such payment controls as Landlord and its Lender and insurer, or any of them,
may reasonably require in order to ensure the proper application of such
proceeds toward the reconstruction of the Interior Improvements pursuant to this
Section 17.1. In the event of damage or destruction the repair of which is not
permitted under applicable governmental laws, regulations and building codes
then in effect, if such damage or destruction (despite being corrected to the
extent then permitted under applicable governmental laws, regulations and
building codes) would still materially impair Tenant's ability to conduct its
business in the Initial Building, then either party may terminate this Lease as
of the date of the occurrence by giving written notice to the other within
thirty (30) days after the date of the occurrence; if neither party timely
elects such termination, or if such damage or destruction does not materially
impair Tenant's ability to conduct its business in the Initial Building, then
this Lease shall continue in full force and effect, except that there shall be
an equitable adjustment in monthly minimum rental and of Tenant's Operating Cost
Share of Operating Expenses, based upon the extent to which Tenant's ability to
conduct its business in the Initial Building is impaired, and Landlord and
Tenant respectively shall restore the Building Shell and the Interior
Improvements to a complete architectural whole and to a functional condition.
In the event of damage or destruction which cannot reasonably be repaired within
one (1) year following the date of the occurrence, then either Landlord or
Tenant, at its election, may terminate this Lease as of the date of the
occurrence by giving written notice to the other within thirty (30) days after
the date of the occurrence; if neither party timely elects such termination,
then this Lease shall continue in full force and effect and Landlord and Tenant
shall each repair and restore applicable portions of the Property in accordance
with the first sentence of this Section 17.1.
(b) The respective obligations of Landlord and Tenant pursuant to
Section 17.1(a) are subject to the following limitations:
-32-
<PAGE>
(i) If the occurrence results from a peril which is required to be
insured pursuant to Section 14.1(c) and (d) above, the obligations of either
party shall not exceed the amount of insurance proceeds received from insurers
by reason of such occurrence, plus the amount of the party's permitted
deductible (provided that each party shall be obligated to use its best efforts
to recover any available proceeds from the insurance which it is required to
maintain pursuant to the provisions of Section 14.1(c) or (d), as applicable),
and, if such proceeds are insufficient, either party may terminate the Lease
unless the other party promptly elects and agrees, in writing, to contribute the
amount of the shortfall; and
(ii) If the occurrence results from a peril which is not required to
be insured pursuant to Section 14.1(c) and (d) above, Landlord shall be required
to repair and restore the Building Shell and Common Areas to the extent
necessary for Tenant's continued use and occupancy of the Initial Building, and
Tenant shall be required to repair and restore the Interior Improvements to the
extent necessary for Tenant's continued use and occupancy of the Initial
Building, provided that each party's obligation to repair and restore shall not
--------
exceed an amount equal to five percent (5%) of the replacement cost of the
Building Shell and Common Area improvements, as to Landlord, or five percent
(5%) of the replacement cost of the Interior Improvements, as to Tenant; if the
replacement cost as to either party exceeds such amount, then the party whose
limit has been exceeded may terminate this Lease unless the other party promptly
elects and agrees, in writing, to contribute the amount of the shortfall.
(c) If this Lease is terminated pursuant to the foregoing provisions of
this Section 17.1 following an occurrence which is a peril required to be
insured against pursuant to Section 14.1(c) and (d), Landlord and Tenant agree
(and any Lender shall be asked to agree) that there shall be paid from such
insurance proceeds (i) to Landlord, the proceeds of Landlord's property
insurance on the Building Shell, (ii) to Landlord, a portion of the aggregate
proceeds of Landlord's and Tenant's property insurance on the Interior
Improvements equal to a fraction, the numerator of which is the insurable value,
immediately prior to the occurrence, of the Interior Improvements that would
have belonged to Landlord upon termination of this Lease in accordance with the
provisions of Section 11.2 and the denominator of which is the total insurable
value, immediately prior to the occurrence, of all of the Interior Improvements,
and (iii) to Tenant, a portion of the aggregate proceeds of Landlord's and
Tenant's property insurance on the Interior Improvements equal to a fraction,
the numerator of which is the insurable value, immediately prior to the
occurrence, of the Interior Improvements that would have belonged to Tenant upon
termination of this Lease in accordance with the provisions of Section 11.2 and
the denominator of which is the total insurable value, immediately prior to the
occurrence, of all of the Interior Improvements.
(d) From and after the date of an occurrence resulting in damage to or
destruction of the Initial Building or of the Common Areas necessary for
Tenant's use and occupancy of the Initial Building, and continuing until repair
and restoration thereof are completed, there shall be an equitable abatement of
minimum rental and of Tenant's Operating Cost Share of Operating Expenses based
upon the degree to which Tenant's ability to conduct its business in the Initial
-33-
<PAGE>
Building is impaired.
17.2 Condemnation.
------------
(a) If during the term of this Lease the Property or Improvements, or
any substantial part of either, is taken by eminent domain or by reason of any
public improvement or condemnation proceeding, or in any manner by exercise of
the right of eminent domain (including any transfer in avoidance of an exercise
of the power of eminent domain), or receives irreparable damage by reason of
anything lawfully done under color of public or other authority, then (i) this
Lease shall terminate as to the entire Property at Landlord's election by
written notice given to Tenant within sixty (60) days after the taking has
occurred, and (ii) this Lease shall terminate as to the entire Property at
Tenant's election, by written notice given to Landlord within thirty (30) days
after the nature and extent of the taking have been finally determined, if the
portion of the Property taken is of such extent and nature as substantially to
handicap, impede or permanently impair Tenant's use of the balance of the
Property. If Tenant elects to terminate this Lease, Tenant shall also notify
Landlord of the date of termination, which date shall not be earlier than thirty
(30) days nor later than ninety (90) days after Tenant has notified Landlord of
Tenant's election to terminate, except that this Lease shall terminate on the
date of taking if such date falls on any date before the date of termination
designated by Tenant. If neither party elects to terminate this Lease as
hereinabove provided, this Lease shall continue in full force and effect (except
that there shall be an equitable abatement of minimum rental and of Tenant's
Operating Cost Share of Operating Expenses based upon the degree to which
Tenant's ability to conduct its business in the Initial Building is impaired),
Landlord shall restore the Building Shell and Common Area improvements to a
complete architectural whole and a functional condition and as nearly as
reasonably possible to the condition existing before the taking, and Tenant
shall restore the Interior Improvements and Tenant's other alterations,
additions and improvements to a complete architectural whole and a functional
condition and as nearly as reasonably possible to the condition existing before
the taking. In connection with any such restoration, each party shall use its
respective best efforts (including, without limitation, any necessary
negotiation or intercession with its respective lender, if any) to ensure that
any severance damages or other condemnation awards intended to provide
compensation for rebuilding or restoration costs are promptly collected and made
available to Landlord and Tenant in portions reasonably corresponding to the
cost and scope of their respective restoration obligations, subject only to such
payment controls as either party or its lender may reasonably require in order
to ensure the proper application of such proceeds toward the restoration of the
Improvements. Each party waives the provisions of Code of Civil Procedure
Section 1265.130, allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial condemnation of the Property.
(b) The respective obligations of Landlord and Tenant pursuant to
Section 17.2(a) are subject to the following limitations:
(i) Each party's obligation to repair and restore shall not exceed,
net of any condemnation awards or other proceeds available for and allocable to
such restoration as
-34-
<PAGE>
contemplated in Section 17.2(a), an amount equal to five percent (5%) of the
replacement cost of the Building Shell and Common Area improvements, as to
Landlord, or five percent (5%) of the replacement cost of the Interior
Improvements, as to Tenant; if the replacement cost as to either party exceeds
such amount, then the party whose limit has been exceeded may terminate this
Lease unless the other party promptly elects and agrees, in writing, to
contribute the amount of the shortfall; and
(ii) If this Lease is terminated pursuant to the foregoing provisions
of this Section 17.2, or if this Lease remains in effect but any condemnation
awards or other proceeds become available as compensation for the loss or
destruction of any of the Improvements, then Landlord and Tenant agree (and any
Lender shall be asked to agree) that there shall be paid from such award or
proceeds (i) to Landlord, the award or proceeds attributable or allocable to the
Building Shell and/or Common Area improvements, and (ii) to Landlord and Tenant,
respectively, portions of the award or proceeds attributable or allocable to the
Interior Improvements, in the respective proportions in which Landlord and
Tenant would have shared, under Section 17.1(c), the proceeds of any insurance
proceeds following loss or destruction of such Interior Improvements by an
insured casualty.
17.3 Reservation Of Compensation. Landlord reserves, and Tenant waives and
---------------------------
assigns to Landlord, all rights to any award or compensation for damage to the
Improvements, the Property and the leasehold estate created hereby, accruing by
reason of any taking in any public improvement, condemnation or eminent domain
proceeding or in any other manner by exercise of the right of eminent domain or
of anything lawfully done by public authority, except that (a) Tenant shall be
entitled to any and all compensation or damages paid for or on account of
Tenant's moving expenses, trade fixtures and equipment, and (b) any condemnation
awards or proceeds described in Section 17.2(b)(ii) shall be allocated and
disbursed in accordance with the provisions of Section 17.2(b)(ii),
notwithstanding any contrary provisions of this Section 17.3.
17.4 Restoration Of Improvements. In connection with any repair or
---------------------------
restoration of Improvements by either party following a casualty or taking as
hereinabove set forth, the party responsible for such repair or restoration
shall, to the extent possible, return such Improvements to a condition
substantially equal to that which existed immediately prior to the casualty or
taking. To the extent such party wishes to make material modifications to such
Improvements, such modifications shall be subject to the prior written approval
of the other party (not to be unreasonably withheld or delayed), except that no
such approval shall be required for modifications that are required by
applicable governmental authorities as a condition of the repair or restoration,
unless such required modifications would impair or impede Tenant's conduct of
its business in the Initial Building (in which case any such modifications in
Landlord's work shall require Tenant's consent, not unreasonably withheld or
delayed) or would materially and adversely affect the exterior appearance, the
structural integrity or the mechanical or other operating systems of the Initial
Building (in which case any such modifications in Tenant's work shall require
Landlord's consent, not unreasonably withheld or delayed).
-35-
<PAGE>
18. DEFAULT
-------
18.1 Events Of Default. The occurrence of any of the following shall
-----------------
constitute an event of default on the part of Tenant:
(a) Abandonment. Abandonment of the Property. "Abandonment" is hereby
-----------
defined to include, but is not limited to, any absence by Tenant from the
Property for fifteen (15) consecutive days or more while Tenant is in default
under any other provision of this Lease. Tenant waives any right Tenant may
have to notice under Section 1951.3 of the California Civil Code, the terms of
this subsection (a) being deemed such notice to Tenant as required by said
Section 1951.3;
(b) Nonpayment. Failure to pay, when due, any amount payable to
----------
Landlord hereunder, such failure continuing for a period of five (5) days after
written notice of such failure;
(c) Other Obligations. Failure to perform any obligation, agreement or
-----------------
covenant under this Lease other than those matters specified in subsection (b)
hereof, such failure continuing for fifteen (15) days after written notice of
such failure; provided, however, that if such failure is curable in nature but
--------
cannot reasonably be cured within such 15-day period, then Tenant shall not be
in default if, and so long as, Tenant promptly (and in all events within such
15-day period) commences such cure and thereafter diligently pursues such cure
to completion;
(d) General Assignment. A general assignment by Tenant for the benefit
------------------
of creditors;
(e) Bankruptcy. The filing of any voluntary petition in bankruptcy by
----------
Tenant, or the filing of an involuntary petition by Tenant's creditors, which
involuntary petition remains undischarged for a period of thirty (30) days. In
the event that under applicable law the trustee in bankruptcy or Tenant has the
right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as may be permitted
by the bankruptcy court having jurisdiction, cure all defaults of Tenant
hereunder outstanding as of the date of the affirmance of this Lease and provide
to Landlord such adequate assurances as may be necessary to ensure Landlord of
the continued performance of Tenant's obligations under this Lease.
Specifically, but without limiting the generality of the foregoing, such
adequate assurances must include assurances that the Property continues to be
operated only for the use permitted hereunder. The provisions hereof are to
assure that the basic understandings between Landlord and Tenant with respect to
Tenant's use of the Property and the benefits to Landlord therefrom are
preserved, consistent with the purpose and intent of applicable bankruptcy laws;
(f) Receivership. The employment of a receiver appointed by court order
------------
to take possession of substantially all of Tenant's assets or the Property, if
such receivership remains undissolved for a period of thirty (30) days;
-36-
<PAGE>
(g) Attachment. The attachment, execution or other judicial seizure of
----------
all or substantially all of Tenant's assets or the Property, if such attachment
or other seizure remains undismissed or undischarged for a period of thirty (30)
days after the levy thereof; or
(h) Insolvency. The admission by Tenant in writing of its inability to
----------
pay its debts as they become due, the filing by Tenant of a petition seeking any
reorganization or arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the filing by Tenant of an answer admitting or failing timely to
contest a material allegation of a petition filed against Tenant in any such
proceeding or, if within thirty (30) days after the commencement of any
proceeding against Tenant seeking any reorganization or arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed.
18.2 Remedies Upon Tenant's Default.
------------------------------
(a) Upon the occurrence of any event of default described in Section
18.1 hereof, Landlord, in addition to and without prejudice to any other rights
or remedies it may have, shall have the immediate right to re-enter the Property
or any part thereof and repossess the same, expelling and removing therefrom all
persons and property (which property may be stored in a public warehouse or
elsewhere at the cost and risk of and for the account of Tenant), using such
force as may be necessary to do so (as to which Tenant hereby waives any claim
for loss or damage that may thereby occur). In addition to or in lieu of such
re-entry, and without prejudice to any other rights or remedies it may have,
Landlord shall have the right either (i) to terminate this Lease and recover
from Tenant all damages incurred by Landlord as a result of Tenant's default, as
hereinafter provided, or (ii) to continue this Lease in effect and recover rent
and other charges and amounts as they become due.
(b) Even if Tenant has breached this Lease or abandoned the Property,
this Lease shall continue in effect for so long as Landlord does not terminate
Tenant's right to possession under subsection (a) hereof and Landlord may
enforce all of its rights and remedies under this Lease, including the right to
recover rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a lessor under California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has right to
sublet or assign, subject only to reasonable limitations), or any successor Code
section. Acts of maintenance, preservation or efforts to relet the Property or
the appointment of a receiver upon application of Landlord to protect Landlord's
interests under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) If Landlord terminates this Lease pursuant to this Section 18.2,
Landlord shall have all of the rights and remedies of a landlord provided by
Section 1951.2 of the Civil Code of the State of California, or any successor
Code section, which remedies include Landlord's right to recover from Tenant (i)
the worth at the time of award of the unpaid rent and additional rent which
-37-
<PAGE>
had been earned at the time of termination, (ii) the worth at the time of award
of the amount by which the unpaid rent and additional rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided, (iii) the
worth at the time of award of the amount by which the unpaid rent and additional
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that Tenant proves could be reasonably avoided, and (iv) any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom, including,
but not limited to, the cost of recovering possession of the Property, expenses
of reletting, including necessary repair, renovation and alteration of the
Property, reasonable attorneys' fees, and other reasonable costs. The "worth at
the time of award" of the amounts referred to in clauses (i) and (ii) above
shall be computed by allowing interest at ten percent (10%) per annum from the
date such amounts accrued to Landlord. The "worth at the time of award" of the
amounts referred to in clause (iii) above shall be computed by discounting such
amount at one percentage point above the discount rate of the Federal Reserve
Bank of San Francisco at the time of award.
18.3 Remedies Cumulative. All rights, privileges and elections or remedies
-------------------
of Landlord contained in this Article 18 are cumulative and not alternative to
the extent permitted by law and except as otherwise provided herein.
-38-
<PAGE>
19. SUBORDINATION, ATTORNMENT AND SALE
----------------------------------
19.1 Subordination To Mortgage. This Lease, and any sublease entered into by
-------------------------
Tenant under the provisions of this Lease, shall be subject and subordinate to
any ground lease, mortgage, deed of trust, sale/leaseback transaction or any
other hypothecation for security now or hereafter placed upon the Initial
Building, the Property, or both, and the rights of any assignee of Landlord or
of any ground lessor, mortgagee, trustee, beneficiary or leaseback lessor under
any of the foregoing, and to any and all advances made on the security thereof
and to all renewals, modifications, consolidations, replacements and extensions
thereof; provided, however, that such subordination in the case of any future
ground lease, mortgage, deed of trust, sale/leaseback transaction or any other
hypothecation for security placed upon the Initial Building, the Property, or
both shall be conditioned on Tenant's receipt from the ground lessor, mortgagee,
trustee, beneficiary or leaseback lessor of a Non-Disturbance Agreement in a
form reasonably acceptable to Tenant confirming that so long as Tenant is not in
default hereunder, Tenant's rights hereunder shall not be disturbed by such
person or entity. Moreover, Tenant's obligations under this Lease shall be
conditioned on Tenant's receipt within thirty (30) days after mutual execution
of this Lease, from any ground lessor, mortgagee, trustee, beneficiary or
leaseback lessor currently owning or holding a security interest in the
Property, of a Non-Disturbance Agreement in a form reasonably acceptable to
Tenant confirming that so long as Tenant is not in default hereunder, Tenant's
rights hereunder shall not be disturbed by such person or entity. If any
mortgagee, trustee, beneficiary, ground lessor, sale/leaseback lessor or
assignee elects to have this Lease be an encumbrance upon the Property prior to
the lien of its mortgage, deed of trust, ground lease or leaseback lease or
other security arrangement and gives notice thereof to Tenant, this Lease shall
be deemed prior thereto, whether this Lease is dated prior or subsequent to the
date thereof or the date of recording thereof. Tenant, and any sublessee, shall
execute such documents as may reasonably be requested by any mortgagee, trustee,
beneficiary, ground lessor, sale/leaseback lessor or assignee to evidence the
subordination herein set forth, subject to the conditions set forth above, or to
make this Lease prior to the lien of any mortgage, deed of trust, ground lease,
leaseback lease or other security arrangement, as the case may be, and if Tenant
fails to do so within ten (10) days after demand from Landlord, Tenant
constitutes and appoints Landlord as Tenant's attorney-in-fact and in Tenant's
name, place and stead to do so. Upon any default by Landlord in the performance
of its obligations under any mortgage, deed of trust, ground lease, leaseback
lease or assignment, Tenant (and any sublessee) shall, notwithstanding any
subordination hereunder, attorn to the mortgagee, trustee, beneficiary, ground
lessor, leaseback lessor or assignee thereunder upon demand and become the
tenant of the successor in interest to Landlord, at the option of such successor
in interest, and shall execute and deliver any instrument or instruments
confirming the attornment herein provided for.
19.2 Sale Of Landlord's Interest. Upon sale, transfer or assignment of
---------------------------
Landlord's entire interest in the Improvements and Property, Landlord shall be
relieved of its obligations hereunder with respect to liabilities accruing from
and after the date of such sale, transfer or assignment, except as otherwise
expressly provided in Section 21.2 hereof.
-39-
<PAGE>
19.3 Estoppel Certificates. Either Tenant or Landlord (the "certifying
---------------------
party") shall at any time and from time to time, within ten (10) days after
written request by the other party (the "requesting party"), execute,
acknowledge and deliver to the requesting party a certificate in writing
stating: (i) that this Lease is unmodified and in full force and effect, or if
there have been any modifications, that this Lease is in full force and effect
as modified and stating the date and the nature of each modification; (ii) the
date to which rental and all other sums payable hereunder have been paid; (iii)
that the requesting party is not in default in the performance of any of its
obligations under this Lease, that the certifying party has given no notice of
default to the requesting party and that no event has occurred which, but for
the expiration of the applicable time period, would constitute an event of
default hereunder, or if the certifying party alleges that any such default,
notice or event has occurred, specifying the same in reasonable detail; and (iv)
such other matters as may reasonably be requested by the requesting party or by
any institutional lender, mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or prospective purchaser of the Property or of Tenant's
leasehold interest therein. Any such certificate provided under this Section
19.3 may be relied upon by any lender, mortgagee, trustee, beneficiary, assignee
or successor in interest to the requesting party, by any prospective purchaser,
by any purchaser on foreclosure or sale, by any grantee under a deed in lieu of
foreclosure of any mortgage or deed of trust on the Property, or by any other
third party. Failure to execute and return within the required time any
estoppel certificate requested hereunder shall be deemed to be an admission of
the truth of the matters set forth in the form of certificate submitted to the
certifying party for execution.
19.4 Subordination to CC&R's. This Lease, and any permitted sublease entered
-----------------------
into by Tenant under the provisions of this Lease, shall be subject and
subordinate to any declarations of covenants, conditions and restrictions
affecting the Property from time to time, which may include easements, access
rights and similar non-exclusive use rights and privileges in favor of
appropriate third parties; provided, however, that following the execution of
--------
this Lease, Landlord shall not record or agree to any such declarations
affecting the Property without the prior written consent of Tenant, which
consent shall not be unreasonably withheld or delayed. It shall be deemed
reasonable for Tenant to withhold consent to any declaration or provision
thereof which impairs Tenant's rights under this Lease in any material respect.
Tenant agrees to execute, upon request by Landlord, any documents reasonably
required from time to time to evidence such subordination.
-40-
<PAGE>
19.5 Mortgagee Protection.
--------------------
(a) If, in connection with any future ground lease, mortgage, deed of
trust, sale/leaseback transaction or any other hypothecation for security placed
upon the Initial Building, the Property, or both, the ground lessor, mortgagee,
trustee, beneficiary or leaseback lessor requests any changes in this Lease as a
condition to its willingness to enter into or accept the ground lease, mortgage,
deed of trust, sale/leaseback transaction or other hypothecation for security,
then Tenant shall not unreasonably withhold or delay its consent to any such
requested changes and shall execute, at the request of Landlord, an amendment to
this Lease incorporating the changes thus reasonably consented to by Tenant. It
shall be deemed reasonable for Tenant to withhold consent to any requested
change which imposes a substantial new monetary obligation on Tenant or which
otherwise substantially impairs Tenant's rights under this Lease. Tenant's
obligations under this Section 19.5(a) shall be conditioned on Tenant's
concurrent receipt, from the ground lessor, mortgagee, trustee, beneficiary or
leaseback lessor, of a Non-Disturbance Agreement in a form reasonably acceptable
to Tenant confirming that so long as Tenant is not in default hereunder,
Tenant's rights hereunder shall not be disturbed by such person or entity.
(b) If, following a default by Landlord under any mortgage, deed of
trust, ground lease, leaseback lease or other security arrangement covering the
Property, the Property is acquired by the mortgagee, beneficiary, master lessor
or other secured party, or by any other successor owner, pursuant to a
foreclosure, trustee's sale, sheriff's sale, lease termination or other similar
procedure (or deed in lieu thereof), then any such person or entity so acquiring
the Property shall not be:
(i) liable for any act or omission of a prior landlord or owner of the
Property (including, but not limited to, Landlord);
(ii) subject to any offsets or defenses that Tenant may have against
any prior landlord or owner of the Property (including, but not limited to,
Landlord);
(iii) bound by any rent or additional rent that Tenant may have
paid in advance to any prior landlord or owner of the Property (including, but
not limited to, Landlord) for a period in excess of one month, or by any
security deposit, cleaning deposit or other prepaid charge that Tenant may have
paid in advance to any prior landlord or owner (including, but not limited to,
Landlord);
(iv) liable for any warranties or representations of any nature
whatsoever, whether pursuant to this Lease or otherwise, by any prior landlord
or owner of the Property (including, but not limited to, Landlord) with respect
to the use, construction, zoning, compliance with laws, title, habitability,
fitness for purpose or possession, or physical condition (including, without
limitation, environmental matters) of the Property or Improvements; or
(v) liable to Tenant in any amount beyond the interest of such
mortgagee,
-41-
<PAGE>
beneficiary, master lessor or other secured party or successor owner in the
Property as it exists from time to time, it being the intent of this provision
that Tenant shall look solely to the interest of any such mortgagee,
beneficiary, master lessor or other secured party or successor owner in the
Property for the payment and discharge of the landlord's obligations under this
Lease and that such mortgagee, beneficiary, master lessor or other secured party
or successor owner shall have no separate personal liability for any such
obligations.
20. SECURITY
--------
20.1 Deposit. Concurrently with Tenant's execution of this Lease, Tenant
-------
shall deposit with Landlord the sum of One Hundred Nineteen Thousand Two Hundred
Forty and No/100 Dollars ($119,240.00), which sum (the "Security Deposit") shall
be held by Landlord as security for the faithful performance of all of the
terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term hereof. If Tenant defaults with respect to any provision
of this Lease, including, without limitation, the provisions relating to the
payment of rental and other sums due hereunder, Landlord shall have the right,
but shall not be required, to use, apply or retain all or any part of the
Security Deposit for the payment of rental or any other amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant shall, within ten (10) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount and Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall not be required to keep any deposit under
this Section separate from Landlord's general funds, and Tenant shall not be
entitled to interest thereon. If Tenant fully and faithfully performs every
provision of this Lease to be performed by it, the Security Deposit, or any
balance thereof, shall be returned to Tenant or, at Landlord's option, to the
last assignee of Tenant's interest hereunder, at the expiration of the term of
this Lease and after Tenant has vacated the Property. In the event of
termination of Landlord's interest in this Lease, Landlord shall transfer all
deposits then held by Landlord under this Section to Landlord's successor in
interest, whereupon Tenant agrees to release Landlord from all liability for the
return of such deposit or the accounting thereof.
21. MISCELLANEOUS
-------------
21.1 Notices. All notices, consents, waivers and other communications which
-------
this Lease requires or permits either party to give to the other shall be in
writing and shall be deemed given when delivered personally (including delivery
by private courier or express delivery service) or four (4) days after deposit
in the United States mail, registered or certified mail, postage prepaid,
addressed to the parties at their respective addresses as follows:
-42-
<PAGE>
To Tenant: (until Commencement Date)
Tularik Inc.
270 E. Grand Avenue
South San Francisco, CA 94080
Attn: James M. Gower, Chairman
(after Commencement Date)
[At the Initial Building --
address to be supplied]
Attn: James M. Gower, Chairman
with copy to: Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306-2155
Attn: Brian Cunningham
To Landlord: Britannia Developments, Inc.
1939 Harrison Street, Suite 610
Park Plaza Building
Oakland, CA 94612
Attn: T. J. Bristow
with copy to: Folger & Levin
Embarcadero Center West
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Attn: Donald E. Kelley, Jr.
and copy to: SDK Incorporated
33 West Monroe Street
Chicago, IL 60603
Attn: Marshall Lees
or to such other address as may be contained in a notice at least fifteen (15)
days prior to the address change from either party to the other given pursuant
to this Section. Rental payments and other sums required by this Lease to be
paid by Tenant shall be delivered to Landlord at Landlord's address provided in
this Section, or to such other address as Landlord may from time to time specify
in writing to Tenant, and shall be deemed to be paid only upon actual receipt.
21.2 Successors And Assigns. The obligations of this Lease shall run with
----------------------
the land, and this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its
-43-
<PAGE>
ownership of the Property, said liability terminating upon termination of such
ownership and passing to the successor lessor, except as otherwise expressly
provided in the following sentence. Tenant acknowledges that it has been advised
by Landlord that following execution of this Lease, Landlord intends to assign
its rights and obligations hereunder (a) to a limited liability company or other
entity having substantially the same ownership and management as Landlord,
and/or (b) to an entity of which Landlord or an affiliate of Landlord is a
general partner or has management responsibilities and equity participation
comparable to those of a general partner; provided, that any such assignment
--------
shall not relieve Landlord of any of its obligations under this Lease.
21.3 No Waiver. The failure of Landlord to seek redress for violation, or to
---------
insist upon the strict performance, of any covenant or condition of this Lease
shall not be deemed a waiver of such violation, or prevent a subsequent act
which would originally have constituted a violation from having all the force
and effect of an original violation.
21.4 Severability. If any provision of this Lease or the application thereof
------------
is held to be invalid or unenforceable, the remainder of this Lease or the
application of such provision to persons or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby, and each of
the provisions of this Lease shall be valid and enforceable, unless enforcement
of this Lease as so invalidated would be unreasonable or grossly inequitable
under all the circumstances or would materially frustrate the purposes of this
Lease.
21.5 Litigation Between Parties. In the event of any litigation or other
--------------------------
dispute resolution proceedings between the parties hereto arising out of or in
connection with this Lease, the prevailing party shall be reimbursed for all
reasonable costs, including, but not limited to, reasonable accountants' fees
and attorneys' fees, incurred in connection with such proceedings (including,
but not limited to, any appellate proceedings relating thereto) or in connection
with the enforcement of any judgment or award rendered in such proceedings.
"Prevailing party" within the meaning of this Section shall include, without
limitation, a party who dismisses an action for recovery hereunder in exchange
for payment of the sums allegedly due, performance of covenants allegedly
breached or consideration substantially equal to the relief sought in the
action.
21.6 Surrender. A voluntary or other surrender of this Lease by Tenant, or a
---------
mutual termination thereof between Landlord and Tenant, shall not result in a
merger but shall, at the option of Landlord, operate either as an assignment to
Landlord of any and all existing subleases and subtenancies, or a termination of
all or any existing subleases and subtenancies. This provision shall be
contained in any and all assignments or subleases made pursuant to this Lease.
21.7 Interpretation. The provisions of this Lease shall be construed as a
--------------
whole, according to their common meaning, and not strictly for or against
Landlord or Tenant. The captions preceding the text of each Section and
subsection hereof are included only for convenience of reference and shall be
disregarded in the construction or interpretation of this Lease.
21.8 Entire Agreement. This written Lease, together with the exhibits
----------------
hereto, contains all
-44-
<PAGE>
the representations and the entire understanding between the parties hereto with
respect to the subject matter hereof. Any prior correspondence, memoranda or
agreements are replaced in total by this Lease and the exhibits hereto. This
Lease may be modified only by an agreement in writing signed by each of the
parties.
21.9 Governing Law. This Lease and all exhibits hereto shall be construed
-------------
and interpreted in accordance with and be governed by all the provisions of the
laws of the State of California.
21.10 No Partnership. The relationship between Landlord and Tenant is solely
--------------
that of a lessor and lessee. Nothing contained in this Lease shall be construed
as creating any type or manner of partnership, joint venture or joint enterprise
with or between Landlord and Tenant.
21.11 Financial Information. From time to time Tenant shall promptly provide
---------------------
directly to prospective lenders and purchasers of the Property designated by
Landlord such financial information pertaining to the financial status of Tenant
as Landlord may reasonably request; provided, Tenant shall be permitted to
provide such financial information in a manner which Tenant deems reasonably
necessary to protect the confidentiality of such information. In addition, from
time to time, Tenant shall provide Landlord with such financial information
pertaining to the financial status of Tenant as Landlord may reasonably request.
Landlord agrees that all financial information supplied to Landlord by Tenant
shall be treated as confidential material, and shall not be disseminated to any
party or entity (including any entity affiliated with Landlord) without Tenant's
prior written consent. For purposes of this Section, without limiting the
generality of the obligations provided herein, it shall be deemed reasonable for
Landlord to request copies of Tenant's most recent audited annual financial
statements, or, if audited statements have not been prepared, unaudited
financial statements for Tenant's most recent fiscal year, accompanied by a
certificate of Tenant's chief financial officer that such financial statements
fairly present Tenant's financial condition as of the date(s) indicated.
Landlord and Tenant recognize the need of Tenant to maintain the
confidentiality of information regarding its financial status and the need of
Landlord to be informed of, and to provide to prospective lenders and purchasers
of the Property financial information pertaining to, Tenant's financial status.
Landlord and Tenant agree to cooperate with each other in achieving these needs
within the context of the obligations set forth in this Section. Landlord also
acknowledges and agrees that Tenant's obligations to furnish information to
Landlord under this Section are in all events subject to Tenant's compliance
with, and may therefore be limited by, applicable securities laws.
21.12 Costs. If Tenant requests the consent of Landlord under any provision
-----
of this Lease for any act that Tenant proposes to do hereunder, including,
without limitation, assignment or subletting of the Property, Tenant shall, as a
condition to doing any such act and the receipt of such consent, reimburse
Landlord promptly for any and all reasonable costs and expenses incurred by
Landlord in connection therewith, including, without limitation, reasonable
attorneys' fees.
-45-
<PAGE>
21.13 Time. Time is of the essence of this Lease, and of every term and
----
condition hereof.
21.14 Rules And Regulations. Tenant shall observe, comply with and obey, and
---------------------
shall cause its employees, agents and, to the best of Tenant's ability, invitees
to observe, comply with and obey such rules and regulations as Landlord may
promulgate from time to time for the safety, care, cleanliness, order and use of
the Improvements and the Property.
21.15 Brokers. Landlord agrees to pay a brokerage commission to Catalyst Real
-------
Estate Group, Tenant's broker, in connection with the consummation of this Lease
in accordance with a separate agreement. Each party represents and warrants
that no other broker participated in the consummation of this Lease and agrees
to indemnify, defend and hold the other party harmless against any liability,
cost or expense, including, without limitation, reasonable attorneys' fees,
arising out of any claims for brokerage commissions or other similar
compensation in connection with any conversations, prior negotiations or other
dealings by the indemnifying party with any other broker.
21.16 Memorandum Of Lease. At any time during the term of this Lease, either
-------------------
party, at its sole expense, shall be entitled to record a memorandum of this
Lease and, if either party so elects, both parties agree to cooperate in the
preparation, execution, acknowledgement and recordation of such document in
reasonable form.
21.17 Corporate Authority. The person signing this Lease on behalf of Tenant
-------------------
warrants that he or she is fully authorized to do so and, by so doing, to bind
Tenant. As evidence of such authority, Tenant shall deliver to Landlord, upon
or prior to execution of this Lease, a certified copy of a resolution of
Tenant's board of directors authorizing the execution of this Lease and naming
the officer that is authorized to execute this Lease on behalf of Tenant.
21.18 Execution and Delivery. This Lease may be executed in one or more
----------------------
counterparts and by separate parties on separate counterparts, but each such
counterpart shall constitute an original and all such counterparts together
shall constitute one and the same instrument.
21.19 Survival. Without limiting survival provisions which would otherwise be
--------
implied or construed under applicable law, the provisions of Sections 2.6, 9.4,
11.2, 11.3, 11.4, 13.6, 14.6 and 21.5 hereof shall survive the termination of
this Lease with respect to matters occurring prior to the expiration of this
Lease.
-46-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first set forth above.
"Landlord" Tenant"
BRITANNIA DEVELOPMENTS, INC., TULARIK INC., a California
a California corporation corporation
By: /s/ T. J. Bristow By: /s/ James M. Gower
----------------- ------------------------------
T. J. Bristow
President Its:
----------------------------
-47-
<PAGE>
EXHIBITS
--------
EXHIBIT A Real Property Description (Site)
EXHIBIT B Site Plan
EXHIBIT C Workletter
EXHIBIT D Estimated Construction Schedule
EXHIBIT E Acknowledgement of Lease Commencement
<PAGE>
EXHIBIT A
---------
REAL PROPERTY DESCRIPTION (SITE)
--------------------------------
All that certain real property in the City of South San Francisco, County of San
Mateo, State of California, more particularly described as follows:
Parcel One:
Parcel C as designated on the Map entitled "PARCEL MAP NO. 89-268", being a
resubdivision of Lots 4, 5, 6 and 7 of that certain Map entitled "FINAL MAP
GATEWAY CENTER" (SA-81-74) filed in the office of the Recorder of the County of
San Mateo in Book 107 of Maps at Pages 27, 28, 29 and 30, which Map was filed in
the Office of the Recorder of the County of San Mateo, State of California on
December 12, 1989 in Book 63 of Parcel Maps at Pages 32 and 33.
Parcel Two:
<PAGE>
A portion of that certain 0.572 acre parcel of land described in Resolution No.
900 by the City of South San Francisco, recorded August 6, 1943, in Book 1079 of
Official Records of San Mateo County at Page 77, further described as follows:
A portion of Industrial Way, as shown on that certain Map entitled "Final Map
Gateway Center" filed October 1, 1982, in Book 107 of Maps at Pages 27-30, San
Mateo County Records, further described as follows:
Beginning at a point on the southeasterly line of said 0.572 acre parcel, also
being the northwesterly line of Lot 4 as shown on said Map (104 Maps 27-30),
distant thereon North 38 degrees 42 minutes 41 seconds East, 29.29 feet from the
southwest corner of said Lot 4; thence along the aforementioned southeasterly
line, North 38 degrees 42 minutes 41 seconds East, 356.97 feet; then
northeasterly along the arc of a tangent, 980.56 foot radius curve to the left,
through a central angle of 7 degrees 19 minutes 26 seconds, an arc distance of
125.34 feet to a point of reverse curvature; thence northeasterly along the arc
of a tangent, 980.56 foot radius curve to the right, through a central angle of
7 degrees 19 minutes 26 seconds, an arc distance of 125.34 feet to a point of
cusp, being the most northerly point of the aforementioned 0.572 acre parcel;
thence along the northwesterly line of said 0.572 acre parcel, South 38 degrees
42 minutes 41 seconds West, 606.97 feet to a line which bears North 51 degrees
17 minutes 19 seconds West from the point of beginning; thence South 51 degrees
17 minutes 19 seconds East, 16.00 feet to the point of beginning.
<PAGE>
EXHIBIT B
---------
SITE PLAN
---------
<PAGE>
EXHIBIT D
---------
ESTIMATED CONSTRUCTION SCHEDULE
-------------------------------
<PAGE>
EXHIBIT E
---------
ACKNOWLEDGEMENT OF LEASE COMMENCEMENT
-------------------------------------
This Acknowledgement is executed as of _________________, 199__, by BRITANNIA
GATEWAY I LIMITED PARTNERSHIP, a Delaware limited partnership ("Landlord"), and
TULARIK INC., a California corporation ("Tenant"), pursuant to Section 2.4 of
the Build-to-Suit Lease dated April 20, 1995 between Landlord's predecessor,
BRITANNIA DEVELOPMENTS, INC., a California corporation, and Tenant (the "Lease")
covering premises located at _________________________________________________,
South San Francisco,CA 94080 (the "Property").
Landlord and Tenant hereby acknowledge and agree as follows:
1. The Commencement Date under the Lease is __________________, 199__.
2. The termination date under the Lease shall be _________________, _____,
subject to any applicable provisions of the Lease for extension or early
termination thereof.
3. Based on the final cost of the Improvements and on any change orders,
delays and other
<PAGE>
factors reflected in that cost, the applicable payment (if any) required under
Paragraph 4 of the Workletter attached to the Lease is as follows (if none, so
state):_________________________________________________________________________
______________________________________________.
4. Tenant accepts the Property and acknowledges the satisfactory completion
of all Improvements thereon required to be made by Landlord, subject only to any
applicable "punch list" or similar procedures specifically provided under the
Lease or under the Workletter governing such work.
EXECUTED as of the date first set forth above.
"Landlord" "Tenant"
BRITANNIA GATEWAY I LIMITED TULARIK INC., a California
PARTNERSHIP, a Delaware corporation
limited partnership
By: BRITANNIA DEVELOPMENTS, By: /s/ James M. Gower
-----------------------------
INC., a California corporation, Its:
-----------------------------
<PAGE>
Its Managing Partner
By: /s/ T. J. Bristow
-----------------
T. J. Bristow
President
<PAGE>
BUILD-TO-SUIT-LEASE
TABLE OF CONTENTS
<PAGE>
<TABLE>
<S> <C> <C>
1. PROPERTY............................................................. 1
1.1 Lease of Property........................................... 1
1.2 Landlord's Reserved Rights.................................. 1
2. TERM................................................................. 2
2.1 Term........................................................ 2
2.2 Early Possession............................................ 2
2.3 Delay In Possession......................................... 2
2.4 Acknowledgement Of Lease Commencement....................... 3
2.5 Holding Over................................................ 3
2.6 Option To Extend Term....................................... 3
3. RENTAL............................................................... 3
3.1 Minimum Rental.............................................. 3
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
3.2 Late Charge................................................. 5
4. STOCK WARRANTS....................................................... 5
4.1 Stock Warrants.............................................. 5
5. CONSTRUCTION......................................................... 6
5.1 Construction of Improvements................................ 6
5.2 Condition of Property....................................... 6
5.3 Compliance with Law......................................... 6
6. EXPANSION BUILDING................................................... 6
6.1 Lock-Up Option.............................................. 6
6.2 Exercise.................................................... 7
6.3 Carrying Costs.............................................. 7
6.4 First Negotiation Right and First Refusal Right to Lease.... 7
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C> <C>
7. FIRST REFUSAL RIGHT TO PURCHASE...................................... 8
7.1 Sale Restriction............................................ 8
7.2 First Refusal Right......................................... 8
7.3 Discount on Purchase Price.................................. 9
8. TAXES................................................................ 9
8.1 Personal Property........................................... 9
8.2 Real Property............................................... 9
9. OPERATING EXPENSES................................................... 9
9.1 Liability For Operating Expenses............................ 9
9.2 Definition Of Operating Expenses............................ 10
9.3 Determination and Payment Of Operating Expenses............. 11
9.4 Proration................................................... 11
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C> <C>
10. UTILITIES........................................................... 12
10.1 Payment..................................................... 12
10.2 Interruption................................................ 12
11. ALTERATIONS; SIGNS.................................................. 12
11.1 Right To Make Alterations................................... 12
11.2 Title To Alterations........................................ 12
11.3 Tenant Fixtures............................................. 12
11.4 No Liens.................................................... 13
11.5 Signs....................................................... 13
12. MAINTENANCE AND REPAIRS............................................. 13
12.1 Landlord's Work............................................. 13
12.2 Tenant's Obligation For Maintenance......................... 13
</TABLE>
-5-
<PAGE>
<TABLE>
<S> <C> <C>
13. USE OF PROPERTY..................................................... 14
13.1 Permitted Use............................................... 14
13.2 [Omitted.].................................................. 14
13.3 No Nuisance................................................. 14
13.4 Compliance With Laws........................................ 15
13.5 Liquidation Sales........................................... 15
13.6 Environmental Matters....................................... 15
14. INSURANCE AND INDEMNITY............................................. 18
14.1 Liability and Property Insurance............................ 18
14.2 Quality Of Policies And Certificates........................ 20
14.3 Workers' Compensation....................................... 20
14.4 Waiver Of Subrogation....................................... 20
14.5 Increase In Premiums........................................ 20
</TABLE>
-6-
<PAGE>
<TABLE>
<S> <C> <C>
14.6 Indemnification............................................. 20
14.7 Blanket Policy.............................................. 21
15. SUBLEASE AND ASSIGNMENT............................................. 21
15.1 Assignment And Sublease Of Property......................... 21
15.2 Rights Of Landlord.......................................... 21
16. RIGHT OF ENTRY AND QUIET ENJOYMENT.................................. 22
16.1 Right Of Entry.............................................. 22
16.2 Quiet Enjoyment............................................. 22
17. CASUALTY AND TAKING................................................. 22
17.1 Damage or Destruction....................................... 22
17.2 Condemnation................................................ 24
17.3 Reservation Of Compensation................................. 25
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C>
17.4 Restoration Of Improvements................................. 25
18. DEFAULT............................................................. 25
18.1 Events Of Default........................................... 25
18.2 Remedies Upon Tenant's Default.............................. 26
18.3 Remedies Cumulative......................................... 27
19. SUBORDINATION, ATTORNMENT AND SALE.................................. 27
19.1 Subordination To Mortgage................................... 27
19.2 Sale Of Landlord's Interest................................. 27
19.3 Estoppel Certificates....................................... 27
19.4 Subordination to CC&R's..................................... 28
19.5 Mortgagee Protection........................................ 28
20. SECURITY........................................................... 29
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C>
20.1 Deposit..................................................... 29
21. MISCELLANEOUS....................................................... 29
21.1 Notices..................................................... 29
21.2 Successors And Assigns...................................... 30
21.3 No Waiver................................................... 30
21.4 Severability................................................ 30
21.5 Litigation Between Parties.................................. 30
21.6 Surrender................................................... 31
21.7 Interpretation.............................................. 31
21.8 Entire Agreement............................................ 31
21.9 Governing Law............................................... 31
21.10 No Partnership.............................................. 31
21.11 Financial Information....................................... 31
21.12 Costs....................................................... 31
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C>
21.13 Time......................................................... 31
21.14 Rules And Regulations........................................ 31
21.15 Brokers...................................................... 32
21.16 Memorandum Of Lease.......................................... 32
21.17 Corporate Authority.......................................... 32
21.18 Execution and Delivery....................................... 32
21.19 Survival..................................................... 32
</TABLE>
EXHIBITS
- --------
EXHIBIT A Real Property Description (Site)
EXHIBIT B Site Plan
-10-
<PAGE>
EXHIBIT C Workletter
EXHIBIT D Estimated Construction Schedule
EXHIBIT E Acknowledgement of Lease Commencement
-11-
<PAGE>
BUILD-TO-SUIT LEASE
-------------------
THIS BUILD-TO-SUIT LEASE ("Lease") is made and entered into as of the ___ day
of ______, 1998, by and between BRITANNIA BIOTECH GATEWAY LIMITED PARTNERSHIP, a
Delaware limited partnership ("Landlord"), and TULARIK INC., a Delaware
corporation ("Tenant").
THE PARTIES AGREE AS FOLLOWS:
1. PROPERTY
--------
1.1 Lease of Property.
-----------------
(a) Landlord leases to Tenant and Tenant hires and leases from Landlord,
on the terms, covenants and conditions hereinafter set forth, the building (the
"Building") to be constructed pursuant to Article 5 hereof and Exhibit C
---------
attached hereto on the real property described in Exhibit A attached hereto (the
---------
"Site"), to consist of a two-story office and laboratory building containing
approximately 80,000 square feet (measured in accordance with the BOMA standard
most closely applicable to a two-story, single-tenant building of this nature).
The location of the Building on the Site is intended to be substantially as
shown for "Building A" on the site plan attached hereto as Exhibit B. The
---------
Building and the other improvements to be constructed, pursuant to Article 5
hereof and Exhibit C attached hereto, on the portion of the Site designated as
---------
"Phase II" on Exhibit B attached hereto (the "Phase II Site") are sometimes
---------
referred to collectively herein as the "Improvements," and the Improvements and
the Phase II Site are sometimes referred to collectively herein as the
"Property." The parking areas, driveways, sidewalks, landscaped areas and other
portions of the Phase II Site that lie outside the exterior walls of the
Building, as depicted on the site plan attached hereto as Exhibit B, are
---------
sometimes referred to herein as the "Common Areas." The Site is part of The
Britannia Biotechnology Center in South San Francisco, California.
(b) As an appurtenance to Tenant's leasing of the Building pursuant to
Section 1.1(a), Landlord hereby grants to Tenant, for the benefit of Tenant and
its employees, suppliers, shippers, customers and invitees, during the term of
this Lease, the non-exclusive right to use, in common with others entitled to
such use, (i) those portions of the Common Areas improved from time to time for
use as parking areas, driveways, sidewalks, landscaped areas, or for other
common purposes, and (ii) all easements, access rights and similar rights and
privileges relating to or appurtenant to the Property and created or existing
from time to time under any easement agreements, declarations of covenants,
conditions and restrictions, or other written agreements now of record with
respect to the Site, including (but not limited to) the portion of the Site
designated as "Phase I" on Exhibit B attached hereto (the "Phase I Site") which
---------
Phase I Site is currently leased by Tenant from Landlord pursuant to that
certain Build-To-Suit Lease between Tenant and Britannia Developments, Inc.
dated April 20, 1995, as amended by that certain First Amendment to Build-To-
Suit Lease and Workletter dated June 15, 1995 (the "Phase I Lease"), subject
however to any
<PAGE>
limitations applicable to such rights and privileges under applicable law and/or
under the written agreements creating such rights and privileges.
1.2 Landlord's Reserved Rights. To the extent reasonably necessary to
--------------------------
permit Landlord to exercise any rights of Landlord and discharge any obligations
of Landlord under this Lease, Landlord shall have, in addition to the right of
entry set forth in Section 16.1 hereof, the following rights: (i) to make
changes to the Common Areas, including, without limitation, changes in the
location, size or shape of any portion of the Common Areas and to relocate (but
not materially decrease the number of) parking spaces on the Phase II Site; (ii)
to close temporarily any of the Common Areas for maintenance or other reasonable
purposes, provided that reasonable parking and reasonable access to the Building
remain available; (iii) to construct, alter or add to other buildings or
improvements on the Site (including, but not limited to, construction of a
building in the area designated as "Building B" on the site plan attached hereto
as Exhibit B, and construction of site improvements and common area improvements
---------
in the Phase I Site; (iv) to build adjoining to the Property and/or the Site;
(v) to use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Property, or any portion thereof; and (vi) to do
and perform such other acts with respect to the Common Areas and the Property as
may be necessary or appropriate; provided, however, that notwithstanding
--------
anything to the contrary in this Section 1.2, Landlord's exercise of its rights
hereunder (x) shall not cause any material diminution of Tenant's rights, nor
any material increase of Tenant's obligations, under this Lease or with respect
to the Improvements, (y) shall not authorize Landlord to make any material,
permanent alterations in the Improvements without the prior written consent of
Tenant, which consent shall not be unreasonably withheld or delayed, and (z)
shall be conducted in such a manner as to minimize, to the extent reasonably
possible, any adverse effect on Tenant's business operations on the Phase II
Site (including, but not limited to, reasonable prior notice to Tenant of any
pile-driving or other activities that will cause significant noise or vibration
on the Phase II Site).
2. TERM
----
2.1 Term. The term of this Lease shall commence on the date which is six
----
(6) months after the date Landlord delivers to Tenant a Structural Completion
Certificate pursuant to the Workletter attached hereto as Exhibit C, subject to
---------
any adjustments authorized or required under the provisions of such Exhibit C
(the "Commencement Date") and shall end on the day immediately preceding the
date fifteen (15) years thereafter, unless sooner terminated or extended (if
applicable) as hereinafter provided.
2.2 Early Possession. Tenant shall have the nonexclusive right to occupy
----------------
and take possession of the Phase II Site from and after the date of Landlord's
delivery of the Structural Completion Certificate described in clause (i) of
Section 2.1, even though such date is prior to the Commencement Date determined
under Section 2.1 and even though Landlord will be continuing to construct the
balance of Landlord's Work as contemplated in Exhibit C, for the purpose of
---------
constructing Tenant's Work as contemplated in Exhibit C. Such occupancy and
---------
possession, and any early access under the next sentence of this Section 2.2,
shall be subject to and upon all of the terms and conditions of this Lease and
of the Workletter attached hereto as Exhibit C (including, but not limited to,
---------
conditions relating to the maintenance of required insurance), except that
Tenant
-2-
<PAGE>
shall have no obligation to pay minimum rental or Operating Expenses for any
period prior to the Commencement Date as determined under Section 2.1; such
early possession shall not advance or otherwise affect the Commencement Date or
termination date determined under Section 2.1. Tenant shall also be entitled to
have early access to the Phase II Site at all appropriate times prior to
Landlord's delivery of the Structural Completion Certificate, subject to the
approval of Landlord and its contractor (which approval shall not be
unreasonably withheld or delayed), solely for the purpose of installing fixtures
and equipment and other similar work preparatory to the construction of Tenant's
Work and the commencement of Tenant's business on the Property, and Tenant shall
not be required to pay minimum rental or Operating Expenses by reason of such
early access until the Commencement Date otherwise occurs. Tenant shall not
interfere with or delay Landlord's contractors by any such early access,
occupancy or possession under this Section 2.2 prior to Landlord's delivery of
the Structural Completion Certificate, shall coordinate and cooperate with
Landlord and its contractors (who shall similarly coordinate and cooperate with
Tenant and its contractors) to minimize any interference or delay by either
party with respect to the other party's work following Landlord's delivery of
the Structural Completion Certificate, and shall indemnify, defend and hold
harmless Landlord and its agents and employees from and against any and all
claims, demands, liabilities, actions, losses, costs and expenses, including
(but not limited to) reasonable attorneys' fees, arising out of or in connection
with Tenant's early entry upon the Phase II Site hereunder.
2.3 Delay In Possession. Landlord agrees to use its best reasonable efforts
-------------------
to complete promptly its portion of the work described in Section 5.1 and
Exhibit C; provided, however, Landlord shall not be liable for any damages
- ---------
caused by any delay in the completion of such work, nor shall any such delay
affect the validity of this Lease or the obligations of Tenant hereunder.
Notwithstanding any other provision of this Section 2.3, however, if Landlord
fails to deliver the Structural Completion Certificate and tender possession of
the completed structural portions of the Building Shell (i.e., those portions
----
required to be completed as a condition of delivery of the Structural Completion
Certificate) to Tenant by April 30, 1999 then Tenant shall have the right to
terminate this Lease without further liability hereunder by written notice
delivered to Landlord at any time prior to Landlord's delivery of the Structural
Completion Certificate and tender of possession of the completed structural
portions of the Building Shell to Tenant; provided, however, that the deadline
--------
of April 30, 1999 set forth in this sentence shall be extended, day for day, for
a period equal to the length of any delay beyond February 28, 1998 in Tenant's
delivery to Landlord of all information reasonably necessary for Landlord to
complete the preparation of all drawings, designs and specifications for the
Building Shell.
2.4 Acknowledgement Of Lease Commencement. Upon commencement of the term of
-------------------------------------
this Lease, Landlord and Tenant shall execute a written acknowledgement of the
Commencement Date, date of termination and related matters, substantially in the
form attached hereto as Exhibit E (with appropriate insertions), which
---------
acknowledgement shall be deemed to be incorporated herein by this reference.
Notwithstanding the foregoing requirement, the failure of Tenant to execute such
a written acknowledgement shall not affect the determination of the Commencement
Date, date of termination and related matters in accordance with the provisions
of this Lease.
2.5 Holding Over. If Tenant holds possession of the Property or any portion
------------
thereof after
-3-
<PAGE>
the term of this Lease with Landlord's written consent, then except as otherwise
specified in such consent, Tenant shall become a tenant from month to month at
one hundred twenty-five percent (125%) of the rental and otherwise upon the
terms herein specified for the period immediately prior to such holding over and
shall continue in such status until the tenancy is terminated by either party
upon not less than thirty (30) days prior written notice. If Tenant holds
possession of the Property or any portion thereof after the term of this Lease
without Landlord's written consent, then Landlord in its sole discretion may
elect (by written notice to Tenant) to have Tenant become a tenant either from
month to month or at will, at one hundred fifty percent (150%) of the rental
(prorated on a daily basis for an at-will tenancy, if applicable) and otherwise
upon the terms herein specified for the period immediately prior to such holding
over, or may elect to pursue any and all legal remedies available to Landlord
under applicable law with respect to such unconsented holding over by Tenant.
Tenant shall indemnify and hold Landlord harmless from any loss, damage, claim,
liability, cost or expense (including reasonable attorneys' fees) resulting from
any delay by Tenant in surrendering the Property (except with Landlord's prior
written consent), including but not limited to any claims made by a succeeding
tenant by reason of such delay. Acceptance of rent by Landlord following
expiration or termination of this Lease shall not constitute a renewal of this
Lease.
2.6 Option To Extend Term. Tenant shall have the option to extend the term
---------------------
of this Lease, at the minimum rental set forth in Section 3.1(b) and (c) and
otherwise upon all the terms and provisions set forth herein with respect to the
initial term of this Lease, for up to two (2) additional periods of five (5)
years each, the first commencing upon the expiration of the initial term hereof
and the second commencing upon the expiration of the first extended term, if
any. Exercise of such option with respect to the first such extended term shall
be by written notice to Landlord at least nine (9) months prior to the
expiration of the initial term hereof; exercise of such option with respect to
the second extended term, if the first extension option has been duly exercised,
shall be by like written notice to Landlord at least nine (9) months prior to
the expiration of the first extended term hereof. If Tenant is in default
hereunder on the date of such notice or on the date any extended term is to
commence, then the option shall be of no force or effect, the extended term
shall not commence and this Lease shall expire at the end of the then current
term hereof (or at such earlier time as Landlord may elect pursuant to the
default provisions of this Lease). If Tenant properly exercises one or more
extension options under this Section, then all references in this Lease (other
than in this Section 2.6) to the "term" of this Lease shall be construed to
include the extension term(s) thus elected by Tenant. Except as expressly set
forth in this Section 2.6, Tenant shall have no right to extend the term of that
Lease beyond its prescribed term.
3. RENTAL
------
3.1 Minimum Rental.
--------------
(a) Tenant shall pay to Landlord as minimum rental for the Property, in
advance, without deduction, offset, notice or demand, on or before the
Commencement Date and on or before the first day of each subsequent calendar
month of the term of this Lease, the following amounts per month:
-4-
<PAGE>
<TABLE>
<CAPTION>
Months Minimum Rental
------ --------------
<S> <C>
1 - 12 $159,200
13 - 24 188,800
25 - 36 200,800
37 - 48 206,400
49 - 60 215,200
61 - 72 217,600
73 - 84 188,800
85 - 96 195,200
97 - 108 200,800
109 - 120 207,200
121 - 132 189,600
133 - 144 196,800
145 - 156 203,200
157 - 168 211,200
169 - 180 219,200
</TABLE>
If the obligation to pay minimum rental hereunder commences on other than the
first day of a calendar month or if the term of this Lease terminates on other
than the last day of a calendar month, the minimum rental for such first or last
month of the term of this Lease, as the case may be, shall be prorated based on
the number of days the term of this Lease is in effect during such month. If an
increase in minimum rental becomes effective on a day other than the first day
of a calendar month, the minimum rental for that month shall be the sum of the
two applicable rates, each prorated for the portion of the month during which
such rate is in effect.
(b) If Tenant properly exercises its right to extend the term of this
Lease pursuant to Section 2.6 hereof, the minimum rental during the first
extended term shall be equal to ninety-five percent (95%) of the fair market
rental value of the Property (as defined below), including any rental increase
provisions then customary in the relevant market for comparable commercial
leases, determined as of the commencement of such extended term in accordance
with this paragraph. Upon Landlord's receipt of a proper notice of Tenant's
exercise of its option to extend the term of this Lease, the parties shall have
sixty (60) days in which to agree on the fair market rental (including any
applicable rental increase provisions) for the Property at the commencement of
the first extended term for the uses permitted hereunder. If the parties agree
on such fair market rental and rental increase provisions (if any), they shall
execute an amendment to this Lease stating the amount of the applicable minimum
monthly rental and any applicable rental increase provisions. If the parties
are unable to agree on such rental (including any applicable rental increase
provisions) within such sixty (60) day period, then within fifteen (15) days
after the expiration of such period each party, at its cost and by giving notice
to the other party, shall appoint a real estate appraiser with at least five (5)
years experience appraising similar commercial properties in northeastern San
Mateo County to appraise and set the fair market rental and any applicable
rental increase provisions for the Property at the commencement of the first
extended term. If either party fails to appoint an appraiser within the
allotted time, the single appraiser appointed by the other party shall
-5-
<PAGE>
be the sole appraiser. If an appraiser is appointed by each party and the two
appraisers so appointed are unable to agree upon a fair market rental (and any
appropriate rental increase provisions) within thirty (30) days after the
appointment of the second, they shall appoint a third qualified appraiser within
ten (10) days after expiration of such 30-day period; if they are unable to
agree upon a third appraiser, either party may, upon not less than five (5) days
notice to the other party, apply to the Presiding Judge of the San Mateo County
Superior Court for the appointment of a third qualified appraiser. Each party
shall bear its own legal fees in connection with appointment of the third
appraiser and shall bear one-half of any other costs of appointment of the third
appraiser and of such third appraiser's fee. The third appraiser, however
selected, shall be a person who has not previously acted for either party in any
capacity. Within thirty (30) days after the appointment of the third appraiser,
a majority of the three appraisers shall set the fair market rental and any
applicable rental increase provisions for the first extended term and shall so
notify the parties. If a majority are unable to agree within the allotted time,
(i) the three appraised fair market rentals shall be added together and divided
by three and the resulting quotient shall be the fair market rental for the
first extended term, and (ii) the applicable rental increase provision shall be
equal to the mathematical average (or the nearest reasonable approximation
thereto) of the two rental increase provisions that are most closely comparable,
which determinations shall be binding on the parties and shall be enforceable in
any further proceedings relating to this Lease. For purposes of this Section
3.1(b), the "fair market rental" of the Property shall be determined with
reference to the then prevailing market rental rates for properties in
northeastern San Mateo County with shell and standard office, research and
development improvements and site (common area) improvements comparable to those
then existing in the Building and on the Property; no equipment or laboratory
improvements shall be taken into account in determining such fair market rental.
(c) If Tenant properly exercises its right to a second extended term of
this Lease pursuant to Section 2.6 hereof, the minimum rental during such second
extended term shall be determined in the same manner provided in the preceding
paragraph for the first extended term, except that the determination shall be
made as of the commencement of the second extended term.
(d) The minimum rental amounts specified in this Section 3.1 are based
upon an estimated area of 80,000 square feet for the Building. If the actual
area of the Building, when completed, is greater or less than such estimated
area, then the minimum rentals specified in this Section 3.1 shall be adjusted
proportionately to the change in the area of the Building, measured in
accordance with the BOMA standard most closely applicable to a two-story,
single-tenant building of this nature.
-6-
<PAGE>
3.2 Late Charge. If Tenant fails to pay when due rental or other amounts
-----------
due Landlord hereunder, such unpaid amounts shall bear interest for the benefit
of Landlord at a rate equal to the lesser of fifteen percent (15%) per annum or
the maximum rate permitted by law, from the date due to the date of payment. In
addition to such interest, Tenant shall pay to Landlord a late charge in an
amount equal to ten percent (10%) of any installment of minimum rental and any
other amounts due Landlord if not paid in full on or before the fifth (5th) day
after such rental or other amount is due. Tenant acknowledges that late payment
by Tenant to Landlord of rental or other amounts due hereunder will cause
Landlord to incur costs not contemplated by this Lease, including, without
limitation, processing and accounting charges and late charges which may be
imposed on Landlord by the terms of any loan relating to the Property. Tenant
further acknowledges that it is extremely difficult and impractical to fix the
exact amount of such costs and that the late charge set forth in this Section
3.2 represents a fair and reasonable estimate thereof. Acceptance of any late
charge by Landlord shall not constitute a waiver of Tenant's default with
respect to overdue rental or other amounts, nor shall such acceptance prevent
Landlord from exercising any other rights and remedies available to it.
Acceptance of rent or other payments by Landlord shall not constitute a waiver
of late charges or interest accrued with respect to such rent or other payments
or any prior installments thereof, nor of any other defaults by Tenant, whether
monetary or non-monetary in nature, remaining uncured at the time of such
acceptance of rent or other payments.
4. STOCK WARRANTS
--------------
4.1 Stock Warrants. Within fifteen (15) days after written request by
--------------
Landlord at any time after execution hereof (but in all events no later than
four (4) months after execution hereof), as a condition to Landlord's
obligations hereunder, Tenant shall deliver to Landlord or Landlord's
designee(s)(which may include any partners, shareholders or affiliates of
Landlord and any affiliates of any such partners, shareholders or affiliates of
Landlord, subject to compliance by Tenant and Landlord with all applicable
securities laws, a warrant registered in Landlord's (or Landlord's designee's)
name to purchase One Hundred Thirty-Nine Thousand Five Hundred Seventy (139,570)
shares of Tenant's preferred stock. The warrant shall have an exercise price of
Thirteen Dollars ($13) per share and shall be exercisable for a period beginning
on the date on which this Lease is entered and ending on the earlier of (a) the
five year anniversary of the closing of the initial public offering of Tenant's
common stock or (b) the ten (10) year anniversary of the date on which this
Lease is entered, and the warrant shall be on the terms and conditions as set
forth therein.
-7-
<PAGE>
5. CONSTRUCTION
------------
5.1 Construction of Improvements. Landlord shall, at Landlord's cost and
----------------------------
expense (except as otherwise provided herein and in Exhibit C), construct
---------
Landlord's Work as defined in and in accordance with the terms and conditions of
the Workletter attached hereto as Exhibit C (the "Workletter"). Landlord shall
---------
use its best efforts to complete such construction in accordance with the
estimated construction schedule attached hereto as Exhibit D as the same may be
---------
modified or revised from time to time in accordance with the Workletter. Tenant
shall, at Tenant's cost and expense (except as otherwise provided herein and in
Exhibit C), construct Tenant's Work as defined in and in accordance with the
- ---------
terms and conditions of the Workletter.
5.2 Condition of Property. Landlord shall deliver the Building Shell and
---------------------
other Improvements constructed by Landlord to Tenant clean and free of debris,
promptly upon completion of construction thereof, and Landlord warrants to
Tenant that the Building Shell and other Improvements constructed by Landlord
(i) shall be free from material structural defects and (ii) shall be constructed
in compliance in all respects with any and all applicable specifications
mutually approved by Landlord and Tenant, subject to any changes implemented in
such specifications in accordance with the procedures set forth in the
Workletter. If it is determined that this warranty has been violated in any
respect, then it shall be the obligation of Landlord, after receipt of written
notice from Tenant setting forth with specificity the nature of the violation,
to promptly, at Landlord's sole cost, correct the condition(s) constituting such
violation. Tenant's failure to give such written notice to Landlord within one
hundred eighty (180) days after the Commencement Date shall give rise to a
conclusive presumption that Landlord has complied with all Landlord's
obligations hereunder, except with respect to latent defects. Landlord shall
also assign to Tenant Landlord's rights under all contractor's and other
warranties relating to the Building Shell and other Improvements constructed by
Landlord (provided, however, that Landlord may reserve joint enforcement rights
--------
under such warranties to the extent of Landlord's continuing obligations or
warranties hereunder), and shall cooperate with Tenant in all reasonable
respects in any enforcement of such assigned warranties. TENANT ACKNOWLEDGES
THAT THE WARRANTY CONTAINED IN THIS SECTION IS IN LIEU OF ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PHYSICAL CONDITION OF THE IMPROVEMENTS
TO BE CONSTRUCTED BY LANDLORD AND THAT LANDLORD MAKES NO OTHER WARRANTIES EXCEPT
AS EXPRESSLY SET FORTH IN THIS LEASE.
5.3 Compliance with Law. Landlord warrants to Tenant that the Building
-------------------
Shell and other Improvements constructed by Landlord (when constructed), as they
exist on the Commencement Date, but without regard to the use for which Tenant
will occupy the Property, shall not violate any covenants or restrictions of
record or any applicable building code, regulation or ordinance in effect on the
Commencement Date. Tenant warrants to Landlord that the Interior Improvements
and any other improvements constructed by Tenant from time to time shall not
violate any applicable building code, regulation or ordinance in effect on the
Commencement Date or at the time such improvements are placed in service. If it
is determined that this warranty has been violated, then it shall be the
obligation of the warranting party, after written notice from the other party,
to correct the condition(s) constituting such violation promptly, at the
warranting party's sole cost and
-8-
<PAGE>
expense. Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty as to the present or future suitability of
the Property for the conduct of Tenant's business or proposed business thereon.
6. EXPANSION BUILDINGS
-------------------
6.1 First Refusal Right to Lease.
----------------------------
(a) Landlord shall cause to be delivered to Tenant concurrently with the
execution of this Lease an agreement between Tenant and Britannia Gateway II
Limited Partnership ("Britannia Gateway") that provides to Tenant certain rights
of first refusal to lease all or any portion of either of the buildings
designated as the "Expansion Building" and the "FibroGen Building"
(collectively, the "Expansion Buildings") if Tenant is not then in default under
this Lease. Tenant acknowledges that such rights shall be subordinate to the
rights of FibroGen, Inc. (and its successors in interest) pursuant to that
certain Lease dated December 20, 1996 between Britannia Gateway as Landlord and
FibroGen, Inc. as Tenant.
7. FIRST REFUSAL RIGHT TO PURCHASE
-------------------------------
7.1 Sale Restriction. Landlord shall not sell the Building, the Site, the
----------------
building occupied by Tenant pursuant to the Phase I Lease, or both (for purposes
of this Article 7, the "First Refusal Buildings") at any time during the term of
-----------------------
this Lease, except in compliance with this Article 7; provided, however, that
the foregoing restriction shall not apply during any period in which Tenant is
in default under this Lease. The parties acknowledge that the sale of either or
both of the First Refusal Buildings independent of the remainder of the Site as
a separate legal parcel may require a subdivision of the Site. For purposes of
this Article 7, the terms "purchase," "sell" and "sale" shall be construed to
include, without limitation, any exchange transaction in which Landlord
transfers or conveys its interest in the Site or the First Refusal Buildings (or
any applicable portion thereof) in exchange for other real property or other
non-cash consideration. Notwithstanding any other provisions of this Article 7,
the provisions of this Article 7 shall not apply to any sale, transfer or other
conveyance of the Site, the First Refusal Buildings or any portion thereof by
Landlord to any person or entity which controls, is controlled by or is under
common control with Landlord, but the provisions of this Article 7 shall
continue to apply to the First Refusal Buildings in the hands of such affiliated
transferee.
7.2 First Refusal Right. If, at any time during the term of this Lease,
-------------------
Landlord receives and wishes to accept a bona fide written offer from a person
---------
or entity other than Tenant (the "Offeror") to purchase the Site or either or
both of the First Refusal Buildings, and if Tenant is not then in default under
this Lease, Landlord shall give written notice of such offer to Tenant,
specifying the material terms on which the Offeror proposes to purchase such
building or specified portion thereof (the "Offered Property"), and shall offer
to Tenant the opportunity to purchase the Offered Property on the terms
specified in Landlord's notice, as modified by Section 7.3 (if applicable). For
purposes of this Section 7.2, an offer shall be considered bona fide if it is
---------
contained in a letter of intent or
-9-
<PAGE>
other writing signed by the Offeror and specifies the material terms of such
proposed purchase. Tenant shall have twenty (20) days after the date of giving
of such notice by Landlord in which to accept such offer by written notice to
Landlord. Upon such acceptance by Tenant, the Offered Property shall be sold to
Tenant on the terms set forth in Landlord's notice, as modified by Section 7.3
hereof (if applicable), and the parties shall promptly execute an agreement
containing the terms of Landlord's said notice and such other reasonable and
customary terms as the parties shall agree. If Tenant does not accept Landlord's
offer within the allotted time, Landlord shall thereafter have the right to sell
the Offered Property to the Offeror, at any time within one hundred eighty (180)
days after Tenant's failure to accept Landlord's offer, at a price and on other
terms and conditions not more favorable to the Offeror than the price and other
terms of the original offer specified in Landlord's said notice. If Tenant does
not accept Landlord's offer and Landlord does not sell the Offered Property to
the Offeror within one hundred eighty (180) days, this First Refusal Right shall
reattach to the Offered Property.
7.3 Discount on Purchase Price. If, at the time Landlord is required to
--------------------------
give Tenant a notice specified in Section 7.2, Tenant has at least one class of
equity securities listed on any national stock exchange, the NASDAQ National
Market System or the NASDAQ Small Cap Market, or registered for public trading
pursuant to the Securities Exchange Act of 1934, as amended, and Tenant has
received gross revenues of at least one hundred fifty million dollars
($150,000,000) during Tenant's most recently completed fiscal year, then the
price at which Tenant is entitled to purchase the Offered Property pursuant to
the notice specified in Section 7.2 shall be four percent (4%) lower than the
price specified in the bona fide offer. For purposes of this Section 7.3,
---------
"gross revenues" shall include equity investments, research and development
funding, milestone payments and royalty revenue.
7.4 Expansion Buildings. Landlord shall cause to be delivered to Tenant
-------------------
concurrently with the execution of this Lease an agreement between Tenant and
Britannia Gateway that provides to Tenant certain rights of first refusal to
purchase either or both of the Expansion Buildings, if Tenant is not then in
default under this Lease. Tenant acknowledges that such rights shall be
subordinate to the rights of FibroGen, Inc. (and its successors in interest)
pursuant to that certain Lease dated December 20, 1996 between Britannia Gateway
as Landlord and FibroGen, Inc. as Tenant.
-10-
<PAGE>
8. TAXES
-----
8.1 Personal Property. Tenant shall be responsible for and shall pay prior
-----------------
to delinquency all taxes and assessments levied against or by reason of (a) any
and all alterations, additions and items installed or placed on the Property and
taxed as personal property rather than as real property, and/or (b) all personal
property, trade fixtures and other property placed by Tenant on or about the
Property. Upon request by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of Tenant's payment thereof. If at any time during the
term of this Lease any of said alterations, additions or personal property,
whether or not belonging to Tenant, shall be taxed or assessed as part of the
Property, then such tax or assessment shall be paid by Tenant to Landlord
immediately upon presentation by Landlord of copies of the tax bills in which
such taxes and assessments are included and shall, for the purposes of this
Lease, be deemed to be personal property taxes or assessments under this Section
8.1.
8.2 Real Property. To the extent any real property taxes and assessments on
-------------
the Property (including, but not limited to, the Improvements) are assessed
directly to Tenant, Tenant shall be responsible for and shall pay prior to
delinquency all such taxes and assessments levied against the Property. Upon
request by Landlord, Tenant shall furnish Landlord with satisfactory evidence of
Tenant's payment thereof. To the extent the Property and/or Improvements are
taxed or assessed to Landlord following the Commencement Date, such real
property taxes and assessments shall constitute Operating Expenses (as that term
is defined in Section 9.2 of this Lease) and shall be paid in accordance with
the provisions of Article 9 of this Lease.
9. OPERATING EXPENSES
------------------
9.1 Liability For Operating Expenses.
--------------------------------
Tenant shall pay to Landlord, at the time and in the manner hereinafter
set forth, as additional rental, an amount equal to one hundred percent (100%)
("Tenant's Operating Cost Share") of the Operating Expenses defined in Section
9.2.
9.2 Definition Of Operating Expenses. Subject to the exclusions and
--------------------------------
provisions hereinafter contained, the term "Operating Expenses" shall mean the
total costs and expenses incurred by or allocable to Landlord for operation and
maintenance of the Improvements and the Property, including, without limitation,
costs and expenses of (i) operation, repair and maintenance of the roof
(structural portions only), exterior walls and other structural portions of the
Building; (ii) liability, casualty or other insurance (including, but not
limited to, earthquake insurance if Landlord in its discretion elects to carry
such insurance, which it is Landlord's present intention to do, so long as such
insurance is reasonably available in the commercial insurance markets) carried
by Landlord with respect to the Property, the Improvements or any portion
thereof; (iii) real and personal property taxes and assessments or substitutes
therefor levied or assessed against the Property or any part thereof, including
(but not limited to) any possessory interest, use, business, license or other
taxes or fees, any taxes imposed directly on rents or services, any assessments
or charges for police
-11-
<PAGE>
or fire protection, housing, transit, open space, street or sidewalk
construction or maintenance or other similar services from time to time by any
governmental or quasi-governmental entity, and any other new taxes on landlords
in addition to taxes now in effect; (iv) supplies, equipment, utilities and
tools used in operation, repair and maintenance of the roof (structural portions
only), exterior walls and other structural portions of the Building; (v) capital
improvements to the Property or the Improvements, amortized over their
respective useful lives, (aa) which reduce or will cause future reduction of
other items of Operating Expenses for which Tenant is otherwise required to
contribute (but not in excess of the cost savings realized) or (bb) which are
required by law, ordinance, regulation or order of any governmental authority
enacted after the date of this Lease; and (vi) any other costs (including, but
not limited to, any parking or utilities fees or surcharges) allocable to or
paid by Landlord, as owner of the Property or Improvements, pursuant to any
applicable laws, ordinances, regulations or orders of any governmental or quasi-
governmental authority or pursuant to the terms of any declarations of
covenants, conditions and restrictions now or hereafter affecting either the
Property or any other property described in Section 9.1(b) or over which Tenant
has non-exclusive usage rights as contemplated in Section 1.1(b) hereof. The
distinction between items of ordinary operating maintenance and repair and items
of a capital nature shall be made in accordance with generally accepted
accounting principles applied on a consistent basis. Notwithstanding any other
provisions of this Section 9.2, Operating Expenses shall not include any costs
attributable to work for which Landlord is required to pay under Section 5.1 or
Exhibit C; any management fees; depreciation on buildings (other than
- ---------
depreciation on personal property); costs of tenants' improvements; interest;
capital items (other than as expressly provided above); payments on debt
(principal or interest); leasing commissions; costs of goods and services
(including utilities) for which Landlord is reimbursed by tenants or occupants
other than Tenant; costs incurred to perform or correct Landlord's Work
described in Section 5.1 and Exhibit C; costs of correcting defects in or
---------
inadequacy of the initial design of the structure of the Building; legal fees;
amounts paid to affiliates of Landlord (i.e., persons or companies controlled
by, under common control with, or which control, Landlord) for services on or to
the Building, except to the extent that the costs of such services do not exceed
competitive costs of such services were they rendered by a non-affiliate of
Landlord; expenses in connection with services or other benefits provided to one
or more other tenants but not generally available to Tenant; space planning
fees, architectural fees, engineering fees (other than those relating to the
general operation of buildings or common areas), marketing, advertising or any
other expenses incurred in connection with the development or leasing of any
buildings or improvements; costs associated with the operation of the business
of the legal entity which constitutes Landlord as the same is separate and apart
from the costs and operation of the Building, including legal entity formation
and internal entity accounting; any late fees or penalties or similar fees
incurred by Landlord, except to the extent attributable to Tenant's late payment
or nonpayment of minimum rental or additional rent; any debt losses, rent losses
or reserves for bad debt; the cost of any repairs in accordance with the
provisions of this Lease relating to fire, casualty and/or condemnation;
Landlord's incremental costs incurred by reason of Landlord's breach of any
leases with other tenants, and any costs incurred by reason of the breach by
other tenants of such tenants' leases (to the extent recoverable from such
tenants); or any unrecovered expenses incurred as a consequence of the grossly
negligent operation and maintenance, by Landlord or its employees, of those
portions of the Building required to be maintained by Landlord.
-12-
<PAGE>
9.3 Determination and Payment Of Operating Expenses.
-----------------------------------------------
(a) Beginning on the Commencement Date and thereafter from time to time
during the term of this Lease, Landlord shall give Tenant written notice of
amounts paid or to be paid by Landlord for insurance premiums, taxes, structural
repair or maintenance costs or any other amount constituting an Operating
Expense under Section 9.2 hereof, accompanied by copies of premium notices, tax
statements, contractor's invoices or other documentation reasonably evidencing
the amount of the applicable Operating Expense payment, and Tenant shall pay to
Landlord Tenant's Operating Cost Share of each such item of Operating Expenses.
Such payment by Tenant shall be due on or before the later to occur of (i) ten
(10) days after delivery of Landlord's written notice to Tenant or (ii) fourteen
(14) days before the date on which the applicable Operating Expense payment by
Landlord is due (in the case of insurance premiums or other payments to private
parties) or would become delinquent (in the case of taxes or assessments). In
the event of any subsequent rebate, refund, adjustment or surcharge with respect
to any item of Operating Expenses allocable to any portion of the term of this
Lease, the amount of such rebate, refund, adjustment or surcharge shall be for
Tenant's benefit or account, as the case may be, and shall be adjusted promptly
by a cash payment from Landlord to Tenant or from Tenant to Landlord, as the
case may be.
(b) Tenant shall be entitled at any time and from time to time, upon
reasonable written notice to Landlord and during normal business hours at
Landlord's office or such other places as Landlord shall designate, to inspect
and examine those books and records of Landlord relating to the determination
and payment of Operating Expenses relating to this Lease, the Property and/or
any other properties described in Section 9.1(b). If, after inspection and
examination of such books and records, Tenant disputes the amount of any such
Operating Expenses charged by Landlord and the parties are not able to resolve
such dispute by good faith negotiations within (30) days after Tenant notifies
Landlord in writing of the disputed items, then Tenant may, by written notice to
Landlord, request an independent audit of such books and records. The
independent audit of the books and records shall be conducted by a certified
public accountant acceptable to both Landlord and Tenant or, if the parties are
unable to agree, by a "Big Six" accounting firm designated by Landlord and not
then employed by Landlord or Tenant. The audit shall be limited to the
determination of the amount of Operating Expenses specified by Tenant in its
notice of objection. If the audit discloses that the amount of Operating
Expenses billed to Tenant was incorrect, the appropriate party shall promptly
pay to the other party the deficiency or overpayment, as applicable. All costs
and expenses of the audit shall be paid by Tenant unless the audit shows that
Landlord overstated Operating Expenses covered by the audit by more than five
percent (5%), in which case Landlord shall pay all costs and expenses of the
audit.
-13-
<PAGE>
9.4 Proration. If the Commencement Date falls on a day other than the first
---------
day of an insurance coverage period, tax fiscal year or other period to which an
Operating Expense is allocable or attributable, or if this Lease terminates on a
day other than the last day of an insurance coverage period, tax fiscal year or
other period to which an Operating Expense is allocable or attributable, then
the amount of Operating Expenses payable by Tenant with respect to such first or
last partial insurance coverage period, tax fiscal year or other period shall be
prorated on the basis which the number of days during such insurance coverage
period, tax fiscal year or other period in which this Lease is in effect bears
to the total number of days in such insurance coverage period, tax fiscal year
or other period.
10. UTILITIES
---------
10.1 Payment. Commencing with the Commencement Date and thereafter
-------
throughout the term of this Lease, Tenant shall pay, before delinquency, all
charges for water, gas, heat, light, electricity, power, sewer, telephone, alarm
system, janitorial and other services or utilities supplied to or consumed in or
upon the Property (including any separately metered costs for water, electricity
or other services or utilities furnished with respect to the Common Areas),
including any taxes on such services and utilities.
10.2 Interruption. There shall be no abatement of rent or other charges
------------
required to be paid hereunder and Landlord shall not be liable in damages or
otherwise for interruption or failure of any service or utility furnished to or
used in the Property because of accident, making of repairs, alterations or
improvements, severe weather, difficulty or inability in obtaining services or
supplies, labor difficulties or any other cause, except to the extent such
interruption or failure of a service or utility is caused by the negligence or
willful misconduct of Landlord or its agents or employees.
-14-
<PAGE>
11. ALTERATIONS; SIGNS
------------------
11.1 Right To Make Alterations. Tenant shall make no alterations, additions
-------------------------
or improvements to the Property without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed, except that Tenant
shall not be required to obtain such consent for interior non-structural
alterations costing less than One Hundred Thousand Dollars ($100,000) in the
aggregate during any twelve (12) month period. All such alterations, additions
and improvements shall be completed with due diligence in a workmanlike manner
similar to Landlord's manner of construction and in compliance with plans and
specifications approved in writing by Landlord and all applicable laws,
ordinances, rules and regulations, and to the extent Landlord's consent is not
otherwise required hereunder for such alterations, additions or improvements,
Tenant shall give prompt written notice thereof to Landlord for purposes of
Section 11.2 hereof. Tenant shall cause any contractors engaged by Tenant for
work on the Property to maintain public liability and property damage insurance,
and other customary insurance, with such terms and in such amounts as Landlord
may reasonably require, naming Landlord and its partners, shareholders, agents
and employees as additional insureds, and shall furnish Landlord with
certificates of insurance or other evidence that such coverage is in effect. In
addition, in connection with any future alterations, additions or improvements
to the Property (including, but not limited to, any construction or installation
of furnishings, fixtures or equipment), after completion of Tenant's work in the
Building pursuant to the Workletter attached hereto, costing in excess of
Seventy-Five Thousand Dollars ($75,000.00) in the aggregate during any twelve
(12) month period, Tenant shall use reasonable best efforts to engage only union
contractors where available for such work. Notwithstanding any other provisions
of this Section 11.1, under no circumstances shall Tenant make any structural
alterations or improvements, or any substantial changes to the roof or
substantial equipment installations on the roof, or any substantial changes or
alterations to building systems, without Landlord's prior written consent.
11.2 Title To Alterations. All alterations, additions and improvements
--------------------
installed in, on or about the Property shall be part of the Improvements and the
property of Landlord, unless Landlord elects to require Tenant to remove the
same upon the termination of this Lease, which election shall be made by
Landlord concurrently with its consent to such alterations, additions or
improvements or, if no such consent is required, then within fifteen (15) days
after Landlord is advised in writing of such alterations, additions or
improvements as contemplated in Section 11.1 hereof; provided, however, that the
--------
foregoing shall not apply (i) to Tenant's movable furniture and trade fixtures
to the Property, or (ii) to any of the Interior Improvements (as defined in
Exhibit C hereto), or any subsequent improvements installed by Tenant at its own
- ---------
expense, which are readily movable, are not an integral part of the Building's
structure or interior architectural improvements, and are not an integral part
of the Building's HVAC, plumbing or electrical systems or other standard
operating systems. All of such items described in clause (i) or (ii) of the
preceding sentence (in all events including, but not limited to, lab benches,
fume hoods and cold rooms) may (and, if duly elected by Landlord hereunder,
shall) be removed by Tenant upon the termination of this Lease. Tenant shall
promptly repair any damage caused by its removal of any such improvements.
11.3 Tenant Fixtures. Notwithstanding the provisions of Sections 11.1 and
---------------
11.2, Tenant may install, remove and reinstall trade fixtures without Landlord's
prior written consent, except that
-15-
<PAGE>
any fixtures which are affixed to the Property or which affect the exterior or
structural portions of the Building or the building systems shall require
Landlord's written approval. The foregoing shall apply to Tenant's signs, logos
and insignia, all of which Tenant shall have the right to place and remove and
replace (a) only with Landlord's prior written consent as to location, size and
composition, which consent shall not be unreasonably withheld or delayed, and
(b) only in compliance with all restrictions and requirements of applicable law
and of any covenants, conditions and restrictions or other written agreements
now or hereafter applicable to the Property. Tenant shall immediately repair any
damage caused by installation and removal of fixtures under this Section 11.3.
11.4 No Liens. Tenant shall at all times keep the Property free from all
--------
liens and claims of any contractors, subcontractors, materialmen, suppliers or
any other parties employed either directly or indirectly by Tenant in
construction work on the Property. Tenant may contest any claim of lien, but
only if, prior to such contest, Tenant either (i) posts security in the amount
of the claim, plus estimated costs and interest, or (ii) records a bond of a
responsible corporate surety in such amount as may be required to release the
lien from the Property. Tenant shall indemnify, defend and hold Landlord
harmless against any and all liability, loss, damage, cost and other expenses,
including, without limitation, reasonable attorneys' fees, arising out of claims
of any lien for work performed or materials or supplies furnished at the request
of Tenant or persons claiming under Tenant.
11.5 Signs. Without limiting the generality of the provisions of Section
-----
11.3 hereof, Tenant shall have the right to display its corporate name and logo
on the Building and in front of the entrance to the Building, subject to
Landlord's prior approval as to location, size and composition (which approval
shall not be unreasonably withheld or delayed) and subject to all restrictions
and requirements of applicable law and of any covenants, conditions and
restrictions or other written agreements now or hereafter applicable to the
Property. Landlord is hereby deemed to have approved, as to location, any
signage the location of which is expressly designated on the site plan attached
hereto as Exhibit B or on any Approved Plan developed pursuant to the Workletter
---------
executed concurrently herewith.
-16-
<PAGE>
12. MAINTENANCE AND REPAIRS
-----------------------
12.1 Landlord's Work.
---------------
(a) Landlord shall repair and maintain or cause to be repaired and
maintained the roof (structural portions only), exterior walls and other
structural portions of the Building. The cost of all work performed by Landlord
under this Section 12.1 shall be an Operating Expense hereunder, except to the
extent such work (i) is required due to the negligence of Landlord, (ii) is a
capital expense not includible as an Operating Expense under Section 9.2 hereof,
or (iii) is required due to the negligence or willful misconduct of Tenant or
its agents, employees or invitees (in which event Tenant shall bear the full
cost of such work pursuant to the indemnification provided in Section 14.6
hereof). Tenant knowingly and voluntarily waives the right to make repairs at
Landlord's expense, except to the extent expressly set forth in Section 12.1(b),
or to offset the cost thereof against rent, under any law, statute, regulation
or ordinance now or hereafter in effect.
(b) If Landlord fails to perform any repairs or maintenance required to
be performed by Landlord under Section 12.1(a) and such failure continues for
thirty (30) days or more after Tenant gives Landlord written notice of such
failure (or, if such repairs or maintenance cannot reasonably be performed
within such 30-day period, then if Landlord fails to commence performance within
such 30-day period and thereafter to pursue such performance diligently to
completion), then Tenant shall have the right to perform such repairs or
maintenance and Landlord shall reimburse Tenant for the reasonable cost thereof
within fifteen (15) days after written notice from Tenant of the completion and
cost of such work, accompanied by copies of invoices or other reasonable
supporting documentation. Under no circumstances, however, shall Tenant have
any right to offset the cost of any such work against rent or other charges
falling due from time to time under this Lease.
12.2 Tenant's Obligation For Maintenance.
-----------------------------------
(a) Good Order, Condition And Repair. Except as provided in Section
--------------------------------
12.1 hereof, Tenant at its sole cost and expense shall keep and maintain in good
and sanitary order, condition and repair the Property and every part thereof,
wherever located, including but not limited to the Common Areas of the Phase II
Site, the roof (non-structural portions only), signs, interior, ceiling,
electrical system, plumbing system, telephone and communications systems of the
Building, the HVAC equipment and related mechanical systems serving the Building
(for which equipment and systems Tenant shall enter into a service contract with
a person or entity designated or approved by Landlord), all doors, door checks,
windows, plate glass, door fronts, exposed plumbing and sewage and other utility
facilities, fixtures, lighting, wall surfaces, floor surfaces and ceiling
surfaces of the Building and all other interior repairs, foreseen and
unforeseen, with respect to the Building, as required.
(b) Landlord's Remedy. If Tenant, after notice from Landlord, fails to
-----------------
make or perform promptly any repairs or maintenance which are the obligation of
Tenant hereunder, Landlord shall have the right, but shall not be required, to
enter the Property and make the repairs or perform the maintenance necessary to
restore the Property to good and sanitary order, condition
-17-
<PAGE>
and repair. Immediately on demand from Landlord, the cost of such repairs shall
be due and payable by Tenant to Landlord.
(c) Condition Upon Surrender. At the expiration or sooner termination
------------------------
of this Lease, Tenant shall surrender the Property, including any additions,
alterations and improvements thereto, broom clean, in good and sanitary order,
condition and repair, ordinary wear and tear excepted, first, however, removing
all goods and effects of Tenant and all and fixtures and items required to be
removed pursuant to this Lease (including, but not limited to, any such removal
required as a result of an election duly made by Landlord to require such
removal as contemplated in Section 11.2), and repairing any damage caused by
such removal. Tenant shall not have the right to remove fixtures or equipment
if Tenant is in default hereunder unless Landlord specifically waives this
provision in writing. Tenant expressly waives any and all interest in any
personal property and trade fixtures not removed from the Property by Tenant at
the expiration or termination of this Lease, agrees that any such personal
property and trade fixtures may, at Landlord's election, be deemed to have been
abandoned by Tenant, and authorizes Landlord (at its election and without
prejudice to any other remedies under this Lease or under applicable law) to
remove and either retain, store or dispose of such property at Tenant's cost and
expense, and Tenant waives all claims against Landlord for any damages resulting
from any such removal, storage, retention or disposal.
13. USE OF PROPERTY
---------------
13.1 Permitted Use. Subject to Sections 13.3 and 13.4 hereof, Tenant shall
-------------
use the Property solely as a laboratory research and development facility,
including (but not limited to) wet chemistry and biology labs, clean rooms,
pilot scale, clinical scale and GMP scale manufacturing, storage and use of
toxic and radioactive materials incidental to such research and development
activities (subject to the provisions of Section 13.6 hereof), storage and use
of laboratory animals, and other lawful purposes related to or incidental to
such research and development use, and as office space for sales and marketing
functions, and for no other purpose without Landlord's written consent (not to
be unreasonably withheld or delayed).
13.2 [Omitted.]
13.3 No Nuisance. Tenant shall not use the Property for or carry on or
-----------
permit upon the Property or any part thereof any offensive, noisy or dangerous
trade, business, manufacture, occupation, odor or fumes, or any nuisance or
anything against public policy, nor interfere with the rights or business of
Landlord in the Building or the Property, nor commit or allow to be committed
any waste in, on or about the Property. Tenant shall not do or permit anything
to be done in or about the Property, nor bring nor keep anything therein, which
will in any way cause the Property to be uninsurable with respect to the
insurance required by this Lease or with respect to standard fire and extended
coverage insurance with vandalism, malicious mischief and riot endorsements.
13.4 Compliance With Laws. Tenant shall not use the Property or permit the
--------------------
Property to be used in whole or in part for any purpose or use that is in
violation of any applicable laws,
-18-
<PAGE>
ordinances, regulations or rules of any governmental agency or public authority.
Tenant shall keep the Property equipped with all safety appliances required by
law, ordinance or insurance on the Property, or any order or regulation of any
public authority, because of Tenant's particular use of the Property. Tenant
shall procure all licenses and permits required for use of the Property. Tenant
shall use the Property in strict accordance with all applicable ordinances,
rules, laws and regulations and shall comply with all requirements of all
governmental authorities now in force or which may hereafter be in force
pertaining to the use of the Property by Tenant, including, without limitation,
regulations applicable to noise, water, soil and air pollution, and making such
nonstructural alterations and additions thereto as may be required from time to
time by such laws, ordinances, rules, regulations and requirements of
governmental authorities or insurers of the Property (collectively,
"Requirements") because of Tenant's construction of improvements in or other
particular use of the Property. Any structural alterations or additions required
from time to time by applicable Requirements because of Tenant's construction of
improvements in or other particular use of the Property shall, at Landlord's
election, either (i) be made by Tenant, at Tenant's sole cost and expense, in
accordance with the procedures and standards set forth in Section 11.1 for
alterations by Tenant, or (ii) be made by Landlord at Tenant's sole cost and
expense, in which event Tenant shall pay to Landlord as additional rent, within
ten (10) days after demand by Landlord, an amount equal to all reasonable costs
incurred by Landlord in connection with such alterations or additions. The
judgment of any court, or the admission by Tenant in any proceeding against
Tenant, that Tenant has violated any law, statute, ordinance or governmental
rule, regulation or requirement shall be conclusive of such violation as between
Landlord and Tenant.
13.5 Liquidation Sales. Tenant shall not conduct or permit to be conducted
-----------------
any auction, bankruptcy sale, liquidation sale, or going out of business sale,
in, upon or about the Property, whether said auction or sale be voluntary,
involuntary or pursuant to any assignment for the benefit of creditors, or
pursuant to any bankruptcy or other insolvency proceeding.
-19-
<PAGE>
13.6 Environmental Matters.
---------------------
(a) For purposes of this Section, "hazardous substance" shall mean the
substances included within the definitions of the term "hazardous substance"
under (i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. (S)(S) 9601 et seq., and the regulations
-- ---
promulgated thereunder, as amended, (ii) the California Carpenter-Presley-Tanner
Hazardous Substance Account Act, California Health & Safety Code (S)(S) 25300 et
--
seq., and regulations promulgated thereunder, as amended, (iii) the Hazardous
- ---
Materials Release Response Plans and Inventory Act, California Heath & Safety
Code (S)(S) 25500 et seq., and regulations promulgated thereunder, as amended,
-- ---
and (iv) petroleum; "hazardous waste" shall mean (i) any waste listed as or
meeting the identified characteristics of a "hazardous waste" under the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. (S)(S) 6901 et seq., and
-- ---
regulations promulgated pursuant thereto, as amended (collectively, "RCRA"),
(ii) any waste meeting the identified characteristics of "hazardous waste,"
"extremely hazardous waste" or "restricted hazardous waste" under the California
Hazardous Waste Control Law, California Health & Safety Code (S)(S) 25100 et
--
seq., and regulations promulgated pursuant thereto, as amended (collectively,
- ---
the "CHWCL"), and/or (iii) any waste meeting the identified characteristics of
"medical waste" under California Health & Safety Code (S)(S) 25015-25027.8, and
regulations promulgated thereunder, as amended; and "hazardous waste facility"
shall mean a hazardous waste facility as defined under the CHWCL.
(b) Without limiting the generality of the obligations set forth in
Section 13.4 of this Lease:
(i) Tenant covenants not to cause or permit any hazardous
substance or hazardous waste to be brought upon, kept, stored or used in or
about the Property without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed, except that Tenant, in connection
with its permitted use of the Property as provided in Section 13.1, may keep,
store and use materials that constitute hazardous substances which are customary
for such permitted use, provided such hazardous substances are kept, stored and
used in quantities which are customary for such permitted use and are kept,
stored and used in full compliance with clauses (ii) and (iii) immediately
below.
(ii) Tenant covenants that it will comply with all applicable laws,
rules, regulations, orders, permits, licenses and operating plans of any
governmental authority with respect to the receipt, use, handling, generation,
transportation, storage, treatment and/or disposal of hazardous substances or
wastes by Tenant or its agents or employees, and Tenant will provide Landlord
with copies of all permits, licenses, registrations and other similar documents
that authorize Tenant to conduct any such activities in connection with its
authorized use of the Property from time to time.
(iii) Tenant agrees that it shall not (A) operate on or about the
Property any facility required to be permitted or licensed as a hazardous waste
facility or for which interim status as such is required, nor (B) store any
hazardous wastes on or about the Property for ninety (90) days or more, nor (C)
conduct any other activities on or about the Property that could result in the
-20-
<PAGE>
Property being deemed to be a "hazardous waste facility" (including, but not
limited to, any storage or treatment of hazardous substances or hazardous wastes
which could have such a result).
(iv) Tenant agrees to comply with all applicable laws, rules,
regulations, orders and permits relating to underground storage tanks installed
by Tenant or its agents or employees (including any installation, monitoring,
maintenance, closure and/or removal of such tanks) as such tanks are defined in
California Health & Safety Code (S) 25281(x), including, without limitation,
complying with California Health & Safety Code (S)(S) 25280-25299.7 and the
regulations promulgated thereunder, as amended. Tenant shall furnish to
Landlord copies of all registrations and permits issued to or held by Tenant
from time to time for any and all underground storage tanks.
(v) If applicable, Tenant shall provide Landlord in writing the
following information and/or documentation at the commencement of this Lease and
within sixty (60) days of any change in or addition to the required information
and/or documentation (provided, however, that in the case of the materials
--------
described in subparagraphs (B), (C) and (E) below, Tenant shall not be required
to deliver copies of such materials to Landlord but shall maintain copies of
such materials to such extent and for such periods as may be required by
applicable law and shall permit Landlord or its representatives to inspect such
materials during normal business hours at any time and from time to time upon
reasonable notice to Tenant):
(A) A list of all hazardous substances and/or wastes that
Tenant receives, uses, handles, generates, transports, stores, treats or
disposes of from time to time in connection with its operations on the Property.
(B) All Material Safety Data Sheets ("MSDS's"), if any,
required to be completed with respect to operations of Tenant at the Property
from time to time in accordance with Title 26, California Code of Regulations
(S) 8-5194 or 42 U.S.C. (S) 11021, or any amendments thereto, and any Hazardous
Materials Inventory Sheets that detail the MSDS's.
(C) All hazardous waste manifests (as defined in Title 26,
California Code of Regulations (S) 22-66481), if any, that Tenant is required to
complete from time to time in connection with its operations at the Property.
(D) A copy of any Hazardous Materials Management Plan required
from time to time with respect to Tenant's operations at the Property, pursuant
to California Health & Safety Code (S)(S) 25500 et seq., and any regulations
-- ---
promulgated thereunder, as amended.
(E) Copies of any Contingency Plans and Emergency Procedures
required of Tenant from time to time due to its operations in accordance with
Title 26, California Code of Regulations (S)(S) 22-67140 et seq., and any
-------
amendments thereto, and copies of any Training Programs and Records required
under Title 26, California Code of Regulations, (S) 22-67105, and any amendments
thereto.
(F) Copies of any biennial reports required to be furnished to
the
-21-
<PAGE>
California Department of Health Services from time to time relating to hazardous
substances or wastes, pursuant to Title 26, California Code of Regulations, (S)
22-66493, and any amendments thereto.
(G) Copies of all industrial wastewater discharge permits
issued to or held by Tenant from time to time in connection with its operations
on the Property.
(H) Copies of any other lists or inventories of hazardous
substances and/or wastes on or about the Property that Tenant is otherwise
required to prepare and file from time to time with any governmental or
regulatory authority.
(vi) Tenant shall secure Landlord's prior written approval for any
proposed receipt, storage, possession, use, transfer or disposal of "radioactive
materials" or "radiation," as such materials are defined in Title 26, California
Code of Regulations (S) 17-30100, and/or any other materials possessing the
characteristics of the materials so defined, which approval Landlord may
withhold in its sole and absolute discretion; provided, that such approval shall
--------
not be required for any radioactive materials for which Tenant has secured prior
written approval of the Nuclear Regulatory Commission and delivered to Landlord
a copy of such approval. Tenant, in connection with any such authorized
receipt, storage, possession, use, transfer or disposal of radioactive materials
or radiation, shall:
(A) Comply with all federal, state and local laws, rules,
regulations, orders, licenses and permits;
(B) Maintain, to such extent and for such periods as may be
required by applicable law, and permit Landlord or its representatives to
inspect during normal business hours at any time and from time to time upon
reasonable notice to Tenant, a list of all radioactive materials or radiation
received, stored, possessed, used, transferred or disposed of from time to time,
to the extent not already disclosed through delivery of a copy of a Nuclear
Regulatory Commission approval with respect thereto as contemplated above;
Landlord agrees to use its best efforts to be minimally disruptive to Tenant's
business and operations during such inspections; and
(C) Maintain, to such extent and for such periods as may be
required by applicable law, and permit Landlord or its representatives to
inspect during normal business hours at any time and from time to time upon
reasonable notice to Tenant, all licenses, registration materials, inspection
reports, governmental orders and permits in connection with the receipt,
storage, possession, use, transfer or disposal of radioactive materials or
radiation from time to time.
(vii) Tenant agrees to comply with any and all applicable laws,
rules, regulations and orders of any governmental authority with respect to the
release into the environment of any hazardous wastes or substances or radiation
or radioactive materials by Tenant or its agents or employees. Tenant agrees to
give Landlord immediate verbal notice of any unauthorized release of any such
hazardous wastes or substances or radiation or radioactive materials into the
environment, and to follow such verbal notice with written notice to Landlord of
-22-
<PAGE>
such release within twenty-four (24) hours of the time at which Tenant became
aware of such release.
(viii) Tenant shall indemnify, defend and hold Landlord harmless
from and against any and all claims, losses (including, but not limited to, loss
of rental income and loss due to business interruption), damages, liabilities,
costs, legal fees and expenses of any sort arising out of or relating to (A) any
failure by Tenant to comply with any provisions of this paragraph (b), or (B)
any receipt, use handling, generation, transportation, storage, treatment,
release and/or disposal of any hazardous substance or waste or any radioactive
material or radiation on or about the Property in connection with Tenant's use
or occupancy of the Property or as a result of any intentional or negligent acts
or omissions of Tenant or of any agent or employee of Tenant.
(ix) Tenant agrees to cooperate with Landlord in furnishing
Landlord with complete information regarding Tenant's receipt, handling, use,
storage, transportation, generation, treatment and/or disposal of any hazardous
substances or wastes or radiation or radioactive materials. Upon request, Tenant
agrees to grant Landlord reasonable access at reasonable times to the Property
to inspect Tenant's receipt, handling, use, storage, transportation, generation,
treatment and/or disposal of hazardous substances or wastes or radiation or
radioactive materials, without being deemed guilty of any disturbance of
Tenant's use or possession and without being liable to Tenant in any manner.
(x) Notwithstanding Landlord's rights of inspection and review
under this paragraph (b), Landlord shall have no obligation or duty to so
inspect or review, and no third party shall be entitled to rely on Landlord to
conduct any sort of inspection or review by reason of the provisions of this
paragraph (b).
(xi) If Tenant receives, handles, uses, stores, transports,
generates, treats and/or disposes of any hazardous substances or wastes or
radiation or radioactive materials on or about the Property at any time during
the term of this Lease, then within thirty (30) days after termination or
expiration of this Lease, Tenant at its sole cost and expense shall obtain and
deliver to Landlord an environmental study, performed by an expert reasonably
satisfactory to Landlord, evaluating the presence or absence of hazardous
substances and wastes, radiation and radioactive materials on and about the
Property. Such study shall be based on a reasonable and prudent level of tests
and investigations of the Property which tests shall be conducted no earlier
than the date of termination or expiration of this Lease. Liability for any
remedial actions required or recommended on the basis of such study shall be
allocated in accordance with Sections 13.4, 13.6, 14.6 and other applicable
provisions of this Lease.
(c) Landlord shall indemnify, defend and hold Tenant harmless from and
against any and all claims, losses, damages, liabilities, costs, legal fees and
expenses of any sort arising out of or relating to (i) the presence on the
Property of any hazardous substances or wastes or radiation or radioactive
materials present on the Property as of the Commencement Date (other than as a
result of any intentional or negligent acts or omissions of Tenant or of any
agent or employee of Tenant), and/or (ii) any unauthorized release into the
environment (including, but not limited to, the Site) of any hazardous
substances or wastes or radiation or radioactive materials to the extent such
-23-
<PAGE>
release results from the negligence of or willful misconduct or omission by
Landlord or its agents or employees.
(d) In the event of any third-party claims, losses, damages,
liabilities, costs, legal fees and expenses of any sort (including, but not
limited to, costs incurred with respect to any government-mandated remediation),
against either Landlord or Tenant or both, arising out of or relating to (i) the
presence on the Property of any hazardous substances or wastes or radiation or
radioactive materials not present on the Property as of the Commencement Date
(except to the extent the presence thereof is already covered by an express
indemnification obligation under Section 13.6(b)(viii) or Section 13.6(c), as
applicable), and/or (ii) any unauthorized release into the environment
(including, but not limited to, the Site) of any hazardous substances or wastes
or radiation or radioactive materials (except to the extent such release is
already covered by an express indemnification obligation under Section
13.6(b)(viii) or Section 13.6(c), as applicable), then (x) Landlord and Tenant
shall cooperate reasonably and in good faith in the defense of such third-party
claims, liabilities and related matters and (y) Landlord and Tenant shall each
bear fifty percent (50%) of the total claims, losses, damages, liabilities,
costs, legal fees and expenses incurred by Landlord and/or Tenant in connection
with matters covered by this Section 13.6(d). For purposes of the sharing of
expenses contemplated in clause (y) of the preceding sentence, the party
directly paying or incurring such costs or expenses shall be entitled to invoice
the other party from time to time (on a monthly basis or at other appropriate
intervals) for such other party's respective share thereof, which invoice shall
be accompanied by copies of third-party invoices or other reasonable
documentation supporting the invoiced amounts, and the party receiving such
invoice shall pay its share as reflected in the applicable invoice within
fifteen (15) days after receipt thereof, unless the parties agree otherwise.
Within three (3) months after receipt of any such invoice, the party receiving
the invoice shall be entitled, upon reasonable written notice and during normal
business hours, to inspect and examine the books and records of the party
submitting the invoice with respect to the invoiced amounts. Any dispute with
respect thereto that the parties are unable to resolve by good faith
negotiations shall be resolved by an independent audit using the same procedure
set forth in Section 9.3(b).
14. INSURANCE AND INDEMNITY
-----------------------
14.1 Liability and Property Insurance.
--------------------------------
(a) Tenant shall procure and maintain in full force and effect at all
times during the term of this Lease, at Tenant's cost and expense, commercial
general liability insurance to protect against liability arising out of or
related to the use of or resulting from any accident occurring in, upon or about
the Property, with combined single limit of liability of not less than Five
Million Dollars ($5,000,000) per occurrence for bodily injury and property
damage. Such insurance shall name Landlord and its partners, shareholders,
agents and employees as additional insureds thereunder. The amount of such
insurance shall not be construed to limit any liability or obligation of Tenant
under this Lease. Tenant shall also procure and maintain in full force and
effect at all times during the term of this Lease, at Tenant's cost and expense,
product liability insurance on terms and in amounts satisfactory to Landlord in
its reasonable discretion.
-24-
<PAGE>
(b) Landlord shall procure and maintain in full force and effect at all
times during the term of this Lease, at Landlord's cost and expense (but
reimbursable as an Operating Expense under Section 9.2 hereof), commercial
general liability insurance to protect against liability arising out of or
related to the use of or resulting from any accident occurring in, upon or about
the Property, with combined single limit of liability of not less than Five
Million Dollars ($5,000,000) per occurrence for bodily injury and property
damage.
(c) Landlord shall procure and maintain in full force and effect at all
times during the term of this Lease, at Landlord's cost and expense (but
reimbursable as an Operating Expense under Section 9.2 hereof), fire and
extended coverage insurance for the Building Shell (as defined in Exhibit C) and
---------
for the improvements in the Common Areas of the Property on a full replacement
cost basis, and for the Interior Improvements in an amount not less than the
total amount contributed by Landlord toward the payment for the Interior
Improvements pursuant to Exhibit C. Such insurance may include earthquake
---------
coverage to the extent Landlord in its discretion elects to carry such coverage,
and shall have such deductibles and other terms as Landlord in its discretion
determines to be appropriate. Except as expressly set forth in this paragraph
(c), Landlord shall have no obligation to insure the Interior Improvements and
shall, in all events, have no obligation to insure any other alterations,
additions or improvements installed by Tenant on or about the Property.
(d) Tenant shall procure and maintain in full force and effect at all
times during the term of this Lease, at Tenant's cost and expense, fire and
extended coverage insurance for the Interior Improvements in an amount not less
than the full replacement cost thereof, less the amount of coverage required to
be carried on the Interior Improvements by Landlord pursuant to Section 14.1(c),
and shall have sole responsibility for insurance coverage of any other
alterations, additions or improvements installed by Tenant on the Property to
the extent Tenant deems such coverage appropriate. Tenant's insurance under
this paragraph (d) may include earthquake coverage to the extent Tenant in its
discretion elects to carry such coverage, and shall have such deductibles and
other terms as Tenant in its discretion determines to be appropriate.
(e) All policies of property insurance carried under paragraphs (c) and
(d) of this Section 14.1 shall provide protection against "all perils of direct
physical damage" (as defined by the Insurance Services Office) on all insured
property. Each insuring party shall cause the other party to be named as an
additional insured on such policy to the extent of the coverage for the Interior
Improvements. Replacement cost for purposes hereof shall be determined
periodically on such reasonable basis as Landlord and Tenant may determine.
Such insurance policies (i) shall be written by companies rated B+ or better,
with a financial rating of not less than Class VII, in "Best's Insurance Guide,"
and authorized to do business in California; (ii) shall be written to apply to
covered property damage and other covered loss occurring during the policy term,
or the onset of which occurred or arose during such policy term; (iii) shall be
endorsed, in the case of Tenant's property insurance, to name Landlord's lender
("Lender"), if any, holding the lien of a mortgage or deed of trust on the
Building and Interior Improvements from time to time as a loss payee, provided
that a condition of such endorsement shall be that at all times during the
effectiveness of the endorsement there shall be in full force and effect an
agreement among Landlord, Tenant and
-25-
<PAGE>
Lender pursuant to which Lender agrees that, in the event of an insured
occurrence, Lender will make available to Tenant such part or all of the
proceeds of insurance on the Interior Improvements which are received by Lender
as are required for the repair or replacement of the Interior Improvements,
except as otherwise provided in Section 17.1 hereof in the event of a
termination of this Lease; (iv) shall provide that the respective coverages
shall be primary and not contributing with or in excess of any coverage that the
other party may carry; (v) shall be endorsed to provide the other party with not
less than thirty (30) days' notice of cancellation; and (vi) shall provide for a
deductible of not to exceed $10,000 (except in the case of earthquake coverage).
Each party shall deliver to the other party, on or before the Commencement Date,
and thereafter at least ten (10) days before the expiration dates of expiring
policies, certificates of insurance or other satisfactory evidence of the
continuation of such property insurance coverage for the period indicated
therein. If either party fails to procure property insurance or to deliver
certificates or other evidence thereof as required hereunder, the other party
may, at its option and in addition to the other party's other remedies in the
event of a default hereunder, procure the same for the benefit of such party.
If, pursuant to the foregoing sentence, Tenant secures such insurance on
Landlord's behalf, Tenant shall not be entitled to reimbursement of the cost
thereof; if Landlord secures such insurance on Tenant's behalf, Tenant shall
reimburse Landlord for the cost thereof within ten (10) business days after
receipt of Landlord's invoice therefor.
14.2 Quality Of Policies And Certificates. All policies of insurance
------------------------------------
required hereunder shall be issued by responsible insurers and, in the case of
policies carried or required to be carried by Tenant, shall be written as
primary policies not contributing with and not in excess of any coverage that
Landlord may carry. Each party shall deliver to the other party certificates of
insurance showing that the insuring party's required policies are in effect. If
either party fails to acquire, maintain or renew any insurance required to be
maintained by it under this Article 14 or to pay the premium therefor, then the
other party, at its option and in addition to its other remedies, but without
obligation so to do, may procure such insurance, and any sums expended by
Landlord to procure any such insurance on behalf of or in place of Tenant shall
be repaid upon demand, with interest as provided in Section 3.2 hereof. Tenant
shall obtain written undertakings from each insurer under policies required to
be maintained by it to notify all insureds thereunder at least thirty (30) days
prior to cancellation.
14.3 Workers' Compensation. Tenant shall maintain in full force and effect
---------------------
during the term of this Lease workers' compensation insurance covering all of
Tenant's employees working on the Property, with a minimum limit of liability of
not less than Five Hundred Thousand Dollars ($500,000) per accident/disease.
14.4 Waiver Of Subrogation. To the extent permitted by law and without
---------------------
affecting the coverage provided by insurance required to be maintained
hereunder, Landlord and Tenant each waive any right to recover against the other
(i) damage to property, (ii) damage to the Property or any part thereof, or
(iii) claims arising by reason of any of the foregoing, but only to the extent
that any of the foregoing damages and claims under subparts (i)-(iii) hereof are
covered, and only to the extent of such coverage, by insurance actually carried
or required to be carried hereunder by either Landlord or Tenant. This
provision is intended to waive fully, and for the benefit of each party, any
rights and claims which might give rise to a right of subrogation in any
insurance carrier. Each
-26-
<PAGE>
party shall procure a clause or endorsement on any property insurance policy
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to the occurrence of injury
or loss. Coverage provided by insurance maintained by Tenant shall not be
limited, reduced or diminished by virtue of the subrogation waiver herein
contained.
14.5 Increase In Premiums. Tenant shall do all acts and pay all expenses
--------------------
necessary to insure that the Property is not used for purposes prohibited by any
applicable fire insurance, and that Tenant's use of the Property complies with
all requirements necessary to obtain any such insurance. If Tenant uses or
permits the Property to be used in a manner which increases the existing rate of
any insurance on the Property carried by Landlord, Tenant shall pay the amount
of the increase in premium caused thereby, and Landlord's costs of obtaining
other replacement insurance policies, including any increase in premium, within
ten (10) days after demand therefor by Landlord.
14.6 Indemnification.
---------------
(a) Tenant shall indemnify, defend and hold Landlord, its partners,
shareholders, officers, directors, agents and employees harmless from any and
all liability for bodily injury to or death of any person, or loss of or damage
to the property of persons, and all actions, claims, demands, costs (including,
but not limited to, reasonable attorneys' fees), damages or expenses arising
therefrom which may be brought or made against Landlord or which Landlord may
pay or incur by reason of the use, occupancy and enjoyment of the Property by
Tenant or any invitees, sublessees, agents or employees of Tenant or holding
under Tenant from any cause whatsoever other than negligence or willful
misconduct or omission by Landlord, its agents or employees. Landlord, its
partners, shareholders, officers, directors, agents and employees shall not be
liable for, and Tenant hereby waives all claims against such persons for,
damages to goods, wares and merchandise in or upon the Property, or for injuries
to Tenant, its agents or third persons in or upon the Property, from any cause
whatsoever other than negligence or willful misconduct or omission by Landlord,
its agents or employees. Tenant shall give prompt notice to Landlord of any
casualty or accident in, on or about the Property.
(b) Landlord shall indemnify, defend and hold Tenant, its shareholders,
officers, directors, agents and employees harmless from liability for bodily
injury to or death of any person, or loss of or damage to the property of
persons, and all actions, claims, demands, costs (including, but not limited to,
reasonable attorneys' fees), damages or expenses arising therefrom which may be
brought or made against Tenant or which Tenant may pay or incur, to the extent
such liabilities or other matters arise by reason of any negligence or willful
misconduct or omission by Landlord, its agents or employees.
14.7 Blanket Policy. Any policy required to be maintained hereunder may be
--------------
maintained under a so-called "blanket policy" insuring other parties and other
locations so long as the amount of insurance required to be provided hereunder
is not thereby diminished.
-27-
<PAGE>
15. SUBLEASE AND ASSIGNMENT
-----------------------
15.1 Assignment And Sublease Of Property. Tenant shall not have the right or
-----------------------------------
power to assign its interest in this Lease, or make any sublease of the Property
or any portion thereof, nor shall any interest of Tenant under this Lease be
assignable involuntarily or by operation of law, without on each occasion
obtaining the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. Any purported sublease or assignment of
Tenant's interest in this Lease requiring but not having received Landlord's
consent thereto shall be void. Without limiting the generality of the
foregoing, Landlord may withhold consent to any proposed subletting or
assignment solely on the ground, if applicable, that the use by the proposed
subtenant or assignee is reasonably likely to be incompatible with Landlord's
use of any adjacent property owned or operated by Landlord, unless the proposed
use is within the permitted uses specified in Section 13.1, in which event it
shall not be reasonable for Landlord to object to the proposed use. Any
dissolution, consolidation, merger or other reorganization of Tenant, or any
sale or transfer of the stock of or other interest in Tenant, or any series of
one or more of such events, involving in the aggregate a change of fifty percent
(50%) or more in the beneficial ownership of Tenant or its assets shall be
deemed to be an assignment hereunder and shall be void without the prior written
consent of Landlord as required above. Notwithstanding the foregoing, (i) an
initial public offering of the common stock of Tenant shall not be deemed to be
an assignment hereunder; and (ii) Tenant shall have the right to assign this
Lease or sublet the Premises, or any portion thereof, without Landlord's consent
(but with prior or concurrent written notice by Tenant to Landlord), to any
entity which controls, is controlled by, or is under common control with Tenant,
or to any entity which results from a merger or consolidation with Tenant, or to
any entity engaged in a joint venture with Tenant, or to any entity which
acquires substantially all of the stock or assets of Tenant, as a going concern,
with respect to the business that is being conducted on the Property
(hereinafter each a "Permitted Transfer"). In addition, a sale or transfer of
the capital stock of Tenant shall be deemed a Permitted Transfer if (x) such
sale or transfer occurs in connection with any bona fide financing or
---------
capitalization for the benefit of Tenant, or (y) Tenant becomes a publicly
traded corporation. Landlord shall have no right to terminate this Lease in
connection with, and shall have no right to any sums or other economic
consideration resulting from, any Permitted Transfer. Except as expressly set
forth in this Section 15.1, however, the provisions of Section 15.2 shall remain
applicable to any Permitted Transfer and the transferee under such Permitted
Transfer shall be and remain subject to all of the terms and provisions of this
Lease.
15.2 Rights Of Landlord. Consent by Landlord to one or more assignments of
------------------
this Lease, or to one or more sublettings of the Property or any portion
thereof, or collection of rent by Landlord from any assignee or sublessee, shall
not operate to exhaust Landlord's rights under this Article 15, nor constitute
consent to any subsequent assignment or subletting. No assignment of Tenant's
interest in this Lease and no sublease shall relieve Tenant of its obligations
hereunder, notwithstanding any waiver or extension of time granted by Landlord
to any assignee or sublessee, or the failure of Landlord to assert its rights
against any assignee or sublessee, and regardless of whether Landlord's consent
thereto is given or required to be given hereunder. In the event of a default
by any assignee, sublessee or other
-28-
<PAGE>
successor of Tenant in the performance of any of the terms or obligations of
Tenant under this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against any such assignee, sublessee or
other successor. In addition, Tenant immediately and irrevocably assigns to
Landlord, as security for Tenant's obligations under this Lease, all rent from
any subletting of all or a part of the Property as permitted under this Lease,
and Landlord, as Tenant's assignee and as attorney-in-fact for Tenant, or any
receiver for Tenant appointed on Landlord's application, may collect such rent
and apply it toward Tenant's obligations under this Lease; except that, until
the occurrence of an act of default by Tenant, Tenant shall have the right to
collect such rent and to retain all sublease profits.
16. RIGHT OF ENTRY AND QUIET ENJOYMENT
----------------------------------
16.1 Right Of Entry. Landlord and its authorized representatives shall have
--------------
the right to enter the Property at any time during the term of this Lease during
normal business hours and upon not less than twenty-four (24) hours prior
notice, except in the case of emergency (in which event no notice shall be
required and entry may be made at any time), for the purpose of inspecting and
determining the condition of the Property or for any other proper purpose
including, without limitation, to make repairs, replacements or improvements
which Landlord may deem necessary, to show the Property to prospective
purchasers, to show the Property to prospective tenants (but only during the
final year of the term of this Lease), and to post notices of nonresponsibility.
Landlord shall not be liable for inconvenience, annoyance, disturbance, loss of
business, quiet enjoyment or other damage or loss to Tenant by reason of making
any repairs or performing any work upon the Building or the Property or by
reason of erecting or maintaining any protective barricades in connection with
any such work, and the obligations of Tenant under this Lease shall not thereby
be affected in any manner whatsoever, provided, however, Landlord shall use
reasonable efforts to minimize the inconvenience to Tenant's normal business
operations caused thereby.
16.2 Quiet Enjoyment. Landlord covenants that Tenant, upon paying the rent
---------------
and performing its obligations hereunder and subject to all the terms and
conditions of this Lease, shall peacefully and quietly have, hold and enjoy the
Property throughout the term of this Lease, or until this Lease is terminated as
provided by this Lease.
-29-
<PAGE>
17. CASUALTY AND TAKING
-------------------
17.1 Damage or Destruction.
---------------------
(a) If the Building, or the Common Areas of the Property necessary for
Tenant's use and occupancy of the Building, are damaged or destroyed in whole or
in part under circumstances in which (i) repair and restoration is permitted
under applicable governmental laws, regulations and building codes then in
effect and (ii) repair and restoration reasonably can be completed within a
period of one (1) year following the date of the occurrence, then Landlord, as
to the Common Areas of the Property and the Building Shell, and Tenant, as to
the Interior Improvements, shall commence and complete, with all due diligence
and as promptly as is reasonably practicable under the conditions then existing,
all such repair and restoration as may be required to return the affected
portions of the Property to the condition existing immediately prior to the
occurrence. In connection with any such reconstruction of the Interior
Improvements, Landlord shall use its best efforts (including, without
limitation, any necessary negotiation or intercession with Landlord's Lender, if
any) to promptly make any proceeds of Landlord's property insurance with respect
to the Interior Improvements (up to a maximum amount equal to the amounts
originally contributed by Landlord toward the construction of the Interior
Improvements) available to Tenant for such reconstruction, subject only to such
payment controls as Landlord and its Lender and insurer, or any of them, may
reasonably require in order to ensure the proper application of such proceeds
toward the reconstruction of the Interior Improvements pursuant to this Section
17.1. In the event of damage or destruction the repair of which is not
permitted under applicable governmental laws, regulations and building codes
then in effect, if such damage or destruction (despite being corrected to the
extent then permitted under applicable governmental laws, regulations and
building codes) would still materially impair Tenant's ability to conduct its
business in the Building, then either party may terminate this Lease as of the
date of the occurrence by giving written notice to the other within thirty (30)
days after the date of the occurrence; if neither party timely elects such
termination, or if such damage or destruction does not materially impair
Tenant's ability to conduct its business in the Building, then this Lease shall
continue in full force and effect, except that there shall be an equitable
adjustment in monthly minimum rental and of Tenant's Operating Cost Share of
Operating Expenses, based upon the extent to which Tenant's ability to conduct
its business in the Building is impaired, and Landlord and Tenant respectively
shall restore the Building Shell and the Interior Improvements to a complete
architectural whole and to a functional condition. In the event of damage or
destruction which cannot reasonably be repaired within one (1) year following
the date of the occurrence, then either Landlord or Tenant, at its election, may
terminate this Lease as of the date of the occurrence by giving written notice
to the other within thirty (30) days after the date of the occurrence; if
neither party timely elects such termination, then this Lease shall continue in
full force and effect and Landlord and Tenant shall each repair and restore
applicable portions of the Property in accordance with the first sentence of
this Section 17.1.
(b) The respective obligations of Landlord and Tenant pursuant to
Section 17.1(a) are subject to the following limitations:
(i) If the occurrence results from a peril which is required to be
insured
-30-
<PAGE>
pursuant to Section 14.1(c) and (d) above, the obligations of either party shall
not exceed the amount of insurance proceeds received from insurers by reason of
such occurrence, plus the amount of the party's permitted deductible (provided
that each party shall be obligated to use its best efforts to recover any
available proceeds from the insurance which it is required to maintain pursuant
to the provisions of Section 14.1(c) or (d), as applicable), and, if such
proceeds are insufficient, either party may terminate the Lease unless the other
party promptly elects and agrees, in writing, to contribute the amount of the
shortfall; and
(ii) If the occurrence results from a peril which is not required
to be insured pursuant to Section 14.1(c) and (d) above, Landlord shall be
required to repair and restore the Building Shell and Common Areas to the extent
necessary for Tenant's continued use and occupancy of the Building, and Tenant
shall be required to repair and restore the Interior Improvements to the extent
necessary for Tenant's continued use and occupancy of the Building, provided
--------
that each party's obligation to repair and restore shall not exceed an amount
equal to five percent (5%) of the replacement cost of the Building Shell and
Common Area improvements, as to Landlord, or five percent (5%) of the
replacement cost of the Interior Improvements, as to Tenant; if the replacement
cost as to either party exceeds such amount, then the party whose limit has been
exceeded may terminate this Lease unless the other party promptly elects and
agrees, in writing, to contribute the amount of the shortfall.
(c) If this Lease is terminated pursuant to the foregoing provisions of
this Section 17.1 following an occurrence which is a peril required to be
insured against pursuant to Section 14.1(c) and (d), Landlord and Tenant agree
(and any Lender shall be asked to agree) that there shall be paid from such
insurance proceeds (i) to Landlord, the proceeds of Landlord's property
insurance on the Building Shell, (ii) to Landlord, a portion of the aggregate
proceeds of Landlord's and Tenant's property insurance on the Interior
Improvements equal to a fraction, the numerator of which is the insurable value,
immediately prior to the occurrence, of the Interior Improvements that would
have belonged to Landlord upon termination of this Lease in accordance with the
provisions of Section 11.2 and the denominator of which is the total insurable
value, immediately prior to the occurrence, of all of the Interior Improvements,
and (iii) to Tenant, a portion of the aggregate proceeds of Landlord's and
Tenant's property insurance on the Interior Improvements equal to a fraction,
the numerator of which is the insurable value, immediately prior to the
occurrence, of the Interior Improvements that would have belonged to Tenant upon
termination of this Lease in accordance with the provisions of Section 11.2 and
the denominator of which is the total insurable value, immediately prior to the
occurrence, of all of the Interior Improvements.
(d) From and after the date of an occurrence resulting in damage to or
destruction of the Building or of the Common Areas necessary for Tenant's use
and occupancy of the Building, and continuing until repair and restoration
thereof are completed, there shall be an equitable abatement of minimum rental
and of Tenant's Operating Cost Share of Operating Expenses based upon the degree
to which Tenant's ability to conduct its business in the Building is impaired.
-31-
<PAGE>
17.2 Condemnation.
------------
(a) If during the term of this Lease the Property or Improvements, or
any substantial part of either, is taken by eminent domain or by reason of any
public improvement or condemnation proceeding, or in any manner by exercise of
the right of eminent domain (including any transfer in avoidance of an exercise
of the power of eminent domain), or receives irreparable damage by reason of
anything lawfully done under color of public or other authority, then (i) this
Lease shall terminate as to the entire Property at Landlord's election by
written notice given to Tenant within sixty (60) days after the taking has
occurred, and (ii) this Lease shall terminate as to the entire Property at
Tenant's election, by written notice given to Landlord within thirty (30) days
after the nature and extent of the taking have been finally determined, if the
portion of the Property taken is of such extent and nature as substantially to
handicap, impede or permanently impair Tenant's use of the balance of the
Property. If Tenant elects to terminate this Lease, Tenant shall also notify
Landlord of the date of termination, which date shall not be earlier than thirty
(30) days nor later than ninety (90) days after Tenant has notified Landlord of
Tenant's election to terminate, except that this Lease shall terminate on the
date of taking if such date falls on any date before the date of termination
designated by Tenant. If neither party elects to terminate this Lease as
hereinabove provided, this Lease shall continue in full force and effect (except
that there shall be an equitable abatement of minimum rental and of Tenant's
Operating Cost Share of Operating Expenses based upon the degree to which
Tenant's ability to conduct its business in the Building is impaired), Landlord
shall restore the Building Shell and Common Area improvements to a complete
architectural whole and a functional condition and as nearly as reasonably
possible to the condition existing before the taking, and Tenant shall restore
the Interior Improvements and Tenant's other alterations, additions and
improvements to a complete architectural whole and a functional condition and as
nearly as reasonably possible to the condition existing before the taking. In
connection with any such restoration, each party shall use its respective best
efforts (including, without limitation, any necessary negotiation or
intercession with its respective lender, if any) to ensure that any severance
damages or other condemnation awards intended to provide compensation for
rebuilding or restoration costs are promptly collected and made available to
Landlord and Tenant in portions reasonably corresponding to the cost and scope
of their respective restoration obligations, subject only to such payment
controls as either party or its lender may reasonably require in order to ensure
the proper application of such proceeds toward the restoration of the
Improvements. Each party waives the provisions of Code of Civil Procedure
Section 1265.130, allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial condemnation of the Property.
(b) The respective obligations of Landlord and Tenant pursuant to
Section 17.2(a) are subject to the following limitations:
(i) Each party's obligation to repair and restore shall not
exceed, net of any condemnation awards or other proceeds available for and
allocable to such restoration as contemplated in Section 17.2(a), an amount
equal to five percent (5%) of the replacement cost of the Building Shell and
Common Area improvements, as to Landlord, or five percent (5%) of the
replacement cost of the Interior Improvements, as to Tenant; if the replacement
cost as to either party exceeds such amount, then the party whose limit has been
exceeded may terminate this Lease
-32-
<PAGE>
unless the other party promptly elects and agrees, in writing, to contribute the
amount of the shortfall; and
(ii) If this Lease is terminated pursuant to the foregoing
provisions of this Section 17.2, or if this Lease remains in effect but any
condemnation awards or other proceeds become available as compensation for the
loss or destruction of any of the Improvements, then Landlord and Tenant agree
(and any Lender shall be asked to agree) that there shall be paid from such
award or proceeds (i) to Landlord, the award or proceeds attributable or
allocable to the Building Shell and/or Common Area improvements, and (ii) to
Landlord and Tenant, respectively, portions of the award or proceeds
attributable or allocable to the Interior Improvements, in the respective
proportions in which Landlord and Tenant would have shared, under Section
17.1(c), the proceeds of any insurance proceeds following loss or destruction of
such Interior Improvements by an insured casualty.
17.3 Reservation Of Compensation. Landlord reserves, and Tenant waives and
---------------------------
assigns to Landlord, all rights to any award or compensation for damage to the
Improvements, the Property and the leasehold estate created hereby, accruing by
reason of any taking in any public improvement, condemnation or eminent domain
proceeding or in any other manner by exercise of the right of eminent domain or
of anything lawfully done by public authority, except that (a) Tenant shall be
entitled to any and all compensation or damages paid for or on account of
Tenant's moving expenses, trade fixtures and equipment, and (b) any condemnation
awards or proceeds described in Section 17.2(b)(ii) shall be allocated and
disbursed in accordance with the provisions of Section 17.2(b)(ii),
notwithstanding any contrary provisions of this Section 17.3.
17.4 Restoration Of Improvements. In connection with any repair or
---------------------------
restoration of Improvements by either party following a casualty or taking as
hereinabove set forth, the party responsible for such repair or restoration
shall, to the extent possible, return such Improvements to a condition
substantially equal to that which existed immediately prior to the casualty or
taking. To the extent such party wishes to make material modifications to such
Improvements, such modifications shall be subject to the prior written approval
of the other party (not to be unreasonably withheld or delayed), except that no
such approval shall be required for modifications that are required by
applicable governmental authorities as a condition of the repair or restoration,
unless such required modifications would impair or impede Tenant's conduct of
its business in the Building (in which case any such modifications in Landlord's
work shall require Tenant's consent, not unreasonably withheld or delayed) or
would materially and adversely affect the exterior appearance, the structural
integrity or the mechanical or other operating systems of the Building (in which
case any such modifications in Tenant's work shall require Landlord's consent,
not unreasonably withheld or delayed).
18. DEFAULT
-------
18.1 Events Of Default. The occurrence of any of the following shall
-----------------
constitute an event of default on the part of Tenant:
-33-
<PAGE>
(a) Abandonment. Abandonment of the Property. "Abandonment" is hereby
-----------
defined to include, but is not limited to, any absence by Tenant from the
Property for fifteen (15) consecutive days or more while Tenant is in default
under any other provision of this Lease. Tenant waives any right Tenant may
have to notice under Section 1951.3 of the California Civil Code, the terms of
this subsection (a) being deemed such notice to Tenant as required by said
Section 1951.3;
(b) Nonpayment. Failure to pay, when due, any amount payable to
----------
Landlord hereunder, such failure continuing for a period of five (5) days after
written notice of such failure;
(c) Other Obligations. Failure to perform any obligation, agreement or
-----------------
covenant under this Lease other than those matters specified in subsection (b)
hereof, such failure continuing for fifteen (15) days after written notice of
such failure; provided, however, that if such failure is curable in nature but
--------
cannot reasonably be cured within such 15-day period, then Tenant shall not be
in default if, and so long as, Tenant promptly (and in all events within such
15-day period) commences such cure and thereafter diligently pursues such cure
to completion;
(d) General Assignment. A general assignment by Tenant for the benefit
------------------
of creditors;
(e) Bankruptcy. The filing of any voluntary petition in bankruptcy by
----------
Tenant, or the filing of an involuntary petition by Tenant's creditors, which
involuntary petition remains undischarged for a period of thirty (30) days. In
the event that under applicable law the trustee in bankruptcy or Tenant has the
right to affirm this Lease and continue to perform the obligations of Tenant
hereunder, such trustee or Tenant shall, in such time period as may be permitted
by the bankruptcy court having jurisdiction, cure all defaults of Tenant
hereunder outstanding as of the date of the affirmance of this Lease and provide
to Landlord such adequate assurances as may be necessary to ensure Landlord of
the continued performance of Tenant's obligations under this Lease.
Specifically, but without limiting the generality of the foregoing, such
adequate assurances must include assurances that the Property continues to be
operated only for the use permitted hereunder. The provisions hereof are to
assure that the basic understandings between Landlord and Tenant with respect to
Tenant's use of the Property and the benefits to Landlord therefrom are
preserved, consistent with the purpose and intent of applicable bankruptcy laws;
(f) Receivership. The employment of a receiver appointed by court order
------------
to take possession of substantially all of Tenant's assets or the Property, if
such receivership remains undissolved for a period of thirty (30) days;
(g) Attachment. The attachment, execution or other judicial seizure of
----------
all or substantially all of Tenant's assets or the Property, if such attachment
or other seizure remains undismissed or undischarged for a period of thirty (30)
days after the levy thereof; or
(h) Insolvency. The admission by Tenant in writing of its inability to
----------
pay its debts as they become due, the filing by Tenant of a petition seeking any
reorganization or arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future
-34-
<PAGE>
statute, law or regulation, the filing by Tenant of an answer admitting or
failing timely to contest a material allegation of a petition filed against
Tenant in any such proceeding or, if within thirty (30) days after the
commencement of any proceeding against Tenant seeking any reorganization or
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such proceeding
shall not have been dismissed.
18.2 Remedies Upon Tenant's Default.
------------------------------
(a) Upon the occurrence of any event of default described in Section
18.1 hereof, Landlord, in addition to and without prejudice to any other rights
or remedies it may have, shall have the immediate right to re-enter the Property
or any part thereof and repossess the same, expelling and removing therefrom all
persons and property (which property may be stored in a public warehouse or
elsewhere at the cost and risk of and for the account of Tenant), using such
force as may be necessary to do so (as to which Tenant hereby waives any claim
for loss or damage that may thereby occur). In addition to or in lieu of such
re-entry, and without prejudice to any other rights or remedies it may have,
Landlord shall have the right either (i) to terminate this Lease and recover
from Tenant all damages incurred by Landlord as a result of Tenant's default, as
hereinafter provided, or (ii) to continue this Lease in effect and recover rent
and other charges and amounts as they become due.
(b) Even if Tenant has breached this Lease or abandoned the Property,
this Lease shall continue in effect for so long as Landlord does not terminate
Tenant's right to possession under subsection (a) hereof and Landlord may
enforce all of its rights and remedies under this Lease, including the right to
recover rent as it becomes due, and Landlord, without terminating this Lease,
may exercise all of the rights and remedies of a lessor under California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has right to
sublet or assign, subject only to reasonable limitations), or any successor Code
section. Acts of maintenance, preservation or efforts to relet the Property or
the appointment of a receiver upon application of Landlord to protect Landlord's
interests under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) If Landlord terminates this Lease pursuant to this Section 18.2,
Landlord shall have all of the rights and remedies of a landlord provided by
Section 1951.2 of the Civil Code of the State of California, or any successor
Code section, which remedies include Landlord's right to recover from Tenant (i)
the worth at the time of award of the unpaid rent and additional rent which had
been earned at the time of termination, (ii) the worth at the time of award of
the amount by which the unpaid rent and additional rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that Tenant proves could have been reasonably avoided, (iii) the
worth at the time of award of the amount by which the unpaid rent and additional
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that Tenant proves could be reasonably avoided, and (iv) any
other amount necessary to compensate Landlord for all the detriment proximately
caused by Tenant's failure to perform its obligations under this Lease or which
in the ordinary course of things would be likely to result therefrom, including,
but not limited to, the cost of recovering possession of the Property, expenses
of reletting, including necessary repair, renovation and alteration of the
Property, reasonable
-35-
<PAGE>
attorneys' fees, and other reasonable costs. The "worth at the time of award" of
the amounts referred to in clauses (i) and (ii) above shall be computed by
allowing interest at ten percent (10%) per annum from the date such amounts
accrued to Landlord. The "worth at the time of award" of the amounts referred to
in clause (iii) above shall be computed by discounting such amount at one
percentage point above the discount rate of the Federal Reserve Bank of San
Francisco at the time of award.
18.3 Remedies Cumulative. All rights, privileges and elections or remedies
-------------------
of Landlord contained in this Article 18 are cumulative and not alternative to
the extent permitted by law and except as otherwise provided herein.
-36-
<PAGE>
19. SUBORDINATION, ATTORNMENT AND SALE
----------------------------------
19.1 Subordination To Mortgage. This Lease, and any sublease entered into by
-------------------------
Tenant under the provisions of this Lease, shall be subject and subordinate to
any ground lease, mortgage, deed of trust, sale/leaseback transaction or any
other hypothecation for security now or hereafter placed upon the Building, the
Property, or both, and the rights of any assignee of Landlord or of any ground
lessor, mortgagee, trustee, beneficiary or leaseback lessor under any of the
foregoing, and to any and all advances made on the security thereof and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, however, that such subordination in the case of any future ground
lease, mortgage, deed of trust, sale/leaseback transaction or any other
hypothecation for security placed upon the Building, the Property, or both shall
be conditioned on Tenant's receipt from the ground lessor, mortgagee, trustee,
beneficiary or leaseback lessor of a Non-Disturbance Agreement in a form
reasonably acceptable to Tenant confirming that so long as Tenant is not in
default hereunder, Tenant's rights hereunder shall not be disturbed by such
person or entity. Moreover, Tenant's obligations under this Lease shall be
conditioned on Tenant's receipt within thirty (30) days after mutual execution
of this Lease, from any ground lessor, mortgagee, trustee, beneficiary or
leaseback lessor currently owning or holding a security interest in the
Property, of a Non-Disturbance Agreement in a form reasonably acceptable to
Tenant confirming that so long as Tenant is not in default hereunder, Tenant's
rights hereunder shall not be disturbed by such person or entity. If any
mortgagee, trustee, beneficiary, ground lessor, sale/leaseback lessor or
assignee elects to have this Lease be an encumbrance upon the Property prior to
the lien of its mortgage, deed of trust, ground lease or leaseback lease or
other security arrangement and gives notice thereof to Tenant, this Lease shall
be deemed prior thereto, whether this Lease is dated prior or subsequent to the
date thereof or the date of recording thereof. Tenant, and any sublessee, shall
execute such documents as may reasonably be requested by any mortgagee, trustee,
beneficiary, ground lessor, sale/leaseback lessor or assignee to evidence the
subordination herein set forth, subject to the conditions set forth above, or to
make this Lease prior to the lien of any mortgage, deed of trust, ground lease,
leaseback lease or other security arrangement, as the case may be, and if Tenant
fails to do so within ten (10) days after demand from Landlord, Tenant
constitutes and appoints Landlord as Tenant's attorney-in-fact and in Tenant's
name, place and stead to do so. Upon any default by Landlord in the performance
of its obligations under any mortgage, deed of trust, ground lease, leaseback
lease or assignment, Tenant (and any sublessee) shall, notwithstanding any
subordination hereunder, attorn to the mortgagee, trustee, beneficiary, ground
lessor, leaseback lessor or assignee thereunder upon demand and become the
tenant of the successor in interest to Landlord, at the option of such successor
in interest, and shall execute and deliver any instrument or instruments
confirming the attornment herein provided for.
19.2 Sale Of Landlord's Interest. Upon sale, transfer or assignment of
---------------------------
Landlord's entire interest in the Improvements and Property, Landlord shall be
relieved of its obligations hereunder with respect to liabilities accruing from
and after the date of such sale, transfer or assignment, except as otherwise
expressly provided in Section 21.2 hereof.
19.3 Estoppel Certificates. Either Tenant or Landlord (the "certifying
---------------------
party") shall at any time and from time to time, within ten (10) days after
written request by the other party (the "requesting party"), execute,
acknowledge and deliver to the requesting party a certificate in writing
-37-
<PAGE>
stating: (i) that this Lease is unmodified and in full force and effect, or if
there have been any modifications, that this Lease is in full force and effect
as modified and stating the date and the nature of each modification; (ii) the
date to which rental and all other sums payable hereunder have been paid; (iii)
that the requesting party is not in default in the performance of any of its
obligations under this Lease, that the certifying party has given no notice of
default to the requesting party and that no event has occurred which, but for
the expiration of the applicable time period, would constitute an event of
default hereunder, or if the certifying party alleges that any such default,
notice or event has occurred, specifying the same in reasonable detail; and (iv)
such other matters as may reasonably be requested by the requesting party or by
any institutional lender, mortgagee, trustee, beneficiary, ground lessor,
sale/leaseback lessor or prospective purchaser of the Property or of Tenant's
leasehold interest therein. Any such certificate provided under this Section
19.3 may be relied upon by any lender, mortgagee, trustee, beneficiary, assignee
or successor in interest to the requesting party, by any prospective purchaser,
by any purchaser on foreclosure or sale, by any grantee under a deed in lieu of
foreclosure of any mortgage or deed of trust on the Property, or by any other
third party. Failure to execute and return within the required time any
estoppel certificate requested hereunder shall be deemed to be an admission of
the truth of the matters set forth in the form of certificate submitted to the
certifying party for execution.
19.4 Subordination to CC&R's. This Lease, and any permitted sublease entered
-----------------------
into by Tenant under the provisions of this Lease, shall be subject and
subordinate to any declarations of covenants, conditions and restrictions
affecting the Property from time to time, which may include easements, access
rights and similar non-exclusive use rights and privileges in favor of
appropriate third parties; provided, however, that following the execution of
--------
this Lease, Landlord shall not record or agree to any such declarations
affecting the Property without the prior written consent of Tenant, which
consent shall not be unreasonably withheld or delayed. It shall be deemed
reasonable for Tenant to withhold consent to any declaration or provision
thereof which impairs Tenant's rights under this Lease in any material respect.
Tenant agrees to execute, upon request by Landlord, any documents reasonably
required from time to time to evidence such subordination.
19.5 Mortgagee Protection.
--------------------
(a) If, in connection with any future ground lease, mortgage, deed of
trust, sale/leaseback transaction or any other hypothecation for security placed
upon the Building, the Property, or both, the ground lessor, mortgagee, trustee,
beneficiary or leaseback lessor requests any changes in this Lease as a
condition to its willingness to enter into or accept the ground lease, mortgage,
deed of trust, sale/leaseback transaction or other hypothecation for security,
then Tenant shall not unreasonably withhold or delay its consent to any such
requested changes and shall execute, at the request of Landlord, an amendment to
this Lease incorporating the changes thus reasonably consented to by Tenant. It
shall be deemed reasonable for Tenant to withhold consent to any requested
change which imposes a substantial new monetary obligation on Tenant or which
otherwise substantially impairs Tenant's rights under this Lease. Tenant's
obligations under this Section 19.5(a) shall be conditioned on Tenant's
concurrent receipt, from the ground lessor, mortgagee, trustee, beneficiary or
leaseback lessor, of a Non-Disturbance Agreement in a form reasonably acceptable
to Tenant confirming that so long as Tenant is not in default hereunder,
Tenant's rights hereunder shall not be disturbed by such person or entity.
-38-
<PAGE>
(b) If, following a default by Landlord under any mortgage, deed of
trust, ground lease, leaseback lease or other security arrangement covering the
Property, the Property is acquired by the mortgagee, beneficiary, master lessor
or other secured party, or by any other successor owner, pursuant to a
foreclosure, trustee's sale, sheriff's sale, lease termination or other similar
procedure (or deed in lieu thereof), then any such person or entity so acquiring
the Property shall not be:
(i) liable for any act or omission of a prior landlord or owner of
the Property (including, but not limited to, Landlord);
(ii) subject to any offsets or defenses that Tenant may have
against any prior landlord or owner of the Property (including, but not limited
to, Landlord);
(iii) bound by any rent or additional rent that Tenant may have paid
in advance to any prior landlord or owner of the Property (including, but not
limited to, Landlord) for a period in excess of one month, or by any security
deposit, cleaning deposit or other prepaid charge that Tenant may have paid in
advance to any prior landlord or owner (including, but not limited to,
Landlord);
(iv) liable for any warranties or representations of any nature
whatsoever, whether pursuant to this Lease or otherwise, by any prior landlord
or owner of the Property (including, but not limited to, Landlord) with respect
to the use, construction, zoning, compliance with laws, title, habitability,
fitness for purpose or possession, or physical condition (including, without
limitation, environmental matters) of the Property or Improvements; or
(v) liable to Tenant in any amount beyond the interest of such
mortgagee, beneficiary, master lessor or other secured party or successor owner
in the Property as it exists from time to time, it being the intent of this
provision that Tenant shall look solely to the interest of any such mortgagee,
beneficiary, master lessor or other secured party or successor owner in the
Property for the payment and discharge of the landlord's obligations under this
Lease and that such mortgagee, beneficiary, master lessor or other secured party
or successor owner shall have no separate personal liability for any such
obligations.
-39-
<PAGE>
20. SECURITY
--------
20.1 Deposit. Concurrently with Tenant's execution of this Lease, Tenant
-------
shall deposit with Landlord the sum of One Hundred Fifty-Nine Thousand Two
Hundred and No/100 Dollars ($159,200.00), which sum (the "Security Deposit")
shall be held by Landlord as security for the faithful performance of all of the
terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term hereof. If Tenant defaults with respect to any provision
of this Lease, including, without limitation, the provisions relating to the
payment of rental and other sums due hereunder, Landlord shall have the right,
but shall not be required, to use, apply or retain all or any part of the
Security Deposit for the payment of rental or any other amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of the Security Deposit is so used
or applied, Tenant shall, within ten (10) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to its original amount and Tenant's failure to do so shall be a material
breach of this Lease. Landlord shall not be required to keep any deposit under
this Section separate from Landlord's general funds, and Tenant shall not be
entitled to interest thereon. If Tenant fully and faithfully performs every
provision of this Lease to be performed by it, the Security Deposit, or any
balance thereof, shall be returned to Tenant or, at Landlord's option, to the
last assignee of Tenant's interest hereunder, at the expiration of the term of
this Lease and after Tenant has vacated the Property. In the event of
termination of Landlord's interest in this Lease, Landlord shall transfer all
deposits then held by Landlord under this Section to Landlord's successor in
interest, whereupon Tenant agrees to release Landlord from all liability for the
return of such deposit or the accounting thereof.
21. MISCELLANEOUS
-------------
21.1 Notices. All notices, consents, waivers and other communications which
-------
this Lease requires or permits either party to give to the other shall be in
writing and shall be deemed given when delivered personally (including delivery
by private courier or express delivery service) or four (4) days after deposit
in the United States mail, registered or certified mail, postage prepaid,
addressed to the parties at their respective addresses as follows:
To Tenant: (until Commencement Date)
Tularik Inc.
270 E. Grand Avenue
South San Francisco, CA 94080
Attn: David V. Goedel, Chief Executive Officer
with copy to: Cooley Godward Castro Huddleson & Tatum
Five Palo Alto Square, 4th Floor
Palo Alto, CA 94306-2155
Attn: Brian Cunningham
-40-
<PAGE>
To Landlord: Britannia Biotech Gateway Limited Partnership
1939 Harrison Street, Suite 610
Park Plaza Building
Oakland, CA 94612
Attn: T. J. Bristow
with copy to: Folger Levin & Kahn LLP
Embarcadero Center West
275 Battery Street, 23rd Floor
San Francisco, CA 94111
Attn: Donald E. Kelley, Jr.
and copy to: Slough Parks Incorporated
33 West Monroe Street
Chicago, IL 60603
Attn: Marshall Lees
or to such other address as may be contained in a notice at least fifteen (15)
days prior to the address change from either party to the other given pursuant
to this Section. Rental payments and other sums required by this Lease to be
paid by Tenant shall be delivered to Landlord at Landlord's address provided in
this Section, or to such other address as Landlord may from time to time specify
in writing to Tenant, and shall be deemed to be paid only upon actual receipt.
21.2 Successors And Assigns. The obligations of this Lease shall run with
----------------------
the land, and this Lease shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
original Landlord named herein and each successive Landlord under this Lease
shall be liable only for obligations accruing during the period of its ownership
of the Property, said liability terminating upon termination of such ownership
and passing to the successor lessor, except as otherwise expressly provided in
the following sentence. Tenant acknowledges that it has been advised by
Landlord that following execution of this Lease, Landlord intends to assign its
rights and obligations hereunder (a) to a limited liability company or other
entity having substantially the same ownership and management as Landlord,
and/or (b) to an entity of which Landlord or an affiliate of Landlord is a
general partner or has management responsibilities and equity participation
comparable to those of a general partner; provided, that any assignee shall
--------
assume any of Landlord's obligations under this Lease.
21.3 No Waiver. The failure of Landlord to seek redress for violation, or to
---------
insist upon the strict performance, of any covenant or condition of this Lease
shall not be deemed a waiver of such violation, or prevent a subsequent act
which would originally have constituted a violation from having all the force
and effect of an original violation.
21.4 Severability. If any provision of this Lease or the application thereof
------------
is held to be invalid or unenforceable, the remainder of this Lease or the
application of such provision to persons or circumstances other than those as to
which it is invalid or unenforceable shall not be affected thereby, and each of
the provisions of this Lease shall be valid and enforceable, unless enforcement
-41-
<PAGE>
of this Lease as so invalidated would be unreasonable or grossly inequitable
under all the circumstances or would materially frustrate the purposes of this
Lease.
21.5 Litigation Between Parties. In the event of any litigation or other
--------------------------
dispute resolution proceedings between the parties hereto arising out of or in
connection with this Lease, the prevailing party shall be reimbursed for all
reasonable costs, including, but not limited to, reasonable accountants' fees
and attorneys' fees, incurred in connection with such proceedings (including,
but not limited to, any appellate proceedings relating thereto) or in connection
with the enforcement of any judgment or award rendered in such proceedings.
"Prevailing party" within the meaning of this Section shall include, without
limitation, a party who dismisses an action for recovery hereunder in exchange
for payment of the sums allegedly due, performance of covenants allegedly
breached or consideration substantially equal to the relief sought in the
action.
21.6 Surrender. A voluntary or other surrender of this Lease by Tenant, or a
---------
mutual termination thereof between Landlord and Tenant, shall not result in a
merger but shall, at the option of Landlord, operate either as an assignment to
Landlord of any and all existing subleases and subtenancies, or a termination of
all or any existing subleases and subtenancies. This provision shall be
contained in any and all assignments or subleases made pursuant to this Lease.
21.7 Interpretation. The provisions of this Lease shall be construed as a
--------------
whole, according to their common meaning, and not strictly for or against
Landlord or Tenant. The captions preceding the text of each Section and
subsection hereof are included only for convenience of reference and shall be
disregarded in the construction or interpretation of this Lease.
21.8 Entire Agreement. This written Lease, together with the exhibits
----------------
hereto, contains all the representations and the entire understanding between
the parties hereto with respect to the subject matter hereof. Any prior
correspondence, memoranda or agreements are replaced in total by this Lease and
the exhibits hereto. This Lease may be modified only by an agreement in writing
signed by each of the parties.
21.9 Governing Law. This Lease and all exhibits hereto shall be construed
-------------
and interpreted in accordance with and be governed by all the provisions of the
laws of the State of California.
21.10 No Partnership. The relationship between Landlord and Tenant is solely
--------------
that of a lessor and lessee. Nothing contained in this Lease shall be construed
as creating any type or manner of partnership, joint venture or joint enterprise
with or between Landlord and Tenant.
21.11 Financial Information. From time to time Tenant shall promptly provide
---------------------
directly to prospective lenders and purchasers of the Property designated by
Landlord such financial information pertaining to the financial status of Tenant
as Landlord may reasonably request; provided, Tenant shall be permitted to
provide such financial information in a manner which Tenant deems reasonably
necessary to protect the confidentiality of such information. In addition, from
time to time, Tenant shall provide Landlord with such financial information
pertaining to the financial status of Tenant as Landlord may reasonably request.
Landlord agrees that all financial information supplied to Landlord by Tenant
shall be treated as confidential material, and shall not
-42-
<PAGE>
be disseminated to any party or entity (including any entity affiliated with
Landlord) without Tenant's prior written consent. For purposes of this Section,
without limiting the generality of the obligations provided herein, it shall be
deemed reasonable for Landlord to request copies of Tenant's most recent audited
annual financial statements, or, if audited statements have not been prepared,
unaudited financial statements for Tenant's most recent fiscal year, accompanied
by a certificate of Tenant's chief financial officer that such financial
statements fairly present Tenant's financial condition as of the date(s)
indicated.
Landlord and Tenant recognize the need of Tenant to maintain the
confidentiality of information regarding its financial status and the need of
Landlord to be informed of, and to provide to prospective lenders and purchasers
of the Property financial information pertaining to, Tenant's financial status.
Landlord and Tenant agree to cooperate with each other in achieving these needs
within the context of the obligations set forth in this Section. Landlord also
acknowledges and agrees that Tenant's obligations to furnish information to
Landlord under this Section are in all events subject to Tenant's compliance
with, and may therefore be limited by, applicable securities laws.
21.12 Costs. If Tenant requests the consent of Landlord under any provision
-----
of this Lease for any act that Tenant proposes to do hereunder, including,
without limitation, assignment or subletting of the Property, Tenant shall, as a
condition to doing any such act and the receipt of such consent, reimburse
Landlord promptly for any and all reasonable costs and expenses incurred by
Landlord in connection therewith, including, without limitation, reasonable
attorneys' fees.
21.13 Time. Time is of the essence of this Lease, and of every term and
----
condition hereof.
21.14 Rules And Regulations. Tenant shall observe, comply with and obey, and
---------------------
shall cause its employees, agents and, to the best of Tenant's ability, invitees
to observe, comply with and obey such rules and regulations as Landlord may
promulgate from time to time for the safety, care, cleanliness, order and use of
the Improvements and the Property.
21.15 Brokers. Landlord agrees to pay a brokerage commission to Catalyst Real
-------
Estate Group, Tenant's broker, in connection with the consummation of this Lease
in accordance with a separate agreement. Each party represents and warrants
that no other broker participated in the consummation of this Lease and agrees
to indemnify, defend and hold the other party harmless against any liability,
cost or expense, including, without limitation, reasonable attorneys' fees,
arising out of any claims for brokerage commissions or other similar
compensation in connection with any conversations, prior negotiations or other
dealings by the indemnifying party with any other broker.
21.16 Memorandum Of Lease. At any time during the term of this Lease, either
-------------------
party, at its sole expense, shall be entitled to record a memorandum of this
Lease and, if either party so elects, both parties agree to cooperate in the
preparation, execution, acknowledgement and recordation of such document in
reasonable form.
21.17 Corporate Authority. The person(s) signing this Lease on behalf of
-------------------
Tenant warrants
-43-
<PAGE>
that he or she is fully authorized to do so and, by so doing, to bind Tenant. As
evidence of such authority, Tenant shall deliver to Landlord, upon or prior to
execution of this Lease, a certified copy of Tenant's board of directors
authorizing the execution of this Lease and naming the officers that are
authorized to execute this Lease on behalf of Tenant.
21.18 Execution and Delivery. This Lease may be executed in one or more
----------------------
counterparts and by separate parties on separate counterparts, but each such
counterpart shall constitute an original and all such counterparts together
shall constitute one and the same instrument.
21.19 Survival. Without limiting survival provisions which would otherwise be
--------
implied or construed under applicable law, the provisions of Sections 2.6, 9.4,
11.2, 11.3, 11.4, 13.6, 14.6 and 21.5 hereof shall survive the termination of
this Lease with respect to matters occurring prior to the expiration of this
Lease.
21.20 Tenant Compensation. Within five (5) business days after the mutual
-------------------
execution of this Lease, Landlord shall pay to Tenant Three Hundred Thousand and
No/100 Dollars ($300,000.00). In addition, if Tenant has paid Carrying Costs
(as that term is defined in Section 6.3 of the Phase I Lease) with respect to
any period of time after the date of mutual execution of this Lease, then,
within five (5) business days after the mutual execution of this Lease, Landlord
will refund to Tenant the amount of such Carrying Costs attributable to the
period following the mutual execution of this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first set forth above.
"Landlord" Tenant"
BRITANNIA BIOTECH GATEWAY LIMITED TULARIK INC., a Delaware
PARTNERSHIP, corporation
a Delaware limited partnership
By: BRITANNIA GATEWAY, LLC.,
By:_____________________________
a California limited liability Its:_____________________________
company
General Partner By: /s/ Luis Bayol
----------------------------
Its:____________________________
By: ___________________________
Name: _________________________
Title: __________________________
By: SLOUGH BIOTECH GATEWAY
INCORPORATED, a Delaware
-44-
<PAGE>
corporation
General Partner
By: ___________________________
Name: _________________________
Title: __________________________
-45-
<PAGE>
EXHIBITS
--------
EXHIBIT A Real Property Description (Site)
EXHIBIT B Site Plan
EXHIBIT C Workletter
EXHIBIT D Estimated Construction Schedule
EXHIBIT E Acknowledgement of Lease Commencement
<PAGE>
EXHIBIT A
---------
REAL PROPERTY DESCRIPTION (SITE)
--------------------------------
All that certain real property in the City of South San Francisco, County of San
Mateo, State of California, more particularly described as follows:
Parcel One:
Parcel C as designated on the Map entitled "PARCEL MAP NO. 89-268", being a
resubdivision of Lots 4, 5, 6 and 7 of that certain Map entitled "FINAL MAP
GATEWAY CENTER" (SA-81-74) filed in the office of the Recorder of the County of
San Mateo in Book 107 of Maps at Pages 27, 28, 29 and 30, which Map was filed in
the Office of the Recorder of the County of San Mateo, State of California on
December 12, 1989 in Book 63 of Parcel Maps at Pages 32 and 33.
Parcel Two:
A portion of that certain 0.572 acre parcel of land described in Resolution No.
900 by the City of South San Francisco, recorded August 6, 1943, in Book 1079 of
Official Records of San Mateo County at Page 77, further described as follows:
A portion of Industrial Way, as shown on that certain Map entitled "Final Map
Gateway Center" filed October 1, 1982, in Book 107 of Maps at Pages 27-30, San
Mateo County Records, further described as follows:
Beginning at a point on the southeasterly line of said 0.572 acre parcel, also
being the northwesterly line of Lot 4 as shown on said Map (104 Maps 27-30),
distant thereon North 38 degrees 42 minutes 41 seconds East, 29.29 feet from the
southwest corner of said Lot 4; thence along the aforementioned southeasterly
line, North 38 degrees 42 minutes 41 seconds East, 356.97 feet; then
northeasterly along the arc of a tangent, 980.56 foot radius curve to the left,
through a central angle of 7 degrees 19 minutes 26 seconds, an arc distance of
125.34 feet to a point of reverse curvature; thence northeasterly along the arc
of a tangent, 980.56 foot radius curve to the right, through a central angle of
7 degrees 19 minutes 26 seconds, an arc distance of 125.34 feet to a point of
cusp, being the most northerly point of the aforementioned 0.572 acre parcel;
thence along the northwesterly line of said 0.572 acre parcel, South 38 degrees
42 minutes 41 seconds West, 606.97 feet to a line which bears North 51 degrees
17 minutes 19 seconds West from the point of beginning; thence South 51 degrees
17 minutes 19 seconds East, 16.00 feet to the point of beginning.
<PAGE>
EXHIBIT B
---------
SITE PLAN
---------
<PAGE>
EXHIBIT D
---------
ESTIMATED CONSTRUCTION SCHEDULE
-------------------------------
<PAGE>
EXHIBIT E
---------
ACKNOWLEDGEMENT OF LEASE COMMENCEMENT
-------------------------------------
This Acknowledgement is executed as of _________________, 199__, by BRITANNIA
BIOTECH GATEWAY LIMITED PARTNERSHIP, a Delaware limited partnership
("Landlord"), and TULARIK INC., a Delaware corporation ("Tenant"), pursuant to
Section 2.4 of the Build-to-Suit Lease dated _____________, 1998 between
Landlord and Tenant (the "Lease") covering premises located at
_________________________________________________________, South San Francisco,
CA 94080 (the "Property").
Landlord and Tenant hereby acknowledge and agree as follows:
1. The Commencement Date under the Lease is __________________, 199__.
2. The termination date under the Lease shall be _________________, _____,
subject to any applicable provisions of the Lease for extension or early
termination thereof.
3. Based on the final cost of the Improvements and on any change orders,
delays and other factors reflected in that cost, the applicable payment (if any)
required under Paragraph 4 of the Workletter attached to the Lease is as follows
(if none, so state): _________________________________________________________
______________________________________________________________________________.
4. Tenant accepts the Property and acknowledges the satisfactory completion
of all Improvements thereon required to be made by Landlord, subject only to any
applicable "punch list" or similar procedures specifically provided under the
Lease or under the Workletter governing such work.
EXECUTED as of the date first set forth above.
"Landlord" Tenant"
BRITANNIA BIOTECH GATEWAY LIMITED TULARIK INC., a Delaware
PARTNERSHIP, corporation
a Delaware limited partnership
By: BRITANNIA GATEWAY, LLC.,
By:_______________________
a California limited liability Its:_____________________________
company
General Partner
By: ___________________________
Name: _________________________
<PAGE>
Title: __________________________
By: SLOUGH BIOTECH GATEWAY
INCORPORATED, a Delaware
corporation
General Partner
By: /s/ T. J. Bristow
-----------------------------
Name: T. J. Bristow
---------------------------
Title: President
--------------------------
<PAGE>
BUILD-TO-SUIT LEASE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. PROPERTY................................................................. 1
1.1 Lease of Property.............................................. 1
1.2 Landlord's Reserved Rights..................................... 1
2. TERM..................................................................... 2
2.1 Term........................................................... 2
2.2 Early Possession............................................... 2
2.3 Delay In Possession............................................ 2
2.4 Acknowledgement Of Lease Commencement.......................... 3
2.5 Holding Over................................................... 3
2.6 Option To Extend Term.......................................... 3
3. RENTAL................................................................... 4
3.1 Minimum Rental................................................. 4
3.2 Late Charge.................................................... 5
4. STOCK WARRANTS............................................................ 5
4.1 Stock Warrants................................................. 5
5. CONSTRUCTION............................................................. 6
5.1 Construction of Improvements................................... 6
5.2 Condition of Property.......................................... 6
5.3 Compliance with Law............................................ 6
6. EXPANSION BUILDINGS...................................................... 7
6.1 First Refusal Right to Lease................................... 7
7. FIRST REFUSAL RIGHT TO PURCHASE.......................................... 7
7.1 Sale Restriction............................................... 7
7.2 First Refusal Right............................................ 7
7.3 Discount on Purchase Price..................................... 7
8. TAXES.................................................................... 8
8.1 Personal Property............................................. 8
8.2 Real Property................................................. 8
9. OPERATING EXPENSES....................................................... 8
9.1 Liability For Operating Expenses.............................. 8
9.2 Definition Of Operating Expenses.............................. 8
9.3 Determination and Payment Of Operating Expenses............... 9
9.4 Proration..................................................... 10
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10. UTILITIES............................................................... 10
10.1 Payment....................................................... 10
10.2 Interruption.................................................. 10
11. ALTERATIONS; SIGNS...................................................... 10
11.1 Right To Make Alterations..................................... 10
11.2 Title To Alterations.......................................... 11
11.3 Tenant Fixtures............................................... 11
11.4 No Liens...................................................... 11
11.5 Signs......................................................... 12
12. MAINTENANCE AND REPAIRS................................................. 12
12.1 Landlord's Work............................................... 12
12.2 Tenant's Obligation For Maintenance........................... 12
13. USE OF PROPERTY......................................................... 13
13.1 Permitted Use................................................. 13
13.2 [Omitted.].................................................... 13
13.3 No Nuisance................................................... 13
13.4 Compliance With Laws.......................................... 13
13.5 Liquidation Sales............................................. 14
13.6 Environmental Matters......................................... 14
14. INSURANCE AND INDEMNITY................................................. 17
14.1 Liability and Property Insurance.............................. 17
14.2 Quality Of Policies And Certificates.......................... 19
14.3 Workers' Compensation......................................... 19
14.4 Waiver Of Subrogation......................................... 19
14.5 Increase In Premiums.......................................... 19
14.6 Indemnification............................................... 19
14.7 Blanket Policy................................................ 20
15. SUBLEASE AND ASSIGNMENT................................................. 20
15.1 Assignment And Sublease Of Property........................... 20
15.2 Rights Of Landlord............................................ 21
16. RIGHT OF ENTRY AND QUIET ENJOYMENT...................................... 21
16.1 Right Of Entry................................................ 21
16.2 Quiet Enjoyment............................................... 21
17. CASUALTY AND TAKING..................................................... 21
17.1 Damage or Destruction......................................... 21
17.2 Condemnation.................................................. 23
17.3 Reservation Of Compensation................................... 24
17.4 Restoration Of Improvements................................... 24
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
18. DEFAULT................................................................. 24
18.1 Events Of Default............................................. 24
(a) Abandonment........................................ 25
(b) Nonpayment......................................... 25
(c) Other Obligations.................................. 25
(d) General Assignment................................. 25
(e) Bankruptcy......................................... 25
(f) Receivership....................................... 25
(g) Attachment......................................... 25
(h) Insolvency......................................... 25
18.2 Remedies Upon Tenant's Default................................ 25
18.3 Remedies Cumulative........................................... 26
19. SUBORDINATION, ATTORNMENT AND SALE...................................... 26
19.1 Subordination To Mortgage..................................... 26
19.2 Sale Of Landlord's Interest................................... 27
19.3 Estoppel Certificates......................................... 27
19.4 Subordination to CC&R's....................................... 27
19.5 Mortgagee Protection.......................................... 28
20. SECURITY................................................................ 29
20.1 Deposit....................................................... 29
21. MISCELLANEOUS........................................................... 29
21.1 Notices....................................................... 29
21.2 Successors And Assigns........................................ 30
21.3 No Waiver..................................................... 30
21.4 Severability.................................................. 30
21.5 Litigation Between Parties.................................... 30
21.6 Surrender..................................................... 30
21.7 Interpretation................................................ 31
21.8 Entire Agreement.............................................. 31
21.9 Governing Law................................................. 31
21.10 No Partnership................................................ 31
21.11 Financial Information......................................... 31
21.12 Costs......................................................... 31
21.13 Time.......................................................... 31
21.14 Rules And Regulations......................................... 31
21.15 Brokers....................................................... 32
21.16 Memorandum Of Lease........................................... 32
21.17 Corporate Authority........................................... 32
21.18 Execution and Delivery........................................ 32
21.19 Survival...................................................... 32
21.20 Tenant Compensation........................................... 32
</TABLE>
-iii-
<PAGE>
EXHIBITS
EXHIBIT A Real Property Description (Site)
EXHIBIT B Site Plan
EXHIBIT C Workletter
EXHIBIT D Estimated Construction Schedule
EXHIBIT E Acknowledgement of Lease Commencement
-iv-
<PAGE>
EXHIBIT 10.25
AGREEMENT AND GENERAL RELEASE
-----------------------------
Tularik Inc., Two Corporate Drive, San Francisco, CA 94080, its
affiliates, subsidiaries, divisions, successors and assigns and the employees,
officers, directors and agents thereof (collectively referred to throughout this
Agreement as "Tularik"), and John P. McLaughlin, 523 Occidental Avenue, San
Mateo, CA 94022 ("Mr. McLaughlin") agree that:
1. Last Day of Employment. Mr. McLaughlin's last day of employment
----------------------
with Tularik is September 30, 1999.
2. Resignation. Effective as of September 30, 1999, Mr. McLaughlin
-----------
hereby resigns as President of Tularik and as an officer or director of any
affiliated or related entities.
3. Consideration. In consideration for signing this Agreement and
-------------
General Release and compliance with the promises made herein, Tularik agrees:
a. to pay to Mr. McLaughlin salary equal to $11,538.46 bi-weekly,
less lawful deductions, for a period commencing on October 1, 1999 and ending on
the later to occur of: (i) December 31, 1999; and (ii) the earlier to occur of
(A) June 30, 2000; and (B) the date Mr. McLaughlin secures "employment" with
another entity (hereinafter, the "Successor Employment Date"). For purposes of
this Agreement, the phrase "employment" shall be understood to include any
occupation, profession, trade, business or commercial activity to which Mr.
McLaughlin devotes a substantial portion of his time, irrespective of whether
Mr. McLaughlin receives compensation (including, without limitation, cash,
equity or in-kind) for such activity. In the event Mr. McLaughlin secures
employment with another entity following December 31, 1999 but prior to June 30,
2000, Tularik shall, for a period commencing on the Successor Employment Date
and ending on June 30, 2000, pay Mr. McLaughlin salary equal to the difference,
if any, between: (I) $11,538.46 bi-weekly, less lawful deductions; and (II) the
remuneration received by Mr. McLaughlin from such employment for equivalent
periods. In the event the remuneration received by Mr. McLaughlin from such
employment for equivalent periods at any time exceeds $11,538.46 bi-weekly, less
lawful deductions, Tularik shall be relieved of the obligation to pay to Mr.
McLaughlin salary for such equivalent period. In the event Mr. McLaughlin shall
die prior to June 30, 2000, Mr. McLaughlin's beneficiary shall be entitled to
receive a payment equal to $11,538.46 bi-weekly, less lawful deductions, for a
period commencing on the date of Mr. McLaughlin's death and ending on June 30,
2000. In the event Mr. McLaughlin receives non-cash compensation from such
employment, the remuneration received by Mr. McLaughlin from such employment for
equivalent periods for purposes of Section 3(a)(II) above shall be deemed to
equal the fair market value of such compensation;
b. to pay to Mr. McLaughlin accrued but unused vacation pay equal to
$5,591.54 in the October 14, 1999 bi-weekly paycheck;
-1-
<PAGE>
c. to maintain Tularik's contribution to the medical, dental, vision
and prescription drug coverage provided to Mr. McLaughlin and his eligible
dependents, under the same terms and conditions (including those for co-pays,
deductibles and premium contributions) as those applicable to Tularik's regular
salaried employees until the earlier to occur of: (i) June 30, 2000; and (ii)
the date Mr. McLaughlin becomes fully eligible for any such coverage from a new
employer, it being understood that "fully eligible" shall mean eligible for such
coverage without regard to any waiting period or pre-existing condition clauses
that may be contained in such new employer's benefit plans;
d. to vest 37,500 options to purchase Tularik common stock previously
granted to Mr. McLaughlin as of September 30, 1999, notwithstanding that such
options would not otherwise be fully vested until December 31, 1999;
provided, however, that the foregoing payments and services shall not be made or
- -------- -------
provided to Mr. McLaughlin unless Tularik receives the letter from Mr.
McLaughlin in the form attached hereto as Exhibit "A" at least seven (7) days
following the day he executes this Agreement and General Release.
4. Covenants of Mr. McLaughlin. In consideration for the execution
---------------------------
by Tularik of this Agreement and General Release and compliance with the
promises made herein, Mr. McLaughlin covenants and agrees to apprise Tularik of
the date that Mr. McLaughlin secures employment (as that term is used herein)
and the date Mr. McLaughlin becomes fully eligible for any medical, dental,
vision and prescription drug coverage from an employer. Mr. McLaughlin shall
provide Tularik with a paycheck stub evidencing the foregoing on or immediately
following the Successor Employment Date. Mr. McLaughlin covenants and agrees to
return and deliver (i) all documents and written materials and (ii) all Tularik-
owned property in good repair and working condition to the Tularik corporate
offices on or before December 31, 1999. Mr. McLaughlin will refrain from
criticizing, expressly or impliedly, the past and present decisions, policies
and practices of Tularik, including its affiliates, and any officer, employee
and director thereof and from making any disparaging statements or remarks about
Tularik, its affiliates, its directors, officers, employees and those persons
having any business relationship with Tularik and its affiliates, including
their competitors. Tularik will refrain from making any disparaging statements
or remarks about Mr. McLaughlin or his job performance. Mr. McLaughlin agrees
to be available to assist Tularik and fully cooperate in any matters relating to
actions taken or decisions made in his capacity as an employee of Tularik at any
time on or before December 31, 1999.
5. No Consideration Absent Execution of this Agreement. Mr.
---------------------------------------------------
McLaughlin understands and agrees that he would not receive the monies and/or
benefits specified in paragraph "3" above, except for his execution of this
Agreement and General Release and the fulfillment of the promises contained
herein. Mr. McLaughlin understands and agrees that the monies and/or benefits
specified in paragraph "3" above are greater than the monies and/or benefits
-2-
<PAGE>
Mr. McLaughlin would have received in the event paragraph "7" below did not
release Tularik from any and all claims under the Age Discrimination in
Employment Act of 1967, as amended.
6. Revocation. Mr. McLaughlin may revoke this Agreement and General
----------
Release for a period of seven (7) days following the day he executes this
Agreement and General Release. Any revocation within this period must be
submitted, in writing, to William J. Rieflin and state, "I hereby revoke my
acceptance of our Agreement and General Release." The revocation must be
personally delivered to William J. Rieflin or his designee, or mailed to William
J. Rieflin and postmarked within seven (7) days of execution of this Agreement
and General Release. This Agreement and General Release shall not become
effective or enforceable until the revocation period has expired. If the last
day of the revocation period is a Saturday, Sunday or legal holiday in
California, then the revocation period shall not expire until the next following
day which is not a Saturday, Sunday or legal holiday.
7. General Release of Claim. Mr. McLaughlin knowingly and
------------------------
voluntarily releases and forever discharges Tularik, of and from any and all
claims, known and unknown, which against Tularik, Mr. McLaughlin, his heirs,
executors, administrators, successors, and assigns (referred to collectively
throughout this Agreement as "Mr. McLaughlin") have or may have as of the date
of execution of this Agreement and General Release, including, but not limited
to, any alleged violation of:
. The National Labor Relations Act, as amended;
. Title VII of the Civil Rights Act of 1964, as amended;
. Sections 1981 through 1988 of Title 42 of the United States Code, as
amended;
. The Employee Retirement Income Security Act of 1974, as amended;
. The Immigration Reform Control Act, as amended;
. The Americans with Disabilities Act of 1990, as amended;
. The Age Discrimination in Employment Act of 1967, as amended;
. The Fair Labor Standards Act, as amended;
. The Occupational Safety and Health Act, as amended;
. The Family and Medical Leave Act of 1993;
. The California Occupational Safety and Health Act, as amended;
-3-
<PAGE>
. The California Fair Employment and Housing Act, as amended;
. The California Civil Rights Act, as amended;
. The California Minimum Wage Law, as amended;
. Equal Pay Law for California, as amended;
. any other federal, state or local civil or human rights law or any other
local, state or federal law, regulation or ordinance;
. any public policy, contract, tort, or common law; or
. any allegation for costs, fees, or other expenses including attorneys' fees
incurred in these matters.
8. No Claims Permitted. Mr. McLaughlin waives his right to file any
-------------------
charge or complaint on his own behalf and/or to participate in any charge or
complaint which may be made by any other person or organization on his behalf
before any federal, state or local court or administrative agency against
Tularik, except as such waiver is prohibited by law. Should any such charge or
complaint be filed Mr. McLaughlin agrees that he will not accept any relief or
recovery therefrom. Mr. McLaughlin confirms that no charge, complaint, or
action exists in any forum or form. Except as prohibited by law, in the event
that any such claim is filed, it shall be dismissed with prejudice upon
presentation of this Agreement and General Release and Mr. McLaughlin shall
reimburse Tularik for the costs, including attorney's fees, of defending any
such action.
9. No Participation In Claims. Mr. McLaughlin waives any right to in
--------------------------
any way voluntarily assist any individual or entity in commencing or prosecuting
any action or proceeding including, but not limited to, any administrative
agency claims, charges or complaints and/or any lawsuit against Tularik, or to
in any way voluntarily participate or cooperate in any such action or
proceeding, except as such waiver is prohibited law.
-4-
<PAGE>
10. Confidentiality. Mr. McLaughlin and his attorney agree not to
---------------
disclose any information regarding the existence or substance of this Agreement
and General Release.
11. No Future Application for Employment. Mr. McLaughlin shall not
------------------------------------
apply in the future for employment with Tularik.
12. Governing Law and Interpretation. This Agreement and General
--------------------------------
Release shall be governed and conformed in accordance with the laws of the State
of California without regard to its conflict of laws provision. Should any
provision of this Agreement and General Release be declared illegal or
unenforceable by any court of competent jurisdiction and cannot be modified to
be enforceable, including the general release language such provision shall
immediately become null and void, leaving the remainder of this Agreement and
General Release in full force and effect. However, if any portion of the
general release language were ruled to be unenforceable for any reason, Mr.
McLaughlin shall return the consideration paid hereunder to Tularik.
13. Nonadmission of Wrongdoing. Mr. McLaughlin agrees that neither
--------------------------
this Agreement and General Release nor the furnishing of the consideration for
this Release shall be deemed or construed at anytime for any purpose as an
admission by Tularik of any liability or unlawful conduct of any kind.
14. Amendment. This Agreement and General Release may not be
---------
modified, altered or changed except upon express written consent of both Parties
wherein specific reference is made to this Agreement and General Release.
15. Entire Agreement. This Agreement and General Release sets forth
----------------
the entire agreement between the parties hereto, and fully supersedes any prior
agreements or understandings between the parties.
MR. MCLAUGHLIN HAS BEEN ADVISED THAT HE HAS AT LEAST TWENTY-ONE (21)
DAYS TO CONSIDER THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN
WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT AND
GENERAL RELEASE. HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE,
TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THEREBY THE SUMS AND
BENEFITS SET FORTH IN PARAGRAPH "3" ABOVE, MR. MCLAUGHLIN FREELY AND KNOWINGLY,
AND AFTER DUE CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE
INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST
TULARIK INC.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this
Agreement and General Release as of the date set forth below:
/s/ John P. McLaughlin
- ------------------------ ----------------------
Witness John P. McLaughlin
- ------------------------ ----------------------
Date Date
Tularik Inc.
By: /s/ David V. Goeddel
---------------------
Name
_____________________
Title
_____________________
Date
-6-
<PAGE>
EXHIBIT A
---------
William J. Rieflin
Tularik Inc.
Two Corporate Drive
South San Francisco, CA 94080
Re: Agreement and General Release
-----------------------------
Dear Bill:
On September 30th, 1999 I executed an Agreement and General Release
between Tularik Inc. and me. I was advised, in writing, to consult with an
attorney of my choosing, prior to executing this Agreement and General Release.
More than seven (7) days have elapsed since I executed the above-
mentioned Agreement and General Release. I have at no time revoked my
acceptance or execution of that Agreement and General Release and hereby
reaffirm my acceptance of that Agreement and General Release. Therefore, in
accordance with the terms of our Agreement and General Release, I hereby request
payment of the monies described in paragraph 3 of that Agreement.
Very truly yours,
/s/ John P. McLaughlin
John P. McLaughlin
-7-
<PAGE>
John P. McLaughlin
523 Occidental Avenue
San Mateo, CA 94022
Re: Agreement and General Release
-----------------------------
Dear John:
This letter confirms that on , I personally delivered or
-----
forwarded to you the enclosed Agreement and General Release. You have until
to consider this Agreement and General Release. To this end, we advise you
- ----
to consult with an attorney of your choosing prior to executing this Agreement
and General Release.
Very truly yours,
/s/ David V. Goeddel
David V. Goeddel
Chief Executive Officer
-8-
<PAGE>
Exhibit 22.1
LIST OF SUBSIDIARIES
1. Amplicon Corp.
1.
<PAGE>
EXHIBIT 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated February 19, 1999,
in the Registration Statement (Form S-1) and related Prospectus of Tularik, Inc.
for the registration of 7,187,500 shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
October 12, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS AS AT JUNE 30, 1999 AND FOR THE SIX MONTH PERIOD
THEN ENDED AND THE AUDITED FINANCIAL STATEMENTS AS AT DECEMBER 31, 1998
AND FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 JUN-30-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 JUN-30-1999
<CASH> 53,398 36,339
<SECURITIES> 58,926 74,858
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 113,906 113,650
<PP&E> 20,674 26,396
<DEPRECIATION> 8,724 10,456
<TOTAL-ASSETS> 136,778 133,926
<CURRENT-LIABILITIES> 19,371 18,643
<BONDS> 0 0
0 0
27 27
<COMMON> 8 8
<OTHER-SE> 110,863 103,301
<TOTAL-LIABILITY-AND-EQUITY> 136,778 133,926
<SALES> 0 0
<TOTAL-REVENUES> 21,362 11,993
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 38,212 24,294
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 508 437
<INCOME-PRETAX> (10,454) (9,734)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (10,454) (9,734)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,454) (9,734)
<EPS-BASIC> (0.31) (0.29)
<EPS-DILUTED> (0.31) (0.29)
</TABLE>
