<PAGE>
As filed with the Securities and Exchange Commission on December 9, 1999
Registration No. 333-89177
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 4
TO
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. [_]
---------------
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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS Subject to Completion, dated December 9, 1999
6,250,000 Shares
[TULARIK INC. LOGO]
Common Stock
- --------------------------------------------------------------------------------
This is our initial public offering of shares of common stock. We are
offering 4,781,250 shares in public offerings in the United States and
Canada and outside the United States and Canada. No public market
currently exists for our shares. Our common stock has been approved
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.
Pharma Vision 2000 AG, our largest stockholder, has expressed an interest in
acquiring additional shares in a direct offering of our common stock that
would allow it to maintain its 23.5% ownership interest in us. We are
offering 1,468,750 shares of common stock in the direct offering.
Any sales to Pharma Vision in the direct offering will be made at
the initial public offering price concurrent with the public
offerings.
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 U.S. underwriters and international managers 30-day options
to purchase up to an aggregate of 717,187 additional shares of common stock
solely to cover over-allotments, if any. Pharma Vision 2000 AG has expressed an
interest in acquiring up to an additional 220,313 shares of our common stock in
order to maintain its 23.5% ownership interest in us in the event the over-
allotment options are exercised.
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 December , 1999.
- --------------------------------------------------------------------------------
Lehman Brothers
Hambrecht & Quist
J.P. Morgan & Co.
Warburg Dillon Read LLC
, 1999
<PAGE>
Inside Front Cover
Most human diseases are linked to the inappropriate activation of genes, which
causes over-production of harmful proteins or under-production of beneficial
proteins. Tularik is committed to the discovery of novel drugs that can be
administered orally to treat disease by blocking or amplifying the activation
of genes.
Graphic Description: Graphic depicting how pills amplify beneficial activation
of genes or block harmful activation of genes.
Developing drugs to treat human disease by regulating genes.
Example: Inflammatory diseases/Immune system protein binds to cell surface and
causes inflammation.
Tularik's drug discovery platform is directed toward identifying numerous novel
proteins within a cell that are linked to disease--enabling us to identify
multiple drug targets and to focus on those that are optimal.
Graphic Description: Graphic depicting an example of the activation of genes
and the multiple protein components inside the cell that could be potential
drug targets.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 21
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 23
Business................................................................. 30
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 55
Related Party Transactions................................................. 67
Principal Stockholders..................................................... 69
Description of Capital Stock............................................... 71
Shares Eligible for Future Sale............................................ 73
Underwriting............................................................... 75
Legal Matters.............................................................. 80
Experts.................................................................... 80
Where You Can Find More Information........................................ 80
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
options and assumes the conversion of all of our preferred stock into common
stock upon completion of these offerings.
Tularik
Tularik engages 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 research programs, all of which address large commercial markets, include
cancer, cytomegalovirus, diabetes, obesity, inflammation, immune disorders,
high blood cholesterol levels, known as hypercholesterolemia, bacterial
diseases and a class of drug targets called orphan nuclear receptors because
their exact function is unknown and they are located within the nucleus of the
cell. 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.
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 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 human testing. 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 novel proteins that regulate the expression of
disease-causing genes;
. established more than 80 automated drug testing systems, known as high
throughput screening assays, that mimic the diseases addressed by our
programs;
. conducted more than 15 million drug screens using a library of more than
500,000 distinct compounds and natural products;
. identified 14 drug leads, seven of which are being optimized by chemists;
. identified one cytomegalovirus drug candidate that is undergoing
preclinical testing consisting of animal studies designed to determine
the feasibility of human testing;
. identified one cancer drug candidate for which an Investigational New
Drug application has been approved by the U.S. Food and Drug
Administration;
. identified one cancer drug candidate that is undergoing human testing
designed to determine safety, known as phase 1 clinical trials; and
. obtained a license for a cancer drug candidate that has completed phase 1
clinical trials and that we expect to enter human testing designed to
determine efficacy, known as phase 2 clinical trials, during 2000.
We have commenced, or are preparing for, human testing 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, which we recently
licensed from Eli Lilly, is called lometrexol. The utility of cancer drugs like
lometrexol has been proven by methotrexate, a drug used extensively in the
treatment of several tumor types. We expect to commence phase 2 clinical trials
of lometrexol in 2000. T67 acts on the same protein targeted by the cancer
drugs Taxol and vincristine. In contrast to these drugs, T67 retains its
activity against tumor cells that are multiple drug resistant and is able to
enter the brain. We have enrolled 29 patients in phase 1 clinical
4
<PAGE>
trials of T67 to date. Pending successful completion of these trials, we will
initiate phase 2 clinical trials of T67 in several tumor types, including brain
tumors. T607 is an analog of T67, has the same target and is similarly active
against multiple drug resistant tumors. Animal studies indicate that T607 is
distinct from T67 because T607 has a reduced ability to enter the brain, which
may make it suitable for the treatment of different tumor types than T67. We
recently received approval of an Investigational New Drug application 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
relating to orphan nuclear receptors; with Roche Bioscience relating to
inflammation; with Japan Tobacco 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 cytomegalovirus
programs and North American commercialization rights in four of our externally
funded programs. As of September 30, 1999, we had received a total of $121.3
million from our current and former corporate collaborators, including $108.3
million in research funding and $13.0 million from equity purchases.
To date, we have funded our operations primarily through the sale of equity
securities, non-equity payments from collaborators and interest income. We
expect our sources of revenue, if any, for the next several years to consist
primarily of payments under corporate collaborations and interest income.
As of September 30, 1999, 41 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 Offerings
<TABLE>
<C> <S>
Common Stock offered in the public offerings........ 4,781,250 shares
Common Stock offered in the direct offering......... 1,468,750 shares
Common Stock to be outstanding after the offerings.. 41,521,375 shares
Research and development
and general corporate
purposes. See "Use of
Use of proceeds..................................... Proceeds."
Proposed Nasdaq National Market Symbol.............. "TLRK"
</TABLE>
The number of shares of common stock to be outstanding after the offerings is
based on the number of shares outstanding as of September 30, 1999 and
excludes:
. 5,955,965 shares of common stock underlying options outstanding as of
September 30, 1999 at a weighted average exercise price of $2.23 per
share;
. 1,015,091 shares of common stock underlying warrants outstanding as of
September 30, 1999 at a weighted average exercise price of $10.17 per
share;
. 436,112 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.
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 in
the public offerings and the direct offering 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>
Nine Months
Year Ended December 31, Ended September 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 $ 13,664 $ 17,856
Total operating ex-
penses(1)............. 12,153 15,980 22,252 49,468 38,297 27,799 40,478
Net loss(1)............ (5,898) (3,607) (5,480) (25,374) (10,539) (9,303) (18,954)
Basic and diluted net
loss per share........ $ (2.27) $ (0.91) $ (1.09) $ (4.19) $ (1.55) $ (1.40) $ (2.57)
Shares used in comput-
ing basic and
diluted net loss per
share................. 2,601 3,957 5,034 6,063 6,791 6,666 7,388
Pro forma basic and di-
luted net loss per
share................. $ (0.31) $ (0.55)
Shares used in comput-
ing pro forma
basic and diluted net
loss per share........ 33,687 34,314
</TABLE>
<TABLE>
<CAPTION>
As of September 30,
As of 1999
December 31, ---------------------
1998 Actual As Adjusted
------------ -------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable
securities................................ $119,324 $104,188 $174,172
Working capital............................ 94,535 84,401 154,385
Total assets............................... 136,778 131,026 201,010
Long-term obligations, less current
portion................................... 4,734 10,254 10,254
Deferred compensation...................... (679) (5,377) (5,377)
Accumulated deficit........................ (61,857) (80,811) (80,811)
Total stockholders' equity................. 110,898 95,556 165,540
</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. If any of these additonal risks or uncertainties occur, the
trading price of our common stock could decline, and you might lose all or part
of your investment.
RISKS RELATED TO TULARIK
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 September 30, 1999, we had an
accumulated deficit of approximately $80.8 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.
Because our product candidates are in an early state of development, 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
drug 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 FDA and international regulatory authorities for
commercial use. We will need to conduct significant additional research, animal
testing, referred to as preclinical testing, and human testing, referred to as
clinical 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 animal and human testing are uncertain.
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 clinical trials will be successful.
7
<PAGE>
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. 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
demonstrates the safety and efficacy of our products before they can be
approved for commercial sale. While we have recently licensed a product
candidate that is ready for the stage of human testing designed to determine
efficacy, known as phase 2 clinical trials, none of the product candidates that
we have internally developed have advanced beyond the stage of human testing
designed to determine safety, known as phase 1 clinical trials.
Any clinical 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 clinical trial could cause a clinical 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 clinical 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 clinical trials will result in marketable products. Our
product development costs will increase if we have delays in testing or
approvals or if we need to perform more or larger clinical trials than planned.
If the delays are significant, our financial results and the commercial
prospects for our products will be harmed, and our ability to become profitable
will be delayed.
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
clinical 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. Our failure to
adequately demonstrate the safety and efficacy of our products under
development will prevent receipt of FDA approval and, ultimately,
commercialization of our products.
For additional information concerning the testing of our prospective
products, see "Business--Government Regulation."
Because we must obtain regulatory approval to market our products in the United
States and foreign jurisdictions, we cannot predict whether or when we will be
permitted to commercialize our products.
The pharmaceutical industry is subject to stringent regulation by a wide
range of authorities. We cannot predict whether regulatory clearance will be
obtained for any product we develop. 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 regulatory requirements typically takes
many years, is dependent upon the type, complexity and novelty of the product
and requires the expenditure of substantial resources. Of particular
significance are the requirements covering research and development, testing,
manufacturing, quality control, labeling and promotion of drugs for human use.
Before commencing clinical trials in humans, we must submit and receive
approval from the FDA of an Investigational New Drug application. 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;
8
<PAGE>
. 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 Investigational New
Drug application 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. We cannot
ensure 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. This foreign regulatory approval process includes all of the risks
associated with FDA clearance described above.
For additional information concerning regulatory approval of our prospective
products, see "Business--Government Regulation."
Failure to attract, retain and motivate skilled personnel and cultivate key
academic collaborations will delay our product development programs and 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. Competition for personnel and academic collaborations is intense.
In particular, our product development programs depend on our ability to
attract and retain highly skilled chemists and clinical development personnel.
If we lose the services of any of these personnel, in particular, David V.
Goeddel, our Chief Executive Officer, it could impede significantly the
achievement of our research and development objectives. 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 the
development of drugs.
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 gene regulation. 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
9
<PAGE>
identifying the pathways that cells use to 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 could 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. 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. 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.
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 these
terminations do 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. Although we are negotiating with Taisho regarding alternative
collaborative opportunities, we believe that Taisho will terminate its current
agreement with us 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 and termination of the Taisho 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.
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 partnering
with pharmaceutical companies to fund our research in gene regulation. Over the
past two years, as our partnered and unpartnered research has led to product
candidates, our corporate collaboration strategy has evolved. In addition to
seeking collaborations for our research-stage programs, we also seek to enter
into collaborations for the development of compounds discovered through our
research and development efforts. The timing of these 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
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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 the offerings, existing cash and
investment securities and anticipated cash flow from existing collaborations
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 depend on many factors that affect our
research, development, collaboration and sales and marketing activities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
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 our competitors develop and market products that are more effective than
ours, our commercial opportunity will be reduced or eliminated.
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. With respect
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<PAGE>
to our drug discovery programs, other companies have product candidates 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.
Our competitors include fully integrated pharmaceutical companies and
biotechnology companies that currently have drug and target discovery efforts
and universities and public and private research institutions. 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 organizations
also compete with us to:
. attract qualified personnel;
. attract parties for acquisitions, joint ventures or other collaborations;
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.
Because it is difficult and costly to protect our proprietary rights, we cannot
ensure their protection.
Our commercial success will depend in part on obtaining patent protection on
our products and successfully defending these patents against third party
challenges. 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 ensure 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
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<PAGE>
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. While we require employees, academic collaborators and
consultants to enter into confidentiality agreements, we may not be able to
adequately protect our trade secrets or other 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 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 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. 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.
If we are unable to create sales, marketing and distribution capabilities or
enter into agreements with third parties to perform these functions, we will
not be able to commercialize products.
We currently have no sales, marketing or distribution capability. In order to
commercialize any products, we must internally develop sales, marketing and
distribution capabilities or make arrangements with a third party to perform
these services. 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, our product revenues are likely to be lower
than if we directly marketed and sold our products, and any revenues we receive
will depend upon the efforts of third parties, which efforts may not be
successful.
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Our ability to generate revenues will be diminished if we fail to obtain
acceptable prices or an adequate level of reimbursement for our products from
third-party payors.
The continuing efforts of government and third-party payors to contain or
reduce the costs of health care through various means will limit our commercial
opportunity. 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, cost control initiatives could adversely affect our
collaborators' ability to commercialize our products, and our ability to
realize royalties from this commercialization.
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.
If conflicts arise between our collaborators, advisors or directors and us,
they may act in their self-interest, which may be adverse to your best
interests.
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. 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 also 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 chips dedicated to a
specific task. 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
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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 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 and may be required to limit commercialization of our
products.
The testing and marketing of medical products entail an inherent risk of
product liability. If we cannot successfully defend ourselves against product
liability claims, we may incur substantial liabilities or be required to limit
commercialization of our products. Our 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 use biological and hazardous materials in a manner that causes injury or
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 cannot completely eliminate the
risk of accidental contamination or injury from the use, storage, handling or
disposal of 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. 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.
RISKS RELATED TO THE OFFERINGS
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 offerings, our directors, executive officers and
principal stockholders and their affiliates will beneficially own approximately
42.7% of our common stock, based on their beneficial
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ownership as of September 30, 1999. 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, Pharma Vision 2000 AG, a closed-end mutual fund investing in
pharmaceutical companies such as Roche, Glaxo and Hoechst, currently owns
approximately 23.5% of our outstanding common stock. Pharma Vision has
expressed an interest in acquiring directly from us concurrently with the
public offerings additional shares of common stock that would allow it to
maintain its approximate percentage ownership. 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
Pharma Vision. Pharma Vision 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 offerings. 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;
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. 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.
If our stockholders sell substantial amounts of our common stock after the
offerings, the market price of our common stock may fall.
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. These 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 the offerings, we
will have outstanding 41,521,375 shares of common stock, including 1,468,750
shares sold to Pharma Vision in the direct offering, and assuming no exercise
of outstanding options or warrants after September 30, 1999 and no exercise of
the underwriters' over-allotment options. Of these shares, the following will
be available for sale in the public market as follows:
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. For an additional description of the eligibility of shares for sale
into the public market following the offerings, see "Shares Eligible for Future
Sale."
The offerings will cause dilution in net tangible book value.
Purchasers in the public offerings and the direct 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.
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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."
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USE OF PROCEEDS
The net proceeds to us from the sale of the 4,781,250 shares of common stock
in the public offerings are estimated to be $52,359,000 ($60,363,000 if the
underwriters' over-allotment options are exercised in full), assuming an
initial public offering price of $12.00 per share and after deducting the
estimated underwriting discount and offering expenses. In addition, we will
receive $17,625,000 ($20,269,000 if the underwriters' over-allotment options
are exercised in full and Pharma Vision maintains its 23.5% ownership interest
in us) of additional proceeds if the direct offering to Pharma Vision is
consummated, assuming an initial public offering price of $12.00 per share. 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 the offerings 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 offerings. 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.
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CAPITALIZATION
The following table sets forth our actual capitalization as of September 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 the offerings; and
. on a pro forma as adjusted basis to reflect our receipt of the net
proceeds from the sale of 4,781,250 shares of common stock in the public
offerings and 1,468,750 shares of common stock to Pharma Vision in the
direct 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 September 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
and per share amounts)
<S> <C> <C> <C>
Long-term obligations, less current portion.... $ 10,254 $ 10,254 $ 10,254
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; 8,317,836 shares issued
and outstanding, actual; 35,271,375 shares
issued and outstanding, pro forma; and
41,521,375 shares issued and outstanding,
pro forma as adjusted....................... 8 35 41
Additional paid-in capital................... 182,356 182,356 252,334
Notes receivable from stockholders........... (647) (647) (647)
Deferred compensation........................ (5,377) (5,377) (5,377)
Accumulated deficit.......................... (80,811) (80,811) (80,811)
-------- -------- ---------
Total stockholders' equity................. 95,556 95,556 165,540
-------- -------- ---------
Total capitalization..................... $105,810 $105,810 $ 175,794
======== ======== =========
</TABLE>
The number of shares of common stock to be outstanding after the offerings is
based on the number of shares outstanding as of September 30, 1999 and
excludes:
. 5,955,965 shares of common stock underlying options outstanding as of
September 30, 1999 at a weighted average exercise price of $2.23 per
share;
. 1,015,091 shares of common stock underlying warrants outstanding as of
September 30, 1999 at a weighted average exercise price of $10.17 per
share;
. 436,112 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.
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DILUTION
The pro forma net tangible book value of the common stock as of September 30,
1999 was $95.6 million or $2.71 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
offerings. After giving effect to the sale of the common stock in the public
offerings and the direct offering to Pharma Vision at an assumed initial public
offering price of $12.00 per share, assuming that the underwriters' over-
allotment options are not exercised, and after deducting the estimated
underwriting discount and offering expenses, the adjusted pro forma net
tangible book value at September 30, 1999, would have been $165.5 million, or
$3.99 per share.
Pro forma net tangible book value per share before the offerings 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 September 30, 1999. The offerings will result in an increase in
pro forma net tangible book value per share of $1.28 to existing stockholders
and dilution in pro forma net tangible book value per share of $8.01 to new
investors who purchase shares in the public offerings and the direct offering.
Dilution is determined by subtracting pro forma net tangible book value per
share after the public offerings and the direct 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 September 30,
1999......................................................... $2.71
Increase attributable to new investors........................ 1.28
-----
Pro forma net tangible book value per share after the public
offerings and the direct offering............................ 3.99
------
Dilution in net tangible book value to new investors.......... $ 8.01
======
</TABLE>
If the underwriters' over-allotment options are exercised in full and Pharma
Vision maintains its 23.5% ownership in us, the pro forma net tangible book
value per share after the offerings would be $4.15 per share, the increase in
net tangible book value per share to existing stockholders would be $1.44 per
share and the dilution in net tangible book value to new investors would be
$7.85 per share.
The following table summarizes, on a pro forma basis as of September 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......... 35,271,375 84.9 175,263,000 70.0 4.97
---------- ----- ------------ -----
Total....................... 41,521,375 100.0% $250,263,000 100.0%
========== ===== ============ =====
</TABLE>
These tables do not assume exercise of stock options and warrants outstanding
at September 30, 1999 and include 515,432 shares subject to repurchase by us at
a weighted average price of $2.01.
At September 30, 1999, there were 5,955,965 shares of common stock issuable
upon exercise of outstanding stock options at a weighted average exercise price
of $2.23 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.
21
<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 for the nine months ended September 30,
1999 and the consolidated balance sheet data as of December 31, 1997 and 1998
and September 30, 1999 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 as of 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 nine months
ended September 30, 1998 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>
Nine Months
Year Ended December 31, Ended September 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 Operations Data:
Revenue:
Collaborative research
and development....... $ 5,618 $ 11,124 $ 15,297 $ 20,009 $ 21,362 $ 13,664 $ 17,856
Operating expenses:
Research and
development........... 9,934 13,473 18,622 26,546 33,264 24,149 31,855
Acquired in-process
research and
development........... -- -- -- 18,902 -- -- 3,000
General and
administrative........ 2,219 2,507 3,630 4,020 5,002 3,650 3,903
Amortization of
deferred stock
compensation.......... -- -- -- -- 31 -- 1,720
-------- -------- -------- -------- -------- ----------- -----------
12,153 15,980 22,252 49,468 38,297 27,799 40,478
-------- -------- -------- -------- -------- ----------- -----------
Loss from operations.... (6,535) (4,856) (6,955) (29,459) (16,935) (14,135) (22,622)
Interest income, net.... 637 1,249 1,475 4,085 6,396 4,832 3,668
-------- -------- -------- -------- -------- ----------- -----------
Net loss................ $ (5,898) $ (3,607) $ (5,480) $(25,374) $(10,539) $ (9,303) $ (18,954)
======== ======== ======== ======== ======== =========== ===========
Basic and diluted net
loss per share......... $ (2.27) $ (0.91) $ (1.09) $ (4.19) $ (1.55) $ (1.40) $ (2.57)
======== ======== ======== ======== ======== =========== ===========
Shares used in computing
basic and diluted net
loss per share......... 2,601 3,957 5,034 6,063 6,791 6,666 7,388
======== ======== ======== ======== ======== =========== ===========
Pro forma basic and
diluted net loss per
share.................. $ (0.31) $ (0.55)
======== ===========
Shares used in computing
pro forma basic and
diluted net loss per
share.................. 33,687 34,314
======== ===========
<CAPTION>
December 31,
------------------------------------------------ September 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- -------------
(in thousands)
<S> <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 $ 104,188
Working capital......... 15,236 15,193 69,394 116,527 94,535 84,401
Total assets............ 28,395 29,617 83,409 133,522 136,778 131,026
Long-term obligations,
less current portion... 2,477 1,712 2,128 3,456 4,734 10,254
Deferred compensation... -- -- -- -- (679) (5,377)
Accumulated deficit..... (16,857) (20,464) (25,944) (51,318) (61,857) (80,811)
Total stockholders'
equity................. 18,435 17,753 72,905 120,856 110,898 95,556
</TABLE>
22
<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, orally available drugs, most of
which act through gene regulation. Our research programs include cancer,
cytomegalovirus, diabetes, obesity, inflammation, immune disorders, high blood
cholesterol levels, known as hypercholesterolemia, and bacterial diseases and a
class of drug targets called orphan nuclear receptors. 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 September 30, 1999, our accumulated deficit was approximately
$80.8 million. We received aggregate research funding under research and
development collaborations between 1995 and September 30, 1999 as follows:
<TABLE>
<CAPTION>
Nine Months
Year Ended December 31, Ended
----------------------- September 30,
1995 1996 1997 1998 1999
----- ----- ----- ----- -------------
(in millions)
<S> <C> <C> <C> <C> <C>
Research funding received................. $13.5 $12.5 $20.0 $29.8 $21.0
</TABLE>
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 are currently engaged in collaborations with leading
pharmaceutical companies as summarized below:
Collaborator Research Program Commencement Date
Knoll Obesity November 1998
Japan Tobacco Orphan Nuclear Receptors September 1998
Roche Bioscience Inflammation July 1997
Japan Tobacco Obesity/Diabetes September 1996
Taisho Immune Disorders April 1995
Sumitomo Hypercholesterolemia January 1995
Under the terms of the collaborations identified above, as of September 30,
1999, our partners had agreed to provide future research funding of up to
approximately $50.7 million over a five-year period as set forth in the table
below, including $33.5 million subject to possible cancellation, as well as
additional payments upon the achievement of specific research and development
milestones and royalties upon commercialization of any products. Research
funding that is payable in the future under existing collaborations was as
follows as of September 30, 1999:
<TABLE>
<CAPTION>
Three Months Year Ending December
Ending 31,
December 31, ----------------------
1999 2000 2001 2002 2003
------------ ----- ----- ----- ----
(in millions)
<S> <C> <C> <C> <C> <C>
Contractual future research funding........ $2.7 $18.0 $14.5 $12.0 $3.5
</TABLE>
23
<PAGE>
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). Our collaborations with Sumitomo and Taisho are scheduled to end in
accordance with their terms during 2000 and 2001, respectively. Furthermore,
Taisho has the right to terminate its agreement with us during 2000, prior to
the scheduled expiration of the agreement in 2001. We do not expect the
Sumitomo collaboration to be extended. Although we are negotiating with Taisho
regarding alternative collaborative opportunities, we believe that Taisho will
exercise its contractual right to terminate its current agreement with us in
March 2000. During 1999, we received an aggregate of $6.7 million from these
agreements and from our prior collaboration with Merck. We do not expect to
receive any funding from Sumitomo or Merck and may not receive any further
funding from Taisho during 2000. Accordingly, if we do not enter into new
corporate collaborations, collaborative research and development revenue and
cash received from collaborative partners will decline for the foreseeable
future.
Acquisition
On October 31, 1997, we acquired Amplicon Corp., a research organization
engaged principally in identifying and characterizing human genes involved in
particular cancers. In connection with the acquisition, we issued 1,620,004
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 aggregate value of the consideration issued to the Amplicon
stockholders and option holders was $18.9 million. 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 sole activity was performing basic
research to identify genes that may result in the development of diagnostic and
therapeutic products for the treatment of cancer. Prior to the acquisition,
Amplicon had discovered over twenty novel genetic regions that are commonly
mutated in human cancers and was actively searching within these regions for
genes that play an important role in the development of cancer. Amplicon's
efforts to identify cancer genes relied heavily on a proprietary methodology,
known as Representational Difference Analysis, that is distinct from other
methods as a result of its ability to identify non-inherited genetic mutations.
The Representational Difference Analysis methodology is specifically applicable
to the discovery of cancer genes, acquired genetic mutations and pathogens and
does not have alternative future uses.
From the date of the acquisition through September 30, 1999, we incurred $6.2
million (less than 9% of total research and development expenses during the
period) of expenses in connection with the effort to discover cancer genes at
Amplicon. We have no plans to significantly change our rate of investment in
the cancer gene discovery project for the foreseeable future. To date, no
products have been developed from this project, technological feasibility has
not been proven and no corporate collaborations have been consummated based on
the research at Amplicon. Accordingly, the future benefits of the ongoing
research remain uncertain. Due to the absence of tangible products from the
research and the uncertainties of the discovery process, we are not able to
precisely predict the time and resources that will be necessary to develop and
obtain regulatory approval for any product that may be discovered using the
acquired methodology.
In order to determine the value of the cancer gene discovery project and the
related methodology at the time of the acquisition, we considered a wide range
of estimates of 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 risk related to changes in target markets.
Using this approach, we concluded that the estimated fair value of the acquired
24
<PAGE>
in-process research and development was $21.4 million at the date of
acquisition. Accordingly, the purchase price was allocated to the tangible and
intangible net assets acquired and $18.9 million was expensed as acquired in-
process research and development. We believe this amount did not exceed the
amount a third party would have paid for the project.
License Agreement
On September 24, 1999, we executed a license agreement with Eli Lilly under
which we obtained an exclusive, worldwide, royalty-bearing license to make, use
and sell pharmaceutical products containing a compound known as lometrexol. In
connection with this agreement, we paid $3.0 million to Eli Lilly as an initial
license fee and agreed to pay specified milestones and royalties upon
successful commercialization of lometrexol. Under the agreement, Eli Lilly
granted us a license to its proprietary technology relating to lometrexol, and
also a sublicense under an exclusive license granted to Eli Lilly by Princeton
University relating to lometrexol. Eli Lilly has specified obligations under
the agreement to maintain the license from Princeton. Eli Lilly has the right
to match the material terms of any offer made by a third party to Tularik for
commercialization rights relating to lometrexol products. We may terminate the
agreement with Eli Lilly upon written notice. Eli Lilly may terminate our
license in specified major countries if we fail to use reasonable diligence to
develop lometrexol products in these countries and may terminate the agreement
if we fail to use appropriate diligence to develop lometrexol products in a
predetermined number of major countries. If Eli Lilly terminates the agreement,
Eli Lilly obtains a nonexclusive, royalty-bearing, worldwide license to our
technical improvements to lometrexol.
At the date of the license agreement, lometrexol had completed the first of
three phases of clinical trials required to seek regulatory approval from the
FDA. No trials had been commenced that could have demonstrated, with
statistical significance, the effectiveness of lometrexol as a treatment for
any type of cancer. These trials, necessary to establish the technological
feasibility of lometrexol, will not be completed for at least several years. In
addition, lometrexol has no known alternative future uses. Accordingly, the
initial license payment was allocated to acquired in-process research and
development and expensed at the time of the agreement.
Stock Compensation
During the year ended December 31, 1998 and the nine months ended September
30, 1999, in connection with the grant of stock options to employees, we
recorded deferred stock compensation totaling $7.1 million, representing the
difference between the deemed fair value of our common stock for financial
reporting purposes on the date these options were granted and the exercise
price. This 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 $1.7 million for the nine months ended September 30,
1999. At September 30, 1999, we had a total of $5.4 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 after
September 30, 1999. You should read Note 2 of notes to consolidated financial
statements.
Results of Operations
Nine Months Ended September 30, 1999 and 1998
Collaborative research and development revenue. Collaborative research and
development revenue was $17.9 million for the nine months ended September 30,
1999, compared with $13.7 million during the nine months ended September 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 Japan
25
<PAGE>
Tobacco 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 expire at the end of 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. Although we are negotiating with Taisho regarding
alternative collaborative opportunities, we believe that Taisho will exercise
its contractual right to terminate its current agreement with us in March 2000.
Until recently, our corporate collaboration strategy focused on funding
research in gene regulation. Over the past two years, as this research has led
to product candidates, our corporate collaboration strategy has evolved. In
addition to seeking corporate collaborations for our research-stage programs,
we also seek to enter into collaborations for the development of compounds
discovered through our research and development efforts. The timing of these
collaborations may be linked to clinical results of our product candidates.
Research and development expenses. Research and development expenses were
$31.9 million for the nine months ended September 30, 1999, compared with $24.1
million during the nine months ended September 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.
Acquired in-process research and development was written off during the nine
months ended September 30, 1999 in connection with the license agreement we
executed with Eli Lilly, which was effective September 24, 1999. You should
read Note 7 of the notes to consolidated financial statements.
General and administrative expenses. General and administrative expenses were
$3.9 million for the nine months ended September 30, 1999, compared with $3.7
million during the nine months ended September 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.
Amortization of deferred compensation. Amortization of deferred stock
compensation was $1.7 million for the nine months ended September 30, 1999.
There was no amortization of deferred stock compensation for the nine months
ended September 30, 1998. We recorded aggregate deferred stock compensation of
$7.1 million in the period from October 1, 1998 through September 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 $3.7 million for the nine
months ended September 30, 1999, compared with $4.8 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
Japan Tobacco 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.
26
<PAGE>
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
September 30, 1999, we had raised $161.1 million from the sale of equity
securities, including $13.0 million from collaborators, and received $108.3
million in non-equity payments from collaborators. Aggregate interest income
earned since our inception was $21.5 million through September 30, 1999.
We had cash, cash equivalents and marketable securities of $104.2 million at
September 30, 1999, a decrease of $15.1 million from December 31, 1998. Cash
used in operations during the nine months ended September 30, 1999 was $11.6
million. Cash used to purchase a restricted investment in connection with a
secured financing arrangement was $4.0 million. Cash used for purchases of
equipment and leasehold improvements totaled $8.5 million during the nine
months ended September 30, 1999. Cash received from equipment financing during
the nine months ended September 30, 1999 was $10.1 million. The annual interest
rates of these financings ranged from 9.0% to 12.0% and the financing
arrangements have terms of approximately 4 years each. As of September 30,
1999,we had $2.9 million available under equipment financing arrangements,
which we expect to utilize in 2000. Repayments of long-term obligations totaled
$2.5 million during the nine months ended September 30, 1999. Cash received
from stock option exercises during the nine months ended September 30, 1999 was
$1.4 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
27
<PAGE>
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 the public offerings and the direct offering to Pharma
Vision 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, this 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 match projected cash needs and limit concentration of
credit risk by diversifying our investments among a variety of high credit-
quality issuers.
As of September 30, 1999, we had federal net operating loss carryforwards of
approximately $54.2 million to offset future taxable income. We also had
federal research and development tax credit carryforwards of approximately $3.9
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 13 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 chips dedicated to a
specific task. Some of our older computer software programs and
28
<PAGE>
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. We have developed contingency plans to address potential
third party Year 2000 problems. These contingency plans include the procurement
of additional back-up power for our facilities in case of power outages,
selection of alternative suppliers for particular supplies if these supplies
become unavailable, and alternative methods of payment to suppliers and
employees if our payment systems become temporarily inoperable. 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. We have incurred $75,000 of expenses to
date to address various Year 2000 issues.
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 by
causing a significant number of operational inconveniences and inefficiences
that may divert our time and attention and financial and human resources from
our ordinary research and business activities. Presently we are unable to
quantitatively estimate the duration and extent of any interruption, or
estimate the effect these interruptions 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 September 30, 1999
levels, the fair value of our portfolio would decline by approximately
$356,000. 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.
29
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BUSINESS
Overview
Tularik engages 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 research programs, all of which address large commercial markets, include
cancer, cytomegalovirus, diabetes, obesity, inflammation, immune disorders,
high blood cholesterol levels, known as hypercholesterolemia, bacterial
diseases and a class of drug targets called orphan nuclear receptors because
their exact function is unknown and they are located within the nucleus of the
cell. 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.
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 tissue plasminogen activator. These advances
in molecular biology led to other protein, DNA and gene related approaches.
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 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.
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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
gene regulatory mechanisms that are within the cell, or intracellular. 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 pathway or subpathway that regulates genes 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 gene regulation 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 human testing. 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 novel proteins that regulate the expression of
disease-causing genes;
. established more than 80 automated drug testing systems, known as high
throughput screening assays, that mimic the diseases addressed by our
programs;
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. conducted more than 15 million drug screens using a library of more than
500,000 distinct compounds and natural products;
. identified 14 drug leads, seven of which are being optimized by chemists;
. identified one cytomegalovirus drug candidate that is undergoing
preclinical testing consisting of animal studies designed to determine
the feasibility of human testing;
. identified one cancer drug candidate for which an Investigational New
Drug application has been approved by the FDA;
. identified one cancer drug candidate that is undergoing human testing
designed to determine safety, known as phase 1 clinical trials; and
. obtained a license for a cancer drug candidate that has completed phase 1
clinical trials and that we expect to enter human testing designed to
determine efficacy, known as phase 2 clinical trials, during 2000.
Clinical Candidates. We have commenced, or are preparing for, human testing
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, which
we recently licensed from Eli Lilly, is called lometrexol. The utility of
cancer drugs like lometrexol has been proven by methotrexate, a drug that has
been used extensively in the treatment of several tumor types. We expect to
commence phase 2 clinical trials of lometrexol in 2000. T67 acts on the same
protein targeted by the cancer drugs Taxol and vincristine. In contrast to
these drugs, T67 retains its activity against tumor cells that are multiple
drug resistant and is able to enter the brain. We have enrolled 29 patients in
phase 1 trials of T67 to date. Pending successful completion of these trials,
we will initiate phase 2 clinical trials of T67 in several tumor types,
including brain tumors. T607 is an analog of T67, has the same target and is
similarly active against multiple drug resistant tumors. Animal studies
indicate that T607 is distinct from T67 because T607 has a reduced ability to
enter the brain, which may make it suitable for the treatment of different
tumor types than T67. We recently received approval of an Investigational New
Drug application for T607.
Attractive Commercial Opportunities. Our programs address cancer,
cytomegalovirus, diabetes, obesity, inflammation, immune disorders, high blood
cholesterol levels, known as hypercholesterolemia, bacterial diseases and a
class of drug targets called orphan nuclear receptors because their exact
function is unknown and they are located within the nucleus of the cell. These
programs offer 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
gene regulation. 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
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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.
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 gene
regulation.
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
discovery and development efforts 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, five corporate
partners fund significant portions of six of our programs. We have retained
worldwide commercialization rights to our cancer, bacterial diseases and
cytomegalovirus programs and North American commercialization rights in four of
our externally funded programs.
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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 Investigational New
Drug application has been approved, one preclinical cytomegalovirus drug
candidate and 14 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 a
clinical trials drug candidate with phase 1
clinical responses in a
range of human tumors.
T67 Phase 1 clinical trials Discovered an agent that
binds to a clinically
proven cancer target and
inhibits growth of multiple
drug resistant tumors in
animals.
T607 Investigational New Drug Generated second-generation
application approved analog of T67 that may have
advantages for treating
particular types of tumors.
- -------------------------------------------------------------------------------
Cytomegalovirus Preclinical Development Discovered compounds that
are orally active in animal
models of human
cytomegalovirus infection
and plan to file an
Investigational New Drug
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
circulating level of a
protein that causes weight
loss in animals.
- -------------------------------------------------------------------------------
Inflammation Lead Optimization Elucidated key gene
regulation pathways and
discovered numerous
proteins involved in
inflammatory gene
regulation. Identified a
lead compound that inhibits
expression of inflammatory
response genes in animal
models.
- -------------------------------------------------------------------------------
Immune Disorders Lead Optimization Discovered and validated
two human transcription
factors as targets for
allergy/asthma and
autoimmune diseases.
Identified a series of
compounds that inhibit the
human transcription factor
that is a target for
allergy/asthma.
- -------------------------------------------------------------------------------
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
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
Investigational New Drug application to the FDA.
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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 a cancer drug candidate known as lometrexol from
Eli Lilly. Lometrexol is an antifolate. Antifolates, which disrupt the
synthesis of 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 trials, Eli Lilly observed a total of
five partial responses and one complete response 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 clinical 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, Eli Lilly noted a complete response lasting more than 18 months in a
patient with head and neck cancer.
We anticipate that we will commence phase 2 clinical trials of lometrexol in
2000. We have not yet selected the five or six tumor types to be treated during
phase 2 clinical 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, a 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 multiple
drug resistant. In contrast, these multiple drug resistant 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, we have enrolled 29
patients and have observed a dose-limiting toxicity of neuropathy in one
patient at the highest administered dose. We expect to continue to enroll
additional patients at a lower dose level. This lower dose results in drug
levels that are sufficient to induce anti-tumor activity in animals. We expect
that data from the phase 1 clinical trials establishing a phase 2 infusion dose
and schedule will be available in 2000. Assuming that a tolerable dose and
schedule can be identified for
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repeat administration, we expect to initiate a number of phase 2 clinical
trials to determine anti-tumor activity. We expect to conduct one of these
trials in glioblastoma, a type of brain cancer, exploiting the ability of T67
to enter the brain. 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 November 1999, we received approval of an Investigational New Drug
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
enter the brain. This may be a desirable feature for treatment of peripheral
tumors. We intend to evaluate three different dosing schedules of T607 in phase
1 clinical trials.
Cancer Gene Discovery. We seek to discover cancer genes using a proprietary
technique known as Representational Difference Analysis. Representational
Difference Analysis works by sampling DNA from healthy and diseased cells from
the same person, and rapidly comparing the samples to identify mutant cancer
genes. Representational Difference Analysis 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 this
technology, Representational Difference Analysis was utilized to isolate two
tumor suppressor genes, BRCA2 and PTEN.
Cytomegalovirus
Cytomegalovirus 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 cytomegalovirus-infected mothers.
In the bone marrow and solid organ transplant population, cytomegalovirus can
cause life-threatening pneumonia. In the AIDS patient population, retinitis
caused by cytomegalovirus is the primary cause of blindness. Cytomegalovirus
infection in newborns can cause death or severe neurological damage, typically
deafness. In 1997, the incidence of cytomegalovirus disease worldwide totaled
approximately 31,000 patients, and worldwide revenues for cytomegalovirus drugs
totaled approximately $143 million and are projected to grow at a 6.5% compound
annual growth rate. Current therapy for cytomegalovirus 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 cytomegalovirus
compounds that interfere with the replication machinery of cytomegalovirus. We
believe that this class of compounds is the first to target a specific
cytomegalovirus-encoded enzyme that is necessary for initiating the synthesis
of viral DNA. This class of compounds is efficacious against clinical
cytomegalovirus taken from patients who have developed resistance to current
therapies. Animal toxicity studies suggest that this class of compounds will be
safer than current therapies. Because they can be taken orally, our
cytomegalovirus drug candidates may also be practical for use in preventative
settings, such as in transplant patients.
We have commenced preclinical testing of several advanced candidates. We
anticipate filing an Investigational New Drug application on a lead compound in
2000.
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
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<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. Our 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. We have
commenced animal studies and a chemistry effort to clarify and exploit these
advantages.
We have collaborated with Japan Tobacco 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 the Ob gene,
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. We have commenced
additional studies of the mechanism by which these compounds regulate the Ob
gene.
The second pathway we are evaluating involves a family of proteins known to
play a major role in determining metabolic rate. 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 this family of proteins. This
family of proteins is 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 this family of proteins. We have
commenced high throughput screening using these proprietary assays.
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 Japan Tobacco 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,
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<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-inflammatory drugs 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.
Inflammatory messengers 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 particular
inflammatory messengers in several inflammatory disease states have been
clearly demonstrated by studies utilizing antibodies and soluble receptors that
neutralize the activities of particular inflammatory messengers. The efficacy
demonstrated by Enbrel, a soluble inflammatory messenger 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 receptors
for particular inflammatory messengers 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.
We are employing several of these targets in high throughput screening 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 high throughput screening
that enable the identification of compounds that interfere with functions
controlled by STAT proteins. We have also developed biochemical assays for high
throughput screening 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.
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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 high throughput
screening 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 high throughput screening 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 high throughput screening 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 United
States 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.
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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. Of the nearly 50 nuclear receptors identified to date, approximately
two-thirds are orphan nuclear receptors. Although the exact functions of these
orphan nuclear receptors 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 drugs that target orphan nuclear receptors, it
has recently been discovered that the antidiabetic drug Rezulin targets the
orphan nuclear receptor known as PPARg.
Our scientists are using proprietary screens to enable the discovery of both
stimulators and inhibitors for many orphan nuclear receptors and have
discovered two novel human orphan nuclear receptors. 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 high throughput screening, and the first leads are
undergoing functional characterization in both cell-based and animal studies.
We have collaborated with Japan Tobacco in orphan nuclear receptor research
since September 1998.
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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]
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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 that regulates genes 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
genes 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 Representational Difference
Analysis. 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 us with opportunities to discover additional components
of the cellular pathway that may lead to identification of additional drug
discovery targets.
Primary Assays
We use primary assays specific to each target or program 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, we adapt the assay to an automated format to allow
for high throughput screening. 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 high
throughput screening, results can be obtained rapidly and reproduced
consistently. We will perform high throughput screening with approximately 35
biochemical assays in 1999.
Cell-based Assays. High throughput screening 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 high throughput screening with approximately
ten cell-based assays during 1999.
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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 automated screening facility, we can annually generate more than eight
million sample evaluations in our assays. Our automated 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, spectroscopy and X-ray crystallography comprise the
essential techniques of structural biology. We have
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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 high throughput screening 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
Investigational New Drug 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 $31.9 million for the nine months
ended September 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; Japan Tobacco relating to orphan nuclear receptors; Roche
Bioscience relating to inflammation; Japan Tobacco relating to
obesity/diabetes; Taisho relating to immune disorders; and Sumitomo relating to
hypercholesterolemia. As of September 30, 1999, we had received a total of
$121.3 million, including $108.3 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. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" for additional details related to funding received to
date and future funding payable under existing corporate collaboration
agreements. 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.
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The table below summarizes 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
- -------------------------------------------------------------------------------------------------------------------
Cytomegalovirus -- Tularik Tularik Tularik
- -------------------------------------------------------------------------------------------------------------------
Diabetes (certain Japan Tobacco Profit split Profit split Profit split
targets)
- -------------------------------------------------------------------------------------------------------------------
Obesity (certain Knoll Knoll (Royalties shared Knoll (Royalties shared Profit split (with
targets) with Japan Tobacco) with Japan Tobacco) Japan Tobacco)
- -------------------------------------------------------------------------------------------------------------------
Obesity (certain Japan Tobacco 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 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)
- -------------------------------------------------------------------------------------------------------------------
Hypercholesterolemia Sumitomo Tularik Tularik Sumitomo (Royalties
(certain targets) to Tularik)
- -------------------------------------------------------------------------------------------------------------------
Bacterial Diseases -- Tularik Tularik Tularik
- -------------------------------------------------------------------------------------------------------------------
Orphan Nuclear Receptors Japan Tobacco 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.
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 these obesity-related targets. 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. Any license would survive termination of the research
portion of the collaboration, and require Knoll to pay to us milestones and
royalties. Each party has defined 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
particular 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 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 Japan Tobacco's rights terminate or expire. The rights
retained in specified Asian countries are subject to the Japan Tobacco
obesity/diabetes agreement.
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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.
Knoll is committed to pay Tularik up to $20.5 million in research payments, of
which $5.6 million has been paid as of September 30, 1999.
Japan Tobacco (Orphan Nuclear Receptors)
Effective September 1998, we established a five-year collaboration with Japan
Tobacco 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 to provide for the equal sharing of expenses
and profits on a worldwide basis. We retain exclusive marketing and sales
rights in the United States and Canada. Japan Tobacco retains exclusive
marketing and sales rights in Japan and Korea. Japan Tobacco and we jointly
determine marketing strategy in other countries. Japan Tobacco 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 Japan Tobacco 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 a 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. Japan Tobacco
is committed to pay Tularik up to $29.0 million in research payments related to
the orphan nuclear receptor collaboration, of which $12.0 million has been paid
as of September 30, 1999.
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 high throughout screening 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
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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. Roche Bioscience is committed to pay Tularik up to $30.0 million in
research payments, of which $16.3 million has been paid as of September 30,
1999.
Japan Tobacco (Obesity/Diabetes)
We established a five-year collaboration with Japan Tobacco 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 structured to provide for the equal sharing of expenses
and profits on a worldwide basis. 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). Japan Tobacco retains exclusive
marketing and sales rights in Japan and Korea, and Japan Tobacco 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. Japan Tobacco 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 Japan Tobacco 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 a 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. Japan Tobacco
is committed to pay Tularik up to $18.5 million in research payments related to
the obesity and diabetes collaboration, of which $14.0 million has been paid as
of September 30, 1999.
Under the terms of a related stock purchase agreement, Japan Tobacco
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.
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Taisho has the right to terminate the collaboration with written notice
before the commencement of the sixth year. Although we are negotiating with
Taisho regarding alternative collaborative opportunities, we believe that
Taisho will exercise its contractual right to terminate its current agreement
with us in March 2000. In this event, we will have exclusive, worldwide,
royalty-free rights to all products identified in the 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. Taisho was committed to pay, and has paid, Tularik $15.0 million in
research payments as of September 30, 1999.
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 the LDL receptor gene. 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. Sumitomo was committed to pay, and has paid, Tularik
$15.0 million in research payments as of September 30, 1999.
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 Eli 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 Eli Lilly milestones
and royalties upon successful commercialization of lometrexol. Eli Lilly filed
an Investigational New Drug application for lometrexol, a treatment for cancer,
in August 1988, a Clinical Trial Exemption for the United Kingdom in June 1991
and subsequently conducted phase 1 trials of lometrexol in cancer patients in
the United States and Europe. Under the agreement, Eli Lilly granted us a
license under Eli Lilly's proprietary technology relating to lometrexol, and
also a sublicense under the exclusive license granted to Eli Lilly by Princeton
University relating to lometrexol. Eli Lilly has specified obligations under
the agreement to maintain the license from Princeton. Eli 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 Eli Lilly upon written notice. Eli Lilly
may terminate our license in specified major countries if we fail to use
reasonable diligence to develop lometrexol products in these countries, and may
terminate the agreement if we fail to use appropriate diligence to develop
lometrexol
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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 Eli Lilly terminates the agreement, Eli
Lilly obtains a nonexclusive, royalty-bearing, worldwide license to our
technical improvements to lometrexol.
Cold Spring Harbor Laboratory (Representational Difference Analysis)
Amplicon had been the exclusive licensee of the rights of Cold Spring Harbor
Laboratory in Representational Difference Analysis, and we acquired these
rights held by Amplicon when we acquired Amplicon. In connection with our
acquisition of Amplicon, we established a research collaboration with Cold
Spring Harbor Laboratory. As part of this collaboration, Dr. Michael Wigler of
Cold Spring Harbor Laboratory supervises research using Representational
Difference Analysis 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 high throughout screens 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 HIV products. In November 1999, Merck orally
waived an option to assume responsibility for the development of our
cytomegalovirus drug candidate.
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, 41 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.
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We have received letters from OSI Pharmaceuticals, Inc. indicating that OSI
believes that Tularik is utilizing patented technology relating to a
methodology for discovering transcription-based drugs and relating to the use
of orally available compounds to modulate gene transcription. OSI has offered
to license this technology to Tularik in exchange for milestones and a royalty
of .75% on net sales of products covered by the claims of these patents. We
believe that we do not infringe any valid and enforceable claims of these
patents and intend to vigorously defend any litigation commenced by OSI in
connection with its claims. We cannot predict whether any litigation will be
commenced, what claims OSI would assert or the outcome of any litigation.
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 that are pursuing the same or
similar technologies, including the discovery of targets that regulate genes,
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;
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. 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, 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 Investigational New Drug application. We expect to rely on some of our
collaborative partners to file Investigational New Drug applications and
generally direct the regulatory approval process for some 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. 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.
The length of time necessary to complete clinical trials 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
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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.
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. These 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 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 discussed 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 including experts in human
genetics, mouse genetics, molecular biology, biochemistry, cell biology,
chemistry, infectious diseases, immunology and structural biology. Generally,
each 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
Scientific Advisory Board 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.
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The following is a list of our other Scientific Advisory Board members:
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 Cold Spring Harbor Laboratory 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.
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.
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Oncology Scientific Advisory Board
In addition to our Scientific Advisory Board, 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
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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
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 tissue plasminogen activator. 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 Pharma Vision
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.
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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.
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 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
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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 Pharma Vision 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.
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.
Compensation Committee Interlocks and Insider Participation
During 1998, our compensation committee consisted of Robert A. 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' Stock Option 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
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the 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.
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<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 according 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>
59
<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. 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 subject 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 this 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 any 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
60
<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.
61
<PAGE>
Stock Options. Stock options are granted subject 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 this
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 these
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. Some
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.
62
<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 our 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.
63
<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
these 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 November 1999, we adopted our 1999
Employee Stock Purchase Plan, authorizing the issuance of common stock through
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 terms of the purchase plan are set forth in the purchase plan document and
each offering 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 employees of Tularik or one of
its affiliates, including executive officers, who are not part-time or seasonal
employees whose customary employment is less than 20 hours per week or whose
customary employment is less than 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 25 1/2
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.
The purchase plan provides that employees may generally be required to
complete at least 90 days and not more than 2 years of employment with Tularik
or one of its affiliates in order to participate in the plan. Initially,
eligible employees may generally participate in the purchase plan only after
completing 90 days of employment with Tularik or one of its affiliates.
However, otherwise eligible employees who have not completed 90 days of
employment but are employed with Tularik or one of its affiliate as of the
effective date of the initial public offering shall be eligible to participate
on the effective date of the initial public offering provided they remain in
employment through the first purchase date under the purchase plan.
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. For this purpose, an employee's regular pay shall include his or
her base salary, contributions to the Tularik Salary Savings Plan, overtime
pay, commissions and bonuses, but shall exclude other remuneration paid
directly to the employee, profit-sharing payments, employee benefits, imputed
income on employee benefits, employee expense reimbursements and income
received in connection with stock options.
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.
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<PAGE>
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 this stock for each calendar year
in which these rights are outstanding. No employee shall be eligible for the
grant of any rights under the purchase plan if immediately after these 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 the lesser of
500,000 shares of common stock or 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.
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 discussed 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 the offerings, 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.
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<PAGE>
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.
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%, in exchange for a promissory note secured by a
pledge of 262,501 shares of common stock.
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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 shown 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 -- --
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)............................ -- -- --
Pharma Vision 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 one of our directors, is a
director of Pharma Vision. Dr. Sjostrand, a member of our board of
directors, is a director of Pharma Vision.
(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 shown above. This agreement and
additional similar agreements provide that these and other stockholders will
have registration rights with respect to their shares of common stock issuable
upon conversion of their preferred stock following the offerings.
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
67
<PAGE>
intend to enter into those agreements with our future directors and officers.
See "Limitation of Liability; Indemnification of Directors and Officers."
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 as an employee of Tularik
through that date. 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 discussed 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.
Pharma Vision, which is our largest stockholder and owns 23.5% of our
outstanding stock, has expressed an interest in acquiring directly from us
concurrently with the offerings additional shares of common stock that would
allow it to maintain its percentage ownership. Pharma Vision would purchase
1,468,750 shares of common stock, and if the underwriters exercised the over-
allotment options in full, Pharma Vision would purchase an additional 220,313
shares of common stock. Any sales of shares by us to Pharma Vision would be
made under a separate purchase agreement between us and Pharma Vision
containing customary terms. All shares to be sold to Pharma Vision under this
agreement would be sold at the public offering price shown on the cover page of
this prospectus. These shares would be sold through the registration statement
of which this prospectus is a part and would not be subject to any lock-up
agreement with us or the underwriters. The underwriters would not receive any
discounts or commissions on the sale of these shares.
BZ Bank Limited, an affiliate of Pharma Vision, is one of the international
managers of the offering. Please see discussion under "Underwriting."
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<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 the offerings,
and 41,521,375 shares of common stock outstanding immediately following the
completion of the public offerings and the direct offering to Pharma Vision.
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 Outstanding
Shares Issuable Shares Beneficially Owned
Shares Subject to Under Options ---------------------------------
Outstanding a Right of Exercisable Before the After the
Shares of Repurchase as of within 60 Days Public Offerings Public Offerings
Common September 30, of September and the and the
Name Stock(1) 1999(2) 30, 1999 Direct Offering Direct Offering
- ---- ----------- ----------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Pharma Vision 2000 AG(3)........... 8,280,000 -- -- 23.5 23.5
Spielhof 3
8750 Glaris Switzerland
Entities affiliated with Mayfield
Fund(4)........................... 3,966,474 -- -- 11.2 9.6
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
David V. Goeddel, Ph.D.(5)......... 9,658,125 171,876 549,999 29.0 28.2
John P. McLaughlin................. -- -- 225,001 * *
Yasunori Kaneko, M.D.(6)........... 395,000 -- 275,000 1.9 1.6
Andrew J. Perlman, M.D., Ph.D.(7).. 270,000 -- 205,000 1.3 1.1
Pieter B.M.W.M. Timmermans, Ph.D... 77,778 38,889 133,333 * *
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 23.6
All executive officers and
directors as a group (14
people)(12)....................... 15,434,649 278,827 2,689,999 48.5 41.6
</TABLE>
- --------
* Less than one percent (1%).
(1) Excludes shares of common stock subject to a right of repurchase as of
September 30, 1999.
69
<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) Pharma Vision has expressed an interest in acquiring directly from us
concurrent with the public offerings additional shares of common stock
that would allow it to maintain its percentage ownership. The percentage
of total outstanding shares beneficially owned by Pharma Vision after the
public offerings and the direct offering includes 1,468,750 shares that
may be purchased by Pharma Vision in the direct offering. See "Related
Party Transactions" for more detail on the direct offering.
(4) 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.
(5) Includes 8,280,000 shares held by Pharma Vision. The percentage of total
outstanding shares beneficially owned by Pharma Vision after the public
offerings and the direct offering includes 1,468,750 shares that may be
purchased by Pharma Vision in the direct offering. Dr. Goeddel is a
director of Pharma Vision 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.
(6) 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.
(7) 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.
(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 Pharma Vision. The percentage of total
outstanding shares beneficially owned by Pharma Vision after the public
offerings and the direct offering includes 1,468,750 shares that may be
purchased by Pharma Vision in the direct offering. Dr. Sjostrand is a
director of Pharma Vision 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.
70
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the offerings 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 options 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
According 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 diminish 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 the offerings, 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 the offerings, 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.
71
<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 that 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
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 that date, the business combination is approved by
our board of directors and is 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 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 public offerings, 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 by our amended and restated 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.
72
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offerings, there has been no public market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could reduce 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 the public offerings and the direct offering to Pharma
Vision, 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 the public offerings and the direct 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:
. unless held by affiliates, the 4,781,250 shares sold in the public
offerings, the 1,468,750 shares sold to Pharma Vision in the direct
offering and an additional 2,086,627 shares will be freely tradable upon
completion of the offerings;
. 104,949 shares will be eligible for sale beginning 90 days after the date
of this prospectus;
. 33,079,799 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. Shares purchased by Pharma Vision in the direct offering
would not be subject to any lock-up agreement with the underwriters or us.
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 the offerings;
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
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<PAGE>
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 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 this registration.
Stock Options. Following the offerings, 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 and unvested shares.
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<PAGE>
UNDERWRITING
Under the U.S. underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, each of the U.S.
underwriters named below, for whom Lehman Brothers Inc., Hambrecht & Quist LLC,
J.P. Morgan Securities Inc. and Warburg Dillon Read LLC are acting as U.S.
representatives, has agreed to purchase from us the number of shares of common
stock shown opposite its name below:
<TABLE>
<CAPTION>
Number
of
U.S. Underwriters Shares
----------------- ------
<S> <C>
Lehman Brothers Inc...................................................
Hambrecht & Quist LLC.................................................
J.P. Morgan Securities Inc............................................
Warburg Dillon Read LLC...............................................
----
Total...............................................................
====
</TABLE>
Under the international underwriting agreement, which is filed as an exhibit
to the registration statement relating to this prospectus, the international
managers named below, for whom Lehman Brothers Inc., Hambrecht & Quist LLC,
J.P. Morgan Securities Inc. and Warburg Dillon Read LLC are acting as lead
managers, have each agreed to purchase from us the respective number of shares
of common stock shown opposite its name below:
<TABLE>
<CAPTION>
Number
of
International Managers Shares
---------------------- ------
<S> <C>
Lehman Brothers Inc...................................................
Hambrecht & Quist LLC.................................................
J.P. Morgan Securities Inc............................................
Warburg Dillon Read LLC...............................................
BZ Bank Limited.......................................................
----
Total...............................................................
====
</TABLE>
We refer to the U.S. underwriters and international managers as the
underwriters and the U.S. representatives and international lead managers as
the representatives.
BZ Bank Limited, a licensed bank and broker-dealer in Switzerland, is one of
the international managers. BZ Bank is an affiliate of Pharma Vision 2000 AG,
which is our largest stockholder and currently owns 23.5% of our outstanding
common stock. Peter Sjostrand, a member of our Board of Directors is a member
of the Pharma Vision Board of Directors and is a partner of BZ Group, which
controls BZ Bank. David V. Goeddel, our Chief Executive Officer and a member of
our Board of Directors, is also a member of the Pharma Vision Board of
Directors. The representatives and we have agreed that BZ Bank shall purchase
from us and have the discretion to place approximately 26.5% of all shares of
common stock to be sold in the offerings, including the over-allotment options.
BZ Bank has advised us that it intends to sell these shares to investors in
Switzerland and other countries in Europe. BZ Bank will receive the selling
concession on those sales. The shares to be sold by BZ Bank will not be subject
to any lock-up agreement with the underwriters.
The U.S. and international underwriting agreements provide that the
obligations of the underwriters to purchase shares of common stock depend on
the satisfaction of the conditions contained in the U.S. and
75
<PAGE>
international underwriting agreements, respectively. The U.S. and international
underwriting agreements also provide that if any of the shares of common stock
are purchased by the underwriters, then all of the shares of common stock which
the underwriters have agreed to purchase under their respective underwriting
agreements, must be purchased. The conditions contained in each 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, and 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 the offering, the underwriters may change the offering price and other
selling terms.
We have granted the U.S. underwriters and the international managers options
to purchase up to an aggregate of 717,187 additional shares of common stock, in
each case 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 U.S. underwriters and international managers may exercise these
options at any time until 30 days after the date of the underwriting
agreements. If these options are exercised, each U.S. underwriter and
international manager will be committed, so long as the conditions of the
underwriting agreements are satisfied, to purchase a number of additional
shares of common stock proportionate to the U.S. underwriter's or international
manager's initial commitment as indicated in the tables above, and we will be
obligated, under the over-allotment options, to sell the shares of common stock
to the U.S. underwriters and international managers.
We have agreed that, without the prior consent of Lehman Brothers, 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 holders of
substantially all of our outstanding capital stock have agreed under lock-up
agreements that, without the prior written consent of Lehman Brothers, they
will not, subject to limited exceptions, 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."
The U.S. underwriters and the international managers have entered into an
agreement among U.S. underwriters and international managers. In this
agreement, each U.S. underwriter has agreed that,
. it is not purchasing any of these shares for the account of anyone other
than a U.S. Person (as defined below), and
. it has not offered or sold, will not offer, sell, resell or deliver,
directly or indirectly, any of these shares or distribute any prospectus
to anyone other than a U.S. Person.
In addition, under the agreement, each international manager has agreed
that,
. it is not purchasing any of these shares for the account of a U.S.
Person, and
. it has not offered or sold, and will not offer, sell, resell, or deliver,
directly or indirectly, any of these shares or distribute any prospectus
to any U.S. Person.
The limitations described above do not apply to stabilization transactions or
to certain other transactions specified in the underwriting agreements and the
agreement among U.S. underwriters and international managers, including
. certain purchases and sales between U.S. underwriters and the
international managers,
76
<PAGE>
. certain offers, sales, resales, deliveries or distributions to or through
investment advisors or other persons exercising investment discretion,
. purchases, offers or sales by a U.S. underwriter who is also acting as an
international manager or by an international manager who is also acting
as a U.S. underwriter and
. other transactions specifically approved by the representatives.
As used in this section, the term "U.S. Person" means any resident or
national of the United States or Canada, any corporation, partnership or other
entity created or organized in or under the laws of the United States or
Canada, or any estate or trust the income of which is subject to United States
or Canadian federal income taxation regardless of the source. The term "United
States" means the United States of America (including the District of Columbia)
and its territories, its possessions and other areas subject to its
jurisdiction, and the term "Canada" means Canada, its provinces, its
territories, its possessions and other areas subject to its jurisdiction.
According to the agreement among the U.S. underwriters and international
managers, sales may be made between the U.S. underwriters and the international
managers of the number of shares of common stock as may be mutually agreed. The
price of any shares so sold shall be the public offering price as then in
effect for the shares of common stock being sold by the U.S. underwriters and
the international managers less an amount equal to the selling concession
allocable to those shares of common stock, unless otherwise determined by
mutual agreement. To the extent that there are sales between the U.S.
underwriters and the international managers under the agreement among the U.S.
underwriters and the international managers, the number of shares of common
stock available for sale by the U.S. underwriters or by the international
managers may be more or less than the amount specified in the tables above.
Before this offering, there has been no public market for shares of our
common stock. The initial public offering price will be negotiated between the
representatives and us. In determining the initial public offering 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."
Fidelity Capital Markets, a division of National Financial Services
Corporation, is acting as a selling group member in this offering and will be
facilitating electronic distribution of information through the Internet,
intranet and other proprietary electronic technology.
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 agreements. 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.
77
<PAGE>
The underwriters may create a short position in the common stock in
connection with the offerings. 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 offerings.
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.
Each international manager has represented and agreed that:
. it has not offered or sold and, prior to the date six months after the
date of issue of the shares of common stock, will not offer to sell any
shares of common stock to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995;
. it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Regulation with respect to anything
done by it in relation to the shares of common stock in, from or
otherwise involving the United Kingdom; and
. it has only issued or passed on, and will only issue or pass on, to any
person in the United Kingdom any document received by it in connection
with the issue of the shares of common stock if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom these
documents may otherwise be issued or passed upon.
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 312,500 shares of the
common stock offered by this prospectus for sale to our officers, directors,
employees and their family members and to our business 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.
78
<PAGE>
BZ Bank Limited, a licensed bank and broker-dealer in Switzerland and an
international manager in the offering, is an affiliate of Pharma Vision 2000
AG, which is our largest stockholder and owns 23.5% of our outstanding common
stock. Given this relationship and BZ Bank's participation in the offerings,
Lehman Brothers has assumed the responsibilities of acting as qualified
independent underwriter of the offerings. In its role as qualified independent
underwriter, Lehman Brothers has performed a due diligence investigation and
reviewed and participated in the preparation of this prospectus and the
registration statement of which this prospectus is a part. We and the other
underwriters have agreed to indemnify Lehman Brothers in its capacity as
qualified independent underwriter against certain liabilities, including
liabilities under the Securities Act.
Pharma Vision has expressed an interest in acquiring directly from us
concurrently with the offerings additional shares of common stock that would
allow it to maintain its percentage ownership in us. Please see the discussion
under the heading "Related Party Transactions."
79
<PAGE>
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
the offerings 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, and at September 30, 1999 and for
the nine months then ended as shown 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 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.
80
<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 September 30, 1999, 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 and for the nine
months ended September 30, 1999. 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 September 30, 1999, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1998 and for the nine months ended September 30, 1999, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Palo Alto, California
October 25, 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
------------------ September 30, September 30,
1997 1998 1999 1999
-------- -------- ------------- -------------
(Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..... $ 74,545 $ 53,398 $ 17,269
Short-term investments........ 49,861 58,926 86,919
Prepaid expenses and other
current assets............... 881 1,582 2,714
-------- -------- --------
Total current assets........ 125,287 113,906 106,902
Property and equipment, net.... 6,209 11,950 15,674
Other investments.............. 1,000 9,050 2,050
Restricted investment.......... -- -- 3,997
Other assets................... 1,026 1,872 2,403
-------- -------- --------
$133,522 $136,778 $131,026
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable.............. $ 1,154 $ 1,570 $ 1,671
Accrued compensation and
related liabilities.......... 1,084 1,170 1,011
Accrued liabilities........... 1,052 1,377 2,257
Accrued construction costs.... -- 2,076 --
Current portion of long-term
obligations.................. 1,222 2,330 4,402
Deferred revenue.............. 4,248 10,848 13,160
-------- -------- --------
Total current liabilities... 8,760 19,371 22,501
Long-term obligations, less
current portion............... 3,456 4,734 10,254
Other non-current liabilities.. 450 1,775 2,715
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 September 30, 1999,
respectively, and none pro
forma, issuable in series;
aggregate liquidation
preference, $173,542 as of
September 30, 1999........... 27 27 27 $ --
Common stock, $0.001 par
value; 55,000,000 shares
authorized; 7,432,729,
7,560,603, and 8,317,836
shares issued and outstanding
in 1997, 1998 and at
September 30, 1999,
respectively, and 35,271,375
shares pro forma............. 7 8 8 35
Additional paid-in capital.... 173,000 174,035 182,356 182,356
Notes receivable from
stockholders................. (860) (636) (647) (647)
Deferred compensation......... -- (679) (5,377) (5,377)
Accumulated deficit........... (51,318) (61,857) (80,811) (80,811)
-------- -------- -------- -------
Total stockholders' equity..... 120,856 110,898 95,556 $95,556
-------- -------- -------- =======
$133,522 $136,778 $131,026
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE>
TULARIK INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
-------------------------------- ----------------------
1996 1997 1998 1998 1999
--------- --------- ---------- ----------- ----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative research and development.. $ 15,297 $ 20,009 $ 21,362 $ 13,664 $ 17,856
Operating expenses:
Research and development................ 18,622 26,546 33,264 24,149 31,855
Acquired in-process research and
development............................ -- 18,902 -- -- 3,000
General and administrative.............. 3,630 4,020 5,002 3,650 3,903
Amortization of deferred stock
compensation........................... -- -- 31 -- 1,720
--------- --------- ---------- --------- ----------
22,252 49,468 38,297 27,799 40,478
--------- --------- ---------- --------- ----------
Loss from operations...................... (6,955) (29,459) (16,935) (14,135) (22,622)
Interest income, net...................... 1,475 4,085 6,396 4,832 3,668
--------- --------- ---------- --------- ----------
Net loss.................................. $ (5,480) $ (25,374) $ (10,539) $ (9,303) $ (18,954)
========= ========= ========== ========= ==========
Basic and diluted net loss per share...... $ (1.09) $ (4.19) $ (1.55) $ (1.40) $ (2.57)
========= ========= ========== ========= ==========
Weighted average shares used in computing
basic and diluted net loss per share..... 5,033,799 6,062,651 6,790,512 6,666,166 7,387,943
========= ========= ========== ========= ==========
Pro forma basic and diluted net loss per
share.................................... $ (0.31) $ (0.55)
========== ==========
Weighted average shares used in computing
pro forma basic and diluted net loss per
share.................................... 33,686,853 34,313,896
========== ==========
</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 $14 4,970,855 $ 5 $ 38,329 $(131) $ -- $(20,464) $ 17,753
Issuance of Series F
convertible
preferred stock..... 6,272,000 6 -- -- 59,851 -- -- -- 59,857
Issuance of common
stock, net of
repurchases......... -- -- 1,823,712 2 1,300 (571) -- -- 731
Repayment of notes
receivable.......... -- -- -- -- -- 44 -- -- 44
Net loss............. -- -- -- -- -- -- -- (5,480) (5,480)
---------- --- --------- --- -------- ----- ------- -------- --------
Balance at December
31, 1996............ 19,917,132 20 6,794,567 7 99,480 (658) -- (25,944) 72,905
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, 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, 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........ 49,654 -- -- -- -- -- -- -- --
Issuance of common
stock, net of
repurchases......... -- -- 757,233 -- 1,903 (240) -- -- 1,663
Repayment of notes
receivable.......... -- -- -- -- -- 229 -- -- 229
Deferred
compensation........ -- -- -- -- 6,418 -- (6,418) -- --
Amortization of
deferred
compensation........ -- -- -- -- -- -- 1,720 -- 1,720
Net loss............. -- -- -- -- -- -- -- (18,954) (18,954)
---------- --- --------- --- -------- ----- ------- -------- --------
Balance at September
30, 1999............ 26,953,539 $27 8,317,836 $ 8 $182,356 $(647) $(5,377) $(80,811) $ 95,556
========== === ========= === ======== ===== ======= ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
TULARIK INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------------ --------------------
1996 1997 1998 1998 1999
-------- --------- --------- ----------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss................ $ (5,480) $ (25,374) $ (10,539) $ (9,303) $(18,954)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization........... 2,027 1,918 2,423 1,735 2,731
Amortization of
deferred stock
compensation........... -- -- 31 -- 1,720
Noncash stock
compensation........... -- -- 188 -- 515
Write-off of in-process
research and
development............ -- 18,902 -- -- --
Changes in assets and
liabilities, net of
Acquisition:
Other assets........... (596) (240) (1,578) (1,223) (1,663)
Accounts payable and
accrued liabilities... 1,351 1,002 827 127 822
Deferred revenue....... (3,127) (340) 7,873 5,527 2,312
Other liabilities...... -- 141 52 58 940
-------- --------- --------- --------- --------
Net cash used in
operating
activities........... (5,825) (3,991) (723) (3,079) (11,577)
-------- --------- --------- --------- --------
Investing activities
Maturities of available-
for-sale securities.... 8,981 103,693 140,982 100,911 74,699
Purchases of available-
for-sale securities.... (46,374) (109,132) (157,047) (115,995) (99,689)
Capital expenditures.... (1,189) (1,970) (6,057) (3,552) (8,531)
Purchases of long-term
investments............ -- (1,000) (1,050) (1,050) --
Acquisition, net of cash
received............... -- (538) -- -- --
-------- --------- --------- --------- --------
Net cash used in
investing
activities........... (38,582) (8,947) (23,172) (19,686) (33,521)
-------- --------- --------- --------- --------
Financing activities
Proceeds from long-term
debt.................... -- 1,268 3,905 2,028 10,087
Payments of long-term
debt.................... (1,721) (1,490) (1,519) (1,067) (2,495)
Net proceeds from
issuance of preferred
stock................... 59,857 54,472 6 6 --
Proceeds from issuances
of common stock, net.... 775 577 356 241 1,377
-------- --------- --------- --------- --------
Net cash provided by
financing
activities........... 58,911 54,827 2,748 1,208 8,969
-------- --------- --------- --------- --------
Net increase (decrease)
in cash and cash
equivalents............. 14,504 41,889 (21,147) (21,557) (36,129)
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 $ 52,988 $ 17,269
======== ========= ========= ========= ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the nine-month period ended September 30, 1998 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 to take advantage of the Delaware General Corporation Law. Upon the
reincorporation, the Company became authorized to issue 33,000,000 shares of
$0.001 par value convertible preferred stock and 55,000,000 shares of $0.001
par value common stock. All par value, share and per share amounts included in
the accompanying financial statements have been retroactively adjusted to
reflect the Company's reincorporation in Delaware.
Since its founding, the Company has been engaged in the discovery and
development of a broad range of novel, orally available drugs, most of which
act through gene regulation. 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 AG ("Knoll")
relating to obesity (commenced in November 1998); Japan Tobacco Inc. ("Japan
Tobacco") relating to orphan nuclear receptors (commenced in September 1998);
Roche Bioscience ("Roche Bioscience") relating to inflammation (commenced in
July 1997); Japan Tobacco relating to obesity (commenced in September 1996);
Taisho Pharmaceutical Co., Ltd. ("Taisho") relating to immune disorders
(commenced in April 1995); and Sumitomo Pharmaceuticals Co., Ltd. ("Sumitomo")
relating to hypercholesterolemia (commenced in January 1995). Previously,
Tularik also had collaborations with Yamanouchi Pharmaceutical Co., Ltd.
("Yamanouchi") relating to inflammation (commenced in November 1993, ended in
November 1996) and with Merck & Co., Inc., ("Merck") relating to viral disease
(commenced in December 1993, ended in March 1999). As of September 30, 1999,
the Company has received $13.0 million in equity investments and $108.3 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.
F-7
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
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.
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 and at September 30,
1999. 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 and for the nine-months ended September 30, 1999, 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
and at September 30, 1999.
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"). Consistent
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 one of these 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).
Research and Development
Research and development expenses, including direct and allocated expenses,
consist of independent research and development costs and costs associated with
collaborative research and development arrangements. In addition, the Company
funds research and development at other companies and research institutions
under agreements which are generally cancelable. All such costs are charged to
operations as incurred.
F-8
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
Stock-Based Compensation
The Company accounts for grants of stock options and common stock purchase
rights according to 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. Options granted to consultants are accounted for using the
Black-Scholes method prescribed by SFAS 123 in accordance with Emerging Issues
Task Force Consensus No. 96-18. These options are subject to periodic re-
valuation over their vesting terms. Any deferred stock compensation calculated
according 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 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 nine months ended September 30, 1999.
Net Loss Per Share
Net loss per share has been computed according to 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.
F-9
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
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 Nine months ended
December 31, September 30,
----------------------------------- ---------------------
1996 1997 1998 1998 1999
---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Basic and diluted:
Net loss.............. $ (5,480) $ (25,374) $ (10,539) $ (9,303) $ (18,954)
========== =========== ========== ========= ==========
Weighted average
shares of common
stock outstanding.... 5,627,770 7,292,476 7,495,576 7,439,137 7,856,192
Less: weighted average
shares subject to
repurchase........... (593,971) (1,229,825) (705,064) (772,971) (468,249)
---------- ----------- ---------- --------- ----------
Weighted average
shares used in
computing basic and
diluted net loss per
share................ 5,033,799 6,062,651 6,790,512 6,666,166 7,387,943
========== =========== ========== ========= ==========
Basic and diluted net
loss per share....... $ (1.09) $ (4.19) $ (1.55) $ (1.40) $ (2.57)
========== =========== ========== ========= ==========
Pro forma basic and
diluted:
Shares used above..... 6,790,512 7,387,943
Pro forma adjustment
to reflect weighted
average effect of
assumed conversion of
preferred stock...... 26,896,341 26,925,953
---------- ----------
Total weighted average
shares of common
stock outstanding pro
forma................ 33,686,853 34,313,896
========== ==========
Basic and diluted pro
forma loss per
share................ $ (0.31) $ (0.55)
========== ==========
</TABLE>
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. These outstanding securities consist of the
following:
<TABLE>
<CAPTION>
December 31, September 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 3,710,872 5,351,309 5,215,407 5,955,965
Warrants................ 702,674 999,235 1,078,382 1,078,382 1,015,091
---------- ---------- ---------- ---------- ----------
Total................. 23,592,556 31,568,930 33,333,576 33,197,674 33,924,595
========== ========== ========== ========== ==========
Weighted average
exercise price of
options................ $ 0.61 $ 1.41 $ 1.99 $ 1.93 $ 2.23
========== ========== ========== ========== ==========
Weighted average
exercise price of
warrants............... $ 7.15 $ 8.88 $ 9.71 $ 9.71 $ 10.17
========== ========== ========== ========== ==========
</TABLE>
F-10
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
Unaudited Financial Statements
The accompanying unaudited financial statements for the nine months ended
September 30, 1998 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 $29.8 million and recognized collaboration revenue of $15.3
million, $20.0 million, and $21.4 million in 1996, 1997, and 1998,
respectively. For the nine months ended September 30, 1999, Tularik received
research funding of $21.0 million and recognized collaboration revenue of $17.9
million. Under the terms of existing collaborations at September 30, 1999, the
Company's partners have agreed to provide future research funding of up to
approximately $50.7 million over a five-year period, including $33.5 million
subject possible cancellation, as well as additional payments upon the
achievement of specific research and development milestones. Annual research
funding under these agreements ranges from $3.5 million to $6.0 million per
agreement. All research payments are non-refundable and the Company performs
research under 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 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 obligation to Knoll. These retained rights are
subject to a collaboration agreement with Japan Tobacco 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. Knoll is committed to pay Tularik up
to $20.5 million in research payments, of which $5.6 million has been paid as
of September 30, 1999.
In September 1998, Tularik and Japan Tobacco established a five-year
collaboration to discover, develop and market compounds that act by regulating
orphan nuclear receptors. Under the terms of the collaboration, Japan Tobacco
is funding the majority of research expenses and development and
commercialization costs and profits will be shared equally by the partners.
Tularik retains exclusive marketing and sales rights in the United States and
Canada. JT retains exclusive marketing and sales rights in Japan and Korea.
Japan Tobacco has the right to terminate the collaboration at the end of the
third or fourth years of the five year collaboration. Japan Tobacco is
committed to pay Tularik up to $29.0 million in research payments related to
the orphan nuclear receptor collaboration, of which $12.0 million has been paid
as of September 30, 1999.
In July 1997, Tularik and Roche Bioscience established a five-year
collaboration to discover, develop and market anti-inflammatory therapeutics.
Under the collaboration, Roche Bioscience has exclusive, worldwide
manufacturing and marketing rights to develop and commercialize drugs resulting
from the research program
F-11
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
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 Bioscience. Roche Bioscience 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. Roche
Bioscience is committed to pay Tularik up to $30.0 million in research
payments, of which $16.3 million has been paid as of September 30, 1999.
In September 1996, the Company entered into a five-year collaboration with
Japan Tobacco to discover, develop and market compounds in the fields of
obesity and diabetes. Under a related stock purchase agreement, Japan Tobacco
purchased 600,000 shares of Tularik's Series F preferred stock for $10.00 per
share, on the same terms and conditions as other investors in the Series F
financing. In September 1998, Tularik and Japan Tobacco 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 Japan Tobacco. Tularik retains
exclusive marketing and sales rights in the United States and Canada. Japan
Tobacco retains exclusive marketing and sales rights in Japan and Korea. Japan
Tobacco will be required to make benchmark payments to Tularik based on
clinical progress. Japan Tobacco has the right to terminate the collaboration
at the end of the fourth year of the five year collaboration. Japan Tobacco is
committed to pay Tularik up to $18.5 million in research payments related to
the obesity and diabetes collaboration, of which $14.0 million has been paid as
of September 30, 1999.
In April 1995, Tularik established a five-year collaboration with 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 these 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. Taisho was committed to
pay, and has paid, Tularik $15.0 million in research payments as of September
30, 1999.
In January 1995, the Company entered into a five-year collaboration with
Sumitomo to fund research and development in the field of hypercholesterolemia.
Under 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, the
fair value of the preferred stock at that date. 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
these 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. Sumitomo was committed to pay, and has
paid, Tularik $15.0 million in research payments as of September 30, 1999.
In December 1993, Tularik established a collaboration with Merck to fund
research and development in specified fields of human viral disease. Under 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, the
fair value of the preferred stock at that date. In December 1996, the companies
amended the original agreement, extending its term to December 1999. In March
1999, utilizing early termination rights under the amended agreement, Merck
terminated the collaboration. Merck was commited to pay, and has paid, Tularik
$18.4 million in research payments as of September 30, 1999.
F-12
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
In November 1993, the Company entered into a five-year collaboration
agreement with Yamanouchi to fund research and development in the field of
inflammation. Under 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, the fair value of the preferred stock at that date. In November
1996, utilizing early termination rights under the agreement, Yamanouchi
terminated the collaboration after three years of the five year term.
Yamanouchi was committed to pay, and has paid, Tularik $12.0 million in
research payments as of September 30, 1999.
4. Investments
The following is a summary of available-for-sale securities at cost, which
approximates fair value (in thousands):
<TABLE>
<CAPTION>
December 31,
--------------- September 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
Cash equivalents:
Money market funds......................... $ 1,624 $ 2,659 $ 2,039
Corporate debt securities.................. 72,905 50,739 15,230
------- ------- -------
$74,529 $53,398 $17,269
======= ======= =======
Short-term investments:
Obligations of domestic governmental
agencies.................................. $10,000 $12,999 $12,004
Corporate debt securities.................. 39,861 45,927 74,915
------- ------- -------
$49,861 $58,926 $86,919
======= ======= =======
</TABLE>
As of December 31, 1997 and 1998 and September 30, 1999, the average
portfolio duration was approximately three, five and eight months,
respectively.
5. Property and Equipment
The following is a summary of property and equipment at (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------- September 30,
1997 1998 1999
------- ------- -------------
<S> <C> <C> <C>
Laboratory and office equipment............ $10,808 $15,063 $ 18,344
Leasehold improvements..................... 1,702 5,376 8,785
Construction in progress................... 31 235 --
------- ------- --------
12,541 20,674 27,129
Less accumulated depreciation and
amortization.............................. (6,332) (8,724) (11,455)
------- ------- --------
Property and equipment, net................ $ 6,209 $11,950 $ 15,674
======= ======= ========
</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, 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 1,620,004 shares of
Tularik
F-13
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
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 29,976
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 million to
in-process research and development and $24,000 to net tangible assets.
Management is responsible for estimating the amount allocated to in-process
research and development, which was expensed at the time of acquisition. The
Company's results of operations include Amplicon's results from October 31,
1997.
At the date of the acquisition, Amplicon's sole activity was performing basic
research to identify genes that may result in the development of diagnostic and
therapeutic products for the treatment of cancer. Prior to the acquisition,
Amplicon had discovered over twenty novel genetic regions that are commonly
mutated in human cancers and was actively searching for genes within these
regions that play an important role in the development of cancer. Amplicon's
efforts to identify cancer genes relied heavily on a proprietary methodology,
Representational Difference Analysis, that is distinguished from other methods
by its ability to identify non-inherited genetic mutations. The
Representational Difference Analysis methodology is specifically applicable to
the discovery of cancer genes, acquired genetic mutations and pathogens and
does not have alternative future uses.
In order to estimate the value of the cancer gene discovery project and the
related methodology at the time of the acquisition, management considered a
wide range of estimates of 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. Management 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 risk related to changes in
target markets.
The Company's analysis, performed using the income method, assumed inception
of product revenues beginning in 2002. Given the high degree of uncertainty
inherent in the discovery and development of diagnostic and therapeutic
products, the analysis applied a risk adjusted discount rate of 40% to the
forecasted cash flows to estimate the present value of the acquired project and
related methodology. Using this approach, the Company concluded that the
estimated fair value of the acquired in-process research and development was
$21.4 million at the date of the acquisition. Management believes that this
amount did not exceed the amount a third party would have paid for the project.
Accordingly, the purchase price was allocated to the tangible and intangible
net assets acquired and $18.9 million was charged to acquired in-process
research and development. Had a lower value been assigned to the acquired in-
process research and development, the difference would have been recorded as
goodwill and amortized to operating expense over future periods.
To date, no products have been developed from this project, technological
feasibility has not been proven and no corporate collaborations have been
consummated based on the research at Amplicon. Accordingly, the future benefits
of the ongoing research remain uncertain and the value allocated to the
acquired in-process research and development was expensed at the time of
acquisition.
F-14
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
7. License Agreement
On September 24, 1999, the Company entered into a license agreement with Eli
Lilly under which it obtained an exclusive, worldwide, royalty-bearing license
to make, use and sell pharmaceutical products containing a compound known as
lometrexol. In connection with this agreement, the Company paid $3.0 million to
Eli Lilly as an initial license fee and agreed to pay certain milestones and
royalties upon successful commercialization of lometrexol. Under the agreement,
Eli Lilly granted the Company a license to its proprietary technology relating
to lometrexol, and also a sublicense under an exclusive license granted to Eli
Lilly by Princeton University relating to lometrexol. Eli Lilly has specified
obligations under the agreement to maintain the license from Princeton. Eli
Lilly has the right to match the material terms of any offer made by a third
party to Tularik for commercialization rights relating to lometrexol products.
The Company may terminate the agreement with Eli Lilly upon written notice and
Eli Lilly may terminate our license in specified major countries if we fail to
use reasonable diligence to develop lometrexol products in these countries, and
may terminate the agreement if we fail to use appropriate diligence to develop
lometrexol products in a predetermined number of major countries. If Eli Lilly
terminates the agreement, Eli Lilly obtains a nonexclusive, royalty-bearing,
worldwide license to our technical improvements to lometrexol.
At the date of the license agreement, lometrexol had completed the first of
three phases of clinical trials required to seek regulatory approval from the
FDA. No trials had been commenced that could have demonstrated, with
statistical significance, the effectiveness of lometrexol as a treatment for
any type of cancer. These trials, necessary to establish the technological
feasibility of lometrexol, will not be completed for at least several years. In
addition, lometrexol has no known alternative future uses. Accordingly, the
initial license payment was allocated to acquired in-process research and
development and expensed at the time of the agreement.
8. Long-Term Obligations
At September 30, 1999, the Company's aggregate commitments under long-term
debt and noncancelable lease arrangements are as follows:
<TABLE>
<CAPTION>
Year ended Long-Term Operating
September 30, Debt Capital Leases Leases
------------- --------- -------------- ---------
(In thousands)
<S> <C> <C> <C>
2000...................................... $ 3,661 $ 1,917 $ 4,614
2001...................................... 3,472 1,554 4,820
2002...................................... 2,640 764 4,762
2003...................................... 2,374 891 4,689
2004...................................... -- -- 4,776
Thereafter................................ -- -- 41,297
------- ------- -------
Total minimum payment required............ 12,147 5,126 $64,958
=======
Less amount representing interest......... (1773) (844)
-------
Present value of future payments 10,374 4,282
Less current portion...................... (2,642) (1,760)
------- -------
$ 7,732 $ 2,522
======= =======
</TABLE>
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
F-15
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
transactions. The leases are classified as capital leases. The cost of assets
under secured financing arrangements was $6.7 million, $10.2 million and $18.9
million and the related accumulated depreciation and amortization was $3.7
million, $5.0 million and $7.8 million at December 31, 1997 and 1998 and at
September 30, 1999, respectively.
Rent expense, principally for leased facilities under long-term operating
lease commitments, was $2.0 million, $2.3 million, $2.4 million and $3.5
million for 1996, 1997, 1998 and for the nine months ended September 30, 1999,
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 received sublease
income of $464,000 during the nine months ended September 30, 1999. The Company
did not receive sublease income in 1996, 1997 and 1998.
9. 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 September 30, 1999.
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 September
30, 1999 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 3,361,894 7,968
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 26,953,539 $173,542
========== ========
Undesignated..................... 1,014,469
----------
33,000,000
==========
</TABLE>
F-16
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
A summary of warrants to purchase preferred stock at September 30, 1999 is as
follows:
<TABLE>
<CAPTION>
Term
Number of Exercise in
Description Warrants Price Years Expiration
----------- --------- ------------- ----- ----------
<S> <C> <C> <C> <C>
Lease financing arrangements...... 124,972 $3.70-$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
-------
815,091
=======
</TABLE>
10. 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 September 30, 1999, 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 nine months ended
September 30, 1999, in connection with the grant of certain share options to
employees, the Company recorded deferred stock compensation of $710,000 and
$6.4 million, respectively, representing the difference between the exercise
price and the deemed fair value of the Company's common stock on the date these
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 nine months
ended September 30, 1999, the Company recorded amortization of deferred stock
compensation expense of approximately $31,000 and $1.7 million, respectively.
At September 30, 1999, the Company had a total of approximately $5.4 million
remaining to be amortized over the corresponding vesting period of each
respective option, generally four years.
F-17
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 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,
1998 and for the nine months ended September 30, 1999, respectively: risk free
interest rates of 6.6%, 6.0%, 5.5% and 6.0%; no dividend yield; and a weighted-
average expected life of the options of 5 years. Pro forma information follows:
<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- -------- -------- ------- --------
(In thousands, except per
share amounts)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported................. $(5,480) $(25,374) $(10,539) $(9,303) $(18,954)
======= ======== ======== ======= ========
Pro forma................... $(5,576) $(25,692) $(11,179) $(9,783) $(20,340)
======= ======== ======== ======= ========
Net loss per share (basic and
diluted):
As reported................. $ (1.09) $ (4.19) $ (1.55) $ (1.40) $ (2.57)
======= ======== ======== ======= ========
Pro forma................... $ (1.11) $ (4.24) $ (1.65) $ (1.47) $ (2.75)
======= ======== ======== ======= ========
</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....................................... 1,501,500 3.00
Exercised..................................... (764,729) 1.95
Forfeited..................................... (132,115) 2.69
----------
Options outstanding at September 30, 1999....... 5,938,003 2.24
==========
</TABLE>
F-18
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
An analysis of options outstanding at September 30, 1999, is as follows:
<TABLE>
<CAPTION>
Weighted
Options Average Weighted Options Weighted
Outstanding at Remaining Average Vested at Average
Exercise September 30, Contractual Exercise September 30, Exercise
Price 1999 Life Price 1999 Price
---------- -------------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
$0.45-0.99 1,828,896 5.44 $0.54 1,662,191 $0.52
1.00-1.99 2,000 6.93 1.00 1,542 1.00
2.00-3.00 4,107,107 8.78 2.99 1,162,588 2.98
--------- ---------
5,938,003 7.75 2.24 2,826,321 1.53
========= =========
</TABLE>
The weighted-average fair value of options granted during 1996, 1997, 1998
and the nine months ended September 30, 1999 was $0.27, $0.76, $0.70 and $5.39,
respectively.
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.
Stock Subject to Repurchase
As of December 31, 1997 and 1998 and September 30, 1999, the Company had
462,635, 1,004,050, and 515,432 shares of common stock outstanding,
respectively, which were subject to the Company's lapsing right of repurchase
in the event the holder's association with the Company terminates. These shares
are the result of the exercise of unvested stock options by employees and
shares of common stock sold to a board member which vest over the four-year
period of the board member's term. The shares which relate to the exercise of
unvested stock options will vest over the four-year vesting period of the
underlying exercised stock options.
Reserved Shares
Shares of common stock reserved for future issuance were as follows:
<TABLE>
<CAPTION>
December 31, September 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 5,955,965
Reserved for future grants...................... 1,737,772 436,112
Convertible preferred stock:
Issued and outstanding.......................... 26,903,885 26,953,539
---------- ----------
35,074,537 34,363,758
========== ==========
</TABLE>
11. Related Party Transactions
During the years ended December 31, 1996, 1997 and 1998 and for the nine
months ended September 30, 1999, the Company loaned stockholders $200,000,
$194,132, $357,000 and $595,000, respectively. The loans
F-19
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
were made in connection with stock option exercises, relocation and housing.
The loans have interest rates
which range from interest-free to 6.1% and certain of the loans provide for
forgiveness based on continued employment. The loans are full-recourse and
amounts forgiven have been recorded as compensation expense. The loans made in
connection with stock option exercises have been recorded in stockholders'
equity in the accompanying financial statements.
12. Employee Savings Plan
The Company has an employee savings plan, which permits substantially all
employees to participate and to make contributions by salary reductions as
provided in 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 and 39,920 shares of common stock to employee savings accounts and
recognized compensation expense of $188,000 and $309,000 in 1998 and for the
nine months ended September 30, 1999, respectively.
13. Income Taxes
As of September 30, 1999, Tularik had federal net operating loss
carryforwards of approximately $54.2 million. The net operating loss
carryforwards will expire at various dates beginning on 2007 through 2019, 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 are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
------------------ September 30
1997 1998 1999
-------- -------- ------------
<S> <C> <C> <C>
Net operating loss carryforwards.......... $ 8,400 $ 13,200 $18,900
Research credits (expiring 2007 to 2019).. 1,700 3,000 3,900
Depreciation.............................. 2,500 1,200 1,100
Capitalized research and development...... 700 3,200 2,200
Other, net................................ 200 -- 2,300
-------- -------- --------
Total deferred tax assets................. 13,500 20,600 28,400
Valuation allowance for deferred tax
assets................................... (13,500) (20,600) (28,400)
-------- -------- --------
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, $7.1 million and $7.8
million during the years ended December 31, 1996, 1997 and 1998 and the nine
months ended September 30, 1999, 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.
F-20
<PAGE>
TULARIK INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine-month period ended September 30, 1998 is unaudited)
14. Supplemental Cash Flow Information
Selected cash payments and noncash activities were as follows (in thousands):
<TABLE>
<CAPTION>
Years ended December Nine months ended
31, September 30,
-------------------- -----------------
1996 1997 1998 1998 1999
------ ------- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Interest paid....................... $ 556 $ 549 $ 508 $ 355 $ 670
====== ======= ===== ======== ========
Equipment and leasehold improvements
financed under capital leases...... $2,137 $ 1,185 $ -- $ -- $ --
====== ======= ===== ======== ========
Common stock issued for notes
receivable......................... $ 571 $ 263 $ 149 $ 149 $ 340
====== ======= ===== ======== ========
Issuance of preferred stock and
warrants in connection with
Acquisition........................ $ -- $18,276 $ -- $ -- $ --
====== ======= ===== ======== ========
</TABLE>
15. Subsequent Events
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 September 30, 1999 reflects
conversion of the outstanding preferred stock into 26,953,539 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.
1999 Employee Stock Purchase Plan
In November 1999, the Company adopted its 1999 Employee Stock Purchase Plan,
authorizing the issuance of common stock through 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 the lesser of
500,000 shares of common stock or 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-21
<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.............................................. $25,976
NASD filing fee................................................... 9,844
Nasdaq National Market listing fee................................ 95,000
Blue Sky Fees and Expenses........................................ 10,000
Transfer Agent and Registrar fees................................. 10,000
Accounting fees and expenses...................................... 250,000
Legal fees and expenses .......................................... 425,000
Printing and engraving costs ..................................... 150,000
Miscellaneous expenses ........................................... 24,180
----------
Total........................................................... $1,000,000
==========
</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, 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 22 former stockholders of Amplicon Corp. in exchange for
outstanding shares of Amplicon stock and issued 22 warrants to purchase
245,456 shares of Series H preferred stock at an exercise price of $13.00 per
share. 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.
(9) 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.
(10) 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.
(11) 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>
(12) 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.
(13) In August 1999, we issued three warrants to purchase an aggregate of
139,570 shares of Series H preferred stock at an exercise price of $13.00 per
share. Warrants to purchase 125,613 shares were issued to Slough Estates USA
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.
(14) From November 1997 to September 1999, we issued an aggregate of 9,855
shares of Series H preferred stock to six former stockholders of Amplicon Corp.
upon the exercise of outstanding Amplicon options at exercise prices ranging
from $0.70 to $0.95 per share. In connection with the issuance of these 9,855
shares of Series H preferred stock, we issued seven warrants to purchase an
aggregate of 1,493 shares of Series H preferred stock at an exercise price of
$13.00 per share.
Item 16. (a) Exhibits and Financial Statement Schedules
<TABLE>
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
1.3+ Form of Purchase Agreement for Pharma Vision 2000 AG.
3.1+ Amended and Restated Certificate of Incorporation of Registrant to
be filed upon the closing of the offering made in connection with
this Registration Statement.
3.2+ Amended and Restated Bylaws of Registrant to be filed upon the
closing of the offering made in connection with this Registration
Statement.
4.1+ Specimen Common Stock Certificate.
4.2+ Amended and Restated Registration Rights Agreement, dated 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.
</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>
- --------
++ Confidential treatment requested as to specific portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
+ Previously filed.
* Previously filed and filed herewith in connection with revisions to our
confidential treatment requests.
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
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.
II- 4
<PAGE>
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 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 Amendment No. 4 to the 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 9th day of
December, 1999.
TULARIK INC.
/s/ Corinne H. Lyle
By:__________________________________
Corinne H. Lyle
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 4 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Chief Executive Officer December 9, 1999
______________________________________ and Director (Principal
David V. Goeddel Executive Officer)
/s/ Corinne H. Lyle Chief Financial Officer December 9, 1999
______________________________________ (Principal Finance and
Corinne H. Lyle Accounting Officer)
* Director December 9, 1999
______________________________________
A. Grant Heidrich, III
* Director December 9, 1999
______________________________________
Mark J. Levin
* Director December 9, 1999
______________________________________
Paul A. Marks
* Director December 9, 1999
______________________________________
Edward R. McCracken
* Director December 9, 1999
______________________________________
Steven L. McKnight
* Director December 9, 1999
______________________________________
Peter J. Sjostrand
</TABLE>
*By /s/ Corinne H. Lyle
- --------------------------------
(Attorney-In-Fact)
II-6
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
1.3+ Form of Purchase Agreement for Pharma Vision 2000 AG.
3.1+ Amended and Restated Certificate of Incorporation of Registrant to
be filed upon the closing of the offering made in connection with
this Registration Statement.
3.2+ Amended and Restated Bylaws of Registrant to be filed upon the
closing of the offering made in connection with this Registration
Statement.
4.1+ Specimen Common Stock Certificate.
4.2+ Amended and Restated Registration Rights Agreement, dated 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>
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>
- --------
++ Confidential treatment requested as to specific portions, which portions are
omitted and filed separately with the Securities and Exchange Commission.
+ Previously filed.
* Previously filed and filed herewith in connection with revisions to our
confidential treatment requests.
<PAGE>
EXHIBIT 1.1
__________ Shares
TULARIK INC.
Common Stock
U.S. UNDERWRITING AGREEMENT
---------------------------
______________, 1999
Lehman Brothers Inc.
Hambrecht & Quist LLC
J.P. Morgan Securities Inc.
Warburg Dillon Read LLC
As Representatives of the several
U.S. Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Tularik Inc., a Delaware corporation (the "Company"), proposes to sell
__________ shares (the "Firm Stock") of the Company's Common Stock, par value
$0.001 per share (the "Common Stock"). In addition, the Company proposes to
grant to the Underwriters named in Schedule 1 hereto (the "U.S. Underwriters")
an option to purchase up to an additional __________ shares of the Common Stock
on the terms and for the purposes set forth in Section 2 (the "Option Stock").
The Firm Stock and the Option Stock, if purchased, are hereinafter collectively
called the "Stock." This is to confirm the agreement concerning the purchase of
the Stock from the Company by the U.S. Underwriters.
It is understood by all parties that the Company is concurrently entering
into an agreement dated the date hereof (the "International Underwriting
Agreement") providing for the sale by the Company of ____ shares of Common Stock
(including the over-allotment option thereunder) (the "International Stock")
through arrangements with certain underwriters outside the United States (the
"International Managers"), for whom Lehman Brothers Inc., Hambrecht & Quist LLC,
J.P. Morgan Securities Inc. and Warburg Dillon Read LLC, are acting as lead
managers. The U.S. Underwriters and the International Managers simultaneously
are entering into an agreement between the U.S. and international underwriting
syndicates (the "Agreement Between U.S. Underwriters and International
Managers") which provides for, among other things, the transfer of shares of
Common Stock between the two syndicates. One form of prospectus will be used in
connection with the offering and sale of shares of Common Stock contemplated by
the foregoing relating to both the Stock and the International Stock. Except as
used in Sections 2, 3, 4, 9 and 10 herein, and except as the context may
otherwise require, references herein to the Stock shall include
<PAGE>
all the shares which may be sold pursuant to either this Agreement or the
International Underwriting Agreement.
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1 with respect to the
Stock has (i) been prepared by the Company in conformity with the
requirements of the United States Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the United States Securities and Exchange Commission
(the "Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective under the
Securities Act. Copies of such registration statement have been
delivered by the Company to you as the representatives (the
"Representatives") of the U.S. Underwriters. As used in this
Agreement, "Effective Time" means the date and the time as of which
such registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission;
"Effective Date" means the date of the Effective Time; "Preliminary
Prospectus" means each prospectus included in such registration
statement, or amendments thereof, before it became effective under the
Securities Act and any prospectus filed with the Commission by the
Company with the consent of the Representatives pursuant to Rule
424(a) of the Rules and Regulations; "Registration Statement" means
such registration statement, as amended at the Effective Time,
including all information contained in the final prospectus filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations in
accordance with Section 5 hereof and deemed to be a part of the
registration statement as of the Effective Time pursuant to paragraph
(b) of Rule 430A of the Rules and Regulations; and "Prospectus" means
such final prospectus, as first filed with the Commission pursuant to
paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations. The
Commission has not issued any order preventing or suspending the use
of any Preliminary Prospectus.
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Securities Act and the Rules and Regulations and
do not and will not, as of the applicable effective date (as to the
Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) 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 statements therein not misleading; provided that
no representation or warranty is made as to information contained in
or omitted from the Registration Statement or the Prospectus or any
further amendments to the Registration Statement or Prospectus, in
reliance upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any U.S.
Underwriter specifically for inclusion therein.
2
<PAGE>
(c) The Company and Amplicon Corp., a Delaware corporation (the
"Subsidiary"), have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in
which their respective ownership or lease of property or the conduct
of their respective businesses requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the business, financial condition or results of operations
of the Company, and have all power and authority necessary to own or
hold their respective properties and to conduct business as described
in the Registration Statement and Prospectus; and the Subsidiary of
the Company is not a "significant subsidiary," as such term is defined
in Rule 405 of the Rules and Regulations. The Company has no
subsidiaries (as defined in Section 15), other than the Subsidiary.
(d) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims.
(e) The unissued shares of the Stock to be issued and sold by
the Company to the U.S. Underwriters hereunder and under the
International Underwriting Agreement have been duly and validly
authorized and, when issued and delivered against payment therefor as
provided herein and in the International Underwriting Agreement, will
be duly and validly issued, fully paid and non-assessable; and the
Stock will conform to the description thereof contained in the
Prospectus.
(f) Each of this Agreement and the International Agreement have
been duly authorized, executed and delivered by the Company.
(g) The execution, delivery and performance of this Agreement
and the International Underwriting Agreement by the Company and the
consummation of the transactions contemplated hereby and thereby will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or the Subsidiary is a party or by
which the Company or the Subsidiary is bound or to which any of the
property or assets of the Company or the Subsidiary is subject, nor
will such actions result in any violation of the provisions of the
charter or bylaws of the Company or the Subsidiary or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or the Subsidiary or any of
their properties or
3
<PAGE>
assets; and except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
applicable state or foreign securities laws in connection with the
purchase and distribution of the Stock by the U.S. Underwriters and
the International Managers, no consent, approval, authorization or
order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery
and performance of this Agreement or the International Underwriting
Agreement by the Company and the consummation of the transactions
contemplated hereby and thereby.
(h) There are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than
rights which have been waived or satisfied), with respect to any
securities of the Company owned by such person, to require the Company
to include such securities in the securities registered pursuant to
the Registration Statement. Except as described in the Prospectus,
there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to register or include securities pursuant to any other
registration statement filed by the Company under the Securities Act.
(i) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act, other
than shares issued pursuant to employee benefit plans, qualified stock
options plans or other employee compensation plans or pursuant to
outstanding options, rights or warrants.
(j) Neither the Company nor the Subsidiary has sustained, since
the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since such date, there has not been any material
change in the capital stock or long-term debt of the Company and the
Subsidiary, taken as a whole, or any material adverse change in, or
any development involving a prospective material adverse change in the
business, financial condition or results of operations of the Company
and the Subsidiary, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus.
(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby,
at the dates and for the periods indicated, and have
4
<PAGE>
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
involved.
(l) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and
who have delivered the initial letter referred to in Section 7(g)
hereof, are independent public accountants as required by the
Securities Act and the Rules and Regulations.
(m) The Company and the Subsidiary have good and marketable
title to all personal property owned by them, free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the
Subsidiary; and all real property and buildings held under lease by
the Company and the Subsidiary are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and the Subsidiary.
(n) The Company and the Subsidiary carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in
similar businesses in similar industries.
(o) The Company owns or possesses adequate licenses or other
rights to use all patents, patent applications, inventions,
trademarks, trade names, applications for registration of trademarks,
service marks, service mark applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights
in any thereof and any other intangible property and assets (herein
called the "Proprietary Rights") necessary to conduct its business in
the manner described in the Prospectus, except where the failure to so
own or possess such Proprietary Rights would not, singularly or in the
aggregate, have a material adverse effect on the financial position,
stockholders' equity, results of operations, business or prospects of
the Company. The Company takes security measures to provide adequate
trade secret protection in its non-patented technology. Except as
disclosed in the Prospectus, the Company has not received any notice
of infringement or conflict with asserted rights of others with
respect to any Proprietary Rights which could result in any material
adverse effect on the Company, and except as specifically identified
and described in the Prospectus, no action, suit, arbitration, or
legal, administrative or other proceeding, or investigation is
pending, or, to the knowledge of the Company, threatened, which
involves any Proprietary Rights. Except as disclosed in the
Prospectus, the Proprietary Rights of the Company referred to in the
Prospectus do not, to the knowledge of the Company, infringe or
conflict with any right or valid and enforceable patent of any third
party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known
5
<PAGE>
to the Company which could have a material adverse effect on the
Company. The Company is not subject to any judgment, order, writ,
injunction or decree of any court or any Federal, state, local,
foreign or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any arbitrator,
nor, except as described in the Prospectus, has it entered into or is
a party to any contract which restricts or impairs the use of any such
Proprietary Rights in a manner which would have a material adverse
effect on the use of any of the Proprietary Rights. The Company has
complied, in all material respects, with its respective contractual
obligations relating to the protection of the Proprietary Rights used
pursuant to licenses. To the knowledge of the Company, no person is
infringing on or violating the Proprietary Rights owned or used by the
Company.
(p) There are no legal or governmental proceedings pending to
which the Company or the Subsidiary is a party or of which any
property or assets of the Company or the Subsidiary is the subject
which, if determined adversely to the Company or the Subsidiary, are
reasonably likely to have a material adverse effect on the financial
position, stockholders' equity, results of operations, business or
prospects of the Company and the Subsidiary, taken as a whole, and to
the knowledge of the Company, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(q) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations.
(r) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described.
(s) No labor disturbance by the employees of the Company exists
or, to the knowledge of the Company, is imminent which would
reasonably be expected to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and the Subsidiary,
taken as a whole.
(t) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
6
<PAGE>
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.
(u) The Company has filed all federal, state and local income
and franchise tax returns required to be filed through the date hereof
and has paid all taxes due thereon, and no tax deficiency has been
determined adversely to the Company or the Subsidiary which has had
(nor does the Company have any knowledge of any tax deficiency which,
if determined adversely to the Company or the Subsidiary, would
reasonably be expected to have) a material adverse effect on the
financial position, stockholders' equity, results of operations,
business or prospects of the Company and the Subsidiary, taken as a
whole.
(v) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company has not (i) issued or granted
any securities, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred
in the ordinary course of business, (iii) entered into any transaction
not in the ordinary course of business or (iv) declared or paid any
dividend on its capital stock.
(w) The Company (i) makes and keeps accurate books and records
and (ii) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing
assets at reasonable intervals.
(x) Neither the Company nor the Subsidiary (i) is in violation
of its charter or bylaws, (ii) is in default in any material respect,
and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance
of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject or (iii) is in
violation in any material respect of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets
may be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct of its
business.
7
<PAGE>
(y) Neither the Company nor the Subsidiary, nor any director or
officer associated with or acting on behalf of the Company or the
Subsidiary, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating
to political activity; made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
(z) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of
toxic wastes, medical wastes, hazardous wastes or hazardous substances
by the Company or the Subsidiary (or, to the knowledge of the Company,
any of their predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company or the
Subsidiary in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or
remedial action which would not have, or could not be reasonably
likely to have, singularly or in the aggregate with all such
violations and remedial actions, a material adverse effect on the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company and the Subsidiary, taken as a
whole; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property
or into the environment surrounding such property of any toxic wastes,
medical wastes, solid wastes, hazardous wastes or hazardous substances
due to or caused by the Company or the Subsidiary or with respect to
which the Company or the Subsidiary have knowledge, except for any
such spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to
have, singularly or in the aggregate with all such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a
material adverse effect on the general affairs, management, financial
position or results of operations of the Company and the Subsidiary,
taken as a whole; and the terms "hazardous wastes," "toxic wastes,"
"hazardous substances" and "medical wastes" shall have the meanings
specified in any applicable local, state and federal laws or
regulations with respect to environmental protection.
(aa) Neither the Company nor the Subsidiary is an "investment
company" within the meaning of such term under the United States
Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.
(bb) The Company has reviewed, and is continuing to review, its
operations and products to evaluate the extent to which the business
or operations of the Company or the Subsidiary will be affected by the
Year 2000 Problem (that is, any significant risk that computer
hardware or software applications used by the Company or the
Subsidiary will not in the case of dates or time periods occurring
8
<PAGE>
after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000); as
a result of such review, (i) the Company has no reason to believe, and
does not believe, that (A) there are any issues related to the
Company's or the Subsidiary's preparedness to address the Year 2000
Problem that are of a character required to be described or referred
to in the Registration Statement or Prospectus which have not been
accurately described in the Registration Statement or Prospectus and
(B) the Year 2000 Problem will have a material adverse effect on the
financial position, stockholders' equity, results of operations,
business or prospects of the Company and the Subsidiary, taken as a
whole, or result in any material loss or interference with the
business or operations of the Company or the Subsidiary, taken as a
whole; and (ii) to the Company's knowledge, the suppliers, vendors,
customers or other material third parties used or served by the
Company or the Subsidiary are addressing or will address the Year 2000
Problem in a timely manner, except to the extent that a failure to
address the Year 2000 Problem by any supplier, vendor, customer or
material third party would not have a material adverse effect on the
financial position, stockholders' equity, results of operations,
business or prospects of the Company and the Subsidiary, taken as a
whole.
2. Purchase of the Stock by the U.S. Underwriters. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell __________ shares of
the Firm Stock to the several U.S. Underwriters, and each of the U.S.
Underwriters, severally and not jointly, agrees to purchase the number of shares
of the Firm Stock set opposite that U.S. Underwriter's name in Schedule 1
hereto. The respective purchase obligations of the U.S. Underwriters with
respect to the Firm Stock shall be rounded among the U.S. Underwriters to avoid
fractional shares, as the Representatives may determine.
In addition, the Company grants to the U.S. Underwriters an option to
purchase up to __________ shares of Option Stock. Such option is granted for
the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 4 hereof. Shares of Option Stock shall be
purchased severally for the account of the U.S. Underwriters in proportion to
the number of shares of Firm Stock set opposite the name of such U.S.
Underwriters in Schedule 1 hereto. The respective purchase obligations of each
U.S. Underwriter with respect to the Option Stock shall be adjusted by the
Representatives so that no U.S. Underwriter shall be obligated to purchase
Option Stock other than in 100 share amounts. The price of both the Firm Stock
and any Option Stock shall be $_____ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on any Delivery Date (as hereinafter defined), as the case may be,
except upon payment for all the Stock to be purchased on such Delivery Date as
provided herein and in the International Underwriting Agreement.
3. Offering of Stock by the U.S. Underwriters.
9
<PAGE>
Upon authorization by the Representatives of the release of the Firm
Stock, the several U.S. Underwriters propose to offer the Firm Stock for sale
upon the terms and conditions set forth in the Prospectus.
It is understood that __________ shares of the Firm Stock will
initially be reserved by the several U.S. Underwriters for offer and sale upon
the terms and conditions set forth in the Prospectus and in accordance with the
rules and regulations of the National Association of Securities Dealers, Inc. to
employees and persons having business relationships with the Company and the
Subsidiary who have heretofore delivered to the Representatives offers to
purchase shares of Firm Stock in form satisfactory to the Representatives, and
that any allocation of such Firm Stock among such persons will be made in
accordance with timely directions received by the Representatives from the
Company; provided, that under no circumstances will the Representatives or any
U.S. Underwriter be liable to the Company or to any such person for any action
taken or omitted in good faith in connection with such offering to employees and
persons having business relationships with the Company and the Subsidiary. It is
further understood that any shares of such Firm Stock which are not purchased by
such persons will be offered by the U.S. Underwriters to the public upon the
terms and conditions set forth in the Prospectus.
Each U.S. Underwriter agrees that, except to the extent permitted by
the Agreement Between U.S. Underwriters and International Managers, it will not
offer or sell any of the Stock outside of the United States.
4. Delivery of and Payment for the Stock. Delivery of and payment
for the Firm Stock shall be made at the office of Cooley Godward LLP, Five Palo
Alto Square, 3000 El Camino Real, Palo Alto, California 94306 at 10:00 A.M., New
York City time, on the [fourth] full business day following the date of this
Agreement or at such other date or place as shall be determined by agreement
between the Representatives and the Company. This date and time are sometimes
referred to as the "First Delivery Date." On the First Delivery Date, the
Company shall deliver or cause to be delivered certificates representing the
Firm Stock to the Representatives for the account of each U.S. Underwriter
against payment to or upon the order of the Company of the purchase price by
wire transfer in immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each U.S. Underwriter hereunder. Upon delivery,
the Firm Stock shall be registered in such names and in such denominations as
the Representatives shall request in writing not less than two full business
days prior to the First Delivery Date. For the purpose of expediting the
checking and packaging of the certificates for the Firm Stock, the Company shall
make the certificates representing the Firm Stock available for inspection by
the Representatives in New York, New York, not later than 2:00 P.M., New York
City time, on the business day prior to the First Delivery Date.
The option granted in Section 2 will expire 30 days after the date of
this Agreement and may be exercised in whole or in part from time to time by
written notice being given to the Company by the Representatives. Such notice
shall set forth the aggregate number of shares of Option Stock as to which the
option is being exercised, the names in which the shares of Option Stock are to
be registered, the denominations in which the shares of Option Stock are to be
issued
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and the date and time, as determined by the Representatives, when the shares of
Option Stock are to be delivered; provided, however, that this date and time
shall not be earlier than the First Delivery Date nor earlier than the second
business day after the date on which the option shall have been exercised nor
later than the fifth business day after the date on which the option shall have
been exercised. The date and time the shares of Option Stock are delivered are
sometimes referred to as a "Second Delivery Date" and the First Delivery Date
and any Second Delivery Date are sometimes each referred to as a "Delivery
Date."
Delivery of and payment for the Option Stock shall be made at the place
specified in the first sentence of the first paragraph of this Section 4 (or at
such other place as shall be determined by agreement between the Representatives
and the Company) at 10:00 A.M., New York City time, on such Second Delivery
Date. On such Second Delivery Date, the Company shall deliver or cause to be
delivered the certificates representing the Option Stock to the Representatives
for the account of each U.S. Underwriter against payment to or upon the order of
the Company of the purchase price by wire transfer in immediately available
funds. Time shall be of the essence, and delivery at the time and place
specified pursuant to this Agreement is a further condition of the obligation of
each U.S. Underwriter hereunder. Upon delivery, the Option Stock shall be
registered in such names and in such denominations as the Representatives shall
request in the aforesaid written notice. For the purpose of expediting the
checking and packaging of the certificates for the Option Stock, the Company
shall make the certificates representing the Option Stock available for
inspection by the Representatives in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to such Second Delivery
Date.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than the Commission's close of
business on the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may
be required by Rule 430A(a)(3) under the Securities Act; to make no
further amendment or any supplement to the Registration Statement or
to the Prospectus except as permitted herein; to advise the
Representatives, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Representatives
with copies thereof; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its
withdrawal;
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(b) To furnish promptly to each of the Representatives and to
counsel for the U.S. Underwriters a signed copy of the Registration
Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith;
(c) To deliver promptly to the Representatives such number of
the following documents as the Representatives shall reasonably
request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in
each case including exhibits other than this Agreement and the
computation of per share earnings) and (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus;
and, if the delivery of a prospectus is required at any time after the
Effective Time in connection with the offering or sale of the Stock or
any other securities relating thereto and if at such time any event
shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary to amend
or supplement the Prospectus in order to comply with the Securities
Act, to notify the Representatives and, upon their request, to file
such amended or supplemental prospectus and to prepare and furnish
without charge to each U.S. Underwriter and to any dealer in
securities as many copies as the Representatives may from time to time
reasonably request of an amended or supplemented Prospectus which will
correct such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any
Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Representatives and counsel for the U.S.
Underwriters and obtain the consent of the Representatives to the
filing;
(f) As soon as practicable after the Effective Date, to make
generally available to the Company's security holders and to deliver
to the Representatives an earnings statement of the Company and the
Subsidiary (which need not be audited) complying with Section 11(a) of
the Securities Act and the Rules and Regulations (including, at the
option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by
the Company to its stockholders
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and all public reports and all reports and financial statements
furnished by the Company to the principal national securities exchange
upon which the Common Stock may be listed pursuant to requirements of
or agreements with such exchange or to the Commission pursuant to the
Exchange Act or any rule or regulation of the Commission thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Stock; provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or
to file a general consent to service of process in any jurisdiction;
(i) For a period of 180 days from the date of the Prospectus,
not to, directly or indirectly, (1) offer for sale, sell, pledge or
otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition by any
person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock (other
than the Stock and shares issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding
options, warrants or rights), or sell or grant options, rights or
warrants with respect to any shares of Common Stock or securities
convertible into or exchangeable for Common Stock (other than the
grant of options pursuant to option plans existing on the date
hereof), or (2) enter into any swap or other derivatives transaction
that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of such shares of Common Stock, whether
any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or
otherwise, in each case without the prior written consent of Lehman
Brothers Inc.; and to cause each officer and director of the Company
to furnish to the Representatives, prior to the First Delivery Date, a
letter or letters, in form and substance satisfactory to counsel for
the U.S. Underwriters, pursuant to which each such person shall agree
not to, directly or indirectly, (1) offer for sale, sell, pledge or
otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition by any
person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock or (2)
enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of such shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of
Common Stock or other securities, in cash or otherwise, in each case
for a period of 180 days from the date of the Prospectus, without the
prior written consent of Lehman Brothers Inc.;
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<PAGE>
(j) Prior to the Effective Date, to apply for the inclusion of
the Stock on the National Market System and to use its best efforts to
complete that listing, subject only to official notice of issuance and
evidence of satisfactory distribution, prior to the First Delivery
Date; and
(k) To take such steps as shall be necessary to ensure that
neither the Company nor the Subsidiary shall become an "investment
company" within the meaning of such term under the United States
Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement, the
Agreement Between U.S. Underwriters and International Managers, and the
Supplemental Agreement Among U.S. Underwriters and any other related documents
in connection with the offering, purchase, sale and delivery of the Stock; (e)
the costs of distributing the terms of agreement relating to the organization of
the domestic underwriting syndicate and selling group to the members thereof by
mail, telex or other means of communication; (f) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of sale of the Stock; (g) any applicable listing or other
fees; (h) the fees and expenses of qualifying the Stock under the securities
laws of the several jurisdictions as provided in Section 5 and of preparing,
printing and distributing a Blue Sky Memorandum (including related fees and
expenses of counsel to the U.S. Underwriters); and (i) all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement; provided that, except as provided in this Section 6 and in
Section 11, the U.S. Underwriters shall pay their own costs and expenses,
including the costs and expenses of their counsel, any transfer taxes on the
Stock which they may sell and the expenses of advertising any offering of the
Stock made by the U.S. Underwriters.
7. Conditions of U.S. Underwriters' Obligations. The respective
obligations of the U.S. Underwriters hereunder are subject to the accuracy, when
made and on each Delivery Date, of the representations and warranties of the
Company contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 5(a); no stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or otherwise shall have been complied
with.
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<PAGE>
(b) No U.S. Underwriter or International Manager shall have
discovered and disclosed to the Company on or prior to such Delivery
Date that the Registration Statement or the Prospectus or any
amendment or supplement thereto contains any untrue statement of a
fact which, in the opinion of Latham & Watkins, counsel for the U.S.
Underwriters, is material or omits to state any fact which, in the
opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the
International Underwriting Agreement, the Stock, the Registration
Statement and the Prospectus, and all other legal matters relating to
this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the
U.S. Underwriters, and the Company shall have furnished to such
counsel all documents and information that they may reasonably request
to enable them to pass upon such matters.
(d) Cooley Godward LLP shall have furnished to the
Representatives its written opinion, as counsel to the Company,
addressed to the U.S. Underwriters and dated such Delivery Date, in
form and substance reasonably satisfactory to the Representatives, to
the effect that:
(i) The Company and the Subsidiary have been duly
incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation, and to our knowledge, are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified
would not have a material adverse effect on the business,
financial condition or results of operations of the Company, and
have all corporate power and authority necessary to own or hold
their respective properties and conduct the businesses in which
they are engaged; and to such counsel's knowledge, other than the
Subsidiary, the Company has no subsidiaries;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company (including the shares of Stock being
delivered on such Delivery Date) have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus;
and all of the issued shares of capital stock of the Subsidiary
have been duly and validly authorized and issued and are fully
paid, non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
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<PAGE>
(iii) There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or
transfer of, any shares of the Stock pursuant to the Company's
Amended and Restated Certificate of Incorporation (the
"Charter"), the Company's bylaws, any agreement filed as an
exhibit to the Registration Statement and Prospectus or, to such
counsel's knowledge, any other agreement to which the Company is
a party;
(iv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or overtly threatened to which
the Company or the Subsidiary is a party or of which any property
or assets of the Company or the Subsidiary is the subject which
are required to be described in the Prospectus by the Securities
Act or the Rules and Regulations;
(v) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such
opinion, the Prospectus was filed with the Commission pursuant to
the subparagraph of Rule 424(b) of the Rules and Regulations as
of the date specified in such opinion and, to such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and, to such counsel's
knowledge, no proceeding for that purpose is pending or
threatened by the Commission;
(vi) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company
prior to such Delivery Date (other than the financial statements,
financial data and related schedules therein, as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and
the Rules and Regulations;
(vii) To such counsel's knowledge, there are no contracts or
other documents that are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by
the Securities Act or by the Rules and Regulations that have not
been described or filed as exhibits to the Registration Statement
or incorporated therein by reference as permitted by the Rules
and Regulations;
(viii) This Agreement and the International Underwriting
Agreement have each been duly authorized, executed and delivered
by the Company;
(ix) The issue and sale of the shares of Stock being
delivered on such Delivery Date by the Company and the compliance
by the Company with all of the provisions of this Agreement and
the consummation of the
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transactions contemplated hereby and thereby will not conflict
with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, or other agreement
material to the Company's business as described in the
Registration Statement and Prospectus, or other instrument known
to such counsel to which the Company or the Subsidiary is a party
or by which the Company or the Subsidiary is bound or to which
any of the property or assets of the Company or the Subsidiary is
subject, nor will such actions result in any violation of the
provisions of the charter or bylaws of the Company or the
Subsidiary or any statute or any order, rule or regulation known
to such counsel of any court or governmental agency or body
having jurisdiction over the Company or the Subsidiary or any of
their properties or assets (except the securities or Blue Sky
laws of the various U.S. states and the rules of the NASD
governing underwriting compensation, as to which we express no
opinion); and, except for the registration of the Stock under the
Securities Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the
Exchange Act, applicable state securities laws and the rules of
the NASD governing underwriting compensation, no consent,
approval, authorization or order of, or filing or registration
with, any such court or governmental agency or body is required
for the execution, delivery and performance of this Agreement or
the International Underwriting Agreement by the Company and the
consummation of the transactions contemplated hereby;
(x) The Company is not an "investment company" within the
meaning of such term under the United States Investment Company
Act of 1940, as amended and the rules and regulations of the
Commission thereunder;
(xi) To such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person
granting such person the right (other than rights which have been
waived or satisfied) to require the Company to include securities
in the securities registered pursuant to the Registration
Statement. To such counsel's knowledge, except as described in
the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such
person the right to require the Company to register or include
securities pursuant to any other registration statement filed by
the Company under the Securities Act.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States
of America, the laws of the State of California and the General
Corporation Law of the State of Delaware and that such counsel is not
admitted in the State of Delaware. Such counsel shall also have
furnished to the Representatives a written statement, addressed to the
U.S.
17
<PAGE>
Underwriters and dated such Delivery Date, in form and substance
satisfactory to the Representatives, to the effect that:
"In connection with the preparation of the Registration Statement, we
have participated in conferences with officers and other
representatives of the Company, representatives of the independent
public or certified public accountants for the Company and with
representatives of the U.S. Underwriters. We have not independently
verified and accordingly are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus
(other than the statements made in the Prospectus under the captions
"Description of Capital Stock" and "Shares Eligible for Future Sale,"
insofar as such statements relate to the Stock and concern legal
matters), and any supplements or amendments thereto. On the basis of
the foregoing and in our capacity as counsel to the Company, nothing
has come to our attention which has caused us to believe that either
the Registration Statement or any amendments thereto (except as to the
financial statements and schedules, and other financial data and
statistical data derived therefrom), at the time the Registration
Statement or such amendments became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus (except as to the
financial statements and schedules, and other financial data and
statistical data derived therefrom), as of its date or as of the date
hereof contained an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading."
(e) Townsend and Townsend and Crew LLP, and the Science &
Technology Law Group shall each have furnished to the Representatives
a written opinion, as intellectual property counsel to the Company,
addressed to the U.S. Underwriters and dated such Delivery Date, in
form and substance reasonably satisfactory to the Representatives, to
the effect that they serve as intellectual property counsel to the
Company with respect to the Proprietary Rights, and that:
Such counsel has carefully read and analyzed the following
portions of the Registration Statement and Prospectus relating to
patents or patent rights: the disclosure appearing under the caption
"Prospectus Summary - Tularik," under the caption "Risk Factors--
Because it is difficult and costly to protect our proprietary rights,
we cannot ensure their protection," under the caption "Patents and
Proprietary Rights," under the caption "Business - Product
Development," under the caption "Business - Corporate Collaborations"
and under the caption "Business - Patents and Proprietary Rights,"
(the "Patent Information"). Such counsel has considered the
statements contained in the Patent Information and, without
independent verification of the accuracy, completeness or fairness of
such statements, nothing has come to such counsel's attention, as of
the date of the Prospectus and the date of such opinion, that leads
such counsel to believe that the
18
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Patent Information contains an untrue statement of material fact or
omits to states a material fact necessary to make the statements
therein not misleading, in light of the circumstances in which they
are made. As of the date of the Prospectus and the date of such
opinion, such counsel has no reason to believe that the Patent
Information is not in all material respects a fair and accurate
summary of the legal matters, documents and proceedings relating
thereto.
(i) Attached as Schedule A to such opinion is a list of the
Company's U.S. patents and pending U.S. patent applications (the
"U.S. Patent Rights") which, to the best of such counsel's
knowledge, are either owned or co-owned by the Company, as
indicated on such Schedule A. Where the Company is listed on
Schedule A to such opinion as the owner or co-owner of any U.S.
Patent Right, either (a) an assignment from the inventors to the
Company has been recorded or is being recorded in the United
States Patent and Trademark Office, or (b) an assignment from the
inventors to an intervening assignee and then to the Company has
been recorded or is being recorded in the United States Patent
and Trademark Office. To the best of such counsel's knowledge,
there are no claims to any ownership interests or liens on any of
the U.S. Patent Rights by any party other than the Company or the
other co-owners.
(ii) Attached as Schedule B to such opinion is a list of the
Company's non-U.S. patents and pending non-U.S. patent
applications (the "Non-U.S. Patent Rights" and together with the
U.S. Patent Rights, the "Patent Rights") which, to the best of
such counsel's knowledge, are either owned or co-owned by the
Company, as indicated on such Schedule B. Where the Company is
listed on Schedule A to such opinion as the owner or co-owner of
any Non-U.S. Patent Right, the named inventors of the Non-U.S.
Patent Rights have either (a) executed an assignment to the
Company or the other co-owner, or (b) are under an obligation to
execute an assignment to the Company or the other co-owner. To
the best of such counsel's knowledge, there are no claims to any
ownership interests or liens on any of the Non-U.S. Patent Rights
by any party other than the Company or the other co-owners.
(iii) To the best of such counsel's knowledge, for each of
the United States patents and patents applications reflected on
Schedule A to such opinion, the Company has disclosed or intends
to disclose to the United States Patent and Trademark Office all
information known and believed to be material to patentability
under the extant 37 C.F.R. (S)1.56.
(iv) Such counsel has reviewed all or portions of certain
patent estates and is unaware of any facts that would lead it to
believe that the Company lacks any patent rights or licenses
under such patent estates
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necessary to conduct the current or prospective business of the
Company as specified in the Registration Statement and
Prospectus.
(v) Except as described in the Prospectus under the caption
"Patent and Proprietary Rights," to the best of such counsel's
knowledge, the Company has not received any claim of infringement
of any patents held by others, and to the best of such counsel's
knowledge, there is no pending or threatened actions, suit,
proceeding or claim by others that the Company is infringing a
patent.
(vi) To the best of such counsel's knowledge, there are no
pending or threatened legal or governmental proceedings relating
to the U.S. Patent Rights, other than proceedings before the
United States Patent and Trademark Office that are carried out
during the course of prosecution.
(f) The Representatives shall have received from Latham &
Watkins, counsel for the U.S. Underwriters, such opinion or opinions,
dated such Delivery Date, with respect to the issuance and sale of the
Stock, the Registration Statement, the Prospectus and other related
matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
(g) At the time of execution of this Agreement, the
Representatives shall have received from Ernst & Young LLP a letter,
in form and substance reasonably satisfactory to the Representatives,
addressed to the U.S. Underwriters and dated the date hereof (i)
confirming that they are independent public accountants within the
meaning of the Securities Act and are in compliance with the
applicable requirements relating to the qualification of accountants
under Rule 2-01 of Regulation S-X of the Commission, and (ii) stating,
as of the date hereof (or, with respect to matters involving changes
or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not
more than five days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and
other matters ordinarily covered by accountants' "comfort letters" to
U.S. Underwriters in connection with registered public offerings.
(h) With respect to the letter of Ernst & Young LLP referred to
in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial
letter"), the Company shall have furnished to the Representatives a
letter (the "bring-down letter") of such accountants, addressed to the
U.S. Underwriters and dated such Delivery Date (i) confirming that
they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letter (or, with respect to matters involving changes
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or developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not
more than five days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set
forth in the initial letter.
(i) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board,
its President or a Vice President and its Chief Financial Officer
stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery
Date; the Company has complied with all its agreements contained
herein; and the conditions set forth in Sections 7(a) and 7(j)
have been fulfilled; and
(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion (A) as of the Effective
Date, the Registration Statement and Prospectus did not include
any untrue statement of a material fact and did not omit to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (B) since the
Effective Date no event has occurred which should have been set
forth in a supplement or amendment to the Registration Statement
or the Prospectus.
(j) (i) Neither the Company nor the Subsidiary shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated
in the Prospectus or (ii) since such date there shall not have been
any change in the capital stock or long-term debt of the Company or
the Subsidiary or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and the Subsidiary, taken as a whole, otherwise than as
set forth or contemplated in the Prospectus, the effect of which, in
any such case described in clause (i) or (ii), is, in the judgment of
the Representatives, so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or
the delivery of the Stock being delivered on such Delivery Date on the
terms and in the manner contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market shall have been
suspended or minimum prices shall have been
21
<PAGE>
established on any such exchange or such market by the Commission, by
such exchange or by any other regulatory body or governmental
authority having jurisdiction, (ii) a banking moratorium shall have
been declared by Federal or state authorities, (iii) the United States
shall have become engaged in hostilities, there shall have been an
escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of a
majority in interest of the several U.S. Underwriters, impracticable
or inadvisable to proceed with the public offering or delivery of the
Stock being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus.
(l) The National Market System shall have approved the Stock for
inclusion, subject only to official notice of issuance and evidence of
satisfactory distribution.
(m) The closing under the International Underwriting Agreement
shall have occurred concurrently with the closing hereunder on the
First Delivery Date.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the U.S. Underwriters.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each U.S.
Underwriter, its officers and employees and each person, if any, who
controls any U.S. Underwriter within the meaning of the Securities
Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited
to, any loss, claim, damage, liability or action relating to purchases
and sales of Stock), to which that U.S. Underwriter, officer, employee
or controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto, (ii) the omission or alleged omission
to state in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or in any amendment or supplement thereto, or in any
Blue Sky Application any material fact required to be stated therein
or necessary to make the statements therein not misleading or (iii)
any act or failure to act or any alleged act or failure to act by any
U.S. Underwriter in connection with, or relating in any manner to, the
Stock or the offering contemplated hereby, and which is included as
part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon matters covered by clause (i) or (ii)
above (provided that the Company shall not be liable under this clause
(iii) to the extent that it is determined in a final judgment by a
court of competent jurisdiction that such loss, claim, damage,
liability or action
22
<PAGE>
resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such U.S. Underwriter through its gross
negligence or willful misconduct), and shall reimburse each U.S.
Underwriter and each such officer, employee or controlling person
promptly upon demand for any legal or other expenses reasonably
incurred by that U.S. Underwriter, officer, employee or controlling
person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or in any such amendment or supplement,
in reliance upon and in conformity with written information concerning
such U.S. Underwriter furnished to the Company through the
Representatives by or on behalf of any U.S. Underwriter specifically
for inclusion therein, which information consists solely of the
information specified in Section 9(e). The foregoing indemnity
agreement is in addition to any liability which the Company may
otherwise have to any U.S. Underwriter or to any officer, employee or
controlling person of that U.S. Underwriter.
[In addition to the foregoing indemnification of all the U.S.
Underwriters, including Lehman Brothers Inc., the Company agrees to indemnify
and hold harmless Lehman Brothers Inc., and each person who controls Lehman
Brothers Inc. within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and expenses incurred by Lehman Brothers Inc. arising out of or
based upon Lehman Brothers Inc.'s serving as "qualified independent underwriter"
for the offering, including reasonable costs of investigation and fees and
disbursements of counsel retained by Lehman Brothers Inc. to represent it in its
capacity as "qualified independent underwriter."]
(b) Each U.S. Underwriter, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees,
each of its directors, and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any
amendment or supplement thereto, or (B) in any Blue Sky Application or
(ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with
written information concerning such U.S. Underwriter furnished to the
Company through the Representatives by or on behalf of that U.S.
Underwriter specifically for inclusion therein, and shall reimburse
the Company and any such director, officer or controlling person for
any legal or other expenses reasonably incurred by the Company or any
such director, officer or controlling person in connection with
investigating or defending or preparing to defend against any such
loss, claim, damage, liability or action as such expenses are
incurred. The
23
<PAGE>
foregoing indemnity agreement is in addition to any liability which
any U.S. Underwriter may otherwise have to the Company or any such
director, officer, employee or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for
any legal or other expenses subsequently incurred by the indemnified
party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that the Representatives
shall have the right to employ counsel to represent jointly the
Representatives and those other U.S. Underwriters and their respective
officers, employees and controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may
be sought by the U.S. Underwriters against the Company under this
Section 8 if, in the reasonable judgment of the Representatives, it is
advisable for the Representatives and those U.S. Underwriters,
officers, employees and controlling persons to be jointly represented
by separate counsel, and in that event the fees and expenses of such
separate counsel shall be paid by the Company. No indemnifying party
shall (i) without the prior written consent of the indemnified parties
(which consent shall not be unreasonably withheld), settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of
which indemnification or contribution may be sought hereunder (whether
or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding, or
(ii) be liable for any settlement of any such action effected without
its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party
or if there be a final judgment for the plaintiff in any such action,
the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of
such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the U.S. Underwriters on
the other
24
<PAGE>
from the offering of the Stock or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the
Company on the one hand and the U.S. Underwriters on the other with
respect to the statements or omissions which resulted in such loss,
claim, damage or liability, or action in respect thereof, as well as
any other relevant equitable considerations. The relative benefits
received by the Company on the one hand and the U.S. Underwriters on
the other with respect to such offering shall be deemed to be in the
same proportion as the total net proceeds from the offering of the
Stock purchased under this Agreement (before deducting expenses)
received by the Company, on the one hand, and the total underwriting
discounts and commissions received by the U.S. Underwriters with
respect to the shares of the Stock purchased under this Agreement, on
the other hand, bear to the total gross proceeds from the offering of
the shares of the Stock under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to whether the untrue or
alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by
the Company or the U.S. Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the
U.S. Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section were to be determined by pro
rata allocation (even if the U.S. Underwriters were treated as one
entity for such purpose) or by any other method of allocation which
does not take into account the equitable considerations referred to
herein. The amount paid or payable by an indemnified party as a result
of the loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 8(d), no U.S. Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which
the Stock underwritten by it and distributed to the public was offered
to the public exceeds the amount of any damages which such U.S.
Underwriter has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The U.S. Underwriters' obligations to contribute as
provided in this Section 8(d) are several in proportion to their
respective underwriting obligations and not joint.
(e) The U.S. Underwriters severally confirm and the Company
acknowledges that the statements with respect to the public offering
of the Stock by the U.S. Underwriters set forth on the cover page, and
the concession and reallowance figures appearing under the caption
"Underwriting" in, the Prospectus are correct and constitute the only
information concerning such U.S. Underwriters furnished in writing to
the Company by or on behalf of the U.S. Underwriters specifically for
inclusion in the Registration Statement and the Prospectus.
9. Defaulting U.S. Underwriters.
If, on either Delivery Date, any U.S. Underwriter defaults in the
performance of its obligations under this Agreement, the remaining non-
defaulting U.S. Underwriters shall be
25
<PAGE>
obligated to purchase the Stock which the defaulting U.S. Underwriter agreed but
failed to purchase on such Delivery Date in the respective proportions which the
number of shares of the Firm Stock set forth opposite the name of each remaining
non-defaulting U.S. Underwriter in Schedule 1 hereto bears to the total number
of shares of the Firm Stock set forth opposite the names of all the remaining
non-defaulting U.S. Underwriters in Schedule 1 hereto; provided, however, that
the remaining non-defaulting U.S. Underwriters shall not be obligated to
purchase any of the Stock on such Delivery Date if the total number of shares of
the Stock which the defaulting U.S. Underwriter or U.S. Underwriters agreed but
failed to purchase on such date exceeds 9.09% of the total number of shares of
the Stock to be purchased on such Delivery Date, and any remaining non-
defaulting U.S. Underwriter shall not be obligated to purchase more than 110% of
the number of shares of the Stock which it agreed to purchase on such Delivery
Date pursuant to the terms of Section 3. If the foregoing maximums are exceeded,
the remaining non-defaulting U.S. Underwriters, or those other underwriters
satisfactory to the Representatives who so agree, shall have the right, but
shall not be obligated, to purchase, in such proportion as may be agreed upon
among them, all the Stock to be purchased on such Delivery Date. If the
remaining U.S. Underwriters or other U.S. Underwriters satisfactory to the
Representatives do not elect to purchase the shares which the defaulting U.S.
Underwriter or U.S. Underwriters agreed but failed to purchase on such Delivery
Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the U.S. Underwriters to purchase, and of the Company to sell, the
Option Stock) shall terminate without liability on the part of any non-
defaulting U.S. Underwriter or the Company, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Sections 6 and 11. As used in this Agreement, the term "U.S. Underwriter"
includes, for all purposes of this Agreement unless the context requires
otherwise, any party not listed in Schedule 1 hereto who, pursuant to this
Section 9, purchases Firm Stock which a defaulting U.S. Underwriter agreed but
failed to purchase.
Nothing contained herein shall relieve a defaulting U.S. Underwriter
of any liability it may have to the Company for damages caused by its default.
If other underwriters are obligated or agree to purchase the Stock of a
defaulting or withdrawing U.S. Underwriter, either the Representatives or the
Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the U.S. Underwriters may be necessary in the Registration
Statement, the Prospectus or in any other document or arrangement.
10. Termination. The obligations of the U.S. Underwriters hereunder
may be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 7(j) or 7(k), shall have occurred
or if the U.S. Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
11. Reimbursement of U.S. Underwriters' Expenses. If the Company
shall fail to tender the Stock for delivery to the U.S. Underwriters by reason
of any failure, refusal or inability on the part of the Company to perform any
agreement on its part to be performed, or because any other condition of the
U.S. Underwriters' obligations hereunder required to be fulfilled by the Company
is not fulfilled, the Company will reimburse the U.S. Underwriters for all
reasonable out-of-pocket expenses (including fees and disbursements of counsel)
incurred by the
26
<PAGE>
U.S. Underwriters in connection with this Agreement and the proposed purchase of
the Stock, and upon demand the Company shall pay the full amount thereof to the
Representative(s). If this Agreement is terminated pursuant to Section 9 by
reason of the default of one or more U.S. Underwriters, the Company shall not be
obligated to reimburse any defaulting U.S. Underwriter on account of those
expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the U.S. Underwriters, shall be delivered or sent by
mail, telex or facsimile transmission to Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-526-6588), with a copy, in the case of any notice
pursuant to Section 11(d), to the Director of Litigation, Office of
the General Counsel, Lehman Brothers Inc., Three World Financial
Center, 10th Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to the address of the Company set forth in
the Registration Statement, Attention: William J. Rieflin, General
Counsel (Fax: 650/825-7303);
provided, however, that any notice to an U.S. Underwriter pursuant to Section
8(c) shall be delivered or sent by mail, telex or facsimile transmission to such
U.S. Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the U.S. Underwriters by Lehman Brothers Inc. on behalf of
the Representatives.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the U.S. Underwriters, the Company,
and their respective successors. This Agreement and the terms and provisions
hereof are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company contained
in this Agreement shall also be deemed to be for the benefit of the person or
persons, if any, who control any U.S. Underwriter within the meaning of Section
15 of the Securities Act and for the benefit of each International Manager (and
controlling persons thereof) who offers or sells any shares of Common Stock in
accordance with the terms of the Agreement Between U.S. Underwriters and
International Managers and (B) the indemnity agreement of the U.S. Underwriters
contained in Section 8(b) of this Agreement shall be deemed to be for the
benefit of directors, officers and employees of the Company and any person
controlling the Company within the meaning of Section 15 of the Securities Act.
Nothing in this Agreement is intended or shall be construed to give any person,
other than the persons referred to in this Section 13, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
contained herein.
27
<PAGE>
14. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the U.S. Underwriters contained in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Stock and shall
remain in full force and effect, regardless of any investigation made by or on
behalf of any of them or any person controlling any of them.
15. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means each Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
in New York are generally authorized or obligated by law or executive order to
close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New York.
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the
Company and the U.S. Underwriters, please indicate your acceptance in the space
provided for that purpose below.
Very truly yours,
Tularik Inc.
By
----------------------------
David V. Goeddel
Chief Executive Officer
Accepted:
Lehman Brothers Inc.
Hambrecht & Quist LLC
J.P. Morgan Securities Inc.
Warburg Dillon Read LLC
For themselves and as Representatives
of the several U.S. Underwriters named
28
<PAGE>
in Schedule 1 hereto
By Lehman Brothers Inc.
By
-------------------------
Authorized Representative
By Hambrecht & Quist LLC
By
-------------------------
Authorized Representative
By J.P. Morgan Securities Inc.
By
-------------------------
Authorized Representative
By Warburg Dillon Read LLC
By
-------------------------
Authorized Representative
29
<PAGE>
EXHIBIT 1.2
__________ Shares
TULARIK INC.
Common Stock
INTERNATIONAL UNDERWRITING AGREEMENT
------------------------------------
__________, 1999
Lehman Brothers Inc.
Hambrecht & Quist LLC
J.P. Morgan Securities Inc.
Warburg Dillon Read LLC
As Lead Managers of the several
International Managers named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Tularik Inc., a Delaware corporation (the "Company"), proposes to sell
_______ shares (the "Firm Stock") of the Company's Common Stock, par value
$0.001 per share (the "Common Stock"). In addition, the Company proposes to
grant to the International Managers named in Schedule 1 hereto (the
"International Managers") an option to purchase up to an additional _______
shares of the Common Stock on the terms and for the purposes set forth in
Section 2 (the "Option Stock"). The Firm Stock and the Option Stock, if
purchased, are hereinafter collectively called the "Stock." This is to confirm
the agreement concerning the purchase of the Stock from the Company by the
International Managers.
It is understood by all parties that the Company is concurrently
entering into an agreement dated the date hereof (the "U.S. Underwriting
Agreement") providing for the sale by the Company of _______ shares of Common
Stock (including the over-allotment option thereunder) (the "U.S. Stock")
through arrangements with certain underwriters inside the United States (the
"U.S. Underwriters"), for whom Lehman Brothers Inc., Hambrecht & Quist LLC, J.P.
Morgan Securities Inc. and Warburg Dillon Read LLC, are acting as
representatives. The U.S. Underwriters and the International Managers
simultaneously are entering into an agreement between the U.S. and international
underwriting syndicates (the "Agreement Between U.S. Underwriters and
International Managers") which provides for, among other things, the transfer of
shares of Common Stock between the two syndicates. One form of prospectus will
be used in connection with the offering and sale of shares of Common Stock
contemplated by the foregoing relating both to the
<PAGE>
Stock and to the International Stock. Except as used in Sections 2, 3, 4, 9 and
10 herein, and except as the context may otherwise require, references herein to
the Stock shall include all the shares of the Common Stock which may be sold
pursuant to either this Agreement or the U.S. Underwriting Agreement.
1. Representations, Warranties and Agreements of the Company. The
Company represents, warrants and agrees that:
(a) A registration statement on Form S-1 with respect to the
Stock has (i) been prepared by the Company in conformity with the
requirements of the United States Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations (the "Rules and
Regulations") of the United States Securities and Exchange Commission
(the "Commission") thereunder, (ii) been filed with the Commission
under the Securities Act and (iii) become effective under the
Securities Act. Copies of such registration statement have been
delivered by the Company to you as the lead managers (the "Lead
Managers") of the International Managers. As used in this Agreement,
"Effective Time" means the date and the time as of which such
registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Preliminary Prospectus"
means each prospectus included in such registration statement, or
amendments thereof, before it became effective under the Securities
Act and any prospectus filed with the Commission by the Company with
the consent of the Lead Managers pursuant to Rule 424(a) of the Rules
and Regulations; "Registration Statement" means such registration
statement, as amended at the Effective Time, including all information
contained in the final prospectus filed with the Commission pursuant
to Rule 424(b) of the Rules and Regulations in accordance with Section
5 hereof and deemed to be a part of the registration statement as of
the Effective Time pursuant to paragraph (b) of Rule 430A of the Rules
and Regulations; and "Prospectus" means such final prospectus, as
first filed with the Commission pursuant to paragraph (1) or (4) of
Rule 424(b) of the Rules and Regulations. The Commission has not
issued any order preventing or suspending the use of any Preliminary
Prospectus.
(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the
requirements of the Securities Act and the Rules and Regulations and
do not and will not, as of the applicable effective date (as to the
Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) 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 statements therein not misleading; provided that
no representation or warranty is made as to information contained in
or omitted from the Registration Statement or the Prospectus or any
further amendments to the Registration Statement or Prospectus, in
reliance upon and in conformity with written
2
<PAGE>
information furnished to the Company through the Lead Managers by or
on behalf of any International Manager specifically for inclusion
therein.
(c) The Company and Amplicon Corp., a Delaware corporation (the
"Subsidiary"), have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation, are duly qualified to do business and
are in good standing as foreign corporations in each jurisdiction in
which their respective ownership or lease of property or the conduct
of their respective businesses requires such qualification, except
where the failure to be so qualified would not have a material adverse
effect on the business, financial condition or results of operations
of the Company, and have all power and authority necessary to own or
hold their respective properties and to conduct business as described
in the Registration Statement and Prospectus; and the Subsidiary of
the Company is not a "significant subsidiary," as such term is defined
in Rule 405 of the Rules and Regulations. The Company has no
subsidiaries (as defined in Section 15), other than the Subsidiary.
(d) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof
contained in the Prospectus; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable and are
owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims.
(e) The unissued shares of the Stock to be issued and sold by
the Company to the International Underwriters hereunder and under the
U.S. Underwriting Agreement have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein
and in the U.S. Underwriting Agreement, will be duly and validly
issued, fully paid and non-assessable; and the Stock will conform to
the description thereof contained in the Prospectus.
(f) Each of this Agreement and the U.S. Underwriting Agreement
has been duly authorized, executed and delivered by the Company.
(g) The execution, delivery and performance of this Agreement
and the U.S. Underwriting Agreement by the Company and the
consummation of the transactions contemplated hereby and thereby will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or the Subsidiary is a party or by
which the Company or the Subsidiary is bound or to which any of the
property or assets of the Company or the Subsidiary is subject, nor
will such actions result in any violation of the provisions of the
charter or bylaws of the Company or the Subsidiary or any statute or
any order, rule or regulation
3
<PAGE>
of any court or governmental agency or body having jurisdiction over
the Company or the Subsidiary or any of their properties or assets;
and except for the registration of the Stock under the Securities Act
and such consents, approvals, authorizations, registrations or
qualifications as may be required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and applicable state or foreign
securities laws in connection with the purchase and distribution of
the Stock by the International Managers and the U.S. Underwriters, no
consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement
or the U.S. Underwriting Agreement by the Company and the consummation
of the transactions contemplated hereby and thereby.
(h) There are no contracts, agreements or understandings between
the Company and any person granting such person the right (other than
rights which have been waived or satisfied), with respect to any
securities of the Company owned by such person, to require the Company
to include such securities in the securities registered pursuant to
the Registration Statement. Except as described in the Prospectus,
there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to register or include securities pursuant to any other
registration statement filed by the Company under the Securities Act.
(i) Except as described in the Prospectus, the Company has not
sold or issued any shares of Common Stock during the six-month period
preceding the date of the Prospectus, including any sales pursuant to
Rule 144A under, or Regulations D or S of, the Securities Act, other
than shares issued pursuant to employee benefit plans, qualified stock
options plans or other employee compensation plans or pursuant to
outstanding options, rights or warrants.
(j) Neither the Company nor the Subsidiary has sustained, since
the date of the latest audited financial statements included in the
Prospectus, any material loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action,
order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since such date, there has not been any material
change in the capital stock or long-term debt of the Company and the
Subsidiary, taken as a whole, or any material adverse change in, or
any development involving a prospective material adverse change in the
business, financial condition or results of operations of the Company
and the Subsidiary, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus.
(k) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby,
at the dates and for the periods indicated, and have been prepared
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in conformity with generally accepted accounting principles applied on
a consistent basis throughout the periods involved.
(l) Ernst & Young LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and
who have delivered the initial letter referred to in Section 7(g)
hereof, are independent public accountants as required by the
Securities Act and the Rules and Regulations.
(m) The Company and the Subsidiary have good and marketable
title to all personal property owned by them, free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not materially interfere with the use made and
proposed to be made of such property by the Company and the
Subsidiary; and all real property and buildings held under lease by
the Company and the Subsidiary are held by them under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and the Subsidiary.
(n) The Company and the Subsidiary carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of their
respective properties and as is customary for companies engaged in
similar businesses in similar industries.
(o) The Company owns or possesses adequate licenses or other
rights to use all patents, patent applications, inventions,
trademarks, trade names, applications for registration of trademarks,
service marks, service mark applications, copyrights, know-how,
manufacturing processes, formulae, trade secrets, licenses and rights
in any thereof and any other intangible property and assets (herein
called the "Proprietary Rights") necessary to conduct its business in
the manner described in the Prospectus, except where the failure to so
own or possess such Proprietary Rights would not, singularly or in the
aggregate, have a material adverse effect on the financial position,
stockholders' equity, results of operations, business or prospects of
the Company. The Company takes security measures to provide adequate
trade secret protection in its non-patented technology. Except as
disclosed in the Prospectus, the Company has not received any notice
of infringement or conflict with asserted rights of others with
respect to any Proprietary Rights which could result in any material
adverse effect on the Company, and except as specifically identified
and described in the Prospectus, no action, suit, arbitration, or
legal, administrative or other proceeding, or investigation is
pending, or, to the knowledge of the Company, threatened, which
involves any Proprietary Rights. Except as disclosed in the
Prospectus, the Proprietary Rights of the Company referred to in the
Prospectus do not, to the knowledge of the Company, infringe or
conflict with any right or valid and enforceable patent of any third
party, or any discovery, invention, product or process which is the
subject of a patent application filed by any third party, known to the
Company which could have a material adverse effect on the Company.
The
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Company is not subject to any judgment, order, writ, injunction or
decree of any court or any Federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or any arbitrator, nor, except
as described in the Prospectus, has it entered into or is a party to
any contract which restricts or impairs the use of any such
Proprietary Rights in a manner which would have a material adverse
effect on the use of any of the Proprietary Rights. The Company has
complied, in all material respects, with its respective contractual
obligations relating to the protection of the Proprietary Rights used
pursuant to licenses. To the knowledge of the Company, no person is
infringing on or violating the Proprietary Rights owned or used by the
Company.
(p) There are no legal or governmental proceedings pending to
which the Company or the Subsidiary is a party or of which any
property or assets of the Company or the Subsidiary is the subject
which, if determined adversely to the Company or the Subsidiary, are
reasonably likely to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and the Subsidiary,
taken as a whole, and to the knowledge of the Company, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others.
(q) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations.
(r) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which is required to be described in the Prospectus which is not so
described.
(s) No labor disturbance by the employees of the Company exists
or, to the knowledge of the Company, is imminent which would
reasonably be expected to have a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and the Subsidiary,
taken as a whole.
(t) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended,
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including the regulations and published interpretations thereunder
(the "Code"); and each "pension plan" for which the Company would have
any liability that is intended to be qualified under Section 401(a) of
the Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause
the loss of such qualification.
(u) The Company has filed all federal, state and local income
and franchise tax returns required to be filed through the date hereof
and has paid all taxes due thereon, and no tax deficiency has been
determined adversely to the Company or the Subsidiary which has had
(nor does the Company have any knowledge of any tax deficiency which,
if determined adversely to the Company or the Subsidiary, would
reasonably be expected to have) a material adverse effect on the
consolidated financial position, stockholders' equity, results of
operations, business or prospects of the Company and the Subsidiary,
taken as a whole.
(v) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company has not (i) issued or granted
any securities, (ii) incurred any liability or obligation, direct or
contingent, other than liabilities and obligations which were incurred
in the ordinary course of business, (iii) entered into any transaction
not in the ordinary course of business or (iv) declared or paid any
dividend on its capital stock.
(w) The Company (i) makes and keeps accurate books and records
and (ii) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to
maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management's authorization and (D)
the reported accountability for its assets is compared with existing
assets at reasonable intervals.
(x) Neither the Company nor the Subsidiary (i) is in violation
of its charter or bylaws, (ii) is in default in any material respect,
and no event has occurred which, with notice or lapse of time or both,
would constitute such a default, in the due performance or observance
of any term, covenant or condition contained in any material
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which it is a party or by which it is bound or to
which any of its properties or assets is subject or (iii) is in
violation in any material respect of any law, ordinance, governmental
rule, regulation or court decree to which it or its property or assets
may be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct of its
business.
(y) Neither the Company nor the Subsidiary, nor any director or
officer associated with or acting on behalf of the Company or the
Subsidiary, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful
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expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or
employee from corporate funds; violated or is in violation of any
provision of the Foreign Corrupt Practices Act of 1977; or made any
bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
(z) There has been no storage, disposal, generation,
manufacture, refinement, transportation, handling or treatment of
toxic wastes, medical wastes, hazardous wastes or hazardous substances
by the Company or the Subsidiary (or, to the knowledge of the Company,
any of their predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company or the
Subsidiary in violation of any applicable law, ordinance, rule,
regulation, order, judgment, decree or permit or which would require
remedial action under any applicable law, ordinance, rule, regulation,
order, judgment, decree or permit, except for any violation or
remedial action which would not have, or could not be reasonably
likely to have, singularly or in the aggregate with all such
violations and remedial actions, a material adverse effect on the
general affairs, management, financial position, stockholders' equity
or results of operations of the Company and the Subsidiary, taken as a
whole; there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property
or into the environment surrounding such property of any toxic wastes,
medical wastes, solid wastes, hazardous wastes or hazardous substances
due to or caused by the Company or the Subsidiary or with respect to
which the Company or the Subsidiary have knowledge, except for any
such spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to
have, singularly or in the aggregate with all such spills, discharges,
leaks, emissions, injections, escapes, dumpings and releases, a
material adverse effect on the general affairs, management, financial
position or results of operations of the Company and the Subsidiary,
taken as a whole; and the terms "hazardous wastes," "toxic wastes,"
"hazardous substances" and "medical wastes" shall have the meanings
specified in any applicable local, state and federal laws or
regulations with respect to environmental protection.
(aa) Neither the Company nor the Subsidiary is an "investment
company" within the meaning of such term under the United States
Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.
(bb) The Company has reviewed, and is continuing to review, its
operations and products to evaluate the extent to which the business
or operations of the Company or the Subsidiary will be affected by the
Year 2000 Problem (that is, any significant risk that computer
hardware or software applications used by the Company or the
Subsidiary will not in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the
case of dates or time periods occurring prior to January 1, 2000); as
a result of such review, (i) the Company has no reason to believe, and
does not believe, that (A) there are any issues related to the
Company's or the Subsidiary's preparedness to address the Year 2000
Problem that are of a character
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<PAGE>
required to be described or referred to in the Registration Statement
or Prospectus which have not been accurately described in the
Registration Statement or Prospectus and (B) the Year 2000 Problem
will have a material adverse effect on the financial position,
stockholders' equity, results of operations, business or prospects of
the Company and the Subsidiary, taken as a whole, or result in any
material loss or interference with the business or operations of the
Company or the Subsidiary, taken as a whole; and (ii) to the Company's
knowledge, the suppliers, vendors, customers or other material third
parties used or served by the Company or the Subsidiary are addressing
or will address the Year 2000 Problem in a timely manner, except to
the extent that a failure to address the Year 2000 Problem by any
supplier, vendor, customer or material third party would not have a
material adverse effect on the financial position, stockholders'
equity, results of operations, business or prospects of the Company
and the Subsidiary, taken as a whole.
2. Purchase of the Stock by the International Underwriters. On the
basis of the representations and warranties contained in, and subject to the
terms and conditions of, this Agreement, the Company agrees to sell __________
shares of the Firm Stock to the several International Underwriters and each of
the International Underwriters, severally and not jointly, agrees to purchase
the number of shares of the Firm Stock set opposite that International
Underwriter's name in Schedule 1 hereto. The respective purchase obligations of
the International Underwriters with respect to the Firm Stock shall be rounded
among the International Underwriters to avoid fractional shares, as the Lead
Managers may determine.
In addition, the Company grants to the International Managers an
option to purchase up to __________ shares of Option Stock. Such option is
granted solely for the purpose of covering over-allotments in the sale of Firm
Stock and is exercisable as provided in Section 4 hereof. Shares of Option
Stock shall be purchased severally for the account of the International Managers
in proportion to the number of shares of Firm Stock set opposite the name of
such International Managers in Schedule 1 hereto. The respective purchase
obligations of each International. Manager with respect to the Option Stock
shall be adjusted by the Lead Managers so that no International Manager shall be
obligated to purchase Option Stock other than in 100 share amounts. The price
of both the Firm Stock and any Option Stock shall be $_____ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on any Delivery Date (as hereinafter defined), as the case may be,
except upon payment for all the Stock to be purchased on such Delivery Date as
provided herein and in the U.S. Underwriting Agreement.
3. Offering of Stock by the International Underwriters.
Upon authorization by the Lead Managers of the release of the Firm
Stock, the several International Underwriters propose to offer the Firm Stock
for sale upon the terms and conditions set forth in the Prospectus.
It is understood that __________ of the shares of the Firm Stock will
initially be reserved by the several International Managers for offer and sale
upon the terms and conditions set
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<PAGE>
forth in the Prospectus and in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. to employees and persons having
business relationships with the Company and the Subsidiary who have heretofore
delivered to the Lead Managers offers to purchase shares of Firm Stock in form
satisfactory to the Lead Managers, and that any allocation of such Firm Stock
among such persons will be made in accordance with timely directions received by
the Lead Managers from the Company; provided, that under no circumstances will
the Lead Managers or any International Manager be liable to the Company or to
any such person for any action taken or omitted in good faith in connection with
such offering to employees and persons having business relationships with the
Company and the Subsidiary. It is further understood that any shares of such
Firm Stock which are not purchased by such persons will be offered by the
International Managers to the public upon the terms and conditions set forth in
the Prospectus.
Each International Manager agrees that, except to the extent permitted
by the Agreement Between U.S. Underwriters and International Managers, it will
not offer or sell any of the Stock inside of the United States.
4. Delivery of and Payment for the Stock. Delivery of and payment
for the Firm Stock shall be made at the office of Cooley Godward LLP, Five Palo
Alto Square, 3000 El Camino Real, Palo Alto, California 94306 at 10:00 A.M., New
York City time, on the [fourth] full business day following the date of this
Agreement or at such other date or place as shall be determined by agreement
between the Lead Managers and the Company. This date and time are sometimes
referred to as the "First Delivery Date." On the First Delivery Date, the
Company shall deliver or cause to be delivered certificates representing the
Firm Stock to the Lead Managers for the account of each International Manager
against payment to or upon the order of the Company of the purchase price by
wire transfer in immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each International Manager hereunder. Upon
delivery, the Firm Stock shall be registered in such names and in such
denominations as the Lead Managers shall request in writing not less than two
full business days prior to the First Delivery Date. For the purpose of
expediting the checking and packaging of the certificates for the Firm Stock,
the Company shall make the certificates representing the Firm Stock available
for inspection by the Lead Managers in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the First Delivery Date.
The option granted in Section 2 will expire 30 days after the date of
this Agreement and may be exercised in whole or in part from time to time by
written notice being given to the Company by the Lead Managers. Such notice
shall set forth the aggregate number of shares of Option Stock as to which the
option is being exercised, the names in which the shares of Option Stock are to
be registered, the denominations in which the shares of Option Stock are to be
issued and the date and time, as determined by the Lead Managers, when the
shares of Option Stock are to be delivered; provided, however, that this date
and time shall not be earlier than the First Delivery Date nor earlier than the
second business day after the date on which the option shall have been exercised
nor later than the fifth business day after the date on which the option shall
have been exercised. The date and time the shares of Option Stock are delivered
are sometimes referred to as a "Second Delivery Date" and the First Delivery
Date and any Second Delivery Date are sometimes each referred to as a "Delivery
Date."
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Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the Lead
Managers and the Company) at 10:00 A.M., New York City time, on such Second
Delivery Date. On such Second Delivery Date, the Company shall deliver or cause
to be delivered the certificates representing the Option Stock to the Lead
Managers for the account of each International Manager against payment to or
upon the order of the Company of the purchase price by wire transfer in
immediately available funds. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each International Manager hereunder. Upon delivery, the
Option Stock shall be registered in such names and in such denominations as the
Lead Managers shall request in the aforesaid written notice. For the purpose of
expediting the checking and packaging of the certificates for the Option Stock,
the Company shall make the certificates representing the Option Stock available
for inspection by the Lead Managers in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to such Second Delivery
Date.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the Lead
Managers and to file such Prospectus pursuant to Rule 424(b) under the
Securities Act not later than the Commission's close of business on
the second business day following the execution and delivery of this
Agreement or, if applicable, such earlier time as may be required by
Rule 430A(a)(3) under the Securities Act; to make no further amendment
or any supplement to the Registration Statement or to the Prospectus
except as permitted herein; to advise the Lead Managers, promptly
after it receives notice thereof, of the time when any amendment to
the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
and to furnish the Lead Managers with copies thereof; to advise the
Lead Managers, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, of the initiation or threatening
of any proceeding for any such purpose, or of any request by the
Commission for the amending or supplementing of the Registration
Statement or the Prospectus or for additional information; and, in the
event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or
suspending any such qualification, to use promptly its best efforts to
obtain its withdrawal;
(b) To furnish promptly to each of the Lead Managers and to
counsel for the International Managers a signed copy of each of the
Registration Statement as originally filed with the Commission, and
each amendment thereto filed with the Commission, including all
consents and exhibits filed therewith;
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(c) To deliver promptly to the Lead Managers in New York City
such number of the following documents as the Lead Managers shall
reasonably request: (i) conformed copies of the Registration
Statement as originally filed with the Commission and each amendment
thereto (in each case including exhibits other than this Agreement and
the computation of per share earnings) and (ii) each Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus;
and, if the delivery of a prospectus is required at any time after the
Effective Time in connection with the offering or sale of the Stock or
any other securities relating thereto and if at such time any event
shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary to amend
or supplement the Prospectus in order to comply with the Securities
Act, to notify the Lead Managers and, upon their request, to file such
amended or supplemental prospectus and to prepare and furnish without
charge to each International Manager and to any dealer in securities
as many copies as the Lead Manager may from time to time reasonably
request of an amended or supplemented Prospectus which will correct
such statement or omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Lead
Managers, be required by the Securities Act or requested by the
Commission;
(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any
Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Lead Managers and counsel for the
International Managers and obtain the consent of the Lead Managers to
the filing;
(f) As soon as practicable after the Effective Date, to make
generally available to the Company's security holders and to deliver
to the Lead Managers an earnings statement of the Company and the
Subsidiary (which need not be audited) complying with Section 11(a) of
the Securities Act and the Rules and Regulations (including, at the
option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Lead Managers copies of all materials furnished by the
Company to its stockholders and all public reports and all reports and
financial statements furnished by the Company to the principal
national securities exchange upon which the Common Stock may be listed
or quoted pursuant to requirements of or agreements with such exchange
or to the Commission pursuant to the Exchange Act or any rule or
regulation of the Commission thereunder;
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(h) Promptly from time to time to take such action as the Lead
Managers may reasonably request to qualify the Stock for offering and
sale under the securities laws of such jurisdictions as the Lead
Managers may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock;
provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(i) For a period of 180 days from the date of the Prospectus,
not to, directly or indirectly, (1) offer for sale, sell, pledge or
otherwise dispose of (or enter into any transaction or device which is
designed to, or could be expected to, result in the disposition by any
person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock (other
than the Stock and shares issued pursuant to employee benefit plans,
qualified stock option plans or other employee compensation plans
existing on the date hereof or pursuant to currently outstanding
options, warrants or rights), or sell or grant options, rights or
warrants with respect to any shares of Common Stock or securities
convertible into or exchangeable for Common Stock (other than the
grant of options pursuant to option plans existing on the date
hereof), or (2) enter into any swap or other derivatives transaction
that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of such shares of Common Stock, whether
any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or other securities, in cash or
otherwise, in each case without the prior written consent of Lehman
Brothers Inc.; and to cause each officer and director of the Company
to furnish to the Lead Managers, prior to the First Delivery Date, a
letter or letters, in form and substance satisfactory to counsel for
the International Managers, pursuant to which each such person shall
agree not to, directly or indirectly, (1) offer for sale, sell, pledge
or otherwise dispose of (or enter into any transaction or device which
is designed to, or could be expected to, result in the disposition by
any person at any time in the future of) any shares of Common Stock or
securities convertible into or exchangeable for Common Stock or (2)
enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of such shares of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of
Common Stock or other securities, in cash or otherwise, in each case
for a period of 180 days from the date of the Prospectus, without the
prior written consent of Lehman Brothers Inc.;
(j) Prior to the Effective Date, to apply for the inclusion of
the Stock on the National Market System and to use its best efforts to
complete that listing, subject only to official notice of issuance and
evidence of satisfactory distribution, prior to the First Delivery
Date; and
(k) To take such steps as shall be necessary to ensure that
neither the Company nor the Subsidiary shall become an "investment
company" within the
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meaning of such term under the United States Investment Company Act of
1940, as amended, and the rules and regulations of the Commission
thereunder.
6. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement, the
Agreement Between U.S. Underwriters and International Managers and the
Supplemental Agreement Among U.S. Underwriters and any other related documents
in connection with the offering, purchase, sale and delivery of the Stock; (e)
the costs of distributing the terms of agreement relating to the organization of
the domestic underwriting syndicate and selling group to the members thereof by
mail, telex or other means of communication; (f) the filing fees incident to
securing any required review by the National Association of Securities Dealers,
Inc. of the terms of sale of the Stock; (g) any applicable listing or other
fees; (h) the fees and expenses of qualifying the Stock under the securities
laws of the several jurisdictions as provided in Section 5(h) and of preparing,
printing and distributing a Blue Sky Memorandum (including related fees and
expenses of counsel to the International Managers); and (i) all other costs and
expenses incident to the performance of the obligations of the Company under
this Agreement; provided that, except as provided in this Section 6 and in
Section 11, the International Managers shall pay their own costs and expenses,
including the costs and expenses of their counsel, any transfer taxes on the
Stock which they may sell and the expenses of advertising any offering of the
Stock made by the International Managers.
7. Conditions of International Managers' Obligations. The respective
obligations of the International Managers hereunder are subject to the accuracy,
when made and on each Delivery Date, of the representations and warranties of
the Company contained herein, to the performance by the Company of its
obligations hereunder, and to each of the following additional terms and
conditions:
(a) The Prospectus shall have been timely filed with the
Commission in accordance with Section 5(a); no stop order suspending
the effectiveness of either of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose
shall have been initiated or threatened by the Commission; and any
request of the Commission for inclusion of additional information in
the Registration Statement or the Prospectus or otherwise shall have
been complied with.
(b) No U.S. Underwriter or International Manager shall have
discovered and disclosed to the Company on or prior to such Delivery
Date that either of the Registration Statement or the Prospectus or
any amendment or supplement thereto contains any untrue statement of a
fact which,
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in the opinion of Latham & Watkins, counsel for the International
Managers, is material or omits to state any fact which, in the opinion
of such counsel, is material and is required to be stated therein or
is necessary to make the statements therein not misleading.
(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the U.S.
Underwriting Agreement, the Stock, the Registration Statement and the
Prospectus, and all other legal matters relating to this Agreement and
the transactions contemplated hereby shall be reasonably satisfactory
in all material respects to counsel for the Lead Managers, and the
Company shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass
upon such matters.
(d) Cooley Godward LLP shall have furnished to the Lead Managers
its written opinion, as counsel to the Company, addressed to the U.S.
Underwriters and dated such Delivery Date, in form and substance
reasonably satisfactory to the Lead Managers, to the effect that:
(i) The Company and the Subsidiary have been duly
incorporated and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation, and to our knowledge, are duly qualified to do
business and are in good standing as foreign corporations in each
jurisdiction in which their respective ownership or lease of
property or the conduct of their respective businesses requires
such qualification, except where the failure to be so qualified
would not have a material adverse effect on the business,
financial condition or results of operations of the Company, and
have all corporate power and authority necessary to own or hold
their respective properties and conduct the businesses in which
they are engaged; and to such counsel's knowledge, other than the
Subsidiary, the Company has no subsidiaries;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of the Company (including the shares of Stock being
delivered on such Delivery Date) have been duly and validly
authorized and issued, are fully paid and non-assessable and
conform to the description thereof contained in the Prospectus;
and all of the issued shares of capital stock of the Subsidiary
have been duly and validly authorized and issued and are fully
paid, non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
(iii) There are no preemptive or other rights to subscribe
for or to purchase, nor any restriction upon the voting or
transfer of, any shares of the Stock pursuant to the Company's
Amended and Restated Certificate of Incorporation (the
"Charter"), the Company's bylaws, any agreement filed as an
exhibit to the Registration Statement and Prospectus or, to such
counsel's
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knowledge, any other agreement to which the Company is a party;
(iv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or overtly threatened to which
the Company or the Subsidiary is a party or of which any property
or assets of the Company or the Subsidiary is the subject which
are required to be described in the Prospectus by the Securities
Act or the Rules and Regulations;
(v) The Registration Statement was declared effective under
the Securities Act as of the date and time specified in such
opinion, the Prospectus was filed with the Commission pursuant to
the subparagraph of Rule 424(b) of the Rules and Regulations as
of the date specified in such opinion and, to such counsel's
knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and, to such counsel's
knowledge, no proceeding for that purpose is pending or
threatened by the Commission;
(vi) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company
prior to such Delivery Date (other than the financial statements,
financial data and related schedules therein, as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and
the Rules and Regulations;
(vii) To such counsel's knowledge, there are no contracts
or other documents that are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by
the Securities Act or by the Rules and Regulations that have not
been described or filed as exhibits to the Registration Statement
or incorporated therein by reference as permitted by the Rules
and Regulations;
(viii) This Agreement and the U.S. Underwriting Agreement
have each been duly authorized, executed and delivered by the
Company;
(ix) The issue and sale of the shares of Stock being
delivered on such Delivery Date by the Company and the compliance
by the Company with all of the provisions of this Agreement and
the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, or
other agreement material to the Company's business as described
in the Registration Statement and Prospectus, or other instrument
known to such counsel to which the Company or the Subsidiary is a
party or by which the Company or the Subsidiary is bound or to
which any of the property or assets of the Company or the
Subsidiary is subject, nor will such actions result in any
violation of the provisions of the charter or bylaws of the
Company or the Subsidiary or any
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statute or any order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over
the Company or the Subsidiary or any of their properties or
assets (except the securities or Blue Sky laws of the various
U.S. states and the rules of the NASD governing underwriting
compensation, as to which we express no opinion); and, except for
the registration of the Stock under the Securities Act and such
consents, approvals, authorizations, registrations or
qualifications as may be required under the Exchange Act,
applicable state securities laws and the rules of the NASD
governing underwriting compensation, no consent, approval,
authorization or order of, or filing or registration with, any
such court or governmental agency or body is required for the
execution, delivery and performance of this Agreement or the U.S.
Underwriting Agreement by the Company and the consummation of the
transactions contemplated hereby;
(x) The Company is not an "investment company" within the
meaning of such term under the United States Investment Company
Act of 1940, as amended and the rules and regulations of the
Commission thereunder;
(xi) To such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person
granting such person the right (other than rights which have been
waived or satisfied) to require the Company to include securities
in the securities registered pursuant to the Registration
Statement. To such counsel's knowledge, except as described in
the Prospectus, there are no contracts, agreements or
understandings between the Company and any person granting such
person the right to require the Company to register or include
securities pursuant to any other registration statement filed by
the Company under the Securities Act.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the federal laws of the United States
of America, the laws of the State of California and the General
Corporation Law of the State of Delaware and that such counsel is not
admitted in the State of Delaware. Such counsel shall also have
furnished to the Lead Managers a written statement, addressed to the
International Managers and dated such Delivery Date, in form and
substance satisfactory to the Lead Managers, to the effect that:
"In connection with the preparation of the Registration Statement, we
have participated in conferences with officers and other
representatives of the Company, representatives of the independent
public or certified public accountants for the Company and with
representatives of the International Managers. We have not
independently verified and accordingly are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus (other than the statements made in the Prospectus under the
captions "Description of Capital Stock" and "Shares Eligible for
Future Sale," insofar as such statements relate to the Stock and
concern legal matters), and any supplements or
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<PAGE>
amendments thereto. On the basis of the foregoing and in our capacity
as counsel to the Company, nothing has come to our attention which has
caused us to believe that either the Registration Statement or any
amendments thereto (except as to the financial statements and
schedules, and other financial data and statistical data derived
therefrom), at the time the Registration Statement or such amendments
became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (except as to the financial statements and schedules, and
other financial data and statistical data derived therefrom), as of
its date or as of the date hereof contained an untrue statement of a
material fact or omitted to state a material fact necessary in order
to make the statements therein, in light of the circumstances in which
they were made, not misleading."
(e) Townsend and Townsend and Crew LLP, and the Science &
Technology Law Group shall each have furnished to the Representatives
a written opinion, as intellectual property counsel to the Company,
addressed to the U.S. Underwriters and dated such Delivery Date, in
form and substance reasonably satisfactory to the Representatives, to
the effect that they serve as intellectual property counsel to the
Company with respect to the Proprietary Rights, and that:
Such counsel has carefully read and analyzed the following
portions of the Registration Statement and Prospectus relating to
patents or patent rights: the disclosure appearing under the caption
"Prospectus Summary - Tularik," under the caption "Risk Factors--
Because it is difficult and costly to protect our proprietary rights,
we cannot ensure their protection," under the caption "Patents and
Proprietary Rights," under the caption "Business - Product
Development," under the caption "Business - Corporate Collaborations"
and under the caption "Business - Patents and Proprietary Rights,"
(the "Patent Information"). Such counsel has considered the
statements contained in the Patent Information and, without
independent verification of the accuracy, completeness or fairness of
such statements, nothing has come to such counsel's attention, as of
the date of the Prospectus and the date of such opinion, that leads
such counsel to believe that the Patent Information contains an untrue
statement of material fact or omits to states a material fact
necessary to make the statements therein not misleading, in light of
the circumstances in which they are made. As of the date of the
Prospectus and the date of such opinion, such counsel has no reason to
believe that the Patent Information is not in all material respects a
fair and accurate summary of the legal matters, documents and
proceedings relating thereto.
(i) Attached as Schedule A to such opinion is a list of the
Company's U.S. patents and pending U.S. patent applications (the
"U.S. Patent Rights") which, to the best of such counsel's
knowledge, are either owned or co-owned by the Company, as
indicated on such Schedule A. Where the Company is listed on
Schedule A to such opinion as the owner or co-owner of any U.S.
Patent Right, either (a) an assignment from the inventors to the
Company has been recorded or is being recorded in the United
States Patent and Trademark Office, or (b) an assignment from the
inventors to an intervening assignee and then to the Company has
been recorded or is being recorded in the United States Patent
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<PAGE>
and Trademark Office. To the best of such counsel's knowledge,
there are no claims to any ownership interests or liens on any of
the U.S. Patent Rights by any party other than the Company or the
other co-owners.
(ii) Attached as Schedule B to such opinion is a list of the
Company's non-U.S. patents and pending non-U.S. patent
applications (the "Non-U.S. Patent Rights" and together with the
U.S. Patent Rights, the "Patent Rights") which, to the best of
such counsel's knowledge, are either owned or co-owned by the
Company, as indicated on such Schedule B. Where the Company is
listed on Schedule A to such opinion as the owner or co-owner of
any Non-U.S. Patent Right, the named inventors of the Non-U.S.
Patent Rights have either (a) executed an assignment to the
Company or the other co-owner, or (b) are under an obligation to
execute an assignment to the Company or the other co-owner. To
the best of such counsel's knowledge, there are no claims to any
ownership interests or liens on any of the Non-U.S. Patent Rights
by any party other than the Company or the other co-owners.
(iii) To the best of such counsel's knowledge, for each of
the United States patents and patents applications reflected on
Schedule A to such opinion, the Company has disclosed or intends
to disclose to the United States Patent and Trademark Office all
information known and believed to be material to patentability
under the extant 37 C.F.R. (S)1.56.
(iv) Such counsel has reviewed all or portions of certain
patent estates and is unaware of any facts that would lead it to
believe that the Company lacks any patent rights or licenses
under such patent estates necessary to conduct the current or
prospective business of the Company as specified in the
Registration Statement and Prospectus.
(v) Except as described in the Prospectus under the caption
"Patent and Proprietary Rights," to the best of such counsel's
knowledge, the Company has not received any claim of infringement
of any patents held by others, and to the best of such counsel's
knowledge, there is no pending or threatened actions, suit,
proceeding or claim by others that the Company is infringing a
patent.
(vi) To the best of such counsel's knowledge, there are no
pending or threatened legal or governmental proceedings relating
to the U.S. Patent Rights, other than proceedings before the
United States Patent and Trademark Office that are carried out
during the course of prosecution.
(f) The Lead Managers shall have received from Latham & Watkins,
counsel for the International Managers, such opinion or opinions,
dated such Delivery Date,
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<PAGE>
with respect to the issuance and sale of the Stock, the Registration
Statement, the Prospectus and other related matters as the Lead
Managers may reasonably require, and the Company shall have furnished
to such counsel such documents as they reasonably request for the
purpose of enabling them to pass upon such matters.
(g) At the time of execution of this Agreement, the Lead Managers
shall have received from Ernst & Young LLP a letter, in form and
substance reasonably satisfactory to the Lead Managers, addressed to
the International Managers and dated the date hereof (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, and (ii) stating, as of the date
hereof (or, with respect to matters involving changes or developments
since the respective dates as of which specified financial information
is given in the Prospectus, as of a date not more than five days prior
to the date hereof), the conclusions and findings of such firm with
respect to the financial information and other matters ordinarily
covered by accountants' "comfort letters" to International Managers in
connection with registered public offerings.
(h) With respect to the letter of Ernst & Young LLP referred to
in the preceding paragraph and delivered to the Lead Managers
concurrently with the execution of this Agreement (the "initial
letter"), the Company shall have furnished to the Lead Managers a
letter (the "bring-down letter") of such accountants, addressed to the
International Managers and dated such Delivery Date (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the qualification of accountants under Rule 2-01 of
Regulation S-X of the Commission, (ii) stating, as of the date of the
bring-down letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified
financial information is given in the Prospectus, as of a date not
more than five days prior to the date of the bring-down letter), the
conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set
forth in the initial letter.
(i) The Company shall have furnished to the Lead Managers a
certificate, dated such Delivery Date, of its Chairman of the Board,
its President or a Vice President and its Chief Financial Officer
stating that:
(i) The representations, warranties and agreements of the
Company in Section 1 are true and correct as of such Delivery
Date; the Company has complied with all its agreements contained
herein; and the conditions set forth in Sections 7(a) and 7(j)
have been fulfilled; and
(ii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of the
Effective Date, the Registration
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Statement and Prospectus did not include any untrue statement of
a material fact and did not omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date no event
has occurred which should have been set forth in a supplement or
amendment to the Registration Statement or the Prospectus.
(j) (i) Neither the Company nor the Subsidiary shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated
in the Prospectus or (ii) since such date there shall not have been
any change in the capital stock or long-term debt of the Company or
the Subsidiary or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of
the Company and the Subsidiary, taken as a whole, otherwise than as
set forth or contemplated in the Prospectus, the effect of which, in
any such case described in clause (i) or (ii), is, in the judgment of
the Lead Managers, so material and adverse as to make it impracticable
or inadvisable to proceed with the public offering or the delivery of
the Stock being delivered on such Delivery Date on the terms and in
the manner contemplated in the Prospectus.
(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or the American
Stock Exchange or in the over-the-counter market shall have been
suspended or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any
other regulatory body or governmental authority having jurisdiction,
(ii) a banking moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of
a national emergency or war by the United States or (iv) there shall
have occurred such a material adverse change in general economic,
political or financial conditions (or the effect of international
conditions on the financial markets in the United States shall be
such) as to make it, in the judgment of a majority in interest of the
several International Managers, impracticable or inadvisable to
proceed with the public offering or delivery of the Stock being
delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(l) The National Market System shall have approved the Stock for
inclusion, subject only to official notice of issuance and evidence of
satisfactory distribution.
(m) The closing under the U.S. Underwriting Agreement shall have
occurred concurrently with the closing hereunder on the First Delivery
Date.
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All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the International Managers.
8. Indemnification and Contribution.
(a) The Company shall indemnify and hold harmless each
International Manager, its officers and employees and each person, if
any, who controls any International Manager within the meaning of the
Securities Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof (including, but not
limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Stock), to which that International Manager,
officer, employee or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained (A)
in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any amendment or supplement thereto, or (B) in any
blue sky application or other document prepared or executed by the
Company (or based upon any written information furnished by the
Company) specifically for the purpose of qualifying any or all of the
Stock under the securities laws of any state or other jurisdiction
(any such application, document or information being hereinafter
called a "Blue Sky Application"), (ii) the omission or alleged
omission to state in any Preliminary Prospectus, either of the
Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact
required to be stated therein or necessary to make the statements
therein not misleading or (iii) any act or failure to act, or any
alleged act or failure to act, by any International Manager in
connection with, or relating in any manner to, the Stock or the
offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising
out of or based upon matters covered by clause (i) or (ii) above
(provided that the Company shall not be liable under this clause (iii)
to the extent that it is determined in a final judgment by a court of
competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act
undertaken or omitted to be taken by such International Manager
through its gross negligence or willful misconduct), and shall
reimburse each International Manager and each such officer, employee
and controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that International Manager, officer,
employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however,
that the Company and the Principal Subsidiary shall not be liable in
any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any such amendment or supplement, in reliance upon
and in conformity with written information concerning such
International Manager furnished to the Company through the Lead
Managers by or on behalf of any International Manager specifically for
inclusion therein which information consists solely of the information
specified in Section 9(e). The foregoing indemnity agreement is in
addition to any liability which the Company and the Principal
Subsidiary may otherwise have to any International Manager or to any
officer, employee or controlling person of that International Manager.
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[In addition to the foregoing indemnification of all the International
Managers, including Lehman Brothers Inc., the Company agrees to indemnify and
hold harmless Lehman Brothers Inc., and each person who controls Lehman Brothers
Inc. within the meaning of Section 15 of the Securities Act or Section 20(a) of
the Exchange Act, from and against any and all losses, claims, damages,
liabilities and expenses incurred by Lehman Brothers Inc. arising out of or
based upon Lehman Brothers Inc.'s serving as "qualified independent underwriter"
for the offering, including reasonable costs of investigation and fees and
disbursements of counsel retained by Lehman Brothers Inc. to represent it in its
capacity as "qualified independent underwriter."]
(b) Each International Manager, severally and not jointly, shall
indemnify and hold harmless the Company, its officers and employees,
each of its directors and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or
otherwise, insofar as such loss, claim, damage, liability or action
arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or (B) in any Blue Sky Application or
(ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any
amendment or supplement thereto, or in any Blue Sky Application any
material fact required to be stated therein or necessary to make the
statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with the
written information concerning such International Manager furnished to
the Company through the Lead Managers by or on behalf of that
International Manager specifically for inclusion therein, and shall
reimburse the Company and any such director, officer or controlling
person for any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in
connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in
addition to any liability which any International Manager may
otherwise have to the Company or any such director, officer, employee
or controlling person.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be
made against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that
action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under
this Section 8 except to the extent it has been materially prejudiced
by such failure and, provided further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel
reasonably satisfactory to the indemnified party. After notice from
the indemnifying party to the indemnified party of its election to
assume the defense of such claim or action, the indemnifying
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party shall not be liable to the indemnified party under this Section
8 for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that the Lead
Managers shall have the right to employ counsel to represent jointly
the Lead Managers and those other International Managers and their
respective officers, employees and controlling persons who may be
subject to liability arising out of any claim in respect of which
indemnity may be sought by the International Managers against the
Company under this Section 8 if, in the reasonable judgment of the
Lead Managers, it is advisable for the Lead Managers and those
International Managers, officers, employees and controlling persons to
be jointly represented by separate counsel, and in that event the fees
and expenses of such separate counsel shall be paid by the Company. No
indemnifying party shall (i) without the prior written consent of the
indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit
or proceeding in respect of which indemnification or contribution may
be sought hereunder (whether or not the indemnified parties are actual
or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim,
action, suit or proceeding, or (ii) be liable for any settlement of
any such action effected without its written consent (which consent
shall not be unreasonably withheld), but if settled with the consent
of the indemnifying party or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
(d) If the indemnification provided for in this Section 8 shall
for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any loss,
claim, damage or liability, or any action in respect thereof, referred
to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i) in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the International Managers
on the other from the offering of the Stock or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault
of the Company on the one hand and the International Managers on the
other with respect to the statements or omissions which resulted in
such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the International
Managers on the other with respect to such offering shall be deemed to
be in the same proportion as the total net proceeds from the offering
of the Stock purchased under this Agreement (before deducting
expenses) received by the Company, on the one hand, and the total
underwriting discounts and commissions received by the International
Managers with respect to the shares of the Stock purchased under this
Agreement, on the other hand, bear to the total gross proceeds from
the offering of the shares of the Stock under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus.
The relative fault shall be determined by reference to whether the
untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information
supplied by the Company or the International Managers, the intent of
the parties and their relative knowledge, access to information and
opportunity to correct or prevent such
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statement or omission. The Company and the International Managers
agree that it would not be just and equitable if contributions
pursuant to this Section were to be determined by pro rata allocation
(even if the International Managers were treated as one entity for
such purpose) or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The
amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof,
referred to above in this Section shall be deemed to include, for
purposes of this Section 8(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of
this Section 8(d), no International Manager shall be required to
contribute any amount in excess of the amount by which the total price
at which the Stock underwritten by it and distributed to the public
was offered to the public exceeds the amount of any damages which such
International Manager has otherwise paid or become liable to pay by
reason of any untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The International Managers' obligations
to contribute as provided in this Section 8(d) are several in
proportion to their respective underwriting obligations and not joint.
(e) The International Managers severally confirm and the Company
acknowledges that the statements with respect to the public offering
of the Stock by the International Managers set forth on the cover page
of, and the concession and reallowance figures appearing under the
caption "Underwriting" in, the Prospectus are correct and constitute
the only information concerning the International Managers furnished
in writing to the Company by or on behalf of the International
Managers specifically for inclusion in the Registration Statement and
the Prospectus.
9. Defaulting International Managers.
If, on either Delivery Date, any International Manager defaults in the
performance of its obligations under this Agreement, the remaining non-
defaulting International Managers shall be obligated to purchase the Stock which
the defaulting International Manager agreed but failed to purchase on such
Delivery Date in the respective proportions which the number of shares of the
Firm Stock set forth opposite the name of each remaining non-defaulting
International Manager in Schedule 1 hereto bears to the total number of shares
of the Firm Stock set forth opposite the names of all the remaining non-
defaulting International Managers in Schedule 1 hereto; provided, however, that
the remaining non-defaulting International Managers shall not be obligated to
purchase any of the Stock on such Delivery Date if the total number of shares of
the Stock which the defaulting International Manager or International Managers
agreed but failed to purchase on such date exceeds 9.09% of the total number of
shares of the Stock to be purchased on such Delivery Date, and any remaining
non-defaulting International Manager shall not be obligated to purchase more
than 110% of the number of shares of the Stock which it agreed to purchase on
such Delivery Date pursuant to the terms of Section 3. If the foregoing
maximums are exceeded, the remaining non-defaulting International Managers, or
those other underwriters satisfactory to the Lead Managers who so agree, shall
have the right, but shall not be obligated, to purchase, in such proportion as
may be agreed upon among them, all the Stock to be purchased on such Delivery
Date. If the remaining International Managers or other underwriters
satisfactory to the Lead Managers do not elect to
25
<PAGE>
purchase the shares which the defaulting International Manager or International
Managers agreed but failed to purchase on such Delivery Date, this Agreement
(or, with respect to the Second Delivery Date, the obligation of the
International Managers to purchase, and of the Company to sell, the Option
Stock) shall terminate without liability on the part of any non-defaulting
International Manager or the Company, except that the Company will continue to
be liable for the payment of expenses to the extent set forth in Sections 6 and
11. As used in this Agreement, the term "International Manager" includes, for
all purposes of this Agreement unless the context requires otherwise, any party
not listed in Schedule 1 hereto who, pursuant to this Section 9, purchases Firm
Stock which a defaulting International Manager agreed but failed to purchase.
Nothing contained herein shall relieve a defaulting International
Manager of any liability it may have to the Company for damages caused by its
default. If other underwriters are obligated or agree to purchase the Stock of
a defaulting or withdrawing International Manager, either the Lead Managers or
the Company may postpone the First Delivery Date for up to seven full business
days in order to effect any changes that in the opinion of counsel for the
Company or counsel for the International Managers may be necessary in the
Registration Statement, the Prospectus or in any other document or arrangement.
10. Termination.
The obligations of the International Managers hereunder may be
terminated by the Lead Managers by notice given to and received by the Company
prior to delivery of and payment for the Firm Stock if, prior to that time, any
of the events described in Sections 7(j) or 7(k) shall have occurred or if the
International Managers shall decline to purchase the Stock for any reason
permitted under this Agreement.
11. Reimbursement of International Managers' Expenses. If (a) the
Company shall fail to tender the Stock for delivery to the International
Managers by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed, or because any
other condition of the International Managers' obligations hereunder required to
be fulfilled by the Company is not fulfilled, the Company will reimburse the
International Managers for all reasonable out-of-pocket expenses (including fees
and disbursements of counsel) incurred by the International Managers in
connection with this Agreement and the proposed purchase of the Stock, and upon
demand the Company shall pay the full amount thereof to the Lead Managers. If
this Agreement is terminated pursuant to Section 9 by reason of the default of
one or more International Managers, the Company shall not be obligated to
reimburse any defaulting International Manager on account of those expenses.
12. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the International Managers, shall be delivered or sent
by mail, telex or facsimile transmission to Lehman Brothers Inc.,
Three World Financial Center, New York, New York 10285, Attention:
Syndicate Department (Fax: 212-528-8822), with a copy, in the case of
any notice pursuant to Section 11(d), to the Director
26
<PAGE>
of Litigation, Office of the General Counsel, Lehman Brothers Inc.,
Three World Financial Center, 10th Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail, telex
or facsimile transmission to the address of the Company set forth in
the Primary Registration Statement, Attention: William J. Rieflin,
General Counsel (Fax: 650/825-7303);
provided, however, that any notice to an International Manager pursuant to
Section 8(c) shall be delivered or sent by mail, telex or facsimile transmission
to such International Manager at its address set forth in its acceptance telex
to the Lead Managers, which address will be supplied to any other party hereto
by the Lead Managers upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company shall
be entitled to act and rely upon any request, consent, notice or agreement given
or made on behalf of the International Managers by Lehman Brothers Inc. on
behalf of the International Managers.
13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the International Managers, the
Company, and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of the
person or persons, if any, who control any International Manager within the
meaning of Section 15 of the Securities Act and for the benefit of each
International Manager (and controlling persons thereof) who offers or sells any
shares of Common Stock in accordance with the terms of the Agreement Between
U.S. Underwriters and International Managers and (B) the indemnity agreement of
the International Managers contained in Section 8(b) of this Agreement shall be
deemed to be for the benefit of directors, officers and employees of the Company
and any person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 13, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
14. Survival. The respective indemnities, representations,
warranties and agreements of the Company and the International Managers
contained in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
15. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means each Monday, Tuesday,
Wednesday, Thursday or Friday which is not a day on which banking institutions
in New York are generally authorized or obligated by law or executive order to
close and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules
and Regulations.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New York.
27
<PAGE>
17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement between the
Company and the International Managers, please indicate your acceptance in the
space provided for that purpose below.
Very truly yours,
Tularik Inc.
By
----------------------------------------------
David V. Goeddel
Chief Executive Officer
Accepted:
Lehman Brothers Inc.
Hambrecht & Quist LLC
J.P. Morgan Securities Inc.
Warburg Dillon Read LLC
For themselves and as Lead Managers
of the several International Managers named
in Schedule 1 hereto
By Lehman Brothers Inc.
By
-----------------------------------
Authorized Representative
By Hambrecht & Quist LLC
By
-----------------------------------
Authorized Representative
28
<PAGE>
By J.P. Morgan Securities Inc.
By
-----------------------------------
Authorized Representative
By Warburg Dillon Read LLC
By
-----------------------------------
Authorized Representative
29
<PAGE>
SCHEDULE 1
Number of
International Managers Shares
- ---------------------- ---------
Lehman Brothers Inc. ...................................... ________
Hambrecht & Quist LLC ..................................... ________
J.P. Morgan Securities Inc. ............................... ________
Warburg Dillon Read LLC ................................... ________
[BZ Bank] ................................................. ________
Total ................................................ ========
<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>
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 by means of
activation of LDL-R gene expression to effectively lower serum LDL-cholesterol.
[ * ] = 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 a single molecule which shows selective activity in an assay
in intact cells (EC50 less than or equal to 1 micromolar and in any other
assays to be agreed by the parties.
"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, China, Hong Kong, Indonesia,
Malaysia, Philippines, Korea, Taiwan and Thailand.
"Tail End Compound" shall mean a compound designated as such by the
Research Committee which is conceived by Tularik or Sumitomo during the Research
Term and which is first reduced to practice prior to the end of the first year
after completion or termination of the Research Term.
"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 all the countries and territories of the
world other than the Sumitomo Territory.
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
three years after the Effective Date, upon one hundred twenty (120) days 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 Fifteen Million Dollars ($15,000,000). 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 to the extent that such claim or claims (i) are due to the neglect or
negligence of Tularik or (ii) result from Tularik's activities under this
Agreement, except insofar as the claim or claims arise out of the possession,
manufacture, use, sale or administration of Products by Sumitomo or Sumitomo's
Affiliates or sublicensees.
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 to the extent that
such claim or claims (i) are due to the neglect or negligence of Sumitomo or
(ii) result from Sumitomo's activities under this Agreement, except insofar as
the claim or claims arise out of the possession, manufacture, use, sale or
administration of the Products by Tularik or Tularik's Affiliates or
sublicensees.
Article 11
Confidentiality
11.1 Confidential Information; Exceptions. During the term of this
Agreement, and for a period of five (5) years 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 in the courts in San Francisco, California
if the action is taken by Sumitomo and in the courts in Osaka, Japan if the
action is taken by Tularik.
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
1. Sumitomo and Tularik will undertake a collaborative research program in
which Tularik will screen compounds to identify specific compounds having
promising activity for regulation of the gene encoding LDL-R using Tularik's
proprietary assay system.
2. Tularik will conduct and develop, under exclusive collaboration with Drs J.
Goldstein and M.S. Brown cell-based screening, biologically-based screening
and follow up assays; inhibition of [*]
3. Sumitomo will be primarily responsible for medicinal chemistry and
pharmacological studies.
4. Tularik will screen its proprietary chemical and natural products compounds
(at least 160,000) and Sumitomo's proprietary chemical and natural products
compounds (at least 20,000).
5. The following tasks will be shared by both parties:
. isolation and determination of structure of active compounds from natural
products;
. synthesis of derivatives of lead compounds for optimization;
. evaluation of in vivo activities and comparison with [*] inhibitors,
including for example [*];
. investigation of gene-specificity and any potential tissue specificity;
. characterization as an anti-hypercholesterolemic drug in an animal model;
and
. studies on mode of action, including for example potentiation of [*]
activity, etc.
6. Details will be discussed and determined in the Research Committee.
<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, China, Hong Kong, Indonesia,
Malaysia, Philippines, Korea, Taiwan and Thailand.
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 seven (7)
years 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) seven (7) years 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 three (3) years 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 three (3) years 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
three (3) years.
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) are due to the neglect
or negligence of Tularik or (ii) result from Tularik's activities under this
Agreement, except insofar as the claim or claims arise out of the possession,
manufacture, use, sale or administration of Preclinical Candidates or Products
by Sumitomo or Sumitomo's Affiliates or sublicensees.
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 due to the neglect or negligence of Sumitomo or
(ii) result from Sumitomo's activities under this Agreement, except insofar as
the claim or claims arise out of the possession, manufacture, use, sale or
administration of the Preclinical Candidates or Products by Tularik or Tularik's
Affiliates or sublicensees.
Article 10
Confidentiality
10.1 Confidential Information; Exceptions. During the term of this
Agreement, and for a period of five (5) years 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 in
the courts in San Francisco, California if the action is taken by Sumitomo and
in the courts in Osaka, Japan if the action is taken by Tularik.
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 the Research
Program shall continue for a full six (6) years.
<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:
[ * ] Up to an aggregate of $4 million.
(b) Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:
[ * ] Up to an aggregate of $4 million.
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 a small molecule (i.e., passes through
cell membranes) which passes animal toxicology studies to be defined by the
Research Committee and is either (i) a Compound or (ii) a chemical entity
conceptually or physically derived from a Compound during or following the term
of the Research Program, whether in the course of medicinal chemistry or
otherwise.
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 the full five (5) year term.
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 five 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.
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 the entire world except the Taisho
Territory.
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.
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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
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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 one hundred
twenty (120) days prior notice Taisho may terminate the Research Program at the
end of the third (3rd) or the fourth (4th) year 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:
[*] up to an aggregate of $3 million.
(b) Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:
[*] up to an aggregate of $3 million.
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, seven (7) 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 an earlier date that precedes the expiration date of such patent by
the length of time between launch and the date patent protection was obtained.
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 three (3) years 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 three (3) years 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
three (3) years.
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.
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<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 five (5) years 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.
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<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.
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<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.
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(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
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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 full five (5) year term 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 failure to make any royalty payment when due and payable hereunder
(except payment of amounts that are under bona fide dispute) and the breaching
party fails to cure such breach within sixty (60) days after written notice
thereof by the non-breaching party or twenty (20) days if the breach shall be
the breaching party's failure to make any undisputed royalty payment, 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 (i) Tularik provides Taisho
prompt notice of any such claim, (ii) Taisho shall not be obligated to indemnify
Tularik for any loss in connection with any settlement unless Taisho consents in
writing to such settlement and (iii) Taisho shall have the exclusive right to
defend any such claim.
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 (i) Taisho
provides Tularik prompt notice of any such claim, (ii) Tularik shall not be
obligated to indemnify Taisho for any loss in connection with any settlement
unless Tularik consents in writing to such settlement and (iii) Tularik
shall have the exclusive right to defend any such claim.
[ * ] = 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 in the courts
in San Francisco, California if the action is taken by Taisho and in the courts
in Tokyo, Japan if the action is taken by Tularik.
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>
Exhibit 10.8
AMENDED AND RESTATED
COLLABORATION AND LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the 22nd day of December 1996 (the
"Amendment Date") by and between Tularik Inc., a California corporation
("Tularik"), and Merck & Co., Inc. ("Merck"), a corporation organized under the
laws of New Jersey, and amends in part and restates the Collaboration and
License Agreement dated as of December 22, 1993 by and between Tularik and
Merck.
RECITALS
WHEREAS, Tularik and Merck have previously entered into the Original
Agreement pursuant to which Tularik and Merck established a cooperative research
relationship based on screening of their respective compound libraries using
their respective assays and other jointly developed assays, and
WHEREAS, Tularik and Merck desire to continue their cooperative research
relationship to develop and market novel therapeutic products based on compounds
identified during such research as having viral regulatory properties;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
1
DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "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.
1.2 "Agreement" shall mean this Amended and Restated Collaboration and
License Agreement.
1.3 "Agreement Compounds" shall mean, collectively, the Option Compounds
and the Program Compounds.
1.4 "Anti-Viral Activity" shall mean that level of activity of a Program
Substance in a Program Assay which [ * ], as appropriate for the target, which
is potentially or actually useful
[ * ]= 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>
in the Field, as determined by the Research Committee.
1.5 "Confidential Information" shall mean, subject to the limitations set
forth in Section 12.1 hereof, all information disclosed to one party by the
other party.
1.6 "Core Targets" shall mean those targets applicable to the [ * ] set
forth on Appendix A, or otherwise designated by a majority of the members of the
entire Research Committee in writing, as well as any other targets designated by
the Research Committee in writing for other viruses which the parties may from
time to time designate or substitute.
1.7 "[ * ] Option Program" shall mean research and development pursuant to
this Agreement of all Option Compounds relating to all Option Targets applicable
to the [ * ].
1.8 "Effective Date" shall mean December 22, 1993.
1.9 "Exercise Data" shall mean data establishing the following criteria
with respect to an Option Program:
a) [ * ];
b) [ * ];
c) [ * ];
d) [ * ]; and
e) [ * ].
1.10 "Exercise Date" shall mean the date on which both of the following
have occurred (i) [ * ] and (ii) [ * ].
1.11 "FDA" shall mean the United States Food and Drug Administration.
1.12 "Field" shall mean all uses in the prevention or treatment of (i)
[ * ].
1.13 "Full Time Equivalent" or "FTE" shall mean the equivalent of a full-
time [ * ]. The portion of an FTE year devoted by a scientist or program manager
to the Research Program shall be determined by dividing the number of days
during any twelve (12) month period devoted by such employee to the Research
Program by the total number of working days during such twelve (12) month
period.
1.14 "GCP" means the Good Clinical Practice regulations promulgated by the
FDA.
[ * ]= 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>
1.15 "GLP" means the Good Laboratory Practice regulations promulgated by
the FDA.
1.16 "GMP" means the Good Manufacturing Practice regulations promulgated by
the FDA.
1.17 "Government Approval" shall mean any approvals, licenses,
registrations or authorizations of any federal, state or local regulatory
agency, department, bureau or other government entity, foreign or domestic,
necessary for the manufacture, use, storage, import, transport or sale, of the
Products in a regulatory jurisdiction.
1.18 "[ * ] Option Program" shall mean research and development pursuant to
this Agreement of all Option Compounds relating to all Option Targets applicable
to the [ * ].
1.19 "IND" or "Investigational New Drug Application" shall mean an
application for regulatory approval by the FDA or its foreign equivalent in
France, the United Kingdom, Germany or Japan, to commence human clinical testing
of a drug, as defined by the FDA or the foreign equivalent.
1.20 "Lead Defense Party" shall have the meaning assigned to it in Section
8.2(e)(2) hereof.
1.21 "Merck Know-How" shall mean all materials and information that Merck
owns, controls or has a license to (with a right to sublicense) as of the
Effective Date and from time to time during the Research Term, which arise
outside of the Research Program, but only insofar as the above are necessary or
useful for the conduct of the activities under the Research Program.
1.22 "Merck Option" shall mean the option by Merck to conduct research and
development activities with respect to any Option Program and to commercialize
Option Compounds, as further described in this Agreement.
1.23 "Merck Patents" shall mean any and all 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 and (b) which Merck owns, controls
or has a license to (with the right to sublicense), and (c) which relate to the
development, manufacture, use or sale of the Products or the Program Assays.
1.24 "Merck Substances" shall mean those natural extracts, natural
compounds and synthetic compounds which Merck owns or has the right to license
or sublicense as of 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.
3
<PAGE>
Effective Date or from time to time during the Research Program, and which Merck
has approved for screening under the Research Program.
1.25 "Merck Technology" shall mean, collectively, the Merck Patents and the
Merck Know-How.
1.26 "NDA" (or "New Drug Application") shall mean a new drug application as
defined by the U.S. FDA or the foreign equivalent in France, the United Kingdom,
Germany or Japan.
1.27 "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 [ * ].
With respect to sales of combination products, which shall consist of Products
combined with one or more additional active ingredients, Net Sales shall be
calculated on the basis of the [ * ].
1.28 "New Target" and "New Target Assay" shall have the meanings assigned
to each, respectively, in Section 2.3 hereof.
1.29 "Option Compound" shall mean a Program Substance (i) which as a result
of screening activities under the Research Program, [ * ] and (iii) as to which
Tularik has commenced and is proceeding with preliminary development activities
within [ * ] after the expiration of the Research Term.
1.30 "Option Product" shall mean any pharmaceutical product which results
during the Research Term [ * ], from research conducted with respect to an
Option Compound. Each Option Product shall be deemed to include [ * ].
1.31 "Option Program" shall mean either the [ * ] Option Program or the
[ * ] Option Program, as the case may be.
1.32 "Option Targets" shall mean those targets applicable to the [ * ] set
forth on Appendix A hereto, or otherwise designated by a majority of the members
of the entire Research Committee in writing.
1.33 "Original Agreement" shall mean the Collaboration and License
Agreement dated as of December 22, 1993 by and between Tularik and Merck.
[ * ]= 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>
1.34 "Products" shall mean, collectively, the Option Products and the
Program Products.
1.35 "Program Assays" shall mean those assays relating to the Core Targets
or the Option Targets which, as of the Effective Date and from time to time
during the Research Term, each party respectively owns or has rights to (with a
right to sublicense), as set forth and periodically updated on Appendix A
hereto.
1.36 "Program Compound" shall mean a Program Substance which (i) as a
result of screening activities under the Research Program, [ * ], (ii) [ * ] and
(iii) is designated by the Research Committee for [ * ]. Program Compounds shall
also include all Option Compounds within any Option Program as to which Merck
has exercised the Merck Option.
1.37 "Program Know-How" shall mean all materials and information developed
in the course of the Research Program.
1.38 "Program Patents" shall mean any and all 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
with out limitation, all substitutions, extensions, reissues, renewals,
supplementary protection certificates and inventors' certificates which cover
inventions or discoveries made in the course of the Research Program.
1.39 "Program Product" shall mean any pharmaceutical product which results
during the Research Term [ * ] from research conducted with respect to a Program
Compound. Each Program Product shall be deemed to include all indications,
formulations, line extensions or modes of administration thereof.
1.40 "Program Substances" shall mean the Merck Substances and the Tularik
Substances.
1.41 "Research Committee" shall mean that committee formed pursuant to
Section 2.2 hereof.
1.42 "Research Management Committee" or "RMC" shall mean Merck's Research
Management Committee.
1.43 "Research Program" shall mean the research program carried out by the
parties in the Field during the Research Term pursuant to Article 2 hereof, as
further described in Appendix B.
1.44 "Restricted Compound" shall mean any Program Compound or Option
Compound which Merck has designated as restricted in accordance with Sections
2.1(c) 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.
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1.45 "Third Party Screening Royalty" shall mean any royalty obligation owed
by Tularik or Merck to any third party, for the screening or use of any Program
Substance.
1.46 "Tularik Know-How" shall mean all materials and information that
Tularik owns, controls or has a license to (with a right to sublicense) as of
the Effective Date and from time to time during the Research Term, which arise
outside the Research Program, but only insofar as any of the above are necessary
or useful to the conduct of the activities carried out under the Research
Program.
1.47 "Tularik Patents" shall mean any and all 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, or (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 relate to the development, manufacture, use and sale of the Products
or the Program Assays.
1.48 "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 Research
Program, and which Tularik has approved for screening under the Research
Program.
1.49 "Tularik Technology" means, collectively, the Tularik Patents and the
Tularik Know-How.
2
RESEARCH PROGRAM
2.1 Research Program. Tularik and Merck will conduct the Research Program
under the direction of the Research Committee. During the Research Term, Tularik
shall [ * ] the Research Program, including management of the Program. Tularik
shall appoint Dr. M. G. Peterson to manage the Research Program. Tularik
acknowledges that the involvement of Dr. S. McKnight in the Research Program is
critical to the success of the Research Program. Merck acknowledges that Dr. S.
McKnight will become a consultant to Tularik on January 1, 1997. The parties
intend that the work of Dr. S. McKnight relating to his employment
responsibilities at the University of Texas Southwestern Medical Center at
Dallas ("UT"), or work developed with UT's support or facilities, shall not be
utilized in the Research Program; provided, however, that [ * ]. Merck shall
have the right to approve all changes in the management of the Research Program,
in its sole discretion.
(a) Provision of Program Substances. Merck shall provide the Merck
Substances in coded form, and Tularik shall provide the Tularik Substances, for
use in 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.
6
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Research Program, in accordance with Appendix B. It is understood that neither
party shall have an obligation to provide any particular amounts or types of
Substances. Each Merck or Tularik Substance that does not possess Anti-Viral
Activity will be returned to Merck or Tularik, as the case may be, and will
cease to be subject to the terms of this Agreement.
(b) Screening Activities. During the Research Term, each party shall
respectively make all Program Assays available for the Research Program. In the
event that either party develops or acquires new Program Assays during the
Research Term, such party shall promptly inform the Research Committee of the
existence of such Program Assay. Unless otherwise directed by the Research
Committee, Tularik shall conduct all screening of the Program Substances. To the
extent practicable, the Program Substances shall be screened contemporaneously
in Program Assays for both the Core Targets and Option Targets. Tularik shall
notify Merck promptly when a Program Substance demonstrates Anti-Viral Activity
in a Core Target or Option Target. Any Program Substance which does not
demonstrate Anti-Viral Activity in a Core Target or Option Target shall be
returned to the party which supplied such Program Substance, and shall not be
included further under the terms of the Agreement.
(c) [ * ] Compounds. Within [ * ] of the date Merck receives all
material data indicating whether or not a Merck Substance has reacted positively
in a Program Assay for a Core Target or an Option Target, Merck shall [ * ],
upon which occurrence [ * ]. In the event that Merck [ * ], the Research
Committee shall commence evaluation of such Merck Substance, or Tularik shall be
free to conduct further research, in the case of a Merck Substance [ * ],
subject to the terms and conditions of this Agreement. Merck will [ * ], as the
case may be, for which such [ * ] without the agreement of Tularik. It is
understood that there are [ * ].
2.2 Research Committee.
(a) Formation of Research Committee. The Research Committee shall
consist of six (6) members, Merck and Tularik each to appoint and substitute as
necessary from time to time three (3) members of such Committee. Each member
shall have appropriate technical credentials and knowledge and ongoing
familiarity with the Research Program. The Chairperson of the Research Committee
shall be one of the Merck-appointed members. Except as otherwise provided in
Sections 1.6, 1.8 and 1.32, all decisions of the Research Committee shall be
unanimous.
(b) Meetings of Research Committee. The Research Committee shall meet
quarterly, at such times as shall be mutually agreed upon by the parties. The
location of such meetings shall alternate between sites designated by Tularik
and sites designated by Merck.
(c) Responsibilities of the Research Committee. The Research Committee
shall carry out the following responsibilities during the Research Term and,
with respect to Option Compounds which continue to be subject to the Merck
Option, for [ * ]: (1) defining the yearly research objectives, (2) determining
whether a Program Substance has Anti-Viral Activity,
[ * ]= 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) coordinating activities required to carry out the Research Program, (4)
periodically revising the Research Program, (5) monitoring progress of the
Research Program and (6) making recommendations regarding further pre-IND
development of Program Compounds and Option Compounds.
2.3 New Target Assays. In the event that Tularik develops any new
screening assays relating to any disease in the Field other than the Core
Targets and the Option Targets (each, a "New Target Assay" and "New Target,"
respectively) during the Research Term, Tularik hereby agrees to promptly
disclose to Merck the existence of each New Target Assay. Merck shall have the
right to [ * ] for the identification and/or development of compounds relating
to such New Target by delivering to Tularik within [ * ] of Tularik's disclosure
of the New Target Assay, [ * ]. Upon receipt by Tularik of [ * ] relating to the
New Target. [ * ].
2.4 Term and Termination of Research Program. The Research Program shall
be carried out for a period commencing on the Effective Date and ending on
December 31, 1999 (the "Research Term"), which Research Term may be extended at
Merck's option for additional one (1)-year periods; provided, however, that any
such extension shall be made upon [ * ] prior written notice to Tularik.
Anything in the foregoing sentence to the contrary notwithstanding, Merck may
terminate the Research Term upon [ * ] written notice given to Tularik any time
after December 31, 1998. In the event of any such termination, payments under
Section 5.1(b) shall be prorated to fund the Research Program to the effective
date of such termination. After expiration or termination of the Research Term,
Tularik may, in its sole discretion, screen Merck Compounds at Merck's request,
at fees and upon terms to be mutually agreed upon by the parties at such time.
3
DEVELOPMENT AND COMMERCIALIZATION OF OPTION PRODUCTS
3.1 Tularik Development of Option Compounds. Tularik shall have the right,
but not the obligation, to conduct research and development and to commercialize
all Option Compounds, subject only to the Merck Option.
3.2 Tularik to Keep Merck Informed. Tularik shall provide Merck with
semi-annual reports of its progress in developing each Option Compound for which
Merck may be entitled to exercise the Merck Option in such reasonable detail as
shall be necessary and appropriate to permit Merck to determine whether it
wishes to exercise the Merck Option.
3.3 Merck Option.
(a) Merck Option. Merck may give Tularik written notice of its
intention to conduct research and development activities with respect to an
Option Program at any time, but
[ * ]= 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>
not later than the expiration of [ * ] following the Exercise Date relating to
such Option Program. Upon exercising the Merck Option by giving such notice in
such manner, all Option Compounds within such Option Program shall become
Program Compounds for all purposes of this Agreement. Upon exercise by Merck of
the Merck Option, Tularik will [ * ] for which the Merck Option has been
exercised or [ * ].
(b) Other Option Programs. Notwithstanding any exercise by Merck of
the Merck Option with respect to an Option Program, [ * ] relating to [ * ] and
[ * ] for which the Merck Option has not been exercised, subject to Section
3.3(a) above.
(c) Reimbursement. Merck shall reimburse Tularik for the reasonable
costs and expenses incurred by Tularik relating to studies and preliminary
development conducted on any Option Program as to which Merck exercises the
Merck Option. Such cost reimbursement shall be on a basis of [ * ], which
reimbursement shall include the items listed on Exhibit C hereto. Merck will
also reimburse Tularik for any additional outside expenses that it approves at
the time of such reimbursement, as necessary and appropriate.
3.4 Tularik Request for Exercise of Merck Option. Tularik shall notify
Merck that the Merck Option has become exercisable with respect to an Option
Program by submission to Merck of Exercise Data on the Exercise Date. In no
event shall Merck be obligated to consider exercise of the Merck Option with
respect to such Option Program unless Exercise Data for such Option Program
shall have been submitted to Merck. In the event Merck shall not exercise the
Merck Option with respect to such Option Program within [ * ] following the
Exercise Date, the Merck Option shall expire with respect to such Option
Program. Following such expiration: (i) [ * ]; (ii) Tularik shall [ * ]; and
(iii) Tularik may [ * ].
4
EXTRA-FIELD INDICATIONS
4.1 Extra-Field Indications. The parties acknowledge that the Program
Compounds and Option Compounds may prove to have applications for indications
outside the Field. Subject to the provisions of this Article 4, Merck shall have
the [ * ] and Tularik shall have the [ * ]. Notwithstanding the foregoing, the
parties acknowledge that each [ * ].
4.2 Royalty Obligations; Approvals. With respect to each Program Compound
or Option Compound developed by either party as set forth above for extra-Field
indications, the developing party shall be subject to the following royalty
obligations and approval requirements:
(a) Developing Party's Substance. With respect to the development and
commercialization of any Program Compound and Option Compound based upon its own
Program Substance [ * ], the developing party shall [ * ] from the other party
for such development and commercialization, [ * ] of such Program Compound or
Option Compound.
(b) Other Party's Substance. With respect to the development 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.
9
<PAGE>
commercialization of any Program Compound or Option Compound based upon the
non-developing party's Program Substance [ * ], the developing party shall be
subject to [ * ] in accordance with the following:
(1) If such Program Compound or Option Compound is subject only to the
developing party's patents or patents jointly owned by Merck and Tularik, such
development and commercialization shall [ * ], and [ * ] of such Program
Compound or Option Compound.
(2) If such Program Compound or Option Compound is either (i) not
covered by any patent of either party or any jointly-owned patent or (ii) is
covered by the other party's patents, such development and commercialization
shall [ * ] if the developing party is also [ * ] if the developing party is
[ * ].
(c) Meaning of the Term "Patent." For purposes of this Section 4.2,
"patent" shall mean, with respect to any Product, a valid United States
[ * ] patent covering such Program Compound or Option Compound, [ * ], which a
party owns, controls or has a license to as of such date.
5
PAYMENT TERMS
5.1 Research Program Funding.
(a) Initial Payment. In consideration for the activities performed by
Tularik under the Research Program with respect to the Core Targets, Merck shall
pay Tularik a sum of [ * ].
(b) Research Term Fees. For each of the [ * ] of the Research Term,
Merck shall pay Tularik a sum of [ * ].
(c) Research Term Extensions. In the event that Merck extends the
Research Term pursuant to Section 2.4 hereof, Merck shall pay Tularik for each
one (1)-year extension [ * ].
5.2 Equity Investment. Within fifteen (15) days of the Effective Date,
Tularik and Merck shall execute a Series D Preferred Stock Purchase Agreement,
pursuant to which Merck shall purchase [ * ] shares of Tularik Series D
Preferred Stock for a sum of [ * ]. After execution of such Stock Purchase
Agreement, this Agreement and such Stock Purchase Agreement shall have no
further relationship and each agreement will operate completely independently.
[ * ]= 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>
5.3 [ * ].
5.4 Option Payments. Merck shall pay Tularik an exercise fee of
[ * ] with respect to each Option Program as to which Merck exercises the Merck
Option, at the time of each respective exercise and thereupon Tularik's rights
with respect to Option Compounds within such Option Program shall be governed by
Section 3.3(a).
5.5 Benchmark Payments. With respect to [ * ], Merck shall pay to
Tularik:
(a) [ * ];
(b) [ * ];
(c) [ * ];
(d) [ * ].
5.6 Royalties.
(a) Merck Royalty Payments for Program Products. Merck shall pay
to Tularik an annual running royalty on Net Sales of each Program Product sold
by it and/or its Affiliates or sublicensees for applications within the Field
(other than Program Products acquired by exercise of the Merck Option),
according to the following rates:
(1) [ * ]; and
(2) [ * ].
(b) Merck Royalty Payments for Merck Option Products. Subject to
Section 4.2 hereof, Merck shall pay Tularik an annual running royalty on Net
Sales of each Program Product acquired by exercise of the Merck Option and sold
by it and/or its Affiliates or sublicensees for applications within the Field,
according to the following rates:
(1) [ * ]
(2) [ * ]
(3) [ * ].
(c) Tularik Royalty Payments for Option Products. Tularik shall
pay to
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchanage Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
11
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Merck an annual running royalty on Net Sales of each Option Product based upon,
derived from or which incorporates a Merck Substance and sold by it and/or its
Affiliates or sublicensees for applications within the Field, according to the
following rates:
(1) [ * ]; and
(2) [ * ].
(d) Third-Party Royalty Credit. In the event that either party is
required to make payments (including, without limitation, royalties, option fees
or license fees) other than the [ * ], to one or more third parties to obtain
licenses or similar rights to patent protected technology necessary to make, use
or sell a Product in the Field, the party marketing such Product may deduct
[ * ] of the actual cost of such payments from royalties payable to the other
party under this Section 5.6 with respect to such Product, provided, however,
that in no event shall the royalties due to either party be reduced by more than
[ * ] of the amount of royalties owed in any given calendar quarter. Unused
royalty credits may be carried over from one royalty period to the next, subject
to the [ * ] limitation set forth above.
5.7 Royalty Term.
(a) Non-Patented Products. For each Product the manufacture, use or
sale of which for applications within the Field is not covered by a Program
Patent, Merck Patent or a Tularik Patent in a country, royalties shall be
payable in such country until seven (7) years from the date of first commercial
sale of the Product in such country.
(b) Patented Products. For each Product the manufacture, use or sale
of which for applications within the Field is covered by a Program Patent, Merck
Patent or Tularik Patent, royalties shall be payable in a country until the
later of (i) seven (7) years from the first commercial sale of the Product in
such country, or (ii) the expiration of the last to expire Program Patent, Merck
Patent or Tularik Patent covering such manufacture, use or sale.
5.8 Manner and Time of Royalty Payments. All royalty payments due
hereunder shall be made in accordance with the provisions of Article 7 hereof.
5.9 Date and Place of Sale. Products shall be considered sold when
invoiced by the selling party. The obligation to pay royalties on Net Sales of a
Product in the Field shall be imposed only once with respect to the same unit of
such Product.
6
GRANT OF RIGHTS
6.1 Research Program 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.
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<PAGE>
(a) Grant by Merck. Merck hereby grants to Tularik, during the
Research Term (and any extension thereof), (i) [ * ] in accordance with the
terms of the Research Program. Nothing herein shall be deemed to grant any
rights or other interests in favor of Tularik with respect to the Merck
Technology and the Merck-owned Program Patents other than as expressly set forth
in this Agreement.
(b) Grant by Tularik. Tularik hereby grants to Merck, during the
Research Term (and any extension thereof) (i) [ * ] in accordance with the terms
of the Research Program. Nothing herein shall be deemed to grant any rights or
other interests in favor of Merck with respect to the Tularik Technology and the
Tularik-owned Program Patents other than as expressly set forth in this
Agreement.
(c) Preliminary Development by Merck of Program Compounds. Tularik
hereby grants to Merck an exclusive (but for the license granted to Tularik
under Section 6.1(d) below) license under the (i) [ * ] as are necessary for
Merck to fulfill its obligations under the Research Program in accordance with
Appendix B.
(d) Preliminary Development by Tularik of Option Compounds. Subject
to the terms of the Merck Option, Merck hereby grants to Tularik an exclusive
(but for the license granted to Merck under Section 6.1(c) above) license under
(i) [ * ] with respect to any Option Compound within any Option Program. Such
license shall terminate as to Options Compounds within any Option Program with
respect to which the Merck Option shall have been exercised or shall have
terminated.
(e) Use Limitation. Each party agrees and acknowledges that use of the
Merck Substances and the Tularik Substances provided pursuant to Article 2 is
limited solely to those activities contemplated by the Research Program, unless
otherwise provided for in this Agreement. Each party understands and
acknowledges that the other party's substances 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, and subject to appropriate Governmental
Approval.
6.2 License to Merck for Program Products. Tularik hereby grants to Merck
an exclusive, worldwide license to develop, make, have made, use, sell and have
sold Program Products in the Field under [ * ]. Tularik shall not conduct any
screening, development, manufacturing or commercialization activities with
respect to the [ * ], except as provided under this Agreement.
6.3 License to Tularik for Option Products. Merck hereby grants to Tularik
an exclusive, worldwide license to make, have made, use, sell, and have sold
Option Products in the Field as to which Merck has not exercised the Merck
Option, under the (i) [ * ].
6.4 Sublicenses. Each party shall have the right to grant sublicenses
under the licenses set forth in this Agreement, as appropriate.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchanage Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
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<PAGE>
6.5 Merck Due Diligence; Obligation to Inform.
(a) Diligent Development and Commercialization. Merck shall devote the
same degree of attention and diligence to [ * ]. The requirements for diligent
development and commercialization set forth in this Section 6.5(a) shall in no
way be interpreted to modify either party's respective obligations under the
Research Program.
(b) Obligation to Inform. Merck hereby agrees to keep Tularik
informed on a reasonable basis of the development of each Program Compound,
including but not limited to periodic written updates on the progress of each
filing with the FDA and its foreign equivalents in France, the United Kingdom,
Germany and Japan.
(c) No Material Breach. Notwithstanding the foregoing, any failure by
Merck to fulfill the development, commercialization and information obligations
set forth in this Section 6.5 with respect to any Program Compound shall not be
deemed a material breach of this Agreement, to the extent that such failure
results [ * ].
7
PAYMENTS; RECORDS; AUDIT
7.1 Payment; Reports. All amounts payable to either party under this
Agreement shall be paid in U.S. Dollars within [ * ] of the end of each calendar
quarter or as otherwise specifically provided herein. Each payment of royalties
shall be accompanied by a statement of the amount of Net Sales during such
quarter, the amount of aggregate worldwide Net Sales to date as of the end of
such quarter where necessary in determination of royalty rates, and the amount
of royalties due on such sales. Each party agrees that if it desires to sell or
otherwise place any Products in exchange for consideration, or in a manner, that
makes it impractical to calculate royalty due, [ * ]. The parties hereby agree
that [ * ].
7.2 Exchange Rate; Manner and Place of Payment. Royalty payments and
reports for the sale of Products (i) in the United States shall be calculated
and reported for each quarter ending on the last day of March, June, September
and December; and (ii) outside the United States shall be reported for each
quarter ending on the last day of February, May, August and November. Exchange
conversion of foreign sales into U.S. Dollars shall be made as necessary at the
rate of exchange quoted by Reuters Ltd., for the spot purchase of U.S. Dollars
at 7:15 a.m. (New York time) on the fourth banking day preceding the end of the
applicable royalty period. All payments owed under this Agreement shall be made
by wire transfer, unless otherwise
[ * ] = 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.
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<PAGE>
specified by such party.
7.3 Records and Audit. During the term of this Agreement and for a period
of two (2) years thereafter, the parties shall each keep complete and accurate
records pertaining to the sale or other disposition of the Products
commercialized by it, in sufficient detail to permit the other party to confirm
the accuracy of all payments due hereunder. Each party shall have the right to
cause an independent, certified public accountant to audit such records to
confirm the other party's Net Sales and royalty payments for the preceding year;
provided, however, that such auditor shall not disclose the audited party's
confidential information to the other party, 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 year, within two (2) years after
the royalty period to which such records relate, upon notice to such other party
and during normal business hours. The party requesting the audit shall bear the
full cost of such audit [ * ]. The terms of this Section 7.3 shall survive any
termination or expiration of this Agreement for a period of two (2) years.
7.4 Taxes. All turnover and other taxes levied on account of the royalties
accruing to each party under this Agreement shall be borne and paid by the party
receiving such royalty for its own account, including taxes levied thereon as
income to the receiving party. If provision is made in law or regulation for
withholding, such tax shall be deducted from the royalty paid by the party
making such payment to the proper taxing authority and a receipt of payment of
the tax secured and shall be promptly delivered to the party entitled to the
royalty. Each party agrees to reasonably 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.
[ * ] = 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>
8
OWNERSHIP; PATENTS
8.1 Ownership.
(a) Technology; Substances; Program Patents and Program Know-How.
Tularik acknowledges and agrees that Merck is and shall remain the sole owner of
the Merck Technology, the Merck-owned Program Patents, the Merck-owned Program
Know-How and the Merck Substances, and that Tularik has no rights in or to the
Merck Technology, the Merck-owned Program Patents, the Merck-owned Program Know-
How and Merck Substances, other than the license rights specifically granted
herein. Merck acknowledges and agrees that Tularik is and shall remain the sole
owner of the Tularik Technology, the Tularik-owned Program Patents, the Tularik-
owned Program Know-How and the Tularik Substances, and that Merck has no rights
in or to the Tularik Technology, Tularik-owned Program Patents, the Tularik-
owned Program Know-How and Tularik Substances other than the license rights
specifically granted herein. Each party acknowledges and agrees that each party
shall be the sole owner of the Program Assays and inventions or discoveries made
solely by it in the course of the Research Program, subject to right granted
under this Agreement, and that the other party has no rights in or to such
Program Assays and inventions or discoveries other than those rights
specifically granted to such other party herein. Program Assays and inventions
or discoveries jointly made by the parties in the course of the Research Program
shall be jointly owned.
(b) Program Know-How. Subject to the licenses granted under this
Agreement, Tularik and Merck shall each solely own the entire right, title and
interest in and to any Program Know-How made or discovered solely by it, and the
parties shall own jointly the entire right, title and interest in and to Program
Know-How jointly made or discovered.
8.2 Patents.
(a) Patent Prosecution.
(1) Tularik Patents and Merck Patents shall be prosecuted
and maintained by Tularik and Merck, 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, at its own expense. [ * ]. In the event that any party decides not
to proceed with prosecuting a patent application which it filed under this
Section, or to pay any annuity for a Program Patent as it becomes due, which
application or patent is relevant to the license rights of the other party under
this Agreement, such party shall give the other party sixty (60) days' 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 the patent. Upon request, the filing party may request
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchanage Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
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<PAGE>
copies of notebook pages containing supporting experimental data. Upon request,
the filing party shall forward copies of official correspondence relating to the
relevant patent application filing.
(3) 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 Article 8 including,
without limitation, the execution of necessary and appropriate instruments of
assignment.
(c) Patent Marking. Each party shall mark 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.
(d) Infringement of Patents by Third Parties.
(1) Each party shall promptly notify the other in writing of any
alleged or threatened infringement of the Tularik Patents, the Merck Patents, or
the Program Patents which may adversely impact the rights of the parties
hereunder, of which it becomes aware.
(2) Each party shall retain the right to bring, at such party's
expense, an appropriate action against any person or entity directly or
contributorily infringing a patent or Program Patent owned by such party. In
such event, the other party hereby agrees to cooperate reasonably with the owner
of such patent or Program Patent in any such efforts. Any recovery obtained by
the patent or Program Patent owner as a result of such action, whether obtained
by settlement or otherwise, shall be disbursed as follows: [ * ]. The non-owner
at its own election and expense shall have the right to be joined in any such
action as a party. No settlement, compromise or other disposition of any such
action which compromises the non-owner's rights under this Agreement shall be
entered into without such non-owner's prior written consent, which shall not be
unreasonably withheld. In the event that an alleged infringer is engaged in the
manufacture, use or sale of a drug product with applications in the Core Targets
or Option Targets in a country in which the non-owner [ * ], and the owner fails
to institute an infringement suit or take other reasonable action to protect the
relevant patent or Program Patent, the non-owner shall have the right, within [
* ] of notification to the owner of such alleged infringement, to institute such
suit or take other appropriate action at its own expense in the name of the
owner or non-owner, or both. In such event, the owner of the patent or Program
Patent shall cooperate reasonably with the non-owner, if applicable, in its
efforts to protect the relevant patent or Program Patent. Any recovery obtained
by the non-owner 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
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchanage Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
17
<PAGE>
validity of any patent or Program Patent shall be entered into without the
patent or Program Patent owner's prior written consent, which shall not be
unreasonably withheld.
(3) In the event that the parties become aware of any alleged or
threatened infringement of the jointly-owned Program Patents, including but not
limited to any certification filed under the U.S. Drug Price Competition and
Patent Term Restoration Act of 1984, the parties shall confer and may agree
jointly to prosecute such infringement. If the parties do not agree on whether
or how to proceed with enforcement activity within (i) [ * ] following the
notice of alleged infringement [ * ], whichever comes first, then either party
may act in its own name to commence litigation with respect to the alleged or
threatened infringement. In the event that a party brings an infringement
action, the other party shall reasonably cooperate, including if required to
bring such action, the furnishing of a power of attorney. Neither party shall
have the right to settle any patent infringement litigation under this Section
8.2(d)(3) in a manner that diminishes the rights or interests of the other party
without the consent of such other party. The costs of any litigation commenced
solely by one party, pursuant to this Section 8.2(d)(3), including attorneys'
fees and expenses, shall be borne entirely by such party. The costs of any
litigation commenced by the parties jointly, shall be borne equally by the
parties (unless they agree to a different cost sharing arrangements in any
particular matter) with such costs to be accounted for and reimbursed under this
Section 8.2(d)(3), without an allocation for internal resources devoted to
litigation. [ * ], after reimbursement of both parties' reasonable expenses in
prosecuting such actions.
(e) Infringement of Third Party Rights.
(1) 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 Merck or Tularik
is charged with said infringement, and the venue of such claim, the parties
shall promptly confer to discuss the claim.
(2) The party responsible for marketing the Product which is the
subject of the infringement claim (the "Lead Defense Party") shall have the
right, but not the obligation, to assume the primary responsibility for the
conduct of the defense of any such claim. In the event that the Lead Defense
Party decides to assume responsibility for such defense, it shall [ * ]. In such
event, the non-Lead Defense party shall have the right, but not the obligation,
to participate in any such suit, at its sole option [ * ]. If the Lead Defense
Party decides not to assume responsibility for the conduct of the defense, the
Non-Lead Defense shall have the right, but not the obligation to conduct the
defense of the claim. 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.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchanage Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
18
<PAGE>
9
TERM; TERMINATION
9.1 Term. Except as provided under Section 9.2 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, [ * ].
9.2 Termination.
(a) Material Breach. If either party materially breaches the Agreement
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 written notice of breach from the non-breaching
party, the non-breaching party may terminate this Agreement upon expiration of
such [ * ] period. In the event of termination of this Agreement for material
breach, [ * ].
(b) Insolvency or Bankruptcy. Either party may terminate this
Agreement effective immediately and without liability upon written notice to the
other party if such other party (a) becomes insolvent or declares bankruptcy,
(b) becomes the subject of any proceedings seeking relief, reorganization or
rearrangement under laws relating to insolvency, (c) makes an assignment for the
benefit of creditors, or (d) commences the liquidation, dissolution or winding
up of its business.
9.3 Surviving Rights. The obligations and rights of the parties under
Articles 4, 7, 8, 9, 10, 11, 12, 14 and 15 and Sections 16.3, 16.4, 16.5, 16.6,
16.9 and 16.10 shall survive termination. Section 5.3 shall survive termination
in accordance with the terms provided in such Section.
9.4 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.
10
INDEMNIFICATION
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchanage Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
19
<PAGE>
10.1 Indemnification by Tularik. Subject to Section 10.2 below, Tularik
hereby agrees to indemnify, hold harmless and defend Merck 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 Merck becomes legally obligated to pay because of any claim or claims
against it to the extent that such claim or claims (i) [ * ].
10.2 Indemnification by Merck. Merck 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) [ * ].
11
PUBLICATION; PUBLICITY
11.1 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 Research 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 [ * ].
11.2 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 other than as may be necessary for
compliance with applicable governmental requirements.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and
Exchanage Commission pursuant to Rule 406 of the Securities Act of 1933, as
amended.
20
<PAGE>
12
CONFIDENTIALITY
12.1 Confidential Information; Exceptions. During the term of this
Agreement, and for a period of five (5) years 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, Merck
shall not use the Tularik Know-How or the Tularik-owned Program Know-How, and
Tularik shall not use the Merck Know-How or the Merck-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. 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.
12.2 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. [ * ].
[ * ]= 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>
13
REPRESENTATIONS AND WARRANTIES
Each party hereby represents and warrants:
13.1 Corporate Power. 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.
13.2 Due Authorization. Such party is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
13.3 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.
13.4 Intellectual Property. Such party (i) has the full right to grant
the licenses granted by it under this Agreement; and (ii) [ * ].
13.5 Third Party Compounds. To the extent that any compounds owned by
third parties are supplied by such party for activities contemplated by this
Agreement, such party has full right and license to use such third party
compounds for the contemplated activities. Such party represents and warrants,
that to the best of its knowledge, the use of such third party compounds in
accordance with the terms of this Agreement will not [ * ].
[ * ]= 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>
14
IMPORT AND EXPORT CONTROLS
14.1 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 Merck
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 Merck or Tularik to violate the Act.
14.2 Non-United States Laws. Merck 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.
15
DISCLAIMER OF WARRANTIES; FURTHER ACTION
15.1 Disclaimers.
(a) Tularik Disclaimer. THE TULARIK TECHNOLOGY, INCLUDING THE
PROGRAM ASSAYS AND THE TULARIK SUBSTANCES, PROVIDED BY TULARIK HEREUNDER ARE
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. Without
limiting the generality of the foregoing, Tularik expressly does not warrant (i)
the success of any study or test commenced pursuant to the Research Program, or
(ii) the safety or usefulness for any purpose of Tularik Technology or the
Program Know-How.
(b) Merck Disclaimer. THE MERCK TECHNOLOGY, INCLUDING 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.
23
<PAGE>
PROGRAM ASSAYS AND THE MERCK SUBSTANCES, PROVIDED BY MERCK HEREUNDER ARE
PROVIDED "AS IS" AND MERCK 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, Merck expressly does not warrant the
safety or usefulness for any purpose of the Merck Technology or the Program
Know-How.
16
MISCELLANEOUS
16.1 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.
16.2 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 Research Program be assigned to an Affiliate without prior written
consent of the other party.
16.3 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.
Two Corporate Drive
S. San Francisco, CA 94080
Fax: (415) 829-4303
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.
[ * ]= 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>
In the case of Merck: Merck & Co., Inc.
One Merck Drive
P.O. Box 100, WS2A-10
White House Station, NJ 08889-0100
Attention: Vice President, Corporate Licensing
Either party may change its address for communications by a notice to the other
party in accordance with this section.
16.4 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.
16.5 Amendment. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.
16.6 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
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.
16.7 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.
16.8 Independent Contractors. In making and performing this Agreement,
Merck 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
Merck. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party.
16.9 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
[ * ]= 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>
full extent.
16.10 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.
16.11 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.
16.12 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, including the
Original Agreement, which is superceded as of the Amendment Date by this
Agreement.
IN WITNESS WHEREOF, both Merck and Tularik have executed this Agreement, in
duplicate originals, by their respective officers hereunto duly authorized, as
of the Amendment Date.
Tularik Inc. Merck & Co., Inc.
By: /s/ David V. Goeddel By: /s/ Raymond V. Gilmartin
--------------------------- --------------------------------------
David V. Goeddel Raymond V. Gilmartin
Title:President and Title: Chairman, President & CEO
-----------------------------------
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.
26
<PAGE>
APPENDIX A
Targets and Assays
Core Targets
- ------------
[ * ]
[ * ]
[ * ]
Core Target Assays
- ------------------
[ * ]
[ * ]
[ * ]
Option Targets
- --------------
[ * ]
[ * ]
Option Target 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.
27
<PAGE>
APPENDIX B
Research Program
The research program, and the responsibilities of the two parties, shall be
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.
28
<PAGE>
APPENDIX C
Merck Option Reimbursement
The reimbursement costs of [ * ] referenced in Section 3.3(c) shall include the
following:
Direct Expenses
[ * ]
Indirect 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.
29
<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.
30
<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.
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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.
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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.
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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.
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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
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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
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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) ten (10) years 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.
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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.
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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 disclose whether the Target is under investigation
by another Roche research site. If the new Target is not under investigation by
Roche at such time, such new Target shall be included in the Research
Collaboration. If the new Target is under investigation by Roche at such time,
Roche Bioscience shall notify Tularik in writing within sixty (60) days of such
Research Management Committee meeting whether Roche Bioscience shall (a) exclude
such Target from the Research Collaboration and the definition of "Target" or
(b) include such Target in the Research Collaboration. If the Research
Management Committee or Roche Bioscience elects to exclude such Target from the
Research Collaboration, then each Party may pursue HTS, development and
commercialization activities against such Target outside of the Research
Collaboration subject to any proprietary rights of the other Party (including
its Affiliates) or any Third Party; provided, however, that the Party that did
not discover such Target shall not use any information developed during the
Research Collaboration with respect to such Target; and provided, further, that
the Party discovering such Target may not license it to a Third Party during the
Research Term and applicable Tail Period, if any. If Roche bioscience elects to
include such Target in the Research Collaboration, then it shall be treated as a
Shared Target (as defined below).
2.3 Shared Targets. Roche sites, other than Roche Bioscience, shall not
be prohibited under this Agreement from conducting research directed against a
Target included in the Research Collaboration (the "Shared Target") at any time
if such research is conducted by such Roche site independently of any Target
Information. If Roche Bioscience cannot reasonably demonstrate that a compound
directed against a Shared Target was developed by Roche without making use of
non-public information developed by Roche Bioscience or Tularik pursuant to the
Research Collaboration and relating to the Shared Target, then such Roche
compound shall be subject to milestones and royalty payments in accordance with
Sections 9.4 and 9.5. All Roche sites shall be free to use such Target
Information to the same extent as Roche Bioscience following the conclusion of
the Research Term.
2.4 Target Firewall. Nowithstanding the provisions of Section 13, during
the Research Term and the applicable Tail Period, Roche Bioscience shall not
disclose any Target Informaiton to any Affiliate, without the prior written
approval of Tularik. "Target Information" means information relating to the [*]
of Targets, the rationale behind such [ * ], and any other information relating
to Targets that is not in the public domain. Roche Bioscience may, however,
disclose to (a) the Roche Research Development Board (or its successor
committee), and other Roche officers responsible for oversight of Roche
Bioscience research activities or financing, the Targets on which it is working
and the general status of development of Research Compounds; (b) Roche Global
Development (or its successor organization) Target Information for purposes of
preparing for the commencement of a Phase III clinical study or the Entry into
Portfolio of a Development Compound directed against such Target; and (c) to
internal Roche or external patent counsel Target Information for purposes of
Patent Management of an Roche Bioscience Invention relating to such Target under
Section 11.3; provided, however, that Roche Bioscience shall not disclose more
information than the amount of information that Roche Bioscience discloses for
other Roche Bioscience development compounds without the prior written approval
of Tularik. Roche Bioscience agrees that the Roche groups receiving such
information shall not disclose such information to other Roche sites or to Third
Parties. The non-disclosure restrictions in this Section 2.4 shall cease for a
particular Target upon the earlier of the commencement of Phase III or the Entry
into Portfolio of a Roche Bioscience Compound directed against such Target.
Should Tularik acquire Affiliates, a comparable firewall shall be put in place
for Tularik at such time.
[ * ] = 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.
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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.
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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.
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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.
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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.
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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, the Chair of the Research Management Committee shall
throw a well-balanced United States coin into the air and a representative from
Roche Bioscience shall call heads or tails while such coin is in the air. Heads
shall mean the side of the coin containing the phrase "In God We Trust." Tails
shall mean the side of the coin containing the phrase "E Pluribus Unum." If the
coin lands with the side of the coin that the Roche Bioscience representative
designated facing up, such Additional Indication shall be designated as a Roche
Bioscience Indication. If the coin lands with the side of the coin that the
Roche Bioscience representative did not designate facing up, such Additional
Indication shall be designated as a Tularik 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.
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<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.
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<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.
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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 Two
years 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.
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<PAGE>
10.2.1 Independent Audit by Developing Party's Auditors. During the
term of this Agreement and for a period of two years 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.
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<PAGE>
10.4.1 Roche Exchange Rate. When calculating the Adjusted Gross
Sales for Roche, the amount of such sales in foreign currencies shall be
converted into Swiss Francs as computed in the central Roche's Swiss Francs
Sales Statistics for the countries concerned, using the average monthly rate of
exchange at the time for such currencies as retrieved from the Reuters System.
When calculating the royalties on Net Sales for Roche, such conversion shall be
at the average rate of the Swiss Franc to the United States dollar as retrieved
from the Reuters System for the applicable calendar quarter.
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
average monthly rate of exchange for such currencies as retrieved from the
Reuters System 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.
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<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.
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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
clinical development and/or commercialization (including but not limited to
making, having made, using, offering to sell, and selling) of any compound by
Roche Bioscience (or its Affiliates, licensees or sublicensees), infringes a
Tularik Background Patent Right, or any associated foreign patent, if the
invention claimed in such Tularik Background Patent Right, or any associated
foreign patent, was practiced by Roche Bioscience (or, with Tularik's written
consent, an Affiliate or Third Party) in the discovery and development of that
compound only in accordance with the license set forth in Section 12.1.1 above.
The Parties acknowledge that it is uncertain as to whether Tularik would be
legally entitled under the patent laws to make any such claim, but wish to
confirm their agreement that this provision shall apply whether or not any such
claim could legally be made.
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.
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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.
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<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
five (5) years 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.
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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.
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<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.
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<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: Head of Applicable Business Unit
For Tularik: Chief Executive Officer
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.
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<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.
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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.
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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.
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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
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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 10.10
RESEARCH AGREEMENT
Research Agreement between Cold Spring Harbor Laboratory, hereinafter
referred to as "CSHL," and Tularik Inc., hereinafter referred to as "Sponsor".
This Agreement is entered into as of October 3, 1997 and will be effective upon
the consummation of the merger between Tularik Acquisition Corp., a wholly-owned
subsidiary of the Company, and Amplicon Corp. ("Effective Date").
WHEREAS, the research program contemplated by this Agreement is of mutual
interest and benefit to CSHL and to Sponsor, and will further the instructional
and research objectives of CSHL in a manner consistent with its status as a non-
profit, tax-exempt, research institution.
WHEREAS, CSHL and Sponsor entered into an agreement executed on even date
herewith entitled License Agreement (hereinafter "License Agreement").
NOW, THEREFORE, the parties hereto agree as follows:
1. STATEMENT OF WORK. CSHL agrees to use its reasonable best efforts to
perform the "Research Program" described in Appendix A attached hereto and
incorporated herein. Work will be performed in accordance with the Research
Program Budget in Appendix B and any changes thereto will be subject to the
mutual consent of parties to this agreement. The Research Program and Research
Program Budgets will be reviewed and amended from time to time by mutual written
agreement of the parties to provide for [ * ].
<PAGE>
2. CONDUCT OF THE RESEARCH.
A. Principal Investigator - The Research Program will be supervised by
Dr. Michael Wigler of CSHL, as Principal Investigator. If, for any reason, he is
unable or unwilling to continue to serve as Principal Investigator, CSHL and
Sponsor shall use their reasonable best efforts to locate a suitable successor
as Principal Investigator to continue the Research Program, or select
alternative research work. If the parties cannot mutually agree on a successor
or alternative research work, and if Sponsor elects not to terminate the License
Agreement as provided in Section VII.B(3) of the License Agreement, then future
funding provided for under Section 4.A hereof shall be reduced by [ * ]
commencing on the date Dr. Wigler becomes unable or unwilling to serve as
Principal Investigator, and Sponsor shall continue to pay to CSHL such reduced
amount as [ * ]. The schedule of reduced funding payments shall continue to be
in accordance with Section 5 hereof. The scientific contact to the Research
Program from the Company will be Dr. R. Scott Powers.
B. Other Researchers - The Principal Investigator shall only assign
personnel to the Research Program who are obliged to CSHL to assign all
inventions they may make under the Research Program to CSHL. If the Principal
Investigator wishes to involve any other persons or to collaborate with
individuals at other institutions on work under the Research Program, he shall
first consult with Sponsor and shall, for a period of [ * ] following the date
of such consultation, consider Sponsor's suggestions and comments. Following
such consultation, if Sponsor shall reasonably believe that the involvement of
other persons or collaborators will jeopardize the intellectual property rights
of Sponsor pursuant to Section 9 hereof, Sponsor shall have the right to appeal
such involvement to the Director of CSHL, currently Bruce Stillman.
[ * ] = 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. Non-Competition - CSHL agrees that it will not, without Sponsor's
prior written consent, permit any for-profit third party to acquire rights to or
an interest in the work of Principal Investigator's group at CSHL that is
involved with developing and applying [ * ] using the methods claimed in U.S.
Patent Numbers [ * ] (such methods being known as [ * ], unless Sponsor has
already elected not to acquire exclusive rights to the results of such work as
provided under Section 9 of this Agreement. This obligation shall expire [ * ]
years from the Effective Date.
D. Information Exchange - The Principal Investigator shall keep Sponsor
informed as to the progress of the Research Program and will meet Sponsor on a
regular basis and as reasonably requested by Sponsor to discuss inventions that
have occurred thereunder. Sponsor shall have the right to access and use, for
its own purposes, the data and information developed under the Research Program.
Sponsor shall have the right to receive samples of materials developed under the
Research Program for commercial use, without additional compensation, pursuant
to a separate Materials Transfer Agreement. Sponsor will, however, respect the
academic tradition of the Principal Investigator's right to first publish and
disseminate the results of the Research Program to third parties, in accordance
with Section 8.
3. PERIOD OF PERFORMANCE. The term of this Agreement shall commence on the
Effective Date and continue until the expiration of the last Licensed Patent (as
that term is defined in the License Agreement) or until it is terminated early
in accordance with Section 7 (the "Research Term").
[ * ] = 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>
4. FUNDING.
A. Research Program - To fund the Research Program, and subject to
Section 2 of this Agreement, Sponsor shall pay to CSHL in accordance with the
payment schedule in Section 5, [ * ] per year during the Research Term, adjusted
in accordance with Section 6 of this Agreement.
B. The [ * ] at CSHL - On January 1, 1998, Sponsor shall pay to CSHL
[ * ] as CSHL financial support for two (2) post doctoral researchers at CSHL
for the year ending December 31, 1998. Commencing on January 1, 1999 and
continuing each January 1 until and including January 1, 2001, Sponsor shall
increase the annual payment to CSHL by the amount of [ * ] per year to provide
support for an additional post doctoral researcher, so that by January 1, 2001
Sponsor's payments shall amount to [ * ] as annual support for five (5) post
doctoral researchers. Such maximum payments shall continue until the end of the
Research Term. The post doctoral research program shall be named the "Tularik
Fellows Program at Cold Spring Harbor Laboratory."
5. SCHEDULE OF RESEARCH PAYMENTS. Payments under Section 4.A shall be payable
by Sponsor in advance in U.S. dollars, net of taxes, in quarterly installments
as follows. The first payment under Section 4.A.is due on the Effective Date
and shall be pro-rated to cover the period from the Effective Date to December
1, 1997. Thereafter, quarterly payments in the amount of [ * ] each are to be
made on or before the first day of [ * ] during the Research Term. The last
payment shall be pro-rated to cover the period from the first day of the last
calendar quarter of the Research Program to the end of the Research Term. If a
full quarterly payment is made but the Research Program is then terminated in
the middle of a quarter, CSHL shall refund a portion of such payment pro-rated
to cover the remainder of the quarter after the Research Term ends.
[ * ] = 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>
A final financial accounting of all costs incurred in the Research Program
and all funds received by CSHL hereunder shall be submitted to Sponsor [ * ] of
each year of the Research Program and following the completion of the project.
6. ADJUSTMENT FOR INFLATION. The base annual funding amount set forth in
Section 4.A. of this Agreement [ * ] shall be prospectively adjusted annually
commencing [ * ] to provide for future inflation by multiplying the base annual
funding amount by the percentage increase in the cost of living index published
by the United States Department of Labor Bureau of Labor Statistics (BLS) Annual
Average Producer Price Index (Finished Goods) for the New York Metropolitan Area
[Base Index, 1982 = 100] for the preceding calendar year of the Research
Agreement for which the adjusted payment is being made. If at any time the
Bureau of Labor Statistics (BLS) of the United States Department of Labor should
cease to publish the Producer Price Index, another annual average index
generally recognized as an authoritative indicator of changes in the United
States of equivalent costs (preferably an index published by the United States
Government) shall be used.
7. TERMINATION.
A. Termination for Default - This Agreement may be terminated for
default. In the event of default by a party ("Defaulting Party"), the other
party ("Non-Defaulting Party") shall give the Defaulting Party written notice of
the default and its election to terminate this Agreement at the expiration of a
probation period of [ * ] from the date of the notice. If the Defaulting Party
fails to resolve the default in the probation period by (i) curing the default,
(ii) providing a written explanation satisfactory to the Non-Defaulting Party
that a default has not occurred or (iii) entering into a written agreement with
the Non-Defaulting Party for the cure 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.
5.
<PAGE>
other resolution of the default, then the Non-Defaulting Party may terminate
this Agreement by giving written notice to the Defaulting Party. The termination
will be effective upon the date specified in the notice. The termination rights
under this Section 7.A shall be in addition to and not in substitution for any
other remedies that may be available to the Non-Defaulting Party. Termination
pursuant to this section shall not relieve the Defaulting Party from liability
and damages to the Non-Defaulting Party for default. Waiver by either party of a
single default or a succession of defaults shall not deprive such party of any
right to terminate this Agreement arising by reason of any subsequent default.
B. Termination of the License Agreement. [ * ], this Agreement may be
terminated by Sponsor without penalty in the event [ * ]. In such event,
termination of this Agreement shall be effective on the date [ * ].
C. Effect of Termination. Termination of this Agreement by Sponsor for
default by CSHL pursuant to Section 7.A shall not affect the License Agreement.
Any agreement between the parties entered into pursuant to Section 9 of this
Agreement shall not be affected by expiration or termination of this Agreement.
Sections 9 and 10 shall survive expiration or termination of this Agreement for
the periods of time set forth in such sections.
8. PUBLICATIONS. CSHL, a not-for-profit basic research institution, will be
free to publish or present the results of research under this Agreement in
accordance with this Section 8. A copy of each proposed publication or
presentation will be provided to Sponsor at least [ * ] prior to the planned
disclosure for publication. Sponsor shall notify CSHL within [ * ] of receipt of
such materials whether it desires CSHL to file patent applications on any
invention contained in the materials; and, if CSHL agrees, CSHL will promptly
proceed to file a patent application(s)
[ * ] = 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>
and CSHL and the Principal Investigator will delay publication and any other
disclosure if necessary for up to [ * ] to ensure that such filings are made
before publication or other disclosure. CSHL and the Principal Investigator
shall otherwise have final authority to determine the scope and content of any
publication, but CSHL and the Principal Investigator will consider in good faith
suggestions offered by Sponsor. Within [ * ] of being requested to do so by
Sponsor and before publication, CSHL will notify Sponsor if CSHL declines to
file a patent application under this paragraph. Sponsor will then have the right
to file patent applications in CSHL's name in accordance with Section 9.A.(5) of
this Agreement.
9. INTELLECTUAL PROPERTY.
A. From The Research Program -
(1) CSHL will disclose to Sponsor (i) all inventions made in the
performance of the research program between Amplicon Corp. and CSHL pursuant to
the Research Agreement dated June 1, 1994 and the Research Program
("Inventions"), and (ii) all [ * ], provided that the Principal Investigator, or
person(s) working under his supervision, is an inventor, and such inventions
and/or improvements are disclosed to CSHL by the inventor(s) pursuant to an
invention assignment agreement between CSHL and the inventor(s). For purposes of
this Agreement, "improvements" means any modification of [ * ], provided such
modification, if unlicensed, would infringe one or more claims of the [ * ]
patent without regard to whether such modification actually infringes such claim
or claims. Title to any Invention shall remain with CSHL if made solely by the
Principal Investigator or CSHL researchers working under his supervision.
Subject to Sections 9.A(2), (3) and (5), CSHL shall have the sole right to
determine the disposition of any such Invention or other rights resulting
therefrom, including the right to determine whether or not a patent application
will be filed, and shall so notify Sponsor. Any Inventions made jointly by CSHL
and Sponsor in the performance of the Research Program 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.
7.
<PAGE>
be owned jointly by CSHL and Sponsor. Any Inventions made solely by Sponsor in
the performance of the Research Program shall be owned solely by Sponsor.
Inventorship shall be determined under U.S. patent laws. Sponsor shall notify
CSHL of all Inventions made solely or jointly by Sponsor and provide CSHL with a
copy of any patent application claiming such an Invention prior to filing such
patent application.
(2) In the event that a patent application on an Invention is filed
by CSHL, or by Sponsor pursuant to Section 9.A(5) below, Sponsor shall be
entitled to elect one of the following Alternatives by notice in writing to CSHL
within [ * ] after written notification to Sponsor that a patent application has
been filed:
(i) Alternative 1 - A non-exclusive, non-transferable (without
the right to sub-license), [ * ] license to Sponsor for [ * ]; or
(ii) Alternative 2 - A non-exclusive, non-transferable (without
the right to sub-license), [ * ] license to Sponsor in the United States and/or
any foreign country elected by Sponsor (subject to Section 9.A(4) below) to
make, have made, use, offer for sale, sell and import products embodying or
produced through the use of such Invention; provided that Sponsor agrees to (a)
demonstrate reasonable efforts to commercialize the technology in the public
interest; (b) [ * ]; and (c) substantially manufacture in the United States
products to be sold in the United States unless CSHL, in its sole discretion,
deems there is justification for waiving such requirement; or
(iii) Alternative 3 - A royalty-bearing (as set forth below),
exclusive license (subject to the third party rights of United States Government
Grantee Agencies) to Sponsor, including the exclusive right to sublicense, in
the United States and/or any foreign country elected by Sponsor (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.
8.
<PAGE>
9.A(4) below) to diligently make, have made, use, offer for sale, sell and
import such Invention, or Primary or Secondary Products (as hereinafter defined)
embodying or produced through the use of such Invention, provided that Sponsor
agrees to reimburse CSHL for the costs of patent prosecution and maintenance in
the U.S. and any elected foreign country, and further agrees that any licensed
products sold in the United States shall be substantially manufactured in the
United States. For the purposes of this Agreement, Primary and Secondary
Products are defined as follows: (1) Primary Products means [ * ], and (2)
Secondary Products means [ * ]. Royalties shall be paid on Primary and Secondary
Products embodying or produced through the use of such Invention(s) in
accordance with the following schedule: (A) until the expiration of the
patent(s) utilized for such Invention, the royalty rates due CSHL on Primary
Products shall be [ * ] of the Net Sales (as defined in the License Agreement)
of Primary Products sold by Sponsor or its sublicensee and the royalty rate on
Secondary Products shall be [ * ] of the Net Sales of Secondary Products sold by
Sponsor or its sublicensee; (B) upon the expiration of the last of the patents
utilized for such Invention, the royalty rates due CSHL by Sponsor or its
sublicensee on Net Sales of such Primary and Secondary Products shall [ * ] for
Primary Products and [ * ] on Secondary Products, provided that a [ * ]. Payment
of such reduced royalties to CSHL shall continue until the last to expire of
Sponsor's patents, if any, on such Primary and/or Secondary Products, but in no
event shall full-rate and reduced royalties be paid for more than fifteen (15)
years from the first commercial sale of any Primary or Secondary Product. In the
event that a Primary and/or Secondary Product is licensed to Sponsor by CSHL,
this Alternative is subject to the negotiation of commercially reasonable terms
(other than financial terms, which shall be as set forth above).
[ * ] = 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 that the Invention is not a Primary or Secondary Product (it
being understood that [ * ] shall not be considered a Primary or Secondary
Product), this Alternative is subject to the negotiation of reasonable terms and
conditions, including financial terms as follows. If the parties are unable to
agree on such terms within [ * ] of the date this Alternative is elected by
Sponsor, either party may submit the terms in dispute to an arbitrator under
Section 15. In negotiating the financial terms under this Alternative in the
event that the Invention is not a Primary or Secondary Product, Sponsor and CSHL
will give weight to prevailing industry standards with respect to compensation
paid for similar exclusive licenses and also considering such factors as market
potential, profit potential, additional research and development costs, economic
value added (in the case of products derived from other products or technologies
provided by Sponsor) and the value and extent of the contribution by each party,
including the funding of the Research Program. It is contemplated by the parties
that the compensation payable by Sponsor under this Alternative in the event
that the Invention is not a Primary or Secondary Product will be less than the
compensation for which a similar license is available or granted to any third
party which did not [ * ] and in which CSHL does not [ * ].
Should marketing of a Primary or Secondary Product require the payment of a
royalty to Sponsor under a license granted pursuant to Section III.A. of the
License Agreement, then the royalty payments due under this Section 9 for the
same Primary or Secondary Product will be reduced by the amount of the royalty
due under the License Agreement or by [*], whichever such reduction is less.
This alternative is also subject to the right of CSHL to use all Inventions
in its non-commercial research and education activities.
(iv) Alternative 4 - The sharing with Sponsor of any Sublicense
Revenue, as defined in the License Agreement [ * ], received by CSHL in respect
of rights to such Invention, in an amount equal to [ * ] of such Sublicense
Revenue; provided, however, that Sponsor waives all rights to such Inventions,
patent applications and any resulting patents.
(3) In the event that Sponsor has not elected any of the foregoing
alternatives within [ * ] after notification that a patent application has been
filed, Sponsor 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.
10.
<PAGE>
(4) If Sponsor elects Alternative "2" or "3", Sponsor shall notify
CSHL of those foreign countries in which its desires a license, in sufficient
time for CSHL to satisfy the patent law requirements of that country. Sponsor
shall reimburse CSHL for the out-of-pocket costs, including patent filing,
prosecution and maintenance fees related to those foreign filings.
(5) In the event that CSHL declines to file a patent application,
Sponsor may [ * ] file such patent application in the United States and/or
elsewhere, in the name of CSHL, and shall be entitled to elect from among the
above Alternatives no later than [ * ] after such filing date. In this case,
(i) [ * ], (ii) to the extent that a patent application is made for laboratory
methods (i.e., not products or manufacturing processes), CSHL reserves the right
to grant non-exclusive licenses to such patent rights to non-profit academic
institutions to use such laboratory methods for non-commercial use only and
(iii) to allow Sponsor to file a patent application, the Principal Investigator
will delay publication or other public disclosure of the Invention on which
Sponsor is filing such Application, for up to a period of time consistent with
Section 8 of this Agreement.
(6) Sponsor shall retain all Invention disclosures submitted by CSHL
in confidence and use its best efforts to prevent their disclosure to third
parties except as may be required by law. Sponsor shall be relieved of this
obligation only when this information becomes publicly available through no
fault of Sponsor, or when Sponsor exclusively licenses patent rights covering
such Invention.
(7) Title to and the right to determine the disposition of any
copyrights or copyrightable material first produced or composed in the
performance of this research shall remain with CSHL. CSHL hereby grants to
Sponsor an irrevocable, royalty-free, non-transferable, non-exclusive right and
license to use, reproduce, display, distribute and perform 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.
11.
<PAGE>
such copyrightable materials other than computer software and its documentation.
CSHL hereby grants to Sponsor an irrevocable, royalty-free, non-transferable,
non-exclusive right and license to use, reproduce, display and perform computer
software and its documentation specified to be developed and delivered under the
Research Program for Sponsor's internal purposes. Sponsor is entitled to elect
to negotiate a royalty bearing license (subject to prior third party rights, if
any) to use, reproduce, display, distribute, and perform such computer software
and its documentation for commercial purposes. Computer software for which a
patent application is filed shall be subject to Section 9.A(2), above.
(8) All licenses elected by Sponsor pursuant to this clause become
effective as of the date the parties sign a subsequent license agreement.
(9) This Agreement and the licenses and Alternatives under Section 9
are subject to the regulations and guidelines of Federal Grant Agencies which
contributed to the Research Program. In order to ensure that Sponsor is able to
obtain rights as provided in this Section 9.A, CSHL agrees that no funding from
any third party other than a Federal Grant Agency will be used in the Research
Program if acceptance of such funding would give such third party any rights or
interest in the work under the Research Program, unless the parties mutually
agree otherwise in writing before any such funding is used. CSHL further agrees
that it has not and will not enter into any other agreement or arrangement which
grants any third party any interest in any Inventions arising out of the
Research Program.
B. From the Tularik Fellows Program at CSHL - CSHL will provide to
----------------------------------------
Sponsor copies of any publications or presentations to be made by the post
doctoral researchers supported by Sponsor under Section 4.B of this Agreement,
prior to the submission of such papers for
[ * ] = 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>
publication or the date of the presentation. CSHL will provide to Sponsor an
annual report describing the work performed and results obtained by the post
doctoral researchers supported by Sponsor under Section 4.B of this Agreement.
Such annual reports shall be provided to Sponsor no later than sixty (60) days
after the end of each funding year.
To the extent that inventions made by any Tularik Fellow are not already
subject to prior rights of any for-profit third party, CSHL grants to Sponsor a
[ * ]. CSHL will disclose such inventions to Sponsor at the time a patent
application is filed and Sponsor will have a sixty (60) day period in which to
evaluate whether Sponsor wishes to license any such inventions.
Sponsor agrees to maintain as Confidential Information, in accordance with
Section 10 of this Agreement, any and all such papers, annual reports and
invention disclosures.
C. Survival - The terms of this Section 9 shall survive any
expiration or termination of this Agreement to allow Sponsor to exercise its
rights with respect to Inventions made under the Research Program or inventions
made by Tularik Fellows prior to the date this Agreement expires or is
terminated.
10. CONFIDENTIALITY. The parties agree that during the term of this Agreement
and any subsequent extension of this Agreement and for a period of five (5)
years after it terminates, a party receiving information from the other party
designated as "confidential" in writing ("Confidential Information") will not
disclose such Confidential Information to any third party or use such
Confidential Information except as provided in this Agreement without prior
written consent. A party shall have no obligations with respect to any portion
of such Confidential Information which:
[ * ] = 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>
(1) is publicly disclosed through no fault of any party hereto, either
before or after it becomes known to the receiving party; or
(2) was known to the receiving party prior to the date of this
Agreement, which knowledge was acquired independently and not from the other
party; or
(3) is subsequently disclosed to the receiving party in good faith by
a third party who has a right to make such a disclosure; or
(4) has been published by a third party as a matter of right; or
(5) is subsequently independently invented or discovered other than
pursuant to the Research Program by the receiving party without reference to the
other party's Confidential Information.
11. USE OF NAMES. Neither party will use the name of the other in any
advertising or other form of publicity without the written permission of the
other, in the case of CSHL, that of the Administrative Director, except as
required by law. Sponsor may refer to the terms of this Agreement in a bona
fide relationship or prospective relationship with financiers or investors.
12. NOTICES. Any notices required to be given or which shall be given under
this Agreement shall be in writing delivered by first class mail (air mail if
not domestic), express mail, or via facsimile (receipt confirmed) addressed to
the parties as follows:
COLD SPRING HARBOR LABORATORY TULARIK INC.
P.O. Box 100 Two Corporate Drive
One Bungtown Road South San Francisco, CA 94080
Cold Spring Harbor, New York 11724 Attn: Chief Executive Officer
Attn: Assistant Administrative 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.
14.
<PAGE>
In the event notices, statements and payments required under this Agreement
are sent by certified or registered mail by one party to the other party at its
above address, they shall be deemed to have been given or made as of the date so
mailed, otherwise as of the date received.
13. ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and the successors to substantially the entire business
and assets of the respective parties hereto. This Agreement shall not be
assignable by either party without the prior written consent of the other party,
except in connection with a merger or sale or other transfer of substantially
the entire business and assets of the party.
14. GOVERNING LAW. The validity and interpretation of this Agreement and the
legal relations of the parties to shall be governed by the laws of the State of
New York and the United States.
15. ARBITRATION. Any dispute or controversy arising out of or relating to this
Research Agreement, its construction or it actual or alleged breach, including a
dispute over [ * ], shall finally be decided by arbitration in the City and
State of New York by and in accordance with the Licensing Agreement Arbitration
Rules of the American Arbitration Association. Judgment upon the award rendered
may be entered in any high court or forum, state or federal, having
jurisdiction; provided, however, that the provisions of this Section shall not
apply to decisions on the validity of patent claims or to any dispute or
controversy as to which any treaty or law prohibits such arbitration.
16. GOVERNING LANGUAGE. In the event that a translation of this Agreement is
prepared and signed by the parties for the convenience of Sponsor, this English
language version shall be the official version and shall govern if there is a
conflict between the two.
[ * ] = 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>
17. INDEMNIFICATION.
A. Sponsor hereby indemnifies and holds CSHL harmless from and against all
damages and cost from third party claims, causes of action or suits arising out
of or resulting from the claimed negligence of Sponsor in respect of (i)
Sponsor's activities under this Agreement or (ii) the manufacture, sale, offer
for sale, use and importation of products or services resulting from or licensed
or sub-licensed under this Agreement provided that CSHL shall promptly notify
Sponsor in writing of any suit or action for which such indemnity is sought,
shall permit Sponsor to control the defense thereof and shall cooperate in the
defense thereof as reasonably requested by Sponsor at Sponsor's expense.
B. CSHL hereby indemnifies and holds Sponsor harmless from and against all
damages and cost from third party claims, causes of action or suits arising out
of or resulting from the claimed negligence of CSHL in respect of CSHL's
activities under this Agreement provided that Sponsor shall promptly notify CSHL
in writing of any suit or action for which such indemnity is sought, shall
permit CSHL to control the defense thereof and shall cooperate in the defense
thereof as reasonably requested by CSHL at CSHL's expense.
C. Sponsor agrees to maintain liability insurance, including product
liability insurance, naming CSHL as an additional insured, in an amount
customary in the industry. Sponsor agrees to provide CSHL with evidence of such
insurance at CSHL's request.
18. EXPORT CONTROLS. It is understood that CSHL is subject to United States
laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities, and that its obligations
hereunder are contingent on compliance with applicable U.S. export laws and
regulations (including the Arms Export Control Act, 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.
16.
<PAGE>
amended, and the Export Administration Act of 1979). The transfer of certain
technical data and commodities may require a license from an agency of the
United States Government and/or written assurances by Sponsor that Sponsor will
not re-export data or commodities to certain, foreign counties without prior
approval of the cognizant government agency. While CSHL agrees to cooperate in
securing any license which the cognizant agency deems necessary in connection
with this Agreement, CSHL cannot guarantee that such licenses will be granted.
19. FORCE MAJEURE. CSHL shall not be responsible to Sponsor for failure to
perform any of the obligations imposed by this Agreement, provided such failure
shall be occasioned by fire, flood, explosion, lightning, windstorm, earthquake,
subsidence of soil, failure or destruction, in whole or in part, of machinery or
equipment or failure of supply of materials, discontinuity in the supply of
power, governmental interference, civil commotion, riot, war, strikes, labor
disturbance, transportation difficulties, labor shortage or any cause beyond the
reasonable control of CSHL.
20. ENTIRE AGREEMENT. Unless otherwise specified, this Agreement and the
License Agreement embody the entire understanding between CSHL and Sponsor for
this Research Program, and any prior or contemporaneous representations, either
oral or written are hereby superseded. No amendments or changes to this
Agreement, including without limitation, changes in the statement of work, total
estimated cost and period of performance, shall be effective unless made in
writing and signed by authorized representatives of 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.
17.
<PAGE>
COLD SPRING HARBOR TULARIK INC.
LABORATORY
/s/ John Maroney /s/ David V. Goeddel
- ---------------------------------- ---------------------------------
Signature Signature
John Maroney David V. Goeddel
Assistant Administrative Director President & CEO
- --------------------------------- ---------------------------------
Typed Name/Title Typed Name/Title
Dated: 10/3/97 Dated: 10/3/97
--------------------------- -------------------------
[ * ] = 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>
Appendix A
THE RESEARCH PROGRAM
Dr. Michael Wigler's laboratory at Cold Spring Harbor Laboratory ("CSHL") will,
as part of the Research Program, undertake the application of RDA to the
discovery of disease genes. The Research Program includes the use of RDA to
search for [*]. The development and use by Dr. Wigler's lab of other
representational approaches to gene discovery are included as part of the
Research Program. The Research Program also includes the study of [*]
discovered by representational approaches. The Research Program also includes
improvements to methodology for gene finding, and mutational and genomic
analysis.
The Research Program will not encompass discoveries falling within the foregoing
areas to the extent that such discoveries are exclusively directed towards the
work of Dr. Wigler's laboratory in the [*] area. The final determination of
whether a discovery falls inside or outside of the Research Program will be made
in good faith between the president and CEO of Tularik, currently David Goeddel,
and the Director of CSHL, currently Bruce Stillman.
Use of Tularik Funds Under the Research Program
-----------------------------------------------
Portions of the Research Program may be funded by the NIH and other government
programs. Payments by Tularik in support of the Research Program will be used
to complement and extend the funding from such governmental sources. In
particular the Tularik research support payments will be used as follows:
1. For the purchase of the [*]
2. For the initiation of RDA projects for which [*]
3. For the purchase of equipment for the Research Program.
4. For the scaling up of work on particular [*]
5. For the hiring of additional scientists and technicians to expand the
Research Program
Averaged over any twelve month period, a minimum of [*] full-time equivalent
personnel directed by Michael Wigler at Cold Spring Harbor Laboratory will be
dedicated to the Research Program, and the Research Program will represent at
least [*] of Dr. Wigler's effort.
[ * ] = 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
THE RESEARCH PROGRAM BUDGET
[ * ]
[ * ]
[ * ]
[ * ] = 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 10.11
LICENSE AGREEMENT
I. BACKGROUND
This Agreement is entered into this 3/rd/ day of October 1997 by and
between COLD SPRING HARBOR LABORATORY ("Licensor" or "CSHL"), a non-profit
research institution located in Cold Spring Harbor, New York; and TULARIK INC.
(which together with its Affiliate companies collectively shall be "Licensee"),
a corporation organized under the laws of the State of Delaware having its
principal office at Two Corporate Drive, South San Francisco, California 94080.
This Agreement will be effective upon the consummation of the merger between
Tularik Acquisition Corp., a wholly-owned subsidiary of the Company, and
Amplicon Corp. (the "Effective Date").
"AFFILIATE" means any present or future domestic or foreign corporation at least
Fifty-One Percent (51%) of whose voting and other capital stock shall at the
time be owned or controlled directly or indirectly by Licensee.
"RESEARCH AGREEMENT" means that certain Research Agreement by and between CSHL
and Licensee having an effective date of even date herewith.
II. LICENSE GRANT
A. Subject to (i) Licensor's right to use the Licensed Patents for
its non-commercial research and education programs, (ii) [ * ] and (iii) Section
X of this Agreement, Licensor grants
<PAGE>
to Licensee a royalty-bearing, worldwide, exclusive right and license to
practice the methods of the Licensed Patents and to make, have made, use, offer
for sale, sell and import Primary Products and Secondary Products (as defined
herein).
B. Subject to the conditions set forth in Section II.A., Licensor grants
to Licensee a worldwide, non-exclusive right and license to non-patented
technology and information necessary or useful for the practice of the Licensed
Patents, provided that such technology and information is known to CSHL and is
in Dr. Michael Wigler's laboratory at CSHL. Dr. Michael Wigler is the Principal
Investigator on the Research Program described in Appendix A to the Research
Agreement.
C. "Licensed Patents" include (1) [ * ], and any divisional,
continuations-in-part, reissues and extensions to the extent that any are
directed to the subject matter specifically described in such [ * ]; (2) [ * ]
and any divisionals, continuations-in-part, reissues and extensions to the
extent that they are directed to the subject matter specifically described in
such [ * ]; and (3) patents and patent applications directed to improvements in
[ * ], provided that Licensor has rights in such patents and/or applications
that it is free to license or sublicense, and Dr. Wigler or any person(s)
working under his supervision is named as an inventor on such patents or
applications. RDA is the term commonly used to refer to the methods of the
Licensed Patents. Improvement(s), as used in this Agreement, means
any modification of [ * ], provided such modification, if unlicensed, would
infringe one or more claims of the Licensed Patents.
For the purposes of this Agreement, Primary and Secondary Products are
defined as follows: (1) Primary Products means [ * ], and (2) Secondary
Products means [ * ]. Primary and Secondary Products will remain assets of
Licensee or sublicensee.
D. Licensee shall have the exclusive right to enter into sublicensing
agreements for the rights, privileges and licenses granted hereunder. Licensee
shall notify Licensor, in writing, of the terms of any sublicense agreement
where collaborative efforts between Licensee and its sublicensee will be
undertaken, prior to the execution of such agreement, so that an allocation
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
<PAGE>
can be made under Section III.B(2). If necessary, Licensee shall delay execution
of such agreement for up to [ * ] after Licensee notifies Licensor of the terms
of such sublicense agreement in order for the parties to agree on such an
allocation prior to execution of such agreement. If they cannot agree within
such time, Licensee may enter into the sublicense agreement and the parties
shall continue to work to determine the allocation as provided in Section
III.B(2). If the parties cannot determine such allocation, the matter shall be
referred to arbitration in accordance with Section XI.F. Licensee agrees to
provide to Licensor a copy of any and all sublicense agreements within [ * ] of
execution of such sublicense and further agrees to provide to Licensor annually
a copy of reports received by Licensee from its sublicensees during the
preceding [ * ] period under the sublicenses as shall be pertinent to a royalty
accounting under the sublicense agreements.
III. ROYALTIES AND OTHER PAYMENTS
A. Royalties shall be paid in accordance with the following schedule
on Primary and Secondary Products based upon the Licensed Patent(s) utilized in
the discovery or development of such Primary or Secondary Product:
1. Until the expiration of the Licensed Patent(s) utilized for such
Primary or Secondary Product: the royalty rate on Primary
Products shall be [ * ] of the Net Sales (as defined below) of
Primary Products sold by Licensee or its sublicensees; the
royalty rate on Secondary Products shall be [ * ] of the Net
Sales of Secondary Products sold by Licensee or its sublicensees;
2. Upon the expiration of the last of the Licensed Patents utilized
for such Primary or Secondary Product: the royalty rates due
Licensor on Net
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3.
<PAGE>
Sales of Primary and Secondary Products by Licensee or its
sublicensees shall be [ * ], that is, [ * ] for Primary Products
and [ * ] on Secondary Products, provided that a method claimed
in a Licensed Patent was utilized in the discovery or development
of such Primary or Secondary Product prior to expiration of such
Licensed Patent. Payment of such reduced royalties to Licensor
shall continue until the last to expire of Licensee's patents, if
any, on such Primary and/or Secondary Products, but in no event
shall full-rate and/or reduced royalties be paid for more than
fifteen (15) years in the aggregate from the First Commercial
Sale (as hereinafter defined) of any Primary or Secondary
Product.
If, upon the last to expire of Licensed Patents utilized in
the discovery or development of such Primary or Secondary
Product, Licensee has no issued patents but has (i) pending
applications covering the Primary and/or Secondary Product, or
(ii) files an application(s) covering such Product within one (1)
year of the expiration date of the applicable Licensed Patent,
Licensee's obligation to pay reduced royalties on such Primary or
Secondary Product shall continue until (i) the last to expire of
any patents issuing on such application, or if no such patents
issue (ii) fifteen (15) years from the expiration of the last of
the aforementioned Licensed Patents, as the case may be; provided
that in no event shall full-rate and/or reduced royalties be paid
for more than fifteen (15) years in the aggregate from the First
Commercial Sale of any Primary or Secondary Product. Licensee
shall promptly notify Licensor of each Primary or Secondary
Product discovered or identified during the life of the Licensed
Patents and shall further promptly notify Licensor of
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4.
<PAGE>
any and all applications for patent and/or patents on such
Primary and Secondary Products and provide to Licensor copies of
such applications and/or patents.
"Net Sales" shall mean the gross amounts received by Licensee, or its
sublicensees, for the commercial sale of Primary or Secondary Products, whether
invoiced or not, less: returns and allowances actually granted, packing,
insurance, freight out, taxes or excise duties imposed on the transaction (if
included in the gross amount received by Licensee), wholesaler discounts and
cash discounts.
Should marketing of a Primary or Secondary Product require the payment
of a royalty to Licensor under any license agreement executed between Licensor
and Licensee upon exercise of the rights granted to Licensee under the Research
Agreement, then the royalty payments due under this Section III.A. for the same
Primary or Secondary Product will be reduced by the amount of the royalty due
under the Research Agreement or by [*], whichever such reduction is less.
Anything in this Section III. to the contrary notwithstanding, in no event
shall [ * ] require the payment of a royalty to Licensor.
B. Sublicensing Payments
---------------------
In the event Licensee enters into any agreement sublicensing rights under
the Licensed Patents, Licensee shall make the following payments with respect to
the sublicensed rights, in addition to the royalties set forth in Section III.A.
of this Agreement. The sublicensing payments to Licensor shall be determined by
the type of sublicensing agreement Licensee proposes to enter, as set forth
below:
1. For sublicensing agreements where no collaborative efforts
between Licensee and its sublicensee are undertaken [ * ],
Licensee shall pay to Licensor [ * ] of Sublicense Revenue (as
defined below), less Licensee's
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5.
<PAGE>
Fully Burdened Costs (as defined below). "Sublicense Revenue"
shall mean [ * ]. "Fully Burdened Costs" as used above shall
include all [ * ]. In no event shall Fully Burdened Costs [ * ].
Each statement under Section III.B. shall specify the amount
of "Fully Burdened Costs" in connection with each sublicensing
agreement and shall be certified by an officer of Licensee, and
the calculation thereof shall be subject to review by Licensor.
2. For sublicensing arrangements where collaborative efforts between
Licensee and its sublicensee are undertaken, including but not
limited to joint ventures, the President and CEO of Licensee,
currently David Goeddel, and the Director of Licensor, currently
Bruce Stillman, shall use their best efforts to determine the
relative contribution of the Licensed Patents to the total
package of patent rights, trade secrets, data, services and
materials which Licensee brings to the proposed arrangement (such
package being the "Transaction Technology"). If the determined
percentage contribution of the Licensed Patents to the
Transaction Technology is [ * ], then Licensee shall pay to
Licensor [ * ]. If the determined percentage contribution of the
Licensed Patents to the Transaction Technology is less than [ *
], then Licensee shall pay to Licensor [ * ] multiplied by the [
* ]. In the event the parties cannot agree upon a fair
apportionment within sixty (60) days of the date Licensee
notifies Licensor of the terms of the sublicense agreement, the
matter will be subject to arbitration in accordance with Section
XI.F. of this Agreement.
C. First Commercial Sale
---------------------
Licensee will notify Licensor within thirty (30) days of the First
Commercial Sale of each royalty-bearing Primary and Secondary Product. By "First
Commercial Sale" is intended the initial transfer by Licensee or a sublicensee
of a Primary or Secondary Product for cash or a cash equivalent.
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6.
<PAGE>
D. Payments And Records
--------------------
Beginning with the date of the First Commercial Sale, Licensee shall pay to
Licensor the royalties due within ninety (90) days of the end of each calendar
half-year. Accompanying the payment will be a statement of the sales of Primary
and Secondary Products by Licensee and the applicable royalties in sufficient
detail to allow Licensor to calculate the royalties due. Licensee shall keep
accounts and records in sufficient detail to enable Licensor to determine
royalties due for sales of Primary and Secondary Products by Licensee and its
sublicensees.
Licensee agrees to make such records available for inspection by Licensor
or its authorized representative at such place or places where such records are
customarily kept upon reasonable notice and at reasonable hours of the day
during which the offices of Licensee shall be open for business. Licensor agrees
to hold strictly confidential in accordance with Section XI.C. all information
learned in the course of any audit or inspection hereunder, except to the extent
that it is necessary for Licensor to reveal such information in order to enforce
rights under this Agreement or to comply with the law. In any license from
Licensee to a third party for the making, using, offering for sale, selling
and/or importing of Primary and/or Secondary Products, Licensee shall provide
that such sublicensee shall assume substantially similar obligations as assumed
by Licensee for reporting and to allow for inspection by Licensor to determine
whether the royalties paid are correct. Within [ * ] of the expiration of the
term of this Agreement as provided for in Section VII, Licensee shall provide a
final report as to all royalties due which were not previously reported by
Licensee, accompanied by the payment due. [ * ].
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7.
<PAGE>
E. Licensing Fees
--------------
In the event the Research Program described in the Research Agreement
terminates under the conditions set forth in Section 2 of the Research
Agreement, the research funding provided for in Section 4.A. of that Research
Agreement shall [*].
IV. DUE DILIGENCE
During the term of this exclusive license, Licensee shall use its
reasonable best efforts to use the Licensed Patents to discover Primary and/or
Secondary Products or, if Licensee itself does not do so, Licensee shall
sublicense to sublicensees that are committed to using their reasonable best
efforts to pursue such Primary or Secondary Products.
V. INDEMNITY
Licensee shall indemnify, hold harmless and defend Licensor from and
against any liability or expense arising from any product liability claim
asserted by any party as to any Primary or Secondary Products, [ * ]. Said
indemnity and defense obligation shall apply to any claims made by employees,
subcontractors, sublicensees or other agents of Licensee, as well as any member
of the general public.
Licensee shall defend, indemnify and hold Licensor harmless from and
against all liability, demands, damages, expenses and losses for death, personal
injury, illness or property damage arising out of the use by Licensee of any
Licensed Patents [ * ]. Licensee will not be obligated to indemnify Licensor
hereunder for the use of the Licensed Patents by others under this Agreement.
Licensee agrees to maintain liability insurance, naming Licensor as an
additional insured, [*], and shall provide evidence of such insurance at
Licensor's request.
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8.
<PAGE>
Licensee shall have the exclusive right to control the defense of any
action pursuant to this Section V, including the right to select counsel to
defend Licensee and Licensor, and to settle any claim, provided that, without
the written consent of Licensor (which shall not be unreasonably withheld or
delayed), Licensee shall not agree to settle any claim against Licensor to the
extent such claim has a material or adverse effect on the Licensed Patents. The
provisions of this paragraph shall survive and remain in full force and effect
after any termination, expiration or cancellation of this Agreement or the term
of this Agreement as provided for in Section VII and obligations hereunder shall
apply whether or not such claims are rightfully brought.
VI. WARRANTIES; PATENT ENFORCEMENT
A. Disclaimers - Nothing in this Agreement shall be construed as:
1. a warranty or representation by Licensor [ * ]; or
2. a warranty or representation that [ * ]; or
3. an obligation to [ * ]; or
4. conferring by implication, estoppel or otherwise [ * ].
5. Licensor makes no representations other than those specified
herein.
LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
B. Warranties - Each of Licensor and Licensee represent and warrant to
the other that it has the full right and authority to enter into this Agreement
and that this Agreement does not require the consent or approval of any other
person or entity.
[ * ] = Certain confidential information in this document, marked by brackets,
has been ommitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9.
<PAGE>
C. Patent Enforcement - Each party shall promptly notify the other if it
learns of any infringement by third parties of the Licensed Patents. Licensee
shall have the first right, but not the obligation, to take commercially
reasonable action with respect to such infringement, including but not limited
to bringing and controlling an enforcement action against such third party (in
CSHL's name if necessary). CSHL agrees to provide all reasonable assistance
requested by Licensee in connection with any such action, including but not
limited to being named in such action and providing testimony, for which
Licensee shall reimburse CSHL for its out-of-pocket costs and expenses. Any
damages, judgments or other payments actually recovered from an infringing party
in litigation pursued by Licensee shall be [ * ]. In the event Licensee elects
not to take any action with respect to such infringement, Licensee shall so
notify CSHL and CSHL shall have the right, but not the obligation, to bring an
infringement action on its own behalf [ * ]; provided that only Licensee shall
have the right to grant a (sub)license to any such third party; provided further
that [ * ].
VII. TERM AND TERMINATION
A. Term
----
This Agreement shall expire upon the later of (i) the expiration of the
last to expire Licensed Patent or (ii) the expiration of all payment obligations
under Section III.A or III.B.
B. Termination
-----------
1. This Agreement shall be terminable upon the default of either
party. In the event of default by a party ("Defaulting Party"), the other party
("Non-Defaulting Party") shall give the Defaulting Party written notice of the
default and of its election to terminate this Agreement at the expiration of a
probation period of [ * ] from the date of the notice. If 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.
10.
<PAGE>
Defaulting Party fails to resolve the default in the probation period by (i)
curing the default, (ii) providing a written explanation satisfactory to the
Non-Defaulting Party that a default has not occurred or (iii) entering into a
written agreement with the Non-Defaulting Party for the cure or other resolution
of the default, then the Non-Defaulting Party may terminate this Agreement by
giving written notice to the Defaulting Party. The termination will be effective
upon the date specified in the notice. All termination rights shall be in
addition to, and not in substitution for, any other remedies that may be
available to the Non-Defaulting Party. Termination pursuant to this section
shall not relieve the Defaulting Party from liability and damages to the Non-
Defaulting Party for default. Waiver by either party of a single default or a
succession of defaults shall not deprive such party of any right to terminate
this Agreement arising by reason of any subsequent default.
2. This Agreement may be terminated by Licensee by written notice
delivered to Licensor at any time after October 3, 2002, effective one year
after the date of such notice, in the event that Licensee determines that it
will no longer utilize the Licensed Patents.
3. This Agreement may be terminated by Licensee at any time upon
[*] prior written notice in the event that Dr. Michael Wigler is, for any
reason, unable or unwilling to continue to serve as Principal Investigator under
the Research Agreement and the parties cannot mutually agree on a successor or
alternative research work to be sponsored under the Research Agreement.
C. Effect of Expiration or Termination
-----------------------------------
Upon the expiration of the term of this Agreement, or any termination of
this Agreement by either Licensor or Licensee prior to the end of such term, the
licenses granted hereunder shall terminate to the extent that Licensee shall no
longer be licensed to practice the Licensed Patents
[ * ] = 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>
after the date of termination. The terms of this Agreement applicable to Primary
Products and Secondary Products discovered or developed through use of the
methods claimed in the Licensed Patents prior to the date of termination,
including the royalty provisions, shall continue to apply after termination of
this Agreement.
VIII. RESEARCH SITE.
Unless Licensor and Licensee otherwise agree in writing, Licensee shall
maintain a facility in reasonable geographic proximity to Licensor or Long
Island, New York (i.e., approximately 10-15 miles from Licensor) until [ * ].
Licensee further agrees that [ * ].
IX. ASSIGNMENT
This Agreement shall not be assignable by either of the parties without
the prior written consent of the other party except to a successor-in-interest
to all or substantially all of the business assets of a party hereto, whether by
way of merger, consolidation, sale of all or substantially all of a party's
assets, change of control or similar transaction.
Subject to the limitations on assignment herein, this Agreement shall be
binding upon and inure to the benefits of the successors-in-interest and assigns
of Licensor and Licensee. Any such successors to or assignee of a party's
interest shall expressly assume in writing the performance of all the terms and
conditions of this Agreement to be performed by said party.
X. THIRD PARTY RIGHTS
The Licensed Technology defined by the [ * ] was made with Government
support under contract [ * ] awarded by the National Institute of Health. This
Agreement is subject to the terms and conditions defined therein, including but
not limited to 37 C.F.R. Part 401 and 45 C.F.R. Parts 6 and 8 plus all
Amendments 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.
12.
<PAGE>
This Agreement is also subject to the terms of [ * ], a copy of which is
hereby acknowledged to have been provided in confidence by Licensor to Licensee.
XI. GENERAL PROVISIONS
A. Patent Marking
--------------
To the extent required by applicable law, Licensee shall mark all Primary
and Secondary Products in accordance with the patent marking laws of the country
in which such Primary and Secondary Products are manufactured, used, or sold.
B. No Use Of Name
--------------
The use of the name "Cold Spring Harbor Laboratory", or any variations
thereof, in connection with the advertising or sale of products or methods
covered by Licensed Patents is expressly prohibited, except as required by law.
Sponsor may refer to the terms of this Agreement in a bona fide relationship or
prospective relationship with financiers or investors.
C. Confidentiality
---------------
The parties agree that during the term of this Agreement and for a period
of five (5) years after it terminates, a party receiving information from the
other party designated as "confidential" in writing ("Confidential Information")
will not disclose such Confidential Information to any third party or use such
Confidential Information except as provided in this Agreement without prior
written consent. A party shall have no obligations with respect to any portion
of such Confidential Information which:
(1) is publicly disclosed through no fault of any party hereto, either
before or after it becomes known to the receiving party; 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.
13.
<PAGE>
(2) was known to the receiving party prior to the date of this
Agreement which knowledge was acquired independently and not from the other
party; or
(3) is subsequently disclosed to the receiving party in good faith by
a third party who has a right to make such a disclosure; or
(4) has been published by a third party as a matter of right; or
(5) is subsequently independently invented or discovered other than
pursuant to the Research Program by the receiving party without reference to the
other party's Confidential Information.
D. Independent Contractors
-----------------------
The relationship between Licensor and Licensee is that of independent
contractors. Licensor and Licensee are not joint venturers, partners, principal
and agent, master and servant, employer and employee, and have no other
relationship other than independent contracting parties. Licensor shall have no
power to bind or obligate Licensee in any manner, other than as is expressly set
forth in this Agreement. Likewise, Licensee shall have no power to bind or
obligate Licensor in any manner, other than as is expressly set forth in this
Agreement.
E. Entire Agreement; Modification
------------------------------
This Agreement, together with the Research Agreement, sets forth the entire
agreement and understanding between the parties as to the subject matter set
forth in this Agreement. There shall be no amendments or modifications to this
Agreement, except by a written document that is 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.
14.
<PAGE>
F. Arbitration
-----------
Any dispute or controversy arising out of or relating to this License
Agreement, its construction or its actual or alleged breach, shall be finally
decided by arbitration conducted in the City and State of New York by and in
accordance with the Licensing Agreement Arbitration Rules of the American
Arbitration Association. The parties agree that any arbitration panel shall
include members knowledgeable as to evaluation of biopharmaceutical technology.
Judgment upon the award rendered may be entered in the highest court or forum,
state or federal, having jurisdiction; provided, however, that the provisions of
this Section shall not apply to decisions on the validity of patent claims or to
any dispute or controversy as to which any treaty or law prohibits such
arbitration.
G. Governing Law
-------------
This Agreement shall be construed and enforced in accordance with the laws
of the State of New York.
H. Headings
--------
The headings for each article and section of this Agreement have been
inserted for the convenience of reference only and are not intended to limit or
expand on the meaning of the language contained in the particular article or
section.
I. Severability
------------
If any provision of his Agreement is ultimately held to be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
[ * ] = 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>
J. No Waiver
---------
Any delay in enforcing a party's rights under this Agreement or any waiver
as to a particular default or other matter shall not constitute a waiver of such
party's rights to the future enforcement of its rights under this Agreement,
excepting only as to an express written and signed waiver as to a particular
matter for a particular period of time.
K. Notices
-------
All notices required or permitted to be given by the terms of this
Agreement shall be given by prepaid registered or certified mail return receipt
requested or by facsimile transmission properly addressed to the other party at
the addresses designated below or to such other addresses as may be designated
in writing by such other party and shall be effective upon receipt.
For Licensor: Cold Spring Harbor Laboratory
One Bungtown Road
Cold Spring Harbor, NY 11724
Attn: Assistant Administrative Director
Telefax: (516) 367-8855
For Licensee: Tularik Inc.
Two Corporate Drive
South San Francisco, CA 94080
Attn: President
Telefax: (650) 829-4303
L. Compliance With Laws
--------------------
Nothing contained in this Agreement shall require or permit Licensor or
Licensee to do any act inconsistent with the requirements of any United States
law, regulation or executive order as the same may be in effect from time to
time.
[ * ] = 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>
COLD SPRING HARBOR LABORATORY TULARIK INC.
By: /s/ John Maroney By: /s/ David V. Goeddel
------------------------------------ ----------------------------------
John Maroney
Assistant Administrative Director David V. Goeddel
----------------------------------
Typed Name
Date: 10/3/97 President & CEO
---------------------------------- ----------------------------------
Title
Date: 10/3/97
----------------------------------
[ * ] = 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>
Exhibit 10.12
COLLABORATION AGREEMENT
between
TULARIK, INC.
and
KNOLL AG
[ * ] = 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.
COLLABORATION AGREEMENT
This Collaboration Agreement is entered into as of the first day of
November, 1998 (the "Effective Date") by and between Tularik Inc., a Delaware
corporation ("Tularik"), and Knoll Ag, a corporation organized under the laws of
Germany ("Knoll").
Recitals
Whereas, Tularik has developed proprietary screening assays and other
proprietary technology useful in the identification of compounds that directly
agonize or antagonize certain targets for the therapeutic treatment of obesity
and related diseases in humans; and
Whereas, Knoll and Tularik both possess substantial libraries of natural
and synthetic compounds that have potential therapeutic pharmaceutical utility;
and
Whereas, Tularik and Knoll desire to establish a cooperative research
relationship where the compound libraries of each Party will be screened 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; and
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:
1.1 "Additional Target" shall mean a Target that is added to Appendix A
pursuant to Section 2.7.2(i) and that it is not a Substitute Target. An
"Additional Target" may or may not also be a [ * ].
1.2 "Affiliate" shall mean any company or entity controlled by,
controlling or under common control with a Party and shall include without
limitation any company fifty percent (50%) or more of whose voting stock or
participating profit interest is owned or controlled, directly or indirectly, by
a Party, and any company that owns or controls, directly or indirectly, fifty
percent (50%) or more of the voting stock of a Party.
1.3 "Agreement" shall mean this Collaboration Agreement.
<PAGE>
1.4 "At Risk" shall mean a Body Mass Index greater than or equal to [ * ]
but less than [ * ], which may be revised from time to time in accordance with
generally accepted international and national scientific practice.
1.5 "Body Mass Index" shall mean weight in kilograms divided by height in
meters squared (kg/m2), as such index shall be revised from time to time in
accordance with generally accepted international and national scientific
practice.
1.6 "Collaboration Program" shall mean the research and development
program in the Field conducted pursuant to this Agreement.
1.7 "Collaboration Program Term" shall mean the period during which the
Collaboration Program is to be conducted as provided in Section 15.1.
1.8 "Commercialization Notice" shall have the meaning set forth in Section
5.1.
1.9 "Compound Libraries" means the Knoll Compound Library, the Tularik
Compound Library and the Research Compound Library.
1.10 "Compound Opportunity" shall have the meaning set forth in Section
2.7.1.
1.11 "Confidential Information" shall mean, subject to the limitations set
forth in Section 13.1 hereof, all information relating to the Collaboration
Program disclosed by one Party to the other Party pursuant to this Agreement.
1.12 "Contribution Royalty" shall mean a royalty determined in accordance
with the procedure set forth in Section 4.4.6.
1.13 "Current Program Target" shall mean one of the Program Targets
included on Appendix A at any given point in time. As of the Effective Date,
the two Current Program Targets are (1) [ * ] and (2) [ * ]. In the event
Additional Targets or Substitute Targets are added to Appendix A pursuant to
Section 2.7.2, at the time such targets are added, they shall be deemed to be
Current Program Targets.
1.14 "Developing Party" shall have the meaning given in Section 4.3.2 of
this Agreement.
1.15 "Development" shall mean the standard, internal program established by
a Party for drug development, which shall commence at the sole discretion of
that Party, but in no event shall such program be considered to have commenced
prior to the start of [ * ].
1.16 "Effective Date" shall have the meaning given in the introductory
paragraph of this Agreement.
1.17 "Extra-Field Products" shall mean products based upon or incorporating
Research Compounds to be commercialized (i) [ * ]; and (ii) [ * ], as set forth
in 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 this Securities Act of 1933, as amended.
2
<PAGE>
"Extra-Field Products" include Knoll Extra-Field Products, Tularik Extra-Field
Products and Third Party Extra-Field Products.
1.18 "FDA" shall mean the United States Food and Drug Administration.
1.19 "Field" shall mean the research, development and commercialization of
products that are agonists or antagonists of the Program Targets and are useful
in the Indications.
1.20 "FTE" shall mean full-time equivalents.
1.21 "Hit" means a Library Compound that agonizes or antagonizes a Program
Target in an HTS performed as part of the Research Program.
1.22 "HTS" means high throughput screening.
1.23 "IND" stands for "Investigational New Drug Application" and shall mean
an application for approval by the FDA, or the equivalent non-U.S. regulatory
authority, to commence human clinical testing of a drug.
1.24 "Independent Research" shall have the meaning set forth in Section
3.1.2.
1.25 "Indications" means the [ * ] human patients and, in addition, may
include the [ * ]. Treatment shall include any [ * ] used in combination with
Program Products.
1.26 "Inventing Party" means the Party whose employees, agents or
consultants have made an Invention.
1.27 "Invention" means any possibly patentable discovery or invention,
whether patentable or not, made during the course of the Collaboration Program
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.
1.28 "JT" shall mean Japan Tobacco Inc.
1.29 "JT Agreement" shall mean the agreement between JT and Tularik dated
December 31, 1996 and amendments thereto.
1.30 "Knoll Compound Library" means the compound library consisting of
Knoll Substances.
1.31 "Knoll Extra-Field Products" shall mean all Extra-Field Products
synthesized by Knoll or its Affiliates.
1.32 "Knoll Know-How" shall mean all materials, know-how and information
(a) that exists as of the Effective Date, (b) that Knoll owns, controls or to
which it has a license (with the right to sublicense), during the Collaboration
Program Term and (c) that would be infringed or misappropriated by the conduct
of the Research Program or the development, manufacture, use or sale of Program
Products. Knoll Know-How shall not include Knoll Patents.
[ * ] = 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 this Securities Act of 1933, as amended.
3
<PAGE>
1.33 "Knoll Patents" shall mean any and all patents (other than Program
Patents), both foreign and domestic, that 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 extensions, reissues,
renewals, reexaminations, supplementary protection certificates and inventors'
certificates, (a) that (i) are issued as of the Effective Date, (ii)
subsequently issue from applications (including substitutions, 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) that Knoll owns, controls or to which it has a
license (with the right to sublicense), during the term of this Agreement and
(c) that would be infringed by the conduct of the Research Program or the
development, manufacture, use or sale of Program Products.
1.34 "Knoll Substances" shall mean those natural extracts, natural
compounds and synthetic compounds that either Knoll or its Affiliates owns or
has the right to license or sublicense as of the Effective Date or from time to
time during the Collaboration Program Term independently of the Collaboration
Program.
1.35 "Knoll Technology" shall mean, collectively, the Knoll Know-How, the
Knoll Patents and the Knoll Substances.
1.36 "Knoll Territory" shall mean [ * ].
1.37 "Library Compound" means a compound from a Knoll Compound Library or a
Tularik Compound Library.
1.38 "License Agreement" shall mean the license agreement or agreements to
be entered into between the Parties substantially in the form attached hereto as
Appendix C.
1.39 "NDA" stands for "New Drug Application" and shall mean an application
for regulatory approval by the FDA, or an equivalent non-U.S. authority,
required for the marketing and sale of a pharmaceutical product in a given
jurisdiction.
1.40 "New Target Candidates" shall mean any Target that is not, and has not
been, a Program Target. [ * ].
1.41 "New Targets" shall mean Additional Targets and Substitute Targets.
1.42 "Obese" shall mean a Body Mass Index greater than or equal to [ * ],
which may be revised from time to time in accordance with generally accepted
international and national scientific practice.
1.43 "Overweight" shall mean a Body Mass Index greater than or equal to [ *
] but less than [ * ], which may be revised from time to time in accordance with
generally accepted international and national scientific practice.
1.44 "Party" shall mean either Tularik or Knoll.
[ * ] = 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 this Securities Act of 1933, as amended.
4
<PAGE>
1.45 "Patents" shall mean Program Patents and/or Research Compound Patents.
1.46 "Pharmaceutical Market" shall mean [ * ].
1.47 "Prior Interest" means a compound that, at the time of identification
as a Validated Hit: [ * ].
1.48 "Program Know-How" shall mean any know-how developed by either Party
pursuant to the Collaboration Program during the Collaboration Program Term.
Program Know-How shall not include Program Patents.
1.49 "Program Patents" shall mean any and all patents and patent
applications, both foreign and domestic, that have not been held invalid or
unenforceable by a court of competent jurisdiction in a decision from which no
appeal has been or can be taken, including without limitation all extensions,
reissues, reexaminations, renewals, supplementary protection certificates and
inventors' certificates, which cover inventions or discoveries made by either
Party or both Parties pursuant to the Collaboration Program during the
Collaboration Program Term. Program Patents shall not include any Research
Compound Patents.
1.50 "Program Product" shall have the meaning set forth in Section 5.1.
1.51 "Program Target" shall mean one of the targets included on Appendix A
at any time during the Collaboration Program Term.
1.52 "Program Technology" shall mean all Program Patents and Program Know-
How.
1.53 "Regulatory Approval" means all approvals (including pricing and
reimbursement approvals), product and/or establishment licenses, registrations
or authorizations of any regional, federal, state or local regulatory agency,
department, bureau or other governmental entity, necessary for the manufacture,
use, storage, import, export, transport or sale of Program Products in a
regulatory jurisdiction.
1.54 "RC" shall stand for "Research Committee" and shall mean that
committee formed pursuant to Section 2.2.1 hereof.
1.55 "Research Compound" means any compound that is based upon any Hit and
that is made, created, discovered, identified, invented, synthesized, optimized
or acquired by either Party pursuant to the Research Plan, in the course of the
Collaboration Program or at the direction of the RC.
1.56 "Research Compound Inventions" shall have the meaning given in Section
4.3.
1.57 "Research Compound Library" means all Research Compounds. The Research
Compound Library shall not include any Knoll Substances or Tularik Substances.
1.58 "Research Compound Patents" shall mean any and all patents and patent
applications, both foreign and domestic, that have not been held invalid or
unenforceable by 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 this Securities Act of 1933, as amended.
5
<PAGE>
court of competent jurisdiction in a decision from which no appeal has been or
can be taken, including without limitation all extensions, reissues,
reexaminations, renewals, supplementary protection certificates and inventors'
certificates, which cover Research Compound Inventions made by either Party or
both Parties pursuant to the Collaboration Program during the Collaboration
Program Term. Research Compound Patents shall not include any patents or patent
applications claiming Program Patents.
1.59 "Research Opportunity" shall have the meaning set forth in Section
2.7.1.
1.60 "Research Plan" shall mean a detailed plan for conducting the
Collaboration Program directed toward the Field attached hereto as Appendix B,
as amended from time to time by the RC in accordance with Section 2.3.
1.61 "Research Program" shall mean the components of the Collaboration
Program in the Field occurring prior to the commencement of Development for each
Validated Hit or Program Product, as described in the Research Plan.
1.62 "Screening Library" means the Knoll Compound Library or the Tularik
Compound Library.
1.63 "SC" shall stand for "Steering Committee" and shall mean that
committee formed pursuant to Section 2.2.2 hereof.
1.64 "Section 12.4 Termination" shall have the meaning set forth in Section
15.1.
1.65 "Substitute Targets" shall mean a Target that is substituted for a
Current Program Target pursuant to Section 2.7.2(ii). Thereafter, such
Substitute Target shall be deemed to be a Current Program Target. A "Substitute
Target" may or may not also be a [ * ].
1.66 "Tail Period" shall mean the twelve (12) month period commencing on
the date the Collaboration Program Term expires or is terminated.
1.67 "Targets" shall mean biochemical components of a system determined by
Tularik to have potential to be agonized or antagonized by Research Compounds or
Library Compounds for use in the Indications.
1.68 "Third Party" shall mean a person or entity other than Tularik, Knoll
or an Affiliate of either Tularik or Knoll.
1.69 "Third Party Extra-Field Products" shall mean all Extra-Field Products
synthesized by a Third Party.
1.70 "Three-Party Agreement" shall mean an agreement that may be executed
following the Effective Date among JT, Knoll and Tularik relating to the
subject matter of this agreement.
1.71 "Tularik Assays" shall mean those biochemical and cell-based assays
developed by, or on behalf of, Tularik for 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 this Securities Act of 1933, as amended.
6
<PAGE>
1.72 "Tularik Compound Library" means the library consisting of Tularik
Substances.
1.73 "Tularik Extra-Field Products" shall mean all Extra-Field Products
synthesized by Tularik or its Affiliates.
1.74 "Tularik Know-How" shall mean all materials, know-how and information
(a) that exists as of the Effective Date, (b) that Tularik owns, controls or to
which it has a license (with the right to sublicense), during the Collaboration
Program Term and (c) that would be infringed or misappropriated by the conduct
of the Research Program or the development, manufacture, use or sale of Program
Products. Tularik Know-How shall not include Tularik Patents.
1.75 "Tularik License Agreement" shall mean a license agreement or license
agreements entered into between the Parties pursuant to this Agreement and
substantially in the form of the License Agreement, with such changes as are
necessary to reflect the grant of licenses from Knoll to Tularik and the
consideration for such licenses described in this Agreement.
1.76 "Tularik Partner" shall mean one or more of: (i) Japan Tobacco Inc.,
Merck & Co., Inc., Sumitomo Pharmaceuticals Co., Ltd., Taisho Pharmaceutical
Co., Ltd. and Rosche Bioscience division of Syntex (U.S.A.) Inc.; (ii) any
Affiliates of the foregoing; and (iii) any successors of an entity described in
clause (i) or (ii).
1.77 "Tularik Patents" shall mean any and all patents (other than Program
Patents), both foreign and domestic, that have not been held invalid or
unenforceable by a court of competent jurisdiction in a decision from which no
appeal has been or can be taken, including without limitation all extensions,
reissues, renewals, reexaminations, supplementary protection certificates and
inventors' certificates, (a) that (i) are issued as of the Effective Date, (ii)
subsequently issue from applications (including substitutions, 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) that Tularik owns, controls or to which it has a
license (with the right to sublicense) during the term of this Agreement and (c)
that would be infringed by the conduct of the Research Program or the
development, manufacture, use or sale of Program Products.
1.78 "Tularik Product" shall have the meaning given in Section 5.3.1.
1.79 "Tularik Substances" shall mean those natural extracts, natural
compounds and synthetic compounds that Tularik owns or has the right to license
or sublicense as of the Effective Date or from time to time during the
Collaboration Program Term independently of the Collaboration Program. "Tularik
Substances" shall not include compounds that (i) prior to the Effective Date,
have been designated as development candidates outside the Field by the
committee or group within Tularik that customarily makes such designations; or
(ii) are natural extracts, natural compounds or synthetic compounds contained in
the screening library of JT as of the Effective Date or from time to time during
the Collaboration Program Term without the written consent of JT.
1.80 "Tularik Technology" shall mean, collectively, the Tularik Assays, the
Tularik Know-How, the Tularik Patents and the Tularik Substances.
1.81 "Tularik Territory" 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 this Securities Act of 1933, as amended.
7
<PAGE>
1.82 [ * ] shall mean a biochemical component of a system that [ * ] that
is determined by the RC to have potential to be agonized or antagonized by
Research Compounds or Library Compounds for use against the Indications.
1.83 "Validated Hit" means a Library Compound or Research Compound that
agonizes or antagonizes a Program Target in confirmatory screening of Hits as
part of the Research Program.
ARTICLE 2 Program; Development.
2.1 Research Program. Tularik and Knoll shall conduct the Research Program
pursuant to the Research Plan. The goals and progress of the Research Program
shall be determined by and monitored under the direction of the RC as set forth
in Section 2.2. The Parties shall commence the Research Program upon the
Effective Date.
2.2 Research Program Management.
2.2.1 Research Committee ("RC").
(a) Tularik and Knoll will each appoint three (3)
representatives to the RC, which shall exist for the Collaboration Program Term
and then be dissolved.
(b) Each representative to the RC shall have appropriate
technical credentials and knowledge and ongoing familiarity with the Research
Program. Tularik's initial representatives to the RC will (i) Dr. Jin-Long Chen,
(ii) Dr. Shugui Huang and (iii) Dr. Martin Thoolen. Knoll's initial
representatives to the RC will be (i) Dr. Robert Jones, (ii) Dr. Siegfried
Bialojan and (iii) Dr. Jim Jeffery. Either Party may change any or all of its
appointments to the RC at any time upon giving written notice to the other
Party. Each Party will designate one of its RC representatives to serve as the
liaison between the Parties and to undertake and coordinate any day-to-day
communications as may be required by and between the Parties. Tularik shall
designate the chairperson of the RC.
(c) The RC shall meet semi-annually, or more frequently as
mutually agreed, such agreement not to be unreasonably withheld or delayed,
during the Research Program Term to review the results of the Research Program
and to revise the Research Plan, as needed. The RC will report to the SC on the
outcome of such meetings.
(d) The RC shall carry out the following responsibilities:
(i) defining, periodically revising and recommending to
the SC the yearly objectives of the Research Program;
(ii) co-ordinating activities required to carry out the
Collaboration Program;
(iii) monitoring progress of the Collaboration Program;
(iv) delegating responsibility for the filing and
prosecution of Program Patents on inventions jointly discovered in the course of
the Collaboration Program Term; 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 this Securities Act of 1933, as amended.
8
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(v) recommending Validated Hits according to the Research
Plan to the SC for Development.
All actions taken and decisions made by the Research Committee shall be by
unanimous agreement.
2.2.2 Steering Committee.
(a) Each Party shall appoint two (2) representatives to the SC,
which shall exist for the Collaboration Program Term and then be dissolved.
(b) Tularik's initial representatives to the SC will be its
Chief Executive Officer, Dr. David V. Goeddel, and Dr. Terry Rosen, Vice
President, Research Operations. Knoll's initial representatives to the SC will
be Dr. Hans-Heinrich Gruenhagen, Vice President of Research and Technology,
Knoll, Germany, and Dr. Ian Hunneyball, Director of Research, Knoll
Pharmaceuticals, UK. Either Party may change its appointments to the SC at any
time upon giving written notice to the other Party. Knoll shall designate the
chairman of the SC.
(c) The SC will meet promptly after the Effective Date to
establish such procedures and mechanisms as may be necessary for the operation
of the SC and the RC to assure the efficient conduct of the Research Program.
Thereafter, the SC will meet annually, or as otherwise mutually agreed, such
agreement not to be unreasonably withheld or delayed, during the Collaboration
Program Term.
(d) The SC shall have the authority to:
(i) recommend that Knoll approve or not approve the
annual Research Plan based on recommendations made by the RC;
(ii) recommend Validated Hits for Development by Knoll;
and
(iii) resolve disputes within the RC.
(e) Decisions of the SC shall be unanimous; [ * ].
(f) Anything in Section 2.2.2(e) to the contrary
notwithstanding, the following decisions require the unanimous vote of the SC:
(i) [ * ];
(ii) [ * ];
(iii) [ * ]; and
(iv) [ * ].
2.2.3. Meetings. The SC and the RC may meet by telephone or in person at
such times as are agreeable to the members of each such committee. The location
of each SC and RC meeting will be determined alternately by each Party, with
each Party bearing the expenses of its representatives attending SC or RC
meetings. Tularik will determine the location of the first meeting of each
committee. Members of a committee may be represented at any meeting by another
member of the committee, or by a deputy, either of whom may cast the absent
member's vote. The SC 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 this Securities Act of 1933, as amended.
9
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RC shall issue agendas in advance of each meeting. The chairperson shall appoint
someone to keep accurate minutes of the meetings, which shall be effective upon
approval of the other Party, such approval not to be unreasonably withheld or
delayed.
2.3 Research Program Review and Amendment. The RC will periodically
review the Research Program, 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.
2.4 Screening and Development. For the purpose of identifying Validated
Hits that are suitable for designation as Program Products for development
within the Field, Tularik shall develop and perform the Tularik Assays during
the Collaboration Program Term to determine: (i) [ * ] of Library Compounds and
Research Compounds; and (ii) [ * ] of such Library Compounds and Research
Compounds. In addition, Tularik shall provide to Knoll the Tularik Assays to
enable Knoll to perform screening of Knoll Substances during the Collaboration
Program Term to identify Validated Hits that are suitable for designation as
Program Products for use in the Field.
2.5 Validated Hit Optimization. Both Parties shall undertake, under the
direction of the RC, target validation, medicinal chemistry, pharmacological
profiling and other preclinical activities with respect to Validated Hits and
otherwise as set forth in the Research Plan. Knoll shall perform such further
preclinical or other activities as shall enable it to prepare one or more
Validated Hits for Development; provided, however, that [ * ] on any Research
Compound or Library Compound within the Field shall not be commenced by or on
behalf of Knoll until [ * ].
2.6 Exchange of Data. All data and information obtained by either Party
pursuant to the Research Program will be provided to the RC. Tularik shall
apprise Knoll promptly following the discovery of compounds with [ * ];
provided, however, that the foregoing obligation shall terminate upon [ * ].
Knoll acknowledges and agrees that Tularik shall [ * ]; provided, however, that
Tularik shall not [ * ] will exchange data relating to Validated Hits [ * ] for
no additional fee or cost; provided, however, that the foregoing shall not
constitute an obligation to exchange reports compiled for submission to
authorities to receive Regulatory Approvals. The Parties may also make such
data available to their respective licensee(s) in the Field subject to the
payment of a reasonable fee to be separately agreed at the time such data is
made available to such licensee(s); provided, however, such data shall not be
made available to licensees until each has executed a standard confidentiality
agreement with respect thereto.
2.7 New Targets.
2.7.1 Tularik may, in its sole discretion, (i) [ * ] New Target
Candidates; (ii) [ * ] to determine whether compounds from the Tularik Compound
Library agonize and/or antagonize such New Target Candidates; and/or (iii) [ * ]
with respect to compounds that agonize and/or antagonize such New Target
Candidates. In the event Tularik determines, in its sole discretion, to [ * ]
as of the Effective Date, the opportunity: (A) to [ * ] a New Target Candidate
(a "Research Opportunity"); or (B) to [ * ] a New Target Candidate (a "Compound
Opportunity"); Tularik shall [ * ] in a written notice reasonably describing
such [ * ], or such [ * ] shall have no obligation to offer to Knoll any: (Y) [
* ]; or (Z) [ * ]; in which case Tularik 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 this Securities Act of 1933, as amended.
10
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be obligated to offer to Knoll such [ * ] or such Compound Opportunity that
relates to such compound that [ * ].
2.7.2 In the event Tularik offers to Knoll a Research Opportunity
pursuant to Section 2.7.1, Knoll shall, within [ * ] of receipt of such written
notice, inform Tularik in writing whether Knoll: (i) wishes to [ * ]; (ii)
wishes to [ * ]; or (iii) does not wish to [ * ].
2.7.3 In the event Knoll elects the option contained in Section 2.7.2(i)
above, and the Research Opportunity relates to a New Target Candidate that is
not a [ * ], (i) Knoll shall pay Tularik [ * ] upon signing of the amended
Appendix A and (ii) Knoll shall [ * ], and such New Target Candidate shall be
added to Appendix A as [ * ];
2.7.4 In the event Knoll elects the option contained in Section 2.7.2(i)
above, and the Research Opportunity relates to a New Target Candidate that is a
[ * ], Knoll shall [ * ] and such New Target Candidate shall be added to
Appendix A as [ * ];
2.7.5 In the event Knoll elects the option contained in Section 2.7.2(ii)
above, Knoll shall not be required to [ * ] such New Target Candidate and such
New Target Candidate shall be added to Appendix A as [ * ]. Upon addition of a
New Target Candidate to Appendix A as a [ * ], one of the then-Current Program
Targets selected by the RC shall be [ * ] and Tularik may [ * ], both within and
outside of the Field, resulting from research relating to such Current Program
Target that has been deleted from Appendix A, either alone or with any Third
Party, [ * ]. Promptly after designation of a New Target Candidate as a [ * ]
hereunder, Knoll shall enter into a sole and exclusive, worldwide license with
Tularik, with the right to sublicense, under Knoll Patents and under Knoll's
interest in any Patents to make and use the [ * ] for research purposes and to
develop, make, have made, use, offer to sell, sell or import any products, both
within and outside of the Field, resulting from research relating to such [ * ],
subject to [ * ].
2.7.6 In the event Knoll elects the option contained in Section 2.7.2(iii),
Tularik may perform research relating to, and/or develop and commercialize,
products, both within and outside of the Field, resulting from research relating
to such [ * ], either alone or with any Third Party without [ * ]. Additionally,
if Knoll elects the option contained in Section 2.7.2(iii), Knoll shall provide
to Tularik all relevant scientific data and information generated by Knoll in
the course of evaluating such [ * ].
2.7.7 In the event Tularik offers to Knoll a [ * ] pursuant to Section
2.7.1, Knoll shall have a first right to [ * ] an exclusive, royalty-bearing
license to develop, make, have made, use, offer for sale, sell and import the [
* ] as described in this Section 2.7.7. Knoll shall provide written notice to
Tularik if Knoll wishes to exercise such right to negotiate for such [ * ] of
receipt by Knoll of the written notice provided by Tularik pursuant to Section
2.7.1. During the [ * ] period following receipt by Tularik of such written
notice, Knoll and Tularik shall negotiate in good faith regarding the terms and
conditions of such license; provided, however, that [ * ]. In the event Knoll
and Tularik are unable to agree upon mutually acceptable terms for any such
license or in the event that Knoll elects not to pursue the [ * ], Tularik may
develop and commercialize the [ * ] both within and outside of the Field, either
alone or with any Third Party, without any further obligation to Knoll.
[ * ] = 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 this Securities Act of 1933, as amended.
11
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2.8 Due Diligence. Each Party shall devote commercially reasonable
efforts to its obligations under the Collaboration Program.
2.9 Research License.
2.9.1 Grant of Rights. Each Party hereby grants to the other Party a
non-exclusive license, without the right to sublicense (except to Affiliates of
Knoll that enter into the agreement with Tularik attached as Exhibit 2.9.1 or as
provided in the following sentence), under its interest in the Program
Technology, Knoll Technology or Tularik Technology, respectively, to the extent
applicable to the Field, for the purpose of conducting the Collaboration
Program. Knoll agrees that Tularik may sublicense to JT such non-exclusive
licenses for use in the research program between Tularik and JT during the term
of the JT Agreement; provided, however, that the foregoing right to the
Sublicense to JT shall not apply unless: (i) JT shall have made a reciprocal
grant to Tularik of a right to sublicense to Knoll comparable intellectual
property or other proprietary rights arising under the research program between
Tularik and JT pursuant to the JT Agreement; and (ii) Tularik shall have, in
turn, sublicensed such JT intellectual property or proprietary rights to Knoll.
2.9.2 Limited Use. Each Party acknowledges and agrees that use of the
Library Compounds provided pursuant to Sections 4.1 and 4.2 is limited solely to
those activities contemplated by the Collaboration Program, unless otherwise
provided for in this Agreement, and that such Library Compounds 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 receipt of
appropriate governmental approvals for such use.
2.9.3 Use of a Party's Own Substances. Notwithstanding anything to
the contrary in Sections 2.4 and 2.9.2, but subject to Section 4.4, Knoll shall
retain the right to use freely Knoll Substances and Tularik shall retain the
right to use freely Tularik Substances, as the case may be, that are not Program
Products for purposes outside the Field and to file patent applications covering
any resulting inventions useful outside the Field. If a Commercialization Notice
is given and a Library Compound becomes a Program Product, such Library Compound
shall be removed from the Screening Library from which such Library Compound
originated until such time as a Party ceases using commercially reasonable
efforts to develop and market such Program Product.
2.10 List of Validated Hits. Knoll shall provide to Tularik a list of
Validated Hits in which Knoll has an interest for developing Program Products
based thereon within [*] after (i) expiration or termination of
the Collaboration Program; or (ii) receipt of the payments required by Section
5.3.3(A), (B) or (C).
ARTICLE 3 Collaboration Program.
3.1 Exclusivity/Third Party Agreements.
3.1.1 Exclusivity. The Parties shall work exclusively with each other
in the Field during the Collaboration Program Term, except as expressly provided
in this Article 3. Any research and development being conducted by the Parties
to discover and develop compounds having activity in the Field as of the
Effective Date shall be included as part of the Collaboration Program. During
the Collaboration Program Term, neither Party will develop or commercialize a
product in the Field other than pursuant to this Agreement. Anything in 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 this Securities Act of 1933, as amended.
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<PAGE>
Article 3 to the contrary notwithstanding, the activities of JT and Tularik
under the JT Agreement in the Tularik Territory, and the activities of JT and
the Parties under the Three-Party Agreement, shall not be deemed to violate the
provisions of Article 3.
3.1.2 Activities Relating to the Field. Except as provided in this Section
3.1, neither Tularik nor Knoll shall, during the Collaboration Program Term, (a)
[ * ] pursuant to any agreement with any Third Party (collectively, "Third Party
Technology") or (b) [ * ] or (c) [ * ] outside the Research Program
("Independent Research"). Independent Research shall not include research [ * ].
3.1.3 Joint Decision-Making Process for Third Party Technology. 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 SC. If the SC
wishes to include such Third Party Technology or Independent Research in the
Research Program, 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 Program; provided, however, that Knoll's
collaboration with Dr. Brand regarding [*] shall be included as Independent
Research under the Research Program to the extent permissible according to the
contractual arrangement between Knoll and Dr. Brand. If an agreement between a
Party and any Third Party is relevant to such decision, it shall be disclosed in
full to the other Party to the extent permissible under such Third Party
agreement. Each Party acknowledges that any rights that a Party obtains pursuant
to any such Third Party agreements that are incorporated into the Research
Program are and shall be subject to the terms of such agreements,
notwithstanding any provisions of this Agreement. If the SC does not agree to
include such Third Party Technology or Independent Research in the Research Plan
on mutually-agreeable terms, then the provisions of Section 3.1.5 shall apply.
3.1.4 Re-Presentation to SC. If a Party proposes to acquire Third Party
Technology and the SC does not agree unanimously 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 again present such
opportunity to the other Party pursuant to Section 3.1.3 promptly following
execution of such agreement.
3.1.5 Outside Activities. If the SC does not agree to include any
particular Third Party Technology or Independent Research in the Research Plan,
then, subject to Section 3.1.4, either Party may conduct or fund such
Independent Research, or use such Third Party Technology, outside the Research
Program (the "Outside Activities"); provided, however, that [ * ]. Should any [
* ] be imposed upon such activities or Program Products, the Party conducting
the Outside Activities shall indemnify the other Party for any [ * ]; provided,
however, that the other Party shall take 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 Program, then such Party may not [ * ], except with the prior written
consent of the other Party, which consent may be withheld in its sole
discretion. Following the issuance of a Commercialization Notice with respect to
a Validated Hit or Program Product, and for so long as the Development of such
Program Product is conducted by Knoll in accordance with Section 5.4 hereof and
Section 2.1.2 of the License Agreement, Tularik 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.
13
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3.2 Third Party Agreements. Except as provided in Section 3.1.5 but
subject to Section 4.1 of the License Agreement, Knoll shall be responsible for
fulfilling all obligations of either Party or both Parties to Third Parties,
including but not limited to financial obligations, arising with respect to the
development and commercialization of Program Products in the Knoll Territory
(but not Third Party obligations arising with respect to research activities,
which Third Party obligations shall be fulfilled in accordance with Section 3.1)
under agreements with Third Parties relating to Third Party Technology,
Independent Research or any other agreements between either Party or both
Parties and Third Parties; provided, however, that such Third Party agreement
has been approved by the SC in accordance with Section 3.1.3.
ARTICLE 4 Compound Libraries And Research Compounds.
4.1 Knoll Compound Library. The Knoll Compound Library shall be used in
HTS against the Current Program Targets. Knoll shall provide structural
information on Validated Hits from the Knoll Compound Library within forty-five
(45) days following Tularik's request and otherwise at the direction of the RC;
provided, however, that Knoll shall have no obligation to reveal structural
information on a Validated Hit if such Validated Hit is of Prior Interest. The
Knoll Compound Library shall be treated as Knoll's Confidential Information. In
no event shall Tularik grant to JT rights in the Knoll Compound Library without
the written consent of Knoll.
4.2 Tularik Compound Library. The Tularik Compound Library shall be used
in HTS against the Current Program Targets. Except for the research license
granted to Knoll contained in Section 2.9.1, Knoll shall have no rights to make,
use or sell Tularik Substances in the Knoll Territory unless a Tularik Substance
becomes a Program Product and the Parties execute a License Agreement therefor
following a Commercialization Notice pursuant to Section 5.1. Tularik shall
provide structural information to Knoll on Validated Hits from the Tularik
Compound Library within [ * ]. The Tularik Compound Library shall be treated as
Tularik's Confidential Information.
4.3 Research Compound Library.
4.3.1 Ownership of Research Compounds. Subject to this Section
4.3, all Research Compounds and all Inventions relating to the composition or
use of Research Compounds ("Research Compound Inventions"), whether made solely
by a Party or jointly by both Parties, shall be jointly owned by the Parties
without regard to whether such Research Compound resulted from the optimization
of a Knoll Substance or Tularik Substance. Each Party agrees to execute, or have
its employees, agents or consultants execute, all paperwork necessary to
effectuate any such assignment necessary to achieve such joint ownership of
Research Compounds and Research Compound Inventions. Research Compound Patents
shall be jointly owned by the Parties and shall be prosecuted in accordance with
Section 8.2 hereof. The RC shall establish a common numbering system for the
Research Compounds to allow the Parties to coordinate their activities with
respect to such Research Compounds. Knoll expressly acknowledges that Tularik
may, as joint owner of Research Compound Inventions, grant to JT a license under
such Research Compound Inventions to make, have made, use, sell, have sold,
import and have imported Research Compounds and Program Products in the Tularik
Territory; provided, however, that the foregoing right to grant a license to JT
shall not apply unless: (i) JT shall have made a reciprocal grant to Tularik of
a right to sublicense to Knoll comparable intellectual property or other
proprietary rights arising under the research program between Tularik and JT
pursuant to the JT Agreement; and (ii) Tularik shall have, in turn, sublicensed
such JT intellectual property or proprietary rights to Knoll.
[ * ] = 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.
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4.3.2 Development of Extra-Field Products.
(a) The Parties intend that: (i) [ * ] may develop and market a Tularik
Extra-Field Product for use within the Pharmaceutical Market; (ii) [ * ] may
develop and market a Knoll Extra-Field Product for use within the Pharmaceutical
Market; (iii) [ * ] may develop and market any Knoll Extra-Field Product or
Tularik Extra-Field Product for use outside of the Pharmaceutical Market; and
(iv) [ * ] may develop and market a Third Party Extra-Field Product for use
within or outside the Pharmaceutical Market. A Party that is developing any
Extra-Field Product for any such use, or a Tularik Product, as the case may be,
shall be the "Developing Party" with respect to such Extra-Field Product and
such use or Tularik Product, as the case may be. If [ * ] desires to develop a
Tularik Extra-Field Product for use within the Pharmaceutical Market, [ * ]
shall disclose in writing to [ * ] the number assigned to the Research Compound
upon which such Tularik Extra-Field Product is based prior to [ * ] with respect
to such Tularik Extra-Field Product. Knoll shall disclose to Tularik the number
assigned to the Research Compound upon which: (i) a [ * ] is based, prior to [ *
] with respect to such [ * ]; or (ii) an Extra-Field Product for [ * ]. The
Developing Party shall disclose to the non-Developing Party the number assigned
to the Research Compound upon which: (i) a Third Party Extra-Field Product is
based, prior to [ * ] with respect to such Third Party Extra-Field Product; or
(ii) a Third Party Extra-Field Product for [ * ].
(B) The Parties shall not at any time [ * ]; provided, however, that
Knoll may, in accordance with Section 4.4.3, commercialize [ * ]; provided
further that Tularik may commercialize [ * ]. If a Developing Party ceases to
use commercially reasonable efforts to develop or market [ * ], then the other
Party may thereafter commence development and commercialization of such [ * ].
(C) Notwithstanding any other provision of this Agreement: (i) the
Developing Party shall not commence [ * ] until the Developing Party has
notified the other Party of its intention to develop such [ * ] for such use in
accordance with Section 4.3.2(a) and has executed a license agreement in the
form of the License Agreement or Tularik License Agreement as provided in
Section 4.4.1; (ii) Knoll shall not commence [ * ] of its intention to develop
such Knoll Extra-Field Product for such use in accordance with Section 4.3.2(a)
and has executed a license agreement as provided in Section 4.4.2; (iii) Knoll
shall not commercialize any [ * ] until Knoll shall have notified Tularik in
accordance with Section 4.3.2(a) and executed a license agreement with respect
thereto as provided in Section 4.4.4; and (iv) the Developing Party shall not
commence [ * ], until the Developing Party has notified the other Party of its
intention to develop such Third Party Extra-Field Product for such use in
accordance with Section 4.3.2(a). [ * ].
4.3.3 Use of Research Compounds During the Collaboration Program Term.
During the Collaboration Program Term: (a) each Party may use Research Compounds
in HTS as provided in Section 2.4 and otherwise to accomplish the purposes of
the Collaboration Program; (b) all data generated on Research Compounds as part
of the Research Program shall be made available to each Party; and (c) Knoll and
Tularik shall each provide to the other Party at such other Party's request
aliquots of Research Compounds that Knoll or Tularik have synthesized or have
been synthesized by a Third Party at the direction 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.
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the RC. Notwithstanding Section 4.3.2, during the Collaboration Program Term,
if Tularik is the non-Developing Party with respect to such Research Compound,
Tularik shall [ * ], and shall have a license for such Tularik Extra-Field
Product under Section 4.3.5(b); provided, however, that Tularik shall [ * ].
4.3.4 Use of Research Compounds Following the Collaboration Program Term.
After the Collaboration Program Term, subject to Sections 4.3.2, 4.3.5, 4.4,
5.1, 5.2 and 5.3, (i) [ * ] may use Research Compounds to research, develop and
commercialize [ * ] in any manner the Developing Party deems appropriate; (ii) [
* ] may use Research Compounds to research, develop and commercialize [ * ] in
any manner [ * ] deems appropriate; (iii) [ * ] may use Research Compounds to
research, develop and commercialize [ * ] in any manner [ * ] deems appropriate;
(iv) [ * ] may use Research Compounds synthesized by Third Parties to
research, develop and commercialize [ * ] in any manner [ * ] deems appropriate;
and (v)(A) Tularik may use Research Compounds synthesized by Tularik in HTS; (B)
Knoll may use Research Compounds synthesized by Knoll in HTS; and (C) each Party
may use Research Compounds synthesized by a Third Party in HTS. The right to
develop and commercialize [ * ] identified through HTS pursuant to this Section
4.3.4 shall be as provided in Section 4.3.2. Each Party hereby covenants and
agrees to disclose to the other Party within [ * ] following completion of HTS
the relevant results of HTS performed pursuant to Section 4.3.4(v)(A)-(C);
provided, however, that neither Party shall be obligated to [ * ] from the
expiration or termination of the Collaboration Program Term. Research Compounds
synthesized by a Party that are based upon Research Compounds synthesized by a
Third Party shall be considered the Research Compounds of such Party.
4.3.5 Cross-License to [ * ].
(a) Promptly following receipt by Tularik of a notice from Knoll
pursuant to Section 4.3.2(a), Tularik shall grant to Knoll a sole and exclusive,
worldwide, royalty-bearing (in accordance with Section 4.4) license, with the
right to sublicense [ * ], under the Tularik Patents and under Tularik's
interest in any Patents to develop, make, have made, use, offer to sell, sell or
import [ * ], subject to the terms of Section 4.3. Any such license granted
with respect to [ * ] granted to Knoll pursuant to this Section 4.3.5(a) shall
be in the form of the License Agreement, subject to Section 4.4. The license
granted pursuant to this Section 4.3.5(a) shall survive the termination of this
Agreement.
(b) Promptly following receipt by Knoll of a notice from Tularik
pursuant to Section 4.3.2(a), Knoll shall grant to Tularik a sole and exclusive
worldwide, royalty-bearing (in accordance with Section 4.4.1) license, with the
right to sublicense, under the Knoll Patents and under Knoll's interest in any
Patents to develop, make, have made, use, offer to sell, sell or import [ * ],
subject to the terms of Section 4.3. The license granted pursuant to this
Section 4.3.5(b) shall be in the form of the Tularik License Agreement, subject
to Section 4.4. The license granted pursuant to this Section 4.3.5(b) shall
survive the termination of this Agreement.
(c) Promptly following receipt by the non-Developing Party of a
notice from the Developing Party pursuant to Section 4.3.2(a), the non-
Developing 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.
16
<PAGE>
grant to the Developing Party a sole and exclusive worldwide, royalty-free
license, with the right to sublicense, under the non-Developing Party's Patents
and under the non-Developing Party's interest in any Patents to develop, make,
have made, use, offer to sell, sell or import [ * ], subject to the terms of
Section 4.3. The license granted pursuant to this Section 4.3.5(c) shall be in
the form (excluding financial terms) of the License Agreement or the Tularik
License Agreement, as the case may be. The license granted pursuant to this
Section 4.3.5(c) shall survive the termination of this Agreement.
4.4 Payments for Extra-Field Products.
4.4.1 Tularik Extra-Field Products Within the Pharmaceutical Market.
A license granted with respect to Tularik Extra-Field Products within the
Pharmaceutical Market pursuant to Section 4.3.5(a) or 4.3.5(b) shall provide for
the payment by [ * ] of both royalties based on net sales of such Tularik Extra-
Field Products and milestone payments with respect to such Tularik Extra-Field
Products in the amounts provided in Sections 4.1 and 4.2 of the License
Agreement.
4.4.2 Knoll Extra-Field Products Within the Pharmaceutical Market.
Any license granted with respect to Knoll Extra-Field Products within the
Pharmaceutical Market pursuant to Section 4.3.5(a) shall [ * ].
4.4.3 Tularik Extra-Field Products Outside the Pharmaceutical Market.
Except as provided in Section 4.4.5, any license granted with respect to Tularik
Extra-Field Products outside the Pharmaceutical Market pursuant to Section
4.3.5(a) shall [ * ].
4.4.4 Knoll Extra-Field Products Outside the Pharmaceutical Market.
Except as provided in Section 4.4.5, any license granted with respect to Knoll
Extra-Field Products outside the Pharmaceutical Market pursuant to Section
4.3.5(a) shall be [ * ].
4.4.5 Sublicenses by [ * ] of Extra-Field Products Outside the
Pharmaceutical Market. Any sublicense granted by [ * ] with respect to Extra-
Field Products outside the Pharmaceutical Market pursuant to Section 4.3.5(a):
(a) as part of a transaction in which rights in such Extra-Field Products
outside the Pharmaceutical Market are exchanged for rights in the products of a
Third Party outside the Pharmaceutical Market shall [ * ]; or (b) as part of any
other transaction shall be subject to the payment by [ * ] of revenues received
by [ * ] from a Third Party in consideration for the grant of a sublicense under
such rights. In no event shall a sublicense granted by [ * ] to an Affiliate of
[ * ] with respect to Extra-Field Products outside the Pharmaceutical Market
pursuant to Section 4.3.5(a) be subject to any payment to Tularik by [ * ] or
such Affiliate of [ * ].
4.4.6 Contribution Royalties. A Party shall provide written notice to
the other Party that such Party desires to obtain a license as provided in
Section 4.3.5 or 5.3 with respect to an Extra-Field Product or a Tularik
Product. Within [ * ] following receipt of such notice, the Parties shall meet
to negotiate in good faith the terms and conditions of such license. Such good
faith negotiation shall continue for a period of [ * ]. In the event the
foregoing negotiation shall not result in an agreement on the terms and
conditions of such license, the Parties shall select three mutually acceptable
arbitrators (the "Arbitrators") to determine the Contribution Royalty.
[ * ] = 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.
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One (1) of the three (3) Arbitrators shall be selected by Knoll, one (1) of the
Arbitrators shall be selected by Tularik and the third Arbitrator, who shall act
as chairperson, shall be selected by the mutual agreement of the other two (2)
Arbitrators within thirty (30) days of their selection; provided, however, if
within such time period the first two (2) selected Arbitrators are unable to
agree on a third member of the arbitration panel, such third member shall be
appointed by the President of the American Arbitration Association as soon as
practicable thereafter. The three (3) Arbitrators shall have relevant
biotechnology and/or pharmaceutical industry experience. Each Party shall submit
to the other Party and the Arbitrators, within [ * ] of the selection of the
chairperson of the Arbitrators, such Party's written proposal of the appropriate
royalty to be paid to the non-Developing Party, along with calculations
supporting such proposal. Such royalty estimates shall take into account [ * ].
Such royalty estimates shall reflect those royalty rates that are reasonable and
customary within the marketplace in which such Extra-Field Product shall be
sold. At the request of either Party, the Arbitrators shall hold a hearing to
determine the appropriate royalty rate. The Arbitrators shall rule on the
royalty estimate within [ * ] following the later to occur of receipt of such
estimates from the Party or such hearing. Such ruling shall [ * ]. The
Arbitrators shall [ * ]. Any arbitration herewith shall be conducted in the
English language to the maximum extent possible. Each Party shall bear its own
costs and attorneys' fees. A royalty percentage negotiated by the Parties or
determined by the Arbitrators in accordance with the procedure set forth in this
Section 4.4.6 shall be considered a "Contribution Royalty."
ARTICLE 5 Commercialization Of Program Products.
5.1 Commercialization Notice. Subject to Sections 5.2 and 5.4 below, at
any time prior to the initiation of [ * ] for a Validated Hit for use within the
Field in the Knoll Territory by or on behalf of Knoll, Knoll may notify Tularik
("Commercialization Notice") of its intention to develop and, if results of the
human clinical studies justify, to prepare and file an NDA for and commercialize
products based upon or incorporating such Validated Hit for use within the Field
in the Knoll Territory. Knoll may provide to Tularik a Commercialization Notice
on compounds with confirmed activity against [ * ] that would qualify as
Validated Hits had such compounds been discovered under this Agreement;
provided, however, that the foregoing right to provide a Commercialization
Notice on compounds discovered pursuant to the JT Agreement shall terminate upon
a Section 12.4 Termination. Promptly after Tularik's receipt of each
Commercialization Notice, Tularik and Knoll shall enter into a License Agreement
with respect to the Validated Hit described in such Commercialization Notice
within the Field in the Knoll Territory and all products based upon or
incorporating such Validated Hit shall become, for all purposes, collectively, a
"Program Product". Knoll acknowledges and agrees that [ * ]; provided, however,
that JT may not commence IND-enabling toxicology studies on Validated Hits in
the JT Territory at any time following a Section 12.4 Termination.
5.2 Additional Program Products. Knoll may elect to issue multiple
Commercialization Notices, enter into additional License Agreements with Tularik
and undertake development of more than one Program Product; provided, however,
that, except as provided in Section 5.3.3, the Commercialization Notice for each
Validated Hit shall be given prior to [ * ]; provided further that any
Commercialization Notice given [ * ].
[ * ] = 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.
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5.3 Rights to Validated Hits.
5.3.1 Tularik Products. In the event that Knoll: (i) does not provide
to Tularik a Commercialization Notice for a Validated Hit prior to [ * ] as
required by Sections 2.5 and 5.1; (ii) does not provide to Tularik a
Commercialization Notice for a Validated Hit prior to [ * ]; (iii) determines to
[ * ]; (iv) fails to [ * ] set forth in Section 5.4 hereof or Section 2.1.2 of
the License Agreement; or (v) does not provide to Tularik a Commercialization
Notice for a Validated Hit prior to [ * ] from the date upon which Knoll
completes [ * ] with respect to such Validated Hit as required by Section 5.4,
Knoll:
(a) shall not commercialize in the Field products based upon or
incorporating any Validated Hit [ * ] ("5.3.1(a) Product") unless Knoll provides
a Commercialization Notice to Tularik in accordance with Section 5.1 and enters
into a License Agreement with respect to the 5.3.1(a) Product described in such
Commercialization Notice within the Field in the Knoll Territory. Anything in
Section 5.3.1(ii) to the contrary notwithstanding, a Commercialization Notice
with respect to a 5.3.1(a) Product provided pursuant to this Section 5.3.1(a)
may be given [ * ];
(b) shall not grant to a Third Party any rights in or to the
Knoll Technology or Knoll's interest in Program Technology or Research Compound
Patents to commercialize in the Field products [ * ] ("Tularik Product");
(c) will grant to Tularik an exclusive (even as to Knoll),
sublicensable, worldwide license pursuant to a Tularik License Agreement to
develop, make, have made, use, offer for sale, sell and import any such [ * ]
under Knoll's interest in the Program Technology and Research Compound Patents
and subject to the payment by Tularik to Knoll of: (A) [ * ] in the event that
Tularik commercializes such Tularik Product; or (B) [ * ] of revenues (excluding
[ * ]) received by Tularik (after deduction of royalties payable by Tularik to
Knoll under Section 5.3.1(d) but including [ * ]) from a Third Party in
consideration for the grant of a sublicense under such rights; and
(d) will grant to Tularik a non-exclusive, sublicensable,
worldwide license pursuant to a Tularik License Agreement to develop, make, have
made, use, offer for sale, sell and import such Tularik Product in the Field
under any [ * ].
Upon the grant to Tularik of the licenses provided in this Section 5.3.1,
pursuant to a Tularik License Agreement, Tularik will be free to pursue clinical
development, registration and commercialization of such Tularik Product in the
Field throughout the world without further obligation to Knoll [ * ] .
5.3.2 Limitations on Section 5.3.1 during Commercialization by Knoll.
For so long as Knoll [ * ] Program Product, Knoll may determine, in its sole
discretion, that [ * ]. In the event that Knoll makes the determination set
forth in the immediately preceding sentence, [ * ] such Program Product.
5.3.3 Exceptions to Section 5.3.1(ii). Anything in Section 5.2 or
5.3.1(ii) to the contrary notwithstanding, (A) if Knoll terminates the
Collaboration Program at the end of 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.
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third year pursuant to Section 15.1 but makes an additional payment of [ * ] to
Tularik within [ * ] of the expiration of the Tail Period, Knoll may give
Tularik a Commercialization Notice as provided in, and with the effect stated
in, Section 5.1 above for an additional [ * ]; (B) if Knoll terminates the
Collaboration Program at the end of the fourth year pursuant to Section 15.1 but
makes an additional payment of [ * ] to Tularik within [ * ] of the expiration
of the Tail Period, Knoll may give Tularik a Commercialization Notice as
provided in, and with the effect stated in, Section 5.1 above for an additional
[ * ]; or (C) if the Collaboration Program terminates at the end of the fifth
year pursuant to Section 15.1 but Knoll makes an additional payment to Tularik
within [ * ] of the expiration of the Tail Period in an amount [ * ], Knoll may
give Tularik, as if the Collaboration Program had continued for an additional
year, a Commercialization Notice as provided in, and with the effect stated in,
Section 5.1 above.
5.3.4 Tularik Commercialization of 5.3.1(a) Products. In the event
Tularik desires to commercialize in the Field a 5.3.1(a) Product, Tularik may
provide written notice to Knoll of its intention to develop and, if results of
the human clinical studies justify, to prepare and file an NDA for and
commercialize such 5.3.1(a) Product for use within the Field anywhere in the
world, subject to the payment by Tularik to Knoll of: (A) [ * ] in the event
that Tularik commercializes such 5.3.1(a) Product; or (B) [ * ] of revenues
(excluding [ * ]) received by Tularik (including [ * ]) from a Third Party in
consideration for the grant of a sublicense to such Third Party. Such written
notice to Knoll may be given at any time following the expiration of the
Collaboration Program Term.
5.4 Diligence. Both Parties shall use commercially reasonable efforts to
discharge their respective responsibilities under the Research Plan. Knoll shall
use commercially reasonable efforts to develop Validated Hits, consistent with [
* ], unless and until it terminates this Agreement; provided, however, that
Knoll may elect to terminate development of a Validated Hit at any time for any
reason. If Knoll fails to use such efforts to develop Validated Hits, Tularik
may terminate this Agreement upon [ * ] prior written notice. If the Parties
disagree on whether Knoll is using commercially reasonable efforts as required
hereunder, [ * ]. In the event of termination of this Agreement for failure to
use such efforts, Knoll will grant to Tularik the licenses set forth in Sections
5.3.1(c) and 5.3.1(d) of this Agreement with respect to such Program Product,
subject to the payment by Tularik to Knoll of the amounts set forth in Sections
5.3.1(c) and 5.3.1(d) of this Agreement. Tularik will then be free to pursue
clinical development, registration and commercialization of any such Program
Product as a Tularik Product in the Field throughout the world without further
obligation to Knoll other than the payment of the foregoing amounts. Anything in
this Agreement to the contrary notwithstanding, Knoll may not issue a
Commercialization Notice on a Validated Hit following [ * ] from the date upon
which Knoll completes [ * ] with respect to such Validated Hit.
ARTICLE 6 Financial Support
6.1 Program Funding. Knoll will support the Research Program with the
payment of a technology access fee equal to [ * ]. In support of Tularik's
activities in the Research Program, Knoll shall pay Tularik (i) [ * ] and (ii) [
* ] The amounts set forth in Section 6.1(ii) shall be paid on each quarter-year
anniversary of the Effective Date in arrears until the end of the Collaboration
Program Term. The first quarterly payment shall be made on the [ * ] of 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.
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Effective Date, and shall constitute payment for the third quarter following the
Effective Date. In the event of a [ * ], Knoll shall pay to Tularik an amount
equal to [ * ]. Any payment required by the immediately preceding sentence shall
be made within [ * ] of the effective date of the Section 12.4 Termination.
6.2 Manner of Payment. Remittance of payments under Section 6.1(ii) will
be within [ * ] of the occurrence of the above specified events by means of
telegraphic transfer to Tularik's account in a bank in the United States to be
designated by Tularik. All payment amounts set forth in this Agreement,
including the Appendices, are stated net of withholding or similar taxes which
may be imposed by any governmental authority, other than U.S. income taxes;
provided, however, that Tularik has provided Knoll with a Certificate of
Exemption (Freistellungsbescheinigung) from the German Federal Tax Office
(Bundesamt fur Finanzen).
6.3 Personnel and Resources. Tularik shall [ * ] to carry out its
obligations under the Research Plan, along with the facilities and other
resources necessary to perform its obligations under this Agreement. Within [ *
] of each anniversary of the Effective Date, Tularik shall provide a report to
Knoll confirming [ * ] in performing under the Research Plan during the
preceding year.
6.4 Records, Reports, Inspection, Audit and Maintenance.
6.4.1 Tularik shall maintain scientific and financial records that
shall be complete, accurate and adequate to verify [ * ] its obligations under
this Agreement. Such records shall fully and properly reflect all work done and
results achieved in the performance of the Collaboration Program.
6.4.2 Knoll shall have the right, during normal business hours and
upon reasonable advance notice, to inspect and copy all records maintained
pursuant to Section 6.4.1 to the extent reasonably required for verification of
[ * ] the performance of Tularik's obligations under this Agreement. Tularik
shall have the right to delete any information contained in such records that
does not pertain to the Collaboration Program prior to any such inspection or
copying by Knoll.
ARTICLE 7 License To Tularik
7.1 Grant by Knoll to Tularik. Knoll shall grant to Tularik an exclusive
royalty-free, sublicensable, worldwide license under Knoll's interest in the
Program Technology and Research Compound Patents to develop, manufacture, use,
sell, offer for sale and import products based upon or incorporating Hits or
Validated Hits in the Field in the Tularik Territory and, under terms to be
separately agreed, a non-exclusive, sublicensable, worldwide license under any
then-existing Knoll Technology to the extent necessary to make, use, sell, offer
for sale and import products based upon or incorporating Hits or Validated Hits
in [ * ]. In no event shall Tularik receive rights in the Knoll
Compound Library without the written consent of Knoll.
7.2 Non-use of Technology Outside of the Field. Subject to Article 4
hereof, Knoll covenants and agrees that it will not use, directly or indirectly,
the Tularik Technology, Tularik's
[ * ] = 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.
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Confidential Information or Tularik's interest in the Program Technology for any
purpose outside the Field other than developing, making, having made, using or
selling Extra-Field Products. Subject to Article 4 hereof, Tularik covenants and
agrees that it will not use, directly or indirectly, the Knoll Technology,
Knoll's Confidential Information or Knoll's interest in the Program Technology
for any purpose outside the Field other than developing, making, having made,
using or selling Extra-Field Products.
ARTICLE 8 Ownership; Patents
8.1 Ownership. Knoll shall have no rights in or to the Tularik Technology
except as expressly provided in this Agreement or any other agreement between
the Parties. Tularik shall have no rights in or to the Knoll Technology except
as expressly provided in this Agreement or any other agreement between the
Parties. Except as provided in Section 4.3.1, each Party shall solely own all
discoveries, information, technology or inventions made or created solely by its
employees, agents or consultants during the course of such Party's performance
under the Collaboration Program and all intellectual property rights related
thereto. The Parties shall jointly own all discoveries, information, technology
or inventions made or created jointly by employees, agents or consultants of
both Parties during the course of their performance under the Collaboration
Program and all intellectual property rights related thereto, without regard, in
the case of Validated Hits and Program Products, to whether a Knoll Substance or
Tularik Substance was selected as a Validated Hit upon which Program Products
may be based.
8.2 Patent Management.
8.2.1 Filing Party. Tularik Patents and Knoll Patents shall be
prosecuted and maintained by Tularik and Knoll, respectively, at such Party's
option and its own expense. Only one Party (the "Filing Party") shall be
responsible for the preparation, filing, prosecution and maintenance (the
"Patent Management") of a Program Patent, subject to the provisions of Section
8.2.2. The Inventing Party shall be initially responsible for the Patent
Management of any patent covering an Invention made solely by such Party's
employees, agents or consultants. With respect to Program Patents covering
Inventions owned jointly by the Parties ("Joint Inventions") and Research
Compound Patents, the RC shall designate initially the Filing Party for related
Patents in accordance with the relative inventive contributions of the Parties.
If Knoll commences development of a compound covered by a Patent as a Program
Product, then responsibility for Patent Management of such Patent shall be
transferred to Knoll if Knoll is not then the Filing Party for such Patent,
unless such compound is [ * ] If a Party commences development of an Extra-
Field Compound pursuant to Section 4.3.2, and if such Party is not then the
Filing Party for any Research Compound Patent upon which such Extra-Field
Compound is based, the Filing Party shall transfer responsibility for Patent
Management of such Research Compound Patents to the other Party, which shall
thereafter become the Filing Party therefor. If the Parties disagree upon the
designation of which Party should be the Filing Party for a particular Patent,
the matter shall be resolved in accordance with Section 2.2.3.
8.2.2 Review Procedures. The Filing Party shall provide the other
Party with drafts of any patent application covering an Invention (the
"Application") prior to filing 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.
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Application, with a request for review within a certain time period, which time
period shall be at least [ * ] if possible or practicable but in no event less
than [ * ]. The Filing Party shall endeavor in good faith to incorporate any
comments made by the other Party with respect to such Application. If the other
Party fails to respond within the time period specified by the Filing Party, the
Filing Party shall not be obligated to delay the filing of such Application. In
addition, the Filing Party shall provide the other Party with copies of all
substantive communications to and from the United States or any foreign patent
office regarding all patent Applications and resulting patents promptly,
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, [ * ]
8.3 Reversion. If (i) Tularik receives a license to develop a Tularik
Product pursuant to Section 5.3.1 that is covered by an Application for which
Knoll is the Filing Party, or (ii) the Filing Party elects upon prior written
notice to the other Party (given at least [ * ] prior to any relevant deadline)
either to discontinue prosecution or maintenance or not to file or conduct any
further activities (including conducting any interferences, re-examinations,
reissues, or oppositions) with respect to an Application or a resulting patent,
then the Filing Party shall offer to transfer such Application or patent to the
other Party, who may, at its sole discretion, accept such transfer and
thereafter become the Filing Party therefor.
8.4 Patent Costs. All fees and expenses paid to outside legal counsel and
other Third Parties in connection with Applications or resulting patents
("Patent Costs") covering Inventions owned solely by a Party that are included
in the Program Patents shall be borne solely by the Inventing Party unless and
until the other Party becomes the Filing Party therefor. All Patent Costs for
the Patents covering Joint Inventions shall be borne equally by the Parties,
regardless of which Party is the Filing Party therefor. The Party developing a
Research Compound shall pay the Patent Costs for Research Compound Patents
relating to such Research Compounds commencing as of the date the developing
Party notifies the other Party in accordance with Section 4.3.2.
8.5 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
Party's ownership interest in accordance with the intent of this Agreement
including, without limitation, the execution of necessary and appropriate
instruments of assignment.
8.6 Infringement of Patents. Infringement of Knoll Patents, Tularik
Patents or Patents by Third Parties as well infringement of Third Party patents
by Knoll shall be governed by the provisions of the License Agreement or the
Tularik License Agreement, as the case may be.
ARTICLE 9 Publication; Publicity
9.1 Publication. Each Party recognizes that the publication of papers,
including oral presentations and abstracts, regarding the Program Technology or
Research Compounds, subject to reasonable controls to protect Confidential
Information, will be beneficial to 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.
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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, that utilizes data generated from the Research Program and/or
includes Program Know-How, information relating to Research Compounds or
Research Compound Inventions or Confidential Information of the other Party.
Before any such paper is presented or submitted for publication, the Party
proposing to make a publication shall deliver a complete copy thereof to the
other Party at least [ * ] prior to presenting the paper to any Third Party
publisher. The Party receiving such proposed publication shall review any such
paper and provide comments thereon 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 date upon which such materials are received by
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 for up to an
additional [ * ] in order to permit the Parties to obtain patent protection on
any patentable inventions disclosed therein, if either of the Parties deems it
necessary, in accordance with the terms of this Agreement. In addition, [ * ].
9.2 Publicity. Except as otherwise provided herein or required by law, no
Party shall make publicly available or provide to any Third Party any
publication, news release or other public announcement, written or oral, whether
in the public press, or stockholders' reports (if applicable), or otherwise,
relating to the existence of or the Parties' performance under this Agreement,
without the prior written approval of the other Party.
ARTICLE 10 Representations And Warranties
10.1 Representations and Warranties. Each Party hereby represents and
warrants that:
10.1.1 it 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 its
behalf has been duly authorized to do so by all requisite corporate action;
10.1.2 it will not take any material action or fail to take any material
action which would be in conflict with its obligations under this Agreement;
10.1.3 to its best knowledge as of the Effective Date: (i) it has full
power and authority to undertake the scientific activities required of it; (ii)
its [ * ]; and (iii) the [ * ];
10.1.4 as of the Effective Date, to the best of its knowledge, it is not
aware of any claims by Third Parties that [ * ];
10.1.5 this Agreement is a legal and valid obligation binding upon it
and is enforceable in accordance with its terms; 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.
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10.1.6 the execution, delivery and performance of this Agreement
by it does not conflict with any agreement, 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.
10.2 Third Party Licenses. Each Party agrees to identify to the other
Party any Third Party Licenses and the technologies to which they pertain. Knoll
shall have no obligation to make any payments whatsoever with respect to such
Third Party Licenses of Tularik. Tularik shall have no obligation to make any
payments whatsoever with respect to such Third Party Licenses of Knoll.
ARTICLE 11 Disclaimer Of Warranties
11.1 Tularik Disclaimer. EXCEPT AS OTHERWISE PROVIDED IN SECTION 10.1,
THE TULARIK TECHNOLOGY PROVIDED 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. Without limiting the generality of the
foregoing, Tularik expressly does not warrant (i) the success of any study or
test commenced pursuant to the Collaboration Program or (ii) the safety or
usefulness for any purpose of Tularik Technology.
11.2 Knoll Disclaimer. EXCEPT AS OTHERWISE PROVIDED IN SECTION 10.1,
THE KNOLL TECHNOLOGY PROVIDED HEREUNDER IS PROVIDED "AS IS" AND KNOLL 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,
Knoll expressly does not warrant the safety or usefulness for any purpose of the
Knoll Technology.
ARTICLE 12 Indemnification
12.1 Indemnification by Tularik. Tularik hereby agrees to indemnify,
hold harmless and defend Knoll, its employees, directors, officers, agents and
consultants against any and all claims, suits, actions, demands, liabilities,
expenses and/or losses (including without limitation reasonable attorneys' fees
and related legal and court expenses) (collectively, "Claims") for damage to
persons or property resulting directly or indirectly from actions in connection
with this Agreement, but only to the extent that such Claims (i) arise out of or
are in connection with negligence, recklessness or willful misconduct of Tularik
or (ii) Tularik's breach of this Agreement, except to the extent such Claims
arise out of or are in connection with any occurrence for which Knoll must
indemnify Tularik pursuant to Section 12.2.
[ * ] = 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.
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12.2 Indemnification by Knoll. Knoll hereby agrees to indemnify, hold
harmless and defend Tularik, its employees, directors, officers, agents and
consultants against any and all Claims for damage to persons or property
resulting directly or indirectly from actions in connection with this Agreement,
but only to the extent that such Claims (i) arise out of or are in connection
with negligence, recklessness or willful misconduct of Tularik or (ii) Tularik's
breach of this Agreement, except to the extent such Claims arise out of or are
in connection with any occurrence for which Tularik must indemnify Knoll
pursuant to Section 12.1.
12.3 Control of Defense. Any person or entity entitled to
indemnification under this Article 12 shall give notice to the indemnifying
Party of any Claims that may be subject to indemnification promptly after such
Party learns of such Claim. The indemnifying Party shall assume the defense of
such Claims using counsel reasonably satisfactory to the indemnified Party, and
the indemnifying Party will not be subject to any liability for any settlement
of such Claims made by the indemnified Party without the indemnifying Party's
consent (such consent not to be unreasonably withheld or delayed), and will not
be obligated to pay any fees and expenses of any separate counsel retained by
the indemnified Party with respect to such Claim.
12.4 Tularik Responsibilities. Knoll acknowledges that Tularik owes
contractual obligations of diligence in the conduct of research and development
activities to JT under the JT Agreement. Furthermore, Knoll acknowledges that
the role of Tularik in identifying, selecting, evaluating and developing
compounds for Knoll under this Agreement and JT under the JT Agreement could
potentially conflict. Knoll, its affiliates, successors and assigns, shall not
institute or be represented or participate in, nor shall it submit or file, or
permit to be submitted or filed on its behalf, any lawsuit, charge, claim,
complaint or other proceeding with any administrative agency, arbitration panel,
court or other forum, under any federal, state or local laws, regulations or
ordinances against Tularik, its affiliates, successors, directors, partners,
attorneys, representatives, stockholders, investors, agents, employees, former
employees, or any person acting by, through, under or in concert with each or
any of them, based upon any conduct by them related in any way to Tularik's non-
compliance with the terms and conditions of this Agreement and/or the Three
Party Agreement where such non-compliance results from a good faith attempt by
Tularik to resolve a dispute between JT and Knoll involving compounds that
agonize or antagonize [*]; and shall not, from any source or proceeding, seek or
accept any award or settlement therefrom.
ARTICLE 13 Confidentiality
13.1 Confidential Information; Exceptions. Except to the extent
expressly authorized by this Agreement or otherwise agreed in writing by the
Parties, each Party agrees that, for the term of this Agreement 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
Agreement, any Confidential Information furnished to it by the other Party
pursuant to this Agreement, except to the extent the receiving Party can
demonstrate by competent proof that such Confidential Information:
13.1.1 was already known to the receiving Party, other than under
an obligation of confidentiality, at the time of disclosure by the other Party;
13.1.2 was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
13.1.3 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 any obligation of confidentiality
with respect thereto;
13.1.4 was disclosed to the receiving Party, other than under an
obligation of confidentiality to a Third Party, by a Third Party without breach
of any obligation of confidentiality with respect thereto; 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.
26
<PAGE>
13.1.5 was independently discovered or developed by the receiving
Party without the use of Confidential Information of the disclosing Party.
Notwithstanding the foregoing, either Party may disclose Confidential
Information of the other Party to those of its employees, agents and consultants
who require such information to perform such Party's obligations under this
Agreement, provided that such employees, agents and consultants are bound by
obligations of confidentiality and non-use with respect to such Confidential
Information at least equivalent in scope with those provided in this Section
13.1.
13.2 Authorized Disclosure. Notwithstanding Section 13.1, each Party may
disclose Confidential Information belonging to the other Party to the extent
such disclosure is reasonably necessary in the following instances:
13.2.1 filing or prosecuting patents relating to Program Products;
13.2.2 making regulatory filings;
13.2.3 prosecuting or defending litigation;
13.2.4 complying with applicable governmental regulations;
13.2.5 conducting pre-clinical or clinical trials of Program
Products; and
13.2.6 as necessary to effectuate [ * ]
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 13.2 it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure and endeavor in good faith to secure
confidential treatment of such information. In any event, the Parties agree to
take all reasonable action to avoid disclosure of Confidential Information
hereunder. The Parties will consult with one another and agree on the provisions
of this Agreement to be redacted in any filings made by the Parties with the
United States Securities and Exchange Commission or as otherwise required by
law.
13.3 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 corporate parties or other sublicensees under the rights
granted herein, if necessary, provided that the Party disclosing such
information shall first enter into a confidentiality agreement with such
corporate partner or other sublicensee governing such disclosure providing
protections commensurate in scope with those provided in Section 13.1. 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 investor, investment banker, 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 14 Government Controls
[ * ] = 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>
This Agreement is made subject to any restrictions concerning the export of
Program Products or technical information from the United States that may be
imposed upon or related to Tularik or Knoll from time to time by the government
of the United States and other applicable jurisdictions.
ARTICLE 15 Term; Termination
15.1 Term and Termination of Collaboration Program. The Collaboration
Program shall be performed during the five year period following the Effective
Date (the "Collaboration Program Term"); provided, however, that Knoll may
terminate the Collaboration Program upon either the third (3rd) or the fourth
(4th) anniversary of the Effective Date upon no less than one (1) year's prior
written notice to Tularik. Knoll may terminate the Collaboration Program at any
time during the Collaboration Program Term in the event an arbitration conducted
pursuant to Section 16.8 concludes, or Tularik acknowledges in writing, that
Tularik [ * ] ("Section 12.4 Termination"); provided, however, that, in the
event of a Section 12.4 Termination, Knoll shall provide to Tularik a written
acknowledgment that [ * ]. Additionally, the RC may terminate the Collaboration
Program at any time during the Collaboration Program Term if the RC unanimously
decides that the then-current Research Plan does not provide adequate
opportunities (i.e., New Targets are not available, the Program Targets and
related pathways have been fully exploited and insufficient opportunities remain
for developing and commercializing products within the Field). In case of such
an early termination of the Collaboration Program by Knoll or the RC, as the
case may be, Knoll shall not be obligated to make any payment(s) under Section
6.1 that would have become due and payable after the effective date of such
early termination.
15.2 Term. Except as provided under Section 15.3 below, the term of this
Agreement shall commence upon the Effective Date and shall expire on the later
to occur of (i) the expiration of the Tail Period, if the Parties have not
previously entered into any License Agreement or Tularik License Agreement
pursuant to this Agreement, or (ii) the expiration or termination of the last to
expire or last to terminate license that the Parties have entered into pursuant
to this Agreement.
15.3 Termination on Material Breach. If either Party materially breaches
this Agreement, including without limitation its diligence obligations under
Section 2.8, 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.
15.4 Surviving Rights. The obligations and rights of the Parties under
Sections 4.3 and 4.4 and Articles 5, 8, 9, 10, 11, 12, 13, 14, 15 and 16 shall
survive termination. In the event that Knoll terminates this Agreement pursuant
to Section 15.3 following the failure by Tularik to cure or initiate good faith
efforts to cure a material breach, the obligations contained in Section 5.3
shall not survive such termination. Additionally, the failure by Knoll to comply
with [ * ].
15.5 Accrued Rights; Surviving Obligations. The termination,
relinquishment or expiration of the Agreement for any reason shall be without
prejudice to any rights that shall have accrued to the benefit of either Party
prior to such termination, relinquishment or expiration,
[ * ] = 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>
including any damages arising from any breach hereunder. Such termination,
relinquishment or expiration shall not relieve either Party from obligations
that are expressly indicated to survive termination or expiration of the
Agreement.
15.6 Return of Assays. Upon the expiration or earlier termination of the
Collaboration Program Term, Knoll shall return to Tularik the Tularik Assays
provided to Knoll pursuant to Section 2.4; provided, however, that, [ * ].
ARTICLE 16 Miscellaneous
16.1 Waiver. No waiver by either Party 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.
16.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties 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, consolidation, 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
further in no event shall either Party's obligations under the Collaboration
Program be assigned to an Affiliate without the prior written consent of the
other Party.
16.3 Notices. Any notice or other communication required or permitted to
be given to either Party 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 Knoll: Knoll AG
Knollstrasse
67061 Ludwigshafen
Germany
Attention: Head of R&D
Either Party may change its address for communications by a notice to the
other Party in accordance with this Section.
16.4 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.
[ * ] = 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>
16.5 Amendment. No amendment or modification hereof shall be valid or
binding upon the Parties unless made in writing and signed by both Parties.
16.6 Governing Law and Language. This Agreement shall be governed
exclusively by laws of California, U.S.A., excluding any choice of law rules
that may direct the application of the law of any other jurisdiction. This
Agreement and the Appendices hereto were drafted in the English language, and
any notice to be given or accounts or statements required to be made under this
Agreement 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.
16.7 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, earthquake, 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, provided that the affected Party uses reasonable efforts to overcome
such delay.
16.8 Dispute Resolution. In the event of any controversy or claim
arising out of, relating to or in connection with any provision of this
Agreement (other than those relating to the determination of Contribution
Royalties), the Parties shall try to settle their differences amicably between
themselves by referring the disputed matter to the SC. 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 a patent shall be submitted to a court of competent
jurisdiction. The arbitration shall be held in San Francisco, California
according to the rules of the American Arbitration Association ("AAA"). 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 attorneys' and witness' fees. Judgment on the award so rendered shall
be final and may be entered in any court having jurisdiction thereof.
16.9 Independent Contractors. In making and performing this Agreement,
Knoll 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
Knoll. At no time shall one Party make commitments or incur any charges or
expenses for or in the name of the other 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.
30
<PAGE>
16.10 Severability. If any part of this Agreement is declared invalid by
any legally governing authority or court having jurisdiction over either Party,
then such declaration shall not affect the remainder of the Agreement and the
Parties shall revise the invalidated part in a manner that will render such
provision valid while achieving closely the Parties' original interest.
16.11 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.
16.12 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.
16.13 Entire Agreement. This Agreement and any and all Appendices
referred to herein embodies the entire understanding of the Parties with respect
to the subject matter hereof and supersedes and terminates 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.
31
<PAGE>
In Witness Whereof, both Knoll and Tularik have executed this Agreement, as
of the Effective Date.
Tularik Inc. Knoll AG
By: /s/ David V. Goeddel By: /s/ Erich Schlich
---------------------------- ------------------------------
Head R&D
Title: Chief Executive Officer Title: /s/ Gottfried Freier
------------------------
General Counsel
Legal & Taxes
[ * ] = 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 A
PROGRAM TARGETS
[ * ]
[ * ]
[ * ] = 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
RESEARCH PLAN
The Research Program described in this Agreement is further described 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.
<PAGE>
EXHIBIT 2.9.1
Tularik Inc.
Two Corporate Drive
South San Francisco, CA 94080
Attention: President
Knoll AG
Knollstrasse
67061 Ludwigshafen
Germany
Attention:
Dear Tularik and Knoll:
Knoll AG ("Knoll") and Tularik Inc. ("Tularik") have entered into a
Collaboration Agreement, dated as of November 1, 1998 (the "Collaboration
Agreement"). The undersigned ("Affiliate") is an Affiliate of Knoll. By this
letter, the undersigned agrees to be bound by, comply with and assume all terms,
conditions, rights, obligations, duties and restrictions of Knoll under the
Collaboration Agreement to the full extent as if the Affiliate were a party to
the Collaboration Agreement. Capitalized terms used herein but not otherwise
defined shall have the respective meaning given in the Collaboration Agreement.
Affiliate:______________________________
By:_____________________________________
Printed Name:___________________________
Title:__________________________________
Date:___________________________________
The undersigned acknowledge receipt of this letter:
Tularik Inc.
By:_____________________________________
Printed Name:___________________________
Date:___________________________________
Knoll AG
By:_____________________________________
Printed Name:___________________________
Date:___________________________________
[ * ] = 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
FORM OF LICENSE AGREEMENT
between
TULARIK INC.
and
KNOLL A.G.
[ * ] = 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>
LICENSE AGREEMENT
This License Agreement (the "Agreement") is made and entered into as of
_____________, ____ (the "Effective Date") by and between Tularik Inc., a
Delaware corporation ("Tularik"), and Knoll AG, a corporation organized under
the laws of Germany ("Knoll").
Recitals
Whereas, Tularik and Knoll have entered into a Collaboration Agreement
dated as of November 1, 1998 (the "Collaboration Agreement"); and
Whereas, the Parties have jointly engaged in researching certain compounds
potentially useful for the treatment of human disease by means of regulation of
[ * ], and Knoll has selected one of such compounds for development of Program
Products (as defined in the Collaboration Agreement) based thereon; and
Whereas, Knoll has given a Commercialization Notice as provided in the
Collaboration Agreement with respect to the compound listed in the
Commercialization Notice; and
Whereas, Knoll intends to [ * ] with respect to one or more Program
Products based on the compound listed in the Commercialization Notice and to
commence clinical development with the intention of obtaining Regulatory
Approval (as defined below) of at least one Program Product based on such
compound for commercialization; and
Now, Therefore, in consideration of the foregoing and the covenants and
premises contained herein, the Parties agree as follows:
ARTICLE 1 Definitions.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings given in the Collaboration Agreement. As used herein, the
following capitalized terms shall have the following meanings:
1.1 "Aggregate Amount" shall have the meaning ascribed in Section
4.1.2(a).
1.2 "Allocable Portion" shall have the meaning ascribed in Section
4.1.2(a).
1.3 "Confidential Information" shall mean, subject to the limitations set
forth in Section 7.1 hereof, all information disclosed by each Party to the
other Party pursuant to this Agreement.
1.4 "FDA" shall mean the United States Food and Drug Administration or any
successor thereto.
1.5 "Field" shall mean [ * ] (as such terms are defined in the
Collaboration Agreement) human patients and, in addition, may include [ * ].
"Field" shall also include any [ * ] used in combination with Program Products.
[ * ] = 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>
1.6 "Licensed Validated Compounds" shall mean a Validated Hit (as defined
in Section 1.83 of the Collaboration Agreement) that agonizes or antagonizes a
Program Target (as defined in Section 1.51 of the Collaboration Agreement) and
that is set forth on Exhibit A, with respect to which Knoll has issued to
Tularik a Commercialization Notice (as defined in Section 1.7 of the
Collaboration Agreement).
1.7 "Net Sales" shall mean the gross sales price of Program Products in
finished form, invoiced by Knoll, its Affiliates and sublicensees from sales to
arm's-length Third Party purchasers, 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. Additional allowances will be permitted for (i) cash,
trade and/or quantity discounts actually allowed; (ii) amounts repaid or
credited by reason of rejection or return of goods; and (iii) discounts mandated
by or granted in response to law. Net Sales shall not be reduced for any
reserves or allowance for bad debts.
1.8 "Party" shall mean either Tularik or Knoll.
1.9 "Royalty Term" shall have the meaning ascribed in Section 4.3.
1.10 "Significant Market Products" shall have the meaning ascribed in
Section 4.1(a).
1.11 "Third Party" shall mean any person or entity other than Knoll and
Tularik, and their respective Affiliates.
1.12 "Third Party Royalties" means royalties payable by Tularik or Knoll
to a Third Party in respect of the sale of Program Products.
1.13 "Valid Claim" shall mean a claim in an issued, unexpired patent that
has not been held invalid or unenforceable in an unappealed and unappealable
judgment of a court of competent jurisdiction.
ARTICLE 2 Licenses.
2.1 License to Knoll. Subject to the other provisions of this Agreement,
Tularik hereby grants to Knoll a license for the development, manufacture, use,
sale and importation of the Program Product based upon or incorporating the
Licensed Validated Compound in the Knoll Territory under Tularik's interest in
Program Technology and Research Compound Patents and under the Tularik
Technology. Such license shall be exclusive and include the right to grant
sublicenses with respect to the Knoll Territory. Subject to Section 2.1.1,
Tularik is granting no licenses to Knoll outside the Knoll Territory.
2.1.1 Right of First Refusal. In the event [ * ], Tularik shall
grant Knoll 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 Program Products based upon or incorporating the Licensed
Validated Compound in the Tularik Territory (the "Right of First Refusal").
Tularik shall negotiate exclusively with Knoll for [ * ] days for such licenses
prior 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.
2
<PAGE>
Tularik offering such opportunity to any Third Party. If the Parties have not
reached agreement by the end of such [ * ] day 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 Knoll 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"). Knoll shall have [ * ] days to
unqualifiedly accept or decline such Offer in writing. If Knoll fails to respond
within such time period, it shall be deemed to have declined such Offer. If
Knoll declines the Offer, Tularik has no further obligation to grant such a
Right of First Refusal to Knoll with respect to the license opportunity that
Knoll has declined; provided, however, that [ * ]. Knoll has [ * ] days to
unqualifiedly accept or decline such re-Offer in writing. If Knoll fails to
respond within such time period, it shall be deemed to have declined such re-
Offer.
2.1.2 Due Diligence. Knoll shall use commercially reasonable efforts
to develop and market the Program Products based upon or incorporating the
Licensed Validated Compound, consistent with [ * ], unless and until it
terminates this Agreement. If Knoll fails to use such efforts, Tularik may
terminate this Agreement upon [ * ] prior written notice. If the Parties
disagree on whether Knoll is using commercially reasonable efforts as required
hereunder, (i) [ * ]. In the event of termination of this Agreement for failure
to use such efforts, Knoll will grant to Tularik the licenses set forth in
Sections 5.3.1(c) and 5.3.1(d) of the Collaboration Agreement with respect to
such Program Product, subject to [ * ]. Tularik will then be free to pursue
clinical development, registration and commercialization of any such Program
Product as a Tularik Product in the Field throughout the world without further
obligation to Knoll other than the payment of the foregoing amounts.
2.2 Obligation to Inform. Knoll agrees to keep Tularik fully informed on a
reasonable basis of the development and commercialization of all Program
Products based upon or incorporating the Licensed Validated Compound, including
but not limited to providing to Tularik periodic written updates on the progress
of each filing for Regulatory Approval.
ARTICLE 3 Product Development.
Knoll is responsible for funding and performing the preclinical and
clinical development plan for the Program Products based upon or incorporating
the Licensed Validated Compound in the Knoll Territory. Knoll will perform all
such preclinical and clinical studies in such manner that the data generated
therefrom will meet the regulatory requirements of the FDA or foreign equivalent
for approval of human pharmaceuticals.
ARTICLE 4 Payments.
4.1 Royalties.
4.1.1 Preliminary Royalties. Knoll will pay Tularik royalties on Net
Sales on a quarterly basis within [ * ] after the end of each calendar quarter.
The royalty rate for each Program Product for which Net Sales are less than [ *
] will be [ * ], subject to a possible increase in the royalty rate (and the
subsequent payment of additional amounts to Tularik) applicable to Net Sales of
any Program Products for which worldwide Net Sales are equal to or greater than
[ * ] = Certain confidential informatin 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 any given calendar year ("Significant Market Products"), as provided in
Section 4.1.2(c) below.
4.1.2 Additional Royalties. Within [ * ] after the end of each
calendar year during the term of this Agreement, Knoll shall make any additional
royalty payments that may be required by Section 4.1.2(c) to Tularik on Net
Sales of Significant Market Products during such calendar year. The amount of
any such additional royalties shall be determined as follows:
(a) First, the amount of Net Sales of Significant Market
Products shall be [ * ] "Aggregate Amount"). The portion of the Aggregate Amount
allocable to [ * ] under this Agreement is the "Allocable Portion."
(b) Second, [ * ] will be determined by ascertaining whether
the Effective Date precedes or follows the date on which the Parties executed
any license agreement (other than this Agreement) for which worldwide net sales
are equal to or greater than [ * ] in any given calendar year. The net sales of
products or of Significant Market Products under [ * ] shall be considered the
first net sales (i.e., sales from $1 upward) and the royalty rate applicable to
net sales of less than [ * ] of such product or Significant Market Product shall
be [ * ] Net sales of subsequently executed agreement(s) shall be considered
sales made in addition to net sales made under the earliest executed agreement.
The foregoing is illustrated in the following example:
[ * ].
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
(c) Knoll shall pay to Tularik any additional royalty due
pursuant to this Section 4.1.2 equal to the amount, if any, by which the amount
of royalties due to Tularik with respect to the Allocable Portion determined
pursuant to Section 4.1.2(a) and (b) exceeds the amount previously paid or due
and payable to Tularik pursuant to Section 4.1.1.
4.1.3 Royalty Offset. Knoll may offset [ * ] of any royalties it must
pay to Third Parties on Net Sales of Program Product pursuant to any licenses
necessary to sell such Program Product against royalties payable by Knoll to
Tularik pursuant to Section 4.1; provided, however, that Tularik's royalty is
not reduced hereunder by more than [ * ] of Net Sales.
4.2 Milestone Payments. Knoll will make the following payments to Tularik
in US Dollars upon the occurrence of the listed event in the Knoll Territory for
each Program Product based upon or incorporating the Licensed Validated
Compound:
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.
4
<PAGE>
[ * ] [ * ] [ * ]
[ * ] [ * ] [ * ]
Amounts due upon achievement of events [ * ] are payable [ * ] the event is
achieved for any Program Product based upon or incorporating a Licensed
Validated Compound in the Knoll Territory. Amounts due upon the achievement of
events [ * ] are payable [ * ] the event is achieved for a Program Product based
upon or incorporating the Licensed Validated Compound [ * ]. For any amount
payable upon achievement of [ * ]. In the event a Program Product based upon or
incorporating a Licensed Validated Compound achieves [ * ] of the listed events
above but does not achieve [ * ] events listed above, the listed events not
achieved by such Program Product shall be available to subsequent Program
Products based upon or incorporating a Licensed Validated Compound until such
time as [ * ] milestones shall have been paid by Knoll to Tularik for one or
more Program Products based upon or incorporating a Licensed Validated Compound.
4.3 Period of Royalty Obligation. The royalty obligation under Section 4.1
shall commence on the date of first commercial sale of a Program Product based
upon or incorporating a Licensed Validated Compound in a country and shall
expire, on a country-by-country and product-by-product basis, on the later of
the expiration of the last to expire patent licensed to Knoll under Section 2.1
above or the [ * ] anniversary of the first commercial sale of the Program
Product in such country ("Royalty Term").
ARTICLE 5 Payment: Record; Audit.
5.1 Payments; Reports. All amounts payable to Tularik under this Agreement
shall be paid in U.S. dollars. The royalty obligation under Section 4.1 shall
accrue at the time of sale of the Program Products to a Third Party. Royalty
obligations that accrue during a particular quarter shall be paid within [ * ]
after the end of such calendar quarter and other payments due to Tularik shall
be made as specified herein. Each payment of royalties and amounts due to
Tularik under Section 4.1 shall be accompanied by a statement of the amount of
Net Sales during such period on a product-by-product and country-by-country
basis, including all other information necessary to determine the appropriate
amount of such payments, and any additional information or reports required
under the Agreement.
5.2 Exchange Rate. The rate of exchange to be used in computing the amount
of currency equivalent in United States dollars due Tularik shall be made at the
period end rate of exchange quoted on the last business day of the royalty
period in the Wall Street Journal.
5.3 Records and Audit. During the term of this Agreement and for a period
of [ * ] thereafter, Knoll shall keep complete and accurate records pertaining
to the sale or other disposition of the Program Products commercialized by it
pursuant to this Agreement, in sufficient detail to permit Tularik to confirm
the accuracy of all payments due hereunder and compliance with the covenants set
forth in Section 2.1.2. Tularik shall have the right to cause an independent,
certified public accountant to audit such records to confirm Net Sales and
royalty payments due thereon to Tularik; provided, however, that such auditor
shall not disclose Knoll's Confidential Information to Tularik, except to the
extent such disclosure is necessary to verify the amount of royalties and other
payments due under this Agreement. Such audit right may b e
[ * ] = 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>
exercised once a year, within [ * ] years after the royalty period to which such
records relate, upon notice to Knoll and during normal business hours. Any
under-payment of amounts due to Tularik by such audits shall be paid immediately
with interest in the amount of [ * ] per month (or the maximum amount permitted
by law, if less) from the date that such amount should have been paid to Tularik
until Knoll actually pays such amount. Tularik shall bear the full cost of such
audit unless such audit discloses a variance in the amounts paid by Knoll of
more than [ * ] from the amount of royalties and/or other payments actually
owed. In such case, Knoll shall bear the full cost of such audit. The terms of
this Section 5 shall survive any termination or expiration of this Agreement for
a period of [ * ].
5.4 Withholding of Taxes. All payment amounts set forth in the Agreement
are stated net of withholding or similar taxes (other than U.S. income taxes)
that may be imposed by any governmental authority; provided, however, that
Tularik has provided Knoll with a Certificate of Exemption
(Freistellungsbescheinigung) from the German Federal Tax Office (Bundesamt fur
Finanzen).
5.5 Blocked Currency. In each country where the local currency is blocked
and cannot be removed from the country, royalties accrued in that country shall
be paid to Tularik in such country in local currency by deposit in a local bank
designated by Tularik.
5.6 Cross-Border Sales. Knoll 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 Program Products in any country outside of the Knoll Territory,
and that Knoll shall use reasonable efforts to deter the importation of Program
Products into any country outside of the Knoll Territory by its affiliates and
licensees. Knoll and Tularik recognize that in certain territories, and in
particular in free trade regions, customers or other third parties may import
Program Products purchased in one country for use in another. If such activity
materially distorts the aggregate relative profitability of the parties from the
sale of Program Products in one or more countries, Tularik and Knoll shall [ * ]
to offset the economic effect of such cross-border transfers to the extent it is
practical to do so.
ARTICLE 6 Ownership; Patents.
6.1 Ownership. Provision is made in the Collaboration Agreement for
ownership of the Knoll Technology, the Tularik Technology, the Research Compound
Inventions and the Program Technology and such matters shall be governed
thereby.
6.2 Patents. Provision is made in the Collaboration Agreement for the
ownership, filing, prosecution and maintenance of Patents, Tularik Patents and
Knoll Patents and such matters shall be governed thereby.
6.3 Infringement of Program Patents.
6.3.1 Notice. Each Party shall promptly notify the other in writing
of any alleged or threatened infringement of the Patents that 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
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6
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6.3.2 Cooperation. Neither Party will notify a Third Party (except
for the Parties' outside litigation counsel) of the infringement of any of the
Patents by a Third Party in the Field without first obtaining the consent of the
other Party, which consent shall not be unreasonably withheld. Both Parties
shall use their best efforts in cooperating with each other to terminate such
infringement without litigation, with each Party being responsible for the
payment of its own out-of-pocket costs (including legal costs) relating thereto.
Any monetary settlement resulting from any such process shall first be allocated
to reimburse both Parties for such out-of-pocket costs, and the remainder shall
be [ * ].
6.3.3 Enforcement Action. In the event that any alleged or threatened
infringement of the Patents by a Third Party in the Field and in the Knoll
Territory cannot be terminated without litigation, Knoll shall have the first
right, but not the obligation, to take appropriate action against any person or
entity directly or contributorily infringing such Patent. In the event Knoll
fails to institute an infringement suit or take other reasonable action in
response to such infringement within [ * ] after notice in accordance with
paragraph 6.3(a) above, Tularik shall have the right, but not the obligation,
upon [ * ] notice to Knoll to institute such suit or take other appropriate
action in its own name, the joint owners' names or both. In the event that any
alleged or threatened infringement of the Patents by a Third Party in the Field
and in the Tularik Territory cannot be terminated without litigation, Tularik
shall have the first right, but not the obligation, to take appropriate action
against any person or entity directly or contributorily infringing such Patent.
If Tularik fails to institute an infringement suit or take other reasonable
action in response to such infringement within [ * ] after notice in accordance
with paragraph 6.3(a) above, Knoll shall have the right, but not the obligation,
upon [ * ] notice to Tularik to institute such suit or take other appropriate
action in its own name, the joint owners' names or both. Regardless of which
Party brings such enforcement action, the other Party hereby agrees to cooperate
reasonably in any such effort, including, if required, bringing a legal action
or furnishing a power of attorney. The Party not bringing the action shall have
the right to participate in such action at its own expense with its own counsel
and any recovery obtained by settlement or otherwise shall be disbursed as
follows: Each Party shall first recover any reasonable expenses incurred in such
action (including counsel fees). Thereafter, the Parties shall [ * ]; provided,
however, that in the event Knoll fails to institute an infringement suit or take
other appropriate action in the Knoll Territory and Tularik shall institute such
suit or take such action, [ * ].
6.4 Infringement of Tularik Patents and Knoll Patents. Subject to [ * ]
Tularik and Knoll shall defend and enforce the Tularik Patents and the Knoll
Patents respectively throughout the world.
6.5 Infringement of Third Party Patent Rights.
6.5.1 Joint Strategy. In the event that the manufacture, use or sale
of a Program Product based upon or incorporating the Licensed Validated Compound
becomes the subject of a claim of infringement of a patent, copyright or other
proprietary right anywhere in the world, and without regard to which Party is
charged with said infringement, or the venue of such claim, the Parties [ * ]
shall promptly confer to discuss the claim.
[ * ] = 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.
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6.5.2 Defense. Unless the Parties otherwise agree, Knoll shall assume
the primary responsibility at its expense for the conduct of the defense of any
such claim brought in the Knoll Territory. Tularik shall have the right, but not
the obligation, to participate in any such suit at its sole option and at its
own expense. Unless the Parties otherwise agree, Tularik shall assume the
primary responsibility at its expense for the conduct of the defense of any such
claim brought in the Tularik Territory. Knoll 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 Knoll and Tularik agree that
payment must be made to a Third Party (the "Third Party Payment") to avoid
infringement of such Third Party's patent in the Knoll Territory, [ * ].
6.6 Patent Marking. Knoll 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.
ARTICLE 7 Confidentiality.
7.1 Confidentiality. Except to the extent expressly authorized by this
Agreement or otherwise agreed in writing by the Parties, each Party agrees that,
for the term of this Agreement and for [ * ] 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 Agreement any Confidential
Information furnished to it by the other Party pursuant to this Agreement except
to the extent the receiving Party can demonstrate by competent proof that such
Confidential Information:
7.1.1 was already known to the receiving Party, other than under an
obligation of confidentiality, at the time of disclosure by the other Party;
7.1.2 was generally available to the public or otherwise part of the
public domain at the time of its disclosure to the receiving Party;
7.1.3 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 any obligation of confidentiality
with respect thereto;
7.1.4 was disclosed to the receiving Party, other than under an
obligation of confidentiality to a Third Party, by a Third Party without breach
of any obligation of confidentiality with respect thereto; or
7.1.5 was independently discovered or developed by the receiving
Party without the use of Confidential Information belonging to the disclosing
Party.
Notwithstanding the foregoing, either Party may disclose Confidential
Information of the other Party to those of its employees, agents and consultants
who require such information to perform such Party's obligations under this
Agreement, provided that such employees, agents
[ * ] = 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
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and consultants are bound by obligations of confidentiality and non-use with
respect to such Confidential Information at least equivalent in scope with those
provided in this Section 7.1.
7.2 Authorized Disclosure. Notwithstanding Section 7.1, each Party may
disclose Confidential Information belonging to the other Party to the extent
such disclosure is reasonably necessary in the following instances:
7.2.1 filing or prosecuting patents relating to Program Products;
7.2.2 making regulatory filings;
7.2.3 prosecuting or defending litigation;
7.2.4 complying with applicable governmental regulations;
7.2.5 conducting pre clinical or clinical trials of Program Products;
and
7.2.6 as necessary to effectuate the [ * ]
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 7.2 it will, except where impracticable, give reasonable advance notice
to the other Party of such disclosure and endeavor in good faith to secure
confidential treatment of such information. In any event, the Parties agree to
take all reasonable action to avoid disclosure of Confidential Information
hereunder. The Parties will consult with one another and agree on the provisions
of this Agreement to be redacted in any filings made by the Parties with the
United States Securities and Exchange Commission or as otherwise required by
law.
ARTICLE 8 Publication; Publicity.
8.1 Publicity. Except as otherwise provided herein or required by law, no
Party shall make publicly available or provide to any Third Party any
publication, news release or other public announcement, written or oral, whether
in the public press, or stockholders' reports (if applicable), or otherwise,
relating to the existence of or the Parties' performance under this Agreement,
without the prior written approval of the other Party.
ARTICLE 9 Representations And Warranties.
9.1 Representations and Warranties. Each Party hereby represents and
warrants that:
9.1.1 it 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 its
behalf has been duly authorized to do so by all requisite corporate action;
9.1.2 it will not take any material action or fail to take any
material action which would be in conflict with its obligations under 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.
9
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9.1.3 to its best knowledge as of the date of this Agreement: (i) it
has full power and authority to undertake the scientific activities required of
it; (ii) [ * ]; and (iii) the [ * ];
9.1.4 as of the date of this Agreement, to the best of its knowledge,
it is not aware of [ * ];
9.1.5 this Agreement is a legal and valid obligation binding upon it
and is enforceable in accordance with its terms; and
9.1.6 the execution, delivery and performance of this Agreement by it
does not conflict with any agreement, 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.
9.2 Third Party Licenses. Each Party agrees to identify to the other Party
any Third Party Licenses and the technologies to which they pertain. Knoll shall
have no obligation to make any payments whatsoever with respect to such Third
Party Licenses of Tularik. Tularik shall have no obligation to make any payments
whatsoever with respect to such Third Party Licenses of Knoll.
9.3 Tularik Disclaimer. EXCEPT AS OTHERWISE PROVIDED IN SECTION 9.1, THE
TULARIK TECHNOLOGY AND PROGRAM TECHNOLOGY LICENSED HEREUNDER ARE 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 ARISING FROM A COURSE OF DEALING,
USAGE OR TRADE PRACTICES, IN ALL CASES WITH RESPECT THERETO.
ARTICLE 10 Indemnification.
10.1 Indemnification by Tularik. Tularik hereby agrees to indemnify, hold
harmless and defend Knoll, its employees, directors, officers, agents and
consultants against any and all claims, suits, actions, demands, liabilities,
expenses and/or losses (including without limitation reasonable attorneys' fees
and related legal and court expenses) (collectively, "Claims") for damage to
persons or property resulting directly or indirectly from actions in connection
with this Agreement, but only to the extent that such Claims [ * ], except to
the extent such Claims arise out of or are in connection with any occurrence for
which Knoll must indemnify Tularik pursuant to Section 10.2.
10.2 Indemnification by Knoll. Knoll hereby agrees to indemnify, hold
harmless and defend Tularik, its employees, directors, officers, agents and
consultants against any and all Claims for damage to persons or property
resulting directly or indirectly from actions in connection with this Agreement,
to the extent that such Claims [ * ], except to the extent such Claims arise out
of or are in connection with any occurrence for which Tularik must indemnify
Knoll pursuant to Section 10.1.
[ * ] = 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.
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10.3 Control of Defense. Any person or entity entitled to indemnification
under this Article 10 shall give notice to the indemnifying Party of any Claims
that may be subject to indemnification promptly after such Party learns of such
Claim. The indemnifying Party shall assume the defense of such Claims using
counsel reasonably satisfactory to the indemnified Party, and the indemnifying
Party will not be subject to any liability for any settlement of such Claims
made by the indemnified Party without the indemnifying Party's consent (such
consent not to be unreasonably withheld or delayed), and will not be obligated
to pay any fees and expenses of any separate counsel retained by the indemnified
Party with respect to such Claim.
ARTICLE 11 Government Controls.
This Agreement is made subject to any restrictions concerning the export of
Program Products or technical information from the United States that may be
imposed upon or related to the Parties from time to time by the government of
the United States and other applicable jurisdictions. Furthermore, each Party
agrees that it will not export, directly or indirectly, any technical
information acquired from the other under this Agreement or any Program Products
made using such technical information to any country for which the United States
government or any agency thereof, or any other applicable jurisdictions at the
time of export requires an export, license or other governmental approval,
without first obtaining the written consent to do so from the Department of
Commerce or other agency of the United States government, or any other
applicable jurisdictions when required by an applicable statute or regulation.
ARTICLE 12 Term And Termination Of Agreement.
12.1 Term. Except as provided under Section 12.2 below, 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 under Section 4.3.
12.2 Termination for Material Breach. Each Party shall have the right to
terminate the Agreement after [ * ] days written notice to the other that the
other is in material breach of the Agreement, unless the other Party cures the
breach before the expiration of such period of time, or, in the case that such
breach cannot be cured within such period, the Party continues to use diligent
efforts to cure such breach until actually cured. In addition, this Agreement
shall terminate in the event the Collaboration Agreement is terminated pursuant
to Section 15.2 or 15.3 thereof. Upon termination, all licenses granted to the
non-breaching Party shall survive and all licenses granted to the breaching
Party under the Agreement shall automatically terminate, but such termination
shall not impair any other rights the non-breaching Party may have at law or
equity. Upon any termination by Knoll for a breach of this Agreement by Tularik,
Tularik shall be entitled to receive a royalty equal to that provided in Section
4.1 until expiration of all Tularik Patents or Patents claiming the manufacture,
use or sale of such Program Products, reduced by any money damages that may be
awarded to Knoll in connection with any such breach by Tularik and by any costs
incurred in connection with the transition of Tularik's responsibilities under
this Agreement to Knoll, its Affiliate or sublicensee. The provisions of Section
4.3 and Article 5 shall apply with respect to any such amounts due to Tularik
hereunder.
12.3 Accrued Rights; Surviving Obligations. Termination of this Agreement
shall not affect any accrued rights of either Party. The terms of Section 5.3
and Article 7 (for 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>
period specified therein), and Articles 6, 8, 9, 10 and 13 and Sections 12.2 and
12.3 of this Agreement, shall survive termination of this 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 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, consolidation, 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.
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.
Two Corporate Drive
S. San Francisco, CA 94080
Fax: (650) 829-4303
Attention: Chief Executive Officer
In the case of Knoll: Knoll AG
Knollstrasse
67061 Ludwigshafen
Germany
Attention: Head of R&D
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 Governing Law and Language. This Agreement shall be governed
exclusively by laws of California, U.S.A., excluding any choice of law rules
that may direct the application of the law of any other jurisdiction. The
official text of this Agreement and any appendices, exhibits and schedules
hereto, or any notice given or accounts or statements required by this Agreement
shall be in English. In the event of any dispute concerning the construction 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.
12
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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.
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, earthquakes, 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, provided that the affected Party uses reasonable efforts to overcome
such delay.
13.8 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 SC (as defined in the Collaboration
Agreement). 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 a patent shall be submitted
to a court of competent jurisdiction. The arbitration shall be held in San
Francisco, California according to the rules of the American Arbitration
Association ("AAA"). 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.
13.9 Independent Contractors. In making and performing this Agreement,
Knoll 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
Knoll. At no time shall one Party make commitments or incur any charges or
expenses for or in the name of the other Party.
13.10 Severability. If any part of this Agreement is declared invalid by
any legally governing authority having jurisdiction over either Party, then such
declaration shall not affect the remainder of the Agreement and the Parties
shall revise the invalidated part in a manner that will render such provision
valid without impairing the Parties' original interest.
13.11 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.
[ * ] = 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.
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13.12 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.
13.13 Entire Agreement. This Agreement, the Collaboration Agreement and
any and all Exhibits referred to herein embodies the entire understanding of the
Parties with respect to the subject matter hereof and supersedes and terminates
all previous communications, representations or understandings, either oral or
written, between the Parties relating to the subject matter hereof.
In Witness Whereof, the Parties have duly executed this Agreement.
Tularik Inc. Knoll AG
By: By:
----------------------------- -----------------------------
Title: Chief Executive Officer Title:
-------------------------- --------------------------
[ * ] = 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.
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Exhibit A
LICENSED VALIDATED 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.
<PAGE>
Exhibit B
PROGRAM PATENTS AND PATENT APPLICATIONS
[ * ] = 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
LICENSE UNDER KNOLL 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.
<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: (i) [ * ], (ii) any protein containing a [ * ] domain of
[ * ] amino acid residues [ * ] of which are [ * ] that is further characterized
by [ * ] of the [ * ] type and to the [ * ] of which [ * ] domain is a region
with [ * ] to the [ * ] domain of any of the [ * ] set forth in (i) above, for
which a [ * ] shall not have been identified, but excluding [ * ] and the [ * ]
(as defined in [ * ]; and (iii) other [ * ] added to the research component of
the Program ("Research Program") by [ * ] of the RMC; provided, however, that in
-------- -------
the event the RMC is unable to [ * ] to the Research Program, such [ * ] shall
be excluded from the Research Program, shall not be [ * ] and may be pursued by
the Parties independently of this Agreement. 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") that may contractually require Tularik
to collaborate [ * ] on orphan nuclear receptors that [ * ] but for [ * ].
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: are [ * ] within the Third Party Agreements
(but only to the extent [ * ]; 2) become [ * ] within a Third Party Agreement by
[ * ] within the Third Party Agreement (but only to the extent required by the
terms of such Third Party Agreement); 3) are [ * ] that are [ * ] a Third Party
Agreement (irrespective of whether the [ * ] of such [ * ] within such [ * ] is
known as of the Agreement Date) (but only to the extent required by the terms of
such Third Party Agreements); or 4) are [ * ] as [ * ] in a Third Party
Agreement (but only to the extent required by the terms of such Third Party
Agreements); provided, however, that Tularik shall not [ * ] such Third Party
Agreements to be [ * ] in a way (including [ * ] contained in the Third Party
Agreements) that [ * ]; provided further that Tularik shall within [ * ] return
any [ * ] following [ * ] in the event that such [ * ] were [ * ] on a Product
that is [ * ] to [ * ] for which Tularik [ * ] pursuant to a [ * ] and for which
JT is required to [ * ]. In the event that a Product is [ * ] determined to [ *
] for which Tularik [ * ] pursuant to a [ * ] and for which JT is required to [
* ], Tularik shall [ * ] to JT an [ * ] between [ * ] in good faith that [ * ]
(as defined in Section [ * ] previously [ * ]. 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. A brief general description of Tularik's
Patent Rights and Know-How is attached as Appendix B. A brief general
description of JT's Patent Rights and Know-How is attached as Appendix C.
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 seventy-five (75) days' prior written notice
JT may, in its sole judgment, terminate the Research Program at the end of the
third (3/rd/) year and fourth (4/th/) year 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) JT will grant to Tularik an
exclusive, sublicensable, worldwide license, to make, use and sell compounds,
Collaboration Lead Compounds or Products under JT's interest in Program Patents
and Program Know-How and (C) under the terms and conditions to be separately
agreed, JT will also grant to Tularik a nonexclusive, sublicensable, worldwide
license under any JT Patent Rights and Know-How to the extent necessary to
practice the license granted under the Program Patents and Program Know-How in
(B) (including, with respect to compounds, a limited number of JT's library
compounds approved by JT); provided, however, that in the event the Research
Program terminates but the Agreement has not terminated with respect to
designated Collaboration Lead Compounds, Independent Lead Compounds and/or
Products as provided in Section 2(g)(ii), Sections 2(g)(A), (B) and (C) shall
apply only to those compounds, Collaboration Lead Compounds, Independent Lead
Compounds and Products for which Development or co-promotion shall have been
terminated and/or to those compounds or Lead Compounds that have not been
designated previously a Collaboration Lead Compound in accordance with Section
3(b) or an Independent Lead Compound in accordance with Section 3(m); provided
further that in the event that JT elects to pursue a Discontinued Compound or a
Non-Proposed Compound on or before the first anniversary of the expiration or
termination of the Research Program Term pursuant to Section 3(b)(iii) or
3(b)(iv), respectively, Sections 2(g)(A), (B) and (C) shall not apply to such
Discontinued Compound or Non-Proposed Compound until such time as JT shall have
terminated the Development or co-promotion of such Discontinued Compound or Non-
Proposed Compound. 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 reasonably charged directly to the Pre-Clinical
Development of any Lead Compound, Collaboration Lead Compound or Development of
any Product, as well as [*] of the functions that such Pre-Clinical Development
or Development (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 [ * ], all as specified in the
Development Plan and the Development Budget. Development Costs shall consist of
the costs of [*] dedicated to such activities [*] and [*] but shall exclude the
costs of [*] to the extent such costs are incurred. Such costs shall include,
without limitation: the [*] for the [*] used in such [*] including [*] for
Regulatory Approval, to the extent [*]); (ii) direct costs for [*], including,
but not limited to, [*] studies [*]; (iii) direct charges for materials
(including [*]; (iv) labor and materials costs incurred in connection with [*];
and (v) labor and materials costs for the development of the [*] of such process
in connection with activities provided in Section [*]. 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 the submission of an IND 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 the submission of an IND on
such Independent Product but prior to the end of the first Phase I clinical
trial on such Product; 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 the end of the first Phase 1 clinical trial. 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 overall
marketing strategy, marketing, sales and promotion efforts to be performed by
each Party, market and sales forecasts, pricing and discounting analysis and
estimated launch date, as well as advertising and other promotional materials
to be used in the co-promotion of Products. The Marketing Plan will take into
consideration to be used in the co-promotion of Products. The Marketing Plan
will take into consideration market conditions, regulatory factors and
competition 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 [ * ] the first
filing of an NDA (or its foreign equivalent) 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 medical
communities (including, for example, the physician, pharmacy, governmental,
reimbursement and hospital sectors) 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.
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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 3 years 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.
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, JT shall not be
required to finance any portion of the Aggregate Commitment that has not
previously be disbursed in the event this Agreement terminates pursuant to
Article 13 hereof. The Aggregate Commitment shall be used by Tularik to finance
the portion of Development Costs to be borne by Tularik for [ * ] clinical
trials (or equivalent) pursuant to this Agreement and the agreement to be
executed between Tularik and JT concerning the Tularik obesity program (the
"Obesity Agreement"), commencing with initiation of Phase 2 clinical trials (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: pay for those [ * ] that are payable
within the [ * ] as estimated by the [ * ]; and (ii) [ * ] JT for an [ * ] made
by JT and payable by Tularik pursuant to Section [ * ]; provided, however, that
no more than [ * ] of such Aggregate Commitment may be Amounts Drawn to finance
[ * ] Collaboration Lead [ * ] (or equivalent under the Obesity Agreement);
provided further that in no event may there be Amounts Drawn on more than [ * ]
Collaboration Lead [ * ] (or equivalent under the Obesity Agreement). Loans made
by JT to Tularik pursuant to such Loan Agreement for a Collaboration Lead
Compound or resulting Product shall provide for the annual repayment of Amounts
Drawn on such Collaboration Lead Compound or resulting Product, and interest
accrued on such Amounts Drawn, over a [ * ] ("Repayment Dates") commencing on
the first anniversary of the first to occur of: the [ * ] of the Product
resulting from such Collaboration Lead Compound; or (ii) a [ * ] the JDC to
[ * ] such Collaboration Lead Compound or resulting Product [ * ]. Interest on
Amounts Drawn shall accrue from the Funding Dates to the Repayment Dates and
shall equal the sum of the then-prevailing [ * ]: (A) [ * ]; and (B) the [ * ];
divided by (ii) [ * ]. In addition, Tularik's Share of Co-Promotion Profit and
its Royalty Rate with respect to the Tularik Territory for a Product 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 completed
Phase [ * ] clinical trials on a Product, JT and Tularik shall negotiate in good
faith the terms and conditions under which JT may [ * ] the Aggregate
Commitment, and the definition of Eligible Development Costs, to include
Development Costs to be incurred in [ * ].
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 five (5) years 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 be held in San Francisco,
California according to the rules of the American Arbitration Association
("AAA"). 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 The Chief Executive
Officer of Tularik and a senior officer of JT's pharmaceutical business 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 [ * ]. A
brief general description of Tularik's Patent Rights and Know-How is attached as
Appendix B. A brief general description of JT's Patent Rights and Know-How is
attached as Appendix C. 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 seventy-five (75) days prior
written notice JT may, in its sole judgment, terminate the Research Program on
first or second anniversary 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) JT will grant to Tularik an
exclusive, sublicensable, worldwide license, to make, use and sell compounds,
Collaboration Lead Compounds or Products under JT's interest in Program Patents
and Program Know-How and (C) under terms and conditions to be separately agreed,
JT will also grant to Tularik a nonexclusive,sublicensable, worldwide license
under any JT Patent Rights and Know-How to the extent necessary to practice the
license granted under the Program Patents and Program Know-How in (B)
(including, with respect to compounds, a limited number of JT's library
compounds approved by JT); provided, however, that in the event the Research
-------- -------
Program terminates but the Agreement has not terminated with respect to
designated Collaboration Lead Compounds, Independent Lead Compounds and/or
Products as provided in Section 2(g)(ii), Sections 2(g)(A),(B) and (C) shall
apply only to those compounds, Collaboration Lead Compounds, Independent Lead
Compounds and Products for which Development or co-promotion shall have been
terminated and/or to those compounds or Lead Compounds that have not been
designated previously a Collaboration Lead Compound in accordance with Section
3(b) or an Independent Lead Compound in accordance with Section 3(m); provided
--------
further that in the event that JT elects to pursue a Discontinued Compound or a
- -------
Non-Proposed Compound on or before the first anniversary of the expiration or
termination of the Research Program Term pursuant to Section 3(b)(iii) or
3(b)(iv), respectively, Sections 2(g)(A), (B) and (C) shall not apply to such
Discontinued Compound or Non-Proposed Compound until such time as JT shall have
terminated the Development or co-promotion of such Discontinued Compound or Non-
Proposed Compound. 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.
[ * ] = 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>
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 reasonably charged directly to the Pre-Clinical
Development of any Lead Compound, Collaboration Lead Compound or Development of
any Product, as well as [*] of the functions that directly support such Pre-
Clinical Development or Development (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 [*], all as specified in the
Development Plan and the Development Budget. Development Costs shall consist of
the costs of [*] and [*] but shall exclude the costs of [*] to the extent such
costs are incurred in connection with activities provided in Section [*]. Such
costs shall include, without limitation: (i) the [*] for the [*] used in such
Development (including [*], to the extent [*]; (ii) direct costs for [*],
including, but not limited to, [*]; (iii) direct charges for materials
(including [*]; (iv) labor and materials costs incurred in connection with [*];
and (v) labor and materials costs for 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.
10.
<PAGE>
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 the submission of an IND 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 the end of the first Phase 1
clinical trial. 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 ten (10) 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 overall marketing
strategy, marketing, sales and promotion efforts to be performed by each Party,
market and sales forecasts, pricing and discounting analysis and estimated
launch date, as well as advertising and other promotional materials to be used
in the co-promotion of Products. The Marketing Plan will take into consideration
market conditions, regulatory factors and competition 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 [ * ] months after the first filing of an NDA (or its
foreign equivalent) 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 every [ * ] months.
[ * ] = 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 medical
communities (including, for example, the physician, pharmacy, governmental,
reimbursement and hospital sectors) 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.
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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.
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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.
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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 3 years 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, JT shall not be
required to finance any portion of Aggregate Commitment that has not previously
been disbursed in the event this Agreement terminates pursuant to Article 13
hereof. The Aggregate Commitment shall be used by Tularik to finance the portion
of Development Costs to be borne by Tularik for [*] (or equivalent) pursuant to
this Agreement [*], commencing with the initiation of [*] (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: (i) pay for those Eligible Development Costs
that are payable within [*] as estimated by the Development Budget; and (ii)
reimburse JT for [*] and payable by Tularik pursuant to Section [*]; provided,
--------
however, that [*] of such Aggregate Commitment may be Amounts Drawn to finance
- --------
[*] Collaboration Lead [*]; provided further that in no event may there be
-------- -------
Amounts Drawn on [*] Collaboration Lead [*]. Loans made by JT to Tularik
pursuant to such Loan Agreement for a Collaboration Lead Compound or resulting
Product shall provide for [*] of Amounts Drawn on such Collaboration Lead [*],
and interest accrued on such Amounts Drawn, over a [*] ("Repayment Dates")
commencing on [*] of the first to occur of: (i) the first sale of the Product
resulting from such Collaboration Lead Compound; or (ii) a [*] the JDC to [*]
such Collaboration Lead Compound or resulting Product. Interest on
Amounts Drawn shall accrue from the Funding Dates to the Repayment Dates and
shall equal (i) the sum of the then-prevailing [*]: (A) [*]; and (B) [*];
divided by (ii) [*]. 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 [*] on a Product, JT and
Tularik shall negotiate in good faith the terms and conditions under which JT
may [*] the Aggregate Commitment, and the definition of Eligible Development
Costs, to include Development Costs to be incurred in [*].
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 five (5) years 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 held in San Francisco,
California according to the rules of the American Arbitration Association
("AAA"). 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. JT acknowledges that Tularik [ * ] in the conduct of
research and development activities [ * ]. Furthermore, JT acknowledges that the
role of Tularik in identifying, selecting, evaluating and developing compounds
for JT under this Agreement [ * ]. JT, its affiliates, successors and assigns,
shall not [ * ], nor shall it [ * ], any [ * ] any administrative agency, [ * ]
Tularik, its affiliates, successors, directors, partners, attorneys,
representatives, stockholders, investors, agents, employees, former employees,
or any person acting by, through, under or in concert with each or any of them,
based upon [ * ] where such [ * ] or other compounds that [ * ] and shall not,
from any source or [ * ] therefrom; provided, however, that the foregoing [ * ]
-------- -------
shall not apply to the extent that such [ * ]. Anything in this Section 24 to
the contrary nothwithstanding, in the event that [ * ] that is identical in all
material respects to [ * ], Tularik shall either: [ * ] to any provision that
[ * ] or (ii) [ * ] in the event 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.
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
I. Summary of [ * ] Tularik Technology
[ * ] has taken an aggressive approach to [ * ], [ * ] patent applications on
[ * ]. Thus far, [ * ] patent applications relevant to activities in [ * ] have
been filed. Brief summaries of the matter embodied in these applications are
provided below.
1. THE [ * ] OF THE [ * ]
[This invention relates to the [ * ] and its uses in [ * ]. The application
discloses [ * ] is linked to a [ * ] the use of these cells in [ * ]. Claims
are also directed to binding assays involving the [ * ]. In addition to these
assay-related inventions, this application also covers [ * ]
2. [ * ] ASSAY
This invention, which concerns [ * ] relating to the initial assay(s) Tularik
will carry out in this project, provides [ * ] for screening to discover drugs
that regulate [ * ]. Specifically, the methodology is relevant to
indentification of agents active at the level of [ * ]. The methods claimed
include [ * ] using [ * ] from [ * ] at least [ * ] to monitor the effects of
drug candidates on [ * ]. Compositions covered include [ * ]. Matter embodied in
this application also includes [ * ].
3. [ * ] ASSAY
This invention involves [ * ] which interfere with [ * ]. The scope of this
[ * ] is quite broad, providing [ * ] that are active at the level of [ * ], and
covers a general class of [ * ] which have been developed by [ * ]. Essentially,
the methodology involves combining a [ * ] which recognizes the [ * ], and
capturing the resulting complex with an [ * ]. Unbound transcription factor is
[ * ] is detected. Compounds that [ * ] are detected by observation of [ * ].
The invention includes [ * ] of this methodology. As appropriate, this
methodology may be utilized for a biochemical assay(s) to detect [ * ].
[ * ] = 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 logic that permits the [ * ] able to
commercialize [ * ] resulting from the collaboration with Tularik in the JT
Territory. Given confidentiality restrictions, we are unable to provide you
with a copy of the Knoll Agreement.
The structure of the [ * ] is comparable to [ * ] in that the [ * ] the [ * ].
In both instances, the License Agreements contain [ * ]. Moreover, both [ * ]
required to [ * ] prior to the [ * ].
However, under the [ * ] is not required to [ * ] agreement to [ * ] that does
not require [ * ]. By contrast, the [ * ] requires that [ * ] a [ * ] agreement
prior to the [ * ] studies on [ * ] of whether [ * ] necessary to [ * ]. The
consequences of [ * ] to the [ * ]. In addition to a [ * ], [ * ] the [ * ]
surrounding the [ * ] have been [ * ]. Accordingly, even if [ * ] to [ * ]
without [ * ] (with its concomitant [ * ]), [ * ] would automatically [ * ] such
[ * ].
Given the foregoing [ * ], we believe that [ * ] 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.
We can confirm that the [ * ] requires the [ * ] studies by [ * ].
Additionally, we can confirm that [ * ] contains [ * ] provision. [ * ].
With respect to your fourth paragraph, we accept your [ * ]. However, this
acceptance is conditioned upon [ * ] until the [ * ]. While we were willing to
defer [ * ] until we reached [ * ] with the [ * ], we are unwilling to [ * ] to
the [ * ].
We can confirm that [ * ] arising out of [ * ] will be eligible for [ * ]. The
[ * ] of such [ * ] is provided in Section __[ * ].
With regard to the [ * ], we have previously considered removing references to
such agreement in both the [ * ]. We decided to [ * ] in [ * ] on the theory
that, while it [ * ] that the [ * ], there is always the possibility that [ * ].
Given this possibility, it will be easier to [ * ] in [ * ] than to [ * ] to
[ * ] in the [ * ].
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.
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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.
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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.
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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) twelve (12) years 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
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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.
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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.
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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.
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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.
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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, unless JT is damaged as a
proximate result of a material breach by Tularik of its representations or
waranties set forth in Article 7, then 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.
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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.
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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 prime rate as reported by the Bank of America, San
Francisco, on the date such payment is due, plus an additional two percent (2%)
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.
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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 hold Tularik or any such Affiliate or licensee, as applicable, free, clear
and harmless from any and all costs and expenses of such litigation, including
reasonable attorneys' fees, except to the extent attributable to the negligence
of Tularik. JT shall have the right to control the conduct and settlement of
any such litigation; provided, however, that JT shall not enter into any
settlement of such claim, suit, or proceeding that admits or concedes that any
aspect of the Tularik Technology or Joint Technology is invalid or unenforceable
without the prior written consent of Tularik.
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 hold JT
free, clear and harmless from any and all costs and expenses of such litigation,
including reasonable attorneys' fees, except to the extent attributable to the
negligence of JT.
5.5 Indemnity. JT shall indemnify, defend and hold harmless Tularik from
any and all damages, costs or expenses arising out of any: (a) Third Party claim
of patent infringement relating to the JT Targets or JT Assays; or (b) recalls,
warranty claims or product liability claims (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 the negligence, recklessness or
intentional misconduct of Tularik.
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 five
(5) 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: Dr. S. Manabe
Manager, International Development Department
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: Mr. T. Yoneyama
Vice President, Pharmaceutical Business Development Dept.
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 held in Tokyo, Japan if initiated by
Tularik, and in San Francisco, California, if initiated by JT, unless otherwise
mutually agreed. 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 costs, losses, claims, liabilities, fines,
-------
penalties, damages and expenses, court costs, and reasonable fees and
disbursements of counsel, consultants and expert witnesses 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 Canada, France, Germany, Italy, Japan, Spain,
---------------
United Kingdom and the United States.
[ * ]=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: (1) synthetic chemical processes for the
production of [ * ] the active pharmaceutical ingredient in the Product, and
intermediates in the preparation of the Product, including the synthetic
methods and development reports generated by or for [ * ] but excluding the
synthetic methods and development reports generated by or for [ * ] (2) the in-
process analytical controls for production of each of: (a) the active
pharmaceutical ingredient in the Product; and (b) the Product; (3) the process,
formulation and development reports generated for the preparation of the
Product; (4) the analytical methods and validation for the quality control
release of each of: (a) the active pharmaceutical ingredient in the Product; and
(b) the Product; and (5) the stability protocols, stability indicating methods
and stability data for each of: (a) the active pharmaceutical ingredient in the
Product; and (b) the Product.
"Net Sales" shall mean, with respect to the Product, the gross amount
---------
billed or invoiced by Tularik, its Affiliates, and sublicensees to unrelated
third parties (excluding any sublicensee) for the Products, less
(a) credits or allowances, if any, given or made on account of
rejection or return of delivered Products;
(b) trade and quantity discounts actually allowed and taken in such
amounts as are customary in the trade; and
(c) duties, sales taxes, and excise taxes and transportation charges
to third party carriers actually paid by or on behalf of the party making the
sale.
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, A/(A+B)
where A is the average sale price of the Product when sold separately in
finished form and B is the average sale price of the other product(s) or system
sold separately in finished form or where A+B is the average sales price of the
product(s) and the delivery system together. In the event that such average sale
price cannot be determined for both the Product and such other product(s) or
system in combination, Net Sales for purposes of determining royalty payments
shall be calculated by multiplying the Net Sales of the combination products by
the fraction C/(C+D) where C is the Tularik's cost of goods of the Product and D
is Tularik's cost of goods for the other product(s) or system, 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 commercially reasonable efforts to develop and
---------
obtain Regulatory Approval in the Territory, consistent with accepted business
practices and legal requirements, and comparable to efforts in the
pharmaceutical industry applicable to development of compounds at an equivalent
stage of development and similar market potential.
"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 the longer of (i) ten (10) years from the date
of first sale of the Product in such country, or (ii) the expiration of the
last-to-expire Licensed Patent listed in Exhibit A in such country that claims
such Product.
"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 (2) years 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 an independent certified accountant, 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. The independent certified account 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 Lilly and/or Princeton, as appropriate;
however, in the event such audit reveals that the Royalty Payments to Lilly
constitute an underpayment of five percent (5%) or more from that revealed by
the audit to be actually owed, the cost of the audit shall be borne by Tularik.
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 Dr. Jackie Walling, a former
---------------
employee of Lilly employed by Tularik as of the Effective Date, 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 State of New York 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 act of God, fire, casualty, flood, war, earthquake, strike, failure of
public utilities, any act, exercise, assertion or requirement of governmental
authority, accident, epidemic, destruction of facilities, or such other similar
occurrences beyond the control of the party affected.
[ * ]=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 10.16
EXHIBIT B [*]
[*]
1. Lilly IND [*]
2. Annual Reports [*]
3. Correspondence [*]
4. [*]
5. Existing Communications [*]
6. SAE reports [*]
- [*] SAE reports from [*]
- [*]
7. Investigator's files [*]
- [*]
- [*]
8. Existing [*] Reports
9. [*] reports
- [*]
- [*]
10. Clinical investigator brochure
11. [*] systems data
- [*]
12. CRFs [*]
- [*]
- [*]
- [*]
13. Copies of [*] contract for [*] study
[*]
[*]
1. Copies of manufacturing [*] for [*]
2. Copies of manufacturing [*] for [*]
3. CT File Folder Transfer Form [*]
4. Bulk CT Material Manufacturing Review Form [*]
5. Lot history [*]
<PAGE>
6. Batch record for API
7. Certificate of Analysis for API
8. QA release documents for API [*]
9. Analytical Methods for API [*]
10. [*] stability information [*]
11. [*] summaries
12. Existing process hazard data
13. Certificate of Analysis [*]
Lometrexol
[*]
Screen prints of [*] pages [*]
Project Investigator Patient Visits
------- ------------ ------- ------
[*] [*] [*] [*]
Data printed and binder prepared by [*].
<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, nor 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 solely by PRINCETON.
11.2 In the event LILLY shall bring to the attention of PRINCETON any
infringement of any patent covering Licensed Products and PRINCETON shall not,
within six months
(i) secure cessation of the infringement, or
(ii) enter suit against the infringer, LILLY, 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, PRINCETON will join as party plaintiff
in such suit. All expenses in such suits shall be borne entirely by LILLY and
LILLY will pay to PRINCETON a royalty of [*] on any excess of recoveries over
expenses of such suit.
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 earliest of (i) termination or cancellation as herein
provided; (ii) failure by
<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 October 25, 1999,
in Amendment No. 4 to the Registration Statement (Form S-1, No. 333-89177) 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
December 9, 1999
