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Sample Business Contracts

Preliminary Research, Development and Marketing Agreement - Tularik Inc. and Japan Tobacco Inc.

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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.
<PAGE>

Promotion Expenses" shall include, without limitation, the following expenses
incurred by a Party to the extent allocable to the co-promotion of Products in
all countries in the Co-Promotion Territory, calculated in accordance with U.S.
Generally Accepted Accounting Practices, consistently applied ("GAAP"): [ * ],
all as defined in Appendix D.

          b.   Co-Promotion Profits and Losses.  In the Co-Promotion
Alternative, profits and losses shall be determined as follows.  If Net Sales
during any calendar quarter exceed Co-Promotion Expenses during such quarter,
such excess shall be "Co-Promotion Profit."  If Net Sales during any calendar
quarter does not exceed Co-Promotion Expenses during such quarter, such excess
shall be "Co-Promotion Loss."  Subject to adjustment pursuant to Section 10(e),
[ * ] Party's "Share of Co-Promotion Profit" shall equal [ * ].

          c.   Payment and Reporting. In the Co-Promotion Alternative, payments
and reporting shall be made as follows. Within thirty (30) days after the close
of [ * ] in which Products are sold in the Co-Promotion Territory, or earlier if
possible, during the Term (i.e., [ * ]), Tularik shall furnish to JT a statement
containing the Net Sales achieved, and the Co-Promotion Expenses incurred, by it
in such calendar quarter for each country in the Co-Promotion Territory.  Within
[ * ] after the close of [ * ] in which Products are sold, or earlier if
possible, during the Term (i.e., [ * ], JT shall furnish to Tularik a statement
(the "P&L Statement") setting forth for each country in the Co-Promotion
Territory, Net Sales of each Product, [ * ] (as defined in Section 6(l)), Co-
Promotion Expenses and all data on which the determination of each Party's Share
of Co-Promotion Profit or Share of Co-Promotion Loss was calculated.  If either
Party owes an amount to the other Party pursuant to Section 6(a) or 6(b), it
shall make such payment within [ * ] after receipt of the P&L Statement, but in
no event shall such payment be due earlier than [ * ] after the end of the
relevant quarter.  If the Term ends during an accounting quarter, the amounts
due hereunder shall be calculated for such shortened calendar quarter.

          d.   Promotion Expenses in the Exclusive Territory. "Promotion
Expenses" shall include, without limitation, the following expenses incurred by
a Party to the extent allocable to promotion of the Product in all countries
within such Party's Exclusive Territory in accordance with GAAP: [ * ], as
defined in Appendix D.

          e.   Royalty Rate.  At least [ * ] prior to the commencement of sales
of Product by a Party in any country within such Party's  Exclusive Territory,


[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                      23.
<PAGE>

such Party ("Marketing Party") shall provide the other Party ("Non-Marketing
Party") with its good faith estimates ("Estimates") of [ * ] expected in all
countries within the Marketing Party's Exclusive Territory during the remaining
portion of the fiscal year in which sales of such Product are commenced, on a
quarterly basis.  In addition, the Marketing Party shall at the same time
provide the Royalty Rate (as defined in Section 6(f)) calculated pursuant to
Section 6(f) using the Estimates.  The Marketing Party shall also provide
supporting information appended to the Estimates, clearly setting forth the
assumptions made and calculations used in deriving the Royalty Rate (the
"Supporting Calculations"). At least [ * ] prior to the beginning of each
[ * ], the Marketing Party shall provide the Non-Marketing Party with its
Estimates [ * ], together with the Supporting Calculations.

          f.   Calculation of Royalty Rate.  The "Royalty Rate" shall be equal
to [ * ]; provided, however, that the Royalty Rate shall be equal to [ * ]
("Pre-Tax Loss").

          g.   Meetings to Discuss Estimates. The Non-Marketing Party may call a
meeting of the Parties to review and discuss in good faith the Estimates and the
Supporting Calculations (including the resulting Royalty Rate). Such meeting
shall be held at a mutually agreeable time and place not more than [ * ] after
notice is given by the Non-Marketing Party. In the event that the Non-Marketing
Party disagrees with the Estimates, the attending representatives of both
Parties will enter into good faith discussions to resolve the disagreement. In
the event that the attending representatives are unable to reach an agreement,
then the issue shall be referred to the MC for unanimous resolution.

          h.   Royalty Payments.  Within [ * ] of the end of each fiscal quarter
following the commencement of sales of a Product in the Marketing Party's
Exclusive Territory, the Marketing Party shall pay a royalty to the Non-
Marketing Party equal to [ * ] during such quarter (the "Royalty Payment").

          i.   Audited Report of Actual Net Sales, Cost of Goods and Promotion
Expenses.  Within [ * ] following the [ * ], or earlier if possible, the
Marketing Party shall provide the Non-Marketing Party with an audited report of
actual Net Sales and Cost of Goods in all countries within the Marketing Party's
Exclusive Territory and all Promotion Expenses in all such countries ("Actual
Results").

          j.   Royalty Adjustment.  In the event that the Actual Results include
a Pre-Tax Loss in the year of commencement of sales of a Product or in


[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                      24.
<PAGE>

any subsequent fiscal year, [ * ] of such loss shall be deducted from future
Royalty Payments otherwise owed by the Marketing Party to the Non-Marketing
Party pursuant to Section 6(f), on a Product-by-Product basis, until fully
liquidated.

          k.     Records. JT and Tularik each shall keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
such Party of all Products and Independent Products in the Territory in
sufficient detail to permit accurate determination of all figures necessary for
verification of royalties, profits, milestone payments and other compensation
required to be paid hereunder. JT and Tularik shall maintain such records for a
period of 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.