Preliminary Research, Development and Marketing Agreement - Tularik Inc. and Japan Tobacco Inc.
September 8, 1998
Mr. Masakazu Kakei
Executive Director and Member of Board
Japan Tobacco Inc.
JT Building, 2-1 Toranomon, 2-chome
Minato-ku, Tokyo 105-8422, Japan
Re: Preliminary Research, Development and Marketing Agreement between Tularik
Inc. ("Tularik") and Japan Tobacco Inc. ("JT") (individually, a "Party"
and, collectively, "Parties").
Dear Mr. Kakei:
This Preliminary Research, Development and Marketing Agreement ("Agreement")
sets forth the Parties' preliminary agreement on terms and conditions under
which Tularik and JT will participate in a collaborative program ("Program") to
research, discover, develop, manufacture and market products that agonize or
antagonize Orphan Nuclear Receptors for the treatment of disease in humans
("Field"). Subject to the fourth sentence of this paragraph, "Orphan Nuclear
Receptors" shall mean: (i) [ * ], (ii) any protein containing a [ * ] domain of
[ * ] amino acid residues [ * ] of which are [ * ] that is further characterized
by [ * ] of the [ * ] type and to the [ * ] of which [ * ] domain is a region
with [ * ] to the [ * ] domain of any of the [ * ] set forth in (i) above, for
which a [ * ] shall not have been identified, but excluding [ * ] and the [ * ]
(as defined in [ * ]; and (iii) other [ * ] added to the research component of
the Program ("Research Program") by [ * ] of the RMC; provided, however, that in
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the event the RMC is unable to [ * ] to the Research Program, such [ * ] shall
be excluded from the Research Program, shall not be [ * ] and may be pursued by
the Parties independently of this Agreement. The Parties acknowledge and agree
that Tularik has existing collaborative programs with JT (obesity), Merck & Co.,
Inc. (viral diseases), Sumitomo Pharmaceuticals Co., Ltd.
(hypercholesterolemia), Taisho Pharmaceuticals Co., Ltd. (immune regulation) and
the Roche Bioscience division of Syntex (U.S.A.), Inc. (inflammation)
(collectively, "Third Party Agreements") that may contractually require Tularik
to collaborate [ * ] on orphan nuclear receptors that [ * ] but for [ * ].
Anything in the second sentence of this paragraph to the contrary
notwithstanding, the definition of Orphan Nuclear Receptor shall not include
those orphan nuclear receptors that: are [ * ] within the Third Party Agreements
(but only to the extent [ * ]; 2) become [ * ] within a Third Party Agreement by
[ * ] within the Third Party Agreement (but only to the extent required by the
terms of such Third Party Agreement); 3) are [ * ] that are [ * ] a Third Party
Agreement (irrespective of whether the [ * ] of such [ * ] within such [ * ] is
known as of the Agreement Date) (but only to the extent required by the terms of
such Third Party Agreements); or 4) are [ * ] as [ * ] in a Third Party
Agreement (but only to the extent required by the terms of such Third Party
Agreements); provided, however, that Tularik shall not [ * ] such Third Party
Agreements to be [ * ] in a way (including [ * ] contained in the Third Party
Agreements) that [ * ]; provided further that Tularik shall within [ * ] return
any [ * ] following [ * ] in the event that such [ * ] were [ * ] on a Product
that is [ * ] to [ * ] for which Tularik [ * ] pursuant to a [ * ] and for which
JT is required to [ * ]. In the event that a Product is [ * ] determined to [ *
] for which Tularik [ * ] pursuant to a [ * ] and for which JT is required to [
* ], Tularik shall [ * ] to JT an [ * ] between [ * ] in good faith that [ * ]
(as defined in Section [ * ] previously [ * ]. All collaborative programs
entered into between Tularik and Third Parties after the Execution Date shall [
* ]. The Parties intend to express their agreement more fully pursuant to a
definitive agreement ("Collaboration Agreement"). The Parties shall use their
respective commercially reasonable efforts to execute the Collaboration
Agreement [ * ] ("Execution Date").
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1. Committees
a. EC. The goals and progress of the Program shall be the ultimate
responsibility of an Executive Committee ("EC") comprised of the Chief Executive
Officer of Tularik and a senior officer of JT's pharmaceutical business to be
appointed within 10 days after the date on which the Parties sign this Agreement
(the "Agreement Date"). A Party may replace its designee to the EC by written
notice to the other Party. Except as provided herein, all decisions of the EC
shall be unanimous. The EC shall resolve problems and settle disagreements that
are unresolved by the RMC, the JDC or the MC. The EC shall meet as necessary to
resolve disagreements pursuant to this Agreement
b. Research Management Committee. The goals and progress of the
Research Program shall be determined and monitored by a Research Management
Committee ("RMC"), which shall be composed of three members from each of Tularik
and JT, the Chairperson of which shall be named by Tularik. A Party may replace
any designee to the RMC by written notice to the other Party. The RMC shall meet
at least twice annually at a time and place it so designates. The RMC will
periodically review the Research Program and the Parties' progress thereunder,
to the extent set forth in the Research Plan, including all screening results
and new developments regarding the Field, and propose changes to the Research
Plan based upon the results of prior work and new developments in the Field. The
RMC will select the Collaboration Lead Compounds by a unanimous vote pursuant to
Section 3(b). All data and information obtained by either Party pursuant to the
Research Program will be provided to the RMC. The RMC will delegate
responsibility for the filing and prosecution of Program Patents arising from
the Research Program on inventions jointly discovered in the course of the
Research Program Term. The RMC will be responsible for coordinating all aspects
of all activities undertaken to identify and develop a Lead Compound that are
necessary or desirable to determine whether such Lead Compound may be suitable
for designation as a Collaboration Lead Compound pursuant to Section 3(b)(i). In
addition, the RMC will be responsible for coordinating all aspects of all
activities (including, but not limited to: [ * ] that will be undertaken with
respect to a Collaboration Lead Compound that are necessary or desirable to
enable the filing of an IND on Products based upon or incorporating such
Collaboration Lead Compound, including the preparation and filing of an IND
(collectively, "Pre-Clinical Development"). All decisions of the RMC shall be
unanimous.
c. Joint Development Committee. Within thirty (30) days of the date
a Collaboration Lead Compound is designated by the RMC, the Parties shall each
appoint three representatives to a Joint Development Committee
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
2.
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("JDC"). A Party may replace any designee to the JDC by written notice to the
other Party. Such representatives will include individuals with expertise and
responsibilities in the areas of pre-clinical development, clinical development
or regulatory affairs. The JDC will be responsible for coordinating all aspects
of the Development of each Product through the filing of an NDA or equivalent by
unanimous decisions. "Development" shall mean the development of any Product
occurring from and after the filing of an IND, through and including approval of
an NDA and any other governmental approvals required for the commercialization
of such Product in a country.
d. Marketing Committee. Upon recommendation of the JDC in
anticipation of the first commercial launch of one or more Products, but in any
event no later than [ * ] for any Product, the Parties shall each appoint three
representatives to a Marketing Committee ("MC"). A Party may replace any
designee to the MC by written notice to the other Party. Such representatives
will include individuals with expertise and responsibilities in the areas of
sales, marketing, manufacturing or regulatory affairs. The MC will develop a
marketing plan for each Product in the Co-Promotion Territory, shall oversee
quality control of the Product and shall oversee operational aspects of
marketing and sales in the Co-Promotion Territory following launch of each such
Product, in all cases by unanimous decisions. "Tularik Territory" shall mean the
countries, territories and possessions of the United States of America and
Canada. "JT Territory" shall mean Japan and Korea and their territories and
possessions. "Exclusive Territories" shall mean the Tularik Territory and the JT
Territory. "Co-Promotion Territory" shall mean all of the countries and
territories of the world other than the countries and territories within the
Exclusive Territories. "Territory" shall mean the Exclusive Territories and the
Co-Promotion Territory.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
3.
<PAGE>
e. Dispute Resolution. Any disputes or disagreements arising in the
RMC, JDC or MC will be referred to the EC if the RMC, JDC or MC, as the case may
be, is unable to resolve such dispute or disagreement [ * ] after submission of
an issue to such committee. In addition, any other disputes or disagreements
between the Parties arising hereunder will first be referred to the EC. If such
dispute is not resolved within [ * ] following submission of such dispute to the
EC and such dispute relates to an alleged breach of this Agreement, then either
Party may propose to refer such dispute to arbitration, and thereafter such
dispute shall be resolved pursuant to Section 19. In the event such dispute is
not resolved within [ * ] following submission of such dispute to the EC and
such dispute does not relate to an alleged breach of this Agreement, such
dispute shall be referred to a Third Party mediator with significant experience
in the pharmaceutical industry acceptable to both parties for resolution. The
costs and expenses of such Third Party mediator shall be shared equally by the
Parties. In the event such dispute is not resolved within [ * ] following
submission of such dispute to the Third Party mediator, then either Party may
propose to refer such dispute to arbitration, and thereafter such dispute shall
be resolved pursuant to Section 19.
2. Research Program
a. Research Program. The Research Program shall be conducted in the
Field pursuant to a detailed Research Plan as set forth in Appendix A ("Research
Plan"). The Parties shall commence the Research Program promptly upon the
Agreement Date.
b. Basic Research. The Parties will jointly undertake, under the
direction of the RMC, basic research towards the objectives of the Research
Program. During the Research Program Term (as defined in Section 2(g)), JT shall
provide the research payments set forth in Section 10(a) to support the [ * ].
The actual [ * ].
c. Screening. Tularik shall develop and perform biochemical and
cell-based assays ("Tularik Assays") to determine (i) [ * ] ("Lead Compounds").
[ * ]. Each Party will provide its proprietary chemical and natural product
libraries to Tularik for screening as directed by the RMC; provided, however,
that a Party shall not be required to provide a compound for screening that [ *
]. Unless otherwise directed by the RMC and except as provided in Section 2(e),
the activities under Sections 2(b) and 2(c) shall be the responsibility [ * ] of
Tularik until such time as [ * ] pursuant to this Section 2(c). If a compound is
designated as a Lead Compound [ * ], such compound shall be removed from the
screening library from which such Lead Compound originated until such time as
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
4.
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such Development of such Lead Compound (or Collaboration Lead Compounds or
Products resulting therefrom) shall be terminated by the Parties.
d. Research License. Each Party hereby grants to the other Party a
non-exclusive license to practice (i) inventions claimed in or covered by
patents and patent applications owned or controlled by such Party relating to
the discovery and commercialization of Independent Lead Compounds, Independent
Products, Lead Compounds, Collaboration Lead Compounds or Products made or
discovered during the Research Program Term ("Program Patents"), (ii) other
know-how, information and technology owned or controlled by the other Party and
developed during Research Program Term ("Program Know-How"), (iii) patents and
patent applications owned or controlled by such Party to the extent applicable
to the Field existing as of the Agreement Date (other than Program Patents)
("Patent Rights") and (iv) know-how, information and technology existing as of
the Agreement Date (other than Program Know-How) owned or controlled by such
Party to the extent applicable to the Field ("Know-How") solely for the purpose
of conducting the Research Program. A brief general description of Tularik's
Patent Rights and Know-How is attached as Appendix B. A brief general
description of JT's Patent Rights and Know-How is attached as Appendix C.
Tularik and JT shall provide numbers of all relevant patents and patent
applications within their respective Patent Rights following execution of this
Agreement.
e. Research Chemists. The Parties recognize that the prompt
allocation of appropriate medicinal chemistry resources to optimize Lead
Compounds will confer a competitive advantage upon the Research Program.
Accordingly, the Parties agree that the RMC, by unanimous decision, shall be
responsible for determining: (i) [ * ]. Each of JT and Tularik shall be
responsible for dedicating to the Research Program [ * ]; provided, however,
that the RMC may decide to [ * ]. In the event that either JT or Tularik is(
unable to [ * ]; provided, however, that the Receiving Party shall, upon written
request by the Paying Party, provide documentation to demonstrate that the [ *
]. In the event that the Receiving Party shall be [ * ], the Paying Party shall
be required to pay the Receiving Party [ * ]. The Parties understand and agree
that: [ * ]. In the event that the RMC is unable to unanimously agree on [ *
], the matter shall be referred to the EC for unanimous resolution. In the
event that the EC is unable to unanimously agree on [ * ], a Party will have the
right to proceed independently to develop such compound as an Independent Lead
Compound under Section 3(m) and to develop Independent Products incorporating or
based on such Collaboration Lead Compound.
f. Exchange of Pre-Clinical Data. JT and Tularik will exchange pre-
clinical data generated during the Research Program for [ * ]. As provided in
Sections 4(a) and 4(b), the Parties may also make such data available
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
5.
<PAGE>
to any permitted sublicensees in the Field in a country or countries in the
Territory; provided, however, such data shall not be made available to such
sublicensees until a sublicensee has executed a standard confidentiality
agreement covering disclosure and use of such data.
g. Research Program Term. The Research Program shall be conducted
during the period of five years commencing as of the Agreement Date ("Research
Program Term"). Upon not later than seventy-five (75) days' prior written notice
JT may, in its sole judgment, terminate the Research Program at the end of the
third (3/rd/) year and fourth (4/th/) year of the Research Program. The RMC may
terminate the Research Program any time during the Research Program Term if it
unanimously determines the Research Program is no longer scientifically useful
or that all potential Products would not be commercially viable. In case of such
an early termination by JT or the RMC, JT shall be exempt from any payment(s)
under Section 10(a) that would have become due and payable after the effective
date of such early termination. Following any termination of the Research
Program (i) that occurs simultaneously with the termination of this Agreement in
accordance with Section 13 (i.e., no compound or Lead Compound has been
designated previously a Collaboration Lead Compound in accordance with Section
3(b) and no Independent Lead Compound is being developed in accordance with
Section 3(m)) or (ii) that is followed at some future date by the termination by
JT of Development or co-promotion of any Collaboration Lead Compound and/or
Product pursuant to Sections 3(l) or 5(c), respectively, or development of an
Independent Lead Compound in accordance with Section 3(m) (A) any licenses
granted by Tularik to JT will terminate, (B) JT will grant to Tularik an
exclusive, sublicensable, worldwide license, to make, use and sell compounds,
Collaboration Lead Compounds or Products under JT's interest in Program Patents
and Program Know-How and (C) under the terms and conditions to be separately
agreed, JT will also grant to Tularik a nonexclusive, sublicensable, worldwide
license under any JT Patent Rights and Know-How to the extent necessary to
practice the license granted under the Program Patents and Program Know-How in
(B) (including, with respect to compounds, a limited number of JT's library
compounds approved by JT); provided, however, that in the event the Research
Program terminates but the Agreement has not terminated with respect to
designated Collaboration Lead Compounds, Independent Lead Compounds and/or
Products as provided in Section 2(g)(ii), Sections 2(g)(A), (B) and (C) shall
apply only to those compounds, Collaboration Lead Compounds, Independent Lead
Compounds and Products for which Development or co-promotion shall have been
terminated and/or to those compounds or Lead Compounds that have not been
designated previously a Collaboration Lead Compound in accordance with Section
3(b) or an Independent Lead Compound in accordance with Section 3(m); provided
further that in the event that JT elects to pursue a Discontinued Compound or a
Non-Proposed Compound on or before the first anniversary of the expiration or
termination of the Research Program Term pursuant to Section 3(b)(iii) or
3(b)(iv), respectively, Sections 2(g)(A), (B) and (C) shall not apply to such
Discontinued Compound or Non-Proposed Compound until such time as JT shall have
terminated the Development or co-promotion of such Discontinued Compound or Non-
Proposed Compound. Tularik will then be free to pursue clinical development and
registration of such compounds, Lead Compounds and/or Products without
obligation to JT except as provided in Section 4(f) or Section 5(c), as
appropriate.
h. Exclusive Collaboration. Except as provided below, the Parties
shall work exclusively with each other in the Field during the Research Program
Term. The research and development program being conducted by JT as of the
Agreement Date to discover and develop compounds having activity against orphan
nuclear receptors (the "JT Program") shall be included as part of the Research
Program; provided, however, that JT shall not be required to contribute (i)
compounds that [ * ] (the orphan nuclear receptors set forth in (i) and (ii)
above, collectively, "Excluded Orphan Nuclear Receptors"). During the Research
Program Term, neither Party shall discuss the terms of, or enter into, an
agreement with any Third Party relating to research, development or
commercialization activities of products in the Field without the express prior
unanimous written consent of the RMC, JDC or MC, respectively, except as
otherwise provided in
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
6.
<PAGE>
this Agreement. During the Term, neither Party will develop or commercialize a
product in the Field other than pursuant to this Agreement.
3. Development Program.
a. General Principles. The Parties agree to use commercially
reasonable efforts to develop Collaboration Lead Compounds for use in the Field,
making use of each Party's special expertise as directed by the RMC with the
intent of obtaining all worldwide approvals or authorizations necessary for the
manufacture, distribution, use or sale of a Product in the Territory
("Regulatory Approval") and bringing Products to the market as soon as
reasonably practicable thereafter.
b. Designation of Collaboration Lead Compound. (i) From time to
time either Party may propose to the RMC one or more Lead Compounds suitable for
Pre-Clinical Development. The RMC will promptly determine whether such Lead
Compound is suitable for Pre-Clinical Development by determining whether such
Lead Compound meets the criteria set forth by the RMC for a particular Orphan
Nuclear Receptor from time to time (the "Pre-Clinical Development Criteria").
(ii) If the RMC determines that such Lead Compound meets the Pre-
Clinical Development Criteria, then within [ * ] of such determination each
Party shall provide to the RMC a written notice as to whether it elects to
participate in and, subject to Section 3(f), commit resources to conduct Pre-
Clinical Development of such Lead Compound as a Collaboration Lead Compound
according to the proposed plan and budget. If the RMC determines that such Lead
Compound does not meet the Pre-Clinical Development Criteria, then within [ * ]
of such determination each Party shall provide to the RMC a written notice as to
whether it elects to designate such Lead Compound as a Collaboration Lead
Compound and participate in and commit resources to conduct Pre-Clinical
Development of such Collaboration Lead Compound notwithstanding that such Lead
Compound does not meet the Pre-Clinical Development Criteria. If each Party
makes an affirmative election with respect to any Lead Compound pursuant to
either the first or second sentence of this Section 3(b)(ii), such Lead Compound
shall be designated a "Collaboration Lead Compound" and, if an IND or equivalent
is filed thereon, a "Product." If one Party makes an affirmative election and
the other Party makes a negative election with respect to any Lead Compound
being designated a Collaboration Lead Compound, the Party making an affirmative
election will have the right to proceed independently to develop such
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
7.
<PAGE>
compound as an Independent Lead Compound or Independent Product under Section
3(m).
(iii) If neither Party makes an affirmative election with respect to
any Lead Compound being designated a Collaboration Lead Compound under Section
3(b)(i), such Lead Compound shall be neither a Collaboration Lead Compound nor a
compound that may be developed under Section 3(m), and development of such non-
elected Lead Compound (a "Discontinued Compound") may be subsequently initiated
by a Party by notifying the other Party of its interest in initiating
Development of such Discontinued Compound at any time on or before [ * ] of the
date of termination or expiration of the Research Program Term. If the other
Party indicates it is not interested in initiating Development of such
Discontinued Compound, the initiating Party may proceed with development of such
Discontinued Compound as an Independent Lead Compound or an Independent Product
and the initiating Party shall be deemed to be the Independent Party, pursuant
to Section 3(m). At any time after [ * ] of the date of termination or
expiration of the Research Program Term, either Party may, upon written notice
to the other Party, proceed with development of a Discontinued Compound as an
Independent Product and such Party shall be deemed to be the Independent Party,
pursuant to Section 3(m).
(iv) If a Lead Compound is not, at any time, presented to the RMC
pursuant to Section 3(b)(i), such Lead Compound shall be neither a Collaboration
Lead Compound nor a compound that may be developed under Section 3(m), and this
Section 3(b)(iv) shall govern any future development of such non-proposed Lead
Compound (a "Non-Proposed Compound"). If at any time on or before [ * ] of the
date of termination or expiration of the Research Program Term, a Party
hereunder (the "Non-Proposed Compound Interested Party") determines to initiate
Pre-Clinical Development of such Non-Proposed Compound, it shall provide written
notice to the other Party of such interest and the reasons therefor. The other
Party will then have [ * ] to indicate whether it also is interested in the
development of such Non-Proposed Compound. If the other Party is so interested,
the Parties will proceed with Pre-Clinical Development or Development of such
Non-Proposed Compound as a Collaboration Lead Compound pursuant to the terms of
this Agreement. If the other Party is not so interested, the Non-Proposed
Compound Interested Party may proceed with development of such Non-Proposed
Compound as an Independent Product and the Non-Proposed Compound Interested
Party shall be deemed to be the Independent Party, pursuant to Section 3(m). At
any time after [ * ] of the date of termination or expiration of the Research
Program Term, either Party may, upon written notice to the other Party, proceed
with development of a Non-Proposed Compound as an Independent
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
8.
<PAGE>
Product and such Party shall be deemed to be the Independent Party, pursuant to
Section 3(m).
c. Pre-Clinical Development. The Parties, under the direction of the
RMC shall conduct Pre-Clinical Development with respect to any designated
Collaboration Lead Compound. The costs of conducting such Pre-Clinical
Development shall be shared by the Parties as set forth in Section 3(f). Under
no circumstances shall either Party conduct studies of any Collaboration Lead
Compound in the Field except as permitted by the RMC.
d. Collaborative Development of Products. The Parties will each
diligently collaborate in the Pre-Clinical Development and Development and use
commercially reasonable efforts to develop and bring Products to the market as
soon as reasonably practicable. The role of each Party in the Development
process will be determined by the JDC, with the Parties intending that each
Party will provide advisory and supporting services with respect to each phase
of the process in which such Party is not actively or primarily involved. [ * ]
shall supply [ * ] for each Product to be promoted or co-promoted by the Parties
in the Territory in the aggregate, as determined by the JDC. A Party's required
Development effort is hereinafter referred to as its ("Required Development
Effort"). The JDC will determine appropriate written standards for measuring
Required Development Efforts and accounting procedures to confirm and document
each Party's performance of its Required Development Effort for any Product
before the Parties commence Development thereof. No clinical trials involving
any Product shall be commenced by or on behalf of either Party without the prior
approval of the JDC. Nothing contained in this Section 3(d) shall be deemed to
preclude either Party from terminating its participation in the collaborative
Development, pursuant to Section 3(l), at such time. Any decision by a Party not
to participate in development pursuant to Section 3(b) or to terminate
participation in the collaborative Development pursuant to Section 3(l) shall
not be deemed a breach of this Agreement.
e. Development Plan and Development Budget. Promptly following the
designation of a Collaboration Lead Compound pursuant to Section 3(b), the JDC
shall initiate preparation of the development plan for the Development (the
"Development Plan") and a budget (the "Development Budget") for proposed
Development Costs (as defined in Section 3(f)). The initial Development Plan
shall set time lines and priorities for the various Development activities
through [ * ] and identify which Party, or whether a Third Party, is to be
responsible for each activity. The budget for each development program shall
include a detailed short-term budget covering all proposed Development Costs of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
9.
<PAGE>
the program expected during the subsequent [ * ] (the "Short-Term Budget
Period") of the Development process. Both Parties recognize that the Development
Plan and the Development Budget represent projections only and will be subject
to frequent changes. Each such Development Plan and Development Budget shall be
updated as deemed appropriate by the JDC, but in no event less frequently than
[ * ], and approved by the JDC not later than thirty (30) days prior to each
[ * ] of each applicable calendar year.
f. Funding of Pre-Clinical Development and Development. Tularik
shall be responsible for [ * ] of the Development Costs and JT shall be
responsible for [ * ] of such Development Costs. "Development Costs" shall mean
all costs and expenses reasonably charged directly to the Pre-Clinical
Development of any Lead Compound, Collaboration Lead Compound or Development of
any Product, as well as [*] of the functions that such Pre-Clinical Development
or Development (as calculated in accordance with GAAP and using the same
allocation methods that the Party incurring such costs uses throughout its
operations, but in all events excluding [ * ], all as specified in the
Development Plan and the Development Budget. Development Costs shall consist of
the costs of [*] dedicated to such activities [*] and [*] but shall exclude the
costs of [*] to the extent such costs are incurred. Such costs shall include,
without limitation: the [*] for the [*] used in such [*] including [*] for
Regulatory Approval, to the extent [*]); (ii) direct costs for [*], including,
but not limited to, [*] studies [*]; (iii) direct charges for materials
(including [*]; (iv) labor and materials costs incurred in connection with [*];
and (v) labor and materials costs for the development of the [*] of such process
in connection with activities provided in Section [*]. In the event the
Development Costs incurred by a Party during any calendar quarter exceed [ * ]
of the Development Costs set forth in the most recently approved Development
Budget for activities to be conducted by such Party during such quarter (the
"Overage Threshold"), then the other Party shall not be responsible for paying [
* ] of any Development Costs in excess of the Overage Threshold incurred by the
Party triggering such overage unless such overage had been approved in advance,
or is subsequently ratified, unanimously by the JDC (in which case each of the
Parties shall be responsible for [ * ] of all such Development Costs). In the
event such overage has not been approved or ratified unanimously by the JDC, the
Party incurring Development Costs exceeding the Overage Threshold in such
quarter shall be responsible for [ * ] of the Development Costs in excess of the
Overage Threshold.
g. Scientific FTE. In preparing the Development Budget and
determining Development Costs, the Parties will use a rate of [ * ] per
Scientific FTE. "Scientific FTE" means the fully-loaded costs, including [ * ],
but excluding [ * ], of employing a full-time scientific/technical person (or,
in the case of less than a full-time dedicated person, the full-time equivalent
scientific/technical person year) dedicated to the Pre-Clinical Development or
Development for a period of one (1) year, [ * ]. Such rate shall be adjusted
annually (utilizing the cost-breakdown and methodology attached hereto as
Appendix E as the basis for such adjustment) and [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
10.
<PAGE>
h. Payment of Development Costs. Each Party shall be responsible for
paying [ * ] Development Costs incurred pursuant to the Development Plan and the
Development Budget as provided in Section 3(f), subject to reimbursement as
provided herein. Within thirty (30) days after each calendar quarter, each Party
shall provide the JDC with detailed information concerning the Development Costs
incurred by such Party during such quarter. Promptly after receipt thereof, the
JDC will determine the amount, if any, which either Party has paid in excess of
the amount to be borne by such Party for such quarter pursuant to Section 3(f)
(an "Overpayment"), and shall so notify the Parties. In the event of an
Overpayment, the other Party shall pay the amount thereof to the Party making
the Overpayment within thirty (30) days after receipt of notice from the JDC
that an Overpayment has occurred.
i. Drug Approval Applications. Consistent with the Development Plan
and Development Budget and as directed by the JDC, the Parties will file
applications for regulatory approval required before commercial sale or use of a
Product as a drug in a country within the Territory ("Drug Approval
Applications") and attempt to obtain regulatory approvals in each country in the
Territory in which the Parties either individually or jointly intend to
commercialize Products. JT will be responsible for filing in its name and shall
own all regulatory submissions relating to Products including, without
limitation, all INDs and NDAs, in each country in the JT Territory, in which
Products will be commercialized. Tularik will be responsible for filing in its
name and shall own all regulatory submissions, including, without limitation,
all INDs and NDAs in each country in the Tularik Territory in which Products
will be commercialized. The JDC will be responsible for designating a Party to
be responsible for filing all regulatory submissions in each country in the Co-
Promotion Territory in which Products will be commercialized. The Party not
responsible for filing regulatory submissions for Products in a country pursuant
to this Agreement shall have a right to cross-reference to all such filings made
by the other Party in any country. The Parties will cooperate in the preparation
of all such regulatory filings and in obtaining Regulatory Approvals under this
Section 3(i).
j. Line Extensions. JT and Tularik may each prepare and submit to
the JDC for consideration plans for development of Product line extensions and
the conduct of clinical trials covering indications other than those for which
Products are being developed or commercialized in the Territory. Any such line
extensions or any additional clinical trials for additional indications will be
subject to the approval and supervision of the JDC as part of the ongoing
Development of such Product.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
11.
<PAGE>
k. Compliance. The Parties will comply with all supranational,
federal, state and/or local laws pertaining to the Development and
commercialization of Products.
l. Termination of Participation in Collaborative Development. On a
Collaboration Lead Compound-by-Collaboration Lead Compound basis, either Party
may elect (upon [ * ] written notice following receipt by the Party
contemplating termination of its participation in the Pre-Clinical Development
of any Collaboration Lead Compound or Development of any Product of Development
Termination Documents) to terminate its participation in, or to not to
participate in, the Pre-Clinical Development of any Collaboration Lead Compound
or Development of any Product. "Development Termination Documents" shall mean
the following documents or reports: [ * ]. After receipt of such notice by the
other Party, the Party providing such notice shall no longer be responsible for
bearing further Development Costs for such Collaboration Lead Compound or
Product as specified herein, in which event the other Party will have the right
to proceed independently to develop such Collaboration Lead Compound or Product
as an Independent Lead Compound or Independent Product, pursuant to Section
3(m). In the event a Party gives notice under this Section 3(l), such non-
Independent Party (i) will remain responsible for its share of Development Costs
for such Collaboration Lead Compound or Product until [ * ] from the date the
other Party receives such notice, and (ii) will make its personnel, relevant
data and other resources available to the Independent Party as necessary to
effect an orderly transition of development responsibilities, with the costs of
such personnel, relevant data and resources to be borne by [ * ]. The Parties
each recognize and agree that a non-Independent Party's termination of
participation in Pre-Clinical Development or Development in accordance with this
Section 3(l) will not be considered a breach of its obligations under this
Agreement. In the event of a non-Independent Party's termination of
participation in Development in accordance with this Section 3(l), such non-
Independent Party shall transfer and assign to the Independent Party all
regulatory submissions and Drug Approval Applications relating to such
Collaboration Lead Compound and/or Products based upon or incorporating such
Collaboration Lead Compound, together with all materials and data related
thereto in its possession.
m. Independent Development. (i) In the event (A) a Party, pursuant
to Sections 2(e), 3(b)(ii), (iii) or (iv) elects not to participate in and
commit resources to conduct Pre-Clinical Development of a Collaboration Lead
Compound or the pre-clinical development of a Discontinued Compound or a Non-
Proposed Compound or (B) any Party unilaterally terminates its participation in
the Pre-Clinical Development or Development of a Collaboration Lead
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
12.
<PAGE>
Compound or Product pursuant to Section 3(l), then the Party that made an
affirmative election to conduct such pre-Clinical Development or Development of
such Compound pursuant to Sections 2(e), 3(b)(ii), (iii) or (iv), or the Party
continuing Development of a Collaboration Lead Compound or Development of a
Product (in either case, the "Independent Party"), shall have the right to
practice the license granted in Section 4(c) and to undertake pre-clinical
development of a Lead Compound or to continue Pre-Clinical Development and
Development of such Collaboration Lead Compound or Product independently as an
"Independent Lead Compound" or "Independent Product", [ * ]. No Party may
utilize the services of its personnel committed to the Research Program pursuant
to Section 2(a) in performance of research or development of an Independent Lead
Compound or Independent Product.
(ii) Until the earlier of the Re-Engagement Expiration Date (as
defined in Section 3(n)) or the date on which the Independent Party receives a
Re-Engagement Notice (as defined in Section 3(n)) for a Product from the non-
Independent Party, the Independent Party will (A) inform the other Party of all
material information developed in its research and development of each
Independent Lead Compound or Independent Product; (B) allow such other Party to
comment on the direction of such research and development; and (C) provide the
other Party a copy of all proposed regulatory submissions relating to such
Independent Lead Compound or Independent Product at least [ * ] prior to
submitting such filing to the FDA or its foreign equivalent.
(iii) In the event either Party elects to proceed as an Independent
Party, subject to Section 3(n), such Independent Party shall be entitled to
develop such Independent Lead Compound and commercialize such Independent
Product at its sole discretion, alone or with a Third Party, with no obligation
to the other Party.
n. Re-engagement Option. Either Party may elect to resume its
participation in the Pre-Clinical Development or Development of an Independent
Lead Compound or Independent Product in all countries in the Territory by so
notifying the other Party in writing (the "Re-engagement Notice"), at any time
prior to the expiration of the [ * ] period commencing upon receipt by such
Party of the final report summarizing the results of [ * ] ("Re-Engagement
Expiration Date") for such Independent Lead Compound or Independent Product
anywhere in the world. In such event, such Independent Lead Compound or
Independent Product shall be immediately designated a Collaboration Lead
Compound or Product for all purposes under this Agreement, including calculating
each Party's responsibility for paying Development Costs, Co-Promotion Expenses
and
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
13.
<PAGE>
Promotion Expenses and receiving the Share of Co-Promotion Profit and
Royalty Payment commencing upon receipt of the Re-engagement Notice. The non-
Independent Party shall pay to the Independent Party [ * ] of the non-
Independent Party's share, based on the allocation set forth in Section 3(f), of
the costs [ * ] of the Independent Lead Compound or Independent Product incurred
by the Independent Party after the date upon which it commenced development or
research of such compound or product as an Independent Lead Compound or
Independent Product and prior to the date of the Re-engagement Notice (the "Re-
Engagement Amount"). The non-Independent Party shall pay the Re-Engagement
Amount in [ * ] beginning on the first day of the calendar quarter following the
date of the election of the non-Independent Party. The Independent Party may
not sublicense intellectual property rights owned or controlled by the
Independent Party that relate to Independent Lead Compound or Independent
Product to any Third Party without the consent of the non-Independent Party
prior to the Re-Engagement Expiration Date for such Independent Lead Compound or
Independent Product. Anything in this Section 3(n) to the contrary
notwithstanding: (i) JT may resume its participation in the Pre-Clinical
Development or Development of an Independent Lead Compound or Independent
Product in the JT Territory (but not the Co-Promotion Territory or the Tularik
Territory) by (a) delivering to Tularik a Re-engagement Notice to that effect
prior to the Re-Engagement Expiration Date; [ * ]; and (ii) Tularik may resume
its participation in the Pre-Clinical Development or Development of an
Independent Lead Compound or Independent Product in the Tularik Territory (but
not the Co-Promotion Territory or the JT Territory) by (a) delivering to JT a
Re-engagement Notice to that effect prior to the Re-Engagement Expiration Date;
[ * ]. In the event a Party resumes participation in the Pre-Clinical
Development or Development of an Independent Lead Compound or Independent
Product in such Party's Exclusive Territory only, such Party shall not receive [
* ].
4. Licenses and Royalties.
a. Grant by Tularik. Subject to the terms and conditions of this
Agreement, Tularik hereby grants and agrees to grant to JT: (i) an exclusive
(except as to Tularik) license (with the right to sublicense as provided in this
Section 4(a)) under the Program Patents, Program Know-How, Patent Rights and
Know-How owned or controlled by Tularik during the Term to the extent necessary
or useful to develop, make, have made, use, import, offer for sale and sell any
Product in the Co-Promotion Territory; and (ii) an exclusive (even as to
Tularik) license (with the right to sublicense as provided in the Section 4(a))
under the Program Patents, Program Know-How, Patent Rights and Know-How owned or
controlled by Tularik to the extent necessary to develop, make, have made, use,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
14.
<PAGE>
import, offer for sale and sell any Product in the JT Territory. JT may not
sublicense any rights granted under this Section 4(a) in the Co-Promotion
Territory to any Third Party without the prior written consent of Tularik, not
to be unreasonably withheld. JT may sublicense any rights granted under this
Section 4(a) in the JT Territory to any Third Party without the prior written
consent of Tularik, with any such sublicenses subject to the payments set forth
in this Agreement. JT shall use reasonable efforts to ensure that any
sublicense negotiated by JT pursuant to this Section 4(a)(ii) shall: (A) [ * ];
and (B) provide that any revenues or other consideration received from such
sublicensee as consideration for the grant of such sublicense in the JT
Territory, [ * ], shall be [ * ] and paid directly to each Party by such
sublicensee.
b. Grant by JT. Subject to the terms and conditions of this
Agreement, JT hereby grants and agrees to grant to Tularik: (i) an exclusive
(except as to JT) license (with the right to sublicense as provided in this
Section 4(b)) under the Program Patents, Program Know-How, Patent Rights and
Know-How owned or controlled by JT during the Term to the extent necessary to
develop, make, have made, use, import, offer for sale and sell any Product in
the Co-Promotion Territory; and (ii) an exclusive (even as to JT) license (with
the right to sublicense as provided in this Section 4(b)) under the Program
Patents, Program Know-How, Patent Rights and Know-How owned or controlled by JT
during the Term to the extent necessary to develop, make, have made, use,
import, offer for sale and sell (with the right to sublicense as provided in
this Section 4(b)) any Product in the Tularik Territory. Tularik may not
sublicense any rights granted under this Section 4(b) to any Third Party in the
Co-Promotion Territory without the prior written consent of JT, not to be
unreasonably withheld. Tularik may sublicense any rights granted under this
Section 4(b) to any Third Party in the Tularik Territory without the prior
written consent of JT, with any such sublicenses subject to the payments set
forth in this Agreement. Tularik shall use reasonable efforts to ensure that
any sublicense negotiated by Tularik pursuant to this Section 4(b)(ii) shall:
(A) [ * ]; and (B) provide that any revenues or other consideration received
from such sublicensee as consideration for the grant of such sublicense in the
Tularik Territory, [ * ], shall be [ * ] and paid directly to each Party by such
sublicensee.
c. Independent Products. Each of JT and Tularik hereby grants to
the other Party an exclusive, royalty-bearing (in accordance with Section 4(f)),
worldwide license (with the right to sublicense after the Re-Engagement
Expiration Date shall have passed without the non-Independent Party having given
a Re-Engagement Notice) under the Program Patents and Program Know-How, and a
non-exclusive, royalty-bearing (in accordance with Section 4(f)), worldwide
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
15.
<PAGE>
license (with the right to sublicense after the Re-Engagement Expiration Date
shall have passed without the non-Independent Party having given a Re-Engagement
Notice) under the Patent Rights and Know-How owned or controlled by the granting
Party to the extent necessary to develop Independent Lead Compounds and to make,
have made, use, import, offer for sale and sell Independent Products
incorporating an Independent Lead Compound in the event such Party is designated
the Independent Party with respect to such Independent Product (or Independent
Lead Compound) pursuant to Section 3(m). Such licenses under the non-
Independent Party's interest in Program Patents and Program Know-How are
exclusive even as to the granting Party. Any such license with respect to an
Independent Product or Independent Lead Compound shall terminate in the event
such Independent Product or Independent Lead Compound becomes a Collaboration
Lead Compound or Product pursuant to the terms of Section 3(n).
d. Third Party Technology. During the Term, if either Party becomes
aware of (i) an opportunity to participate in research with a Third Party that
could advance the objectives of the Research Program; or (ii) an opportunity to
obtain a license or other right owned or controlled by a Third Party relating to
the manufacture, marketing, import, use or sale of a Product ("Third Party
Rights"), it shall so notify the other Party and the RMC will determine whether
to pursue such opportunity in connection with the Research Program. In the
event that the Parties pursue such opportunity and in connection therewith incur
obligations to make payments to a Third Party, such payments shall [ * ].
e. Use Outside the Field. Each Party hereby covenants to the other
that it will not practice the license granted to it pursuant to Section 4 under
the other Party's interest in Patent Rights, Know-How, Program Patents or
Program Know-How, except as explicitly permitted in this Agreement.
f. Royalties Payable by the Independent Party. Except as provided in
Section 5(c), the Independent Party will pay the non-Independent Party, in lieu
of any Share of Co-Promotion Profits and Royalty Payments, a royalty equal to:
(i) [ * ] of Net Sales of Independent Products by the Independent Party, its
affiliates or sublicensees in the event the non-Independent Party terminates
participation in the Pre-Clinical Development of a Collaboration Lead Compound
pursuant to Section 3(l) prior to the submission of an IND on such Independent
Product; (ii) [ * ] of Net Sales of Independent Products by the Independent
Party, its affiliates or sublicensees in the event the non-Independent Party
terminates participation in the Pre-Clinical Development of a Collaboration Lead
Compound pursuant to Section 3(l) upon or following the submission of an IND on
such Independent Product but prior to the end of the first Phase I clinical
trial on such Product; or (iii) [ * ] of Net Sales of Independent Products by
the Independent Party, its affiliates or sublicensees in the event the non-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
16.
<PAGE>
Independent Party terminates participation in the Pre-Clinical Development of a
Collaboration Lead Compound or Development of a Product pursuant to Section 3(l)
following the end of the first Phase 1 clinical trial. Such royalty shall be
payable on a quarterly basis in respect of each country in which sales occur
until the later of expiration of all patents included in the Program Patents and
Patent Rights necessary to make, use, import for sale or sell such Product in
such country, or [ * ] years after first commercial sale of an Independent
Product in such country. "Net Sales" shall mean the gross sales prices of the
Product in finished product form, invoiced by a Party or the Independent Party,
as the case may be, its affiliates and sublicensees from sales to arms'-length
Third Party end users, less, to the extent such amounts are included in the
invoiced sales price, taxes, shipping costs (including freight and insurance)
and duties and other governmental charges paid for and separately identified on
the invoice. Additionally, the following amounts will be subtracted from the
gross invoiced sales price: (i) cash, trade and/or quantity discounts actually
allowed; (ii) amounts repaid or credited by reason of rejection or return of
goods; (iii) volume or formal discount amounts paid or credited to a wholesaler,
purchaser, Third Party payor or other contractee as a result of a contractual
arrangement specific to a Product; (iv) rebates paid or credited to any
governmental agency (or branch thereof) or to any Third Party payor,
administrator or contractee; and (v) discounts mandated by, or granted in
response to, applicable state, provincial or federal law, wholesaler chargebacks
or retroactive price reductions. The Independent Party may offset [ * ] of any
royalties it must pay to Third Parties pursuant to any licenses necessary to
commercialize Products against royalties payable by the Independent Party to the
non-Independent Party; provided, however, that in no event shall the royalties
payable by the Independent Party to the non-Independent Party be reduced to less
than [ * ] of the amounts that would have otherwise been due under the
percentages set forth in this Section 4(f).
Section 5. Promotion of Products.
a. Promotion Rights in the Exclusive Territory. JT shall have the
exclusive responsibility for promoting each Product in the JT Territory.
Tularik shall have the exclusive responsibility for promoting each Product in
the Tularik Territory. All information and materials generated by a Party in
the course of the promotion effort within any country in such Party's Exclusive
Territory or in the Co-Promotion Territory shall be provided to the MC for use
in the promotion effort within the other Party's Exclusive Territory and in the
Co-Promotion Territory.
b. Commercialization in the Exclusive Territories. JT shall oversee
and implement all commercialization activities in the JT Territory during
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
17.
<PAGE>
the Term, based on the principle of maximizing profits from sales of Products.
Tularik shall oversee and implement all commercialization activities in the
Tularik Territory during the Term, based on the principle of maximizing profits
from sales of Products. The MC shall review a Party's commercialization
activities within its Exclusive Territory to provide suggestions for
facilitating the promotion and commercialization of Products on a global basis.
c. Election or Revocation of Co-Promotion Right. In the Co-
Promotion Alternative (as defined in Section 5(d)(ii)), either Party may
terminate early its participation in the co-promotion of a Product in any
country in the Co-Promotion Territory at any time following [ * ] prior written
notice to the other Party. In such case, the other Party may continue promotion
of such Product, as an Independent Product, either alone or with a Third Party,
in such country in the Co-Promotion Territory, effective as of the date of the
terminating Party's notice hereunder. The Parties shall negotiate in good faith
for a period of [ * ] following the receipt of such notice to determine the
appropriate royalty to be paid on Net Sales of such Independent Product in such
country in the Co-Promotion Territory. In the event the Parties are unable to
agree on the appropriate royalty pursuant to the immediately preceding sentence,
the Independent Party with respect to such Independent Product shall pay to the
other Party a royalty on Net Sales of such Independent Product in such country
in the Co-Promotion Territory pursuant to Section 4(f), except that the
applicable royalty shall equal: [ * ] on the portion of aggregate Net Sales of
such Independent Product in such country up to [ * ] on the portion of aggregate
Net Sales of such Independent Product in such country in excess of [ * ]; and [
* ] on the portion of aggregate Net Sales of such Independent Product in such
country in excess of [ * ]. In the event a Party elects to cease participating
in the co-promotion of a Product of such Independent Product in a country in the
Co-Promotion Territory and the Independent Party proceeds to commercialize such
Product as an Independent Product, the non-Independent Party shall (i) transfer
and assign to the Independent Party all regulatory submissions and Drug Approval
Applications in such country relating to such Collaboration Lead Compound and/or
Products based upon or incorporating such Collaboration Lead Compound, together
with all materials and data related thereto in its possession and (ii) transfer
to the Independent Party all other relevant information that will enable such
Independent Party to promote such product as an Independent Product in such
country. A non-Independent Party may not reinitiate its participation in the
co-promotion of a Product in any given country in the Co-Promotion Territory in
which it relinquished such right hereunder.
d. Promotion Rights in the Co-Promotion Territory. (i) The MC shall
oversee and implement all commercialization activities in the Co-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
18.
<PAGE>
Promotion Territory during the Term, based on the principle of maximizing
profits from sales of Products, by unanimous decisions. The MC shall have the
ability to determine whether the objective of maximizing profits from sales of
Products in the Co-Promotion Territory during the Term is best achieved through,
inter alia, [ * ]. In the event the MC determines that the foregoing objective
is best achieved by activities other than as provided in Sections 5(d)(ii), (e),
(f), (g) and (h), the MC shall determine [ * ] the optimal alternative structure
and the duties, responsibilities and economic parameters for the Parties and
Third Parties in such alternative structure. The Parties shall use reasonable
efforts to ensure that any sublicense negotiated by a Party or the Parties
pursuant to Section 4(a)(i) or 4(b)(i) shall: (a) [ * ]; and (b) provide that
any revenues or other consideration received from such sublicensee as
consideration for the grant of such sublicense in the Co-Promotion Territory,
less [ * ], shall be [ * ] and paid directly to each Party by such
sublicensee.
(ii) In the absence of [ * ] by the MC pursuant to Section 5(d)(i) or
in the event of a [ * ] by the MC to retain for the Parties commercialization
rights to a Product in the Co-Promotion Territory (the "Co-Promotion
Alternative"), JT and Tularik shall have the co-exclusive responsibility for
promoting such Product in the Co-Promotion Territory. Tularik and JT shall each
work diligently to perform its respective obligations under the Marketing Plan
and use the same effort such Party puts forth to promote other products of
similar commercial value to co-promote such Product in the Co-Promotion
Territory from initiation of pre-launch activities for such Product in the Co-
Promotion Territory until the expiration of the Term pursuant to the terms and
conditions hereof. The Parties intend that [ * ] shall supply [ * ] of the
total promotional and marketing effort (including details, if determined to be
an appropriate sales activity for a Party by the MC) for each Product being co-
promoted by the Parties in the Co-Promotion Territory, as determined by the MC.
Each Party's required promotional and marketing effort under the Marketing Plan
is hereinafter referred to as its "Required Sales Effort". The MC will
determine appropriate written standards for measuring and accounting procedures
to confirm and document each Party's performance of its Required Sales Effort,
one (1) month after the filing of the NDA for any Product. Nothing contained in
this Section 5(d) shall be deemed to preclude either Party from relinquishing
its right to participate in the co-promotion of Products in the Co-Promotion
Territory pursuant to Section 5(c), at any time. Any failure to provide the
Required Sales Effort shall not be deemed a breach of this Agreement.
e. Marketing Plan and Marketing Budget in the Co-Promotion
Territory. In the Co-Promotion Alternative, no later than one (1)
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
19.
<PAGE>
month after [ * ], the MC shall initiate preparation of a marketing plan
("Marketing Plan") and a marketing budget ("Marketing Budget"). The co-promotion
of a Product in the Co-Promotion Territory will be governed by the Marketing
Plan and Marketing Budget. The Marketing Plan and Marketing Budget will describe
fully, to the extent practicable, the proposed plan for commercialization of the
Product in each country in the Co-Promotion Territory, including overall
marketing strategy, marketing, sales and promotion efforts to be performed by
each Party, market and sales forecasts, pricing and discounting analysis and
estimated launch date, as well as advertising and other promotional materials
to be used in the co-promotion of Products. The Marketing Plan will take into
consideration to be used in the co-promotion of Products. The Marketing Plan
will take into consideration market conditions, regulatory factors and
competition with respect to Products. The Marketing Budget will include all
projected Co-Promotion Expenses for the Product. The initial Marketing Plan and
Marketing Budget shall be prepared by the MC no later than [ * ] the first
filing of an NDA (or its foreign equivalent) for a Product in any country in the
Co-Promotion Territory. Each such Marketing Plan and Marketing Budget shall
thereafter be updated by the MC [ * ].
f. Promotional and Advertising Materials in the Co-Promotion
Territory. In the Co-Promotion Alternative, the Parties shall disseminate in the
Co-Promotion Territory only those promotional and advertising materials that
have been provided or approved for use by the MC, and the cost of producing such
materials shall be a Co-Promotion Expense of the Party incurring such cost. All
such materials shall be consistent with the relevant Marketing Plan and
Marketing Budget approved by the MC and neither Party shall make any claims or
representations in respect of the Products that have not been approved by the
MC. In all written or visual materials related to Products that identify either
of the Parties, the Parties will be presented and described to the medical
communities (including, for example, the physician, pharmacy, governmental,
reimbursement and hospital sectors) as joining in the promotion of the Product
as permitted by applicable law. All such written and visual materials and all
documentary information, promotional material and oral presentations (where
practical) regarding the promotion of the Product will state this arrangement
and will display the JT and Tularik names and logos with equal prominence as
permitted by applicable law and as directed by the MC.
g. Miscellaneous. In the Co-Promotion Alternative, the MC shall by
unanimous decision designate a Party as being primarily responsible in the Co-
Promotion Territory for returns, orders and samples. In addition, the MC shall
by unanimous decision determine the policies and procedures necessary to
implement the foregoing.
Section 6. Determination of Payments.
a. Co-Promotion Expenses. In the Co-Promotion Alternative, Tularik
shall be responsible for paying [ * ] of all Co-Promotion Expenses and JT shall
be responsible for paying [ * ] of all Co-Promotion Expenses. "Co-Promotion
Expenses" shall include, without limitation, the following expenses
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
20.
<PAGE>
incurred by a Party to the extent allocable to the co-promotion of Products in
all countries in the Co-Promotion Territory, calculated in accordance with U.S.
Generally Accepted Accounting Practices, consistently applied ("GAAP"): [ * ],
all as defined in Appendix D.
b. Co-Promotion Profits and Losses. In the Co-Promotion
Alternative, profits and losses shall be determined as follows. If Net Sales
during any calendar quarter exceed Co-Promotion Expenses during such quarter,
such excess shall be "Co-Promotion Profit." If the Net Sales during any calendar
quarter does not exceed Co-Promotion Expenses during such quarter, such excess
shall be "Co-Promotion Loss." Subject to adjustment pursuant to Section 10(e), [
* ].
c. Payment and Reporting. In the Co-Promotion Alternative, payments
and reporting shall be made as follows. Within [ * ] after the close of each
calendar quarter in which Products are sold in the Co-Promotion Territory, or
earlier if possible, during the Term (i.e., [ * ]), Tularik shall furnish to JT
a statement containing the Net Sales achieved, and the Co-Promotion Expenses
incurred, by it in such calendar quarter for each country in the Co-Promotion
Territory. Within [ * ] after the close of each calendar quarter in which
Products are sold, or earlier if possible, during the Term (i.e., [ * ]), JT
shall furnish to Tularik a statement (the "P&L Statement") setting forth for
each country in the Co-Promotion Territory, Net Sales of each Product, Co-
Promotion Expenses and all data on which the determination of each Party's Share
of Co-Promotion Profit or Share of Co-Promotion Loss was calculated. If either
Party owes an amount to the other Party pursuant to Section 6(a) or 6(b), it
shall make such payment within [ * ] after receipt of the P&L Statement, but in
no event shall such payment be due earlier than [ * ] after the end of the
relevant quarter. If the Term ends during an accounting quarter, the amounts
due hereunder shall be calculated for such shortened calendar quarter.
d. Promotion Expenses in the Exclusive Territory. "Promotion
Expenses" shall include, without limitation, the following expenses incurred by
a Party to the extent allocable to promotion of the Product in all countries
within such Party's Exclusive Territory in accordance with GAAP: [ * ], as
defined in Appendix D.
e. Royalty Rate. At least [ * ] prior to the commencement of sales
of Product in any country within a Party's Exclusive Territory, such Party
("Marketing Party") shall provide the other Party ("Non-Marketing Party") with
its good faith estimates ("Estimates") of [ * ] expected in all countries within
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
21.
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the Marketing Party's Exclusive Territory during the remaining portion of the
fiscal year in which sales of such Product are commenced, on a quarterly basis.
In addition, the Marketing Party shall at the same time provide the Royalty Rate
(as defined in Section 6(f)) calculated pursuant to Section 6(f) using the
Estimates. The Marketing Party shall also provide supporting information
appended to the Estimates, clearly setting forth the assumptions made and
calculations used in deriving the Royalty Rate (the "Supporting Calculations").
At least [ * ] prior to the beginning of each [ * ], the Marketing Party shall
provide the Non-Marketing Party with its Estimates for [ * ], together with the
Supporting Calculations.
f. Calculation of Royalty Rate. The "Royalty Rate" shall be equal
to [ * ]; provided, however, that the Royalty Rate shall be equal to [ * ]
("Pre-Tax Loss").
g. Meetings to Discuss Estimates. The Non-Marketing Party may call
a meeting of the Parties to review and discuss in good faith the Estimates and
the Supporting Calculations (including the resulting Royalty Rate). Such
meeting shall be held at a mutually agreeable time and place not more than [ * ]
after notice is given by the Non-Marketing Party. In the event that the Non-
Marketing Party disagrees with the Estimates, the attending representatives of
both Parties will enter into good faith discussions to resolve the disagreement.
In the event that the attending representatives are unable to reach an
agreement, then the issue shall be referred to the MC for unanimous resolution.
h. Royalty Payments. Within [ * ] of the end of each fiscal quarter
following the commencement of sales of a Product in the Marketing Party's
Exclusive Territory, the Marketing Party shall pay a royalty to the Non-
Marketing Party equal to [ * ] during such quarter (the "Royalty Payment").
i. Audited Report of Actual Net Sales, Cost of Goods and Promotion
Expenses. Within [ * ] following [ * ], or earlier if possible, the Marketing
Party shall provide the Non-Marketing Party with an audited report of actual Net
Sales and Cost of Goods in all countries within the Marketing Party's Exclusive
Territory and Promotion Expenses in all such countries ("Actual Results").
j. Royalty Adjustment. In the event that the Actual Results include
a Pre-Tax Loss in the year of commencement of sales of a particular Product or
in any subsequent fiscal year, [ * ] of such loss shall be deducted from future
Royalty Payments otherwise owed by the Marketing Party to the Non-
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
22.
<PAGE>
Marketing Party with respect to such Product pursuant to Section 6(f), until
such loss is fully liquidated.
k. Records. JT and Tularik each shall keep accurate books and
accounts of record in connection with the manufacture, use and/or sale by or for
such Party of all Products and Independent Products in the Territory in
sufficient detail to permit accurate determination of all figures necessary for
verification of royalties, profits, milestone payments and other compensation
required to be paid hereunder. JT and Tularik shall maintain such records for a
period of 3 years after the end of the year in which such records were
generated. At such Party's expense, a Party, through a certified public
accountant reasonably acceptable to the other Party, shall have the right to
access the books and records of the other Party for the sole purpose of
verifying amounts due pursuant to this Agreement. Such access shall be permitted
only upon reasonable prior written notice to the other Party during ordinary
business hours and not more frequently than once during each calendar year.
Section 7. Trademarks. The Parties, through the MC, shall mutually agree
upon the trademark or trademarks (each a "Trademark"). To the extent
commercially reasonable and appropriate, a single Trademark shall be used for
each Product in each country in the Territory. To the extent the MC determines
that the use of a single Trademark is impractical given cultural and other
differences among countries in the Co-Promotion Territory, each Party shall have
the right to designate a different Trademark for use within different countries
within the Territory; provided, however, that in no event shall different
-------- -------
Trademarks be used for the same Product within the same country in the
Territory. Each Party shall have the right to designate a different Trademark
for use within different countries within such Party's Exclusive Territory.
Each Trademark shall be used only in connection with the applicable Product and
shall not be used by either Party on or in connection with any other product.
The MC shall assign responsibility to one or both Parties for searching,
clearing, filing, prosecuting, maintaining and all reasonable steps necessary in
defending each Trademark. The MC shall approve all trade dress, logos, slogans,
designs and copyrights used on and in connection with any Product in the
Territory. During the Term, the MC shall approve all printed materials bearing
each Trademark, including but not limited to business materials, printed
materials, advertising materials, promotional materials and any such other
materials that may reference or incorporate such Trademark. In the event that
any action or proceeding is brought against either or both JT or Tularik, any
alleged infringement of a Third Party's trademark, trade dress or similar
intellectual property rights, each Party shall promptly notify the other and
cooperate in the defense of any such action or proceeding, as applicable. The
MC shall be responsible for the management of such action. In the event
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
23.
<PAGE>
Tularik or JT becomes aware of any actual or threatened violation of any
Trademark in any country in the Territory, that Party shall promptly notify the
other Party and the MC shall promptly discuss how to proceed in connection with
such actual or threatened violation.
Section 8. Supply Of Product.
a. Supply of Product. The JDC shall be responsible for determining
the sources of, and arrangements for, the manufacture and supply of Products
that the JDC believes will result in long-term profit maximization for such
Products. The JDC shall endeavor to [ * ].
b. Specifications for Products. The Parties shall designate one of
the Parties to be responsible for establishing, subject to approval by the MC,
the specifications for bulk and finished Product, and providing any necessary
documentation, certificates of analysis and test results, for the relevant
Product to be manufactured under this Section 8. Copies of all such
specifications and other information and documentation will be provided promptly
to the Parties. In addition, notice of, and results and data from, all FDA (or
its foreign equivalent) audits relating to the manufacture of Product will be
provided to the Parties. The Cost of Goods (including qualification batches for
FDA (or its foreign equivalent) approval) for Products actually used (and not
sold) for all Pre-Clinical Development and Development studies shall be included
in Development Costs.
c. Terms of Manufacture and Supply. The MC shall establish
procedures acceptable to both Parties regarding forecasts of requirements of the
Products.
Section 9. Regulatory Matters.
a. Side Effects and Adverse Events. During the Term, each Party
shall promptly advise the other by telephone, telefax or overnight delivery
service of every serious or unexpected side effect, adverse reaction or injury
that has been brought to that Party's attention and which is alleged to have
been caused by a Product. For each country in the Territory, the Party that has
the responsibility for filing the Drug Approval Application and the IND (or
foreign equivalent) in such country for such Product shall have all rights and
responsibilities to report such side effect, adverse reaction or injury to the
appropriate regulatory authorities as required by applicable law.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
24.
<PAGE>
b. Communication with Regulatory Agencies. If a Party is contacted
by the FDA or any equivalent regulatory agency in any country in the Territory
during the Term pertaining to this Agreement or to a Product, Tularik and JT
shall promptly, but always within [ * ] days, notify and consult with one
another. The Party that has filed the Drug Approval Application in such country
within the Territory or, if no Drug Approval Application has been filed, the
Party which has filed the IND (or foreign equivalent) in such country within the
Territory shall provide an appropriate response to such contact after such
consultation with the other Party.
c. Product Recall. In the event that JT or Tularik determines that
an event, incident or circumstance has occurred that may result in the need for
a recall or other removal of any Product or any lot or lots thereof from the
market in a country within the Territory, it shall promptly advise and consult
with the other Party with respect thereto. Thereafter, on a country-by-country
basis, the owner of the NDA for such Product in a country (or foreign
equivalent) shall, in its sole discretion, have the right to order a recall or
other removal after such consultations and the other Party shall co-operate with
such recall.
10. Financial provisions.
a. Research Payments. In support of Tularik's activities in the
Research Program, JT shall pay Tularik (i) [ * ] and, unless the Research
Program is previously terminated as provided in Section 2(g), [ * ]. Any
payments made by JT to Tularik pursuant to this Section 10(a) shall not affect
in any way the calculation of [ * ].
b. Milestone Payments. JT shall pay to Tularik [ * ] within [ * ]
after the dates upon which JT confirms that Tularik has [ * ]; provided,
however, that [ * ]; provided further that [ * ]. In addition, JT will make the
following payments to Tularik in US Dollars within [ * ] of the occurrence of
each event listed below in [ * ]:
Event Payment
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] [ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
25.
<PAGE>
In the event all of the listed events above are not achieved by a Collaboration
Lead Compound or Product, any listed events not achieved by such Collaboration
Lead Compound or Product shall be available to other Collaboration Lead
Compounds or Products until such time as each of the listed events has been
achieved [ * ].
c. Taxes. The burden of all withholding or similar taxes that may
be imposed by any governmental authority on milestone, royalty and profit share
payment amounts set forth in this Agreement shall be [ * ].
d. Reports. Tularik shall provide JT with a quarterly report
describing Tularik's use of the annual payments received from JT pursuant to
Section 10(a) for research purposes. Such report shall include the following
two categories of expenditures: (i) "Personnel Costs" and (ii) "Other Costs."
e. Loans from JT. JT will make available to Tularik, under and
subject to certain additional terms and conditions as provided in a loan
agreement to be executed by the Parties on the Execution Date ("Loan
Agreement"), an irrevocable loan commitment to finance an aggregate amount of up
to [ * ] (the "Aggregate Commitment"); provided, however, JT shall not be
required to finance any portion of the Aggregate Commitment that has not
previously be disbursed in the event this Agreement terminates pursuant to
Article 13 hereof. The Aggregate Commitment shall be used by Tularik to finance
the portion of Development Costs to be borne by Tularik for [ * ] clinical
trials (or equivalent) pursuant to this Agreement and the agreement to be
executed between Tularik and JT concerning the Tularik obesity program (the
"Obesity Agreement"), commencing with initiation of Phase 2 clinical trials (or
equivalent) (the "Eligible Development Costs"). Such Aggregate Commitment may be
drawn in multiple disbursements in amounts ("Amounts Drawn") and at times
("Funding Dates") requested by Tularik to: pay for those [ * ] that are payable
within the [ * ] as estimated by the [ * ]; and (ii) [ * ] JT for an [ * ] made
by JT and payable by Tularik pursuant to Section [ * ]; provided, however, that
no more than [ * ] of such Aggregate Commitment may be Amounts Drawn to finance
[ * ] Collaboration Lead [ * ] (or equivalent under the Obesity Agreement);
provided further that in no event may there be Amounts Drawn on more than [ * ]
Collaboration Lead [ * ] (or equivalent under the Obesity Agreement). Loans made
by JT to Tularik pursuant to such Loan Agreement for a Collaboration Lead
Compound or resulting Product shall provide for the annual repayment of Amounts
Drawn on such Collaboration Lead Compound or resulting Product, and interest
accrued on such Amounts Drawn, over a [ * ] ("Repayment Dates") commencing on
the first anniversary of the first to occur of: the [ * ] of the Product
resulting from such Collaboration Lead Compound; or (ii) a [ * ] the JDC to
[ * ] such Collaboration Lead Compound or resulting Product [ * ]. Interest on
Amounts Drawn shall accrue from the Funding Dates to the Repayment Dates and
shall equal the sum of the then-prevailing [ * ]: (A) [ * ]; and (B) the [ * ];
divided by (ii) [ * ]. In addition, Tularik's Share of Co-Promotion Profit and
its Royalty Rate with respect to the Tularik Territory for a Product for which
Tularik shall have Amounts Drawn pursuant to the Loan Agreement shall [ * ]. In
addition to the foregoing, during the [ * ] period immediately following the
receipt by the Parties of executed reports covering all aspects of completed
Phase [ * ] clinical trials on a Product, JT and Tularik shall negotiate in good
faith the terms and conditions under which JT may [ * ] the Aggregate
Commitment, and the definition of Eligible Development Costs, to include
Development Costs to be incurred in [ * ].
11. Intellectual Property. Each Party shall remain the sole owner or
licensee, as applicable, of all technology, compounds, discoveries and
inventions owned or controlled by such Party on the Agreement Date and shall
have no rights in or to those owned by the other Party except as specifically
granted herein. All inventions or discoveries made, and materials and
information created, jointly by employees, agents or consultants of both Parties
in the course of
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
26.
<PAGE>
conducting activities pursuant to this Agreement shall be jointly owned, without
regard, in the case of inventions or discoveries relating to Lead Compounds,
Collaboration Lead Compounds and Products, to which Party provided the compound
library from which such invention or discovery was derived. All inventions or
discoveries made, and materials and information created solely by employees,
agents or consultants of one Party in the course of conducting activities
pursuant to this Agreement shall be owned solely by the Party whose employees,
agents or consultants made such invention, without regard, in the case of
inventions or discoveries relating to Lead Compounds, Collaboration Lead
Compounds and Products, to which Party provided the compound library from which
such invention or discovery was derived. Inventorship shall be determined in
accordance with the U.S. patent laws. [ * ].
12. Confidential Information. Each Party agrees that proprietary and
confidential information regarding either Party's technology and intellectual
property, as well as information regarding the Research Program, Lead Compounds,
Collaboration Lead Compounds, Products and other matters material to this
Agreement or to the Collaboration Agreement shall not be disclosed to any Third
Party or used except as permitted hereby during the term hereof and for a period
of five (5) years after its expiration or termination, except to the extent it
can be shown by competent written record that such information is now or
subsequently becomes, without breach of any obligation by the Party receiving
such information hereunder, public knowledge or is lawfully disclosed to or
independently developed by such Party. Any information disclosed to a Scientific
FTE of one Party who is resident with the other Party shall be deemed the
confidential information of the Party with whom such Scientific FTE is in
residence.
13. Term. This Agreement shall expire upon the earlier of the execution
of the Collaboration Agreement or the end the Term. "Term" shall mean the
period from the Agreement Date until the later to occur of (i) the expiration of
all patents on Products; or (ii) [ * ]; provided, however, that [ * ]. Either
Party may terminate this Agreement for material breach by the other Party, if
such breach remains uncured for [ * ] after the breaching Party receives written
notice thereof from the other Party. Except to the extent required by law, the
Parties agree not to disclose the material terms of this Agreement to Third
Parties (other than its affiliates) without the other Party's prior written
consent during its term and after its expiration or termination. In the event
this Agreement expires or terminates and the Collaboration Agreement shall not
have been executed by the Parties, then the provisions of Sections 4, 10, 11 and
12 shall survive such expiration or termination and each Party shall return
promptly any of the other
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
27.
<PAGE>
Party's confidential information and biological or chemical materials provided
to it pursuant to this Agreement.
14. Diligence. Subject to Section 3(c), 3(l) and 3(m), JT and/or Tularik
shall use commercially reasonable efforts to develop the Lead Compounds and
Collaboration Lead Compounds consistent with the efforts such Party expends on
compounds involved in its other research and development programs that have
comparable market potential. Subject to Section 5(c), JT and/or Tularik shall
use commercially reasonable efforts to develop and market Products, consistent
with the efforts it expends on its other products having comparable market
potential. If a Party disagrees on whether the other Party's actions are
commercially reasonable, such disagreement shall be resolved in accordance with
Section 19.
15. Representations and Warranties. Each Party hereby represents and
warrants that such Party has full corporate power and authority under the laws
of the state or country of its incorporation to enter into this Agreement and
carry out the provisions hereunder and that the person executing this Agreement
on each Party's behalf has been duly authorized to do so by all requisite
corporate action.
a. Each Party represents and warrants that, as of the date of this
Agreement, it is not a Party to any agreement, arrangement or understanding with
any Third Party that in any significant way prevents such Party from fulfilling
any of its material obligations under the terms of this Agreement.
b. Each Party covenants that it will not commit any acts or fail to
take any action that would be in material conflict with its obligations under
this Agreement.
c. Each Party represents and warrants to such Party's best knowledge
as of the date of this Agreement: [ * ].
d. Each Party represents and warrants that [ * ].
16. Binding Agreement. Each Party represents this Agreement is a legal
and valid obligation, binding upon it and enforceable in accordance with its
terms. Each Party represents it has not and will not during the term of this
Agreement grant any right to any Third Party that would conflict with the rights
granted to the other Party hereunder.
17. Provisions to be Included. The Collaboration Agreement shall include
the terms specified in this Agreement and other terms customary in the
pharmaceutical industry for agreements governing the research, development and
commercialization of pharmaceutical products including, without limitation,
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
28.
<PAGE>
enforcement of Program Patents, defense against Third Party claims of
infringement, payments, information and reports, indemnification, relationship
of the Parties, assignments, notices, amendments, waiver, counterparts, force
majeure, headings, governing law, language, entire agreement and public
announcements.
18. Severability. If any part of this Agreement is declared invalid by
any legal authority having jurisdiction over either Party, then such declaration
shall not affect the remainder of the Agreement, which shall continue in full
force and effect. The Parties shall revise the invalidated part in a manner
that will render such provision valid and closely approximate the Parties'
original intent.
19. dispute resolution. In the event of any controversy or claim arising
out of, relating to or in connection with any provision of this agreement, the
Parties shall try to settle their differences amicably between themselves by
referring the disputed matter to the committee(s) provided in Article 1. Any
unresolved disputes arising between the Parties arising out of, relating to, in
connection with or in any way connected with this Agreement or any term or
conditions hereof, or performance by either Party of its obligations hereunder,
whether before or after termination or expiration of this Agreement, shall be
finally resolved by binding arbitration, except that any disputes regarding the
validity, scope or enforceability of patents shall be submitted to a court of
competent jurisdiction. The arbitration shall be held in San Francisco,
California according to the rules of the American Arbitration Association
("AAA"). The arbitration will be conducted by a panel of three (3) arbitrators
with significant experience in the pharmaceutical industry appointed in
accordance with applicable AAA rules. Any arbitration herewith shall be
conducted in the English language to the maximum extent possible. Each Party
shall bear its own costs and attorney's and witness' fees. Judgment on the award
so rendered shall be final and may be entered in any court having jurisdiction
thereof.
20. Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that neither Party shall assign any of its rights and
obligations hereunder without the prior written consent of the other Party
except in connection with the merger, consolidation, reorganization or
acquisition of stock or assets affecting substantially all of the assets or
actual voting control of the assigning Party.
21. Governing Law. This Agreement shall be governed by California law,
notwithstanding its conflicts of laws principles.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
29.
<PAGE>
22. Entire Agreement, Amendment. This Agreement sets forth the principal
terms of the arrangement between the Parties hereto and, except as otherwise set
forth herein, supersedes and terminates all prior agreements and understandings
between the Parties. No subsequent alteration, amendment, change or addition to
this Agreement shall be binding upon the Parties unless reduced to writing and
signed by an authorized officer of each Party.
23. Public Announcements. Each Party agrees that, prior to the execution
of the Agreement, except as may be required by law, it shall not disclose the
existence, substance or details of this Agreement without the prior written
consent of the other Party, such consent not to be unreasonably withheld.
Nothing herein shall prevent either Party from disclosing such information as
reasonably necessary to its affiliates; provided, however, each Party shall take
such steps necessary to ensure that such affiliates agree to be bound to the
provisions of this Section 23. In cases in which disclosure may be required by
law, the disclosing Party, prior to such disclosure to the extent practicable,
shall notify the non-disclosing Party of the contents of the proposed
disclosure. Consistent with applicable law, the non-disclosing Party shall have
the right to propose reasonable changes to the disclosure to protect its
interests, provided that it requests such changes promptly after the potential
disclosure is submitted to it. The disclosing Party shall not unreasonably
refuse to include such changes in its disclosure.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
30.
<PAGE>
If this Agreement correctly sets forth your understanding of the agreement
between JT and Tularik, please confirm by signing and returning the duplicate
copy, addressed to my attention.
Tularik Inc.
By: /s/ John P. McLaughlin
-------------------------
Title: President
AGREED:
Japan Tobacco Inc.
By: /s/ Masakazu Kakio
-------------------------
Title: Executive Director
Date: September 8, 1998
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
31.
<PAGE>
APPENDIX A
RESEARCH PLAN
The details of the Research Program described in this Agreement are as follows:
1. The following tasks will be carried out predominantly at Tularik:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
2. The following tasks will be shared by both parties:
[ * ]
[ * ]
[ * ]
[ * ]
3. Details will be discussed and determined by the RMC. An initial meeting of
the RMC will take place within one month of the date of execution of this
Agreement.
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
32.
<PAGE>
APPENDIX B
DESCRIPTION OF TULARIK EXISTING
TECHNOLOGY APPLICABLE TO THE FIELD
I. Summary of Existing Tularik Technology
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
33.
<PAGE>
APPENDIX C
DESCRIPTION OF JAPAN TOBACCO EXISTING
TECHNOLOGY APPLICABLE TO THE FIELD
Summary of JT Patent Applications Relevant to the Orphan Nuclear Receptor
Project
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
34.
<PAGE>
APPENDIX D
Definitions for Calculation of Co-Promotion Expenses, Development Costs
and Promotion Expenses in the Exclusive Territory
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
35.
<PAGE>
APPENDIX E
Description of Scientific FTE Rate
The initial Scientific FTE rate that will be used by the Parties in
preparing the Development Budget and determining Development Costs is [ * ].
Such rate is composed of the following expense categories in the amounts
indicated:
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
[ * ]
The Scientific FTE rate shall be adjusted annually such that [ * ].
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
36.
<PAGE>
APPENDIX F
Excluded Orphan Nuclear Receptors
[ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
37.
<PAGE>
APPENDIX G
Tularik Scientific FTE
Assigned to the Research Program
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] [ * ] [ * ] [ * ] [ * ] [ * ] [ * ]
[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.
38.