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Research, Collaboration and License/Development Agreement - Tularik Inc. and Taisho Pharmaceutical Co. Ltd.

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                            RESEARCH, COLLABORATION

                                      AND

                              LICENSE/DEVELOPMENT

                                   AGREEMENT

                                    BETWEEN

                                 TULARIK INC.

                                      AND

                        TAISHO PHARMACEUTICAL CO., LTD.


                            RESEARCH, COLLABORATION

                                      AND

                         LICENSE/DEVELOPMENT AGREEMENT



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

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  Page
<S>                                                                               <C>
Article 1. Definitions............................................................   1
      1.1   "Agreement"...........................................................   1
      1.2   "Annual Research Plan"................................................   1
      1.3   "Compound"............................................................   1
      1.4   "Confidential Information"............................................   2
      1.5   "Drug Candidate"......................................................   2
      1.6   "Field"...............................................................   2
      1.7   "MHW".................................................................   2
      1.8   "NDA".................................................................   2
      1.9   "Net Sales"...........................................................   2
      1.10  "Product".............................................................   2
      1.11  "Program Know-How"....................................................   2
      1.12  "Program Patents".....................................................   3
      1.13  "Research Committee"..................................................   3
      1.14  "Research Program"....................................................   3
      1.15  "Taisho Compound Library".............................................   3
      1.16  "Taisho Know-How".....................................................   3
      1.17  "Taisho Licensed Technology"..........................................   3
      1.18  "Taisho Patents"......................................................   3
      1.19  "Taisho Territory"....................................................   4
      1.20  "Tularik Assays"......................................................   4
      1.21  "Tularik Compound Library"............................................   4
      1.22  "Tularik Know-How"....................................................   4
      1.23  "Tularik Licensed Technology".........................................   4
      1.24  "Tularik Patents".....................................................   4
      1.25  "Tularik Territory"...................................................   5

Article 2. Research Program.......................................................   5
      2.1   Objectives; Annual Research Plan......................................   5
      2.2   Research Committee....................................................   6
      2.3   Use of Taisho Compound Library........................................   6
      2.4   Research Diligence....................................................   7
      2.5   Program Funding.......................................................   7
      2.6   Termination of Research Program.......................................   7
      2.7   Right to Conduct Research.............................................   7
      2.8   Exclusive Research Collaboration......................................   7

Article 3. Development; Intellectual Property Rights; Payment Obligations.........   7
      3.1   Development...........................................................   7
      3.2   License to Taisho of Tularik Licensed Technology......................   8
      3.3   License to Tularik of Taisho Licensed Technology......................   8
      3.4   Sublicenses...........................................................   8
</TABLE>

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

                                      i.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  Page
<S>                                                                               <C>
      3.5   Use Limitation of Compound Libraries..................................   8
      3.6   Nonuse of the Other Party's Technology Outside of the Field...........   9
      3.7   Use of a Party's Own Substances.......................................   9
      3.8   Development and Commercialization Diligence...........................   9
      3.9   Benchmark Payments....................................................  10
      3.10  Royalties.............................................................  10
      3.11  Payment; Reports......................................................  11
      3.12  Exchange Rate; Manner and Place of Payment............................  11
      3.13  Records and Audit.....................................................  11
      3.14  Withholding of Taxes..................................................  12
      3.15  Reciprocal Arrangements with Third Parties............................  12
      3.16  Exclusive Development and Commercialization Collaboration.............  13

Article 4. Publication............................................................  13

Article 5. Confidentiality........................................................  13
      5.1   Confidential Information; Exceptions..................................  13
      5.2   Financial Terms.......................................................  14

Article 6. Patents And Patent Applications........................................  14
      6.1   Ownership.............................................................  14
      6.2   Patents...............................................................  15
      6.3   Assignments...........................................................  16
      6.4   No Representation.....................................................  16
      6.5   Infringement of Patents by Third Parties..............................  16
      6.6   Infringement of Third Party Rights....................................  18

Article 7. Term And Termination Of Agreement......................................  19
      7.1   Term..................................................................  19
      7.2   Extensions............................................................  19
      7.3   Termination for Material Breach.......................................  19
      7.4   Insolvency or Bankruptcy..............................................  19
      7.5   Accrued Rights, Surviving Obligations.................................  19

Article 8. Indemnity..............................................................  20
      8.1   Product Liability Indemnity by Taisho.................................  20
      8.2   Product Liability Indemnity by Tularik................................  20

Article 9. Representations And Warranties.........................................  20
      9.1   Taisho Representations, Warranties and Indemnities....................  20
      9.2   Tularik Representations, Warranties and Indemnities...................  21

Article 10. Import And Export Controls............................................  22
</TABLE>

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

                                      ii.
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                  Page
<S>                                                                               <C>
     10.1   United States Laws....................................................  22
     10.2   Non-United States Laws................................................  23

Article 11. Limitations Of Liability..............................................  23

Article 12. Miscellaneous Provisions..............................................  23
     12.1   Waiver................................................................  23
     12.2   Assignment............................................................  23
     12.3   Notices...............................................................  23
     12.4   Headings..............................................................  24
     12.5   Amendment.............................................................  24
     12.6   Construction of Agreement and Choice of Law, Jurisdiction and Venue...  24
     12.7   Force Majeure.........................................................  24
     12.8   Independent Contractors...............................................  25
     12.9   Severability..........................................................  25
     12.10  Cumulative Rights.....................................................  25
     12.11  Entire Agreement......................................................  25
</TABLE>

Exhibit A   Research Program
Exhibit B   Tularik Assays
Exhibit C   Initial Annual Research Plan

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

                                     iii.
<PAGE>

                            RESEARCH, COLLABORATION
                                      AND
                         LICENSE/DEVELOPMENT AGREEMENT



This Agreement is entered into as of the 20th day of March 1996, ("Effective
Date") by and between Tularik Inc., a California corporation having its
principal place of business at 270 East Grand Avenue, South San Francisco,
California 94080, U.S.A. ("Tularik"), and Taisho Pharmaceutical Co., Ltd., a
Japanese corporation, having its head office at 24-1, Takata 3-chome, Toshima-
ku, Tokyo 171, Japan ("Taisho").

                                   Recitals

Whereas, Tularik is engaged in the research and development of therapeutic
pharmaceutical products based upon the regulation of transcription factors;

Whereas, Taisho is also engaged in the research and development of therapeutic
pharmaceutical products; and

Whereas, Tularik and Taisho desire to establish a cooperative research and
development relationship in order to discover, develop and market novel products
whose action is based upon the regulation of Signal Transducers and Activators
of Transcription ("STATs") involved in [ * ];

Now, Therefore, in consideration of the foregoing and the covenants and promises
contained herein, the parties agree as follows:

                                  Article 1.

                                  Definitions

As used herein, the following terms shall have the following meaning and the
singular shall include the plural and vice versa:

     1.1  "Agreement" shall mean this Research, Collaboration and
License/Development Agreement.

     1.2  "Annual Research Plan" shall mean the annual plan for conduct of the
Research Program to be approved by the parties pursuant to Section 2.1
hereunder.

     1.3  "Compound"  shall mean (i) a substance which is identified by Tularik
or Taisho during the term of the Research Program as either inhibiting or
promoting the activity of STATs activated by [ * ] and (ii) any such substance
identified by Tularik within [ * ] after the end of the Research Program [ * ]

     1.4  "Confidential Information" shall mean, subject to the limitations set
forth in Article 5 hereof, all information disclosed to one party by the other
party.

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

                                       1
<PAGE>

     1.5   "Drug Candidate" shall mean a small molecule (i.e., passes through
cell membranes) which passes animal toxicology studies to be defined by the
Research Committee and is either (i) a Compound or (ii) a chemical entity
conceptually or physically derived from a Compound during or following the term
of the Research Program, whether in the course of medicinal chemistry or
otherwise.

     1.6   "Field" shall mean [ * ].

     1.7   "MHW" shall mean the Japanese Ministry of Health and Welfare or such
other agency or instrumentality of Japan to which the responsibilities and
authority of the MHW are given or delegated from time to time.

     1.8   "NDA" shall mean a New Drug Application or the equivalent in Japan
for a Product, including all supplements, documents, data and other information
necessary to be included for MHW approval to market such Product, as more
closely defined in the rules and regulations of the MHW.

     1.9   "Net Sales" shall mean, with respect to a Product, and on a
country-by-country basis, the gross invoice price of all quantities of such
Product sold by Taisho, its Affiliates or sublicensees to an independent third
party after deducting, if not already deducted in the amount invoiced (a) trade,
quantity and cash discounts actually taken, (b) returns, rebates and allowances,
(c) duties, sales and excise taxes and (d) transportation and insurance charges.
With respect to sales of combination products, which shall consist of Products
combined with one or more additional active ingredients, the parties will agree
on a method of allocation in the event the situation arises. Sales among Taisho
and its Affiliates or sublicensees shall not be deemed Net Sales; provided,
however, that any sales by Taisho, its Affiliates or sublicensees to independent
third parties shall be deemed Net Sales.

     1.10  "Product" shall mean a Drug Candidate, when used as an active
ingredient in a pharmaceutical product for use in the Field, including all
indications, formulations, line extension or modes of administration thereof.

     1.11  "Program Know-How" shall mean all tangible or intangible know-how,
trade secrets, inventions (whether or not patentable), data, clinical and
preclinical results, information, and any physical, chemical or biological
material, including cell lines, any replication or any part of such material,
all of which is in any way derived from or developed pursuant to activities
during the course of the Research Program. Program Know-How shall not include
any know-how, trade secrets, invention, data, information or material first
developed, reduced to practice or discovered, each after any termination of the
Research Program prior to the completion of the full five (5) year term.

     1.12  "Program Patents" shall mean all patents, both foreign and domestic,
including without limitation, all applications, provisionals, substitutions,
extensions, reissues, renewals, inventors certificates, divisionals,
continuations and continuations-in-part covering Program Know-How. In each case,
such patents and applications shall include only those that have not been held
invalid, unenforceable or unpatentable by a final decision, un-appealed to a
court or other appropriate body of competent jurisdiction.

     1.13  "Research Committee" shall mean that committee to be formed pursuant
to Section 2.2.

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

                                       2
<PAGE>

     1.14  "Research Program" shall mean the collaborative program of five (5)
years, which consists of five one (1)-year periods, of research relating to the
discovery and development of one or more Compounds, as such program is defined
on Exhibit A and as the same may be further defined, revised and implemented,
from time to time, by the parties on the recommendation of the Research
Committee, and as further described in Article 2.

     1.15  "Taisho Compound Library" shall mean that collection of natural
extracts, natural compounds and synthetic compounds which Taisho owns or has the
right to license or sublicense as of the Effective Date or from time to time
during the Research Program which Taisho in its sole discretion actually
provides to Tularik.

     1.16  "Taisho Know-How" shall mean, to the extent Taisho is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all tangible or
intangible know-how, trade secrets, inventions (whether or not patentable),
data, clinical and preclinical results, information, and any physical, chemical
or biological material, including cell lines, any replication or any part of
such material, which Taisho owns, controls or has a license to (with right to
sublicense) on the Effective Date and which Taisho determines in its sole
discretion actually to disclose or provide to Tularik hereunder; provided,
however, that in the event that [ * ].

     1.17  "Taisho Licensed Technology" shall mean Taisho's rights in and to (i)
any Taisho Know-How disclosed to Tularik under this Agreement, (ii) the Program
Patents owned by Taisho or jointly by Taisho and Tularik, (iii) the Taisho
Patents and (iv) the Program Know-How owned by Taisho or jointly by Taisho and
Tularik.

     1.18  "Taisho Patents" shall mean, to the extent Taisho is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all patents, both
foreign and domestic, including without limitation, all substitutions,
extensions, reissues, renewals and inventors certificates,

            (a)  issued as of the Effective Date and

            (b)  issuing from applications (including provisionals, divisionals,
           continuations and continuations-in-part) arising out of the above
           patents or otherwise in existence as of the Effective Date, which
           applications relate to the Research Program or Product and

which Taisho owns, controls or has a license to (with right to sublicense) on
the Effective Date. In each case, such patents and applications shall include
only those that have not been held invalid, unenforceable or unpatentable by a
final decision, un-appealed to a court or other appropriate body of competent
jurisdiction.

     1.19  "Taisho Territory" shall mean Japan, [ * ].

     1.20  "Tularik Assays" shall mean those assays designed to discover
Compounds, which, as of the Effective Date and from time to time during the
period of the Research Program,

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

                                       3
<PAGE>

Tularik owns or to which it has rights (with a right to sublicense), as set
forth and periodically updated on Exhibit B hereto.

     1.21  "Tularik Compound Library" shall mean that collection of natural
extracts, natural compounds and synthetic compounds which Tularik owns or has
the right to license or sublicense as of the Effective Date or from time to time
during the period of the Research Program.

     1.22  "Tularik Know-How" shall mean, to the extent Tularik is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all tangible or
intangible know-how, trade secrets, inventions (whether or not patentable),
data, clinical and preclinical results, information, and any physical, chemical
or biological material, including cell lines, any replication or any part of
such material, which relate to the Research Program or a Product and which
Tularik owns, controls or has a license to (with right to sublicense) on the
Effective Date; provided, however, that in the event that [ * ].

     1.23  "Tularik Licensed Technology" shall mean Tularik's rights in and to
(i) any Tularik Know-How and Tularik Assays disclosed to Taisho under this
Agreement, (ii) the Program Patents owned by Tularik or jointly by Tularik and
Taisho, (iii) the Tularik Patents and (iv) the Program Know-How owned by Tularik
or jointly by Tularik and Taisho.

     1.24  "Tularik Patents" shall mean, to the extent Tularik is free to grant
rights therein and it is necessary and useful for the conduct of the Research
Program or the development, manufacture or sale of Product, all patents, both
foreign and domestic, including without limitation, all substitutions,
extensions, reissues, renewals and inventors certificates,

            (a)  issued as of the Effective Date and

            (b)  issuing from applications (including provisionals, divisionals,
           continuations and continuations-in-part) arising out of the above
           patents or otherwise in existence as of the Effective Date, which
           applications relate to the Research Program or Product and

which Tularik owns, controls or has a license to (with right to sublicense) on
the Effective Date. In each case, such patents and applications shall include
only those that have not been held invalid, unenforceable or unpatentable by a
final decision, un-appealed to a court or other appropriate body of competent
jurisdiction.

     1.25  "Tularik Territory" shall mean the entire world except the Taisho
Territory.

                                  Article 2.

                               Research Program

           2.1   Objectives; Annual Research Plan. The parties agree to conduct
a collaborative Research Program for identification and development of Compounds
intended for

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

                                       4
<PAGE>

use as Drug Candidates, to be conducted by both parties under the direction of
the Research Committee. The Research Program shall consist primarily of [ * ] to
identify specific Compounds with promising activity for regulation of STAT
proteins activated by [ * ], using Tularik Assays and other technology available
to the parties and (ii) each party endeavoring to work together to fulfill their
respective obligations under Section 2.4 below to develop Compounds through
application of medicinal chemistry and preclinical testing for commercialization
of Products. For any given year of the Research Program, the Research Program
will be conducted in accordance with an annual research plan to be approved by
the parties no later than [ * ] prior to the start of such year, upon
recommendation of the Research Committee pursuant to Section 2.2(c)(1). The
initial Annual Research Plan, for the year commencing on the Effective Date and
ending on the day before the first anniversary of the Effective Date, is
attached hereto as Exhibit C. Each Annual Research Plan may be revised by mutual
consent of the parties from time to time.

     2.2  Research Committee.

          (a)  Formation of Research Committee. The Research Committee will
consist of an equal number of members from each of Taisho and Tularik, including
any substitutions as may be needed from time to time, the chairperson of which
will be one of the Tularik members. The parties shall notify each other in
writing of the individuals who will act on such party's behalf as members of the
Research Committee and of any changes in the membership thereof. All decisions
of the Research Committee shall be unanimous.

          (b)  Meetings of Research Committee. Meetings of the Research
Committee shall be held [ * ] and at such times as shall be mutually agreed upon
by the parties. Additional persons from each party may attend meetings of the
Research Committee without voting rights as the case may be. Minutes of the
meeting shall be confirmed by both parties at each meeting.

          (c)  Responsibilities of Research Committee. The Research Committee
shall make recommendations to the parties with respect to: (1) establishing each
Annual Research Plan, based upon the research results for the preceding year and
designed to accomplish the goals of the Research Program, (2) defining the
yearly research objectives, (3) allocating tasks and coordinating activities
required to carry out the Research Program, (4) periodically revising the
Research Program, (5) monitoring progress of the Research Program and the
parties' due diligence in carrying out their responsibilities under the Research
Program, (6) developing the criterion and selecting Compounds to be advanced to
Drug Candidate, (7) selecting Drug Candidates and monitoring the progress of
Drug Candidate development and (8) determining the strategy for filing,
prosecution and obtaining Program Patents.

          (d)  Annual Report. Each party shall submit a brief, written annual
report on its activities under the Research Program to the other within [ * ]
after each anniversary of the Effective Date during the Research Program.

     2.3  Use of Taisho Compound Library. Tularik shall have the limited right
to use the Taisho Compound Library only (i) for the Research Program in
accordance with Section 2.7 of this Agreement, (ii) in accordance with Section
3.3(a) and [ * ]. In the event Tularik shall desire to use any of the Taisho
Compound Library for any other purposes, [ * ]. The rights granted in

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

                                       5
<PAGE>

the first sentence of this Section 2.3 shall not survive expiration or
termination of this Agreement. Taisho shall have no obligation to [ * ].

     2.4 Research Diligence. Each party shall initiate its performance of the
Research Program promptly and shall continue with at least the same care and
diligence with which it conducts its internal research.

     2.5  Program Funding. To support Tularik's activities in the Research
Program, Taisho has paid Tularik [ * ] U.S. Dollars on [ * ], and agrees to pay
Tularik, on [ * ], an [ * ].

     2.6  Termination of Research Program. Upon not later than one hundred
twenty (120) days prior notice Taisho may terminate the Research Program at the
end of the third (3rd) or the fourth (4th) year of the Research Program if it
shall be dissatisfied, in its sole judgement, with the progress or results of
the Research Program. The Research Committee may terminate the Research Program
any time if it determines the Research Program is no longer scientifically
useful. In case of such an early termination by Taisho or the Research
Committee, Taisho shall be exempt from any payment(s) which would have become
due and payable after such early termination date.

     2.7  Right to Conduct Research. Each party shall have the non-exclusive
worldwide right under the other party's Licensed Technology to carry out its
obligations under the Research Program.

     2.8  Exclusive Research Collaboration. During the conduct of the Research
Program, Taisho and Tularik agree that they shall collaborate on an exclusive
basis hereunder with respect to the identification, using the Tularik Assays, of
Compounds for use in the Field in the Taisho Territory. This Section 2.8 shall
not restrict either party's rights to [ * ].

                                  Article 3.

     Development; Intellectual Property Rights; Payment Obligations

     3.1  Development. After the Research Program, to minimize the expense and
delays of the development by each party, the parties may collaborate in the
development of a Compound under the terms and conditions of an appropriate co-
development agreement to be agreed upon by the parties separately. Such co-
development agreement may incorporate the sharing methods for work, cost and the
results of the development activities.

     3.2  License to Taisho of Tularik Licensed Technology.

     Tularik hereby grants Taisho:

          (a) an exclusive license to make, have made, use, offer to sell, sell
          and import Product in the Taisho Territory under the Tularik Licensed
          Technology; and

          (b) a nonexclusive, royalty-free, worldwide license under Tularik's
          rights in and to the Program Know-How and Program Patents for any
          purpose outside the Field.

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

                                       6
<PAGE>

Except in the event Tularik terminates this Agreement pursuant to Section 7.3 or
7.4, the rights granted under Section 3.2(b) shall survive expiration or
termination of this Agreement. The license granted above in Section 3.2(a) shall
survive after royalties have been paid for the full term described in Section
3.10(c).

     3.3  License to Tularik of Taisho Licensed Technology.

     Taisho hereby grants Tularik:

          (a)  an exclusive license to make, have made, use, offer to sell, sell
          and import Products in the Tularik Territory under the Taisho Licensed
          Technology; and

          (b)  a nonexclusive, royalty-free worldwide license under Taisho's
          rights in and to the Program Know-How and Program Patents for any
          purpose outside the Field.

Upon expiration or termination of this Agreement, other than termination by
Taisho pursuant to Sections 7.3 or 7.4, (i) the rights granted under Section
3.3(b) shall survive, and (ii) Taisho shall, and it hereby does, grant Tularik
an exclusive license to make, have made, use, offer to sell, sell and import
Products worldwide under Taisho's rights in and to the Program Patents and the
Program Know-How. Notwithstanding the foregoing, if this Agreement expires after
royalties have been paid for the full term described in Section 3.10(c), the
license granted in clause (ii) of the previous sentence shall [ * ].

     3.4  Sublicenses. Each party shall have the right to grant sublicenses
under the licenses set forth in Section 3.2 or 3.3 above, as appropriate,
provided that each such sublicense is subject to substantially the same terms
and conditions as are set forth herein. Subject to Sections 7.3 and 7.4, the
rights granted under this Section 3.4 shall survive expiration or termination of
this Agreement.

     3.5  Use Limitation of Compound Libraries.. Each party agrees and
acknowledges that use of the substances contained in the Taisho Compound Library
or the Tularik Compound Library, as the case may be, is limited solely to those
activities contemplated by the Research Program, unless otherwise provided for
in this Agreement, and are for research use only and shall not be administered
to humans in any manner or form, except in accordance with the terms of this
Agreement, subject to appropriate governmental approval.

     3.6  Nonuse of the Other Party's Technology Outside of the Field. Taisho
covenants and agrees that it will not use, directly or indirectly, the Tularik
Patents, Tularik Know-How or Tularik's Confidential Information, for any purpose
other than developing, making, having made, using or selling Products in the
Taisho Territory under this Agreement. Tularik covenants and agrees that it will
not use, directly or indirectly, the Taisho Patents, Taisho Know-How or Taisho's
Confidential Information, for any purpose other than developing, making, having
made, using or selling Products in the Tularik Territory under this Agreement.

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

                                       7
<PAGE>

     3.7  Use of a Party's Own Substances. Notwithstanding anything to the
contrary in Sections 3.5 or 3.6 above, during and following the term of this
Agreement, each party shall retain the right to use freely the substances
contained in its own Compound Libraries which are not classified as Compounds.

     3.8  Development and Commercialization Diligence.

          (a)  Taisho shall devote the same degree of attention and diligence to
the development and marketing of Products in Japan that it devotes to other
compounds and products of its own development. If Taisho fails to use such
diligence, Tularik may notify Taisho of such failure and the parties shall meet
to discuss such matter. Tularik may request that Taisho propose a detailed plan,
with a timeline, for remedying such failure and carrying out further development
and marketing with the degree of diligence described above. If requested, such
plan shall be submitted to Tularik within [ * ] of the date of Tularik's
request. If Tularik determines that such plan provides for the degree of
diligence described above, it shall approve the plan. Tularik's approval shall
not be unreasonably withheld or delayed. If the plan does not provide for the
degree of diligence described above, or if the plan is approved by Tularik but
Taisho later fails to carry out development or marketing as provided in the
approved plan, then Tularik may terminate this Agreement pursuant to Section
7.3. The requirements for diligent development and commercialization set forth
in this Section 3.8 shall in no way be interpreted to modify either party's
respective obligations under the Research Program.

          (b)  Taisho hereby agrees to keep Tularik informed on a reasonable
basis of the development of each Compound, including but not limited to periodic
written updates on the progress of each filing with MHW or other appropriate
regulatory authorities in Japan.

          (c)  Notwithstanding the foregoing, any failure by Taisho to fulfill
the development, commercialization and information obligations set forth in this
Section 3.8 with respect to any Compound shall not be deemed a material breach
of this Agreement, to the extent that [ * ].

     3.9  Benchmark Payments.

          (a)   Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:

     [*]  up to an aggregate of $3 million.

          (b)   Taisho shall pay Tularik within [ * ] after the occurrence of
the following events:

     [*]  up to an aggregate of $3 million.

     3.10 Royalties.

          (a)  Taisho Royalty Payments to Tularik. Taisho shall pay Tularik a
royalty based on Net Sales equal to [ * ] percent [ * ] of such Net Sales [ * ].

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

                                       8
<PAGE>

           (b)  Third-Party Royalty Credit. In the event that Taisho is required
to make payments (including, without limitation, royalties, option fees or
license fees, and any such fees paid by Taisho pursuant to Section 1.22 above)
to one or more third parties to obtain licenses or similar rights to patent-
protected technology necessary to make, use or sell a Product, by reason of
Taisho's use of Tularik Licensed Technology in such manufacture, use or sale,
Taisho may deduct [ * ] percent [ * ] of such payments actually made from
royalties payable to Tularik under this Section with respect to such Product;
provided, however, that in no event shall the royalties due to Tularik be
reduced by more than [ * ] percent [ * ] of the amount of royalties otherwise
owed in any given [ * ] period. Unused royalty credits may be carried over from
one royalty period to the next, subject to the latter [ * ] percent [ * ]
limitation set forth above.

           (c)  Royalty Term. Royalties shall be payable for each country in the
Taisho Territory until the expiration of the last to expire Program Patent or
Tularik Patent in such country covering the manufacture, use or sale of the Drug
Candidate contained in the Product or, in the case of Products containing only
unpatented technology, seven (7) years from first commercial sale of such
Product. The royalty term shall be adjusted in the event a Product is launched
in any country of the Taisho Territory without such patent protection in such
country, if such patent protection is later obtained. In such event, the above
royalty obligation shall expire not upon expiration of the last such patent, but
instead on an earlier date that precedes the expiration date of such patent by
the length of time between launch and the date patent protection was obtained.

     3.11  Payment; Reports. All amounts payable to Tularik under this Agreement
shall be paid in U.S. Dollars within [ * ] after the end of each June and
December. Each payment of royalties shall be accompanied by a statement of the
amount of Net Sales during such period, the amount of aggregate Net Sales to
date as of the end of such period where necessary in determination of royalty
rates, and the amount of royalties due on such sales. Tularik hereby agrees that
[ * ].

     3.12  Exchange Rate; Manner and Place of Payment. Royalty payments and
reports for the sale of Products shall be made for each [ * ] period ending on
the last day of [ * ]. Exchange conversion for foreign currency into U.S.
Dollars shall be made as necessary at the median of the rates of exchange for
sales and purchases of U.S. Dollars on the last business day of the relevant
royalty period, as established by [ * ]. Once selected, the designated bank may
only be changed by the mutual written agreement of the parties. All payments
owed under this Agreement shall be made by telegraphic transfer.

     3.13  Records and Audit. During the term of this Agreement and for a period
of three (3) years thereafter, Taisho shall keep complete and accurate records
pertaining to the sale or other disposition of the Products commercialized by
it, in sufficient detail to permit Tularik to confirm the accuracy of all
payments due hereunder. Tularik shall have the right to cause an independent,
certified public accountant to whom Taisho has no reasonable objection to audit
such records to confirm Taisho's Net Sales and royalty payments; provided,
however, that such auditor shall not disclose Taisho's confidential information
to Tularik, except to the extent such disclosure is necessary to verify the
amount of royalties due under this Agreement. Such audits may be exercised once
a fiscal year, within three (3) years after the royalty period to which such
records relate, upon notice to Taisho and during normal business hours. Tularik
shall bear the full cost of such audit unless such audit discloses a variance of
more than [ * ] from the amount of the Net Sales

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

                                       9
<PAGE>

or royalties previously paid. In such case, Taisho shall bear the full cost of
such audit. The independent, certified public accountant conducting such audit
shall only report the results of its audit and shall not disclose to Tularik the
facts relied upon in making such computation. The terms of this Section 3.13
shall survive any termination or expiration of this Agreement for a period of
three (3) years.

     3.14  Withholding of Taxes. Any withholding of taxes levied by Japanese tax
authorities on the payments required by Sections 3.9 and 3.10 above shall [ * ].
The parties shall discuss any other withholding taxes imposed on payments made
hereunder in order to find a reasonable solution for minimizing and allocating
the burden of any withholding taxes.

     3.15  Reciprocal Arrangements with Third Parties. In the event that Tularik
enters into an arrangement with a third party outside the Taisho Territory to
utilize the Tularik Assays for the identification of compounds for use within
the Field, Tularik:

           (i)   shall [ * ];

           (ii)  shall [ * ];

           (iii) may [ * ]; and

           (iv)  will, [ * ].

           Tularik agrees that [ * ].

     3.16  Exclusive Development and Commercialization Collaboration. Tularik
agrees not to grant to any third party during the term of this Agreement any
rights under the Tularik Licensed Technology to make, have made, use, offer to
sell, sell or import Products in the Taisho Territory, except as may be
permitted under this Agreement (including but not limited to Section 3.8).

                                  Article 4.

                                  Publication

     Each party to this Agreement recognizes that the publication of papers,
including oral presentations and abstracts, regarding the results of the
Research Program as embodied in the Program Know-How and Program Patents,
subject to reasonable controls to protect Confidential Information and Program
Know-How, will be beneficial to both parties. Accordingly, each party shall have
the right to review and approve any paper proposed for publication by the other
party, including oral presentations and abstracts, which utilizes data generated
from the Research Program. Before any such paper is presented or submitted for
publication, the party proposing publication shall deliver a complete copy to
the other party at least [ * ] prior to presenting the paper to a publisher. The
receiving party shall review any such paper and promptly give its comments to
the publishing party. The publishing party shall comply with the other party's
request to delete references to such other party's Confidential Information and
any Program

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

                                      10
<PAGE>

Know-How in any such paper and agrees to withhold publication of same an
additional [ * ] in order to permit the parties to obtain patent protection, if
the other party deems it necessary, in accordance with the terms of this
Agreement.

Both parties expressly agree that any information which, express or implied,
suggests the chemical structure of any Compound shall be published only after
the first laid-open or publication of the corresponding patent or patent
application.

                                  Article 5.

                                Confidentiality

     5.1  Confidential Information; Exceptions. During the term of this
Agreement, and for a period of five (5) years after termination thereof, each
party will maintain all Confidential Information in trust and confidence and
will not disclose any Confidential Information to any third party or use any
Confidential Information for any unauthorized purpose; in particular, Taisho
shall not use the Tularik Know-How, and Tularik shall not use the Taisho Know-
How, for the manufacture or sale of any products other than the Products, except
as expressly authorized by this Agreement. Each party may use such Confidential
Information only to the extent required to accomplish the purposes of this
Agreement or to the extent required by law, regulation or government or judicial
order. Confidential Information shall not be used for any purpose or in any
manner that would constitute a violation of any laws or regulations, including
without limitation the export control laws of the United States. Confidential
Information shall not be reproduced in any form except as required to accomplish
the intent of this Agreement. No Confidential Information shall be disclosed to
any employee, agent, consultant, Affiliate, or sublicensee who does not have a
need for such information. Each party will use at least the same standard of
care as it uses to protect proprietary or confidential information of its own to
ensure that such employees, agents, consultants and clinical investigators do
not disclose or make any unauthorized use of the Confidential Information. Each
party will promptly notify the other upon discovery of any unauthorized use or
disclosure of the Confidential Information.

     Confidential Information shall not include any information which:

          (a)  is now, or hereafter becomes, through no act or failure to act on
the part of the receiving party, generally known or available;

          (b)  is known by the receiving party at the time of receiving such
information, as evidenced by its records;

          (c)  is hereafter furnished to the receiving party by a third party,
as a matter of right and without restriction on disclosure;

          (d)  is independently developed by the receiving party without any
breach of this Agreement; or

          (e)  is the subject of a written permission to disclose provided by
the disclosing party.

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

                                      11
<PAGE>

     5.2  Financial Terms. The parties agree that the material financial terms
of the Agreement will be considered Confidential Information of both parties.
Notwithstanding the foregoing, either party may disclose such terms to bona fide
potential sublicensees, if necessary. In connection with any such disclosure,
each party agrees to use its best efforts to secure confidential treatment of
such information. Tularik and Taisho shall have the further right to disclose
the material financial terms of the Agreement to any potential acquiror, merger
partner, or other bona fide potential financial partner, subject to a
requirement of best efforts to secure confidential treatment of such
information.

                                  Article 6.

                        Patents And Patent Applications

     6.1  Ownership. Tularik acknowledges and agrees that Taisho is and shall
remain the sole owner (or licensee with right to sublicense) of the Taisho
Patents, the Taisho Know-How and the materials and compounds in the Taisho
Compound Library and that Tularik has no rights in or to any of them other than
the license and rights specifically granted herein.  Taisho acknowledges and
agrees that Tularik is and shall remain the sole owner (or licensee with right
to sublicense) of the Tularik Patents, the Tularik Know-How, the Tularik Assays
and the materials and compounds in the Tularik Compound Library and that Taisho
has no rights in or to any of them other than the rights specifically granted
herein.  Each party shall be the sole owner of any inventions or discoveries
made, or materials, compounds or information created, solely by it in the course
of the Research Program, and the other party shall have no rights in or to any
such inventions, discoveries, materials, compounds or information other than
those rights specifically granted to such other party herein.  Inventions or
discoveries made, and materials, compounds and information created, jointly by
the parties in the course of the Research Program shall be jointly owned.
Inventorship shall be determined in accordance with the U.S. inventorship
principles.

     6.2  Patents.

          (a)  Patent Prosecution.

          (i)  Tularik Patents and Taisho Patents shall be prosecuted and
maintained by Tularik and Taisho, respectively, at such party's option and its
own expense.

          (ii) Each party shall be responsible for filing, prosecuting and
maintaining those Program Patents covering inventions or discoveries made solely
by it throughout the world, shall consult with the other party as to the
selection of countries in which to file applications for such Program Patents in
the other's Territory and shall cooperate with the other as to the prosecution
of Program Patents in its own Territory. Each party shall be responsible for
bearing the cost of filing, prosecution and maintenance of Program Patents in
its own Territory regardless of which party owns the Program Patent. In the
event that any party decides not to proceed with prosecuting an application for
such a Program Patent, or to pay any annuity for such a Program Patent as it
becomes due, such party shall give the other [ * ] notice before any relevant
deadline, and the other party shall have the right to pursue, at its own option
and expense, prosecution of

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

                                      12
<PAGE>

such patent application or maintenance of such patent. A party's decision not to
prosecute or pay annuities for a Program Patent invented solely by such party
shall not affect either party's rights under this Agreement, particularly those
granted under Sections 3.2 and 3.3.

          (iii)  The Research Committee shall determine a responsible party or
parties for filing, prosecuting and maintaining patent applications for Program
Patents which cover inventions or discoveries jointly made by the parties,
provided that each party shall be responsible for bearing the cost of
application, prosecution and maintenance of such patent application and/or
patent in its own Territory. In the event that any party decides not to proceed
with prosecuting a patent application filed under this Section 6.2(a)(iii) or to
pay any annuity for a jointly owned Program Patent as it becomes due in its own
Territory, such party shall give the other [ * ] notice before any relevant
deadline, and the other party shall have the right to pursue, at its own option
and expense, prosecution of such patent application or maintenance of such
patent. A party's decision not to prosecute or pay annuities in its own
Territory with respect to a jointly owned Program Patent shall not affect either
party's rights under this Agreement, particularly those granted under Sections
3.2 and 3.3.

          (b)    Perfection of Interest. Each party agrees to cooperate with the
other and take all reasonable additional actions and execute such agreements,
instruments, and documents as may be reasonably required to perfect the other's
ownership interest in accordance with the intent of this Agreement including,
without limitation, the execution of necessary and appropriate instruments of
assignment.

          (c)    Patent Marking. Each party shall mark, if necessary, all
Products manufactured, used or sold under the terms of this Agreement, or their
containers, in accordance with the applicable patent marking laws, as required.

     6.3  Assignments. Each party which acquires by operation of law ownership
or other interests in any portion of a Compound, Product or Program Know-How in
a manner other than as intended and set forth in this Agreement shall, to the
extent required by the intent or provisions of this Agreement, immediately
assign to the other such right, title, and interest therein. Each party agrees
to cooperate with the other and take all reasonable additional actions and
execute such agreements, instruments, and documents as may be reasonably
required to perfect the other's ownership interest in accordance with the intent
of this Agreement including, without limitation, the execution of necessary and
appropriate instruments of assignment.

     6.4  No Representation. Tularik and Taisho each specifically excludes any
representation or warranty, express or implied, that Tularik or Taisho will
successfully obtain any patent, including without limitation any Program Patent.

     6.5  Infringement of Patents by Third Parties.

          (a)    Notice. Each party shall promptly notify the other in writing
of any alleged or threatened infringement of the Tularik Patents, the Taisho
Patents, or the Program Patents which may adversely impact the rights of the
parties hereunder, of which it becomes aware.

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

                                      13
<PAGE>

          (b)   Separately Owned Patents.

          (i)   Tularik shall have the right, but not the obligation, to bring
at its expense an appropriate action against any person or entity directly or
contributorily infringing a Tularik Patent or a Program Patent owned solely by
Tularik in the Taisho Territory. In such event, Taisho hereby agrees to
cooperate reasonably with Tularik in any such efforts. Any recovery obtained by
Tularik as a result of such action, whether obtained by settlement or otherwise,
shall be disbursed as follows: [ * ]. No settlement, compromise or other
disposition of any such action which compromises Taisho's rights under this
Agreement shall be entered into without Taisho's prior consent, which shall not
be unreasonably withheld. In the event Tularik fails to institute an
infringement suit or take other reasonable action in the Taisho Territory to
protect such relevant Tularik Patent or Program Patent owned solely by Tularik,
Taisho shall have the right, but not the obligation, within [ * ] of
notification to Tularik of such alleged infringement, to institute such suit or
take other appropriate action at its own expense in the name of Tularik or
Taisho, or both. [ * ]. In such event, Tularik shall cooperate reasonably with
Taisho. Any recovery obtained by Taisho as a result of such proceeding, by
settlement or otherwise, shall be disbursed as follows: [ * ].

          (ii)  Taisho shall have the right, but not the obligation, to bring
at its expense an appropriate action against any person or entity directly or
contributorily infringing a Taisho Patent or a Program Patent owned solely by
Taisho in the Tularik Territory. In such event, Tularik hereby agrees to
cooperate reasonably with Taisho in any such efforts. Any recovery obtained by
Taisho as a result of such action, whether obtained by settlement or otherwise,
shall be disbursed as follows: [ * ]. No settlement, compromise or other
disposition of any such action which compromises Tularik's rights under this
Agreement shall be entered into without Tularik's prior consent, which shall not
be unreasonably withheld. In the event Taisho fails to institute an infringement
suit or take other reasonable action in the Tularik Territory to protect such
relevant Taisho Patent or Program Patent owned solely by Taisho, Tularik shall
have the right, but not the obligation, within [ * ] of notification to Taisho
of such alleged infringement, to institute such suit or take other appropriate
action at its own expense in the name of Taisho or Tularik, or both. [ * ]. In
such event, Taisho shall cooperate reasonably with Tularik. Any recovery
obtained by Tularik as a result of such proceeding, by settlement or otherwise,
shall be disbursed as follows: [ * ].

          (iii) No settlement, compromise or other disposition of any such
proceeding which concerns the validity of any Patent or Program Patent shall be
entered into without the Patent or Program Patent owner's prior consent, which
shall not be unreasonably withheld.

          (c)   Jointly Owned Patents. In the event that the parties become
aware of any alleged or threatened infringement of the jointly owned Program
Patents in either party's Territory, the party in whose Territory the
infringement is occurring shall have the right, but not the obligation, to
bring, at such party's expense, an appropriate action against any person or
entity directly or contributorily infringing such jointly owned Program Patent.
In such event, the other party hereby agrees to cooperate reasonably with the
party bringing such action in any such efforts, including, if required to bring
such action, the furnishing of a power-of-attorney. In the event the party in
whose Territory the infringement is occurring fails to institute an infringement

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

                                      14
<PAGE>

suit or take other reasonable action to protect the relevant Program Patent, the
other party shall have the right, upon [ * ] of notification of the party in
whose Territory the infringement is occurring, to institute such suit or take
other appropriate action at its own expense in its own name, the joint owner's
name, or both. In such event, the party not bringing such action hereby agrees
to cooperate reasonably with the party bringing such action in any such effort,
including if required to bring such action, the furnishing of a power-of-
attorney. Regardless of which party brings the action, any recovery obtained by
settlement or otherwise shall be disbursed as follows: [ * ].

     6.6  Infringement of Third Party Rights.

          (a)  Joint Strategy. In the event that any Product manufactured or
sold hereunder becomes the subject of a claim for patent, copyright or other
proprietary right infringement anywhere in the world, and irrespective of
whether Taisho or Tularik is charged with said infringement, and the venue of
such claim, the parties shall promptly confer to discuss the claim.

          (b)  Defense. The party responsible for marketing the Product which is
the subject of the infringement claim shall have the right, but not the
obligation, to assume the primary responsibility for the conduct of the defense
of any such claim. If the party responsible for marketing the Product decides
not to assume responsibility for the conduct of the defense, the other party
shall have the right, but not the obligation, to conduct the defense of the
claim. The party which decides to assume responsibility for such defense shall
bear all costs for the conduct thereof. In such event, the other party shall
have the right, but not the obligation, to participate in any such suit, at its
sole option and at its own expense. Each party shall reasonably cooperate with
the party conducting the defense of the claim, including if required to conduct
such defense, furnishing a power-of-attorney. Neither party shall enter into any
settlement that affects the other party's rights or interests without such other
party's written consent, which consent shall not be unreasonably withheld. In no
event shall the party not conducting the defense of the claim engage in conduct
or make any express or implied representation which may detrimentally affect
such defense.


                                  Article 7.

                       Term And Termination Of Agreement

     7.1  Term. This Agreement shall expire on the later of (i) the expiration
date of the last to expire patent licensed from Taisho to Tularik pursuant to
Section 3.3(a) and (ii) the expiration date of the last to expire royalty
obligation contained herein. Notwithstanding the foregoing, if the Research
Program is terminated prior to the completion of its full five (5) year term,
this Agreement shall terminate upon the date on which the Research Program is
terminated.

     7.2  Extensions. The parties may extend the term of this Agreement or of
the Research Program on the written agreement of the parties. If the Research
Program expires after the full five (5) year term thereof, Taisho and Tularik
shall mutually determine whether this Agreement should

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

                                      15
<PAGE>

survive or terminate following such expiration based upon an evaluation of the
promise of Compounds identified during such term.

     7.3  Termination for Material Breach. Either party may, in its sole
discretion, terminate this Agreement, effective after the grace periods
described below, by giving notice of such termination to the other party, if the
other party fails to comply with any material obligation of this Agreement,
including failure to make any royalty payment when due and payable hereunder
(except payment of amounts that are under bona fide dispute) and the breaching
party fails to cure such breach within sixty (60) days after written notice
thereof by the non-breaching party or twenty (20) days if the breach shall be
the breaching party's failure to make any undisputed royalty payment, unless
otherwise specified in this Agreement. All licenses granted to the non-breaching
party under this Agreement shall not be affected by termination for material
breach. All licenses granted to the breaching party under this Agreement shall
automatically terminate upon termination under this Section 7.3.

     7.4  Insolvency or Bankruptcy. Either party may terminate this Agreement
effective immediately and without liability upon written notice to the other
party if the other party (a) becomes insolvent or declares bankruptcy, (b)
becomes the subject of any proceedings seeking relief, reorganization, or
rearrangement under any laws relating to insolvency, (c) makes an assignment for
the benefit of creditors, (d) commences the liquidation, dissolution, or winding
up of its business. To the extent legally possible, all licenses granted to the
non-breaching party shall not be affected by any termination of this Agreement
under this Section 7.4. All licenses granted to the breaching party under this
Agreement shall automatically terminate upon termination under this Section 7.4.

     7.5  Accrued Rights, Surviving Obligations. Termination of this Agreement
shall not affect any accrued rights and obligations of either party.


                                  Article 8.

                                  Indemnity

     8.1  Product Liability Indemnity by Taisho. Taisho shall defend, indemnify
and hold Tularik harmless from and against all claims and expenses, including
reasonable attorneys' fees, arising out of the death of or bodily injury to any
person or persons resulting from the manufacture or marketing of Products by
Taisho and its sublicensees (other than the manufacture or marketing of Products
by Tularik or its sublicensees); provided that (i) Tularik provides Taisho
prompt notice of any such claim, (ii) Taisho shall not be obligated to indemnify
Tularik for any loss in connection with any settlement unless Taisho consents in
writing to such settlement and (iii) Taisho shall have the exclusive right to
defend any such claim.

     8.2  Product Liability Indemnity by Tularik. Tularik shall defend,
indemnify and hold Taisho harmless from and against all claims and expenses,
including reasonable attorneys' fees, arising out of the death of or bodily
injury to any person or persons resulting from the manufacture or marketing of
Products by Tularik and its sublicensees (other than the manufacture or
marketing of Products by Taisho or its sublicensees); provided that (i) Taisho
provides Tularik prompt notice of any such claim, (ii) Tularik shall not be
obligated to indemnify Taisho for any loss in connection with any settlement
unless Tularik consents in writing to such settlement and (iii) Tularik
shall have the exclusive right to defend any such claim.

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

                                      16
<PAGE>

                                  Article 9.

                        Representations And Warranties

     9.1  Taisho Representations, Warranties and Indemnities. Taisho represents
warrants the following:

          (a)  Corporate Authority. Taisho is a corporation duly organized,
validly existing and in good standing under the laws of Japan, has the power and
authority, corporate and otherwise, to execute and deliver this Agreement and to
perform its obligations hereunder and thereunder, and has by all necessary
corporate action duly and validly authorized the execution and delivery of this
Agreement, and the performance of its obligations hereunder.

          (b)  Binding Obligation. This Agreement is the valid and legally
binding obligation of Taisho in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.

          (c)  No Conflicts. The execution, delivery and performance by Taisho
of this Agreement, and each other agreement, document, or instrument now or
hereafter executed and delivered by Taisho pursuant thereto or in connection
herewith will not: (i) conflict with or violate the articles of incorporation or
by-laws of Taisho or any provision of any law, rule, regulation, authorization
or judgement of any governmental authority having applicability to Taisho or its
actions; or (ii) conflict with or result in any breach of, or constitute a
default under, any note, security agreement, commitment, contract or other
agreement, instrument or undertaking to which Taisho is a party or by which any
of its property is bound.

          (d)  Ownership and Right to Sublicense. Taisho owns (or upon their
creation will own) or has a right to sublicense the Taisho Patents and Taisho
Know-How and all intellectual property rights with respect thereto and has (or
will have) the right and power to grant the rights granted to Tularik under this
Agreement.

          (e)  Independent Work. Except for the Taisho Patents and Taisho Know-
How licensed to Taisho with a right of sublicense, the Taisho Patents and Taisho
Know-How have been (or upon their creation will have been) independently created
by Taisho's employees, agents and consultants. Use of the Taisho Patents and
Taisho Know-How by Tularik as contemplated herein will not depend on the
acquisition of rights from any third party.

          (f)  [ * ].

          (g)  Agreements with Employees and Consultants. Taisho has and will
maintain with all Taisho employees, agents and consultants, written agreements
sufficient to enable Taisho to perform its obligations under this Agreement,
whenever Taisho thinks it is necessary.

     9.2  Tularik Representations, Warranties and Indemnities. Tularik
represents and warrants the following:

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

                                      17
<PAGE>

          (a)  Corporate Authority. Tularik is a corporation duly organized,
validly existing and in good standing under the laws of the state of California,
has the power and authority, corporate and otherwise, to execute and deliver
this Agreement, and to perform its obligations hereunder, and has by all
necessary corporate action duly and validly authorized the execution and
delivery of this Agreement, and the performance of its obligations hereunder.

          (b)  Binding Obligation. This Agreement is the valid and legally
binding obligation of Tularik in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.

          (c)  No Conflicts. The execution, delivery and performance by Tularik
of this Agreement, and each other agreement, document, or instrument now or
hereafter executed and delivered by Tularik pursuant thereto or in connection
herewith will not: (i) conflict with or violate the articles of incorporation or
by-laws of Tularik or any provision of any law, rule, regulation, authorization
or judgement of any governmental authority having applicability to Tularik or
its actions; or (ii) conflict with or result in any breach of, or constitute a
default under, any note, security agreement, commitment, contract or other
agreement, instrument or undertaking to which Tularik is a party or by which any
of its property is bound.

          (d)  Ownership and Right to Sublicense. Tularik owns (or upon their
creation will own) or has a right to sublicense the Tularik Patents and Tularik
Know-How and all intellectual property rights with respect thereto and has (or
will have) the right and power to grant the rights granted to Taisho under this
Agreement.

          (e)  Independent Work. Except for the Tularik Patents and Tularik
Know-How licensed to Tularik with a right of sublicense, the Tularik Patents and
Tularik Know-How have been (or upon their creation will have been) independently
created by Tularik's employees, agents and consultants. Use of the Tularik
Patents and Tularik Know-How by Taisho as contemplated herein will not depend on
the acquisition of rights from any third party.

          (f)  [ * ].

          (g)  Agreements with Employees and Consultants. Tularik has and will
maintain with all Tularik employees, agents and consultants, written agreements
sufficient to enable Tularik to perform its obligations under this Agreement,
whenever Tularik thinks it is necessary.


                                  Article 10.

                          Import And Export Controls

     10.1 United States Laws. The parties understand and acknowledge that each
of them is subject to regulation by agencies of the U.S. government, including
the U.S. Department of Commerce which prohibit export or diversion of certain
products and technology to certain countries. Any and all obligations of Taisho
or Tularik to provide access to or license any

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

                                      18
<PAGE>

technology pursuant to this Agreement, as well as any technical assistance shall
be subject in all respects to such United States laws and regulations as shall
from time to time govern the license and delivery of technology and products
abroad by persons subject to the Jurisdiction of the United States, including
the Export Administration Act of 1979, as amended, any successor or interim
controlling legislation, and the Export Administration Regulations issued by the
Department of Commerce, International Trade Administration, Bureau of Export
Administration. Both parties also agree to comply with the requirements of the
U.S. Foreign Corrupt Practices Act (the "Act") and shall refrain from any
payments to third parties which would cause Taisho or Tularik to violate the
Act. At Taisho's request and expense, Tularik shall advise Taisho regarding
compliance with the Act.

     10.2 Non-United States Laws. Taisho and Tularik shall each provide the
other party with such reasonable assistance as may be required for the party
requesting such assistance to comply with all non-United States laws,
ordinances, rules, regulations and the like of all governmental units or
agencies within any territory having jurisdiction pertaining to this Agreement,
including without limitation, obtaining all import, export and other permits,
certificates, licenses or the like required by such non-United States laws,
ordinances, rules, regulations and the like, necessary to permit the parties to
perform hereunder and to exercise their respective rights hereunder.


                                  Article 11.

                           Limitations Of Liability

NEITHER TULARIK NOR TAISHO WILL BE LIABLE OR OBLIGATED IN ANY MANNER FOR ANY
SPECIAL INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, UNDER ANY CAUSE OF ACTION
AND EVEN IF INFORMED OF THE POSSIBILITY THEREOF IN ADVANCE, ARISING OUT OF THIS
AGREEMENT OR BY REASON OF BREACH OF THIS AGREEMENT. THESE LIMITATIONS WILL APPLY
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY HEREIN.


                                  Article 12.

                           Miscellaneous Provisions

     12.1 Waiver. No waiver by either party hereto of any breach or default of
any of the covenants or agreements herein set forth shall be deemed a waiver as
to any subsequent or similar breach or default.

     12.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their permitted successors and assigns;
provided, however, that neither party shall assign any of its rights and
obligations hereunder except as incident to the merger, consolidations,
reorganization, or acquisition of stock or assets affecting substantially all of
the assets or actual voting control of the assigning party.

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

                                      19
<PAGE>

     12.3 Notices. Any notice or other communication required or permitted to be
given to either party hereto shall be in writing and shall be deemed to have
been properly given and to be effective on the date of delivery if delivered in
person or by facsimile or five (5) days after mailing by registered or certified
mail, postage paid, to the other party at the following address:

     In the case of Tularik:     Tularik Inc.
                                 270 E. Grand Ave.
                                 S. San Francisco, CA 94080
                                 Fax:(415) 615-4222
                                 Attention: President

     In the case of Taisho:

                                 Taisho Pharmaceutical Co., Ltd.,
                                 24-1, Takata 3-chome
                                 Toshimaku, Tokyo, 171 Japan
                                 Attention: Executive Vice President

Either party may change its address for communications by a notice to the other
party in accordance with this section.

     12.4 Headings. The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.

     12.5 Amendment. No amendment or modification hereof shall be valid or
binding upon the parties unless made in writing and signed by both parties.

     12.6 Construction of Agreement and Choice of Law, Jurisdiction and Venue.
This agreement and its terms and conditions shall be governed exclusively by and
construed according to the laws of California, U.S.A., excluding its choice of
law provisions and also excluding the United Nations Convention on Contracts for
International Sale of Goods. The official text of this Agreement and any notices
given or accounts or statements required hereby shall be in English. In the
event of any dispute concerning the construction or meaning of this Agreement,
reference shall be made only to this Agreement as written in English and not to
any other translation into any other language. All disputes which may arise
between the parties hereto in relation to the interpretation or administration
of this Agreement shall be first referred to the Research Committee for
resolution. Any disputes which the Research Committee shall be unable to resolve
with a reasonable period of time shall be resolved by the agreement of the Chief
Executive Officers of the respective parties or their delegates. Any disputes
which cannot be resolved in this manner shall be finally resolved in the courts
in San Francisco, California if the action is taken by Taisho and in the courts
in Tokyo, Japan if the action is taken by Tularik.

     12.7 Force Majeure. Any delays in performance by any party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, flood,
explosion, riots, wars, civil disorder, rebellion or sabotage. The party
suffering such occurrence

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

                                      20
<PAGE>

shall immediately notify the other party and any time for performance hereunder
shall be extended by the actual time of delay caused by the occurrence.

     12.8  Independent Contractors. In making and performing this Agreement,
Taisho and Tularik act and shall act all times as independent contractors and
nothing contained in this Agreement shall be construed or implied to create an
agency, partnership or employer and employee relationship between Tularik and
Taisho. At no time shall one party make commitments or incur any charges or
expenses for or in the name of the other party.

     12.9  Severability. If any term, condition or provision of this Agreement
is held to be unenforceable for any reason, it shall, if possible, be
interpreted rather than voided in order to achieve the intent of the parties to
this Agreement to the extent possible. In any event, all other terms, conditions
and provisions of this Agreement shall be deemed valid and enforceable to the
full extent.

     12.10 Cumulative Rights. The rights, powers and remedies hereunder shall be
in addition to, and not in limitation of all rights, powers and remedies
provided at law or in equity, or under any other agreement between the parties.
All of such rights, powers and remedies shall be cumulative, and may be
exercised successively or cumulatively.

     12.11 Entire Agreement. This Agreement, and any and all Exhibits referred
to herein, embodies the entire understanding of the parties with respect to the
subject matter hereof and shall supersede all previous communications,
representations or understandings, either oral or written, between the parties
relating to the subject matter hereof, including without limitation the secrecy
agreement between the parties dated December 2, 1994 and the Letter of Intent
dated March 24, 1995.

     In Witness Whereof, both Taisho and Tularik have executed this Agreement,
in duplicate originals, by their respective officers hereunto duly authorized,
as of the day and year hereinabove written.

Tularik Inc.                            Taisho Pharmaceutical Co., Ltd.



By:    /s/ David V. Goeddel             By:    /s/ Akira Ohira
   -----------------------                 -------------------
       David V. Goeddel                        Akira Ohira
Title: President and                    Title: Executive Vice President
       Chief Executive Officer

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

                                      21
<PAGE>

                                   EXHIBIT A

                               Research Program

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

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

                                   EXHIBIT B

                                Tularik Assays

[ * ]

[ * ]

[ * ]

[ * ]

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

                                   EXHIBIT C

                         Initial Annual Research Plan

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

[ * ]

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