EXHIBIT 10.30


 


COLLABORATION AGREEMENT


 


This
COLLABORATION AGREEMENT (the “Agreement”), effective as of May 3, 2002 (the “Effective
Date”), is made by and between Sunesis Pharmaceuticals, Inc., a Delaware
corporation, having a principal place of business at 341 Oyster Point
Boulevard, South San Francisco, CA 94080 (“Sunesis”), and Johnson &
Johnson Pharmaceutical Research & Development, L.L.C., a limited liability
company incorporated in New Jersey, having a principal place of business at
U.S. Route 202, Raritan, NJ  08869 (“JJPRD”).  Sunesis and JJPRD are sometimes referred to
herein as individually as a party and collectively as the parties.  Reference to JJPRD herein includes reference
to its Affiliates (as hereinafter defined) unless otherwise indicated.


 


BACKGROUND


 


A.            Sunesis
has developed a proprietary technology and know-how that allows discovery and
optimization of small molecules that bind to or modulate the activity of enzyme
targets and protein-protein interfaces;


 


B.            JJPRD
is a leader in the research and development of pharmaceutical compounds;


 


C.            Sunesis
and JJPRD wish to collaborate to discover and develop small molecules that
directly modulate the Target (as defined below), with the goal of delivering
compounds with desired activity and selectivity; and


 


D.            JJPRD
wishes to acquire an exclusive license to develop and commercialize
Collaboration Compounds (as defined below) resulting from the collaboration, as
well as certain other rights to the results of the collaboration, and Sunesis
wishes to grant to JJPRD such license, all on the terms and conditions herein.


 


NOW, THEREFORE, for and
in consideration of the covenants, conditions and undertakings hereinafter set
forth, it is agreed by and between the parties as follows:


 


ARTICLE 1

DEFINITIONS


 


As
used herein, the following terms will have the meanings set forth below:


 


1.1           “Additional
Component” means a therapeutically active drug substance, and/or a Device
that enables the delivery and/or efficacy of a Collaboration Compound and/or a
JJPRD Derivative Compound, which substance or Device is part of a Combination
Product developed by JJPRD.  As used
herein “Device” shall mean a pump, stent, patch, inhaler, and/or other
mechanical or implantable apparatus or depot system.  By definition, an Additional Component is not
a Collaboration Compound or a Derivative Compound.


 










Confidential
treatment has been requested for portions of this exhibit.  The copy filed herewith omits the information
subject to the confidentiality request. 
Omissions are designated as [*]. 
A complete version of this exhibit has been filed separately with the
Securities and Exchange Commission.


 


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1.2           “Affiliate”
shall mean any corporation or other business entity which during the term of
this Agreement controls, is controlled by or is under common control with
Sunesis or JJPRD but only for so long as such entity controls, is controlled
by, or is under common control with Sunesis or JJPRD.  For this purpose, control means the possession
of the power to direct or cause the direction of the management and the
policies of an entity through ownership directly or indirectly of fifty percent
(50%) or more of the stock entitled to vote for the election of directors, and
for nonstock organizations, of the equity interests entitled to control the
management of such entity.


 


1.3           “Collaboration
Compound” shall mean:


 


(a)           a
Lead Compound or a Development Candidate; or


 


(b)           any
compound that is within the chemical genus of a Lead Compound or Development
Candidate, as such genus is claimed by a patent or patent application within
the Program Patent Rights, and which meets the Lead Compound Criteria or the
Development Candidate Criteria.


 


Notwithstanding
the foregoing, JJPRD Compounds shall not be considered Collaboration Compounds.


 


1.4           “Combination
Product” means a Product sold by JJPRD which contains one or more
Additional Components in addition to a Collaboration Compound or a JJPRD
Derivative Compound.


 


1.5           “Criteria”
shall mean the Lead Compound Criteria and Development Candidate Criteria.


 


1.5.1                “Lead
Compound Criteria” shall mean (i) those criteria set forth in
Exhibit 1.5.1 hereto, and (ii) such other criteria as are approved by
the JRC and agreed in writing by the parties required to be demonstrated from
the testing of a compound in order for such compound to be deemed a Lead
Compound.


 


1.5.2                “Development
Candidate Criteria” shall mean (i) those criteria set forth in
Exhibit 1.5.2 hereto, and (ii) such other criteria as are approved by
the JRC and agreed in writing by the parties required to be demonstrated from
the testing of a Lead Compound and/or other compound in order for such Lead
Compound and/or other compound to be deemed a Development Candidate.


 


No other criteria shall be deemed Lead Compound Criteria or Development
Candidate Criteria under Section 1.5.1(ii) or 1.5.2(ii) above unless such
other criteria are formally approved by the JRC and agreed in writing by the
parties, regardless of whether such other criteria are used informally or
discussed by the parties in the course of the Research Program or thereafter
during the Exclusivity Period.  Within
ninety (90) days, or as soon as reasonably practicable, after the Effective
Date, but in no event later than the end of the Research Term, JJPRD shall
provide Sunesis with, and the parties shall mutually agree upon, a detailed
description of the specific screening assays to be used for identifying and
testing compounds against each of the Lead Compound Criteria and Development
Compound Criteria, such mutually agreed upon description of such assays to be
attached hereto as an addendum to Exhibit 1.5.1 or 1.5.2, as applicable.  Such assays shall be reviewed on an ongoing
basis and may be amended in writing by the JRC.


 


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1.6           “Derivative
Compound(s)” shall mean, individually any JJPRD Derivative Compound or
Sunesis Derivative Compound, and collectively JJPRD Derivative Compounds and/or
Sunesis Derivative Compounds, as the case may be.


 


1.6.1        “JJPRD
Derivative Compound” shall mean any compound, other than a Collaboration
Compound, first synthesized or otherwise first invented solely by JJPRD, which,
in whole or in part:


 


(i)          results during the
Exclusivity Period from a chemical synthesis program which is based on
structure-activity data of one or more Collaboration Compounds in the Research
Program; or


 


(ii)         results during the
Exclusivity Period from a chemical synthesis program which is based on
structure-activity data of one or more Sunesis Derivative Compounds; or


 


(iii)        is covered by the Program
Patent Rights.


 


By definition,
JJPRD Derivative Compounds do not meet the Criteria.  By definition, Sunesis Derivative Compounds
shall not be considered JJPRD Derivative Compounds.


 


1.6.2                “Sunesis
Derivative Compounds” shall mean any compound, other than a Collaboration
Compound, first synthesized or otherwise first invented solely by Sunesis,
which, in whole or in part:


 


(i)          results during the
Research Term from a chemical synthesis program which is based on
structure-activity data of one or more Collaboration Compounds in the Research
Program; and


 


(ii)         was made in the course of
further advancing one or more compounds toward meeting the Lead Compound
Criteria and/or Development Candidate Criteria.


 


By definition,
Sunesis Derivative Compounds do not meet the Criteria.


 


1.7           “Development
Candidate” shall mean any compound that either (a) meets the
Development Candidate Criteria, or (b) is otherwise approved by the JRC as
a Development Candidate (i.e., that was so approved by the JRC even though such
compound did not meet the Development Candidate Criteria), provided, however a
compound shall be deemed a Development Candidate only if it was first
discovered, synthesized identified, acquired or first invented by:


 


(i)          either party during the
Research Term in the course of performing the Research Program; or


 


(ii)         JJPRD after the end of
the Research Term and prior to the second anniversary of the end of the
Research Term, and was so made or invented in the course of activities directed
to the


 


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discovery, research or development of compounds for use in the Field;
or


 


(iii)        JJPRD after the end of the
Exclusivity Period and during the term of this Agreement, and such compound is
covered by a Valid Claim within the Program Patent Rights and was tested by
Sunesis or JJPRD and demonstrated as meeting the Criteria; or


 


(iv)       Sunesis after the end of
the Research Term and prior to the second anniversary of the end of the Research
Term, and was so made or invented in the course of activities directed to the
discovery, research or development of compounds for use in the Field; or


 


(v)        Sunesis after the Research
Term and during the term of this Agreement, and such compound is covered by a
Valid Claim within the Program Patent Rights and was tested by Sunesis and
demonstrated as meeting the Development Candidate Criteria.


 


1.8           “Exclusivity
Period” shall mean the period from the Effective Date until the second
anniversary of the end of the Research Term.


 


1.9           “Field”
shall mean, subject to Section 4.1.2, the diagnosis, therapeutic or
prophylactic treatment of diseases in humans and/or animals through the use of
an agonist or antagonist or other modulator of the Target.


 


1.10         “FTE”
means a full-time scientific person dedicated to the Research, or in the case
of less than a full-time dedicated scientific person, a full-time, equivalent
scientific person year, based upon a total of [*] ([*]) [*] weeks or ([*]) hours per year of scientific work,
on or directly related to the Research Program, carried out by an employee, an
Affiliate or a Third Party under contract; provided however that 100% of the
Research Program effort is performed by employees of Sunesis.  Scientific work on or directly related to the
Research Program to be performed by Sunesis employees can include, but is not
limited to, experimental laboratory work, recording and writing up results,
reviewing literature and references, holding scientific discussions, attending
selected and appropriate seminars and symposia. 
Scientific work does not include management duties.


 


1.11         “Generic
Equivalent” means a product that is being sold in the same country in which
JJPRD is selling a Product, which product incorporates a therapeutically active
compound that is the 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


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same as the Collaboration
Compound contained within such Product being sold in such country, and for
which a ANDA (or equivalent regulatory filing in such country) has been
accepted and approved by the FDA (or equivalent regulatory body in such
country).


 


1.12         “JJPRD
Compounds” shall mean those compounds disclosed in the JJPRD patents or
patent applications listed in Exhibit 1.12, and any JJPRD compounds that have
been approved by the JJPRD Drug Evaluation Executive Committee and are in
development and/or in commercialization as of the Effective Date as evidenced
by JJPRD contemporaneous written records.


 


1.13         “JJPRD
Technology” shall mean all JJPRD Patent Rights and JJPRD Know-how.


 


(a)           “JJPRD
Patent Rights” shall mean all patents, patent applications and invention
disclosures the subject of which is an invention made:


 


(i)          by or under authority of
JJPRD prior to the Effective Date or after the end of the Exclusivity Period;
or


 


(ii)         by or under authority of
JJPRD during the Exclusivity Period in the course of activities directed to the
discovery, research or development of compounds outside the Research Program
and for use outside Field;


 


as well as any
divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions or other governmental actions which extend any of the patent
applications or patents in (i) or (ii) above, and any substitutions,
confirmations, registrations or revalidations of any of the foregoing.


 


(b)           “JJPRD
Know-how” shall mean any information or material made or developed:


 


(i)          by or under authority of
JJPRD prior to the Effective Date or after the end of the Exclusivity Period;
or


 


(ii)         by or under authority of
JJPRD during the Exclusivity Period, and was so made or invented in the course
of activities directed to the discovery, research or development of compounds
outside the Research Program and for use outside the Field.


 


Notwithstanding
(a) and (b) above, the JJPRD Technology shall not include any Program
Technology or any Sunesis Technology. 
For the purposes of this Agreement, JJPRD Compounds shall be considered
to be part of JJPRD Technology.


 


1.14         “JRC”
or “Joint Research Committee” shall have the meaning set forth in Section 3.1.


 


1.15         “Lead
Compound” shall mean any compound that either (a) meets the Lead
Compound Criteria, or (b) is otherwise approved by the JRC as a Lead
Compound (i.e., that was so approved by the JRC even though such compound did
not meet the Lead Compound Criteria); 


 


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provided however, a
compound shall be deemed a Lead Compound only if it was first discovered,
synthesized identified, acquired or first invented by:


 


(i)          either party during the
Research Term in the course of performing the Research Program; or


 


(ii)         JJPRD after the end of the Research Term and
prior to the second anniversary of the end of the Research Term, and was so
made or invented in the course of activities directed to the discovery,
research or development of compounds for use in the Field; or


 


(iii)        JJPRD after the end of the Exclusivity Period
and during the term of this Agreement, and such compound is covered by a Valid
Claim within the Program Patent Rights and was tested by Sunesis and
demonstrated as meeting the Lead Compound Criteria; or


 


(iv)       Sunesis after the end of the Research Term and
prior to the second anniversary of the end of the Research Term, and was so
made or invented in the course of activities directed to the discovery,
research or development of compounds for use in the Field; or


 


(v)        Sunesis after the end of the Research Term and
during the term of this Agreement, and such compound is covered by a Valid
Claim within the Program Patent Rights and was tested by Sunesis and
demonstrated as meeting the Lead Compound Criteria; or


 


(vi)       Sunesis, and is controlled by Sunesis, prior to
the Effective Date (“Sunesis Compounds”) (with respect to such Sunesis
Compounds, Sunesis shall have no affirmative obligation to test such compounds
to determine whether they meet the Criteria).


 


1.16         “Licensed
Compound” shall mean each Collaboration Compound and JJPRD Derivative
Compound.


 


1.17         “Marketing
Approval Application” or “MAA” shall mean a New Drug Application (or
its equivalent), as defined in the U.S. Food, Drug and Cosmetic Act and the
regulations promulgated thereunder, or any corresponding or similar
application, registration or certification in any country.


 


1.18         “Net Sales”
shall mean the invoice price of Products sold by JJPRD, its Affiliates, or
Sublicensees to Third Parties, less reasonable and customary deductions for:
(i) discounts, including cash discounts, discounts to managed care or similar
organizations or government organizations, 


 


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rebates paid, credit,
accrued or actually taken from the billed amount with respect to the Product in
question, including government rebates such as Medicaid charge backs or
rebates, and retroactive price reductions or allowances actually allowed or
granted from the billed amount with respect to the Product in question, and
commercially reasonable and customary fees paid to distributors (other than to
a distributor that is an Affiliate of JJPRD), but not any fees, rebates,
credits or discounts paid to Sublicensees or Copromotion Partners (i.e.,
partners responsible for jointly co-promoting a Product through JJPRD and such
partners respective sales force in a given country), (ii) credits or allowances
actually granted upon claims, rejections or returns of such sales of Products,
including recalls, regardless of JJPRD requesting such recalls, (iii) taxes,
duties or other governmental charges levied on or measured by the billing
amount, to the extent billed separately on the invoice and paid by the buyer,
as adjusted for rebates, charge-backs, and refunds, and (iv) freight, postage,
shipping and insurance charges paid for delivery of such Products, to the
extent billed separately on the invoice and paid by the buyer, and (v)
provisions for uncollectable accounts determined in accordance with U.S. generally
accepted accounting practices, consistently applied to all products of JJPRD,
provided, however, that if collected at a later date such amounts will be added
to Net Sales in the quarter in which it is received.


 


Sales between
JJPRD, its Affiliates and its or their Sublicensees for resale shall be
excluded from the computation of Net Sales, to the extent that the subsequent
resale is included within Net Sales.  If
a sale, transfer or other disposition with respect to such Product involves
consideration other than cash or is not at arm’s length, then the Net Sales
from such sale, transfer or other disposition shall be the arm’s length fair
market value thereof.


 


With
respect to Combination Products, Net Sales for such Combination Product for the
purpose of determining royalties shall, in all cases, be determined by the
parties to this Agreement in good faith based on the relative value of the
Collaboration Compounds and the Additional Components that are part of the
Combination Product.  This also includes
the potential if, for any particular country, neither the Collaboration
Compound nor the Additional Components of the Combination Product are sold
separately in said country.


 


1.19         “Phase I”
shall mean human clinical trials, the principal purpose of which is preliminary
determination of safety in healthy individuals or patients as required in 21
C.F.R. §312, or similar clinical study in a country other than the United
States, and for which there are no primary endpoints to efficacy in the
protocol.


 


1.20         “Phase
II” shall mean that portion of the clinical development program beyond
Phase I, which provides for clinical studies conducted on a limited number of
patients for the purpose of preliminary evaluation of clinical efficacy and
safety, and/or to obtain an indication of the dosage regimen required as more
fully defined in 21 C.F. R. 312.21(b).


 


1.21         “Phase III”
shall mean human clinical trials, the principal purpose of which is to
establish safety and efficacy in patients with the disease being studied as
required in 21 C.F.R. §312, or similar clinical study in a country other than
the United States.  Phase III shall
also include any other human clinical trial intended as a pivotal trial for
regulatory approval purposes whether or not such trial is a traditional
Phase III trial.


 


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1.22         “Product”
shall mean a product that incorporates a Licensed Compound.


 


1.23         “Program
Technology” shall mean all Program Patent Rights and Program Know-How.


 


(a)           “Program
Patent Rights” shall mean all patents, patent applications and invention
disclosures the subject of which is an invention made:


 


(i)          solely or jointly by
employees of JJPRD and Sunesis in the course of performing the Research
Program; or


 


(ii)         by JJPRD after the end of
the Research Program and prior to the end of the second anniversary of the end
of the Research Term in the course of activities directed to the discovery,
research or development of compounds for use in the Field; or


 


(iii)        by Sunesis after the end
of the Research Program and prior to the end of the second anniversary of the
end of the Research Term in the course of activities directed to the discovery,
research or development of compounds for use in the Field;


 


as well as any
divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions or other governmental actions which extend any of the patent
applications or patents in (i), (ii) or (iii) above, and any substitutions,
confirmations, registrations or revalidations of any of the foregoing.


 


(b)           “Program
Know-How” shall mean any information or material made or developed:


 


(i)          solely or jointly by
employees of JJPRD and Sunesis during the Research Term in the course of
performing the Research Program; or


 


(ii)         by JJPRD after the end of
the Research Term and prior to the second anniversary of the end of the
Research Term, and was so made or invented in the course of activities directed
to the discovery, research or development of compounds for use in the Field; or


 


(iii)        by Sunesis prior to the
second anniversary of the end of the Research Term, and was so made or invented
in the course of activities directed to the discovery, research or development
of compounds for use in the Field.


 


Notwithstanding
(a) and (b) above, the Program Technology shall not include any JJPRD
Technology or any Sunesis Core Technology.


 


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1.24         “Regulatory
Approval” shall mean all approvals, including licenses, registrations and
authorizations, of all governmental agencies in a country necessary for the
manufacture, use or sale of a Product in the applicable country.  As used herein, “Regulatory Approval” shall
not include pricing or reimbursement approval.


 


1.25         “Research
Program” shall mean the research activities undertaken by the parties
pursuant to Article 2 below.


 


1.26         “Research
Plan” shall have the meaning set forth in Section 2.2.


 


1.27         “Research
Term” shall mean the period commencing on the Effective Date and ending on
the later of (i) the second anniversary of the Effective Date, or
(ii) if extended in accordance with Section 2.5 below, the end of
such extension period.


 


1.28         “Returned
Compound” shall have the meaning recited in section 7.3.2.


 


1.29         “Sublicensee”
shall mean, with respect to a particular Product, a Third Party to whom JJPRD
has granted a right to make, have made, sell, or have sold such Product.  As used in this Agreement, “Sublicensee”
shall also include a Third Party to whom JJPRD has granted the right to
distribute such Product, provided that such Third Party has responsibility for
marketing and promotion of such Product within the field or territory for which
such distribution rights are granted.


 


1.30         “Sunesis
Core Technology” shall mean all Sunesis Patent Rights and Sunesis Know-how
as defined below.


 


(a)           “Sunesis
Patent Rights” shall mean all patents, patent applications and invention
disclosures controlled by Sunesis relating to (w) the use of novel protein
engineering techniques and compositions and its application in drug discovery
(x) target directed fragment discovery and maturation to produce drug leads (y)
Covalent Tethering and techniques related thereto (e.g. NMR, X-ray, mass spec.
AUC, Biacore) and its use to discover fragments and test binding hypotheses of
fragments and leads or (z) dynamic and other combinatorial chemistries related
to engineered proteins, the subject of which is an invention made:


 


(i)          by Sunesis prior to the
Effective Date or after the end of the Exclusivity Period; or


 


(ii)         by Sunesis during the Exclusivity
Period in the course of activities directed to the discovery, research or
development of compounds outside the Research Program and for use outside
Field; or


 


(iii)        solely or jointly by
employees of JJPRD and Sunesis during the Exclusivity Period in the course of
activities directed to the discovery, research or development of compounds
inside the Research Program and for use in the Field, provided such invention
is an improvement relating to Sunesis Core Technology;


 


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as well as any
divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions or other governmental actions which extend any of the patent
applications or patents in (i), (ii) or (iii) above, and any substitutions,
confirmations, registrations or revalidations of any of the foregoing.


 


(b)           “Sunesis
Know-how” shall mean any information or material controlled by Sunesis
relating to (w) the use of novel protein engineering techniques and
compositions and its application in drug discovery (x) target directed fragment
discovery and maturation to produce drug leads (y) Covalent Tethering and
techniques related thereto (e.g. NMR, X-ray, mass spec. AUC, Biacore) and its
use to discover fragments and test binding hypotheses of fragments and leads or
(z) dynamic and other combinatorial chemistries related to engineered proteins,
the subject of which is made or developed:


 


(i)          by Sunesis prior to the
Effective Date or after the end of the Exclusivity Period; or


 


(ii)         by Sunesis during the
Exclusivity Period, and was so made or invented in the course of activities
directed to the discovery, research or development of compounds outside the
Research Program and for use outside the Field; or


 


(iii)        solely or jointly by
employees of JJPRD and Sunesis during the Exclusivity Period in the course of
activities directed to the discovery, research or development of compounds
inside the Research Program and for use in the Field, provided such information
or material relates to the Sunesis Core Technology or any improvement thereof.


 


Notwithstanding
(a) and (b) above, it is understood and agreed that “improvements”, as used
herein this Section 1.30, shall not include any inventions, information or
materials made or developed by either party solely from the use of information
and/or materials which is generally made available in the public domain without
restriction on use or disclosure.


 


1.31         “Target”
shall mean Cathepsin S, [*] or in [*]
with [*] and/or [*].


 


1.32         “Third
Party” shall mean any person or entity other than Sunesis and JJPRD.


 


1.33         “Thiol
Protease” shall mean any enzyme that hydrolizes a peptide bond and contains
a cysteine residue in the catalytic site of the enzyme.


 


1.34         “Valid
Claim” shall mean a claim of an issued and unexpired patent within the
Program Patent Rights, JJPRD Patent Rights, or Sunesis Patent Rights, which has
not been held 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


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unenforceable, invalid or
unpatentable by a court or other government body having competent jurisdiction
in a decision from which no appeal can or has been taken, and which has not
been rendered unenforceable through disclaimer. 
“Valid Claim” shall also include the claim of a patent application
within the Program Patent Rights, JJPRD Patent Rights, or Sunesis Patent Rights
as well as any invention disclosure directed to Program Technology, JJPRD
Technology, or Sunesis Core Technology. 
For the purpose of royalty determination and payment, any claim being
prosecuted in a pending patent application shall be deemed to be the equivalent
of a Valid Claim of an issued unexpired patent provided it is not pending for
greater than [*] [(*)] years from the filing date of the patent application in
which case it will cease to be a Valid Claim until the patent issues.


 


ARTICLE 2

RESEARCH PROGRAM


 


2.1           Nature
of Research Program.  Subject to the
terms and conditions set forth herein, the parties agree to conduct research
under the Research Plan on a collaborative basis.  During the Research Term, Sunesis and JJPRD
shall collaborate and each use diligent efforts consistent with each party’s
normal business practices to identify Lead Compounds and Development Candidates
in accordance with the Research Plan.


 


2.2           Research
Plan.  The parties will conduct the
Research Program in the Field in accordance with a written plan approved by the
JRC (the “Research Plan”).  The Research
Plan shall establish: (i) the scope of the research activities which will be
performed; (ii) the research objectives, work plan activities and schedules
with respect to the Research Program; and (iii) the respective obligations of
the parties with respect to the Research Program.  The Research Plan shall be reviewed on an
ongoing basis and may be amended by approval of the Joint Research Committee from
time to time as it deems necessary or appropriate.  The initial Research Plan is attached hereto
as Exhibit 2.2


 


2.3           Disclosure.  Each party shall keep the other party
informed of its progress and results in performing the Research Program.  In this regards, each party shall provide the
JRC with samples of, as well as data and information pertaining to, all Lead
Compounds, Development Candidates, and Derivative Compounds identified by such
party, including the chemical structures of such Lead Compounds, Development
Candidates, and Derivative Compounds, structure-activity data with respect
thereto, and such other information as the parties agree.


 


2.4           Term
of Research Program.  The Research
Program shall continue for an initial period of two (2) years after the
Effective Date.  JJPRD will have the
option to extend the Research Term, for two additional one (1) year
periods at the then current level of research funding by JJPRD and FTE effort
by Sunesis, by providing Sunesis written notice at least three (3) months
before the end of the then-current Research Term.  Any changes to the level of research funding
by JJPRD or 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


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FTE effort by Sunesis
must be agreed in writing by the parties and attached to this Agreement as an
addendum.


 


2.5           Target
Exclusivity.  During the Exclusivity
Period, neither Sunesis nor JJPRD shall knowingly collaborate or otherwise
cooperate with a Third Party, or perform screening or other research for its
own account, for the purpose of identifying compounds for commercialization
based upon their activity in directly agonizing, antagonizing, or modulating
the activity of the Target.  The parties
may enter into service agreements or other non-collaborative agreements with
Third Parties related to the Research Program with the written approval of the
JRC during the Exclusivity Period.


 


2.6           Records;
Inspection.


 


2.6.1        Research
Records.  Sunesis and JJPRD shall
maintain records of the Research Program (or cause such records to be
maintained) in sufficient detail and in good scientific manner as will properly
reflect all work done and results achieved in the performance of the Research
Program.  During the Exclusivity Period,
and for one (1) year thereafter, the parties shall provide each other access to
such records, upon request, during ordinary business hours.


 


2.6.2        Reports.  Sunesis and JJPRD shall each provide the
other, at least once quarterly, a written summary of research activities and
results in connection with the Research Program.


 


2.6.3        Post
Collaboration Activities.  For each
Licensed Compound and Product to which JJPRD retains rights under this
Agreement, JJPRD shall be responsible, at its sole expense, for conducting all
preclinical and clinical development of such Licensed Compounds and Products
following the end of the Research Term, and all commercialization of such
Products.


 


ARTICLE 3

MANAGEMENT


 


3.1           Joint
Research Committee.  JJPRD and
Sunesis will establish a committee (the “Joint Research Committee” or “JRC”) to
oversee, review and recommend direction of the Research Program.  The responsibilities of the Joint Research
Committee shall consist of: (i) monitoring and reporting research progress
and ensuring open and frequent exchange between the parties regarding Research
Program activities; (ii) establishing or modifying Criteria for the
selection of Lead Compounds and Development Candidates; (iii) taking such other
actions as are specifically allocated the JRC under this Agreement; and (iv)
designating compounds as Lead Compounds and/or Development Candidates.


 


3.2           Membership.  The JRC shall include three (3) representatives
of each of JJPRD and Sunesis, with each party’s members selected by that
party.  Sunesis and JJPRD may each
replace its JRC representatives at any time, upon written notice to the other
party.  Each of JJPRD and Sunesis shall
identify a co-chair who shall be responsible for communicating the vote of such
party in decisions of the JRC.


 


3.3           Meetings.  During the Exclusivity Period, the JRC shall
meet at least quarterly, or more frequently as agreed by the parties, at such
locations as the parties agree, and will otherwise 


 


12





















 


communicate regularly by
telephone, electronic mail, facsimile and/or video conference.  With the consent of the parties, other
representatives of Sunesis or JJPRD may attend JRC meetings as nonvoting
observers.  Each party shall be
responsible for all of its own expenses associated with attendance of such
meetings.


 


3.4           Decision
Making.  With respect to decisions
taken on matters placed by either party before the JRC, each party shall have
one vote.  Decisions of the JRC shall be
made by unanimous approval of the parties. 
JRC members may be present in person or by other means (e.g.,
teleconference) at any meeting; provided that at least one member from each
party must be so present and voting.  In
the event the JRC is unable to reach consensus on a particular matter, such
matter shall be referred to the CEO of Sunesis and the Chairman, Pharmaceutical
Research & Development, of JJPRD or their representatives for resolution,
who shall meet in person or by telephone within thirty (30) days after such
referral to attempt in good faith to resolve such matter.  If such matter cannot be resolved by
discussion of the Chairman, Pharmaceutical Research & Development, of JJPRD
and the CEO of Sunesis within such thirty (30) days period (as may be extended
by mutual agreement), either party shall be entitled to seek temporary and
permanent relief in any court of competent jurisdiction.


 


3.5           Development.  JJPRD shall be solely responsible for and
have the sole right to determine whether or not a Development Candidate enters
development.  The mere fact that a
Collaboration Compound is determined to be a Development Candidate does not
obligate JJPRD to move that Development Candidate into development.  Rather, such a designation of Development
Candidate does require payment according to Section 5.2.2.  Moreover decisions on whether or not to
remove compounds from development once they have entered development shall be
at the sole discretion of JJPRD.  Once a
Development Candidate has entered development, JJPRD shall have the sole right
to develop such for the treatment for any indication through Phases I, II and
III, including but not limited to, preparing, filing and exclusively owning,
all MAAs and obtaining and exclusively owning all Regulatory Approvals.  Notwithstanding the foregoing, it understood
and agreed that once a Collaboration Compound is determined to be a Development
Candidate, development of such Collaboration Compound shall be subject to Article 7.


 


3.6           Regulatory
Reports and Communications.  Reports
made to and communications with regulatory agencies in connection with any
Collaboration Compound hereunder including adverse reaction reports shall be
made exclusively by JJPRD.


 


3.7           JJPRD’s
Marketing Obligations For Products. 
All business decisions, including, but not limited to, the design, sale,
price and promotion of Collaboration Compound under this Agreement and the
decisions whether to market and how to market any particular Collaboration
Compound shall be within the sole discretion of JJPRD.  Any marketing of a Collaboration Compound in
one market or country shall not obligate JJPRD to market said Collaboration
Compound in any other market or country. 
Furthermore, JJPRD makes no representation or warranty that the
marketing of a Collaboration Compound shall be the exclusive means by which
JPJRD will participate in any therapeutic field.  In marketing any Collaboration Compound,
JPJRD will use efforts that are consistent with the efforts it uses in
commercializing its own pharmaceutical products (that are similar with regard
to, for example, market potential, price per treatment, patient population and
competitive position).


 


13





















 


3.8           Trademarks.  JJPRD shall select its own trademarks under
which it will market Collaboration Compound and shall solely own such
trademarks.


 


ARTICLE 4

LICENSES


 


4.1           Licensed
Compounds and Corresponding Products.


 


4.1.1        Grants.


 


(a)           Products.  Subject to the terms and conditions of this
Agreement, Sunesis hereby grants to JJPRD a worldwide, royalty-bearing license
under Sunesis’ interest in the applicable Program Technology to make, have
made, use, import, offer for sale, sell, and have sold Collaboration Compounds
and JJPRD Derivative Compounds, alone or as incorporated into a Product, for
any purpose.  Such license shall be
exclusive with respect to all Collaboration Compounds and those JJPRD
Derivative Compounds within the Program Patent Rights that are contained in
Products; and shall, subject to Section 4.3.3 below, be “co-exclusive” with
Sunesis with respect to other JJPRD Derivative Compounds.  It is understood and agreed, that “co-exclusive”
means that Sunesis’ rights with respect to such JJPRD Derivative Compounds are
restricted in accordance Section 4.3.3 below.


 


(b)           Sunesis
Derivative Compounds.  Subject to the
terms and conditions of this Agreement, Sunesis hereby grants JJPRD a
worldwide, non-exclusive license under Sunesis’ interest in the applicable
Program Technology to make, have made, and use Sunesis Derivative Compounds to
conduct research using such Sunesis Derivative Compounds solely in order to
discover, research, and/or develop Collaboration Compounds pursuant to the
Research Program.  Unless terminated
earlier herein, such license shall expire at the end of the Exclusivity Period.


 


(c)           Sunesis
Core Technology.  Subject to the
terms and conditions of this Agreement, Sunesis hereby grants to JJPRD a
worldwide, non-exclusive license under the Sunesis Patent Rights as reasonably
necessary to make, have made, use, import, offer for sale, sell, and have sold
Collaboration Compounds and JJPRD Derivative Compounds, alone or as
incorporated into a Product, for any purpose.


 


4.1.2        Diagnostic
and Veterinary Applications.  Prior
to initiating any development or commercialization activities with respect to
Collaboration Compounds and/or Derivative Compounds (and their corresponding
Products) for diagnostic and/or veterinary applications, which development or
commercialization may otherwise trigger an obligation by JJPRD to make payments
to Sunesis, JJPRD and Sunesis shall negotiate the economic terms under which
JJPRD may be allowed to develop and commercialize Collaboration Compounds and
Derivative Compounds (and their corresponding Products) for such uses.


 


4.2           Sublicenses.


 


4.2.1        Approved
Products.  Subject to the terms and
conditions of this Agreement, JJPRD shall have the right to sublicense the
rights granted in Section 4.1 above, with respect to 


 


14





















 


Products for which JJPRD
has obtained Regulatory Approval for its own account prior to the grant of such
sublicense.


 


4.2.2        Other
Products.  In addition, subject to
Sunesis’ approval (which shall not be withheld unreasonably), JJPRD may
sublicense the rights granted in Section 4.1 above with respect to
Products for which JJPRD has not obtained Regulatory Approval, but for which
JJPRD has initiated Phase III trials, for its own account prior to the
grant of such sublicense.


 


4.2.3        Other
Sublicense Requirements.  Within
thirty (30) days following the execution of any such sublicense, JJPRD shall
provide Sunesis with at least the following information with respect to each
sublicensee: (i) the identity of the Sublicensee; (ii) a description
of the Product, and the rights granted to the Sublicensee; (iii) the
territory in which the Product will be sold; and (iv) other terms thereof,
sufficient to allow Sunesis to verify the amounts due under Articles 5 and 6
below.  Each sublicense granted by JJPRD
shall be consistent with all the terms and conditions of this Agreement, and
subordinate thereto, and JJPRD shall remain responsible to Sunesis for the
compliance of each such Sublicensee with the financial and other obligations
due under this Agreement.  For purposes
of this Section 4.2, it is understood that the grant to a Third Party of
any right to market, sell or distribute a product containing a Licensed
Compound shall be deemed a “sublicense.” 
Except as expressly authorized under Section 4.2.1 or 4.2.2 above,
JJPRD shall not sublicense its rights with respect to a Licensed Compound or
Product to any Third Party.


 


4.3           Derivative
Compounds.


 


4.3.1        Right
for JJPRD to Screen Compounds Outside Field.  It is understood that JJPRD shall have the
right, under Section 4.1 above, to include in its screening libraries
(i) all Collaboration Compounds for any purpose; and (ii) JJPRD
Derivative Compounds, in each of cases (i) and (ii) for the purpose of
identifying and developing JJPRD Derivative Compounds that may be useful
outside the Research Program against biological targets other than the Target,
subject to Section 4.3.2 below.  It
is also understood that milestone payments and royalties may be due on Products
incorporating such JJPRD Derivative Compounds under Article 5 below, if
such JJPRD Derivative Compounds are covered by a Valid Claim within the Program
Patent Rights.


 


4.3.2        Disclosure
of Derivative Compounds.


 


(a)           The
parties agree to provide to each other, on a regular and ongoing basis, with
data and information pertaining to all Derivative Compounds synthesized by a
party prior to the end of the Exclusivity Period, including the chemical
structures of such Derivative Compounds, structure-activity data with respect thereto,
and such other information as the parties agree.


 


(b)           Notwithstanding
the exclusive rights granted to JJPRD under Section 4.1.1 to JJPRD
Derivative Compounds, if a clinical study in humans is initiated by or under
authority of Sunesis using a compound the same in structure to a JJPRD
Derivative Compound and Sunesis notifies JJPRD of such initiation, then unless
JJPRD has initiated a clinical study of such compound in humans and has
previously notified Sunesis of such trial (including identifying the particular
JJPRD Derivative Compound in such trial), JJPRD’s Rights under section 4.1.1
to such 


 


15





















 


compound shall terminate
and Sunesis shall be free to commercialize such compound without restriction.


 


4.3.3        Sunesis
Rights to Use JJPRD Derivative Compounds.


 


(a)           With
respect to any JJPRD Derivative Compound disclosed to Sunesis under Section 4.3.2,
Sunesis shall have the right to make and use such JJPRD Derivative Compound for
research purposes, but shall not have the right to use, and agrees not to use
(or authorize any Third Party to use), such JJPRD Derivative Compound in
connection with the discovery, research and/or development of products in the
Field except pursuant to the Research Program. 
In addition, other than as set forth in this Agreement, Sunesis shall
not license the right to market, sell or distribute any such JJPRD Derivative
Compound to a Third Party for any purpose.


 


(b)           With
respect to any JJPRD Derivative Compound not disclosed to Sunesis under Section 4.3.2,
notwithstanding the exclusive rights granted to JJPRD under Section 4.1.1
to such JJPRD Derivative Compounds, Sunesis shall have the right to research,
develop, make, have made, use, import, sell and have sold compounds the same in
structure to such JJPRD Derivative Compound until such time as JJPRD notifies
Sunesis that JJPRD has initiated clinical studies in humans to such
compound.  This section 4.3.3(b)
shall not be deemed to limit Sunesis rights under section 4.3.2(b).


 


4.3.4        JJPRD
Rights to Use Sunesis Derivative Compounds.


 


(a)           Rights
to Use.  With respect to any Sunesis
Derivative Compound disclosed to JJPRD under Section 4.3.2, it is
understood and agreed that JJPRD shall only use such Sunesis Derivative
Compounds as provided in Section 4.1.1(b). 
It is further understood and agreed that JJPRD shall not have the right
to use, and agrees not to use (or authorize any Third Party to use), such
Sunesis Derivative Compounds except in connection with the discovery, research
and/or development of products in the Field pursuant to the Research
Program.  In addition, other than as set
forth in this Agreement, JJPRD shall not license the right to market, sell or
distribute any such Sunesis Derivative Compounds to a Third Party for any purpose.


 


(b)           Return/Destruction
of Sunesis Derivative Compounds. 
Following the earlier of (i) the end of the Exclusivity Period, or (ii)
termination of this Agreement, JJPRD shall have no further right to use the
Sunesis Derivative Compounds.  Following
the earlier of (i) the end of the Exclusivity Period, or (ii) termination of
this Agreement, JJPRD shall return (or destroy and provide to Sunesis
certification of such destruction) to Sunesis all such compounds.


 


4.3.5        JJPRD
Derivative Compounds Entering Clinical Development.  JJPRD shall be obligated to disclose promptly
to Sunesis when JJPRD has initiated a first clinical trial in humans of a JJPRD
Derivative Compound.  This notification
shall include the identification of the JJPRD Derivative Compound and the
nature of the clinical trial and the potential indication for which development
of such JJPRD Derivative Compound is being carried out.  Upon the occurrence of this notification,
JJPRD shall have the exclusive rights from Sunesis to such JJPRD Derivative
Compound as specified in Section 4.1.1 to make, use and sell that JJPRD
Derivative Compound.


 


16





















 


4.4           Compounds
Covered by Program Patent Rights.  It
is understood and agreed, that with respect to compounds (including but not
limited to Derivative Compounds) claimed within a patent or patent application
within the Program Patent Rights, during the life of such patent or patent
application, only such compounds demonstrated by Sunesis not to meet the Criteria
may be used by Sunesis (or its sublicensees) in its research, development and
commercialization programs outside the Research Program.  Prior to using any such compound in any
program outside the Research Program (whether by itself or with a Third Party),
Sunesis agrees to test each such compound to ascertain whether such compound
meets the Criteria.


 


4.5           Restrictions
on Use for Thiol Proteases. 
Notwithstanding Sections 4.1 and 4.4 above, JJPRD agrees that it
shall not have the right to use, and agrees not to use (or authorize any
Affiliate or Third Party to use) during the term of this Agreement, a
Collaboration Compound or Derivative Compound in connection with the discovery,
research and/or development of products to modulate the activity of any Thiol Protease
(other than a Target).


 


4.6           No
Implied Licenses.  Only the licenses
granted pursuant to the express terms of this Agreement shall be of any legal
force or effect.  No other license rights
shall be created by implication, estoppel or otherwise.


 


ARTICLE 5

PAYMENTS


 


5.1           Research
Program Funding.


 


5.1.1        Research
Program Payment Schedule.  JJPRD
agrees to pay Sunesis research funding for Sunesis’ conduct of the Research
Program quarterly, in advance, in an amount equal to the number of Sunesis FTEs
called for in the Research Plan for the applicable quarter multiplied by the
Sunesis FTE Rate (as defined below).  All
Research Program Funding shall be used only to conduct the Research Program.
The Sunesis FTE Rate for the first two years of the Research Term shall be
equal to [*] U.S. Dollars (US$[*])
per FTE per year.  The Research Plan
shall provide for [*] ([*]) Sunesis FTEs during the first year
of the Research Term, and [*] ([*]) FTEs during the second year of the
Research Term, such FTEs to be allocated as set forth in the Research Plan.


 


(a)           Initial
Research Term.  JJPRD shall pay to
Sunesis [*] U.S. dollars (US$[*]) for the first 12-months of the
Research Program and [*] U.S.
Dollars (US$[*]) for the second
12-months of the Research Program for the FTEs provided above.


 


(b)           Extended
Research Term.  As set forth in Section 2.4,
during any extension of the Research Term beyond the initial two year period,
unless otherwise approved in writing by the JRC, the extended Research Plan
shall provide for a number of Sunesis FTEs per year equal to the number of
Sunesis FTEs for the previous year, such FTEs to be allocated as set forth in 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.


 


17





















 


the extended Research
Plan.  The Sunesis FTE Rate during any
such extended Research Term shall be equal to Sunesis FTE rate for the previous
year plus an increase to reflect annual CPI increase over such year.  It is understood and agreed, that in no event
is JJPRD obligated to extend the Research Term.


 


5.1.2        Quarterly
Payments.  The payments subject to
this Section 5.1 shall be paid in quarterly installments, in advance,
within forty-five days after receipt by JJPRD of a written invoice from
Sunesis.  The initial research payment
shall be due on the Effective Date, and subsequent payments shall be due on or
before each date quarterly thereafter. 
Such payments are non-creditable and non-refundable.


 


5.2           Research
Milestones.


 


5.2.1        Upfront
Payment.  Upon signing of this
Agreement, an upfront technology access fee of [*] U.S. Dollars (US$[*]) will be due to Sunesis on January 1,
2003, and payment shall be made by JJPRD to Sunesis within thirty (30) days
after this date.  JJPRD, at its election,
may make this payment to Sunesis at any time prior to January 31,
2003.  At the request of JJPRD, Sunesis
will provide JJPRD with a written invoice for such amount.  This upfront technology access fee shall be
non-refundable and non-creditable against other amounts due Sunesis hereunder.


 


5.2.2        Research
Milestones Payments.


 


(a)           On
a target-by-target basis, JJPRD shall pay to Sunesis the following amounts
within thirty (30) days following the first achievement of the following
research milestones (as determined by the JRC during the Exclusivity Period,
and by the parties following the Exclusivity Period) with respect to the
Target:


 


	
  Research Milestones

  	
   

  	
  Payment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  The earlier of (i) designation of the first Lead
  Compound for such target by the JRC, or (ii) identification of the first Lead
  Compound to meet Lead Compound Criteria for such target.

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  The
  earlier of (i) designation of the first Development Candidate for such
  target by the JRC, or (ii) identification of the first Lead Compound to
  meet Development Candidate Criteria for such target.

  	
   

  	
  $

  	
  [*]

  	
   

  



 


(b)           Notwithstanding
any other provision of this Agreement, JJPRD shall not initiate GLP toxicity
studies with respect to a Collaboration Compound unless such 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


18





















 


Collaboration Compound
has been designated a Development Candidate for the purpose of payment of
Research Milestone # 2.


 


5.3           Development
Milestones.  On a Licensed
Compound-by-Licensed Compound basis JJPRD shall pay to Sunesis the following
amounts within thirty (30) days following the first achievement by JJPRD
or Sublicensees, as the case may be, of each of the following milestones with
respect to each Licensed Compound (or corresponding Product incorporating such
Licensed Compound) that is covered by a Valid Claim within the Program Patent
Rights:


 


	
  Development Milestones

  	
   

  	
  Payment Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Initiation
  (defined as treatment of at least two (2) human subjects) of Phase I for
  such Licensed Compound in any country:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Initiation
  (defined as treatment of at least five (5) human subjects) of Phase III
  for such Licensed Compound in any country:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Acceptance
  of an MAA by U.S. FDA for such Licensed Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  First
  Acceptance of an MAA in a *Major Country in the European Union for such
  Licensed Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Regulatory
  Approval of an MAA in the United States for such Licensed Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  First
  Regulatory Approval of an MAA in a *Major Country in the European Union for
  such Licensed Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Approval
  of an MAA in Japan for such Licensed Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  



 










*”Major Country” shall
mean any of France, Germany, Italy, Spain or the United Kingdom.


 


5.4           Certain
Terms.


 


5.4.1        Multiple
Licensed Compounds to the Same Target; Multiple Indications.  If a second or subsequent Licensed Compound
against the same Target is commercialized by JJPRD or its Sublicensee, it is
understood that a further full set of milestone payments will become due and
payable at the time(s) set forth in Section 5.3 for such second or
subsequent Licensed Compound.  It is also
understood, however, that once a particular milestone payment under Section 5.3
has been 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


19





















 


paid with respect to a
particular Licensed Compound, that milestone payment will not be due again with
respect to the same Licensed Compound (e.g., if the same Licensed Compound is
tested in clinical trials or approved for more than one disease indication,
development milestones for such Licensed Compound will not have to be paid more
than a total of one time).


 


5.4.2        Credit
for Discontinued Compounds.  The
payments set forth in Section 5.3 above shall be due once with respect to
each Licensed Compound; provided, however, if JJPRD ceases all clinical
development of a particular Licensed Compound (“Discontinued Compound”) after
having made one or more payments under Section 5.3 above on the
achievement of a particular milestone(s) by such Licensed Compound, there shall
be no payment due upon the accomplishment of the same milestone(s) with respect
to the next Licensed Compound (the “Replacement Compound”) directed to the “Same
Indication” as the Discontinued Compound. 
For purposes of the foregoing, it is understood and agreed that “Same
Indication” shall mean at least one common disease indication being pursued for
the Replacement Compound as for the Discontinued Compound.


 


5.4.3        Accrued
Milestones.  If a subsequent research
milestone for a target under Section 5.2 above, or a subsequent
development milestone for a Licensed Compound under Section 5.3 above, is
achieved with respect to such target or Licensed Compound (respectively) before
a prior research milestone listed under Section 5.2 or development
milestone listed under Section 5.3 for such target or Licensed Compound,
then the earlier milestone payments shall then be due with respect to such
target or Licensed Compound, as the case may be.  For such purposes, “subsequent” and “prior”
shall refer to the numerical order of such milestone, as indicated next to such
milestone in Sections 5.2 and 5.3 above.


 


5.4.4        Acceptance.  For purposes of this Article 5, “acceptance”
of an MAA shall mean (i) in the United States, that the FDA has accepted
such MAA for substantive review and not rejected such filing for substantive
review for any reason; and (ii) in the European Union, that the health
regulatory authority of a country of the European Union, or the European
Medicines Evaluation Agency (or a comparable agency of the EU), has validated
or otherwise accepted such MAA for substantive review and not rejected such
filing for substantive review for any reason.


 


5.4.5        Reports.  Within ten (10) business days of the
occurrence of any event which would trigger a milestone payment according to Section 5.2
or 5.3, JJPRD shall inform Sunesis of such occurrence in writing.


 


20





















 


5.5           Royalties.


 


5.5.1        Products.  JJPRD shall pay to Sunesis a royalty on
annual Net Sales of products incorporating Licensed Compounds on a
Product-by-Product basis as follows:


 


	
  Annual Net Sales

  	
   

  	
  Royalty on Net Sales

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Portion of Annual Net Sales of such Product up to
  and including $[*]

  	
   

  	
  [*]%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Portion of Annual Net Sales of such Product in
  excess of $[*]
  and up to and including $[*]

  	
   

  	
  [*]%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Portion of Annual Net Sales of such Product in
  excess of $[*]

  	
   

  	
  [*]%

  	
   

  



 


For
purposes of the foregoing, “annual Net Sales” shall mean, for a particular
Product, the worldwide Net Sales of such Product for human therapeutic or
prophylactic use for the particular calendar year.  In addition, it is understood for the
purposes of determining annual Net Sales of a Product, that all formulations
and dosage forms of the same active ingredients shall be deemed the same “Product,”
but Products with different active ingredients shall be deemed different
Products.  It is understood and agreed
that royalties shall only be due on Products covered by a Valid Claim within
the Program Patent Rights.


 


5.5.2        Royalty
Term.  The royalties due pursuant to
this Section 5.5 shall be payable on a country-by-country and
Product-by-Product basis until the date which is the later of: (i) the
expiration of the last to expire of any Valid Claim within the Program Patent
Rights covering the Licensed Compound incorporated in such Product, in such
country (such expiration to occur only after expiration of extensions of any
nature to such patents which may be obtained under applicable statutes or
regulations in the respective countries, such as the Drug Price Competition and
Patent Term Restoration Act of 1984 in the U.S.A. and similar patent extension
laws in other countries), or (ii) ten (10) years following the first
commercial sale of such Product in such country.


 


5.5.3        Generic
Equivalents.  If in any royalty
reporting period: (i) a Third Party commences selling a product in a country
which is a Generic Equivalent of the Collaboration Compound being sold by JJPRD
in such country and (ii) such Unlicensed Unit Sales (as defined below) in units
of the Generic Equivalent in such country amount to at least [*] percent ([*]%) of JJPRD’s Unit Sales (as defined below) in units of the
Collaboration Compound in such country in the same royalty reporting period,
and (iii) such Unlicensed Unit Sales in units of the Generic Equivalent in such
country are having a material adverse effect on JJPRD’s sales of such
Collaboration Compound in such country, then the royalty rate applied in such
country with respect to such Collaboration Compound shall be reduced by [*] percent ([*]%), as long as the Unlicensed Unit Sales in units of such
Generic Equivalent amount to at least [*] percent ([*]%) of JJPRD’s Unit


 










[*]           Certain
information on this page has been redacted and filed separately with the Securities
and Exchange Commission.  Confidential
treatment has been requested with respect to the omitted portions.


 


21





















 


Sales in units of the
Collaboration Compound in such country in the same royalty reporting
period.  Notwithstanding the foregoing,
it is understood and agreed that JJPRD shall not be entitled to such reduction
in royalty in countries in which JJPRD directed Sunesis not to file, or JJPRD
elected not to maintain, a Program Patent covering such Collaboration Compound.


 


For
purposes of this Section 5.5.3 “Unlicensed Unit Sales” and “JJPRD Unit
Sales” shall be deemed to mean the total grams of the Collaboration Compound
contained in the Third Party product (irrespective of dosage form) and the Collaboration
Compound (irrespective of dosage form), respectively, as reflected on the label
of each such Collaboration Compound and Third Party product; and (ii)
Unlicensed Unit Sales shall be determined by the sales reports of IMS America
Ltd. of Plymouth Meeting, Pennsylvania (“IMS”) or any successor to IMS or any
other independent sales auditing firm selected by JJPRD and reasonably
acceptable to Sunesis.  JJPRD shall bear
all costs of providing Sunesis with such information.  If JJPRD is entitled to a royalty reduction
based on Unlicensed Unit Sales pursuant to this Section 5.5.3 for any
royalty reporting period, JJPRD shall submit the sales report of IMS or such
other independent firm, as applicable, for the relevant royalty reporting
period to Sunesis, together with JJPRD’s or its Sublicensees’ sales report for
the relevant royalty reporting period submitted pursuant to Section 6.1.


 


5.5.4        Third
Party Patents.  If: (i) a patent or
patents of a Third Party should be in force in any country during the term of
this Agreement covering the practice of the Sunesis Core Technology as licensed
under Section 4.1.1(c) with respect to the manufacture, use or sale of any
Collaboration Compound, and (ii) it should prove in JJPRD’s reasonable
judgment, after consultation with Sunesis, impractical or impossible for JJPRD
or any Affiliate or Sublicensee to continue such activity or activities
licensed hereunder without obtaining a royalty bearing license from such Third
Party under such patent or patents in said country, and (iii) the royalty paid
to such Third Party is directed to the practice of rights granted to JJPRD
under the Sunesis Core Technology pursuant to Section 4.1.1 with respect
to a Collaboration Compound, and (iv) the practice of such Sunesis Core
Technology as practiced alone would require such license (whether or not JJPRD
is practicing such Sunesis Core Technology with any other technology owned or
controlled by JJPRD), then JJPRD shall be entitled to a credit against the
royalty payments due under Section 5.5 with respect to the same
Collaboration Compound in such country of an amount equal to [*] percent ([*]%)
of the royalty paid to such Third Party for such Collaboration Compound in such
country, such credit not to exceed [*] percent ([*]%) of the royalty otherwise
due under this Agreement for such Collaboration Compound in such country,
arising from the practice of such Sunesis Core Technology with respect to the
manufacture, use or sale of the Collaboration Compound in said country.


 


5.5.5        Compulsory
License.  If at any time and from
time to time (i) a Third Party in any country shall, under the right of a
compulsory license granted or ordered to be granted by a competent governmental
authority, manufacture, use or sell any Collaboration Compound, with 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


22





















 


respect to which
royalties would be payable pursuant to Section 5.5.1 hereof, and (ii) such
Third Party Net Sales of such Collaboration Compound in a country amount to at
least [*] percent ([*]%) of JJPRD’s Net Sales of such Collaboration Compound in
such country in the same royalty reporting period, (iii) and the sales of such
Third Party of such Collaboration Compound in such country are having a
material adverse effect on JJPRD’s sales of such Collaboration Compound in such
country, then JJPRD may reduce the royalty on sales in such country of such
Collaboration Compound, to an amount equal to [*] percent ([*]%) of the amount
that would otherwise be payable to Sunesis in such country under provisions of Section 5.5.1,
as long as the Third Party Net Sales of such Collaboration Compound amount to
at least [*] percent ([*]%) of the JJPRD’s Net Sales of such Collaboration
Compound in such country in the same royalty reporting period.  Concurrent with the grant of such compulsory
license, JJPRD shall provide Sunesis with a copy of such license.


 


5.5.6        Royalty
Floor.  Notwithstanding the above,
the royalty due to Sunesis under Section 5.5 shall never be reduced by
more than [*] percent ([*]%) of the amount reflected in Section 5.5.1.


 


ARTICLE 6

PAYMENTS, BOOKS AND RECORDS


 


6.1           Royalty
Reports and Payments.  After the
first sale of a Product on which royalties are payable by JJPRD or Sublicensees
hereunder, JJPRD shall make quarterly written reports to Sunesis within sixty
(60) days after the end of each calendar quarter, stating in each such report,
separately for JJPRD and Sublicensee, the number, description, and aggregate
Net Sales, by country, of each such Product sold during the calendar quarter
upon which a royalty is payable under Section 5.5 above.  Concurrently with the making of such reports,
JJPRD shall pay to Sunesis royalties due at the rates specified in Section 5.5.


 


6.2           Payment
Method.  All payments due under this
Agreement shall be made by bank wire transfer in immediately available funds to
a bank account designated by Sunesis. 
All payments hereunder shall be made in U.S. dollars.  In the event that the due date of any payment
subject to Article 5 hereof is a Saturday, Sunday or national holiday,
such payment may be paid on the following business day.  Any payments that are not paid on the date
such payments are due under this Agreement shall bear interest to the extent
permitted by applicable law at the prime rate as reported by the Chase
Manhattan Bank, New York, New York, on the date such payment is due.


 


6.3           Place
of Royalty Payment; Currency Conversion. 
In the case of sales outside the United States, royalty payments by
JJPRD to Sunesis shall be converted to Dollars in accordance with JJPRD’s
current customary and usual procedures for calculating same which are the
following: the rate of currency conversion shall be calculated using a simple
monthly period average of the end “spot rates” provided by Brown Brothers
Harriman, 59 Wall Street, NY, NY  10005,
for each quarter, or if such rates are not available, the same computation
using the spot rates as published by a 


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


23





















 


leading United States
commercial bank for such accounting period. 
These methods of conversion are consistent with JJPRD’s current
accounting methods.  JJPRD shall give
Sunesis prompt written notice of any proposed changes to JJPRD’s customary and
usual procedures for currency conversion, which shall only apply after such
notice has been delivered to and approved by Sunesis, provided that such
changes continue to maintain a set methodology for currency conversion.


 


6.4           Records;
Inspection.  JJPRD shall keep, and
shall ensure that its Sublicensees keep, complete, true and accurate books of
account and records for the purpose of determining the amounts payable under
this Agreement.  Such books and records
shall be kept at the principal place of business of JJPRD for at least three
(3) years following the end of the calendar quarter to which they pertain.  Such records will be open for inspection by a
public accounting firm to whom JJPRD has no reasonable objection, solely for
the purpose of determining the payments to Sunesis hereunder.  Such inspections may be made no more than
once each calendar year, at reasonable times and on reasonable notice.  Inspections conducted under this Section 6.4
shall be at the expense of Sunesis, unless a variation or error producing an
increase exceeding [*] percent ([*]%) of the amount stated for any period
covered by the inspection is established in the course of any such inspection,
whereupon all reasonable costs relating to the inspection for such period and
any unpaid amounts that are discovered will be paid promptly by JJPRD together
with interest, at the rate specified in Section 6.2,thereon from the date
such payments were due.  The interest available
to Sunesis pursuant to this Section 6.4 shall in no way limit any other
remedies available to Sunesis.


 


6.5           Withholding
Taxes.  If laws or regulations
require that taxes be withheld from any amounts payable hereunder, the paying
party will (i) deduct those taxes from the otherwise remittable royalty, (ii)
timely pay the taxes to the proper taxing authority, and (iii) send proof of
payment to the other party within thirty (30) days of receipt of confirmation
of payment from the relevant taxing authority.


 


ARTICLE 7

DILIGENCE


 


7.1           Diligence.  JJPRD shall use commercially reasonable
efforts consistent with its normal business practices to expeditiously develop
and market Products.  Such efforts shall
include those efforts that JJPRD and its Affiliates would normally apply to so
develop and market in such manner a product of its own that is directed at
indications with a similar market size.


 


7.2           Reports.  JJPRD agrees to keep Sunesis reasonably
advised with respect to the pre-clinical and clinical development of such
Products.  Without limiting the
foregoing, JJPRD shall provide Sunesis, at least once quarterly, a written
summary of the pre-clinical and clinical development activities and results
with respect to each Product.


 










[*]           Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


24





















 


7.3           Reversion
of Rights.


 


7.3.1        Notice
of Termination.  If during any
consecutive six (6) month period following the end of the Research Term, but
prior to obtaining the first Regulatory Approval for any Product, JJPRD fails
to maintain an active program with respect to Products directed to the Target,
then Sunesis shall have the right to terminate this Agreement, as provided
below, by notifying JJPRD in writing.  As
used herein, an “active program” shall include a reasonable allocation of
resources to the ongoing discovery, and/or the preclinical and clinical
development, of a Product directed to the Target using an appropriate
complement of internal staffing and/or staffing from a contract research
organization, sufficient to identify a Development Candidate and to develop and
obtain Regulatory Approval in major markets for a Product directed to the
Target based on such Development Candidate.


 


(a)           JJPRD
Rights Upon Receipt of Notice of Termination.  Any termination shall become effective within
sixty (60) days after written notice thereof was provided to JJPRD by Sunesis
pursuant to this Section 7.3.1, unless within such sixty (60) day period:


 


(i)          JJPRD cures such breach
or default by resuming an active program with respect to Products directed to
the Target and providing Sunesis with a written plan, reasonably acceptable to
Sunesis, with respect to the activities to be conducted under such active
program; or


 


(ii)         to the extent JJPRD has
initiated Phase III clinical testing for a particular Product directed to the
Target, JJPRD requests in writing, and obtains, Sunesis’ written consent (such
consent not to be unreasonably withheld) to sublicense its rights to such
Product to a Third Party, and within one hundred and twenty (120) days
following such written consent JJPRD enters into a written agreement with a
Third Party sublicensing its rights to such Product; or


 


(iii)        JJPRD elects to pay, and
pays, to Sunesis a development extension fee equal to twenty-five percent (25%)
of the next development milestone that would be due under Section 5.3
(upon payment of such fee, Sunesis will grant JJPRD an additional six (6)
months in which to resume an active program with respect to Products directed
to the Target, such six (6) month extension commencing upon the effective date
of payment of such extension fee); or


 


(iv)       JJPRD, in good faith,
disputes such breach or default by providing to Sunesis evidence of an active
program with respect to Products directed to the Target.


 


25





















 


It is understood
and agreed that JJPRD rights as provided under Section 7.3.1(a)(i) above,
shall be exercisable only once during any twenty-four (24) consecutive month
period.


 


(b)           Disputes
Regarding Active Programs.  In the
event the parties are unable to resolve a dispute between the parties arising
under Section 7.3.1(a)(iv) within thirty (30) days after receipt of the
written notice of the dispute, such matter may, at either party’s written
request, be submitted to binding arbitration pursuant to Article 13.  If an arbitrator, pursuant to Section 13.1,
does not agree with JJPRD’s stated position with respect to a dispute under Section 7.3.1(a)(iv),
then Sunesis shall have the right to terminate this Agreement within ten (10)
business days following completion of such arbitration, unless within such ten
(10) business day period JJPRD elects to pay, and pays, to Sunesis a
development extension fee equal to twenty-five percent (25%) of the next
development milestone that would be due under Section 5.3.  In the event JJPRD makes such election, the
payment of such fee shall be made within thirty (30) days thereafter.  Upon notice of election of payment of such
fee within such ten (10) business day period, Sunesis will grant JJPRD an
additional six (6) months in which to resume an active program with respect to
Products directed to the Target, such six (6) month extension commencing upon
the notice of election of payment of such extension fee.


 


(c)           Reservation
of Rights.  It is understood and
agreed that Sunesis rights under Section 7.3.1(a) and (b) shall continue
in full force and effect, such that (i) following any such resumption of an
active program by JJPRD under Section 7.3.1(a)(i), or (ii) following
sublicense of rights under Section 7.3.1(a)(ii), or (iii) following any
extension granted under Section 7.3.1(a)(iii) or 7.3.1(b), if during any
consecutive six (6) month period prior to JJPRD obtaining the first Regulatory
Approval for any Product, JJPRD (or its Sublicensee, as the case may be) fails
to maintain an active program with respect to Products directed to the Target,
then Sunesis shall have the right to terminate this Agreement, as provided in Section 7.3.1(a),
by notifying JJPRD in writing.


 


(d)           Credit
of Extension Fees.  With respect to
any extension fees paid by JJPRD to Sunesis pursuant to Section 7.3.1(a)(iii)
or 7.3.1(b), each such extension fee shall only be creditable against the
payment that would be due upon achievement of the same milestone from which
such extension fee was calculated.


 


(e)           Return
of Collaboration Compound and Products thereof.  In the event of a termination of this
Agreement under this Section 7.3.1 or Section 12.3 below, all
Collaboration Compounds and Products thereof shall be returned to Sunesis
within thirty (30) day of the effective date of such termination.


 


7.3.2        Grant
Back.  Subject to Section 7.3.4,
if the Agreement is terminated pursuant to Section 7.3.1 above or Section 12.3
below, JJPRD shall grant and hereby grants to Sunesis an exclusive, worldwide,
irrevocable license, including the right to grant and authorize sublicenses,
under any patent rights owned or controlled by JJPRD, to make, have made, use,
import, offer for sale and sell Licensed Compounds, alone or as incorporated in
a Product, for any purpose.  Any Licensed
Compounds that were in development hereunder that are returned to Sunesis and
licensed back to Sunesis under this Section 7.3.2, shall be considered “Returned
Compounds”.


 


26










 










 


7.3.3                        Regulatory
Filings.  If the Agreement is
terminated pursuant to Section 7.3.1 above or Section 12.3 below,
JJPRD shall promptly provide Sunesis with all data and information generated or
acquired by or on behalf of JJPRD or its Affiliates with respect to the
Licensed Compound and any Product, and to assign to Sunesis all regulatory
filings made by JJPRD with respect to such Returned Compounds, including all
correspondence pertaining thereto.  JJPRD
agrees to reasonably cooperate with Sunesis to facilitate a smooth and prompt
transition of the development of such Returned Compounds to Sunesis or its
designee.


 


7.3.4                        Reverse
Royalty.  Sunesis agrees to pay to
JJPRD a reverse royalty on aggregate “net sales” by Sunesis or its sublicensees
of Returned Compounds returned to Sunesis by JJPRD pursuant to this Section 7.3
based on the development status of the Returned Compound at the time of its
return by JJPRD, to the extent the manufacture, sale or use of such Returned
Compound is covered by a Valid Claim within the Program Patents Rights.


 


	
  Stage of
  Returned Compound

  	
   

  	
  Reverse Royalty

  on Net Sales

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Prior to initiation of first Phase I of the Returned
  Compound

  	
   

  	
  [*]%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  After initiation of first Phase I, but prior to
  initiation of first Phase II, of the Returned Compound

  	
   

  	
  [*]%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  After initiation of first Phase II, but prior to
  initiation of first Phase III (i.e. Pivotal Quality clinical study), of the
  Returned Compound

  	
   

  	
  [*]%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  After initiation of first Phase III, but prior to
  first Regulatory Approval, of the Returned Compound

  	
   

  	
  [*]%

  	
   

  



 


For such purposes,
“net sales” shall be calculated in the same manner as defined in Section 1.18
above, substituting “Sunesis” for each reference to “JJPRD” in such Section,
and substituting “Returned Compound” for each reference to “Product” therein;
similarly, “sublicensees” shall be defined in the same manner as defined in Section 1.29
above, substituting “Returned Compound” for each reference to “Product”
therein.  Such royalty shall be subject
to the same terms as apply to JJPRD under Sections 5.5.2, 5.5.3, and 5.5, mutatis mutandis.


 


ARTICLE 8

INTELLECTUAL PROPERTY


 


8.1                                 Ownership;
Disclosure.


 


8.1.1                        Assignment.  All right, title and interest in and to the
Program Technology, and in any inventions or improvements made by or under
authority of either party relating to Sunesis


 










[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


27





















 


Core Technology, shall,
as between the parties, be owned solely by Sunesis.  JJPRD hereby assigns to Sunesis all of its
rights in and to such Program Technology and in such inventions and
improvements relating to Sunesis Core Technology.


 


8.1.2                        Disclosure.  Each party shall promptly disclose to the
other, inventions within the Program Technology made in connection with this
Agreement; provided that Sunesis shall not be obligated to so disclose any
technology related to the Sunesis Core Technology except such Sunesis Core
Technology which is reasonably necessary to perform the Research Program.


 


8.2                                 Patent
Prosecution.


 


8.2.1                        Program
Technology Claiming Licensed Compounds. 
Sunesis shall have the right, at JJPRD’s expense, to control the
preparation, filing, prosecution and maintenance of patent applications and
patents directed to Program Technology using patent counsel selected by
Sunesis; provided, that such patent counsel is mutually acceptable to
JJPRD.  As used herein, “prosecution”
shall include interferences, re-examinations, reissues, oppositions and the
like.


 


8.2.2                        Decisions.  Sunesis reserves the right to make final
decisions pertaining to the preparing, filing, prosecuting and maintaining of
patent applications and patents directed to the Program Technology.  Notwithstanding the foregoing, with respect
to foreign filing of any patent applications claiming one or more Licensed
Compounds, other than filings in those countries listed in Exhibit 8.2.2,
Sunesis shall consult with JJPRD and file only in those countries designated by
JJPRD.


 


8.3                                 Cooperation.  Sunesis will promptly provide to JJPRD, as
JJPRD reasonably request, all information and copies of correspondence
pertaining to Sections 8.2.1 and 8.2.2. 
Likewise, JJPRD agrees to cooperate fully with Sunesis, and to provide
Sunesis with such information as Sunesis reasonably requests, to facilitate
Sunesis’ filing, prosecution and maintenance of patent applications and patents
directed to the Program Technology.


 


8.4                                 Enforcement.


 


8.4.1                        Notice.  Each party shall promptly notify the other of
any knowledge it acquires of any potential infringement of the Program
Technology by the manufacture, sale or use of a Collaboration Compound by a
Third Party (an “Infringement”).


 


8.4.2                        Enforcement.  JJPRD shall have the initial right, but not
the obligation, to take reasonable legal action to enforce against
Infringements by Third Parties at its sole cost and expense.  If, within six (6) month following receipt of
such notice from Sunesis, JJPRD fails to take such action to halt a
commercially significant Infringement, Sunesis (or its designee) shall, in its
sole discretion, have the right, at its sole expense, to take such action.


 


8.4.3                        Cooperation;
Costs and Recoveries.  If a party
(the “Controlling Party”) brings an action with respect to an Infringement in
accordance with Section 8.4.2 above (an “Infringement Action”), then the
other party (the “Cooperating Party”) shall cooperate as reasonably requested,
at such Controlling Party’s expense, in the pursuit of such Infringement
Action, including if necessary by joining as a nominal party to the
Infringement Action.  In any case, the
Cooperating Party shall


 


28





















 


have the right, even if
not required to be joined, to participate in such Infringement Action with its
own counsel at its own expense.  The
costs and expenses of the Infringement Action shall be the responsibility of
the Controlling Party, and any damages or other monetary rewards or settlement
payments received by the Controlling Party shall first be applied to reimburse
the Controlling Party’s out-of-pocket expenses directly attributed to the
Infringement Action, and the remainder shall be shared as follows: [*] percent ([*]%) to the Controlling Party and [*] percent ([*]%)
to the Cooperating Party.


 


8.5                                 Infringement
Claims.  If the manufacture, sale or
use of any Licensed Compound pursuant to this Agreement results in any claim,
suit or proceeding alleging patent infringement against Sunesis or JJPRD ( or
Sublicensees), such party shall promptly notify the other party hereto in
writing setting forth the facts of such claim in reasonable detail.  Except with respect to litigation involving
Sunesis Core Technology, JJPRD shall have the exclusive right to defend and
control the defense of any such claim, suit or proceeding, at its own expense,
using counsel of its own choice, subject to Article 11 below; provided,
however, JJPRD shall not enter into any settlement which admits or concedes
that any patent or application within the Program Patent Rights is invalid or
unenforceable, without the prior written consent of Sunesis.  The defendant shall keep the other party
hereto reasonably informed of all material developments in connection with any
such claim, suit or proceeding.


 


8.6                                 Notices
Relating to the Act.  Sunesis shall
immediately notify JJPRD of (a) the issuance of each U.S. Patent included among
the Program Patent Rights covering a Product, giving the date of issue and
patent number for each such patent; and (b) communications pertaining to any
patent included among the Program Patent Rights covering a Product, which
Sunesis receives as patent owner pursuant to the Drug Price Competition and
Patent Term Restoration Act of 1984 (hereinafter the “Act”), including but not
necessarily limited to notices pursuant to §§101 and 103 of the Act from
persons who have filed an abbreviated NDA (“ANDA”) or a “paper” NDA.


 


8.7                                 Authorization
Relating to Patent Term Extension. 
Sunesis hereby authorizes JJPRD to: (a) provide in any NDA a list of
patents which includes Program Patent Rights that relate to such Product and
such other information as JJPRD believes is appropriate; (b) commence suit for
infringement of Program Patent Rights covering a Product under § 271(e)
(2) of Title 35 of the United States Code; and (c) exercise any rights that may
be exercisable by Sunesis as patent owner under the Act, including without
limitation, applying for an extension of the term of any patent included in
Program Patent Rights covering a Product. 
In the event that applicable law in any country provides for the
extension of the term of any patent included among Program Patent Rights
covering a Product, such as under the U.S. Drug Price Competition and Patent
Term Restoration Act of 1984, the Supplementary Certificate of Protection of
the Member States of the European Union and other similar measures in any other
country, Sunesis shall apply for and use its reasonable efforts to obtain such
an extension or, should the law require JJPRD to so apply, Sunesis hereby 


 










[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


29





















 


gives permission to JJPRD
to do so.  JJPRD and Sunesis agree to
cooperate with one another in obtaining such extension.  Sunesis agrees to cooperate with JJPRD or its
Sublicensee, as applicable, in the exercise of the authorization granted herein
and will execute such documents and take such additional action as JJPRD may
reasonably request in connection therewith, including, if necessary, permitting
itself to be joined as a party in any suit for infringement brought by JJPRD
hereunder.


 


ARTICLE 9

CONFIDENTIALITY


 


9.1                                 Confidential
Information.  Except as otherwise
expressly provided herein, the parties agree that the receiving party shall
not, except as expressly provided in this Article 9, disclose to any Third
Party or use for any purpose any confidential information furnished to it by
the disclosing party hereto pursuant to this Agreement (“Confidential
Information”), except to the extent that it can be established by the receiving
party by competent proof that such information:


 


(a)                                  was
already known to the receiving party, other than under an obligation of
confidentiality, at the time of disclosure;


 


(b)                                 was
generally available to the public or otherwise part of the public domain at the
time of its disclosure to the receiving party;


 


(c)                                  became
generally available to the public or otherwise part of the public domain after
its disclosure and other than through any act or omission of the receiving
party in breach of this Agreement;


 


(d)                                 was
independently developed by the receiving party as demonstrated by documented
evidence prepared contemporaneously with such independent development; or


 


(e)                                  was
disclosed to the receiving party, other than under an obligation of
confidentiality, by a Third Party who had no obligation to the disclosing party
not to disclose such information to others.


 


 Program Technology shall be deemed “Confidential
Information” of Sunesis and JJPRD.


 


9.2                                 Permitted
Use and Disclosures.  Each party
hereto may use or disclose Confidential Information disclosed to it by the
other party to the extent such use or disclosure is reasonably necessary
(a) in the exercise of the rights granted to it hereunder, or (b) in
prosecuting or defending litigation, complying with applicable governmental
laws, regulations or court order or otherwise submitting information to tax or
other governmental authorities; provided that if a party is required by law to
make any such disclosure, other than pursuant to a confidentiality agreement,
it will give reasonable advance notice to the other party of such disclosure
and, save to the extent inappropriate in the case of patent applications or the
like, will use its reasonable efforts to secure confidential treatment of such
information in consultation with the other party prior to its disclosure
(whether through protective orders or otherwise) and disclose only the minimum
necessary to comply with such requirements. 
Subject to the exclusive licenses granted to JJPRD under Section 4.1
above, and to the restrictions of Section 4.3.3 above, it is understood
and agreed that Sunesis may use and disclose the Program Technology in the
course of its business, other than JJPRD Derivative 


 


30





















 


Compounds disclosed by
JJPRD to Sunesis hereunder or Collaboration Compounds.  Upon any termination of this Agreement, such
restrictions on Sunesis shall terminate.


 


9.3                                 Nondisclosure
of Terms.  Each of the parties hereto
agrees not to disclose the terms of this Agreement to any Third Party without
the prior written consent of the other party hereto, which consent shall not be
unreasonably withheld, except to such party’s attorneys, advisors, investors
and others on a need to know basis under circumstances that reasonably ensure
the confidentiality thereof, or to the extent required by law.  Notwithstanding the foregoing, the parties
have agreed upon a press release announcing the execution of this Agreement, a
copy of which is attached hereto as Exhibit 9.3.  After signing of this Agreement by the
parties, Sunesis may issue for public disclosure the press release attached
hereto as Exhibit 9.3; thereafter, Sunesis and JJPRD may each disclose to Third
Parties the information contained in such press release without the need for
further approval by the other.  Without
limiting the foregoing, both parties shall have the right to make public
disclosures (including a Q&A outline for use in responding to inquiries about
this Agreement) of the progress of the Research Program and the achievement of
milestones and the payment of fees (but not the amounts) with respect to
Products, provided that: (i) the non-disclosing party approves of the language
of such disclosure, which approval shall not be unreasonably withheld, and (ii)
the non-disclosing party is not required to participate in such disclosure
..  In the event of any termination of
this Agreement under Article 12, the parties shall agree on an
announcement of such termination provided that the parties shall use reasonable
efforts to fashion a mutually acceptable announcement.


 


9.4                                 Publication.  Any manuscript by Sunesis or JJPRD describing
scientific results pertaining to any Collaboration Compound to be published or
publicly disclosed, shall be subject to the prior review of the other party at
least thirty (30) days prior to submission. 
Further, to avoid loss of patent rights as a result of premature public
disclosure of patentable information, the receiving party shall notify the
disclosing party in writing within thirty (30) days after receipt of any
disclosure whether the receiving party desires to file a patent application on
any invention disclosed in such scientific results.  In the event that the receiving party desires
to file such a patent application, the disclosing party shall withhold
publication or disclosure of such scientific results until the earlier of
(i) a patent application is filed thereon, (ii) the parties determine
after consultation that no patentable invention exists, or (iii) one hundred
eighty (180) days after receipt by the disclosing party of the receiving party’s
written notice of the receiving party’s desire to file such patent application,
or such other period as is reasonable for seeking patent protection.  Further, if such scientific results contain
the information of the other party that is subject to use and nondisclosure
restrictions under this Article 9, the publishing party agrees to remove
such information from the proposed publication or disclosure.  Following the filing of any patent
application within the Program Technology, in the eighteen (18) month period
prior to the publication of such a patent application, neither party shall make
any written public disclosure regarding any invention claimed in such patent
application without the prior consent of the other party.


 


ARTICLE 10

REPRESENTATIONS AND WARRANTIES


 


10.1                           Warranty.  Each party represents and warrants on its own
behalf and on behalf of its Affiliates that: 
(i) it has the legal power and authority to enter into this
Agreement and to perform all of its obligations hereunder; (ii) this
Agreement is a legal and valid obligation binding upon it and


 


31





















 


enforceable in accordance
with its terms; and (iii) it has not previously granted, and during the
term of this Agreement will not knowingly make any commitment or grant, any
rights which are in conflict in any material way with the rights and licenses
granted herein.


 


10.2                           Additional
Warranty of Sunesis.  In addition, Sunesis
represents and warrants that, to the best of its knowledge as of the Effective
Date, the practice of the Sunesis Core Technology in general is not dominated
by patent rights of a Third Party. 
Sunesis also represents and warrant that, to best of its knowledge as of
the Effective Date, Sunesis does not own or control any patents and/or patent
applications claiming a Collaboration Compound. 
It is understood that Sunesis makes no representation or warranty with respect
to any patent rights of Third Parties relating to the Target.


 


10.3                           Disclaimer.  JJPRD AND SUNESIS SPECIFICALLY DISCLAIM ANY
GUARANTEE THAT THE RESEARCH PROGRAM WILL BE SUCCESSFUL, IN WHOLE OR IN
PART.  THE FAILURE OF THE PARTIES TO
SUCCESSFULLY DEVELOP LEAD COMPOUNDS, DERIVATIVE COMPOUNDS, DEVELOPMENT
CANDIDATES OR PRODUCTS WILL NOT CONSTITUTE A BREACH OF ANY REPRESENTATION OR
WARRANTY OR OTHER OBLIGATION UNDER THIS AGREEMENT.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
THIS AGREEMENT, SUNESIS AND JJPRD MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT
TO THE PROGRAM TECHNOLOGY, JJPRD TECHNOLOGY, SUNESIS CORE TECHNOLOGY, LICENSED
COMPOUNDS, PRODUCTS OR INFORMATION DISCLOSED HEREUNDER, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
VALIDITY OF ANY PROGRAM TECHNOLOGY, PATENTED OR UNPATENTED, OR NONINFRINGEMENT
OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.


 


ARTICLE 11

INDEMNIFICATION


 


11.1                           JJPRD.  JJPRD agrees to indemnify, defend and hold
Sunesis and their respective directors, officers, employees, agents and their
respective successors, heirs and assigns (the “Sunesis Indemnitees”) harmless
from and against any losses, costs, claims, damages, liabilities or expense
(including reasonable attorneys’ and professional fees and other expenses of
litigation) (collectively, “Liabilities”) arising, directly or indirectly out
of or in connection with Third Party claims, suits, actions, demands or
judgments, relating to (i) any Products or Licensed Compounds developed,
manufactured, used, sold or otherwise distributed by or on behalf of JJPRD, its
Affiliates or Sublicensees or other designees (including, without limitation,
product liability and patent infringement claims other than claims relating to
Sunesis Core Technology, for which Sunesis shall be solely responsible),
(ii) the Targets which are involved in the conduct of the Research Program
or the making or use of modulators of such Targets, and (iii) any breach
by JJPRD of the representations and warranties made in this Agreement, except,
in each case, to the extent such Liabilities result from a material breach of
this Agreement by Sunesis, gross negligence or intentional misconduct of
Sunesis.


 


32





















 


11.2                           Sunesis.  Sunesis agrees to indemnify, defend and hold
JJPRD and their respective directors, officers, employees, agents and their
respective heirs and assigns (the “JJPRD Indemnitees”) harmless from and
against any losses, costs, claims, damages, liabilities or expense (including
reasonable attorneys’ and professional fees and other expenses of litigation)
(collectively, “Liabilities”) arising, directly or indirectly out of or in
connection with Third Party claims, suits, actions, demands or judgments,
relating to (i) any product incorporating a Returned Compound developed,
manufactured, used, sold or otherwise distributed by or on behalf of Sunesis,
its Affiliates, licensees or other designees as permitted under this Agreement
(including, without limitation, product liability and patent infringement
claims other than claims relating to JJPRD Technology, for which JJPRD shall be
solely responsible)), and (ii) any breach by Sunesis of its
representations and warranties made in this Agreement, except, in each case, to
the extent such Liabilities result from a material breach of this Agreement by
JJPRD, gross negligence or intentional misconduct of JJPRD.


 


11.3                           Procedure.  In the event that any Indemnitee (either a
JJPRD Indemnitee or a Sunesis Indemnitee) intends to claim indemnification
under this Article 11 it shall promptly notify the other party in writing
of such alleged Liability.  The
indemnifying party shall have the right to control the defense thereof with
counsel of its choice as long as such counsel is reasonably acceptable to
Indemnitee; provided, however, that any Indemnitee shall have the right to
retain its own counsel at its own expense, for any reason, including if
representation of any Indemnitee by the counsel retained by the indemnifying
party would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party reasonably represented by such
counsel in such proceeding.  The affected
Indemnitee shall cooperate with the indemnifying party and its legal
representatives in the investigation of any action, claim or liability covered
by this Article 11.  The Indemnitee
shall not, except at its own cost, voluntarily make any payment or incur any
expense with respect to any claim or suit without the prior written consent of
the indemnifying party, which such party shall not be required to give.


 


ARTICLE 12

TERM AND TERMINATION


 


12.1                           Term.  The term of this Agreement shall commence on
the Effective Date, and shall continue in full force and effect on a
country-by-country and Product-by-Product basis until JJPRD has no remaining
royalty payment obligations in such country with respect to such Products,
unless terminated earlier as provided in this Article 12.


 


12.2                           Termination
for Breach.  Either party to this
Agreement may terminate this Agreement in the event the other party hereto
shall have materially breached or defaulted in the performance of any of its
material obligations hereunder, and such default shall have continued for sixty (60)
days after written notice thereof was provided to the breaching party by the
non-breaching party.  Any termination
shall become effective at the end of such sixty (60) day period unless the
breaching party has cured any such breach or default prior to the expiration of
the sixty (60) day period; provided, however, in the case of a failure to
pay any amount due hereunder, such default may be the basis of termination ten
(10) business days following the date that notice of such default was provided
to the breaching party, if such default is not cured within such ten-day
period.


 


33





















 


12.3                           Permissive
Termination by JJPRD.  At any time
following the end of the Research Term, JJPRD shall have the right to terminate
this Agreement, without cause, upon one hundred eighty (180) days prior written
notice.  Upon such termination, all
rights and obligations of JJPRD, except those set forth in Section 12.6
and 12.7, shall be terminated.


 


12.4                           Termination
by Sunesis.  Sunesis shall have the
right to terminate this Agreement as provided in Section 7.3.1 above.


 


12.5                           Termination
For Bankruptcy.  Either party hereto
shall have the right to terminate this Agreement forthwith by written notice to
the other party (i) if the other party is declared insolvent or bankrupt by a
court of competent jurisdiction, (ii) if a voluntary or involuntary petition in
bankruptcy is filed in any court of competent jurisdiction against the other
party and such petition is not dismissed within ninety (90) days after filing,
(iii) if the other party shall make or execute an assignment of substantially
all of its assets for the benefit of creditors, or (iv) substantially all of
the assets of such other party are seized or attached and not released within
ninety (90) days thereafter.


 


12.6                           Effect
of Breach or Termination.


 


12.6.1                  Accrued
Rights and Obligations.  Termination
of this Agreement for any reason shall not release either party hereto from any
liability which, at the time of such termination, has already accrued to the
other party or which is attributable to a period prior to such termination nor
preclude either party from pursuing any rights and remedies it may have
hereunder or at law or in equity with respect to any breach of this Agreement.


 


12.6.2                  Termination
by Sunesis for Breach or Bankruptcy of JJPRD, or Permissive Termination by
JJPRD.  In the event of termination
of this Agreement by Sunesis pursuant to Sections 12.2 (Termination for
Breach), 12.4 (Termination by Sunesis) or 12.5 (Termination for Bankruptcy), or
termination of this Agreement by JJPRD pursuant to Section 12.3
(Permissive Termination by JJPRD), in addition to those rights and obligations
surviving under Section 12.7 (Survival), the following Sections shall
survive: Sections 7.3.1(e) (Return of Collaboration Compounds and Products
thereof), 7.3.2 (Grant Back), 7.3.3 (Regulatory Filings), 7.3.4 (Reverse
Royalty) (except with respect to a termination as a result of JJPRD’s breach of
Section 2.5 (Exclusivity)) and 12.6.2 (Termination by Sunesis for Breach
or Bankruptcy of JJPRD, or Permissive Termination by JJPRD), and JJPRD’s
obligations under Section 2.3 (Disclosure), 2.6 (Records;Inspection),
8.1.2 (Disclosure) and 9.4 (Publication). 
Upon such termination, JJPRD shall provide Sunesis at no cost to Sunesis
copies of all JJPRD internal reports, reports from Third Parties, and notes of
communications and correspondence with and reports submitted to regulatory
agencies pertaining to Licensed Compounds.


 


12.6.3                  JJPRD
Derivative Compounds.  In the event
of any termination of this Agreement, with respect to JJPRD Derivative
Compounds, in addition to any rights and obligations surviving under Section 12.7
(Survival), the following Sections shall survive:  Sections 4.1.1(a) (Products), 4.2
(Sublicenses), 4.3.1 (Right for JJPRD to Screen Compounds Outside the Field),
4.3.2 (Disclosure of Derivative Compounds), and 4.3.5 (JJPRD Derivative
Compounds Entering Clinical Development).


 


34





















 


12.7                           Survival.  Sections 4.3.3 (Sunesis Rights to Use
JJPRD Derivative Compounds), 4.3.4(b) ( Return/Destruction of Sunesis
Derivative Compounds), 5.2.1 (Upfront Payment), 5.2.2 (Research Milestone
Payments), 5.3 (Development Milestones), 5.4.5 (Certain Terms), 5.5
(Royalties), 8.1 (Ownership; Disclosure), 8.3 (Cooperation) (last sentence
only), 9.1 (Confidential Information), 9.2 (Permitted Uses and Disclosures),
9.3 (Nondisclosure of Terms), 12.6.1 (Accrued Rights and Obligations), 12.6.2
(Termination by Sunesis for Breach or Bankruptcy of JJPRD, or Permissive
Termination by JJPRD) (as applicable), Section 12.6.3 (JJPRD Derivative
Compounds) and 12.7 (Survival) of this Agreement, and Articles 1
(Definitions), 6 (Payments, Books and Records), 10 (Representations and
Warranties), 11 (Indemnification) and 14 (Miscellaneous) of this Agreement
shall survive the expiration or termination of this Agreement for any reason.


 


ARTICLE 13


DISPUTE RESOLUTION


 


13.1                           Arbitration.  If the parties are unable to reach agreement
pursuant to Section 7.3.1(a)(iv) with respect to a dispute between the
parties as to whether or not JJPRD has maintained an active program with
respect to Products directed to the Target, upon written request by either
party such dispute will be conducted by binding arbitration in English pursuant
to the International Commercial Arbitration Rules of the American Arbitration
Association for Large, Complex Cases then in effect in accordance with this Section 13.1.  Notwithstanding those rules, the following provisions
shall apply.  The arbitration shall be
conducted by one (1) arbitrator.  In such
arbitration, the arbitrator shall be an independent expert in worldwide
pharmaceutical product development (including clinical development and
regulatory affairs) mutually acceptable to the parties.  If the parties are unable to agree on an
arbitrator, the arbitrator shall be an independent expert as described in the
preceding sentence selected by the chief executive of the New York City office
of the American Arbitration Association. 
Each party to the arbitration shall prepare a written report setting
forth it position or proposal with respect to the dispute, and shall submit
such report to the arbitrator within the later of (i) three months following a
request by any party for such arbitration, or (ii) ten days after selection of
such arbitrator.  The arbitrator shall
select one of the requested positions as his decision, and shall not have the
authority to render any substantive decision other than to so select the position
of either JJPRD or Sunesis.  The costs of
such arbitration, and the direct expenses of both parties in connection with
such arbitration, shall be borne by the losing party.  Any such arbitration shall be completed
within six (6) months following a request by any party for such arbitration.


 


13.2                           Injunctive
Relief.  This Article 13 shall
not be construed to prohibit either party from seeking preliminary or permanent
injunctive relief, restraining order or degree of specific performance in any
court of competent jurisdiction to the extent not prohibited by this
Agreement.  For avoidance of doubt, any
such equitable remedies provided under this Article 13 shall be cumulative
and not exclusive and are in addition to any other remedies, which either party
may have under this Agreement or applicable law.


 


35





















 


ARTICLE 14 

MISCELLANEOUS


 


14.1                           Governing
Laws.  This Agreement and any dispute
arising from the construction, performance or breach hereof shall be governed
by and construed, and enforced in accordance with, the laws of the state of
California, without reference to conflicts of laws principles.


 


14.2                           Waiver.  It is agreed that 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 and/or similar breach
or default.


 


14.3                           Assignment.  This Agreement shall not be assignable by
either party without the written consent of the other party hereto, except
either party may assign this Agreement, without such consent, to an entity that
acquires all or substantially all of the business or assets of such party
whether by merger, reorganization, acquisition, sale, or otherwise; provided,
however, that within thirty (30) days of such an assignment, the assignee
shall agree in writing to be bound by the terms and conditions of this
Agreement.


 


14.4                           Independent
Contractors.  The relationship of the
parties hereto is that of independent contractors.  The parties hereto are not deemed to be
agents, partners or joint venturers of the others for any purpose as a result
of this Agreement or the transactions contemplated thereby.


 


14.5                           Compliance
with Laws.  In exercising their
rights under this license, the parties shall fully comply in all material
respects with the requirements of any and all applicable laws, regulations,
rules and orders of any governmental body having jurisdiction over the exercise
of rights under this license including, without limitation, those applicable to
the discovery, development, manufacture, distribution, import and export and
sale of Products pursuant to this Agreement.


 


14.6                           Patent
Marking.  JJPRD agrees to mark
Sublicensees mark all Products sold pursuant to this Agreement in accordance
with the applicable statute or regulations relating to patent marking in the
country or countries of manufacture and sale thereof.


 


14.7                           Notices.  All notices, requests and other
communications hereunder shall be in writing and shall be personally delivered
or by registered or certified mail, return receipt requested, postage prepaid,
in each case to the respective address specified below, or such other address
as may be specified in writing to the other parties hereto and shall be deemed
to have been given upon receipt:


 


	
  Sunesis:

  	
  Sunesis
  Pharmaceuticals, Inc.

  
	
   

  	
  341
  Oyster Point Boulevard

  
	
   

  	
  South
  San Francisco, California 94080

  
	
   

  	
  Attn:
  Chief Executive Officer

  
	
   

  	
  Fax:
  (650) 266-3505

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Wilson
  Sonsini Goodrich & Rosati

  



 


36





















 


	
   

  	
  Professional
  Corporation

  
	
   

  	
  650
  Page Mill Road

  
	
   

  	
  Palo
  Alto, California 94304-1050

  
	
   

  	
  Attn:
  Kenneth A. Clark, Esq.

  
	
   

  	
  Fax:
  (650) 493-6811

  
	
   

  	
   

  
	
  JJPRD:

  	
  Johnson
  & Johnson Pharmaceutical Research &

  
	
   

  	
  Development,
  L.L.C.

  
	
   

  	
  U.S.
  Route 202

  
	
   

  	
  Raritan,
  NJ  08869

  
	
   

  	
  Attn:
  Chairman, Pharmaceutical R&D

  
	
   

  	
  Fax:
  908-707-1895

  
	
   

  	
   

  
	
  With
  a copy to:

  	
  Johnson
  & Johnson

  
	
   

  	
  Law
  Department

  
	
   

  	
  One
  Johnson & Johnson Plaza

  
	
   

  	
  New
  Brunswick, NJ  08933

  
	
   

  	
  Attn:
  Chief Patent Counsel

  
	
   

  	
  Fax:
  732-524-2368

  



 


14.8                           Severability.  In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect to the fullest extent permitted by law without said provision, and the
parties shall amend the Agreement to the extent feasible to lawfully include
the substance of the excluded term to as fully as possible realize the intent
of the parties and their commercial bargain. 
If a party seeks to avoid a provision of this Agreement by asserting
that such provision is invalid, illegal or otherwise unenforceable, the other
party shall have the right to terminate this Agreement upon sixty (60) days’
prior written notice to the asserting party, unless such assertion is eliminated
and cured within such sixty (60) day period. 
If JJPRD has sought to so avoid a provision of this Agreement, such
termination shall be deemed a termination for breach by JJPRD under Section 12.2
above, and if Sunesis has sought such an avoidance, such termination shall be
deemed a termination for breach by Sunesis under Section 12.2 above.


 


14.9                           Advice
of Counsel.  Sunesis and JJPRD have
each consulted counsel of their choice regarding this Agreement, and each
acknowledges and agrees that this Agreement shall not be deemed to have been
drafted by one party or another and will be construed accordingly.


 


14.10                     Performance
Warranty.  Each party hereby warrants
and guarantees the performance of any and all rights and obligations of this
Agreement by its Affiliates and Sublicensees.


 


14.11                     Force
Majeure.  Neither party shall lose
any rights hereunder or be liable to the other party for damages or losses
(except for payment obligations) on account of failure of performance by the
defaulting party if the failure is occasioned by war, strike, fire, Act of God,
earthquake, flood, lockout, embargo, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to
perform is beyond the reasonable control and not caused by the negligence,
intentional conduct or misconduct of the non-performing party and such party
has exerted all 


 


37





















 


reasonable efforts to
avoid or remedy such force majeure; provided, however, that in no event shall a
party be required to settle any labor dispute or disturbance.


 


14.12                     Complete
Agreement.  This Agreement with its
Exhibits, constitutes the entire agreement, both written and oral, between the
parties with respect to the subject matter hereof, and all prior agreements
respecting the subject matter hereof, either written or oral, express or
implied, shall be abrogated, canceled, and are null and void and of no
effect.  No amendment or change hereof or
addition hereto shall be effective or binding on either of the parties hereto
unless reduced to writing and executed by the respective duly authorized
representatives of Sunesis and JJPRD.


 


14.13                     Consultation.  Except as provided in Section 3.4 and/or
7.3.1, if an unresolved dispute arises out of or relates to this Agreement, or
the breach thereof, either party may refer such dispute to the Chairman,
Pharmaceutical Research and Development, of JJPRD and the Chief Executive
Officer of Sunesis, who shall meet in person or by telephone within thirty (30)
days after such referral to attempt in good faith to resolve such dispute.  If such matter cannot be resolved by
discussion of the Chairman, Pharmaceutical Research and Development, of JJPRD
and the Chief Executive Officer of Sunesis within such thirty (30) days period
(as may be extended by mutual agreement), either party shall be entitled to
seek temporary and permanent relief in any court of competent jurisdiction.


 


14.14                     Headings.  The captions to the several Sections and
Articles hereof are not a part of this Agreement, but are included merely for
convenience of reference and shall not affect its meaning or interpretation.


 


14.15                     Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same agreement.


 


14.16                     Bankruptcy.  All rights and licenses granted under or
pursuant to this Agreement by each Party as a licensor are, and shall otherwise
be deemed to be, for purposes of Section 365(n) of Title ll, U.S. Code
(the “Bankruptcy Code”), licenses of rights to “intellectual property” as
defined under section 101(35A) of the Bankruptcy Code.  The parties agree that each licensee of such
rights under this Agreement, shall retain and may fully exercise all rights and
elections it would have in the case of a licensor bankruptcy under the
Bankruptcy Code.  Each party agrees
during the term of this Agreement to create or maintain current copies, or if
not amenable to copying, detailed descriptions or other appropriate
embodiments, of all such intellectual property licensed to the other party.


 


38





















 


IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representatives and delivered in duplicate
originals as of the Effective Date.


 


	
  JOHNSON & JOHNSON PHARMACEUTICAL

  	
  SUNESIS PHARMACEUTICALS, INC.

  
	
  RESEARCH & DEVELOPMENT, L.L.C.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
										



 


39





















 


EXHIBIT 1.5.1


 


Lead Compound Criteria—Cathespin S


 


•                                          IC50
[*] in an enzyme assay (standard hCatS JJPRD assay conditions)


 


•                                          Cell-based
activity with IC50 [*] (specific assay TBD)


 


•                                          IC50
cytotoxicity/IC50 functional assay [*]


 


•                                          Distinct
SAR based upon [*] compounds per Lead Series


 


•                                          Selectivity
[*]-fold for other targets (but specifically excluding [*] and [*] from this
selectivity criterion)


 


Those Compounds
with selectivity in the range of [*] to [*]- fold for other targets as enumerated
in the Research Plan (but specifically excluding [*] and [*] from this
selectivity criterion) may qualify as Leads at JRC’s discretion.


 


 










[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


40





















 


EXHIBIT 1.5.2


 


Development Candidate Criteria


 


•                  Same
criteria as provided under Exhibit 1.3.1 above, in addition to the following:


 


•                  IC50
[*] in enzyme assay specified above


 


•                  Activity
in functional assay using human cells: 
IC50 [*]


 


•                  Pharmacokinetics
examined


 


•                  In vivo activity:  ([*])
in suitable animal model


 


•                  Oral
bioavailability [*] in rat & dog; p.o. @ 30 mpk [*] of relevant cellular
assay


 


•                  IC50
[*] with human cytochrome P450


 


•                  Patentable


 


•                  hERG
channel IC@ 30 mpk [*]


 


•                  CV
effects:  [*] change in bp in
anaesthetized guinea pigs @ 30 mpk i.v. bolus; [*] QT prolongation at same dose
*


 


•                  Negative
Ames


 


•                  5-day
rat tolerance @ [*]:  no lethal events,
no significant hepatomegaly *


 


•                  Single-dose
dog tolerance @ [*]:  no lethal events *


 


•                  5-day
dog tolerance @ [*]:  no lethal events *


 










* For purpose of determining whether compounds meet
Development Candidate Criteria, these assays shall not be considered GLP
Toxicity Studies as referenced in Section 5.2.2(b).


 


 


[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


41





















 


EXHIBIT 1.12


 


JJPRD
TECHNOLOGY


 


Compositions
of matter and patents and patent applications within JJPRD Technology directed
to Cathepsin S include the following patent applications:


 


1.                                       [*]                                 PCT
WO 02 14314;


 


2.                                       [*]                                 PCT
WO 02 14315; and


 


3.                                       [*]                                 PCT
WO 02 14317.


 


 










[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


42





















 


EXHIBIT 2.2


 


RESEARCH PLAN


 


Cathepsin
S Research Plan/Outline


 


[*]


 


1.                                       Prepare
[*]


 


a.               [*]
and [*]


 


b.              [*] and
[*]


 


2.                                       [*]
conditions


 


a.               Determine
[*] operating [*]


 


b.              [*]


 


3.                                       [*]


 


a.               [*]
from [*]


 


b.              [*]


 


c.               Prepare
[*] for [*]


 


[*]


 


1.               Establish
[*] using [*]


 


a.               Determine
[*]


 


2.               Establish
[*] (required to [*]).  [*] will be [*]
Sunesis by [*].


 


a.               [*]


 


b.              [*]


 


c.               [*]


 










[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


43





















 


d.              [*]


 


e.               [*]


 


f.                 [*]


 


3.               [*]


 


a.               [*]


 


b.              [*]


 


c.               [*]


 


4.               Establish
[*] on [*].


 


[*]


 


1.               Prepare
[*]


 


2.               Develop
[*] for [*]


 


3.               Determine
[*] of [*]


 


[*]


 


1.               Develop
[*] of [*]


 


2.               Identify
[*]


 


3.               Identify
and [*]


 


4.               [*]


 


5.               [*]


 


6.               [*]


 


7.               Support
[*]


 


[*]


 


1.               [*] of
[*] for [*]


 










[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


44





















 


2.               [*] and [*] of [*] from [*]


 


a.               Design
[*]


 


b.              Prepare
[*] as [*]


 


c.               [*]
against [*]


 


3.               [*]


 


4.               [*]


 


5.               [*]


 


a.               Determine
[*] on [*]


 


b.              Develop
[*] on [*] (see [*] section)


 


6.               [*]


 


a.               Determine
[*] on [*]


 


b.              Identify
[*] on [*] (see [*] section)


 


7.               [*]
(optional)


 


a.               [*]
from [*] papers


 


[*]


 


1.               [*]


 


a.               [*]


 


b.              [*]


 


c.               [*]


 


d.              other [*]
([*] etc)


 


2.               [*]


 


a.               [*]


 










[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


45





















 


b.              [*] active [*]


 


[*]


 


1.               [*]


 


2.               [*]


 


3.               [*] of
[*]


 


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[*]                                 Certain
information on this page has been redacted and filed separately with the
Securities and Exchange Commission. 
Confidential treatment has been requested with respect to the omitted
portions.


 


46





















 


EXHIBIT 8.2.2


 


FOREIGN FILING COUNTRIES


 


1.                                       Non-PCT
countries: Malaysia, Chile, Hong Kong, Venezuela, Taiwan, and Argentina; and


 


2.                                       PCT
countries:  PCT’s shall be filed
designating all countries, with a Chapter II demand following by national stage
filings in the following countries:


 


Australia, all EP
countries (including Austria, Denmark, Finland, France, Germany, Spain, Sweden,
Switzerland, Netherlands, UK, Norway, Ireland, Italy, Poland, Portugal,
Hungary), the US, Bellarus, Mexico, New Zealand, India, Indonesia, Israel,
Japan, Ukraine, Brazil, Canada, South Africa, China, Republic of Korea, Russian
Federation, Philippines, Czech Republic, Greece, Romania, Brazil and Singapore.


 


47





















 


EXHIBIT 9.3


 


PRESS RELEASE


 


 


For immediate release


 


Sunesis
Enters Collaboration With Johnson & Johnson Pharmaceutical Research &
Development, L.L.C. To Discover New Small Molecule Therapeutics


 


South
San Francisco, CA, May     , 2002 — Sunesis Pharmaceuticals,
Inc. announced today that the company has entered into a research collaboration
with Johnson & Johnson Pharmaceutical Research & Development, L.L.C.,
to discover small molecule enzyme inhibitors for the treatment of major chronic
diseases, including inflammatory and autoimmune diseases. Sunesis will apply
its proprietary “Target Directed Lead Discovery” technology, the company’s
novel approach to increase the efficiency and productivity of small molecule
pharmaceutical discovery, to this collaboration.


 


Under
the terms of the agreement, Sunesis will receive upfront payments, research
funding, and research and development milestones, as well as royalty payments
based on an exclusive, worldwide license to products resulting from the
collaboration. The specific terms of the collaboration are undisclosed.


 


“We
are excited to be entering into this collaboration with Johnson & Johnson
Pharmaceutical Research & Development, one of the leading research-based
global pharmaceutical firms, and we expect that this program will result in
breakthrough therapeutics for major chronic diseases” stated James Young,
Ph.D., CEO of Sunesis.


 


Dr.
Young added, “Sunesis’ business strategy is to fully capitalize on the
potential of our powerful discovery platform by selective collaboration with
pharmaceutical partners, while retaining rights to other programs”.


 


Sunesis’
Target Directed Lead Discovery reliably generates small-molecule leads against
challenging enzyme targets and protein-protein interfaces by screening greater
diversity space and identifying binding ligands that other techniques such as
high throughput screening are too insensitive to find. Sunesis’ approach can
dramatically reduce the number of compounds that must be tested to provide
novel leads for pharmaceutical development, resulting in savings of time and
resources.


 


Founded
in 1998, Sunesis is focused on the discovery and development of small molecule
therapeutics that inhibit protein-protein and enzyme targets. Sunesis’ strategy
is to focus initially on highly validated targets that have an established
clinical path and will be first-in-class therapeutics or orally available
replacements to injectable protein-based therapeutics, such as monoclonal
antibodies. Sunesis intends to pursue certain targets on behalf of corporate
pharmaceutical partners using its discovery technology to generate lead
compounds. In addition, Sunesis will selectively pursue other compounds and
targets for internal development.


 


CONTACT:

Sunesis Pharmaceuticals, Inc.

Dan Swisher

CFO and Chief Business Officer

+1-650-266-3715


 


Burns McClellan Inc.

Stephanie Diaz (investors)

+1-415-352-6262


 


Justin
Jackson (media)

+1-212-213-0006


 


 


48