Document:

Exhibit 10.35

 

EXECUTION
COPY

 

(FOR
DISCUSSION ONLY, SUBJECT TO SENIOR MANAGEMENT APPROVAL AND FINAL EXECUTION BY
BOTH PARTIES)

 

[*] Viral
Inhibitor

 

[*]

 

LICENSE

 

and

 

RESEARCH
COLLABORATION

 

AGREEMENT

 

between

 

MERCK
& CO., INC.

 

and

 

SUNESIS PHARMACEUTICALS, INC.

 

LICENSE AND RESEARCH
COLLABORATION AGREEMENT

 

 

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.

 

 

LICENSE
AND RESEARCH COLLABORATION AGREEMENT

 

This LICENSE AND RESEARCH
COLLABORATION AGREEMENT (the “Agreement”),
effective as of July 22, 2004 (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
Merck & Co., Inc., a New Jersey corporation, having a principal place of
business at One Merck Drive, Whitehouse Station, NJ 08889-0100 (“Merck”).  Sunesis and
Merck are sometimes referred to herein individually as a “Party”
and collectively as the “Parties”.

 

BACKGROUND

 

A.                                   Sunesis has developed Sunesis Core Technology
(as hereinafter defined) and Sunesis Inhibition Mode Know-How (as hereinafter
defined) and has rights to Sunesis Inhibition Mode Patents (as hereinafter
defined);

 

B.                                     Merck is a leader in the research and
development of pharmaceutical products;

 

C.                                     Merck and Sunesis desire to enter into a
license and research collaboration upon the terms and conditions set forth
herein;

 

D.                                    Merck desires to obtain a license under the
Sunesis Core Technology and to obtain rights to Sunesis Inhibition Mode
Technology upon the terms and conditions set forth herein and Sunesis desires
to grant such a license and to transfer such rights to Merck;

 

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                                 “Affiliate”
means (i) any corporation or other business entity of which fifty percent (50%)
or more of the securities or other ownership interests representing the equity,
the voting stock or general partnership interest are owned, controlled or held,
directly or indirectly, by Merck or Sunesis; or (ii) any corporation or
business entity which, directly or indirectly, owns, controls or holds fifty
percent (50%) (or the maximum ownership interest permitted by law) or more of
the securities or other ownership interests representing the equity, the voting
stock or, if applicable, the general partnership interest, of Merck or Sunesis;
or (iii) any corporation or business entity of which fifty percent (50%) or
more of the securities or other ownership interests representing the equity,
the voting stock or general partnership interest are owned, controlled or held,
directly or indirectly, by a corporation or business entity described in (i) or
(ii), in each case, for so long as such corporation or business entity meets
the requirements in (i), (ii) or (iii) above. 
Notwithstanding the foregoing, it is understood and agreed that, for
purposes of Sections 1.37, 1.38 and 8.1.1 as they relate to Sunesis Inhibition
Mode Technology, an entity shall not be deemed to be an Affiliate of a Party
where such

 

2

 

entity meets the
requirements in (ii) or (iii) above as a result of a Change of Control (as that
term is defined in Section 14.3 below) that takes place after the
Effective Date.

 

1.2                                 “[*]
Lead” means any Program Compound that is approved by Merck in its sole
discretion as an [*] Lead in accordance with Section 2.6.

 

1.3                                 “Calendar
Quarter” means the respective periods of three (3) consecutive calendar
months ending on March 31, June 30, September 30 and December 31.

 

1.4                                 “Calendar
Year” means each successive period of twelve (12) months commencing on January 1
and ending on December 31.

 

1.5                                 “Combination
Product” means a Product which includes one or more active ingredients
other than a Program Compound in addition to a Program Compound.  All references to Product in this Agreement
shall be deemed to include Combination Product.

 

1.6                                 “Control” or “Controlled”
means with respect to any item of or right under know-how or intellectual
property rights, the possession of (whether by ownership or license, other than
pursuant to this Agreement) the ability of Sunesis or its Affiliate to grant a
license, sublicense or assignment of such item or right as provided for herein
without (i) violating the terms of any agreement or other arrangement with, or
the enforceable rights of, any Third Party existing at the time Sunesis or its
Affiliate would be required hereunder to grant Merck such license, sublicense
or assignment, or (ii) incurring an obligation to pay any royalties or license
fees to any Third Party based solely upon (A) the grant of such license,
sublicense or assignment to Merck, or (B) the exercise of such rights by
Merck.  Sunesis represents that, as of
the Effective Date, there are no items of know-how or intellectual property rights
for which the licenses, sublicenses or assignments set forth in this Agreement
would result in Sunesis or its Affiliate incurring an obligation under (ii)
above.

 

1.7                                 “Criteria”
means the [*] Lead Criteria, Viral Inhibitor Lead Criteria, Lead Compound
Criteria and Pre-Clinical Candidate (“PCC”) Criteria
as defined below.

 

1.7.1                        “[*]
Lead Criteria” means (i) those criteria set forth in
Exhibit 1.7.1 hereto, and/or (ii) such other criteria that are agreed
in writing by the Parties, which are required to be demonstrated from the
testing of a compound in order for such compound to be deemed an [*] Lead.

 

1.7.2                        “Viral
Inhibitor Lead Criteria” means (i) those criteria set forth in
Exhibit 1.7.2 hereto, and/or (ii) such other criteria that are agreed
in writing by the Parties, which are required to be demonstrated from the
testing of a compound in order for such compound to be deemed a Viral Inhibitor
Lead.

 

[*]                                 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.

 

3

 

1.7.3                        “Lead
Compound Criteria” means (i) those criteria set forth in
Exhibit 1.7.3 hereto, and/or (ii) such other criteria that are agreed
in writing by the Parties, which are required to be demonstrated from the
testing of a compound in order for such compound to be deemed a Lead Compound.

 

1.7.4                        “PCC
Criteria” means those criteria set forth in Exhibit 1.7.4 hereto which
are required to be demonstrated from the testing of a compound in order for
such compound to be deemed a PCC.

 

1.8                                 “[*]”
means that certain [*] of the [*] that is required to [*] into [*] in the [*]
of a [*].

 

1.9                                 “IND-Enabling
GLP Toxicology Studies” means genotoxicity, acute toxicology, and
sub-chronic toxicology studies using “Good Laboratory Practices” for obtaining
approval from a Regulatory Agency to administer the Product to a human.

 

1.10                           “Joint Research Program Know-How” means all technology, information,
and material, including, but not limited to, inventions, discoveries, know-how,
processes, methods, protocols, formulas, data, and trade secrets, patentable or
otherwise, made or developed jointly by personnel of Sunesis and Merck, their
respective Affiliates or Third Parties acting on their behalf (i) in the course
of the Research Program during the Research Program Term, or (ii) within [*]  ([*]) years of the conclusion of the Research
Program Term in the course of activities directed to discovery, research or
development relating to the Target.

 

1.11                           “Joint
Research Program Patents” mean all patents, patent applications, invention disclosures, certificates of
invention and applications for certificates of invention, the subject of
which is an invention made jointly by personnel of Merck and Sunesis, their
respective Affiliates or Third Parties acting on their behalf (i) in the course
of the Research Program during the Research Program Term, or (ii) within [*] ([*])
years of the conclusion of the Research Program Term in the course of
activities directed to discovery, research or development relating to the
Target;  as well as any divisions,
continuations, continuations-in-part, reissues, reexaminations, extensions,
supplementary protection certificates, and other governmental actions which
extend any of the patent applications, patents, invention disclosures, certificates of invention or certificate of
invention applications relating to the above, and all foreign
counterparts to any of the foregoing.

 

1.12                           “Lead
Compound” means any Program Compound that is approved by Merck in its
sole discretion as a Lead Compound in accordance with Section 2.6.

 

1.13                           “Major
Territories” mean any of France, Germany, Italy, Japan or the United
Kingdom.

 

[*]                                 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.

 

 

4

 

1.14                           “Merck Research Program Know-How” means all technology, information,
and material, including, but not limited to, inventions, discoveries, know-how,
processes, methods, protocols, formulas, data, and trade secrets, patentable or
otherwise, made or developed solely by
personnel of Merck, its Affiliates or Third Parties acting on their behalf (i)
in the course of the Research Program during the Research Program Term, or
(ii) within [*] ([*]) years of the conclusion of the Research Program Term in
the course of activities directed to discovery, research or development
relating to the Target.

 

1.15                           “Merck Research Program Patents” mean all patents, patent
applications, invention disclosures,
certificates of invention and applications for certificates of invention,the subject of which is an invention
made solely by personnel of Merck, its Affiliates or Third Parties acting on
their behalf (i) in the course of the Research Program during the Research
Program Term, or (ii) within [*] ([*]) 
years of the conclusion of the Research Program Term in the course of
activities directed to discovery, research or development relating to the
Target;  as well as any divisions, continuations,
continuations-in-part, reissues, reexaminations, extensions, supplementary
protection certificates, and other governmental actions which extend any of the
patent applications, patents, invention
disclosures, certificates of invention or certificate of invention
applications relating to the above, and all foreign counterparts to any of the
foregoing.

 

1.16                           “NDA”
or “MAA” means 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 or submission for
Regulatory Approval of a Product filed with a Regulatory Authority to obtain
marketing approval in that country or in that group of countries.

 

1.17                           “Net
Sales” means the invoice price of Products sold by Merck, its Affiliates,
or Sublicensees to the first Third Party, after deducting, if not previously deducted,
from the amount invoiced or received:

 

(a)                                  a
fixed amount equal to five percent (5%) of the amount invoiced to cover bad
debt, sales or excise taxes, early payment discounts, transportation and
insurance, custom duties, and other governmental charges;

 

(b)                                 sales
commissions paid to Third Party distributors and/or selling agents (excluding
sales commissions paid for sales made in the United States, Australia, Japan,
and the countries of the European Union);

 

(c)                                  trade
and quantity discounts other than early pay cash discounts;

 

(d)                                 rejections,
returns, rebates, chargebacks and other allowances or credits; and

 

[*]                                 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.

 

5

 

(e)                                  retroactive
price reductions that are actually allowed or granted.

 

Sales among Merck, its
Affiliates and their respective Sublicensees for resale shall be excluded from
the computation of Net Sales, to the extent that (i) the subsequent resale is
included within Net Sales, or (ii) such sales relate to products that are
transferred or otherwise disposed of without charge as samples (promotion or
otherwise) or as donations (for example, to non-profit institutions or
government agencies for a non-commercial purposes).

 

With respect to sales of
Combination Products, Net Sales shall be calculated on the basis of the invoice
price of Product(s) containing the same strength of Program Compound sold
without other active ingredients.  In the
event that Product is sold only as a Combination Product, Net Sales shall be
calculated on the basis of the invoice price of the Combination Product
multiplied by a fraction, the numerator of which shall be the inventory cost of
Program Compound and the denominator of which shall be the inventory cost of
all of the active ingredients in the Combination Product.  Inventory cost shall be determined in
accordance with the Party’s regular accounting methods, consistently
applied.  The deductions set forth in
paragraphs (a) through (e) above will be applied in calculating Net Sales for a
Combination Product.  In the event that
Product is sold only as a Combination Product and either Party reasonably
believes that the calculation set forth in this Paragraph does not fairly
reflect the value of the Product relative to the other active ingredients in
the Combination Product, the Parties shall negotiate, in good faith, other means
of calculating Net Sales with respect to Combination Products.

 

1.18                           “[*]”
means a protein, small molecule or
other compound specifically directed at the Target which [*] the [*] or [*] of
the Target at a [*] equal to or greater than the [*] with which such protein,
small molecule or other compound directly [*] by the Target, in each case as
measured in both an [*] assay and an assay of [*] cells.  Within ninety (90) days of the Effective
Date, the Parties shall mutually agree on parameters and appropriate laboratory
procedures necessary to objectively determine the foregoing inhibition
characteristics to determine whether a particular protein, small molecule or
other compound is a [*] Inhibitor, including the relevant [*] and [*] assays,
and assay conditions and criteria related thereto.  All determinations of whether a particular
protein, small molecule or other compound is a [*] Inhibitor shall be made in
accordance with such parameters, and such parameters shall be amended only upon
written agreement of the Parties.

 

1.19                           “PDRC”
means Merck’s Preclinical Development Review Committee or any successor
committee that performs the same functions.

 

1.20                           “Phase I”
means human clinical trials, the principal purpose of which is preliminary
evaluation of safety and/or pharmacokinetic effect of a Product in human
subjects or that would otherwise satisfy the requirements of 21 C.F.R.
§312.21(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.

 

6

 

1.21                           “Phase
II” means human clinical trials conducted on a limited number of patients
for the purpose of preliminary evaluation of the effectiveness of a Product for
a particular indication or indications in human subjects with the disease or
indication under study or that would otherwise satisfy the requirements of 21
C.F.R. 312.21(b).

 

1.22                           “Phase III”
means pivotal human clinical trials the results of which could be used to
establish safety and efficacy of a Product as a basis for Regulatory Approval
or that would otherwise satisfy the requirements of 21 C.F.R. §312.21(c).

 

1.23                           “Pre-Clinical
Candidate” or “PCC” means any Program Compound that is approved
by Merck in its sole discretion as a PCC in accordance with Section 2.6.

 

1.24                           “Product”
means any preparation in final form for sale by prescription, over-the-counter
or any other method, for any and all
uses, which contains a Program Compound, including without limitation a
Combination Product.

 

1.25                           “Program
Compound” means any chemical entity
that: (i) is a protein, small molecule, or other compound, (ii) is made,
identified or discovered by or under authority of either Party or their
respective Affiliates (A) pursuant to work conducted under the Research Program
during the Research Program Term, or (B) during the period from the Effective
Date until the [*] ([*]) anniversary of
the end of the Research Program Term in the course of activities directed to
the discovery, research or development relating to the Target, and (iii)
inhibits the Target through the Sunesis Inhibition Mode.

 

1.26                           “Regulatory
Agency” means any applicable government regulatory authority involved in
granting approvals for the manufacturing, marketing, reimbursement and/or
pricing of a Product in the Territory, including the United States Food and
Drug Administration and any successor governmental authority having
substantially the same function.

 

1.27                           “Regulatory
Approval” means any approval (including without limitation all applicable
pricing and governmental reimbursement approvals) from the relevant Regulatory
Agency necessary for the marketing and sale of a Product in the applicable
country.

 

1.28                           “Research
Program” means the activities undertaken by or under authority of Merck, which may include input from Sunesis
and the Sunesis Principal Consultant, to discover and develop Program Compounds
as set forth in Article 2 below and in the Research Plan.

 

1.29                           “Research Program Know-How” means Merck Research Program Know-How,
Sunesis Research Program Know-How, and Joint Research Program Know-How.

 

[*]                                 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.

 

7

 

1.30                           “Research Program Patents” mean Merck Research Program Patents,
Sunesis Research Program Patents, and Joint Research Program Patents.

 

1.31                           “Research
Program Technology” means Research Program Know-How and Research Program
Patents.

 

1.32                           “Research
Program Term” means the period commencing on the Effective Date and ending
on the later of (i) the third anniversary of the Effective Date, or
(ii) if extended in accordance with Section 2.4 below, the end of
such extension period; provided that, the Research Program Term shall in all
events terminate upon an earlier termination of the Agreement in accordance with
Article 12 below.

 

1.33                           “Sublicensee”
means, with respect to a particular Product, a Third Party to whom Merck has
granted a right to make and sell or sell such Product, but shall not include
distributors (i.e., distributors that are not responsible for marketing
or promotion of such Product).

 

1.34                           “Sunesis
Background Technology” means all patents, patent applications, invention disclosures, certificates of
invention and applications for certificates of invention, Controlled by
Sunesis or its Affiliates as of the Effective Date and/or during the term of
the Agreement, that (i) are necessary or useful to Merck in the research,
development, or commercialization of compounds that inhibit the Target
(including but not limited to Program Compounds and Products), and (ii) are not
Sunesis Inhibition Mode Patents, Research Program Patents or within the Sunesis
Core Technology; as well as any
divisions, continuations, continuations-in-part, reissues, reexaminations,
extensions, supplementary protection certificates, and other governmental
actions which extend any of the patent applications, patents, invention disclosures, certificates of
invention or certificates of invention applications above, and all
foreign counterparts to any of the foregoing.

 

1.35                           “Sunesis
Core Technology” mean all patents, patent applications, invention disclosures, certificates of
invention and applications for certificates of invention, owned or
Controlled by Sunesis or its Affiliates as of the Agreement’s Effective Date
and/or during the term of the Agreement (as described in Exhibit 1.35 hereto), and all information, materials and other
subject matter, and improvements thereof, relating to (i) mutants or the use
thereof in screening, (ii) the use of novel protein engineering techniques and
their application in drug discovery, (iii) target-directed fragment discovery
and maturation to produce drug leads, including monophores, extenders and
fragments, and monophore, extender and fragment libraries for such purposes,
(iv) 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 (v) dynamic and other
combinatorial chemistries related to proteins, as well as any divisions,
continuations, continuations-in-part, reissues, reexaminations, extensions,
supplementary protection certificates, and other governmental actions which
extend any of the patent applications, patents, invention disclosures, certificates of invention or certificates of
invention applications above, and all foreign counterparts to any of the
foregoing.  Notwithstanding the
foregoing, Sunesis Core Technology shall exclude all Sunesis Inhibition Mode
Technology and Research Program Technology.

 

8

 

1.36                           “Sunesis
Inhibition Mode” means inhibition of the Target with [*] Inhibitors which are derivatives of small
molecules or drug fragments disclosed to Merck in the Sunesis Core Technology
or the Sunesis Inhibition Mode Technology.

 

1.37                           “Sunesis
Inhibition Mode Know-How” means all technology, information, and material,
including, but not limited to, inventions, discoveries, know-how, processes,
methods, protocols, formulas, data, and trade secrets, patentable or otherwise,
which, as of the Agreement’s Effective Date and/or during the term of the
Agreement, is in the Control of Sunesis and/or its Affiliates, and which: (1)
specifically relate to small molecules
or drug fragments that utilize the Sunesis Inhibition Mode, or (2) (a) are
necessary or useful to Merck in connection with the Research Program and/or in
the research, development, or commercialization of Products and (b)
specifically relate to the Sunesis Inhibition Mode.

 

1.38                           “Sunesis
Inhibition Mode Patents” mean all patents, patent applications, invention disclosures, certificates of
invention and applications for certificates of invention, owned or
Controlled by Sunesis or its Affiliates as of the Agreement’s Effective Date
and/or during the term of the Agreement, which: (1) specifically relate to small molecules or drug fragments that
utilize the Sunesis Inhibition Mode, or (2) (a) are necessary or useful to
Merck in connection with the Research Program and/or for the research,
development, or commercialization of Products and (b) specifically relate to
the Sunesis Inhibition Mode; as well as any divisions, continuations,
continuations-in-part, reissues, reexaminations, extensions, supplementary
protection certificates, and other governmental actions which extend any of the
patent applications, patents, invention
disclosures, certificates of invention or certificates of invention
applications above, and all foreign counterparts to any of the foregoing.

 

1.39                           “Sunesis
Inhibition Mode Technology” means Sunesis
Inhibition Mode Patents and Sunesis Inhibition Mode Know-How.

 

1.40                           “Sunesis Research Program Know-How” means all technology, information,
and material, including, but not limited to, inventions, discoveries, know-how,
processes, methods, protocols, formulas, data, and trade secrets, patentable or
otherwise, made or developed solely by
personnel of Sunesis, its Affiliates or Third Parties acting on their behalf
(i) in the course of the Research Program during the Research Program Term, or
(ii) within [*] ([*]) years of the conclusion of the Research Program Term in
the course of activities directed to discovery, research or development
relating to the Target.

 

1.41                           “Sunesis Research Program Patents” means all patents, patent
applications, invention disclosures,
certificates of invention and applications for certificates of invention,the subject of which is an invention
made solely by personnel of Sunesis, its Affiliates or Third Parties acting on
their behalf (i) in the course of the Research Program during the Research
Program Term, or (ii)

 

[*]                                 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.

 

9

 

within [*] ([*]) years of
the conclusion of the Research Program Term in the course of activities
directed to discovery, research or development relating to the Target; as well as any divisions,
continuations, continuations-in-part, reissues, reexaminations, extensions,
supplementary protection certificates, and other governmental actions which
extend any of the patent applications, patents, invention disclosures, certificates of invention or certificates of
invention applications relating to the above, and all foreign
counterparts to any of the foregoing.

 

1.42                           “Target”
means [*].

 

1.43                           “Territory”
means all of the countries of the world.

 

1.44                           “Third
Party” means any person or entity other than Sunesis, Merck, and their Affiliates.

 

1.45                           “UC
Patents” means those patents, patent applications, invention disclosures, certificates of invention and applications for
certificates of invention within the Sunesis Core Technology set forth in Section 1
of Exhibit 1.35 hereto; as
well as any divisions, continuations, continuations-in-part, reissues,
reexaminations, extensions, supplementary protection certificates, and other
governmental actions which extend any of the patent applications, patents, invention disclosures, certificates of
invention or certificates of invention applications above, and all
foreign counterparts to any of the foregoing.

 

1.46                           “Valid
Patent Claim” means a claim of an issued and unexpired composition of
matter patent within the Sunesis Core Technology, Sunesis Inhibition Mode Patents or Research Program Patents,
which has not been revoked or held 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.

 

1.47                           “Viral
Inhibitor Lead” means any Program Compound that is approved by Merck in its
sole discretion as a Viral Inhibitor Lead in accordance with Section 2.6.

 

1.48                           Additional
Terms.  In addition to the foregoing,
the following terms shall have the meaning defined in the corresponding Section below:

 

	
   Term

   	
    

   	
   Section Defined

   
	
  “AAA”

  	
   

  	
   

  	
  13.1.1

  
	
  “Annual License
  Fee”

  	
   

  	
   

  	
  5.1.2

  
	
  “Change of
  Control”

  	
   

  	
   

  	
  14.3

  
	
  “Code”

  	
   

  	
   

  	
  12.3

  
	
  “Competitive
  Product”

  	
   

  	
   

  	
  5.5.3

  

 

[*]                                 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.

 

10

 

	
  Term

  	
   

  	
  Section Defined

  
	
  “Confidential
  Information”

  	
   

  	
   

  	
  9.1

  
	
  “Controlling
  Party”

  	
   

  	
   

  	
  8.4.4

  
	
  “Discontinued
  Compound”

  	
   

  	
   

  	
  5.4.2

  
	
  “Excluded Claim”

  	
   

  	
   

  	
  13.1.6

  
	
  “Exclusivity
  Period”

  	
   

  	
   

  	
  2.5

  
	
  “First
  Commercial Sale”

  	
   

  	
   

  	
  5.6

  
	
  “Know-How Royalty”

  	
   

  	
   

  	
  5.5.2

  
	
  “Liabilities”

  	
   

  	
   

  	
  11.1

  
	
  “Merck Indemnities”

  	
   

  	
   

  	
  11.2

  
	
  “Patent Royalty”

  	
   

  	
   

  	
  5.5.1

  
	
  “Principal
  Consultant”

  	
   

  	
   

  	
  2.2

  
	
  “Research Plan”

  	
   

  	
   

  	
  2.3

  
	
  “Sunesis
  Indemnities”

  	
   

  	
   

  	
  11.1

  
	
  “Technology
  Access Fee”

  	
   

  	
   

  	
  5.1.1

  
	
  “Third Party
  Payments”

  	
   

  	
   

  	
  5.5.4

  

 

ARTICLE 2—RESEARCH
PROGRAM

 

2.1                                 General;
Conduct of Research.  Sunesis, the
Principal Consultant and Merck shall engage in the Research Program upon the
terms and conditions set forth herein. 
Sunesis agrees to dedicate to the Research Program a Principal
Consultant as provided in Section 2.2. 
During the Research Program Term, each Party shall keep the other Party
informed of its progress and material results in performing the Research
Program.

 

2.2                                 Principal
Consultant.  For the duration of the
Research Program Term, Sunesis shall make the services of a principal
consultant available to Merck to assist with the Research Program (the “Principal Consultant”)
and such individual shall be available to devote no fewer than [*] ([*]) hours
per calendar month to the Research Program as reasonably requested by Merck, provided
that the Principal Consultant shall not be obligated to devote more than [*] ([*])
hours in any calendar month.  It is
understood and agreed that the Principal Consultant shall travel to
Merck facilities to perform such services as reasonably requested by Merck,
provided that the Principal Consultant shall not be required to travel to Merck
facilities more than once per Calendar Quarter. 
The Principal

 

[*]                                 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.

 

[*]                                 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.

 

11

 

Consultant to be provided
by Sunesis shall be [*].  If [*] is not
able to serve as the Principal Consultant or if he leaves Sunesis’ employ, then
Sunesis shall notify Merck immediately and a replacement shall be selected
subject to Merck’s approval.  Sunesis
agrees that any Principal Consultant which it proposes to Merck shall have
sufficient skills and experience as are required to fulfill its obligations
under the Research Program in accordance with the terms of this Agreement,
including any exhibits hereto.

 

2.3                                 Research
Plan.  The Parties will conduct the
Research Program in accordance with a written plan approved by Merck with input
of Sunesis (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 in writing by
Merck from time-to-time as it deems necessary or appropriate, provided that
Merck shall not have the authority to make any amendment to the Research Plan
that increases the ongoing obligations of the Principal Consultant or Sunesis
except as mutually agreed in writing. 
The initial Research Plan shall be completed within thirty (30) days of
the Effective Date and shall be attached hereto as Exhibit 2.3.

 

2.4                                 Term
of Research Program.  The Research
Program shall continue for an initial period of three (3) years after the
Effective Date.  Merck may extend the
Research Program Term for one additional one (1) year period with Sunesis’
approval; provided that Merck gives Sunesis written notice of its desire to
extend the term at least ninety (90) days before the end of the initial
three-year Research Program Term.  In
addition, Merck shall have the right to terminate the Research Program and/or
this Agreement, effective on the eighteen (18) month anniversary of the
Effective Date, by providing Sunesis
with ninety (90) days’ written notice as specified in Section 12.4.

 

2.5                                 Exclusivity.  Unless otherwise agreed by the Parties in
writing, during the period from the Effective Date until the time that Merck or
its Affiliates cease researching, developing and/or commercializing compounds
which inhibit the Target which utilize the Sunesis Inhibition Binding Mode
(including but not limited to Program Compounds and/or Products) (the “Exclusivity Period”), Sunesis and its Affiliates shall not
knowingly collaborate or otherwise cooperate with a Third Party or perform
screening or other research for its own account outside the Research Program
for the purpose of identifying compounds which inhibit the Target.  For the avoidance of doubt, the Parties agree
that, during the Exclusivity Period, Sunesis and its Affiliates shall not grant
any rights to Third Parties to perform research activities directed at
identifying compounds which inhibit the Target. 
The Parties agree that nothing in this Agreement and particularly in
this Section 2.5 shall in any way limit Merck from acquiring, from a party
other than Sunesis, a compound which inhibits the Target and that no milestones
nor royalties shall be owed to Sunesis with regard to such compound unless the
compound inhibits the Target through the Sunesis Inhibition Mode and otherwise
satisfies the definition of Program Compound set forth in Section 1.25
above and the conditions required for payment under Article 5.

 

12

 

2.6                                 Designation
of [*] Leads, Viral Inhibitor Leads, Lead Compounds and PCCs.  The Parties have established Criteria, set
forth in Exhibits 1.7.1, 1.7.2, 1.7.3, and 1.7.4, for the nomination of Program
Compounds as [*] Leads, Viral Inhibitor Leads, Lead Compounds or PCCs,
respectively.  Based upon the Criteria,
Merck shall consider Program Compounds as [*] Leads, Viral Inhibitor Leads,
Lead Compounds or PCCs and, upon approval by Merck in writing to Sunesis, such
Program Compound shall be deemed an [*] Lead, Viral Inhibitor Lead, Lead
Compound or PCC, as the case may be. 
During the Research Program Term, Merck may approve, or withhold its
approval of, the designation of any Program Compound as a Lead Compound or as a
PCC in Merck’s sole discretion, whether or not such Program Compound meets the
Criteria, and a Program Compound shall not be deemed a Lead Compound or PCC
unless so approved by Merck except as set forth in this Section 2.6.  In addition to the foregoing, following the
end of the Research Program Term and continuing until the expiration or
termination of the Agreement, Merck may approve, in its sole discretion, the
designation of any Program Compound as a PCC, provided such Program Compound
meets the PCC Criteria.  Notwithstanding
anything else in this Section 2.6, it is understood and agreed that, if
Merck undertakes IND–Enabling GLP Toxicity Studies with respect to a particular
Program Compound, such Program Compound shall be deemed designated and approved
by Merck as an [*] Lead, a Viral Inhibitor Lead, a Lead Compound and a PCC for
the purposes of Section 5.2 below, in each case to the extent such Program
Compound has not already been so designated and approved by Merck.

 

2.7                                 Research
Records.  Sunesis and Merck shall
maintain records of the Research Program (or cause such records to be
maintained) in sufficient detail and in good scientific manner, in accordance
with the standards used in the pharmaceutical industry for drug discovery and
development, and appropriate for patent and regulatory purposes as will
properly reflect all work done and results achieved in the performance of the
Research Program.  During the Research
Program Term, and for three (3) years thereafter, Sunesis shall provide Merck
with access to such records, upon request, during ordinary business hours.

 

ARTICLE 3—MANAGEMENT

 

3.1                                 Oversight
and Meetings.  Merck shall oversee,
review and recommend direction of the Research Program.  During the Research Program Term, the
Principal Consultant and personnel at Merck responsible for the Research
Program shall meet at least quarterly or at a frequency as agreed by the Parities,
to discuss the status of the Research Program, at such locations as the Parties
agree or by means of teleconference, videoconference or other similar
communications equipment, and will otherwise communicate by telephone,
electronic mail, facsimile and/or videoconference.  With the prior written consent of the
Parties, other representatives of Sunesis or Merck may attend the meetings as
nonvoting observers.  Each Party shall be
responsible for all of its own expenses associated with attendance of such
meetings.

 

[*]                                 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.

 

13

 

3.2                                 Decision-Making.  Merck shall have final decision-making
authority with regard to all issues relating to the Research Program, except as
set forth in Sections 1.17 and 2.3 above.

 

ARTICLE 4—LICENSES

 

4.1                                 License
Grant.

 

4.1.1                        License
under the Research Program Technology and Sunesis Inhibition Mode Technology.  Subject to the terms and conditions of this
Agreement, Merck hereby grants to Sunesis a worldwide, non-exclusive license
under the Research Program Technology and Sunesis Inhibition Mode Technology
solely to perform its obligations under the Research Program as specifically
provided in the Research Plan.

 

4.1.2                        License
under Sunesis Core Technology. 
Subject to the terms and conditions of this Agreement, Sunesis hereby
grants to Merck and its Affiliates a worldwide, non-exclusive license under the
Sunesis Core Technology (and any improvements thereto) to research, develop,
make, have made, use, import, offer for sale, sell, have sold or otherwise
exploit compounds that inhibit the Target (including but not limited to Program
Compounds) and/or Products in the Territory.

 

4.1.3                        License
under Sunesis Background Technology. 
Subject to the terms and conditions of this Agreement, Sunesis hereby
grants to Merck and its Affiliates a worldwide, non-exclusive license under the
Sunesis Background Technology to research, develop, make, have made, use,
import, offer for sale, sell, have sold or otherwise exploit compounds that
inhibit the Target (including but not limited to Program Compounds) and/or
Products in the Territory.

 

4.2                                 Sublicenses.  Subject to the terms and conditions of this
Agreement, Merck and its Affiliates shall have the right to sublicense the
rights granted in Sections 4.1.2 and 4.1.3 (i) to a Third Party contract
research organization (“CRO”) where
Merck retains all commercialization rights to compounds produced by the CRO,
(ii) to Third Parties for the purposes of a bona fide research or development
collaboration with such Third Party, where Merck remains substantially involved
in the performance of the research or development with such Third Party
collaborator, and (iii) to Third
Parties for the purpose of commercializing a Product developed in substantial
part by Merck, in each case provided such Third Party agrees in writing
carrying out aspects of Merck’s or its Affiliates’ efforts on Merck’s or its
Affiliates’ behalf and who agree to be bound by the terms and conditions of
this Agreement.  Within sixty (60)
days following Merck’s grant of a sublicense to a Sublicensee to make and sell
or to sell a Product, Merck shall provide Sunesis with the identity of the
Sublicensee and the rights granted with respect thereto for each Product and
territory, sufficient to allow Sunesis to verify the amounts due under Article 5.  Each sublicense granted by Merck under this Section 4.2
shall be consistent with all of the terms and conditions of this Agreement, and
subordinate thereto, and Merck shall remain responsible to Sunesis for the
compliance of each Sublicensee with the financial and other obligations due
under this Agreement.

 

14

 

4.3                                 No
Implied Licenses.  Only the licenses
granted or retained 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                                 Technology
Access Fee and License Fees.

 

5.1.1                        Technology
Access Fee.  Upon execution of this
Agreement by both Parties, an upfront technology access fee of [*] U.S. Dollars
(US$[*]) shall be due to Sunesis, payable by Merck within thirty (30) days
after the Effective Date (“Technology Access Fee”).  The Parties agree that the Technology Access
Fee shall cover all costs and expenses
relating to the Principal Consultant and his/her participation in the Research
Program.  Such fee shall be
non-refundable and non-creditable against other amounts due Sunesis hereunder.

 

5.1.2                        Annual
License Fee.  In consideration for
the licenses granted herein, Merck shall pay Sunesis an annual license fee (“Annual License Fee”) within thirty (30) days of the
following dates:

 

	
  Payment
  Date

  	
   

  	
  Annual License

  Fee (U.S. Dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Effective Date:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  The first anniversary
  of the Effective Date:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  The second anniversary
  of the Effective Date:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  The third anniversary
  of the Effective Date:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  The fourth anniversary
  of the Effective Date, and each anniversary of the Effective Date thereafter:

  	
   

  	
  $

  	
  [*]

  	
   

  

 

 

[*]                                 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.

 

15

 

5.2                                 Research
Milestones.  Subject to the terms and
conditions of this Agreement, Merck shall pay to Sunesis the amounts set forth
below within thirty (30) days following the achievement of the research
milestones with respect to the Target:

 

	
  Research Milestones

  	
   

  	
  Payment
  Amount (U.S.

  Dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  First achievement
  of the [*] Lead Criteria as determined by Merck, in accordance with Section 2.6,
  of the first [*] Lead for the Target:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  First
  achievement of the [*] Lead Criteria as determined by Merck, in accordance
  with Section 2.6, of the first [*] Lead for the Target:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Approval by
  Merck, in accordance with Section 2.6, of the first Lead Compound for
  the Target:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Approval by
  Merck, in accordance with Section 2.6, of the first PCC for the Target:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Approval by Merck, in
  accordance with Section 2.6, of the next four (4) PCCs for the Target:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Successful
  completion of IND-Enabling GLP Toxicology Studies on a PCC-by-PCC basis, for
  each of the first four (4) PCCs to reach such completion:

  	
   

  	
  $

  	
  [*]

  	
   

  

 

For milestones 1 through
4, the milestone payment shall be payable only upon the initial achievement of
such milestone for the Target and no amounts shall be due hereunder for
subsequent or repeated achievement of such milestone.  All milestone payments under this Section 5.2
shall be non-refundable and non-creditable against other amounts due Sunesis
hereunder.

 

[*]                                 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.

 

16

 

5.3                                 Development
Milestones.  On a Program
Compound-by-Program Compound basis, Merck shall pay to Sunesis the following
amounts within thirty (30) days following the first achievement by Merck,
its Affiliates or Sublicensees, as the case may be, of each of the following
milestones with respect to a Program Compound:

 

	
  Development Milestones

  	
   

  	
  Payment
  Amount (U.S.

  Dollars)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  Initiation of
  Phase I for such Program Compound in any country:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Initiation of the first
  Phase II trial for such Program Compound in any country:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Initiation of the first
  Phase III trial for such Program Compound in any country:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Acceptance of a NDA in
  the U.S. for such Program Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  Acceptance of an MAA in
  a Major Territory for such Program Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  Regulatory Approval in
  the U.S. of such Program Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Regulatory Approval in
  a Major Territory of such Program Compound:

  	
   

  	
  $

  	
  [*]

  	
   

  

 

Such milestone payments
shall be non-refundable and non-creditable against other amounts due Sunesis
hereunder.  The milestone payment shall
be payable only upon the initial achievement of such milestone and no amounts
shall be due hereunder for subsequent or repeated achievement of such
milestone.  In addition, in all
circumstances, milestone payments applicable to each Program Compound shall be
payable only once per Program Compound.

 

5.4                                 Research
and Development Milestones – Additional Terms.

 

5.4.1                        Multiple
Program Compounds.  It is understood
that the milestone payments set forth in Section 5.3 above shall be
payable only upon the initial achievement of such milestone with respect to a
particular Program Compound, and no amounts shall be due hereunder for
subsequent or repeated achievement of such milestone with respect to the same
Program Compound.  It is further
understood that the payments under Section 5.3 shall be due separately for
each Program

 

[*]                                 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

 

Compound to meet such
milestones; accordingly, if a second or subsequent Program Compound is
developed, 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
Program Compound, subject to the provisions of this Agreement, including Section 5.4.2
below.

 

5.4.2                        Credit
for Discontinued Compounds.  If Merck
ceases all clinical development of a particular Program Compound (a “Discontinued Compound”) after having made payment under Section 5.3
above on the achievement of a particular milestone by such Program Compound,
there shall be no payment due upon the accomplishment of that same milestone
with respect to the next Program Compound to achieve such milestone.

 

5.4.3                        Acceptance.  For purposes of this Article 5, “acceptance”
of an NDA or MAA shall mean (i) in the United States, that the FDA has
accepted such NDA for substantive review; and (ii) in the European Union,
that the Regulatory Agency 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 (iii) in Japan, that
the Regulatory Agency of Japan has validated or otherwise accepted such NDA for
substantive review.

 

5.4.4                        Accrued
Milestones.  If a research milestone
for a PCC under Section 5.2 above, or a development milestone for a
Program Compound under Section 5.3 above, is achieved with respect to such
PCC or Program Compound (respectively) in a territory before a prior research
milestone under Section 5.2 or a prior development milestone under Section 5.3
for such PCC or Program Compound in such territory, then the earlier milestone
payments under Section 5.2 and 5.3 in such territory shall then be due
with respect to such PCC or Program 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; provided,
that for the purposes of this Section 5.4.3, (i) milestone 5 under Section 5.2
above shall not be so deemed “prior” to milestone 6 thereunder, and (ii)
milestones 4 and 6 under Section 5.3 above shall not be so deemed “prior”
to milestones 5 and 7 thereunder, and vice versa.

 

5.4.5                        Reports;
Payments.  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, Merck shall inform Sunesis of such
occurrence.  The corresponding payment
shall be due thirty (30) days after the occurrence of such event.

 

5.5                                 Royalties
on annual Net Sales of Products by Merck, its Affiliates and Sublicensees.

 

5.5.1                        Patent
Royalty.  Subject to Section 5.5.2 below and the other terms and conditions of this Agreement, Merck
shall pay to Sunesis a royalty on annual Net Sales by Merck, its Affiliates and
their Sublicensees of Products, on a Product-by-Product basis, equal to the
percentage of such Net Sales set forth below, provided the sale of the Product would, but for the license hereunder,
infringe a Valid Patent Claim in the country of sale (“Patent
Royalty”):

 

18

 

	
  Annual
  Net Sales (U.S. Dollars)

  	
   

  	
  Patent Royalty on

  Net Sales

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Portion of
  annual Net Sales of such Product up to $[*]:

  	
   

  	
  [*]%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Portion of annual Net
  Sales of such Product between $[*] and $[*]:

  	
   

  	
  [*]%

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Portion of annual Net
  Sales of such Product over $[*]:

  	
   

  	
  [*]%

  	
   

  

 

For purposes of the
foregoing, “annual Net Sales” shall mean, for a particular Product, the
worldwide Net Sales of such Product for the particular Calendar Year.  In addition, it is understood that all
formulations and dosage forms of the same active ingredient(s) shall be deemed
the same “Product,” but Products with different active ingredients shall be
deemed different Products.  No royalties
shall be due upon the sale or other transfer among Merck, its Affiliates or
Sublicensees, but in such cases the royalty shall be due and calculated upon
Merck’s or its Affiliate’s or its Sublicensee’s Net Sales to the first Third
Party.

 

5.5.2                        Know-How
Royalty.  Subject to Section 5.5.5
below, in those countries where the sale of the Product would not infringe a
Valid Patent Claim, the royalty rate shall be [*] percent ([*]%) of the Patent
Royalty rates set forth above (the “Know-How Royalty”).

 

5.5.3                        Competitive
Products.

 

(a)          If, in any Calendar
Year, a Third Party that is not acting under authority of Merck or its
Affiliates or Sublicensees sells a product in a country which is a Competitive
Product (as defined below) of a Product, then the royalty rate to be paid on
Net Sales of such Product in that country under Section 5.5.1 shall be
reduced by fifty percent (50%) in such country during such Calendar Year, subject
to Section 5.5.5 below.

 

(b)         For purposes of this Section 5.5.3
“Competitive Product” shall mean a
product:

 

(i)                                     that
is being sold in the same country in which Merck or its Affiliate or their
Sublicensees is selling a Product, which product incorporates an active moiety
that is the same as the Program Compound contained within such Product being
sold in such country;

 

(ii)                                  the
sale of which is not covered by a Valid Patent Claim in such country or a Valid
Patent Claim exists in such country but is unenforceable; and

 

[*]                                 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

 

(iii)                               of
which sales in such country attains over such Calendar Year basis a market
share of [*] percent ([*]%) or more in such country of sale as measured by
prescriptions or other similar information in the country of sale as determined
by an independent sales auditing firm selected by Merck (such as IMS) and
reasonably acceptable to Sunesis.  Once
the Competitive Product has achieved such percentage market share in a country,
its shall be deemed to satisfy this clause (iii) for each subsequent Calendar
Year in such country until such time as commercial sales of such Competitive
Product are effectively discontinued in such country.

 

If Merck is
entitled to a royalty reduction based on Competitive Product sales pursuant to
this Section 5.5.3 for any royalty reporting period, Merck shall submit
the sales report of such independent firm, as applicable, for the relevant
royalty reporting period to Sunesis, together with the sales report for the
relevant royalty reporting period submitted pursuant to Section 6.1.

 

5.5.4                        Royalty
Offset.  In the event that Merck, its
Affiliates or their Sublicensees are required to pay royalties or to make any
other payments to Third Parties in any country order to research, develop,
make, have made, use, offer to sell, sell or import Program Compound(s) or
Product(s) (hereinafter “Third Party Payments”),
then [*] percent ([*]%) of the consideration actually paid for such Third Party
Payments by Merck, its Affiliates or their Sublicensees for such Program
Compound or Product for a Calendar Quarter shall be creditable against the
royalty payments due Sunesis by Merck with respect to such Program Compounds or
Products in any country; provided, however,
that in no event shall the royalties owed by Merck to Sunesis for such Calendar
Quarter be reduced by more than [*] percent ([*]%).

 

5.5.5                        Coordination
of Sections 5.5.2, 5.5.3 and 5.5.4. 
Royalty tiers pursuant to this Section 5.5 shall be calculated
based on worldwide Net Sales of each Product, provided that the determination
of whether the royalty rate shall be reduced under Section 5.5.2 and/or Section 5.5.3
or whether credits shall be allowable under Section 5.5.4 for each Product
shall be determined on a country-by-country basis.  Accordingly, Net Sales in countries to which
the provisions of Sections 5.5.2, 5.5.3 and/or 5.5.4 apply in a particular
Calendar Quarter shall be included in the total worldwide Net Sales for
purposes of determining the royalty tiers applicable to Net Sales under Section 5.5.1
in such Calendar Quarter, and if more than one royalty rate applies under Section 5.5.1
in such Calendar Quarter, then the Net Sales in countries to which the
provisions of Sections 5.5.2, 5.5.3 and/or 5.5.4 apply shall be included
proportionally in each such royalty tier in that Calendar Quarter.  Notwithstanding any provisions of this Section 5.5,
under no circumstances shall the aggregate royalty rate for worldwide Net Sales
of any Product be less than fifty percent (50%) of the Patent Royalty rates set
forth in Section 5.5.1.  Examples of
the operation of this Section 5.5.5 are set forth in Exhibit 5.5.5
attached hereto.

 

[*]                                 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.

 

20

 

5.6                                 Royalty
Term.  The royalties due pursuant to Section 5.5
shall be payable on a country-by-country and Product-by-Product basis
commencing on the First Commercial Sale in a country and continuing until:
(i) in the case of sales for which a Patent Royalty is due, the expiration
of the last Valid Patent Claim claiming the Program Compound or Product as a
composition of matter 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); provided, however, that, in those countries in the Territory where such Valid Patent Claims exist
but expire before the twelfth anniversary date of the date of the Product’s
First Commercial Sale, Merck will continue to pay royalties at the Know-How
Royalty rate during the remainder of the 12-year period and Section 5.6(ii)
shall not apply to such sales, or (ii)  in the case of sales for
which a Know-How Royalty is due, twelve (12) years following the First
Commercial Sale of such Product in such country.  “First
Commercial Sale” means, with respect to any Product, the first sale
for end use or consumption of such Product in a country after all required
approvals (other than pricing and reimbursement approvals) have been granted by
the Regulatory Agency of such country.

 

ARTICLE 6—PAYMENTS,
BOOKS AND RECORDS

 

6.1                                 Royalty
Reports and Payments.  After the
First Commercial Sale of a Product on which royalties are payable hereunder,
Merck shall make quarterly written reports to Sunesis within sixty (60) days
after the end of each Calendar Quarter. 
Each report shall state the aggregate Net Sales and royalties payable,
by country, of each such Product sold during the Calendar Quarter upon which a
royalty is payable under Section 5.5 above, and Merck shall, concurrently
with provision of the report, 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 check made to the order of Sunesis or by bank wire
transfer in immediately available funds to such bank account designated in
writing by Sunesis from time-to-time. 
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                                 Currency
Conversion.  In the case of sales
invoiced in a foreign currency, exchange conversion of such sales into U.S.
Dollars shall be made on a monthly basis and shall be translated at the rate of
exchange utilized by Merck in its worldwide accounting system.  As of the Effective Date of this Agreement,
Merck accesses such monthly rates of exchange as quoted by Reuters Ltd.

 

6.4                                 Records;
Inspection.  Merck shall keep
complete and accurate records for the purpose of determining the royalties
payable under this Agreement.  Merck
shall maintain such records for at least two (2) years following the end of the
Calendar Quarter to which they pertain. 
Such records will be open for inspection by an independent certified
public accounting firm of nationally-recognized standing to whom Merck has no
reasonable objection, solely for the purpose of

 

21

 

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 Sunesis’ expense, unless a variation or
error producing an increase exceeding [*] percent ([*]%) and at least [*]
Dollars (US$[*]) of the amount stated for the 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 shall be paid promptly by
Merck.  The interest available to Sunesis
pursuant to this Section 6.4 shall in no way limit any other remedies
available to it.

 

6.5                                 Withholding
Taxes.  If laws, rules or regulations
require withholding of income taxes or other taxes imposed upon payments set
forth in Article 5, Merck shall timely make such withholding payments as
required and subtract such withholding payments from the payments set forth in Article 5.  Merck shall submit appropriate proof of
payment of the withholding taxes to Sunesis within a reasonable period of time.

 

ARTICLE 7—DILIGENCE

 

7.1                                 Diligence.  Merck shall use commercially reasonable
efforts, consistent with the usual practice followed by Merck in pursuing the
commercialization and marketing of its other pharmaceutical products of a
similar commercial value, to develop and commercialize a Product on a
commercially reasonable basis in such countries in the Territory where, in
Merck’s opinion, it is commercially viable to do so.  In addition to the provisions of Article 10
hereof, the obligation of Merck with respect to any Product under this Section 7.1
is expressly conditioned upon the continuing absence of any adverse condition
or event relating to the safety or efficacy of the Product, and the obligation
of Merck to develop or market any such Product shall be delayed or suspended so
long as, in Merck’s opinion, any such condition or event exists.

 

7.2                                 Reports.  Throughout the term of this Agreement, Merck
agrees to keep Sunesis informed at least one (1) time per Calendar Quarter with
respect to the basic research, pre-clinical and clinical development of all
Products, to the extent it has the right to do so.

 

ARTICLE 8—INTELLECTUAL
PROPERTY

 

8.1                                 Ownership;
Disclosure.

 

8.1.1                        Research
Program Technology and Sunesis Inhibition Mode Technology.  Subject to Section 8.1.2, all right,
title and interest in and to the Research Program Technology (including all
improvements thereto) and Sunesis Inhibition Mode Technology (including all
improvements thereto) shall, as between the Parties, be solely owned by
Merck.  Sunesis hereby assigns and
transfers to Merck, and Merck hereby acquires from Sunesis, Sunesis’ and its
Affiliates’

 

[*]                                 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

 

right, title and interest
in and to the Research Program Technology and Sunesis Inhibition Mode
Technology.  Sunesis and its Affiliates
shall execute such documents and perform such acts at their expense as may be
reasonably necessary to effect an assignment of such Research Program Patents
and Sunesis Inhibition Mode Patents to Merck in a timely manner.  It is understood that, except as expressly
set forth in this Agreement, Sunesis shall have no right to research, develop,
commercialize and/or otherwise exploit Research Program Technology or Sunesis
Inhibition Mode Technology without the express written consent of Merck.

 

8.1.2                        Sunesis
Core Technology and Sunesis Background Technology.  All right, title and interest in and to the
Sunesis Background Technology and the Sunesis Core Technology and in any
improvements made to Sunesis Core Technology by or under authority of either
Party or its Affiliates during the term of this Agreement shall, as between the
Parties, be owned solely by Sunesis. 
Merck hereby assigns to Sunesis all of its rights in and to such
improvements to Sunesis Core Technology (including all patent and other
intellectual property rights therein).

 

8.1.3                        Disclosure.  Sunesis shall promptly disclose to Merck any
inventions made in connection with this Agreement within: (i) the Sunesis Core
Technology during the Research Program Term, (ii) the Sunesis Inhibition Mode
Technology during the term of this Agreement, and (iii) the Research Program
Technology during the Research Program Term and for a period of two (2) years
thereafter.  Merck shall promptly
disclose to Sunesis any inventions made in connection with this Agreement
within: (i) the Sunesis Core Technology during the term of this Agreement, and
(ii) the Research Program Technology during the Research Program Term.

 

8.2                                 Filing,
Prosecution and Maintenance of Patents.

 

8.2.1                        Sunesis
Core Technology and Sunesis Background Technology.  Sunesis shall have the right to control the
preparation, filing, prosecution and maintenance of patent applications and
patents within the Sunesis Core Technology and the Sunesis Background
Technology using patent counsel of Sunesis’ choice.  All costs associated with filing,
prosecuting, issuing and maintaining patent applications and patents, including
interference, opposition, reexamination and reissue actions, within the Sunesis
Core Technology or the Sunesis Background Technology shall be borne by Sunesis.

 

8.2.2                        Research
Program Technology and Sunesis Inhibition Mode Technology.  Merck shall have the right to control the
preparation, filing, prosecution and maintenance of patent applications and
patents within the Research Program Technology and the Sunesis Inhibition Mode
Technology using patent counsel of Merck’s choice.  All costs associated with filing,
prosecuting, issuing and maintaining patent applications and patents, including
interference, opposition, reexamination and reissue actions, within the
Research Program Technology or the Sunesis Inhibition Mode Technology shall be
borne by Merck.  Merck shall keep Sunesis
reasonably informed as to the status of such patent matters, including without
limitation by providing Sunesis with annual reports on all ongoing prosecution
matters, including a list of all issued Research Program Patents and Sunesis
Inhibition Mode Patents and summaries of pending patent applications within the
Research Program Patents and Sunesis Inhibition Mode Patents.

 

23

 

8.2.3                        Cooperation.  Each Party will promptly provide to the other
Party information reasonably requested by other Party that is necessary for the
prosecution activities pursuant to this Section 8.2.

 

8.3                                 Interference,
Opposition, Reexamination and Reissue of Research Program Patents and Sunesis
Inhibition Mode Patents.  Sunesis
shall, within ten (10) days of learning of such event, inform Merck of any
request for, or filing or declaration of, any interference, opposition, or
reexamination relating to the Research Program Patents and the Sunesis
Inhibition Mode Patents and the Parties shall cooperate and provide each other
with any information or assistance that either reasonably requests relating
thereto.

 

8.4                                 Enforcement
and Defense of Research Program Technology and Sunesis Inhibition Mode
Technology.

 

8.4.1                        Sunesis
shall promptly give Merck notice of any infringement of Research Program
Patents or Sunesis Inhibition Mode Patents and any misappropriation or misuse
of Research Program Know-How or Sunesis Inhibition Mode Know-How of which it
becomes aware.  Merck and Sunesis
thereafter shall promptly consult and cooperate fully to determine a course of
action including, without limitation, the commencement of legal action by
Merck, to terminate any infringement of such Research Program Patents or the
Sunesis Inhibition Mode Patents or any misappropriation or misuse of Research
Program Know-How or Sunesis Inhibition Mode Know-How.  Merck shall have the right to initiate and
prosecute such legal action at its own expense and in the name of Merck and, if
necessary, Sunesis, or to control the defense of any declaratory judgment
action relating to Research Program Patents or Sunesis Inhibition Mode Patents.

 

8.4.2                        If,
within six (6) months following the notice by Sunesis to Merck set forth in Section 8.4.1,
Merck fails to take such action, or if Merck informs Sunesis that it elects not
to exercise such right, Sunesis (or its designee) thereafter shall have the
right either to initiate and prosecute such action or to control the defense of
such declaratory judgment in the name of Sunesis.  If Sunesis elects to initiate and prosecute
such action or to control the defense of such declaratory judgment, the costs
incurred by Sunesis in such course of action, including the costs of any legal
action commenced or the defense of any declaratory judgment, shall be borne
solely by Sunesis.

 

8.4.3                        For
any action to terminate any infringement of Research Program Patents or Sunesis
Inhibition Mode Patents and/or any misappropriation or misuse of Research
Program Know-How or Sunesis Inhibition Mode Know-How, if either party is unable
to initiate or prosecute such action solely in its own name, the other Party
shall join such action voluntarily and shall execute all documents necessary to
initiate litigation to prosecute and maintain such action.  In connection with any such action, Merck and
Sunesis shall cooperate fully and will provide each other with any information
or assistance that either reasonably requests. 
Each Party shall keep the other informed of developments in any such
action or proceeding, including, to the extent permissible by law, the
consultation and approval of any offer related thereto.

 

8.4.4                        Any
recovery obtained by Merck or Sunesis in connection with or as a result of any
action contemplated by Section 8.4.1 or Section 8.4.2, respectively,
whether by settlement or

 

24

 

otherwise, shall first be
applied to reimburse the out-of-pocket expenses of the Party controlling such
action (the “Controlling Party”) directly
attributed to such action, then the other Party’s out-of-pocket expenses
directly attributed to such action, and the remainder shall be shared as
follows:  [*] percent ([*]%) to the
Controlling Party and [*] percent ([*]%) to the other Party.

 

8.4.5                        Each
Party shall inform the other Party of any certification regarding any Research
Program Patents or Sunesis Inhibition Mode Patents it has received pursuant to
either 21 U.S.C. §§ 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or its
successor provisions, or Canada’s Patented Medicines (Notice of Compliance)
Regulations Article 5, or any similar provisions in a country other than
the United States and Canada, and shall provide the other Party with a copy of
such certification within five (5) days of receipt by such Party.  Sunesis’ and Merck’s rights with respect to
the initiation and prosecution of any legal action as a result of such
certification or any recovery obtained as a result of such legal action shall
be as defined in Subsections 8.4.1 through 8.4.4.

 

8.5                                 Notice
of Infringement.  Merck shall
promptly report to Sunesis any notice which Merck receives from a Third Party
that acts performed by Merck and/or Sunesis under this Agreement which utilize
or utilized Sunesis Core Technology constitute infringement of a Third Party
patent or a misappropriation or misuse of Third Party know-how.  Sunesis shall promptly report to Merck any
notice from a Third Party that acts performed by Merck and/or Sunesis under
this Agreement which utilize or utilized Sunesis Core Technology constitute
infringement of a Third Party patent or a misappropriation or misuse of Third
Party know-how.  Merck and Sunesis
thereafter shall promptly consult and cooperate fully to determine a course of
action including, without limitation, settlement with the Third Party, defense
against such legal action by either or both of Sunesis and Merck, or the filing
of a declaratory judgment action against the Third Party patent.  Sunesis shall have the first right to defend
against such legal action at its own expense and in the name of Sunesis and, if
necessary, Merck, or to control the filing of any declaratory judgment action
relating to such Third Party patents and know-how.  If, within six (6) months following
notification by Sunesis to Merck of such a notice of infringement, Sunesis
fails to take a declaratory judgment action or if Sunesis informs Merck that it
elects not to defend against such a claim of infringement, Merck (or its
designee) thereafter shall have the right either to defend against such action
or to initiate and prosecute such a declaratory judgment in the name of Merck.

 

8.6                                 Patent
Term Restoration.  The Parties shall
cooperate in obtaining patent term restoration or supplemental protection
certificates or their equivalents in any country in the Territory where
applicable to Research Program Patents and Sunesis Inhibition Mode
Patents.  If elections with respect to
obtaining such patent term restoration are to be made, Merck shall have the
right to make the election to seek patent term restoration or supplemental
protection and Sunesis shall abide by such election.

 

[*]                                 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.

 

25

 

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 or with the prior
written consent of the disclosing Party, 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; or

 

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

 

(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; or

 

(d)                                 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; or

 

(e)                                  was
developed by the receiving Party independently of, and without knowledge of,
Confidential Information received from the disclosing Party, as documented by
the Receiving Party’s business records.

 

Except as
otherwise expressly provided in this Agreement, Research Program Technology and
Sunesis Inhibition Mode Technology shall be deemed Confidential Information of
Merck and Sunesis Core Technology shall be deemed Confidential Information of
Sunesis.

 

9.2                                 Permitted
Use and Disclosures.  Each Party
hereto may use or disclose Confidential Information of the other Party to the
extent such use or disclosure is reasonably necessary (a) in the exercise
of the rights granted or reserved to it hereunder (including permitted
licensees or sublicenses) on the condition that any Affiliate or Third Party to
whom it is disclosed agrees to be bound by confidentiality and non-use
obligations substantially similar to those contained in this Agreement; or
(b) in prosecuting patents or to gain approval to conduct clinical trials
or to market Product, but such disclosure may be only to the extent reasonably
necessary to obtain patents or authorizations from governmental or other
regulatory agencies; or (c) 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 promptly notify the other Party of such
disclosure in order to provide the other Party an opportunity to challenge or
limit the disclosure obligations 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

 

26

 

 

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.

 

9.3                                 Nondisclosure
of Terms/Use of Names.  Each of the
Parties hereto agrees not to disclose the existence of, or the terms of, this
Agreement to any Third Party and neither Party shall use the name, trademark,
trade name or logo of the other Party or its employees in any publicity, news
release or disclosure relating to this Agreement or its subject matter, without
the prior written consent of the other Party hereto; provided,
however, that each Party may disclose the terms and conditions of
this Agreement (a) as required by any court or other governmental body or as
otherwise required by law (including securities laws); (b) in confidence, to
attorneys, accountants, financing sources, subcontractors and sublicensees, on
the condition that such party to whom it is disclosed agrees to be bound by
confidentiality and non-use obligations substantially similar to those
contained in this Agreement; and (c) in confidence, in connection with a merger
or acquisition, or a proposed merger or acquisition, on the condition that such
party to whom it is disclosed agrees to be bound by confidentiality and non-use
obligations substantially similar to those contained in this Agreement.  Notwithstanding the foregoing, the Parties
shall agree upon a press release (attached hereto as Exhibit 9.3) and timing to
announce the execution of this Agreement; thereafter, Sunesis and Merck may
each disclose to Third Parties the information contained in such press release
without the need for further approval by the other.

 

9.4                                 Publication.
Any manuscript or oral disclosure by Sunesis or Merck describing scientific
results pertaining to any activity under the Research Program to be published
or publicly disclosed, shall be subject to the prior review of the other Party
at least sixty (60) days prior to submission for publication or presentation.  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) ninety (90)
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 Research 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 written consent of the other Party.

 

ARTICLE 10—REPRESENTATIONS
AND WARRANTIES

 

10.1                           Representations
and Warranties.  Each Party
represents and warrants on its own behalf 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

 

27

 

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
Representations and Warranties 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
and/or the Sunesis Inhibition Mode Technology are not in an interference with,
and does not infringe, the patent rights of any Third Party.  Sunesis also represents and warrants that, to
the best of its knowledge as of the Effective Date, Sunesis does not own or
control any patents and/or patent applications directed to inhibitors of the
Target.  In addition, Sunesis represents
and warrants that, to the best of its knowledge as of the Effective Date, with
regard to the Sunesis Core Technology, Sunesis Background Technology and
Sunesis Inhibition Mode Technology: (a) such exist and with respect to the
issued patents contained therein, such patents are not invalid or
unenforceable, in whole or in part; (b) Sunesis has not previously assigned,
transferred, conveyed or otherwise encumbered its right, title and interest
therein in a manner that is in conflict with the rights and licenses granted
herein; (c) Sunesis is the sole and exclusive owner thereof (other than the UC
Patents) and all are free and clear of any liens, charges and encumbrances
(other than with respect to certain non-exclusive licenses granted by Sunesis
to its collaboration partners under the Sunesis Core Technology), and no other
person, corporate or other private entity, or governmental entity or
subdivision thereof, has or shall have any claim of ownership therein (other
than with respect to the UC Patents); (d) the exercise of the licenses granted
herein do not infringe any intellectual property rights owned or possessed by
any Third Party; (e) there are no claims, judgments or settlements against or
owed by Sunesis or pending or threatened claims or litigation relating thereto;
and (f) Sunesis has disclosed to Merck all reasonably relevant information
relating thereto of which Sunesis is aware of and is in Sunesis’ Control; and
(g) the patents listed on Exhibit 1.35 are all of the Sunesis Core Technology
patents necessary for Merck to exercise its rights under Section 4.1.2.  In addition, Sunesis represents and warrants
that it is the exclusive licensee under the UC Patents.  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.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN
THIS AGREEMENT, SUNESIS AND MERCK MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OR CONDITIONS OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT
TO THE RESEARCH PROGRAM TECHNOLOGY, SUNESIS CORE TECHNOLOGY, SUNESIS BACKGROUND
TECHNOLOGY, SUNESIS INHIBITION MODE TECHNOLOGY, PROGRAM COMPOUNDS, PRODUCTS OR
CONFIDENTIAL INFORMATION DISCLOSED HEREUNDER, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF
ANY INTELLECTUAL PROPERTY, PATENTED OR UNPATENTED, OR NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.

 

ARTICLE 11—INDEMNIFICATION

 

11.1                           Merck.  Merck agrees to indemnify, defend and hold
Sunesis and its Affiliates and their respective directors, officers, employees,
agents and their respective successors, heirs and

 

28

 

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
(including, without limitation, product liability and patent infringement
claims) relating to (i) any Products or Program Compounds manufactured or sold
by or under authority of Merck, its Affiliates or Sublicensees, or (ii) any
material breach by Merck 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 Sunesis, gross negligence or intentional
misconduct of Sunesis.

 

11.2                           Sunesis.  Sunesis agrees to indemnify, defend and hold
Merck and its Affiliates and their respective directors, officers, employees,
agents and their respective successors, heirs and assigns (the “Merck Indemnitees”) harmless from and against any
Liabilities arising, directly or indirectly out of or in connection with Third
Party claims, suits, actions, demands or judgments (including, without
limitation, patent infringement claims) relating to any material 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 Merck, gross negligence or intentional misconduct of Merck.

 

11.3                           Procedure.  In the event that any Indemnitee (either a
Merck 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 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, unless terminated earlier as provided in this Article 12,
shall continue in full force and effect on a country-by-country and
Product-by-Product basis until there are no remaining payment obligations in
such country with respect to such Products. 
Effective upon the expiration (but not earlier termination) of this
Agreement, Merck’s licenses pursuant to Sections 4.1.2 and 4.1.3 shall become
fully-paid up, perpetual licenses and no further Annual License Fees shall be
due.

 

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

 

29

 

sixty (60) days
after written notice thereof was provided to the breaching Party by the
non-breaching Party, and such 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 event of a good faith dispute with
respect to the existence of a material breach, the sixty (60) day cure period
shall be tolled (effective as of the date the allegedly breaching Party provides
notice of such dispute) until such time as the dispute is resolved pursuant to Section 13.1.

 

12.3                           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.

 

If this Agreement is
terminated by Merck pursuant to this Section 12.3 due to the rejection of
this Agreement by or on behalf of Sunesis under Section 365 of the United
States Bankruptcy Code (the “Code”), all licenses
and rights to licenses granted under or pursuant to this Agreement by Sunesis
to Merck are, and shall otherwise be deemed to be, for purposes of Section 365(n)
of the Code, licenses of rights to “intellectual property” as defined under Section 101(35A)
of the Code.  The Parties agree that
Merck, as a licensee of such rights under this Agreement, shall retain and may
fully exercise all of its rights and elections under the Code, and that upon
commencement of a bankruptcy proceeding by or against Sunesis under the Code,
Merck shall be entitled to a complete duplicate of or complete access to (as
Merck deems appropriate), any such intellectual property and all embodiments of
such intellectual property.  Such intellectual
property and all embodiments thereof shall be promptly delivered to Merck (i)
upon any such commencement of a bankruptcy proceeding upon written request
therefore by Merck, unless Sunesis elects to continue to perform all of its
obligations under this Agreement or (ii) if not delivered under (i) above, upon
the rejection of this Agreement by or on behalf of Sunesis upon written request
therefore by Merck.  The foregoing
provisions are without prejudice to any rights Merck may have arising under the
Code or other applicable law.

 

12.4                           Permissive
Termination by Merck.  Merck has the
right to terminate the Research Program and/or this Agreement, effective on the
eighteen (18) month anniversary of the Effective Date, by providing Sunesis with ninety (90) days’ written notice.

 

12.5                           Effect
of Breach or Permissive Termination.

 

12.5.1                  Termination
by Merck for Breach by Sunesis.  In
the event of termination of this Agreement by Merck pursuant to Section 12.2
due to Sunesis’ material breach:

 

(a)                                  Merck
shall elect between: (1) Merck shall offset a pro rata portion of the most
recently-paid Annual License Fee (based upon the amount of time remaining
between the date of termination and the subsequent anniversary of the Effective
Date) against any monies owed to

 

30

 

Sunesis up to the date of
termination, and (2) Sunesis shall refund to Merck such pro rata portion of the
most recent Annual License Fee within thirty (30) days of Merck’s written
request; and

 

(b) in addition to
those provisions surviving under Section 12.6, the rights and obligations
of the Parties under Sections 2.5, 4.1.2, 4.1.3, 4.2 shall survive, except that
(i) with respect to the milestone and royalty amounts accrued and payable by
Merck to Sunesis pursuant to Article 5 after the effective date of
termination, such amounts shall be reduced by fifty percent (50%) of the
amounts that would otherwise be due to Sunesis; and (ii) Merck’s licenses
pursuant to Sections 4.1.2 and 4.1.3 shall become fully-paid up, perpetual
licenses and no further Annual License Fees shall be due.  In addition to the foregoing, upon such
termination Merck’s rights and Sunesis’ obligations under Section 2.7
shall survive.

 

12.5.2                  Termination
by Sunesis for Breach by Merck, or Permissive Termination by Merck.  In the event of termination of this Agreement
by Sunesis pursuant to Section 12.2 due to Merck’s breach or termination
of this Agreement by Merck pursuant to Section 12.4, in addition to those
provisions surviving under Section 12.6, Merck’s licenses pursuant to
Sections 4.1.2 and Section 4.1.3 shall, at Merck’s election, terminate as
of such termination date, and Section 7.2 shall survive.  In addition to the foregoing, upon such
termination, Sunesis’ rights and Merck’s obligations under Section 2.7
shall survive.

 

12.5.3                  Transition of Confidential
Information and Materials.  Not later
than thirty (30) days after the date of termination, each Party shall return or
cause to be returned to the other Party all Confidential Information in
tangible form received from the other Party and all copies thereof and all
substances, materials or compositions delivered or provided to the other Party,
except that each Party may retain all Confidential Information, substances,
compositions and materials relevant to licenses and rights it retains hereunder
and may retain one copy of Confidential Information in its confidential files
for record purposes.

 

12.6                           Accrued
Rights and Obligations; Survival Sections. 
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.  Sections 2.6, 4.2, 4.3,
8.1, 8.2 (other than Merck’s reporting requirement), 8.6, 9.1, 9.2, 9.3 and
Articles 1, 5 (as modified by Section 12.5.1 in the event of Sunesis
breach) 6, 10, 11, 12, 13 and 14 of this Agreement shall survive the expiration
or termination of this Agreement for any reason.

 

ARTICLE 13—DISPUTE
RESOLUTION

 

13.1                           Dispute
Resolution.

 

13.1.1                  The
Parties shall negotiate in good faith and use reasonable efforts to settle any
dispute, controversy or claim arising from or related to this Agreement or the
breach thereof, including submission of such to the Executive Vice President of
Worldwide Basic Research of Merck and the Chief Executive Officer of Sunesis.  If the Parties do not fully settle, and a
Party

 

31

 

wishes to pursue the
matter, each such dispute, controversy or claim that is not an “Excluded Claim”
shall be finally resolved by binding arbitration in accordance with the
Commercial Arbitration Rules and Supplementary Procedures for Large Complex
Disputes of the American Arbitration Association (“AAA”),
and judgment on the arbitration award may be entered in any court having
jurisdiction thereof.

 

13.1.2                  The
arbitration shall be conducted by a panel of three (3) persons experienced in
the pharmaceutical business:  within
thirty (30) days after initiation of arbitration, each Party shall select one
person to act as arbitrator and the two Party-selected arbitrators shall select
a third arbitrator within thirty (30) days of their appointment.  If the arbitrators selected by the Parties
are unable or fail to agree upon the third arbitrator, the third arbitrator
shall be appointed by the AAA.  The place
of arbitration shall be New York, New York, and all proceedings and
communications shall be in English.

 

13.1.3                  Either
Party may apply to the arbitrators for interim injunctive relief until the
arbitration award is rendered or the controversy is otherwise resolved.  Either Party also may, without waiving any
remedy under this Agreement, seek from any court having jurisdiction any
injunctive or provisional relief necessary to protect the rights or property of
that Party pending the arbitration award. 
The arbitrators shall have no authority to award punitive or any other
type of damages not measured by a Party’s compensatory damages.  Each Party shall bear its own costs and
expenses and attorneys’ fees and an equal share of the arbitrators’ and any
administrative fees of arbitration.

 

13.1.4                  Except
to the extent necessary to confirm an award or as may be required by law,
neither a Party nor an arbitrator may disclose the existence, content, or
results of an arbitration without the prior written consent of both Parties.  In no event shall an arbitration be initiated
after the date when commencement of a legal or equitable proceeding based on
the dispute, controversy or claim would be barred by the applicable Delaware
statute of limitations.

 

13.1.5                  The
Parties agree that, in the event of a dispute over the nature or quality of
performance under this Agreement, neither Party may terminate the Agreement
until final resolution of the dispute through arbitration or other judicial
determination.  The Parties further agree
that any payments made pursuant to this Agreement pending resolution of the
dispute shall be refunded if an arbitrator or court determines that such
payments are not due.

 

13.1.6                  As
used in this Section, the term “Excluded Claim”
shall mean a dispute, controversy or claim that concerns (a) the validity or
infringement of a patent, trademark or copyright; or (b) any antitrust,
anti-monopoly or competition law or regulation, whether or not statutory.  The Parties hereby consent to the
jurisdiction and venue of New York federal courts for Excluded Claims.

 

32

 

ARTICLE 14—MISCELLANEOUS

 

14.1                           Governing
Law.  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 New
York, 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. 
Except as provided in this Section 14.3, this Agreement may not be
assigned or otherwise transferred, nor may any right or obligation hereunder be
assigned or transferred, by either Party without the written consent of
the other Party.  Merck may, without Sunesis’ consent, assign this
Agreement and its rights and obligations hereunder in whole or in part
to an Affiliate or in connection with a Change of Control (as defined
below).  Sunesis may, without Merck’s consent, assign this
Agreement and its rights and obligations hereunder, except as specified
below, in connection with a Change of Control; provided,
however, that Sunesis must notify Merck at least
thirty (30) days, where feasible, prior to the closing of any such Change of
Control, and Merck shall have the right, at any time after receipt of
such notice, to notify Sunesis of the termination of the Research
Program and thereafter Merck shall have no obligation to
provide any reports except for a royalty report on a worldwide
basis.  Any permitted assignee shall assume all obligations of
its assignor under this Agreement.  Any attempted assignment not in accordance
with this Section 14.3 shall be void.  For purposes of this Section 14.3,
a “Change of Control” of a Party shall be
deemed to occur if such Party is involved in a merger, reorganization or
consolidation, or if a person or group (acting together) other than the current
controlling person or group shall effectively acquire control of the management
and policies of such Party or if there is a sale of all or substantially all of
such Party’s assets or business relating to this Agreement, in each case where
the shareholders of such Party prior to such transaction do not control such
Party immediately after such transaction.

 

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 Party for any purpose as a
result of this Agreement or the transactions contemplated thereby.  Neither Sunesis nor Merck shall have the
authority to make any statements, representations or commitments of any kind,
or to take any action, which shall be binding on the other Party, without the
prior written consent of the other Party.

 

14.5                           Compliance
with Law.  In exercising their rights
and obligations under this Agreement, 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 and obligations under this Agreement.

 

14.6                           Patent-Marking.  Merck agrees to request that 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.

 

33

 

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,
or by facsimile (and promptly confirmed by personal delivery, registered or
certified mail or overnight courier), or by nationally-recognized overnight
courier, 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: General Counsel

Fax: (650) 266-3505

 

With a
copy to:                                                             Wilson
Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, California
94304-1050

Attn: Kenneth A. Clark,
Esq.

Fax: (650) 493-6811

 

Merck:                                                                                                           Merck
& Co., Inc.

One Merck Drive

P.O. Box 100

Whitehouse Station, NJ
08889-0100

Attn: Chief Licensing
Officer

Tele: (908) 423-1000

Fax: (908) 735-1202

 

With a
copy to:                                                             Merck
& Co., Inc.

One Merck Drive

P.O. Box 100

Whitehouse Station, NJ
08889-0100

Attn: Corporate Secretary

Tele: (908) 423-1000

Fax: (908) 735-1224

 

14.8                           Severability.  In the event that any provision(s) of this
Agreement becomes or is declared by a court of competent jurisdiction or an
arbitrator(s) as provided in Article 13 to be illegal, unenforceable or
invalid, this Agreement shall continue in full force and effect to the fullest
extent permitted by law without said provision, and the Parties shall use their
best efforts to 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.

 

34

 

14.9                           Advice
of Counsel.  Sunesis and Merck 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                     Force
Majeure.  Neither Party shall be held
liable to the other Party nor be deemed to have defaulted under or breached the
Agreement for failure or delay in performing any obligation under the Agreement
when such failure or delay is caused by or results from causes beyond the
reasonable control of the affected Party including, but not limited to,
embargoes, war, acts of war (whether war be declared or not), acts of
terrorism, insurrections, riots, civil commotions, strikes, lockouts or other
labor disturbances, fire, floods, or other acts of God, or acts, omissions or
delays in acting by any governmental authority or the other Party.  The affected Party shall notify the other
Party of such force majeure circumstances as soon as reasonably practical, and
shall promptly undertake all reasonable efforts necessary to cure such force
majeure circumstances.

 

14.11                     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 Merck.

 

14.12                     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.

 

14.13                     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.

 

 

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.

 

	
  MERCK & CO.,
  INC.

  	
   

  	
   

  	
  SUNESIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
											

 

35

 

EXHIBIT 1.7.1

 

[*]
Lead Criteria

 

An [*] Lead is a Program
Compound having all of the following properties:

 

	
  •

  	
  IC50 [*]
  versus [*] reaction.

  
	
  •

  	
  Potency in [*] reaction
  [*] reaction.

  
	
  •

  	
  Supporting [*] from [*]
  compounds in the series.

  
	
  •

  	
  Solubility [*].

  
	
  •

  	
  MW [*].

  
	
  •

  	
  [*].

  
	
  •

  	
  Clear pathway for advancement.

  

 

 

[*]                                 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.

 

36

 

EXHIBIT 1.7.2

 

Viral
Inhibitor Lead Criteria

 

A Viral Inhibitor Lead is
a Program Compound which satisfies the [*] Lead Criteria and also has all of
the following properties:

 

	
  •

  	
  IC50 [*]
  versus [*] reaction.

  
	
  •

  	
  Potency in [*] reaction
  [*] reaction.

  
	
  •

  	
  IC50 [*]
  versus viral [*] in cell culture.

  
	
  •

  	
  Supporting [*] from [*]
  compounds in the series.

  
	
  •

  	
  Evidence for clean MOA
  (e.g., [*]).

  
	
  •

  	
  MW [*].

  
	
  •

  	
  [*].

  
	
  •

  	
  Clear pathway for
  advancement.

  

 

 

[*]                                 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.

 

37

 

EXHIBIT 1.7.3

 

Lead
Compound Criteria 

 

A Lead Compound is a
Program Compound which satisfies the [*] Lead Criteria and the Viral Inhibitor
Lead Criteria and also has all of the following properties:

 

	
  •

  	
  IC50 [*]
  versus viral [*] in cell culture with added 50% normal human serum.

  
	
  •

  	
  Supporting [*] from [*]
  compounds in the series.

  
	
  •

  	
  MW [*].

  
	
  •

  	
  Pharmacokinetics [*] in [*] species (one of which is [*] and the other of which is [*]) when administered in a [*] and
  suitable for [*].

  
	
  •

  	
  A selectivity profile
  which is [*] when
  tested against targets in Panlabs screen.

  
	
  •

  	
  [*].

  
	
  •

  	
  Physical and chemical
  properties consistent with [*] in man.

  
	
  •

  	
  [*] donors [*].

  
	
  •

  	
  [*] acceptors [*].

  
	
  •

  	
  [*] in Merck version of HERG binding assay.

  
	
  •

  	
  Low measured [*] consistent with [*] standards (i.e., [*]).

  

 

 

[*]                                 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.

 

38

 

EXHIBIT 1.7.4

 

PCC
Criteria

 

A PCC is a Program
Compound which satisfies the [*] Lead Criteria, the Viral Inhibitor Lead
Criteria, the Lead Compound Criteria and which has been accepted for further
pre-clinical or clinical development by the PDRC pursuant to the PDRC’s
standards for designating PCCs (or any successor designation thereof).

 

 

[*]                                 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.

 

39

 

EXHIBIT 1.35

 

Sunesis
Core Technology

 

Section 1.                                          UC
Patents within the Sunesis Core Technology.

 

	
  Sunesis No.

  	
   

  	
  Serial No.

  	
   

  	
  Title

  	
   

  	
  Status

  
	
  UC-100

  	
   

  	
  US 09/049,754

  	
   

  	
  Pharmacophore
  Recombination For the Identification of Small Molecule Drug Lead Compounds

  	
   

  	
  Issued as U.S. Patent
  No. 6,344,330

  
	
  UC-100 AU

  	
   

  	
  32113/99

  	
   

  	
  Pharmacophore
  Recombination For the Identification of Small Molecule Drug Lead Compounds

  	
   

  	
  Issued as AU Patent No.
  759327

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  

 

 

[*]                                 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

 

Section 2.                                          Other
patents within the Sunesis Core Technology.

 

	
  Sunesis No.

  	
   

  	
  Serial No.

  	
   

  	
  Title

  	
   

  	
  Status

  
	
  SU-100

  	
   

  	
  US 09/105,372

  	
   

  	
  Methods for Rapidly
  Identifying Small Organic Molecule Ligands for Binding to Biological Target
  Molecules

  	
   

  	
  Issued as U.S. Patent
  No. 6,335,155

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  allowed

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  

 

[*]                                 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

 

	
  Sunesis No.

  	
   

  	
  Serial No.

  	
   

  	
  Title

  	
   

  	
  Status

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  SU-630 PCT

  	
   

  	
  US03/06217

  	
   

  	
  Methods for Identifying
  Compounds that Modulate Enzymatic Activity

  	
   

  	
  Published as WO
  03/087054

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  SU-1400 PCT

  	
   

  	
  US03/08725

  	
   

  	
  Identification of
  Kinase Inhibitors

  	
   

  	
  Published as WO
  03/081210

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
   

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  
	
  SU-1800 PCT

  	
   

  	
  US03/10831

  	
   

  	
  Methods for Identifying
  Exosites

  	
   

  	
  Published as WO
  03/087051

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  pending

  

 

 

[*]                                 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

 

	
  Sunesis
  No.

  	
   

  	
  Serial No.

  	
   

  	
  Title

  	
   

  	
  Status

  
	
  SU-2200 PCT

  	
   

  	
  US03/10209

  	
   

  	
  Methods and Materials
  to Find and Characterize Molecular Interaction Sites on Proteins

  	
   

  	
  Published as WO
  03/087299

  

 

43

 

EXHIBIT 2.3

 

Research
Plan

 

[Research
Plan not in existence as of Effective Date]

 

44

 

EXHIBIT 5.5.5

 

Royalty
Calculations

 

The following examples
are calculated assuming that in the first Calendar Quarter of a particular
Calendar Year the worldwide Net Sales of a particular Product equals [*] U.S.
Dollars (US$[*]).

 

1.  If all of such Net Sales are subject to the
Patent Royalty pursuant to Section 5.5.1, and none of the reductions or
credits described in Sections 5.5.3 or 5.5.4 apply to any of such Net Sales,
then the royalty payable for such Product for such Calendar Quarter would be calculated
as [*]% of the first $[*] of such Net Sales and [*]% of the next $[*], for a
total of $[*].

 

2.  If (i) $[*] of such Net Sales are subject to
the Know-How Royalty pursuant to Section 5.5.2, (ii) $[*] are subject to
the Patent Royalty pursuant to Section 5.5.1, and (iii) none of the
reductions or credits described in Sections 5.5.3 or 5.5.4 apply to any of such
Net Sales, then the royalty payable for such Product would be calculated as
follows.  Because more than one royalty
rate applies under Section 5.5.1 in that royalty period, the $[*] to which
the Know-How Royalty applies shall be included proportionally in each
applicable royalty tier.  In this case, [*]
(the fraction of total Net Sales subject to that particular reduction) of the
first $[*] of such Net Sales is reduced from [*]% to [*]%, and [*] of the next
$[*] is reduced from [*]% to [*]%.  This
would result in a royalty payable for such Product equal to $[*].

 

[*]                                 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

 

EXHIBIT 9.3

 

Press
Release

 

	
  

  	
   

  	
   

  	
   

  	
  

  	
   

  

 

For Immediate Release

 

Merck and Sunesis Agree to Collaborate on

 

Discovery of New Drugs for Treatment of Viral Infections

 

Anti-viral collaboration follows
partnership on Alzheimer’s disease drugs 

 

SOUTH
SAN FRANCISCO, CA and WHITEHOUSE STATION, N.J., July XX, 2004—Sunesis Pharmaceuticals, Inc. and Merck &
Co., Inc. (NYSE: MRK) today announced that they have entered into a multi-year
research collaboration to discover novel oral drugs for the treatment of viral
infections.

 

Sunesis
will provide Merck with a series of small molecule compounds targeting viral
infections. These compounds were derived from TetheringSM, Sunesis’
proprietary fragment-based drug discovery platform.  Merck will be responsible for advancing these compounds into lead
optimization, preclinical development, and clinical studies.  Merck will pay annual license fees for
ongoing access to Sunesis’ core technology as a means of identifying additional
compounds for the treatment of viral infections.

 

46

 

Under
the terms of the agreement, Sunesis will receive an upfront payment, annual
license fees and payments based on the achievement of development milestones.
In addition, Sunesis will receive royalty payments based on net sales for
products resulting from the collaboration. 
Merck receives an exclusive worldwide license to any products resulting
from the collaboration.

 

This
is the second collaboration between the two companies.  A previous collaboration to discover new
small molecule medicines for Alzheimer’s disease was signed in February 2003.

 

“Sunesis
is a valued partner to Merck, and we are pleased to be collaborating with them
on a second program,” said Merv Turner, Ph.D., senior vice president of
Worldwide Licensing and External Research at Merck.  “Viral infections are an important area of
research for Merck, and we believe that Sunesis’ fragment-based drug discovery
approach has the potential to play a key role in the discovery of potent and
targeted anti-viral medicines.”

 

“Merck
is dedicated to quality and innovation in medicine, and we are proud to be
collaborating with them on another important therapeutic program,” said Daniel
Swisher, CEO of Sunesis Pharmaceuticals. 
“The continued satisfaction of our partners further validates the
capacity of Sunesis’s drug discovery engine to consistently produce highly
targeted small molecule medicines.”

 

Sunesis will apply the
company’s proprietary Tetheringsm approach to identify fragments that bind with high affinity to antiviral
targets.  Sunesis will leverage these
fragments as the foundation for potential new drugs with the ability to address
viral infections.

 

47

 

About
Sunesis Pharmaceuticals

 

Sunesis is a
biopharmaceutical company focused on discovering and developing superior small
molecule medicines for oncology and inflammatory disease.  The company has established a rich pipeline
using its proprietary fragment-based drug discovery engine, known as Tetheringsm, in-licensing a promising
compound within its therapeutic areas of focus and forming partnerships for the
development of certain Sunesis-discovered leads.  To date, Sunesis has established partnerships
with Johnson & Johnson PRD, Merck & Co., Inc., Biogen Idec and
Dainippon Pharmaceuticals. For further information, visit www.sunesis.com.

 

About
Merck

 

Merck & Co., Inc. is
a global research-driven pharmaceutical products company. Merck discovers,
develops, manufactures and markets a broad range of innovative products to
improve human and animal health, directly and through its joint ventures.

 

Merck Forward-Looking
Statement

 

This press release contains “forward-looking statements” as that term is
defined in the Private Securities Litigation Reform Act of 1995.  These statements involve risks and
uncertainties, which may cause results to differ materially from those set
forth in the statements.  The
forward-looking statements include statements regarding product development and
product potential.  No forward-looking
statement can be guaranteed, and actual results may differ materially from
those projected.  We undertake no
obligation to publicly update any forward-looking statement, whether as a
result of new information, future events, or otherwise.  Forward-looking statements in this press
release should be evaluated together with the many uncertainties that affect
Merck’s business, particularly those mentioned in the cautionary statements in
Item 1 of our Form 10-K for the year

 

48

 

 

ended Dec. 31, 2003, and in our periodic reports on Form 10-Q and Form 8-K
(if any), which Merck incorporates by
reference.

 

# # #

 

	
  CONTACTS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Merck
  & Co., Inc.

  	
   

  	
  Sunesis
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
   

  
	
  Mark
  Stejbach

  	
   

  	
  Investors

  
	
   

  	
   

  	
   

  
	
  Investor
  Relations

  	
   

  	
  Eric
  Bjerkholt, CFO

  
	
   

  	
   

  	
   

  
	
  908-423-5185

  	
   

  	
  650-266-3717

  

 

	
  Media

  	
   

  	
  Media

  
	
   

  	
   

  	
   

  
	
  Janet
  Skidmore

  	
   

  	
  Karen
  L. Bergman or

  
	
   

  	
   

  	
   

  
	
  Media
  Relations

  	
   

  	
  Michelle
  Corral

  
	
   

  	
   

  	
   

  
	
  908-423-3046

  	
   

  	
  BCC
  Partners

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  650-575-1509
  or 415-794-8662

  

 

49EXHIBIT 10.36

 

LICENSE
AGREEMENT

 

(AG-7352)

 

This LICENSE AGREEMENT made and entered into
as of the       day of              ,
2003 by and between Dainippon Pharmaceutical Co., Ltd., existing under the laws
of Japan and having its principal place of business at 6-8, Doshomachi 2-chome,
Chuo-ku, Osaka, 541-0045 Japan (hereinafter referred to as “Dainippon”) and
Sunesis Pharmaceuticals Inc., incorporated under the laws of the State of
Delaware, the United States of America and having its principal place of business
at 341 Oyster Point Boulevard, South San Francisco, California 94080, the
United States of America (hereinafter referred to as “Sunesis”)

 

WITNESSETH:

 

WHEREAS, Dainippon has long been engaged in
research on and development of pharmaceuticals and has made extensive efforts
in search, screening and invention of new medical substances in important
therapeutic fields, and as a result, Dainippon has found a certain valuable
compound; and

 

WHEREAS, Sunesis is interested in evaluating
the compound, and Dainippon and Sunesis concluded the confidentiality agreement
dated January 17, 2003 (hereinafter referred to as “Confidentiality
Agreement”) and the material transfer agreement dated February 26, 2003
(hereinafter referred to as “Material Transfer Agreement”) for Sunesis’
evaluation of the compound; and

 

WHEREAS, as a result of Sunesis’ evaluation, Sunesis proposed, and
Dainippon accepted, that Sunesis would carry out further evaluation of the
Compound, and Dainippon and Sunesis concluded the option agreement dated May
23, 2003 (hereinafter referred to as “Option Agreement”), under which Dainippon
granted Sunesis an exclusive option to conclude a license agreement covering
the Compounds and the Products (as defined below); and

 

WHEREAS, Sunesis exercised the option on (Date), 2003 under the Option
Agreement, and Dainippon and Sunesis intend to enter into the license
agreement.

 

NOW, THEREFORE, in consideration of the above premises and the
agreement herein contained, the parties agree as follows:

 

Article 1.        Definition

 

1.01         The
terms defined herein shall have the meaning set forth herein when they are used
in this Agreement.  As used in this
Agreement, the singular includes the plural, and the plural includes the
singular, wherever so required by fact or context.  Titles used in the Articles hereof shall be
only for the sake of convenience and shall not be regarded as a part of this
Agreement.

 

1.02         The
term “Primary Compound” shall mean a compound identified as
(+)-1,4-dihydro-7-[(3S,4S)-3-methoxy-4-(methylamino)-1-pyrrolidinyl]-4-oxo-1-(2-thiazolyl)-1,8-naphthyridine-3-carboxylic
acid which is specified by Dainippon as AG-7352.

 

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.

 

 

1.03         The
term “Compounds” shall mean the Primary Compound, and other compounds covered
by protection of the patents or claim of the patent applications included in
the Patent Rights as set forth in Schedule 1.17 attached hereto.

 

1.04         The
term “Products” shall mean products containing the Compound(s) as active
ingredient(s) ready for sale to customers, in finished, final packaged form as
pharmaceuticals for use in humans.

 

1.05         The
term “Information and Know-How” shall mean data, know-how, and information
relating to the Compounds and/or the Products in existence as of the date of
execution of this Agreement and owned or controlled by Dainippon, which is
listed on Schedule B of the Option Agreement or otherwise provided to
Sunesis pursuant to the Option Agreement or this Agreement, including Section 4.03,
and which includes the Manufacturing Know-How.

 

1.06         The
term “Territory” shall mean the entire world.

 

1.07         The
term “Affiliate” shall mean any company or organization directly or indirectly
owning, owned by or under common ownership with the subject entity in
question.  For purposes of this
definition only, a company shall “own” another entity only if it owns or
controls fifty percent (50%) or more of the voting ownership interest of the
subject entity.

 

1.08         The
term “Effective Date” shall mean the date first set forth above.

 

1.09         The
term “Test” shall mean any and all preclinical, non-clinical and clinical tests
or trials for the Compounds and/or the Products performed by Sunesis, its
Affiliate(s) and/or the Sublicensee(s) that are necessary or useful for
securing and/or maintaining the Regulatory Approval in the Territory.

 

1.10         The
term “Phase II Clinical Study” shall mean a study of a Product in human
patients for which the primary endpoint is a preliminary determination of
efficacy in patients being studied (for example, as described in 21 C.F.R.
§312.21(b), or similar clinical study in a country other than the United States
of America).  A first-in-human study or
any study for which a primary endpoint is directed to safety shall not be considered
a Phase II Clinical Study.

 

1.11         The
term “Phase III Clinical Study” shall mean large scale pivotal human clinical
trials of a Product, which is designed and sufficiently powered to establish
safety and efficacy of one or more particular doses in patients being studied
and to provide the statistical basis for the Marketing Approval for the
respective drug (for example, as described in 21 C.F.R. § 312.21(c), or
similar clinical study in a country other than the United States of America).

 

1.12         The
term “FDA” shall mean the United States Food and Drug Administration and any
successor agency thereof.

 

1.13         The
term “Regulatory Body” shall mean, as the fact or context of this Agreement
requires, the FDA and any or all equivalent governmental 

2

 

authorities outside the United States of
America, authorized to permit any Test in the Territory and whose approval is
required for manufacture, marketing, promotion, sale or distribution of the
Products in the Territory.

 

1.14         The
term “IND” shall mean an Investigational New Drug Application filed with the
FDA or an equivalent filing with a Regulatory Body in the Territory.

 

1.15         The
term “NDA” shall mean a New Drug Application filed with the FDA or an
equivalent filing with a Regulatory Body in the Territory.

 

1.16         The
term “Regulatory Approval” shall mean all approvals (including pricing and
reimbursement approvals, if applicable), licenses, registrations or
authorizations by the Regulatory Body in any jurisdiction in the world
necessary to launch, sell, market, promote and distribute the Products in such
regulatory jurisdiction.

 

1.17         The
term “Patent Rights” shall mean any and all patents and patent applications in
the Territory which are owned or controlled by Dainippon or under which
Dainippon is or may become empowered to grant licenses, the subject matter of
which is necessary or useful in use and/or manufacture of the Compounds or
development, the Regulatory Approval, manufacture, use, marketing, promotion,
sale or distribution of the Products, and shall be the patents and patent
applications set forth in Schedule 1.17 attached hereto, as well as any
patents and patent applications covering the Improvements (as defined in Section 18.01),
together with any and all extensions, reissues, continuations in part,
reexaminations, substitutions and renewals of or to any of the aforesaid
patents or applications, and any patents issuing therefrom.  Dainippon shall use reasonable efforts to
update Schedule 1.17 from time to time as reasonably necessary, at least
once a year during the term of this Agreement, including in the event of
registration or expiration of any of the Patent Rights, provided, however, in
the event that Dainippon develops any Improvements with respect to the
Compounds which Dainippon considers would be the Dominating Patent Rights (as
defined hereinafter) and from which a patent is issuable, Dainippon shall grant
Sunesis a semi-exclusive license with respect thereto for the purpose of
development and manufacture of the Compounds and manufacture, sale, marketing,
promotion and distribution of the Products; and provided further that to the
extent a patent claims a particular drug formulation technology that is
patentable without regard to the particular drug substance being delivered, and
whose application is not limited to the Compounds, such patent shall not be
included in the license to be granted pursuant to the foregoing proviso.

 

1.18         The
term “Manufacturing Know-How” shall mean any and all proprietary information
relating to manufacture of the Compounds which is reasonably owned by or
available to Dainippon and is not subject to any Dainippon’s non-disclosure
obligations.

 

1.19         The
term “Marketing Year” shall mean any full calendar year after first launch of
the Product by Sunesis in the Territory commencing on January

 

3

 

1 and ending on December 31, provided
that the first (1st) Marketing Year shall commence on the day of first launch
of the Product by Sunesis, its Affiliate(s) or the Sublicensee(s) in the
Territory and end on December 31 of the following calendar year.

 

1.20         The
term “Net Selling Price” shall mean the average selling price for the Products
during a given period which shall be calculated by dividing the Net Sales
during such period by the total number of the Products sold by Sunesis, its
Affiliates and the Sublicensees.

 

1.21         The
term “Net Sales” shall mean the actual gross sales of the Products sold by
Sunesis, its Affiliates and the Sublicensees to a non-Affiliate third party (excluding
any sales among Sunesis, its Affiliates and the Sublicensees) less the
following amounts related to the Products: (a) reasonable and customary
credits, allowances, discounts, rebates, and chargebacks for spoiled, damaged,
outdated, rejected, and returned Products, (b) reasonable and customary freight
and insurance costs incurred with respect to the shipment of the Products to
customers, in each case if charged separately on the invoice and paid by the
customer, (c) duties, surcharges and other governmental charges, (d) sales,
use, value-added, excise and other similar taxes (excluding income taxes), (e)
rebates, normal and customary cash, quantity, trade and similar discounts and
allowances and other price reductions reasonably and actually granted or paid
by Sunesis, its Affiliates and the Sublicensees in so far as they relate
directly to sales of the Products, and (f) actual uncollectible amounts.  Net Sales shall not include transfers of the
Products for use in clinical trials, development or other transactions that are
not a full commercial sale, and no royalty shall be due hereunder with respect
to such transfers.

 

1.22         The
term “Dainippon” shall include, where applicable, Dainippon’s Affiliate(s)
designated by Dainippon as provided for in Section 2.03.

 

1.23         The
term “Sunesis” shall include, where applicable, its Affiliate(s).

 

1.24         The
term “Major Market Countries” shall mean the United States of America, Canada,
Japan, Germany, Spain, France, Italy, and the United Kingdom.

 

1.25         The
term “Sublicensee” shall mean a non-Affiliate third party to whom Sunesis has
granted the right to develop, manufacture, promote, market, use, sell,
offer for sale, import and/or distribute the Products within the scope of the
license hereunder, including the marketing partner set forth in Section 10.01,
provided that such third party has primary responsibility for the development,
manufacture, promotion, marketing, use, sale, offer for sale, importation
and/or distribution of such Products in its distribution territory as granted
by Sunesis subject to Section 2.05 and has the right to record sales of
such Products for its account, provided that Sunesis shall remain responsible
for performance of such third party hereunder. 
For clarity, the Sublicensee(s) shall exclude any wholesaler or reseller
of the Products which is not primarily responsible for marketing or promotion
of the Products.  This definition shall
not be construed to limit

 

4

 

the scope of sublicenses which may be granted
hereunder.

 

Article 2.        Grant

 

2.01         Dainippon
shall grant and hereby grants Sunesis a license, with the right to grant and
authorize sublicenses, under the Patent Rights and the Information and Know-How
to develop, manufacture, promote, market, use, sell, offer for sale, import
and/or distribute the Compounds and/or the Products in the Territory.  The license and right granted herein shall be
exclusive (even as to Dainippon), except that the license granted herein with
respect to a patent application for an intermediate of the Compound (Japanese
Patent Application No. 10-173986) as specified in Schedule 1.17 attached
hereto and the patents issuing thereon shall be non-exclusive.  Dainippon agrees not to (a) manufacture,
promote, market, use, sell, offer for sale, import or distribute the Compounds
and/or the Products for any commercial purpose, or (b) license any of the
Patent Rights or the Information and Know-How to any third party to develop,
manufacture, promote, market, use, sell, offer for sale, import and/or
distribute the Compounds and/or the Products for any use including veterinary
uses.  Notwithstanding the foregoing,
Dainippon shall have the right to license the patent application for the intermediate
of the Compound claimed in Japanese Patent Application No. 10-173986, as well
as the patents issuing thereon, to third parties; provided that neither
Dainippon nor such third parties shall have the right to use the intermediate
in the manufacture of the Compounds and/or the Products.  In addition, in the event that Dainippon
develops any Improvements which Dainippon considers would be the Dominating
Patent Rights and from which a patent is issuable, Dainippon shall grant
Sunesis a semi-exclusive license with respect to the Improvements of the
Compounds developed by Dainippon as described in Section 1.17.

 

2.02         Except
as provided in Section 23.01, the license granted Sunesis by Dainippon in Section 2.01
shall be non-assignable.  For purposes of
this Section 2.02, assignment shall mean a transfer of all rights and
obligations of Sunesis under this Agreement, such that Sunesis retains no
rights and obligations with respect to the Compounds and the Products.

 

2.03         Sunesis
may designate its Affiliate(s) to carry out its rights and obligations hereunder
in whole or in part, subject to Section 2.06 below, in which event Sunesis
shall promptly, but in no event later than sixty (60) days following such
designation, inform Dainippon in writing of the identity of such Affiliate(s)
and other reasonable information regarding such Affiliate(s), including the
nature of the rights and obligations given to the Affiliate(s).

 

2.04         Sunesis
may, at its cost, risk and responsibility, retain any contract research
organization(s) or other third party (hereinafter collectively referred to as “CRO”)
to have any Test or other services carried out by the CRO on Sunesis’ behalf,
subject to Section 2.06 below.

 

2.05         Sunesis
may appoint the Sublicensee(s) under the license granted

 

5

 

Sunesis by Dainippon herein, subject to
Sections 2.02 and 2.06, provided that Sunesis shall inform Dainippon of the
identity of such Sublicensee(s) and other reasonable information regarding such
Sublicensee(s) promptly, but in no event later than sixty (60) days following
such appointment.  In addition, Sunesis
agrees that prior to the appointment of a Sublicensee within a Major Market
Country, to the extent it has the right to do so, Sunesis shall provide Dainippon
with other agreed information regarding such Sublicensee.  In the event Sunesis grants a sublicense
hereunder, Sunesis shall use diligent efforts to obtain from such Sublicensee
the same, substantially similar or more stringent material obligations,
including diligence obligations, to the extent applicable, as Sunesis has
hereunder.

 

2.06         In
the event that Sunesis delegates some or all of its rights and/or obligations
under this Agreement to its Affiliate(s), the Sublicensee(s) and/or the CRO,
Sunesis shall remain responsible for the performance of such rights and/or
obligations.

 

2.07         Dainippon
may designate its Affiliate(s) to carry out its rights and obligations
hereunder in whole or in part, in which event Dainippon shall promptly, but in
no event later than sixty (60) days following such designation, inform Sunesis
in writing of the identity of such Affiliate(s) and other reasonable
information regarding such Affiliate(s), including the nature of the rights and
obligations given to the Affiliate(s), and shall remain responsible for the
performance of such rights and obligations.

 

Article 3.        Payment

 

3.01         Sunesis
shall make the following payments to Dainippon in consideration of the license
granted to it under this Agreement (it being understood that each of the
Initial Payment and the Milestone Payments set forth below shall only be paid
one time):

 

(a)           Initial
Payment of United States Dollars [*] (US$[*]), payable within thirty (30) days
after the Effective Date, provided that the option fee of United States Dollars
[*] (US$[*]) paid by Sunesis to Dainippon under the Option Agreement shall be
credited against the Initial Payment;

 

(b)           Milestone
Payment of United States Dollars [*] (US$[*]), payable within sixty (60) days
after the date of the dosing of the first patient in the first Phase II
Clinical Study for the first Product in the Territory;

 

(c)           Milestone
Payment of United States Dollars [*] (US$[*]), payable within sixty (60) days
after the date of the dosing of the first patient in the first Phase III
Clinical Study for the first Product in the Territory, provided that in case no
Phase III Clinical Study is required for such Product in the Territory, the
amount of United

 

[*] 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.

 

6

 

States Dollars [*] (US$[*]) for this
Milestone Payment shall be paid simultaneously with the first payment of any of
the Milestone Payments in subsection (d), (e) or (f) below;

 

(d)           Milestone
Payment of United States Dollars [*] (US$[*]), payable within thirty (30) days
after the date of filing of the first NDA for the first Product in the United
States of America for treatment or prevention of cancer.  For purposes of this subsection (d), “the
date of filing” means the date of acceptance of such first NDA for substantive
review by the FDA as specified in 21 CFR 314.101(a);

 

(e)           Milestone
Payment of United States Dollars [*] (US$[*]), payable within thirty (30) days
after the date of filing of the first NDA for the first Product in any of the
Major Market Countries in Europe for treatment or prevention of cancer.  For purposes of this subsection (e), “the
date of filing” means the date of acceptance of such first NDA for substantive
review by the Regulatory Body in any of the Major Market Countries in Europe,
or such later date as may be provided by applicable law or regulation;

 

(f)            Milestone
Payment of United States Dollars [*] (US$[*]), payable within thirty (30) days
after the date of filing of the first NDA for the first Product in Japan for
treatment or prevention of cancer.  For
purposes of this subsection (f), “the date of filing” means the date of
acceptance of such first NDA for substantive review by the Regulatory Body in
Japan or such later date as may provided by applicable law or regulation;

 

(g)           Milestone
Payment of United States Dollars [*] (US$[*]), payable within thirty (30) days
after the date of the first receipt of the Regulatory Approval for the first
Product in the United States of America for treatment or prevention of cancer;

 

(h)           Milestone
Payment of United States Dollars [*] (US$[*]), payable within thirty (30) days
after the date of the first receipt of the Regulatory Approval for the first
Product in any of the Major Market Countries in Europe for treatment or
prevention of cancer;

 

(i)            Milestone
Payment of United States Dollars [*] (US$[*]), payable within thirty (30) days
after the date of the first receipt of the Regulatory Approval for the first
Product in Japan for treatment or prevention of cancer; and

 

(j)            Milestone
Payment of United States Dollars [*] (US $[*]), payable within thirty (30) days
after the date of the first receipt of the Regulatory Approval for a Product
for any indication other than treatment or prevention of cancer in any of the
Major Market Countries.  It is understood
and agreed that the Products for 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.

 

7

 

non-cancer indications, and the development,
clinical studies, regulatory filings and the Regulatory Approvals thereof, if
any, shall be subject to this Milestone Payment (j) only (i.e. such Products
shall not be subject to the Milestone Payments (a) through (i) above) and this
Milestone Payment (j) shall be paid only one time (upon its first achievement).

 

For avoidance of doubt, the parties
acknowledge that in no event shall the total amount payable under this Section 3.01
exceed United States Dollars [*] (US$[*]), less any applicable credits.

 

3.02         Sunesis
shall pay royalties on annual Net Sales of the Products by Sunesis, its
Affiliate(s) and the Sublicensee(s) in the Territory.  Royalties shall be payable within sixty (60)
days after December 31 of each calendar year.

 

For any sales of the Products made by Sunesis
and its Affiliate(s), Sunesis shall pay Dainippon royalties based on the
following table, with each royalty percentage being applicable to the portion
of the annual Net Sales of the Products falling within the relevant band of the
Net Sales for a calendar year.

 

	
  Total annual Net Sales of Products by Sunesis and its Affiliates

  	
   

  	
  Applicable royalty rate

  	
   

  
	
  US$[*] or
  less

  	
   

  	
  [*]

  	
  %

  
	
  Greater than
  US$[*]

  	
   

  	
  [*]

  	
  %

  

 

For example, if in a calendar year, Net Sales
of US$[*] was realized by Sunesis and its Affiliate(s), the royalty payable
would be US$[*] ([*]% of the first US$[*] and [*]% of the next US$[*]).

 

For any sales of the Products made by any
Sublicensee(s), Sunesis shall pay Dainippon royalties equal to [*] percent
([*]%) of total annual Net Sales by the Sublicensee(s).

 

For purposes of the foregoing, it is
understood that annual Net Sales shall be calculated on a calendar year basis.

 

3.03         Sunesis
shall, from time to time and/or at the request of Dainippon, provide Dainippon
with its best estimate of the timing of the events relating to the Milestone
Payments as provided for in Section 3.01, and shall promptly notify
Dainippon of such events upon occurrence thereof.

 

3.04         The
royalties under Section 3.02 shall be payable on a country-by-country
basis with respect to each Product until: (a) expiry of the last to expire of
the patents within the Patent Rights (or, if any, the patents owned by Sunesis)
covering such Product sold in such country and/or the Compound contained in
such Product; or (b) ten (10) years following the date of commercial launch of
the first Product in 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.

 

8

 

country, whichever is longer; provided that
in any country in which a generic competitor to a Product has been introduced,
if for any royalty period the Net Sales of the Product in such country declines
by [*] percent ([*]%) or more from the last full royalty reporting period prior
to the first commercial sale of the generic competitor in such country, then
the royalty rate applicable for sales of such Product in such country under Section 3.02
above shall be reduced for such period and the remainder of such royalty period
to [*] percent ([*]%) of such royalty rate. 
As used herein, a “generic competitor” shall mean a product sold by a
third party that contains the same active ingredient as the Product hereunder.

 

3.05         In
the event Sunesis, its Affiliate(s) or the Sublicensee(s) are required to pay a
third party amounts with respect to a Product for a right or license under
Dominating Patent Rights (as defined below), Sunesis may deduct [*] percent
([*]%) of such amount owing to such third parties (prior to any reductions)
from the payments owing to Dainippon for such Product.  Notwithstanding the foregoing provisions of
this Section 3.05, in no event shall the amounts due to Dainippon be so
reduced to less than [*] percent ([*]%) of the amount that would otherwise be
due to Dainippon.  In the event Sunesis
proposes to acquire from a third party patent rights that Sunesis believes are
Dominating Patent Rights, Sunesis shall advise Dainippon thereof, and the
parties shall discuss the situation.  As
used herein, “Dominating Patent Rights” shall mean patent rights without which
development and/or manufacture of the particular Compound and/or manufacture,
marketing, sale, promotion and/or commercialization of the particular Product
would not be reasonably practicable, as determined by mutual agreement of the
parties either prior to or following Sunesis’ acquisition of such third party
patent rights.  If the parties are not
able to agree whether a patent is a “Dominating Patent Right”, the
determination shall be made pursuant to Section 25.01.

 

3.06         In
the event that a Product is sold for a single combined price with another
product, component, active ingredient or service for which no royalty would be
due hereunder if sold separately, Net Sales from such combination sales for
purposes of calculating the amounts due under this Article 3 shall be
reasonably allocated between such Product and such other product, component,
ingredient or service, based on the relative values thereof.

 

3.07         The
payments made by Sunesis under Sections 3.01 and 3.02 shall be made in the
United States Dollars by telegraphic transfer to a bank account designated by
Dainippon and shall in any event be non-refundable.  The withholding tax relating to the payments,
if any, shall be borne by Dainippon, and Sunesis shall provide Dainippon with
appropriate evidence of Sunesis’ payments of the withholding tax.

 

[*] 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.

 

9

 

Article 4.        Supply
of Information

 

4.01         Dainippon
represents and warrants that to the best knowledge of Dainippon, Dainippon has
furnished Sunesis prior to the Effective Date with all substantial information
requested by Sunesis (and has not withheld from Sunesis any material
information) in its possession as of the Effective Date necessary or useful to
enable Sunesis to properly evaluate safety and efficacy of the Compounds and/or
the Products, or which would otherwise be material to Sunesis’ decision to
enter into this Agreement and to undertake the obligations set forth herein,
including all information provided to Sunesis under the Option Agreement, the
Confidentiality Agreement or the Material Transfer Agreement.

 

4.02         Dainippon’s
obligations under Article 3 of the Option Agreement to provide Sunesis
with all documents listed in Schedule B thereto shall continue to apply to
the extent that such obligations have not been satisfied by Dainippon prior to
execution of this Agreement.  Upon
execution of this Agreement, and from time to time for the duration of this
Agreement thereafter when it becomes available to Dainippon, Dainippon shall
promptly supply Sunesis with other Information and Know-How in Dainippon’s
possession or available to Dainippon.

 

4.03         In
addition to Section 4.02 above, if Sunesis or Dainippon identifies a
particular item pertaining to the Compounds and/or the manufacture thereof that
Dainippon owns or has the right to provide to Sunesis hereunder but has not
been previously transferred to Sunesis, and without which Sunesis’ performance
or exercise of rights under this Agreement would be materially impeded by not
having such item, Dainippon shall use reasonable efforts to provide the same to
Sunesis as soon as practicable, subject to such non-disclosure obligations to
which the disclosure of such requested item may be subject.

 

4.04         Any
Information and Know-How supplied by Dainippon to Sunesis before the Effective
Date shall be regarded as having been supplied under this Agreement and shall
be governed by the terms and conditions contained herein.

 

Article 5.        Reports
and Consultation

 

5.01         Sunesis
shall report to Dainippon in writing annually, providing a summary of its
activities under this Agreement with respect to the Major Market Countries
during a calendar year (each, an “Annual Report”), within sixty (60) days after
December 31 of the relevant calendar year. 
In addition, Sunesis agrees to provide Dainippon with such other summary
of its activities under this Agreement as reasonably requested by Dainippon and
agreed by Sunesis, which agreement shall not be unreasonably withheld (each, an
“Additional Report”).

 

5.02         Prior
to the commercial launch of the first Product, Sunesis shall include in the
Annual Report and the Additional Report information regarding the progress
during the relevant period of the Tests, and efforts, performed or undertaken
by Sunesis, its Affiliates and, to the extent that Sunesis has the right to do
so and such information is available to Sunesis, the Sublicensees, to obtain
the Regulatory Approval of the Compounds and

 

10

 

the Products in the Major Market Countries,
and such other countries of the Territory as reasonably requested by Dainippon
and agreed by Sunesis, which agreement shall not be unreasonably withheld,
including the protocols as well as summaries of the results, in written and/or
computerized form, of the major clinical studies within the Tests for the Major
Market Countries hereunder initiated or completed during such period and any
milestones achieved during such period, provided that Sunesis shall diligently
seek to obtain such information relating to the Sublicensees from the
Sublicensees as described in Section 2.05 above.  The parties acknowledge that the aggregate
burden on Sunesis of providing information with respect to the countries other
than the Major Market Countries requested by Dainippon under this Section 5.02
(and other information requested under Section 9.04 below), in relation to
the significance to Dainippon of obtaining such incremental information at the
time of such request, shall be a factor in determining whether it would be
reasonable for Sunesis to withhold its agreement to provide such
information.  In addition, each Annual
Report provided to Dainippon under this Section 5.02 shall identify the
primary CROs involved in the major clinical studies within the Tests conducted
for the Major Market Countries during the period covered by such Annual Report.

 

5.03         After
the commercial launch of the first Product, Sunesis shall include in the Annual
Report information as specified in (a), (b), (c) and (d) below, and to the
extent requested by Dainippon and agreed by Sunesis, which agreement shall not
be unreasonably withheld, in the Additional Report the information as specified
in (a) and (d) below:

 

(a)           the
Net Sales and number of the Products sold in the relevant period by Sunesis,
its Affiliates and the Sublicensees on a country-by-country basis,

 

(b)           a
calculation of the royalties due on a country-by-country basis based on such
Net Sales,

 

(c)           the
total royalties so calculated and due Dainippon on a country-by-country basis,

 

(d)           the
progress of any efforts in the relevant period to conduct further Tests or
develop the Compounds and/or the Products in those countries in the Territory
covered by Section 5.02 above in each case, to the extent the information
is available and Sunesis has the right to provide the same, provided that
Sunesis shall diligently seek to obtain such information.

 

5.04         In
addition, Dainippon may request Sunesis to arrange a meeting between appropriate
representatives of Dainippon and of Sunesis, its Affiliates and/or the
Sublicensees to discuss in good faith the current status, prospect, strategy
and other issues relating to the development and the Regulatory Approval of the
Compounds and the Products as reflected in the Annual Report and/or the
Additional Report and to discuss in good faith the way and strategy for
optimizing the parties’ mutual success with respect to the Compounds and the
Products.

 

11

 

Sunesis shall make reasonable efforts to
arrange such meeting as requested by Dainippon. 
Such meetings shall take place no more frequently than once per calendar
year and shall be held at Sunesis’ or its Affiliate’s facilities at times
convenient for Sunesis.  Each party shall
be responsible for its own costs in connection with such meetings.

 

Article 6.        Development
and Regulatory Approval

 

6.01         Without
limiting the rights granted in Article 2 above, Sunesis shall have the
right and obligation to take at its sole expense, risk and responsibility, or
have its Affiliates and/or the Sublicensees take at their expense, risk and
responsibility, either by itself or themselves or through its or their
designee, all necessary steps for securing and maintaining the Regulatory
Approval and carrying out the Tests. 
Sunesis shall undertake, or have its Affiliates and/or the Sublicensees
undertake, such activities in accordance with Articles 6 and 14 and any
applicable laws or regulations in the Territory.  Dainippon shall have no obligation to carry
out any Test, and Sunesis agrees that no Test will be carried out by Dainippon.

 

6.02         Promptly
after the Effective Date, Dainippon shall supply Sunesis at no additional cost
to Sunesis with all quantities of the Compounds and intermediates as are
available to Dainippon as of the Effective Date as set forth in Schedule 6.02
attached hereto.  Dainippon shall have no
obligation to synthesize nor manufacture any further Compounds including any
intermediates thereof, and Sunesis agrees that no further Compounds including
any intermediates thereof will be synthesized nor manufactured by Dainippon.

 

6.03         Sunesis
has provided Dainippon with its preliminary development plan for the Compounds
and the Products as set forth in Schedule 6.03 attached hereto.  Sunesis shall provide Dainippon with a draft
of the development plan for the Compounds and the Products within six (6)
months after the Effective Date, and with a draft of the update annually to the
extent the plans have been updated; provided that if the development plan has
not been updated in such annual reporting period, Sunesis shall so state.  Dainippon shall review, and may comment on,
the draft of the development plan and the update thereof, and the parties may
discuss such comments and plans.

 

6.04         Sunesis
shall, promptly after they become available to Sunesis, provide Dainippon with
a copy of the letter of approval and the summary of product
characteristic/package insert.  In
addition, Sunesis shall, upon reasonable notice, provide Dainippon with (i) the
initial IND package for the United States of America in written and/or
computerized form, and (ii) electronic copies of the NDAs filed in the Major
Market Countries, to the extent such copies exist in electronic format, in each
case subject to Section 19.03 below and to the extent Sunesis has the
right to provide the same, and will diligently seek to obtain such right from
any Sublicensee with respect to the NDAs for the United States of America.

 

6.05         In
the event that Sunesis does not intend to continue its efforts to secure the
Regulatory Approval by itself or through its Affiliate(s) or the

 

12

 

Sublicensee(s) due to any reason in (i) Asia
and the Pacific Rim, (ii) North America, (iii) Europe, (iv) Latin America or
(v) all other countries in the world (each of (i)-(v), as further defined in Schedule 6.05,
being referred to as a “Region”), Sunesis shall immediately notify Dainippon
thereof and the parties shall meet to discuss the situation, and Sunesis shall
return to Dainippon its rights in the Products in such Region.  For clarity, it is understood that so long as
Sunesis intends to continue such efforts, and uses diligent efforts consistent
with its obligations under Section 14.01 to do so, in one or more
countries in a Region, this Section 6.05 shall not apply to that
Region.  In addition, the foregoing shall
not apply in the event Sunesis makes such determination based upon factors
relating to safety or efficacy of the Products as supported by clear evidence,
or based on the potential for commercial harm to the Products in a Region that
may be agreed upon between the parties (for example, the potential for parallel
imports).  For clarity, it is understood
that “diligent efforts” would not require Sunesis to simultaneously pursue each
Region, as long as the activities and Regions it is pursuing are consistent
with pursuing the particular Region within a reasonable time frame (which may,
for example, be to pursue such Region after obtaining Regulatory Approval in
another Region).

 

Article 7.        Publication

 

7.01         In
the event that either party intends to publish a paper in a peer reviewed
journal or make a scientific oral presentation containing non-public
Information and Know-How relating to the Compounds and/or the Products, such
party shall provide the other party with a draft of such publication for prior
review (or, in the case of a public oral presentation, use reasonable efforts,
to the extent practicable under the circumstances, to provide the other party
with a summary of the proposed oral presentation for prior review).  Within fifteen (15) business days after
receipt of a draft publication (or within five (5) days in the case of a public
oral presentation) (the “Review Period”), the receiving party may review the
draft and may give its written comments on the draft to the publishing
party.  The publishing party shall
prepare the final version of the publication or the oral presentation, taking
the comments into consideration if appropriate. 
Thereafter, the publishing party may disclose to third parties the
information disclosed in such publication or oral presentation (i.e., in that
or any subsequent publication or presentation) without the need for further
approval by the other party.  In the
event that no response is given by the receiving party to the publishing party
within the applicable Review Period, the receiving party shall be deemed to
have no comment on the draft. 
Notwithstanding the foregoing, as Sunesis has been granted the exclusive
right to commercialize the Products in the Territory, Sunesis shall have the
right to make the final decision whether to proceed with any publication or
oral presentation.  Sunesis shall have the
right to approve (but shall not unreasonably withhold such consent) to any
publication or oral presentation requested by Dainippon and, if no response is
given by

 

13

 

Sunesis to Dainippon within the applicable
Review Period, Sunesis shall be deemed to consent to the publication or oral
presentation.  With respect to
publications or oral presentation by third parties, it is understood that the
foregoing rights of review shall apply only to the extent the party hereto has
the right to require such third party to comply.  Additionally, Sunesis shall use reasonable
efforts to inform Dainippon of major publications and major public
announcements of Test results, to the extent Sunesis has the right to do so and
to the extent practicable, in advance of such publications and announcements.

 

Article 8.        Manufacture

 

8.01         Without
limiting the rights granted in Article 2 above, Sunesis shall have the
right and obligation to manufacture at its sole expense, risk and
responsibility, or have its Affiliate and/or the Sublicensees manufacture at
their expense, risk and responsibility, the Compounds and the Products by
itself or themselves or through its or their designee for the purpose of this
Agreement.  Dainippon shall have no
obligation to supply nor manufacture the Compounds and the Products, and
Sunesis agrees that no Compounds nor Products will be supplied nor manufactured
by Dainippon.

 

8.02         In
the event that Sunesis requests Dainippon to provide Sunesis with direct
technical assistance (including ongoing assistance) with respect to manufacture
or regulatory aspects of the Compounds, Dainippon shall make its reasonable
efforts to provide such assistance to Sunesis, for example, by sending a person
or persons qualified for this purpose to Sunesis’ facility or receiving Sunesis’
employee(s) in Dainippon’s facilities for such purpose.  Sunesis shall bear traveling, lodging and
other out-of-pocket expenses incurred for such assistance as mutually
agreed.  Dainippon shall, at Sunesis’
written request, cooperate with Sunesis in responding to requests from the
Regulatory Bodies relating to the Compounds and/or the Products, including
without limitation making its facilities available for audit and inspection by
representatives of such Regulatory Bodies. 
Notwithstanding the foregoing, nothing in this Section 8.02 shall
relieve Dainippon of its obligation to supply the Compounds and intermediates
listed in Schedule 6.02 attached hereto under the terms and conditions set
forth in Section 6.02 and Dainippon shall make no warranty, express or
implied, relating to such direct technical assistance.

 

Article 9.        Marketing
and Sale

 

9.01         Without
limiting the rights granted in Article 2 above, Sunesis shall have the
right and obligation to perform at its sole expense, risk and responsibility,
or have its Affiliates and/or the Sublicensees perform at their expense, risk
and responsibility, by itself or themselves or through its or their designee,
any promotion, marketing, sale and distribution of the Products in the
Territory.  Sunesis shall undertake, or
have its Affiliates and/or the Sublicensees undertake, such activities in
accordance with Articles 9 and 14 below, and in accordance with all

 

14

 

applicable laws and regulations.

 

9.02         Sunesis
may use the trademark(s) selected by Sunesis for its marketing, promotion, sale
and distribution of the Products in the Territory, and shall bear all expenses,
risk and responsibility relating such trademark(s) used for the Products.

 

9.03         Sunesis
has provided Dainippon with the preliminary non-binding sales forecast of the
Products for the initial three (3) Marketing Years as set forth in Schedule 9.03
attached hereto.  Sunesis shall update
such preliminary sales forecast with respect to sales in the Major Market
Countries upon completion of the Phase II Clinical Studies.  Following receipt by Sunesis of the
Regulatory Approval for a Product in a Major Market Country, Sunesis shall
provide to Dainippon a three (3) year sales forecast for such Product in such
country and shall update such forecast annually thereafter, which shall be used
for purposes of Section 10.01 below. 
It is understood that such forecast for any period may include a range
of potential sales levels, based on alternative assumptions.  In addition, Sunesis shall diligently seek to
provide annual sales forecasts following receipt by the Sublicensees of the
Regulatory Approval for the Major Market Countries relating to the Sublicensees
(it being understood, however, that Section 10.01 shall not apply to the
Sublicensees).

 

9.04         Sunesis
shall notify Dainippon within sixty (60) days of its receipt (or receipt by its
Affiliate(s) or the Sublicensee(s)) of the Regulatory Approval in any country
of the Territory and shall, within a reasonable time after obtaining the
Regulatory Approval in a Major Market Country and such other countries of the
Territory as reasonably requested by Dainippon and agreed by Sunesis, which
agreement shall not be unreasonably withheld, furnish Dainippon with an
estimated date of launch of the Products and an outline of how Sunesis, its
Affiliate(s) or, to the extent available, the Sublicensee(s) intends to market
the Products in such country, provided that Sunesis shall diligently seek to
obtain such information relating to the Sublicensees from the Sublicensees as
described in Section 2.05 above. 
The parties acknowledge that the aggregate burden on Sunesis of
providing information with respect to the countries other than the Major Market
Countries requested by Dainippon under Section 9.04 above (and other
information requested under this Section 5.02), in relation to the
significance to Dainippon of obtaining such incremental information at the time
of such request, shall be a factor in determining whether it would be
reasonable for Sunesis to withhold its agreement to provide such information.

 

9.05         In
the event that Sunesis intends not to launch the Products in a given Region, or
having launched a Product in a given Region, intends to discontinue all sales
of the Products (including sales through its Affiliate(s) or the
Sublicensee(s)) within such Region, Sunesis shall immediately notify Dainippon
thereof and the parties shall meet to discuss the situation and Sunesis shall
return to Dainippon its rights in the Products in such Region.  For clarity, it is understood that so long as

 

15

 

Sunesis intends to so launch or continue such
sales of the Products, and uses diligent efforts consistent with its
obligations under Section 14.01 to do so, in one or more countries in a
Region, this Section 9.05 shall not apply. 
In addition, the foregoing shall not apply in the event Sunesis makes
such determination based upon factors relating to safety or efficacy of the
Products as supported by clear evidence, or based on the potential for
commercial harm to the Products in a Region that may be agreed upon between the
parties (for example, the potential for parallel imports).  For clarity, it is understood that “diligent
efforts” would not require Sunesis to simultaneously pursue each Region, as
long as the activities and Regions it is pursuing are consistent with pursuing
the particular Region within a reasonable time frame (which may, for example,
be to pursue such Region after obtaining Regulatory Approval in another
Region).

 

Article 10.      Minimum
Sales Amount

 

10.01       If
despite its commercially reasonable efforts, Sunesis fails in any [*] Marketing Years to attain [*] percent
([*]%) of the [*] sales amount of the [*] as set forth in the [*] provided
under Section 9.03 for the Major Market Countries in which Sunesis or its
Affiliate(s) market the Products, the parties shall meet to discuss the
situation and potential solutions, such as (where appropriate and commercially
reasonable) for Sunesis to recruit the efforts of a marketing partner.  In the event of recruiting a marketing
partner under this Section 10.01, Sunesis shall provide Dainippon with
reasonable details of the proposed marketing partner including but not limited
to its sales capacity and products, and Dainippon may approve or disapprove the
proposed marketing partner, but shall not unreasonably withhold the approval.

 

Article 11.      Records;
Audits

 

11.01       Sunesis
shall keep accurate and adequate records with respect to the Net Sales of the
Products by Sunesis, its Affiliate(s) and the Sublicensee(s), including the Net
Selling Price thereof, during the term of this Agreement and upon Dainippon’
written request, but not more frequently than once per calendar year, shall
permit a certified independent public accountant selected by Dainippon and
reasonably acceptable to Sunesis to examine the books and records of Sunesis,
its Affiliate(s) and the Sublicensee(s) during regular business hours of
Sunesis, its Affiliate(s) and, to the extent provided below, the
Sublicensee(s), to verify the accuracy thereof but only with respect to any
calendar year ending not more than two (2) years prior to the date of the
examination.  To the extent that Sunesis
does not have the right to grant Dainippon the right to audit the Sublicensees’
books and records hereunder, Sunesis shall, upon Dainippon’s request, exercise
its own audit right with respect to the Sublicensees by having such audit
carried

 

[*] 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

 

16

 

out by a
certified independent public account selected by Sunesis and reasonably
acceptable to Dainippon and provide the results of such audit for inspection by
Dainippon pursuant to this Section 11.01.  Sunesis
shall provide any information reasonably required to explain its records to the
extent necessary.  If the certified
independent public accountant’s report establishes that the figures previously
provided to Dainippon by Sunesis were incorrect and as the result, amount of
the royalties already paid by Sunesis is different from the amount that should
have been paid, the amount of difference shall be compensated by Sunesis or
Dainippon, as the case may be, within sixty (60) days after receipt of such
report by Dainippon.  The fee and expense
of the certified independent public accountant shall be borne by Dainippon,
except that such fee and expense shall be borne by Sunesis if the certified
independent public accountant’s report indicates Sunesis has underpaid amounts
owed hereunder by [*] percent ([*]%) during
such audited period.

 

Article 12.      Protection
of Patent Rights

 

12.01       Dainippon
shall at its own expense and responsibility maintain the Patent Rights in the
Territory, and agrees to take any necessary steps to extend the patent term of
the Patent Rights as reasonably requested by Sunesis.  Sunesis shall cooperate, and have the
Sublicensee(s) cooperate, with Dainippon in extension of patent term of the
Patent Rights and at the request and expense of Dainippon, shall take any
necessary steps to extend the patent term of the Patent Rights on behalf of
Dainippon.  Additionally, Dainippon
agrees to keep Sunesis informed regarding the status and maintenance of the
Patent Rights and the prosecution of any patent applications therein by
updating Schedule 1.17, and without limiting the foregoing shall not allow
any patent or patent application within the Patent Rights to lapse without
Sunesis’ mutual consent.

 

12.02       Each
party shall inform the other party promptly when it becomes aware that a third
party is infringing or attempting to infringe the Patent Rights.

 

12.03       Dainippon
is not obliged to indemnify Sunesis, its Affiliate(s) and the Sublicensee(s)
for any damage or loss caused from infringement by any third party of the
Patent Rights, but Dainippon shall grant Sunesis the first right, but not the
obligation, to institute, by itself or through Sunesis’ designee, at its
expense, such action, suit or proceeding as Sunesis may consider necessary to
stop the infringement (hereinafter referred to as “Enforcement Action”).  If within ninety (90) days after Dainippon
has requested Sunesis to initiate a suit with respect to a particular alleged
infringement, Sunesis has failed by itself or through its designee to initiate
an Enforcement Action to stop the infringement or use reasonable efforts to
settle such infringement, then Dainippon shall be entitled, but have no
obligation, to initiate an Enforcement Action at its expense against the
infringing party.  The party initiating
an Enforcement Action (hereinafter

 

[*] 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

 

referred to as the “Enforcing Party”) shall
control such action, provided that the other party (hereinafter referred to as
the “Non-Enforcing Party”) shall have the right to participate therein with
advisory counsel of its own choice at its own expense.  All recoveries received from an action to
enforce the Patent Rights shall be first applied to reimburse the Enforcing
Party’s, and then the Non-Enforcing Party’s, unreimbursed expenses, including
without limitation, reasonable attorney’s fees and court costs.  Any remainder shall, to the extent the same
pertains to an infringement of the Patent Rights, be divided [*] percent ([*]%)
to the Enforcing Party and [*] percent ([*]%) to the Non-Enforcing Party.

 

12.04       The
Non-Enforcing Party shall cooperate with the Enforcing Party with respect to
any Enforcement Action, in all aspects and shall make available any relevant
personnel, records, documents, information, evidence, samples, papers,
materials and the like for the action in its possession, and shall upon the
request of the Enforcing Party, join as a party-plaintiff in any such
Enforcement Action to the extent such joinder is required by law to bring such
action, provided that for purposes of this Section 12.04, the
Non-Enforcing Party shall not be required to dispatch more personnel and expend
more resources hereunder than may be legally required or otherwise agreed upon
by the parties.

 

Article 13.      Representations
and Warranties; Disclaimer

 

13.01       Dainippon
represents and warrants that to the best of Dainippon’s knowledge as of the
Effective Date:

 

(a)           Dainippon
is the owner of the right, title, and interest in and to the Compounds and the
Patent Rights and agrees not to transfer ownership of the Patent Rights to any
third party during the period of this Agreement without the prior written
consent of Sunesis.  Dainippon has the
sole right and authority to enter into this Agreement and grant the rights and
licenses hereunder.

 

(b)           Dainippon
has not previously granted, and during the period of this Agreement will not
grant, any rights in the Compounds and the Patent Rights that are inconsistent
with the rights and licenses granted to Sunesis herein. Dainippon shall not
suffer or permit any liens or restrictions to be imposed on the Patent Rights
without the prior written consent of Sunesis unless the lien holder agrees to
take such intellectual property subject to Sunesis’ rights therein.

 

(c)           Schedule 1.17
accurately and completely identifies all of the patents and patent applications
within the Patent Rights as of the Effective Date.  To the extent that Dainippon has omitted from
the Patent Rights any patent or patent application, the claims of which would
dominate the practice of the Patent Rights or be

 

[*]
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

 

infringed by the manufacture, sale, use,
importation or other exploitation of the Compounds, Dainippon shall grant
Sunesis a semi-exclusive license, including the right to sublicense, under such
patent to perform the rights and obligations of this Agreement.

 

(d)           There
are no patent rights of any third party which may prevent or hinder any
performance of obligations or exercise of rights under this Agreement, and none
of the Patent Rights are invalid, unenforceable or have been misused; provided
that no such warranty is made under this Section 13.01(d) with respect to
patent rights disclosed to Sunesis in writing prior to the Effective Date.

 

(e)           With
respect to the composition of matter, method of use and manufacture relating to
the Compounds, Dainippon owns the right, title and interest in and to the
Compounds and the Products.

 

(f)            As
of the Effective Date, there are no existing actions, suits or proceedings, and
Dainippon has not received any written claim or demand from a third party, that
challenges Dainippon’s rights with respect to the Patent Rights, the
Information and Know-How, the Compounds and/or the Products or Dainippon’s
rights to enter into this Agreement or that asserts that development,
manufacture or sale of the Compounds and/or the Products would infringe the
intellectual property rights of a third party.

 

13.02       Except
as set forth in Section 13.01, Dainippon does not warrant that the Patent
Rights granted Sunesis by Dainippon hereunder are valid and do not infringe
upon any patent rights or other intellectual property rights held or to be held
by third parties in the Territory or that Sunesis’ performances under this
Agreement are free from infringement upon any rights or licenses held or to be
held by third parties in the Territory. 
Except pursuant to the representations and warranties set forth in Section 13.01,
Dainippon is not obliged to indemnify Sunesis, its Affiliates and the
Sublicensees for any cost, loss or damage caused by invalidity of the Patent
Rights or infringement by the Compounds and/or the Products upon any rights or
licenses held by third parties.

 

13.03       Each
party hereto shall notify the other party promptly in the event of the receipt
of notice of any action, suit or claim alleging infringement by the Compounds
and/or the Products upon any patent rights or other intellectual property
rights held by a third party.  Sunesis
shall have the right to control the defense of such action, suit or claim
alleging infringement.  Any liability and
expenses incurred by Sunesis in such defense shall be treated as amounts paid
for third party patent rights under Section 3.05 above to the extent such
third party patent rights are Dominating Patent Rights.  In the event that the Patent Rights are
alleged to be invalid by such third party, Sunesis shall have the right, but
not the obligation, to defend against such claims of invalidity, provided that

 

19

 

Dainippon shall have the right to participate
therein with advisory counsel of its own selection at its own expense.  In the event Sunesis elects not to defend
against such claims of invalidity, Dainippon shall take at its own expense,
risk and responsibility any step to cope with the claim of invalidity, provided
that Dainippon reasonably judges that there is commercial interest for
Dainippon to cope with the claim of invalidity.

 

13.04       NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL,
EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING LOST OR ANTICIPATED REVENUES OR
PROFITS RELATING TO THE SAME), ARISING FROM ANY CLAIM RELATING TO THIS
AGREEMENT, WHETHER SUCH CLAIM IS BASED ON CONTRACT, TORT (INCLUDING NEGLIGENCE)
OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF SAME.

 

Article 14.      Diligence

 

14.01       Sunesis
shall either directly or through its Affiliates and/or the Sublicensees use
commercially reasonable diligent efforts to develop, commercialize, promote,
market, sell and distribute the Products in the Territory.  In addition, Sunesis shall use such efforts
to appoint the Sublicensees where and when Sunesis reasonably considers
appropriate.

 

Article 15.      Indication
of Collaboration

 

15.01       To
the extent required by applicable laws and regulations in a particular country
within the Territory or reasonably requested by Dainippon, Sunesis shall refer
to Dainippon as “Under license from Dainippon Pharmaceutical Co., Ltd.” or any
other wording as agreed upon between the parties in all package, package insert
and promotional literature for the Products being marketed by Sunesis and its
Affiliates for use in such country.  In
addition, to the extent required by applicable laws and regulations in a
particular country within the Territory, or as reasonably requested by
Dainippon where Sunesis has the right to do so, Sunesis shall require the
Sublicensee(s) to mark the package and the package insert for the Products with
the words “Under license from Dainippon Pharmaceutical Co., Ltd.” or other
wording as agreed upon between the parties.

 

Article 16.      Independent
Contractor

 

16.01       Each
of the parties hereto shall act as an independent contractor hereunder and
neither of the parties shall bind, or attempt to bind the other party to any
other contract or any performance of any obligation not included herein except
as to which the other party specifically agrees.  Nothing contained herein or done hereunder
shall be construed as constituting either party the agent of the other party in
any sense of the term whatsoever.

 

20

 

Article 17.      Indemnification

 

17.01       Sunesis
shall indemnify Dainippon and Dainippon’s Affiliates against and hold Dainippon
and Dainippon’s Affiliates harmless from any and all liability, loss, judgment,
damage or expense (including reasonable attorney’s fee) (hereinafter
collectively referred to as “Loss”) by reason of litigation brought or
otherwise for claims made by a third party against Dainippon or Dainippon’s
Affiliates arising out of or by reason of or in connection with Sunesis’, its
Affiliates’ and/or the Sublicensees’ performance of this Agreement including
but not limited to use and manufacture of the Compounds and test, development,
manufacture, packaging, promotion, marketing, sale and distribution of the
Products in each case by Sunesis, its Affiliates and/or the Sublicensees,
except to the extent that the Loss is attributable to any negligent or intentional
act or omission of Dainippon or Dainippon’s Affiliates, or otherwise falling
within the claims described in Section 17.02 below.  Dainippon shall promptly notify Sunesis of
any such claim or litigation, shall reasonably cooperate with and provide full
information to Sunesis with respect thereto and shall permit Sunesis to handle
and control such claim or litigation at Sunesis’ cost and expense, to the
extent Dainippon desires indemnification therefor, and Dainippon shall have the
right to participate in any defense or settlement thereof with its own counsel
at its own expense.

 

17.02       Dainippon
shall indemnify Sunesis, its Affiliates and the Sublicensees against and hold
Sunesis, its Affiliates and the Sublicensees harmless from any and all
liability, loss, judgment, damage or expense (including reasonable attorney’s
fee) by reason of litigation brought or otherwise for claims made by a third
party against Sunesis, its Affiliates and/or the Sublicensees arising out of or
by reason of any negligent or intentional act or omission of Dainippon or any
breach by Dainippon of its warranties under Section 13.01.  Sunesis shall promptly notify Dainippon of
any such claim or litigation, shall reasonably cooperate with and provide full
information to Dainippon with respect thereto and shall permit Dainippon to
handle and control such claim or litigation at Dainippon’s cost and expense to
the extent Sunesis desires indemnification therefor, and Sunesis shall have the
right to participate in any defense or settlement thereof with its own counsel
at its own expense.

 

Article 18.      Improvement

 

18.01       In
the event that Dainippon or Sunesis makes any improvement, invention or
discovery relating to the Compounds and/or the Products including formulation
of the Products and derivative of the Compounds (hereinafter referred to as “Improvement”),
the inventing party shall have the right, title and interest in the Improvement
and any patent application or patent covering the Improvement, subject to the
licenses granted herein (i.e., subject to Sunesis’ license under Section 2.01
in the case of an Improvement by Dainippon and subject to Dainippon’s license
under Section 21.01 in the case of an Improvement by Sunesis).

 

21

 

Notwithstanding the foregoing, Improvements
consisting of drug formulation technology that is patentable without regard to
the particular drug substance being delivered, and whose application is not
limited to the Compounds, shall not be subject to the licenses granted in
Sections 2.01 and 21.01.  As used herein,
“Improvements” shall include such inventions made by Dainippon’s other
licensees or Sunesis’ Sublicensees, to the extent Dainippon or Sunesis,
respectively, has the right to include the same hereunder, provided that
Dainippon and Sunesis shall diligently seek to obtain such right.

 

Article 19.      Confidentiality

 

19.01       Sunesis
and Dainippon shall each maintain confidential and not use or disclose
information received from the other party under this Agreement in writing and
marked “Confidential” or otherwise to indicate its proprietary nature or that
is disclosed orally and confirmed in writing as confidential within a
reasonable time following the initial disclosure thereof (hereinafter
collectively referred to as “Confidential Information”), except for
information:

 

(a)           which
must be disclosed by any of the parties to the Regulatory Body to the extent
the same is reasonably necessary to enable the attainment of the purpose of
this Agreement; or

 

(b)           which
is subsequently disclosed in literature available to the public but only to the
extent of the disclosure thereof; or

 

(c)           the
disclosure of which is expressly approved by the providing party; or

 

(d)           which
is made public by a third party without the receiving party’s fault; or

 

(e)           which
is known to the receiving party at the time of disclosure; or

 

(f)            which
the receiving party can demonstrate was developed independently of the
Confidential Information disclosed hereunder; or

 

(g)           which
is received by the recipient without any obligation of confidentiality from a
third party as a result of lawful and proper disclosure by such third party.

 

19.02       Notwithstanding
the foregoing, Sunesis shall have the right to use and disclose the
Confidential Information within the Information and Know-How, subject to Section 7.01
above, provided that Sunesis shall not disclose the Confidential Information to
third parties other than for purposes of this Agreement (including in
connection with fund raising activities, recruitment of patients and clinicians
for clinical trials, and other activities that may directly or indirectly
assist Sunesis’ development or commercialization of the Products).  In addition, Sunesis may disclose the
Confidential Information within the Information and Know-How to the
Sublicensees and permit the Sublicensees to use the Confidential Information
for the sole purpose of this Agreement, provided that the

 

22

 

Sublicensees shall have the same,
substantially similar or more stringent confidentiality obligations as provided
for in this Article 19.  With
respect to Dainippon’s use and disclosure of the Confidential Information
within the Information and Know-How, it is understood that the exclusivity
provided to Sunesis under Section 2.01 above means that during the term of
the Agreement, Dainippon shall not disclose to any third party the Information
and Know-How, provided however that the foregoing restriction shall not apply
to the Manufacturing Know-How.

 

19.03       Notwithstanding
any other provision of this Agreement, the protocols, summary results, NDAs and
other information regarding the Tests supplied to Dainippon pursuant to this
Agreement, including Sections 5.02, 5.03, and 6.04, are for Dainippon’s
informational purposes only and Dainippon shall not use or disclose such
documents and the information contained therein for any purpose, provided
however that the foregoing shall not apply to the designation of a third party
by Dainippon pursuant to Section 21.02 following termination of this
Agreement.

 

19.04       The
obligation of confidentiality and non-use under this Article 19 shall
survive expiration or early termination of this Agreement.

 

19.05       Notwithstanding
the provisions of Section 19.01, but subject to Sections 19.03 above, the
receiving party may also use or disclose the Confidential Information of the
disclosing party to the extent it exercises its rights hereunder (including
commercialization and/or sublicensing of the Compounds, the Products, the
Patent Rights and the Information and Know-How) or fulfills its obligations
and/or duties hereunder and in filing for, prosecuting or maintaining any
proprietary rights, prosecuting or defending litigation, complying with
applicable governmental regulations and/or submitting information to tax or
other governmental authorities; provided that if the receiving party is
required by law to make any public disclosures of the Confidential Information
of the disclosing party, to the extent it may legally do so, it shall give reasonable
advance notice to the disclosing party of such disclosure.

 

19.06       Except
as expressly provided herein, each party agrees not to disclose any terms of
this Agreement to any third party without the prior written consent of the
other party, except that a party may disclose the terms or conditions of this
Agreement (a) as required by securities or other applicable laws; (b) to
prospective and other investors; (c) to such party’s accountants, attorneys and
other professional advisors; or (d) to other third parties on a need to know
basis under an obligation of confidentiality.

 

19.07       Upon
execution of this Agreement, the parties shall agree upon the timing and
content of a press release relating to execution of this Agreement. Thereafter,
each party may disclose to third parties the information disclosed in such
press release without the need for further approval by the other party.

 

23

 

Article 20.      Term
of Agreement

 

20.01       This
Agreement takes effect on the Effective Date, and unless sooner terminated as
provided in Article 22, shall expire upon the expiration of all
obligations of Sunesis to make payments under this Agreement.  Sunesis’ license with respect to the
Compounds, the Products and the Information and Know-How shall survive the
expiration (but not an earlier termination, except as provided in Section 22.05
below) of this Agreement and shall be fully paid-up, royalty-free and
perpetual.

 

Article 21.      Return
of Rights upon Termination 

 

21.01       Upon
termination of this Agreement as provided for in Section 22.01 or 22.03,
or for a material breach of this Agreement by Sunesis under Section 22.02
or bankruptcy of Sunesis under Section 22.04, all Information and Know-How
on the Compounds and/or the Products shall be immediately returned to
Dainippon, and thereafter Sunesis shall not be granted the right to develop,
register, manufacture, use, promote, market, sell or distribute the Compounds
and the Products by itself or through its Affiliates and/or (except as provided
below) the Sublicensees, and Sunesis shall promptly assign to Dainippon or
Dainippon’s designee free of charge, subject to 21.02 below, all approvals,
permits, and registrations (including the Regulatory Approval) obtained by
Sunesis, its Affiliate(s) and the Sublicensee(s) from a Regulatory Body with
respect to the Compounds and/or the Products unless local laws prohibit such
assignment, in each case to the extent that Sunesis has the right to make such
return and/or assignment.  In addition,
upon such termination Sunesis agrees to grant to Dainippon a non-exclusive
license under any patent rights in the Improvements owned by Sunesis that are
necessary to make, use or sell any Products for which Sunesis has conducted
clinical trials during the term of this Agreement.  Notwithstanding the foregoing, Sunesis shall
have no obligation to grant such license to Dainippon, or to assign to
Dainippon any Regulatory Approvals, permits and registrations, and the rights
and licenses granted hereunder shall not terminate, (i) to the extent relating
to the Compounds and/or the Products that are being developed by a Sublicensee
at the time of the termination of this Agreement if such Sublicensee notifies
Sunesis and Dainippon of its intention to diligently continue such development
and/or commercialization efforts and the Sublicensee diligently continues the
development and/or commercialization, and in addition, in such case, Sunesis
shall have no obligation to return the Information and Know-How provided to such
Sublicensee, or (ii) in the event such termination is based upon factors
relating to safety or efficacy of the Products as supported by clear evidence,
or based on the potential for commercial harm to the Products in a Region that
may be agreed upon between the parties (for example, the potential for parallel
imports).  Dainippon shall reimburse
Sunesis for all fees actually paid by Sunesis in transferring such approvals,
permits, and registrations under this Section 21.01 (except in the event
of breach by Sunesis).

 

21.02       In
the event of a return of the Products to Dainippon by Sunesis under Section 21.01,
except in the event of termination due to Sunesis’ material

 

24

 

breach or failure under Section 22.02, Dainippon and Sunesis shall
discuss in good faith whether or not Dainippon should pay to Sunesis a reverse
royalty on the net sales of the Products by Dainippon, its Affiliates and sublicensees,
the amount of which shall be reasonably agreed to reflect Sunesis’ contribution
in the development of such Products as well as the value of any Improvements
that may be licensed to Dainippon under Section 21.01 above.

 

Article 22.      Termination

 

During the term of this Agreement, the Agreement may only be terminated
in accordance with this Article 22.

 

22.01       Dainippon
may terminate this Agreement pursuant to Section 6.05 or 9.05 in the event
Sunesis has decided to discontinue seeking the Regulatory Approval and/or sale
of the Products in the whole Territory and so notifies Dainippon in writing
pursuant to Section 6.05 or 9.05.

 

22.02       In
the event that Dainippon or Sunesis materially fails to fulfill (including a
failure by Sunesis to ensure that a Sublicensee fulfills) or materially
breaches the terms and conditions hereof, the other party shall give the
breaching party a written notice to remedy such material failure or breach
within ninety (90) days.  In cases where
there is no dispute as to the failure or breach and such material failure or
breach is not remedied by the breaching party within ninety (90) days of
receipt of such notice, the complaining party may terminate this Agreement at
its option.  However, if the party
alleged to be in breach of this Agreement disputes such failure or breach
within such ninety (90) day period, the complaining party shall not have the
right to terminate this Agreement unless it has been determined by an
arbitrator pursuant to Section 25.01 that this Agreement was materially
breached, and the breaching party fails to comply with its obligations
hereunder within ninety (90) days after such determination.

 

22.03       Sunesis
may terminate this Agreement for its convenience by giving Dainippon at least
one hundred twenty (120) days prior written notice; provided, however, that if
Sunesis is terminating for reasons related to safety or efficacy of the Product
supported by clear evidence, Sunesis may terminate this Agreement upon thirty
(30) days prior written notice.  However,
at least sixty (60) days prior to delivering such notice of termination,
Sunesis shall apprise Dainippon of Sunesis’ desire to terminate this Agreement
and, upon Dainippon’s request, the parties shall meet to review the situation
and discuss in good faith as mutually agreed the best manner in which to
proceed under the circumstances.

 

22.04       In
the event that Dainippon or Sunesis is declared bankrupt, ceases all business
or is subject to any proceedings for bankruptcy or dissolution, which
proceedings if involuntary, are not dismissed within ninety (90) days after
filing, or makes an assignment of substantially all of its assets for the
benefit of creditors, the other party may terminate this Agreement immediately
with a written notice.

 

25

 

22.05       In
the event of any merger involving Sunesis, or a sale of all or substantially
all of the assets of Sunesis, Dainippon has an option to terminate this
Agreement by giving at least ninety (90) days prior written notice if, after
such merger or sale, the surviving entity does not agree to use the same
diligence in developing and/or marketing the Products as is required of Sunesis
under Article 14 above.

 

22.06       Survival

 

(a)           Articles
and Sections 1, 3.07, 11, 13.01, 13.02, 13.04, 16, 17, 18, 19, 21, 22.06, 23,
24, 25, 26, 27, 28 and 29 shall survive expiration or any termination of this
Agreement.  Except as otherwise provided
in this Section 22.06, all rights and obligations of the parties under
this Agreement shall terminate upon the expiration or termination of this
Agreement.

 

(b)           Expiration
or termination of this Agreement shall have no effect on amounts due either
party at the time of such expiration or termination, or any other obligations
or liabilities that have accrued prior to such expiration or termination.

 

(c)           Subject
to Section 21.01, upon termination of this Agreement by Dainippon for any
reason, any sublicense granted by Sunesis hereunder shall survive, provided
that Dainippon shall make, and Sunesis shall have the Sublicensee(s) make,
reasonable efforts to conclude new agreement(s) between Dainippon and the
Sublicensee(s) for the Products on terms substantially identical to this
Agreement.

 

Article 23.      Assignment
of this Agreement

 

23.01       This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective corporate successors and shall not be assigned by either
party without prior written consent of the other party.  Notwithstanding the foregoing, either party
may assign this Agreement and its rights and delegate its obligations hereunder
(a) to any of its Affiliates as described in Section 2.03 above or (b) to
a third party in connection with the transfer or sale of all or substantially
all of its business relating to the subject matter of this Agreement, or in the
event of its merger, consolidation, change in control or similar transaction;
provided Dainippon shall have the right to terminate this Agreement in the
event of (b) above, as provided in Section 22.05 above.  Any permitted assignee shall assume all
obligations of its assignor under this Agreement.  Any purported assignment or transfer in
violation of this Section 23.01 shall be void.

 

Article 24.      Force
Majeure

 

24.01       Neither
party shall be liable for failure to perform part or the whole of this
Agreement when such failure is due to force majeure events including but not
limited to fire, flood, earthquake, strike, labor troubles, delays of carriers,
common carriers or other industrial disturbances, inevitable accidents, war
(declared or undeclared), embargoes, blockades, legal

 

26

 

restrictions, riots, insurrections, governmental action, orders,
legislation, regulations or restrictions, and/or any similar or other causes
beyond control of the parties hereto, provided that any obligations of payment
under this Agreement that have already accrued shall not be excused by such
force majeure.

 

Article 25.      Arbitration

 

25.01       In
the event of any controversy or claim arising out of or in relation to any
provision of this Agreement or the breach thereof, the parties shall try to
settle the problem between themselves. 
Should they fail to agree, the matter in dispute shall be finally
settled by arbitration in the English language (including all testimony
therein) in accordance with the Rules of Arbitration of International Chamber
of Commerce.  The arbitration shall be
held in Geneva, Switzerland.  The award
rendered by the arbitration shall in any case be final and binding upon the
parties hereto.  Judgment upon the award may be entered in any court having jurisdiction
thereof.

 

Article 26.      Governing
Law

 

26.01       This
Agreement shall be interpreted in accordance with and governed by the laws of
Switzerland, without reference to conflict of laws principles.

 

Article 27.      Waiver

 

27.01       The
waiver of any relief for any breach or non-fulfillment of any term or condition
of this Agreement does not constitute a waiver of any relief for any other
breach or non-fulfillment of that or any other term or condition.

 

Article 28.      Notice

 

28.01       Any
notice required or permitted to be given hereunder by either party shall be
given in writing, by registered or certified airmail or recognized courier
service, or fax followed by registered or certified airmail or recognized
courier service, addressed to the party for whom it is intended at the
following address or such other address as such party may subsequently notify
the other party in writing:

 

To Sunesis:           Sunesis
Pharmaceuticals Inc.

341 Oyster Point Boulevard,

South San Francisco,

California 94080, the United States of America

Attention:   Daryl Winter, General Counsel

Facsimile number: +1-(650)
266-3506

 

To
Dainippon:      Dainippon Pharmaceutical Co., Ltd.

6-8, Doshomachi 2-chome, Chuo-ku,

Osaka, 541-0045 Japan

Attention:   Takashi Wada, Senior
Director, Legal Affairs

Facsimile number: +81-6-6202-6028

 

Article 29.      Entire
Agreement and Miscellaneous

 

29.01       This
Agreement supersedes any promise, agreement or consent

 

27

 

concerning the Compounds and/or the Products in relation to the subject
matter of this Agreement made between the parties hereto by officers or
employees of the parties before the execution of this Agreement, except the
Option Agreement to the extent provided for in Section 4.02.

 

29.02       This
Agreement may not be modified orally and no modification nor any claimed waiver
of any of the provisions hereof shall be binding unless in writing and signed
by both parties.

 

29.03       If
any provision of this Agreement shall be found by a court to be void, invalid
or unenforceable, the same shall be reformed to comply with applicable law or
stricken if not so conformable, so as not to affect the validity or
enforceability of the remainder of this Agreement.

 

29.04       This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but both of which together shall constitute one and the same
instrument.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first set
forth above and each one of the two originals to be kept by the respective
parties.

 

	
   

  	
   

  	
   

  	
  Dainippon Pharmaceutical Co., Ltd.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  	
  By

  
	
   

  	
   

  	
  Kenjiro Miyatake, President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Sunesis Pharmaceuticals Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Date

  	
   

  	
   

  	
  By

  
	
   

  	
   

  
	
   

  	
   

  	
  James W. Young, Ph. D.

  
	
   

  	
   

  	
  Chief Executive Officer

  
							

 

28

 

Schedule 1.17

 

Patent Rights (1)

 

	
  Country

  	
   

  	
  Application No.

  Entering Date

  	
   

  	
  Patent No.

  Patent Date

  	
   

  	
  Expiry

  	
   

  	
  Date Annuity

  Paid(1)

  	
   

  	
  Next

  Annuity

  Due Date

  
	
  Argentina

  	
   

  	
  950100147

  	
   

  	
  3914

  	
   

  	
  Nov. 13, 2015 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Nov.13, 1995)

  	
   

  	
  July 6, 2001

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Australia 

  	
   

  	
  25767/95

  	
   

  	
  679,859

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dec. 6, 1996

  	
   

  	
  Oct. 30, 1997

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Brazil

  	
   

  	
  PI 9508037-6

  	
   

  	
  PI9508037-6

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dec. 16, 1996

  	
   

  	
  Apr. 15, 2003

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Canada 

  	
   

  	
  2,192,824

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dec. 12, 1996

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  China

  	
   

  	
  95 194461.4

  	
   

  	
  55440

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Jan. 31, 1997

  	
   

  	
  Mar. 17, 2000

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Czech 

  	
   

  	
  PV 3643/96

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dec. 11, 1996

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EP

  	
   

  	
  95 920265.6

  	
   

  	
  787726

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dec.12, 1996

  	
   

  	
  Nov. 28, 2001

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Austria

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Apr.30, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Belgium

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.18, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Denmark

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.4, 2003

  	
   

  	
  Jun.30, 2004

  
	
  France

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  May 28, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Germany

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  June 18, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Greece

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  May 5, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Ireland

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  May 20, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Italy

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.12, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Luxembourg

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  May 27, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Monaco

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Apr.29, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Netherlands

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Apr.29, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Portugal

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  May 7, 2003

  	
   

  	
  Jun.6, 2004

  
	
  Spain

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.17, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Sweden

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.4, 2003

  	
   

  	
  Jun.30, 2004

  
	
  Switzerland & Liechtenstein

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.10, 2003

  	
   

  	
  Jun.30, 2004

  
	
  UK

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.4, 2003

  	
   

  	
  Jun.6, 2004

  
	
  Latvia

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.20, 2003

  	
   

  	
  Jun.6, 2004

  
	
  Lithuania

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  May 6, 2003

  	
   

  	
  Jun.6, 2004

  
	
  Slovenia

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Apr.29, 2003

  	
   

  	
  Jun.6, 2004

  
	
  Finland 

  	
   

  	
  96 5020

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dec. 13, 1996

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Jun.10,
  2003

  	
   

  	
  Jun.30,
  2004

  

 

29

 

Schedule 1.17

 

Patent Rights (2)

 

	
  Country

  	
   

  	
  Application No.

  Entering Date

  	
   

  	
  Patent No.

  Patent Date

  	
   

  	
  Expiry

  	
   

  	
  Date

  Annuity

  Paid(1)

  	
   

  	
  Next

  Annuity

  Due Date

  
	
  Hong Kong 

  	
   

  	
  97 101948.5

  	
   

  	
  1000495B

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
   

  	
   

  	
  June 6,
  2006 

  
	
   

  	
  (Oct. 17, 1997)

  	
   

  	
  Jul. 19, 2002

  	
   

  	
   

  	
   

  	
   

  
	
  Hungary 

  	
   

  	
  P 96 03455

  	
   

  	
  220072

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  May 9, 2003 

  	
   

  	
  June 6, 2006 

  
	
   

  	
  Dec. 13, 1996

  	
   

  	
  Oct. 29, 2001

  	
   

  	
   

  	
   

  
	
  Israel 

  	
   

  	
  115726

  	
   

  	
  115726

  	
   

  	
  Oct. 23, 2015 

  	
   

  	
  Oct.22, 2001 

  	
   

  	
  Oct.25, 2005 

  
	
   

  	
  (Oct. 23, 1995)

  	
   

  	
  Mar. 1, 2000

  	
   

  	
   

  	
   

  
	
  Korea 

  	
   

  	
  707029/1996

  	
   

  	
  350921

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  Aug.20, 2002 

  	
   

  	
  Aug.20, 2005 

  
	
   

  	
  Dec. 9, 1996

  	
   

  	
  Aug. 20, 2002

  	
   

  	
   

  	
   

  
	
  Mexico 

  	
   

  	
  96 6331

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Dec. 11, 1996

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New Zealand 

  	
   

  	
  287139

  	
   

  	
  287139

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  Apr.18, 2002 

  	
   

  	
  Jun.6, 2006 

  
	
   

  	
  Dec. 5, 1996

  	
   

  	
  Nov. 19, 1997

  	
   

  	
   

  	
   

  
	
  Norway 

  	
   

  	
  96.5305

  	
   

  	
  307255

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  Apr.29, 2003 

  	
   

  	
  Jun.30, 2006 

  
	
   

  	
  Dec. 11, 1996

  	
   

  	
  Mar. 6, 2000,

  	
   

  	
   

  	
   

  
	
  Pakistan 

  	
   

  	
  564/95

  	
   

  	
  134,868

  	
   

  	
  Oct. 23, 2011 

  	
   

  	
  Sep.1, 2003 

  	
   

  	
  Oct.23, 2004 

  
	
   

  	
  (Oct. 23, 1995)

  	
   

  	
  Oct. 23, 1997

  	
   

  	
   

  	
   

  
	
  Philippines 

  	
   

  	
  51621

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Nov. 2, 1995)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Poland 

  	
   

  	
  P 317726

  	
   

  	
   

  	
   

  	
  Jun.6, 2015 

  	
   

  	
  May 5, 2003 

  	
   

  	
  June.6, 2005 

  
	
   

  	
  Dec. 13, 1996

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Romania 

  	
   

  	
  96-02349

  	
   

  	
   

  	
   

  	
  Jun.6, 2015 

  	
   

  	
  Jul.30, 2003 

  	
   

  	
  June.6, 2006 

  
	
   

  	
  Dec. 12, 1996

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Russia 

  	
   

  	
  97 100718

  	
   

  	
  2151770

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  May 15, 2003 

  	
   

  	
  Jun.6, 2006 

  
	
   

  	
  Jan. 13, 1997

  	
   

  	
  Jun.27, 2000

  	
   

  	
   

  	
   

  
	
  Singapore 

  	
   

  	
  96 12283-3

  	
   

  	
  37810

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  May 26, 2003 

  	
   

  	
  Jun.6, 2006 

  
	
   

  	
  Dec. 10, 1996?

  	
   

  	
  Dec. 19, 1997

  	
   

  	
   

  	
   

  
	
  Slovakia 

  	
   

  	
  PV 1574/96

  	
   

  	
  281341

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  May 15, 2003 

  	
   

  	
  Jun.6, 2006 

  
	
   

  	
  Dec. 6, 1996

  	
   

  	
  Nov. 8, 2000

  	
   

  	
   

  	
   

  
	
  South Africa 

  	
   

  	
  95/9030

  	
   

  	
  95/9030

  	
   

  	
  Oct. 25, 2015 

  	
   

  	
  Sep.2, 2003 

  	
   

  	
  Oct.25, 2004 

  
	
   

  	
  (Oct. 25, 1995)

  	
   

  	
  Aug. 28, 1996

  	
   

  	
   

  	
   

  
	
  Taiwan 

  	
   

  	
  84 106000

  	
   

  	
  90869

  	
   

  	
  Jun. 12, 2015 

  	
   

  	
  Aug.28, 2003 

  	
   

  	
  Nov.10, 2004 

  
	
   

  	
  (Jun. 13, 1995)

  	
   

  	
  Mar. 18, 1998

  	
   

  	
   

  	
   

  

 

30

 

Schedule 1.17

 

Patent Rights (3)

 

	
  Country

  	
   

  	
  Application No.

  Entering Date

  	
   

  	
  Patent No.

  Patent Date

  	
   

  	
  Expiry

  	
   

  	
  Date Annuity

  Paid(1)

  	
   

  	
  Next

  Annuity

  Due Date

  
	
  USA 

  	
   

  	
  08/765,232

  	
   

  	
  5,817,669

  	
   

  	
  Oct. 6, 2015 

  	
   

  	
  Mar.13, 2002 

  	
   

  	
  Apr.6 2006 

  
	
   

  	
  Dec. 13, 1996

  	
   

  	
  Oct. 6, 1998

  	
   

  	
   

  	
   

  
	
  Japan

  	
   

  	
  8-501923 (2)

  	
   

  	
  3391796

  	
   

  	
  Jun. 6, 2015 

  	
   

  	
  Jan.10, 2003 

  	
   

  	
  Jan.24, 2006 

  
	
   

  	
  Dec. 6, 1996

  	
   

  	
  Jan. 24, 2003

  	
   

  	
   

  	
   

  
	
   

  	
  8-351948 (3)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Dec. 10, 1996)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10-173986 (4)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Jun. 5, 1998)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

PCT: WO
95/34559 (Filing Date: June 6, 1995)

(   ):
 Filing date

Bold & Underlined:
Granted

(1)   Place
date annuity was paid here.

(2)   Basic
Patent Application

(3)   Patent
Application for a medical use

(4)   Patent
Application for an intermediate

 

31

 

Schedule 6.02

 

Compounds available for supply

 

	
  Code number

  	
   

  	
  Chemical Structure

  	
   

  	
  Available Quantity

  
	
  AG-7352

  	
   

  	
  

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  

 

[*]  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.

 

32

 

Schedule 6.03

 

Preliminary Development Plan (1)

 

Sunesis Pharmaceuticals, Inc. is planning to develop SPC-595 (AG-7352)
for the treatment of human cancer. 
SPC-595 is a novel cytotoxic drug of the naphthyridine chemical class,
structurally related to the quinolone antibiotics.  It possesses anti-tumor activity in a large
number of syngeneic and xenograft models. 
The proposed mechanism of action has not been fully elucidated, although
there is experimental evidence suggesting that the drug acts by arresting the
cell cycle at the G2/M interface.

 

Phase I

Sunesis intends to conduct phase I clinical trials on two schedules in
subjects with advanced solid tumors.  The
phase II regimen (dose and schedule) will be selected based on the phase I
results.

 

The first phase I study is likely to be designed as an open-label [*]
study in which SPC-595 will be administered intravenously once every 21 days, for
two cycles.  Drug doses will be
administered to [*] of [*], and [*], using an [*] schema.

 

The second phase I study is likely to be designed as an open-label [*]
study, in which SPC-595 will be administered [*] weekly times [*] weeks, for
[*].  In this study, a cycle is defined
as a 4-week period, with study drug administered on Days 0, 7, and 14 of each
cycle, followed by at least 14 days of observation.  Initial dosing in this study will begin after
preliminary safety and tolerability of SPC-595 has been evaluated in at least
[*] in the first phase I study.

 

Phase II

The goal of the phase II program is to provide evidence of clinical
activity and safety in a variety of tumor types.  At this time, Sunesis is planning to evaluate
SPC-595 in different indications possibly including: [*].  The choice of tumor types in the phase II
program will likely be based on a number of factors, including the compound’s
[*] observed in [*], likely [*] to and [*] of [*], and the [*].  This phase II program will likely be modified
based on the findings in the phase I studies.

 

If Sunesis chooses [*], the plan is to treat patients with [*] for [*]
of SPC-595 therapy, [*] to treatment with a [*] regimen.  We would anticipate enrolling up to [*] and
assess [*].

 

[*]  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.

 

33

 

If Sunesis chooses [*], the plan would be to conduct a [*], with
enrollment of up to [*] patients who have [*] and [*] for their disease.  Approximately [*] would be enrolled in the
[*], and would be administered [*] of SPC-595 therapy.  If there were any [*] observed, then an
additional [*] would be [*].

 

Another choice for a phase Ib/II study could be first-line [*] of [*]
with SPC-595 in [*] with [*].  In the
phase Ib portion of the study patients would be administered [*] doses of [*]
and [*] of SPC-595 to determine an optimal regimen for the phase II
portion.  Patients would be followed to
assess the [*].

 

Another potential indication for study would be [*].  In this phase Ib/II study, patients who [*]
or have [*] would be enrolled and administered [*] of SPC-595 with the goal of
[*].  The study would be expected to
enroll up to [*], and if there was evidence of [*] in at least [*], the study
could be expanded to approximately [*].

 

Phase III

The lead
indication for a phase III trial will be contingent on the outcome of the phase
II trial.  The trial design, size and
duration of any phase III trial will depend on the specific indications and
upon extensive discussions with treating physicians and members of the
appropriate regulatory agencies.

 

[*]  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.

 

34

 

Schedule 6.05

 

Region

 

(i) Asia and Pacific
Rim

 

Japan, Korea, North Korea, China (including Hong Kong and Macao),
Taiwan, Thailand, Malaysia, Singapore, Philippines, Indonesia, East Timor,
Brunei, Viet Nam, Laos, Cambodia, Myanmar, India, Pakistan, Bangladesh, Sri
Lanka, Maldives, Nepal, Bhutan, Mongolia, Iran, Iraq, United Arab Emirates,
Saudi Arabia, Bahrain, Kuwait, Qatar, Oman, Syria, Jordan, Lebanon, Palestine,
Yemen, Israel, Afghanistan, Kazakhstan, Uzbekistan, Turkmenistan, Kyrgyz,
Tajikistan, Australia, New Zealand, Papua New Guinea, Fiji, Kiribati, Marshall
Islands, Micronesia, Nauru, Solomon Islands, Tonga, Tuvalu, Vanuatu, Samoa,
Palau, Niue, Cook Islands

 

(ii) North America

 

United States of America (including Puerto Rico), Canada

 

(iii) Europe

 

United Kingdom, Spain, Portugal, France, Monaco, Andorra, Italy,
Vatican, Malta, San Marino, Liechtenstein, Switzerland, Austria, Belgium,
Netherlands, Luxembourg, Germany, Denmark, Sweden, Finland, Norway, Ireland,
Iceland, Greece, Cyprus, Poland, Czech Republic, Slovakia, Hungary, Romania,
Bulgaria, Croatia, Slovenia, Macedonia, Bosnia and Herzegovina, Serbia and Montenegro, Albania,
Estonia, Latvia, Lithuania, Russia, Belarus, Ukraine, Azerbaijan, Armenia,
Georgia, Moldova, Turkey

 

(iv) Latin America

 

Mexico, Guatemala, Belize, El Salvador, Honduras, Nicaragua, Costa
Rica, Panama, Colombia, Venezuela, Guyana, Suriname, Ecuador, Peru, Brazil,
Bolivia, Paraguay, Uruguay, Argentina, Chile, Jamaica, Cuba, Bahamas, Haiti,
Dominican Republic, Saint
Christopher and Nevis, Antigua and Barbuda, Dominica, Saint Lucia, Saint
Vincent and the Grenadines, Trinidad and Tobago, Barbados, Grenada

 

(v) Other Countries

 

All the countries other than those set forth
in (i), (ii), (iii) and (iv) above.

 

35

 

Schedule 9.03

 

Preliminary Sales Forecast

 

Preliminary
Sales Forecast (U.S. $ Millions)

 

This forecast
is based on the assumption that one of the potential Phase II programs in the
Preliminary Development Plan is successfully pursued and results in a drug
approval. The forecast is based on AG-7352 being used in first line [*] in [*]
with  [*].

 

The worldwide
market for [*] therapeutics in 2000 was:

 

	
   

  	
   

  	
  2000

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
   

  
	
  Other

  	
   

  	
  34

  	
   

  	
   

  
	
  Total

  	
   

  	
  [*]

  	
   

  	
  (source:
  Decision Resources)

  

 

Assumptions:

 

AG-7352
secures FDA approval for first-line [*] in 2011.

The market for
therapeutics grows by [*]% per annum for all agents.

AG-7352 is
priced similarly to [*].

 

	
   

  	
   

  	
  2011

  	
   

  	
  2012

  	
   

  	
  2013

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  Other

  	
   

  	
  59

  	
   

  	
  62

  	
   

  	
  65

  	
   

  
	
  Total

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  

 

Percentage (%)
of use of AG-7352 in [*] with [*] in [*]:

 

	
   

  	
   

  	
  [*]

  	
  %

  	
  [*]

  	
  %

  	
  [*]

  	
  %

  

 

	
  Sales of

  AG-7352

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  	
   

  

 

Potential
factors that could reduce this preliminary sales forecast:

Sales could be
lower based on the likelihood that the indication will not be granted in all
markets at the same time (in 2000, the U.S. market represented [*]% of
worldwide [*] market).  Generic entries
into this market could depress pricing and reduce penetration rates of new
entities.  Time to new drug approval may
be longer than indicated.

 

[*]  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.

 

36

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00077-of-00352.parquet"}]]