OPTION AGREEMENT

     This Option Agreement (the "Agreement") is made and entered into as of this
1st day of June, 2000 (the "Effective Date"), by and among Tularik Inc.
("Tularik"), a Delaware corporation, Japan Tobacco Inc. ("JT"), a corporation
organized under the laws of Japan, and Tularik Pharmaceutical Company (the
"Subsidiary"), a Delaware corporation and a wholly owned subsidiary of Tularik.
Each of Tularik, JT and the Subsidiary are referenced herein individually as a
"Party" and together as the "Parties."

                                   Witnesseth

     Whereas, Tularik and JT are entering into a Collaboration Agreement of even
date herewith (the "Collaboration Agreement") pursuant to which they will
develop and commercialize products useful to treat or prevent metabolic diseases
and conditions;

     Whereas, Tularik has formed the Subsidiary to perform its obligations under
the research program to be conducted pursuant to the Collaboration Agreement,
and is the beneficial owner of all issued and outstanding shares of capital
stock of the Subsidiary (the "Stock");

     Whereas, JT desires to acquire an option to purchase the Subsidiary at
specified times, and Tularik desires to grant such option to JT and to provide
for certain related requirements for the voting of Tularik's shares of Stock;
and

     Whereas, the Parties' obligations in the Collaboration Agreement are
conditioned upon the execution and delivery of this Agreement;

     Now, Therefore, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:

                                   ARTICLE 1

                                  Definitions

     1.1 "Affiliate" shall mean any corporation or other business entity that
during the term of this Agreement controls, is controlled by or is under common
control with a Party, but only for so long as such entity controls, is
controlled by or is under common control with a Party. For this purpose, control
means the possession of the power to direct or cause the direction of the
management and the policies of an entity, whether through ownership (directly or
indirectly) of over fifty percent (50%) of the stock entitled to vote, or if not
meeting the preceding requirements, any company owned or controlled by or owning
or controlling a Party at the maximum control or ownership right permitted in a
country where such company exists. Notwithstanding the foregoing, the Government
of Japan shall not be considered an Affiliate of JT.

                                       1.
<PAGE>

     1.2 "Bylaws" shall mean the then-current bylaws of the Subsidiary. The
Bylaws effective as of the Effective Date are set forth on Exhibit A attached
hereto.

     1.3 "Certificate of Incorporation" shall mean the then-current certificate
of incorporation of the Subsidiary filed with the Secretary of State of the
State of Delaware. The Certificate of Incorporation effective as of the
Effective Date are set forth on Exhibit B attached hereto

     1.4 "Change in Control" means the date JT receives notice of occurrence of
any of the following events:

          (a) Tularik is merged, consolidated, or reorganized into or with
     another corporation or other legal person, and, as a result of such merger,
     consolidation or reorganization, less than [*] of the combined voting power
     of the then-outstanding securities entitled to vote generally in the
     election of directors ("Voting Stock") of the surviving and controlling
     corporation or person immediately after such transaction are held in the
     aggregate by the holders of Voting Stock of Tularik immediately prior to
     such transaction;

          (b) Tularik sells or otherwise transfers all or substantially all of
     its assets to another corporation or other legal person;

          (c) Any person (as the term "person" is used in Section 13(d)(3) or
     Section 14(d)(2) of the Exchange Act) becomes the beneficial owner (as the
     term "beneficial owner" is defined under Rule 13d-3 or any successor rule
     or regulation promulgated under the Exchange Act) of securities
     representing [*] or more of the combined voting power of the then-
     outstanding Voting Stock of Tularik;

          (d) Tularik files a report or proxy statement with the Securities and
     Exchange Commission pursuant to the Exchange Act disclosing in response to
     Item 1 of Form 8-K or Schedule 14A (or any successor schedule, form or
     report or item therein) that a change in control of Tularik has occurred;
     or

          (e) If, during any period of [*], individuals who at the beginning of
     any such period constitute the directors of Tularik cease for any reason to
     constitute at least [*] thereof; provided, however, that for purposes of
     this Section 1.4(e), each director who is first elected, or first nominated
     for election by Tularik's stockholders, by vote of at least [*] of the
     directors of Tularik (or a committee thereof) then still in office who were
     directors of Tularik at the beginning of any such period (or deemed to be a
     director of Tularik at the beginning of such period) will be deemed to have
     been a director of Tularik at the beginning of such period.

Notwithstanding the foregoing provisions of Section 1.4(c) or (d), unless
otherwise determined in a specific case by majority vote of the board of
directors of Tularik, a "Change in Control" shall not be deemed to have occurred
for purposes of Section 1.4(c) or (d) solely because either (i) (A) Tularik, (B)
an entity in which Tularik directly or indirectly beneficially owns [*] or more
of the outstanding Voting Stock (a "Tularik Subsidiary"), or (C) any Tularik-
sponsored employee stock ownership plan or any other employee benefit plan of
Tularik or any Tularik Subsidiary, either files, becomes obligated to file or
requires the filing of a report or a proxy

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       2.
<PAGE>

statement under or in response to Schedule 13D, Schedule 14D-1, Item 1 to Form
8-K, or Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act disclosing beneficial ownership by it of shares of Voting
Stock, whether in excess of [*] or otherwise, or (ii) Tularik reports that a
change in control of Tularik has occurred by reason of such beneficial
ownership.

     1.5 "Change of Control Purchase Option" shall have the meaning given in
Section 2.2.

     1.6 "Change of Control Purchase Option Exercise Date" means the date that
JT notifies Tularik and the Subsidiary that JT is exercising the Change of
Control Purchase Option as provided in Sections 2.2 and 2.3.

     1.7 "Change of Control Purchase Option Exercise Price" means the amount set
forth below in the event the Change of Control Purchase Option Exercise Date
occurs within the relevant time period set forth below:

        ---------------------------------------------------------------------
         Exercise Price    Change of Control Purchase Option Exercise Date
        ---------------------------------------------------------------------
               [*]         Prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------
               [*]         After [*] and prior to or on [*]
        ---------------------------------------------------------------------


     1.8 "Collaboration Agreement" shall have the meaning given in the recitals.

     1.9 "Confidential Information" shall mean, subject to the limitations set
forth in Section 5.1 hereof, all information disclosed by each Party to another
Party under this Agreement; provided, however, that information [*] shall not be
considered Confidential Information.

     1.10 "Exercise Date" means the Change of Control Purchase Option Exercise
Date or the Volitional Purchase Option Exercise Date, as the case may be.

     1.11 "Exercise Price" means the Change of Control Purchase Option Exercise
Price or the Volitional Purchase Option Exercise Price, as the case may be.

     1.12 "Final Change of Control Purchase Option Exercise Price" means the
Change of Control Purchase Option Exercise Price minus the amount by which [*]
exceed the aggregate of [*].

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       3.
<PAGE>

     1.13 "Final Exercise Price" means the Final Volitional Purchase Option
Exercise Price or the Final Change of Control Purchase Option Exercise Price, as
the case may be.

     1.14 "Final Volitional Purchase Option Exercise Price" means the Volitional
Purchase Option Exercise Price minus the amount by which [*] exceed the
aggregate of the [*].

     1.15 "Liabilities" means, with respect to the Subsidiary, (a) all
liabilities required to be reflected or reserved against in the Subsidiary's
financial statements under U.S. generally accepted accounting principles
consistently applied ("GAAP"), (b) any guaranty of any indebtedness of another
person and (c) any reimbursement or similar obligation with respect to any
letter of credit issued for the account of the Subsidiary or as to which the
Subsidiary is otherwise liable. Liabilities of the type described in (b) and (c)
shall be [*].

     1.16 "License Agreement" means the License Agreement of even date herewith
between Tularik and the Subsidiary.

     1.17 "Payment Agent" shall have the meaning given in Section 2.4(d).

     1.18 "Program" shall have the meaning given in the Collaboration Agreement.

     1.19  "Purchase Option" means either the Volitional Purchase Option or the
Change of Control Purchase Option, as the case may be.

     1.20 "Status Statement" a balance sheet prepared by the Subsidiary, audited
by independent public accountants and delivered to JT reflecting the
Subsidiary's business operations as of a given date, together with a statement
and brief description of all other liabilities [*] of the Subsidiary
constituting Total Liabilities as of such date not reflected on such balance
sheet.

     1.21  "Stock" shall have the meaning given in the recitals.

     1.22  "Subsidiary" shall have the meaning given in the recitals.

     1.23 "Third Party" shall mean any person or entity other than a Party
hereto or their Affiliates.

     1.24 "Total Liabilities" means (a) all Liabilities, plus (b) any other
debts, liabilities or obligations, absolute or contingent, matured or unmatured,
liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever
arising, including all costs and expenses relating thereto, and including those
debts, liabilities and obligations arising under any law, rule or regulation, or
under any pending or threatened action, suit or proceeding, or any order or
consent decree of any governmental entity or any award of any arbitrator of any
kind, and those arising under any contract, commitment or undertaking.

     1.25 "Volitional Purchase Option" shall have the meaning given in Section
2.1.

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       4.
<PAGE>

     1.26 "Volitional Purchase Option Exercise Date" means the date upon which
JT notifies Tularik and the Subsidiary that JT is exercising the Volitional
Purchase Option in accordance with Sections 2.1 and 2.3.

     1.27 "Volitional Purchase Option Exercise Price" means the amount set forth
below in the event the Volitional Purchase Option Exercise Date occurs within
the time periods set forth below:

                ------------------------------------------------------
                 Exercise Price           Volitional Purchase Option
                                               Exercise Date
                ------------------------------------------------------
                       [*]                          [*]
                ------------------------------------------------------
                       [*]                          [*]
                ------------------------------------------------------
                       [*]                          [*]
                ------------------------------------------------------


     1.28 "Voting Stock" shall have the meaning set forth in Section 1.4(a).

                                   ARTICLE 2

                                    Option

     2.1 Grant of Volitional Purchase Option. Tularik hereby grants to JT an
exclusive option for JT or an Affiliate of JT to purchase all issued and
outstanding shares of Stock for the Final Volitional Purchase Option Exercise
Price (the "Volitional Purchase Option"). The Volitional Purchase Option, if
exercised, must be exercised as to all, but not less than all, issued and
outstanding shares of Stock on or within thirty days after [*] (the date of such
exercise, as determined in accordance with Section 2.3, the "Volitional Purchase
Option Exercise Date") by written notice to Tularik and the Subsidiary as
provided in Section 2.3. JT or an Affiliate shall pay the Final Volitional
Purchase Option Exercise Price in cash upon the closing of such purchase as
provided in Section 2.4. The Volitional Purchase Option shall expire [*].

     2.2 Grant of Change of Control Purchase Option. Tularik hereby grants to JT
an exclusive option for JT or an Affiliate of JT to purchase all issued and
outstanding shares of Stock for the Final Change of Control Purchase Option
Exercise Price (the "Change of Control Purchase Option"). The Change of Control
Purchase Option, if exercised, must be exercised as to all, but not less than
all, issued and outstanding shares of Stock and may be exercised [*]; provided
that JT may exercise the Change of Control Purchase Option only if such date
[*]; provided, further, that the Change of Control Purchase Option shall expire
if not exercised [*] following the first Change of Control to occur. JT shall,
if it so elects, exercise the Change of Control Purchase Option by written
notice to Tularik and the Subsidiary as provided in Section 2.3. JT or an
Affiliate shall pay the Final Change of Control Purchase Option Exercise Price
in cash as provided in Section 2.4. The Change of Control Purchase Option shall
expire [*] following the date upon which a Change in Control occurs.

     2.3 Manner of Exercise. The Purchase Option shall be exercised, if at all,
within the time periods provided in Section 2.1 or 2.2, as applicable, by
written notice (the "Exercise Notice") from JT to Tularik and to the Subsidiary
stating that the Purchase Option is being

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       5.
<PAGE>

exercised and setting forth (1) the Exercise Price; and (2) a closing date (the
"Closing Date") on which JT shall purchase all of the issued and outstanding
shares of Stock, subject to Section 2.4, which date shall not be more than [*]
after the Exercise Date (the "Closing"). The Exercise Date shall be deemed to
occur upon the date [*] in accordance with Section 2.1 or 2.2, as applicable.

     2.4  Closing.

          (a) Closing Date; Cooperation. Except as set forth below, the Closing
     Date shall be the date specified as such in the Exercise Notice provided
     pursuant to Section 2.3. The Closing Date may be extended by JT if, in the
     judgment of JT, an extension of the Closing Date is necessary to obtain any
     governmental or Third Party consent to the purchase of the Stock or to
     permit the expiration prior to the Closing Date of any statutory or
     regulatory waiting period. JT may extend the Closing Date for the reasons
     set forth in the preceding sentence by delivering written notice of such
     extension to the Subsidiary on or prior to the previously specified Closing
     Date. Tularik and the Subsidiary shall cooperate with JT to effect the
     Closing, including without limitation seeking any required Third Party or
     governmental consents, and filing any applications, notifications,
     registration statements or the like that may be necessary to effect the
     closing.

          (b) Certain Restrictions Following Exercise Date. From the Exercise
     Date until the Closing Date, Tularik shall cause the Subsidiary to conduct
     its operations in the ordinary and usual course consistent with past
     practice and to use its best efforts to preserve intact its business
     organization, to keep available the services of its officers and employees
     and to maintain satisfactory relations with suppliers, contractors,
     distributors, licensors, licensees, customers and others having business
     relationships with it. Without limiting the generality of the foregoing and
     except as provided in or contemplated by this Agreement, the Subsidiary
     will not take any of the following actions (or permit any such actions to
     be taken on its behalf), except with the prior written consent of Tularik
     and JT:

              (i)   declare or pay any dividends on or make any other
     distribution in respect of any of the capital stock of the Subsidiary;

              (ii)  incur any indebtedness for borrowed money or guarantee any
     such indebtedness or issue or sell any debt securities of the Subsidiary or
     guarantee any debt securities of others, other than in the ordinary course
     of business consistent with past practice;

              (iii) sell, lease, license or otherwise dispose of any of its
assets (including the Subsidiary's intellectual property rights), other than in
the ordinary course of business consistent with its past practices;

              (iv)  default in its obligations under any material contract,
     agreement, commitment or undertaking of any kind or enter into any material
     contract, agreement, purchase order or other commitment;

              (v)   enter into any other material transaction or agreement or
     arrangement, or incur any liabilities, not in the ordinary course of the
     Subsidiary's business consistent with past practice;

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       6.
<PAGE>

              (vi)   split, combine or reclassify any of the capital stock of
     the Subsidiary or issue or authorize any other securities in respect of, in
     lieu of or in substitution for, shares of the capital stock of the
     Subsidiary or repurchase, redeem or otherwise acquire any shares of the
     capital stock of the Subsidiary, except from former employees, directors
     and consultants in accordance with agreements providing for the repurchase
     of shares in connection with any termination of service to the Subsidiary;

              (vii)  issue, deliver, encumber, sell or purchase any shares of
the capital stock of the Subsidiary or any securities convertible into, or
rights, warrants, options or other rights of any kind to acquire, any such
shares of capital stock (other than stock option grants in the ordinary course
of business consistent with past practice), other convertible securities or any
other ownership interest (other than the issuance of shares upon the exercise of
outstanding stock options and warrants);

              (viii) amend or otherwise change its Certificate of Incorporation
or Bylaws;

              (ix)   authorize any single capital expenditure (as treated under
GAAP) which is in excess of [*] dollars or capital expenditures which are, in
the aggregate, in excess of [*] dollars;

              (x)    increase the compensation payable or to become payable to
     its officers or employees, except for increases in accordance with past
     practices for salaries or wages of employees of the Subsidiary who are not
     officers of the Subsidiary, or grant any severance or termination pay to
     (other than pursuant to existing agreements), or enter into any employment
     or severance agreement with, any director, officer or other employee of the
     Subsidiary, or establish, adopt, enter into or amend any collective
     bargaining, bonus, profit sharing, thrift, compensation, stock option,
     restricted stock, pension, retirement, deferred compensation, employment,
     termination, severance or other plan, agreement, trust, fund, policy or
     arrangement for the benefit of any director, officer or employee, other
     than in the ordinary course of business consistent with past practices;

              (xi)   take any action, other than reasonable and usual actions in
     the ordinary course of business and consistent with past practice, with
     respect to accounting policies or procedures (including, without
     limitation, procedures with respect to cash management, the payment of
     accounts payable and the collection of accounts receivable);

              (xii)  make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability, or execute or file with
the IRS or any other taxing authority any agreement or other document extending,
or having the effect of extending, the period of assessment or collection of any
taxes;

              (xiii) pay, discharge, satisfy, settle or compromise any suit,
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent with past practice, of
liabilities reflected or reserved against in the Status Statement or
subsequently incurred in the ordinary course of business and consistent with
past practice; or

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       7.
<PAGE>

               (xiv)  take any action that would result in any of the
representations and warranties of the Subsidiary set forth in this Agreement
becoming untrue in any material respect or in any of the conditions to the
transaction not being satisfied.

          (c)  Determination of Final Exercise Price. Not later than [*]
following the Exercise Date, the Subsidiary shall deliver a final Status
Statement to JT prepared as of the Exercise Date. Following receipt of such
Status Statement and completion of any other investigation as is reasonably
necessary or appropriate in connection with JT's exercise of the Purchase
Option, and prior to the Closing Date, JT and Tularik shall determine the Final
Exercise Price by [*], and shall notify Tularik and the Subsidiary of such
determination. JT may rescind the Exercise Notice prior to the Closing Date
should the review of the Status Statement or the results of any investigation
performed by JT pursuant to this Section 2.4(c) reveal a materially adverse
change in the operations or financial position of the Subsidiary; [*].

          (d)  Payment of Final Exercise Price. On or before the Closing Date,
JT shall deposit the full amount of the Final Exercise Price with a bank or
banks or similar entit(y)ies (the "Payment Agent(s)") designated by JT to pay,
on JT's behalf, the Final Exercise Price. Funds deposited with the Payment
Agent(s) shall be delivered in trust for the benefit of Tularik, and JT shall
provide the Payment Agent(s) with irrevocable instructions to pay, on or
promptly after the Closing Date, the Final Exercise Price for the shares of
Stock to Tularik. Payment for shares of Stock shall be sent by wire transfer to
the account designated by Tularik.

     2.5  Transfer of Title. Tularik and the Subsidiary shall each take all
actions reasonably requested by JT to assist in effectuating the transfer of
title to the shares of Stock following exercise of the Purchase Option in
accordance with this Article 2.

     2.6  Termination of Purchase Option. If [*] the Purchase Option shall
terminate.

     2.7  No Assignment. JT may not assign or otherwise transfer the Purchase
Option, or any other rights of JT under this Article 2, to any Third Party.

     2.7  Guarantee. If JT or its Affiliate exercises the Purchase Option, JT
shall, and hereby does, guarantee the performance of the Subsidiary under the
License Agreement after the Closing Date.


                                   ARTICLE 3

                                    Voting

     3.1  Stock. Tularik agrees to hold all shares of Stock registered in its
name or beneficially owned by it subject to, and to vote the Stock in accordance
with, the provisions of this Agreement.

     3.2  Size of Board of Directors. Tularik hereby covenants and agrees that
the authorized size of the Board of Directors of Tularik shall be and remain
[*].

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       8.
<PAGE>

     3.3  Election of Directors.  On all matters relating to the election of
directors of the Subsidiary, Tularik agrees to vote all Stock held by it (or to
consent pursuant to an action by written consent of the holders of Stock) so as
to elect members of the Subsidiary's Board of Directors as follows.  At each
election of directors in which the holders of Stock are entitled to elect
directors of the Subsidiary, Tularik shall vote all of its shares of Stock so as
to [*].  Any vote taken to [*] shall also be subject to the provisions of this
Section 3.3.  JT shall be responsible for [*] to the Subsidiary.

     3.4  Appointment of Officers. Tularik agrees to cause its representatives
on Subsidiary's Board of Directors to appoint as president and chief executive
officer of the Subsidiary a representative of JT, which individual shall
initially be [*]. In addition, Tularik agrees to cause the Subsidiary's Board of
Directors to [*]. Any vote taken by the Subsidiary's Board of Directors to [*]
shall also be subject to the provisions of this Section 3.4. [*]

     3.5  Duration of Obligations. The obligation to elect a director nominated
by JT pursuant to Section 3.3 and the obligation to appoint officers of the
Subsidiary pursuant to Section 3.4 shall continue for so long as the [*].

     3.6  Resignations. If JT terminates the Program in accordance with Section
3.7 of the Collaboration Agreement [*], JT shall cause the director of the
Subsidiary elected pursuant to Section 3.3 and the officers of the Subsidiary
that are representatives of JT appointed pursuant to Section 3.4 shall tender
their respective resignations immediately. Tularik may accept such resignations
in its sole discretion.

     3.7  Legend.

          (a)  Concurrently with the execution of this Agreement, there shall be
imprinted or otherwise placed, on certificates representing the Stock the
following restrictive legend (the "Legend"), as well as any other restrictive
legends required to be placed thereon pursuant to federal or state securities
laws:

               "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
          SUBJECT TO THE TERMS AND CONDITIONS OF AN OPTION
          AGREEMENT THAT PLACES CERTAIN RESTRICTIONS ON THE
          VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON
          ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED
          TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
          PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH OPTION
          AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF
          THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO
          THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."

          (b)  Tularik and the Subsidiary agree that, during the term of this
Agreement, neither of them will remove, nor permit to be removed (upon
registration of transfer, reissuance of otherwise), the Legend from any such
certificate and will place or cause to be placed the


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                       9.
<PAGE>

Legend on any new certificate issued to represent shares of Stock theretofore
represented by a certificate carrying the Legend.

     3.8  Successors. The provisions of this Agreement shall be binding upon the
successors in interest to any of the shares of Stock. Tularik shall not permit
the transfer of any of the shares of Stock on its books or issue a new
certificate representing any of the shares of Stock unless and until the person
to whom such security is to be transferred shall have executed a written
agreement, substantially in the form of this Agreement, pursuant to which such
person becomes a Party to this Agreement and agrees to be bound by all the
provisions hereof.

     3.9  Subsidiary Actions Prior to the Exercise Date. Prior to the Exercise
Date, Tularik shall cause the Subsidiary to not take any of the following
actions, except with the unanimous consent of the Board of Directors of the
Subsidiary:

               (i) [*]


                                   ARTICLE 4

                                  Termination

     4.1  This Agreement shall continue in full force and effect from the
Effective Date through the earliest of the following dates, on which date it
shall terminate in its entirety:

          (a)  the Program is terminated by JT in accordance with Section 3.7 of
the Collaboration Agreement [*];

          (b)  the Closing Date (including any extension thereof pursuant to
Section 2.4);

          (c)  [*] from the Effective Date, if the Purchase Option is not
exercised prior thereto;

          (d)  the date as of which the Parties hereto terminate this Agreement
by written consent; or

          (e)  [*] following the date upon which a Change in Control occurs, if
the Purchase Option is not exercised prior thereto.


                                   ARTICLE 5

                        Confidentiality and Publication

     5.1  Confidential Information; Exceptions. Except to the extent expressly
authorized by this Agreement or otherwise agreed in writing by the parties, each
Party agrees that, for the term of this Agreement and for [*] thereafter, it
shall keep confidential and shall not publish or otherwise disclose and shall
not use for any purpose other than as provided for in this Agreement any
Confidential Information furnished to it by the other party pursuant to this

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      10.
<PAGE>

Agreement, except to the extent that the receiving Party can demonstrate by
competent proof that such Confidential Information:

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

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

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

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

          (e)  was independently discovered or developed by the receiving Party
without the use of Confidential Information belonging to the disclosing Party.

     5.2  Financial Terms; Permitted Disclosure. The Parties agree that the
material terms of the Agreement will be considered Confidential Information of
both Parties. Notwithstanding the foregoing, either Party may disclose such
terms to bona fide potential investors or acquirors or to investment banks, if
necessary for purposes of this Agreement and/or the Collaboration Agreement, and
may disclose other Confidential Information as required by law, regulation or
court order. In connection with any permitted disclosure of Confidential
Information pursuant to this Section 5.2, each Party agrees to use all
reasonable efforts to secure confidential treatment of, or a protective order
for, any such information. No Party shall make any public announcement regarding
the existence or terms of this Agreement, or the exercise of any rights under
this Agreement, without the prior written consent of the other Party, except
that a Party may make disclosures to governmental authorities to the extent
necessary to secure regulatory approvals.

                                   ARTICLE 6

                                Indemnification

     6.1  Indemnification by JT. JT hereby agrees to indemnify, hold harmless
and defend Tularik, its Affiliates, employees, agents and independent
contractors ("Tularik Indemnified Parties") against any and all expenses, costs
of defense (including without limitation attorneys' fees, witness fees, damages,
judgments, fines and amounts paid in settlement) and any amounts Tularik
Indemnified Parties become legally obligated to pay because of any Third Party
claim or claims against it to the extent that such claim or claims result from
(i) the negligence, recklessness or willful misconduct of JT, its Affiliates,
employees, agents, or independent contractors, or (ii) JT's breach or alleged
breach of any representation or warranty or any other provision of this
Agreement, except in each case to the extent such claims arise from the
negligence, recklessness or willful misconduct of Tularik Indemnified Parties,
or from any


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      11.
<PAGE>

breach of any representation or warranty in this Agreement or of any other
provision of this Agreement by Tularik; provided that Tularik provides JT with
prompt notice of any such claim and the exclusive ability to defend (with the
reasonable cooperation of Tularik Indemnified Parties) and settle any such
claim.

     6.2  Indemnification by Tularik. Tularik hereby agrees to indemnify, hold
harmless and defend JT, its Affiliates, employees, agents and independent
contractors ("JT Indemnified Parties") against any and all expenses, costs of
defense (including without limitation attorneys' fees, witness fees, damages,
judgments, fines and amounts paid in settlement) and any amounts JT Indemnified
Parties become legally obligated to pay because of any Third Party claim or
claims against it to the extent that such claim or claims arise out of (i) the
negligence, recklessness or willful misconduct of Tularik, its employees or
agents, or (ii) Tularik' breach or alleged breach of any representation or
warranty or of any other provision of this Agreement by Tularik, except in each
case to the extent such claims arise from the negligence, recklessness or
willful misconduct of JT Indemnified Parties, or any breach of any
representation or warranty or of any other provision of this Agreement by JT;
provided that JT provides Tularik with prompt notice of any such claim and the
exclusive ability to defend (with the reasonable cooperation of JT Indemnified
Parties) or settle any such claim.

     6.3  Mechanics. In the event that the Parties cannot agree as to the
application of Sections 6.1 and 6.2 above to any particular loss or claim, the
Parties may conduct separate defenses of such claim. Each Party further reserves
the right to claim indemnity from the other in accordance with Sections 6.1 and
6.2 above upon resolution of the underlying claim, notwithstanding the
provisions of Sections 6.1 and 6.2 above requiring the indemnified Party to
tender to the indemnifying Party the exclusive ability to defend such claim or
suit.

     6.4  [*] Indemnification. In addition to the indemnification set forth in
the Section 6.2, [*] Indemnified Parties for any [*] that the Subsidiary becomes
legally obligated to pay on or after the Closing Date resulting from, arising
out of or in connection with [*] the Closing Date by, [*] except to the extent
[*].


                                   ARTICLE 7

                                 Miscellaneous

     7.1  Ownership. Tularik represents and warrants to JT that (a) Tularik now
owns the Stock, free and clear of liens or encumbrances, and has not, prior to
or on the Effective Date, executed or delivered any proxy or entered into any
other voting agreement or similar arrangement with respect thereto, other than
one which has expired or terminated prior to the Effective Date, and (b) Tularik
has full power and authority to execute, deliver and perform this Agreement,
which has been duly executed and delivered by, and evidences the valid and
binding obligation of, Tularik, enforceable in accordance with its terms. JT
represents and warrants to Tularik that it has full power and authority to
execute, deliver and perform this Agreement, which has been duly executed and
delivered by, and evidences the valid and binding obligation of, JT, enforceable
in accordance with its terms.


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      12.
<PAGE>

     7.2  Additional Shares. In the event that subsequent to the Effective Date
any shares or other securities are issued on, or in exchange for, any of the
Stock by reason of any stock dividend, stock split, combination of shares,
reclassification, recapitalization or similar event, such shares or securities
shall be deemed to be Stock, as the case may be, for purposes of this Agreement.

     7.3  [*]. Tularik shall not, for a period of [*] from the Exercise Date, if
any, without obtaining the prior written consent of JT, [*] the Subsidiary as of
the Exercise Date.

     7.4  Additional Covenants. If JT exercises the Purchase Option, it shall,
promptly after the Closing Date, (a) grant to the Subsidiary all necessary
rights and licenses to enable the Subsidiary to perform its obligations under
the License Agreement; and (b) not take any actions in contravention of or in
conflict with the intent of the License Agreement or the Collaboration Agreement
following the exercise of the Purchase Option. In the event that any Affiliate
of JT exercises the Purchase Option, JT shall, promptly after the Closing Date,
(a) grant to the Affiliate all necessary rights and licenses to enable the
Subsidiary to continue to perform its obligations under the Collaboration
Agreement and the License Agreement; (b) cause such Affiliate to grant to the
Subsidiary all necessary rights and licenses to allow Tularik to exercise its
rights under the Collaboration Agreement and the License Agreement, and (c)
cause such Affiliate not to take any actions in contravention of or in conflict
with the intent of the License Agreement or the Collaboration Agreement
following the exercise of the Purchase Option. Tularik shall cause the
Subsidiary's financial statements to be audited by independent public
accountants on an annual basis. A copy of such audited financial statements
shall be provided to JT.

     7.5  Services and Facilities Agreement. If JT exercises the Purchase
Option, the Parties hereby covenant and agree to negotiate a services and
facilities agreement that provides JT with access to the Tularik infrastructure
utilized by the Subsidiary immediately prior to the exercise of such Purchase
Option for a period not to exceed [*]. Such infrastructure shall include access
to space in the Tularik facility that is the same as, or substantially
comparable to, that occupied by the Subsidiary prior to the Closing Date. Such
services and facilities shall be provided [*] following the date upon which JT
exercises such Purchase Option, and thereafter JT shall [*]

     7.6  Specific Performance. The Parties hereto hereby declare that it is
impossible to measure in money the damages that will accrue to a Party hereto or
to their heirs, personal representatives, or assigns by reason of a failure to
perform any of the obligations under this Agreement and agree that the terms of
this Agreement shall be specifically enforceable. If any Party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such Party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.

     7.7  Severability. If any part of this Agreement is declared invalid by any
legal authority having jurisdiction over a Party, then such declaration shall
not affect the remainder of the Agreement, which shall continue in full force
and effect. The Parties shall revise the


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      13.
<PAGE>

invalidated part in a manner that will render such provision valid and closely
approximate the Parties' original intent.

     7.8  Waiver. Except as specifically provided for herein, the waiver from
time to time by either of the Parties of any of their rights or their failure to
exercise any remedy shall not operate or be construed as a continuing waiver of
same or of any other of such Party's rights or remedies provided in this
Agreement.

     7.9  Consents Not Unreasonably Withheld. Whenever provision is made in this
Agreement for a Party to secure the consent or approval of the other, that
consent or approval shall not unreasonably be withheld, and whenever in this
Agreement provision is made for one Party to object to or disapprove a matter,
such objection or disapproval shall not unreasonably be exercised.

     7.10 Ambiguities. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authored the ambiguous provision.

     7.11 Further Action. Each Party agrees to execute, acknowledge and deliver
such further instruments, and to do all such other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

     7.12 Notices. All notices hereunder shall be in writing and shall be deemed
given if delivered personally or by facsimile transmission (receipt verified),
telexed, mailed by registered or certified mail (return receipt requested),
postage prepaid, or sent by express courier service, to the Parties at the
following addresses (or at such other address for a Party as shall be specified
by like notice; provided, that notices of a change of address shall be effective
only upon receipt thereof).

          (A)  If to Japan Tobacco, Inc., addressed to:



                       Japan Tobacco, Inc.
                       Pharmaceutical Division
                       JT Building, 2-1 Toranomon, 2-chome
                       Minato-ku, Tokyo 105, Japan
                       Attention: Vice President Business Development
                       Telephone: 011 81 3 3582 3111
                       Facsimile: 011 81 3 5572 1449


               With a copy to:
                       Neal N. Beaton, Esq.
                       Gilbert, Segall and Young LLP
                       430 Park Avenue
                       New York, NY 10022
                       Telephone: (212) 644-4010
                       Facsimile: (212) 644-4051



[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      14.
<PAGE>

          (b)  If to Tularik Inc. or Tularik Pharmaceutical Company, addressed
to:


                    Tularik Inc.
                    Two Corporate Drive
                    South San Francisco, CA 94080
                    Attn: Secretary
                    Telephone: (650) 825-7300
                    Facsimile: (650) 825-7392


               With a copy to:

                    Cooley Godward LLP
                    Five Palo Alto Square
                    3000 El Camino Real
                    Palo Alto, CA 94306-2155
                    Attention: Judith A. Hasko, Esq.
                    Telephone: (650) 843-5000
                    Facsimile: (650) 857-0663

     7.13  Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties hereto and their permitted successors and assigns;
provided, however, that no Party shall assign any of its rights and obligations
hereunder, except that JT may assign its rights hereunder to its Affiliate.

     7.14  Force Majeure. Any delays in performance by a Party under this
Agreement shall not be considered a breach of this Agreement if and to the
extent caused by occurrences beyond the reasonable control of the Party
affected, including but not limited to acts of God, embargoes, governmental
restrictions, strikes or other concerted acts of workers, fire, earthquake,
flood, explosion, riots, wars, civil disorder, rebellion or sabotage. The Party
suffering such occurrence shall immediately notify the other Party as soon as
practicable and any time for performance hereunder shall be extended by the
actual time of delay caused by the occurrence, provided that the Party affected
by such event uses reasonable efforts to overcome such delay.

     7.15  Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.

     7.16  Headings. The section and paragraph headings contained herein are for
the purposes of convenience only and are not intended to define or limit the
contents of said sections or paragraphs.

     7.17  Governing Law and Language. This Agreement shall be governed by
California law, notwithstanding its conflicts of laws principles. The official
text of this Agreement and any Appendices hereto, or any notice given or
accounts or statements required by this Agreement shall be in English. In the
event of any dispute concerning the construction or


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      15.
<PAGE>

meaning of this Agreement, reference shall be made only to this Agreement as
written in English and not to any other translation into any other language.

     7.18  Arbitration. In the event of any controversy or claim arising out of,
relating to or in connection with any provision of this agreement, the Parties
shall try to settle their differences amicably between themselves. Any
unresolved disputes arising between the Parties arising out of, relating to, in
connection with or in any way connected with this Agreement or any term or
condition hereof, or performance by a Party of its obligations hereunder,
whether before or after termination or expiration of this Agreement, shall be
finally resolved by binding arbitration, except as otherwise provided in this
Agreement and except that any disputes regarding the validity, scope or
enforceability of patents shall be submitted to a court of competent
jurisdiction. The arbitration shall be held in San Francisco, California
according to the rules of the American Arbitration Association ("AAA"). The
arbitration will be conducted by a panel of three (3) arbitrators with
significant experience in the pharmaceutical industry appointed in accordance
with applicable AAA rules. Any arbitration herewith shall be conducted in the
English language to the maximum extent possible. Each Party shall bear its own
costs and attorney's and witness' fees. Judgment on the award so rendered shall
be final and may be entered in any court having jurisdiction thereof.

     7.19  Entire Agreement; Amendment. This Agreement, together with the
Collaboration Agreement and the License Agreement, and all Appendices hereto and
thereto, sets forth the principal terms of the arrangement between the Parties
hereto and, except as otherwise set forth herein, supersedes and terminates all
prior agreements, including the preliminary agreement, and understandings
between the Parties. No subsequent alteration, amendment, change or addition to
this Agreement shall be binding upon the Parties unless reduced to writing and
signed by an authorized officer of each Party.


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      16.
<PAGE>

     In Witness Whereof, the Parties hereto have executed this Option Agreement
as of the Effective Date.

Tularik Inc.                            Japan Tobacco Inc.


By: /s/ David Goeddel                   By: /s/ Takashi Kato
    ----------------------------            ------------------------------
    Chief Executive Officer             Name:   Takashi Kato
                                              ----------------------------
                                        Title:  Managing Director
                                               ---------------------------
                                               Pharmaceutical Division


Tularik Pharmaceutical Company

By: /s/ William J. Rieflin
    ----------------------------
Name: Wm. J. Rieflin
      --------------------------
Title:   Secretary
      --------------------------


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      17.
<PAGE>

                                  Appendix A

                                    Bylaws


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      18.
<PAGE>

                                  Appendix B
                         CERTIFICATE OF INCORPORATION


                                      OF


                        TULARIK PHARMACEUTICAL COMPANY

     The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:

                                      1.

     The name of this corporation is Tularik Pharmaceutical Company (the
"Corporation").

                                      2.

     The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent of the Corporation in the State of Delaware at such
address is Corporation Service Company.

                                      3.

     The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.

                                      4.

     This Corporation is authorized to issue only one class of stock, to be
designated Common Stock.  The total number of shares of Common Stock presently
authorized is One Hundred Shares (100 shares), each having a par value of one-
tenth of one cent ($0.001).

                                      5.

     5.1 The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
that shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.

     5.2 Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the stockholders entitled to vote.
The Board of Directors shall also have the power to adopt, amend or repeal
Bylaws.


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      19.
<PAGE>

                                      6.

     6.1 The liability of the directors for monetary damages shall be eliminated
to the fullest extent under applicable law.

     6.2 Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.

                                      7.

     The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this reservation.

                                      8.

     The name and the mailing address of the Sole Incorporator is as follows:

          William J. Rieflin
          Two Corporate Drive
          South San Francisco, CA 94080


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      20.
<PAGE>

     In Witness Whereof, this Certificate has been subscribed this 12/th/ day of
May, 2000 by the undersigned who affirms that the statements made herein are
true and correct.



                              ________________________________
                              William J. Rieflin
                              Sole Incorporator


[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Act of 1934, as amended.

                                      21.

Source: OneCLE Business Contracts.