Note 15. Commitments and Contingencies

Our corporate headquarters, including our principal offices, are currently located in South San Francisco, California. We began occupying these premises in May 2011. In July 2010, we entered into arrangements to lease and sublease a total of approximately 126,493 square feet located at our corporate headquarters in South San Francisco, California. The sublease and the lease expire in 2015 and 2024, respectively. Upon expiration of the sublease, the lease will be automatically expanded to include the premises subject to the sublease. The lease includes two successive five-year options to extend the term of the lease to 2034. In November 2011, we entered into an arrangement to lease up to an additional 170,618 square feet in a building being constructed adjacent to our corporate headquarters in South San Francisco, California, and this lease is expected to expire in 2024. The lease includes two successive five-year options to extend the term of the lease to 2034. The lease also includes a one-time option to lease additional premises that will be constructed after the exercise of the option. If the option is exercised, the term of the lease will be automatically extended by ten years. For accounting purposes, due to the nature of our involvement with the construction of this second building, we were considered to be the owner of the assets during the construction period through the lease commencement date, even though the lessor is responsible for funding and constructing the building shell and some infrastructure costs. For accounting purposes, we treated this as a sale-lease-back transaction on the building completion date and account for the lease as an operating lease going forward. The building was substantially complete by December 31, 2012 and the building and related liability was removed from our balance sheet as that time.

We also have additional office space in South San Francisco, Washington D.C. and Zug, Switzerland.

Minimum annual rental commitments, net of sublease income, under all leases at December 31, 2012 are as follows (in thousands):


Year ending December 31:
2013	$	10,797
2014		10,817
2015		9,883
2016		12,090
2017		12,540
Thereafter		71,472

	$	127,599

Rent expense, net of sublease income, for the years ended December 31, 2012, 2011 and 2010 was approximately $5.8 million, $6.1 million, and $4.3 million, respectively. For the years ended December 31, 2012 and 2011, sublease income was $0. For the year ended December 31, 2010, sublease income was $66,000.

Contract Manufacturing and Supply Agreements

On August 29, 2012, we entered into a commercial manufacturing and supply agreement with Senn Chemicals AG, or SENN, pursuant to which SENN serves as our single source supplier of certain products, including PR-16 and PR-26, which is used in the process to produce the carfilzomib drug substance for Kyprolis. Under the commercial supply agreement with SENN, SENN is obligated to manufacture our firmly forecasted commercial supply of certain products, including PR-16 and PR-26, and we are obligated to purchase from SENN such products manufactured, pursuant to the terms and conditions of this agreement. Under the agreement, we are obligated to make specified minimum purchases of PR-16 and PR-26 from SENN. We must provide SENN with a rolling forecast on a quarterly basis setting forth the total quantities of PR-16 and PR-26 that we expect to require in the following 12 months. As December 31, 2012, based on current forecasts, we are committed to purchase PR-16 and PR-26 at an aggregate cost of approximately $5.2 million during 2013. Our agreement with SENN has an initial term ending in December 2016. Prior to the expiration of the term, we may terminate the agreement without cause upon 6 months advance notice. Either we or SENN may terminate the agreement in the event of the other party's insolvency or uncured material breach. In the event that we terminate the agreement for SENN's breach or bankruptcy, we may require SENN to transfer manufacturing documentation and technology within 3 months of the breach to alternate supplier(s) designated by Onyx. If we terminate the agreement for convenience, we will not be relieved from our obligations under the agreement.

On June 25, 2012, we entered into commercial manufacturing and supply agreements with Cambridge Major Laboratories, Inc., or CML, pursuant to which CML serves as the commercial manufacturer and commercial supplier of the active ingredient of carfilzomib, or carfilzomib drug substance, and provides manufacturing services in relation to the product. Under the commercial supply agreement with CML, CML is obligated to manufacture exclusively for us, our firmly forecasted commercial supply of carfilzomib drug substance. We are obligated to provide CML with a rolling forecast on a quarterly basis setting forth the total quantity of carfilzomib drug substance we expect to require for commercial supply in the following 12 months. The first 3 months of each forecast represent a rolling firm irrevocable order, and we may only increase or decrease our forecast for the next 9 months within specified limits. As of December 31, 2012, based on our most current forecast, we are committed to purchase an aggregate of approximately $1.1 million of carfilzomib drug substance during 2013. Our agreement with CML has an initial term ending in July 2017. Following the initial term, either party may terminate the agreement without cause upon 18 months advance notice. Either we or CML may terminate the agreement in the event of the other party's insolvency or uncured material breach. In the event that we terminate the agreement for CML's breach due to supply shortfall, we may require CML to transfer manufacturing to alternate supplier chosen by us. If we terminate the agreement, we will be required to purchase the inventory on hand from CML.

On July 3, 2012, we entered into a commercial manufacturing and supply agreement with DSM Pharmaceuticals, Inc., or DSM. Under the terms of the commercial supply agreement, DSM has agreed to fill and finish product manufacturing services for the final Kyprolis drug product. We are obligated to provide DSM with a rolling forecast on a monthly basis setting forth the total quantity of Kyprolis drug product we expect to require for commercial supply in the following 18 months. The first 6 months of each forecast represent a rolling firm irrevocable order. As of December 31, 2012, we are committed to purchase from DSM support services at an aggregate cost of approximately $2.4 million during 2013. Our agreement with DSM has an initial term ending in January 2015. Either party may terminate the agreement without cause upon 18 months advance notice. Either we or DSM may terminate the agreement in the event of the other party's insolvency or uncured material breach. In the event that we terminate the agreement for DSM's breach due to default, we may require DSM to transfer manufacturing documentation to the alternate supplier chosen by us within 3 months of such termination. If we terminate the agreement without cause or if DSM terminated the agreement with or without cause, we will be required to purchase the on hand inventory from DSM.

Contingencies

From time to time, the Company may become involved in claims and other legal matters arising in the ordinary course of business. Management is not currently aware of any matters that could have a material adverse effect on the financial position, results of operations or cash flows of the Company.