Exhibit 10.37

 

   

*  Confidential Treatment has been requested for the marked portions of this
exhibit pursuant to Rule 24B-2 of the Securities Exchange Act of 1934, as
amended.

THIRD RESTATED LICENSE AGREEMENT

FOR IL-21 EMBODIMENTS

by and between

ZymoGenetics, Inc.,

and

Novo Nordisk A/S

Effective Date: December 3, 2009

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CONTENTS

 

ARTICLE ONE Definitions and Terminology    1

1.1

  Definitions    1

1.2

  Terminology    11 ARTICLE TWO License    11

2.1

  License Grant    11

2.2

  Nonexclusive License Grant – IL-21 Protein    11

2.3

  Sublicensing by NN    11

2.4

  ZGEN Reservation of Rights    12

2.5

  Transition Plan    12

2.6

  Development    12

2.7

  Commercialization    13

2.8

  [*] Technology    13 ARTICLE THREE Upfront and Milestone Fees    14

3.1

  Execution Fee    14

3.2

  Milestone Fees    14

3.3

  Milestone Fees under [*] Agreement    15 ARTICLE FOUR Royalties    15

4.1

  Patent Products    15

4.2

  Know-How Products    16

4.3

  Not Additive; Aggregation    16

4.4

  Third Party Agreements    16  

4.4.1

  General    16  

4.4.2

  Royalties under [*] Agreement    17

4.5

  Generic Products    17

4.6

  Additive Offsets; Minimum Royalties    17

4.7

  Payments and Reports    18

4.8

  Taxation of Payments    18

4.9

  Currency Blockage    19 ARTICLE FIVE Co-Funding Phase III Clinical Development
and USA Co-Promotion    19

5.1

  Election to Co-Fund    19

5.2

  Procedure    19

5.3

  Consequences of Election to Co-Fund    19  

5.3.1

  Cost Sharing    19  

5.3.2

  Royalties on Net Sales in the USA    19  

5.3.3

  ZGEN’s Right to Co-Promote in USA    20

5.4

  Phase III Costs    20  

5.4.1

  Cost Sharing of Phase III Costs    20  

5.4.2

  Accounting and Reconciliation    20

5.5

  Co-Promotion in USA    22

 

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  5.5.1   USA Co-Promotion Agreement    22   5.5.2   Right to Co-Promote    22

5.6

  ZGEN’s Right to Opt Out of Co-Funding    23 ARTICLE SIX Relationship
Management    23

6.1

  Joint Executive Committee    23   6.1.1   Formation; Composition; Decisions   
23   6.1.2   Role and Responsibilities    24   6.1.3   Meetings and
Communications    24

6.2

  Development and Commercialization Plan    24

6.3

  Alliance Managers    25   6.3.1   Appointment    25   6.3.2   Responsibilities
   25

6.4

  Finance Contacts    26 ARTICLE SEVEN Confidentiality    26

7.1

  Confidential Information    26

7.2

  Confidentiality Obligation    27

7.3

  Release from Confidentiality Obligation    27 ARTICLE EIGHT Indemnification   
28

8.1

  Personal Injury or Property Damage    28

8.2

  Insurance    28 ARTICLE NINE Patents    29

9.1

  Prosecution    29

9.2

  Patent Term Extension    30

9.3

  Notice of Infringement and Conference    31

9.4

  ZGEN Has First Right    31

9.5

  NN Has Secondary Right    32

9.6

  Settlement    33

9.7

  Patent Contacts    33

9.8

  Cooperation    33

9.9

  Affiliates, Commercialization Partners and Sublicensees    34

9.10

  Filing, Prosecution, Maintenance of Cell Line Patents and Construction Strain
Patents    34

9.11

  Filing, Prosecution, Maintenance of Patents and Patent Applications arising
from Work Performed pursuant to Annual Plan or Long Range Plan    34 ARTICLE TEN
Term and Termination    34

10.1

  Term and Expiration    34

10.2

  Termination by NN for Convenience    34

10.3

  Safety Reasons    35

10.4

  Insolvency    35

10.5

  Breach    35

 

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10.6

  Termination of License With Respect to Contested Patent Rights    36

10.7

  Effect of Expiration or Termination    36

10.8

  Survival of Obligations under Second Restated License Agreement    36

10.9

  Return of Project Following Termination    36

ARTICLE ELEVEN Representations and Warranties

   37

11.1

  Representations, Warranties and Covenants of NN    37

11.2

  Representations, Warranties and Covenants of ZGEN    38

11.3

  Warranty Disclaimer    39

11.4

  Limited Liability    39

ARTICLE TWELVE Miscellaneous

   39

12.1

  Assignment    39

12.2

  Relationship between the Parties    40

12.3

  Public Announcements    40

12.4

  Use of Names, Trade Names and Trademarks    41

12.5

  Force Majeure    41

12.6

  Governing Law    41

12.7

  Waiver of Remedies    41

12.8

  Entire Agreement    41

12.9

  Notices    42

12.10

  Severability    42

12.11

  Headings    42

12.12

  Review of Agreement    42

12.13

  Compliance with Laws; Export Regulations    43

12.14

  [*]    43

12.15

  Counterparts    43

 

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LIST OF SCHEDULES AND APPENDICES

Schedule 1

  Illustrative List of Items to be Transferred in Accordance with Section 2.5 –
Transition Plan

Schedule 2

  Press Release

Schedule 3

  Description of Certain Sales Incentives Referenced in the   Definition of Net
Sales

Appendix 1

  IL-21 Related Patents, Cell Line Patents and Construction Strain Patents

Appendix 2

  [*] Agreement

Appendix 3

  Principal Terms of USA Co-Promotion Agreement

Appendix 4

  Novo Nordisk Invoice Instructions

Appendix 5

  List of Countries Pursuant to Section 9.1

Appendix 6

  [*]

 

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THIRD RESTATED LICENSE AGREEMENT

FOR IL-21 EMBODIMENTS

This Third Restated License Agreement for IL-21 Embodiments (as defined herein)
(“Agreement”) is entered into as of December 3, 2009 (“Effective Date”) by and
between ZymoGenetics, Inc., a Washington corporation (“ZGEN”), and Novo Nordisk
A/S, a Danish corporation (“NN”).

RECITALS

A. ZGEN and NN were parties to an Option and License Agreement, effective as of
November 10, 2000 (as amended, the “Option Agreement”).

B. Pursuant to the Option Agreement, NN exercised its option to receive an
exclusive license to various embodiments of IL-21 and ZGEN and NN entered into a
License Agreement for IL-21, effective as of August 21, 2001 (the “Original
License Agreement”), that covered a territory comprising all the countries of
the world other than USA, Canada and Mexico.

C. ZGEN and NN entered into a Restated License Agreement for IL-21, effective as
of January 1, 2003 (the “Restated License Agreement”), that superseded the
Original License Agreement and added to the intellectual property subject to the
license.

D. ZGEN and NN entered into a Second Restated License Agreement for IL-21,
effective as of January 16, 2009 (the “Second Restated License Agreement”), that
superseded the Restated License Agreement and removed certain embodiments of
IL-21 from the license.

E. ZGEN and NN desire to supersede the Second Restated License Agreement with
this Agreement, which further adds to the intellectual property subject to the
license and expands the territory to include all the countries of the world.

AGREEMENT

NOW, THEREFORE, the parties, intending to be legally bound, agree as follows:

ARTICLE ONE

Definitions and Terminology

 

1.1 Definitions

In addition to other terms defined elsewhere in this Agreement, words and
phrases with initial capitals shall have the meanings stated in this
Section 1.1.

1.1.1 “Ab Embodiment of IL-21 Product” means: a Product based on an Ab
Embodiment of IL-21.

 

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1.1.2 “Affiliate” means: with respect to a party, any other business entity
which directly or indirectly controls, is controlled by or is under common
control with the party. The direct or indirect ownership of at least fifty
percent (50%) or, if smaller, the maximum allowed by applicable law, of the
voting securities of a business entity or of an interest in the assets, profits
or earnings of a business entity shall be deemed to constitute control of the
business entity. For the avoidance of doubt, ZGEN and NN are not (as of the
Effective Date) Affiliates of each other. Notwithstanding the above, the Novo
Nordisk Foundation, Novo A/S and Novozymes A/S shall not be considered
Affiliates of NN; provided that any transfers of Product by NN to any of such
entities shall be at an arm’s length price.

1.1.3 “Agency” means: the FDA, the EMEA or foreign equivalent of either.

1.1.4 “Annual Plan” is defined in Section 6.2.

1.1.5 “Antisense Embodiment of IL-21 Product” means: a Product based on an
Antisense Embodiment of IL-21.

1.1.6 “Applicable Phase IIIB Costs” means: costs incurred by NN or for its
account (including costs incurred outside of the USA and the European Union)
that are attributable to trials conducted to support the registration of a
Product in the USA and/or European Union that are required by an Agency for the
granting of the Regulatory Approval. This includes trials or long-term
extensions of Phase III trials conducted in order to [*] in the [*] at the [*]
The post-approval commitments (if any) [*]

1.1.7 “Bankruptcy Code” is defined in Section 10.4.

1.1.8 “BLA” means: a Biologics License Application, New Drug Application or an
application for any other approval from the FDA required to market a Product in
the USA or a non-USA equivalent of any of the foregoing filed with an Agency.

1.1.9 “Business Day” means: any day other than a Saturday, Sunday or other day
on which commercial banks in Seattle, Washington or Copenhagen, Denmark are
authorized or required by applicable law to close.

1.1.10 “Candidate Antibody” means: the Ab Embodiment of IL-21 that constitutes
ZGEN’s current development candidate.

1.1.11 “Cell Line Patents” means: the patents and patent applications set forth
in Part B of Appendix 1.

1.1.12 “Commercialization Rights” means, subject to the terms and conditions of
this Agreement, including ZGEN’s right to make an Election to Co-Fund: (a) the
right to conduct research, use, sample, develop (including clinical
development), manufacture, promote, market, offer to sell, import, export,
distribute, sell, and have sold Products, including the use of , contract
research organizations; and (b) the right to conduct research, use, sample,
develop (including clinical development), manufacture, promote, market, offer to
sell, import, export,

 

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distribute, sell and have sold Products together with one or more third parties
as part of a co-marketing agreement, strategic partnership, joint venture
relationship or the like in which NN or its Affiliate continues work on research
and development of Products; and (c) the right to sublicense one or more third
parties to manufacture, promote, market, offer to sell, import, export,
distribute, sell or have sold Products.

1.1.13 “Commercialization Partner” means: a third party to whom NN has extended
rights consistent with Section 1.1.12(b).

1.1.14 “Construction Strain Patents” means: the patents and patent applications
set forth in Part C of Appendix 1.

1.1.15 “Control” or “Controlled” means: with respect to a particular item of
information or any intellectual property right or other tangible or intangible
property, the entity referenced has the ability to exploit and to license or
sublicense the right to exploit the referenced technology or rights, without
violating the terms of any agreement or any other arrangement between the entity
referenced and a third party.

1.1.16 “[*]” is defined in Section 2.8(c).

1.1.17 “Election to Co-Fund” is defined in Section 5.1.

1.1.18 “EMEA” means: the European Medicines Evaluation Agency or any successor
agency thereto.

1.1.19 “FDA” means: the United States Food and Drug Administration or any
successor agency thereto.

1.1.20 “First Indication” means: the first disease that a Product is intended to
treat.

1.1.21 “FTE” means a total of [*] weeks or [*] hours per year of work on the
development or commercialization of Products carried out by employees of a party
having the appropriate relevant expertise to conduct such activities.

1.1.22 “FTE Rate” for both parties until December 31, 2009 will be [*] dollars.
Thereafter, the FTE Rate will be adjusted annually by a percentage equal to the
amount, if any, by which the Consumer Price Index for All Urban Consumers,
United States City Average, All Items, Not Seasonally Adjusted (Base Period
1982-84 = 100) as published by the United States Department of Labor, Bureau of
Labor Statistics immediately prior to the time of an adjustment differs from
such Consumer Price Index as published immediately prior to January 1, 2009.
Adjustments shall take place annually on January 1 of each year thereafter. If
such Consumer Price Index is discontinued, unavailable or otherwise
substantially revised, a comparable index shall be used.

1.1.23 “Generic Product” means: any product marketed by a third party that is
not an Affiliate, Commercialization Partner or Sublicensee, that (i) contains
the same active pharmaceutical ingredient as the Patent Product marketed by NN
or its Affiliates,

 

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Commercialization Partners or Sublicensees and (ii) does not significantly
differ from such Patent Product in formulation, quality or effectiveness. For
the avoidance of doubt, where the active pharmaceutical ingredient contained in
the Patent Product is an Ab Embodiment of IL-21 or an IL-21 Antagonist Protein,
then a Generic Product shall be considered to have the “same active
pharmaceutical ingredient as the Patent Product” when the active pharmaceutical
ingredient in the Generic Product has the same sequence as the Ab Embodiment of
IL-21 or the IL-21 Antagonist Protein contained in the Patent Product.

1.1.24 “GT Embodiment of IL-21 Product” means: a Product based on a GT
Embodiment of IL-21.

1.1.25 “IL-21 Antagonist Protein” means: a protein, and all species, fragments
and modifications of such polypeptide sequence, encoded by an IL-21 Gene that
(i) act solely as an antagonist protein on the IL-21 receptor (i.e., such
protein binds the receptor but does not elicit receptor signaling), and
(ii) competitively inhibits the binding of IL-21 Protein on the IL-21 receptor.

1.1.26 “IL-21 Antagonist Protein Product” means: a Product based on an IL-21
Antagonist Protein.

1.1.27 “IL-21 Embodiment” means: one or more of the following:

(a) an IL-21 Gene;

(b) “GT Embodiments of IL-21”, which are further defined as gene therapy vectors
or constructs capable of expressing the IL-21 Protein in vivo;

(c) “Ab Embodiments of IL-21”, which are further defined as a polypeptide
(including a monoclonal antibody or fusion protein) or any fragment or
derivative thereof that binds to IL-21 Protein;

(d) “Antisense Embodiments of IL-21”, which are further defined as natural or
modified polynucleotides, such as triple helix variants or alternative
chemistries, that interfere with expression of the IL-21 Protein; or

(e) an IL-21 Antagonist Protein.

1.1.28 “IL-21 Gene” means: the polynucleotide sequence identified in SEQ ID No.
[*] in International application number [*], published as [*], and all species,
fragments and modifications of such polynucleotide sequence that are disclosed
in such application or any patents or patent applications included in Appendix
1.

1.1.29 “IL-21 Gene Product” means: a Product based on an IL-21 Gene.

1.1.30 “IL-21 Protein” means: the protein identified in SEQ ID No. [*] in
International application number [*], published as [*] and any protein encoded
by an IL-21 Gene, and all species, fragments and modifications of such
polypeptide sequence that are disclosed in such

 

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application or any patents or patent applications included in Appendix 1.
Notwithstanding the above, any IL-21 Antagonist Protein shall be expressly
excluded from the definition of IL-21 Protein.

1.1.31 “IL-21 Related Know-How” means: all inventions, discoveries, know-how,
methodologies, technology, tangible materials (including nucleic acids,
peptides, vectors, proteins, and the like) that:

(a) are Controlled by ZGEN as of the Effective Date and either (i) pertain to at
least one IL-21 Embodiment or (ii) are otherwise necessary for NN to make, have
made, use, sell, offer to sell and import Products in the Territory; and

(b) are Controlled by ZGEN during the term of this Agreement and both
(i) pertain to at least one IL-21 Embodiment and (ii) are necessary for NN to
make, have made, use, sell, offer to sell and import Products in the Territory.

For the avoidance of doubt, IL-21 Related Know-How shall not include:
(A) know-how which at the time of disclosure is in the public domain;
(B) know-how which, prior to the disclosure from ZGEN to NN (whether before or
after the Effective Date), was in NN’s possession; and (C) know-how developed
independently by NN without any use of any confidential ZGEN know-how or
confidential ZGEN patent rights whatsoever.

1.1.32 “IL-21 Related Patents” means:

(a) the patents and patent applications set forth in Part A of Appendix 1;

(b) any patents and patent applications that claim (i) an IL-21 Embodiment;
(ii) a process, formulation and/or mixture comprising an IL-21 Embodiment;
(iii) a method of making or manufacturing an IL-21 Embodiment; or (iv) a method
of using an IL-21 Embodiment and are Controlled by ZGEN during the term of this
Agreement and that are necessary for NN to make, have made, use, sell, offer to
sell and import Products in the Territory;

(c) all divisional or continuation (in whole or in part) applications of the
applications described in subsection (a) or (b);

(d) all patents issuing from the applications described in subsections (a),
(b) and (c); and

(e) all extensions, supplemental protection certificates (including any form of
patent term extensions), reissues, reexaminations, substitutions or renewals of
the patents described in subsection (d).

[*]

1.1.33 “IND” means: an Investigational New Drug application, or its foreign
equivalent.

1.1.34 “JEC” is defined in Section 6.1.1.

 

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1.1.35 “Know-How Product” means: a product in final dosage form that contains an
IL-21 Embodiment and is not a Patent Product but that was developed through use
of any IL-21 Related Patent, Cell Line Patent, Construction Strain Patent or
IL-21 Related Know-How, or which otherwise incorporates or embodies IL-21
Related Know-How.

1.1.36 “Letter Agreement” is defined in Appendix 2.

1.1.37 “License Dispute” is defined in Section 4.4.1(b).

1.1.38 “Long-Range Plan” is defined in Section 6.2.

1.1.39 “[*] Agreement” is defined in Appendix 2.

1.1.40 “[*] Commercial License” is defined in Section 2.8(b)(i).

1.1.41 “Milestone Events” is defined in Section 3.2(a).

1.1.42 “Milestone Fee” is defined in Section 3.2(a).

1.1.43 “Net Sales” means: the gross amount invoiced by NN, its Affiliates,
Commercialization Partners and Sublicensees from sales or other dispositions of
Products to any independent third party (i.e., non-Affiliate), less the
following with respect to the invoiced Product:

(a) any credits and allowances on account of retroactive price adjustments or on
account of rejection, recall or return of Products previously invoiced;

(b) any price reductions, chargebacks and volume rebates and discounts,
including cash discounts, as well as administrative, management and other fees,
commissions, reimbursements and similar payments to wholesalers and other third
party distributors, government authorities, benefit management organizations,
health insurance carriers, hospitals, group purchasing organizations and other
institutions such as [*] as further described on Schedule 3;

(c) any sales, excise, turnover, value added, or similar taxes and any duties
and other governmental charges imposed upon the sale of Product(s) that are
included in the invoice;

(d) the [*] of [*] used for [*], comprising the total of (i) the [*] if such [*]
is [*] from [*] or (ii) the [*] of such [*] if such [*] are [*] by NN or its
Affiliates. Such [*] shall not include conventional [*].

In the event that the Product is sold as part of a Combination Product (as
defined herein) the Net Sales of the Product, for the purposes of determining
royalty payments, shall be determined by multiplying the Net Sales of the
Combination Product by the fraction, A/(A + B) where A is the average net sale
price of the Product when sold separately in finished form and B is the average
net sale price of the Other Active Agents (as defined herein) sold separately in
finished form. In the event that the average sale price of the Product or Other
Active Agents

 

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cannot be determined, Net Sales of the Product, for the purposes of determining
royalty payments, shall be determined by multiplying the Net Sales of the
Combination Product by the fraction C/(C+D), where C is the average per unit
inventory cost of the Product and D is the average per unit inventory cost of
the Other Active Agents. Inventory costs shall be determined in accordance with
NN’s regular accounting methods.

The fractions set forth in the preceding two paragraphs, as applicable, for a
Combination Product shall be calculated once each calendar year, for a country,
and shall be used during all applicable royalty reporting periods for the entire
calendar year. When determining the average sale price or inventory cost of a
Product or Other Active Agents, data for the preceding calendar year shall be
used for calculating the applicable fraction; provided, however, that with
respect to the first year of Net Sales of a Combination Product for a country
when there have not been prior separate sales of the corresponding Product, a
reasonable estimate of the applicable fraction shall be used, and an adjustment
made after the end of the year for the actual fraction calculated for the year.
As used above, the term “Combination Product” means any pharmaceutical product
which comprises (i) a Product and (ii) other pharmaceutically active compounds
which are not moieties that are the subject of third-party patents described in
Section 4.4 (“Other Active Agents”).

Notwithstanding the foregoing, the Net Sales of a Product in a country shall
never be reduced below fifty percent (50%) of the gross amount invoiced for the
Combination Product.

Any Product sold or otherwise disposed of in other than an arm’s-length
transaction or for other property (e.g., barter) shall be deemed invoiced at its
fair market value in the country of sale or disposition.

1.1.44 “Non-Receiving Party” is defined in Section 4.8.

1.1.45 “NN Development Technology” means all of the following Controlled by NN
or its Affiliates:

(a) any inventions, discoveries, know-how, methods, processes, data,
information, technology, research tools, reagents, compositions, formulas,
biologic and other materials (including nucleic acids, peptides, vectors,
proteins, antibodies, assays and the like) relating to Products that:

(i) are invented, discovered, developed or otherwise generated by or on behalf
of NN or its Affiliates, Commercialization Partners or Sublicensees pursuant to
its activities under this Agreement or a Prior Agreement; or

(ii) were actually used by or on behalf of NN or its Affiliates,
Commercialization Partners or Sublicensees in the performance of its activities
under this Agreement or a Prior Agreement; and

 

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(b) all patent applications and patent, trademarks, trade secrets and other
intellectual property rights anywhere in the world covering any of the
technology described in Section 1.1.45(a) or otherwise related to the Product.

1.1.46 “NN Patent” is defined in Section 9.2.

1.1.47 “Original License Effective Date” means: August 21, 2001.

1.1.48 “Patent Attorney” is defined in Section 4.4.1(b).

1.1.49 “Patent Product” means: a product in final dosage form that contains an
IL-21 Embodiment, the making, using, importation, exportation, offer for sale,
or sale of which would infringe, in the absence of the license granted under
this Agreement, any unexpired Valid Claim of an IL-21 Related Patent.

1.1.50 “Phase I Clinical Trial” means: a human clinical trial intended to obtain
initial data regarding the safety of a Product.

1.1.51 “Phase IIa Clinical Trial” means: a clinical trial of a Product that
utilizes the pharmacokinetic and pharmacodynamic information obtained from one
(1) or more previously conducted Phase I Clinical Trial(s) and/or other Phase
IIa Clinical Trial(s) in order to confirm the optimal manner of use of such
Product (dose and dose regimens) and to better determine safety and efficacy.

1.1.52 “Phase IIb Clinical Trial” means: a clinical trial of a Product on
sufficient numbers of patients that is designed to provide a determination of
safety and efficacy of such Product in the target patient population over a
range of doses and/or dose regimens. A successful Phase IIb Clinical Trial
should support moving to Phase III Clinical Trial(s).

1.1.53 “Phase IIb Data Package” means: the following information to be presented
by NN to ZGEN in order for ZGEN to determine whether it wants to make an
Election to Co-Fund:

(a) a report summarizing all material data relating to the Product including:

(i) preclinical data and plans;

(ii) clinical data and plans;

(iii) manufacturing data and plans;

(iv) intellectual property status; and

(v) marketing data and commercialization plans;

(b) access to all source data for the above;

(c) access to all regulatory correspondence related to or material to the
Product; and

 

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(d) any other information NN knows is material to ZGEN’s decision whether it
wants to make an Election to Co-Fund.

1.1.54 “Phase III Clinical Trial” means: a clinical trial to demonstrate
efficacy and safety following the approval by NN senior management, in
accordance with the policies and procedures as set forth in NN’s Health Care
Project Manual. The initiation of a clinical trial that has been prospectively
designed to demonstrate in a patient group (of sufficient size) statistically
whether the Product is safe and effective for use in a particular indication, in
a manner intended as part of a clinical Phase III program to be sufficient to
obtain Regulatory Approval to market such Product, shall be deemed to be
approval by NN senior management.

1.1.55 “Phase III Clinical Development” means: with respect to a Product, those
activities, including Phase III Clinical Trials (which for purposes of this
definition shall include Phase IIIb clinical trials generating additional safety
documentation) and supporting manufacturing and regulatory activities, that are
necessary to obtain the Regulatory Approval of such Product in the USA or
European Union. Phase III Clinical Development shall not include (a) Phase IV
Clinical Trials or post-approval clinical studies regulated as a condition of
Regulatory Approval in the USA or European Union or (b) commercial scale up and
process development, including process transfer and validation and assay
transfer and validation conducted solely for commercialization of the Product
and not for Regulatory Approval of the Product.

1.1.56 “Phase III Costs” means: the costs incurred by NN or for its account
during the term of this Agreement in accordance with an Annual Plan (as defined
herein) that are specifically identifiable or allocable to the Phase III
Clinical Development of a Product and that are directed to achieving Regulatory
Approval of such Product in the USA and European Union (including costs incurred
outside of the USA and the European Union). The Phase III Costs shall include
(a) amounts that NN pays to third parties involved in the Phase III Clinical
Development of a Product (excluding any royalties, which are addressed in
Section 4.4), (b) all internal costs calculated at the FTE Rate incurred by NN
in connection with the Phase III Clinical Development of such Product and
(c) Applicable Phase IIIB Costs.

1.1.57 “Phase III Stop/Go Decision” means: the decision on termination or
continuation of the development of a Product into Phase III Clinical Trials
(i.e., the [*]). The Phase III Stop/Go Decision provides [*] of all available
[*] along with [*] is also included in the [*]. A report encompassing [*]
supporting the [*] is also prepared for approval.

1.1.58 “Phase IV Clinical Trials” means: a product support clinical trial of a
Product commenced after receipt of Regulatory Approval in the country where such
trial is conducted. A Phase IV Clinical Trial may include epidemiological
studies, modeling and pharmacoeconomic studies, investigator-sponsored clinical
trials and trials required by an Agency for safety or other reasons that
otherwise fit the foregoing definition.

1.1.59 “Product” means: either a Know-How Product or a Patent Product.

 

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1.1.60 “Prior Agreements” means: the Option Agreement, Original License
Agreement, Restated License Agreement, Second Restated License Agreement and the
Confidentiality Agreement, dated January 15, 2008.

1.1.61 “Reasonable Commercial Efforts” means: the exertion on a substantially
continuous basis of efforts as would normally be devoted to the applicable task
by a motivated commercial party with similar resources to those of the
applicable party taking into account, without limitation, consideration of the
[*], its [*], the [*], [*] factors, and other [*] factors. Notwithstanding the
foregoing, to the extent that the performance of a party’s responsibilities
hereunder is adversely affected by the other party’s failure to perform its
responsibilities hereunder, such party will not be deemed to have failed to use
its Reasonable Commercial Efforts in performing such responsibilities.

1.1.62 “Receiving Party” is defined in Section 4.8.

1.1.63 “Regulatory Approval” means: the authorization by an appropriate Agency
to market and sell a Product in a jurisdiction.

1.1.64 “[*]” is defined in Section 12.14.

1.1.65 “Safety Reasons” is defined in Section 10.3.

1.1.66 “Second Indication” means: the second disease that a Product is intended
to treat.

1.1.67 “Sublicensee” means: a third party to whom NN has extended a sublicense
consistent with Section 1.1.12(c).

1.1.68 “Submission Milestone” means: the submission of the BLA to the FDA. The
Submission Milestone is passed when the file has been delivered to, and accepted
by, the FDA. The Submission Milestone ensures that all documentation determined
by NN to be sufficient to satisfy the applicable requirements for Regulatory
Approval is completed and collected and that the BLA is received by the FDA.

1.1.69 “Territory” means: all the countries of the world.

1.1.70 “Third Indication” means: the third disease that a Product is intended to
treat.

1.1.71 “Valid Claim” means: (a) a claim of a pending IL-21 Related Patent that
has been pending for less than [*] years from the filing date of the earliest
filed patent application anywhere in the world from which such pending IL-21
Related Patent claims priority and has not been cancelled, withdrawn or
abandoned or (b) an unexpired, granted IL-21 Related Patent that has not:
(i) been disclaimed, withdrawn, canceled, or abandoned; or (ii) been finally
rejected or held invalid by a decision of a patent-granting authority beyond
right of review or appeal; or (iii) been held invalid or unenforceable in an
unappealable decision of a court or competent body having jurisdiction
(including a decision which was appealable, but which was not timely appealed).
For the avoidance of doubt, if a claim of a patent application within the IL-21
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Patents that issues or grants after [*] years from the filing date of the
earliest filed patent application anywhere in the world from which such pending
IL-21 Related Patent claims priority, such claim from such issued or granted
IL-21 Related Patent shall be considered a valid claim in accordance with clause
(b) above.

 

1.2 Terminology

Where words and phrases are used in this Agreement in the singular, such usage
is intended to include the plural forms where appropriate to the context, and
vice versa. The words “including,” “includes” and “such as” are used in a
non-limiting sense and have the same meaning as “including without limitation”
and “including, but not limited to.” “Herein” means anywhere in this Agreement.
“Hereunder” and “hereto” mean under or pursuant to any provision of this
Agreement. References to Articles, Sections, Schedules and Appendices are to
Articles, Sections, Schedules and Appendices of this Agreement unless otherwise
specified. All Schedules and Appendices annexed hereto or referred to herein are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Any capitalized terms used in any Schedule or Appendix but not otherwise
defined therein, shall have the meaning as defined in this Agreement.

ARTICLE TWO

License

 

2.1 License Grant

Subject to the terms and conditions of this Agreement (including Section 2.4),
ZGEN hereby grants to NN the exclusive (even as to ZGEN) right in the Territory
to practice all Commercialization Rights under the IL-21 Related Patents and
IL-21 Related Know-How for all Products. Subject to Section 2.2, NN shall not
use the IL-21 Related Patents or IL-21 Related Know-How for any other purpose.

 

2.2 Nonexclusive License Grant – IL-21 Protein

Subject to the terms and conditions of this Agreement, ZGEN further grants to NN
the nonexclusive right to make and use worldwide the IL-21 Protein [*] only as
required to develop (including to clinically develop), produce, and
commercialize Products.

 

2.3 Sublicensing by NN

(a) NN may sublicense its rights granted pursuant to Section 2.1 without ZGEN’s
written approval; provided that such sublicense is granted in accordance with
the provisions of this Section 2.3. NN may sublicense its rights granted
pursuant to Section 2.2 only upon ZGEN’s prior written approval, such approval
not to be unreasonably withheld. Each sublicense shall be in writing, shall be
subject to and consistent with the terms of this Agreement, and shall contain
provisions substantially identical to Sections 2.6(b), 2.7(b) and 4.7, Articles
Seven through Eight, and Sections 10.6, 10.7, 10.9, 12.3 and 12.4. Upon
execution of each sublicense NN shall promptly provide ZGEN with a copy of each
such sublicense (together with an English-language translation where necessary)
and of each amendment and notice of termination of each sublicense.

 

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(b) Each sublicense shall be terminable upon termination of this Agreement upon
ZGEN’s written request, and NN shall include a statement to that effect in each
sublicense. Notwithstanding the above, ZGEN will consider in good faith
maintaining such sublicense upon termination of this Agreement with a
sublicensee who is in full compliance with the terms of the applicable
sublicense agreement.

 

2.4 ZGEN Reservation of Rights

ZGEN reserves for itself, its Affiliates, commercialization partners and
licensees, the nonexclusive right to make and use in the Territory the IL-21
Embodiments as required for the development (including clinical development),
production, and commercialization of products based on the IL-21 Protein.

 

2.5 Transition Plan

Within ninety (90) days of the Effective Date, the parties shall agree on a plan
(the “Transition Plan”) pursuant to which ZGEN shall: (i) fully disclose to NN
the IL-21 Related Patents and IL-21 Related Know-How to the extent not
previously disclosed and (ii) transfer to NN the manufacturing processes
relating to the Candidate Antibody as promptly as practicable, including the
items set forth in Schedule 1 attached hereto. NN will reimburse ZGEN for its
actual costs incurred in accordance with the Transition Plan or otherwise
approved in writing by NN. Such costs shall include all internal costs
calculated at the FTE Rate incurred by ZGEN in connection with the Transition
Plan and all amounts that ZGEN pays to third parties to the extent approved in
advance by NN, such approval not to be unreasonably withheld. The parties
anticipate that the activities to be covered by the Transition Plan will be
substantively complete within six (6) months after the Effective Date.

 

2.6 Development

(a) Subject to the terms and conditions of this Agreement, including
Section 2.6(b), NN shall have sole control and decision-making authority over
the development of Products; provided that NN’s decisions are reflected in the
Long-Range Plan or Annual Plan.

(b) NN shall use its Reasonable Commercial Efforts to develop, manufacture and
obtain Regulatory Approval for one or more Products, as soon as reasonably
practicable, in one or more indications from Agencies in (i) the USA, (ii) Great
Britain, (iii) Germany, (iv) France, (v) Italy, (vi) Spain, (vii) Japan and
(viii) each of Brazil, Russia, India and China; provided that, in the case of
any of the four countries listed in this subsection (viii), NN considers,
following consultation with ZGEN, including at the JEC (as defined herein), that
it represents a reasonable commercial opportunity to NN.

 

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(c) Except as expressly set forth elsewhere in this Agreement, NN shall fund and
shall bear one hundred percent (100%) of the costs of the development of
Products hereunder in the Territory, including the costs of activities performed
by ZGEN pursuant to this Agreement.

 

2.7 Commercialization

(a) Subject to the terms and conditions of this Agreement, including
Section 2.7(b), NN shall have sole control and decision-making authority over
the commercialization of Products; provided that NN’s decisions are reflected in
the Long-Range Plan or Annual Plan.

(b) NN shall use its Reasonable Commercial Efforts to commercialize one or more
Products, as soon as reasonably practicable, in one or more indications in
(i) the USA, (ii) Great Britain, (iii) Germany, (iv) France, (v) Italy,
(vi) Spain, (vii) Japan and (viii) each of Brazil, Russia, India and China
provided that, in the case of any of the four countries listed in this
subsection (viii), NN considers, following consultation with ZGEN, including at
the JEC (as defined herein), that it represents a reasonable commercial
opportunity to NN.

(c) Except as expressly set forth elsewhere in this Agreement, NN shall fund and
shall bear one hundred percent (100%) of the costs of commercializing Products
hereunder in the Territory, including amounts payable to ZGEN under the USA
Co-Promotion Agreement.

 

2.8 [*] Technology

(a) Under the [*] Agreement ZGEN may, and ZGEN hereby does, grant NN an
exclusive sublicense under the [*] Technology (as defined in the [*] Agreement)
to develop, make, have made, import, have imported, use, offer for sale, sell
and have sold the Products. NN acknowledges that it has been given access to a
copy of the [*] Agreement, and agrees that its sublicense to the [*] Technology
is subordinate thereto.

(b) ZGEN agrees that during the term of this Agreement it shall:

(i) not terminate the commercial license of [*] under the [*] Agreement that
relates to the Candidate Antibody (the “[*] Commercial License”) or the Letter
Agreement as it relates to the [*] Commercial License without the prior written
consent of NN;

(ii) not, without the prior written consent of NN, amend, modify, waive
compliance with or assign, or agree to any amendment, modification, waiver of
compliance with or any assignment of any rights or obligations under the [*]
Commercial License or the Letter Agreement as it relates to the [*] Commercial
License, including rights and obligations relating to royalties, fees, milestone
achievements and payments therefor, diligent efforts, reports, regulatory
filings, research, patent filings, maintenance and enforcement and
confidentiality, insofar as any such amendment, modification, waiver of
compliance with or assignment or agreement to do any of the foregoing could
reasonably be expected to affect any of NN’s rights and obligations hereunder;

 

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(iii) at all times comply with all provisions of the [*] Commercial License and
the Letter Agreement as it relates to the [*] Commercial License and fulfill all
of its obligations thereunder, other than those which NN has agreed to fulfill
directly hereunder.

(c) In order to [*], NN will be required to [*]. As a condition precedent to the
effectiveness of this Agreement, the parties, together with [*] shall have [*]
in the form attached hereto as Appendix 6.

ARTICLE THREE

Upfront and Milestone Fees

 

3.1 Execution Fee

In partial consideration for ZGEN’s entering into this Agreement and making the
license grants hereunder, NN shall pay to ZGEN an execution fee of Twenty Four
Million Dollars ($24,000,000), which amount shall be non-creditable and
non-refundable, and shall be paid within ten (10) Business Days after the
Effective Date.

 

3.2 Milestone Fees

(a) Within ten (10) Business Days after achievement by NN or its Affiliate,
Commercialization Partner or Sublicensee of each milestone event stated below
(the “Milestone Events”), NN shall pay ZGEN the corresponding milestone fee (the
“Milestone Fees”).

 

Milestone Event

  

Milestone Fee
for

First
Indication ($)

   

Milestone Fee
for

Second
Indication ($)

   

Milestone Fee

for

Third
Indication ($)

 

Filing of IND with an Agency

   1,500,000      —        —     

Initiation (i.e., first patient or healthy volunteer, first dose) of the first
Phase I Clinical Trial

   8,500,000      [ *]    [ *] 

[*]

   [ *]    [ *]    [ *] 

[*]

   [ *]    [ *]    [ *] 

[*]

   [ *]    [ *]    [ *] 

[*]

   [ *]    [ *]    [ *] 

[*]

   [ *]    [ *]    [ *] 

[*]

   [ *]    [ *]    [ *] 

[*]

   [ *]    [ *]    [ *] 

Total

   [ *]    [ *]    [ *] 

(b) All Milestone Fees hereunder shall be payable only for the first IL-21 Gene
Product, GT Embodiment of IL-21 Product, Ab Embodiment of IL-21 Product,
Antisense Embodiment of IL-21 Product and/or IL-21 Antagonist Protein Product,
as the case may be, that achieves the relevant Milestone Event for the relevant
indication. For the avoidance of doubt, if

 

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multiple IL-21 Gene Products, GT Embodiment of IL-21 Products, Ab Embodiment of
IL-21 Products, Antisense Embodiment of IL-21 Products and/or IL-21 Antagonist
Protein Products, as the case may be, proceed through development, NN shall pay
Milestone Fees only for the first such IL-21 Gene Product, GT Embodiment of
IL-21 Product, Ab Embodiment of IL-21 Product, Antisense Embodiment for IL-21
Product and/or IL-21 Antagonist Protein Product to pass each Milestone Event;
provided that if an IL-21 Gene Product, GT Embodiment of IL-21 Product, Ab
Embodiment of IL-21 Product, Antisense Embodiment for IL-21 Product and/or IL-21
Antagonist Protein Product, as the case may be, achieves one or more Milestone
Events but is not developed further the remaining Milestones Fees will be
payable if a second IL-21 Gene Product, GT Embodiment of IL-21 Product, Ab
Embodiment of IL-21 Product, Antisense Embodiment for IL-21 Product and/or IL-21
Antagonist Protein Product, as the case may be, achieves the remaining Milestone
Events. Each Milestone Fee shall be non-refundable and non-creditable against
any other amount payable by NN under this Agreement.

 

3.3 Milestone Fees under [*] Agreement

NN shall pay to ZGEN (or, at ZGEN’s request, directly to [*]) [*] percent ([*]%)
of the milestone fees paid or payable in accordance with the [*] Agreement upon
the achievement of the [*] milestone events set forth in the [*] Agreement. For
clarity, ZGEN shall pay [*] percent ([*]%) of the milestone fee payable under
the [*] Agreement upon the achievement of the [*] milestone event set forth in
the [*] Agreement, and NN shall not be required to reimburse ZGEN for such
payment.

ARTICLE FOUR

Royalties

 

4.1 Patent Products

NN shall pay a royalty to ZGEN on a country by country basis for each Patent
Product made, used, imported, offered for sale or sold by NN, its Affiliates,
Commercialization Partners or Sublicensees. NN’s obligation to pay royalties for
a Patent Product in a country shall expire on the expiration date of the
last-to-expire IL-21 Related Patent with a Valid Claim which would be infringed,
in the absence of the license granted under this Agreement, by the making,
using, importation, exportation, offer for sale, or sale of the Patent Product
in such country (i.e., when the Patent Product ceases being a “Patent Product”
as defined and thereafter may become a “Know-How Product”). The royalties shall
be calculated by multiplying the applicable royalty rate by the Net Sales of
such Patent Product in such country. Unless ZGEN makes an Election to Co-Fund
and has not revoked such election pursuant to Section 5.6, the applicable
royalty rate shall be as set forth below.

 

Aggregate Net Sales in Territory

in a calendar year

  

Royalty Rate for
Such Net Sales in Territory

 

Up to and including $[*]

   [ *] 

Greater than $[*] and up to and including $[*]

   [ *] 

Greater than $[*]

   [ *] 

 

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4.2 Know-How Products

NN shall pay a royalty to ZGEN on a country by country basis for each Know-How
Product made, used, imported, offered for sale or sold by NN, its Affiliates,
Commercialization Partners or Sublicensees. NN’s obligation to pay royalties for
each Know-How Product shall expire in each country on the date [*] years after
the first sale of the Product in such country (“Know-How Royalty Period”). The
royalties shall be calculated by multiplying the applicable royalty rate by the
Net Sales of such Know-How Product. Unless ZGEN makes an Election to Co-Fund and
has not revoked such election pursuant to Section 5.6, the applicable royalty
rate shall be (i) [*] percent ([*]%) or (ii) if (w) NN exercises its [*]
pursuant to Section 9.2(c), (x) there is an [*] that [*], (y) ZGEN has not [*],
and (z) NN does not [*] [*] percent ([*]%), of the rate determined in accordance
with the table set forth in Section 4.1. If the last-to-expire IL-21 Related
Patent expires in a country prior to the end of the Know-How Royalty Period,
then NN shall pay to ZGEN Know-How Product royalties in such country for the
remainder of the Know-How Royalty Period.

 

4.3 Not Additive; Aggregation

(a) The royalties under Sections 4.1 and 4.2 and Sections 5.3.2(a) and (b) are
not additive. NN shall pay the highest applicable royalty rate only.

(b) All Net Sales in the Territory whether covered by Section 4.1, 4.2 or 5.3.2
shall be aggregated for purposes of determining which royalty rate set forth in
the table in Section 4.1 or 5.3.2(a) is payable.

 

4.4 Third Party Agreements

4.4.1 General

(a) Except for those paid or payable in accordance with the [*] Agreement (as
defined herein), NN shall pay one hundred percent (100%) of all third party
royalties necessary in order to commercialize any Products in accordance with
this Agreement. NN shall pay to ZGEN the royalties set forth in this Agreement
except to the extent that a third party (that is not an Affiliate,
Commercialization Partner or Sublicensee of NN) has an issued patent in a
country claiming a composition of matter or a method of use that the parties
agree is necessary to commercialize a Product in such country. In such an event,
NN shall be entitled to offset, on a country by country basis, [*] percent
([*]%) of the royalties paid to such third party against royalties due and owing
to ZGEN pursuant to Section 4.1, 4.2 or 5.3.2(a) or (b), as applicable, for such
Product i.e., whether such Product is a Patent Product or a Know-How Product.

(b) If the parties are unable to reach agreement that a license to a patent is
necessary (“License Dispute”), then the parties shall select by mutual agreement
within fifteen (15) days a patent attorney from a recognized law firm (the
“Patent Attorney”) with suitable expertise in the field of intellectual property
in pharmaceuticals to settle such License Dispute. At the time of selection of
the Patent Attorney, the Patent Attorney’s firm shall not be rendering (and
during the preceding two-year period shall not have rendered) services to either
party. The Patent Attorney

 

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shall have agreed to sign a confidentiality agreement undertaking that all
documents exchanged by the parties in reference to the License Dispute,
including the Patent Attorney’s decision resolving the License Dispute, shall be
maintained in confidence and save as required by applicable law shall not be
used for any purpose other than deciding whether a license is necessary. The
parties shall seek to obtain a decision on the License Dispute within sixty
(60) days from the date the Patent Attorney is chosen by the parties. The
decision of the Patent Attorney as to whether a license is necessary shall be
final.

(c) Even if the Patent Attorney decides that a license is not necessary, NN may,
in its absolute discretion, enter into such a license; provided NN shall not be
entitled to offset any amounts paid or payable under such agreement against the
royalties owed to ZGEN under this Agreement.

4.4.2 Royalties under [*] Agreement

(a) NN shall pay to ZGEN (or, at ZGEN’s request, directly to [*]) [*] percent
([*]%) of the royalties paid or payable in accordance with the [*] Agreement.

(b) To the extent ZGEN’s obligation to pay royalties under the [*] Agreement
extends beyond the Know-How Royalty Period in a country, NN shall pay to ZGEN
(or, at ZGEN’s request, directly to [*]) [*] percent ([*]%) of the royalties
paid or payable in accordance with the [*] Agreement on sales of Products in
such country.

(c) There shall be no offset against the royalties set forth in this Agreement
for NN’s payments with respect to the [*] Agreement.

 

4.5 Generic Products

If, in any country in the Territory, Generic Products reach a market share equal
to or higher than [*] percent ([*]%) of the local market for a Product, then the
royalty rate on such Product otherwise applicable shall be reduced with respect
to such country according to the following scale:

 

Market Share of the Generic Product

  

Percentage of Reduction
of the Royalty Rates
Otherwise Applicable

[*]%

   [*]% reduction

Greater than [*]%

   [*]% reduction

Greater than [*]%

   [*]% reduction

Greater than [*]%

   [*]% reduction

Greater than [*]%

   [*]% reduction

 

4.6 Additive Offsets; Minimum Royalties

The royalty offsets and reductions for Products set forth in Sections 4.4 and
4.5 shall be additive; provided that, the minimum royalty payable by NN to ZGEN
(i.e., after reducing the

 

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royalty rate pursuant to Section 4.4.1 and 4.5 and deducting amounts paid by
ZGEN to [*], Inc. under Section 4.4.2) shall never be reduced below [*] of the
royalties set forth, in the case of Patent Products, in Sections 4.1 or 5.3.2(a)
and, in the case of Know-How Products, Sections 4.2 or 5.3.2(b).

 

4.7 Payments and Reports

(a) Royalties payable pursuant to this Agreement shall be due quarterly within
forty-five (45) days following the end of each calendar quarter for Net Sales in
such calendar quarter. All sales in foreign currencies shall be converted into
United States dollars using the rate of exchange quoted by Bank of America and
its successor(s) on the last Business Day of the calendar quarter in which the
sales were made. Each such payment shall be accompanied by a statement of Net
Sales for the quarter (including number of units), applicable exchange rates and
the calculation of royalties payable hereunder by Product and country. All
Milestone Fees, royalties and all other amounts which are overdue under this
Agreement will bear interest at the rate of one and one-half percent
(1 1/2%) per month from the date due through the date of payment. NN shall keep
and shall cause its Affiliates, Commercialization Partners and Sublicensees to
keep complete, true and accurate records for at least five (5) years for the
purpose of showing the derivation of all Milestone Fees and royalties payable
under this Agreement. ZGEN’s duly accredited representatives, which are
reasonably acceptable to NN, shall have the right to inspect and audit such
records at any time during reasonable business hours upon reasonable prior
notice to NN or any of its Affiliates, Commercialization Partners or
Sublicensees, but such right will not be exercised more often than annually (it
being understood that a single exercise of such right may include a series of
related or continuing inspections and audits).

(b) Except for the execution fee, Milestone Fees and royalties, all payments
made under this Agreement will only be made pursuant to NN’s receipt of an
invoice prepared in adherence to the guidelines set forth in Appendix 4.
Payments will be made within forty-five (45) days after NN’s receipt of each
such invoice. For the avoidance of doubt, all bank fees related to receipt of
interbank transfers must be borne by the recipient.

 

4.8 Taxation of Payments

Each party shall be responsible for and shall bear any taxes levied upon
payments received by such party (such party, the “Receiving Party”), and
authorizes the other party (the “Non-Receiving Party”) to withhold such taxes
from the payments which are payable to the Receiving Party in accordance with
this Agreement if the Non-Receiving is either required to do so under the
applicable tax laws or directed to do so by an agency of the relevant
government. Upon the Receiving Party’s written request, the Non-Receiving Party
shall, with respect to the laws of Denmark (if NN is the Non-Receiving Party),
or the laws of the United States or the State of Washington (if ZGEN is the
Non-Receiving Party) and at no cost to the Receiving Party, support the
Receiving Party in its legal efforts to minimize any such withholding taxes, and
provide the Receiving Party with information about and necessary for any
documentation needed to reduce withholding to a legal minimum. In addition, if
either party anticipates witholding taxes in accordance with this Section 4.8,
it will give the other party prior written notice thereof,

 

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and the parties will cooperate reasonably to obtain available exemptions or
relief from any applicable withholding tax under the provisions of any
applicable tax laws or under any other applicable laws, including double tax
treaties.

 

4.9 Currency Blockage

If the laws or regulations of another country prevent the conversion of its
currency into United States dollars for the payment of royalties, NN will either
(a) pay such royalties by depositing the currency of the other country into a
bank account designated by ZGEN in that country or (b) if permitted by law, pay
such royalties in the currency of the country in question to ZGEN’s designee in
that country.

ARTICLE FIVE

Co-Funding Phase III Clinical Development and USA Co-Promotion

 

5.1 Election to Co-Fund

ZGEN shall have, subject to this Article Five, the right to elect to co-fund the
Phase III Clinical Development of a Product (an “Election to Co-Fund”) and
co-fund such costs in which case the royalties payable to ZGEN with respect to
Net Sales of such Product in the USA shall be adjusted as provided in
Section 5.3.2 (subject to the provisions of Section 5.3.2(c)) and ZGEN shall
have the option to co-promote as described in Section 5.3.3.

 

5.2 Procedure

(a) NN shall provide to ZGEN the Phase IIb Data Package no later than [*] but in
any event prior to the date on which the first Product passes the [*].

(b) To exercise its Election to Co-Fund, ZGEN must provide written notice to NN
and pay to NN a non-refundable opt-in fee of Ten Million Dollars ($10,000,000)
within [*] of receipt of the Phase IIb Data Package, in accordance with payment
instructions that shall be provided by NN to ZGEN prior to the date on which
such payment is due. Subject to Section 5.6, any Election to Co-Fund shall be
irrevocable.

 

5.3 Consequences of Election to Co-Fund

Following an Election to Co-Fund:

5.3.1 Cost Sharing

The parties shall share Phase III Costs as described in Section 5.4.

5.3.2 Royalties on Net Sales in the USA

(a) Rather than the royalty rates set forth in Section 4.1, the royalty rate
applicable to Net Sales of a Patent Product in the USA shall be the rate
determined in accordance with the table set forth below.

 

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Aggregate Net Sales in Territory

in a calendar year

  

Royalty Rate for
Such Net Sales in USA

 

Up to and including $[*]

   [ *]% 

Greater than $[*] and up to and including $[*]

   [ *]% 

Greater than $[*]

   [ *]% 

(b) Rather than the royalty rates set forth in Section 4.2, the royalty rate
applicable to Net Sales of a Know-How Product in the USA shall be either (i) [*]
percent ([*]%) or (ii) if (w) NN exercises its [*] pursuant to Section 9.2(c),
(x) there is an [*] that [*], (y) ZGEN has not [*], and (z) NN does not [*], [*]
percent ([*]%), of the rate determined in accordance with the table set forth in
Section 5.3.2(a).

(c) For the avoidance of doubt, the royalty rates set forth in Sections 4.1 and
4.2 shall continue to apply to Net Sales of Patent Products and Know-How
Products outside the USA, and Net Sales shall be aggregated in accordance with
Section 4.3(b).

5.3.3 ZGEN’s Right to Co-Promote in USA

Following an Election to Co-Fund, ZGEN will have the right (but not the
obligation) to co-promote the Product to which such Election to Co-Fund relates
in the USA as contemplated in Section 5.5.

 

5.4 Phase III Costs

5.4.1 Cost Sharing of Phase III Costs

All Phase III Costs relating to a Product for which ZGEN made an Election to
Co-Fund incurred after ZGEN’s receipt of the Phase IIB Data Package shall be
borne by the parties as set forth in the following table:

 

Name

  

Percentage of Phase III Costs

 

NN

   85 % 

ZGEN

   15 % 

5.4.2 Accounting and Reconciliation

(a) NN shall submit to ZGEN no later than the twenty fifth (25th) day of the
last month of each calendar quarter a written estimate of Phase III Costs
incurred by it during such calendar quarter. In addition, NN shall report to
ZGEN within thirty (30) days after the end of each calendar quarter with regard
to the Phase III Costs incurred by it during such calendar quarter. Such report
shall specify in reasonable detail all expenses included in such Phase III Costs
during such calendar quarter and, upon ZGEN’s reasonable request, NN shall
provide invoices and other supporting documentation. NN’s report shall include,
in addition to the Phase III Costs actually incurred by it during the relevant
calendar quarter, a comparison of the amounts budgeted in the applicable Annual
Plan for such activities and an explanation of any significant variances. The
parties’ Finance Contacts (as defined herein) shall facilitate the reporting of
Phase III Costs hereunder and the resolution of any questions concerning such
reports.

 

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(b) NN shall record and account for its FTE effort for the Phase III Clinical
Development of a Product to the extent that such FTE efforts are included in
Phase III Costs that are, or may in the future be, shared under this Agreement,
and shall report such FTE effort to the Finance Contacts on a quarterly basis.
Except to the extent provided herein, NN shall calculate and maintain records of
FTE effort incurred by it in the same manner as used for other products it
develops.

(c) The Phase III Costs shall be accounted for by NN hereunder in accordance
with the following cost accounting principles:

(i) The parties intend that all costs defined herein are to be: (A) determined
consistent with generally accepted accounting principles and (B) allocated among
projects and activities by NN in a good faith attempt to calculate the relative
cost of each of such projects and activities in a manner consistent with NN’s
customary practices.

(ii) The following guidelines shall be used in determining amounts chargeable to
Phase III Costs.

(A) If a cost is specifically and exclusively incurred for Phase III Clinical
Development of a Product solely to support a Regulatory Approval in a country
other than USA or outside the European Union, then none of such cost shall be
included in Phase III Costs.

(B) If a cost is incurred for Phase III Clinical Development of a Product to
support a Regulatory Approval in USA or the European Union, and [*] connection
with such Phase III Clinical Development [*], then the cost shall be [*];
provided that, if in connection with the incurrence of such cost there are [*]
with respect to development of a Product in a [*], then such [*] shall be [*]

(iii) NN shall track FTEs by functional area and by quarter in a manner
consistent with its project cost system or using such other time tracking system
as NN applies with respect to its internal programs. In general, these project
cost systems shall report actual time spent on specific projects by an
individual, and apply the FTE Rate. The Finance Contacts shall determine the
costs of which individuals or functions will be reimbursed through the
application of an FTE Rate, which FTE Rate shall be determined in accordance
with the definition thereof.

(d) Within forty-five (45) days after the end of each of the first three
(3) calendar quarters and, for the last calendar quarter in a calendar year,
within sixty (60) days after the end of such calendar quarter, ZGEN shall make a
reconciling payment to NN to achieve the appropriate allocation of Phase III
Costs provided for in Section 5.4.1. The Finance Contacts shall seek to resolve
any questions related to such accounting statements within fifteen (15) days
following receipt by ZGEN of NN’s report.

 

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(e) Any expenses incurred by NN for development activities related to a Product
that do not fall within the definitions of Phase III Costs shall be borne solely
by NN. In addition, any expenditure or cost that exceeds the amount set forth in
the then applicable Annual Plan by ten percent (10%) or more for a calendar year
or any unbudgeted cost that is incurred by NN shall be borne by NN (in the
amount of the excess), with the exception of costs incurred due to safety or
regulatory reasons not foreseen at the date of the applicable Annual Plan;
provided that NN shall consult with ZGEN prior to incurring any such costs.

(f) NN shall keep detailed records of the Phase III Costs it incurs, including
all supporting documentation for such expenses. NN shall keep such records for
at least seven (7) years after the date that such expense was incurred. ZGEN
shall have the right at reasonable times and upon reasonable prior notice to
review NN’s records to confirm the accuracy of NN’s costs and reports with
respect to Phase III Costs.

 

5.5 Co-Promotion in USA

5.5.1 USA Co-Promotion Agreement

Promptly following an Election to Co-Fund, NN and ZGEN shall negotiate an
agreement for the co-promotion of the Product in the USA (the “USA Co-Promotion
Agreement”) that contains provisions consistent with Appendix 3 as well as other
terms customary for co-promotion agreements. The parties intend that no later
than [*] following the exercise by ZGEN of its Election to Co-Fund, the final
form of the USA Co-Promotion Agreement shall be available for review by ZGEN for
the purpose of its determining whether it wishes to co-promote the Product in
the USA. However, if the parties after good faith efforts to reach reasonable
terms on the USA Co-Promotion Agreement are unable to reach agreement within the
foregoing [*] period, the dispute shall be referred to the chief executive
officers of NN and ZGEN. If the chief executive officers are unable to resolve a
dispute within [*] days after the end of the forgoing [*] period, [*].
Notwithstanding the above, upon mutual agreement in writing, the chief executive
officers of NN and ZGEN may extend the period for resolving a dispute beyond [*]
days.

5.5.2 Right to Co-Promote

Subject to Section 5.5.1, no later than thirty (30) days after ZGEN receives
written notice from NN that the first Product for which ZGEN made an Election to
Co-Fund has passed the [*], ZGEN shall give NN written notice of its decision
whether or not to co-promote such Product in the USA (which decision shall apply
to all Indications of such Product). If ZGEN confirms that it desires to
co-promote, the parties shall proceed to execute the USA Co-Promotion Agreement
that has been negotiated in accordance with Section 5.5.1. If and upon such
terms as mutually agreed upon by the parties following the execution of the USA
Co-Promotion Agreement, ZGEN’s co-promotion obligations with respect to the
applicable Product may be limited to certain specified indications of such
Product.

 

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5.6 ZGEN’s Right to Opt Out of Co-Funding

(a) ZGEN shall have the right to cease contributing to Phase III Costs for a
Product (“Opt Out of Co-Funding”). ZGEN may exercise its right to Opt Out of
Co-Funding at any time by written notice to NN; provided that the effective date
of the Opt Out of Co-Funding shall be the last day of the second full calendar
quarter following the calendar quarter in which the notice is given.

(b) ZGEN’s responsibility for a pro rata share of the Phase III Costs shall end
upon the effective date of the Opt Out of Co-Funding; provided that ZGEN shall
continue to be responsible for its pro rata share of such costs incurred during
the period prior to the effective date of the Opt Out of Co-Funding in
accordance with the applicable Annual Plan in effect on the date the notice was
given.

(c) Upon the effective date of the Opt Out of Co-Funding, ZGEN’s right to
co-promote Products under Section 5.5 shall terminate, and the royalty rates set
forth in Sections 5.3.2(a) and (b) shall cease to apply to Net Sales of Products
in the USA.

ARTICLE SIX

Relationship Management

 

6.1 Joint Executive Committee

6.1.1 Formation; Composition; Decisions

(a) Following an Election to Co-Fund, the parties’ shall form a joint executive
committee (the “Joint Executive Committee” or “JEC”) to manage their
relationship in connection with this Agreement. Each party shall appoint its
representatives on the initial JEC in writing within thirty (30) days following
the Election to Co-Fund and shall promptly thereafter notify the other party in
writing of such appointment.

(b) The JEC shall have up to six (6) members. ZGEN and NN shall each appoint at
least two (2) members. Each party shall appoint representatives of sufficient
seniority to make strategic decisions regarding Phase III Clinical Development,
approve the Long-Range Plan and Annual Plan and otherwise make final decisions
on the sorts of matters likely to come before the JEC on behalf of their
respective companies. NN shall designate one of the members it appoints to be
the chairperson of the JEC. If at any time a position on the JEC becomes vacant
for any reason, the party that appointed the prior incumbent shall as soon as
reasonably practicable appoint a successor. Each party shall promptly notify the
other party of any substitution of another person as its appointee on the JEC.

(c) All official actions, decisions or rulings of the JEC under this Agreement
shall be taken by consensus; provided that [*] in the event the [*] after a [*]
(generally no more than [*]) and [*].

 

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(d) ZGEN may, in its discretion, withdraw from the JEC at any time, at which
time any rights granted to ZGEN with respect to the JEC under this Article 6
shall cease with immediate effect.

6.1.2 Role and Responsibilities

The responsibilities of the JEC shall include:

(a) Review and approval of [*] (as defined herein) and [*].

(b) Review of the [*], in particular [*] and [*].

(c) Such other responsibilities as may be assigned to the JEC pursuant to this
Agreement or as may be agreed between the parties from time to time.

6.1.3 Meetings and Communications

The JEC shall meet face-to-face at least semi-annually at mutually agreed upon
times and locations. Unless otherwise agreed, the location of such meetings will
alternate between the parties’ facilities, and the party hosting a meeting shall
be responsible for chairing the meeting and secretarial duties (i.e.,
circulating an agenda and taking minutes). Either or both of the parties may,
with the consent of the other party (not to be unreasonably withheld), bring
other personnel employed by them to meetings of the JEC as observers or to
present data and information. The JEC shall also address issues as they arise in
the interim via telephone conference, videoconference or electronic mail. A
written agenda for each face-to-face meeting shall be circulated in advance of
the meeting by the Alliance Managers (as defined herein), and written minutes of
each meeting shall be taken by the Alliance Managers and shall include the
issues discussed, decisions made and action items, if any, arising from the
meeting; provided that before adjourning the JEC shall approve a written
(including electronic e.g., PowerPoint slides) summary of all actions taken at a
particular meeting. Each face-to-face meeting of the JEC shall conclude with
approval of the minutes of prior meetings and of all actions taken through
interim communications since the last face-to-face meeting. Meeting minutes and
written summaries of any action taken by way of interim communications shall be
promptly submitted by the Alliance Managers:

(a) to all members of the JEC; and

(b) to the extent such minutes or action involve financial matters, to the
Finance Contacts.

 

6.2 Development and Commercialization Plan

(a) Within one hundred eighty (180) days after the Effective Date, NN shall
prepare and provide to ZGEN an initial high-level long-range plan and high-level
budget forecast to cover the development and commercialization of Products for a
multi-year period of at least three years consistent with NN’s long-range
project and financial planning (such long-range plan and high-level budget, as
amended from time to time in accordance with this subsection (a), the

 

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“Long-Range Plan”). Thereafter, NN shall, on an annual basis, prepare and
provide to ZGEN updates and amendments to the Long-Range Plan to cover a
rolling, multi-year period of at least three (3) years. Following the formation
of a JEC updates to the Long-Range Plan will be submitted to the JEC.

(b) Within one hundred eighty (180) days after the Effective Date, NN shall
prepare and provide to ZGEN an initial plan and budget to cover in detail the
development and commercialization of Products for the remainder of the current
calendar year and the next full calendar year broken out by calendar quarter
(such plan and budget, as amended from time to time in accordance with this
subsection (b), the “Annual Plan”). Thereafter, NN shall, on an annual basis,
prepare and provide to ZGEN an updated Annual Plan to cover the forthcoming
calendar year. Following the formation of a JEC updated Annual Plans will be
submitted to the JEC. NN may amend an Annual Plan previously provided to ZGEN or
submitted to the JEC at any time following consultation with ZGEN or at the JEC,
as the case may be.

(c) The goals of the Long-Range Plan are (i) the development of Products as
required to obtain Regulatory Approval for one or more commercially significant
indications as promptly as commercially and technically practicable, (ii) the
acquisition of Regulatory Approval for Product in a manner sufficient to allow
the commercialization of Product in those countries of the Territory that
represent a commercially reasonable opportunity for NN based on the size of the
potential market and other relevant factors, (iii) the identification, selection
and development of additional Products if appropriate and (iv) allow ZGEN to
monitor development and make an informed decision regarding an Election to
Co-Fund and its participation in co-promotion in the USA. In addition the
Long-Range Plan shall include a summary of marketing, sales, supply and
post-approval clinical trial strategies for each Product in the Territory.
Following an Election to Co-Fund and so long as ZGEN does not Opt Out of
Co-Funding (i.e., ZGEN is co-promoting Products in the USA or retains the right
to do so in the future), each Annual Plan will include a comprehensive market
development, marketing, sales, supply, distribution, Phase IV Clinical Trial and
post-approval clinical trial strategy in the USA for each Product for which ZGEN
made an Election to Co-Fund.

 

6.3 Alliance Managers

6.3.1 Appointment

Within thirty (30) days following the Effective Date, each of the parties shall
appoint a single individual to act as a single point of contact between the
parties to assure the success of their relationship relating to this Agreement
(each, an “Alliance Manager”). Each party may change its designated Alliance
Manager from time to time upon written notice to the other party. Any Alliance
Manager may designate a substitute to temporarily perform the functions of that
Alliance Manager by written notice to the other party.

6.3.2 Responsibilities

Each Alliance Manager shall be charged with creating and maintaining a spirit of
collaboration between the parties. In addition, each Alliance Manager:

(a) will be the point of first referral in all matters of conflict resolution;

 

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(b) will provide a single point of communication for seeking consensus both
internally within the respective parties’ organizations and between the parties
regarding key strategy and plan issues;

(c) will identify and bring disputes to the attention of senior management or,
if formed, the JEC in a timely manner;

(d) will plan and coordinate cooperative efforts and internal and external
communications; and

(e) will take responsibility for ensuring that governance activities, such as
the conduct of required JEC meetings and production of meeting minutes, occur as
set forth in this Agreement, and that relevant action items resulting from such
meetings are appropriately carried out or otherwise addressed.

Following the formation of the JEC, the Alliance Managers shall use good faith
efforts to attend all JEC meetings and support the chairperson of the JEC in the
discharge of his or her responsibilities. Alliance Managers shall be nonvoting
participants in JEC meetings. An Alliance Manager may bring any matter to the
attention of the JEC if such Alliance Manager reasonably believes that such
matter warrants such attention.

 

6.4 Finance Contacts

(a) Each party shall appoint its initial finance contact (each a “Finance
Contact”) within thirty (30) days following the Effective Date and shall
promptly thereafter notify the other party of such appointment. Each Finance
Contact shall consult with the other regarding accounting policies and practices
relevant to this Agreement and otherwise support the Alliance Managers and, if
formed, the JEC. If at any time a vacancy occurs for any reason, the party that
appointed the prior incumbent shall as soon as reasonably practicable appoint a
successor. Each party shall promptly notify the other party in writing of any
substitution of another person as its Finance Contact.

(b) Each party’s Finance Contact will be available throughout the term of this
Agreement to answer any reasonable questions from the other party’s Finance
Contact.

ARTICLE SEVEN

Confidentiality

 

7.1 Confidential Information

For the purposes of this Agreement, “Confidential Information” shall include all
proprietary information and materials, patentable or otherwise, of a party that
is disclosed by or on behalf of such disclosing party to the receiving party,
including DNA sequences, amino acid sequences, vectors, cells, substances,
formulations, techniques, methodology, equipment, data, reports, know-how, assay
results, preclinical studies and clinical trials and the results thereof, patent
positioning and business plans, including any negative developments.

 

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7.2 Confidentiality Obligation

Except as otherwise authorized under this Agreement, during the term of this
Agreement and for a period of five (5) years thereafter, each party shall
maintain as secret and confidential all Confidential Information obtained from
the other party pursuant to this Agreement or a Prior Agreement or prior to and
in contemplation of this Agreement or a Prior Agreement. Each party shall
respect the other party’s proprietary rights in such Confidential Information,
use the same exclusively for the purposes of this Agreement, and disclose the
same only to those of its representatives to whom and to the extent that such
disclosure is reasonably necessary for the purposes of this Agreement. The
obligations under this Section 7.2 shall survive the termination of this
Agreement. Subject to Section 10.9, upon termination or expiration of this
Agreement, each party shall, upon request of the other party, promptly return
and destroy all documents and document copies containing Confidential
Information belonging to such other party, provided that each party may retain
one copy of such Confidential Information for the sole purpose of ensuring
compliance with this Article Seven.

 

7.3 Release from Confidentiality Obligation

Notwithstanding the foregoing provision, a party shall be permitted to disclose
any Confidential Information of the other party to (i) its Affiliates,
Commercialization Partners, Sublicensees and lenders, (ii) prospective
Affiliates, Commercialization Partners, Sublicensees and lenders and (iii) its
licensors under third party agreements related to IL-21 Embodiments, (iv) its
legal advisors, in particular patent practitioners and (v) its auditors, who
are, in the case of each of subsections (i)-(v), subject to written
confidentiality and non-use restrictions at least as stringent as those
contained herein. Notwithstanding the above, a party shall be permitted to
disclose the [*]. The confidentiality and non-use restrictions imposed on [*]
shall be [*] that [*]. The party disclosing Confidential Information to [*] or
to [*] shall [*] the Confidential Information is disclosed and the [*]. In
addition, a party shall be permitted to disclose any Confidential Information of
the other party to any patent office in any country, as is reasonably required
for filing or prosecuting any patent application permitted to be filed by it
hereunder. Furthermore, the obligations of Section 7.2 shall not apply to
Confidential Information that:

(a) was properly in the possession of the receiving party, without any
restriction on use or disclosure, prior to receipt from the disclosing party,
and such possession can be demonstrated by competent evidence of the receiving
party;

(b) is in the public domain by public use, publication, general knowledge or the
like, or after disclosure hereunder becomes general or public knowledge through
no fault of the receiving party;

(c) is properly obtained by the receiving party from a third party not under a
confidentiality obligation;

 

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(d) is independently developed by or on behalf of the receiving party without
the assistance of the Confidential Information of the disclosing party; or

(e) is required to be disclosed by order of any court or governmental or
regulatory authority after notification to the disclosing party of the necessity
to allow the disclosing party to seek protection for the disclosing party’s
Confidential Information from such court or governmental or regulatory
authority.

ARTICLE EIGHT

Indemnification

 

8.1 Personal Injury or Property Damage

(a) NN shall indemnify, defend and hold harmless ZGEN, its directors, officers,
employees and agents (collectively, the “Indemnitees”) from and against any and
all claims, judgments, costs, awards, expenses (including any attorneys’ fees)
or liability of any kind arising out of personal injury or property damage
caused or alleged to be caused by any Product developed, manufactured, used or
sold by NN or any of its Affiliates, Commercialization Partners or Sublicensees
or the use of any IL-21 Related Patents or IL-21 Related Know-How by NN or any
of its Affiliates, Commercialization Partners or Sublicensees. In addition, NN
shall assume all obligations for warranties and product liability claims that
accompany or result from the sale or use of any Product developed, manufactured
or sold by NN or any of its Affiliates, Commercialization Partners or
Sublicensees and shall indemnify, defend and hold harmless the Indemnitees from
and against any and all claims, judgments, costs, awards, expenses (including
any attorneys’ fees) or liability of any kind arising from customers’ or users’
use of any Product developed, manufactured or sold by NN or any of its
Affiliates, Commercialization Partners or Sublicensees and relating to such
warranty obligations or product liability claims.

(b) NN’s obligations under this Section 8.1 shall not apply to any Indemnitee to
the extent that (i) such Indemnitee is grossly negligent or engaged in willful
misconduct or (ii) such claims arise from any material breach by the Indemnitees
of any of their representations, warranties or obligations under this Agreement.

(c) ZGEN shall (i) promptly notify NN of any claim, judgment, cost, award or
expense covered by this Section 8.1, (ii) reasonably cooperate with NN in the
defense of such claim, judgment, cost, award or expense, at NN’s cost and
expense in connection therewith, (iii) allow NN to control the defense of the
claim, judgment, cost, award or expense, and (iv) not compromise or settle the
claim, judgment, cost, award or expense without NN’s prior written consent,
which consent shall not be unreasonably withheld.

 

8.2 Insurance

NN shall use commercially reasonable efforts to maintain and cause its
Affiliates, Commercialization Partners and Sublicensees to maintain appropriate
product liability insurance with respect to development, manufacture and sale of
Products in such amount as NN customarily maintains with respect to its other
products. NN shall use commercially reasonable

 

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efforts to maintain and cause its Affiliates, Commercialization Partners and
Sublicensees to maintain such insurance for so long as it continues to
manufacture or sell Products, and thereafter for so long as NN customarily
maintains insurance with respect to sales of its other products.

ARTICLE NINE

Patents

 

9.1 Prosecution

ZGEN shall be solely responsible, as it shall determine, for the filing and
prosecution of any and all patent applications included in the IL-21 Related
Patents (including opposition and interference proceedings) and for the
maintenance of any patents included in the IL-21 Related Patents. NN shall
reimburse ZGEN within thirty (30) days after date of invoice for all of ZGEN’s
out-of-pocket costs for the IL-21 Related Patents incurred after the Effective
Date, including translation costs, filing and maintenance fees, and costs of
oppositions and interferences, outside attorneys’ and expert fees. ZGEN will in
September of each year provide NN with an estimate of reasonable out-of-pocket
costs for the IL-21 Related Patents for the following year.

Notwithstanding the above, with at least sixty (60) days written notice to ZGEN,
NN may elect to discontinue reimbursing ZGEN’s out-of-pocket costs for a
specified patent application or patent within the IL-21 Related Patents, in
which case ZGEN may choose to maintain such patent or patent application at its
own expense and such patent application or patent shall no longer continue to be
considered part of the IL-21 Related Patents and the license granted by ZGEN to
NN pursuant to Section 2.1; provided, (i) if the patent application or patent NN
elects to discontinue reimbursing ZGEN’s out-of-pocket costs for is a patent or
patent application in one or more of the countries set forth in Appendix 5 then
for such country(ies) such patent or patent application shall continue to be
considered an IL-21 Related Patent for the purposes of Section 10.6; and (ii) if
NN elects to discontinue reimbursing ZGEN’s out-of-pocket costs for any patent
or patent application in a country not listed in Appendix 5, then for such
country such patent or patent application shall not be considered an IL-21
Related Patent for the purposes of Section 10.6.

ZGEN shall deliver to NN a copy of each new patent application within the IL-21
Related Patents and all documents received from patent offices regarding the
IL-21 Related Patents. As long as NN is not in material breach of any obligation
hereunder, and provided NN has continued to pay ZGEN’s out-of-pocket costs for
the IL-21 Related Patents in accordance with this Section 9.1: (a) NN shall have
the right to review and comment on the nature and text of such, and ZGEN shall
consider in good faith any comments from NN regarding steps that might be taken
to strengthen the IL-21 Related Patents, provided that all final decisions
regarding the filing and prosecution of IL-21 Related Patents shall be within
ZGEN’s sole discretion; and (b) if ZGEN elects not to prosecute or maintain any
IL-21 Related Patents in any country in the Territory, ZGEN shall provide NN
with written notice of such election, in which case, NN shall be entitled to
assume responsibility for prosecuting or maintaining such IL-21 Related Patent
at its expense, in ZGEN’s name. Upon NN’s reasonable request and at no
out-of-pocket expense to ZGEN, ZGEN shall render such reasonable assistance,
execute any documents and do such other acts as may be reasonably necessary in
connection with such prosecution or maintenance of any such IL-21 Related
Patents by NN.

 

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For the avoidance of doubt, the ZGEN patent application family 02-11 previously
licensed to NN (International Application PCT US/03/17808 titled ‘USE OF
ZALPHA11 LIGAND IN CANCER AND OTHER THERAPEUTIC APPLICATIONS’ filed June 6, 2003
and foreign equivalents thereof including US parent patent application
10/456,262) (the “02-11 Patents”) is related to the IL-21 Protein and is
excluded from this Agreement. Notwithstanding the preceding sentence, if any
claims to IL-21 Antagonist Proteins were to issue from the 02-11 Patents, they
would be included in the licenses and reservations pursuant to Article Two as
they relate to an IL-21 Antagonist Protein.

 

9.2 Patent Term Extension

NN shall provide written notice to ZGEN within ten (10) days after receiving
(i) Regulatory Approval by any Agency to market any Product or (ii) any other
governmental approval obtained by or on behalf of NN, any Affiliate,
Commercialization Partner or Sublicensee that is pertinent to any patent term
extension (including supplementary protection certificates) for any IL-21
Related Patent. Subject to this Section 9.2, NN shall have the right to seek,
or, where appropriate, to direct ZGEN to seek, an extension of the term of any
IL-21 Related Patent for a licensed Product (including filing for patent term
restoration under the U.S. Patent Statutes (35 U.S.C §§1-376) and seeking
supplementary protection certificates in the member states of the European Union
or European Economic Area, or Switzerland); provided, that the parties shall
follow the procedure described below on a Product-by-Product and
country-by-country basis:

(a) At least nine (9) months prior to an anticipated Regulatory Approval the
Patent Contacts (as defined in Section 9.7) shall confer and discuss in good
faith the IL-21 Related Patents as well as any patent Controlled by NN (a “NN
Patent”) eligible for extension for the Product in the given jurisdiction where
the Regulatory Approval is sought.

(b) Within two (2) months of the conference in Section 9.2(a) the Patent
Contacts shall mutually agree in writing upon (i) a recommendation as to which
patent(s) to extend in such jurisdiction, (ii) the preferred patent to select
providing such extension is ultimately granted including the party responsible
for applying for such extensions, and (iii) the general identification of the
documents necessary from each party that will be necessary to support such
extension.

(c) Subject to Section 9.2(e) below, if the Patent Contacts cannot mutually
agree in accordance to Section 9.2(b) above as to which patent(s) to extend in a
jurisdiction, then within three (3) months of the conference in Section 9.2(a)
[*] with regard to which patent(s) to extend in such jurisdiction, and the [*]
providing such extension is ultimately granted [*]. Exercise of the [*] shall be
effective upon receipt of written notice of exercise from NN to ZGEN, within
three (3) months of the conference in Section 9.2(a) or shall expire on the last
day of such three month period (“[*] Option Period”).

 

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(d) The parties shall cooperate with any efforts to seek patent term extension
of an IL-21 Related Patent or a NN Patent, including diligently supplying all
pertinent information pertaining to such patent term extension, and with all
information and supporting documents required to comply with all laws pertaining
to the extension of such patent term.

(e) If NN by exercise of its [*] elects to extend an IL-21 Related Patent and
ZGEN reasonably believes that extension of such an IL-21 Related Patent would
conflict with or otherwise interfere with the ability of ZGEN or its
commercialization partners, licensees, or affiliates to extend such IL-21
Related Patent based upon anticipated Regulatory Approval of an IL-21 Protein in
such jurisdiction, then ZGEN shall provide NN with written notice of such
interference within two weeks of receipt of NN’s written notice of exercise of
NN’s [*] and immediately upon receipt of ZGEN’s written notice, NN shall no
longer be able to select such IL-21 Related Patent with NN’s [*] in
Section 9.2(c) with regard to such identified patent for such Product in such
jurisdiction. NN shall then have two weeks from receipt of ZGEN’s written notice
to use its [*] to select a different patent to extend for such Product in such
jurisdiction.

For the avoidance of doubt with respect to this Section 9.2, regardless of the
period for which the term of any IL-21 Related Patent is extended in a country,
NN shall continue to pay royalties on a Patent Product pursuant to Section 4.1
or 5.3.2 on Net Sales of the Patent Product in such country through the
expiration date of the last-to-expire IL-21 Related Patent with a Valid Claim in
such country which would be infringed, in the absence of the license granted
under this Agreement, by the making, using, importation, exportation, offer for
sale, or sale of the Patent Product in such country.

For the avoidance of doubt, NN shall not pay royalties on a Patent Product for
Net Sales of such Patent Product in such country for the period by which the
extended term of any NN Patent in such country extends beyond the term of the
last-to-expire IL-21 Related Patent with a Valid Claim in such country which
would be infringed, in the absence of the license granted under this Agreement,
by the making, using, importation, exportation, offer for sale, or sale of the
Patent Product in such country.

 

9.3 Notice of Infringement and Conference

Each party shall promptly notify the other party in writing of any alleged or
threatened infringement, in the Territory of any IL-21 Related Patent. Any
notice provided under this Section 9.3 shall set forth all relevant facts (to
the extent known by the party giving notice) in reasonable detail and shall
include a reasonable description of available evidence associated therewith or
copies of any readily available documentary evidence associated therewith. Upon
receipt of such written notice, the parties shall confer regarding all available
evidence of infringement or attack, and the manner of addressing such
infringement or attack. The parties may agree to pursue the matter jointly.

 

9.4 ZGEN Has First Right

Unless the parties agree otherwise, ZGEN shall have the first right, but not the
obligation, to initiate and control any action, including cease and desist
letters and lawsuits, at its expense, to

 

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enforce the IL-21 Related Patents against any infringer or alleged infringer of
the IL-21 Related Patents to the extent exclusively licensed hereunder to NN.
ZGEN shall notify NN of ZGEN’s decisions regarding such infringement, and shall
keep NN reasonably apprised of the progress of the matter. As long as NN is not
in material breach of any obligation hereunder, NN shall have the right, at its
own expense, to join any legal proceeding initiated by ZGEN regarding any IL-21
Related Patent in the Territory that is being infringed; it is understood,
however, that ZGEN shall have sole control over any issues or matters pertaining
to the validity or scope of any and all IL-21 Related Patents. Unless NN joins
such suit, as described above, ZGEN shall have the right to retain all damages
awarded. If NN does join such suit, then out of any damages awarded, the parties
have an equal right to recover their expenses for the proceeding; then NN shall
be entitled to retain all damages specifically awarded by the court to NN, e.g.,
lost profits; then ZGEN shall have the right to retain any damages remaining.

 

9.5 NN Has Secondary Right

If within sixty (60) days after the conference described in Section 9.3, ZGEN
has not taken any action to stop such infringement, and as long as NN is not in
material breach of any obligation hereunder, NN shall have the right to take
legal action regarding any infringement, at its own expense. If NN initiates
legal proceedings hereunder, ZGEN shall have the right to join such suit, at its
own expense. If the law governing any proceeding brought by NN under this
Section 9.5 requires ZGEN to join such proceeding, then ZGEN shall be
represented by NN’s legal counsel, at NN’s expense. If NN’s counsel is unable to
represent ZGEN because of a bona fide conflict of interest, then ZGEN may engage
other competent legal counsel, reasonably acceptable to NN, to represent ZGEN in
such proceeding, at NN’s expense. If ZGEN elects not to use NN’s counsel for any
reason other than a bona fide conflict of interest, then ZGEN may engage
competent legal counsel of its own choosing, at ZGEN’s expense. If NN
unilaterally elects to discontinue any proceeding instituted under this
Section 9.5 (other than as part of a settlement), NN shall give ZGEN reasonable
prior notice of such election. ZGEN may elect to continue such proceedings in
its sole name, under its sole control, and at its own expense; if ZGEN so
elects, NN shall reasonably cooperate, at no out-of-pocket expense to NN, in all
actions reasonably necessary to transfer control of the proceedings from NN to
ZGEN. NN shall indemnify, defend and hold harmless ZGEN and the Indemnitees (as
defined in Section 8.1) from any and all claims, damages or other obligations
arising out of or resulting from any claim or legal proceedings instituted by NN
under this Section 9.5; provided that the foregoing indemnity shall not apply to
the extent ZGEN incurs claims, damages or obligations because ZGEN elected to
continue the proceedings in its own name as described above. Unless ZGEN
voluntarily joins such suit, as described above, NN shall have the right to
retain all damages awarded. If ZGEN does voluntarily join such suit, then out of
any damages awarded, the parties have an equal right to recover their expenses
for the proceeding; then NN shall pay to ZGEN the amount that would have been
payable as royalties hereunder if the infringer’s infringing activities had been
those of NN; then NN shall have the right to retain any damages remaining. If
ZGEN does not voluntarily join such suit and in the event that it is an
indispensable party required to be joined as a party in such infringement action
involving the NN, ZGEN hereby agrees to waive any objections to such joinder on
the grounds of standing, personal jurisdiction, venue and/or forum non
conveniens, provided NN shall promptly reimburse ZGEN for all costs associated
with such joinder.

 

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9.6 Settlement

(a) ZGEN may enter into any settlement, consent judgment, or other voluntary
final disposition of any action that was initiated by ZGEN in accordance with
Section 9.4 without NN’s prior consent; provided that NN receives a general
release of any claims against it in such proceeding and NN is promptly provided
thereafter a copy of such settlement, consent judgment or other voluntary
disposition and such settlement is not otherwise inconsistent with the terms of
this Agreement and would not have a material adverse impact on the validity,
scope or enforceability of the IL-21 Related Patents, or result in a material
payment by NN to a third party. Any other settlement, consent judgment or
voluntary final disposition of any proceeding by ZGEN shall require the prior
written consent of NN.

(b) NN may enter into any settlement, consent judgment, or other voluntary final
disposition of any action that was initiated by NN in accordance with
Section 9.5 without ZGEN’s prior consent; provided that ZGEN receives a general
release of any claims against it in such proceeding and ZGEN is promptly
provided thereafter a copy of such settlement, consent judgment or other
voluntary disposition and such settlement is not otherwise inconsistent with the
terms of this Agreement and would not have a material adverse impact on the
validity, scope or enforceability of the IL-21 Related Patents, or result in a
material payment by ZGEN to a third party, or, following the date of such
settlement, result in a material reduction in payments by NN to ZGEN pursuant to
Article Four. Any other such settlement, consent judgment or voluntary final
disposition of any proceeding by NN shall require the prior written consent of
ZGEN.

 

9.7 Patent Contacts

(a) Each party shall appoint its initial patent contact to coordinate patent
matters in accordance with this Article Nine (each a “Patent Contact”) within
thirty (30) days following the Effective Date and shall promptly thereafter
notify the other party of such appointment. If at any time a vacancy occurs for
any reason, the party that appointed the prior incumbent shall as soon as
reasonably practicable appoint a successor. Each party shall promptly notify the
other party in writing of any substitution of another person as its Patent
Contact.

(b) Each party’s Patent Contact will be available throughout the term of this
Agreement to answer any reasonable questions from the other party’s Patent
Contact.

 

9.8 Cooperation

In any legal proceeding conducted under this Article Nine, each party agrees,
without charge, to render such reasonable assistance, execute any documents and
do such other acts as may be reasonably necessary in such legal action as the
other party may reasonably request.

 

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9.9 Affiliates, Commercialization Partners and Sublicensees

NN shall require its Affiliates, Commercialization Partners and Sublicensees to
comply with this Article Nine.

 

9.10 Filing, Prosecution, Maintenance of Cell Line Patents and Construction
Strain Patents

ZGEN shall be solely responsible at its sole cost and expense for the filing,
prosecution, maintenance and enforcement of Cell Line Patents and Construction
Strain Patents.

 

9.11 Filing, Prosecution, Maintenance of Patents and Patent Applications arising
from Work Performed pursuant to Annual Plan or Long Range Plan

As among the parties, all intellectual property arising from work performed
pursuant to any Annual Plan or Long-Range Plan during the term of this Agreement
shall be owned by NN or, if owned by ZGEN or jointly owned by ZGEN and NN, shall
be licensed to NN in accordance with this Agreement. NN shall be solely
responsible at its sole cost and expense for the filing, prosecution,
maintenance and enforcement of all such intellectual property regardless of
ownership. Ownership of intellectual property arising from work performed
pursuant to any Annual Plan or Long-Range Plan during the term of this Agreement
shall be determined in good faith in accordance with a determination of
inventorship pursuant to the United States patent laws (Title 35, United States
Code). All determinations of such inventorship shall be documented to ensure
that divisional or continuation patent applications reflect appropriate
inventorship.

ARTICLE TEN

Term and Termination

 

10.1 Term and Expiration

This Agreement and the licenses contained herein shall come into force on the
Effective Date. Unless terminated earlier, the licenses provided hereunder for
any Products shall expire on a country-by-country basis on the date on which
ZGEN is no longer entitled to receive a royalty with respect thereto, and this
Agreement shall expire on the date on which ZGEN is no longer entitled to
receive a royalty from NN on any Product under this Agreement. After expiration
(but not termination), NN shall have a fully paid-up (except for payments to
third parties pursuant to Section 4.4), irrevocable, non-exclusive license under
the IL-21 Related Know-How to make, have made, use, sell, offer to sell and
import Know-How Products in the Territory.

 

10.2 Termination by NN for Convenience

NN may terminate this Agreement for any reason by giving ZGEN [*] prior written
notice.

 

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10.3 Safety Reasons

NN may terminate this Agreement and the licenses granted hereunder upon six
(6) months prior written notice to ZGEN with an explanation contained therein
if, in the reasonable opinion of NN senior management, the development and/or
commercialization of IL-21 Embodiments must be terminated for Safety Reasons. In
such event, NN shall be obligated to pay to ZGEN all Milestone Fees outlined in
Section 3.2 that have been achieved and accrued under this Agreement prior to
termination. For purposes of this Section 10.3, “Safety Reasons” means [*],
based on [*], that there [*] at [*] of the [*] or, if [*], [*] of the [*] listed
in [*] in the [*] for which [*].

If NN terminates this Agreement pursuant to this Section 10.3, then any license
granted to ZGEN under Section 10.9(c), any obligation of NN to continue to
supply a Product under Section 10.9(d) and any obligation to assign to ZGEN any
IND, BLA or Regulatory Approval under Section 10.9(b) shall be of no force or
effect.

 

10.4 Insolvency

Either party shall have the right to terminate this Agreement forthwith by
written notice to the other party (a) if the other party is declared insolvent
or bankrupt by a court of competent jurisdiction, (b) if a voluntary or
involuntary petition in bankruptcy is filed in any court of competent
jurisdiction against the other party and such petition remains undismissed,
undischarged or unbonded for a period of ninety (90) days after the filing
thereof, or (c) if the other party shall make or execute an assignment for the
benefit of creditors generally, have a receiver, administrator or an equivalent
official appointed with respect to its properties or undertakings, enter into
any liquidation or become insolvent. All rights and licenses granted under or
pursuant to this Agreement by ZGEN to NN are, and shall otherwise be deemed to
be, for purposes of Section 365(n) of the United States Bankruptcy Code, as
amended, (“Bankruptcy Code”) licenses of right to “intellectual property” as
defined under Section 101 of the Bankruptcy Code. The parties agree that NN, as
licensee of such rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the Bankruptcy Code. The parties
further agree that, in the event of the commencement of a bankruptcy proceeding
by or against ZGEN under the Bankruptcy Code, NN shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, shall be promptly
delivered to NN (i) upon any such commencement of a bankruptcy proceeding upon
NN’s written request therefor, unless ZGEN elects to continue to perform all of
its obligations under this Agreement, or (ii) if not delivered under (i) above,
following the rejection of this Agreement by or on behalf of the party subject
to such proceeding upon written request therefor by the non-subject party.

 

10.5 Breach

Each party shall have the right to terminate this Agreement after written notice
to the other party in the event the other party is in material breach of this
Agreement (including failure to meet diligence obligations or timely pay any
amounts due hereunder), unless the other party cures such breach within sixty
(60) days (or ten (10) days in the case of the failure to pay any

 

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amount due) after the date of notice; provided, however, that any termination
shall not release either party from any obligations accrued prior thereto. Upon
termination of this Agreement by NN pursuant to this Section 10.5, NN shall be
entitled, at its own cost and for its own benefit, to sell or otherwise dispose
of all Product that it has on hand on the effective date of termination during
the six (6) months following the effective date of termination; provided that
all such sales shall bear royalties in accordance with this Agreement.

 

10.6 Termination of License With Respect to Contested Patent Rights

ZGEN may at its option terminate this Agreement to the extent NN, or its
Affiliate, Commercialization Partner or Sublicensee, or any entity acting in
concert with or on behalf of any of them, commences any action or asserts any
formal position in any forum (including a court, a patent office, or an arbitral
tribunal, and whether in the form of petitions for declaratory relief, claims,
counterclaims, defenses, interferences, petitions for re-examination,
oppositions, or otherwise) that any IL-21 Related Patent is invalid or
unenforceable.

 

10.7 Effect of Expiration or Termination

Expiration or termination of this Agreement shall not relieve the parties of any
obligations accruing prior to such expiration or termination. In addition to any
provision that expressly provides for its survival, any accrued obligation and
the provisions of Article One, Section 2.3(b), Section 4.7, Articles Seven and
Eight, Section 10.3, 10.8, 10.9, and Articles Eleven and Twelve shall survive
the expiration or termination of this Agreement. Expiration or termination shall
not affect any party’s ability to seek any other remedies available at law.

 

10.8 Survival of Obligations under Second Restated License Agreement

Any obligations accrued under the Second Restated License Agreement shall
survive in accordance with the terms set forth in the Second Restated License
Agreement. For the avoidance of doubt, obligations that NN has accrued regarding
payment of costs accrued for IL-21 Related Patents as defined in the Second
Restated License Agreement shall be payable in accordance with the terms set
forth in this Agreement i.e., such costs shall rollover.

 

10.9 Return of Project Following Termination

Upon termination of this Agreement by NN pursuant to Section 10.2 and upon any
termination of this Agreement by ZGEN, NN shall:

(a) At ZGEN’s request, transfer to ZGEN as promptly as is reasonably
practicable, at no cost to ZGEN, all material data relating to Products that
(i) is Controlled by NN or its Affiliates, (ii) has not previously been
transferred to ZGEN, and (iii) was generated in the performance of activities by
or on behalf of NN or its Affiliates, Commercialization Partners or Sublicensees
under this Agreement or a Prior Agreement. During the [*] period commencing on
the effective date of termination, NN shall offer, at no cost to ZGEN, such
assistance as ZGEN may reasonably request in connection with the transfer of
such data. If NN identifies any such data to ZGEN in writing and ZGEN does not
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with this Section 10.9(a) within [*] days following the date on which NN
identifies such data in writing to ZGEN, NN shall be entitled to destroy such
data at its own cost if permitted to do so under applicable law.

(b) At ZGEN’s request, assign to ZGEN all INDs, BLAs and Regulatory Approvals
and, to the extent assignable, contracts for the manufacture, distribution or
sale of Products.

(c) At ZGEN’s request, NN shall and does hereby grant to ZGEN an exclusive
license, with right to sublicense, under the NN Development Technology
(including NN Patents) that is necessary to make, have made, use, sell, offer to
sell and import Products in the Territory.

(d) At ZGEN’s request, supply Products to ZGEN pursuant to a manufacturing and
supply agreement, including costs and delivery terms, to be negotiated by the
parties in good faith promptly following the date the notice of termination was
given, the period for such manufacture and supply to be, unless the parties
otherwise agree, the shorter of (i) a period of [*] years from the effective
date of termination, or (ii) until ZGEN has the ability to manufacture the
applicable Product in compliance with the Regulatory Approvals therefor and
applicable laws following a technology transfer of manufacturing operations for
such Product to ZGEN in accordance with terms and conditions to be negotiated by
the parties in good faith promptly following the date the notice of termination
was given.

ARTICLE ELEVEN

Representations and Warranties

 

11.1 Representations, Warranties and Covenants of NN

As of the Effective Date, NN represents and warrants to and covenants with ZGEN
that:

(a) NN is a corporation duly organized, validly existing and in corporate good
standing under the laws of Denmark; and

(b) NN has the corporate and legal right, title, authority and power to enter
into this Agreement; and

(c) NN has taken all necessary action to authorize the execution, delivery and
performance of this Agreement; and

(d) upon the execution and delivery of this Agreement, this Agreement shall
constitute a valid and binding obligation of NN, enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law); and

(e) the performance of its obligations under this Agreement will not conflict
with or result in a breach of any agreements, contracts or other arrangements to
which it is a party; and

 

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(f) NN will not during the term of this Agreement enter into any agreements,
contracts or other arrangements that would prevent NN from meeting its
obligations or adversely impact ZGEN’s rights under this Agreement; and

(g) NN will comply with all applicable laws, regulations and guidelines in
connection with the exercise of NN’s license rights under this Agreement,
including all applicable product safety, product testing, product labeling,
package marking and product advertising laws and regulations and the regulations
of any relevant nations concerning any export or other transfer of technology,
services or products.

 

11.2 Representations, Warranties and Covenants of ZGEN

As of the Effective Date, ZGEN represents and warrants to and covenants with NN
that:

(a) ZGEN is a corporation duly organized, validly existing and in corporate good
standing under the laws of the State of Washington, USA; and

(b) ZGEN has the corporate and legal right, title, authority and power to enter
into this Agreement; and

(c) ZGEN has taken all necessary action to authorize the execution, delivery and
performance of this Agreement; and

(d) upon the execution and delivery of this Agreement, this Agreement shall
constitute a valid and binding obligation of ZGEN enforceable in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or, at law); and

(e) the performance of its obligations under this Agreement will not conflict
with or result in a breach of any agreements, contracts or other arrangements to
which it is a party; and

(f) ZGEN will not after the Original License Effective Date enter into any
agreements, contracts or other arrangements that would prevent ZGEN from meeting
its obligations or adversely impact NN’s rights under this Agreement;

(g) ZGEN will comply with all applicable laws, regulations and guidelines in
connection with the performance of ZGEN’s obligations under this Agreement;

(h) Part A of Appendix 1 identifies all patent applications and patents in the
Territory that are owned or Controlled by ZGEN that claim an invention with a
date of conception prior to the Effective Date and that claim: (i) an IL-21
Embodiment; (ii) a process, formulation and/or mixture comprising an IL-21
Embodiment; (iii) a method of making or manufacturing an IL-21 Embodiment; or
(iv) a method of using an IL-21 Embodiment;

 

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(i) other than the [*] Agreement, there are no agreements or arrangements
between ZGEN and any third party relating to the IL-21 Related Patents or which
could otherwise affect NN’s ability to market or sell Products in the Territory;

(j) ZGEN has not received any written communications from any third party that
any patent within the IL-21 Related Patents is invalid or unenforceable or,
except in connection with the ongoing opposition proceedings related to [*],
that any patent application or patent within the IL-21 Related Patents is
subject to interference, reexamination, reissue, revocation, opposition, appeal
or other administrative proceedings (including any third party inventorship
dispute); provided that nothing in this Agreement shall be construed as a
representation or warranty as to the scope or validity of any patent application
or patent within the IL-21 Related Patents;

(k) all required maintenance fees have been paid with regard to the IL-21
Related Patents; and

(l) following execution of the Letter Agreement, ZGEN is not in breach or
default of any of its material obligations under the [*] Agreement.

 

11.3 Warranty Disclaimer

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES
ANY WARRANTY WITH RESPECT TO IL-21 EMBODIMENTS, PRODUCTS, IL-21 RELATED PATENTS,
IL-21 RELATED KNOW-HOW OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY
DISCLAIMS WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT AND PATENTABILITY WITH RESPECT TO ANY AND ALL OF THE FOREGOING.

 

11.4 Limited Liability

EXCEPT IN THE CASE OF GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, NEITHER NN NOR
ZGEN WILL BE LIABLE WITH RESPECT TO ANY MATTER ARISING UNDER THIS AGREEMENT
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY FOR ANY PUNITIVE OR EXEMPLARY DAMAGES.

ARTICLE TWELVE

Miscellaneous

 

12.1 Assignment

This Agreement may not be assigned by either party without prior written consent
of the other party, except to: (a) a successor or a purchaser of all or
substantially all of the party’s assets and business or (b) an Affiliate;
provided, however, that in the event of an assignment by NN to an Affiliate, the
Affiliate’s rights under this Agreement shall terminate once it ceases being an
Affiliate of NN (however, its rights may be reassigned back to NN at the time it
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Affiliate of NN). If, as a result of any assignment of any rights or interest in
this Agreement by NN, any payment by or on behalf of NN to ZGEN is subject to an
increased level of tax withholding than would have been the case under this
Agreement with payments by NN from Denmark and ZGEN cannot use any related tax
credit as an offset against its obligation to pay United States federal income
tax in the year in which the withholding is effected, NN shall pay ZGEN an
amount such that, after deduction of any amount required to be withheld, ZGEN
receives the same amount that it would have received but for the assignment. In
the event of any permissible assignment under this Agreement, the assignor shall
guarantee the assignee’s performance of the assignor’s obligations hereunder.
ZGEN shall have the right to assign its right to receive any payments under this
Agreement.

 

12.2 Relationship between the Parties

Nothing in this Agreement is intended to create or shall be deemed to constitute
a partnership, agency or joint venture relationship between the parties or their
sublicensees, contractors or licensees. Neither party shall be responsible for
the acts or omissions of the other party, and neither party shall have the
authority to speak for, represent or obligate the other party in any way without
the prior written authority of the other party.

 

12.3 Public Announcements

(a) The parties will issue a joint press release, substantially in the form set
out in Schedule 2, and will cooperate in the release thereof as soon as
practicable after the signature of this Agreement by the parties.

(b) No other public announcement or other disclosure to third parties (other
than as permitted by Section 7.3) concerning the existence or terms of this
Agreement shall be made, either directly or indirectly, by either party hereto,
without first obtaining the written approval of the other party, which shall
include agreement upon the nature and text of such announcement or disclosure,
except as may be required by any applicable law or regulation, including those
of the U.S. Securities and Exchange Commission. The party desiring to make any
such public announcement or other disclosure shall inform the other party of the
proposed announcement or disclosure by providing the other party with a written
copy thereof, and allowing reasonably sufficient time prior to public release to
permit such other party to comment upon such announcement or disclosure. Once
any such public announcement or disclosure has been approved in accordance with
this Section 12.3, then either party may appropriately communicate information
contained in such permitted announcement or disclosure.

(c) Each party agrees that it shall reasonably cooperate with the other with
respect to all disclosures regarding this Agreement to the Securities and
Exchange Commission and any other governmental or Agencies, including requests
for confidential treatment of proprietary information of either party included
in any such disclosure.

 

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12.4 Use of Names, Trade Names and Trademarks

Except as provided herein, nothing contained in this Agreement shall be
construed as conferring any right on either party to use in advertising,
publicity or other promotional activities any name, trade name, trademark or
other designation of the other party hereto, including any contraction,
abbreviation or simulation of any of the foregoing, unless the express written
permission of such other party has been obtained.

 

12.5 Force Majeure

If either party to this Agreement is prevented or delayed in the performance of
any of its obligations under this Agreement by force majeure, and if such party
gives written notice thereof to the other party specifying the matters
constituting force majeure, together with such evidence as it can reasonably
give and specifying the period for which it is estimated that such prevention or
delay will continue, then the party in question shall be excused from the
performance of its obligations or the punctual performance thereof as the case
may be as from the date of such notice for so long as such cause of prevention
or delay shall continue. For the purpose of this Agreement, “force majeure”
shall be deemed to be any cause affecting the performance of this Agreement
arising from or attributable to acts, events, omissions or accidents beyond the
reasonable control of the party.

 

12.6 Governing Law

This Agreement shall be governed by and construed in accordance with the law of
the State of New York, without regard to the conflicts of law rules of such
state.

 

12.7 Waiver of Remedies

No forbearance, delay or indulgence by either party in enforcing the provisions
of this Agreement shall prejudice or restrict the rights of that party, nor
shall any waiver of its rights operate as a waiver of any subsequent breach, and
no right, power or remedy herein conferred upon or reserved for either party is
exclusive of any other right, power or remedy available to that party.

 

12.8 Entire Agreement

This Agreement and the Appendices hereto constitute the entire agreement between
the parties and supersede all prior oral and written agreements, understandings
or arrangements relating to the subject matter hereof, including the Second
Restated License Agreement and Confidentiality Agreement, dated January 15,
2008. No addition to or modification of any provision of this Agreement shall be
binding upon the parties, unless made in writing and signed by a duly authorized
representative of each of the parties.

 

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12.9 Notices

All notices or other communication hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, faxed with receipt
acknowledged (and with a confirmation copy also sent by registered mail, return
receipt requested), or delivered by a recognized commercial courier service with
receipt acknowledged, postage prepaid, as follows:

 

If to NN:    Novo Nordisk A/S    Novo Allé    DK-2880 Bagsvaerd    Denmark   
Attn: Head of Business Development    Facsimile:    +45 4442-1830
With a copy to:    Novo Nordisk Legal Department    Novo Allé    DK-2880
Bagsvaerd    Denmark    Attn: Head of Licensing, Litigation & Trademarks   
Facsimile:    +45 4498 0670 If to ZGEN:    ZymoGenetics, Inc.    1201 Eastlake
Avenue East    Seattle, WA 98102    Attn: Vice President, Law & Compliance   
Facsimile:    (206) 442-6697

or to such other addresses as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notices or other communication will
be deemed effective as of the date so delivered (either personally or by courier
service) or faxed.

 

12.10 Severability

The parties agree that, if any provision of this Agreement shall for any reason
be held to be invalid or unenforceable, such provision shall be enforced to the
maximum extent permitted by law and the parties’ fundamental intentions
hereunder, and the remaining provisions hereof shall not be affected, impaired
or invalidated and shall continue in full force and effect.

 

12.11 Headings

The headings contained herein are for reference only and shall not be considered
a part of this Agreement, nor shall they in any way affect the interpretation
hereof.

 

12.12 Review of Agreement

This Agreement has been submitted to the scrutiny of both parties and their
counsel and shall be given a fair and reasonable interpretation in accordance
with the words hereof, without consideration or weight being given to its being
drafted by or for one of the parties.

 

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12.13 Compliance with Laws; Export Regulations

In performance of this Agreement, each party shall comply with all laws,
regulations, rules, orders and other requirements and guidelines, now or
hereafter in effect, and governmental authorities having jurisdiction. This
Agreement and any information related to IL-21 Related Know-How provided
hereunder are subject to restrictions concerning the export of information and
materials that may be imposed by government. Accordingly, NN agrees that it will
not export, directly or indirectly, any information or materials acquired under
this Agreement or any products utilizing such information or materials to any
country for which a government or any agency thereof at the time of export
requires an export license or other governmental approval, without first
obtaining the written consent to do so from the appropriate agency of the
government when required by an applicable statute or regulation.

 

12.14 [*]

Prior to executing the USA Co-Promotion Agreement, the parties shall inform each
other of their respective [*] (“[*]”), if any. Thereafter, the parties shall
make suitable representatives reasonably available to discuss such [*].

 

12.15 Counterparts

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

 

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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement to be
effective as of the Effective Date.

 

NOVO NORDISK A/S By:  

/s/ JESPER BRANDGAARD

  Jesper Brandgaard Its:   Chief Financial Officer By:  

/s/ MADS KROGSGAARD THOMSEN

  Mads Krogsgaard Thomsen Its:   Chief Science Officer ZYMOGENETICS, INC. By:  

/s/ DOUGLAS E. WILLIAMS

  Douglas E. Williams, Ph.D. Its:   Chief Executive Officer

 

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Schedule 1

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SCHEDULE 2

to the Third Restated License Agreement

for IL-21 Embodiments,

dated December 3, 2009

PRESS RELEASE

Novo Nordisk licenses IL-21 mAb and patent rights to IL-21 antibodies from

ZymoGenetics

24 million US dollars upfront payment with 157.5 million dollars of total
potential

milestone payments

Seattle, [month, day], 2009— Novo Nordisk A/S (NYSE: NVO) and ZymoGenetics, Inc.
(NASDAQ: ZGEN) today announced an agreement where Novo Nordisk in-licenses a
fully-human anti-IL21 monoclonal antibody (IL-21 mAb) developed by ZymoGenetics,
as well as broad intellectual property rights covering IL-21 mAb and the
development of other IL-21 antibodies. The IL-21 mAb is a pre-IND candidate for
the treatment of autoimmune and inflammatory diseases. Novo Nordisk in-licensed
intellectual property rights to IL-21 antibodies outside North America in 2001
and now has worldwide rights.

Under the terms of the licence, Novo Nordisk has agreed to pay ZymoGenetics an
initial upfront cash payment of 24 million dollars. In addition, as the
development programme of the IL-21 mAb advances, ZymoGenetics may receive
further milestones from Novo Nordisk of up to 157.5 million dollars over the
term of the agreement, including a 1.5 million dollar milestone payment upon
filing an investigational new drug application and a 8.5 million dollar
milestone payment at the start of phase 1 studies with the mAb, plus royalties
on net sales. ZymoGenetics also has a right to co-promote the IL-21 mAb product
in the US if the company contributes to phase 3 clinical development costs.

“Novo Nordisk is currently building a pipeline of products to treat autoimmune
and inflammatory diseases such as rheumatoid arthritis, lupus and inflammatory
bowel disease,” said Mads Krogsgaard Thomsen, executive vice president and chief
science officer of Novo Nordisk. “It was important for us to secure the
worldwide rights to the IL-21 mAb project as well as worldwide patent rights to
IL-21 antibodies, and we look forward to initiating a phase 1 trial with this
IL-21 mAb in 2010.”

“ZymoGenetics has a rich pipeline and, while the IL-21 mAb is an exciting
molecule, we believe that other development programmes offer us a better
opportunity for return on investment,” said Douglas E Williams, PhD, chief
executive officer of ZymoGenetics. “We believe that Novo Nordisk will be able to
develop and create value for this asset. Furthermore, we have the option to
increase our participation in commercialisation of the product, retaining
long-term upside potential for our shareholders.”

 

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As part of the agreement, ZymoGenetics retains the option to fund a portion of
phase 3 clinical development costs in exchange for an increased royalty rate on
US sales and US co-promotion rights. If ZymoGenetics exercises the option, it
would pay a fixed fee of 10 million dollars together with 15% of the costs of
phase 3 clinical trials, and royalties on US sales would increase from single to
double digits.

IL-21 mAb

ZymoGenetics developed a fully-human anti-IL-21 monoclonal antibody, or IL-21
mAb, as a potential therapeutic treatment for autoimmune and chronic
inflammatory disorders. Cell biology experiments and preclinical models of
inflammatory diseases suggest that IL-21 is a key mediator of inflammation, and
over-expression patterns of IL-21 and its receptor in inflamed tissues of human
diseases, such as in inflammatory bowel disease, rheumatoid arthritis and lupus,
further support the role of IL-21 in the disease process.

ZymoGenetics is focused on the creation of novel protein drugs to improve
patient care and address unmet medical needs. The company’s strategy is to
discover, develop and commercialize its products independently, in collaboration
with partner companies or through out-licensing. ZymoGenetics developed and
markets RECOTHROM® Thrombin, topical (Recombinant). The company is developing a
proprietary portfolio of immune-based product candidates. PEG-Interferon lambda
is a novel type-3 interferon in clinical development for the treatment of
chronic hepatitis C infection. Interleukin-21 is a novel cytokine in clinical
development for the treatment of metastatic melanoma and renal cell carcinoma.
Several other proprietary product candidates are in preclinical development. In
addition, ZymoGenetics has licensed rights to multiple clinical and preclinical
drug candidates being developed by other companies. For further information,
visit www.zymogenetics.com.

Novo Nordisk is a healthcare company and a world leader in diabetes care. In
addition, Novo Nordisk has a leading position within areas such as haemostasis
management, growth hormone therapy and hormone replacement therapy. Novo Nordisk
manufactures and markets pharmaceutical products and services that make a
significant difference to patients, the medical profession and society. With
headquarters in Denmark, Novo Nordisk employs more than 28,500 employees in 81
countries, and markets its products in 179 countries. Novo Nordisk’s B shares
are listed on the stock exchanges in Copenhagen and London. Its ADRs are listed
on the New York Stock Exchange under the symbol ‘NVO’. For more information,
visit novonordisk.com.

ZymoGenetics Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on the current intent and expectations of the management of
ZymoGenetics. These statements are not guarantees of future performance and
involve risks and uncertainties that are difficult to predict. ZymoGenetics
actual results and the timing and outcome of events may differ materially from
those expressed in or implied by the forward-looking statements because of risks
associated with ZymoGenetics dependence on Novo Nordisk to develop and
commercialize IL-21 mAb. In particular, ZymoGenetics ability to generate
revenues from the license arrangement is subject to numerous risks, including,
among other things: the possibility that Novo Nordisk chooses to scale back or
discontinue its development of IL-21 mAb due to, among other things, changes in
its strategies, restructuring, mergers or acquisitions; the

 

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possibility that clinical trials involving IL-21 mAb reveal that it is not
effective or has undesirable side effects, unacceptable toxicities or other
characteristics that preclude regulatory approval or prevent or limit commercial
use; and the length of time that it takes for Novo Nordisk to solve technical
problems or achieve various clinical development and regulatory approval
milestones. In addition, the forward-looking statements in this press release
are subject to the other risks detailed in the other risks detailed in the
ZymoGenetics Annual Report on Form 10-K for the year ended December 31, 2008,
Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 and from time
to time in other reports filed by ZymoGenetics with the U.S. Securities and
Exchange Commission. Except as required by law, ZymoGenetics undertakes no
obligation to update any forward-looking or other statements in this press
release, whether as a result of new information, future events or otherwise.

 

Further information:

   Novo Nordisk Media:    Novo Nordisk Investors: Rachel Curtis Gravesen    Mads
Veggerby Lausten Tel: (+45) 4442 7603    Tel: (+45) 4443 7919
rcgv@novonordisk.com    mlau@novonordisk.com    Kasper Roseeuw Poulsen    Tel:
(+45) 4442 4471    krop@novonordisk.com In North America:    In North America:
Sean Clements    Hans Rommer Tel: (+1) 609 514 8316    Tel: (+1) 609 919 7937
secl@novonordisk.com    hrmm@novonordisk.com

ZymoGenetics Media and Investors:

Susan W Specht 206-442-6592

 

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Schedule 3

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Appendix 1

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Appendix 2

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Appendix 3

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Schedule 1 to Appendix 3

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APPENDIX 4

to the Third Restated License Agreement

for IL-21 Embodiments,

dated December 3, 2009

NOVO NORDISK INVOICE INSTRUCTIONS

Novo Nordisk Invoice Instructions

We kindly ask you to comply with the following guidelines when sending invoices
to NN. A properly formulated invoice is a requirement for payment by NN.

Invoices must be addressed to the address directly below and may be sent to NN
as a PDF file attached to an email at [*]

[*]

Alternatively, hard copy invoices may be sent by mail or courier to the address
above.

NN does not accept invoices received via facsimile.

All invoices must include:

 

  •  

A clear statement that the document sent is an invoice

 

  •  

A reference to the NN agreement ID

 

  •  

A reference to the specific section in the contract that identifies the payment
obligation Value Added Tax number or Federal ID/registration number of your
affiliation (if relevant)

 

  •  

Recipient’s bank information that uniquely identifies recipient’s bank account:

1. International Bank Account Number and/or IBAN code (the latter is applicable
in all EU countries): [*]

2. Name of Bank: [*]

3. Address of Bank: [*]

4. Bank details (e.g. ACH/ABA/Routing/Fedwire/Transit number/Sort Number):[*]

 

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5. Swift code: [*]

6. Account Name: [*]

7. Currency: [*]

If you have questions regarding the above, please contact the person identified
above as being your NN contact person.

Thank you very much for your cooperation.

 

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Appendix 5

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Appendix 6

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