Exhibit 10.1

U.S. CO-PROMOTION AGREEMENT

BY AND BETWEEN

ZYMOGENETICS, INC.

AND

BAYER HEALTHCARE LLC

EFFECTIVE AS OF JUNE 18, 2007

“[    *    ]” = omitted, confidential material, which material has been
separately filed with

the Securities and Exchange Commission pursuant to a request for confidential
treatment.

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U.S. CO-PROMOTION AGREEMENT

THIS U.S. CO-PROMOTION AGREEMENT is made as of the 18th day of June, 2007 (the
“Effective Date”) by and between ZymoGenetics, Inc., a corporation organized and
existing under the laws of Washington State, U.S.A. (“ZGEN”), and Bayer
HealthCare LLC, a limited liability company organized and existing under the
laws of Delaware (“Bayer”). ZGEN and Bayer are sometimes referred to herein
individually as a “Party” and collectively as the “Parties.”

RECITALS

A. ZGEN is developing certain products containing Recombinant Thrombin (as
defined in the LCA) for use in hemostasis.

B. Concurrent with the execution of this Agreement, ZGEN and Bayer’s Affiliate,
Bayer Schering Pharma A.G., are entering into a License and Collaboration
Agreement of even date herewith (the “LCA”), pursuant to which ZGEN and Bayer
Schering Pharma A.G. have agreed to collaborate in the global development of
certain Licensed Products (as defined in the LCA) and Bayer Schering Pharma A.G.
has agreed to develop and Commercialize certain Licensed Products outside of the
United States.

C. In furtherance of the goal of maximizing Commercialization (defined below),
the Parties desire to enter into this Agreement for the time-limited
co-promotion of Initial Licensed Products (defined below) in the United States.

AGREEMENT

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

ARTICLE 1

Definitions

Where words and phrases are used herein 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.” References to Articles, Sections, Subsections and paragraphs
are to the same with all their subparts as they appear in this Agreement.
“Herein” means anywhere in this Agreement. “Hereunder” and “hereto” mean under
or pursuant to any provision of this Agreement. The Article and Section 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. All
references to time are to the time in Seattle, Washington, U.S.A. As used
herein, the following terms shall have the meanings indicated and any
capitalized terms used, but not otherwise defined, in this Agreement shall have
the meanings defined in the LCA:

1.1 “Active Period” means the period of time commencing on the Launch Date and
ending on (i) the last day of the calendar quarter that contains the third
(3rd) anniversary of the Launch Date or (ii) if extended pursuant to
Section 3.2.3, the last day of the calendar quarter that contains the
[    *    ] anniversary of the Launch Date or (iii) if terminated early pursuant
to Section 3.2.4, the last day of the calendar quarter that contains the
[    *    ] anniversary of the Launch Date.

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1.2 “Adverse Event” means any event defined as an adverse experience pursuant to
21 CFR 600.80(a), as the same may be amended from time to time.

1.3 “Affiliate” means, with respect to a Party, an individual, a partnership, a
joint venture, a corporation, or any other entity or any combination of the
aforementioned entities that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with such
Party. For purposes of this definition, “control” will mean the possession,
direct or indirect, of the power to cause the direction of the management and
policies of a Party, whether through ownership of more than fifty percent
(50%) of the voting securities of such Party, by contract or otherwise.

1.4 “Alliance Manager” means a single contact person within a Party’s
organization who shall be designated by such Party to act as liaison and serve
as the principal point of communication with the other Party with respect to the
Parties’ activities under this Agreement.

1.5 “Annual Revenue Threshold” is defined in Section 3.2.1.

1.6 “Applicable Laws” means all laws, rules, regulations, guidance and
guidelines that are applicable to the marketing, sale and promotion of
pharmaceutical products for human use in the Co-Promotion Territory and that
materially affect a Party’s performance under this Agreement, including the
United States Federal Food, Drug, and Cosmetic Act, the Public Health Service
Act, the Prescription Drug Marketing Act, Federal Health Care Program
Anti-Kickback Law (42 U.S.C. ss.1320a-7b), the Health Insurance Portability and
Accountability Act of 1996, and all rules and regulations promulgated
thereunder, the Office of Inspector General (“OIG”) Compliance Guidance Program,
the Code on Interactions with Healthcare Professionals promulgated by the
Pharmaceutical Research and Manufacturers of America (PhRMA) and the American
Medical Association Guidelines on Gifts to Physicians, as any of the foregoing
may be amended.

1.7 “Bayer Indemnitees” is defined in Section 8.1.1.

1.8 “Bayer MSLs” is defined in Section 2.7.6.

1.9 “Bayer Sales Force” is defined in Section 2.7.5.

1.10 “Bulk Drug Substance” has the meaning defined in the LCA.

1.11 “Commercialization” or “Commercialize” means all activities relating to the
promotion, marketing, advertisement, sale, reimbursement and distribution of
Initial Licensed Product in the Co-Promotion Territory, and other pre-launch and
post-launch marketing and sale activities for Initial Licensed Product in the
Co-Promotion Territory. When used as a verb, “Commercialize” means to engage in
Commercialization.

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1.12 “Commercially Reasonable Efforts” means the level of efforts and resources
required to Commercialize an Initial Licensed Product in the Co-Promotion
Territory in a sustained manner consistent with the efforts a similarly situated
biopharmaceutical company (in the case of ZGEN) or pharmaceutical company (in
the case of Bayer) would reasonably devote to a product of similar market
potential at a similar stage in its product life, profit potential or strategic
value resulting from its own research efforts, based on conditions then
prevailing.

1.13 “Confidential Information” means all tangible and intangible techniques,
technology, practices, trade secrets, inventions (whether patentable or not),
methods, knowledge, know-how, conclusions, skill, experience, test data and
results (including pharmacological, toxicological and clinical test data and
results), analytical and quality control data, results or descriptions, software
and algorithms received by either Party or its Affiliates from the other Party
or its Affiliates pursuant to (1) this Agreement, (2) the Confidentiality
Agreement, dated as of January 24, 2006, by and between ZGEN and Bayer
Pharmaceuticals Corporation (as amended by Amendment No. 1 to Confidentiality
Agreement, dated January 5, 2007), or (3) Confidential Disclosure Agreement,
dated April 19, 2006, by and between Bayer and ZGEN, other than that portion of
such information that:

(a) is publicly disclosed by the disclosing Party, either before or after it
becomes known to the receiving Party;

(b) was known to the receiving Party, without obligation to keep it
confidential, prior to when it was received from the disclosing Party;

(c) is subsequently disclosed to the receiving Party by a Third Party lawfully
in possession thereof without obligation to keep it confidential;

(d) has been publicly disclosed other than by the disclosing Party and without
breach of an obligation of confidentiality with respect thereto; or

(e) has been independently developed by the receiving Party without the aid,
application or use of Confidential Information, as demonstrated by competent
written proof.

1.14 “Content Compliance Contact” a member of a Party’s Review Board designated
by that Party to coordinate the review of Promotional Materials and Medical
Education Materials when required by this Agreement.

1.15 “Control” has the meaning defined in the LCA.

1.16 “Coordination Committee” is defined in Section 2.3.1.

1.17 “Co-Promotion Plan” means a strategic plan for the promotion and Detailing
of the Initial Licensed Products by ZGEN and Bayer in the Co-Promotion Territory
during the Active Period, including the methodology for deployment of Sales
Representatives, call patterns and mechanisms for coordination among field
representatives for each Party, as developed by the CPT in accordance with
Section 2.4.3 and approved by the Coordination Committee in accordance with
Section 2.3.4.

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1.18 “Co-Promotion Territory” means the United States.

1.19 “Courts” is defined in Section 10.5.

1.20 “CPT” is defined in Section 2.4.1.

1.21 “CSO” means a contract sales organization in the business of providing
sales details for pharmaceutical products.

1.22 “Detail” or “Detailing” means a face-to-face meeting (including a live
video presentation but not including Promotion Related Activities) in the
Co-Promotion Territory between a Party’s Sales Representative and (a) a medical
professional with prescribing authority or other individuals or entities that
have a significant impact/influence on prescribing decisions or (b) such other
groups as may be mutually agreed by the Parties, during which the Sales
Representative provides an oral presentation of an Initial Licensed Product’s
attributes in a fair and balanced manner consistent with the requirements of
this Agreement and Applicable Law and in a manner that is customary in the
industry for the purpose of promoting a prescription pharmaceutical product.
When used as a verb, “Detail” shall mean to engage in the activities set forth
in this paragraph.

1.23 “Dispute” is defined in Section 2.3.5.

1.24 “Effective Date” means the date this Agreement was entered into and is
defined in the introduction to this Agreement.

1.25 “Expert” means a mutually acceptable, disinterested,
conflict-of-interest-free individual with such scientific, technical, regulatory
and commercial experience as is necessary to resolve a Dispute. The Expert shall
not be or have been during the preceding five (5) years an Affiliate, employee,
consultant, officer or director of either Party or any of its respective
Affiliates.

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

1.27 “Force Majeure” means any occurrence beyond the reasonable control of a
Party that prevents or substantially interferes with the performance by such
Party of any of its obligations hereunder, if such occurs by reason of any act
of God, flood, fire, explosion, earthquake, breakdown of plant, shortage of
critical equipment, loss or unavailability of manufacturing facilities or
material, strike, lockout, labor dispute, casualty or accident, or war,
revolution, civil commotion, terrorism and acts of public enemies, blockage or
embargo, or any injunction, law, order, proclamation, regulation, ordinance,
demand or requirement of any government or of any subdivision, authority or
representative of any such government, inability to procure or use materials,
labor, equipment, transportation or energy sufficient to meet manufacturing
needs without allocation, or any other cause whatsoever, whether similar or
dissimilar to those above enumerated, beyond the reasonable control of such
Party, if and only if the Party affected will have used reasonable efforts to
avoid such occurrence and to remedy it promptly if it will have occurred.

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1.28 “Individual Annual Revenue Threshold” is defined in Section 3.2.2.

1.29 “Initial Licensed Products” means the Presentations (as defined in the LCA)
listed as paragraphs 1 through 3 on Exhibit A attached hereto and incorporated
herein.

1.30 “Knowledge” means (a) the [    *    ] of any individual within a group
consisting of [    *    ] (the “ZGEN Management”) and (b) the [    *    ] the
ZGEN Management [    *    ] have based on the [    *    ] of any ZGEN employee
of [    *    ]; provided that in no event shall ZGEN be required to [    *    ].
In addition, the determination of the knowledge ZGEN Management [    *    ] and
the information that is [    *    ] shall take into consideration that
[    *    ].

1.31 “Launch Date” means the date of [    *    ] in the [    *    ] of the
[    *    ] Initial Licensed Product [    *    ] Third Party after obtaining the
required Regulatory Approval from the FDA [    *    ] Initial Licensed Product
in the [    *    ]. For purposes of the foregoing, [    *    ].

1.32 “LCA” means the License and Collaboration Agreement between ZGEN and Bayer
Schering Pharma A.G. of even date herewith, as the same may be amended from time
to time in accordance with its terms.

1.33 “Losses” means liabilities, costs, fees, expenses and/or losses, including
reasonable legal costs and expenses and attorneys’ fees for outside counsel.

1.34 “Medical Education Materials” means, with respect to an Initial Licensed
Product, (a) all written, printed, graphic, electronic, audio or video matter
intended for (i) use in responding to unsolicited questions from health care
professionals relating to the Initial Licensed Products and/or Recombinant
Thrombin or (ii) proactive use with physician thought leaders, and
(b) scientific publications and materials produced for independent education
programs by Third Party education providers.

1.35 “Medical Education Activities” means business meals with, or medically
related items for, physician thought leaders. For purposes of this Agreement,
Medical Education Activities expressly includes conference or convention
participation, continuing medical education programs, paid speaker programs and
symposia.

1.36 “Medical Education Plan” means a strategic plan for scientific interchange
with physician thought leaders relating to the Initial Licensed Products by ZGEN
and Bayer in the Co-Promotion Territory during the Active Period, as developed
by the MET in accordance with Section 2.5.3 and approved by the Coordination
Committee in accordance with Section 2.3.4.

1.37 “MET” is defined in Section 2.5.1.

1.38 “MSL” means an individual who is regularly employed by the applicable Party
on a full-time basis, whose skills, training and experience are consistent with
industry standards applicable to scientific interchange (as opposed to product
promotion) with physician thought

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leaders, including meeting minimum professional standards of a four-year college
degree (B.A., B.S. or equivalent), and who shall have (a) satisfactorily
completed the product–specific training developed by ZGEN and the ethics and
compliance training required by the Party by whom he or she is employed and
(b) become adequately equipped and knowledgeable with respect to the Initial
Licensed Products, including the Product Labels and the use of the Medical
Education Materials in accordance with this Agreement and the Medical Education
Plan. Titles of such personnel may be Medical Science Liaisons, Scientific
Affairs Liaisons or Medical Liaisons.

1.39 “Net Sales” means the gross amount invoiced with respect to the sale or
other disposition of Initial Licensed Products in the Co-Promotion Territory by
ZGEN or its Affiliates or sublicensees to a non-sublicensee Third Party after
deducting returns and allowances (actually paid or allowed) including prompt
payment and any other discounts (including deductions commonly referred to as
“fee for service”), price reductions, including government reimbursement
programs in the Co-Promotion Territory such as Medicare and Medicaid and similar
types of rebates, chargebacks from wholesalers of Initial Licensed Product
(whether in cash or trade), and rebates, when included in gross sales, but not
including taxes when assessed on income derived from such sales and bad debts.
Amounts received by ZGEN or its Affiliates for the sale in the Co-Promotion
Territory of Initial Licensed Product between ZGEN and its Affiliates for resale
or for transfer in the Co-Promotion Territory of Initial Licensed Product to a
sublicensee for resale will not be included in the computation of Net Sales
hereunder. Any Initial Licensed Product sold or otherwise transferred in the
Co-Promotion Territory in other than an arm’s-length transaction or for other
property (e.g., barter) shall be deemed invoiced at its fair market price in the
Co-Promotion Territory.

1.40 “Party” is defined in the introduction to this Agreement.

1.41 “Product Labels” means all FDA-approved labels and other written, printed
or graphic matter upon any container, wrapper or any package insert or outsert
utilized with or for an Initial Licensed Product in the Co-Promotion Territory.

1.42 “Product Trademark” means any Trademarks that are (a) Controlled by ZGEN or
Bayer and (b) actually applied to or used, or intended to be used, with any
Initial Licensed Product or any Promotional Materials or Medical Education
Materials in the Co-Promotion Territory.

1.43 “Promotional Materials” means, with respect to an Initial Licensed Product,
all written, printed, graphic, electronic, audio or video matter, including
journal advertisements and sales visual aids, direct mail, direct-to-consumer
advertising, Internet postings, broadcast advertisements, sales reminder aids
(e.g., scratch pads, pens and other such items) and other Detail aids, intended
for use or used by a Party in connection with any promotion of such Initial
Licensed Product, except for: (a) the FDA-approved full prescribing information
for such Initial Licensed Product, including any required patient information;
(b) Product Labels; and (c) Medical Education Materials.

1.44 “Promotion Related Activities” means business meals (including promotional
speaker programs) with, or medically related items for, health care
professionals with prescribing authority or other individuals or entities that
have a significant impact/influence on prescribing

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decisions used to promote Initial Licensed Products to such persons. For
purposes of this Agreement, Promotion Related Activities expressly excludes
conference or convention participation (other than promotional exhibit booths),
independent medical education programs and grants.

1.45 “Recall” means an event, incident or circumstance that may result in the
need for a “recall” or “market withdrawal” (as those terms are defined in United
States regulations in 21 C.F.R. 7.3) or field alert (including biological
product deviation reports) or field correction of an Initial Licensed Product or
any lot thereof.

1.46 “Regulatory Approval” means any approvals (including supplements,
amendments, pre- and post-approvals, reimbursement approvals and price
approvals), licenses, registrations or authorizations of any national, state or
local regulatory agency, department, bureau, commission, council or other
governmental entity, including the FDA, necessary for the marketing and sale of
Initial Licensed Product in the Co-Promotion Territory. Regulatory Approval does
not include any site license for a Party’s manufacturing facility.

1.47 “Review Board” means the multi-disciplinary committee within a Party:
(a) tasked with reviewing Promotional Materials for compliance with Applicable
Laws, known at Bayer as the “LMR” and at ZGEN as the “Promotional Review Board”
or (b) tasked with reviewing Medical Education Materials for compliance with
Applicable Laws, as applicable.

1.48 “Safety Issues” is defined in Section 3.1.4(c).

1.49 “Sales Bonuses” means collectively the First Sales Bonus and the Second
Sales Bonus as described in Section 4.3.

1.50 “Sales Force” means, as applicable, the ZGEN Sales Force or the Bayer Sales
Force and “Sale Forces” means both the ZGEN Sales Force and the Bayer Sales
Force.

1.51 “Sales Representative” means an individual who is regularly employed by the
applicable Party on a full-time basis, whose skills, training and experience are
consistent with industry standards applicable to the promotion, marketing and
sale of a prescription pharmaceutical product, including meeting minimum
professional standards of a four-year college degree (B.A., B.S. or equivalent),
and who shall have (a) satisfactorily completed the product–specific training
developed by ZGEN and the ethics and compliance training required by the Party
by whom he or she is employed and (b) become adequately equipped and
knowledgeable with respect to the Initial Licensed Products, including the
Product Labels and the use of the Promotional Materials in accordance with this
Agreement and the Co-Promotion Plan.

1.52 “Samples” means units of Initial Licensed Product distributed or provided
at no cost to health care professionals in response to their request for
“evaluation and trial use” in treating patients in the Co-Promotion Territory as
part of the marketing, advertising and promotion of the Initial Licensed
Product.

1.53 “Sunset Period” is defined in Section 4.2.2.

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1.54 “Target Audience” means targets identified by the Coordination Committee as
being suitable targets for the promotion and Detail of Initial Licensed Products
in the Co-Promotion Territory, which targets may include health care
professionals with actual prescribing authority as well as other individuals or
entities that have a significant impact/influence on prescribing decisions.

1.55 “Term” is defined in Section 9.1.

1.55 “Third Party” means any individual or entity other than ZGEN or Bayer or an
Affiliate of either of them.

1.56 “Trademark” means any and all service marks, logos or trademarks and
trademark applications (whether or not registered) together with all good will
associated therewith, and any renewals, extensions or modifications thereto
either filed or used.

1.57 “United States” means the United States of America, together with its
territories and possessions.

1.58 “ZGEN Enabling Technology” has the meaning defined in the LCA.

1.59 “ZGEN Indemnitees” is defined in Section 8.2.1.

1.60 “ZGEN MSLs” is defined in Section 2.7.4.

1.61 “ZGEN Sales Force” is defined in Section 2.7.3.

ARTICLE 2

Co-Promotion Rights and Obligations

2.1 Co-Promotion Right

Subject to the terms and conditions of this Agreement:

(a) ZGEN hereby grants Bayer during the Active Period the co-exclusive right
with ZGEN to promote and Detail the Initial Licensed Products in the
Co-Promotion Territory.

(b) ZGEN grants Bayer a fully paid license during the Active Period under ZGEN’s
entire right, title and interest in and to the Product Trademarks Controlled by
ZGEN, to use and display such Product Trademarks solely in connection with the
marketing and promotion of the Initial Licensed Products in the Co-Promotion
Territory as contemplated in this Agreement. In order to maintain the value of
ZGEN’s Product Trademarks, corporate name and logo, Bayer will maintain quality
standards comparable to those it maintains for its own product-related
Trademarks, corporate name or logo, which, in any event, shall not be less than
reasonable, and Bayer will use ZGEN’s Product Trademarks consistent with Product
Trademark usage guidelines developed by ZGEN.

(c) Bayer grants ZGEN a fully paid license during the Active Period under
Bayer’s entire right, title and interest in and to the Product Trademarks
Controlled by Bayer to

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use and display such Product Trademarks solely in connection with the marketing
and promotion of the Initial Licensed Products in the Co-Promotion Territory as
contemplated in this Agreement. In order to maintain the value of Bayer’s
Product Trademarks, corporate name and logo, ZGEN will maintain quality
standards comparable to those it maintains for its own product-related
Trademarks, corporate name or logo, which, in any event, shall not be less than
reasonable, and ZGEN will use Bayer’s Product Trademarks consistent with Product
Trademark usage guidelines developed by Bayer.

2.2 Responsibilities Reserved to ZGEN

(a) ZGEN shall have sole responsibility for:

(i) strategic decisions relating to marketing, advertising and medical education
programs in support of the Initial Licensed Products in the Co-Promotion
Territory;

(iii) pricing of the Initial Licensed Products in the Co-Promotion Territory,
including any discounts, rebates or other deviations from the established
pricing;

(iv) distribution and delivery of the Initial Licensed Products to customers in
the Co-Promotion Territory;

(v) regulatory matters relating to the Initial Licensed Products in the
Co-Promotion Territory; and

(vi) scientific publication strategies.

The Parties agree that ZGEN may make decisions regarding the foregoing matters
within its sole responsibility in its absolute discretion.

(b) In addition, ZGEN shall have sole responsibility for the matters listed in
this Section 2.2(b); provided that, ZGEN’s decisions relating to materials,
activities, campaigns and programs to be used or participated in by Bayer’s
Sales Force or Bayer’s MSLs shall be subject to review by Bayer’s Review Board
in accordance with Section 2.6. The matters include:

(i) all marketing, advertising and medical education programs in support of the
Initial Licensed Products in the Co-Promotion Territory, including the content
of Promotional Materials and Medical Education Materials;

(ii) public relation activities and campaigns;

(iii) supplementary non-personal promotional programs (such as compliance,
telemarketing and Internet activities);

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(iv) professional/medical education programs (including seminars, symposia,
participation at professional and medical conferences, and conventions,
physician advocacy programs and event marketing programs);

(v) ensuring that all materials, campaigns and programs comply with Applicable
Laws; and

(vi) product-related training.

(c) Any responsibilities delegated to the Coordination Committee pursuant to
Section 2.3.4 shall be subject to the decision-making mechanism described in
Section 2.3.5.

(d) Bayer shall have no authority independent of ZGEN to:

(i) conduct any form of direct-to-consumer promotion related to Initial Licensed
Products in the Co-Promotion Territory;

(ii) schedule or manage conference involvement pertaining to Initial Licensed
Products in the Co-Promotion Territory;

(iii) establish or manage advisory boards and opinion leaders for Initial
Licensed Products in the Co-Promotion Territory;

(iv) conduct or sponsor continuing medical education programs, paid speaker
programs, or symposia related to Initial Licensed Products in the Co-Promotion
Territory; or

(v) provide grants with respect to Initial Licensed Products in the Co-Promotion
Territory.

2.3 Coordination Committee

2.3.1 Formation of Coordination Committee. Within ten (10) days following the
Effective Date, the Parties will establish a committee (the “Coordination
Committee”) to coordinate the co-promotion and medical education activities to
be undertaken by the Parties in the Co-Promotion Territory during the Active
Period. The Coordination Committee may form such subcommittees as it, from time
to time, deems appropriate, including the CPT and MET. The Coordination
Committee and its subcommittees shall be disbanded upon expiration or earlier
termination of the Active Period. The Coordination Committee will be comprised
of at least three (3) members representing each Party, one of whom shall be such
Party’s Alliance Manager, and all of whom shall have appropriate expertise and
seniority to enable them to make decisions on behalf of the Parties with respect
to the issues falling within the jurisdiction of the Coordination Committee.
Either Party, in its sole discretion, may substitute members of the Coordination
Committee from time to time upon written notice to the other Party; provided,
however that, without limiting the generality of the foregoing, a key objective
with respect to membership in the Coordination Committee shall be preserving
balance and continuity.

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2.3.2 Coordination Committee Meetings. The Coordination Committee will establish
its own procedural rules for its operation, consistent with the terms of this
Section 2.3.2. Regular meetings of the Coordination Committee will be held
either by phone, videoconference or in person at least once per calendar
quarter, unless the Coordination Committee chooses to reduce the frequency of
such meetings. Unless otherwise agreed by the members of the Coordination
Committee, the location of Coordination Committee meetings will alternate
between ZGEN’s offices in Seattle, Washington and, until December 31, 2007,
Bayer’s offices in West Haven, Connecticut and, on and after January 1, 2008,
Bayer’s offices in Wayne, New Jersey. The Coordination Committee shall be
chaired at each meeting by a representative of ZGEN. The chairperson of the
Coordination Committee will be responsible for calling regular meetings of the
Coordination Committee and for leading the meetings. ZGEN’s Alliance Manager
will serve as secretary of that meeting. Promptly following each meeting, the
secretary of the meeting will prepare and distribute to all members of the
Coordination Committee the written minutes of the meeting. The minutes will
provide a reasonably detailed description of the meeting discussions and a list
of any actions, decisions or determinations approved by the Coordination
Committee. The minutes of each Coordination Committee meeting will be approved
or disapproved by each Party (on behalf of such Party’s Coordination Committee
members) promptly following receipt, and revised as necessary, for approval at
the next meeting. Final minutes of each meeting will be distributed to the
members of the Coordination Committee by the chairperson prior to commencement
of the next meeting. Each Party shall bear its own costs associated with its
participation on the Coordination Committee, including all travel and living
expenses.

2.3.3 Attendance at Meetings. If a Party’s representative is unable to attend a
meeting, that Party may designate an alternate representative with
decision-making authority for that Party to attend the meeting. Any decision
made by that attendee will be considered to be a decision made by the absent
representative. In addition, each Party may, at its discretion (and with the
consent of the other Party), invite additional employees, consultants or
scientific advisors to attend any Coordination Committee meeting, provided that
any individual so invited will not have any voting power at such Coordination
Committee meeting and is subject to obligations of confidentiality comparable to
Article 6. A quorum for each Coordination Committee meeting will consist of at
least two (2) members from each Party.

2.3.4 Responsibilities of Coordination Committee. The Coordination Committee
shall have responsibility for coordinating the promotional and medical
educational activities of the Parties under this Agreement in the Co-Promotion
Territory during the Active Period, including:

(a) discussing strategies (i) for marketing the Initial Licensed Products in the
Co-Promotion Territory, including allocation of the Parties’ responsibility for
such marketing activities; (ii) relating to Detailing activity, including the
Target Audience for such Details; and (iii) for scientific interchange with
physician thought leaders relating to the Initial Licensed Products in the
Co-Promotion Territory;

(b) approving (i) the Co-Promotion Plan and Medical Education Plan; (ii) the
proposed Individual Annual Revenue Threshold for each Party; and
(iii) adjustments under Sections 2.7.3 and 2.7.5; and

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(c) such other matters as the Parties may delegate.

2.3.5 Coordination Committee Decision-Making. The Coordination Committee shall
operate by consensus. The representatives from each Party on the Coordination
Committee shall have collectively one (1) vote on behalf of that Party.

(a) If the Coordination Committee cannot reach consensus on any matter within
the area of responsibility of the Coordination Committee as described in
Section 2.3.4(b) or (c) (a “Dispute”), the Dispute shall be referred for
resolution to the Chief Executive Officer of ZGEN and the Head of the
responsible Business Unit within the Pharmaceutical Division of Bayer in
accordance with Section 10.2. Until a Dispute is resolved in accordance with
Section 10.2, the Parties shall refrain from taking action on the matter;
provided, however, that if the matter in Dispute pertains to any activity that
is required by Applicable Law, the affected Party shall be entitled to conduct
such activity as so required.

(b) Any Dispute that cannot be resolved in accordance with Section 10.2 shall be
resolved by an Expert in accordance with Section 10.3.

2.4 Co-Promotion Team; Co-Promotion Plan

2.4.1 Formation of CPT. Within ten (10) days following the Effective Date, the
Parties will establish a co-promotion team (the “CPT”), as the standing
sub-committee of the Coordination Committee for co-promotion activities. Each
Party may appoint as many members to the CPT it feels is necessary or useful to
perform the functions of the CPT. Either Party, in its sole discretion, may
substitute members of the CPT from time to time upon written notice to the other
Party. The CPT will establish its own rules for operation, including rules
relating to procedure and attendance, consistent with those of the Coordination
Committee.

2.4.2 Responsibilities of CPT. The CPT shall have responsibility for the
day-to-day coordination of the co-promotion activities of the Parties under this
Agreement in the Co-Promotion Territory during the Active Period, including:

(a) discussing strategies for marketing the Initial Licensed Products in the
Co-Promotion Territory;

(b) developing the Co-Promotion Plan and potential amendments thereto, and
submitting them to the Coordination Committee for approval;

(c) reviewing progress against the current Co-Promotion Plan;

(d) establishing individual and area performance measures for the activities of
the respective Sales Forces; and

(e) discussing Samples practices, if any.

2.4.3 Co-Promotion Plan. As provided in, and without limiting the generality of,
Section 2.4.2, the CPT shall develop the Co-Promotion Plan. The CPT shall
develop the initial Co-Promotion Plan prior to the Launch Date and amend and
update the Co-Promotion

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Plan annually during the Active Period, or more frequently as determined by the
Coordination Committee. The Co-Promotion Plan for the year scheduled to be the
final year of the Active Period shall be submitted to the Coordination Committee
ninety (90) days in advance of the start of such year and shall specifically
address transitioning all promotional activities to ZGEN, including phasing out
the use of Bayer’s Product Trademarks, in an orderly and efficient manner. The
CPT may address and include any of the activities or responsibilities set forth
in Section 2.4.2 in the Co-Promotion Plan and, to the extent included therein,
the Co-Promotion Plan will state the responsibilities of each Party with respect
to the same. Neither Party shall make any material change in any Co-Promotion
Plan without the prior approval of the CPT.

2.4.4 CPT Decision-Making. The representatives from each Party on the CPT shall
have collectively one (1) vote on behalf of that Party. Members of the CPT shall
endeavor to reach decisions via consensus; provided that if they are unable to
do so a member from either Party may refer the matter to the Coordination
Committee for resolution.

2.5 Medical Education Team; Medical Education Plan

2.5.1 Formation of MET. Within ten (10) days following the Effective Date, the
Parties will establish a medical education team (the “MET”), as the standing
sub-committee of the Coordination Committee for medical education activities.
Each Party may appoint as many members to the MET it feels is necessary or
useful to perform the functions of the MET. Either Party, in its sole
discretion, may substitute members of the MET from time to time upon written
notice to the other Party. The MET will establish its own rules for operation,
including rules relating to procedure and attendance, consistent with those of
the Coordination Committee.

2.5.2 Responsibilities of MET. The MET shall have responsibility for the
day-to-day coordination of the medical education activities of the Parties under
this Agreement in the Co-Promotion Territory during the Active Period,
including:

(a) discussing strategies for scientific interchange with physician thought
leaders relating to the Initial Licensed Products in the Co-Promotion Territory;

(b) developing the Medical Education Plan and potential amendments thereto, and
submitting them to the Coordination Committee for approval;

(c) reviewing progress against the current Medical Education Plan; and

(d) establishing individual and area performance measures for MSL activities.

2.5.3 Medical Education Plan. As provided in, and without limiting the
generality of, Section 2.5.2, the MET shall develop the Medical Education Plan.
The MET shall develop the initial Medical Education Plan prior to the Launch
Date and amend and update the Medical Education Plan annually during the Active
Period, or more frequently as determined by the Coordination Committee. The
Medical Education Plan for the year scheduled to be the final year of the Active
Period shall be submitted to the Coordination Committee ninety (90) days in
advance of the start of such year and shall specifically address transitioning
all medical education activities to ZGEN, including phasing out the use of
Bayer’s Product Trademarks, in an orderly and efficient manner. The MET may
address and include any of the activities or responsibilities

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set forth in Section 2.5.2 in the Medical Education Plan and, to the extent
included therein, the Medical Education Plan will state the responsibilities of
each Party with respect to the same. Neither Party shall make any material
change in any Medical Education Plan without the prior approval of the MET.

2.5.4 MET Decision-Making. The representatives from each Party on the MET shall
have collectively one (1) vote on behalf of that Party. Members of the MET shall
endeavor to reach decisions via consensus; provided that if they are unable to
do so a member from either Party may refer the matter to the Coordination
Committee for resolution.

2.6 Review Board

2.6.1 Review. Any materials (including program manuals) subject to the review by
Bayer’s Review Board pursuant to Section 2.2(b) shall be submitted to Bayer’s
Review Board in proof form at least [    *    ] days prior to intended use.
Bayer’s Review Board will review the materials submitted and give its comments
to ZGEN no later than [    *    ] days after receipt. The Parties’ Content
Compliance Contacts may agree to alternative time periods, taking into
consideration the nature and use of the materials to be reviewed. ZGEN agrees to
take into consideration any comments received during the foregoing time period.
If ZGEN disagrees with any comments received by Bayer, Section 2.7.2(d) may
apply (i.e., Bayer’s Sales Force and Bayer’s MSLs will have no obligation to use
the relevant materials or participate in the relevant programs).

2.6.2 Content Compliance Contacts. The Parties’ Content Compliance Contacts may
from time to time exchange or discuss their respective internal guidelines and
such other matters as may facilitate the review of materials by Bayer’s Review
Board.

2.7 Co-Promotion Efforts and Medical Education Efforts

2.7.1 Efforts. The principal objective of the Parties under this Agreement is to
maximize the Commercialization of the Initial Licensed Products in the
Co-Promotion Territory. Following receipt of all Regulatory Approvals in the
Co-Promotion Territory with respect to each Initial Licensed Product, the
Parties shall use Commercially Reasonable Efforts to (a) promote such Initial
Licensed Product in the Co-Promotion Territory, (b) engage in scientific
interchange with physician thought leaders relating to Initial Licensed Product
in the Co-Promotion Territory and (c) to otherwise fulfill their obligations
under this Agreement.

2.7.2 Compliance and Training.

(a) Each Party agrees that all activities under this Agreement by it or on its
behalf, including training, Detailing, Promotion Related Activities, Medical
Education Activities, record-keeping, reporting, collection of consumer data (if
any), sales activities under Section 3.1.1 and provision of Samples, will be
conducted in compliance with the Product Labels, Regulatory Approvals,
Promotional Materials or Medical Education Materials (as applicable), a Party’s
promotional practice or medical education guidelines, if any, and all Applicable
Laws, including applicable PhRMA marketing practices guidelines.

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(b) At all times during the Active Period after the Launch Date, each Party
shall maintain a corporate compliance program consistent with 2003 Health and
Human Services (HHS) Office of Inspector General (OIG) Compliance Program
Guidance for Pharmaceutical Manufacturers, to the extent applicable to the
activities of such Party hereunder. Without prejudice to the generality of the
foregoing, each Party’s corporate compliance program shall include written
policies requiring adherence to the 2002 PhRMA Code on Interactions with
Healthcare Professionals, and training for field representatives on such policy.

(c) The Sales Forces and MSLs of each Party shall participate in a
product-related training to be developed by ZGEN, subject to Section 2.2(b) and
Section 2.6. In addition, each Party will maintain a broad training program,
including training on proper promotion and marketing techniques, ethics, and
compliance with Applicable Laws in a manner consistent with all applicable
pharmaceutical industry standards. Within a reasonable time period after the
Effective Date, the Parties shall meet and confer to review and discuss each
Party’s ethics and compliance training program.

(d) No Party shall be required to undertake any obligation, or incur any cost or
reimbursement obligation, in connection with any activity under this Agreement
that such Party believes, in good faith, (i) may violate any Applicable Law or
any Corporate Integrity Agreement entered into by such Party with OIG, or
(ii) does not meet its internal pharmaceutical promotional guidelines. The
Parties will exchange their internal pharmaceutical promotional guidelines, if
any, within thirty (30) days after the Effective Date and thereafter within
thirty (30) days after such pharmaceutical promotional guidelines are approved
or modified.

2.7.3 ZGEN Sales Force. ZGEN will establish a sales force of Sales
Representatives responsible for promoting and Detailing Initial Licensed
Products in the Co-Promotion Territory in accordance with this Agreement (the
“ZGEN Sales Force”). The ZGEN Sales Force shall consist of [    *    ] Sales
Representatives employed by ZGEN, with final allocation of effort being at least
sufficient to cover the market potential for the Initial Licensed Product
allocated to the ZGEN Sales Force. Market potential shall be allocated to ZGEN
based on a percentage obtained by dividing ZGEN’s Individual Annual Revenue
Threshold (as determined in accordance with Section 3.2.2) by the Annual Revenue
Threshold. Following the Launch Date, ZGEN will, subject to review and
adjustment, if any, under this Section 2.7.3, devote [    *    ] percent
([    *    ]%) of the aggregate effort of ZGEN’s Sales Force to fulfill the
foregoing obligation. On a regular basis, ZGEN will perform a review and
determine whether the effort put forth by ZGEN’s Sales Force is sufficient to
cover the market potential for the Initial Licensed Product allocated to the
ZGEN Sales Force, based on then current business and market conditions, and will
determine what adjustments, if any, are required to meet the foregoing
obligation. ZGEN will report any adjustments that ZGEN proposes to make,
together with a justification for such adjustments, to the Coordination
Committee. If the Coordination Committee does not agree that such adjustments
are appropriate, then such matter shall be considered a Dispute and shall be
resolved as set forth in Section 2.3.5.

2.7.4 ZGEN MSLs. ZGEN has a group of [    *    ] MSLs, subject to normal
operating fluctuations in staffing due to vacancies or otherwise, who will be
responsible for scientific interchange (as opposed to product promotion) with
physician thought leaders relating to the Initial Licensed Products in the
Co-Promotion Territory in accordance with this Agreement (the “ZGEN MSLs”).

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2.7.5 Bayer Sales Force. Bayer will establish or designate a sales force of
Sales Representatives responsible for promoting and Detailing Initial Licensed
Products in the Co-Promotion Territory in accordance with this Agreement (the
“Bayer Sales Force”). The Bayer Sales Force shall consist of all the sales
representatives in Bayer’s Hospital/Surgical sales force group (as of the
Effective Date, [    *    ]), with final allocation of effort being at least
sufficient to cover the market potential for the Initial Licensed Product
allocated to the Bayer Sales Force. Market potential shall be allocated to Bayer
based on a percentage obtained by dividing Bayer’s Individual Annual Revenue
Threshold (as determined in accordance with Section 3.2.2) by the Annual Revenue
Threshold. Following the Launch Date, Bayer will, subject to review and
adjustment, if any, under this Section 2.7.5, devote [    *    ] percent
([    *    ]%) of the aggregate effort of Bayer’s Sales Force to fulfill the
foregoing obligation. On a regular basis, Bayer will perform a review and
determine whether the effort put forth by Bayer’s Sales Force is sufficient to
cover the market potential for the Initial Licensed Product allocated to the
Bayer Sales Force, based on then current business and market conditions, and
will determine what adjustments, if any, are required to meet the foregoing
obligation. Bayer will report any adjustments that Bayer proposes to make,
together with a justification for such adjustments, to the Coordination
Committee. If the Coordination Committee does not agree that such adjustments
are appropriate, then such matter shall be considered a Dispute and shall be
resolved as set forth in Section 2.3.5.

2.7.6 Bayer MSLs. Bayer has a group of MSLs who will be responsible for
scientific interchange (as opposed to product promotion) with physician thought
leaders relating to the Initial Licensed Products in the Co-Promotion Territory
in accordance with this Agreement (the “Bayer MSLs”). As of the Effective Date,
Bayer has a group of [    *    ] MSLs who will support the Initial Licensed
Products, among other products.

2.7.7 CSOs. Bayer may not employ a CSO to fulfill any of its Detail or other
obligations under this Agreement in the Co-Promotion Territory without the prior
written consent of ZGEN. ZGEN may employ a CSO to fulfill any of its Detail or
other obligations under this Agreement in the Co-Promotion Territory. In any
event, each Party may only use a CSO to fulfill some of its Detail or other
obligations under this Agreement in the Co-Promotion Territory if such CSO is
reputable and experienced. If a Party engages a CSO, such Party will require the
CSO to comply in all material respects with the obligations of such Party as
contained herein and such Party will remain responsible for the full and
complete performance of all of its obligations and duties under this Agreement,
whether the obligations and duties are performed by such Party or by its CSO.

2.7.8 Responsibility for Sales Forces and MSLs. In implementing its obligations
under this Agreement and subject to compliance with the other provisions of this
Agreement (including Section 2.7.2), each Party shall have sole discretion as to
the manner (which shall not be inconsistent with the Co-Promotion Plan, Medical
Education Plan or directions of the Coordination Committee) in which it promotes
and Details, or engages in scientific interchange relating to, the Initial
Licensed Products in the Co-Promotion Territory. Each Party shall have sole
authority and responsibility for recruiting, hiring, training (provided that all
Bayer’s Sales Representatives shall participate in the product-related training
developed

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by ZGEN, subject to Section 2.2(b) and Section 2.6), managing, compensating
(including, subject to Section 2.7.9, designing and paying for all benefits,
wages and incentives programs and paying for all workers’ compensation and
employment taxes), disciplining and firing (notwithstanding Section 2.7.12) and
otherwise controlling the persons comprising its Sales Force and MSLs in
accordance with such Party’s standard procedures. Subject to the terms and
conditions of this Agreement, each Party will provide the day-to-day management
of its Sales Force and MSLs, including furnishing administrative support,
transport, lodging, establishing monitoring and recordkeeping practices, and
assuring its Sales Force and MSLs understand and comply with this Agreement and
Applicable Laws.

2.7.9 Sales Force Incentives. The aggregate incentive compensation for the Bayer
Sales Force shall be structured to provide that the Initial Licensed Product’s
weighting shall be at least [    *    ] percent ([    *    ]%) of the aggregate
target incentive compensation available during each calendar year during the
Active Period assuming all incentive goals are fully accomplished. The aggregate
incentive compensation for the ZGEN Sales Force shall be structured to provide
that the Initial Licensed Product’s weighting shall be at least [    *    ]
percent ([    *    ]%) of the aggregate target incentive compensation available
during each calendar year during the Active Period assuming all incentive goals
are fully accomplished. Each Party shall provide the other Party with a written
report on its incentive compensation program in June and December of each year
of the Active Period, and such reports shall be discussed by the Coordination
Committee at the meeting immediately following distribution of the report.

2.7.10 [    *    ] Products. During the Active Period, Bayer’s Sales Force shall
not promote, market or sell any [    *    ] product in the Co-Promotion
Territory without the consent of ZGEN, such consent not to be unreasonably
withheld. For the avoidance of doubt, Trasylol is not a [    *    ] product for
purposes of this provision.

2.7.11 Coordinating, Monitoring Sales Force Activities and MSL Activities.

(a) The CPT or MEC, as the case may be, shall establish reasonable procedures
for monitoring Sales Force activities and MSL activities to ensure that each
Party is complying with its obligations under this Agreement, and each Party
agrees to make available to the other Party such information as may reasonably
be required in order for the other Party to monitor compliance with this
Agreement, subject to the reviewing Party’s compliance with Article 6. All face
to face contacts by Sales Representatives and MSLs will be logged into and
tracked via a field force automation tool for quarterly and annual reporting.

(b) The Coordination Committee will review commission target and automation tool
reports completed by members of the Sales Forces to determine whether the
Parties are meeting their commitments described in the Co-Promotion Plan.
Similarly, the Coordination Committee will review automation tool reports
completed by the MSLs to determine whether the Parties are meeting their
commitments described in the Medical Education Plan.

(c) The CPT will determine whether and when Sales Force meetings regarding
Initial Licensed Products should be jointly or separately held by the Parties
and will

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coordinate the timing of joint Sales Force meetings. Similarly, the MET will
determine whether and when MSL meetings regarding Initial Licensed Products
should be jointly or separately held by the Parties and will coordinate the
timing of joint MSL meetings.

2.7.12 Sales Force and MSL Issues. Should either Party (the “First Party”)
identify a member of the other Party’s Sales Force (including its management) or
an MSL of the other Party that the First Party believes is damaging
relationships with health care professionals or damaging the Initial Licensed
Product brand, the First Party shall promptly notify the other Party in writing
of such belief and the basis therefor. Following such notification and a
reasonable opportunity to investigate the relevant facts, the Parties shall meet
to discuss such belief and basis. The notified Party shall take such action as
it deems reasonable in the situation in response to the First Party’s concerns
about such individual.

2.7.13 Samples. ZGEN will, with input from the Coordination Committee, determine
whether and to what extent Samples will be utilized as a part of the promotional
effort for Initial Licensed Products. ZGEN will establish and the Parties will
follow a procedure for forecasting needs, ordering and delivery of Samples. ZGEN
will supply all Samples to be distributed by the Parties’ respective Sales
Forces, in accordance with such forecasts and orders, at ZGEN’s cost and
expense. In the event in any month there is shortage of Samples, unless
otherwise agreed by the Parties, available Samples will be allocated in
accordance with each Party’s Individual Annual Revenue Threshold (expressed as a
percentage of the corresponding Annual Revenue Threshold). Each Party shall use
Samples strictly in accordance with the then current Co-Promotion Plan and shall
transport, store, handle, and distribute all Samples in compliance with all
Applicable Laws and with the procedures established by the Coordination
Committee.

2.7.14 Promotional Materials, Medical Education Materials and Other Materials.

(a) All Promotional Materials, Medical Education Materials, product-related
training program materials and other supplies, information and materials to be
used by the Parties’ Sales Forces or MSLs, as the case may be, will be utilized
by the Parties only for purposes of this Agreement and in accordance with the
Co-Promotion Plan, Medical Education Plan or as otherwise agreed by the
Coordination Committee.

(b) ZGEN shall, at its cost and expense (subject to Section 4.4), supply all
such Promotional Materials, Medical Education Materials, product-related
training program materials and other supplies, information and materials, in
accordance with such forecasts and orders. The Coordination Committee will
establish and the Parties will follow a procedure for forecasting needs,
ordering and delivery of all such Promotional Materials, Medical Education
Materials, product-related training program materials and other supplies,
information and materials. If ZGEN does not have a sufficient supply in
inventory to satisfy requests for any Promotional Materials or Medical Education
Materials, unless otherwise agreed by the Parties, the available supply of such
Promotional Materials and Medical Education Materials will be allocated in
accordance with each Party’s Individual Annual Revenue Threshold (expressed as a
percentage of the corresponding Annual Revenue Threshold).

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(c) ZGEN shall have sole responsibility for development and production of
Promotional Materials and Medical Education Materials. All Promotional Materials
and Medical Education Materials to be used by Bayer’s Sales Force or Bayer’s
MSLs shall be subject to review by Bayer’s Review Board in accordance with
Section 2.6. Bayer agrees that it will not create any Promotional Materials or
Medical Education Materials except as authorized by ZGEN. Bayer also agrees that
it will not copy or alter in any manner (including rearranging, underlining,
highlighting, recording notes) the Promotional Materials or Medical Education
Materials nor will it allow its Sales Force or MSLs to use any such
unauthorized, copied, or altered Promotional Materials or Medical Education
Materials.

(d) If ZGEN determines that any Promotional Materials or Medical Education
Materials may no longer be used or distributed, Bayer agrees that it will not
allow its Sales Force or MSLs to use or distribute such Promotional Materials or
Medical Education Materials after the no-use date identified by ZGEN.

2.7.15 Product Trademarks. Subject to Section 2.1(b) and (c), during the Active
Period, unless prohibited by Applicable Law, all Promotional Materials and
Medical Education Materials in the Co-Promotion Territory to be used by Bayer’s
Sales Force or Bayer’s MSLs shall bear Bayer’s Product Trademark in addition to
ZGEN’s Product Trademark, which Product Trademarks shall, subject to compliance
with Applicable Law, be displayed with equal prominence. For the sake of
clarity, neither (a) FDA-approved prescribing information nor (b) Product Labels
shall bear Bayer’s Product Trademark.

2.8 License and Collaboration Agreement

This Agreement is designed to supplement the LCA with respect to the
Commercialization of the Initial Licensed Products in the Co-Promotion Territory
during the Term. It is not intended to amend or otherwise modify the terms of
the LCA and each Party shall retain all of its rights with respect to Licensed
Products, including with respect to the Initial Licensed Products outside the
Co-Promotion Territory, as set forth in the LCA.

2.9 Delegation to Affiliates

A Party may delegate performance of its obligations under this Agreement to an
Affiliate (for so long as such person or entity remains an Affiliate) without
the approval of the other Party; provided that it guarantees performance of this
Agreement by its Affiliates. Wherever in this Agreement the Parties delegate
responsibility to Affiliates, the Parties agree that the Affiliates may not make
decisions inconsistent with this Agreement, or amend the terms of this Agreement
or act contrary to its terms in any way. In case any Affiliate of a Party
materially breaches this Agreement, the non-breaching Party will promptly notify
the other Party of the breach, including a description of the breach and the
identity of the Affiliate, and thereafter the non-breaching Party will have the
rights under Section 9.2.1 directly against the other Party.

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ARTICLE 3

Initial Licensed Product Sales and Revenue Forecasts

3.1 Initial Licensed Product Sales

3.1.1 Sales Responsibility. ZGEN shall have the sole right in the Co-Promotion
Territory to (1) receive, accept and fill orders for Initial Licensed Products,
(2) distribute the Initial Licensed Products to customers, (3) control
invoicing, order processing and collection of accounts receivable for Initial
Licensed Product sales, and (4) record Initial Licensed Product sales in its
books of account. ZGEN shall determine commercial terms and conditions with
respect to the sale and distribution of Initial Licensed Products in the
Co-Promotion Territory, including matters such as the price at which the Initial
Licensed Products shall be sold and whether any discounts, rebates or other
deductions should be made, paid or allowed. ZGEN will maintain all
responsibility for returns, charge-backs, and rebates on Initial Licensed
Product sales in the Co-Promotion Territory. ZGEN will manufacture, or have
manufactured, Initial Licensed Products and will arrange and be solely
responsible for shipment, distribution and delivery of the Initial Licensed
Products in the Co-Promotion Territory.

3.1.2 Misdirected Orders. If, for any reason, Bayer receives orders in the
Co-Promotion Territory for Initial Licensed Products, Bayer shall forward such
orders to ZGEN (or if directed by ZGEN to ZGEN’s wholesalers or distributors) as
soon as practicable.

3.1.3 Product Returns. If any quantities of the Initial Licensed Product are
returned to Bayer in the Co-Promotion Territory, Bayer shall notify ZGEN as soon
as practicable and shall ship such returned Initial Licensed Product to the
facility designated by ZGEN, or, at ZGEN’s request, shall destroy such returned
Initial Licensed Product, in either case at ZGEN’s cost. Bayer, at its option,
may advise the customer who made the return that the Initial Licensed Product
should have been returned to ZGEN, but shall take no other actions with respect
to the return without ZGEN’s consent.

3.1.4 Recalls.

(a) Subject to this Section 3.1.4, a Recall in the Co-Promotion Territory shall
be the responsibility, and under the control, of ZGEN. Bayer shall provide all
pertinent records and such other assistance to ZGEN as ZGEN reasonably may
request to assist in effecting any Recall in the Co-Promotion Territory. In
addition, Bayer will maintain all records relating to the Recall for the period
required by legal requirements, but for no less than three (3) years. ZGEN shall
bear the costs of the Recall in the Co-Promotion Territory except to the extent
that a Recall results from the negligence or willful misconduct of Bayer.

(b) If either Party becomes aware of information about quantities of Initial
Licensed Product that may not conform to the specifications for the Initial
Licensed Product, or for which there are potential adulteration, misbranding
and/or other issues regarding safety or effectiveness, or for which the Initial
Licensed Product itself is alleged or proven to be the subject of a Recall in
any country in the world, it will promptly so notify the other Party. The
Parties will meet (in person, by telephone or otherwise) to discuss the
circumstances of a Recall in the Co-Promotion Territory and to consider
appropriate courses of action with respect such Recall; provided that ZGEN may
take immediate action when regulatory time frames or public safety
considerations so require.

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(c) If ZGEN fails to conduct a Recall in the Co-Promotion Territory after Bayer
gives written notice that, in the good faith opinion of Bayer, a Recall should
be undertaken to address specific issues of Initial Licensed Product safety
(“Safety Issues”), which written notice identifies the specific Safety Issues,
then (i) Bayer shall have no obligation to defend or indemnify ZGEN under
Article 8 for any Losses arising in connection with the Safety Issues for
Initial Licensed Product that was sold, promoted or distributed in the
Co-Promotion Territory after receiving such written notice from Bayer, (ii) ZGEN
will defend and indemnify Bayer under Article 8 for any such Losses, and
(iii) Bayer will have no further obligations under this Agreement to Detail or
otherwise promote the relevant Initial Licensed Product unless and until the
Safety Issues are resolved in the good faith opinion of Bayer.

3.2 Net Sales Threshold

3.2.1 Annual Revenue Threshold The Parties have established the following
threshold for annual aggregate Net Sales (shown in Millions of Dollars) of all
Initial Licensed Products sold in the Co-Promotion Territory during each of the
years set forth below (the “Annual Revenue Threshold”):

 

     2008    2009    2010    2011    2012    2013

Annual Revenue Threshold

   [    *    ]    [    *    ]    [    *    ]    [    *    ]    [    *    ]   
[    *    ]

The Parties shall use Commercially Reasonable Efforts to promote the Initial
Licensed Products in the Co-Promotion Territory during the Active Period with
the goal of exceeding the Annual Revenue Threshold set forth above for each year
during the Active Period. In addition, ZGEN shall use Commercially Reasonable
Efforts to promote the Initial Licensed Products in the Co-Promotion Territory
during the Sunset Period with the goal of exceeding the Annual Revenue Threshold
set forth above for each year during the Sunset Period.

3.2.2 Individual Annual Revenue Thresholds. For each year during the Active
Period, the Coordination Committee shall propose for the approval of the Parties
an individual annual Net Sales threshold that each Party will seek to exceed
through the promotion and Detailing efforts of such Party’s Sales Force under
this Agreement (each, an “Individual Annual Revenue Threshold”). The Individual
Annual Revenue Thresholds for the first year of the Active Period will be
derived by allocating between the Parties the market potential of the Initial
Licensed Products [    *    ], with the sum of the Parties’ Individual Annual
Revenue Thresholds for the first year of the Active Period equaling the Annual
Revenue Threshold for the first year of the Active Period. The Parties shall
review and adjust the Parties’ Individual Annual Revenue Thresholds annually
during the Active Period, or more frequently as determined by the Parties. In
allocating the market potential and establishing each Party’s Individual Annual
Revenue Threshold for subsequent years, the Coordination Committee shall
consider all material factors, including [    *    ], each Party’s performance
against its Individual Annual Revenue Threshold for the prior year and such
other internal and external factors as may affect the thrombin market.

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3.2.3 Extension of Active Period. Bayer may extend the Active Period by
[    *    ] until the last day of the calendar quarter that contains the
[    *    ] anniversary of the Launch Date upon giving written notice to ZGEN on
or before the ninetieth (90th) day following the last day of the calendar
quarter that contains the [    *    ] anniversary of the Launch Date if
cumulative Net Sales during the [    *    ] period commencing the first day of
the first full calendar quarter after the Launch Date do not exceed [    *    ]
percent ([    *    ]%) of the sum of the Annual Revenue Thresholds set forth in
the table in Section 3.2.1 for the years [    *    ] and [    *    ] (i.e., if
such cumulative Net Sales during such [    *    ] period do not exceed
[    *    ] Dollars ($[    *    ])). Notwithstanding the foregoing, if the
reason such cumulative Net Sales do not exceed such [    *    ]% level is due
solely to the failure of Bayer to meet its Individual Annual Revenue Threshold,
and provided that ZGEN has met its Individual Annual Revenue Threshold, during
such [    *    ] period (as such Individual Annual Revenue Thresholds are
established pursuant to Section 3.2.2 for [    *    ] and [    *    ]), then the
Active Period shall not be extended as provided in this Section 3.2.3. In
addition to the reports to be provided pursuant to Section 4.2.3, ZGEN shall
provide a report of cumulative Net Sales for the purposes of this Sections 3.2.3
as soon as reasonably practicable (not to exceed sixty (60) days) following the
last day of the calendar quarter that contains the [    *    ] anniversary of
the Launch Date.

3.2.4 Early Termination of Active Period.

(a) ZGEN may terminate the Active Period as of the last day of the calendar
quarter that contains the [    *    ] anniversary of the Launch Date upon giving
written notice to Bayer on or before the ninetieth (90th) day following the last
day of the calendar quarter that contains the [    *    ] anniversary of the
Launch Date if cumulative Net Sales to accounts assigned to the Bayer Sales
Force during the [    *    ] period commencing the first day of the first full
calendar quarter after the Launch Date do not exceed [    *    ] percent
([    *    ]%) of the sum of Bayer’s Individual Annual Revenue Threshold
established pursuant to Section 3.2.2 for [    *    ] and [    *    ]; provided
that cumulative Net Sales to accounts assigned to the ZGEN Sales Force during
such [    *    ] period are equal to or exceed [    *    ] percent
([    *    ]%) of the sum of ZGEN’s Individual Annual Revenue Threshold
established pursuant to Section 3.2.2 for [    *    ] and [    *    ]. If the
Active Period is terminated pursuant to this Section 3.2.4(a), the commission
payable to Bayer during the Sunset Period pursuant to Section 4.2.2 (including
the cap thereon) shall be reduced in proportion to Bayer’s performance during
such [    *    ] period against its Individual Annual Revenue Threshold
established for [    *    ] and [    *    ]. For example, assuming the Launch
Date is in the [    *    ], if cumulative Net Sales to accounts assigned to the
Bayer Sales Force during [    *    ] and [    *    ] equal [    *    ] percent
([    *    ]%) of the sum of Bayer’s Individual Annual Revenue Threshold for
[    *    ] and [    *    ], Bayer will receive [    *    ] percent
([    *    ]%) of the commission that would otherwise be payable during the
Sunset Period pursuant to Section 4.2.2 and the cap on annual aggregate
commission shall be [    *    ] Dollars ($[    *    ]) per year.

(b) Bayer may terminate the Active Period as of the last day of the calendar
quarter that contains the [    *    ] anniversary of the Launch Date upon giving
written notice to ZGEN on or before the ninetieth (90th) day following the last
day of the calendar quarter that contains the [    *    ] anniversary of the
Launch Date if cumulative Net Sales to accounts assigned to the ZGEN Sales Force
during the [    *    ] period commencing the first day of the first full
calendar quarter after the Launch Date do not exceed [    *    ] percent
([    *    ]%) of the

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sum of ZGEN’s Individual Annual Revenue Threshold established pursuant to
Section 3.2.2 for [    *    ] and [    *    ]; provided that cumulative Net
Sales to accounts assigned to the Bayer Sales Force during such [    *    ]
period are equal to or exceed [    *    ] percent ([    *    ]%) of the sum of
Bayer’s Individual Annual Revenue Threshold established pursuant to
Section 3.2.2 for [    *    ] and [    *    ]. If the Active Period is
terminated pursuant to this Section 3.2.4(b), the commission payable to Bayer
during the Sunset Period pursuant to Section 4.2.2 shall be increased to [ * ]
that would have been paid under Section 4.2.1 (with no cap thereon) i.e., rather
than [    *    ] percent ([    *    ]%) of the commission set forth in
Section 4.2.1, [    *    ] percent ([    *    ]%) of the commission set forth in
Section 4.2.1 shall be payable.

(c) In addition to the reports to be provided pursuant to Section 4.2.3, ZGEN
shall provide a report of cumulative Net Sales for the purposes of this Sections
3.2.4 as soon as reasonably practicable (not to exceed sixty (60) days)
following the last day of the calendar quarter that contains the [    *    ]
anniversary of the Launch Date.

ARTICLE 4

Payments; Reports; Audits

4.1 Milestone Payment

In consideration of the rights granted to Bayer under this Agreement and for the
successful achievement of the following milestone, Bayer shall pay ZGEN or its
assignee a one-time milestone payment of Forty Million Dollars ($40,000,000)
within thirty (30) days after the first Regulatory Approval by the FDA of any
Initial Licensed Product. Such milestone payment will be non-refundable and
non-creditable against any fees or payments due ZGEN with respect to Licensed
Product under this Agreement or the LCA.

4.2 Commission

4.2.1 Active Period Commission. During the Active Period, ZGEN shall pay Bayer a
commission of [    *    ] percent ([    *    ]%) of the portion of annual
aggregate Net Sales that is less than the Annual Revenue Threshold and a
commission of twenty percent (20%) of the portion of annual aggregate Net Sales
that is greater than the Annual Revenue Threshold (i.e., for 2008, $[    *    ]
or more).

4.2.2 Sunset Period Commission. In consideration for Bayer’s Detailing and
promotional activities during the Active Period, ZGEN shall pay Bayer during
each of the [    *    ] following expiration or early termination of the Active
Period (the “Sunset Period”) a commission that is, subject to Section 3.2.4,
equal to [    *    ] percent ([    *    ]%) of the commission set forth in
Section 4.2.1; provided, however, that in no event shall ZGEN be obligated to
pay Bayer annual aggregate commission in excess of [    *    ] Dollars
($[    *    ]) per year during the Sunset Period, except as set forth in
Section 3.2.4(b).

4.2.3 Reports; Payment; Reconciliation. Within sixty (60) days after the end of
each calendar quarter during the Active Period and the Sunset Period, ZGEN shall
provide Bayer with a written statement of year-to-date aggregate Net Sales for
the current calendar year based on actual data to the extent available and on
estimated data otherwise. Based on and at the time that ZGEN transmits such
statement, ZGEN shall pay Bayer the commission due and owing

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pursuant to Section 4.2.1 or Section 4.2.2, as applicable. Within sixty
(60) days after the end of each calendar year during the Active Period and the
Sunset Period, ZGEN shall provide Bayer with a written statement of the actual
aggregate Net Sales obtained during that calendar year. ZGEN shall pay Bayer or
Bayer shall pay ZGEN, as the case may be, the difference between (a) the amount
that is actually due to Bayer for commission for that calendar year and (b) the
amount that was previously paid to Bayer for commission for the four
(4) calendar quarters of that calendar year. The net remaining balance shall be
paid by ZGEN to Bayer at the time that ZGEN transmits such written statement or
shall be paid by Bayer to ZGEN, as the case may be, within thirty (30) days
after Bayer’s receipt of such written statement. Each Party shall have the right
to offset and deduct any amounts due to such Party under this Section 4.2.3
against payments such Party is required to make to the other Party under this
Agreement, except as set forth in Section 4.1.

4.3 Sales Bonus

4.3.1 Sales Thresholds. ZGEN shall pay Bayer two (2) sales bonuses as follows:
(a) upon cumulative Net Sales of Initial Licensed Products (in the aggregate)
reaching [    *    ] Dollars ($[    *    ]) (the “First Sales Threshold”), ZGEN
shall pay Bayer a sales bonus of [    *    ] Dollars ($[    *    ]) (the “First
Sales Bonus”); and (b) upon cumulative Net Sales of Initial Licensed Products
(in the aggregate) reaching [    *    ] Dollars ($[    *    ]) (the “Second
Sales Threshold”), ZGEN shall pay Bayer a sales bonus of [    *    ] Dollars
($[    *    ]) (the “Second Sales Bonus”). ZGEN shall pay each sales bonus
within thirty (30) days after each of the First Sales Threshold and the Second
Sales Threshold is reached. Except as provided in Section 4.3.2, if the First
Sales Bonus and the Second Sales Bonus would otherwise be paid in the same
calendar year, the Second Sales Bonus shall be due within the first ten
(10) days of the calendar year immediately following the calendar year in which
the First Sales Bonus is paid.

4.3.2 Material Shortage in Supply; Frustration. In the event the First Sales
Threshold and/or the Second Sales Threshold is or are not reached within
[    *    ] after the Launch Date and there has been a material shortage in
supply of any Initial Licensed Product during the first [    *    ] after the
Launch Date, ZGEN shall pay Bayer both the First Sales Bonus and the Second
Sales Bonus (to the extent not previously paid) within ten (10) days after the
expiration of the [    *    ] after the Launch Date; provided, however, that if
such supply shortage is due to an inability to meet the demand for Initial
Licensed Products as a result of aggregate annual Net Sales exceeding the
Baseline Revenue Forecast set forth in the next sentence, ZGEN shall have no
obligation to pay the applicable sales bonus(es) hereunder in the event the
First Sales Threshold and/or the Second Sales Threshold is or are not reached.
For purposes of the preceding sentence, the Baseline Revenue Forecast (shown in
Millions of Dollars) agreed upon by the Parties is:

 

     2008    2009    2010    2011

Baseline Revenue Forecast

   [    *    ]    [    *    ]    [    *    ]    [    *    ]

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4.4 Incremental Costs

(a) To the extent that ZGEN incurs any incremental increased costs in supplying
Promotional Materials, Medical Education Materials, product-related training
program materials or other such supplies, information or materials in the
Co-Promotion Territory during the Active Period solely as a result of the
increase in the size of the Sales Forces or number of the MSLs as a result of
this Agreement (i.e., such costs would not have been incurred by ZGEN but for
the involvement of Bayer’s Sales Force in the promotion and Detailing of Initial
Licensed Product under this Agreement), Bayer shall reimburse ZGEN for such
incremental out-of-pocket costs actually incurred by ZGEN. The Parties
acknowledge that Bayer’s reimbursement obligations under this Section 4.4 are
intended to correspond to those costs which are incremental based on Bayer’s
Sales Force’s and Bayer’s MSLs’ use of Promotional Materials, Medical Education
Materials, product-related training program materials and other supplies,
information and materials in connection with their performance of this Agreement
and not to those costs which ZGEN would have incurred regardless of such
activities. By way of example, if ZGEN incurs costs in connection with the
development, production (including design and set-up) and printing of Detail
aids and ZGEN supplies 40% of such Detail aids to Bayer’s Sales Force, Bayer
will reimburse ZGEN for 40% of the per-piece printing costs and freight of such
Detail aids but shall not reimburse ZGEN for the costs of production or other
costs associated with the development or preparation of such Detail aids.

(b) Within sixty (60) days after the end of each calendar quarter during the
Active Period in which ZGEN incurs any incremental increased costs in supplying
Promotional Materials, Medical Education Materials, product-related training
program materials or other such supplies, ZGEN shall provide Bayer with a
written statement of such costs incurred by ZGEN during such calendar quarter,
which written statement shall include such supporting documentation as Bayer may
reasonably request. Bayer shall reimburse ZGEN such incremental costs that are
not in dispute within thirty (30) days after Bayer’s receipt of such written
statement.

(c) For the avoidance of doubt, ZGEN shall be solely responsible, and Bayer
shall have no obligation to reimburse ZGEN, for any costs other than as set
forth in this Section 4.4, including ZGEN’s field based program costs, all of
which shall be borne solely by ZGEN.

4.5 Late Payments

Any amounts not paid by a Party when due under this Agreement will be subject to
interest from and including the date payment is due through and including the
date on which the paying Party makes a wire transfer of immediately available
funds into an account designated by the receiving party of such payment at a
rate equal to the lesser of (i) the sum of one percent (1%) plus the annual
prime rate or successive annual prime rates of interest quoted in the Money
Rates section of the on-line edition of The Wall Street Journal (currently at
http://www.interactive.wsj.com) calculated daily on the basis of a 365-day year
or (ii) the highest rate permitted by applicable law.

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4.6 Records; Audit

ZGEN will keep or cause to be kept such records as are required in sufficient
detail to track and determine (in accordance with United States generally
accepted accounting principles) the accuracy of calculations of all sums or
reimbursements due under this Agreement. Such records will be retained for a
period of the longer of (i) a three (3) year period following the year in which
any payments were made hereunder and (ii) the expiration of the applicable tax
statute of limitations (or any extensions thereof), or such longer period as may
be required by law. Once per calendar year, Bayer will have the option to engage
(at its own expense) an independent certified public accountant, who is bound by
appropriate conditions of confidentiality and reasonably acceptable to ZGEN, to
examine in confidence the books and records of ZGEN as may be necessary to
determine, with respect to the preceding three (3) calendar years, the
correctness or completeness of any payment or reimbursement required to be made
under this Agreement; provided however, that the books and records for any
particular calendar year will only be subject to one (1) audit. The report of
such accountant will be limited to a certificate verifying any report or payment
made during such period or identifying any overpayment or underpayment,
accompanied by an explanation of the basis for its determination of such
overpayment or underpayment. In addition, if the accountant is unable to verify
the correctness of any such payment or charge, the accountant shall provide
information relating to why such payment or charge is unverifiable. The results
of any audit performed under this Section 4.6 may be disputed by ZGEN in
accordance with Article 10. If the audit reveals any underpayment or
over-charge, then ZGEN will pay the same to Bayer, together will all interest
accrued thereon, promptly after ZGEN’s receipt of the audit report or, if
disputed, promptly after resolution of such dispute. If any audit performed
under this Section 4.6 discloses a variance of more than five percent (5%) from
the amount of the original report, invoice or statement, ZGEN will bear the full
cost of the performance of such audit. The result of the audit and the audit
report shall be treated as Confidential Information subject to Article 6. Upon
the expiration of three (3) years following the end of any calendar year, the
calculation of any such amounts payable or charged with respect to such calendar
year will be binding and conclusive upon the Parties.

ARTICLE 5

Complaints, Adverse Events, Medical Inquiries

5.1 Complaints, Adverse Events Reporting

ZGEN will maintain a record of all non-medical and medical product-related
complaints and reports of all Adverse Events that it receives with respect to
Initial Licensed Product in the Co-Promotion Territory. ZGEN will exchange
electronic copies of all product complaints and all Adverse Events (with
electronic copies of source documents) (both from clinical trials and
post-marketing) with Bayer. ZGEN will be responsible for reporting to the FDA
any Adverse Events and safety issues for Initial Licensed Product in compliance
with all Applicable Laws. ZGEN will simultaneously provide Bayer with a copy of
any such reports provided to the FDA. ZGEN will have responsibility for all
correspondence and communication with physicians and other health care
professionals and customers in the Co-Promotion Territory regarding complaints
(e.g., quality) and adverse drug experience information relating to Initial
Licensed Products in the Co-Promotion Territory. ZGEN will keep such records and
make such reports as

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will be reasonably necessary to document such communications in compliance with
all Applicable Laws and ZGEN will make such records and reports available to
Bayer for inspection. Notwithstanding the foregoing, Bayer shall notify ZGEN as
soon as practicable of any complaints and reports of Adverse Events received by
Bayer concerning Initial Licensed Products in the Co-Promotion Territory, in
accordance with reasonable standard operating procedures established by ZGEN and
provided in writing to Bayer. Bayer shall maintain complete and accurate records
pertaining to such complaints and Adverse Events reports for such periods as may
be required by Applicable Laws. ZGEN will provide Bayer with ZGEN’s internal
standard operating procedures and guidelines relating to non-medical and medical
product-related complaints, Adverse Event reporting and medical inquires, if
any, within thirty (30) days after the Effective Date and thereafter within
thirty (30) days after such guidelines are approved or modified.

5.2 Medical Inquiries

Bayer shall comply with the reasonable directions and policies of ZGEN
concerning responses to be made to medical questions or inquiries regarding the
Initial Licensed Products from members of the medical profession and consumers
in the Co-Promotion Territory. ZGEN shall provide Bayer with information known
to ZGEN which is relevant or appropriate to enable Bayer to respond to such
questions or inquiries in the Co-Promotion Territory. Bayer will refer to ZGEN
all questions and inquiries to which Bayer is unable to respond using such
information provided by ZGEN. If requested by ZGEN, Bayer will provide ZGEN with
details of inquiries received and responses given by Bayer in accordance with
this Section.

5.3 Pharmacovigilance Agreement; Procedures Established by the Coordination
Committee

Notwithstanding anything to the contrary in this Agreement, within ninety
(90) days after the Effective Date, the Parties shall execute a
pharmacovigilance agreement (the “Pharmacovigilance Agreement”). The Parties may
establish procedures for handling and reporting of Adverse Events, complaints
and/or medical inquiries relating to Initial Licensed Product in the
Co-Promotion Territory during the Active Period provided the same are consistent
with the Pharmacovigilance Agreement.

ARTICLE 6

Confidentiality

6.1 Treatment of Confidential Information

(a) The Parties agree that during the Term, and for a period of
[    *    ] years after this Agreement expires or terminates, a Party receiving
Confidential Information of the other Party will (i) maintain such Confidential
Information in confidence to the same extent such Party maintains its own
confidential or proprietary information or trade secrets of similar kind and
value; (ii) not disclose such Confidential Information to any Third Party
without the prior written consent of the disclosing Party, except for
disclosures to its Affiliates, sublicensees and subcontractors who agree to be
bound by obligations of non-disclosure and non-use at least as stringent as
those contained in this Article 6; and (iii) not use Confidential Information
for any purpose except those purposes contemplated by this Agreement.

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(b) Neither Party will knowingly disclose to the other Party any Third Party
information or know-how that such Party (i) does not have the legal right to
disclose to the other Party and/or (ii) has a contractual obligation not to
disclose to the other Party.

6.2 Authorized Disclosure

Notwithstanding any other provision of this Agreement, each Party may disclose
Confidential Information of the other Party:

(a) to the extent and to the persons and entities as required by an applicable
law, rule, regulation, legal process, court order or the rules of any securities
exchange on which any security issued by either Party is traded or of a
Regulatory Authority; or

(b) to prosecute or defend litigation or otherwise establish rights or enforce
obligations under this Agreement, but only to the extent that any disclosure is
necessary.

The Party required or intending to disclose the other Party’s Confidential
Information under Section 6.2(a) or (b) will first have given prompt notice to
the other Party to enable it to seek any available exemptions from or
limitations on such disclosure requirement and will reasonably cooperate in such
efforts by the other Party. In addition, in the case of a disclosure required to
comply with the rules of any securities exchange, the Party required or
intending to disclose the other Party’s Confidential Information will provide
the other Party with a reasonable opportunity to review such disclosure prior to
its public release or filing with a Regulatory Authority and will consider in
good faith reasonable changes to such disclosure requested by the other Party.

6.3 Publicity; Terms of Agreement

The Parties will mutually agree upon the text of a press release announcing the
execution of this Agreement and the LCA. Thereafter, if either Party desires to
make a public announcement concerning this Agreement or the terms hereof that
differs from this mutually agreed upon text, the Party will give reasonable
prior advance notice of the proposed text of the announcement to the other Party
for its prior review and approval, the approval not to be unreasonably withheld
or delayed. A Party will not be required to seek permission from the other Party
to repeatedly publish any information as to the terms of this Agreement that
have already been publicly disclosed by such Party, in accordance with the
foregoing, or by the other Party. Either Party may disclose the terms of this
Agreement to potential investors under appropriate conditions of
confidentiality. The Parties acknowledge that ZGEN and/or Bayer may be obligated
to file a copy of this Agreement with the United States Securities and Exchange
Commission (the “SEC”) with its next quarterly report on Form 10-Q, annual
report on Form 10-K or current report on Form 8-K or with any registration
statement filed with the SEC pursuant to the Securities Act of 1933, as amended.
Each Party will be entitled to make the filing(s) and will have the right to
exercise its sole discretion regarding any request for confidential treatment
for this Agreement or any provision of this Agreement. In the event of any
request for confidential treatment, the filing Party will provide the non-filing
Party with an

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advance copy of this Agreement is marked to show provisions for which the filing
Party intends to seek confidential treatment and will reasonably consider the
non-filing Party’s timely comments thereon. Each Party will give the other
reasonable prior notice of any announcement relating to activities concerning
Initial Licensed Product.

ARTICLE 7

Representations, Warranties, Covenants And Disclaimers

7.1 Representations and Warranties

7.1.1 Validity; Authority. Each Party represents and warrants to the other Party
that as of the Effective Date: (a) it is a corporation (in the case of ZGEN) or
a limited liability company (in the case of Bayer) duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has full corporate power and authority and the legal right to own
and operate its property and assets and to carry on its business as it is now
being conducted and as contemplated in this Agreement and to perform its
obligations hereunder; (b) it has taken all necessary corporate action on its
part required to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder; (c) this Agreement has been duly
executed and delivered on behalf of such Party and constitutes a legal, valid
and binding obligation of such Party that is enforceable against it in
accordance with its terms; (d) the execution, delivery and performance of this
Agreement by such Party does not conflict with and would not result in a breach
of any agreement, instrument or understanding, oral or written, to which it is a
party or by which it may be bound, nor does it violate any material law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it; and (e) it is not aware of any action, suit,
inquiry or investigation instituted by any Third Party that questions or
threatens the validity of this Agreement.

7.1.2 Business Condition. Each Party represents and warrants to the other Party
that as of the Effective Date: (a) it is not in violation of its charter,
bylaws, or any other organizational document, or in violation of any law,
administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to it, which violation,
individually or in the aggregate would reasonably likely have a materially
adverse effect on its business or financial condition and (b) except as may be
set forth in any documents filed with the SEC, as required to be filed by it
under the Securities Act of 1933 or Exchange Act of 1934, as the case may be, it
is not aware of any facts or circumstances, individually or in the aggregate,
that would reasonably likely have a materially adverse effect on its business or
financial condition.

7.1.3 Samples. ZGEN represents and warrants to Bayer that, at the time ZGEN
delivers Samples to Bayer (if applicable), such Samples (a) will comply in all
material respects with the then current specifications set forth in ZGEN’s
agreements with Third Party manufacturers, (b) will comply in all material
respects with all Applicable Laws, (c) will not have been adulterated or
misbranded within the meaning set forth in the United States Federal Food, Drug,
and Cosmetic Act, (d) may be introduced into interstate commerce, and (e) will
have been manufactured, packaged, stored, and shipped in conformity with all
applicable current good manufacturing practices.

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7.1.4 Additional ZGEN Representations. ZGEN hereby represents and warrants to
Bayer that as of the Effective Date:

(a) To its Knowledge, it has not received any [    *    ] from any Third Party
that any patent within the ZGEN Enabling Technology is invalid or unenforceable
in the Co-Promotion Territory or that any patent application or patent within
the ZGEN Enabling Technology subject to interference, reexamination, reissue,
revocation, opposition, appeal or other administrative proceedings in the
Co-Promotion Territory.

(b) It Controls the ZGEN Enabling Technology and the Initial Licensed Products
in the Co-Promotion Territory, and has the right and authority to grant the
rights granted pursuant to the terms and conditions of this Agreement. It has
not granted any right, license, or interest in, to, or under the ZGEN Enabling
Technology or the Initial Licensed Products in the Co-Promotion Territory that
is inconsistent with the rights and interests granted to Bayer under the terms
and conditions of this Agreement. It has not placed, and to its Knowledge there
does not exist, upon the ZGEN Enabling Technology or any Initial Licensed
Products in the Co-Promotion Territory any encumbrance, charge or lien.

(c) It has no Knowledge of any actual or threatened infringement by any Third
Party of the Patent Rights within the ZGEN Enabling Technology in the
Co-Promotion Territory. Furthermore, it has no Knowledge of any claim,
litigation, action, suit, proceeding investigation, arbitration or other
proceedings pending or threatened affecting, in whole or in part, the ZGEN
Enabling Technology or the Initial Licensed Products in the Co-Promotion
Territory, and there is not currently outstanding any unsatisfied judgment or
outstanding order, injunction, decree, stipulation or award, in whole or in
part, against any of the ZGEN Enabling Technology or Initial Licensed Products
in the Co-Promotion Territory.

(d) It has disclosed to Bayer [    *    ] patents that have been assessed by or
for ZGEN as being [    *    ] to the [    *    ]; provided that the presence of
a patent [    *    ] that any [    *    ] about whether any claim of the listed
patent is, in fact, [    *    ].

(e) To its Knowledge, it has provided complete and accurate factual responses to
all requests for information that were made in writing by Bayer related to this
Agreement; provided that ZGEN does not represent or warrant that it has
provided, or will provide, any opinions or analyses, or that any opinions or
analyses provided to Bayer by or on behalf of ZGEN are complete or accurate. In
addition, it has made available to Bayer all other information that, to ZGEN’s
Knowledge, is (a) material to the [    *    ] of the Initial Licensed Products
and Bulk Drug Substance and (b) [    *    ].

(f) Neither it nor any of its officers, employees or agents has made an untrue
statement of a material fact to the FDA with respect to Initial Licensed Product
(whether in any submission to the FDA or otherwise), or knowingly failed to
disclose a material fact required to be disclosed to the FDA with respect to
Initial Licensed Product. To its Knowledge, the Development of Initial Licensed
Products (and the Bulk Drug Substance incorporated therein) in the Co-Promotion
Territory has been conducted by ZGEN and its employees, agents, clinical
institutions, clinical investigators and subcontractors in compliance in all
material respects with Applicable Laws, including all FDA statutory and
regulatory requirements with respect to Initial

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Licensed Products, and there are no claims, announced investigations, actions or
other proceedings pending before or, to its Knowledge, threatened by the FDA or
other government agency with respect to Initial Licensed Products (or the Bulk
Drug Substance incorporated therein) or, to ZGEN’s Knowledge, any facility where
Initial Licensed Products (or the Bulk Drug Substance incorporated therein) are
manufactured, and ZGEN has not received written notice threatening any such
claim, investigation, action or other proceeding; provided that ZGEN anticipates
pre-approval inspections (PAIs) of all such facilities.

7.2 Covenants

Each Party hereby covenants to the other Party as follows:

(a) It will not promote or Detail Initial Licensed Products in the Co-Promotion
Territory for any use not approved by the FDA. It will ensure that its Sales
Representatives in the Co-Promotion Territory shall make no statements, claims
or undertakings relating to Initial Licensed Products that are inconsistent
with, nor provide or use any labeling, literature, or other materials other
than, the Promotional Materials developed and approved for use pursuant to this
Agreement. It will ensure that all statements, claims and comments made by its
Sales Representatives in the Co-Promotion Territory related to the Initial
Licensed Products, including as to efficacy and safety, are truthful, accurate
and in strict compliance with the Product Labels and all Applicable Laws.

(b) It will not during the Active Period grant any right, license, consent or
privilege to any Third Party(ies) in the Co-Promotion Territory that would
conflict with the rights granted to the other Party under this Agreement, and
will not take any action that would in any way prevent it from assuming its
obligations or granting the rights granted to the other Party under this
Agreement or that would otherwise materially conflict with or adversely affect
its obligations or its assumption of the rights granted to the other Party under
this Agreement.

(c) It will comply with all Applicable Laws in carrying out its activities under
this Agreement.

(d) It will not knowingly misappropriate the trade secret of a Third Party in
its activities to Commercialize Initial Licensed Product in the Co-Promotion
Territory.

(e) It will not use in any capacity in the promotion or Detailing of Initial
Licensed Products in the Co-Promotion Territory any person or entity who has
been debarred pursuant to Section 306 of the United States Federal Food, Drug,
and Cosmetic Act, or who is the subject of a conviction described in such
section. It agrees to inform the other Party in writing immediately if it or any
person or entity who is performing services under this Agreement on its behalf
is debarred or is the subject of a conviction described in Section 306, or if
any action, suit, claim, investigation or legal or administrative proceeding is
pending, or to the best of its knowledge threatened, relating to the debarment
or conviction of such Party or any person or entity used in any capacity by such
Party in connection with the promotion or Detailing of Initial Licensed Products
in the Co-Promotion Territory.

(f) It will ensure, throughout the Active Period, that its Sales Representatives
and MSLs receive training on proper promotion and marketing techniques, ethics,
and compliance with Applicable Laws in a manner consistent with all applicable
pharmaceutical industry standards.

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7.3 Acknowledgement regarding Disclosure

Bayer confirms that ZGEN has made available to Bayer the eCTD for the Initial
Licensed Product described in paragraph 1 of Exhibit A, the IND for the Initial
Licensed Products described in paragraphs 1 and 2 of Exhibit A, and ZGEN’s FDA
correspondence log for the Initial Licensed Products, and has given Bayer an
opportunity to ask questions relating thereto.

7.4 Disclaimers

Nothing in this Agreement shall be construed as: (a) a warranty or
representation by ZGEN as to the validity, enforceability or scope of any
patent; or (b) a warranty or representation that any Initial Licensed Product is
or will be free from infringement of patents or other intellectual property
rights of Third Parties. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER
PARTY MAKES ANY OTHER REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, EITHER IN
FACT OR BY OPERATION OF LAW, STATUTE, OR OTHERWISE, AND EACH PARTY SPECIFICALLY
DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES INCLUDING WARRANTIES OF
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, AND OF NON-INFRINGEMENT.

ARTICLE 8

Indemnification and Insurance

8.1 Indemnification by ZGEN

8.1.1 ZGEN Indemnity. Except to the extent described in Section 8.1.3, ZGEN
hereby agrees to defend, hold harmless and indemnify Bayer and its Affiliates,
agents, directors, officers and employees (the “Bayer Indemnitees”) from and
against any and all Losses, resulting from any Third Party claims, suits,
actions or demands arising out of:

(a) any of ZGEN’s representations and warranties set forth in this Agreement
being untrue when made; and/or

(b) any material breach or material default by ZGEN of its covenants, agreements
or obligations under this Agreement; and/or

(c) any material failure by ZGEN or its Affiliates, employees, agents,
contractors or representatives to adhere to the terms of the Co-Promotion Plan
or the Medical Education Plan; and/or

(d) failure by ZGEN to conduct a Recall following notice from Bayer of Safety
Issues as described in Section 3.1.4;

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(e) failure of any Initial Licensed Product manufactured by or on behalf of ZGEN
to meet the then applicable manufacturing specifications for Initial Licensed
Product (as set forth in the applicable contract between ZGEN and its Third
Party manufacturer) at the time the Initial Licensed Product is delivered by or
on behalf of ZGEN in the Co-Promotion Territory;

(f) any negligent act or omission or intentional misconduct by ZGEN or any of
its Affiliates, contractors, agents or representatives in the development
(including conduct of Clinical Trials), testing, use, storage, handling,
packaging, labeling, manufacture, delivery, supply, marketing, sale,
distribution or promotion of any Initial Licensed Product in the Co-Promotion
Territory; and/or

(g) the assertion that the development, testing, use, storage, handling,
packaging, labeling, manufacture, delivery, supply, marketing, sale,
distribution or promotion of any Initial Licensed Product sold or to be sold in
the Co-Promotion Territory under this Agreement infringes any Third Party patent
in the Co-Promotion Territory.

8.1.2 Procedure. To be eligible to be so indemnified as described in this
Section 8.1, the Bayer Indemnitees must provide ZGEN with prompt written notice
of any claims, suits, actions or demands (with a description of the claim and
the nature and amount of any such Loss) giving rise to the indemnification
obligation pursuant to Section 8.1.1 and the exclusive ability to defend such
claims, suits, actions or demands (with the reasonable cooperation of the Bayer
Indemnitees). ZGEN will be relieved of its obligations only if any failure by
the Bayer Indemnitees to deliver prompt notice is prejudicial to its ability to
defend such claims, suits, actions or demands. Bayer will have the right to
retain its own counsel, at its own expense. ZGEN will not settle or consent to
the entry of any judgment with respect to any claim for Losses for which
indemnification is sought, in a manner that would materially adversely affect
Bayer, without Bayer’s prior written consent.

8.1.3 Exclusions. ZGEN’s obligation to defend, hold harmless and indemnify the
Bayer Indemnitees pursuant to Section 8.1.1 will not apply to the extent of any
Losses for which Bayer is obligated to indemnify the ZGEN Indemnitees pursuant
to Section 8.2.1.

8.2 Indemnification by Bayer

8.2.1 Bayer Indemnity. Except to the extent described in Section 8.2.3, Bayer
hereby agrees to defend, hold harmless and indemnify ZGEN and its Affiliates,
agents, directors, officers and employees (the “ZGEN Indemnitees”) from and
against any and all Losses, resulting from any Third Party claims, suits,
actions or demands arising out of:

(a) any of Bayer’s representations and warranties set forth in this Agreement
being untrue when made; and/or

(b) any material breach or material default by Bayer of its covenants,
agreements or obligations under this Agreement; and/or

(c) any material failure by Bayer or its Affiliates, employees, agents,
contractors or representatives to adhere to the terms of the Co-Promotion Plan
or the Medical Education Plan; and/or

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(d) any negligent act or omission or intentional misconduct by Bayer or any of
its Affiliates, contractors, agents or representatives in the marketing or
promotion of any Initial Licensed Product in the Co-Promotion Territory.

8.2.2 Procedure. To be eligible to be so indemnified as described in this
Section 8.2, the ZGEN Indemnitees must provide Bayer with prompt written notice
of any claims, suits, actions or demands (with a description of the claim and
the nature and amount of any such Loss) giving rise to the indemnification
obligation pursuant to Section 8.2.1 and the exclusive ability to defend such
claims, suits, actions or demands (with the reasonable cooperation of the ZGEN
Indemnitees). Bayer will be relieved of its obligations only if any failure by
the ZGEN Indemnitees to deliver prompt notice is prejudicial to its ability to
defend such claims, suits, actions or demands. ZGEN will have the right to
retain its own counsel, at its own expense. Bayer will not settle or consent to
the entry of any judgment with respect to any claim for Losses for which
indemnification is sought, in a manner that would materially adversely affect
ZGEN, without ZGEN’s prior written consent.

8.2.3 Exclusions. Bayer’s obligation to defend, hold harmless and indemnify the
ZGEN Indemnitees pursuant to Section 8.2.1 will not apply to the extent of any
Losses for which ZGEN is obligated to indemnify the Bayer Indemnitees pursuant
to Section 8.1.1.

8.3 Insurance

During the Active Period and for a period of [    *    ] after the expiration of
the Active Period or the earlier termination of the Agreement, each Party shall
obtain and/or maintain, respectively, at its sole cost and expense, product
liability insurance (including any self-insured arrangements) that shall insure
against all liability, including personal injury, physical injury or property
damage, arising out of such Party’s activities under this Agreement. Such
insurance will not be construed to create a limit of either Party’s liability
with respect to its indemnification obligations under this Article 8. Each Party
will provide the other Party with a copy of the certificate of insurance or
other evidence of such insurance and/or self-insurance, upon request. Each Party
will use Commercially Reasonable Efforts to provide the other Party with written
notice at least thirty (30) days prior to the cancellation of, non-renewal of or
material change in such insurance or self-insurance that materially adversely
affects the rights of the other Party hereunder.

8.4 Limitation of Liability

EXCEPT FOR A PARTY’S BREACH OF ITS OBLIGATIONS UNDER ARTICLE 6, NEITHER IT NOR
ITS RESPECTIVE AFFILIATES, WILL BE LIABLE TO THE OTHER PARTY FOR SPECIAL,
EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, WHETHER IN CONTRACT, WARRANTY,
TORT, STRICT LIABILITY OR OTHERWISE INCURRED BY THE OTHER PARTY IN CONNECTION
WITH THIS AGREEMENT, INCLUDING DAMAGES MEASURING LOST PROFITS OR BUSINESS
OPPORTUNITIES. THIS SECTION 8.4 WILL NOT BE CONSTRUED TO LIMIT EITHER PARTY’S
OBLIGATIONS UNDER SECTIONS 8.1 THROUGH 8.3 OF THIS AGREEMENT.

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ARTICLE 9

Term and Termination

9.1 Term

This Agreement will be in effect from the Effective Date until expiration of the
Sunset Period, unless extended by the Parties in writing or terminated earlier
in accordance with this Article 9 (the “Term”).

9.2 Termination

9.2.1 Termination for Breach. Bayer and ZGEN shall each have the right to
terminate this Agreement in the event that any term or condition of this
Agreement is materially breached by the other Party, and such breach is not
remedied within a period of [    *    ] days after the breaching Party’s receipt
of written notice of such breach. The foregoing [    *    ] day period shall
toll during any period in which the Parties are seeking to resolve a bona fide
dispute relating to the alleged breach pursuant to Section 10.1. If a breach is
corrected within the [    *    ]-day period, this Agreement and the rights
granted hereunder shall continue in full force and effect.

9.2.2 Termination for Bankruptcy. Either Party may terminate this Agreement if
the other Party (the “Bankrupt Party”): (i) files in any court or agency
pursuant to any statute or regulation of any state or country, a petition in
bankruptcy or insolvency or for reorganization or for an arrangement or for the
appointment of a receiver or trustee of the Bankrupt Party or of its assets;
(ii) proposes a written agreement of composition or extension of its debts;
(iii) is served with an involuntary petition in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up arrangement, composition or
readjustment of its debts or any other relief under any bankruptcy, insolvency,
reorganization or other similar act or law of any jurisdiction now or hereafter
in effect, which petition is not dismissed within ninety (90) days after the
filing thereof; (iv) has a warrant of attachment, execution, or similar process
issued against it, filed in any insolvency proceeding, and the petition is not
dismissed or stayed within ninety (90) days after the filing thereof;
(v) proposes to be a party to any dissolution or liquidation; or (vi) makes an
assignment for the benefit of creditors.

9.2.3 Termination of LCA.

(a) ZGEN may terminate this Agreement upon giving written notice to Bayer in the
event the LCA is terminated pursuant to Section 17.3 of the LCA due to a
material breach by Bayer;

(b) Bayer may terminate this Agreement upon giving written notice to ZGEN in the
event the LCA is terminated pursuant to Section 17.3 of the LCA due to a
material breach by ZGEN; and

(c) ZGEN may terminate this Agreement upon giving written notice to Bayer at any
time following ZGEN’s receipt of written notice from Bayer that Bayer is
electing to terminate the LCA for convenience pursuant to Section 17.6 of the
LCA.

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9.2.4 Failure to Obtain or Withdrawal of Regulatory Approval.

Either Party may terminate this Agreement (i) if no Initial Licensed Product has
received Regulatory Approval by [    *    ], (ii) upon the withdrawal of
Regulatory Approval for an Initial Licensed Product or (iii) upon the withdrawal
of an Initial Licensed Product from the market in the Co-Promotion Territory by
the FDA or ZGEN due to a serious life-threatening health and/or safety concern.

9.2.5 Government Enforcement Action.

Either Party may terminate this Agreement upon giving written notice to the
other Party if the other Party is subject to a government enforcement action
regarding violation of Applicable Laws relating to sales or marketing activities
in the Co-Promotion Territory, including government action resulting from the
breach of an existing Corporate Integrity Agreement with HHS OIG.

9.3 Effects of Termination.

9.3.1 Materials; Account Information. Upon the expiration or earlier termination
of this Agreement, Bayer shall promptly (a) cease, and cause its Sales
Representatives to cease all promotion and Detailing of the Initial Licensed
Products in the Co-Promotion Territory, (b) discontinue the use in the
Co-Promotion Territory of any Promotional Materials or Medical Education
Materials provided pursuant to this Agreement, and (c) as requested by ZGEN,
either return to ZGEN or destroy (and certify to the destruction of) all
Promotional Materials, Medical Education Materials, product-related training
program materials and all other materials related to the Initial Licensed
Product provided by ZGEN for use in the Co-Promotion Territory pursuant to this
Agreement. In addition, upon the expiration or earlier termination of this
Agreement, Bayer shall provide to ZGEN such account information as is regularly
maintained by Bayer and is reasonably required to transition Detailing from
Bayer to ZGEN in the Co-Promotion Territory.

9.3.2 Sales Bonuses. To the extent not previously paid, the Sales Bonuses shall
be immediately due and payable upon the early termination (for any reason) of
this Agreement after Regulatory Approval, and the obligation of ZGEN to pay
Bayer the First Sales Bonus and the Second Sales Bonus shall survive such early
termination.

9.3.3 Survival. The following provisions will remain in full force and effect
after the expiration or termination of this Agreement: Article 1 (Definitions);
Sections 4.5 and 4.6 (Late Payment; Records; Audits, only with respect to
accrued rights and obligations as to payments); Article 6 (Confidentiality);
Section 7.3 (Disclaimers); Article 8 (Indemnification and Insurance); Article 9
(Term and Termination); Article 10 (Dispute Resolution) and Article 11 (General
Provisions).

9.4 Accrued Rights

Termination or expiration of this Agreement for any reason will be without
prejudice to any rights which will have accrued to the benefit of either Party
or any liability incurred by either Party prior to the effective date of
termination or expiration (including the right to receive any

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commission or milestone payment that has been earned but not paid), and will not
preclude either Party from pursuing all rights and remedies it may have
hereunder or at law or in equity with respect to any breach of this Agreement or
prejudice either Party’s right to obtain performance of any obligation.

9.5 Non-Solicitation

During the Active Period and for a period of [    *    ] thereafter, the Parties
agree that neither Party shall solicit any employee of the other Party or any of
its Affiliates, with whom the first Party has come in contact or interacted for
the purposes of performing this Agreement, to leave the employment of the other
Party or its Affiliate and accept employment (either as an employee or as a
consultant) with the first Party. Notwithstanding the foregoing, nothing herein
shall restrict or preclude either Party’s right to make generalized searches for
employees by the issue of advertisement in the media (including trade media) or
by engaging search firms to engage in searches that are not targeted or focused
on an employee or employees of the other Party.

ARTICLE 10

Dispute Resolution

10.1 Goal; Cooperative Decision-Making

The Parties recognize that disputes as to certain matters may from time to time
arise during the Term that relate to either Party’s rights or obligations
hereunder. It is the objective of the Parties to establish procedures to
facilitate the resolution of disputes arising from, concerning or in any way
relating to this Agreement in an expedient manner by mutual cooperation and
without resort to litigation. To accomplish this objective, the Parties agree to
follow the procedures set forth in this Article 10.

10.2 Escalation of Disputes at Coordination Committee Level

If and when the members of the Coordination Committee have a Dispute that is not
resolved by informal discussions by the Parties, either Party may, by written
notice to the other Party, have the Dispute referred to the Chief Executive
Officer of ZGEN and the Head of the responsible Business Unit within the
Pharmaceutical Division of Bayer, who may delegate responsibility to the
Regional Head for the United States, who shall schedule a meeting within
[    *    ] days after the Dispute is referred to such officers and who shall
attempt to resolve the Dispute by good faith negotiations within
[    *    ] days after their first meeting.

10.3 Expedited Arbitration of Disputes at Coordination Committee Level

If a Dispute is not resolved in accordance with Section 10.2, the matter in
dispute shall be resolved by expedited arbitration by an Expert as follows:

(a) Upon written request by either Party to the other Party, the Parties shall
promptly negotiate in good faith to appoint an appropriate Expert. If the
Parties are not able to agree within [    *    ] days after the receipt by a
Party of the written request in the immediately preceding sentence, the CPR
Institute for Dispute Resolution, or such other similar entity as the

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Parties may agree upon, shall be responsible for selecting an Expert within
[    *    ] days of being approached by a Party. The fees and costs of the
Expert and the CPR Institute for Dispute Resolution (or such other entity) shall
be borne equally by ZGEN and Bayer.

(b) Within [    *    ] days after the designation of the Expert, the Parties
shall each simultaneously submit to the Expert and one another a written
statement of their respective positions on the Dispute and proposed resolution
thereof. Each Party shall have [    *    ] business days from receipt of the
other Party’s submission to submit a written response thereto, which shall
include any scientific and technical information in support thereof. The Expert
shall have the right to meet with the Parties, either alone or together, as
necessary to make a determination.

(c) No later than [    *    ] days after the designation of the Expert, the
Expert shall make a determination by selecting the resolution proposed by one of
the Parties that as a whole is the most fair and reasonable to the Parties in
light of the totality of the circumstances and shall provide the Parties with a
written statement setting forth the basis of the determination in connection
therewith. The decision of the Expert shall be final and conclusive.

10.4 Other Matters; Litigation

Other than a Dispute, any disputes arising from, concerning or in any way
relating to this Agreement shall, at the election of either Party, be decided by
litigation in accordance with Section 10.5. Notwithstanding the above, either
Party will be entitled at all times and without delay to seek equitable relief,
provided that such relief is sought exclusively from a court as provided in
Section 10.5.

10.5 Governing Law; Judicial Resolution

Subject to Sections 10.1 through 10.3, resolution of all disputes arising out of
or related to this Agreement, or the performance, enforcement, breach or
termination of this Agreement and any remedies relating thereto, will be
governed by and construed under the substantive laws of the State of [    *    ]
as applied to agreements executed and performed entirely in the State of New
York by residents of the State of [    *    ], without regard to conflicts of
law rules. Subject to Section 10.1 through 10.3, each Party irrevocably and
unconditionally consents to the exclusive jurisdiction of the courts of general
jurisdiction of the State of [    *    ] and the United States District Court
for the [    *    ] (collectively, the “Courts”) for any action, suit or
proceeding (other than appeals therefrom) solely for a dispute arising out of
this Agreement, and agrees not to commence any action, suit or proceeding (other
than appeals therefrom) solely for disputes arising out of this Agreement except
in the Courts. Submission to United States jurisdiction is for the limited
purpose of disputes arising out of this Agreement and does not create general
jurisdiction. Each Party hereby waives any other venue to which it may be
entitled by virtue of domicile or otherwise.

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ARTICLE 11

General Provisions

11.1 Force Majeure

Both Parties will be excused from the performance of their obligations under
this Agreement to the extent that such performance is prevented by Force Majeure
and the non-performing Party promptly provides notice of the condition
constituting Force Majeure to the other Party. Such excuse will be continued so
long as the condition constituting Force Majeure continues and the
non-performing Party uses Commercially Reasonable Efforts to remove the
condition. When such circumstances arise, the Parties will discuss what, if any,
modification of the terms of this Agreement may be required in order to arrive
at an equitable solution. Notwithstanding anything to the contrary, failure to
fulfill payment obligations may only be excused under this Section 11.1 if the
actual payment process is affected by the Force Majeure.

11.2 Notices

Any notice required or permitted to be given under this Agreement will be in
writing in the English language, will specifically refer to this Agreement and
will be deemed to have been sufficiently given for all purposes if mailed by
first class certified or registered mail, postage prepaid, express delivery
service or personally delivered or, if sent by facsimile, electronic
transmission is confirmed. Unless otherwise notified in writing, the mailing
addresses and fax numbers for notice of the Parties will be as described below.

If to Bayer:

Bayer HealthCare LLC

Cardiology and Hematology Business Unit

800 Dwight Way

Berkeley, CA 94701

Attention: Hans Bishop

Executive Vice President

Fax: 510-705-4233

With a copy to (which shall not constitute notice):

General Counsel

Bayer HealthCare LLC

555 White Plains Road

Tarrytown, NY 10591

Attention: Jeffrey M. Greenman

Fax: 914-366-1784

If to ZGEN:

ZymoGenetics, Inc.

1201 Eastlake Avenue East

Seattle, WA 98102

U.S.A.

Attn: Senior Vice President and General Counsel

FAX: (206) 442-6697

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11.3 No Strict Construction

This Agreement has been prepared jointly and will not be strictly construed
against either Party.

11.4 Assignment

(a) Except an assignment:

(i) in which the assignee agrees to be bound by all obligations of the assigning
Party under this Agreement; and

(ii) that is made in connection with the transfer to a single buyer of all or
substantially all of the assets or stock of a Party’s business to which this
Agreement relates or pursuant to a merger, consolidation or other corporate
reorganization,

neither this Agreement nor any right herein granted may be assigned by either
Party to any Third Party without the prior, express written consent of the other
Party, which consent shall not be unreasonably withheld. Any purported
assignment prohibited hereunder and made without the other Party’s consent shall
be void and shall constitute a material breach of this Agreement.

(b) Notwithstanding Section 11.4(a), a Party may assign its rights and interests
under this Agreement to an entity that is its Affiliate as of the date of such
assignment; provided that the assigning Party executes a written guaranty, in
form and substance reasonably acceptable to the other Party, guaranteeing the
full and timely performance of the assigning Party’s responsibilities and
obligations hereunder by the assignee and the assignee agrees to be bound by all
obligations of the assigning Party hereunder, including the obligations set
forth in this Section 11.4.

(c) A sale or transfer of the ownership or control of a Party or any of its
Affiliates to whom it has assigned its rights or interest under this Agreement
as provided herein (other than in connection with a transfer under
Section 11.4(a)(ii)) shall be deemed to be a prohibited assignment under this
Section 11.4.

11.5 Counterparts

This Agreement may be executed in two (2) or more counterparts, each of which
will be deemed an original but all of which together will constitute one and the
same instrument.

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11.6 Severability

If any one or more of the provisions of this Agreement are held to be invalid or
unenforceable by any court of competent jurisdiction from which no appeal can be
or is taken, such provisions will be considered severed from this Agreement and
will not serve to invalidate any remaining provisions hereof. The Parties will
make a good faith effort to replace any invalid or unenforceable provision with
a valid and enforceable one such that the objectives contemplated by the Parties
when entering this Agreement, as evidenced by the terms of this Agreement, may
be realized.

11.7 Further Actions

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

11.8 Independent Contractors

The relationship between Bayer and ZGEN created by this Agreement is one of
independent contractors. This Agreement does not create any agency,
distributorship, employee-employer, partnership, joint venture or similar
business relationship between the parties. Neither Party is a legal
representative of the other Party, and neither Party can assume or create any
obligation, representation, warranty or guarantee (express or implied) on behalf
of the other Party for any purpose whatsoever. Each Party will use its own
discretion and will have complete and authoritative control over its employees
and the details of performing its obligations under this Agreement.

11.9 No Benefit of Third Parties

The representations, warranties, covenants and agreements set forth in this
Agreement are for the sole benefit of the Parties hereto and their successors
and permitted assigns, and they will not be construed as conferring any rights
on any Third Parties other than the Bayer Indemnitees and ZGEN Indemnitees.

11.10 No Waiver

Any delay in enforcing a Party’s rights under this Agreement or any waiver as to
a particular default or other matter will not constitute a waiver of such
Party’s rights to the future enforcement of its rights under this Agreement,
except with respect to an express written and signed waiver relating to a
particular matter for a particular period of time.

11.11 Entire Agreement; Amendment

This Agreement sets forth the complete, final and exclusive agreement and all
the covenants, promises, agreements, warranties, representations, conditions and
understandings between the Parties hereto with respect to the subject matter
hereof and supersedes and terminates all prior agreements and understandings
between the Parties, including the (1) Confidentiality Agreement, dated as of
January 24, 2006, by and between ZGEN and Bayer

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Pharmaceuticals Corporation (as amended by Amendment No. 1 to Confidentiality
Agreement, dated January 5, 2007), and (2) Confidential Disclosure Agreement,
dated April 19, 2006, by and between Bayer and ZGEN, which are hereby
superseded. For the sake of clarity, the Letter Agreement dated December 21,
2006 by and among ZGEN, Bayer and [    *    ] shall not be terminated or
superseded by this Agreement. This Agreement may only be modified or
supplemented in a writing expressly stated for this purpose and signed by an
authorized officer of each Party (i.e., it may not be modified by any purchase
order, change order, acknowledgment, order acceptance, standard terms of sale,
invoice or the like).

[Signatures on next page.]

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

 

BAYER HEALTHCARE LLC By:  

/s/ Hans Bishop

  Hans Bishop Its:   Executive Vice President ZYMOGENETICS, INC. By:  

/s/ Bruce L.A. Carter, Ph.D.

  Bruce L.A. Carter, Ph.D. Its:   President and Chief Executive Officer

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EXHIBIT A

[    *    ]1

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1

One page redacted.

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