Exhibit 10.39

 

ZYMOGENETICS, INC.

DEVELOPMENT AND SUPPLY AGREEMENT

 

This Agreement is entered into this 1st day of October, 2003 (“Effective Date”)
by and between Abbott Laboratories, an Illinois corporation having a principal
place of business at 100 Abbott Park Road, Abbott Park, Illinois 60064-3500
(“Abbott”), and ZymoGenetics, Inc. having a principal place of business at 1201
Eastlake Avenue East in Seattle WA, 98102 (“ZymoGenetics”).

 

WHEREAS, ZymoGenetics is the owner of certain technology and patent rights
regarding the compound rhThrombin (“Thrombin”), which is used as a drug for
blood coagulation for applications in such areas as surgery;

 

WHEREAS, ZymoGenetics will file for approval with the United States Food and
Drug Administration (and its foreign equivalents), a Biologics License
Application (BLA) (and its foreign equivalents), for certain formulations
containing Bulk Drug Substance, as defined below;

 

WHEREAS, ZymoGenetics has certain process information relating to the synthesis
of Bulk Drug Substance and desires to have Abbott evaluate such information and
to scale-up and adapt the current manufacturing process for the preparation of
Bulk Drug Substance at Abbott facilities;

 

WHEREAS, Abbott possesses process engineering capabilities and operates process
development facilities, which include small scale bulk drug substance
laboratories and pilot plants, as well as large scale facilities for the
manufacture of commercial quantities of certain bulk drug substances;

 

WHEREAS, Abbott desires to evaluate ZymoGenetics’ process information and
scale-up and adapt the current manufacturing process for the preparation of Bulk
Drug Substance at Abbott facilities; and

 

WHEREAS, Abbott desires to manufacture for ZymoGenetics, developmental, clinical
and commercial quantities of Bulk Drug Substance, and ZymoGenetics desires to
purchase from Abbott such quantities, all subject to the terms and conditions of
this Agreement.

 

WHEREAS, the Parties entered into a [ * ] to begin technology transfer and
payments directly related to manufacture of Bulk Drug Substance and the Project
and which Purchase Order shall be terminated on an even date with the Effective
Date of this Agreement.

 

CONFIDENTIAL AGREEMENT

   1    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements contained herein, the Parties hereto agree as follows:

 

1. Definitions

 

As used in this Agreement, the following words and phrases shall have the
following meanings:

 

1.1 “Abbott Know-How” means all proprietary non-patented technical data,
drawings, documentation, analytical and regulatory information and other
information, including all improvements thereto, not included in Abbott Patent
Rights, as defined below, [ * ] as developed by Abbott for ZymoGenetics during
the Project that is either (a) owned by Abbott, or Abbott’s Affiliates, or
licensed to Abbott, with the right to sublicense, as of the Effective Date, (b)
generated by Abbott during the term of this Agreement, or (c) acquired by Abbott
(other than from or on behalf of ZymoGenetics) during the term of this
Agreement.

 

1.2 “Abbott Patent Rights” means United States and foreign patents and patent
applications, including divisions, continuations, continuations-in-part,
additions, renewals, extensions, re-examinations and reissues of all such
patents and patent applications, all as are owned by Abbott, or Abbott’s
Affiliates, or licensed by Abbott, with the right to sublicense, and to which
ZymoGenetics would need a license in order to practice the manufacturing and/or
process development operations relating to the manufacture of Bulk Drug
Substance as developed by Abbott for ZymoGenetics during the Project.

 

1.3 “Affiliate” of a party hereto means any entity that controls, is controlled
by, or is under common control with such party. For purposes of this definition,
a party shall be deemed to control another entity if it owns or controls,
directly or indirectly, [ * ] of the voting equity of the other entity (or other
comparable ownership interest for an entity other than a corporation).

 

1.4 “Assumptions” means as such term is defined in Exhibits C and D.

 

1.5 “BLA” means the Biologics License Application (or its foreign equivalent)
filed with the FDA (or foreign Regulatory Authority), seeking authorization to
market Product in the United States (or applicable foreign country within the
Territory).

 

1.6 “Bulk Drug Substance” means the bulk form of Thrombin, as more fully
described in Exhibits A and B, manufactured in accordance with this Agreement
and meeting the Bulk Drug Substance Specifications.

 

1.7 “Bulk Drug Substance Specifications” means the written specifications for
Bulk Drug Substance set forth in Exhibit B as modified from time to time
pursuant to Section 7.5.

 

1.8 “cGMP” means the FDA’s current good manufacturing practices, as specified in
the Code of Federal Regulations and FDA’s guidance documents, and all successor
regulations and guidance documents thereto, as well as the comparable practices,
regulations and documents of any other comparable Regulatory Authorities.

 

1.9 “CMC” means the Chemistry, Manufacturing and Controls section of the BLA.

 

1.10 “Confidential Information” means all information, including, but not
limited to, ZymoGenetics Know-How and Abbott Know-How disclosed pursuant to this
Agreement inwriting (or all information disclosed orally, visually and/or in
another intangible form which is

 

CONFIDENTIAL AGREEMENT

   2    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

summarized in writing as to its general content within thirty (30) days after
original disclosure and identified as being confidential), except any portion
thereof that:

 

(a) is already known to the recipient upon receipt, as evidenced by its written
records;

 

(b) is disclosed to the recipient without restriction after acceptance of this
Agreement by a Third Party who has the right to make such disclosure; or

 

(c) is independently developed by or for the recipient without reliance on the
Confidential Information, as evidenced by its written records; or

 

(d) becomes available to the general public without fault of the recipient.

 

1.11 “Contract Year” shall mean [ * ] A Contract Year shall end upon the
termination of this Agreement regardless of the actual calendar date.

 

1.12 “Dedicated Equipment” means as such term is defined in Section 8.8.

 

1.13 “EMEA” shall mean the European Agency for the Evaluation of Medical
Products, or any successor entity thereto.

 

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

 

1.15 “Fully Burdened Manufacturing Cost” means the sum of the following costs to
the extent allocable to the manufacture of Bulk Drug Substance: [ * ], that the
allocation of the foregoing costs shall be made to generally reflect the costs
incurred during [ * ], and would not include any costs associated with [ * ].
Fully Burdened Manufacturing Cost shall be calculatedin a manner consistent with
Generally Accepted Accounting Principles consistently applied.

 

1.16 “ICH” shall mean the International Convention on Harmonisation and any
successor agreements and/or amendments thereto.

 

1.17 “Incurred Fees” means as such term is defined in Section 12.6.

 

1.18 “Launch Date” means the date on which the first commercial sale of Product
is made in the Territory by ZymoGenetics or its designee.

 

1.19 “Liability” means as such term is defined in Section 14.1.

 

1.20 “Maximum [ * ] Capacity” means [ * ] Bulk Drug Substance per calendar of
each Contract.

 

1.21 “Minimum Purchase Obligation” means as such term is defined [ * ]

 

1.22 “Product” means any pharmaceutical product containing Bulk Drug Substance
as its active ingredient.

 

CONFIDENTIAL AGREEMENT

   3    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

1.23 “Project” means a multi-stage (each a “Stage”) project to adapt and further
develop ZymoGenetics’ current process for the manufacture of Bulk Drug Substance
to Abbott’s manufacturing facility and develop such process to commercial scale
so as to manufacture Bulk Drug Substance in compliance with this Agreement, as
set forth in Exhibit C.

 

1.24 “Reassignment Costs” means as such term is defined [ * ]

 

1.25 “Regulatory Authority(ies)” means the FDA, the EMEA, or any comparable
national or territorial regulatory entity within the Territory.

 

1.26 “Regulatory Filings” means the governmental filings required to obtain
approval to market Product in a given country within the Territory, including,
but not limited to, Product registration(s) and marketing approval(s), as
applicable, in each such country.

 

1.27 “Research and Development Fee” means as such term is defined in Section
5.1.

 

1.28 “Termination Cap” means [ * ].

 

1.29 “Territory” means the world.

 

1.30 “Third Party” or Third Parties” means any person(s) or entity(ies), as
applicable, other than Abbott or ZymoGenetics or any of their employees or
agents.

 

1.31 “ZymoGenetics Know-How” means all proprietary non-patented technical data,
drawings, documentation, analytical and regulatory information and other
information, including all improvements thereto, not included in ZymoGenetics
Patent Rights, as defined below, relating to the manufacture, use or sale of
Bulk Drug Substance that is either (a) owned by ZymoGenetics (or ZymoGenetics’
Affiliates), or licensed to ZymoGenetics, with the right to sublicense, as of
the Effective Date, (b) generated by ZymoGenetics during the term of this
Agreement, or (c) acquired by ZymoGenetics (other than from or on behalf of
Abbott) during the term of this Agreement.

 

1.32 “ZymoGenetics Patent Rights” means the United States (listed on Exhibit G)
and foreign patents and patent applications, including divisions, continuations,
continuations-in-part, additions, renewals, extensions, re-examinations and
reissues of all such patents and patent applications, all as are owned by
ZymoGenetics (or ZymoGenetics’ Affiliates), or licensed to ZymoGenetics, with
the right to sublicense, claiming Bulk Drug Substance, or to which Abbott would
need a license or sublicense in order to make Bulk Drug Substance.

 

2. Bulk Drug Substance Development Project

 

2.1 The Project. Following the Effective Date and according to the timelines set
forth in Exhibit C, Abbott shall undertake the Project. The Project shall
consist of research and development activities described in the Project in
accordance with Exhibit C. Abbott shall perform its research and development
activities hereunder pursuant to the terms of this Agreement and the Project;
provided, however, ZymoGenetics understands that, because the Project involves
research from which the results are inherently uncertain, Abbott does not make
any [ * ] or [ * ] of any kind that the Project will result in a
commercially-viable process.

 

CONFIDENTIAL AGREEMENT

   4    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

2.2 Project Stages. At the completion of each Project Stage, except in the event
that this Agreement is otherwise terminated as permitted herein, the Parties
shall mutually agree whether to (i) proceed with the Project or (ii) conduct
further development work under the then current Stage in addition to those
activities described in the Project for the then current Stage. In the event,
that the Parties cannot agree on (i) or (ii) above, the Parties shall organize
representatives with technical and executive decision making authority, to meet
in good faith and attempt to mutually agree on either (i) or (ii) above, or some
alternative course of action, prior to entering ADR as outlined in Section 18.2.

 

2.3 [ * ]-Manufacturing Facility [ * ]. Abbott shall -[ * ] requirements, and
ZymoGenetics shall agree to pay for [ * ], on the date prior to the initiation
of [ * ], based on the then current Project schedule, as may be revised by the
Parties (the “[ * ]”). The [ * ] -rate shall be-[ * ] per month for the [ * ] to
fulfill [ * ] -obligations (the [ * ] Rate”); provided, however, that the
aggregate [ * ] -to complete [ * ], which shall be agreed to by the Parties in
writing prior to [ * ] shall not exceed [ * ] -provided further, however,
ZymoGenetics shall be relieved of its obligation to pay such portion of the-[ *
] based on the time period for such [ * ]) for each period of time that-[ * ]
necessary components, equipment or materials, except to the extent [ * ]. Once
any such capacity [ * ] occurs, and the initiation date for [ * ] -has passed,
Abbott shall begin to invoice ZymoGenetics monthly according to the Payment
Schedule in Exhibit C, regardless of the status of this Agreement (except if the
Agreement is terminated pursuant to Section 12.3 or due to Abbott’s breach
pursuant to Section 12.4) or the development and manufacturing activities
performed therein. In the event that ZymoGenetics [ * ] and Abbott is able to
fill such-[ * ] Abbott shall provide ZymoGenetics with a [ * ]-(as elected by
ZymoGenetics) in [ * ] Once Abbott commences the manufacture of validation runs
of the Bulk Drug Substance, if any such run fails to conform to the Bulk Drug
Substance Specifications, Abbott shall [ * ] cost as soon as reasonably possible
(but in no event later than [ * ] from the foregoing failure) in order to meet
regulatory requirements to validate the manufacturing process.

 

3. Abbott’s Research and Development Activities

 

3.1 Abbott’s Activities. One of the objectives of the Project shall be for
Abbott to develop and manufacture Bulk Drug Substance and to support
ZymoGenetics’ Regulatory Filings as appropriate, however, ZymoGenetics shall be
responsible forthe preparation and filing of Regulatory filings, and all
communications with Regulatory Authorities, with respect to the Bulk Drug
Substance. Abbott shall conduct and perform according to the work-plan set forth
in Exhibit C as may be amended from time to time by the Parties to achieve such
objectives, including, but not limited to, the following:

 

  a. Sourcing raw materials for use in manufacturing Bulk Drug Substance, with
the price of such materials included in the price of the Project, excluding the
[ * ]

 

  b. Performing pilot scale evaluation of ZymoGenetics’ manufacturing process;

 

  c.

Adapting ZymoGenetics’ manufacturing process to Abbott’s equipment and systems.
In no event, without ZymoGenetics’ prior written approval and the Parties’
written agreement on licensing terms, will Abbott incorporate any proprietary
procedures or processes (whether or not patented and including, without
limitation, any Abbott Invention) into the manufacturing process that

 

CONFIDENTIAL AGREEMENT

   5    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

 

would require ZymoGenetics’ to obtain a license (from Abbott or any Third Party)
in order to practice such manufacture of any Bulk Drug Substance. In the event
Abbott incorporates any such proprietary procedures or processes without first
obtaining ZymoGenetics’ written consent, Abbott hereby grants to ZymoGenetics a
royalty-free, irrevocable, worldwide, nonexclusive license (or sublicense, if
applicable) (with the right to sublicense) to practice the proprietary
procedures or processes;

 

  d. Developing [ * ] to manufacture Bulk Drug Substance in Abbott’s
manufacturing facility;

 

  e. Preparing suitable manufacturing process documentation, including
instructions and manufacturing controls for inclusion in Regulatory Filings;

 

  f. Provide the Bulk Drug Substance information directly to ZymoGenetics in
support of Regulatory Filings, and assisting ZymoGenetics in responding to
questions from Regulatory Authorities concerning the manufacture of Bulk Drug
Substance;

 

  g. Conducting material contact and cleaning validation studies, engineering
and validation runs, process validation studies, and preparing process
justification and validation summary reports, in a mutually agreed upon timely
manner, to meet pre-approval and other appropriate inspection requirements of
the Regulatory Authorities and to support approval of the manufacture of the
Bulk Drug Substance in the Abbott manufacturing facility;

 

  h. Permitting ZymoGenetics to conduct all necessary cGMP and quality assurance
reviews of Abbott documentation, including review and receipt of copies of
Abbott manufacturing work orders;

 

  i. Permitting ZymoGenetics to access Abbott’s manufacturing data relating to
Bulk Drug Substance;

 

  j. Providing ZymoGenetics with acceptable environmental impact statements, if
required, for inclusion with Regulatory Filings;

 

  k. Providing ZymoGenetics with appropriate pilot and commercial scale batch
record manufacturing documentation for Regulatory Filings;

 

  l. Conducting [ * ] on Bulk Drug Substance as defined in Exhibit C;

 

  m. Preparation for and administration of the pre-approval inspection (and any
other necessary inspections) by the Regulatory Authorities; and

 

  n. Subject to Section 2.1, manufacturing development supplies, clinical
supplies, stability supplies and process validation batches of Bulk Drug
Substance in accordance with current cGMP’s and pursuant to protocols to which
the Parties shall mutually agree.

 

CONFIDENTIAL AGREEMENT

   6    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

4. ZymoGenetics’ Research and Development Activities

 

4.1 ZymoGenetics’ Activities. ZymoGenetics shall assist Abbott in completing the
Project, including, but not limited to ZymoGenetics’ responsibility for the
following:

 

  a. Providing Abbott with applicable analytical methods validated to Abbott’s
standards for raw materials which standards shall reasonably comport with
industry standards, in-process tests and manufacture of Bulk Drug Substance and
all available reference materials;

 

  b. Providing Abbott with technical data on Bulk Drug Substance that includes,
but is not limited to, the following: (i) material safety data sheets with
environmental and safety information, and (ii) additional detailed data, if
necessary, to define potential hazards and establish employee exposure levels;

 

  c. Obtaining and providing Abbott with copies of Regulatory Filings as
necessary for Abbott to obtain regulatory approval of the pre-approval
inspection; and

 

  d. Maintaining a stability program for, and retaining samples of, the marketed
Bulk Drug Substance.

 

5. Payment for Abbott’s Development Efforts

 

5.1 Research and Development Fee. To reimburse Abbott for its participation in
the Project in compliance with the activities described therein and in, this
Agreement, and in accordance with the Delivery and Payment Schedule set forth in
Exhibit C, ZymoGenetics shall pay Abbott a [ * ] (except as set forth in Section
12.6(f)) research and development fee (“Research and Development Fee”), which
fee in the aggregate upon completion of the Project may be less than or equal
to, but shall not exceed, [ * ], unless revisions occur in the Project scope in
accordance with the terms of this Article 5. The Parties understand and agree
that the Research and Development Fee is composed of, in part, by the
Reservation Rate described in Section 2.3. The Research and Development Fee,
shall be paid to Abbott as outlined in the Delivery and Payment Schedule
identified in the Project (Exhibit C). Any such modifications agreed upon by the
Parties to the scope of the Project shall be incorporated into the Payment
Schedule by a written agreement between ZymoGenetics and Abbott.

 

5.2 Changes in Project Scope. If changes occur in the Project or Bulk Drug
Substance Specifications, or if technical difficulties require that Abbott
perform either additional work or repeat work, and provided such work is
unrelated to Abbott’s fault or negligence, in advance of incorporating such
changes or performing any work associated therewith, Abbott shall consult with
ZymoGenetics and thereafter provide ZymoGenetics with a new or revised written
test protocol with cost estimates for such work. If ZymoGenetics approves such
costs and protocols, Abbott shall perform such work and ZymoGenetics shall pay
Abbott’s costs for such work in the manner and at the time as agreed upon by the
Parties in conjunction with the approval of the work.

 

5.3 Additional Filing Costs. ZymoGenetics shall reimburse Abbott for Abbott’s
direct costs paid to any Third Party (excluding Affiliates of Abbott, unless
otherwise agreed upon by the

 

CONFIDENTIAL AGREEMENT

   7    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

Parties), which are subject in each case to written pre-approval by
ZymoGenetics, associated with any filings with Regulatory Authorities including
but not limited to the filing of a CMC or CMC amendment, in support of
ZymoGenetics’ Regulatory Filings with respect to Bulk Drug Substance.
ZymoGenetics also shall reimburse Abbott for Abbott’s direct costs or those
reasonable costs paid to any Third Party (excluding Affiliates of Abbott, unless
otherwise agreed upon by the Parties), which are subject in each case to written
pre-approval by ZymoGenetics, for any work requested by ZymoGenetics to produce
and assemble documentation for Bulk Drug Substance registrations outside the
United States.

 

6. Pilot Scale and Clinical Supplies

 

6.1 Pilot Scale Supplies. Subject to Section 2.1, as part of completing the
Project, Abbott shall manufacture and provide to ZymoGenetics samples that
result from up to (as determined by ZymoGenetics) [ * ] pilot scale lots of Bulk
Drug Substance.

 

6.2 Registration/Validation Supplies. Subject to Section 2.1, as part of
completing the Project, Abbott shall manufacture and provide to ZymoGenetics
Bulk Drug Substance supplies that result from approximately [ * ] runs that are
scheduled for engineering runs and BLA registration/validation, with the last
three runs to be characterized as final “Registration Batches” which will be
suitable for commercial distribution and that Abbott warrants in accordance with
Section 13.2. ZymoGenetics shall promptly notify Abbott of any alteration of the
clinical schedule and Bulk Drug Substance amount.

 

6.3 Revisions to Schedule. No revisions may be made to the pilot scale and
clinical development schedule unless mutually agreed upon in writing by
ZymoGenetics and Abbott. The Parties shall mutually agree to the revision of a
change in costs associated with such agreed upon adjustment to such schedule.

 

6.4 No Warranties. Notwithstanding any terms or conditions to the contrary
contained herein, including, without limitation Section 13.2, Abbott makes no
warranties, express or implied, with respect to Bulk Drug Substance produced for
pilot scale supplies in accordance with this Section 6.4. All warranties,
express or implied, including without limitation, the implied warranties of
merchantability, fitness for a particular purpose and noninfringement, are
hereby disclaimed by Abbott.

 

7. Manufacture and Commercial Supply of Bulk Drug Substance

 

7.1 Purchase and Sale of Bulk Drug Substance. Abbott shall manufacture and
deliver Bulk Drug Substance, in accordance with the terms of this Agreement, [ *
] for the benefit of ZymoGenetics or its designee, and ZymoGenetics shall
purchase, in accordance with the terms of this Agreement, its Bulk Drug
Substance requirements in the Territory [ * ] from Abbott provided that Abbott
is able to supply Bulk Drug Substance in accordance with Article 9. Abbott shall
manufacture Bulk Drug Substance in accordance with the Bulk Drug Substance
Specifications that the Parties shall mutually develop. The Parties may alter
from time to time the Bulk Drug Substance Specifications by mutual written
agreement without amending this Agreement in accordance with Section 7.5.

 

CONFIDENTIAL AGREEMENT

   8    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

7.2 Raw Materials and Components. Abbott shall source all raw materials and
components necessary for the manufacture of the Bulk Drug Substance, subject to
the limitation on Abbott’s obligation to cover the cost of purchasing PTA as
described in Exhibit D (which limitation is based on the cost of the PTA as a
cost component of the final manufactured Bulk Drug Substance). Such raw
materials and components are included in the price of the Bulk Drug Substance.

 

7.3 Use of Third Parties. Abbott shall not utilize a Third Party to manufacture
any portion or all of the Bulk Drug Substance without first obtaining
ZymoGenetics’ written consent which consent shall not be unreasonably withheld
or delayed. In the event that Abbott is authorized to utilize a Third Party in
the manufacture of Bulk Drug Substance, such Third Party shall be approved by
Abbott’s Quality Assurance department. Any Third Party contract entered into by
Abbott and that Third Party shall contain a provision that allows ZymoGenetics
to audit such Third Party’s facilities. Abbott agrees that it shall remain
liable for the performance of Abbott’s obligations hereunder in the event that
Abbott is authorized to use a Third Party to perform Abbott’s obligations on its
behalf.

 

7.4 [ * ]. ZymoGenetics covenants to [ * ] of Bulk Drug Substance for each
Contract Year prior to the last to expire of the ZymoGenetics Patent Rights
listed on Exhibit G, commencing in the calendar year following the year of the
Launch Date. The [ * ] during each such Contract Year shall [ * ] If
ZymoGenetics does not purchase th [ * ] during any such Contract Year, then
within thirty (30) days after the end of the Contract Year, ZymoGenetics shall
pay to Abbott [ * ] from Abbott during the just concluded Contract Year-provided
that any failure to [ * ] is not due to [ * ] such quantity of Bulk Drug
Substance. Abbott may agree, solely at Abbott’s option, to waive such purchase
obligation.

 

7.5 Modification of Bulk Drug Substance Specifications. Abbott shall not
implement any modification, material or otherwise, to the Bulk Drug Substance
Specifications without ZymoGenetics’ prior written approval. Abbott shall submit
to ZymoGenetics a revised price for either the current or future Stage of
development during the Project or the Bulk Drug Substance that reflects such
cost increase resulting from any of the following events: (i) the Bulk Drug
Substance Specifications are modified by ZymoGenetics, (ii) the Bulk Drug
Substance Specifications must be modified by requirement of any Regulatory
Authority, or (iii) a process change is required as part of the CMC or other
applicable governmental application, and such modification or process change
increases Abbott’s cost to manufacture Bulk Drug Substance. Abbott and
ZymoGenetics shall mutually agree on the cost allocation of such change. In the
event the Parties are unable to agree on such cost allocation, Abbott may (i)
refuse to implement the change (in which event, ZymoGenetics may terminate this
Agreement) or (ii) terminate this Agreement. If such modification results in the
requirement to reprocess and/or retest previously manufactured and otherwise
acceptable Bulk Drug Substance, any additional costs incurred by Abbott in such
reprocessing and/or retesting shall be paid within the longer of: (i) sixty (60)
days of the mutual written agreement of the Parties for Abbott to reprocess
and/or retest the Bulk Drug Substance; or (ii) thirty (30) days after receipt of
the final report of the results of the retest or reprocessing.

 

7.6 Modification of Bulk Drug Substance Process. Abbott shall not make any
process changes with respect to the manufacture of the Bulk Drug Substance
without prior written permission from ZymoGenetics. Prior to any such change
being made, ZymoGenetics shall be

 

CONFIDENTIAL AGREEMENT

   9    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

responsible for obtaining (a) all necessary regulatory approvals from Regulatory
Authorities and (b) to the extent necessary and under terms to be agreed upon in
writing by ZymoGenetics, licensure from Abbott or any Third Party in order to
practice such process change for the manufacture of Bulk Drug Substance with
respect to such modifications.

 

8. Manufacture of Bulk Drug Substance

 

8.1 Bulk Drug Substance Title and Shipment. Any Bulk Drug Substance manufactured
by Abbott pursuant to this Agreement shall be shipped F.O.B. Abbott’s
manufacturing facility using [ * ] shipping methods. Title and risk of loss
shall pass to ZymoGenetics upon delivery of Bulk Drug Substance to the carrier.
Shipment shall be via a carrier designated by ZymoGenetics.

 

8.2 Bulk Drug Substance Storage. ZymoGenetics shall pay Abbott for any Bulk Drug
Substance storage costs per manufacturing lot or part thereof (excepting
retained samples) incurred by Abbott at ZymoGenetics’ request for storage after
the period ending sixty (60) days after release of post Launch Date Bulk Drug
Substance, provided that such Bulk Drug Substance was forecasted by ZymoGenetics
according to Article 9. Such costs shall be calculated at a rate of [ * ] per
month.

 

8.3 Quality Control. Abbott shall apply its quality control procedures and
in-plant quality control checks on the manufacture of Bulk Drug Substance for
ZymoGenetics in the same manner as Abbott applies such procedures and checks to
bulk drug substance of similar nature manufactured for sale by Abbott. In
addition, Abbott will test and release Bulk Drug Substance to ZymoGenetics in
accordance with the Bulk Drug Substance Specifications described in Exhibit B.

 

8.4 Quality Assurance. Representatives of the Parties’ Quality Assurance
departments shall meet to develop and approve a quality agreement (“Quality
Agreement”) outlining the responsibilities and key contacts for quality and
compliance-related issues. Items to be contained in the Quality Agreement
include, but are not limited to recalls, annual product reviews, returned goods,
regulatory audits, compliance with cGMP and compliance with such other quality
related concerns as are deemed appropriate by the Parties. The Quality Agreement
shall be negotiated in good faith by the parties no later than six (6) months
prior to Stage IV cGMP manufacturing and, once executed by both parties, shall
be incorporated into and made part of this Agreement by this reference. In the
event that any terms in the Quality Agreement conflict with any terms contained
in this Agreement, the terms of this Agreement shall control.

 

8.5 Audits. ZymoGenetics shall have the right, upon thirty (30) days’ prior
written notice to Abbott, and Abbott’s written approval, which approval shall
not be unreasonably withheld, to conduct during normal business hours a quality
assurance audit and inspection of Abbott’s records and Bulk Drug Substance
facilities relating to the manufacture of Bulk Drug Substance and to perform
follow-up audits as reasonably necessary. Prior to Abbott commencing the
production of the first batch of commercial Bulk Drug Substance as ordered by
ZymoGenetics, such audits and inspections may be conducted from time to time on
a reasonable basis. Once Abbott has commenced production of the first batch of
commercial Bulk Drug Substance, such audits may only be conducted once each
calendar year. The duration of such audits shall not exceed three (3) days and
such audits shall be performed by no more than two (2)

 

CONFIDENTIAL AGREEMENT

   10    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

auditors, unless ZymoGenetics reasonably believes that a longer audit or
additional personnel are necessary and provides its reasons for such belief to
Abbott in writing. If ZymoGenetics wishes to perform audits more often than once
per year or over a period in excess of three (3) days, ZymoGenetics shall pay
Abbott [ * ] per additional audit day. Notwithstanding the foregoing, in the
event that an audit is required by ZymoGenetics due to quality issues that
arise, per the terms of 8.6 and/or 9.8 or associated with any ineffective
corrective action, as demonstrated by subsequent Bulk Drug Substance lot(s)
containing comparable deviations, during any Contract Year, ZymoGenetics shall
be entitled to conduct such audit [ * ]. If more than two (2) auditors perform
the audit, ZymoGenetics shall pay Abbott [ * ] per additional auditor. In
addition, ZymoGenetics licensees shall have the right at any time during the
term of this Agreement, upon five (5) business days prior written notice to
Abbott, to conduct any audits specifically mandated by any Regulatory Authority
or to respond to specific questions from any such Regulatory Authority.
Notwithstanding anything to the contrary contained in this Agreement, any audits
conducted on Abbott’s property shall be subject to Abbott’s rules and
regulations regarding security and confidentiality and shall be conducted in the
presence of Abbott’s employees. In addition, Abbott shall promptly provide
ZymoGenetics a written response to any such audit report received by Abbott.

 

Visits by ZymoGenetics to Abbott’s Bulk Drug Substance facilities may involve
the transfer of Confidential Information, and any such Confidential Information
shall be subject to the terms of Article 11 hereof. The results of such audits
and inspections shall be considered Confidential Information under Article 11
and shall not be disclosed to Third Parties, including but not limited to any
Regulatory Authority, unless required by law and upon prior written notice to
Abbott. If ZymoGenetics utilizes auditors that are not employees of
ZymoGenetics, each of such auditors shall execute a non-disclosure agreement
with confidentiality terms at least as stringent as those set forth herein.

 

Abbott shall be responsible for inspections of its manufacturing facilities by
any Regulatory Authorities and shall promptly notify ZymoGenetics if such
inspections are directly related to the manufacture of ZymoGenetics’ Bulk Drug
Substance or if the results of a non-related inspection could materially impair
Abbott’s ability to perform in accordance with this Agreement. With respect to
inspections directly related to the manufacture of Bulk Drug Substance, Abbott
shall (a) provide ZymoGenetics with copies of all documents, reports or
communications received from or given to any Regulatory Authority associated
therewith, (b) permit ZymoGenetics’ representatives to be present on site and
participate, at Abbott’s discretion, as appropriate, based on questions or
requests specific to ZymoGenetics and as permitted by Regulatory Authorities, in
such inspections, and (c) allow ZymoGenetics to provide comments to Abbott, and
Abbott shall draft any such correspondence to Regulatory Authorities in
connection therewith.

 

ZymoGenetics shall promptly notify Abbott regarding any inspection on
ZymoGenetics property related to the manufacture of Bulk Drug Substance.

 

8.6 Recalls. Product recalls and contacts with any Regulatory Authorities
relating to the recall of Product shall be the responsibility of, and under the
control of, ZymoGenetics. In the event that Abbott has reason to believe that
any Products should be recalled or withdrawn from distribution, it shall
promptly inform ZymoGenetics in writing of such belief.

 

CONFIDENTIAL AGREEMENT

   11    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

ZymoGenetics shall notify the appropriate Regulatory Authorities of any recall
and shall be responsible for coordinating all necessary activities regarding the
action taken. Abbott and ZymoGenetics shall fully cooperate to complete the
recall, and shall thereafter resolve any allocation of liability as may be
appropriate in accordance with the terms of this Agreement. The costs and
expenses of conducting any recall shall be treated as follows:

 

(a) If any Product is recalled as a result of the supply by Abbott of Bulk Drug
Substance that was not manufactured in compliance with the terms of this
Agreement, then Abbott shall reimburse ZymoGenetics for all reasonable expenses
actually incurred as a result of such recall. If ZymoGenetics elects to utilize
a Third Party to conduct a recall, ZymoGenetics shall notify Abbott of the
identity of such Third Party;

 

(b) If each party contributes to the cause for a recall, the expenses actually
incurred as a result of such recall will be shared in proportion to each party’s
responsibility; and

 

(c) All recalls of Product other than those described in clauses (a) or (b)
shall be at ZymoGenetics’ sole expense. ZymoGenetics shall give Abbott prompt
written notice of any Product recalls that ZymoGenetics believes were caused or
may have been caused by Abbott’s failure to comply with this Agreement.

 

8.7 Payment Terms.

 

(a) Price and Payment. For (a) work performed in conducting the Project in
accordance with this Agreement, (b) Deliverables to ZymoGenetics as specified in
Exhibit C, and (c) Bulk Drug Substance that is manufactured and delivered in
accordance with this Agreement and meets the Bulk Drug Substance Specifications,
Abbott shall invoice ZymoGenetics according to the Payment Schedule in Exhibit C
and Bulk Drug Pricing in Exhibit D. ZymoGenetics shall make payment of all
undisputed amounts net thirty (30) days from the date of receipt of Abbott’s
invoice. All payments due under this Agreement shall be paid in U.S. Dollars by
wire transfer (ZymoGenetics will endeavor but is not obligated to provide twenty
four (24) hours advance notice of each wire transfer to the bank account
identified below or such other bank accounts as Abbott shall designate) or by
such other means agreed to by the Parties, for value, in each case at the
expense of the payor:

 

Account Name:         [ * ]

Account Number:

Bank:

ABA Number:

 

(b) Taxes. Any federal, state, county or municipal sales or use tax, excise,
customs charges, duties or similar charge, or any other tax assessment (other
than that assessed against income), license, fee or other charge lawfully
assessed or charged on the manufacture, sale or transportation of Bulk Drug
Substance sold pursuant to this Agreement shall be paid by ZymoGenetics.

 

8.8 Dedicated Equipment. ZymoGenetics shall pay the cost of additional equipment
purchased by Abbott (“Dedicated Equipment”), which is required for Abbott to
manufacture

 

CONFIDENTIAL AGREEMENT

   12    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

Bulk Drug Substance for ZymoGenetics (subject to the approval conditions stated
below). Abbott shall advise ZymoGenetics of any Dedicated Equipment required and
the estimated costs associated with the purchase, installation and validation of
such Dedicated Equipment. Such DedicatedEquipment shall be used exclusively for
manufacturing of Bulk Drug Substance hereunder, unless otherwise permitted in
advance by ZymoGenetics in writing. [ * ] Abbott shall bill ZymoGenetics for the
reasonable installation and equipment validation costs after Abbott installs the
Dedicated Equipment. This Section 8.8 shall not apply to any replacement
equipment purchased by Abbott because of obsolescence (technical or otherwise).
Dedicated Equipment, as estimated on or around the Effective Date, is outlined
in Exhibit F. Any requirements that vary from Exhibit F herein shall be
communicated to ZymoGenetics and approved in writing (letter, e-mail or
facsimile) by an authorized ZymoGenetics representative prior to the purchase of
any such Dedicated Equipment. ZymoGenetics shall own any Dedicated Equipment
upon the date it makes full payment to Abbott for said Dedicated Equipment. In
the event this Agreement is terminated, Abbott and ZymoGenetics shall in good
faith agree on the commercially reasonable procedures and costs related to the
return of the Dedicated Equipment to ZymoGenetics. Upon such termination, if
Abbott wishes to retain any such Dedicated Equipment, and ZymoGenetics approves
of such retention in writing, Abbott shall [ * ] In addition to Exhibit F,
Abbott shall submit quarterly to ZymoGenetics, an updated estimate of Dedicated
Equipment costs for the entire Project. Abbott shall purchase such Dedicated
Equipment and promptly bill ZymoGenetics. Abbott must receive written approval
from ZymoGenetics prior to any such purchase if (a) the purchase is for an
amount greater than [ * ] of (b) if the aggregate of such purchases during a
particular calendar quarter are for an amount greater than [ * ].

 

Title to, and risk of loss of, all Dedicated Equipment shall be retained by
ZymoGenetics; provided, however, that Abbott shall be responsible for replacing
any ZymoGenetics Owned Dedicated Equipment that is destroyed due to Abbott’s
negligence, willful misconduct, unauthorized use or unauthorized use with other
products. All Dedicated Equipment shall remain at Abbott’s manufacturing
facilities.

 

Abbott shall be responsible for maintaining and servicing the Dedicated
Equipment. ZymoGenetics, however, shall be responsible for the cost of
non-routine maintenance and servicing of the Dedicated Equipment (such as major
repairs and material parts replacement), except to the extent caused by Abbott’s
negligence, willful misconduct, unauthorized use or use with other products in
which case Abbott shall be responsible. Abbott shall notify ZymoGenetics prior
to the performance of any non-routine maintenance or servicing, and ZymoGenetics
shall reimburse Abbott at cost for such maintenance or servicing costs that
ZymoGenetics has authorized to be incurred and for which it is responsible.

 

9. Orders and Forecasts

 

9.1 First Year Estimate. ZymoGenetics shall, within [ * ] days after filing its
BLA for Bulk Drug Substance, provide Abbott with a written estimate of
ZymoGenetics’ monthly requirements of Bulk Drug Substance to be supplied by
Abbott for the first Contract Year; provided, however, the Parties acknowledge
that most if not all requirements of Bulk Drug Substance for the first Contract
Year may be obtained through the validation runs described in Section 6.2.
Abbott acknowledges that such quantities are estimates only and are nonbinding.

 

CONFIDENTIAL AGREEMENT

   13    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

9.2 First Order. Abbott and ZymoGenetics shall cooperate fully in estimating and
scheduling production for ZymoGenetics’ first commercial order of Bulk Drug
Substance in anticipation of regulatory approval of Bulk Drug Substance.

 

9.3 First Firm Order. Approximately [ * ] months in advance (the “Initial Order
Date”) of the desired Bulk Drug Substance availability date, ZymoGenetics shall
place its first firm order for a period of time equal to the longer of (a) the
remaining months of the calendar year in which the Initial Order Date occurs or
(b) [ * ] following the Initial Order Date. At the same time, ZymoGenetics shall
provide to Abbott with ZymoGenetics’ estimate of its monthly requirements of
Bulk Drug Substance to be supplied by Abbott for the next succeeding [ * ] month
period. For illustrative purposes only, the following are examples of how the
Parties intend to apply this Section 9.3:

 

Example 1: If the desired Bulk Drug Substance availability date is [ * ],
ZymoGenetics will place its first firm order on the Initial Order Date (which
will be [ * ]) for its expected orders to be delivered during the period of time
of [ * ].

 

Example 2: If the desired Bulk Drug Substance availability date is [ * ],
ZymoGenetics will place its first firm order on the Initial Order Date (which
will be [ * ]) for its expected orders to be delivered during the period of time
of [ * ]

 

9.4 Rolling Forecast. At the beginning of each calendar quarter following the
Initial Order Date, ZymoGenetics shall provide to Abbott a rolling [ * ]
projection of requirements of Bulk Drug Substance to be supplied by Abbott, with
the [ * ] of such projection consisting of firm purchase orders and the
remaining [ * ] of such projection consisting of ZymoGenetics’ best estimate
forecast of its Bulk Drug Substance requirements. For illustrative purposes
only, the following are examples of how the Parties intend to apply this Section
9.4:

 

Example 1: Considering the scenario under Example 1 of Section 9.3, at the
beginning of [ * ] following the Initial Order Date, commencing [ * ],
ZymoGenetics shall provide to Abbott a rolling [ * ] forecast in the format
described above; provided, however, the Parties recognize that all [ * ] from [
* ] will remain firm due to the initial firm forecast produced under Section
9.3.

 

Example 2: Considering the scenario under Example 2 of Section 9.3, at the
beginning of [ * ] following the Initial Order Date, commencing the [ * ],
ZymoGenetics shall provide to Abbott a rolling forecast in the format described
above; provided, however, the Parties recognize that all [ * ] from [ * ] will
remain firm due to the initial firm forecast produced under Section 9.3.

 

9.5 Purchase Order Acceptance. If a firm purchase order is not in excess of [ *
] of the amounts previously reflected for the applicable months in the
immediately preceding Rolling Forecast, and the amounts in the firm purchase
order are in compliance with the [ * ], the firm purchase order shall be deemed
accepted by Abbott upon its receipt thereof. If, however, the firm purchase
order exceeds such [ * ] or the amounts ordered for any given [ * ] would exceed
the [ * ] then, within [ * ] after receipt of ZymoGenetics’ firm purchase orders
for Bulk Drug Substance, Abbott shall confirm to ZymoGenetics its acceptance or
non acceptance of the purchase order, the delivery date and the quantity of Bulk
Drug Substance ordered by

 

CONFIDENTIAL AGREEMENT

   14    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

ZymoGenetics. In the event that Abbott is unable to meet ZymoGenetics’ order,
then ZymoGenetics may either (a) reduce its firm purchase order to no more than
[ * ] of the amounts previously reflected for the applicable months in the
Rolling Forecast and to fall into compliance with the Maximum [ * ] Capacity or
(b) employ a Third Party supplier of Bulk Drug Substance, provided that the
Third Party supplier is only employed to supply the firm purchase order for
which Abbott was unable to fulfill.

 

9.6 Firm Order Changes. If, due to significant unforeseen circumstances,
ZymoGenetics requests changes to firm orders within the [ * ] firm purchase
order timeframe, then Abbott shall attempt to accommodate the changes within
reasonable manufacturing capabilities and efficiencies. Abbott shall advise
ZymoGenetics in writing of the costs associated with making any such change and
ZymoGenetics shall be deemed to have accepted the obligation to pay Abbott for
such costs if ZymoGenetics indicates to Abbott, in writing, that Abbott should
proceed to make the change. Abbott is obligated to fill all accepted firm orders
for Bulk Drug Substance provided that (i) the order is no greater than [ * ] of
the amounts previously reflected for the applicable months in the immediately
preceding Rolling Forecast and (ii) the firm purchase order is in compliance
with the Maximum [ * ] Capacity. Abbott shall use reasonable commercial efforts
to fill any accepted firm orders for Bulk Drug Substance in excess of such [ * ]

 

9.7 Purchase Order Terms. Each purchase order or any acknowledgment thereof,
whether printed, stamped, typed, or written shall be governed by the terms of
this Agreement and none of the provisions of such purchase order or
acknowledgment shall be applicable except those specifying Bulk Drug Substance
and quantity ordered, delivery dates, special shipping instructions and invoice
information.

 

9.8 Acceptance of Bulk Drug Substance.

 

(a) Acceptance. ZymoGenetics shall inspect the Bulk Drug Substance manufactured
by Abbott upon receipt thereof and, within [ * ], (i) shall give Abbott written
notice (a “Deficiency Notice”) of any Bulk Drug Substance that fails to comply
with any of Abbott’s warranties stated in Section 13.2 or is delivered without a
certificate of analysis; and (ii) shall reconcile the shipment against the
relevant firm purchase order and give Abbott notice of any shortages. Should
ZymoGenetics fail to provide Abbott with written notice of its acceptance or
rejection of the Bulk Drug Substance within the above described [ * ] period,
then the delivery shall be deemed to have been accepted by ZymoGenetics on the [
* ] after delivery.

 

(b) Determination of Deficiency. Upon receipt of a Deficiency Notice, Abbott
shall have [ * ] to advise ZymoGenetics in writing that it disagrees in good
faith with the contents of such Deficiency Notice (the “Response Notice”). If
ZymoGenetics and Abbott fail to agree within [ * ] days after ZymoGenetics’
receipt of Abbott’s Response Notice, then the Parties shall promptly mutually
select an independent laboratory to evaluate (using the test methods described
in the Bulk Drug Substance Specifications) if the Bulk Drug Substance deviates
from any Bulk Drug Substance Specifications. Such evaluation shall be binding on
the Parties, and if such evaluation certifies that the Bulk Drug Substance
deviates from any Bulk Drug Substance Specifications, ZymoGenetics may reject
those Bulk Drug Substance in the manner contemplated by Section 9.8(c). If such
evaluation reveals that the Bulk Drug Substance in question complies with the
Bulk Drug Substance Specifications and Abbott has complied with

 

CONFIDENTIAL AGREEMENT

   15    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

all the warranties in Section 13.2, then ZymoGenetics shall be deemed to have
accepted delivery of such Bulk Drug Substance upon the independent laboratory
issuing its opinion.

 

(c) Rejection. Subject to the provisions of Sections 9.8, ZymoGenetics has the
right to reject and return, at the expense of Abbott, any portion of any
shipment of Bulk Drug Substance that deviates from any Bulk Drug Substance
Specifications, without invalidating any remainder of such shipment, to the
extent that such deviation arises from Abbott’s failure to manufacture and
supply the Bulk Drug Substance in accordance with this Agreement (including,
without limitation, the Bulk Drug Substance Specifications). In such event,
Abbott at its cost shall promptly replace such rejected amounts with Bulk Drug
Substance that conforms with the Bulk Drug Substance Specifications.

 

10. Proprietary Ownership of Development Work, Preexisting Technology and
License Grants

 

10.1 Existing Proprietary Information. Except as otherwise expressly provided
herein, neither party shall be deemed to have been granted any license or other
rights to patent rights, know-how relating to compounds, formulations, or
processes which are owned or controlled by the other party existing as of the
date hereof.

 

10.2 Abbott Inventions. With respect to any ideas, innovations or inventions
related to manufacturing (whether or not patentable) developed by Abbott or
Abbott’s Affiliates prior to or during the term of this Agreement (“Abbott
Inventions”), Abbott shall own all proprietary rights to such ideas, innovations
and inventions, and may obtain patent, copyright, and/or other proprietary
protection relating to such Abbott Inventions. Abbott hereby grants to
ZymoGenetics an [ * ] license with the right to [ * ], to each Abbott Invention
which has been incorporated into the manufacturing process of the Bulk Drug
Substance. Such license ([ * ]) shall be granted in exchange for a royalty equal
to [ * ] of the Applicable Dollar Volume. “Applicable Dollar Volume” shall mean,
as applicable, either (a) the purchase price paid by ZymoGenetics or its Third
Party licensee for their purchase of Bulk Drug Substance from a Third Party
manufacturer that is utilizing such licensed Abbott Inventions solely for the
manufacturer of Bulk Drug Substance; or (b) [ * ] of the actual Fully Burdened
Manufacturing Cost of the Bulk Drug Substance incurred by ZymoGenetics or its
Third Party Licensee to manufacture such Bulk Drug Substance internally
utilizing such Abbott Invention. In the event that Abbott files a patent
application on an Abbott Invention, then Abbott shall so notify ZymoGenetics
within [ * ] of the filing of such patent application.

 

10.3 ZymoGenetics Inventions. With respect to any ideas, innovations or
inventions (whether or not patentable) developed by Abbott or ZymoGenetics
(alone, or in conjunction with Third Parties) during the term of this Agreement
and relating to the Bulk Drug Substance, other than Abbott Inventions
(“ZymoGenetics Inventions”), ZymoGenetics shall own all proprietary rights to
such ZymoGenetics Inventions, and may obtain patent, copyright, and/or other
proprietary protection relating to such ideas, innovations and inventions.
Abbott hereby assigns and shall assign to ZymoGenetics all of Abbott’s right,
title and interest in and to the ZymoGenetics’ Inventions. During the term of
this Agreement, ZymoGenetics hereby grants to Abbott a [ * ]

 

CONFIDENTIAL AGREEMENT

   16    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

10.4 Joint Inventions. Except for inventions to be owned individually by a party
as described in Sections 10.2 and 10.3 above, each party shall own a [ * ] in
all such inventions, discoveries and know-how made, conceived, reduced to
practice and/or otherwise generated jointly by at least one employee, agent, or
other person acting for each party in the course of this Agreement. The Parties
shall collaborate on any actions with respect to the protection of their joint
rights in such inventions, discoveries and know-how, at shared expense, and
thereafter each party may make, use, sell, keep, license, assign, or mortgage
such jointly-owned inventions, discoveries and know-how, and otherwise undertake
all activities a sole owner might undertake with respect to such inventions,
discoveries and know-how, with the prior written consent of the other party,
which consent shall not be unreasonably withheld.

 

11. Confidential Information

 

Neither party shall use or disclose any of the other party’s Confidential
Information received by it without the prior written consent of the other party.
Except as provided in the following sentence, nothing contained in this Article
shall be construed to restrict the Parties from disclosing Confidential
Information as is reasonably necessary to perform acts expressly permitted by
this Agreement or such acts the Parties’ could reasonably expect to be performed
in conjunction with the approval and/or manufacture of Bulk Drug Substance
and/or any Product. However, if either party is required or feels it necessary
to disclose any of the other party’s Confidential Information received by it
pursuant to this Agreement (whether by audit or otherwise) to any Third Party or
governmental authority or agency in compliance with any federal, state and/or
local laws and/or regulations, or pursuant to an order of a court of competent
jurisdiction, the disclosing party shall first notify the party owning such
Confidential Information, prior to any such disclosure, in order to afford the
disclosing party a reasonable opportunity to obtain a protective order as to
such information and will use reasonable efforts to obtain reliable assurance
that the information disclosed will be treated confidentially. In any event,
each party shall make any disclosures of the other party’s Confidential
Information received by it pursuant to this Agreement only to the extent
required, and only to such persons who have a need to know. The obligations of
each party relating to the other party’s Confidential Information shall expire
ten (10) years after termination of this Agreement. The disclosure of
Confidential Information shall not constitute the grant of any license or any
other rights, or generate any business arrangements, unless specifically set
forth herein or in another writing.

 

Neither party shall disclose the existence or any terms and conditions of this
Agreement except (a) with the other party’s prior written consent or (b) as
required to comply with foreign, federal, state or local laws and regulations
(including, without limitation, federal and state securities laws and
regulations).

 

Each party acknowledges that the remedy at law for any breach of this Article 11
would be inadequate, and the full amount of damages that may result from such
breach is not readily susceptible to being measured in monetary terms.
Accordingly, in the event of a breach or threatened breach by either party of
this Article 11, the other party shall be entitled to immediate injunctive
relief prohibiting any such breach and requiring the immediate return of all
Confidential Information. Such remedies shall be in addition to any other
remedies that may be available.

 

CONFIDENTIAL AGREEMENT

   17    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

12. Term and Termination

 

12.1 Term. This Agreement shall become effective as of the Effective Date, and
unless sooner terminated hereunder, shall continue in effect until the
completion of the tenth (10th) Contract Year following the Launch Date (the
“Initial Term”). THEREAFTER, THIS AGREEMENT SHALL STAY IN EFFECT AND, UNLESS
SOONER TERMINATED HEREUNDER, SHALL TERMINATE ONLY AFTER NO LESS THAN EIGHTEEN
(18) MONTHS’ PRIOR WRITTEN NOTICE OF A PARTY’S INTENT TO TERMINATE IS GIVEN TO
THE OTHER PARTY (WHICH NOTICE MAY BE GIVEN PRIOR TO OR AFTER THE EXPIRATION OF
THE INITIAL TERM).

 

12.2 ZymoGenetics Termination Rights. ZymoGenetics may terminate this Agreement
upon [ * ] days prior written notice to Abbott if ZymoGenetics determines in
good faith that the clinical, development and/or commercial stage of a Product,
before or after the Launch Date, is not (or would not be) technically,
clinically, legally (as governed by Regulatory Authorities or any local, state
or federal laws or regulations in the United States) or commercially feasible as
determined solely by ZymoGenetics and/or ZymoGenetics’ licensee (other than
Abbott); provided, however, that in the event ZymoGenetics terminates this
Agreement pursuant to this Section 12.2 but within two years thereafter decides
to proceed toward the commercialization of the Product, and if ZymoGenetics is
not restricted by any technical, regulatory or legal (as governed by Regulatory
Authorities or any local, state or federal laws or regulations in the United
States) limitations, Abbott shall have the first right to manufacture the Bulk
Drug Substance (exercisable within a 30 day period from the date Abbott receives
written notice from ZymoGenetics of such decision to proceed) for use in the
Product at the price and upon the terms and conditions set forth in this
Agreement (provided the necessary specifications for the Bulk Drug Substance are
the same, in all material respects, as the Bulk Drug Specifications).

 

12.3 Abbott Termination Rights. Following the Launch Date, Abbott may terminate
this Agreement under either of the following circumstances:

 

(a) If Abbott (in consultation with ZymoGenetics) determines [ * ] that the
continued operation of the manufacturing process for the Bulk Drug Substance is
not [ * ] (for reasons other than Abbott’s acts or omissions) in Abbott’s
manufacturing facilities, provided, however, that prior to terminating this
Agreement, Abbott shall first provide ZymoGenetics with (i) a written
description of all the factors considered by Abbott in determining that [ * ]
and (ii) a good faith estimate of the costs that each party would incur to
resolve [ * ] (the “Written Estimate”). Within ten (10) days of ZymoGenetics’
receipt of the Written Estimate, representatives with [ * ] and executive
decision making authority from each Party shall meet and endeavor to arrive at a
mutually agreeable resolution as to whether and how to address [ * ] . If the
Parties cannot reach such mutual agreement within a thirty period following such
meeting, the Parties (by written agreement) may elect to either (i) immediately
terminate this Agreement or (ii) proceed in a diligent and good faith manner,[ *
] At ZymoGenetics’ request, Abbott shall reasonably assist ZymoGenetics in
identifying [ * ] and Abbott shall take all reasonable steps to achieve an [ *
], including if necessary, providing reasonable training to ZymoGenetics or to
its designated Third Party manufacturer, as well as perform such other [ * ]
necessary to permit continuity in the development and manufacture of the Bulk
Drug Substance. The Parties shall discuss in good [ * ] between the Parties [ *
]

 

(b) If Abbott decides to terminate this Agreement, prior to the completion of
the Initial Term (defined in Section 12.1),[ * ] which would otherwise be used
to fulfill its

 

CONFIDENTIAL AGREEMENT

   18    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

obligations under this Agreement, for the purpose of [ * ] owned by Abbott or
any of Abbott’s Affiliates; provided, however, that if Abbott terminates this
Agreement for the foregoing reason, it shall do the following: (i) Provide
ZymoGenetics with [ * ] notice before the effective date of such termination,
during which time Abbott shall continue to fulfill its obligations to supply
Bulk Drug Substance to ZymoGenetics in accordance with the terms of this
Agreement; (ii) assist ZymoGenetics [ * ] (iii) take [ * ] steps (and cause its
Affiliates, as necessary, to take reasonable steps), [ * ] to ZymoGenetics, to
achieve [ * ] thereto (including, without limitation, providing[ * ] to
ZymoGenetics and the replacement manufacturer, as well as perform such other [ *
] necessary to permit continuity in the development and manufacture of the Bulk
Drug Substance) and provide [ * ]

 

12.4 General Termination Rights. Upon the occurrence of the following events,
either party may terminate this Agreement by giving the other party [ * ] prior
written notice:

 

(a) Upon the voluntary or involuntary filing of bankruptcy or insolvency of the
other party; or

 

(b) Upon the material breach of any provision of this Agreement by the other
party if the breach is not remedied prior to the expiration of such [ * ] notice
period, or if the breach is of a type that cannot be remedied within [ * ], then
a remedy promptly commenced and diligently pursued until complete remediation.

 

12.5 Termination Due to Regulatory Action. ZymoGenetics may terminate this
Agreement upon [ * ] written notice in the event that any Regulatory Authority
takes any action, or raises any objection, that has (or could reasonably be
expected to have) a material adverse effect on ZymoGenetics’ right or ability to
import, export, have manufactured, purchase or sell any Product. In the event
ZymoGenetics terminates this Agreement pursuant to this Section 12.5 but within
[ * ] thereafter determines that it is able to proceed toward or with the
commercialization of Bulk Drug Substance, unless such termination is due to
regulatory actions directly affecting Abbott’s ability to operate its biologics
manufacturing business or the manufacturing facilities at which the Bulk Drug
Substance is being made, Abbott shall have the first right to manufacture the
Bulk Drug Substance (exercisable within a [ * ] from the date Abbott receives
written notice from ZymoGenetics of such decision to proceed) for such Bulk Drug
Substance at the price and upon the terms and conditions set forth in this
Agreement.

 

12.6 Actions on Termination. Upon termination of this Agreement for any reason,
the following shall occur:

 

(a) Dedicated Equipment. Upon ZymoGenetics’ option (i) Abbott shall deliver to
ZymoGenetics (at ZymoGenetics’ cost of removal and shipment) all Dedicated
Equipment or if the Parties mutually agree (ii) Abbott shall purchase all
Dedicated Equipment from ZymoGenetics at its depreciated (calculated on a
straight-line basis) book value thereof;

 

(b) Confidential Information and Records. Each party shall deliver to the other,
or destroy at the Parties election, all materials, reports, and other documents
(including copies thereof) in its possession or control containing Confidential
Information of the other party, and each will cease to make use of the other’s
Confidential Information; in particular, the Bulk Drug Substance Specifications
shall be promptly returned to ZymoGenetics along with the

 

CONFIDENTIAL AGREEMENT

   19    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

following records, which are to be maintained by Abbott on behalf of
ZymoGenetics during the term of this Agreement: Bulk Drug Substance Specific
Master Manufacturing Batch Records; Drug Product Specific Test Methods; Drug
Product Specific Standard Operating Procedures; Drug Product Specific Material
Specifications (in-process limits and Drug Product specifications); and Drug
Product Specific Validation Protocols and Reports (Equipment, Process, Cleaning,
Test Method);

 

(c) Technology Transfer. Upon ZymoGenetics’ request, Abbott will assist
ZymoGenetics with the transfer of the manufacturing process associated with the
Bulk Drug Substance to ZymoGenetics or its designee;

 

(d) Raw Materials. Abbott shall return to ZymoGenetics all unused raw materials
associated with Bulk Drug Substance to the extent it has been paid for by
ZymoGenetics;

 

(e) Maintenance of Information. ZymoGenetics shall continue to maintain
information about the Bulk Drug Substance and its production for such time and
in such manner as required by the Regulatory Authorities and shall continue to
respond in a timely manner to all queries and requests for information from
Regulatory Authorities; and

 

(f) Project Reassignment Costs. If the Project is terminated, Abbott shall
advise ZymoGenetics of Abbott’s reasonable research and development fees on the
Project incurred in accordance with the Project budget as described in Article 5
of this Agreement (“Incurred Fees”) prior to such termination. The Parties shall
negotiate in good faith an appropriate and reasonable adjustment based upon
Abbott’s Incurred Fees and ZymoGenetics’ Research and Development Fee payments
previously made following such termination. Unless the Agreement was terminated
due to Abbott’s material breach, ZymoGenetics shall pay Abbott for [ * ]
associated with reassignment of resources as determined in good faith by Abbott
(“Reassignment Costs”). Such Reassignment Costs shall include but not be limited
to: [ * ] (less any avoidable out-of-pocket costs). Abbott shall use reasonable
best efforts to minimize Reassignment Costs. Any such Reassignment Costs shall
be limited to costs incurred within the period of time that is the shorter of
(a) [ * ] of the labor, assets and other resources or (b) the [ * ] period
following the termination of the Agreement, except to the extent that
ZymoGenetics approves such additional costs in writing. Abbott shall provide to
ZymoGenetics a detailed summary of Incurred Fees and [ * ] payable pursuant to
this Section 12.6. Upon payment of any adjustment required by this Section 12.6,
this Agreement shall terminate.

 

12.7 Purchase of Firm Orders. Upon termination of this Agreement for any reason
other than due to Abbott’s material breach, ZymoGenetics shall pay an amount to
Abbott equal to the then outstanding firm purchase order (as described in
Section 9.4); provided, however, if the amount of Bulk Drug Substance purchased
by ZymoGenetics in the year of termination (including the amount reflected in
the final firm purchase order) is less than the minimum purchase obligation for
such year, ZymoGenetics shall pay an additional amount to meet such minimum
purchase obligation. Notwithstanding the foregoing, if Abbott is able to resell
its unused capacity that was attributable to the firm purchase order, it shall
provide ZymoGenetics with a reasonable credit, offset or refund (as elected by
ZymoGenetics) in an amount to be determined in good faith. ZymoGenetics shall
have no purchase obligations beyond (a) the amounts reflected in the firm
purchase order and (b) any portion of that Contract Year’s

 

CONFIDENTIAL AGREEMENT

   20    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

minimum purchase obligation that ZymoGenetics has not otherwise purchased
(including any outstanding firm purchase orders).

 

12.8 Additional Remedies on Abbott’s Breach. In the event this Agreement is
terminated due to Abbott’s material breach, ZymoGenetics shall have the
following additional remedies:

 

(a) Continued Supply. Upon ZymoGenetics’ request, Abbott will continue to
manufacture Bulk Drug Substance, for a reasonable amount of time not to exceed [
* ], under the terms of this Agreement until ZymoGenetics establishes an
alternative source of manufacturing of the Bulk Drug Substance, which source is
capable of performing at levels satisfactory to ZymoGenetics and has received
all requisite regulatory and legal approvals to perform such manufacturing and
supply services.

 

(b) Cost of Transfer. Abbott shall [ * ] to qualify the above described
alternative source of manufacturing, subject to the Termination Cap.

 

(c) Technology Transfer. Upon ZymoGenetics’ request, Abbott will assist
ZymoGenetics with the transfer of the manufacturing process associated with the
Bulk Drug Substance to ZymoGenetics or its designee, including, without
limitation, all information, data, documentation and technical assistance that
may be reasonably needed to manufacture the Bulk Drug Substance.

 

12.9 Survival Provisions. Termination, expiration, cancellation or abandonment
of this Agreement through any means and for any reason shall not relieve the
Parties of any obligation accruing prior thereto, including, but not limited to,
the obligation to pay money, and shall be without prejudice to the rights and
remedies of either party with respect to the antecedent breach of any of the
provisions of this Agreement. Further, Articles 2.3, 5.3, 9.3 and 9.4 (firm
orders), 10, 11, 12, 13, 14, 15, 16, 18, 19, 20, 21, 24 and 29 shall survive the
termination of this Agreement.

 

12.10 [ * ] Termination Expenses. NOTWITHSTANDING ANY TERMS OR CONDITIONS TO THE
CONTRARY CONTAINED HEREIN, IN NO EVENT SHALL ABBOTT BE [ * ] TO ZYMOGENETICS [ *
] (OTHER THAN TO AN AFFILIATE OF EITHER PARTY) [ * ] , ARISING FROM ARTICLE 12
OF THIS AGREEMENT [ * ]

 

13. Warranties

 

13.1 ZymoGenetics Warranties. ZymoGenetics warrants that it owns or controls all
of the rights in and to the ZymoGenetics Patent Rights, ZymoGenetics Know-How,
and Confidential Information provided by ZymoGenetics to Abbott hereunder, and
that it has the full right and authority to grant to Abbott the licenses
described in Section 10.3. ZYMOGENETICS MAKES NO OTHER WARRANTIES, EXPRESS OR
IMPLIED, WITH RESPECT TO BULK DRUG SUBSTANCE, ZYMOGENETICS PATENT RIGHTS,
ZYMOGENETICS KNOW-HOW, AND ZYMOGENETICS CONFIDENTIAL INFORMATION PROVIDED
HEREUNDER. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT

 

CONFIDENTIAL AGREEMENT

   21    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NONINFRINGEMENT, ARE HEREBY DISCLAIMED BY ZYMOGENETICS. IN NO EVENT
SHALL ZYMOGENETICS OR ZYMOGENETICS’ AFFILIATES BE LIABLE FOR INDIRECT,
INCIDENTAL, LIQUIDATED OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION,
LOST REVENUES OR PROFITS. If at any time any representation or warranty to
ZymoGenetics’ knowledge is no longer accurate, ZymoGenetics will promptly notify
Abbott of such fact.

 

13.2 Abbott Warranties. Abbott warrants to ZymoGenetics that Bulk Drug Substance
delivered to ZymoGenetics pursuant to Section 6.2 (as “Registration Batches”) or
Articles 8 and 9 of this Agreement shall conform with the Bulk Drug Substance
Specifications and shall have been manufactured in compliance with this
Agreement and all applicable laws and regulations. Abbott warrants to
ZymoGenetics that it has, and shall maintain in compliance with applicable laws
and regulations during the term of this Agreement, the facilities, equipment,
personnel, licenses and patents and expertise necessary to fulfill its
obligations hereunder. Abbott also represents and warrants that (a) it is not
debarred and has not and will not knowingly use in any capacity the services of
any person debarred under Section 306(a) or (b) of the U.S. Generic Drug
Enforcement Act of 1992 as amended or any comparable law of the EMEA or any ICH
confirming country, as each may be amended from time to time, and (b) the Bulk
Drug Product will not be adulterated or misbranded, within the meaning of the
U.S. Food, Drug & Cosmetics Act, or any comparable laws, rules or regulations of
any non-U.S. jurisdiction, as a result of any act or omission of Abbott. ABBOTT
MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO BULK DRUG
SUBSTANCE. ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND NONINFRINGEMENT, ARE HEREBY DISCLAIMED BY ABBOTT. IN NO EVENT SHALL
ABBOTT OR ABBOTT’S AFFILIATES BE LIABLE FOR INDIRECT, INCIDENTAL, LIQUIDATED OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOST REVENUES OR PROFITS.
If at any time any representation or warranty to Abbott’s knowledge is no longer
accurate, Abbott will promptly notify ZymoGenetics of such fact.

 

14. Indemnification

 

14.1 ZymoGenetics Indemnification. ZymoGenetics shall defend, indemnify and hold
harmless Abbott and its Affiliates and their respective employees, directors and
agents against any liability, judgment, loss, damage, cost and other expense
(including reasonable attorney’s fees) (“Liability”) resulting from any Third
Party (except for Affiliates of Abbott) demand or lawsuit arising from (i)
ZymoGenetics’ negligence or willful misconduct in the development, testing, use,
manufacture, promotion, marketing, sale, distribution, packaging, labeling,
handling, storage, and/or disposal of Bulk Drug Substance and/or formulations
containing Bulk Drug Substance; or (ii) alleged infringement of any patent or
other proprietary rights of such Third Party (except for Affiliates of Abbott)
based on the testing, use, manufacture, promotion, marketing, sale,
distribution, packaging, labeling, handling, storage, and/or disposal of the
Bulk Drug Substance, except to the extent the Third Party (except for Affiliates
of Abbott) demands, or lawsuit arises out of, or relates to the events described
in section 14.2 (ii); or (iii) ZymoGenetics’ and/or any ZymoGenetics’
Affiliate’s, licensee’s and/or sublicensee’s material

 

CONFIDENTIAL AGREEMENT

   22    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

breach of this Agreement, except to the extent the Third Party (except for
Affiliates of Abbott) demand or lawsuit arises out of or relates to the events
described in Section 14.2.

 

14.2 Abbott Indemnification. Abbott shall defend, indemnify and hold harmless
ZymoGenetics, its Affiliates, licensees and sublicensees and their respective
employees, directors and agents against any Liability arising from (i) Abbott’s
negligence or willful misconduct in the development, testing, use, storage,
handling, packaging, labeling, manufacture, storage or delivery of Bulk Drug
Substance, formulations containing Bulk Drug Substance or its raw materials;
(ii) an action brought by a Third Party (except for Affiliates of ZymoGenetics)
based on any manufacturing procedures, methods or techniques (or component
thereof) that are incorporated into the manufacturing process of the Bulk Drug
Substance by Abbott without first obtaining the express written consent of
ZymoGenetics and which are other than ZymoGenetics Patent Rights and
ZymoGenetics Know-How, or (iii) Abbott’s material breach of this Agreement,
except to the extent the Third Party (except for Affiliates of ZymoGenetics)
demand or lawsuit arises out of or relates to the events described in is liable
under Section 14.1.

 

14.3 Claims and Proceedings. Each party shall notify the other promptly of any
threatened or pending claim or proceeding covered by any of the above Sections
in this Article 14 and shall include sufficient information to enable the other
party to assess the facts; provided, however, the failure to provide such notice
within a reasonable period of time shall not relieve the indemnifying party of
its obligations hereunder except to the extent the it is prejudiced by such
failure. Each party shall cooperate in good faith with the indemnifying party in
the defense of all such claims, with the indemnifying party being permitted to
maintain control of such defense through legal counsel selected by such party.
No settlement or compromise shall be binding on a party hereto without its prior
written consent.

 

15. Assignment

 

Neither Party may assign this Agreement or any of its rights under this
Agreement or delegate (or subcontract) any of its duties or obligations under
this Agreement without the prior written consent of the other Party.
Notwithstanding the foregoing, but subject to the last sentence of this Article
15, either Party may assign this Agreement, without the other Party’s consent,
to any purchaser of all or substantially all of such Party’s assets, or the
assets of the business unit or division of which this Agreement is a part, or to
any successor by way of merger, consolidation or similar transaction. Subject to
the foregoing, this Agreement will be binding upon, enforceable by, and inure to
the benefit of the Parties and their respective successors and assigns. No
assignment of this Agreement may be made in the event such action would in any
way impair or jeopardize any pending or actual regulatory approval for the
manufacture of the Bulk Drug Substance or adversely affect the regulatory status
of the Bulk Drug Substance or any Product.

 

16. Notices

 

All notices hereunder shall be in writing and shall be delivered personally, by
nationally recognized courier service, registered or certified mail, postage
prepaid, mailed by express mail service or given by Facsimile (with hard copy
sent by one of the other approved methods on the same day), to the following
addresses of the respective Parties:

 

If to Abbott:   

Abbott Laboratories

Senior Vice President,

Global Pharmaceutical Manufacturing

Department 390, Building NCA1

1401 Sheridan Road

North Chicago, IL 60064-6314

Fax Number: 847-938-2315

 

CONFIDENTIAL AGREEMENT

   23    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

with copy to:   

Abbott Laboratories

Senior Vice President and General Counsel

Department 364, Building AP6D

100 Abbott Park Road

Abbott Park, IL 60064-6049

Fax Number: 847-938-6277

If to ZymoGenetics:   

ZymoGenetics, Inc.

Senior Vice President, Technical Operations

1201 Eastlake Avenue East

Seattle, WA 98102

Fax Number: 206-442-6559

with copy to:   

ZymoGenetics, Inc.

Senior Vice President,

Intellectual Property & Legal Affairs

1201 Eastlake Avenue East

Seattle, WA 98102

Fax Number: 206-442-6678

 

Notices shall be effective upon receipt if personally delivered, on the third
business day following the date of mailing if sent by certified or registered
mail, and on the second business day following the date of delivery to the
express mail service if sent by express mail, or the date of transmission if
sent by facsimile (provided a hard copy is sent as described above). A party may
change its address listed above by notice to the other party.

 

17. Entire Agreement; Amendments

 

This Agreement constitutes the entire agreement between the Parties concerning
the subject matter hereof and supersedes all written or oral prior agreements or
understandings with respect thereto. No amendment or modification to this
Agreement will be effective unless it is in writing and signed by both Parties
to this Agreement.

 

18. Alternative Dispute Resolution and Applicable Law

 

18.1 Choice of Law. This Agreement shall be construed, interpreted and governed
by the laws of the State of New York, excluding its choice of law provisions.

 

18.2 Alternative Dispute Resolution. The Parties recognize that bona fide
disputes may arise which relate to the Parties’ rights and obligations under
this Agreement. The Parties agree that

 

CONFIDENTIAL AGREEMENT

   24    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

any such dispute shall be resolved by Alternative Dispute Resolution (“ADR”) in
accordance with the procedure set forth in Exhibit E.

 

19. Force Majeure

 

Any delay in the performance of any of the duties or obligations of any party
(except the payment of money due hereunder for services rendered) caused by an
event outside the affected party’s reasonable control shall not be considered a
breach of this Agreement, and unless provided to the contrary herein, the time
required for performance shall be extended for a period equal to the period of
such delay. Such events shall include without limitation, acts of God; acts of
the public enemy; insurrections; riots; injunctions; embargoes; labor disputes,
including strikes, lockouts, job actions, or boycotts; fires; explosions;
floods; earthquakes; shortages of material or energy; delays in the delivery of
raw materials, or other unforeseeable causes beyond the reasonable control and
without the fault or negligence of the party so affected (a “Force Majeure
Event”). The party so affected shall give prompt notice to the other party of
such cause, following which the Parties will promptly meet to determine an
equitable solution to the effects of such event and the party affected by the
event shall take whatever reasonable steps are necessary to relieve the effect
of such cause as rapidly as reasonably possible. ZymoGenetics may cancel without
penalty (and shall have no obligation to pay any amounts attributable to minimum
quantities or firm purchase orders applicable to any period following the date
of the Force Majeure Event) (a) any and all purchase orders in the event Abbott
is unable to fulfil an outstanding purchase order within [ * ] of its scheduled
delivery date due to a Force Majeure Event and (b) this Agreement if the Force
Majeure Event affects Abbott’s ability to perform pursuant to this Agreement for
more than an aggregate of [ * ] in any single [ * ]. Upon cessation of such
Force Majeure Event, the affected party shall promptly resume performance on all
purchase orders which have not been terminated.

 

20. Severability

 

If any term or provision of this Agreement shall for any reason be held invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other term or provision hereof, and in
lieu of each such invalid, illegal or unenforceable provision there shall be
added automatically as a part of this Agreement a provision that is valid, legal
and enforceable, and as similar in terms to such invalid, illegal or
unenforceable provision as may be possible while giving effect to the benefits
and burdens for which the Parties have bargained hereunder.

 

21. Waiver

 

No waiver or modification of any of the terms of this Agreement shall be valid
unless in writing and signed by an authorized representative of each party
hereto. Failure by either party to enforce any rights under this Agreement shall
not be construed as a waiver of such rights, nor shall a waiver by either party
in one or more instances be construed as constituting a continuing waiver or as
a waiver in other instances.

 

22. Exhibits

 

All Exhibits referenced herein are hereby made a part of this Agreement.

 

CONFIDENTIAL AGREEMENT

   25    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

23. Counterparts

 

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

 

24. No Publicity

 

Except as required by law or regulation, neither party shall disclose the
material provisions (as defined in the next sentence) of this Agreement or make
any public announcement or public statement concerning the material provisions
of this Agreement, without the prior written approval of the other party. For
purposes of this Article, the term “material provisions” shall include price,
term, termination options and ownership of intellectual property. Except as
permitted in Exhibit H, neither party shall use the name of the other party in
any publicity release or advertising without the other party’s prior written
consent, not to be unreasonably withheld. Notwithstanding the foregoing, either
party, without the consent of the other party, may disclose the general nature
and terms of this Agreement to investors or potential investors, provided that
prior to such disclosure, such investors executed confidentiality and
non-disclosure agreements with terms no less stringent than as provided for in
this Article 24. Any disclosure required by law or judicial order proposed by a
Party that names the other Party, shall first be provided in draft to the other
Party. Each Party shall use reasonable best efforts to provide the other Party
with [ * ] to review such proposed draft.

 

25. Relationship

 

The relationship between the Parties to this Agreement is that of independent
contractors and nothing herein shall be deemed to constitute the relationship of
partners, joint ventures, nor of principal and agent between Abbott and
ZymoGenetics. Neither party shall have any express or implied right or authority
to assume or create any obligations on behalf of or in the name of the other
party or to bind the other Party to any contract or undertaking with any Third
Party.

 

26. Headings

 

The headings in this Agreement are for convenience of reference only and shall
not affect its interpretation.

 

27. Non-Compete

 

Notwithstanding anything to the contrary set forth herein, Abbott agrees that
during the term of this Agreement, unless sooner terminated in accordance with
the terms of this Agreement, Abbott will not enter into any supply agreement
with any Third Party (except for Abbott’s Affiliates) which agreement is for the
supply of a similar pharmaceutical compound indicated for use in blood
coagulation applications in surgery or such other approved Product label claim
at the time of the initial BLA filing (the “Competitive Compound”). The terms
and provisions of this Section 27 shall not apply in any way to restrict or
limit Abbott’s supply of Competitive Compounds to Abbott or to an Abbott
Affiliate.

 

CONFIDENTIAL AGREEMENT

   26    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

28. Insurance

 

During the term of this Agreement, ZymoGenetics and Abbott shall maintain in
full force and effect, for the benefit of ZymoGenetics and Abbott respectively
product liability insurance (with Abbott’s coverage extending to its obligations
as a manufacturer of the Bulk Drug Substance) in an amount of not less than [ *
] for each accident or occurrence and in the aggregate. At the inception of this
Agreement and annually thereafter, ZymoGenetics and Abbott shall furnish the
other with a certificate of insurance evidencing that it has such insurance
coverage in force. During the term of this Agreement, either Party may
self-insure in whole or in part the insurance requirements described above,
provided such Party maintains both (a) a net worth as measured by its retained
earnings in the amount of [ * ] and (b) a minimum of [ * ] of unrestricted cash
or cash equivalents at its disposal (together, “Self-Insurance Requirement”). If
a party self-insures in accordance with the foregoing, then in order to be
permitted to maintain such self-insurance, such party must maintain throughout
the term of this Agreement the Self-Insurance Requirement and deliver to other
party, within [ * ] after the end of each of such party’s fiscal years, a
statement in the form described above evidencing the compliance with the
Self-Insurance Requirement. If at any time the Party fails to comply with either
of the Self-Insurance Requirement, then such Party must obtain, provide, and
keep in full force and effect (until the Party complies with Self-Insurance
Requirements) the above referenced insurance coverage and provide the other
Party with evidence of the same in accordance with this Section. Notwithstanding
any of the foregoing to the contrary, so long as a party is publicly traded on a
nationally recognized stock exchange, such party shall have no obligation to
provide the other party with the Self Insurance Requirement otherwise required
pursuant to this Section.

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their duly authorized representatives on the later day and year written
below.

 

ABBOTT LABORATORIES       ZYMOGENETICS, INC. By:  

/s/ Lance B. Wyatt

      By:  

/s/ Mark D. Young

   

--------------------------------------------------------------------------------

         

--------------------------------------------------------------------------------

   

Lance B. Wyatt

                             

Title:

 

Senior Vice President,

Global Pharmaceutical Manufacturing

     

Title:

 

S.V.P. Technical Operations

Date:

 

30 September 2003

     

Date:

 

30 September 2003

                              By:  

/s/ James A. Johnson

               

--------------------------------------------------------------------------------

           

Title:

 

S.V.P. and Chief Financial Officer

           

Date:

 

30 September 2003

 

CONFIDENTIAL AGREEMENT

   27    Abbott-ZymoGenetics

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

EXHIBIT A

 

[ * ]

 

     i     

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

EXHIBIT B

 

[ * ]

 

     ii     

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

EXHIBIT C

 

[ * ]

 

     iii     

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

PAYMENT SCHEDULE

 

[ * ]

 

     iv     

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

EXHIBIT D

 

Bulk Drug Substance Pricing

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

EXHIBIT E

 

Alternative Dispute Resolution

 

The Parties recognize that bona fide disputes as to certain matters may arise
from time to time during the term of this Agreement which relate to either
party’s rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution (“ADR”) provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective presidents (or their designees)
of the affected subsidiaries, divisions, or business units within twenty-eight
(28) days after such notice is received (all references to “days” in this ADR
provision are to calendar days).

 

If the matter has not been resolved within twenty-eight (28) days of the notice
of dispute, or if the Parties fail to meet within such twenty-eight (28) days,
either party may initiate an ADR proceeding as provided herein. The Parties
shall have the right to be represented by counsel in such a proceeding.

 

1. To begin an ADR proceeding, a party shall provide written notice to the other
party of the issues to be resolved by ADR. Within fourteen (14) days after its
receipt of such notice, the other party may, by written notice to the party
initiating the ADR, add additional issued to be resolved within the same ADR.

 

2. Within twenty-one (21) days following receipt of the original ADR notice, the
Parties shall select a mutually acceptable neutral to preside in the resolution
of any disputes in this ADR proceeding. If the Parties are unable to agree on a
mutually acceptable neutral within such period, either party may request the
President of the CPR Institute for Dispute Resolution (“CPR”), 366 Madison
Avenue, 14th Floor, New York, New York 10017, to select a neutral pursuant to
the following procedures:

 

  (a) The CPR shall submit to the Parties a list of not less than five (5)
candidates within fourteen (14) days after receipt of the request, along with a
Curriculum Vitae for each candidate. No candidate shall be an employee,
director, or shareholder of either party or any of their subsidiaries or
affiliates.

 

  (b) Such list shall include a statement of disclosure by each candidate of any
circumstances likely to affect his or her impartiality.

 

  (c) Each party shall number the candidates in order of preference (with the
number one (1) signifying the greatest preference) and shall deliver the list to
the CPR within seven (7) days following receipt of the list of candidates. If a
party believes a conflict of interest exists regarding any of the candidates,
that party shall provide a written explanation of the conflict to the CPR along
with its list showing its order of preference for the candidates. Any party
failing to return a list of preferences on time shall be deemed to have no order
of preference.

 

  (d) If the Parties collectively have identified fewer than three (3)
candidates deemed to have conflicts, the CPR immediately shall designate as the
neutral the candidate for whom the Parties collectively have indicated the
greatest preference. If a tie should result between

 

           

--------------------------------------------------------------------------------

     two candidates, the CPR may designate either candidate. If the Parties
collectively have identified three (3) or more candidates deemed to have
conflicts, the CPR shall review the explanations regarding conflicts and, in its
sole discretion, may either (i) immediately designate as the neutral the
candidate for whom the Parties collectively have indicated the greatest
preference, or (ii) issue a new list of not less than five (5) candidates, in
which case the procedures set forth in subparagraph 2(a) - 2(d) shall be
repeated.

 

3. No earlier than twenty-eight (28) days or later than fifty-six (56) days
after selection, the neutral shall hold a hearing to resolve each of the issues
identified by the Parties. The ADR proceeding shall take place at a location
agreed upon by the Parties. If the Parties cannot agree, the neutral shall
designate a location other than the principal place of business of either party
or any of their subsidiaries or affiliates.

 

4. At least seven (7) days prior to the hearing, each party shall submit the
following to the other party and the neutral:

 

  (a) a copy of all exhibits on which such party intends to rely in any oral or
written presentation to the neutral;

 

  (b) a list of any witnesses such party intends to call at the hearing, and a
short summary of the anticipated testimony of each witness;

 

  (c) a proposed ruling on each issue to be resolved, together with a request
for a specific damage award or other remedy for each issue. The proposed rulings
and remedies shall not contain any recitation of the facts or any legal
arguments and shall not exceed one (1) page per issue.

 

  (d) a brief in support of such party’s proposed rulings and remedies, provided
that the brief shall not exceed twenty (20) pages. This page limitation shall
apply regardless of the number of issues raised in the ADR proceeding.

 

     Except as expressly set forth in subparagraph 4(a) - 4(d), no discovery
shall be required or permitted by any means, including depositions,
interrogations, requests for admissions, or production of documents.

 

5. The hearing shall be conducted on two (2) consecutive days and shall be
governed by the following rules:

 

  (a) Each party shall be entitled to five (5) hours of hearing time to present
its case. The neutral shall determine whether each party has had the five (5)
hours to which it is entitled.

 

  (b) Each party shall be entitled, but not required, to make an opening
statement, to present regular and rebuttal testimony, documents or other
evidence, to cross-examine witnesses, and to make a closing argument.
Cross-examination of witnesses shall occur immediately after their direct
testimony, and cross-examination time shall be charged against the party
conducting the cross-examination.

 

  (c)

The party initiating the ADR shall begin the hearing and, if it chooses to make
an opening statement, shall address not only issues it raised but also any
issues raised by the

--------------------------------------------------------------------------------

 

responding party. The responding party, if it chooses to make an opening
statement, also shall address all issues raised in the ADR. Thereafter, the
presentation of regular and rebuttal testimony and documents, other evidence,
and closing arguments shall proceed in the same sequence.

 

  (d) Except when testifying, witness shall be excluded from the hearing until
closing arguments.

 

  (e) Settlement negotiations, including any statements made therein, shall not
be admissible under any circumstances. Affidavits prepared for purposes of the
ADR hearing also shall not be admissible. As to all other matters, the neutral
shall have sole discretion regarding the admissibility of any evidence.

 

6. Within seven (7) days following completion of the hearing, each party may
submit to the other party and the neutral a post-hearing brief in support of its
proposed rulings and remedies, provided that such brief shall not contain or
discuss any new evidence and shall not exceed ten (10) pages. This page
limitation shall apply regardless of the number of issues raised in the ADR
proceeding.

 

7. The neutral shall rule on each disputed issue within fourteen (14) days
following completion of the hearing. Such ruling shall adopt in its entirety the
proposed ruling and remedy of one of the Parties on each disputed issue but may
adopt one party’s proposed rulings and remedies on some issues and the other
party’s proposed rulings and remedies on other issues. The neutral shall not
issue any written opinion or otherwise explain the basis of the ruling.

 

8. The neutral shall be paid a reasonable fee plus expenses. These fees and
expenses, along with the reasonable legal fees and expenses of the prevailing
party (including all expert witness fees and expenses), the fees and expenses of
a court reporter, and any expenses for a hearing room, shall be paid as follows:

 

  (a) If the neutral rules in favor of one party on all disputed issues in the
ADR, the losing party shall pay 100% of such fees and expenses.

 

  (b) If the neutral rules in favor of one party on some issues and the other
party on other issues, the neutral shall issue with the rulings a written
determination as to how such fees and expenses shall be allocated between the
Parties. The neutral shall allocate fees and expenses in a way that bears a
reasonable relationship to the outcome of the ADR, with the party prevailing on
more issues, or on issues of greater value or gravity, recovering a relatively
larger share of its legal fees and expenses.

 

9. The rulings of the neutral and the allocation of fees and expenses shall be
binding, non-reviewable, and non-appealable, and may be entered as a final
judgment in any court having jurisdiction.

 

10. Except as provided in paragraph 9 or as required by law, the existence of
the dispute, any settlement negotiations, the ADR hearing, any submissions
(including exhibits, testimony, proposed rulings, and briefs), and the rulings
shall be deemed Confidential Information. The

 

           

--------------------------------------------------------------------------------

 

neutral shall have the authority to impose sanctions for unauthorized disclosure
of Confidential Information.

 

  11. All disputes referred to ADR, the statute of limitations, and the remedies
for any wrong that may be found, shall be governed by the laws of the State of
Illinois.

 

  12. The neutral may not award punitive damages. The Parties hereby waive the
right to punitive damages.

 

  13. The hearings shall be conducted in the English language.

 

 

           

--------------------------------------------------------------------------------

EXHIBIT F

 

[ * ]

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

EXHIBIT G

 

[ * ]

 

[ * ] designated portions of this document have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

--------------------------------------------------------------------------------

EXHIBIT H

 

Press Release

 

LOGO [g13713g78i12.jpg]

 

Contact     Investor Relations    

 

Charles E. Hart, Ph.D.

Sr. Director, Corporate Communications &

Investor Relations

(206) 442-6744

 

Media Relations

Susan W. Specht, MBA

Public Relations Associate

(206) 442-6592

 

CONFIDENTIAL DRAFT: NOT FOR IMMEDIATE RELEASE

 

ZymoGenetics Signs Manufacturing Agreement with Abbott Laboratories to Produce
Recombinant Human Thrombin

 

Seattle, [date tbd], 2003 – ZymoGenetics, Inc. (NASDAQ:ZGEN) today announced
that it has entered into a commercial manufacturing agreement with Abbott
Laboratories (NYSE:ABT) for the production of recombinant human Thrombin
(rhThrombin). ZymoGenetics is developing rhThrombin as an alternative to bovine
plasma-derived thrombin for use as a topical hemostat to control bleeding in a
variety of surgical and wound healing settings.

 

“We’re pleased to be working with a company the caliber of Abbott,” commented
Bruce L. A. Carter, Ph.D., President and Chief Executive Officer of
ZymoGenetics. “The establishment of this agreement provides us with a
manufacturer that has extensive experience in the production of recombinant
proteins. Though rhThrombin has not yet entered clinical testing, we expect he
program to advance quite rapidly. By establishing a manufacturing partnership
early in the development process, we hope to insure that the clinical
development of rhThrombin proceeds on schedule.”

 

Plasma-derived thrombin has been used as a hemostatic agent for more than 30
years and is applied topically to surgical incisions, sutures and burns to help
stop bleeding at these sites. Plasma-derived thrombin is used annually in over
500,000 surgeries in the US, and more than 1,000,000 surgeries worldwide.
ZymoGenetics is developing recombinant human thrombin as an alternative to the
bovine plasma-derived product. Bovine thrombin is currently the only form of
thrombin that is sold in the United States as a stand-alone product for the
treatment of surgical bleeding. Recombinant coagulation proteins have, to date,
been readily accepted by the medial community as safe alternatives to
plasma-derived proteins, as demonstrated by the rapid acceptance of recombinant
forms of coagulation Factor VIII and Factor IX.

 

Under the agreement, Abbott will be responsible for the production of
rhThrombin, which is produced in mammalian cell culture, for use by ZymoGenetics
in late stage clinical studies and commercial sale. ZymoGenetics retains all
commercial rights to rhThrombin under this agreement. Financial terms were not
disclosed.

 

continued

 

           

--------------------------------------------------------------------------------

About ZymoGenetics

ZymoGenetics is a biopharmaceutical company focused on the discovery,
development and commercialization of therapeutic proteins for the prevention or
treatment of human diseases. Using a product discovery engine that combines
ZymoGenetics’ strengths in biology, protein chemistry, molecular and cellular
biology and bioinformatics, ZymoGenetics has generated a broad pipeline of
potential proprietary product candidates. These span a wide array of clinical
opportunities, including cardiovascular disease, autoimmune disease, cancer and
tissue repair. ZymoGenetics intends to commercialize these product candidates
through internal development, collaborations with partners, and out-licensing of
patents from its extensive patent portfolio. For further information, visit
www.zymogenetics.com.

 

About Abbott Laboratories

Abbott Laboratories is a global, broad-based health care company devoted to the
discovery, development, manufacture and marketing of pharmaceuticals,
nutritionals, and medical products, including devices and diagnostics. The
company employs more than 70,000 people and markets its products in more than
130 countries. In 2002, the Company’s sales were $17.7 billion.

 

Abbott news releases and other information are available on the company’s Web
site at www.abbott.com.

 

This press release contains “forward-looking statements” within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on the current intent and expectations of the management of
ZymoGenetics. These statements are not guarantees of future performance and
involve risks and uncertainties that are difficult to predict. ZymoGenetics’
actual results and the timing and outcome of events may differ materially from
those expressed in or implied by the forward-looking statements because of risks
associated with our unproven discovery strategy, preclinical and clinical
development, regulatory oversight, intellectual property claims and litigation
and other risks detailed in the company’s public filings with the Securities and
Exchange Commission, including the company’s Annual Report on Form 10-K for the
year ended December 31, 2002. Except as required by law, ZymoGenetics undertakes
no obligation to update any forward-looking or other statements in this press
release, whether as a result of new information, future events or otherwise.