Exhibit 10.23

Certain information in this document, marked by brackets, has been omitted and
filed separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.

CO-DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

This Co-Development and Commercialization Agreement (the “Agreement”) is entered
into as of December 9, 2005, by and between Hoffmann-La Roche Inc., a
corporation organized and existing under the laws of the State of New Jersey,
with its principal place of business at 340 Kingsland Street, Nutley, New Jersey
07110 (“Roche Nutley”), and F. Hoffmann-La Roche Ltd, a Swiss Corporation, with
its principal place of business at Grenzacherstrasse 124, CH-4070 Basel,
Switzerland (“Roche Basel”), (Roche Nutley and Roche Basel are collectively
referred to as “Roche”) and Maxygen Holdings Ltd., a company organized under the
laws of Cayman Islands, British West Indies (“Maxygen”). Roche and Maxygen are
each referred to herein individually as a “Party,” and collectively as the
“Parties.”

BACKGROUND

 

A. Maxygen owns or possesses certain Patent Rights (as defined below) and
Know-How (as defined below) with respect to certain novel human Factor VII
variants, and believes that the Factor VII variants have the potential to be
used therapeutically for the treatment of bleeding disorders;

 

B. Maxygen desires to collaborate with a pharmaceutical company with development
and commercialization expertise with regard to drugs useful for the Field (as
defined below), so as to realize promptly, the therapeutic and commercial
potential of the Factor VII variants, and Roche desires to collaborate with
Maxygen in the development and commercialization of Factor VII variants for
multiple indications in the Field, and further desires to make the commitment
and investment to develop diligently and commercialize Products (as defined
herein) worldwide;

 

C. Roche and Maxygen envision that the scope of this Agreement will include the
invention and discovery of Factor VII variants, and means for making,
formulating, and using such compounds; and

 

D. The Parties have agreed that Maxygen shall have certain rights to develop and
commercialize certain of its Factor VII variants (other than Licensed Compounds
and corresponding Products subject to this Agreement) for use outside the Field,
itself or with a Third Party.

NOW THEREFORE, in consideration of the foregoing and of the mutual covenants
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties hereby agree as
follows:

1. DEFINITIONS

As used in this Agreement, the following capitalized terms shall have the
following meanings, and singular forms, plural forms and derivative forms
thereof shall be interpreted accordingly:

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1.1 “Accounting Standards” means generally accepted accounting principles
applicable internationally and/or in a particular country (e.g., International
Accounting Standards, U.S. GAAP), as consistently applied by or on behalf of the
relevant Party.

1.2 “Adjusted Gross Sales” means, on a Product-by-Product basis, the amount of
gross sales of applicable Product invoiced by the Roche Group to independent
Third Parties, less the following deductions: returns [****]; in each case, only
to the extent such deductions are applied in accordance with applicable
Accounting Standards, are actually incurred, are included in the amount of gross
sales invoiced and separately identified on the invoice or other documentation
maintained in the ordinary course of business and are not otherwise recovered by
or reimbursed to the Roche Group. Notwithstanding the foregoing, amounts
received by the Roche Group for the sale of Products among members of the Roche
Group for resale shall not be included in the computation of Adjusted Gross
Sales; provided, however, that if and when such Product is resold to Third
Parties, amounts for any such sales shall be included in Adjusted Gross Sales. A
“sale” shall include any transfer or other disposition for consideration, and
Adjusted Gross Sales shall include the fair market value of all consideration
received by the Roche Group in respect of any sale of a Product, whether such
consideration is in cash payment, in kind, exchange for value or another form.
Roche will use [****] to reconcile amounts included and/or deducted in Adjusted
Gross Sales for a particular Product on [****] basis and credit or debit
Adjusted Gross Sales accordingly.

If a member of the Roche Group provides services to a Third Party in connection
with the sale or use of a Product (except where such Product is provided without
consideration pursuant to Section 9.5), then Adjusted Gross Sales shall also
include the fair market value of such Product and services, subject to the
following paragraph.

In the case of discounts on “bundles” of products and services that include
Products, Roche may discount the bona fide list price of a Product by no more
than the average percentage discount of all products of the Roche Group in a
particular “bundle,” calculated as follows:

 

Average percentage discount on a particular “bundle”    =    [1-(A/B)] x 100

where A equals the total discounted price of a particular “bundle” of products,
and B equals the sum of the undiscounted bona fide list prices of each unit of
every product in such “bundle”. Roche shall retain (and in the course of any
audit subject to Section 9.5 provide to Maxygen) documentation, establishing
such average discount with respect to each “bundle”. If Roche cannot so
establish the average discount of a “bundle”, Adjusted Gross Sales shall be
based on the undiscounted list price of the Product in the “bundle”. If a
Product in a “bundle” is not sold separately, and no bona fide list price exists
for such Product, then the Parties shall negotiate in good faith an imputed list
price for such Product and Adjusted Gross Sales with respect thereto shall be
based on such imputed list price.

 

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1.3 “Adverse Safety/Tox Results” means, with respect to a particular Product,
either (i) results showing the failure of such Product to meet GLP safety and
toxicity studies that are required by the FDA/EMEA prior to introduction of such
a biological compound into humans, or (ii) results that provide a reasonable
basis for the discontinuance by Roche of all further development or
commercialization of such Product for use in the Field because the risk profile
of such Product makes it unlikely that Regulatory Approval can be obtained or
maintained for such Product in the Major Markets.

1.4 “Affiliate” means any corporation or other business entity that controls, is
controlled by, or is under common control with a Party. A corporation or other
entity shall be regarded as in control of another corporation or entity if it
owns or directly or indirectly controls at least fifty percent (50%) of the
outstanding shares or other voting rights of the other corporation or entity
having the right to elect directors (other than Genentech, Inc. and Chugai
Pharmaceutical Company Ltd, neither of which shall be a Roche Affiliate nor be
entitled to the rights of a Roche Affiliate under this Agreement unless Roche in
its sole discretion opts for one or both of them to be a Roche Affiliate, and
Codexis, Inc., which shall not be a Maxygen Affiliate or entitled to the rights
of a Maxygen Affiliate under this Agreement) or such lesser percentage that is
the maximum permitted to be owned by a foreign entity in those jurisdictions
where majority ownership by foreign entities is prohibited, or (a) in the
absence of the ownership of at least fifty percent (50%) of the outstanding
shares or other voting rights of a corporation, or (b) in the case of a
non-corporate business entity, if it possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of the
corporation or non-corporate business entity, as applicable, whether through the
ownership or control of voting securities, by contract or otherwise.

1.5 “Animal [****] Result” means with respect to a Product: (a) results showing
[****] as described on Exhibit F of the Program Plan and Budget, [****] in (i) a
[****] model, or (ii) [****] model, or (iii) another animal model [****]
approved by [****]; or (b) a [****] decision by [****] to file an IND.

1.6 “Backup Compound” means an E Compound that Roche has designated as such
pursuant to Section 3.5.1, and any replacement thereof selected by Roche.

1.7 “BLA” means a Biological License Application, as defined in the U.S. Public
Health Service Act and the regulations promulgated thereunder, or any
corresponding foreign application, registration or certification, filed with a
Regulatory Agency with respect to a Product, or any corresponding foreign
application, registration or certification.

1.8 “Budgeted Costs” means the costs and expenses budgeted and approved by the
JMC, from time to time, for the conduct of the activities in the R&D Program
and/or Product commercialization, which costs and expenses are expressly
included in the Program Plan and Budget.

1.9 “CMC Costs” has the meaning set forth on Exhibit A.

 

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1.10 “Collaboration Costs” means (a) R&D Costs worldwide, and (b) M&P Costs
allocated to the U.S. by the Finance Team, in each case, actually incurred
and/or accrued in accordance with applicable Accounting Standards and guidelines
established by the Finance Team, in connection with the conduct of R&D Program
activities pursuant to the Program Plan and Budget.

1.11 “Commencement” means, with respect to a clinical trial, the date upon which
the first human subject receives the first dose of the Product that is the
subject of such clinical trial.

1.12 “Commercial Manufacturing Costs” has the meaning set forth on Exhibit A.

1.13 “Commercially Reasonable Efforts” means the level of efforts and resources
reasonably appropriate to diligently develop and/or commercialize (as
applicable) a Licensed Compound or Product in a sustained manner, consistent
with the efforts and resources a similarly situated biopharmaceutical company
would typically devote to a product of similar market potential, profit
potential, and/or proprietary protection, based on market conditions then
prevailing.

1.14 “[****] Process Result” means (i) results demonstrating in [****] a) the
ability to grow cells expressing an E Compound in [****] cultures for [****] and
maintain an [****], and b) the ability to reach the [****] followed by at least
[****] of an E compound in a bioreactor working volume of at least [****], and
(c) [****], and (d) the ability to purify an E compound with at least a [****]
final recovery yield per [****] campaign as compared to the recovery yield
described in “Satisfactory [****] Culture Results” with a consistent Product
quality in terms of [****], and (e) complete written documentation through
Standard Operating Procedures for the [****] process; or (ii) a decision by
[****] to utilize a [****] process to manufacture a Product for Phase III
clinical trials and commercial use.

1.15 “Completion of Phase IIa” means for a particular Initial Indication, the
date immediately after the completion of the Phase IIa clinical trial program
for such Initial Indication (i.e., when the clinical database is locked for such
trial). As used in this Agreement, Phase IIa clinical trial means the initial
Phase II clinical trial designed to demonstrate proof of concept for a Product,
and may be included within a single Phase II clinical trial if no separate Phase
IIb clinical trial is needed for the applicable indication.

1.16 “Compound” shall mean [****] that was made, conceived, reduced to practice
or otherwise developed (a) by Maxygen on or before the Effective Date, or (b) by
Maxygen or Roche or jointly by the Parties in connection with the R&D Program.

1.17 “Confidential Information” means any proprietary or confidential
information disclosed by one Party to the other hereunder that (a) is in written
or graphic form and marked as “Confidential” at the time it is delivered to the
receiving Party, (b) is disclosed orally hereunder that is identified as
confidential or proprietary when disclosed or within thirty (30) days
thereafter, or (c) the proprietary or confidential nature of which would be
reasonably apparent to the recipient in view of the context and/or circumstances
of disclosure.

 

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1.18 “Control” or “Controlled” means the possession by a Party of the ability to
grant a license or sublicense as provided for herein without violating the terms
of any agreement or other arrangement with any Third Party that exists at the
time such Party would be granting to the other Party such license or sublicense.

1.19 “Data Package” means, in respect to any Product, all (a) Regulatory
Filings, (b) databases containing clinical and/or safety data relating to such
Product, including, the master database, and all data in such databases,
(c) pre-clinical data, including any CMC data, and/or data from any clinical
trial, whether or not contained in any IND, (d) records of any and all
communications with any Regulatory Agency, and (e) information relating to any
adverse events whether or not reported to any Regulatory Agency.

1.20 “Derivative” means any E Compound that is [****].

1.21 “[****] Therapeutic [****] Result” means (i) results with an E Compound
proving [****] in agreed animal model(s) (a) described in Exhibit E of the
Program Plan and Budget, or (b) otherwise [****] agreed by [****], or (ii) a
decision [****] to commence GLP toxicology studies with a Product.

1.22 “Distribution Costs” has the meaning set forth on Exhibit A.

1.23 “Dollars” or “$” means U.S. dollars.

1.24 “E Compound” means (a) any Compound that Tests Positively, and (b) any
Derivative.

1.25 “Effective Date” means the later of (a) the date in the caption to this
Agreement, or (b) if an HSR filing is made, the second business day immediately
following the earlier of: (i) the date upon which the waiting period under the
Hart Scott Rodino Antitrust Improvement Act (“HSR”) expires or terminates early
or (ii) the date upon which all requests to the Parties by the Federal Trade
Commission or the Justice Department, as the case may be, with regard to the
transaction contemplated by this Agreement have been satisfactorily met and no
objection on the part of the Federal Trade Commission or the Justice Department
remain.

1.26 “EMEA” means the European Medicines Agency, and any successor agency(ies)
thereto.

1.27 “[****] Decision Point” means with respect to a decision by Maxygen to
opt-out of further sharing of Collaboration Costs, the date that Maxygen gives
Roche notice of such decision, which date is at least [****] before the [****],
which meeting date was previously disclosed by Roche to Maxygen pursuant to
Section 4.7.3.

1.28 “Entry into Humans” or “EIH” means with regard to a particular Product, the
date of dosing of the first human subject in the first clinical trial of the
applicable Product.

1.29 “Exit Costs” means the Collaboration Costs that will be shared by the
Parties following either (a) an opt-out by Maxygen pursuant to Section 4.7, or
(b) a termination by

 

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Roche pursuant to Section 18.4 for (i) then-ongoing clinical activities
conducted pursuant to the most recent agreed update of the Program Plan and
Budget, and (ii) non-cancelable obligations for other activities ongoing as of
the date of opt-out or notice of termination, as applicable, conducted pursuant
to the most recent update of the Program Plan and Budget [****]. Exit Costs
shall not include any amounts for (x) [****], (y) cancelable obligations of
other on-going activities being conducted pursuant to the most recent update of
the Program Plan and Budget (except [****], or (z) any other activities [****]
notice by the Party receiving such notice.

1.30 “FDA” means the U.S. Food and Drug Administration and any successor entity
thereto.

1.31 “Field” means the [****]. By way of illustration, but without limitation,
the Field includes: [****].

1.32 “Finance Team” means the committee described in Section 2.5.

1.33 “First Commercial Sale” means the first sale of a Product to a Third Party
following the receipt of any Regulatory Approval required for the sale of such
Product.

1.34 “FTE” means a full-time equivalent person-year of effort undertaken in
connection with the conduct of the R&D Program.

1.35 “Hemophilia” means hemophilia A, hemophilia B, acquired hemophilia, genetic
Factor VII deficiency and Glanzman thombasthenia.

1.36 “ICH” means intracerebral hemorrhage.

1.37 “IND” means an Investigational New Drug application, as defined in the U.S.
Food, Drug and Cosmetic Act and the regulations promulgated thereunder,
including all subsequent filings in support of the initial filing(s), or any
corresponding foreign application, registration or certification (e.g., a CTA).

1.38 “Indication” means any human bleeding disorder or injury in the Field.

1.39 “Initial Indication” means each of trauma and ICH, unless otherwise agreed
to by the Parties pursuant to Section 3.1.2 (c).

1.40 “Initial Period” means the period from the Effective Date until the earlier
of: (a) [****], or (b) the date [****] after the Effective Date, provided,
however, if the [****] Culture Result with [****] is not achieved on or before
[****], and as a result, [****], such [****] period shall be extended by a
period equal to the time between [****] and the date that a [****] Culture
Result is achieved, provided, further, if any E Compound other than [****] is
selected as the Lead Compound, the foregoing [****] period shall be [****] and
[****].

1.41 “Invention(s)” means any and all useful ideas, concepts, methods,
procedures, processes, improvements, inventions, discoveries, and reductions to
practice, whether or not patentable, which arise from or are first made,
conceived or first reduced to practice in the course of the joint or separate
activities of the Parties conducted in connection with the R&D Program

 

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1.42 “Joint Management Committee” or “JMC” means the committee described in
Section 2.2.

1.43 “Joint Program Team” or “JPT” means the committee described in Section 2.3.

1.44 “Know-How” means all non-patented data, information, methods, procedures,
processes, materials (including any Material) and other know-how. Know-How
includes but is not limited to: biological, chemical, biochemical,
toxicological, pharmacological, metabolic, formulation, clinical, analytical and
stability information and data (other than such information and data that is or
becomes the subject of a patent or patent application). Know-How does not
include any inventions otherwise included in the Patent Rights.

1.45 “Lead Compound” means the E Compound that is selected as such by [****]
pursuant to Section 3.5.1, and any replacement thereof selected by [****].

1.46 “Legal Requirement” means any present and future multinational, national,
state, local or similar laws (whether under statute, rule, regulation or
otherwise); requirements under permits, orders, decrees, judgments or
directives, and requirements of applicable Regulatory Agencies (including,
without limitation, current Good Manufacturing Practices, Good Laboratory
Practices, Good Clinical Practices); and regulations pertaining to
Investigational New Drug Applications (as amended or revised from time to time).

1.47 “Licensed Compound” means any E Compound that is then a Lead Compound or a
Backup Compound.

1.48 “Major Country” means each of the United Kingdom, France, Germany, Italy or
Spain.

1.49 “Major Markets” means all Major Countries, the U.S., Canada, Australia and
Japan.

1.50 “Marketing and Promotion Costs” or “M&P Costs” has the meaning set forth on
Exhibit A.

1.51 “Materials” means any chemical or biological substances including any:
(a) organic or inorganic chemical or compound; (b) gene; (c) vector or
construct, whether plasmid, phage, virus or any other type; (d) host organism,
including bacteria and eukaryotic cells; (e) eukaryotic or prokaryotic cells,
cell line or expression system; (f) protein, including any peptide or amino acid
sequence, enzyme, antibody or protein conferring targeting properties and any
fragment of a protein or peptide or enzyme; (g) genetic material, including any
genetic control element (e.g., promoters); (h) virus; or (i) assay or reagent.

1.51.1 “Roche Materials” means any Materials provided by Roche to Maxygen
pursuant to this Agreement other than those that are Maxygen Materials.

 

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1.51.2 “Maxygen Materials” means any Materials provided by Maxygen to Roche
pursuant to this Agreement. It is understood and agreed that all Compounds shall
be Maxygen Materials.

1.51.3 “Program Materials” means all Materials that are first developed or made
or discovered during and in connection with the R&D Program.

1.52 “Maxygen Compound” shall mean E Compounds that Maxygen has selected to
develop and/or commercialize for Hemophilia as described in Section 6.3.

1.53 “Maxygen Technology” means the Maxygen Separate Technology and Maxygen’s
ownership interest in the Program Technology.

1.54 “Net Sales” means with respect to a particular Product, the amount
calculated by subtracting from the amount of Adjusted Gross Sales a [****]
deduction of [****] percent [****] of Adjusted Gross Sales for sales in the
U.S., and [****] percent [****] of Adjusted Gross Sales for sales outside the
U.S. in lieu of sales-related deductions not specifically provided for in the
definition of Adjusted Gross Sales (e.g., [****])). For clarity, such deductions
shall not be used in the calculation of Adjusted Gross Sales nor shall any
amount for any such deductions be included in Distribution Costs,
Commercialization Costs or any other category of Collaboration Costs.

1.55 “Patent Rights” means U.S. and foreign patent applications (including,
without limitation, all continuations, continuations-in-part, substitutions and
divisions thereof) and patents (including all reissues, renewals, extensions,
confirmations, re-registrations, re-examinations, revalidations and patents of
addition, supplementary protection certificates, or other governmental actions
that extend the term of any of the patents).

1.56 “Phase I” means the first phase of human clinical trials using a limited
number of human subjects to gain evidence of the safety and tolerability of a
Product and information regarding pharmacokinetics and potential pharmacological
activity for such Product, which human clinical trials are usually completed
prior to the initiation of Phase II, as described with respect to the U.S. in 21
C.F.R. §312.21(a), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction.

1.57 “Phase II” means the second phase of human clinical trials of a Product in
human subjects to gain evidence of the efficacy in one or more indications and
expanded evidence of the safety of such Product, as well as an indication of the
dosage regimen required, as described with respect to the U.S. in 21 C.F.R.
§312.21(b), as may be amended, and, with respect to any other country or
jurisdiction, the equivalent of such a clinical trial in such other country or
jurisdiction. A Phase I/II clinical trial shall be considered a Phase II trial.

1.58 “Phase III” means the third phase of human clinical trials of a Product,
which are large-scale trials to gain evidence of the efficacy and safety in a
number of human subjects sufficient to support registration for such Product, as
described with respect to the U.S. in 21 C.F.R. §312.21(c), as may be amended,
and, with respect to any other country or jurisdiction, the equivalent of such a
clinical trial in such other country or jurisdiction. A Phase II/III clinical
trial shall be considered a Phase III trial.

 

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1.59 “Phase IV” means the phase of human clinical trials of a Product conducted
after such Product receives Regulatory Approval for commercial sale and is
marketed to (a) delineate additional information regarding the use of such
Product for a particular indication to confirm safety in human subjects for such
indication or to support marketing of such Product, as described with respect to
the U.S. in 21 C.F.R. §312.85, as may be amended, and, with respect to any other
country or jurisdiction, the equivalent of such a clinical trial in such other
country or jurisdiction, or (b) otherwise to support sales of such Product.

1.60 “[****] Decision Point” means with respect to a decision by Maxygen to
opt-out of further sharing of Collaboration Costs, the date that Maxygen gives
Roche notice of such decision, which date is at least [****].

1.61 “[****] Decision Point” means with respect to a decision by Maxygen to
opt-out of further sharing of Collaboration Costs, the date that Maxygen gives
Roche notice of such decision, which date is at least [****] before the [****],
which [****] was previously disclosed by [****] pursuant to Section 4.7.3.

1.62 “Product” means a pharmaceutical composition intended for use in the Field
(in any dosage form and/or formulation) containing one or more Licensed
Compounds as an active ingredient. Products containing one or more different
Licensed Compounds shall be considered as different Products.

1.63 “Product Commercialization Team” or “PCT” means the committee described in
Section 2.4.

1.64 “Product Liaison Team” or “PLT” means the committee established pursuant to
Section 2.7.

1.65 “Program Plan and Budget” means the overall plan and budget described in
Section 3.3 governing the collaborative research and development of Products and
commercialization of Products for the Initial Indications, as may be amended
from time to time by the JMC.

1.66 “Program Technology” means Know-How and Patent Rights, in each case, that
are (a) made or conceived or reduced to practice or otherwise developed by
Maxygen or Roche or jointly by Maxygen and Roche or their respective Affiliates,
in each case, in connection with the R&D Program or other activities subject to
this Agreement, and (b) necessary or useful for the manufacture, use or
commercialization of any Product. Notwithstanding the foregoing, Program
Technology shall not include any Shuffling Technology.

1.67 “R&D Costs” shall have the meaning set forth in Exhibit A hereto.

1.68 “R&D Program” means the activities undertaken by the Parties pursuant to
the Program Plan and Budget to develop at least one Product for the Initial
Indications, in each case, through BLA Approval for the applicable Product, and
such other activities with regard to Compounds and Products as the Parties may
agree in writing.

 

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1.69 “R&D Program Term” shall have the meaning set forth in Section 3.4

1.70 “Regulatory Agency” means, with respect to any particular country or, where
applicable, a multinational jurisdiction, the governmental authority, body,
commission, agency or other instrumentality of such country or multinational
jurisdiction (e.g., the EMEA with respect to the European Union), with the
primary responsibility for the approval of pharmaceutical products before a
Product can be tested, marketed, promoted, distributed or sold in such country
or multinational jurisdiction, including such governmental bodies, if any, that
have jurisdiction over the pricing of such pharmaceutical product. The term
“Regulatory Agency” includes, without limitation, the FDA, EMEA and MHW.

1.71 “Regulatory Approval” means, with respect to a nation or, where applicable,
a multinational jurisdiction, such approvals, licenses, registrations or
authorizations that are required to be obtained from a Regulatory Agency prior
to the marketing and sale of a Product for use in the Field in such country or
multinational jurisdiction (including, where applicable, pricing approvals
necessary to obtain reimbursement).

1.72 “Regulatory Filing” means any filing with a Regulatory Agency relating to a
Product and/or its use or potential use in humans, including any documents
submitted to any Regulatory Agency and all supporting data (e.g., pharmacology,
toxicology, CMC, etc.). Regulatory Filing includes, without limitation, any IND
and/or BLA.

1.73 “Rest of World” means all countries and territories excluding the U.S. and
Japan.

1.74 “Roche Group” means, collectively, Roche and its Affiliates and
Sublicensees.

1.75 “Roche Technology” means the Roche Separate Technology and the ownership
interest of Roche in the Program Technology.

1.76 “Satisfactory [****] Result” means, with respect to a Product either (i):
(a) a demonstration of [****] between Products made [****] for manufacturing of
clinical material for Phase I clinical trials and Phase II clinical trials; and
(b) [****] decision [****] to initiate cGMP production of a Product having
acceptable [****], as demonstrated by [****] activity for at least [****] at the
target storage temperature; and (c) [****] decision [****] to file an IND for
the applicable Product, and all [****] needed for Phase I clinical trials is
produced and released to allow EIH; or (ii) EIH, if such EIH occurs for [****]
or before [****], or such EIH occurs for [****] on or before [****], unless
prior to the applicable date, [****] makes a [****] decision to allow EIH, even
if all the conditions in (i) above have not all been met, provided in such case,
a Satisfactory [****] Result shall not be deemed to have been achieved until all
the requirements in (i) above have been achieved (or equivalent data has been
generated, as [****] deems appropriate), which may occur after the applicable
date described above.

1.77 “Satisfactory GLP Toxicology Result” means with respect to a Product: (a) a
result of [****] in (i) [****] GLP toxicology studies, in [****] animal species,
with a [****],

 

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and (ii) other supporting activities listed in Exhibit D of the Program Plan and
Budget, to generate data sufficient to support an IND filing, or (b) [****]
decision [****] to file an IND for the applicable Product.

1.78 “Satisfactory [****] Culture Result” means results demonstrating (a) the
ability to grow cells expressing an E Compound in suspension culture [****] for
[****], achieve a [****] throughout the period, and maintain an [****], and
(b) in [****] using [****] culture the ability to reach a [****] of inoculation
followed by [****] of an E Compound in a bioreactor working volume of at least
[****], with [****] and with [****] and (c) the ability to purify an E Compound
from the [****] cultures with a [****] yield of [****] mg/L [****] reactor
harvest with a consistent Product quality in terms of [****], and (d) complete
written documentation of Standard Operating Procedures for the [****] culture
process and the purification process.

1.79 “Satisfactory [****] Culture Result” means results demonstrating the
ability to use a [****] to culture a cell line for at least [****] in a
bioreactor working volume of at least [****] and achieve [****] expression of a
Product of at least [****] in the harvest, with acceptable Product quality in
terms of [****], and with [****].

1.80 “Separate Technology” means Patent Rights and Know-How owned, in whole or
in part, or Controlled by a Party or its Affiliates (excluding any and all
Program Technology), in each case, that are necessary or useful for the
performance of the R&D Program and/or for the development, manufacture and/or
commercialization of a Product for use in the Field.

1.80.1 “Maxygen Separate Technology” means Separate Technology owned, in whole
or in part, or Controlled by Maxygen or its Affiliates as of the Effective Date,
excluding any Shuffling Technology. A list of the Patent Rights relating to
Compounds within the Maxygen Separate Technology as of the Effective Date is
attached as Exhibit B hereto.

1.80.2 “Roche Separate Technology” means Separate Technology owned, in whole or
in part, or Controlled by Roche or its Affiliates as of the Effective Date.

1.81 “Shuffle”, “Shuffled” and “Shuffling” means techniques, methodologies,
processes, materials and/or instrumentation for performing recombination-based
modification of genetic material for the creation of potentially useful variant
nucleic acids and/or proteins.

1.82 “Shuffling Technology” means Patent Rights and/or Know-How owned, in whole
or part, or Controlled by Maxygen relating to the use of Shuffling.

1.83 “Sublicensee” means any Third Party to which Roche has granted a sublicense
under one or more of the licenses granted to Roche hereunder or to whom Roche
has granted the right to distribute one or more Products.

1.84 “Territory” means the entire world, subject to Section 18.7.

1.85 “Tests Positively” means that results demonstrate that a Compound has
(a) [****], and (b) [****], in each case, [****] in the assays and conditions
set forth on Exhibit C of the Program Plan and Budget.

 

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1.86 “Third Party” means any party other than Maxygen, Affiliates of Maxygen,
and each member of the Roche Group.

1.87 “[****] Agreement” means that certain Exclusive License Agreement entered
by [****] and Maxygen, Inc. effective [****].

1.88 “U.S.” means the United States of America, including its territories,
protectorates and possessions.

1.89 “Valid Claim” means a claim contained in (a) an issued and unexpired patent
included within the (i) Maxygen Separate Technology and/or (ii) Program
Technology, that has not been held unenforceable, unpatentable or invalid by a
decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, and that has not
been admitted to be invalid or unenforceable through abandonment, reissue,
disclaimer or otherwise, or (b) a pending patent application that is included
within the Maxygen Separate Technology and/or the Program Technology, which
application claims in the case of any country outside [****], a first priority
date of no more than [****] years, and in the case of [****], a first priority
date of no more than [****] years, in each case, prior to the date upon which
pendency is determined. If a claim of a patent application that ceased to be a
Valid Claim under subsection 1.89(b) later issues or grants as a patent within
the scope of subsection 1.89(a), then such claim shall again be considered to be
a Valid Claim, effective as of the earlier of the grant, allowance, or issuance
of such patent.

2. GOVERANCE AND MANAGEMENT

2.1 Senior Executive Meetings. At least annually during the term of this
Agreement, members of senior management of Roche and Maxygen shall meet to
discuss the activities subject to this Agreement. The Roche participant in such
meetings shall be the [****] or a person holding a position of at least
equivalent responsibility in Roche, and the Maxygen participant shall be the
[****] or a person holding a position of at least equivalent responsibility in
Maxygen.

2.2 Joint Management Committee.

2.2.1 Responsibilities. Promptly following the Effective Date, the Parties shall
establish a Joint Management Committee (“JMC”) that shall be responsible for
overall supervision, direction and management of the activities subject to this
Agreement. The responsibilities of the JMC will include, without limitation:

(a) developing strategies for the development and commercialization of Products
for each indication in the Field, including the Pre-clinical R&D Plan, the CMC
Plan, the Clinical Development Plan, and the U.S Product Plan;

(b) reviewing and approving, on an annual basis, the Program Budget for all
activities of the R&D Program, and reviewing such Program Budget at least
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(c) monitoring the progress of the activities conducted pursuant to the Program
Plan and Budget;

(d) determining which indications, if any, shall be pursued in the R&D Program
in addition to the Initial Indications, and the priority of each such
indication;

(e) determining whether Shuffling Technology should be used in the R&D Program
to generate new Compounds;

(f) determining how far the Backup Compound shall be advanced through
pre-clinical research;

(g) establishing, supervising and reviewing the activities of any committees,
subject to this Agreement (e.g., the JPT, PCT and the Finance Team);

(h) reviewing and discussing intellectual property matters relating to Products
and determining whether to seek licenses from Third Parties with respect to
intellectual property and/or technology necessary or useful for the conduct of
the R&D Program and/or Product commercialization; and

(i) timely resolving any issues that arise relating to the performance of the
activities subject to this Agreement.

2.2.2 Membership. The Parties shall each appoint [****] voting representatives
to membership on the JMC. At least one representative of each Party on the JMC
shall be a member of a senior executive level decision-making group of such
Party, with such initial Roche representative being a member of the global
research senior management team, or its successor entity from a global
development or marketing senior management team. Each Party shall have the power
to appoint or replace its own representatives on the JMC with notice to the
other Party; provided, however, that at all times, each Party must have on the
JMC at least one representative as described in the preceding sentence. If
personal attendance by a member of the JMC is not possible, voting by proxy is
permissible.

2.2.3 Meetings. During the term of this Agreement, the JMC shall meet to
discharge its responsibilities at least semi-annually, but meet more frequently
as the JMC may agree; provided, however, that during the initial [****] months
of the R&D Program Term, the JMC shall meet at least quarterly. The first
meeting of the JMC shall occur within [****] days following the Effective Date.

2.2.4 Decision-Making. Unless Maxygen has opted out of further sharing of
Collaboration Costs pursuant to Section 4.7, the JMC shall seek to make all
decisions by [****], provided, however, that:

(a) [****] approval of [****] shall be required to (i) make strategic decisions
relating to the research and development of Products in the Field; (ii) increase
the Program Budget, if such increase would result in projected Collaboration
Costs for future expenditures that, in the aggregate, would be greater than
[****] of the aggregate Collaboration

 

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Costs in the last Program Budget approved by the JMC for the applicable [****]
period; (iii) commence [****] for any Product; (iv) commence development of any
Product for any indication other than the Initial Indications; (v) the selection
of the [****] for clinical supply of Products; or (vi) amend the exhibits to the
Program Plan and Budget;

(b) [****] shall have final decision as to:

(i) [****];

(ii) [****] matters regarding [****]; provided, upon the earlier of: (x) [****],
if no Satisfactory [****] Culture Result is achieved on or before [****], or
(y) such earlier date, if any, as the data indicate that no Satisfactory [****]
Culture Result could be achieved, [****] shall have the final decision
thereafter for all [****] matters. Notwithstanding the above, if Satisfactory
[****] Culture Result is achieved by [****], then [****] shall remain
responsible for [****] matters relating to the manufacture of Products for use
in Phase I and IIa clinical trials; and

(iii) whether or not the following have been achieved: (v) [****], or (w) a
[****], or (x) a [****], or (y) [****], or (z) a [****], each of which
decision(s) will be made on a timely and reasonable basis, considering the
available data, and be subject to the terms of Section 19.4 if [****] believes
any such decision is not reasonable.

(c) subject to Section 2.2.4(a) and (b) above, [****] shall have the final
decision as to all matters in regard to Product development for each of the
Initial Indications until the first Product successfully achieves the Completion
of Phase IIa for the first Initial Indication (and thereafter [****] shall
retain agreed operational responsibility(ies), e.g., clinical development of the
second Initial Indication through Completion of Phase IIa); and

(d) subject to Section 2.2.4(a), after the first Product(s) successfully
achieves the Completion of Phase IIa for the first Initial Indication, [****]
shall have the final decision for all matters relating to Product(s), including
all decisions relating to Product development and commercialization (although
[****] shall retain agreed operational responsibility(ies), e.g., clinical
development of the second Initial Indication through Completion of Phase IIa).

If Maxygen has opted out of further sharing of Collaboration Costs pursuant to
Section 4.7, Roche shall have the final authority as to all Product development
and commercialization decisions, but may not amend or modify any terms of this
Agreement without Maxygen’s written consent.

2.2.5 Disputes. Except where a Party has final decision authority pursuant to
Section 2.2.4, if the members of the JMC become deadlocked on a decision which
requires [****] approval of the JMC, then either Party may refer the matter to
dispute resolution pursuant to Article 19 after written notification to the
other Party.

2.2.6 Subcommittees. The JMC shall have the right to establish such other
subcommittees with representation from each Party as the JMC deems appropriate
to address specific issues relating to Products in detail (e.g., Patent
Committee, Product-specific committees).

 

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2.3 Joint Program Team.

2.3.1 Responsibilities. The Parties shall establish a Joint Program Team (“JPT”)
that shall report to the JMC and shall be responsible for overall operational
oversight and day-to day management of the R&D Program and advancement of the
Products into development and through to commercialization, including developing
and implementing the strategy for clinical development and obtaining Regulatory
Approvals of Products, including objectives and plans for the development and
regulatory submissions for Products for each Initial Indication, the manufacture
of the Product for clinical studies and commercial supply, and the budgets
necessary to implement such activities. The responsibilities of the JPT will
include, without limitation:

(a) developing and implementing the Pre-clinical R&D Plan and Budget, including
the associated Pre-clinical Plan and Budget, CMC Plan and Budget, and Clinical
and Regulatory Plan and Budget, which will reflect the stage of the R&D Program
with more detailed information for the activities planned over approximately the
next [****] months and less detailed information for later planned activities
(e.g., the Plans and Budgets prepared as of the Effective Date will be detailed
through IND filing, and more general for activities to be conducted after IND
filing), and proposing updates to such Plan and budget to the JMC;

(b) preparing and filing [****] INDs to allow the commencement of human clinical
trials for at least [****] for the treatment of each of the Initial Indications;

(c) developing and implementing an overall Product development strategy;

(d) interacting with Regulatory Agencies worldwide to obtain Regulatory Approval
of the Products for the Initial Indications, and other indications approved by
the JMC, if any; and

(e) developing a multi-year strategic Commercialization Plan for the applicable
Product (Roche’s Strategic Launch Concept subsequently modified into a Strategic
Launch Plan), including plans for Regulatory Approval of the Product(s) for the
Initial Indications and other agreed indications within the Field in at least
the Major Markets; and developing the profile(s) of the Product(s), and
conducting appropriate pre-launch market research for the Initial Indications
and other agreed indications within the Field.

2.3.2 Membership. The Parties shall each appoint [****] voting representatives
to the JPT. Each Party shall have the power to appoint or replace its own
representatives on the JPT with notice to the other Party.

2.3.3 Decision-Making. The Parties shall seek to make all decisions of the JPT
by [****] consent; provided, however, that [****] shall retain final decision on
the selection of the manufacturing process for commercial supply of each
Product, and the global commercialization strategy for all Products.

 

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2.3.4 Effect of Opt-Out. If Maxygen elects to opt-out of further sharing of
Collaboration Costs pursuant to Section 4.7, the JPT shall be dissolved.

2.4 Product Commercialization Team.

2.4.1 Responsibilities. Promptly after first Completion of Phase IIa for a
Product for an Initial Indication, the Parties shall form a Product
Commercialization Team (“PCT”) to plan and manage Product commercialization in
the U.S., including, without limitation, the marketing, promotion and sale of
the Product in the U.S. and associated budgets.

2.4.2 Membership. Each PCT shall have a number of Maxygen representatives
representing [****] of the total PCT number of representatives but no less than
[****] Maxygen representatives. Each Party shall have the power to appoint or
replace its own representatives on the PCT with notice to the other Party. A
[****] member shall act as the chair of the PCT. Each representative of the PCT
shall have one vote.

2.4.3 Decision-Making. The Parties shall seek to make all decisions of the PCT
by [****]; provided, however, that [****] shall have the final decision for
matters relating to [****].

2.4.4 Effect of Opt-Out. If Maxygen elects to opt-out of further sharing of
Collaboration Costs pursuant to Section 4.7, the PCT shall be dissolved but
shall be replaced with a Product Liaison Team as described in Section 2.7.

2.5 Finance Team.

2.5.1 Responsibilities. Promptly after the Effective Date, the JMC shall
establish a Finance Team that will include individuals with expertise and
responsibilities in the areas of project management and accounting, cost
allocation, budgeting and financial reporting. The Finance Team shall operate
under the direction of the JMC to (a) oversee and facilitate the exchange
between the Parties of financial information relating to the Program Budget,
including without limitation, Budgeted Costs and Collaboration Costs, and
(b) provide services to and consult with the JMC in order to address the
financial, budgetary and accounting issues that arise in connection with the
activities performed under the Program Plan and Budget.

2.5.2 Membership. The Parties shall each appoint two (2) voting representatives
to the Finance Team. Each Party shall have the power to appoint or replace its
own representatives on the Finance Team with notice to the other Party.

2.5.3 Decision-Making. The Parties shall seek to make all decisions of the
Finance Team by unanimous consent.

 

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2.5.4 Effect of Opt-Out. If Maxygen opts out of further sharing of Collaboration
Costs pursuant to Section 4.7, then the Finance Team shall be dissolved after
the end of the applicable Transition Period described in Section 4.7.4.

2.6 General.

2.6.1 Meetings. Each committee described in Sections 2.3, 2.4 and 2.5 shall
establish a schedule for its meetings; provided, however, that during the term
of this Agreement, each committee shall meet at least quarterly unless otherwise
agreed in writing by the members of the applicable committee. The location of
committee meetings shall alternate between the offices of Maxygen and Roche, or
as otherwise agreed upon by the members of the applicable committee. At least
two meetings every year will be face-to-face, unless the committee members of
both Parties of the applicable committee agree to other methods of
communication, such as teleconferences and/or videoconference, for a particular
meeting. Each committee may from time-to-time invite the participation of
additional ad hoc non-voting attendees from either Party as the need arises and
with the consent of all members of the applicable committee may invite Third
Parties to attend such meetings as it deems appropriate.

2.6.2 Minutes. Each of the JMC, JPT and PCT, and any other committees
established by the JMC, shall select a member of such committee or their
designee to prepare written minutes of their meetings and a written record of
all decisions of the applicable committee, whether made at a formal meeting or
otherwise. Draft minutes shall be prepared within [****] days after each meeting
and, after review and revision by the representatives of each Party on the
applicable committee, shall be adopted in final form by the members of the
applicable committee. Minutes of the committee meetings shall be treated as
Confidential Information of both Parties.

2.6.3 Lead Representatives. To coordinate interactions between the Parties on
each committee, Roche and Maxygen shall each appoint one representative from
such Party as their Lead Representative for each committee. The Lead
Representative shall coordinate communications between its representatives on
the committee with the other Party, and serve as an initial point of contact for
such interactions.

2.6.4 Communication; Annual Meetings. The JMC shall ensure that there is close
and frequent communication and interaction between the committees subject to
this Agreement to facilitate the accomplishment of the goals of each committee.
To ensure efficient communication between the JMC, JPT and PCT, the JMC shall
ensure that at least annually all such committees meet together at a time and
location selected by the JMC.

2.6.5 Voting. If personal attendance by a member of the applicable committee is
not possible, voting by proxy is permissible.

2.6.6 Disputes. If the voting members of the JPT, Finance Team or any committee
established by the JMC, become deadlocked on any decision, then either Party may
refer the dispute to the JMC for resolution.

 

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2.6.7 Limitations on Authority. No committee described in this Article 2 shall
have the authority to amend the terms of this Agreement or waive compliance
with, or any breach of, this Agreement.

2.7 If Maxygen Opt-Out.

2.7.1 Effect. If Maxygen elects to opt-out of further sharing of Collaboration
Costs pursuant to Section 4.7, then the JPT and PCT shall dissolve immediately,
and the Finance Team shall dissolve at the end of the applicable Transition
Period. After the dissolution of the applicable Team, Roche shall have the final
decision authority at the JMC for all decisions relating to Product development
and commercialization previously made by the applicable Team, but may not amend
or modify any terms of this Agreement without Maxygen’s written consent.

2.7.2 Product Liaison Team. Promptly after the date, if any, that Maxygen elects
to opt-out of further sharing of Collaboration Costs pursuant to Section 4.7,
the Parties shall establish a Product Liaison Team (“PLT”) to provide a forum
through which Maxygen shall be informed on the strategy, plans and timelines for
the worldwide development and commercialization of Products and the progress of
activities relating to the development and commercialization of Products
completed since the prior PLT meeting. The PLT shall not be a decision-making
body. The PLT shall have representatives from the Roche team(s) in charge of
clinical development and commercialization of Product(s) and [****]
representatives from Maxygen.

2.7.3 Meetings. The PLT shall meet at least semiannually during the Term of the
Agreement so long as Roche retains an exclusive license to the applicable
Product. At each PLT meeting, the PLT will review the strategy, plans, timelines
for further clinical trials, Regulatory Approval, CMC and commercialization of
Products, and Roche will provide Maxygen with a written summary of activities
and plans related to Regulatory Approval with respect to the applicable Product,
as well as a summary report on the results of any clinical trials and
anticipated future developmental activities and time lines, and Roche’s
commercialization activities with regard to the applicable Product in the Major
Markets. If Maxygen makes reasonable requests for additional information
regarding the applicable Product(s), Roche agrees to provide such information to
Maxygen if Roche maintains or collects such information as part of its customary
practices; provided, however, that Roche shall not need to adapt, modify or
extend in any way its then-current practices and procedures to satisfy such
request. With the agreement of the PLT, other Maxygen or Roche employees may be
invited to PLT meetings.

2.7.4 Status Reports. Through the PLT, Roche shall keep Maxygen apprised of the
status of the development of, plans and activities for, and any issues that
arise relating to efforts to obtain Regulatory Approval of, and/or
commercialization of, such Product(s) by providing Maxygen with a written report
promptly after the end of each calendar year detailing such activities with
respect to each applicable Product. Such reports shall describe the status of,
without limitation, (a) all Products that have been brought into pre-clinical
development or clinical trials, including all clinical trials then in progress,
(b) all Products for which Roche has sought or obtained Regulatory Approval,
including progress toward Regulatory Approval throughout the Territory, and
(c) commercialization activities by Roche and/or its Affiliates or

 

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Sublicensees at least throughout the Major Markets, and other information
sufficient to allow Maxygen to monitor Roche’s compliance with this Agreement,
including without limitation, Roche’s obligations in Article 7 and the
accomplishment of the events that would result in Event Payments subject to
Article 8. Such reports shall contain or be based on information that Roche
maintains or collects as part of its customary practices, and Roche shall have
no obligation to adapt, modify or extend its then-current practices and
procedures to generate different information.

3. R&D PROGRAM

3.1 Collaborative Development.

3.1.1 Focus. Subject to the terms and conditions set forth herein, Roche and
Maxygen will work together to diligently conduct a mutually agreed research and
development program (the “R&D Program”) pursuant to the Program Plan and Budget,
with the goals of (a) identifying E Compounds with potential utility for the
treatment of each of the Initial Indications, (b) timely conduct of activities
to enable at least [****] INDs for [****] Products for the Initial Indications,
and (c) rapidly developing Product(s) for the Initial Indications.

3.1.2 Other Indications. With the [****] agreement of [****], the R&D Program
may be expanded to include the development of Products for indications in the
Field other than the Initial Indications, through (a) the line extension of
Products previously developed for an Initial Indication for one or more other
indications, and/or (b) the development of additional Product(s) for such other
indications, and/or (c) the substitution of one or more new indication(s) for
one or more of the Initial Indications, and/or (d) the addition of one or more
new indication(s).

3.2 Responsibilities.

3.2.1 Efforts. Roche and Maxygen shall each use Commercially Reasonable Efforts
to perform their respective tasks and obligations in conducting all activities
ascribed to it in the then-current Program Plan and Budget approved by the JMC,
in accordance with the time schedules set forth therein.

3.2.2 Conduct. Each Party understands and agrees that time is of the essence in
addressing the market for the Products in the Field. Each Party shall conduct
itself and its activities hereunder consistent with that understanding, sound
and ethical business and scientific practices, and in accordance with the
then-current Program Plan and Budget.

3.2.3 Responsibilities.

(a) Pre-clinical R&D. Maxygen shall be primarily responsible for the
implementation of activities subject to the Pre-clinical R&D Plan.

(b) CMC. The CMC Plan will establish the responsibilities of each Party with
respect to Product manufacturing, including, process development, assay
development, scale-up, manufacturing clinical and commercial supplies, release
testing, quality

 

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assurance, formulation, stability and other CMC-related activities. It is
anticipated that each Party will have significant responsibilities for specified
activities under the CMC Plan, with [****] primarily responsible for the [****]
with regard to such process, and [****] primarily responsible for [****] with
regard to such process, including [****].

(c) Clinical Development. The Clinical Development Plan will establish the
responsibilities of each Party with respect to clinical development. Maxygen
shall have primary operational responsibility for the clinical development of
each Product until [****]. Thereafter, Roche shall assume primary operational
responsibility for all further clinical development of such Product. Maxygen and
Roche shall be responsible for regulatory matters as described in Article 12.

(d) Commercialization. As described in Article 6, Roche shall have sole
responsibility for commercialization of the Products worldwide so long as Roche
retains an exclusive license for the applicable Product, indication and/or
geographic region.

3.3 Plans and Budgets.

3.3.1 Program Plan and Budget.

(a) The Parties will conduct the overall R&D Program in accordance with a
written plan (the “Program Plan”) and budget (the “Program Budget”)
(collectively, the “Program Plan and Budget”) with more detailed information for
the activities planned over approximately the next [****] months and less
detailed information for later planned activities. The initial Program Plan and
Program Budget for the conduct of the activities to be conducted pursuant to
this Agreement from the Effective Date through BLA filing for at least one
Product for the treatment of each of the Initial Indications, has been agreed in
writing by the Parties prior to the Effective Date.

(b) The Program Plan will set forth (i) the activities of the R&D Program and
the resources that will be dedicated to the activities contemplated within the
scope of the R&D Program for at least [****] for each Initial Indication, and
(ii) specific objectives and timelines for each Product. The Program Plan and
Budget shall include, without limitation, the component plans described in
Section 3.3.2.

(c) The Program Budget will include detailed budgets for all activities to be
conducted in connection with the Program Plan, including activities to be
conducted by the Parties and by Third Parties on behalf of the Parties. The
Program Budget shall establish Budgeted Costs against which Collaboration Costs
shall be compared, on a quarter-by-quarter basis, by Party. The Program Budget
shall not include the commercial budget for countries other than the U.S.

(d) The Program Plan and Budget shall be reviewed, updated and approved at least
semi-annually by the JMC, with such changes as the JMC may deem appropriate. Any
changes to the Program Plan and/or Program Budget shall be reflected in the
official JMC meeting minutes; provided, in the case of any change to the Program
Budget, such minutes must be signed by the lead representative of each Party.

 

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3.3.2 Component Plans. The JMC shall ensure that at least the following plans
and budgets shall be prepared with respect to Products, and updated at least
prior to each JMC meeting until the subject activities have been completed.

(a) Pre-clinical R&D Plan and Budget. To facilitate the advancement of Products
for the Initial Indications to IND filing, the JPT shall develop a Pre-clinical
R&D Plan and Budget that will describe in detail the specific activities,
timelines and budgets for advancement of Products for each of the Initial
Indications until IND filing, which shall include activities to assess efficacy
and safety and validate Licensed Compound selection.

(b) CMC Plan and Budget. To facilitate the manufacture of Products, the JPT
shall develop a CMC Plan and Budget for the applicable Product describing in
detail the specific activities, timelines, and budgets for (i) selection of the
manufacturing process; and (ii) manufacture of pre-clinical R&D materials,
clinical trial and commercial supplies of such Product.

(c) Clinical Development Plan and Budget. To facilitate the clinical development
of Products, the JPT shall develop a Development Plan and Budget for the
applicable Product describing in detail the specific activities, timelines and
budgets for advancement of Products for the Initial Indications from IND filing
through at least BLA filing.

(d) Commercialization Plan and Budget. To facilitate commercialization of each
Product, the PCT shall [****], develop a multi-year strategic Commercialization
Plan that describes (i) the proposed strategy, and plans for Regulatory Approval
for the applicable Product (Strategic Launch Concept subsequently modified into
a Strategic Launch Plan) in at least the Major Markets; and (ii) the proposed
strategy, plans and proposed budgets for commercialization of the Product in the
U.S. (U.S Product Plan and Budget), for each Initial Indication, including:
[****], as well as advertising and other promotional materials to be used in the
Product marketing in the U.S.

3.4 R&D Program Term. The R&D Program shall commence on the Effective Date and,
unless otherwise agreed in writing by the Parties or the Agreement is earlier
terminated pursuant to Article 18, shall continue until BLAs are filed for at
least [****] for each of the Initial Indications. Notwithstanding the above, if
Maxygen has not opted out of sharing Collaboration Costs pursuant to
Section 4.7, and the Parties are developing any Products for indications other
than the Initial Indications pursuant to Section 3.1.2, the R&D Program shall
continue until BLAs are filed for at least each of such indications or the
Parties agree to the termination of development of such indications.

3.5 Licensed Compound Selection Process.

3.5.1 Initial Period. To the extent not already provided to Roche, promptly
following the Effective Date, Maxygen shall provide to Roche summaries of all
data in its possession relating to the [****] of then existing Compounds
(described on Exhibit C of the Program Plan and Budget). During the Initial
Period, all Compounds that have not been previously tested in at least one E
Compound screening assay(s) described on Exhibit C of the

 

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Program Plan and Budget shall be tested in the assays listed on Exhibit C and
such other assays as the JMC may agree, to determine if they are E Compounds;
provided, the JMC may decide to test any Compound in any assay listed in Exhibit
C. Roche shall have the right to evaluate all E Compounds as potential Licensed
Compounds; provided, the preliminary Lead Compound shall be [****], and the
preliminary Backup Compound shall be [****]. At any time during [****], if
[****] wishes for any reason to [****], then [****], including without
limitation, [****]. The Lead Compound and Backup Compound shall each be a
Licensed Compound. When for at least one E Compound (a) [****] (as described in
Exhibit D of the Program Plan and Budget) is available, and (b) [****] has been
achieved, Roche shall with notice to Maxygen select one E Compound as the Lead
Compound for development in the Field. At any time during the Initial Period,
Roche may also select one other E Compound as a Backup Compound for advancement
in the Field.

3.5.2 After Initial Period.

(a) After the Initial Period, after consultation with Roche, Maxygen may, at its
sole discretion, select any [****] E Compounds, excluding any Licensed Compound,
for development and commercialization for Hemophilia by Maxygen, pursuant to
Section 6.3.

(b) After the Initial Period, Roche may not select as a replacement Lead
Compound or Backup Compound [****] Maxygen Compounds (as defined in Section 6.3)
selected by Maxygen for Hemophilia unless Maxygen relinquishes rights to such
Maxygen Compound as described in Section 6.4.

(c) Roche shall have the right to evaluate all E Compounds not selected by
Maxygen for Hemophilia as potential Licensed Compounds.

(d) All E Compounds not selected by Maxygen for Hemophilia shall remain
available to Roche for exclusive development and commercialization in the Field
under the Agreement, subject to Sections 3.5.4 and 6.3.

3.5.3 Roche Exclusive Rights. Once a particular E Compound is selected by Roche
as a Licensed Compound, Maxygen will not conduct any further evaluation of any
such Licensed Compound for Hemophilia, subject to Sections 3.5.4 and 6.3.

3.5.4 Relinquishment. If at any time during the Initial Period or after the
Initial Period during the term of this Agreement, Roche determines that it does
not wish to retain its rights to a particular Lead Compound or Backup Compound,
then it shall promptly notify Maxygen. In any such event, such E Compound shall
cease to be a Licensed Compound, and such Compound shall again be an E Compound
subject to the terms of this Agreement, and Roche may select as a replacement
Licensed Compound any other E Compound that is not then a Maxygen Compound.

3.5.5 Licensed Compound Exclusivity. To ensure that a Third Party cannot obtain
license rights to any Licensed Compound to which Roche retains rights under this
Agreement, Maxygen will not grant to any Third Party any license or other rights
with respect to any E Compound except the Maxygen Compounds.

 

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3.6 Materials; Limited Use.

3.6.1 Transfer of Materials. With written approval of the JPT, each Party shall
transfer Compounds and other Materials to the other Party (“Transferred
Materials”). The Transferred Materials shall be used by the recipient Party
solely for activities expressly approved in advance in writing by the JMC or JPT
or in practicing its rights under this Agreement.

3.6.2 Limited Use. Except in connection with the practice of the rights
expressly granted to Roche with regard to Compound(s) and Products in the Field
pursuant to this Agreement, Roche shall not, without the express prior written
consent of Maxygen: (i) transfer any Compound, or materials derived therefrom,
including without limitation, DNA, RNA or protein, to any of its Affiliates,
Sublicensees or to any Third Party; (ii) use any data or information obtained
from the research activities conducted using any Compound, or other Materials
provided by Maxygen (including, without limitation, any sequence information
regarding the DNA of any Compound or any protein encoded thereby) for any
purpose; (iii) permit any Affiliate, Sublicensee or Third Party to obtain or use
any Compound or materials derived therefrom, including without limitation, DNA,
RNA or protein for any purpose; or (iv) use, or attempt to use, any data or
information relating to any Compound or other Materials provided by Maxygen,
including without limitation, consensus sequences or structural motifs, to
reverse engineer, reconstruct, synthesize or otherwise modify or copy any
Compound, or any materials derived therefrom, including without limitation, DNA,
RNA or protein.

3.6.3 Use of Compounds. Roche shall not have any right to use any of the
Compounds for any use except the development and commercialization of Products
in the Field pursuant to the licenses granted to it in Section 5.2.1. Maxygen
shall not have any right to use any of the Compounds for any use except (a) for
the development of Products in the Field pursuant to this Agreement, and/or
(b) as permitted by Sections 5.7 and 5.8 and Articles 6 and 18.

3.6.4 Program Technology. All Program Technology shall be treated as
Confidential Information of both Parties. Nothing in this Section 3.6.4 shall be
construed to limit the ability of either Party to disclose Program Technology as
necessary to perform patent prosecution and related activities allocated or
permitted to be conducted by such Party pursuant to Article 13.

3.7 Reports and Records.

3.7.1 Records. The Parties shall maintain records that will properly reflect all
work done and results achieved in the performance of the R&D Program (including
all data in the form required under any applicable governmental regulations and
as directed by the JMC), including laboratory records sufficient to establish
the dates of first conception and reduction to practice of any inventions within
the Program Technology. Upon request during the term of this Agreement and for
one year thereafter, the Parties shall provide each other reasonable access to
such records relating to any Products during ordinary business hours.

 

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3.7.2 Reports.

(a) Status Reports. Each Party shall keep the other Party apprised of the status
of all activities conducted by it pursuant to this Agreement since the last JMC
meeting by providing the JMC, at least [****] days prior to the next scheduled
JMC meeting, a written report describing the activities (pre-clinical, CMC,
clinical and, if applicable, regarding commercialization) conducted with respect
to worldwide development of each Product. Such reports shall detail and
summarize the progress of the activities performed by the Parties in connection
with the R&D Program since the last written report, in the level of detail
requested by the JMC. All material Program Technology made by either Party will
be promptly disclosed to the other, with significant discoveries or advances
being communicated as soon as practical after such information is obtained or
its significance is appreciated.

(b) Scientific Reports. Each Party shall provide to the other Party as soon as
practicable, written final reports summarizing the results obtained (e.g.,
research reports, pharmacology, toxicology, process development, technical SOPs,
etc.) by such Parties in connection with the R&D Program, in the level of detail
and format agreed by the Parties, which shall include at least final results,
protocols, specifications, etc. For technical SOPs that embody Know-How within
either Party’s Separate Technology (i.e., developed outside the R&D Program),
such SOPs shall only be disclosed to the other Party as needed and treated as
Know-How of the other Party pursuant to Section 5.6.2 or 5.6.3, as applicable.

4. COLLABORATION COSTS

4.1 Collaboration Costs.

4.1.1 Sharing of Collaboration Costs. Subject to the terms of this Article 4,
Maxygen and Roche shall share Collaboration Costs incurred in connection with
the development and commercialization of Products, as follows:

(a) subject to the terms of Section 4.7, Maxygen and Roche shall [****] share
R&D Costs for Products; and

(b) subject to the terms of Section 4.7: (i) Maxygen shall pay [****] and Roche
shall pay [****] of M&P Costs incurred in connection with the commercialization
of Products in the U.S., and (ii) Roche shall pay one hundred percent (100%) of
M&P Costs incurred in connection with the commercialization of such Products
outside the U.S.; and

The Parties agree that R&D Costs and/or M&P Costs do not include, and Maxygen
shall not pay any share of, any Commercial Manufacturing Costs and/or any
Distribution Costs with regard to any Product.

4.1.2 Cost Tracking. The Finance Team shall establish an agreed mechanism,
consistent with Exhibit A, the Accounting Standards and the standard practices
of the Parties, for tracking of Collaboration Costs and comparing such expenses
to the Budgeted Costs for the applicable period, by Party. Collaboration Costs
shall, at a minimum, be tracked by expense category, on a Product-by-Product
basis, and to the extent feasible, on an indication-by-indication basis.

 

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4.2 Reports of Collaboration Costs.

4.2.1 Quarterly Reports.

(a) So long as Maxygen and Roche are sharing Budgeted Costs under this
Agreement, each Party shall furnish the other Party with a written report (the
“Quarterly Collaboration Cost Report”) detailing the Collaboration Costs
incurred by such Party during such calendar quarter (in the format and level of
detail established by the Finance Team in a manner consistent with
Section 4.1.2). Each such report shall be provided within [****] days after the
end of the calendar quarter to which such report pertains; provided, Roche shall
use reasonable efforts to provide Maxygen with a preliminary report within
[****] business days after the end of the calendar quarter to which such report
pertains.

(b) All such Collaboration Costs shall be reported in Dollars and shall state
the exchange rates used in determining the costs incurred. Unless otherwise
agreed by the Parties, (i) for Maxygen, the exchange rate used for any such
currency conversion shall be made using the exchange rate for conversion of the
foreign currency into Dollars, quoted for current transactions for buying
Dollars, as reported in The Wall Street Journal, West Coast edition, for the
last business day of the calendar quarter to which such payment pertains; and
(ii) for Roche, the amount of any such Collaboration Costs shall (x) first be
converted for computational purposes into Swiss Francs and the exchange rates
used by Roche for any such currency conversion into Swiss Francs shall be made
using [****]; and (y) then be converted into Dollars and such conversion shall
be made at the average [****] rate of the Swiss Francs to Dollars as retrieved
from the Reuters system (or [****]) for the applicable quarter. If amounts are
converted from Dollars to Swiss francs and back to Dollars, the same exchange
rate will be used.

4.2.2 Verification. The Finance Team shall quarterly (a) review the Quarterly
Collaboration Cost Reports provided by each Party to verify the appropriateness
and amount of all costs in any such Report, and (b) compare such Collaboration
Costs with the Budgeted Costs set out in the then-current updated Program Budget
for the applicable quarter and year to assess consistency with such Program
Budget. The JMC shall review such reports at JMC meetings.

4.2.3 Certain Costs. If either Party requests additional information regarding
any Collaboration Costs incurred by the other Party, the other Party shall
promptly provide the requesting Party with any information reasonably requested
by the requesting Party. Any JMC member may request that the Finance Team
provide further reasonable information regarding any Collaboration Costs;
provided, however, that the other Party shall not need to adapt, modify or
extend in any way its then-current practices and procedures to satisfy such
request.

4.2.4 Forecasts. Unless Maxygen has opted out of further sharing of
Collaboration Costs, in the [****] month of each calendar quarter, each Party
shall provide the Finance Team a written quarterly rolling forecast of the
Collaboration Costs it expects to incur over the next [****] months and shall
use reasonable efforts to promptly inform the Finance Team of any expected
deviation of [****] or more from such forecasts in any quarter; provided,
however, that this requirement shall not oblige a Party to adapt, modify or
extend in any way its then-current practices and procedures. Such quarterly
rolling forecast shall be updated on a quarterly basis.

 

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4.3 Payments.

4.3.1 Quarterly Balancing Payments. So long as the Parties are sharing
Collaboration Costs for any Product, quarterly balancing payments shall be made
based on the Collaboration Costs for such Product based on the Quarterly
Collaboration Cost Reports provided by each Party pursuant to Section 4.2.1.

(a) Within [****] days after the end of each calendar quarter during the term of
the Agreement, to ensure that Collaboration Costs are being shared as set forth
in this Agreement, the Finance Team shall (i) compare the total Collaboration
Costs incurred by each Party in the preceding quarter to the Budgeted Costs (as
reflected in the Program Budget in the then-current Program Plan and Budget) for
such quarter, and (ii) determine whether a payment needs to be made by one Party
to the other Party so that each Party will have paid its share of the
Collaboration Costs for such quarter. Each Party shall send to the Finance Team
a written summary of Collaboration Costs actually incurred by such Party in the
applicable quarter, and the Finance Team shall determine the amount, if any, due
from each Party for the applicable quarter as described in Section 4.3.1(b).

(b) If the Finance Team determines that a payment needs to be made to ensure
that each Party has paid its share of the Collaboration Costs for such calendar
quarter, then the Party that reported that it incurred and/or accrued the lesser
amount in Collaboration Costs for the applicable quarter (the “Reimbursing
Party”) shall make a balancing payment (the “Quarterly Balancing Payment”) to
the other Party in an amount equal [****] of the total Collaboration Costs
incurred and/or accrued for such quarter (by both Parties), less the
Collaboration Costs incurred by the Reimbursing Party in such quarter. For
example, if in a particular quarter, total Collaboration Costs were one million
five hundred thousand Dollars ($1,500,000) and Roche expended one million
Dollars ($1,000,000) of such total, and Maxygen expended five hundred thousand
Dollars ($500,000) of such total, then for such quarter [****] would pay to
[****] a Quarterly Balancing Payment of [****]. Such payments shall be adjusted
accordingly to reflect the [****] sharing of M&P Costs allocated to the U.S. for
Products.

4.3.2 Limitation. Notwithstanding the above, if in any calendar year the actual
CMC Costs and/or M&P Costs exceed the costs budgeted in the most recent update
of the applicable Program Budget for such year for CMC Costs and/or M&P Costs,
unless otherwise agreed in writing by the Parties pursuant to Section 2.2.4(a)
or otherwise, Maxygen shall have no obligation to pay for its share of CMC Costs
and/or M&P Costs, as the case may be, in such calendar year, more than the
lesser of:

(a) For CMC Costs. [****] of the Budgeted Costs for CMC Costs set forth in the
most recent Program Budget for the applicable calendar year that was [****]
approved by [****], or [****] of the actual CMC Costs for the applicable year.
For example, if in a particular calendar year Budgeted Costs for CMC Costs were
[****] and actual CMC Costs were [****], then Maxygen would have no obligation
to pay more than [****] for such year (i.e., [****], since such amount is less
than [****] of the actual CMC Costs for such year.

 

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(b) For M&P Costs. [****] of the Budgeted Costs for M&P Costs allocated to the
U.S. set forth in the most recent Program Budget for the applicable calendar
year that was [****] approved by [****], or [****] of the actual M&P Costs
allocated to the U.S. for the applicable year.

Notwithstanding the above, this Section 4.3.2 shall not apply to excess
expenditures that were (i) approved by the JMC in a Program Budget for a prior
calendar year but not incurred in that year but due to a delay in occurrence of
any expenses, or (ii) approved by the JMC in a Program Budget for a future
calendar year but incurred earlier, due to more rapid progress in the R&D
Program than was expected. If the terms of this Section 4.3.2 apply, and Maxygen
pays the amount described in Section 4.3.2(a) and/or (b), as applicable, then
Maxygen shall be deemed to have paid its share of the Collaboration Costs for
such calendar year due pursuant to Section 4.1. Maxygen shall not abuse this
limitation to unreasonably avoid the sharing of Collaboration Costs under this
Agreement as long as the excess expenditures are reasonably justified by the
usual uncertainties related to development and commercialization of
pharmaceutical products or external circumstances out of control of the Parties.

4.3.3 No Deductions. All payments of Collaboration Costs shall be made without
withholding for taxes or any other charge.

4.4 Audits.

4.4.1 Each Party shall keep complete and accurate records pertaining to
Collaboration Costs incurred by it in sufficient detail to permit the other
Party to confirm the accuracy of all such costs and for no less than [****]
years after the time period(s) to which such records relate.

4.4.2 Upon written request by a Party with at least [****] days prior notice,
not more often than [****] per year, each Party may engage an independent
certified public accountant selected by the Party, reasonably acceptable to the
other Party, to perform an audit of the books and records of the other Party
during normal business hours to verify the accuracy of the Collaboration Cost
reports furnished by such Party and to confirm payments made hereunder with
respect to any quarterly period ending not more than [****] months prior to the
date of such request. The auditing party shall bear the costs and expenses of
inspections conducted under this Section 4.4.

4.4.3 If a Party determines through an internal audit that any prior report on
Collaboration Costs is incorrect for any reason, it shall promptly notify the
other Party, and provide a written explanation of the error and a calculation of
the amount due and payment of the amount due.

4.4.4 If any audit of Collaboration Costs identifies any apparent discrepancies,
the Parties shall discuss any such apparent discrepancies in good faith to
clarify and resolve such matter. If the Parties are unable to reach agreement on
any such matter, either Party shall have the right to refer such matter to
arbitration for resolution pursuant to Section 19.4.

 

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4.5 R&D Program Staffing.

4.5.1 FTE Commitments. On a calendar quarter-by-calendar quarter basis, each
Party will devote to the conduct of the R&D Program FTEs in accordance with the
average staffing set forth in the then-current R&D Plan.

4.5.2 FTE-Tracking. Roche and Maxygen will track participation of their
employees in the conduct of the R&D Program, on an FTE basis. Quarterly, as part
of the Quarterly Collaboration Cost Reports, each Party shall provide the JMC
with a quarterly written report detailing the average number of its FTEs that
participated in the R&D Program during the applicable calendar quarter, by
budget activity.

4.5.3 FTE-related Records. Each Party shall maintain written records of the FTEs
by such Party devoted to the R&D Program. The other Party shall be entitled to
audit such records during ordinary business hours no more often than once each
calendar year for purposes of verifying the time such FTEs spent on R&D Program
activities.

4.5.4 FTE Requirements. The JMC shall establish the annual FTE requirements for
the R&D Program in the Program Plan and Budget. The expenses of such FTEs shall
be Collaboration Costs, subject to this Section 4.5, unless otherwise agreed by
the JMC.

4.5.5 FTE Rates.

(a) The FTE rate shall be established yearly by the Finance Team, and approved
by the JMC for the various activities that will be undertaken in the R&D Program
prior to the commencement of the applicable activity. Such FTE rate shall apply
equally to both Parties, and shall reflect the weighted average fully burdened
cost, material costs included, of the participation of all FTEs in the R&D
Program for the applicable year, e.g., for Roche, would reflect the sum of its
yearly standard fixed rate (material costs excluded) plus an agreed yearly
standard amount for material costs. In determining such rate, expenditures for
long-lived assets such as facilities or capital equipment shall be amortized
over their useful life, consistent with the periods used for financial reporting
by the Parties under the applicable Accounting Standards. The Parties have
agreed that in no event shall the FTE rate(s) for activities undertaken pursuant
to the Initial Period of the R&D Plan exceed [****] per FTE per year. If a Party
does not include material costs in its procedures for calculating its standard
FTE rate, then the Parties, when agreeing on the yearly FTE rate, shall agree on
a standard amount to be added to the applicable standard FTE rate of that Party
to arrive at a yearly FTE rate that ensures both Parties are sharing
Collaboration Costs on a comparable basis.

(b) The FTE rate shall be [****]; provided, within [****] days after the
Effective Date, the Finance Team shall meet to review the data supporting such
FTE rate for each Party, based on the activities to be conducted by such Party
in the next [****] month period, and may with the [****] agreement of [****]
adjust such FTE rate to reflect the actual costs for such activities. Prior to
the [****], and annually thereafter, the Finance Team shall establish the
applicable FTE rate for the next year of the R&D Program.

 

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4.6 Other R&D Program Costs.

4.6.1 Subcontracts. With the prior approval of the JMC, either party may enter
into agreements with Third Parties for the performance of activities in
furtherance of the R&D Program and/or the commercialization of Products. The JMC
shall determine which Party shall have the principal responsibility for
negotiating and entering into such agreement(s); provided, however, that in
general, the Party with final decision-making authority for the activities to
which the subcontract directly relates will have principal responsibility for
negotiating and entering into such agreement. The Party with principal
responsibility for negotiating such agreements shall keep the other Party fully
informed with respect to such negotiations, and such other Party shall have the
right to review and comment on such agreements prior to execution. Costs and
expenses of such agreement(s) shall be considered R&D Costs only to the extent
that they are specifically related to activities in furtherance of the R&D
Program. If such costs and expenses also benefit activities outside the R&D
Program, then the Parties shall agree on the allocation of such costs and
expenses to the R&D Costs on the basis of their relative contribution to the R&D
Program. The Party that enters any such agreement shall keep the other Party
hereto informed with respect to the direction of the activities to be performed
by the subcontractor, the performance of the subcontracted activities and any
performance problems of which it becomes aware. For clarity, the Parties agree
that all costs subject to this Section 4.6.1 shall be Collaboration Costs,
unless otherwise agreed in writing by the Parties.

4.6.2 Third Party Technology.

(a) The JMC will be responsible for determining whether licenses to intellectual
property or technology of one or more Third Parties are necessary for the
conduct of the R&D Program. If the JMC determines that it is necessary for
Maxygen or Roche to acquire any license to any intellectual property or
technology from a Third Party for the conduct of the R&D Program and/or the
manufacture or commercialization of a Product, then except as provided in
Section 4.6.2(b) or (c) below, the JMC shall determine which Party shall be
responsible for negotiating and entering into any such license; provided,
however, that the terms of such a license shall be approved by the JMC before
such license is entered by either Party. If such license is entered prior to
[****] for a Product, Maxygen shall negotiate and enter into such a license
unless otherwise agreed by the JMC, and thereafter Roche shall enter into any
such license. Any upfront and/or license fees due to a Third Party pursuant to
any such license shall be shared [****] by the Parties.

(b) Notwithstanding Section 4.6.2(a), if any such Third Party technology,
intellectual property and/or materials is necessary or useful for the
development and/or commercialization of Products in the Field and also necessary
or useful for the development and/or commercialization of products outside the
Field, then Maxygen shall have the right to negotiate and enter into any such a
license. In any such event, any upfront and/or license fees due to a Third Party
pursuant to any such license shall be shared by the Parties with Maxygen paying
[****] of each such payment and Roche paying [****] of each such payment.

 

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Roche shall be responsible, subject to Sections 9.6 and 9.7, for paying any
royalties due under such agreement for activities inside the Field. [****] shall
be responsible for paying any royalties due under such agreement for activities
outside the Field.

(c) Except as expressly described in Section 4.6.2(b), each Party shall be free,
without consulting with or obtaining the agreement of the JMC, to enter into any
agreement such Party deems appropriate to gain access to Third Party technology,
intellectual property and/or materials that such Party will also use for
purposes other than the development and/or commercialization of Products, but
shall be fully responsible for any amounts due to such Third Party to obtain or
use such technology, intellectual property and/or materials. In any such event,
if such technology, intellectual property and/or materials is useful for the R&D
Program the Party licensing such technology, intellectual property and/or
materials and shall use reasonable efforts to make such technology available for
use in the R&D Program. Any upfront and/or license fees due to a Third Party
pursuant to such a license shall be shared by Maxygen and Roche as may be
negotiated in good faith and agreed to the Parties at the time such license is
acquired.

(d) Notwithstanding Sections 4.6.2(a) and (b) above, the Parties agree that any
Event Payments and annual license fees due after the Effective Date under the
[****] Agreement shall be shared by the Parties, with Maxygen paying [****] of
each such payment and Roche paying [****] of each such payment. The Parties
further agree that Maxygen shall be solely responsible for paying any amounts
due to [****] for Products pursuant to that certain License Agreement entered by
Maxygen and [****] effective [****].

(e) Any royalties paid by Roche to Third Parties with regard to Products under
agreements subject to this Section 4.6.2 shall be subject to the terms of
Sections 9.6 and 9.7.

4.6.3 Manufacturing for Clinical Trials. Unless otherwise agreed in writing by
the Parties, subject to Section 12.1, Maxygen shall be responsible, through a
Third Party manufacturer approved by Roche, for manufacturing Products for use
in pre-clinical development and Phase I and IIa clinical trials. For clarity,
the Parties agree that all costs subject to this Section 4.6.3 shall be
Collaboration Costs, unless otherwise agreed in writing by the Parties.

4.7 Opt-Out of Collaboration Cost Sharing.

4.7.1 Election. Maxygen shall have the right, with notice to Roche, to elect to
opt-out of further sharing of Collaboration Costs at each of the following
points: (a) the [****]; and/or (b) the [****], and/or (c) on or after [****].
Any Maxygen opt-out shall be effective as of the date of such notice; provided,
any notice of opt-out provided by Maxygen prior to [****] shall not be effective
until [****]. For example, at [****] months after the [****] in the U.S. Maxygen
could give notice to Roche of Maxygen’s intent to opt-out, in which case, such
notice would be effective [****] in the U.S. In the case of any opt-out, Maxygen
shall be responsible for its share of Exit Costs for the applicable Transition
Period described in Section 4.7.5.

 

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4.7.2 Scope of Opt-Out. If Maxygen provides Roche notice of Maxygen’s opt-out of
further sharing of Collaboration Costs for Products, such decision shall be
irrevocable, and shall terminate Maxygen’s right and obligation to share further
Collaboration Costs other than Exit Costs as expressly described in
Section 4.7.4, including, without limitation, its right to co-fund M&P Costs in
the U.S.

4.7.3 Disclosures to Maxygen. To provide Maxygen adequate information to allow
it to determine whether it wishes to elect to opt-out of further sharing of
Collaboration Costs, at least [****] prior to the meeting of the applicable
Roche internal committee that will have the relevant decision, Roche shall
provide to Maxygen notice of the planned date of such meeting and available
drafts of all plans, budget for worldwide development and the U.S. Project Plan
and Budget, supporting documents Roche is preparing for such meeting. At least
[****] before the date of the applicable committee meeting Roche shall provide
to Maxygen written copies of all plans, budgets and supporting documentation
that Roche has prepared for any such meeting and/or intends to use at any such
meeting or in its decision-making process.

(a) at the [****], such report shall contain information sufficient for Roche to
make the [****] and shall include (i) detailed reports and analyses for all
clinical trials conducted up to such date, high level strategic plans and
supporting documentation for all planned clinical trials of such Product
worldwide through at least the [****] (and further if such plans exist, e.g.,
for Phase IV clinical trials) together with (ii) preliminary plans (Roche’s
Strategic Launch Concept) for commercial launch of Products in at least the
Major Markets and for marketing of Products in the U.S. through at least [****]
years after First Commercial Sale of Products in the U.S., and (iii) the
estimated budgets for all R&D Costs and M&P Costs allocated to the U.S.
projected to be incurred in the conduct of the activities described in (i) and
(ii) above; and

(b) at the [****], such report shall contain information sufficient for Roche to
make the [****] and shall include at least: (i) detailed reports and analyses
for all clinical trials conducted up to such date, detailed plans and supporting
documentation for all planned clinical trials of such Product worldwide,
including, without limitation, any anticipated Phase IV trials and/or trials to
obtain Regulatory Approval for the Product for indications beyond the Initial
Indications, together with (ii) detailed plans (Roche’s Strategic Launch Plan)
for commercial launch of Products in at least the Major Markets and for
marketing of Products in the U.S. through at least [****] years after First
Commercial Sale of Products in the U.S., and (iii) the estimated budgets for all
R&D Costs and M&P Costs allocated to the U.S. projected to be incurred in the
conduct of the activities described in (i) and (ii) above.

(c) To allow Maxygen to make its decision(s) regarding opt-out with adequate
information, Roche shall promptly provide to Maxygen draft versions of all such
documents described in this Section as they become available. Maxygen
acknowledges that at the time that Roche provides such documents and information
to Maxygen, less detail may be available regarding plans and budgets for
indications at earlier stages of development than those for more advanced
indications

 

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In addition, so that Maxygen can determine if it wishes to opt-out at the
[****], following the [****], Roche shall, through the PCT, keep Maxygen fully
informed of Product commercialization plans in the U.S. and activities so that
Maxygen can decide whether to opt-out at the [****]. Such information shall
include at least: (i) plans for all planned clinical trials of such Product
worldwide (to the extent covered by Collaboration Costs), including, without
limitation, any anticipated Phase IV trials and/or trials to obtain Regulatory
Approval for the Product for indications beyond the Initial Indications (except
to the extent that Maxygen is not sharing Collaboration Costs for such trials),
(ii) all available plans and information for marketing of Products in the U.S.,
with detailed plans and budgets for at least [****] years, plans and budgets for
at [****] years, and high level plans for [****] years after First Commercial
Sale of Products in the U.S., and (iii) the estimated budgets for all R&D Costs
and M&P Costs allocated to the U.S. projected to be incurred in the conduct of
the activities described in (i) and (ii) above.

With regard to any reports provided by Roche to Maxygen pursuant to this
Section 4.7.3, Roche shall use reasonable efforts to respond promptly and in
good faith to any questions or requests for clarification reasonably posed by
Maxygen with regard to any such documents or information if Roche maintains or
collects such information as part of its customary practices; provided, however,
that Roche shall not need to adapt, modify or extend in any way its then-current
practices and procedures to satisfy such request.

4.7.4 Exit Cost Sharing. If Maxygen elects to opt-out of sharing of
Collaboration Costs pursuant to Section 4.7.1, then,

(a) with respect to any opt-out by Maxygen at the [****], from the date of
notice of opt-out [****] later (the “[****]”), the Parties shall [****] share
all Exit Costs.

(b) with respect to any opt-out by Maxygen at the [****], from the date of
notice of opt-out [****] later (the “BLA Transition Period”), the Parties shall
equally share all Exit Costs.

(c) with respect to any opt-out at the [****], during the [****] period from the
effective date of Maxygen’s notice of opt-out (the “[****]”), the Parties shall
share ([****], Roche:Maxygen) [****] M&P Costs in the U.S. planned and budgeted
prior to the issuance of such notice in the most recent update of the agreed U.S
Product Plan and Budget.

(d) except as expressly described above in this Section 4.7.4, in no case shall
Maxygen be responsible for any Collaboration Costs (i.e., R&D Costs and/or M&P
Costs) incurred for activities initiated by Roche after Roche receives Maxygen’s
notice of opt-out. After the applicable Transition Period described above, Roche
shall be responsible for all Collaboration Costs subject to this Agreement.

4.7.5 Consequences of Opt-out.

(a) Royalties. If Maxygen elects to opt-out from further sharing of
Collaboration Costs at the [****], then Roche shall pay to Maxygen royalty
payments with regard to Net Sales of Products as set forth in Section 9.1.2. If
Maxygen elects to opt-out from further sharing of Collaboration Costs at the
[****], then Roche shall pay to Maxygen royalty

 

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payments with regard to Net Sales of Products as set forth in Section 9.1.3. If
Maxygen elects to opt-out from further sharing of Collaboration Costs at the
[****], then Roche shall pay to Maxygen royalty payments with regard to Net
Sales of Products as set forth in Section 9.1.4.

(b) Events. If Maxygen elects to opt-out from further sharing of Collaboration
Costs, then Event Payments for events achieved after the opt-out shall be
subject to the terms of Section 8.2.6.

5. LICENSES

5.1 R&D Program Licenses.

5.1.1 License to Roche. Subject to the terms and conditions of this Agreement,
Maxygen hereby grants to Roche and its Affiliates a non-exclusive,
non-transferable, royalty-free license under the Maxygen Technology solely to
conduct the R&D Program.

5.1.2 License to Maxygen. Subject to the terms and conditions of this Agreement,
Roche hereby grants to Maxygen, Maxygen, Inc. and Maxygen ApS, non-exclusive,
non-transferable, royalty-free license under the Roche Technology solely to
conduct the R&D Program.

5.2 Commercial Licenses.

5.2.1 License to Roche. Subject to the terms and conditions of this Agreement,
Maxygen hereby grants to Roche, and Roche hereby accepts, an exclusive (subject
to Section 5.7) license or sublicense, as the case may be, under the Maxygen
Technology, solely to develop, make, have made, use, import, offer for sale and
sell Licensed Compounds and corresponding Products for use in the Field in the
Territory.

5.2.2 [****] Agreement.

(a) Sublicense. Subject to the terms and conditions of this Agreement, it is
understood and agreed that pursuant to Sections 5.1.1 and 5.2.1, Roche shall
have, subject to the retained rights of the [****] and the U.S. Government, a
royalty-bearing sublicense under the Patent Rights licensed to Maxygen, Inc. and
its Affiliates in the [****] Agreement, solely to develop, make, have made, use,
import, offer for sale and sell Licensed Compounds and corresponding Products
for use in the Field in the Territory.

(b) Terms of Sublicense. Roche understands and agrees (i) that the sublicense
granted to Roche pursuant to Section 5.2.2(a) is subordinate to the [****]
Agreement and the sublicense granted to Roche under the [****] Agreement is
limited in scope to the rights granted to Maxygen in the [****] Agreement;
(ii) the inventions claimed in the patents subject to the [****] Agreement were
made, in whole or part, using funds provided by the U.S. government and as a
result, the provisions of 35 U.S.C. §200 et seq. apply thereto, including,
without limitation, the requirement that certain Products that will be sold in
the United States must be manufactured in the United States; (iii) it will
comply with all provisions of the [****] Agreement relevant to its activities as
a sublicensee; (iv) it will not take any action that would result in a breach of
the [****] Agreement; and (v) it will cooperate with and assist Maxygen to meet
its obligations under the [****] Agreement.

 

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(c) Acknowledgement. Roche acknowledges that prior to the Effective Date it
received from Maxygen and reviewed a copy of the [****] Agreement.

(d) [****] Agreement. After the Effective Date, Maxygen agrees to approach the
[****] and use reasonable efforts to discuss possible modifications to the
[****] Agreement to make certain terms relating to royalties and reporting in
such agreement more consistent with Roche’s customary practices as reflected in
this Agreement.

5.2.3 Limited License.

(a) Licensed Compounds. The license in Section 5.2.1 grants to Roche rights to
develop and commercialize Licensed Compounds (and corresponding Products) in the
Field. Roche agrees that such license does not grant to Roche any right to
develop and/or commercialize any Compounds other than Licensed Compounds (and
corresponding Products) in the Field, and further agrees that, during the term
of this Agreement, Roche will not develop, make, have made, use, import, sell,
offer for sale or otherwise commercialize, any Compounds other than Licensed
Compounds (and corresponding Products) for use in the Field, and will not
authorize, facilitate or assist any Affiliate or Third Party to conduct any such
activities. Notwithstanding the above, during the term of the Agreement Roche
shall have the right to conduct pre-clinical research with any E Compounds
(except those that are then Maxygen Compounds) to assess which such E Compounds
Roche wishes to select as Licensed Compounds.

(b) Field Limitation. The license in Section 5.2.1 grants to Roche rights to
develop and commercialize Licensed Compounds (and corresponding Products) in the
Field. Roche agrees that the license in Section 5.2.1 does not grant to Roche
any right to develop and/or commercialize any Compound or Product outside the
Field, and agrees that, during the term of this Agreement, Roche will not
develop, make, have made, use, import, sell, offer for sale or otherwise
commercialize, any Compound or Product for use outside the Field, and will not
authorize, facilitate or assist any Affiliate or Third Party to conduct any such
activities.

5.3 Right to Sublicense. Roche shall have the right to sublicense the rights
granted it under Section 5.2.1 (and Section 5.2.2) to Third Parties. If Roche
grants a sublicense, all terms and conditions of this Agreement shall apply to
the Sublicensee to the same extent as they apply to Roche for all purposes of
this Agreement. Roche assumes full responsibility for the performance of all
obligations so imposed on such Sublicensee and will itself pay and account to
Maxygen for all Event Payments and royalties due under this Agreement by reason
of the operations of any such Sublicensee. Any such sublicense that is
inconsistent with the terms of this Agreement shall be null and void to the
extent of the inconsistency and each such sublicense shall automatically
terminate if the senior license terminates. Within [****] days after the date of
effectiveness of any such sublicense, Roche shall notify Maxygen of such
sublicense and the identity of each Sublicensee and the scope of rights granted
to such Sublicensee. Roche shall not enter into an agreement granting a
sublicense hereunder that permits the Sublicensee to grant further sublicenses
without seeking and obtaining the prior written consent of Maxygen, which
consent shall not be unreasonably withheld.

 

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5.4 Exclusivity.

5.4.1 Licensed Compounds. During the term of this Agreement, for so long as
Roche retains its exclusive worldwide license to any Product set forth in
Section 5.2.1, Maxygen will not, without Roche’s written consent, develop, make,
use or commercialize itself, and will not grant to any Third Party a license, to
develop or commercialize any Licensed Compound or corresponding Product.

5.4.2 Field. During the term of this Agreement, for so long as Roche retains its
exclusive worldwide license to any Product set forth in Section 5.2.1, Maxygen
will not, without Roche’s written consent, develop, make, use or commercialize
itself, and will not grant to any Third Party a license, to develop or
commercialize any Licensed Compound or Product for use in the Field; provided,
however, that Maxygen shall retain the right to (a) perform its responsibilities
in connection with the R&D Program as set forth in the Program Plan or as
otherwise directed by the JMC, and (b) conduct the activities permitted pursuant
to Sections 5.7.

5.5 No Implied Licenses. No rights or licenses are granted or shall be deemed
granted under this Agreement with respect to the Maxygen Technology and other
intellectual property owned by Maxygen, other than those rights and licenses
expressly granted herein.

5.6 Transfer of Know-How. Pursuant to the licenses granted in this Article 5,
each Party shall transfer to the other Know-How necessary for the conduct of the
R&D Program as determined by the JPT, such as the following:

5.6.1 Initial. Within [****] days following the Effective Date, to the extent it
has not already done so, Maxygen shall make available to Roche at Maxygen’s
facilities, key personnel familiar with all material Maxygen Know-How that
exists as of the Effective Date relating to the E Compounds and is licensed to
Roche hereunder.

5.6.2 Maxygen. During the R&D Program, Maxygen shall, from time to time, make
periodic transfers to Roche of new Maxygen Know-How licensed hereunder and
documents containing such Maxygen Know-How, in electronic format, if available,
either at Maxygen’s facilities or as presentations at a JPT meeting. Such
Maxygen Know-How shall include, without limitation, information relating to
pre-clinical development, manufacturing and regulatory matters.

5.6.3 Roche. During the R&D Program, Roche shall, as needed, from time to time,
make periodic transfers to Maxygen of new Roche Know-How licensed hereunder and
documents containing such Roche Know-How, in electronic format, if available,
either at Roche’s facilities or as presentations at a JPT meeting. Such Roche
Know-How shall include, without limitation, information relating to pre-clinical
development, manufacturing and regulatory matters.

 

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5.6.4 [****] Know-How. If, on or before [****], Maxygen fails to achieve a
Satisfactory [****] Culture Result, then unless the JMC decides that [****],
Roche shall promptly transfer to Maxygen [****] Know-How and provide to Maxygen
technical assistance to allow Maxygen to try to achieve a Satisfactory [****]
Culture Result. Any such [****] Know-How shall be subject to the license granted
to Maxygen in Section 5.1.2. In any such event, the terms of Section 8.2.1 and
Section 9.2.4 shall apply. For clarity, it is understood that [****] Know-How
shall be Roche Separate Technology and shall not be Program Technology.

5.7 Retained Rights.

5.7.1 Permitted Activities. Notwithstanding any other provision of this
Agreement, including without limitation the exclusive licenses granted to Roche
in Section 5.2.1, Maxygen shall retain the rights to (a) perform activities in
connection with the R&D Program as set forth in the Program Plan and Budget
and/or as otherwise agreed by the JMC; (b) to develop, make, have made, use,
sell, offer for sale and/or otherwise commercialize itself Maxygen Compounds for
use outside the Field, and (c) to enter into agreement(s) with any Third Party
that would grant such Third Party with a license or other rights with regard to
Maxygen Technology (other than the Licensed Compounds) to develop and
commercialize any products outside the Field.

5.7.2 Intellectual Property.

(a) Maxygen shall retain all rights under its interest in the Maxygen Technology
that are not exclusively granted to Roche in Section 5.2.1. It is understood
that Maxygen may, among other things, grant to one or more Third Parties
licenses under its interest in the Maxygen Technology for use outside the Field;
provided, however, that during the term of this Agreement, Maxygen shall not
grant any license to any Third Party with regard to any Maxygen Technology that
would be inconsistent with the licenses granted to Roche in Sections 5.1.1 or
5.2.1.

(b) Subject to the rights granted to Maxygen in Sections 5.2.1 and 5.8 and
Article 18, Roche shall retain all rights under its interest in the Roche
Technology.

5.8 License to Maxygen. In recognition of the fact that Roche may develop
Inventions and related Patent Rights as a result of its access to and use of the
Compounds and Maxygen Separate Technology, and in partial consideration for such
use, Roche hereby grants to Maxygen, the following licenses, which Maxygen shall
have the right to accept or decline on a case-by-case basis:

(a) an exclusive, worldwide, royalty-free, license under Roche’s interest in the
Program Technology, and

(b) a non-exclusive, worldwide, license to any other Patent Rights owned by
Roche or its Affiliates claiming any E Compound and/or Product, or the
manufacture, formulation and/or use thereof,

 

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in each case, with the right to grant and authorize sublicenses, to develop,
make, have made, use, sell, offer for sale and/or otherwise commercialize
products outside the Field. With regard to the Patent Rights subject to
Section 5.8 (b), if Maxygen indicates that it wishes to accept such a license,
the Parties shall negotiate in good faith the payments that will be due to Roche
for such rights, provided, such payment (i) will not exceed [****] of net sales
of the applicable product commercialized for use outside the Field, and (ii) if
Roche grants to any Third Party a license to any such Patent Rights on any terms
more favorable than those provided to Maxygen, Maxygen shall be entitled to the
benefit of such more favorable terms.

6. COMPOUNDS AND PRODUCTS FOR HEMOPHILIA

6.1 No Hemophilia Rights. Roche agrees that this Agreement provides Roche no
rights to develop or commercialize any Compound(s) and/or Product(s) for
Hemophilia, and that Maxygen retains the right to develop and commercialize for
Hemophilia any Compounds(s) and corresponding Hemophilia Product(s), subject to
the terms of this Article 6.

6.2 Maxygen Rights.

6.2.1 Pre-clinical Activities. At any time during the [****], Maxygen shall have
the right to pursue (including by contracting with Third Party service providers
and/or not-for-profit entities), at its own cost, the pre-clinical development
for Hemophilia of any E Compound that is not then a Licensed Compound to assess
the suitability of such E Compound for development and/or commercialization for
Hemophilia. During the [****], before commencing any such activities (a) Maxygen
will inform the JMC of the pre-clinical activities it would like to conduct
[****], (b) until [****], Maxygen will only conduct those activities that [****]
has [****] approved, and (c) [****] conducted by it or on its behalf with regard
to the evaluation of E Compounds for Hemophilia; provided, however, it is
understood that Maxygen shall only [****].

6.2.2 Clinical Activities. Until the end of the [****], Maxygen shall not
commence clinical development of any E Compound except for the Initial
Indications.

6.3 Maxygen Compounds.

6.3.1 After the end of the [****], after consultation with Roche, Maxygen shall
have the right to select any [****] E Compounds that are not then Licensed
Compounds for further development and commercialization for Hemophilia. Each
such E Compound shall be deemed to be a “Maxygen Compound” as of the date that
Maxygen provides to Roche notice of the identity of such E Compound(s).

6.3.2 At any given time during the Agreement no more than [****] E Compounds
shall be Maxygen Compounds.

6.3.3 Maxygen shall have the right to develop (including, without limitation,
clinically develop) and/or commercialize Maxygen Compound(s) itself, and may
enter into agreements with any Third Party(ies) to develop and/or commercialize
any such Maxygen Compounds for Hemophilia.

 

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6.4 Relinquishment. If Maxygen elects to stop all development and
commercialization for Hemophilia of a particular Maxygen Compound, it shall
promptly notify Roche and such E Compound shall (a) cease to be a Maxygen
Compound, and (b) again be available to Roche for selection of a Licensed
Compound for exclusive development and commercialization in the Field under this
Agreement. In any such case, after [****], the Parties shall discuss in good
faith, and agree on as a replacement Maxygen Compound an E Compound that is not
then a Licensed Compound.

6.5 Right of Negotiation. If Maxygen decides to seek a partner for the
development and/or commercialization of any Maxygen Compounds for Hemophilia,
then Maxygen shall offer Roche an equal opportunity to negotiate with Maxygen
the terms of an agreement for the development and/or commercialization of such
Maxygen Compounds for Hemophilia. If Roche provides Maxygen with notice that
Roche wishes to negotiate the terms of such an agreement, then the Parties shall
negotiate such terms in good faith; provided, Maxygen shall have the sole
discretion as to whether it wishes to enter into any such agreement with Roche.
If the Parties agree upon mutually acceptable terms, the Parties shall enter
into a written agreement reflecting such terms. Neither Party shall be obligated
to accept or agree to any terms or conditions proposed by the other party, or to
enter into any agreement regarding any grant of rights to develop and/or
commercialize such Maxygen Compounds for Hemophilia.

7. LATE CLINICAL DEVELOPMENT AND COMMERCIALIZATION ACTIVITIES

7.1 Roche Responsibilities. Subject to Maxygen’s rights set forth in Articles 5
and 18, Roche will have sole responsibility, for (a) all clinical development of
Products for the applicable Initial Indication after Maxygen transfers to Roche
the INDs for such Initial Indication pursuant to Section 12.3, and (b) all
commercialization of Products in the Field in the Territory, including all
Product sales and marketing.

7.2 Reports. After the Completion of Phase IIa for each Initial Indication is
first reached, Roche shall keep Maxygen apprised of the status of the clinical
development of, and activities and plans for Regulatory Approval and US
commercialization of Product(s) by providing Maxygen with a written report
before meetings of the JMC detailing such activities, on a Product-by-Product
basis, including, without limitation: (a) the activities planned with respect to
worldwide development and strategic plans for Regulatory Approval of each
Product (Strategic Launch Concept subsequently modified into a Strategic Launch
Plan) in at least the Major Markets, (b) if Maxygen is sharing Collaboration
Costs with regard to the applicable Product, the Collaboration Costs actually
incurred in connection with such Products, and (c) if Maxygen is sharing
Collaboration Costs with regard to the applicable Product, comparing such
expenses to date with the projections set forth in the applicable Product Plan
and Budget. Such reports shall, without limitation, describe the status of all
Products for those Indications that have achieved Completion of Phase IIa, and
all Products for which Roche has sought or obtained Regulatory Approval, or that
Roche has licensed to a Sublicensee for development or commercialization and
shall also contain sufficient other information to allow Maxygen to monitor
Roche’s compliance with this Agreement, including without limitation, Roche’s
obligations with respect to the Event Payments set forth in Section 8.2. Such
reports shall contain or be based on information that [****], and [****] shall
have no obligation to adapt, modify or extend [****] to generate different
information.

 

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7.3 Commercially Reasonable Efforts. Roche shall use Commercially Reasonable
Efforts with respect to Products for each Initial Indication in the Field to:
(i) complete clinical development of at least one Product for each Initial
Indication; (ii) obtain Regulatory Approvals to market such Products for each
Initial Indication in the Field; (iii) after obtaining Regulatory Approvals for
any Product for each Initial Indication, launch such Product and promote to
generate demand, and meet market demand for Products for each Initial Indication
in the Major Markets in the Field, and (iv) maximize the clinical and commercial
potential of the Products in at least the Major Markets. In conducting such
activities, Roche shall utilize at least the same efforts as Roche expends for
its own products with similar market potential, with the objective of maximizing
the economic value of the Products in the Field in the Territory, taking into
account scientific, business and marketing and return on investment
considerations. [****]. Roche’s obligations with respect to due diligence shall
terminate in the event that Roche’s rights under this Agreement terminate in
their entirety pursuant to Article 18.

7.4 Roche Explanation.

7.4.1 If Maxygen believes that Roche has failed to exercise Commercially
Reasonable Efforts with respect to any Product and/or Initial Indication, then
Maxygen may give Roche written notice of such alleged failure, identifying the
Product at issue and giving specific detailed reasons of such allegation. Within
[****] days following Roche’s receipt of any such notice from Maxygen (“Response
Period”), Roche shall have the right to provide Maxygen with a written response
specifying, in reasonable detail, how it has used the required Commercially
Reasonable Efforts.

7.4.2 If Roche fails within the applicable Response Period (a) to provide
Maxygen a written response, in reasonable detail, indicating (x) the manner in
which Roche is in compliance with its obligations, or (y) how Roche has remedied
any breach thereof, or (z) why such failure is due to a Force Majeure Event (as
defined in Section 20.2), or (b) to remedy any breach of its obligations, then
Maxygen shall have the right to terminate this Agreement, in whole or in part
(i.e., as to any Product and/or as to any portion of the Territory in which
Roche has failed to meet its obligations (taken as a whole) under this
Agreement), upon written notice to Roche effective as of the end of the Response
Period. In the event of such termination, Maxygen shall thereafter have the
exclusive rights to commercialize such Product in the applicable country, alone
or with Third Parties pursuant to Section 18.7.

7.5 General.

7.5.1 Trademarks. Subject to Section 18.7, Roche shall select, own and maintain
the trademark(s) for the Products marketed by Roche in the Field in the
Territory.

7.5.2 Legend. Unless prohibited by applicable law or regulation, all Products
sold by Roche or its Affiliates or Sublicensees under this Agreement shall be
marked in a legible manner with the Legend: “Commercialized under license from
Maxygen Holdings Ltd.”

 

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7.5.3 Other Maxygen Rights. With respect to each Product, Maxygen shall have the
first right, but not the obligation, to provide promotional and/or marketing
services for any Product if it would be beneficial for Product(s) (e.g., to
service customer areas or geographies) where such new infrastructure is needed
to commercialize the Products and Roche elects not to conduct such activities
itself.

7.6 No Use of Compound or Product Information. Except in connection with the
development or commercialization of Products in a manner expressly permitted by
this Agreement, Roche and its Affiliates and Sublicensees shall not develop or
commercialize, or authorize the development or commercialization of, any Factor
VII-based therapeutic that is based on or derived from any Compound, or any
product that contains or is made with the use of a gene (or genetic element)
derived from a Compound or information obtained therefrom, regardless of whether
such variant gene is made or obtained through synthesis, or mutation of a
starting gene or a fragment thereof. Except in connection with the development
or commercialization of Products subject to this Agreement, Roche will not
itself, or through any Third Party, use any Maxygen Technology or Program
Technology or structure-function data relating to any Compound, including
without limitation, consensus sequences or structural motifs, to reverse
engineer, reconstruct, synthesize or otherwise modify or copy any Compound or
Product or any other variant with similar biological activities, or to attempt
the same.

7.7 Off Label Use.

7.7.1 Acknowledgement. The Parties acknowledge that off-label sales of products
intended for use to treat Hemophilia could have an adverse impact on one or more
Products developed for Indications in the Field, or visa versa.

7.7.2 Principles. In order to help protect the value of the Products in the
Field and products for the treatment of Hemophilia, Roche agrees to comply with
the following principles to the extent permitted by law: (a) differentiated
products and Products will be developed respectively for Hemophilia and the
Field, and (b) reasonable efforts will be made to prevent off-label use for each
product and Product outside the Indications for which it has received Regulatory
Approval in the applicable jurisdiction. In this regard, Roche specifically
covenants that:

(i) no Compound and/or Product that is developed for use in the Field will be
developed for Hemophilia;

(ii) Roche shall not undertake or encourage, directly or indirectly, off-label
use of any Product for Hemophilia, and shall discourage the same;

(iii) no Product that receives Regulatory Approval for an indication in the
Field will be promoted, directly or indirectly, for Hemophilia;

(iv) Roche and its Affiliates and Sublicensees shall not seek, directly or
indirectly, reimbursement approval from any governmental entity or other third
party payor (e.g., Medicaid) for any Product for Hemophilia; and

 

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(v) where reasonably feasible, Roche will seek to formulate and/or package each
Product in such a way so that it will not be useful for Hemophilia.

7.7.3 Hemophilia. If Maxygen enters into an agreement with a Third Party
granting such Third Party rights to develop and commercialize any Maxygen
Compound for Hemophilia, Maxygen shall seek to include in any such agreement
provisions substantially similar to those in Sections 7.7.1 and 7.7.2. If
Maxygen enters into a written agreement with a Third Party that [****], then
Maxygen shall promptly notify Roche, and Roche [****].

7.8 Phase III Clinical Trials. Roche will not initiate Phase III clinical trials
until the internal Roche committee described in Section 4.7.3 has made the Full
Development Decision and Roche has notified Maxygen of such decision. As used in
this Section 7.8, “initiate” means the dosing of the first patient with a
Product in the first Phase III clinical trial.

8. LICENSE FEE AND EVENT PAYMENTS

8.1 License Fee. In partial consideration for the rights granted to Roche in
this Agreement, within five (5) business days after the Effective Date, Roche
shall pay to Maxygen a license fee of eight million Dollars ($8,000,000). Such
fee shall be non-refundable and shall not be creditable against any other amount
due to Maxygen pursuant to this Agreement.

8.2 Event Payments.

8.2.1 Certain Event Payments.

(a) Satisfactory Culture Result.

(i) [****]. If Maxygen achieves a Satisfactory [****] Culture Result with [****]
on or before [****], then within [****] of the achievement thereof, Roche shall
make an Event Payment to Maxygen of [****] Dollars [****]. If Maxygen does not
achieve a Satisfactory [****] Culture Result with [****] but the Parties achieve
a Satisfactory [****] Culture Result with [****] or a decision by the Parties to
initiate technology transfer for GMP manufacturing of [****] to Roche or a CMO,
then within [****] of the achievement thereof, Roche shall make an Event Payment
to Maxygen of [****] Dollars [****].

(ii) [****]. If Maxygen does not achieve a Satisfactory [****] Culture Result
with [****] on or before [****], then upon the [****] to occur with [****] of
either a Satisfactory [****] Culture Result or a Satisfactory [****] Culture
Result, or a decision by the Parties to initiate technology transfer for GMP
manufacturing of [****] to Roche or a CMO, Roche shall make an Event Payment to
Maxygen of [****] Dollars [****], within [****] of the achievement thereof.

(b) Satisfactory [****] Result.

(i) [****]. If Maxygen achieves a Satisfactory [****] Culture Result with [****]
on or before [****], and achieves a Satisfactory [****] Result with [****] on or
before [****] (unless achieved via EIH by [****] or such [****] date provided in
Section 1.76(ii)), then for the Satisfactory [****] Result, Roche will make an
Event Payment to Maxygen [****] Dollars [****] within [****] of the achievement
thereof.

 

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(ii) [****]. If a Satisfactory [****] Result is achieved with [****] on or
before [****] (unless achieved via EIH by [****] or such later date provided in
Section 1.76(ii)), then unless Roche has previously made an Event Payment to
Maxygen pursuant to Section 8.2.1(b)(i), Roche shall make an Event Payment to
Maxygen of [****] Dollars [****], and, if the Satisfactory [****] Result is
achieved with [****] between [****] and [****] (unless achieved via EIH by
[****] or such [****] date provided in Section 1.76(ii)), then Roche shall make
an Event Payment to Maxygen of [****] Dollars [****]. In each such case, Roche
shall make the applicable payment within [****] of the achievement of the
Satisfactory [****] Result.

(iii) For clarity, at most only [****] Event Payment for a Satisfactory [****]
Result shall be made to Maxygen under this Section 8.2.1(b).

8.2.2 First Achievement of Events. Immediately following the first achievement
of any of the following Events with regard to any Product for any Initial
Indication, the Party achieving such Event shall notify the other Party of such
achievement. Roche shall pay to Maxygen Event Payments in the applicable amounts
set forth in this Section 8.2.2 within [****] after receipt of such notice (each
a “Event Payment”).

 

Event

   Event Payment (U.S.$) A.   [****]        $ [****] B.   [****]        $ [****]
C.   [****]        $ [****] D.   [****]        $ [****] E.   [****]        $
[****] F.   [****]        $ [****] G.   [****]        $ [****] H.   [****]    
   $ [****] I.   [****]        $ [****] J.   [****]        $ [****] K.   [****]
       $ [****] L.   [****]        $ [****] M.   [****]        $ [****] N.  
[****]        $ [****] O.   [****]        $ [****]

 

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With regard to Events A, B and C above, achievement of each such Event shall be
subject to [****], as described in Section 2.2.4(b), that the Event was
accomplished.

8.2.3 Second Achievement of Events. Immediately following the first achievement
of each Event specified below for any Product intended to treat the second
Initial Indication, the Party achieving such Event shall notify the other Party
of such achievement. Roche shall pay to Maxygen Event Payments in the applicable
amounts set forth in this Section 8.2.3 within [****] days after receipt of such
notice.

 

Event

   Event Payment (U.S.$)

A.

  [****]        $ [****]

B.

  [****]        $ [****]

C.

  [****]        $ [****]

D.

  [****]        $ [****]

E.

  [****]        $ [****]

F.

  [****]        $ [****]

G.

  [****]        $ [****]

H.

  [****]        $ [****]

I.

  [****]        $ [****]

J.

  [****]        $ [****]

K.

  [****]        $ [****]

L.

  [****]        $ [****]

Such Event Payments shall be paid regardless of whether the subject Product has
previously triggered any Event Payments (i.e., for a prior Indication) and shall
be paid based on the timing (i.e., sequence) of when the applicable Event is
achieved. For example, if a Product initially is developed for [****] and is
later developed for [****], the second set of Event Payments set forth in
Section 8.2.3 shall be paid with regard to such Product as it is developed for
the second Indication.

 

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8.2.4 Timing. If an Event subject to Section 8.2.2 or 8.2.3 is achieved and the
Event Payment for a preceding Event has not yet been paid, including without
limitation, because the earlier Event was not reached, then, upon achievement of
the later event, the Event Payments due for such Event, and all earlier Events
for which an Event Payment for the applicable Product has not yet been paid,
shall be due. By way of illustration, if pursuant to Section 8.2.3 a [****] is
commenced for a Product for the treatment of [****] without the Commencement of
a [****], at such time as Event Payment C is due pursuant to Section 8.2.3,
Event Payment B shall also be due.

8.2.5 Discontinued Products. The Event Payments due under Sections 8.2.2, 8.2.3
and 8.2.4 shall be made with respect to the Products as described above;
provided, however, that if Roche ceases all development of a particular Product
(a “Discontinued Product”) after having made any payment with respect to such
Discontinued Product under Sections 8.2.2, 8.2.3 or 8.2.4 in respect of the
achievement of any Event described therein with the Discontinued Product in
relation to a particular indication, then following the accomplishment of that
same Event with respect to the next Product for the same indication, no Event
Payment shall be due hereunder in respect of such achievement. When Events
described in such Sections are achieved with respect to such subsequent Product
corresponding to Event Payments that were not previously paid with respect to
the Discontinued Product, then any Event Payment that was not previously paid
shall be payable pursuant to Sections 8.2.2, 8.2.3 and 8.2.4.

8.2.6 Effect of Opt-Out. If Maxygen exercises its right to opt-out pursuant to
Section 4.7, then all Event Payments payable pursuant to Section 8.2.2 or 8.2.3,
as applicable, for achievements of events attained after the effective date of
such opt-out shall be reduced as follows: (a) with regard to Products that have
commenced clinical trials as of effective date of such opt-out as described in
Section 4.7.4, such Event Payment shall be reduced by [****] of the Event
Payments otherwise payable (i.e., [****] of such Event Payments shall be paid),
and (b) with regard to Products that have not commenced clinical trials as of
the effective date of such opt-out, such Event Payment shall be reduced to
[****] of the Event Payments otherwise payable.

8.2.7 Non-creditable Payments. All Event Payments made to Maxygen pursuant to
this Article 8 shall be non-refundable and shall not be creditable against any
other amount due to Maxygen pursuant to this Agreement.

8.2.8 Invoices. For each event achieved that relates to an Event Payment subject
to this Section 8.2, the Party achieving such event shall promptly, and in any
event within thirty (30) days, notify the other Party. Maxygen shall provide
Roche with an invoice for any Event Payment due under this Section 8.2, and
Roche shall pay Maxygen the applicable Event Payment within thirty (30) days
after receipt of such invoice.

8.2.9 Aggregate Event Payments. In no event shall the total amount of Event
Payments paid to Maxygen with regard to Products exceed ninety-five million
Dollars ($95,000,000).

 

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9. ROYALTIES

9.1 Royalties. On a Product-by-Product basis, Roche will pay to Maxygen royalty
payments on Net Sales of Products by Roche and its Affiliates and Sublicensees,
as follows:

9.1.1 No Opt-Out. If Maxygen continues to pay its share of the Collaboration
Costs for Products as described in Section 4.1.1, and does not opt-out of the
payment of Collaboration Costs pursuant to Section 4.7, then Maxygen shall
receive royalties on annual Net Sales of such Product in the applicable
geographic region, as follows:

(a) U.S.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to [****]

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

By way of example, if in a particular year annual Net Sales of Products in the
U.S. are $[****] million, then the royalty payment due to Maxygen for such sales
shall be $[****] million, where a royalty of $[****] million is due for Net
Sales up to $[****] million, $[****] million is due for Net Sales from $[****]
to $[****], $[****] million is due for Net Sales from $[****] to $[****]
million, and $[****] million is due for Net Sales from $[****] to $[****]
million.

(b) Japan.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****]

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

(c) Rest of World.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

 

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9.1.2 Opt-Out at [****].

(a) U.S. If Maxygen opts out of further sharing of Collaboration Costs at the
[****] pursuant to Section 4.7, then after the applicable Transition Period the
royalty rates for Net Sales of Products in the U.S. shall be based on those set
forth in Section 9.1.1(a) but reduced for each tier (a) by [****] in which
Maxygen has exercised its opt-out right and (b) by [****]. Thereafter, such
royalty rates shall [****]. By way of example, but without limitation, if
Maxygen opt-out is month [****] after [****] in the U.S. and the beginning of
the next calendar quarter is month [****], then for the first tier of Net Sales
in the U.S. ($[****] to $[****] million) the royalty rate shall be [****]% for
month [****] and [****],[****]% for month [****] to [****],[****]% for month
[****] to [****],[****]% for month [****] to [****],[****]% for month [****] to
[****], and [****]% for the remainder of the royalty period beyond month [****].

(b) Japan. If Maxygen opts out of further sharing of Collaboration Costs at the
[****] pursuant to Section 4.7, then after the effective date of the opt-out the
royalty rates on Net Sales of Products in Japan shall be as follows:

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

(c) Rest of World. If Maxygen opts out of further sharing of Collaboration Costs
at the [****] pursuant to Section 4.7, then after the effective date of the
opt-out, the royalty rates on Net Sales of Products in ROW shall be as follows:

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

9.1.3 Opt-Out at [****]. If Maxygen opts out of paying further Collaboration
Costs at the [****] pursuant to Section 4.7, then after the effective date of
the opt-out, Maxygen will receive royalties on annual Net Sales of Products in
the applicable geographic region(s), as follows:

(a) U.S.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

 

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(b) Japan.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

(c) Rest of World.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

9.1.4 Opt-Out at [****]. If Maxygen opts out of paying further Collaboration
Costs at the [****] pursuant to Section 4.7, then after the effective date of
the opt-out, Maxygen will receive royalties on annual Net Sales of Products in
the applicable geographic region, as follows:

(a) U.S.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

(b) Japan.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

 

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(c) Rest of World.

 

Net Sales ($U.S.)

   Royalty Rate  

Up to $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million and £ $[****] million

   [****] %

>$[****] million

   [****] %

9.2 Royalty Reductions.

9.2.1 New Indications. If Maxygen opts out, and subsequently Roche develops a
Product for an Indication beyond the Initial Indications and in a particular
geographic area receives Regulatory Approval for a Product for such Indication,
then the royalty rates described in Sections 9.1.2, 9.1.3 and 9.1.4 due to
Maxygen for Net Sales of such Product in the applicable geographic area (i.e.,
U.S., Japan, ROW) shall be reduced, as follows:

(a) if Maxygen has opted out at the [****] or the [****], then, from the end of
the calendar quarter in which Regulatory Approval is received in the first
country in such geographic area, the royalty rates for such geographic area set
forth in Section 9.1.3 or 9.1.4 will be reduced: (i) by [****] per tier, if the
development of such Indication was initiated prior to the effective date of
opt-out and Maxygen has partially contributed to its co-funding, or (ii) by
[****] per tier, if the development of such Indication was initiated after the
effective date of opt-out and Maxygen has not contributed any funding for such
Indication. For purposes of this Section 9.2.1(a), “development of such
Indication was initiated” means the first patient was dosed in the first
clinical trial for such Indication.

(b) if Maxygen has opted out at the [****], and Roche receives regulatory
approval in the U.S. for an Indication beyond the Initial Indications
(irrespective of when such development was initiated), then, from the end of the
calendar quarter in which Regulatory Approval is received in the U.S., the
royalty rates applicable pursuant to 9.1.2 above will be further reduced in the
US by [****] per tier, commencing immediately after the quarter in which Roche
receives Regulatory Approval in the U.S. for the new Indication.

(c) Any royalty reduction subject to Section 9.2.1(a) or (b) shall apply for the
first such additional Indication that obtains Regulatory Approval in the
applicable geographic area. If any other additional Indications receive
Regulatory Approval there shall be no further royalty reductions.

9.2.2 Where Compulsory License have been Granted. If a compulsory license is
granted to a Third Party under the applicable laws of any country in the
Territory with regard to any Product, then if the royalty rate granted such
Third Party under such compulsory license is lower than the rate otherwise due
to Maxygen pursuant to Section 9.1 above, then for so long as such compulsory
lower royalty rate remains in effect in such country with regard to the

 

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applicable Product, Roche shall pay to Maxygen [****] any amounts the Roche
Group receives from Third Parties in such country under any such compulsory
license, in lieu of royalties under Section 9.1. When applicable, compulsory
license Net Sales shall not be taken into account for the calculation of minimum
annual royalty payments subject to Sections 9.2.4 and 9.7.3 or the Commercial
Manufacturing Costs offset in Section 9.2.3. If the threat of a compulsory
license looms in a country, then Roche and Maxygen shall discuss whether to
grant a voluntary license to preclude the issuance of a compulsory license. If
the Parties agree to grant such a voluntary license, then such voluntary license
shall be treated as a compulsory license and shall be subject to this
Section 9.2.2.

9.2.3 Reduction for Commercial Manufacturing Costs. Roche shall be fully
responsible for all Commercial Manufacturing Costs for commercial Product
supplies. However, if after the [****] in a given geographic area of the
Territory and for a given calendar year, Commercial Manufacturing Costs for a
particular Product exceed [****] of Net Sales of such Product in such geographic
area, then, subject to the limitation in Section 9.7.3, Roche shall be entitled
to deduct [****] of the amount of Commercial Manufacturing Costs in excess of
[****] of the applicable Net Sales for such Product in such geographic area from
the royalties payable to Maxygen for the applicable Net Sales, and for so long
as this remains so. For example, if Commercial Manufacturing Costs, for a given
calendar year after the [****]Japan, is [****] of Net Sales in Japan, then,
subject to the limitation in Section 9.7.3, Roche may deduct [****] of such Net
Sales of such Product in Japan from the royalties otherwise due to Maxygen on
the applicable Net Sales for such Product in Japan.

9.2.4 [****] Result; [****] Culture Result.

(a) If a Satisfactory [****] Culture Result with [****] is achieved on or before
[****], but a Commercially Viable [****] Process Result is not achieved with
[****] by [****], and Roche elects to develop [****] made using [****]
manufacturing, all royalty rates in all tiers described in Section 9.1 shall be
reduced by [****]; provided, for Product sales in any calendar year following
the end of the [****], in no event shall the total amount of royalties paid to
Maxygen with regard to royalty-bearing Net Sales of Products sold in the
applicable year be less than [****] of aggregate worldwide royalty-bearing Net
Sales of Products.

(b) If a Satisfactory [****] Culture Result with [****] is not achieved on or
before [****], but a Satisfactory [****] Culture Result is achieved with [****],
and Roche elects to develop [****] using [****] manufacturing, in consideration
for the use of the [****] Know-How, then all royalty rates in all tiers
described in Section 9.1 shall be reduced by [****]; provided, for Product sales
in any calendar year following the end of the [****], in no event shall the
total amount of royalties paid to Maxygen with regard to royalty-bearing Net
Sales of Products sold in the applicable year be less than [****] of aggregate
worldwide royalty-bearing Net Sales of Products. For example, if the First
Commercial Sale of a Product occurs on [****], the guaranteed minimum royalty
payment would only apply beginning in calendar year [****] and onwards. By way
of further example, if the First Commercial Sale of a Product occurs on [****],
and worldwide aggregate royalty-bearing Net Sales of Products by Roche and its
Affiliates and Sublicensees in [****] were [****], and Roche paid to Maxygen
royalties totaling

 

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[****] for such royalty-bearing Net Sales pursuant to the applicable provision
of Section 9.1, and 9.2.1, 9.2.2 and/or 9.2.3, if applicable, then for calendar
year [****], the guaranteed minimum royalty payment due to Maxygen for such
royalty-bearing Net Sales would be [****].

(c) If (i) a Satisfactory [****] Culture Result is not achieved with [****] on
or before [****], (ii) Roche elects to advance [****] as the Lead Compound, and
(iii) Roche elects, for any reason, to use a [****] process to manufacture such
Compound, then, in consideration for the use of the [****] Know-How, all royalty
rates in all tiers described in Section 9.1 shall be reduced by [****];
provided, for Product sales in any calendar year following the end of the
[****], in no event shall the total amount of royalties paid to Maxygen with
regard to royalty-bearing Net Sales of Products sold in the applicable year be
less than [****] of aggregate worldwide royalty-bearing Net Sales of Products.

(d) For any minimum royalty payment due under this Section 9.2.4, Roche shall
pay any amount due (i.e., the difference between the amount due and the amount
previously paid to Maxygen for such Net Sales) to Maxygen, within [****] after
the end of the applicable calendar year, together with calculations showing the
amount due.

9.3 Combination Products.

9.3.1 If Roche sells any Product in the form of a combination Product containing
one or more pharmaceutically active ingredients or a delivery device in addition
to the Licensed Compound included in such Product (whether combined in a single
formulation and/or package, as applicable, or formulated and/or packaged
separately), Net Sales of such combination Product will be calculated by
multiplying actual Net Sales of such combination Product by the fraction A/(A+B)
where A is the invoice price of any Product comprising as its sole active
ingredient such Licensed Compound if sold separately, and B is the total invoice
price of the other active ingredient(s) or the delivery device in the
combination Product if sold separately.

9.3.2 If, on a country-by-country basis, such other pharmaceutically active
ingredient or ingredients or delivery device in the combination Product are not
sold separately in such country, but the Licensed Compound component of the
combination Product is sold separately in such country, Net Sales for the
purpose of determining royalties of the combination Product shall be calculated
by multiplying actual Net Sales of such combination Product by the fraction A/C
where A is the invoice price of such Licensed Compound component if sold
separately, and C is the invoice price of the combination Product. If, on a
country-by-country basis, such Licensed Compound component is not sold
separately in such country, Net Sales for the purposes of determining royalties
of the combination Product shall be D/(D+E) where D is the fair market value of
the portion of the combination Product that contains the Licensed Compound and E
is the fair market value of the portion of the combination Product containing
the other active ingredient(s) or delivery device included in such combination
Product, as such fair market values are determined in good faith by the Parties.

9.3.3 With regard to any Product sold in combination with a delivery device, if
Roche plans to reduce the invoice price of such Product as compared to the
invoice price of the

 

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delivery device, on a relative basis, then Roche shall promptly notify Maxygen
of the proposed change. In any such event, at Maxygen’s request, Roche shall
explain the reason for such change. In the event that Maxygen has a concern that
any such change will result in disproportionate impact on the proportion of the
value attributed to Products, the Parties shall discuss such concern in good
faith with the goal of reaching a fair and equitable resolution.

9.4 Royalty Term. For each Product, the obligation of Roche to pay Maxygen
royalties on Net Sales in a given country shall commence on the date of the
First Commercial Sale of such Product by any member of the Roche Group in such
country, and shall continue on a country-by-country and Product-by-Product
basis, until the later of (a) the date upon which no Valid Claim would cover the
manufacture, use, sale, offer for sale, importation or exportation of the
applicable Product in the applicable country, and (b) the date that is [****]
years after the date of the First Commercial Sale of the applicable Product in
such country. Notwithstanding the above, if Maxygen is continuing to share M&P
Costs with regard to the applicable Product in the U.S., then Roche’s obligation
to pay Maxygen royalties on Net Sales of such Product in the US shall continue
for so long as Maxygen shares such M&P Costs.

9.5 Accrual of Royalties; One Royalty. No royalty shall be due or owing from the
use or distribution of Product in transactions where no consideration is
received by the Roche Group, such as when Product is made or used for tests or
development purposes or is distributed, without charge, as promotional samples.
No royalties shall be payable on sales among entities in the Roche Group, but
royalties shall be payable on subsequent sales by entities within the Roche
Group to a Third Party. No multiple royalties shall be payable under this
Agreement because any Product is covered by more than one Valid Claim or
incorporates or is covered by or made with the use of both Know-How and a Valid
Claim.

9.6 Third Party Payments. Except as expressly provided in Section 4.6.2, and
subject to Section 9.7, Roche shall be solely responsible for paying to Third
Parties (including, without limitation, the [****] pursuant to the [****]
Agreement) all amounts due for licenses or other rights necessary to develop,
make, have made, use, sell, offer for sale or import Products worldwide in the
Field. If Roche has entered the applicable Third Party agreement, then Roche
shall directly pay such Third Party any amounts subject to this Section 9.6. If
Maxygen has entered the applicable Third Party agreement (e.g., the [****]
Agreement), then Maxygen shall directly pay such Third Party any amounts subject
to this Section 9.6 and Roche shall pay to Maxygen all such amounts within
thirty (30) days after receipt of an invoice thereof.

9.7 Third Party Royalty Offset.

9.7.1 Payments to Third Parties. Subject to the limitation in Section 9.7.3, if
pursuant to Section 9.6, Roche makes royalty payments to a Third Party for a
Product in a particular country, then, [****] of any such royalty payments paid
by Roche to such Third Party with regard to such Product in such country shall
be creditable against the royalties owed to Maxygen pursuant to Section 9.1 on
the Net Sales of such Product in such country.

9.7.2 Delivery Devices. If Roche sells any Product in combination with a
delivery device and Net Sales for such combination is adjusted pursuant to
Section 9.2, then Roche shall not be entitled to any offset pursuant to this
Section 9.7 for any payments made to Third Parties with respect to the
applicable delivery device.

 

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9.7.3 Limitations on Royalty Offsets. In no event shall the royalty paid to
Maxygen for Net Sales of any Product in any country be reduced by more than an
amount equal to [****] of the royalties otherwise due for Net Sales of such
Product in such country, per the applicable royalty rates set forth in
Section 9.1, unless the terms of Section 9.2.4 apply, in which case the minimum
annual royalty payment to Maxygen shall be as provided in Section 9.2.4.

9.7.4 No Offset. It is understood and agreed that no offset subject to this
Section 9.7 shall be available to or applied by Roche with regard to any amount
paid to Maxygen pursuant to Articles 4 and 8.

9.7.5 Determination. In applying any royalty reductions available to Roche, any
offset available pursuant to Section 9.2 shall be first applied, and then any
deduction available pursuant to Section 9.7 shall be applied to the applicable
Net Sales figure determined by application of Section 9.2.

9.8 Convenience. Roche acknowledges that Maxygen may not own or Control patents
covering the Compounds or Products and/or the use thereof for the manufacture of
Products, but agrees that substantial commercial value has been or will be
contributed by Maxygen’s development of the Compounds. Accordingly, for their
mutual convenience, the Parties have agreed to the royalty payment obligations
set forth in this Article 9.

9.9 Royalty Reports. Commencing with the First Commercial Sale of a Product and
for the remaining term of this Agreement, Roche shall submit quarterly to
Maxygen a written royalty report (“Royalty Report”) covering sales of each
Product for each Roche fiscal quarter (currently ending on or about the last day
of March, June, September, and December) with the following information for each
of Roche and its Affiliates and Sublicensees, on a country-by-country and
Product-by-Product basis:

(a) Adjusted Gross Sales, showing applicable lump sum deductions used to
determine Net Sales, and the resulting Net Sales;

(b) the royalties due to Maxygen, which shall have accrued hereunder in respect
to the applicable Net Sales, and calculations showing how such royalties were
determined, including the royalty rate(s) applied to calculate the royalties
due;

(c) the amount of taxes, if any, withheld to comply with any applicable law;

(d) the exchange rates used in determining the payments due Maxygen; and

(e) any royalty offsets or other adjustments (e.g., for any combination Product
as provided for in Section 9.3) applied in calculating the royalties due to
Maxygen, and stepwise calculations showing the royalties due to Maxygen for the
applicable Product after any such offset or adjustments.

 

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Royalty Reports shall be provided to Maxygen for the entire Territory no later
than the earlier of: (a) [****] days after the end of the fiscal quarter to
which they pertain, or (b) [****] days prior to the date that Maxygen is
obligated to make a report with respect thereto to a Third Party (e.g., under
the [****] Agreement).

9.10 Timing of Royalty Payments. Roche shall make any royalty payments due
pursuant to Section 9.1 concurrently with Roche’s provision of the Royalty
Report required by Section 9.9 for the relevant quarter.

10. GENERAL FINANCIAL MATTERS

10.1 Payment Method.

10.1.1 Maxygen. All amounts due Maxygen hereunder shall be paid in Dollars by
wire transfer in immediately available funds to an account designated by
Maxygen, or by such other commercially reasonable means as may be designated by
Maxygen.

10.1.2 Roche. All amounts due Roche hereunder shall be paid in Dollars by wire
transfer in immediately available funds to an account designated by Roche, or by
such other commercially reasonable means as may be designated by Roche.

10.2 Exchange Rates for Royalties. If a conversion of currency is required for
the payment of royalties due from Roche to Maxygen, then such conversion shall
be made as follows:

10.2.1 When calculating Net Sales, the amount of any such Net Sales for sales
outside the U.S. shall be converted for computational purposes only into Swiss
Francs as computed in Roche’s Central Swiss Francs Sales Statistics for the
countries concerned, using for internal foreign currency translation [****]
actually used on a consistent basis in preparing its audited financial
statements. If, after the Effective Date, Roche changes its procedures for
foreign currency exchange during the term of this Agreement, Roche shall
promptly provide to Maxygen a written description of any such change, with an
illustrative calculation.

10.2.2 When calculating royalty payments on Net Sales, any conversion under
Section 10.2.1 shall be at the [****] rate of the Swiss Francs to Dollars as
retrieved from the Reuters system (or any other source then routinely used by
Roche) for the applicable period.

10.3 Late Payments; Interest. Unless otherwise stated under this Agreement, any
payments or portions thereof due under this Agreement that are not paid the date
such payments are due shall bear interest at a rate equal to the lesser of the
[****] rate as reported by the Wall Street Journal for the last day of the
applicable calendar quarter, plus an additional [****] per year, or the maximum
rate permitted by law, calculated on the number of days such payment is
delinquent, compounded monthly, without prejudice to any other claim or remedy
available to the receiving Party.

10.4 Restrictions on Payments. If by law, regulations or fiscal policies,
remittance of royalties in Dollars is prohibited or restricted, Roche will
notify Maxygen and payment of the royalty obligation shall be made by deposit
thereof in local currency to the credit of Maxygen in a recognized banking
institution designated by Maxygen.

 

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10.5 Audit Right.

10.5.1 Roche shall keep, and shall cause its Affiliates and Sublicensees to
keep, complete and accurate records pertaining to the sale of Products and all
amounts payable to Maxygen under this Agreement pursuant to Article 9, in
sufficient detail to permit Maxygen to confirm the accuracy of all payments due
hereunder for no less than [****] years after the time period(s) to which such
records relate. Roche shall include in each written sublicense granted by it
pursuant to this Agreement a provision requiring the Sublicensee to keep and
maintain records of sales made pursuant to such sublicense and to grant access
to such records by Maxygen’s auditor subject to the same terms and conditions as
stated in this Section 10.5. Such records shall be sufficient for Maxygen to
verify the reports provided to Maxygen pursuant to Section 9.9, on a
Product-by-Product and country-by-country.

10.5.2 Upon written request to Roche and at least [****] days prior notice from
Maxygen, and not more often than [****] per year, Maxygen may engage [****]
independent certified public accountant to perform, on behalf of Maxygen, an
audit of Roche’s books and records during normal business hours to verify the
accuracy of the royalty reports furnished by Roche and to confirm payments made
hereunder with respect to any quarterly period ending not more than [****]
months prior to the date of such request.

10.5.3 Upon the expiration of [****] months following the end of any quarterly
payment period, the calculation of amounts payable to Maxygen with respect to
such quarter shall be binding and conclusive upon Maxygen (except with respect
to any audit then underway, or in the case of fraud or misrepresentation), and
Roche shall be released from any liability or accountability with respect to
royalties for such fiscal quarter.

10.5.4 The auditor shall disclose its factual findings and conclusions to the
Parties in a written report, including any calculations, and explain the basis
of such findings and conclusions. A copy of such report shall be provided to
Roche at the same time it is sent or otherwise provided to Maxygen. After such
disclosure of the auditor’s report, the Parties will discuss in good faith and
seek to agree on a shared interpretation of the relevant parts of the Agreement,
and compare their shared interpretation with auditor’s findings and conclusions,
and determine if there has been an overpayment or underpayment of royalties with
respect to the period covered by the auditor’s report.

10.5.5 If the Parties determine any underpayment of royalties with respect to
the period covered by the auditor’s report, Roche shall remit, or shall cause
its Affiliates or Sublicensees to remit, to Maxygen, the amount of such
underpayment within thirty (30) days after the date of such determination by the
Parties, together with any interest due thereon. If the amount of any
underpayment of any amount due with respect to the period covered by the
auditor’s report is in excess of [****] of the total royalties due to Maxygen
with respect to the period covered by the auditor’s report, then Roche shall
reimburse Maxygen for the cost of the audit in which the underpayment was
discovered, the amount of the underpayment discovered,

 

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and interest on the underpayment at the rate set forth in Section 10.3. Any
overpayment of royalties shall be fully creditable against future royalties
payable in subsequent periods or be reimbursed to Roche if no further royalties
are due.

10.5.6 Notwithstanding the statements above concerning Maxygen, if any audit
performed by [****] independent public accountant has concluded to the
correctness of the report on Net Sales for the period or periods requested by
Maxygen and Maxygen, after reviewing the information received from the [****]
independent public accounting, believes that a supplementary audit is
appropriate to investigate a possible discrepancy between Roche’s returns and
other information, Maxygen shall have the right to engage its officially
appointed worldwide independent public accountant or audit specialty firm
reasonably acceptable to Roche, to perform, upon at least [****] days prior
written notice, such supplementary audit to examine and copy pertinent books and
records of Roche as are reasonably necessary to enable such accounting firm to
deal with that discrepancy and confirm to Maxygen the correctness of the report
on Net Sales for the specific countries and for the period or periods initially
requested by Maxygen. Such supplementary audit shall be conducted in accordance
with Accounting Standards used by Roche at the time of the audit, as
consistently applied and shall be performed during regular business hours in
such a manner as to not unnecessarily interfere with Roche’s normal business
activities. Maxygen will bear the full cost of such supplementary audit unless
such supplementary audit leads the Parties to determine an underpayment of any
amount due that is in excess of [****] percent of the total royalties due to
Maxygen with respect to the period covered by the Auditor’s report, in which
case Roche shall reimburse Maxygen for the cost of the audit in which the
underpayment was discovered, the amount of the underpayment discovered, and
interest on the underpayment at the rate set forth in Section 10.3.

10.5.7 In addition, to ensure compliance with the [****] Agreement, Roche shall
permit an [****] as required by the [****] Agreement.

10.5.8 If Roche determines through an internal audit within the Roche Group that
any payment to Maxygen is incorrect, it shall promptly notify Maxygen, and
provide a written explanation of the error and any unpaid amounts will
immediately be paid by Roche, without interest on such unpaid amount. Any unpaid
amount, if paid by Roche as described above immediately after the error is
determined, shall not be taken into account for the calculation of any penalty
under Section(s) 10.5.5 and 10.5.6.

10.6 Confidentiality of Records. Maxygen agrees that all information subject to
review under this Article 10 (other than the reported results of such review to
comply with any legal obligation of Maxygen) is confidential and that Maxygen
and the auditor shall retain all such information in confidence, although this
condition is not intended to restrict Maxygen from enforcing any term or
provision of this Agreement, and provided that Maxygen shall be entitled to
disclose such information to its licensors of Maxygen Separate Technology as
reasonably necessary for Maxygen to comply with its obligations to any such
licensors. At Roche’s request, Maxygen’s auditors shall sign a confidentiality
agreement, with terms reasonably acceptable to Maxygen and Roche, with Maxygen
and Roche before the commencement of any audit.

 

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10.7 Taxes.

10.7.1 General. Each Party shall bear and, except as otherwise expressly
provided in this Section 10.7, pay any and all taxes, duties, levies, and other
similar charges (and any related interest and penalties), however designated,
imposed on that Party as a result of the existence or operation of this
Agreement. If laws or regulations require that taxes be withheld, the paying
Party will (a) deduct those taxes from the remittable payment, (b) timely pay
the taxes to the proper taxing authority, and (c) send proof of payment to the
other Party within [****] days following that payment. In addition and without
limiting the foregoing, with respect to amounts payable under this Agreement
that may give rise to taxes based on net income, the paying Party may withhold
from such payments and pay such taxes to the proper taxing authority if the
paying Party reasonably determines that as a result of the relationship of the
parties under this Agreement a withholding of such taxes is required by
applicable law, in which case the paying Party shall send proof of such payment
to the other Party within [****] days following that payment. Further, each
Party, as is necessary or desirable, shall have the right to file any tax or
other returns or make any election as a result of the relationship of the
Parties under this Agreement and such Party shall have the right to file all
such returns and make such elections as required by law. Each Party agrees to
provide the other Party with reasonable information and assistance in connection
with the other Party’s performance of the activities described in this
Section 10.7.1.

10.7.2 Withholding Taxes. Roche may deduct from any royalty payments it is
required to pay to Maxygen pursuant to this Agreement an amount equal to that
required to be withheld on behalf of Maxygen for or due on account of any taxes
(other than taxes imposed on or measured by net income) or similar governmental
charge imposed by a jurisdiction other than the U.S. (“Withholding Taxes”). At
Maxygen’s request, Roche shall provide Maxygen a certificate evidencing payment
by Roche of any Withholding Taxes hereunder and shall reasonably assist Maxygen,
at Maxygen’s expense, to obtain the benefit of any applicable tax treaty.

10.7.3 Other Taxes. Any sales taxes (e.g., consumption or value added taxes),
use taxes, transfer taxes, value added, duties and other taxes or governmental
charges required to be paid in connection with the transfer to the Roche Group
or by the Roche Group with regard to any Products shall be the sole
responsibility of Roche. In the event that Maxygen is required to pay any such
amounts, Roche shall promptly remit payment to Maxygen of such amounts following
receipt of an invoice therefor.

11. MANUFACTURING

11.1 Maxygen. Unless otherwise agreed in writing by the Parties, Maxygen shall
be responsible, through a contract manufacturer approved by the JMC pursuant to
Section 4.6.1, for manufacturing and supplying Products for use in pre-clinical
development activities and Phase I and Phase IIa clinical trials for the Initial
Indications and, if necessary, until such time as Roche has scaled-up the
manufacturing process at its manufacturing facility. Maxygen (or the contract
manufacturer) shall use reasonable efforts to conduct all manufacturing and CMC
activities in a manner designed to meet Roche CMC quality criteria for similar
products and avoid undue risk that may jeopardize later-stage timelines and/or
activities with regard to Products. The Parties hereby agree that [****] are
acceptable contract manufacturers.

 

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11.2 Roche. Prior to the commencement of clinical trials, Roche will not provide
a significant portion of Roche personnel or facilities for work under the CMC
Plan, except to assess the feasibility of manufacturing Products using a [****]
process. Roche shall assess and advise Maxygen regarding the manufacturing the
Product for Phase I and/or IIa clinical trials for the Initial Indications, and
if a Satisfactory [****] Culture Result is not achieved by Maxygen on or before
[****], then, unless Roche wishes to assume such responsibility itself, Maxygen
will remain responsible for the manufacture of Products for such Phase I and/or
Phase II clinical trials through a contract manufacturer approved by the JMC
pursuant to Section 4.6.1. Roche shall be responsible for manufacturing and
supplying Products for Phase III and subsequent clinical trials and
commercialization of Products worldwide in the Field. Roche acknowledges that
manufacturing of Products for sale in the United States must be in compliance
with Section 5.2.2(b)(ii).

12. REGULATORY MATTERS

12.1 Regulatory Responsibilities. Maxygen shall, in consultation with Roche, be
responsible with regard to all Products for the preparation and filing of all
INDs and other Regulatory Filings necessary to conduct Phase I and Phase IIa
clinical trials for the Initial Indications. The JMC shall select the countries
where clinical trials will be conducted and INDs shall be filed in countries as
are necessary to satisfy Legal Requirements to conduct clinical trials in such
countries. Roche shall, in consultation with Maxygen, be responsible for the
preparation and representation of the Products after the Completion of Phase IIa
for the applicable Initial Indication, and the preparation and filing of BLAs
and all other submissions to Regulatory Agencies necessary to conduct Phase III
and later clinical trials, manufacture the Products for Phase III and later
clinical trials and commercialize sale.

12.2 Regulatory Status. Each Party shall keep the other Party reasonably and
regularly informed of all communications with Regulatory Agencies regarding
Products for use in the Field, including all safety information, until Maxygen
transfers to Roche the last IND held by Maxygen, provide the other Party with
access to and the right to, cross-reference and use all information contained in
and a right of reference to all Regulatory Filings relating to Products,
including a full electronic copy thereof. After Maxygen transfers to Roche the
last IND held by Maxygen, Maxygen’s right to cross-reference and use such
Regulatory Filings shall terminate unless it reacquires such rights pursuant to
Section 18.7, in such a case, the Parties shall enter into pharmacovigilance
agreements as appropriate.

12.3 Ownership of Regulatory Filings.

12.3.1 Prior to the Completion of Phase IIa for the applicable Initial
Indication, Maxygen shall hold all INDs (including any CTAs) filed with regard
to Products for the applicable Initial Indication; provided, however, that
immediately after the Completion of Phase IIa for each of the Initial
Indications (i.e., when the clinical database is locked for the trial for the
applicable Initial Indication), Maxygen shall transfer and assign to Roche, all
Regulatory Filings owned by Maxygen related to all such INDs (the “Transferred
Regulatory Filings”), including the safety database for such Product, and Roche
shall have full responsibility for all subsequent regulatory activities for such
Initial Indication. If requested by Roche, Maxygen agrees to

 

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perform such acts, and execute such further instruments, documents or
certificates, as may reasonably be required for the Transferred Regulatory
Filings to be transferred and assigned to Roche. Effective upon the date that
Maxygen transfers to Roche each Transferred Regulatory Filing officially with
the applicable Regulatory Agency, Roche shall and hereby does undertake all
regulatory responsibilities of such undertakings.

12.3.2 Roche shall hold all BLAs filed with regard to Products for use in the
Field, and the dossiers and marketing authorizations for Products shall be held
in the name of Roche; provided, however, that in the event that Roche’s rights
terminate for any Product, Roche shall promptly assign the Transferred
Regulatory Filings and other materials described in Section 12.3.1 to Maxygen,
and the terms of Section 12.3.1 shall apply mutatis mutandi with regard to
Maxygen’s and Roche’s rights and responsibilities.

12.3.3 The Parties agree that, in each country in the Territory the Party
then-owning the applicable Regulatory Filings shall maintain such Regulatory
Filings during the term of the Agreement.

12.4 Communications with Regulatory Agencies.

12.4.1 If either Party (a) has the responsibility or right to make a submission
to or filing with, or to communicate with, a Regulatory Agency pursuant to this
Agreement or (b) is required pursuant to Legal Requirements to make a given
submission or filing, or to communicate with, a Regulatory Agency, such Party
shall, if not legally prohibited and if reasonably practicable, notify the other
Party in advance and consult with such Party with respect to such submission,
filing and communication to the extent that it is material to the development,
commercialization or regulatory status of the applicable Product. In any event,
each Party shall promptly notify the other Party of all material filings and
submissions with any Regulatory Agency such Party has made with respect to the
applicable Product, and shall include a summary of the contents of any such
Regulatory Filing or submission. Each Party shall reasonably cooperate with the
other Party regarding submissions to and Regulatory Filings with Regulatory
Authorities with respect to Products

12.4.2 Neither Party shall make any material or substantive submissions, filings
or communications with any Regulatory Agency, with respect to any Product
without first providing the other Party written notice of the content and
purpose of such submission, filings or communication, unless the timing imposed
by Legal Requirements for making a given submission, filing or communication
makes it not reasonably practicable to provide the other Party such advance
notice. Notwithstanding the foregoing, the Party then responsible for clinical
development of the applicable Initial Indication shall after consultation with
the other Party be entitled to make all submissions and filings to the
applicable Regulatory Agencies it deems appropriate, and have communications
with applicable Regulatory Agencies as required by any legal requirement.

12.4.3 Before the Completion of Phase IIa for a particular Initial Indication,
Maxygen as sponsor of the applicable IND shall be entitled to have Maxygen
representation at any meeting with a Regulatory Agency that relates to a Product
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its use in the Field. After the Completion of Phase IIa for a particular Initial
Indication, Maxygen shall be entitled to have a Maxygen representation at any
meeting with the FDA and EMEA to the extent such meeting relates to a Product
for such Indication and/or its use in the Field, unless such attendance is
prohibited by the relevant Regulatory Agency; provided such Maxygen
representation shall be limited to one silent representative.

12.4.4 Prior to Completion of a Phase IIa for each Indication, Roche shall be
entitled to have a Roche representative attend any meeting between Maxygen and
any Regulatory Agency to the extent such meeting relates to a Product and/or its
use in the Field, unless such attendance is prohibited by the relevant
Regulatory Agency.

12.5 Prohibited Communications and Filings. Except as legally required:

12.5.1 During the term of this Agreement, Roche and its Affiliates shall not
communicate or otherwise make a Regulatory Filing with any Regulatory Agency
regarding any indication outside the Field to which it has not obtained a
license from Maxygen, and shall not seek Regulatory Approval of any Product
outside the Field.

12.5.2 During the time that any country remains in the Territory, except as
provided in this Article 12, or as permitted under Section 18.7, Maxygen and its
Affiliates shall not communicate or otherwise make a Regulatory Filing with any
Regulatory Agency regarding any Product in the Field to which Roche retains an
exclusive license in that country, and shall not seek Regulatory Approval of any
such Product in the Field in that country.

12.6 Reporting Obligations.

12.6.1 Procedures. In advance of the transfer of any IND or CTA to Roche, the
JPT shall establish a standard adverse event reporting procedure that will
govern information exchange between the Parties regarding such events for the
applicable Product. Such adverse events reporting procedure shall, in any event,
require at least such timely disclosure as is reasonably necessary to permit
both Parties to satisfy their adverse event reporting responsibilities to all
Regulatory Authorities having jurisdiction and any other Legal Requirements.
Pursuant to such protocol, each Party shall notify the other Party with regard
to each Product of all adverse events (AEs), including without limitation,
serious adverse events (SAEs) and serious unexpected suspected adverse reactions
(SUSARs) (as defined by the EMEA) anywhere in the world.

12.6.2 Exchange of Drug Safety Information. The IND holder shall be responsible
for recording, investigating, summarizing and reviewing any AEs and SAEs
(including SUSARs) for the applicable Product. Each Party shall, and shall
require that its sublicensees and Affiliates, (i) adhere to all requirements of
applicable laws and regulations that relate to the reporting and investigation
of AEs, SAEs and SUSARs, and (ii) keep the other Party informed of such
experiences and any reporting to Regulatory Agencies with regard thereto.

12.6.3 Periodic Safety Update Reports and Safety Requests from Health
Authorities. The IND holder shall use an internationally recognized format
selected by the JMC as a standard for the reporting of SAEs and the compilation
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(“PSUR”) for which it is responsible under Legal Requirements, or as determined
by the JDT in accordance with Legal Requirements. A Party shall provide the
other Party with copies of any such PSUR at the time of its submission or such
earlier time as the JPT may agree. During the preparation of the report, if
significant safety issues arise, the JPT shall discuss and address such issues.
The agreed reporting intervals for PSURs shall be every quarter for the first
[****] following the international launch date of the Product in the Territory
(i.e., the first BLA approval), and thereafter at least annually, unless
applicable laws and regulations governing PSURs require more frequent or
different reporting and unless otherwise agreed by the JPT.

12.6.4 Exchange of Drug Safety Requests. The Parties shall immediately provide
each other with copies of all drug safety requests made by any Regulatory Agency
regarding a Product. Proposed answers will be exchanged between the Parties
before submission and the Parties shall cooperate with respect to such answers;
provided, however, that the IND holder shall have ultimate decision-making
authority with respect to answers relating to the Product, unless Legal
Requirements require otherwise. The Parties shall exchange decisions received
from applicable Regulatory Agency reasonably promptly after a Party receives
notice of such decision.

12.7 Data Package. To the extent a Party has the right to do so and to the
extent Maxygen has not opted out pursuant to Section 4.7, each Party shall
assign and hereby assigns to the other Party hereto a joint ownership interest
in and to the Data Package and all data therein. For avoidance of doubt, the
foregoing assignment shall not include any right in or to any intellectual
property rights, including without limitation, patent rights or copyright,
embodied in such Data Package. It is understood that with respect to Products
for use in the Field, neither Party shall have any obligation to account to
obtain any approval of the other Party to license or exploit any Data Package,
by reason of joint ownership thereof or other intellectual property, and each
Party hereby waives any such right it may have under applicable laws in any
country. In the event of any termination of the Agreement, the terms of
Section 18.7.4 shall apply.

12.8 Product Recalls. Roche shall advise Maxygen if the Roche Group determines
that any event, incident, or circumstance has occurred that may result in the
need for a recall or other removal of any Product, or any lot or lots thereof,
from the market. Roche shall be responsible, at its sole expense, for the costs
of any such recall.

12.9 Inspections by Regulatory Agencies. Each Party shall advise the other of
any governmental communication, inspection or report of which it is aware that
affects the Product or Legal Requirements relating to the Product. Any response
to a regulatory notice relating to the Product or such Legal Requirement shall
be prepared jointly by the Parties, with the lead role taken by the Party to
whom such notice is addressed (or, if addressed to both Parties, the IND holder
shall take lead role in responding to any such notice); provided, however, that
each Party shall be entitled to take all such actions with respect to such
notice as are required of it by Legal Requirements. Both Parties shall have the
right to be present during any such inspection.

12.10 Product Complaints. Each Party shall promptly notify the other Party of
any complaints received regarding the Product (other than those relating to
safety or efficacy) in sufficient detail to allow such Party to comply with any
and all applicable laws and regulations imposed upon it in any country in the
Territory.

 

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12.11 Databases. The JPT shall be responsible for:

12.11.1 the establishment for each Product of a master clinical database that
shall be based on validated software for such purpose, which database (or
duplicate thereof) shall be available with timely updates to each of Roche and
Maxygen;

12.11.2 listing all clinical data regarding each Product in such databases as
may be useful to support the goals of this Agreement and/or required to comply
with applicable Legal Requirements; and

12.11.3 the establishment for each Product of a master safety database that
shall be based on validated software for such purpose, which would be
(a) searched to provide answers to safety queries, (b) utilized in the
generation of safety reports in accordance with Legal Requirements, and
(c) available to both Roche and Maxygen.

13. INTELLECTUAL PROPERTY

13.1 Program Technology.

13.1.1 Ownership. Title to all Inventions and other intellectual property made
in connection with the R&D Program shall be as follows:

(a) title to all Inventions and other intellectual property made solely by
Maxygen employees or its agents in connection with the R&D Program without
inventive contribution by Roche employees or its agents shall be solely owned by
Maxygen; and

(b) title to all Inventions and other intellectual property made solely by Roche
employees or its agents in connection with the R&D Program without inventive
contribution by Maxygen employees or its agents shall be solely owned by Roche;
and

(c) title to all Inventions and other intellectual property made jointly by
employees or the agents of Roche and Maxygen in connection with the R&D Program
(each a “Joint Invention”) shall be jointly owned by Maxygen and Roche, with
each Party having an undivided ownership interest therein.

Notwithstanding the foregoing, Roche agrees to assign, and hereby assigns, to
Maxygen, without additional consideration, any and all right, title and interest
Roche may have in any Patent Rights and Know-How relating to Shuffling
Technology that is conceived or reduced to practice, or otherwise developed, by
Roche or jointly by Maxygen and Roche in connection with the R&D Program.

13.1.2 Law. Inventorship and rights of ownership of patentable Program
Technology shall be determined in accordance with U.S. laws of inventorship.
Rights of ownership of non-patentable Program Technology shall be determined in
accordance with the laws of the jurisdiction in which such Program Technology is
developed.

 

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13.2 Patent Prosecution.

13.2.1 Solely Owned Inventions.

(a) Roche shall, at its sole discretion and expense, prosecute any and all
patent applications within the Roche Technology that are solely owned by Roche,
to obtain patents thereon and to maintain all such patents, in countries of its
choice, using patent counsel of its choice. Interferences, nullification
proceedings, reexaminations, reissues and oppositions shall be considered a part
of the prosecution and maintenance of the Roche Patent Rights.

(b) Maxygen shall, at its sole discretion and expense, prosecute any and all
patent applications within the Maxygen Technology that are solely owned by
Maxygen, to obtain patents thereon and to maintain all such patents, in
countries of its choice, using patent counsel of its choice. Interferences,
nullification proceedings, reexaminations, reissues and oppositions shall be
considered a part of the prosecution and maintenance of the Maxygen Patent
Rights.

(c) The owner of patent applications and patents subject to this Agreement shall
keep the other Party fully informed as to the status of any patent applications
subject to Section this 13.2.1, including, without limitation, by providing such
other Party the opportunity, at such other Party’s expense, to review and
comment on any documents relating to such patent applications that will be filed
in any patent office at least [****] days before such filing, and promptly
providing such other Party with copies of any documents that the owner receives
from any patent office(s), including notice of all interferences, reissues,
reexaminations, oppositions or requests for patent term extensions. Each Party
shall take into consideration the other Party’s comments with regard to the
prosecution of any such patent applications. Notwithstanding the foregoing
provisions of this Section 13.2.1(c), if Maxygen opts out of further sharing of
Collaboration Costs, Roche shall have no further obligation, with regard to
patent applications and patents solely owned by Roche that are within the
Program Technology, to provide to Maxygen copies of documents relating to such
patent applications and patents before the filings thereof, however, Roche shall
continue to provide to Maxygen copies of any such documents promptly after they
are filed.

(d) Within [****] days after the Effective Date, Maxygen shall make available to
Roche at Maxygen’s offices for review the complete texts of all pending patent
applications within the Maxygen Separate Technology, as well as all
correspondence concerning the prosecution thereof and any information or
correspondence received by Maxygen from a patent office concerning the
institution of any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceeding involving the Maxygen
Patent Rights anywhere in the Territory.

 

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(e) Notwithstanding Section 13.2.1(a) and (b) each Party shall have the right to
discontinue the prosecution of any patent application owned solely by or solely
Controlled by it, or to abandon any patent owned solely by it. If a Party
decides to abandon or allow to lapse any such patent application or patent, such
Party shall inform the other Party at least [****] days prior to such
abandonment or lapse and, unless the owner reasonably believes prosecution by
the other Party could have a material adverse impact on other patent
applications or patents owned or Controlled by the owner, then the other Party
shall be given the opportunity to assume responsibility to prosecute such patent
application and/or maintain such patent, at its expense, at least [****] days
prior to the date that such abandonment or lapse would otherwise take effect.
The foregoing sentence shall not apply to any patent application or patent owned
by a Third Party for which Maxygen does not have the right to grant to Roche
such rights.

(f) Notwithstanding Sections 13.2.1(c), (d) and (e) it is understood and agreed
that Maxygen shall have no obligation to disclose to Roche, or allow Roche to
participate in the prosecution of, any Patent Rights owned by or licensed to
Maxygen that claim any methods of performing Shuffling.

13.2.2 Joint Inventions.

(a) The Parties will cooperate to file, prosecute and maintain patent
applications covering the Joint Invention(s) (as defined in Section 13.1.1(c) in
the Major Markets and other countries agreed by the Parties. The Parties shall
confer and agree which Party shall be responsible for conducting such activities
with respect to a particular Joint Invention. The Party conducting such
activities shall keep the other Party fully informed as to the status of such
patent matters, including, without limitation, by providing the other Party the
opportunity, at the other Party’s expense, to review and comment on any
documents relating to the Joint Invention(s) that will be filed in any patent
office at least [****] days before such filing, and promptly providing the other
Party copies of any documents relating to Joint Invention that the Party
conducting such activities receives from such patent offices, including notice
of all interferences, reissues, reexaminations, oppositions or requests for
patent term extensions. Subject to Section 13.2.2(c), the Parties will equally
share all expenses and fees associated with the filing, prosecution, issuance
and maintenance of any patent application and resulting patent for a Joint
Invention in the Major Markets, Other Markets and other agreed countries.

(b) If either Party wishes to seek patent protection with respect to any Joint
Invention outside the Major Markets and other agreed countries, it shall notify
the other Party hereto. If both Parties wish to seek patent protection with
respect to such Joint Invention in such country or countries, such activities
shall be subject to Section 13.2.2(a). If only one Party wishes to seek patent
protection with respect to such Joint Invention in such country or countries, it
may file, prosecute and maintain patent applications and patents with respect
thereto, at its own expense.

(c) If at any time the Party responsible for the patent activities described in
Section 13.2.2(a) (the “Responsible Party”) does not wish to file or wishes to
discontinue the prosecution or maintenance of any patent application or patent
filed in any country, on a country-by-country basis, it shall promptly give
notice of such intention to the other Party. The latter shall have the right,
but not the obligation, to assume responsibility for the prosecution of any such
patent applications in the applicable country, at its own expense, by giving
notice to the Responsible Party of such intention within [****] days.

 

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13.2.3 Cooperation. The Parties recognize that from a global patent prosecution
perspective it is desirable for them to confer with one another regarding the
strategy for and the course of prosecution of Patent Rights with the Maxygen
Separate Technology, Roche Separate Technology and Program Technology, as such
relate to any Product. It is the Parties’ intention to share information, and
generally to collaborate, regarding patent protection for Products for the
Field, and to confer regularly regarding such matter. To such end, the JMC may
appoint a subcommittee to focus on patent matters relating to the Products.

13.3 Common Interest Disclosures. With regard to any information or opinions
disclosed pursuant to this Agreement by one Party to each other regarding
intellectual property and/or technology owned by Third Parties, Maxygen and
Roche agree that they have a common legal interest in determining whether, and
to what extent, third party intellectual property rights may affect the conduct
of the R&D Program and/or Compounds and/or Products, and have a further common
legal interest in defending against any actual or prospective Third Party claims
based on allegations of misuse or infringement of intellectual property rights
relating to the conduct of the R&D Program and/or Compounds and/or Products.
Accordingly, Maxygen and Roche agree that all such information and materials
obtained by Maxygen and Roche from each other will be used solely for purposes
of the Parties’ common legal interests with respect to the conduct of the
Agreement. All information and materials will be treated as protected by the
attorney-client privilege, the work product privilege, and any other privilege
or immunity that may otherwise be applicable. By sharing any such information
and materials, neither Party intends to waive or limit any privilege or immunity
that may apply to the shared information and materials. Neither Party shall have
the authority to waive any privilege or immunity on behalf of the other Party
without such other Party’s prior written consent, nor shall the waiver of
privilege or immunity resulting from the conduct of one Party be deemed to apply
against any other Party.

13.4 [****] Patent Expenses. All expenses incurred by Maxygen under the [****]
Agreement after the Effective Date in respect of the preparation, filing,
prosecution and maintenance of patent applications and/or patents owned by the
[****] shall be shared [****] by Roche and Maxygen. Interferences, nullification
proceedings, reexaminations, reissues and oppositions and similar proceedings
shall all be considered a part of the prosecution of the [****] Patent Rights.

14. INFRINGEMENT

14.1 Applicability. The provisions of this Article 14 shall govern the Parties’
rights and obligations, as between themselves, with respect to actions against
Third Parties for infringement of the patents or misappropriation of the
Know-How licensed under this Agreement. Notwithstanding the foregoing, in the
case of patents and Know-How licensed under this Agreement that are owned by a
Third Party, then the Parties’ rights to enforce such Patents or any right in
such Know-How shall be subject to the rights of such Third Party set forth in
its agreement with the Party Controlling such patents or Know-How.

 

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14.2 Enforcement of Intellectual Property Rights.

14.2.1 Notice. If either Party becomes aware of any actual or threatened
commercially material infringement or improper use in the Field of any patent
claiming a Product or its manufacture or use that is (a) owned solely by Maxygen
and licensed exclusively to Roche in the Field under this Agreement, or
(b) owned jointly by the Parties (in each case, a “Relevant Patent”) (in each
case, an “Infringement”), then that Party shall promptly (within [****] days or
[****] days in the event of receiving a Paragraph IV Certification as described
in 21 C.F.R. §314.50(i)(A)(4), should such type of provision then apply to a
biological product) notify the other Party and provide it with full details. The
Parties will meet to discuss the appropriate course of action, and may
collaborate in pursuing such course or action. Unless otherwise agreed in
writing by the Parties, the terms of this Section 14.2 shall apply.

14.2.2 Solely Owned Patents.

(a) Subject to 14.2.3, in the event that an Infringement by a Third Party has
occurred in the Field with regard to a Relevant Patent in any country in the
Territory, or is subject to a declaratory judgment action arising from such
Infringement in such country, a Party becoming aware of such event shall
promptly notify the other Party hereto. Maxygen shall have the initial right
(but not the obligation) to enforce any Relevant Patent that is owned or
Controlled by Maxygen, or defend any declaratory judgment action with respect
thereto, at its expense. In the event that Maxygen fails to initiate a suit to
enforce such Relevant Patent against an Infringement in the Field by a Third
Party in any jurisdiction in the Territory within [****] days (or [****] days in
the event of receiving a Paragraph IV Certification, should such type of
provision then apply) of a request by Roche to do so, Roche may, unless Maxygen
is contractually prohibited from doing so, and, subject to any of Maxygen’s
agreements, if any, with a Third Party owner or licensee of such Relevant
Patent, initiate suit against such Infringement in the Field, at the expense of
Roche. Roche shall have the right (but not the obligation) to enforce any
Relevant Patent that is owned or Controlled by Roche, or defend any declaratory
judgment action with respect thereto, at its expense. The Party involved in any
such claim, suit or proceeding, shall keep the other Party hereto reasonably
informed of the progress of any such claim, suit or proceeding.

(b) No settlement or consent judgment or other voluntary final disposition of
any claim, suit or proceeding brought by a Party pursuant to this Section 14.2.2
to abate an Infringement in the Field may be entered into without the prior
written consent of the other Party if such settlement would require the other
Party to be subject to an injunction or to make a monetary payment or would
restrict the claims in or admit any invalidity of any of the Patent Rights
within the Program Technology or have a material adverse effect the rights of
the other Party to this Agreement.

(c) Any recovery by such Party received as a result of any claim, suit or
proceeding instituted to abate an Infringement in the Field subject to this
Section 14.2.2 shall be used first to reimburse such Party for all expenses
(including attorneys and professional fees) incurred in connection with such
claim, suit or proceeding. If Maxygen owns the Relevant Patent and initiates the
claim, suit or proceeding, then the Parties shall equally share the remainder of
any such recovery; otherwise, Maxygen shall receive [****] of the remainder, and
Roche shall retain [****] of the remainder.

 

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14.2.3 Solely Owned Patents. Except as provided in Section 14.2.2 each Party
shall be responsible, in its discretion and at its expense, for enforcing and
defending any Patent Rights and Know-How owned solely by it.

14.2.4 Jointly Owned Patents.

(a) If an Infringement of any patent owned jointly by Maxygen and Roche, then
the Parties shall agree which Party will have the rights and responsibilities of
abating such an Infringement, and how the expenses of abating any such
Infringement shall be shared and how any recovery obtained in abating such
Infringement will be allocated. If both Parties wish to participate in any such
claim, suit or proceeding, the Parties shall jointly conduct such action and
share the costs incurred in connection therewith. If only one Party wishes to
pursue such a claim, suit or proceeding, then it shall have the right to proceed
alone, at its expense. If the responsible Party initiates any claim, suit or
proceeding relating to enforcement of the applicable Relevant Patent described
above in connection with the abatement of such an Infringement, or becomes
involved in a declaratory judgment action related to the applicable Relevant
Patent, then the responsible Party shall use counsel reasonably acceptable to
the other Party, and shall keep the other Party fully informed as to the status
of such matters. Whether or not requested by the Party responsible for such
claim, suit or proceeding, the other Party shall have the right to be
represented by counsel of its own selection, at its own expense, in any suit
initiated by the responsible Party against a Third Party under this Section for
an Infringement, and the responsible Party agrees not to oppose attempts by the
other Party to join in any such proceeding.

(b) Any recovery received by the responsible Party as a result of any such
claim, suit or proceeding shall be used (i) first to reimburse the responsible
Party for all costs and expenses (including attorneys and professional fees, and
including amounts used to reimburse the other Party for activities requested by
the responsible Party) incurred in connection with such claim, suit or
proceeding and (ii) if the Parties have agreed to allocate the remainder, the
remainder shall be divided with the other Party as agreed by the Parties.

(c) Neither Party may enter into any settlement with respect to any Infringement
of any jointly owned patent, and may not voluntarily concede (or agree in
settlement) that any of such Patent Rights are invalid or unenforceable, without
the prior consent of other Party, which consent shall not be unreasonably
withheld.

14.2.5 Cooperation with Regard to Infringement in the Field. In any action under
this Section 14.2:

(a) Each Party shall fully cooperate with and assist the other Party as
reasonably requested, at the expense of the Party responsible for such action as
set forth in Section 14.2.2, 14.2.3 or 14.2.4 or as otherwise agreed by the
Parties in writing. Such cooperation shall include joinder to any proceeding to
abate such an Infringement as a plaintiff in the event that such other Party is
necessary or indispensable to such proceedings under applicable law; and

 

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(b) Except as expressly provided in this Agreement or in support of any license
granted by Maxygen to a Third Party for the development and/or commercialization
of Compounds (or Products based thereon) for use outside the Field, neither
Party shall be entitled to grant covenants not to sue or other similar rights
under patents owned or Controlled by the other Party that are related to
Compounds, Products or the manufacture or use thereof. If Roche wishes to permit
an entity to practice under any Patent Rights within the Maxygen Technology,
then Roche shall make such entity a Sublicensee hereunder and therefore a member
of the Roche Group; and

(c) Neither Party shall enter into any agreement that makes any admission of
(i) wrongdoing on the part of the other Party, or (ii) the invalidity,
unenforceability or absence of infringement of any patent owned in whole or part
by the other Party that are related to Compounds, Products or the manufacture or
use thereof, without the prior written consent of such other Party, which
consent shall not be unreasonably withheld.

14.2.6 Cooperation with Regard to Infringement Outside the Field. With regard to
any Infringement outside the Field, Roche, at Maxygen’s request and expense,
shall make reasonable efforts to cooperate with and assist Maxygen, as
reasonably requested by Maxygen, to abate any such Infringement.

14.2.7 Trade Secret Misappropriation. Sections 14.2.2-14.2.6 shall apply mutatis
mutandis to any trade secret misappropriation action(s) relating to
Product-related activities in the Field in the same manner as enforcement of
Relevant Patents against Infringement.

14.3 Allegations by Third Parties.

14.3.1 Notice. If the manufacture, use, importation, offer for sale or sale of
any Product pursuant to this Agreement results in any claim, suit or proceeding
alleging patent infringement or trade secret misappropriation against Maxygen or
Roche, then such Party shall promptly notify the other Party hereto. The Parties
shall cooperate with each other in connection with any such claim, suit or
proceeding and shall keep each other reasonably informed of all material
developments in connection with any such claim, suit or proceeding.

14.3.2 Defense. If a Third Party asserts that Patent Rights owned by or licensed
to it are infringed by the development, manufacture, use, importation, offer for
sale or sale of Products by a member of the Roche Group, or that its trade
secrets were misappropriated in connection with such activity, then Roche shall
have the exclusive right and responsibility to resolve any such claim, whether
by obtaining a license from such Third Party, by defending against such Third
Party’s claims or otherwise, and shall be solely responsible for the defense of
any such action, any and all costs incurred in connection with such action
(including, without limitation, attorneys’ and expert fees) and all liabilities
incurred in connection therewith pursuant to Section 16.2. Notwithstanding the
above, Roche shall not enter into any settlement of any such claim without the
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Maxygen to be subject to an injunction or to make any monetary payment to Roche
or any Third Party, or admit any wrongful conduct by Maxygen or its Affiliates,
or would limit or restrict the claims of or admit any invalidity and/or
unenforceability of any of the Patent Rights owned or Controlled by Maxygen, or
have any impact on activities outside the Field. For clarity, if Roche enters
into any agreement with a Third Party as a result of any claim subject to this
Section 14.3.2, the terms of Section 9.6 shall apply to applicable amounts paid
by Roche to such a Third Party.

15. CONFIDENTIALITY

15.1 Treatment of Confidential Information. Except as otherwise provided in this
Article 15, during the term of this Agreement and for a period of [****] years
thereafter, Roche and its Affiliates will retain in confidence and use only as
permitted by this Agreement any Confidential Information supplied by or on
behalf of Maxygen to Roche and its Affiliates under this Agreement, and Maxygen
will retain in confidence and use only as permitted by this Agreement any
Confidential Information supplied by or on behalf of Roche to Maxygen under this
Agreement. Each Party may use its Confidential Information as it deems
appropriate, provided that such use is not in conflict with the terms and
conditions of this Agreement.

15.2 Permitted Disclosures. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement or any rights that survive termination or expiration hereof, Roche and
Maxygen may disclose to their respective Affiliates, sublicensees, consultants,
outside contractors, clinical investigators or other Third Parties Confidential
Information of the other Party; provided, however, that such entities or persons
agree in writing (a) to keep such Confidential Information confidential to the
same extent as Roche and Maxygen are required to keep such Confidential
Information confidential, and (b) to use such Confidential Information of the
other Party only for such activities as Roche and Maxygen, as the case may be,
are authorized to conduct under the terms of this Agreement. Each Party (or its
Affiliates or sublicensees) may disclose such Confidential Information of the
other Party to Regulatory Agencies or other government authorities to the extent
that such disclosure (i) is reasonably necessary to obtain authorizations to
conduct clinical trials, seek Regulatory Approvals and/or otherwise conduct
activities such Party is authorized to conduct under the terms of this Agreement
(e.g., patent filings); or (ii) is otherwise legally required; provided,
however, that if a Party is legally required to make such a disclosure, it shall
first have given prompt notice to the other Party hereto to enable it to seek
any available exemptions from or limitations on such a disclosure or to apply
for confidential treatment or a protective order and take reasonable efforts to
limit such disclosures to the minimum extent possible.

15.3 Release From Restrictions. The foregoing obligations in respect of
disclosure and use of Confidential Information shall not apply to any part of
such Confidential Information that the non-disclosing Party (the “Receiving
Party”) can demonstrate by contemporaneously prepared competent evidence:

(a) is or becomes part of the public domain other than by acts of the Receiving
Party in contravention of this Agreement;

 

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(b) is disclosed to the Receiving Party or its Affiliates or sublicensees by a
Third Party who had the right to disclose such Confidential Information to the
Receiving Party or its Affiliates or sublicensees;

(c) prior to disclosure under this Agreement, was already in the possession of
the Receiving Party or its Affiliates or sublicensees, provided such
Confidential Information was not obtained, directly or indirectly, from the
other Party under this Agreement; or

(d) was independently discovered or developed by the Receiving Party without
reference to or use of Confidential Information of the disclosing Party.

15.4 Terms of Agreement. Except as otherwise required by law or the terms of
this Agreement or mutually agreed upon by the Parties hereto, each Party shall
treat as confidential the terms of this Agreement; provided, however, that
Maxygen and Roche may each disclose such terms, in confidence, to its Affiliates
and sublicensees, and to potential acquirors or investors. In addition, Roche
may disclose such terms, in confidence, to Genentech, Inc. and Chugai
Pharmaceutical Company Ltd, so that such entities can determine if they wish to
become sublicensees of Roche. It is understood and agreed that Maxygen, Inc.
will be required to disclose terms of this Agreement to comply with federal laws
and may be required to disclose terms of this Agreement to comply with state
securities laws and/or stock exchange requirements. In any such case, Maxygen
shall seek confidential treatment of key business terms contained in this
Agreement including, but not limited to, the royalty rates, Event Payments and
the research and development payments. To the extent feasible, Maxygen shall
provide Roche in advance with any disclosures made to comply with state
securities laws and/or stock exchange requirements. Roche shall have the right
to request that certain information be redacted from public versions of such
documents and Maxygen shall consider Roche requests with regard to the treatment
of such disclosures and the Confidential Information contained therein.

15.5 Publicity. The Parties shall release a joint press release promptly after
the execution date of this Agreement. Except as may be required by law, stock
exchange or regulatory authority, neither Party nor any of their respective
Affiliates, shall originate any publicity, news release or other public
announcement, written or oral, relating to the confidential terms or conditions
contained in this Agreement without the prior written approval of the other
Party, and agreement upon the nature and text of such announcement or
disclosure, which approval shall not be unreasonably withheld. A Party desiring
to make any such public announcement or other disclosure shall inform the other
Party of the proposed announcement or disclosure in reasonably sufficient time
prior to public release, and shall provide the other Party with a written copy
thereof, in order to allow such other Party to comment upon such announcement or
disclosure. Unless disclosure is required by law in a shorter period of time,
the Party receiving the proposed release shall have at least [****] business
days to review any such release. Roche agrees that the timely announcement of
the progression of a Product into and through clinical development is required
for Maxygen to communicate effectively with its stockholders and prospective
investors and to cooperate with Maxygen, Inc. in jointly preparing and issuing
such announcements in a timely manner. Such cooperation shall include, without
limitation, prompt public disclosure of clinical trial results. At Maxygen,
Inc.’s election, such announcements may be made for each Product at the
achievement of any event described in

 

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Article 8, including, without limitation, the initiation of Phase I, Phase II
and Phase III trials, completion of any clinical trial, the filing of a BLA,
Regulatory Approval of an BLA, and the First Commercial Sale of a Product,
within [****] business days of each such occurrence. The Parties acknowledge the
importance of supporting each other’s efforts to publicly disclose results and
significant developments regarding Products. The principles to be observed by
the Parties in such public disclosures will be: accuracy, the requirements of
confidentiality for information that would materially benefit a competitor, and
the standards and customs in the biotechnology and pharmaceutical industries for
such disclosures by companies comparable to Maxygen, Inc. and Roche.

15.6 Acknowledgement. Roche acknowledges that as of the Effective Date Maxygen,
Inc. is a NASDAQ-listed company that has obligations that are different from the
disclosure obligations of Roche, and that Maxygen may be obligated to publicly
disclose certain information (e.g., clinical results and/or material information
relating to Product development and/or commercialization) that Roche would not
be legally obligated to publicly disclose. Maxygen acknowledges that Roche may
publish the results of clinical trials of Products, consistent with Roche’s
customary practices and shall include any Maxygen authors consistent with
customary scientific practices. Such disclosures, if any, shall be subject to
the terms of this Article 15.

15.7 Publication. Reasonably in advance of any oral or written presentation, or
written submission for publication that would disclose any Invention relating to
a Licensed Compound or a Product for use in the Field for which Invention a
patent application has not been filed in the U.S., Japan, with the European
Patent Office or pursuant to the Patent Cooperation Treaty, the Party wishing to
make such a publication shall notify the other Party and provide a draft of such
publication for review at least [****] weeks in advance of any such proposed
public disclosure. In such event, the Parties will discuss filing patent
applications claiming such Invention. During the term of this Agreement, neither
Party shall make any oral or written presentation, or written submission for
publication, of any data or information produced pursuant to the R&D Program or
otherwise relating to Products without the other Party’s advance written
consent. Any publication of the results of the R&D Program shall include an
acknowledgment of the contributions of each Party, consistent with customary
scientific process.

16. REPRESENTATIONS AND WARRANTIES

16.1 Representations and Warranties of Maxygen. Maxygen hereby represents and
warrants to Roche as of the Effective Date that:

16.1.1 Maxygen is a corporation duly incorporated, validly existing and in good
standing under the laws of the Cayman Islands, with the corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of Maxygen. This Agreement has been duly executed
and delivered by Maxygen and constitutes the valid, binding and enforceable
obligation of Maxygen, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors’ rights generally from
time to time in effect.

 

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16.1.2 Maxygen is not subject to, or bound by, any provision of:

 

  (a) any articles or certificates of incorporation or by-laws;

 

  (b) any mortgage, deed of trust, lease, note, shareholders’ agreement, bond,
indenture, license, permit, trust, custodianship, or other instrument, agreement
or restriction; or

 

  (c) any judgment, order, writ, injunction or decree or any court, governmental
body, administrative agency or arbitrator;

in each case, that would prevent, or be violated by, or under which there would
be a default as a result of, nor is the consent of any Third Party required for,
the execution, delivery and performance by Maxygen of this Agreement and the
obligations contained herein, including without limitation, the grant to Roche
of the license described in Section 5.2.1.

16.1.3 To the best of Maxygen’s knowledge, there is no pending (i.e., filed or
declared) interference or litigation that involves any patent or patent
application within the Maxygen Separate Technology [****], and Maxygen has
received no written notice of infringement from any Third Party based on
Maxygen’s activities with Compounds or Products.

16.2 Representations and Warranties of Roche. Roche hereby represents and
warrants to Maxygen as of the Effective Date that:

16.2.1 Roche is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its organization, with the
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all requisite corporate action on the part of Roche. This Agreement has been
duly executed and delivered by Roche and constitutes the valid, binding and
enforceable obligation of Roche, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors’
rights generally from time to time in effect.

16.2.2 Roche is not subject to, or bound by, any provision of:

 

  (a) any articles or certificates of incorporation or by-laws;

 

  (b) any mortgage, deed of trust, lease, note, shareholders’ agreement, bond,
indenture, license, permit, trust, custodianship, or other instrument, agreement
or restriction, or

 

  (c) any judgment, order, writ, injunction or decree or any court, governmental
body, administrative agency or arbitrator,

in each case, that would prevent, or be violated by, or under which there would
be a default as a result of, nor is the consent of any Third Party required for,
the execution, delivery and performance by Roche of this Agreement and the
obligations contained herein.

 

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16.3 Disclaimer of Warranties. MAXYGEN AND ROCHE EACH SPECIFICALLY DISCLAIMS
THAT THE R&D PROGRAM WILL BE SUCCESSFUL IN WHOLE OR PART. EXCEPT AS SET FORTH
EXPRESSLY IN THIS ARTICLE 16, EACH PARTY HEREBY EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES OF ANY KIND, EXPRESSED OR IMPLIED, STATUTORY OR OTHERWISE, INCLUDING
WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, AND/OR NONINFRINGEMENT OF THE INTELLECTUAL RIGHTS OF ANY
THIRD PARTIES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BOTH PARTIES
ACKNOWLEDGE AND DISCLAIM ANY WARRANTY AS TO: (I) THE SUCCESS OF ANY DEVELOPMENT
OR CLINICAL TRIAL, STUDY OR TEST COMMENCED UNDER THIS AGREEMENT; OR (II)
REGULATORY APPROVAL, PRODUCT INTRODUCTION, SAFETY, USEFULNESS OR COMMERCIAL
SUCCESS OF ANY PRODUCT.

17. INDEMNIFICATION

17.1 Indemnification by Maxygen. Maxygen hereby agrees to indemnify and hold
harmless Roche and its Affiliates and their respective directors, officers,
employees and agents (each a “Roche Indemnitee”) from and against any
liabilities, losses, fines, penalties, damages, expenses (including reasonable
attorney’s fees and expenses incurred in connection with the enforcement of this
provision), actions, or claims brought or threatened after the Effective Date
that arise out of claims against Roche Indemnitees brought by Third Parties
after the Effective Date, including but not limited to, any actions in contract
(including breach of warranty) or tort (including negligence, strict liability
or commercial torts) that arise or result from or relate to:

(a) any breach of any of the representations and warranties of Maxygen contained
in Section 16.1, or

(b) the negligence, recklessness or willful misconduct of Maxygen, its
Affiliates or agents in the conduct of the R&D Program; and

(c) any development or commercialization by Maxygen or its Affiliates or agents
of any Reverted Products, including without limitation, any manufacture,
storage, use, importation, sale or distribution of any Reverted Products.

Items (a) through (c) are hereinafter collectively referred to as a “Roche
Loss.” Maxygen shall have no obligation to indemnify Roche Indemnitees to the
extent that any Roche Loss is due to the negligence, recklessness or willful
misconduct of any Roche Indemnitee.

17.2 Indemnification by Roche. Roche hereby agrees to defend, indemnify and hold
harmless Maxygen and its Affiliates, and the [****] and their respective
directors, officers, employees and agents (each a “Maxygen Indemnitee”) from and
against any liabilities, losses, fines, penalties, damages, expenses (including
reasonable attorney’s fees and expenses incurred in connection with the
enforcement of this provision), actions, claims brought or threatened after the
Effective Date that arise out of claims against Maxygen Indemnitees brought by
Third Parties

 

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after the Effective Date, including but not limited to, any actions in contract
(including breach of warranty) or tort (including negligence, product liability,
strict liability or commercial torts) that arise or result from or relate to:

(a) any breach of any of the representations and warranties of Roche contained
in Section 16.2,

(b) the negligence, recklessness or willful misconduct of any member of the
Roche Group or the agents of any member of the Roche Group in the conduct of the
R&D Program; and

(c) any development or commercialization of any Product by Roche or its
Affiliates, Sublicensees and/or agents, including without limitation, any
manufacture, storage, use, importation, sale or distribution of any Product.

Items (a) through (c) are hereinafter collectively referred to as a “Maxygen
Loss.” Roche shall have no obligation to indemnify Maxygen Indemnitees to the
extent that any Maxygen Loss is due to the negligence, recklessness or willful
misconduct of such Maxygen Indemnitee.

17.3 Indemnification With Respect to Third Party Claims.

17.3.1 Procedures.

(a) To be eligible to seek indemnification under this Article 17 in respect to a
liability, loss, fine, penalty, damage, expense, action, or claim brought
against such Indemnitee by a Third Party (such claim hereinafter referred to as
a “Third Party Claim”), a Roche Indemnitee or Maxygen Indemnitee (each, an
“Indemnitee”) shall promptly give written notice thereof to the Party from whom
indemnification is sought (such Party hereinafter referred to as the
“Indemnitor”) within a reasonable period of time after the assertion of such
Third Party Claim by such Third Party; provided, however, that the failure to
provide written notice of such Third Party Claim within a reasonable period of
time shall not relieve the Indemnitor of any of its obligations hereunder,
except to the extent that the Indemnitor is prejudiced by such failure.

(b) The Indemnitor shall have the right to assume the complete control of the
defense, compromise or settlement of any Third Party Claim (provided that no
settlement of any Third Party Claim shall include any admission of wrongdoing on
the part of an Indemnitee or the invalidity, unenforceability or absence of
infringement of any patent owned in whole or part by the Indemnitee, and shall
not grant any right inconsistent with the terms of this Agreement, without the
prior written consent of such Indemnitee, which consent shall not be
unreasonably withheld), including, at its own expense, employment of legal
counsel reasonably acceptable to the Indemnitee. At any time thereafter the
Indemnitor shall be entitled to exercise, on behalf of the Indemnitee, any
rights that may mitigate the extent or amount of such Third Party Claim;
provided, however, that if the Indemnitor shall have exercised its right to
assume control of such Third Party Claim, the Indemnitee (i) may, in its sole
discretion and at its own expense (which expense shall not be subject to
indemnification hereunder), employ legal counsel to represent it (in addition to
the legal counsel employed by the Indemnitor) in any such matter, and in such
event legal counsel selected by the Indemnitee shall be required to confer and

 

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cooperate with such counsel of the Indemnitor in such defense, compromise or
settlement for the purpose of informing and sharing information with the
Indemnitor; (ii) shall, at its own expense, make available to Indemnitor those
employees, officers and directors or Indemnitee whose assistance, testimony or
presence is necessary or appropriate to assist the Indemnitor in evaluating and
in defending any such Third Party Claim (provided, however, that any such access
shall be conducted in such a manner as not to interfere unreasonably with the
operations of the businesses of Indemnitee); and (iii) shall otherwise fully
cooperate with the Indemnitor and its legal counsel in the investigation and
defense of such Third Party Claim.

(c) The Parties shall cooperate with each other in connection with any such
claim, suit or proceeding and shall keep each other reasonably informed of all
material developments in connection with any such claim, suit or proceeding.

17.3.2 Reservation. If the Parties acting in good faith cannot agree as to the
applicability of Section 17.1 and/or 17.2 to a particular Third Party Claim,
then each Party (and its respective Indemnitees) reserves the right to conduct
its own defense of such Third Party Claim and seek indemnification from the
applicable Party upon its resolution.

18. TERM AND TERMINATION

18.1 Term.

18.1.1 Term of the Agreement. This Agreement shall become effective upon the
Effective Date and shall continue thereafter in full force and effect on a
Product-by-Product and country-by-country basis, unless terminated earlier, in
whole, or as to a particular Product pursuant to Sections 18.2, 18.3, 18.4 or
18.5, until the expiration of Roche’s obligation to pay any royalties to Maxygen
hereunder in the applicable country with regard to the applicable Product (such
expiration of the term of this Agreement in the absence of termination,
“Expiration”).

18.1.2 Term of the R&D Program. The R&D Term shall terminate as of the effective
date of any termination of the Agreement, unless the R&D Program has terminated
previously.

18.2 Insolvency. Either Party may terminate this Agreement upon (i) the
bankruptcy, liquidation or dissolution of the other Party; or (ii) the filing of
any petition (voluntary or involuntary) for bankruptcy, dissolution, liquidation
or winding-up of the affairs of the other Party that is not dismissed within
[****] days after the date upon which it is filed or commenced.

18.3 Termination for Material Breach. Either Party may terminate this Agreement,
as a whole, at any time with [****] days prior notice if the other Party
breaches a material term of the Agreement and such material breach is not cured
by the breaching Party (a) within [****] days after the non-breaching Party
provides the Party with written notice of such breach, or (b) if such breach
cannot be cured through Commercially Reasonable Efforts within such [****] and
the Party has within such time period submitted a plan to cure such breach as
promptly as reasonably practicable through the application of Commercially
Reasonable Efforts, with a cure

 

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date reasonably acceptable to the non-breaching Party, then after the earlier of
(i) the cure date agreed to by the non-breaching Party, or (ii) the date the
breaching Party ceases Commercially Reasonable Efforts to cure such breach.
Notwithstanding the above, in the case of a failure to pay any amount due
hereunder, the period for cure of any such default following notice thereof
shall be [****] days and, unless payment is made within such period, the
termination shall become effective at the end of such period.

18.4 For Convenience. Roche may terminate this Agreement in its entirety, at its
sole discretion, as follows:

18.4.1 Roche may terminate this Agreement in its entirety due to Adverse
Safety/Tox Results for a Product, with [****] days notice to Maxygen at any
time. If Roche wishes to terminate the Agreement pursuant to this
Section 18.4.1, then Roche shall provide to Maxygen the Adverse Safety/Tox
Results together with all supporting data and a detailed written explanation of
why Roche believes that the Adverse Safety/Tox Results justify discontinuing all
further Product development or commercialization for Products.

18.4.2 Roche may terminate this Agreement in its entirety during the
pre-clinical development of the first [****] E Compounds, at any time with
[****] notice to Maxygen, if (a) the [****] have failed to achieve a [****]
Therapeutic [****] Result, (b) the [****] evaluated for in vivo efficacy fails
to achieve the Animal [****] Result, or (c) the Parties are unable to achieve
(i) one of: a Satisfactory [****] Culture Result on or before [****], or a
Satisfactory [****] Culture Result on or before [****], or (ii) one of, a
Commercially Viable [****] Process Result or a Satisfactory [****] Culture
Result on a commercial scale. If Roche wishes to terminate the Agreement
pursuant to this Section 18.4.2, then Roche shall provide to Maxygen the
applicable results together with all supporting data and a detailed written
explanation of why Roche believes that such results justify discontinuing all
further Product development or commercialization for Products.

18.4.3 After [****] and achievement of either a Satisfactory [****] Culture
Result or a Satisfactory [****] Culture Result, whichever comes earlier, but
before the First Commercial Sale of a Product, Roche may provide notice of
termination at any time on or after the date [****] after the Effective Date of
the Agreement. If notice of such termination is provided at [****] after the
Effective Date, it shall be effective [****] later. If Roche provides such
notice of termination in the period after [****] until [****] after the
Effective Date, the notice period shall be reduced monthly by one month, such
that the termination will be effective at [****] after the Effective Date, but
in all cases there shall be at least a [****] notice period. Therefore, if
notice of termination is given by Roche between [****] and [****] after the
Effective Date, the notice period shall be [****] months; between [****] and
[****] after the Effective Date, the notice period shall be [****]; and at
[****] after the Effective Date, the notice period shall be [****]. For any
notice of termination provided after [****] after the Effective Date until the
First Commercial Sale of a Product, the notice period will be [****] (i.e., the
termination will be effective [****] after the date that notice of such
termination is given).

 

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18.4.4 After First Commercial Sale of a Product, Roche may terminate, at its
discretion, the whole Agreement or development of a specific Product, with
[****] prior written notice to Maxygen.

18.4.5 If Roche terminates this Agreement under this Section 18.4, then the
Agreement shall terminate in its entirety as of the end of the applicable notice
period.

18.4.6 Either Party may terminate this Agreement in its entirety, upon [****]
prior written notice to the other Party, if the Effective Date of this Agreement
has not occurred within [****] after [****], in which case, there shall be no
liabilities under this Agreement on the part of either Party, except as may be
otherwise agreed in writing by the Parties.

18.5 Partial Terminations.

18.5.1 Product Terminations. If Roche formally terminates or otherwise
discontinues all development and/or commercialization activities with regard to
a particular Product (i.e., for a particular Product for all indications in the
Field), but not all Products then in active development), and/or for any reason
or must divest a particular Product to obtain regulatory approval for any
transaction, Roche shall promptly (and in no event later than thirty (30) days
after such decision or discontinuance) notify Maxygen in writing. Any such
notice shall serve as notice of permissive termination by Roche pursuant to
Section 18.4, and in any such case, Roche’s license and rights with regard to
the applicable Product shall terminate and such Product shall be deemed to be a
Reverted Product, and the terms of Section 18.7 shall apply thereto. In such
event, this Agreement will remain in effect with regard to other Products for
use in the Field in the Territory.

18.5.2 Geographic Terminations. If Roche fails to exercise Commercially
Reasonable Efforts pursuant to Section 7.3 in regard to the development and/or
commercialization of a Product or the entire Agreement, e.g., does not pursue
the commercialization of a Product that has received Regulatory Approval for at
least one Initial Indication in the Major Markets (provided to do so would be
consistent with Roche’s obligation to use Commercially Reasonable Efforts), then
Maxygen may with notice to Roche terminate this Agreement on a
Product-by-Product basis as to any Major Markets in which Roche has obtained
Regulatory Approval and reimbursement approvals required from any Regulatory
Agency for such Product but not pursued commercialization of such Product, and
all rights to such Product in such area of the Territory shall revert to
Maxygen, and Maxygen shall have the exclusive right to develop and/or
commercialize such Product(s) in and for such geographic area of the Territory.
The terminated country or countries (together with their territories and
possessions) in the case of a partial termination, shall be deemed to be the
“Reverted Territory” effective as of the effective date of such termination. In
the case of a partial termination, the Reverted Territory shall thereafter be
excluded from the Territory for all purposes under this Agreement, but this
Agreement will remain in effect in the remaining Territory. All such Products in
the Reverted Territory shall, effective upon the effective date of such
termination, be deemed “Reverted Products.”

 

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18.6 Exit Costs on Termination by Roche.

18.6.1 If Roche terminates this Agreement under Section 18.4.1 or 18.4.2 above,
then, from the date of notice of termination until the end of the notice period,
the Parties shall share [****] all Exit Costs incurred during the notice period,
provided, that (a) if Maxygen does not wish to continue the development of
Products, the Parties shall make all reasonable efforts to mitigate such Exit
Costs, and (b) if Maxygen wishes to continue the development of Products,
Maxygen shall be free to do so, and Roche shall have no obligation to pay more
in Exit Costs that Roche would be responsible for under Section 18.6.1(a).
Except to the extent that such costs are Exit Costs, in no case shall Roche be
responsible for costs incurred for activities initiated after receipt by Maxygen
of the notice of termination.

18.6.2 If Roche terminates this Agreement under Section 18.4.3 above and Maxygen
agrees to discontinue the R&D Program, then, from the date of Roche’s notice of
termination until the end of the notice period, the Parties shall share [****]
all Exit Costs incurred during the notice period, with the understanding that
the Parties shall make all reasonable efforts to mitigate such Exit Costs.
Except to the extent that such costs are Exit Costs, in no case shall Roche be
responsible for costs incurred for activities initiated after receipt by Maxygen
of the notice of termination.

18.6.3 If Roche terminates this Agreement under Section 18.4.3 and Maxygen does
not agree to discontinue the R&D Program, then from the date of receipt of
Roche’s notice of termination until the applicable date described below, the
Parties shall [****] share Exit Costs during the notice period, with the
understanding that the Parties shall make all reasonable efforts to mitigate
such Exit Costs:

(a) If notice of termination is given by Roche prior to and up to [****] after
the Effective Date, then sharing of Exit Costs shall extend to end of [****].

(b) If notice of termination is given by Roche after [****] after the Effective
Date but prior to Commencement of Phase II, then sharing of Exit Costs shall
extend for a period of [****] from the date of such termination notice to
Maxygen.

(c) If notice of termination is given by Roche after the Commencement of Phase
II but before Commencement of Phase III, then sharing of Exit Costs shall extend
for a period of [****] from the date of such termination notice to Maxygen.

(d) If notice of termination is given by Roche after Commencement of Phase III
(first dose) but prior to First Launch, then sharing of Exit Costs shall extend
for a period of [****] from the date of such termination notice to Maxygen.

(e) After the end of the applicable period, subject to the terms of
Section 18.7, Maxygen shall be solely responsible for all costs incurred in
connection with the development and commercialization of Products for the Field.

18.6.4 If Roche terminates under Section 18.4.4 above and Maxygen does not agree
to discontinue the commercialization of Products, then from the date of the
termination notice and until the date [****] later, the Parties shall continue
to share ([****], Roche:Maxygen) all M&P Costs in the U.S. as planned and
budgeted prior to the issuance of

 

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such notice in the most recent update of the applicable U.S. Product Plan and
Budget. After the end of the [****] notice period, subject to the terms of
Section 18.7, Maxygen shall be solely responsible for all other costs incurred
in connection with the commercialization of Products for the Field.

18.7 Rights Upon Terminations. In the event of any termination of this Agreement
in its entirety, or as to a specific Product, or as to a specific geographic
jurisdiction, then:

18.7.1 License to Maxygen. Roche shall grant to Maxygen, effective upon such
termination, irrevocable, royalty-free, perpetual licenses, with the right to
grant and authorize sublicenses, as follows: (i) an exclusive license under
Roche’s interest in any Program Technology, and (ii) a non-exclusive license
under any other Patents and Know-How owned or Controlled by Roche or its
Affiliates (excluding [****] Know-How if the Animal [****] Result is not
achieved, unless the Parties have commenced GMP manufacturing of the Reverted
Product using such [****] Know-How), in each case, that is necessary for Maxygen
to make, have made, use, import, offer for sale, sell and otherwise
commercialize Licensed Compounds and/or Reverted Product(s), and to manufacture
such Reverted Products anywhere in the Territory, for development and/or
commercialization, for the Reverted Indication and/or the Reverted Territory, if
applicable. In addition, at Maxygen’s request, Roche shall promptly provide
Maxygen copies of all Third-Party agreements entered by Roche or its Affiliates
containing a license under patents or patent applications claiming inventions or
Know-How specific to or used or incorporated into the development, manufacture
and/or commercialization of the applicable Reverted Product(s) (for the
applicable Reverted Indication and/or Reverted Territory, if applicable). At
Maxygen’s request, Roche shall promptly: (x) with respect to Third Party
agreements relating solely to the applicable Reverted Product(s), immediately
assign (or cause to be assigned), such agreements to Maxygen, and (y) with
respect to all other Third Party agreements, grant (or cause to be granted) to
Maxygen a sublicense thereunder of a scope equivalent to that described in the
first sentence of this Section 18.7.1 (for the Reverted Product(s), for
applicable Reverted Indication(s) and/or Reverted Territory, as applicable). In
any case, thereafter Maxygen shall be fully responsible for all obligations due
for its actions under such agreements. Notwithstanding the above, if Maxygen
does not wish to assume any financial or other obligations associated with a
particular assignment or sublicense, then Maxygen shall so notify Roche and
Roche shall not make such assignment or grant such sublicense (or cause it to be
made or granted).

18.7.2 Further Sales. In the event of any such termination, Roche may continue
to sell its remaining inventory of the applicable Reverted Product for a period
of six (6) months from the effective date of such termination, subject to the
payment of royalties pursuant to Section 8.1. Roche covenants that promptly
after such six (6) month period it and its Affiliates and former Sublicensees
hereunder shall cease to sell, and thereafter shall not sell, any Reverted
Product for the Licensed Field.

18.7.3 Regulatory Filings. Roche shall assign and transfer (or cause to be
assigned and transferred) to Maxygen at [****], any and all Regulatory Filings
with respect to any Reverted Product (or Licensed Compound contained in a
Reverted Product), and take such actions and execute such other instruments,
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effect the transfer of rights thereunder to Maxygen. Roche shall, in each
sublicense that it grants hereunder, require the sublicensee to transfer any
Regulatory Filings with respect to any Reverted Product (or Licensed Compound
contained in a Reverted Product) in the event of a termination of this Agreement
or such sublicense, to Maxygen if this Agreement remains in effect, and to Roche
if only such sublicense terminates.

18.7.4 Data Disclosure. Roche shall provide Maxygen with all reasonably
retrievable pre-clinical, clinical and commercial data in the Roche Group’s
possession with respect to any Reverted Product (or Licensed Compound contained
in a Reverted Product, including, without limitation, the relevant Data Package,
all information subject to Section 12.6, and all reports subject to
Section 3.7.2(b)), which Maxygen (or its designees) shall be free to use in
connection with the development, manufacture and/or commercialization of
Products.

18.7.5 Remaining Quantities. At the end of the period described in
Section 18.7.2, Roche shall transfer to Maxygen, at a price to be agreed in good
faith, which shall not be lower than [****] of Roche’s Manufacturing Cost for
the Reverted Product or higher than [****] of Roche’s Manufacturing Cost for the
Reverted Product, all quantities of reverted Licensed Compounds and Reverted
Products in the possession of the Roche Group (including, without limitation,
clinical trial supplies and Products intended for commercial sale), in the case
of a Territory-wide termination, or in their possession and labeled specifically
for sale in any country of the Reverted Territory, in the case of a partial
termination. Notwithstanding the above, if as of the effective date of
termination Maxygen was sharing Collaboration Costs for the Product that became
a Reverted Product, then Roche shall transfer to Maxygen all such quantities of
Reverted Product without charge. Roche shall have no obligation to alter the
labeling of such purchased Licensed Compounds and/or Reverted Products for
commercialization by Maxygen.

18.7.6 Product Manufacture by Roche.

(a) If any Reverted Product was manufactured by Roche (including, without
limitation, any testing and/or release) has commenced commercial sales at the
time of such termination, then Roche shall continue to provide for manufacturing
of such Reverted Product for Maxygen, at a cost [****] of Roche’s Commercial
Manufacturing Cost for the Reverted Product from the time of the effective date
of termination, until such time (not to exceed [****] months) as Maxygen is able
to secure an equivalent alternative commercial manufacturing source from which
quantities of Reverted Product are registered for commercial sale in each
country of the Territory.

(b) In the case of any termination of this Agreement prior to the first
Regulatory Approval of a Product, if any Reverted Product was being manufactured
by Roche (including, without limitation, any testing and/or release) as of the
date of notice of any such termination, then Roche will complete the
manufacturing and release of any GMP manufacturing runs of such Reverted Product
initiated prior to the date of notice of termination, and facilitate technology
transfer of the manufacturing processes for such Reverted Product to an
alternative manufacturer selected by Maxygen. For purposes of this provision,
“initiation” means that a vial of cells was thawed for the manufacturing of such
applicable runs.

 

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18.7.7 Third-Party Contracts. If any Reverted Product was manufactured (and/or
tested) by Third Parties for Roche, or Roche had contracts with vendors which
contracts are necessary or useful for Maxygen to take over responsibility for
the Reverted Products, Roche shall, without charge to Maxygen, assign all of the
relevant Third-Party contracts to Maxygen. Each contract that Roche enters into
for the manufacture and/or testing of any Product shall provide that such
contract be assignable to Maxygen.

18.7.8 Technical Assistance. Promptly after the effective date of such
termination, Roche shall provide, at Maxygen’s expense (at Roche’s actual cost)
technical assistance of the equivalent of up to a total of [****] full-time
equivalent persons (i.e., a total of [****] quarters of person-time), in the
period from the effective date of such termination until [****] months after
such date, to provide technology transfer necessary for Maxygen to commence or
continue to commercially manufacture Reverted Products, and a non-exclusive,
royalty-free, perpetual license under any Know-How disclosed by Roche to Maxygen
in the course of such activities to manufacture Reverted Products. If Roche
provides the total of [****] full-time equivalent persons, then Roche’s
Commercially Reasonable Efforts shall be deemed satisfied with regard to this
obligation.

18.7.9 No Further Representations. The Roche Group shall discontinue making any
representation regarding its status as a licensee of or distributor for Maxygen,
for all Reverted Products. The Roche Group shall cease conducting any activities
with respect to the marketing, promotion, sale or distribution of the Reverted
Products.

18.7.10 Trademarks. If Roche used with regard to any Reverted Product in a
country in the Reverted Territory any trademark, tradename or logo solely with a
Product (“Roche Product Marks”) Roche shall at no charge, at its option, assign
such Roche Product Mark(s) to Maxygen, or grant to Maxygen an exclusive license
(for no additional payment, except that Maxygen shall thereafter be responsible
for reimbursing Roche for all costs of maintaining, policing, enforcing (with
respect to the Reverted Territory) such Roche Product Mark(s)), with the right
to sublicense, to use such Roche Product Mark(s) solely in connection with the
development and commercialization of such Reverted Product in the Reverted
Territory (collectively “Permitted Uses”). For clarity, Maxygen shall under no
circumstance receive any rights under the Roche and Roche hexagon housemarks,
except with respect to selling off existing inventory in Reverted Territory.

18.7.11 Commercialization. Maxygen shall have the right to develop and
commercialize the applicable Reverted Products (for the Reverted Indication
and/or in the Reverted Territory, if applicable), itself or with one or more
Third Parties, and shall have the right, without obligation to Roche (other than
with respect to pharmacovigilance), to take any such actions in connection with
such activities as Maxygen (or its designee), at its discretion, deems
appropriate (e.g., to seek Regulatory Approvals with regard to the applicable
Product), unless expressly prohibited by the terms of this Section 18.7.

18.7.12 Maxygen License. Except in the case of a termination of this Agreement
by Roche pursuant to Section 18.3, the license granted to Maxygen in Section 5.8
shall remain in full force and effect.

 

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18.7.13 Roche Licenses. In the case of any termination of this Agreement, all
licenses and sublicenses granted by Maxygen to Roche shall terminate
concurrently.

18.8 Effect of Expiration or Termination. Upon Expiration or termination of this
Agreement for any reason, all rights and obligations of the Parties hereunder
shall cease, except as explicitly provided for below in this Article 18.

18.8.1 Accrued Rights and Obligations. Termination or Expiration of this
Agreement for any reason shall not release any Party hereto from any liability
that, at the time of such termination, has already accrued to the other Party or
that is attributable to a period prior to such termination, nor preclude either
Party from pursuing any rights and remedies it may have hereunder or at law or
in equity that accrued or are based upon any event occurring prior to such
termination.

18.8.2 Confidential Information. Upon termination of this Agreement by either
Party for any reason, the rights of each Party to retain and use the
Confidential Information of the other to exercise its rights shall be as set
forth in this Section 18.8; provided, however, that each Party may retain a
single archival copy of the other Party’s Confidential Information solely for
the purpose of determining the extent of disclosure of Confidential Information
hereunder and assuring compliance with the surviving provisions of this
Agreement.

18.8.3 Roche Rights Upon Expiration. Upon Expiration of this Agreement in any
country with regard to a particular Product, Roche shall continue to have a
perpetual right to commercialize such Products in the Field in the Territory, as
the license granted Roche in Section 5.2.1 with regard to such Product shall
automatically become royalty-free and non-exclusive in the country of
Expiration.

18.9 Survival. Upon Expiration or termination of this Agreement for any reason,
the following Sections and Articles shall survive such Expiration or
termination, subject to any later termination dates provided for therein:
Sections 3.6.2, 3.7, 4.4, 5.8, 9.9, 9.10 (with respect to any Products sold by
Roche before the termination of the Agreement), 12.7, 13.1, 13.3, 18.6, 18.7,
18.8 and 18.9 and Articles 10, 14 (as relates to infringement occurring during
the term of this Agreement), 15, 17, 19 and 20.

19. DISPUTE RESOLUTION

19.1 Initial Efforts. The Parties recognize that disputes as to certain matters
may from time to time arise during the term of this Agreement that relate to
either Party’s rights and/or obligations hereunder. The Parties shall seek to
amicably resolve disputes arising under this Agreement in an expedient manner by
mutual cooperation and without resort to litigation. Specifically, the Parties
agree to refer such disputes to the [****] and the [****] or another person of
comparable responsibility in Roche to seek resolution before pursuing any
remedies that either of the Parties may have available at law or in equity, and
further agree that the [****] and the [****] or other person of comparable
responsibility in Roche shall discuss the substance of any such matter within
[****] of any such request by either Party for such a discussion.

 

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19.2 Mediation. If a dispute arises out of or relates to this Agreement, or the
breach thereof, and if the dispute cannot be settled through negotiation, then
the Parties agree before resorting to litigation to first try in good faith to
settle the dispute by non-binding mediation with a neutral mediator; provided,
however, that (a) no such mediation shall be required for any disagreement
regarding the failure by a Party to fully pay any sum due hereunder, and (b) if
such mediation has not occurred within [****] days after a written request for
mediation by either Party, then either Party may commence litigation.

19.3 Venue. Any action against the other Party relating to this Agreement, or
the performance or breach hereof, shall be brought before a court located within
the U.S. Northern District of the State of California. Each Party hereby waives
any defenses such Party may have with regard to venue before such courts, and
consents to the personal jurisdiction of such courts. Notwithstanding the above,
any action regarding the infringement and/or validity of a patent may be brought
before any court or tribunal (e.g., the U.S. International Trade Commission)
having jurisdiction over the Parties and such subject matter.

19.4 Arbitration for Certain Disputes. Notwithstanding Section 19.3, if
(a) Roche provides notice of its intent to terminate the Agreement pursuant to
Section 18.4.1 or 18.4.2, but Maxygen believes such a termination was not
reasonable in view of the available data, or (b) the Parties are unable to agree
on the resolution of an apparent discrepancy identified in an audit with regard
to the amount or allocation of any Collaboration Costs as to a particular
Product, indication, activity and/or country or geographic region subject to
this Agreement, then such matters shall be determined by binding arbitration
pursuant to this Section 19.4 by one (1) independent, neutral arbitrator that is
mutually acceptable to the Parties. With respect to any disagreement subject to
Section 19.4(a), the arbitrator shall be an expert in the development of protein
pharmaceuticals and with respect to any disagreement subject to Section 19.4(b),
the arbitrator shall be an expert in financial accounting in respect of
pharmaceutical development and commercialization. If the Parties are unable to
agree within [****] days upon a mutually acceptable arbitrator, the arbitrator
shall be an independent expert as described in the preceding sentence selected
by the chief executive of the office of the American Arbitration Association
encompassing San Francisco, California. For arbitration of disputes subject to
this Section 19.4, each Party shall provide to the other Party such documents as
the arbitrator may direct (after consulting with both Parties). Except as
otherwise expressly provided in this Agreement, the costs of the arbitration,
including administrative and arbitrator’s fees, shall be shared equally by the
Parties and each Party shall bear its own costs and attorneys’ fees incurred in
connection with the arbitration. A disputed performance or suspended
performances pending the resolution of the arbitration must be completed within
a reasonable time period following the final decision of the arbitrator. The
arbitrator shall be directed that any arbitration subject to this Section 19.4
shall be completed within [****] months from the filing of notice of a request
for such arbitration. The arbitration proceedings and the decision shall not be
made public without the joint consent of the Parties and each Party shall
maintain the confidentiality of such proceedings and decision unless otherwise
permitted by the other Party. Any decision that requires a monetary payment
shall require such payment to be payable in Dollars, free of any tax or other
deduction. The Parties agree that the decision shall be the sole, exclusive and
binding remedy between them regarding determination of the matters presented to
the arbitrator.

 

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19.5 Injunctive Relief. Notwithstanding any other provision of this Article 19,
either Party, at any time, may seek from a court of competent jurisdiction any
interim or provisional injunctive relief that may be necessary to protect the
rights or property of that Party.

20. GENERAL PROVISIONS

20.1 Governing Law. This Agreement and any dispute arising from the performance
or breach hereof, shall be governed by and construed in accordance with the laws
of the State of Delaware, excluding its rules governing conflicts of laws.
Notwithstanding the above, any dispute regarding and limited to validity or
enforceability of any patent shall be governed by the patent laws of the
jurisdiction in which such patent was issued.

20.2 Force Majeure. Neither Party shall be held liable or responsible to the
other Party nor be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement, other
than an obligation to make payments hereunder, when such failure or delay is
caused by or results from fire; flood; earthquake; tornado; embargo; government
regulation; prohibition or intervention; war; act of war (whether war be
declared or not); insurrection; act of terrorism; riot; civil commotion; strike;
act of God or any other cause where failure to perform is beyond the reasonable
control and not caused by the negligence or misconduct of the affected Party (a
“Force Majeure Event”) so long as the affected Party has used Commercially
Reasonable Efforts to avoid, mitigate and/or overcome the effects of the Force
Majeure Event.

20.3 Severability. Both Parties hereby expressly acknowledge and agree that it
is the intention of neither Party to violate any public policy, statutory or
common law, rules, regulations, treaty or decision of any government agency or
executive body thereof of any country or community or association of countries
and specifically agree that if any word, sentence, paragraph, clause or
combination thereof in this Agreement is found by a court or executive body with
judicial powers having jurisdiction over this Agreement or any of the Parties
hereto in a final unappealed order, to be in violation of any such provisions in
any country or community or association of countries, then in such event such
words, sentences, paragraphs, clauses or combination shall be inoperative in
such country or community or association of countries (or reformed, for example
but without limitation, to apply for a shorter period of time, such that their
effect is in compliance with law) and the remainder of this Agreement shall
remain binding upon the Parties hereto.

20.4 Notices. Any notice required or permitted to be given hereunder shall be in
writing and shall be deemed to have been properly given if delivered in person,
or if mailed by registered or certified mail (return receipt requested) postage
prepaid, or by an internationally recognized overnight delivery service, or by
facsimile (and promptly confirmed by registered, certified mail, overnight
courier or fax receipt), to the addresses given below or such other addresses as
may be designated in writing by the Parties from time to time during the term of
this Agreement. Any notice sent by overnight courier or facsimile shall be
deemed received on the first business day after posted with the courier or
transmittal. Any notice sent by registered, certified mail shall be deemed
received on the fourth (4th) business day following the date of posting.

 

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In the case of Roche (for either    Hoffmann-La Roche Inc.
Roche Nutley or Roche Basel):    340 Kingsland Street    Nutley, NJ 07110   
Attention: Corporate Secretary With a required copy to:    F. Hoffmann-La Roche
Ltd    Grenzacherstrasse 124    CH-4070 Basel    Switzerland    Attention:
Corporate Law In the case of Maxygen:    Maxygen Holdings Ltd.    c/o Close
Brothers (Cayman) Limited    103 South Church Street    P.O. Box 1034 GT   
Grand Cayman    British West Indies with a required copy to:    Maxygen, Inc.   
515 Galveston Drive    Redwood City, CA 94063    Attention: General Counsel

20.5 Assignment. This Agreement may not be assigned or otherwise transferred, in
whole or in part, by either Party without the written consent of the other
Party; provided, however, that either Party may, without such consent, assign
this Agreement (i) to a successor corporation in connection with the transfer or
sale of all or substantially all of its business to which this Agreement
pertains or in the event of the merger or consolidation with another
corporation; and (ii) to an Affiliate. Any purported assignment in violation of
the preceding sentence shall be void. Any permitted assignee shall assume all
obligations of its assignor under this Agreement. Subject to the foregoing, this
Agreement shall be binding on and inure to the benefit of the Parties and their
respective successors and permitted assignees.

20.6 Performance by Affiliates. Each of Maxygen and Roche acknowledge that their
obligations and rights under this Agreement may be performed and exercised by
Affiliates of Maxygen and Roche, respectively. Obligations of the Party for
which one of its Affiliates is performing hereunder shall be deemed to extend to
such performing Affiliate. Each of Maxygen and Roche guarantee performance of
this Agreement by its Affiliates. Wherever in this Agreement the Parties
delegate responsibility to Affiliates or local operating entities, the Parties
agree that such entities shall not make decisions inconsistent with this
Agreement, amend the terms of this Agreement or act contrary to its terms in any
way. If a Party’s Affiliate breaches any aspect of this Agreement in the
performance of any activity that has been delegated to such Affiliate, then the
other Party shall be entitled to proceed against the Party whose Affiliate so
breached, and shall not first be required to proceed against the Affiliate that
so breached.

 

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20.7 Waiver. The failure or delay of a Party to enforce or to exercise, at any
time for any period of time, any provisions hereof or any right or remedy
hereunder shall not be construed as a waiver of such provision or right or
remedy or of the right of such Party thereafter to enforce or exercise the same;
provided, however, that such right or remedy is not time-barred or otherwise
precluded by law or by a writing expressly waiving such right or remedy and
signed by that Party seeking to assert such right or remedy. The written waiver
by either Party of a breach of any term or provision of this Agreement by the
other Party shall not be construed as a waiver of any subsequent breach.

20.8 No Implied Licenses. Except as expressly and specifically provided under
this Agreement, the Parties agree that neither Party is granted any implied
rights to or under any of the other Party’s current or future patents, trade
secrets, copyrights, moral rights, trade or service marks, trade dress, or any
other intellectual property rights.

20.9 Independent Contractors. The Parties agree that the relationship of Maxygen
and Roche established by this Agreement is that of independent contractors.
Furthermore, the Parties agree that this Agreement does not, is not intended to,
and shall not be construed to, establish a partnership or joint venture, nor
shall this Agreement create or establish an employment, agency or any other
relationship. Neither Party shall have any right, power or authority, nor shall
they represent themselves as having any authority to assume, create or incur any
expense, liability or obligation, express or implied, on behalf of the other
Party, or otherwise act as an agent for the other Party for any purpose.

20.10 No Third Party Beneficiaries. All rights, benefits and remedies under this
Agreement are solely intended for the benefit of Maxygen and Roche, and no Third
Party shall have any rights whatsoever to (i) enforce any obligation contained
in this Agreement; (ii) seek a benefit or remedy for any breach of this
Agreement; or (iii) take any other action relating to this Agreement under any
legal theory, including but not limited to, actions in contract, tort (including
but not limited to negligence, gross negligence and strict liability), or as a
defense, setoff or counterclaim to any action or claim brought or made by the
Parties. Notwithstanding the above, Maxygen Indemnities shall have the right to
enforce Section 17.2 and Roche Indemnities shall have the right to enforce
Section 17.1.

20.11 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER PARTY FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS OR INTERRUPTION OF
BUSINESS, OR FOR ANY OTHER INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
PUNITIVE DAMAGES OF ANY KIND, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH LOSS OR DAMAGES. IN NO CASE SHALL EITHER PARTY BE LIABLE FOR
ANY REPRESENTATION OR WARRANTY MADE BY THE OTHER PARTY TO ANY THIRD PARTY.
NOTHING IN THIS SECTION 20.11 IS INTENDED TO LIMIT EITHER PARTY’S OBLIGATIONS
UNDER ARTICLE 17 IN RELATION TO AMOUNTS PAID TO A THIRD PARTY.

 

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20.12 Advice of Counsel. Maxygen and Roche have each consulted counsel of their
choice regarding this Agreement, and each acknowledges and agrees that this
Agreement shall not be deemed to have been drafted by one Party or another and
will be construed accordingly.

20.13 Other Obligations. Except as expressly provided in this Agreement or as
separately agreed upon in writing between Maxygen and Roche, each Party shall
bear its own costs incurred in connection with the implementation of the
obligations under this Agreement.

20.14 Further Assurances. At any time or from time-to-time on and after the
Effective Date, either Party shall at the request of the other Party (i) deliver
to the requesting Party such records, data or other documents consistent with
the provisions of this Agreement, (ii) execute, and deliver or cause to be
delivered, all such consents, documents or further instruments of assignment,
transfer or license, and (iii) take or cause to be taken all such actions, as
the requesting Party may reasonably deem necessary or desirable in order for the
requesting Party to obtain the full benefits of this Agreement and the
transactions contemplated hereby.

20.15 Export Laws. Notwithstanding anything to the contrary contained herein,
all obligations of Maxygen and Roche are subject to prior compliance with U.S.
export regulations and such other U.S. laws and regulations as may be
applicable, and to obtaining all necessary approvals required by the applicable
agencies of the government of the U.S. or the European Union. Maxygen and Roche,
respectively, shall each use its best efforts to obtain such approvals for its
own activities. Each Party shall cooperate with the other Party and shall
provide assistance to the other Party as reasonably necessary to obtain any
required approvals.

20.16 Governmental Matters.

20.16.1 Governmental Filings. To the extent, if any, that a Party concludes in
good faith that it is required to file or register this Agreement or a
notification thereof with any governmental authority, including without
limitation the U.S. Securities and Exchange Commission and the Competition
Directorate of the Commission of the European Communities, in accordance with
applicable laws and regulations, such Party may do so, and the other Party shall
cooperate in such filing or notification and shall execute all documents
reasonable required in connection therewith, at the expense of the requesting
Party. The Parties shall promptly notify each other as to the activities or
inquires of any such governmental authority relating to this Agreement, and
shall cooperate, to respond to any request for further information therefrom at
the expense of the requesting Party.

20.16.2 License Registrations. Roche may, at its expense, register the exclusive
license granted under this Agreement in any country of, or community or
association of countries in, the Territory. Maxygen shall reasonably cooperate
in such registration at Roche’s expense. Upon request by Roche, Maxygen agrees
promptly to execute any “short form” licenses developed in a form reasonably
acceptable to both Roche and Maxygen and reasonably submitted to it by Roche
from time to time in order to effect the foregoing registration in such country.
No such “short form” license shall be deemed to amend or be used to interpret
this Agreement. If there is any conflict between such a license or other
recordation document and this Agreement, this Agreement shall control.

 

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20.17 Headings. The article, section and paragraph headings contained in this
Agreement are for ease of reference purposes only and shall not affect in any
way the meaning or interpretation of any provision contained in this Agreement.

20.18 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document.

20.19 Amendment. The Parties hereto may amend, modify or alter any of the
provisions of this Agreement, but only by a written instrument that explicitly
refers to the provisions of this Agreement that are being amended and is duly
executed by both Parties hereto.

20.20 Entire Agreement. This Agreement together with the attached Exhibits,
which are hereby incorporated herein by reference, constitutes the entire
agreement, both written or oral, between the Parties with respect to the subject
matter of this Agreement, and supersedes all prior or contemporaneous
understandings or agreements, whether written or oral, between Roche and Maxygen
with respect to such subject matter; provided, however, that the Confidentiality
Agreement entered by Roche and Maxygen, Inc. effective [****] (the “CDA”) shall
remain in force and effect in accordance with its terms. This Agreement
supercedes the CDA to the extent of any conflict between such agreements.

[THIS SPACE INTENTIONALLY LEFT BLANK]

 

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In Witness Hereof, the Parties have executed this Agreement, effective as of the
Effective Date.

 

HOFFMANN-LA ROCHE INC.   MAXYGEN HOLDINGS LTD. By:  

/s/ Dennis E. Burns

  By:  

/s/ Balkrishan Gill

Name:   Dennis E. Burns   Name:   Balkrishan Gill Title:   Vice President,
Global Head of Business Development   Title:   President

 

F. HOFFMANN-LA ROCHE LTD By:  

/s/ Stefan Arnold

  By:  

/s/ Nigel Sheail

Name:   Stefan Arnold   Name:   Nigel Sheail Title:   Deputy Director   Title:  
Vice President, Global Head Licensing

 

Exhibits:   A: Collaboration Costs definitions   B: Maxygen Separate Technology
Patent Rights

 

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EXHIBIT A

COLLABORATION COSTS DEFINITIONS

A. General Principles of Application. The following general principles shall
apply with respect to the defined terms and phrases set forth on this Exhibit A:

 

  (1) each of the Costs (as defined in Section B below) shall be tracked and
calculated on a Product-by-Product basis;

 

  (2) Costs shall be determined, as agreed by the Parties, in accordance with
applicable Accounting Standards, as consistently applied internally by a Party
for all its products;

 

  (3) all Costs shall exclude any costs and/or expenses included in the
deductions used to determine Adjusted Gross Sales and/or Net Sales;

 

  (4) all Costs shall exclude any and all amounts recovered and reimbursed to or
paid to the applicable Party by a Third Party;

 

  (5) all Costs shall only include those amounts described in this Exhibit A
and/or Article 4 of the Agreement (e.g., shall not include any payments to
Maxygen pursuant to Articles 8 and/or 9);

 

  (6) to the extent that Costs relate to elements of M&P Costs, only the
proportion of those costs that directly relate to the sale of Products in the
U.S. shall be included in M&P Costs.

 

  (7) where Costs relate to or provide benefit to more than one Product (or
product), indication and/or country or geographic region, such Costs shall be
tracked and allocated reasonably and equitably between such Products (or
products), indications and/or countries or regions, in accordance with
guidelines agreed by the Parties in good faith.

B. Definitions.

 

1. “CMC Costs” means, with regard to a particular Product, the external and
internal costs associated with the manufacturing, testing and release of Product
up until the release of Phase III clinical materials for activities related to
the [****] indication planed to be filed for such Product, authorized and
approved by the JMC as part of the applicable Program Plan and Budget, as
follows:

 

  (a) creation and selection of cell lines, GMP cell banking and
characterization testing of master cell bank(s) and working cell bank(s) to be
used for GMP production of Product.

 

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  (b) process development (optimization and characterization), scale-up and
process qualification and/or validation as necessary or useful to manufacture
Products for pre-clinical use and Phase I, Phase II and Phase III clinical
trials;

 

  (c) assay development, assay qualification and/or validation, as necessary or
useful to support pre-clinical use and Phase I, Phase II and Phase III clinical
trials.

 

  (d) formulation and stability studies, as necessary or useful to support
pre-clinical use and Phase I, Phase II and Phase III clinical trials.

 

  (e) manufacture (including fill and finish), testing and release of Products
for pre-clinical use and Phase I, Phase II and Phase III clinical trials, as
follows:

 

  (i) CMC Costs includes the direct and indirect costs for such manufacture or
contracting for each stage of the manufacturing of the Product shipped for
pre-clinical or clinical use; provided, with respect to Products manufactured by
Roche, in no event shall the direct costs and indirect costs exceed the amount
that a Third Party vendor would charge for such manufacturing.

 

  (ii) For purposes of this definition, “direct costs” shall include: (1) direct
labor costs (including a proportional share of fringe benefits), (2) direct
costs of materials (including inbound costs, taxes and duties), (3) direct
product testing costs (including QC and QA bulk testing and in-process testing),
and (4) Third-Party contract costs and royalties payable by Roche to Third
Parties in relation with the manufacturing, formulation and filling of the
Product for pre-clinical use and clinical use up to the release of Phase III
clinical materials for the first indication, but with regard to such Third Party
royalties only to the extent that [****].

 

  (iii) Indirect costs means items treated as “manufacturing allocable overhead”
consistent with Roche’s internal processes used for all its products, subject to
compliance with all applicable Accounting Standards. Such “manufacturing
allocable overhead” are those costs allocated to the applicable manufacturing
department based on a space occupied or headcount or other activity-based method
such as, but not limited to: (1) indirect labor and material costs;
(2) occupancy costs; (3) payroll and purchasing functions; (4) information
systems; and (5) depreciation of property, plant and equipment only to the
extent they are used in and allocable to the manufacturing of the applicable
Product for pre-clinical uses and Phase I, Phase II and Phase III clinical
trials; and (6) failures that are considered normal yield losses reasonably
expected and/or justified in this area of technology.

 

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  (iv) With respect to Products manufactured by a Third Party vendor and
acquired by Roche or Maxygen, reasonable amounts actually paid to the vendor for
such Products.

 

  (v) Notwithstanding the foregoing, CMC Costs shall exclude: (1) any costs
incurred in relation to the manufacture of Products for commercial sale; (2) any
and all costs associated with establishing capacity to manufacture any Product
for commercial sale; (3) any and all costs incurred to lower the potential
commercial cost of goods of a Product and/or increase the production yield of a
Product beyond what is necessary to conduct Phase III trials; (4) any and all
costs incurred to support commercial manufacturing of Products, including,
without limitation, start-up and validation costs; (5) idle or excess capacity
charges and costs consistent with Roche’s internal processes used for all its
products, subject to compliance with all applicable Accounting Standards;
(6) any costs (other than depreciation) associated with building or repairing or
expanding or closing or the acquisition of any manufacturing facilities and/or
any equipment for any manufacturing facilities; and (7) M&P Costs, R&D Costs,
Commercial Manufacturing Costs and Distribution Costs.

 

2. “Commercial Manufacturing Costs” means, with regard to a particular Product:

Roche’s fully burdened standard manufacturing costs of Product shipped for
commercial use worldwide, determined in accordance with applicable Accounting
Principles as consistently applied by Roche for all its products, as follows:

 

  (a) Commercial Manufacturing Costs includes the direct and indirect costs for
manufacturing or contracting for each stage of the manufacturing of the Product
for commercial sale worldwide, including, without limitation, any cost incurred
after the release of Phase III clinical materials for activities related to the
first indication planed to be filed for such Product, for: (i) stability testing
to support manufacturing improvements, (ii) process development to lower the
potential commercial cost of goods of a Product, (iii) increase the production
yield of a Product beyond what is necessary to conduct Phase III trials, and/or
(iv) inventory buildup of Products for Product launch.

 

  (b) For purposes of this definition, “direct costs” shall include (i) direct
labor costs (including a proportional share of fringe benefits), (ii) direct
costs of materials (including inbound costs, taxes and duties), (iii) direct
product testing costs (including QC and QA bulk testing and in-process testing),
and (iv) third-party contract costs and royalties payable by Roche to third
parties in relation with the manufacturing, formulation and filling of the
Product, but with regard to such Third Party royalties only to the extent that
[****].

 

  (c)

Indirect costs means items treated as “manufacturing allocable overhead”
consistent with Roche’s internal processes used for all its products, subject to

 

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compliance with all applicable Accounting Principles. Such “manufacturing
allocable overhead” are those costs allocated by Roche to the applicable
manufacturing department based on a space occupied or headcount or other
activity-based method such as, but not limited to: (i) indirect labor and
material costs; (ii) occupancy costs; (iii) payroll and purchasing functions;
(iv) information systems; (v) costs attributable to obtaining and maintaining
Regulatory Approval for a manufacturing facility for Products for commercial
sale to the extent such costs are directly related to Products (including
start-up and validation costs); and (vi) depreciation of property, plant and
equipment only to the extent they are used in and allocable to the manufacturing
process for the applicable Product beyond what is necessary to conduct Phase III
trials; and (vii) failures that are considered normal yield losses reasonably
expected and/or justified in this area of technology.

 

  (d) Roche uses the main drivers of estimated and actual Commercial
Manufacturing Costs of a calendar year X to determine the annual standard cost
chargeable as Commercial Manufacturing Costs for the calendar year X+1 for the
Product. Such standard Commercial Manufacturing Costs will consider yields,
success factors (failures) and other pertinent data.

 

  (e) With respect to any Product manufactured by and acquired by Roche from a
non-Affiliate vendor, reasonable amounts actually paid to the vendor for the
manufacturing, formulation or filling of such Product.

 

  (f) Notwithstanding the foregoing, Commercial Manufacturing Costs shall
exclude: (i) any CMC Costs, M&P Costs, Distribution Costs and R&D Costs;
(ii) idle or excess manufacturing, capacity charges and costs consistent with
Roche’s internal processes used for all its products, subject to compliance with
all applicable Accounting Standards; (iii) any costs (other than depreciation)
associated with building or repairing or expanding or closing or the acquisition
of any manufacturing facilities and/or any equipment for any manufacturing
facilities; and (iv) royalties payable by Roche to Third Parties in relation
with the use or sale of the Product, but with regard to such Third Party
royalties, only to the extent that [****].

Commercial Manufacturing Costs shall reflect costs, as described above, that
occur during the term of the Agreement, and after the term so long as Roche is
manufacturing Reverted Product for Maxygen.

 

3. “Distribution Costs” means, with regard to a particular Product in its
finished form for commercialization, the direct and indirect costs incurred by
Roche and/or its Affiliates or Sublicensees with regard to: (a) invoicing Third
Parties for sales of such Product; and (b) inventory, warehousing and outbound
distribution to Third Parties of such Product.

 

4.

“M&P Costs” means, with regard to a particular Product, the external and
internal costs associated with the promotion, marketing and sale of such Product
in the U.S. for

 

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activities authorized and approved by the JMC as part of applicable Product Plan
and Budget, as follows:

 

  (a) M&P Costs shall include the external and internal costs of marketing the
Product in the U.S., which shall include, but not be limited to, the allocated
costs of field-based sales organizations and professional contract service
personnel engaged in marketing the Product, advertising, sales and/or marketing
training activities, and selling Product and any specifically identifiable Third
Party contract services or materials associated with such activities. For
purposes of determining such allocated costs, all relevant factors (e.g., number
and type of products detailed, site of marketing, proportion of effort devoted
to different products, units of each Product sold) shall be taken into
consideration. The internal marketing costs include “marketing allocable
overhead” charges to marketing the Product consistent with applicable Accounting
Principles as applied by Roche to all of its products on a consistent basis.

 

  (b) M&P Costs shall also include the pre-registration marketing expenses
related to the above activities in the U.S. performed before the First
Commercial Sale of such Product in the U.S.

 

  (c) M&P Costs includes costs attributable to the marketing and/or promotion of
the Product in the U.S., as follows: (i) all Product-related U.S. media
advertising and promotion literature, e.g., peer-reviewed journals, newspapers,
TV, radio, agency fees, Internet, including production costs, handouts, mailing
and other printed materials, (ii) samples of Product distributed in the U.S. for
promotional purposes, (iii) organizing and participating in congresses and
sponsoring local delegates to such events in the U.S., (iv) mini symposia, such
as evening events, in the U.S., and (v) running marketing studies, including the
costs of compassionate use programs, in the U.S.

 

  (d) M&P Costs shall not include any cost or expense included in R&D Costs, CMC
Costs, Commercial Manufacturing Costs or Distribution Costs.

 

  (e) M&P Costs shall further include the external and internal costs of the
following:

 

  (i) Trial material costs used in trials and/or studies described in paragraph
(ii) below, if commercially available products of Third Parties are purchased
and used by the Parties to do comparative studies with the applicable Product;

 

  (ii)

Costs of post-registration Phase IV clinical trials conducted in the U.S.,
including without limitation, (1) studies on the toxicological,
pharmacokinetical, metabolical or clinical aspects of a Product (including costs
of clinical and placebo material supply if a Party bears such cost), conducted
internally or by Third Party investigators, or consultants, in each case that is
necessary for the purpose of maintaining Regulatory

 

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Approvals of a Product in the U.S., and (2) costs incurred in connection with
expanding Regulatory Approval of such Product beyond an initial indication,
including without limitation, the direct costs of preparing, submitting,
reviewing or developing data or information to make any submission to the FDA
required to obtain and/or expand Regulatory Approval of such Product in the U.S.
beyond the Initial Indications, including reasonable per patient/study subject
fees, costs of developing protocols and case report forms used, preparation of
final study reports, statistical evaluations, and investigators’ fees and
reasonable costs of attendance at meetings related to such trials and/or
studies; and

 

  (iii) Clinical personnel (including reasonable travel expenses, training, but
excluding salaries) for monitoring personnel if attributable to the marketing
and/or promotion of such Product in the U.S.

 

5. “R&D Costs” means, with regard to a particular Product, the external and
internal costs for research and development activities authorized and approved
by the JMC as part of applicable Product Plan and Budget, as follows:

 

  (a) the worldwide R&D costs specifically attributable to the research and/or
development of such Product actually incurred after the Effective Date by Roche
and/or Maxygen, as the case may be, from the commencement of research to bring
Product into development through the earlier of: (i) the date of Regulatory
Approval, or (ii) termination of development efforts for the Initial Indications
and other Indications for which Regulatory Approval is sought in the Territory
as determined by the JMC.

 

  (b) “R&D Costs” shall include, but are not limited to, direct costs of
(i) studies on the toxicological, pharmacokinetical, metabolical or clinical
aspects of a Product (including costs of clinical and placebo material supply),
conducted internally or by Third Party investigators, or consultants, in each
case that are necessary for the purpose of obtaining and/or expanding Regulatory
Approvals of a Product (i.e., label extensions), and (ii) costs incurred in
connection with obtaining and/or expanding Regulatory Approval of such Product,
including without limitation, the direct costs of preparing, submitting,
reviewing or developing data or information to make any applicable submission to
Regulatory Agencies in the U.S., Japan, Major Markets and the Other Markets, in
each case, required to obtain and/or expand Regulatory Approval of such Product.

 

  (c) R&D Costs also include CMC Costs required for research and/or development
of Products.

 

  (d) R&D Costs shall also include expenses for data management, statistical
designs and studies, document preparation, and other administration expenses
attributable to the clinical testing program for such Product.

 

  (e) For purposes of this definition, indirect costs include items treated as
“research and development allocable overhead,” such as indirect labor and
material costs, fringe benefits, occupancy costs, payroll, information systems,
human resources or purchasing functions, depreciation of property, plant and
equipment used in the research and development process of Product and other
costs allocable to the research and development process of Product that are
allocated to the research and development departments based on a space occupied
or headcount or other activity-based method.

 

  (f) Notwithstanding the foregoing, R&D Costs shall exclude any M&P Costs,
Distribution Costs and/or Commercial Manufacturing Cost.

 

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EXHIBIT B

MAXYGEN SEPARATE TECHNOLOGY PATENT RIGHTS

(existing as of the Effective Date)

[****]

 

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