Exhibit 10.44

 

STRATEGIC ALLIANCE AGREEMENT

 

by and between

 

ZymoGenetics, Inc.

 

and

 

Serono S.A.

 

Effective Date: October 12, 2004

 

“[ * ]” = omitted, confidential material, which material has been separately
filed with the Securities and Exchange Commission pursuant to a request for
confidential treatment.

 

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CONTENTS

 

ARTICLE ONE Definitions and Terminology

   1              1.1      Definitions    1      1.2      Terminology    1

ARTICLE TWO Coordination of the Alliance

   2      2.1      Steering Committee    2             2.1.1      Formation of
Steering Committee    2             2.1.2      Roles and Responsibilities    2  
          2.1.3      Meetings and Communications    3             2.1.4     
Decision Making; Formalities    3      2.2      Research Leaders and Research
Team    3             2.2.1      Research Leaders; Appointment; Role and
Responsibilities    3             2.2.2      Formation of Research Team    4  
          2.2.3      Roles and Responsibilities    4             2.2.4     
Meetings and Communications    5             2.2.5      Decision Making;
Formalities    5      2.3      Use of Third Party Intellectual Property; Reach
Through Royalties    5

ARTICLE THREE Evaluation of Genes and Selection for Collaborative Research

   5      3.1      Evaluation prior to Medical Hypothesis    5             3.1.1
     Parties’ Rights to Independently Evaluate    5             3.1.2      ZGEN
Core Genes    6             3.1.3      Initial Transfer    6      3.2     
Selection for Collaborative Research at Medical Hypothesis    6            
3.2.1      Notice of Medical Hypothesis to the Other Party and Novo    6       
     3.2.2      Collaboration Election; Procedure    7             3.2.3      No
Collaboration Election Because ZGEN Does Not Wish to Perform Research    7     
       3.2.4      No Collaboration Election Because Serono Does Not Wish to
Perform Research    8      3.3      Expiration of the Evaluation Term    8

ARTICLE FOUR Collaborative Research Following a Collaboration Election

   9      4.1      Guiding Principles    9      4.2      Efforts; Cooperation   
9      4.3      Exchange of Technology    9      4.4      Research Plan and
Budget    9      4.5      Shared Research Costs    9             4.5.1      Cost
Sharing Ratio    9             4.5.2      Cap on Research Costs    10       
     4.5.3      Quarterly Accounting and Reconciliation    10      4.6     
Third Party Research Fees    10      4.7      Serono’s Right to Opt Out of
Collaborative Research    11      4.8      ZGEN's Right to Opt Out of
Collaborative Research    11

 

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     4.9      Expiration of the Research Term    11

ARTICLE FIVE Option Rights

   12              5.1      Option Rights    12      5.2      Procedure    12  
   5.3      Licenses to Third Parties    14      5.4      Terms of the Novo
Agreement    14      5.5      Designation of U.S.A. Vendor    14

ARTICLE SIX Right of Negotiation for an [ * ] Agreement

   15      6.1      Negotiation Right    15      6.2      Conduct of
Negotiations    15

ARTICLE SEVEN Payment

   16

ARTICLE EIGHT Records, Reporting, Payment and Audits

   16      8.1      Form of Payment; Currency Conversion    16      8.2     
Late Payment    16      8.3      Records    16      8.4      Audits    17     
8.5      Payments Based on Audit Results    17      8.6      Withholding    17

ARTICLE NINE Licenses

   17      9.1      License to Serono    17      9.2      License to ZGEN    18
     9.3      Grant of Sublicenses and Use of Contractors    18      9.4     
Licenses from Third Parties    18      9.5      [*]    19      9.6      No Other
Rights    19      9.7      Use of Names, Trade Names and Trademarks    19

ARTICLE TEN Intellectual Property Ownership, Prosecution and Enforcement

   20      10.1      Intellectual Property Ownership    20      10.2      Patent
Contacts for Gene    20      10.3      Prosecution and Maintenance    20       
     10.3.1      ZGEN IP    20             10.3.2      Serono IP    20       
     10.3.3      Joint Project Technology    20             10.3.4      Patent
Prosecution Party’s Efforts    21      10.4      Defense and Enforcement Actions
   21

ARTICLE ELEVEN Confidentiality; Materials; Publicity

   22      11.1      Confidentiality and Non-Use    22

 

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[ * ] Confidential Treatment Requested

 

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             11.2      Exceptions    22              11.3      Permitted
Disclosures    23              11.4      Materials; Permitted Uses    23     
        11.5      Publications    24              11.6      Obligations of
Confidentiality to Third Parties    24

ARTICLE TWELVE Representations, Warranties and Covenants

   24              12.1      Representations, Warranties and Covenants of Serono
   24             12.1.1      Organization and Good Standing    24            
12.1.2      Enforceability; Authority and No Current Conflicts    25            
12.1.3      Invention Agreements With Personnel    25             12.1.4      No
Future Conflicts    25             12.1.5      Compliance With Laws    25       
     12.1.6      Authority to License    25              12.2     
Representations, Warranties and Covenants of ZGEN    25             12.2.1     
Organization and Good Standing    26             12.2.2      Enforceability;
Authority and No Current Conflicts    26             12.2.3      Invention
Agreements With Personnel    26             12.2.4      No Future Conflicts   
26             12.2.5      Compliance With Laws    26             12.2.6     
Authority to License    27              12.3      Materials    27     
        12.4      Warranty Disclaimer    27              12.5      No Use in
Humans    27

ARTICLE THIRTEEN Indemnification; Insurance

   28              13.1      Indemnification    28             13.1.1     
Matters Covered    28             13.1.2      Exclusions    28              13.2
     Defense of Claims    28             13.2.1      Provision of Attorney    28
            13.2.2      Notice    29             13.2.3      Tender of Defense
   29             13.2.4      Assistance    29              13.3      Insurance
   30

ARTICLE FOURTEEN Term and Termination

   30              14.1      Term    30              14.2      Termination for
Material Breach    30              14.3      Termination Upon Serono's
Bankruptcy         30              14.4      No Termination Upon ZGEN's
Bankruptcy    30              14.5      Termination of License With Respect to
Contested Patent Rights    31              14.6      Consequences of Expiration
and Termination    31             14.6.1      Accrued Rights    32            
14.6.2      Surviving Provisions    32             14.6.3      Cumulative
Remedies         32

 

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ARTICLE FIFTEEN Dispute Resolution    32              15.1      Cooperative
Decision Making    32             15.1.1      General Rule    32            
15.1.2      Resolution by Senior Executives    32             15.1.3     
Escalation to CEOs    33              15.2      Review by CEOs    33            
15.2.1      Matters Referred to CEOs    33             15.2.2      Resolution by
CEOs    33             15.2.3      Escalation to Arbitration    33     
        15.3      Arbitration    33             15.3.1      Matters to be
Arbitrated    33             15.3.2      Venue, Rules and Applicable Law    33  
          15.3.3      Composition of Tribunal    34             15.3.4     
Tribunal’s Jurisdiction    34             15.3.5      Costs    34            
15.3.6      Continuing Performance    34             15.3.7      Equitable
Remedies    34              15.4      Matters to Proceed to Court    35 ARTICLE
SIXTEEN General    35              16.1      Entire Agreement    35     
        16.2      No Drafting Party; Legal Counsel    35              16.3     
Controlling Law    35              16.4      Notices    35              16.5
     Force Majeure    36              16.6      Assignability    37     
        16.7      Amendments and Waivers    37              16.8     
Severability    37              16.9      Counterparts    38              16.10
     Relationship    38

 

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LIST OF EXHIBITS

 

Exhibit A   

Definitions

Exhibit B   

Medical Hypothesis Deliverables

Exhibit C   

Research Costs - Cost Accounting Principles

Exhibit D   

Financial Terms of Co-Development/Co-Promotion and License Agreement for
Non-Core Gene

Exhibit E   

Financial Terms of Exclusive License Agreement for Non-Core Gene

Exhibit F   

Financial Terms of Co-Development/Co-Promotion and License Agreement for Core
Gene

Exhibit G   

Financial Terms of Exclusive License Agreement for Core Gene

Exhibit H   

Lead Deliverables

Exhibit I   

Target Deliverables

Exhibit J   

Template Co-Development/Co-Promotion and License Agreement

Exhibit K   

Template Exclusive License Agreement

Exhibit L   

ZGEN Core Genes

Exhibit M   

Non-Core Genes

Exhibit N   

Excluded Genes

Exhibit O   

Encumbered Genes

 

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STRATEGIC ALLIANCE AGREEMENT

 

This Strategic Alliance Agreement is made as of the Effective Date, October 12,
2004, by and between ZymoGenetics, Inc., a Washington corporation (“ZGEN”), and
Serono S.A., a Swiss corporation (“Serono”).

 

RECITALS

 

A. Each party has an interest in the development of potential therapies for
human diseases.

 

B. ZGEN has certain rights to the Genes and the Genes have potential therapeutic
value.

 

C. ZGEN wishes to grant Serono, and Serono wishes to receive, the right, on the
terms set forth herein:

 

(i) to evaluate the therapeutic value of proteins expressed by the Genes by
performing research in pursuit of a Medical Hypothesis;

 

(ii) to perform research relating to a Gene for which a Medical Hypothesis is
formed to gather information to support the designation of a Lead or Target
related to the Gene, which research may be conducted in collaboration with ZGEN
or by Serono on its own; and

 

(iii) to acquire rights for the development and commercialization of a Lead or
Target for which Serono performed research.

 

AGREEMENT

 

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

 

ARTICLE ONE

Definitions and Terminology

 

1.1 Definitions

 

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

 

1.2 Terminology

 

Where words and phrases are used herein in the singular, such usage is intended
to include the plural forms where appropriate to the context, and vice versa.
The words “including,” “includes” and “such as” are used in a non-limiting sense
and have the same meaning as “including without limitation” and “including, but
not limited to.” References to Articles, Sections, Subsections and paragraphs
are to the same with all their subparts as they

 

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appear in this Agreement. “Herein” means anywhere in this Agreement. “Hereunder”
and “hereto” mean under or pursuant to any provision of this Agreement. The
Article and Section headings contained herein are for reference only and shall
not be considered a part of this Agreement, nor shall they in any way affect the
interpretation hereof. All references to dollars or $ are to the currency of the
U.S.A. All references to time are to the time in Seattle, Washington, U.S.A.

 

ARTICLE TWO

Coordination of the Alliance

 

2.1 Steering Committee

 

2.1.1 Formation of Steering Committee

 

(a) The parties’ collaboration shall be governed by a steering committee (the
“Steering Committee”). Each party shall appoint its representatives on the
initial Steering Committee within thirty (30) days following the Effective Date
and shall promptly thereafter notify the other party of such appointment.

 

(b) The Steering Committee shall have a total of six (6) members. ZGEN and
Serono shall each appoint three (3) members. If at any time a vacancy occurs for
any reason, the party that appointed the prior incumbent shall as soon as
reasonably practicable appoint a successor. Each party shall promptly notify the
other party of any substitution of another person as its appointee on the
Steering Committee.

 

2.1.2 Roles and Responsibilities

 

The Steering Committee shall be responsible for:

 

(a) Review and approval of a Medical Hypothesis for a Gene.

 

(b) Review and approval of the Research Plan and Budget for a Gene.

 

(c) Monitoring the use of a Third Party’s intellectual property under Section
2.3.

 

(d) Designation of Leads and Targets and facilitating the exercise of Option
Rights pursuant to Section 5.2, including determining whether a Lead or Target [
* ] licensed Lead or Target.

 

(e) Resolution of disputes occurring at the Research Team level or between the
parties’ respective Patent Contacts.

 

The Steering Committee may, on its own initiative and at any time, act or
reverse action, within the scope of the Research Team’s or Patent Contacts’
responsibilities.

 

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[ * ] Confidential Treatment Requested

 

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2.1.3 Meetings and Communications

 

The Steering Committee shall meet at least semi-annually at mutually agreed upon
times and locations. Unless otherwise agreed, the location of such meetings will
alternate between the parties’ headquarters. Meetings shall take place in
person, by videoconference or by telephone conference, as mutually agreed by the
parties. There shall be an agenda for each meeting of the Steering Committee,
and written minutes of each meeting shall be taken and shall include the issues
discussed and action items, if any, arising from such meeting. Meeting minutes
shall be submitted to the members of the Steering Committee. Each face-to-face
meeting of the Steering Committee shall include a review and approval (or
amendment) of minutes from the prior meeting and of all actions taken through
interim communications.

 

2.1.4 Decision Making; Formalities

 

(a) All official actions, decisions or rulings of the Steering Committee under
this Agreement must receive the approval of four (4) members either in writing
(including by email or facsimile) or by vote at a meeting of the Steering
Committee, and all significant actions, decisions or rulings shall subsequently
be entered into the minutes of meetings of the Steering Committee.

 

(b) The parties intend that, to the maximum extent practicable, they shall reach
decisions hereunder cooperatively through the deliberations of the Steering
Committee. If a decision cannot be made in accordance with this Section 2.1.4,
either of the parties may institute the procedure described in Article Fifteen.

 

2.2 Research Leaders and Research Team

 

2.2.1 Research Leaders; Appointment; Role and Responsibilities

 

(a) Each party shall appoint its initial research leader to be responsible for
the day to day coordination of the parties’ efforts under this Agreement (each a
“Research Leader”) within thirty (30) days following the Effective Date and
shall promptly thereafter notify the other party of such appointment. If at any
time a vacancy occurs for any reason, the party that appointed the prior
incumbent shall as soon as reasonably practicable appoint a successor. Each
party shall promptly notify the other party of any substitution of another
person as its Research Leader.

 

(b) Subject to the Guiding Principles, the Research Leaders shall coordinate the
parties’ efforts under this Agreement, including the performance of the parties’
respective Research Tasks. In particular the Research Leaders shall review and,
subject to Sections 2.3 and 9.4, approve any proposed use of a Third Party’s
products, materials or services in a Research Project, and the related costs and
expenses as Research Costs, whether under an existing or a proposed new Third
Party Agreement. The Research Leaders shall communicate with each other as often
and by such media as they deem appropriate but in no case less than quarterly.

 

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2.2.2 Formation of Research Team

 

(a) The Research Leaders shall form the initial research team to manage the
research to be conducted hereunder (the “Research Team”) by the thirtieth (30th)
day following their appointment as the Research Leaders.

 

(b) Those serving on the Research Team must be approved by the Steering
Committee. The Research Team may have any number of members as may be approved
by the Steering Committee. While the parties need not be equally represented in
number of members on the Research Team, the Research Team will be co-led by the
two (2) Research Leaders.

 

(c) The Research Leaders may form additional Research Teams for distinct Genes;
provided that the individuals serving on the Research Team for a Gene may serve
on the Research Team for one or more different Genes.

 

2.2.3 Roles and Responsibilities

 

(a) The Research Team shall coordinate the exchange of information pursuant to
Section 3.1.3.

 

(b) The Research Team shall coordinate any interactions between the parties with
respect to evaluation of Genes prior to Medical Hypothesis.

 

(c) Within ninety (90) days after a Collaboration Election, the Research Team
shall prepare and submit to the Steering Committee for approval an initial
Research Plan and Budget directed at gathering information relating to the Gene
to support the designation of a Lead or Target. The initial Research Plan and
Budget shall cover the remainder of the then current calendar year and the whole
of the immediately following calendar year. As appropriate from time to time and
not less often than annually, the Research Team shall prepare and submit to the
Steering Committee for approval proposed updates and amendments to the Research
Plan and Budget; provided that an update or amendment may not extend the
Research Term for the Gene.

 

(d) Subject to the Guiding Principles, the Research Team shall under the
direction of the Research Leaders plan the Research Tasks of the parties,
establish and monitor timetables for the conduct of the Research Tasks, select
entities or individuals, including Serono, ZGEN or Third Party contractors, to
perform Research Tasks, and otherwise monitor compliance with the Research Plan
and Budget.

 

(e) The Research Team shall periodically review the information gathered
relating to a Gene to assess whether a Lead or Target may be designated and make
recommendations to the Steering Committee promptly after the Research Team
considers that a Lead or Target may be designated.

 

(f) Following a Collaboration Election with respect to a Gene, the Research Team
shall submit to the Steering Committee a full written status report with respect
to such Gene on a semi-annual basis during the Research Term. A status report
shall cover the then-current status, the results achieved, the problems
encountered and other pertinent material information relating to the designation
of a Lead or Target related to such Gene.

 

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2.2.4 Meetings and Communications

 

The Research Team shall meet as often as is deemed necessary by the Research
Leaders but in no case less than quarterly. Meetings shall take place in person,
by videoconference or by telephone conference, as mutually agreed by the
Research Leaders. There shall be an agenda for each meeting of the Research
Team, and written minutes of each meeting shall be taken and shall include the
issues discussed and action items, if any, arising from such meeting. Meeting
minutes shall be submitted to the members of the Research Team and the Steering
Committee.

 

2.2.5 Decision Making; Formalities

 

All official actions, decisions or rulings of the Research Team under this
Agreement must receive the approval of the two (2) Research Leaders, either in
writing (including by email or facsimile) or by vote at a meeting of the
Research Team, and all significant actions, decisions or rulings shall
subsequently be entered into the minutes of meetings of the Research Team. In
the absence of such mutual approval, either Research Leader may by formal
written notice to the Steering Committee declare the existence of a dispute at
the Research Team level and thereby request that such dispute be resolved by the
Steering Committee.

 

2.3 Use of Third Party Intellectual Property; Reach Through Royalties

 

Neither party shall knowingly incur a financial obligation to a Third Party
payable in connection with the subsequent development or sale of a therapeutic
product related to a Gene whether by using the intellectual property of a Third
Party in the evaluation of the protein expressed by the Gene or as part of the
Research Project or otherwise without providing the Steering Committee with
prior written notice. Unless the Steering Committee decides the costs and
expenses are Research Costs, all costs and expenses shall be borne by the party
incurring the obligation. If a party becomes aware of a financial obligation
described in this Section 2.3 as to which no notice was provided to the Steering
Committee, it shall notify the Steering Committee of the event promptly after it
becomes aware thereof.

 

ARTICLE THREE

Evaluation of Genes and Selection for Collaborative Research

 

3.1 Evaluation prior to Medical Hypothesis

 

3.1.1 Parties’ Rights to Independently Evaluate

 

(a) During the Evaluation Term, each party may, in accordance with this
Agreement and at its own cost and expense, evaluate the therapeutic utility of
the proteins expressed by each Non-Core Gene using any research methods or tools
that it deems appropriate. Subject to Section 3.1.2, only ZGEN may evaluate the
ZGEN Core Genes.

 

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(b) Subject to Section 3.2, the parties shall have no obligation to collaborate
regarding the evaluation of the therapeutic utility of the protein expressed by
any Gene.

 

(c) At least on a semi-annual basis via a meeting of the Research Leaders, each
party shall keep the other apprised as to the status of its evaluation of the
therapeutic utility of the proteins expressed by each Gene, in particular
reporting any material results achieved, problems encountered and other
pertinent material information. Such meetings shall take place by such means (in
person, by videoconference or by telephone conference) and at such times and
locations as mutually agreed by the Research Leaders. Written minutes of each
meeting shall be taken and shall include the issues discussed and action items,
if any, arising from such meeting. In calendar year 2006, one such semi-annual
meeting will occur during the third quarter.

 

3.1.2 ZGEN Core Genes

 

(a) ZGEN anticipates advancing the ZGEN Core Genes to Medical Hypothesis, at its
sole cost and expense. Therefore, except as set forth in Subsection (b), Serono
shall not evaluate the therapeutic utility of the proteins expressed by a ZGEN
Core Gene during the Evaluation Term. [ * ].

 

(b) ZGEN may by written notice to Serono remove a Gene’s designation as a ZGEN
Core Gene and allow Serono to evaluate the therapeutic utility of the proteins
it expresses during the Evaluation Term.

 

3.1.3 Initial Transfer

 

Promptly following the Effective Date, the Research Team shall develop a plan
whereby the parties shall disclose to each other ZGEN Enabling Technology and
Serono Enabling Technology, respectively.

 

3.2 Selection for Collaborative Research at Medical Hypothesis

 

3.2.1 Notice of Medical Hypothesis to the Other Party and Novo

 

(a) Each party’s Research Leader shall provide prompt written notice to the
other Research Leader when the party he or she represents has formed a Medical
Hypothesis for a Gene. The notice shall summarize in writing the information
relating to the Medical Hypothesis set forth in Exhibit B. The Research Leaders
shall submit the notice to the Steering Committee for approval within [ * ] of
receipt, and the Steering Committee shall consider the Medical Hypothesis within
[ * ] thereafter and approve or give reasons for withholding approval of the
Medical Hypothesis for the Gene.

 

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[ * ] Confidential Treatment Requested

 

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(b) If ZGEN considers that a Medical Hypothesis exists for a Gene, ZGEN shall be
free to [ * ]. If a Medical Hypothesis is acceptable [ * ] approved by the
Steering Committee.

 

(c) ZGEN shall be responsible for all communications with Novo relating to [ *
]. Simultaneous with its communication to Novo, ZGEN will report to Serono all
material information that is communicated by ZGEN to Novo relating to [ * ]
disclosed in accordance with the Novo Agreement, as well as each Definitive
Response or Extension Response [ * ] and notice of any extension of the option
period under Section 4.3.3 of the Novo Agreement.

 

3.2.2 Collaboration Election; Procedure

 

(a) By the [ * ] after the later of the day on which:

 

(i) the Steering Committee approves a Medical Hypothesis for a Gene; and

 

(ii) ZGEN gives Serono notice of a Definitive Response for such Gene;

 

Serono shall indicate in writing whether it wishes to perform research relating
to the Gene to gather information to support the designation of a related Lead
or Target. [ * ] after receipt of a notice from Serono indicating a wish to
perform research, ZGEN shall indicate in writing whether it wishes to
collaborate in such research.

 

(b) All research relating to a Gene for which a Collaboration Election is made
shall be conducted in accordance with Article Four.

 

3.2.3 No Collaboration Election Because ZGEN Does Not Wish to Perform Research

 

(a) If Serono (but not ZGEN) wishes to perform research relating to a Gene for
which a Medical Hypothesis is approved to support the designation of a related
Lead or Target, it may do so at its sole cost and expense during the Research
Term. Serono shall submit to ZGEN a written status report on a semi-annual basis
during the Research Term. A status report shall cover the then-current status,
the results achieved, the problems encountered and other pertinent material
information relating to the designation of a Lead or Target related to the Gene.
Serono shall [ * ] to gather information relating to the Gene in order to
support the designation of a related Lead or Target, [ * ]. During the Research
Term, ZGEN will provide to Serono full and prompt disclosure of any new ZGEN
Enabling Technology described in paragraph 76(a)(i) or to be transferred
pursuant to paragraph 76(a)(iii) of Exhibit A, including any invention
disclosures submitted to its patent department which disclose such new ZGEN
Enabling Technology.

 

(b) If Serono subsequently exercises its Option Rights as to a Lead or Target
related to a Gene for which it performed research without ZGEN under Subsection
(a), the parties shall

 

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[ * ] Confidential Treatment Requested

 

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enter into an Exclusive License Agreement with respect to such Lead or Target,
i.e., ZGEN shall have no right to enter into a Co-Development/Co-Promotion and
License Agreement with respect to such Lead or Target.

 

(c) Serono may terminate research relating to a Gene for which it performs
research without ZGEN under Subsection (a) at any time before a Lead or Target
related to the Gene is designated by giving ZGEN written notice, which shall be
effective immediately upon receipt by ZGEN. On the effective date of Serono’s
termination of research with respect to such Gene, the parties shall have the
Wind Down Rights and Obligations with respect to such Gene.

 

(d) If ZGEN believes that Serono has failed [ * ] with respect to the
performance of research relating to a Gene as required by Subsection (a), ZGEN
shall deliver a written notice to Serono stating that Serono has failed [ * ]
and ZGEN’s reasons for such belief. Unless Serono earlier provides written
notice disputing ZGEN’s assertion, effective on the [ * ] following Serono’s
receipt of ZGEN’s notice, the parties shall have the Wind Down Rights and
Obligations with respect to such Gene. If Serono timely provides notice of a
dispute, then notwithstanding Section 15.4, such dispute shall be resolved in
accordance with Sections 15.1 through 15.3, and, if such dispute is finally
resolved in ZGEN’s favor, the parties shall have the Wind Down Rights and
Obligations with respect to such Gene. If such dispute is finally resolved in
Serono’s favor, Serono shall retain all its rights and obligations hereunder
with respect to such Gene.

 

3.2.4 No Collaboration Election Because Serono Does Not Wish to Perform Research

 

If Serono does not wish to perform research relating to a Gene for which a
Medical Hypothesis is approved to support the designation of a related Lead or
Target, the parties shall have the Wind Down Rights and Obligations with respect
to such Gene.

 

3.3 Expiration of the Evaluation Term

 

If, on expiration of the Evaluation Term for a Gene, a Medical Hypothesis for
the Gene has not been formed, either:

 

(a) Serono may exercise its Option Rights with respect to any potential Lead or
Target related to the Gene (subject to, in the case of ZGEN Core Genes, the Cap)
on the financial terms outlined as if such potential Lead or Target (as
appropriate) related to the Gene met the stated criteria and had been
designated; or

 

(b) the parties shall have the Wind Down Rights and Obligations with respect to
such Gene.

 

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ARTICLE FOUR

Collaborative Research Following a Collaboration Election

 

4.1 Guiding Principles

 

The parties intend to conduct any research relating to a Gene for which a
Collaboration Election is made in accordance with the following principles
(“Guiding Principles”): joint governance, collaboration, joint decision-making,
shared access and responsibility and shared opportunity.

 

4.2 Efforts; Cooperation

 

(a) Each party shall [ * ] gather information relating to a Gene for which a
Collaboration Election is made in order to support the designation of a Lead or
Target based on such Gene, including performing its Research Tasks in accordance
with the Research Plan and Budget for the Gene.

 

(b) Each party shall cooperate with and provide reasonable support to the other
party, as requested by the other party, in connection with the performance of
its Research Tasks.

 

(c) Each party shall be responsible for the selection and supervision of its
personnel who are assigned any Research Tasks pursuant to this Agreement.

 

4.3 Exchange of Technology

 

During the Research Term, Serono and ZGEN will each provide to the other party
full and prompt disclosure of any new Serono Enabling Technology, ZGEN Enabling
Technology or Project Technology Controlled by such party, including any
invention disclosures submitted to its patent department which disclose such new
Serono Enabling Technology, ZGEN Enabling Technology or Project Technology.

 

4.4 Research Plan and Budget

 

The Research Plan and Budget shall describe the Research Tasks and allocate them
between the parties in accordance with the Guiding Principles.

 

4.5 Shared Research Costs

 

4.5.1 Cost Sharing Ratio

 

All Research Costs incurred during the Research Term and pursuant to the
Research Plan and Budget shall be funded and borne [ * ] percent ([ * ]%) by
Serono and [ * ] percent ([ * ]%) by ZGEN, regardless of which party is
allocated, performs or incurs the cost of one or more of the relevant Research
Tasks. Notwithstanding the foregoing, in the event [ * ], the amount of the
Research Costs to be funded and borne by the parties pursuant to the Research
Plan and Budget shall be [ * ] of the Research Costs [ * ].

 

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4.5.2 Cap on Research Costs

 

The Research Plan and Budget for a Gene shall specify an annual maximum amount
of Research Costs that may be incurred in connection with research on the Gene,
subject to appropriate adjustment of such Research Plan and Budget by the
Steering Committee from time to time. Neither party shall be obliged to incur or
reimburse costs in excess of its cost sharing portion of such maximum amount of
Research Costs.

 

4.5.3 Quarterly Accounting and Reconciliation

 

(a) Each party shall submit to the Research Leaders at least quarterly (or on
such other schedule as may be determined by the Research Team) a written and
itemized accounting of the expenditures, costs, and other resources actually
devoted by such party to Research Tasks in accordance with the Research Plan and
Budget since the last such accounting. The parties’ accountings shall be
considered to be Information subject to the confidentiality restrictions of
Article Eleven. The parties’ accountings will be reviewed and approved in whole
or in part (and/or returned in whole or in part to a party for correction or
adjustment prior to resubmission) by action of the Research Leaders within
thirty (30) days of receipt. The Research Leaders will notify each party on a
quarterly basis of the results of such reviews.

 

(b) To the extent that both parties’ accountings for prior expenditures, costs
and other resources for the Research Plan and Budget are approved by the
Research Leaders, the Research Leaders will direct by a quarterly invoice (with
copies to both parties) that the party that has borne less than its share of the
aggregate Research Costs shall reconcile the disparity by paying to the other
party an amount sufficient to bring the respective amounts borne by each party,
as of the end of the period covered by the accountings, back to the ratio set
forth in Section 4.5.1. Any such invoice shall be payable by Serono or ZGEN, as
the case may be, to the other party in accordance with Article Eight and within
thirty (30) days after receipt of the invoice.

 

(c) The Research Costs shall be accounted for by each party in accordance with
the cost accounting principles described in Exhibit C.

 

4.6 Third Party Research Fees

 

No Third Party Research Fees shall be allowable as part of the Research Costs
borne by a party hereto except to the extent that the same are:

 

(a) payable by Serono under Section 9.4 (whether or not Subsection (b) of this
Section 4.6 applies); or

 

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(b) within the Research Plan and Budget and allowed by the Steering Committee
under Section 2.3 or the Research Leaders under Section 2.2.1. All other Third
Party Research Fees, if any, shall be borne solely by the party hereto (or its
Affiliate) that is party to the applicable Third Party Agreement.

 

4.7 Serono’s Right to Opt Out of Collaborative Research

 

Serono may opt out of research relating to a Gene for which a Collaboration
Election was made at any time before a Lead or Target related to the Gene is
designated by giving ZGEN written notice, which shall be effective [ * ] after
receipt by ZGEN. On the effective date of Serono’s opt out with respect to such
Gene:

 

(a) Serono’s obligation to contribute to future Research Costs shall cease.
However, Serono shall continue to be responsible for its pro rata share of
Research Costs incurred during the [ * ] period prior to the effective date of
its opt out in accordance with the Research Plan and Budget in effect on the
date the opt out notice was given.

 

(b) The parties shall have the Wind Down Rights and Obligations.

 

4.8 ZGEN’s Right to Opt Out of Collaborative Research

 

ZGEN may opt out of research relating to a Gene for which a Collaboration
Election was made at any time before a Lead or Target related to the Gene is
designated by giving Serono written notice, which shall be effective [ * ] after
receipt by Serono. On the effective date of ZGEN’s opt out with respect to such
Gene:

 

(a) ZGEN’s obligation to contribute to future Research Costs shall cease.
However, ZGEN shall continue to be responsible for its pro rata share of
Research Costs incurred during the [ * ] period prior to the effective date of
its opt out in accordance with the Research Plan and Budget in effect on the
date the opt out notice was given.

 

(b) If Serono subsequently exercises its Option Rights as to the Lead or Target
related to such Gene, the parties shall enter into an Exclusive License
Agreement with respect to such Lead or Target, i.e., ZGEN shall have no right to
enter into a Co-Development/Co-Promotion and License Agreement with respect to
such Lead or Target.

 

4.9 Expiration of the Research Term

 

If, on expiration of the Research Term for a Gene, a Lead or Target related to
the Gene has not been designated, either:

 

(a) Serono may exercise its Option Rights with respect to any potential Lead or
Target related to the Gene (subject to, in the case of ZGEN Core Genes, the Cap)
on the financial terms outlined as if such potential Lead or Target (as
appropriate) related to the Gene met the stated criteria and had been
designated; or

 

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(b) the parties shall have the Wind Down Rights and Obligations with respect to
such Gene.

 

ARTICLE FIVE

Option Rights

 

5.1 Option Rights

 

Subject to:

 

(a) the terms of this Agreement, including, in the case of ZGEN Core Genes, the
Cap; and

 

(b) the rights of Novo under the Novo Agreement and License Agreements entered
into pursuant thereto in accordance with Section 5.4,

 

Serono shall have exclusive rights (“Option Rights”) to acquire rights and
licenses to any Lead or Target that has been designated during the Research Term
or any potential Lead or Target described in Sections 3.3 or 4.9. ZGEN will not
grant any rights or licenses under the ZGEN IP to any such Lead or Target unless
Serono has not exercised its Option Rights with respect to such Lead or Target
and such Option Rights have expired. The procedure for the exercise of these
Option Rights is set forth in Section 5.2 below.

 

5.2 Procedure

 

(a) Once sufficient information with respect to a Gene has been generated to
support the designation of a Lead or Target, the Research Team or, if Serono is
performing research on the Gene alone under Section 3.2.3, Serono will summarize
in writing all available information relating to a putative Lead or Target and
submit it to the Steering Committee for approval, and the Steering Committee
shall consider the designation of the Lead or Target within [ * ] thereafter and
approve or give reasons for withholding the designation. A notice relating to a
Lead shall summarize in writing the information set forth in Exhibit H and a
notice relating to a Target shall summarize in writing the information set forth
in Exhibit I.

 

(b) To exercise its Option Rights with respect to a Lead and/or Target, Serono
must provide written notice to ZGEN by the [ * ] after the later of the day on
which:

 

(i) the Steering Committee designates such Lead or Target; and

 

(ii) ZGEN gives Serono notice of a Definitive Response relating to the Gene.

 

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Notwithstanding the foregoing, if [ * ] Definitive Response extends the period [
* ], then (A) ZGEN shall, pursuant to [ * ] at Serono’s request and subject to
Serono’s agreement to exercise its Option Rights [ * ] determine whether it
wishes to obtain a license for the Gene, and (B) the period for Serono’s
exercise of its Option Rights shall be extended until the [ * ] after the day on
which ZGEN gives Serono notice of a further Definitive Response with respect to
such Gene.

 

(c) If Novo decides to exercise its right to license a Gene under the Novo
Agreement, then Serono may exercise its Option Rights with respect to a Lead or
a Target based on such Gene, but the territory for any resulting
Co-Development/Co-Promotion and License Agreement or Exclusive License Agreement
shall be restricted to the U.S.A. and the EX-U.S.A. If Novo does not exercise
its right to license a Gene under the Novo Agreement, then Serono may exercise
its Option Rights with respect to a Lead or a Target based on such Gene, but the
territory for any resulting Co-Development/Co-Promotion and License Agreement or
Exclusive License Agreement shall be worldwide.

 

(d) Serono may exercise its Option Rights with respect to any Gene by indicating
that it wishes to exercise such rights for a Lead based on such Gene or a Target
based on such Gene, or both. If Serono exercises such rights for both a Target
and a Lead based on the same Gene, then ZGEN and Serono (or its designated
Affiliate) will enter into two separate agreements, but the [ * ] under the
agreement for the Target shall [ * ] against the [ * ] under the agreement for
the Lead. If ZGEN and Serono (or its designated Affiliate) enter into an
agreement with respect to a Target and subsequently enter into one or more
agreements with respect to a Lead or a Target directed at developing licensed
products that bind to or inhibit the activity of the Target that was the subject
of the first agreement, then the [ * ] under all such agreements shall be deemed
to be satisfied by the [ * ] any one of such agreements.

 

(e) Subject to Section 3.2.3 and Section 4.8, [ * ] after receipt of Serono’s
notice exercising its Option Rights, ZGEN will notify Serono whether ZGEN and
Serono (or its designated Affiliate) will enter into a
Co-Development/Co-Promotion and License Agreement or an Exclusive License
Agreement. Within [ * ] after receipt of Serono’s notice exercising its Option
Rights, ZGEN shall provide Serono with a draft Co-Development/Co-Promotion and
License Agreement or Exclusive License Agreement in the form set forth in
Exhibit J or Exhibit K hereto, as applicable and incorporating the financial
terms set forth in Subsection (f) below. ZGEN and Serono (or its designated
Affiliate) shall negotiate, to the extent applicable, and execute and deliver
such agreement within [ * ] of its receipt by Serono.

 

(f) Depending on whether the Gene is a Non-Core Gene or a ZGEN Core Gene, the
financial terms for the draft Co-Development/Co-Promotion and License Agreement
or Exclusive License Agreement described in Subsection (e) shall be the
financial terms set forth in Exhibits D, F, E or G as indicated below:

 

   

Co-Development/

Co-Promotion and License

Agreement

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Exclusive License

Agreement

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Non-Core Gene

  Exhibit D   Exhibit E

ZGEN Core Gene

  Exhibit F   Exhibit G

 

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(g) If Serono does not exercise its Option Rights with respect to a Lead or
Target in accordance with the terms and conditions set forth above, the parties
shall have the Wind Down Rights and Obligations with respect to the related
Gene.

 

5.3 Licenses to Third Parties

 

(a) Neither party will, without the prior written consent of the other party,
grant to a Third Party a license or other rights with respect to a Gene under
the Serono Enabling Technology, ZGEN Enabling Technology or Project Technology,
as applicable, during the Evaluation Term or Research Term. Serono hereby
consents to the grant by ZGEN of one or more licenses to Novo in accordance with
the Novo Agreement and in accordance with Section 5.4.

 

(b) Except for ZGEN Core Genes [ * ], ZGEN and Serono shall share equally in
remuneration for any of the Serono Enabling Technology, the ZGEN Enabling
Technology or the Project Technology, respectively, licensed by ZGEN or Serono
to a Third Party during the Evaluation Term or Research Term in accordance with
Subsection (a). For the avoidance of doubt, [ * ] does not include the [ * ]
paid to ZGEN under the [ * ].

 

5.4 Terms of the Novo Agreement

 

Serono acknowledges that, in certain circumstances outlined in the Novo
Agreement, ZGEN will be obliged to grant licenses to Novo to develop and
commercialize therapeutic products related to Genes. The foregoing licenses are
to be on the terms outlined in the Novo Agreement and otherwise negotiated by
ZGEN and Novo; provided, however, that ZGEN will consult with Serono with
respect to any license of the [ * ] to Novo. The terms of any license with Novo
related to Genes shall in no way be inconsistent with the terms of this
Agreement and shall not in any way be deemed to modify the terms of this
Agreement except as explicitly provided herein.

 

5.5 Designation of U.S.A. Vendor

 

Pursuant to any Co-Development/Co-Promotion and License Agreement entered into
by Serono (or its designated Affiliate) and ZGEN pursuant to this Agreement or
the Master

 

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Agreement, either Serono (or its designated Affiliate) or ZGEN shall be
designated the U.S.A. Vendor of a Licensed Product as follows (all capitalized
terms used in this Section 5.5 and not defined in this Agreement are defined in
the Co-Development/Co-Promotion and License Agreement):

 

(a) For Licensed Products with respect to which Serono has rights in the ROW,
Serono shall be the U.S.A. Vendor of the [ * ] and ZGEN shall be the U.S.A.
Vendor of the [ * ], unless the parties agree to depart from such [ * ]
appointment, in which case the parties shall also agree on the impact [ * ] of
such departure, i.e., whether a party loses the right to be a U.S.A. Vendor or [
* ] is restarted.

 

(b) For any Licensed Product with respect to which [ * ], Serono shall be the
U.S.A. Vendor.

 

ARTICLE SIX

Right of Negotiation for an [ * ] Agreement

 

6.1 Negotiation Right

 

ZGEN shall not, at any time after the Effective Date of the Master Agreement and
prior to the [ * ] of the Effective Date, enter into an agreement with a Third
Party whereby the Third Party gains any rights to any of the [ * ] Gene, the [ *
] Protein, the [ * ] Gene, the [ * ] Protein, the [ * ] Gene or the [ * ]
Protein in North America (but not rights that relate solely to (i) research
purposes, (ii) a contract whose only purpose is to retain personnel to be
utilized as a sales force (i.e., a contract for a contract sales organization),
(iii) a contract with a Distributor or (iv) a manufacturing arrangement),
without first providing Serono with a right to negotiate an [ * ] Agreement
pursuant to Section 6.2 (the “Negotiation Right”).

 

6.2 Conduct of Negotiations

 

ZGEN shall notify Serono in writing of its desire to enter into an [ * ]
Agreement with respect to any or all of the [ * ] Gene, the [ * ] Protein, the [
* ] Gene, the [ * ] Protein, the [ * ] Gene or the [ * ] Protein (the
“Negotiation Notice”). If Serono exercises the Negotiation Right in writing
within [ * ] following receipt of the Negotiation Notice:

 

(a) ZGEN shall provide to Serono, or otherwise make readily available to Serono,
all material data that (i) relates to those of the [ * ] Gene, the [ * ]
Protein, the [ * ] Gene, the [ * ] Protein, the [ * ] Gene and the [ * ] Protein
that are the subject of the Negotiation Notice and (ii) is reasonably available
to ZGEN and its Affiliates and necessary for Serono to evaluate such genes and
proteins; and

 

(b) ZGEN and Serono shall exclusively negotiate in good faith for a period of up
to [ * ] commencing on the date of the Negotiation Notice a definitive [ * ]
Agreement relating

 

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to those of the [ * ] Gene, the [ * ] Protein, the [ * ] Gene, the [ * ]
Protein, the [ * ] Gene and the [ * ] Protein that are the subject of the
Negotiation Notice. If, at the end of the [ * ] period, ZGEN and Serono are
unable to agree on terms for a definitive [ * ] Agreement, ZGEN shall be free to
initiate discussions and conclude an [ * ] Agreement with one or more Third
Parties, with no further obligation to Serono under this Agreement with respect
only to such of the [ * ] Gene, the [ * ] Protein, the [ * ] Gene, the [ * ]
Protein, the [ * ] Gene or the [ * ] Protein that were the subject of the
Negotiation Notice.

 

ARTICLE SEVEN

Payment

 

In partial consideration for ZGEN’s entering into this Agreement and granting
the rights and licenses hereunder, Serono shall pay to ZGEN a fee of Twenty
Million Dollars ($20,000,000) within thirty (30) days after the Effective Date.
The foregoing fee shall be noncreditable against any other amounts payable by
Serono to ZGEN hereunder.

 

ARTICLE EIGHT

Records, Reporting, Payment and Audits

 

8.1 Form of Payment; Currency Conversion

 

All monies due from one party to the other hereunder shall be paid in United
States Dollars by wire transfer or other method designated from time to time by
the receiving party. The rate of exchange to be used shall be the average rate
of exchange for the thirty (30) days preceding the date of payment for the
conversion of local currency to United States Dollars as published by The Wall
Street Journal (or if it ceases to be published, a comparable publication to be
agreed upon by the parties) or, for those countries for which such average
exchange rate is not published by The Wall Street Journal, the exchange rate
used by Serono for its own corporate consolidation purposes.

 

8.2 Late Payment

 

Without limitation on other available rights or remedies, all amounts payable
under this Agreement will bear interest at the rate of one percent (1%) per
month or the maximum legal rate, whichever is less, from the date due through
the date of payment.

 

8.3 Records

 

Both Serono and ZGEN shall keep true and accurate records of revenues,
deductions from revenue, expenses and employees’ time devoted to the
collaborative effort undertaken pursuant to this Agreement and any Research Plan
and Budget for a Gene, such that their Research Costs and Third Party Research
Fees will be accurately accounted for and determined hereunder. All such records
shall be retained for a period of at least two (2) years following the end of
the calendar year to which they relate.

 

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8.4 Audits

 

At the other party’s request, Serono and ZGEN shall permit the records kept and
maintained pursuant hereto to be inspected at any time during regular business
hours, but not more often than once per calendar year, by an independent public
accountant appointed by the other party for this purpose and reasonably
acceptable to the audited party. The independent public accountant shall report
to the auditing party and the party under audit only its conclusions regarding
the amount of the allowed costs or deductions and/or the payments due hereunder.
The parties shall mutually determine a general strategy for such audit in
advance of its conduct. Any such audit shall be at the expense of the party
requesting the same, unless the audit concludes that, with respect to the period
under audit, the party under audit overstated or understated any amounts to such
an extent that a payment made or called for under this Agreement was more than
five percent (5%) in error and in the favor of the party under audit, in which
event if such conclusion is undisputed, the party under audit shall pay or
reimburse the auditing party for the reasonable expenses of such audit. ZGEN and
Serono agree that unless covered by one or more exceptions described in Sections
11.2(a) - (e), all information subject to audit under this Section 8.4 is
confidential and that each Party shall cause its accounting firm to retain all
such information subject to the confidentiality restrictions of Article Eleven.

 

8.5 Payments Based on Audit Results

 

If the independent public accountant makes an undisputed determination that any
amounts to be paid hereunder have been under-paid or over-paid, the party that
benefited therefrom shall promptly make a payment to the other party such that
all amounts paid hereunder shall conform to the amounts so determined to be
payable.

 

8.6 Withholding

 

If any amounts are required to be withheld or any taxes are required to be paid
on behalf of or with respect to any party hereto by reason of any payment to
such party by the other party, the payor may withhold such amounts and make the
tax payments so required. All such tax payments made on behalf of a party shall
be considered to be paid to such party for purposes of this Agreement. The party
withholding the same shall promptly secure and deliver to the other party
appropriate official receipts for the taxes withheld and other documents
necessary to enable such other party to claim appropriate foreign tax credits
for such taxes paid.

 

ARTICLE NINE

Licenses

 

9.1 License to Serono

 

Subject to Section 9.5 and the terms of this Agreement, ZGEN hereby grants to
Serono a nonexclusive license under the ZGEN IP to:

 

(a) evaluate the therapeutic utility of a protein expressed by a Non-Core Gene
during the Evaluation Term; and

 

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(b) perform Serono’s Research Tasks or perform research pursuant to Section
3.2.3 during the Research Term.

 

Unless separately licensed, Serono shall not use the ZGEN IP for any other
purpose, including [ * ].

 

9.2 License to ZGEN

 

Subject to Section 9.5 and the terms of this Agreement, Serono hereby grants to
ZGEN a nonexclusive license under the Serono IP to:

 

(a) evaluate the therapeutic utility of a protein expressed by a Gene during the
Evaluation Term; and

 

(b) perform ZGEN’s Research Tasks during the Research Term.

 

Unless separately licensed, ZGEN shall not use the Serono IP for any other
purpose, including [ * ].

 

9.3 Grant of Sublicenses and Use of Contractors

 

ZGEN and Serono shall each have the right to grant sublicenses under the
licenses granted in Sections 9.1 and 9.2 respectively or otherwise use
Contractors to perform this Agreement; provided that:

 

(a) any such sublicense or agreement shall be in writing and shall provide that:

 

(i) all intellectual property resulting from the sublicense or the Contractor’s
activities is [ * ] (as the case may be);

 

(ii) the grant of further sublicenses or subcontracts is prohibited; and

 

(iii) its scope is limited to the performance of this Agreement; and

 

(b) the party granting the sublicense or entering the agreement with a
Contractor shall not be relieved of its responsibilities and obligations
hereunder.

 

9.4 Licenses from Third Parties

 

If ZGEN licenses, or has licensed, ZGEN Enabling Technology from a Third Party,
ZGEN will notify Serono of any such licenses, and at the request of Serono and
where permitted

 

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by the Third Party Agreement, ZGEN will sublicense such rights to Serono for the
sole purpose of evaluating the therapeutic utility of the proteins expressed by
the Gene and performing Research Tasks or research pursuant to Section 3.2.3
relating to the Gene; provided that Serono [ * ] in connection with acquiring or
exercising the sublicensed rights, which [ * ] if incurred in connection with
the performance of Research Tasks. ZGEN shall be deemed not to Control the
applicable ZGEN Enabling Technology contemplated by this Section 9.4 until [ * ]
under this Section 9.4.

 

9.5 [ * ]

 

The license rights granted under Sections 9.1 and 9.2 shall not apply in the [ *
] until, on a Gene by Gene basis, the earlier of:

 

(a) [ * ] election to waive all [ * ] to license a Gene;

 

(b) the expiration of the period [ * ] to exercise its rights [ * ] to license a
Gene; or

 

(c) [ * ] election to exercise its rights [ * ] to license a Gene for a field
other than [ * ] and the expiration of [ * ] without [ * ] exercising its right
[ * ] to take a license [ * ].

 

9.6 No Other Rights

 

Except for the rights expressly granted under this Article Nine, Article Five
and Article Six, no right, option or license is granted or implied to Serono or
ZGEN under any patent or other intellectual property or to any other product, in
any field, or in any geographic territory. Neither party makes any grant of
rights by implication.

 

9.7 Use of Names, Trade Names and Trademarks

 

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

 

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ARTICLE TEN

Intellectual Property Ownership, Prosecution and Enforcement

 

10.1 Intellectual Property Ownership

 

ZGEN shall own any and all intellectual property covering ZGEN IP, Serono shall
own any and all intellectual property covering Serono IP, and ZGEN and Serono
shall jointly own any and all intellectual property covering Joint Project
Technology, in each case subject to the licenses granted hereunder. Regardless
of where an invention is discovered, developed or otherwise generated and
regardless of the laws of the country in which the patent application is filed,
laws of the United States shall apply to determine inventorship hereunder.

 

10.2 Patent Contacts for Gene

 

Each party shall designate its initial Patent Contact within thirty (30) days
following the Effective Date and shall promptly thereafter notify the other
party of such designation. If at any time a vacancy occurs for any reason, the
party that appointed the prior incumbent shall as soon as reasonably practicable
appoint a successor. Each party shall promptly notify the other party of any
substitution of another person as its Patent Contact. The Patent Contacts shall
have the responsibilities set forth in Section 10.3.3.

 

10.3 Prosecution and Maintenance

 

10.3.1 ZGEN IP

 

ZGEN shall be solely responsible, as it shall determine in its sole discretion
and at its own expense, for the filing and prosecution of any and all patent
applications with respect, in whole or in part, to any ZGEN IP (other than
ZGEN’s interest in Joint Project Technology, which is addressed in Section
10.3.3), for opposition, appeal, reexamination, reissue, revocation,
interference or other administrative proceedings with respect thereto, and for
the maintenance of any available patent protection with respect thereto.

 

10.3.2 Serono IP

 

Serono shall be solely responsible, as it shall determine in its sole discretion
and at its own expense, for the filing and prosecution of any and all patent
applications with respect, in whole or in part, to any Serono IP (other than
Serono’s interest in Joint Project Technology, which is addressed in Section
10.3.3), for opposition, appeal, reexamination, reissue, revocation,
interference or other administrative proceedings with respect thereto, and for
the maintenance of any available patent protection with respect thereto.

 

10.3.3 Joint Project Technology

 

ZGEN and Serono shall share responsibilities and decision making with regard to
patent matters relating to Joint Project Technology and shall share the costs of
filing, prosecution, oppositions, appeals, reexaminations, reissues,
revocations, interferences, other administrative proceedings and maintenance
with respect thereto on a fifty/fifty (50/50) basis. The Patent

 

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Contacts shall be responsible for assigning specific tasks to each of the
parties for the filing and prosecution of any and all patent applications, for
opposition, appeal, reexamination, reissue, revocation, interference or other
administrative proceedings, and for the maintenance of any available patent
protection with respect to any Joint Project Technology.

 

10.3.4 Patent Prosecution Party’s Efforts

 

(a) The “Patent Prosecution Party” means:

 

(i) with respect to patents and patent applications within the ZGEN IP (other
than Joint Project Technology), ZGEN;

 

(ii) with respect to patents and patent applications within the Serono IP (other
than Joint Project Technology), Serono; and

 

(iii) with respect to patents and patent applications within the Joint Project
Technology, the party appointed by the Patent Contacts on a patent-by-patent
basis.

 

(b) For each patent application, patent and proceeding described in this Section
10.3, the Patent Prosecution Party shall exert its Reasonable Commercial
Efforts, consistent with its customary practices with respect to its own
activities. However, with respect to Joint Project Technology, the Patent
Prosecution Party shall:

 

(i) deliver to the other party copies of communications between the Patent
Prosecution Party and relevant patent offices, promptly after receipt from, or
delivery to, such patent office; and

 

(ii) take the other party’s comments and suggestions, if any, into consideration
when framing responses and submissions to patent offices.

 

The Patent Prosecution Party shall have no obligation to solicit comments or
suggestions from the other party and shall have final authority over patent
strategy, including selection of jurisdictions in which to file patent
applications and the content of responses and submissions to patent offices.

 

10.4 Defense and Enforcement Actions

 

During the Term, each party shall, as soon as reasonably practicable after it
becomes aware of the relevant event, notify the other party of:

 

(a) any attack on the validity or enforceability of the Serono Enabling
Technology, ZGEN Enabling Technology or Project Technology;

 

(b) any infringement or misappropriation of the Serono Enabling Technology, ZGEN
Enabling Technology or Project Technology; or

 

(c) any certification filed under the U.S. Drug Price Competition and Patent
Term Restoration Act of 1984 claiming that any patent within the Serono Enabling
Technology, ZGEN Enabling Technology or Project Technology, is invalid or that
infringement of any such technology will not arise from the manufacture, use or
sale of any product by a Third Party.

 

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The Patent Prosecution Party shall have the sole right to respond to the
applicable event listed in Section 10.4. However, the parties may, on the
recommendation of the Patent Contacts and with the consent of the Patent
Prosecution Party, decide to pursue the Third Party jointly under mutually
agreeable conditions but, except where a party has an interest in Joint Project
Technology, the other party shall have no right under this Agreement to
intervene if the Patent Prosecution Party fails to take action in connection
with an event listed in this Section 10.4. In the case where an event listed in
this Section 10.4 relates to Joint Project Technology, if the Patent Prosecution
Party for the relevant patents fails to take reasonable action within ninety
(90) days after receiving notice of the claim (or twenty-one (21) days after the
filing date with respect to an event listed in Section 10.4(c)), then the other
party shall have the right to take such action, by counsel of its own choice and
at its own expense. Each party shall provide reasonable cooperation and
assistance as may be reasonably requested by the party taking any action
pursuant to this Section 10.4. For the sake of clarity, the other party shall
have no right to intervene if the patent owner or Patent Prosecution Party fails
to take action in connection with any patent that does not relate to Joint
Project Technology.

 

ARTICLE ELEVEN

Confidentiality; Materials; Publicity

 

11.1 Confidentiality and Non-Use

 

During the Term and for a period [ * ] thereafter each party shall maintain the
other party’s Information as confidential, using the same degree of care it uses
to protect its own confidential information. During the Term and at all times
thereafter, neither party shall use the other party’s Information, except for
the activities contemplated by this Agreement.

 

11.2 Exceptions

 

The obligations of Section 11.1 shall not apply to Information that:

 

(a) was known by the receiving party or its Affiliates prior to disclosure by
the disclosing party, as evidenced by prior written records;

 

(b) becomes part of the public domain through no fault of the receiving party or
its Affiliates;

 

(c) was obtained, on a non-confidential basis, by the receiving party or its
Affiliates from a Third Party having no direct or indirect obligation of
confidentiality to the disclosing party or its Affiliates;

 

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(d) was disclosed by the disclosing party to a Third Party on a non-confidential
basis; or

 

(e) is developed by the receiving party or its Affiliates independently of
disclosures made hereunder, as evidenced by written records.

 

11.3 Permitted Disclosures

 

Notwithstanding Section 11.1, Serono and ZGEN shall each be permitted to
disclose the other party’s Information:

 

(a) to its Affiliates, Contractors and sublicensees, or prospective Affiliates,
Contractors or sublicensees, and its licensors under Third Party Agreements, who
are subject to confidentiality requirements at least as stringent as those
contained herein;

 

(b) to its employees, and employees of its Affiliates, Contractors or
sublicensees who require the same for the purposes contemplated by this
Agreement, and who are subject to confidentiality requirements at least as
stringent as those contained herein;

 

(c) to its patent attorney or agent or any patent authority in any country as
shall be reasonably required for filing or prosecuting any patent application
with respect to any Patent Rights in accordance with Article Ten;

 

(d) in support of or in connection with any actions to defend or enforce any
Patent Rights in accordance with Article Ten;

 

(e) if such disclosure is required to meet the requirements of any stock
exchange or stock market or securities laws or regulations to which either party
may be subject;

 

(f) if such disclosure is required by any order of a court or other governmental
authorities of competent jurisdiction, but only after having provided the other
party with written notice within a period sufficiently prior to such disclosure
to permit the other party to apply for a protective order or take other
appropriate action to restrict such disclosure and, if disclosure is still
required, so far as reasonably practicable, having minimized the degree of such
disclosure and provided such disclosure is covered by conditions of
confidentiality; or

 

(g) to Novo in accordance with the Novo Agreement provided such disclosure is
covered by obligations of confidentiality.

 

11.4 Materials; Permitted Uses

 

Any Materials transferred by one party to the other pursuant to this Agreement
shall be used by the receiving party and its Affiliates, Contractors and
sublicensees solely for the purposes contemplated by and in accordance with this
Agreement. Any Affiliate, Contractor or sublicensee shall be bound by terms at
least as stringent as the confidentiality and non-use obligations hereunder with
respect to such Materials. Any person using Materials on behalf of the receiving
party will be advised of, and is subject to, the terms of this Section 11.4.

 

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11.5 Publications

 

Each party agrees that the parties’ personnel involved in a Research Project,
separately, together or with other authors, shall be permitted to present at
symposia and national or regional professional meetings, and to publish in
journals, theses, dissertations or otherwise the results of the Research
Project. The foregoing permission is subject to each party’s right (via the
relevant Research Leader) to receive copies of any proposed publication or
presentation in advance of the submission of such proposed publication or
presentation to a journal, editor, or other Third Party. The foregoing right
shall lapse as to publications relating to a Gene as to which the Wind Down
Rights and Obligations apply. Each party shall have [ * ] after receipt of said
copies to object to such proposed presentation or proposed publication either:

 

(a) because there is subject matter that either party desires [ * ] to [ * ] of
this Agreement; or

 

(b) because there is [ * ] which needs [ * ].

 

If either party makes an objection under Subsection (a) above, such subject
matter shall remain subject to Article Eleven and shall not be published or
otherwise disclosed without the written consent of both parties. If either party
makes an objection under Subsection (b) above, the parties shall negotiate a
mutually acceptable version, and both parties and such other authors (if any)
shall withhold such subject matter from such publication or presentation until [
* ] or, if earlier, the date [ * ] from the date of receipt of such objection
from either party.

 

11.6 Obligations of Confidentiality to Third Parties

 

Nothing herein or otherwise shall require any party to disclose information with
respect to which such party has an obligation of confidentiality to a Third
Party, but each party will exert its Reasonable Commercial Efforts to bring to
the attention of the Steering Committee any such Third Party restrictions as may
be relevant hereunder.

 

ARTICLE TWELVE

Representations, Warranties and Covenants

 

12.1 Representations, Warranties and Covenants of Serono

 

Serono hereby makes in favor of ZGEN the representations, warranties and
covenants set forth below.

 

12.1.1 Organization and Good Standing

 

Serono is a corporation duly organized, validly existing and in corporate good
standing under the laws of Switzerland and has the corporate and legal right,
title, authority and power to enter into and to perform this Agreement.

 

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12.1.2 Enforceability; Authority and No Current Conflicts

 

This Agreement is a legal and valid obligation binding upon Serono and
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors’ rights generally
and by general equitable principles. Serono has taken all necessary action to
authorize the execution, delivery and performance of this Agreement. The
execution, delivery and performance of Serono’s obligations under this Agreement
will not conflict with or result in a breach of or a default under any
agreements, contracts, commitments or other arrangements to which Serono is a
party or by which it or its properties are bound or violate any order, law or
regulation of any court, governmental authority or administrative or other
agency having authority over it.

 

12.1.3 Invention Agreements With Personnel

 

Serono and its Affiliates have in place with all of their officers and employees
who will perform this Agreement written agreements in proper form and substance
requiring the assignment to Serono or such Affiliate of all inventions made
during the course of their employment by Serono or such Affiliate and requiring
such individuals to maintain the confidentiality of Serono’s or such Affiliate’s
own information and information that is entrusted to Serono or such Affiliate in
confidence by others.

 

12.1.4 No Future Conflicts

 

Serono will not during the Term enter into any agreements, contracts,
commitments or other arrangements that could prevent Serono from meeting its
obligations hereunder.

 

12.1.5 Compliance With Laws

 

Serono will comply and will require its Affiliates, Contractors and sublicensees
to comply with all applicable laws and regulations in connection with the
performance of Serono’s obligations and other activities pursuant to this
Agreement; all applicable rules and regulations relating to the use of
Materials, including those relating to the use of human and animal subjects or
recombinant DNA; and all laws and regulations of Switzerland and any other
relevant country concerning any export or other transfer of technology, services
or products.

 

12.1.6 Authority to License

 

Serono has the right, power and authority to grant the rights and licenses
granted by Serono herein.

 

12.2 Representations, Warranties and Covenants of ZGEN

 

ZGEN hereby makes in favor of Serono the representations, warranties and
covenants set forth below.

 

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12.2.1 Organization and Good Standing

 

ZGEN is a corporation duly organized, validly existing and in corporate good
standing under the laws of the State of Washington, U.S.A., and has the
corporate and legal right, title, authority and power to enter into and to
perform this Agreement.

 

12.2.2 Enforceability; Authority and No Current Conflicts

 

This Agreement is a legal and valid obligation binding upon ZGEN and enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors’ rights generally and by general
equitable principles. ZGEN has taken all necessary action to authorize the
execution, delivery and performance of this Agreement. The execution, delivery
and performance of ZGEN’s obligations under this Agreement will not conflict
with or result in a breach of or a default under any agreements, contracts,
commitments or other arrangements to which ZGEN is a party or by which it or its
properties are bound or violate any order, law or regulation of any court,
governmental authority or administrative or other agency having authority over
it.

 

12.2.3 Invention Agreements With Personnel

 

ZGEN and its Affiliates have in place with all of their officers and employees
who will perform this Agreement written agreements in proper form and substance
requiring the assignment to ZGEN or such Affiliate of all inventions made during
the course of their employment by ZGEN or such Affiliate and requiring such
individuals to maintain the confidentiality of ZGEN’s or such Affiliate’s own
information and information that is entrusted to ZGEN or such Affiliate in
confidence by others.

 

12.2.4 No Future Conflicts

 

ZGEN will not during the Term enter into any agreements, contracts, commitments
or other arrangements that could conflict with the Option Rights or Negotiation
Right or otherwise prevent ZGEN from meeting its obligations hereunder.

 

12.2.5 Compliance With Laws

 

ZGEN will comply and will require its Affiliates, Contractors and sublicensees
to comply with all applicable laws and regulations in connection with the
performance of ZGEN’s obligations and other activities pursuant to this
Agreement; all applicable rules and regulations relating to the use of
Materials, including those relating to the use of human and animal subjects or
recombinant DNA; and all laws and regulations of the U.S.A. and any other
relevant country concerning any export or other transfer of technology, services
or products.

 

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12.2.6 Authority to License

 

ZGEN has the right, power and authority to grant the rights and licenses granted
by ZGEN herein. As of the Effective Date, ZGEN has not, [ * ], granted any Third
Party a right to commercialize a product based on a Gene or a protein expressed
by such Gene covered by Patent Rights claiming such Gene or protein expressed by
such Gene, except:

 

(a) for rights under the Novo Agreement or License Agreements entered into
pursuant thereto.

 

(b) for rights to commercialize that have expired or terminated; or

 

(c) pursuant to currently effective agreements listed on Exhibit O with respect
to the Genes and in the fields described on Exhibit O.

 

12.3 Materials

 

ANY MATERIALS PROVIDED OR TO BE PROVIDED HEREUNDER ARE EXPERIMENTAL IN NATURE
AND ARE TRANSFERRED BETWEEN THE PARTIES “AS IS” AND WITH ALL FAULTS. NEITHER
SERONO NOR ZGEN MAKES ANY WARRANTY OR REPRESENTATION WITH RESPECT TO THE
UTILITY, EFFICACY, NONTOXICITY, SAFETY OR APPROPRIATENESS OF USING THE
MATERIALS. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY USE OF MATERIALS,
OR ANY LOSS THAT MAY ARISE FROM SUCH USE.

 

12.4 Warranty Disclaimer

 

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES
ANY WARRANTY WITH RESPECT TO THE ZGEN IP, SERONO IP, JOINT PROJECT TECHNOLOGY,
GOODS, SERVICES OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
NON-INFRINGEMENT, PATENTABILITY OR VALIDITY WITH RESPECT TO ANY AND ALL OF THE
FOREGOING.

 

12.5 No Use in Humans

 

In no event shall a party perform studies or trials in humans relating to the
evaluation of a Gene or a Research Project.

 

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ARTICLE THIRTEEN

Indemnification; Insurance

 

13.1 Indemnification

 

13.1.1 Matters Covered

 

Each party (the “Indemnifying Party”) shall defend, indemnify and hold harmless
the other party and its Affiliates, Contractors and sublicensees and their
respective directors, employees and agents (the “Indemnified Parties”) from and
against any and all Liabilities to the extent they arise out of:

 

(a) Third Party claims or actions for personal injury or property damage to the
extent such injury or damage is attributable to matters within the scope of the
Indemnifying Party’s responsibilities or allocated tasks hereunder;

 

(b) Third Party claims or actions arising from the conduct of any Research Tasks
by or for the Indemnifying Party; or

 

(c) Third Party claims or actions arising in connection with any breach of this
Agreement by the Indemnifying Party, including a breach of any warranties,
representations or covenants made by the Indemnifying Party hereunder.

 

13.1.2 Exclusions

 

The Indemnifying Party will not be required to defend, indemnify or hold
harmless any Indemnified Party from any Liabilities to the extent they result
from:

 

(a) Third Party claims or actions arising from the negligence or willful
malfeasance of any Indemnified Party;

 

(b) Third Party claims or actions arising from any breach of this Agreement,
including the representations, warranties and covenants set forth herein, by, if
Serono is the Indemnifying Party, ZGEN and, if ZGEN is the Indemnifying Party,
Serono; or

 

(c) any settlement or admission of liability made or purported to be made by any
Indemnified Party without the Indemnifying Party’s prior written approval.

 

13.2 Defense of Claims

 

13.2.1 Provision of Attorney

 

The Indemnifying Party agrees, at its own expense, to provide attorneys to
defend against any claims or actions brought or filed against the Indemnified
Parties with respect to the subject of the indemnity contained in Section 13.1,
whether or not such claims or actions are rightfully brought or filed.

 

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13.2.2 Notice

 

An Indemnified Party seeking indemnification hereunder shall notify the
Indemnifying Party in writing promptly after the assertion of any claim within
the scope of the Indemnifying Party’s indemnity obligation hereunder; provided,
however, that the failure or delay so to notify the Indemnifying Party shall not
relieve it of any obligation hereunder except to the extent that the
Indemnifying Party demonstrates that such failure or delay adversely affected
its ability to defend or resolve such claim.

 

13.2.3 Tender of Defense

 

An Indemnified Party seeking indemnification hereunder shall tender to the
Indemnifying Party the right to control the defense of the relevant claim or
action, including any decisions regarding the settlement or disposition thereof;
provided, however, that

 

(a) The Indemnifying Party shall not settle any claim or action in a way that
prejudices or adversely impacts an Indemnified Party without the prior approval
of the Indemnified Party, which approval shall not be unreasonably withheld or
delayed;

 

(b) If the defendants in any claim or action include both the Indemnifying Party
and the Indemnified Party, and either of them concludes that there may be legal
defenses available to it that are different from, additional to or inconsistent
with those available to the other party, the party so concluding shall:

 

(i) have the right to select separate counsel to participate in the defense of
the claim or action on its behalf; and

 

(ii) bear the cost and expense of such separate defense, unless, and to the
extent, the parties otherwise agree or it is determined pursuant to Article
Fifteen that such cost and expense are or were required to be indemnified by the
Indemnifying Party hereunder and are or were required to be incurred separately
due to such different, additional or inconsistent defenses; and

 

(c) If the Indemnifying Party determines not to defend the claim or action, or
otherwise fails to do so diligently, the Indemnified Party shall have the right
to maintain the defense of such claim or action and the Indemnifying Party shall
provide reasonable assistance to it in the defense of such claim or action and
shall bear the reasonable cost and expense of such defense (including reasonable
attorneys’ fees, experts’ fees and other costs of defense at any stage of the
proceedings).

 

13.2.4 Assistance

 

Either Serono or ZGEN, as applicable, shall provide, and shall cause any
Indemnified Party to provide, reasonable assistance to the Indemnifying Party in
the defense, settlement or other disposition of a claim or action, including by
making available all pertinent information and personnel under its control to
the Indemnifying Party.

 

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13.3 Insurance

 

Each party shall obtain and keep in force, through self insurance or otherwise,
in a form reasonably acceptable to the other party hereto, insurance in the
amount of [ * ] Dollars ($[ * ]) covering its indemnification obligations. It is
understood that such insurance shall not be construed to limit a party’s
liability with respect to indemnification obligations under this Article
Thirteen. Each party shall, except to the extent self insured, provide to the
other party upon request a certificate evidencing the insurance such party is
required to obtain and keep in force under this Article Thirteen. Such
certificate shall provide that such insurance shall not expire or be cancelled
or modified without at least thirty (30) days’ prior notice to the other party.

 

ARTICLE FOURTEEN

Term and Termination

 

14.1 Term

 

This Agreement shall be effective for the period (“Term”) starting on the
Effective Date and, unless terminated earlier in accordance with this Agreement,
ending on the later of:

 

(a) the expiration of the last to expire of any Evaluation Term; and

 

(b) the expiration of the last to expire of any Research Term.

 

14.2 Termination for Material Breach

 

Serono and ZGEN shall have the right to terminate this Agreement, including the
Option Rights, Negotiation Right and licenses granted herein, in the event that
any material term or condition of this Agreement is breached by the other party,
and such breach is not remedied within a period of [ * ] after the other party’s
receipt of written notice of such breach. If a material breach is corrected
within the [ * ] period, this Agreement and the rights granted hereunder shall
continue in full force and effect.

 

14.3 Termination Upon Serono’s Bankruptcy

 

This Agreement will automatically terminate if Serono becomes insolvent, makes
an assignment for the benefit of its creditors, appoints or suffers appointment
of a receiver or trustee over its property, files a petition under any
bankruptcy or insolvency act or has such a petition filed against it and any
such event shall have continued for [ * ] undismissed or undischarged.

 

14.4 No Termination Upon ZGEN’s Bankruptcy

 

All rights and licenses granted under or pursuant to this Agreement by ZGEN to
Serono are, and shall otherwise be deemed to be, for purposes of Section 365(n)
of the United States

 

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Bankruptcy Code, as amended from time to time (the “Bankruptcy Code”), licenses
of rights to “intellectual property” as defined under Section 101(35A) of the
Bankruptcy Code. The parties agree that Serono, as a recipient of such rights
under this Agreement, shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code. The parties further agree that, in the
event of the commencement of a bankruptcy proceeding by or against ZGEN under
the Bankruptcy Code that is not dismissed within [ * ] after it is filed, either
the expiration of the Evaluation Terms with respect to the ZGEN Core Genes or
the exercise by ZGEN of its right to opt out of research for which a
Collaboration Election was made shall be deemed to have occurred, as applicable.
The parties also further agree that, in the event of the commencement of a
bankruptcy proceeding by or against ZGEN under the Bankruptcy Code that is not
dismissed within [ * ] after it is filed, Serono shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property, and the same, if not
already in its possession, shall be promptly delivered to Serono:

 

(a) upon written request therefor by Serono, unless ZGEN elects to continue to
perform all of its obligations under this Agreement; or

 

(b) if not delivered under Subsection (a) above, upon the rejection of this
Agreement by or on behalf of ZGEN and written request therefor by Serono.

 

Following the commencement of such a bankruptcy proceeding and so long as such
proceeding continues, ZGEN will not, without Serono’s prior written consent,
sell, transfer, assign or otherwise dispose of, or purport to sell, transfer,
assign or otherwise dispose of, any right, title or interest in, to or under the
ZGEN IP related to any Gene.

 

14.5 Termination of License With Respect to Contested Patent Rights

 

Either ZGEN, as the licensor of ZGEN IP under this Agreement, or Serono, as the
licensor of Serono IP under this Agreement, may at its option terminate the
Option Rights, Negotiation Right and its licenses to the other party under this
Agreement to the extent covering any of the licensor’s Patent Rights as to which
the other party hereto commences any action or asserts any formal position in
any forum (including a court, a patent office, or an arbitral tribunal, and
whether in the form of petitions for declaratory relief, claims, counterclaims,
defenses, interferences, petitions for reexamination, oppositions or otherwise)
that such Patent Right is invalid or unenforceable.

 

14.6 Consequences of Expiration and Termination

 

14.6.1 Accrued Rights

 

Expiration or termination of this Agreement shall not affect the parties’ rights
and obligations that have accrued as of the expiration or termination date,
including the parties’ obligations to bear Research Costs incurred prior to the
effectiveness of the expiration or termination.

 

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14.6.2 Surviving Provisions

 

The parties’ rights and obligations under Sections 4.5 and 5.5 and those
provisions of Articles Eight, and Eleven, and Articles Thirteen through Sixteen
that by their context are intended to survive termination or expiration, shall
so survive.

 

14.6.3 Cumulative Remedies

 

Any right to terminate this Agreement shall be in addition to and not in lieu of
all other rights or remedies that the party giving notice of termination may
have at law, in equity or otherwise, including rights under the Bankruptcy Code.

 

ARTICLE FIFTEEN

Dispute Resolution

15.1 Cooperative Decision Making

 

15.1.1 General Rule

 

Subject to Section 15.4, the parties intend that, to the maximum extent
practicable, they shall reach decisions hereunder cooperatively through the
deliberations of the Steering Committee. Accordingly any disputes, controversies
or claims (each a “Dispute”) arising out of or relating to this Agreement shall
be first referred to the Steering Committee by either party at any time after
such Dispute has arisen; provided, however, that any Dispute relating to the
determination of validity of a party’s Patent Rights or other issues relating
solely to a party’s intellectual property may only be determined in accordance
with Section 15.4 hereof.

 

15.1.2 Resolution by Senior Executives

 

If a decision cannot be made in accordance with Section 15.1.1 by the Steering
Committee within [ * ] of being requested by a party to do so or the Steering
Committee is unable to resolve a Dispute among its members, any two (2) members
of the Steering Committee may institute the procedure described in this Article
Fifteen. In such circumstances, a summary of the unresolved Dispute will be
provided in writing to the parties’ respective Senior Executives. If either
party has not then designated any Senior Executives, such summary shall be
provided to such party’s CEO with a request that one or more Senior Executives
be appointed. The CEO shall within [ * ] appoint such party’s Senior
Executive(s) and forward the summary to them. The parties’ respective Senior
Executives shall discuss the unresolved Dispute, and shall meet with respect
thereto if one or more of them believes a meeting or meetings to be useful.

 

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15.1.3 Escalation to CEOs

 

If the Senior Executives do not resolve the matter within [ * ] following the
receipt by them (or by the CEO for either or both of them, as described above)
of the summary of the unresolved Dispute (or such lesser or longer period as
they may agree is a useful period for their discussions), then any one or more
of the Senior Executives may institute a formal review of such matter by the
parties’ CEOs pursuant to Section 15.2.

 

15.2 Review by CEOs

 

15.2.1 Matters Referred to CEOs

 

Any Dispute that cannot be resolved pursuant to Section 15.1, shall be referred
for review by the parties’ respective CEOs.

 

15.2.2 Resolution by CEOs

 

A summary or summaries of the Dispute will be provided in writing by the Senior
Executives to the parties’ respective CEOs. The CEOs shall discuss the Dispute,
and shall meet with respect thereto if either of them believes a meeting or
meetings to be useful.

 

15.2.3 Escalation to Arbitration

 

If the CEOs do not resolve the Dispute [ * ] (or such lesser or longer period as
they may agree is a useful period for their discussions), then (except as
provided in Section 15.4) then either party may submit any Disputes with respect
to the interpretation or potential breach, termination or invalidity of this
Agreement to federal court pursuant to Section 15.4 and may submit any other
Disputes to arbitration pursuant to Section 15.3.

 

15.3 Arbitration

 

15.3.1 Matters to be Arbitrated

 

Subject to Section 15.4, should the parties fail to reach agreement with respect
to a Dispute, then the Dispute will be determined by arbitration in accordance
with this Section 15.3.

 

15.3.2 Venue, Rules and Applicable Law

 

[ * ] shall be the venue for the arbitration, which shall be conducted in
accordance with the Non-Administered Arbitration Rules & Commentary (Revised
2000) of the CPR Institute for Dispute Resolution. Any arbitration pursuant to
this Section 15.3 will be governed by the substantive laws of [ * ] applicable
to contracts made and to be performed in that state, without regard to conflicts
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(9 U.S.C. § 1 et seq.). Judgment upon the award rendered by the tribunal may be
entered

 

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by any court having jurisdiction thereof. The statute of limitations of [ * ]
applicable to the commencement of a lawsuit will apply to the commencement of an
arbitration under this Section 15.3, except that no defenses will be available
based upon the passage of time during any negotiation required pursuant to this
Article Fifteen.

 

15.3.3 Composition of Tribunal

 

The arbitration shall be conducted before a tribunal of three (3) independent
and impartial arbitrators, one of which will be appointed by each of ZGEN and
Serono, and the third of which shall be appointed by agreement of both parties
and shall have had both training and experience as a mediator of pharmaceutical
industry licensing and other general commercial matters. If the parties to this
Agreement cannot agree on the third arbitrator, then the third arbitrator will
be selected by the CPR Institute for Dispute Resolution in accordance with the
criteria set forth in the preceding sentence.

 

15.3.4 Tribunal’s Jurisdiction

 

The tribunal may decide any issue as to whether, or as to the extent to which,
any Dispute is subject to the arbitration and other dispute resolution
provisions in this Agreement. The tribunal must render its award in a writing,
which writing must include an explanation of the reasons for such award.

 

15.3.5 Costs

 

All fees, costs and expenses of the arbitrators, and all other costs and
expenses of the arbitration, will be shared equally by the parties to this
Agreement unless such parties agree otherwise or unless the tribunal in the
award assesses such costs and expenses against one of such parties or allocates
such costs and expenses other than equally between such parties.

 

15.3.6 Continuing Performance

 

Pending the award of the arbitration tribunal, the parties shall continue to
perform their respective obligations under this Agreement.

 

15.3.7 Equitable Remedies

 

Notwithstanding the foregoing, either party may, on good cause shown, seek a
temporary restraining order and/or a preliminary injunction from a court of
competent jurisdiction, to be effective pending the institution of the
arbitration process or the deliberation and award of the arbitration tribunal.

 

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[ * ] Confidential Treatment Requested

 

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15.4 Matters to Proceed to Court

 

Notwithstanding the foregoing, any Dispute relating to the determination of
validity of a party’s Patent Rights or other issues relating solely to a party’s
intellectual property and any Dispute with respect to the interpretation or
potential breach, termination or invalidity of this Agreement, including
potential breach of the representations, warranties and covenants made
hereunder, shall be submitted exclusively to the [ * ] court [ * ], and the
parties hereby consent to the jurisdiction and venue of such court.

 

ARTICLE SIXTEEN

General

 

16.1 Entire Agreement

 

Except for the Master Agreement and the agreements referenced therein, this
Agreement, together with all of the Exhibits hereto, constitutes the entire
agreement between the parties and supersedes all prior and contemporaneous oral
and written agreements, term sheets, summaries, understandings or arrangements
relating to the subject matter hereof, including the NDA.

 

16.2 No Drafting Party; Legal Counsel

 

This Agreement has been submitted to the scrutiny of, and has been negotiated
by, both parties and their counsel, and shall be given a fair and reasonable
interpretation in accordance with its terms, without consideration or weight
being given to any such terms having been drafted by any party or its counsel.

 

16.3 Controlling Law

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to the doctrine of conflict of
laws, except that the issues of patentability, validity, enforceability and
scope of any Patent Rights shall be determined according to the patent laws of
the country in which the particular Patent Rights are pending or granted.

 

16.4 Notices

 

All notices, reports and other communications by ZGEN or Serono to the other
under this Agreement shall:

 

(a) be in writing in the English language;

 

(b) refer specifically to this Agreement; and

 

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[ * ] Confidential Treatment Requested

 

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(c) be sent by electronic or facsimile transmission for which a confirmation of
delivery is obtained or by express courier services providing evidence of
delivery,

 

in each case to the respective address specified below (or to such updated
address as may be specified in writing to the other party from time to time).

 

If to Serono:

 

Serono S.A.

c/o Serono International S.A.

15 bis, Chemin des Mines

Case Postale 54

CH-1211 Geneve 20

Switzerland

Attn: General Counsel

FAX: 41-22-739-3070

 

If to ZGEN:

 

ZymoGenetics, Inc.

1201 Eastlake Avenue East

Seattle, WA 98102

U.S.A.

Attn: Senior Vice President,

  Intellectual Property and Legal Affairs

FAX: (206) 442-6678

 

Such notice, report or other communication will be deemed effective as of the
date so delivered either by courier service or by electronic or facsimile
transmission.

 

16.5 Force Majeure

 

If either party hereto is prevented from carrying out its obligations under this
Agreement by events beyond its reasonable control, including acts or omissions
of the other party, acts of God or government, fire, acts of terrorism,
political strife, labor disputes, failure or delay of transportation, default by
suppliers or unavailability of raw materials, then such party’s performance of
its obligations hereunder shall be excused during the period of such events and
for a reasonable period of recovery thereafter, and the time for performance of
such obligations shall be automatically extended for a period of time equal to
the duration of such events; provided, however, that the party claiming force
majeure shall promptly notify the other party of the existence of such force
majeure, shall use Reasonable Commercial Efforts to avoid or remedy such force
majeure and shall continue performance hereunder with the utmost dispatch
whenever such force majeure is avoided or remedied.

 

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16.6 Assignability

 

(a) Except an assignment that:

 

(i) does not relieve the assigning party of any of its responsibilities or
obligations hereunder and in which the assignee agrees to be bound by all
obligations of the assigning party under this Agreement; and

 

(ii) is made in connection with the transfer of all or substantially all of the
assets of a party and its Affiliates (i.e., the entire Affiliated group of
companies) related to their respective pharmaceutical businesses to a single
buyer or pursuant to a merger or other corporate reorganization,

 

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

 

(b) Notwithstanding Subsection (a), a party may assign its rights and interests
under this Agreement to an entity that is its Affiliate as of the date of such
assignment; provided that such assignment does not relieve the assigning party
of any of its responsibilities or obligations hereunder and the assignee agrees
to be bound by all obligations of the assigning party hereunder, including the
obligations set forth in this Section 16.6.

 

(c) A sale or transfer of the ownership or control of a party or any of its
Affiliates to whom it has assigned its rights or interest under this Agreement
as provided herein other than in connection with the transfer of all or
substantially all of the assets of the party and its Affiliates (i.e., the
entire Affiliated group of companies) related to their respective pharmaceutical
businesses shall be deemed to be a prohibited assignment under this Section
16.6.

 

16.7 Amendments and Waivers

 

No terms or provisions of this Agreement shall be modified by any prior or
subsequent statement, conduct or act of either of the parties, whether oral or
written, except that the parties may amend this Agreement by written instruments
specifically referring to, and executed in the same manner as, this Agreement.
No waiver of any right or remedy hereunder shall be effective unless in a
writing signed by the party to be bound, nor shall any waiver in one instance
constitute a waiver of the same or any other right or remedy in any other
instance.

 

16.8 Severability

 

If any provision hereof should be held invalid, illegal or unenforceable in any
respect in any jurisdiction, then, to the fullest extent permitted by law:

 

(a) all other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as is possible; and

 

(b) such invalidity, illegality or unenforceability shall not affect the
validity, legality or enforceability of such provision in any other
jurisdiction.

 

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To the extent permitted by applicable law, ZGEN and Serono hereby waive their
right to enforce any provision of law that would render any provision hereof
prohibited or unenforceable in any respect. If the terms and conditions of this
Agreement are materially altered as a result of this Section 16.8, the parties
shall attempt to renegotiate the terms and conditions of this Agreement, in good
faith, to resolve any inequities.

 

16.9 Counterparts

 

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

 

16.10 Relationship

 

This Agreement shall not create any employer-employee relationship between ZGEN
and Serono, nor shall it be deemed to establish a joint venture or partnership
between ZGEN and Serono. Neither party shall at any time enter into or incur, or
hold itself out to Third Parties as having the authority to enter into or incur,
on behalf of the other party, any commitment, expense or liability whatsoever.

 

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

 

SERONO S.A. By:  

/s/ Leon Bushara

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    Leon Bushara Its:   Authorized Representative ZYMOGENETICS, INC. By:  

/s/ Fredrik Henell

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    Fredrik Henell Its:   Senior Vice President, Business Development

 

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