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| TABLE      OF CONTENTS                                        |   |
|---------------------------------------------------------------|--------|
| 1.DEFINITIONS                                                 | 1      |
| 2.RESEARCH                                                    | 5      |
|        2.1      General                                  | 5      |
|        2.2      Conduct of Research                      | 5      |
|        2.3      Use of Research Funding                  | 6      |
|        2.4      Records and Reports                      | 6      |
|        2.5      Research Information and Inventions      | 7      |
|        2.6      Research Term                            | 7      |
| 3.      EXCHANGE OF INFORMATION; LICENSE;                     | 7      |
|        3.1      Procedure for Novel Obesity-related Gene | 7      |
|        3.2      Exercise of Option                       | 7      |
|        3.3      Licenses                                 | 7      |
|        3.4      Rights of MERCK to an Exclusive License  | 8      |
|        3.5      No Implied Licenses                      | 8      |
|        3.6      Bankruptcy                               | 8      |
| 4.      CONFIDENTIALITY AND PUBUCATION                        | 9      |
|        4.1      Nondisclosure Obligation                 | 9      |
|        4.2      ZNOMICS Know-How                         | 9      |
|        4.3      Publication                              | 10     |
|        4.4      Publicity/Use of Names                   | 11     |
| 5.      PAYMENTS; ROYALTIES AND REPORTS                       | 12     |
|        5.1      Research Funding                         | 12     |
|        5.2      Payments for ZNOMICS Related Milestones  |   |
|        5.3      License Fees                             | 12     |
|        5.3      Payments for MERCK Research Milestones   | 13     |
| 6.      REPRESENTATIONS AND WARRANTIES                        | 14     |
|        6.1      Representations and Warranties           | 14     |
| 7.      PATENT PROVISIONS                                     | 14     |

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|        7.1      Filing, Prosecution and Maintenance of Patents             | 14 |
|---------------------------------------------------------------------------------|----|
|        7.2      Option of MERCK to Prosecute and Maintain Patents          | 15 |
|        7.3      Interference, Opposition, Reexamination and Reissue        | 15 |
|        7.4      Enforcement and Defense                                    | 16 |
|        7.5      Patent Term Restoration                                    | 17 |
| 8.      TERM AND TERMINATION                                                    | 18 |
|        8.1      Term and Expiration                                        | 18 |
|        8.2      Termination by MERCK                                       | 18 |
|        8.3      Termination for Cause                                      | 18 |
|        8.4      Effect of Expiration or Termination; Survival              | 19 |
| 9.      MISCELLANEOUS                                                           | 19 |
|        9.1      Force Majeure                                              | 19 |
|        9.2      Assignment                                                 | 19 |
|        9.3      Severability                                               | 20 |
|        9.4      Notices                                                    | 20 |
|        9.5      Applicable Law                                             | 21 |
|        9.6      Dispute Resolution                                         | 21 |
|        9.7      Entire Agreement; Amendments                               | 22 |
|        9.8      Headings                                                   | 23 |
|        9.9      Independent Contractors                                    | 23 |
|        9.10      Waiver23                                                  |
|        9.11      Cumulative Remedies                                       | 23 |
|        9.12Waiver      of Rule of Construction                             | 23 |
|        9.13Counterparts                                                    | 23 |
|                                                                            |
| SCHEDULE      1.27PATENT      RIGHTS                                            | 25 |
| SCHEDULE      2.1   RESEARCH       | 25 |

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|   | (c) | Joint      Information and Inventions shall be owned jointly by ZNOMICS and MERCK.      Inventorship will be determined in accordance with United States patent      laws. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (a) | is      known by the receiving Party at the time of its receipt. and not through a      prior disclosure by the disclosing Party, as documented by the receiving      Party's business records; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | is      in the public domain by use and/or publication before its receipt from the      disclosing Party, or thereafter enters the public domain through no fault      of the receiving Party; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | is      subsequently disclosed to the receiving Party by a Third Party who may      lawfully do so and is not under an obligation of confidentiality to the      disclosing Party; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | is      developed by the receiving Party independently of Information received      from the disclosing Party, as documented by the receiving Party's business      records; |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (e) | is      disclosed to governmental or other regulatory agencies in order to obtain      patents or to gain or maintain approval to conduct clinical trials or to      market Product, but such disclosure may be only to the extent reasonably      necessary to obtain patents orauthorizations; |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (f) | is      deemed necessary by MERCK to be disclosed to Related Parties, agents,      consultants, and/or other Third Parties for any and all purposes MERCK and      its Affiliates deem necessary or advisable in the ordinary course of      business for the research and development, manufacturing and/or marketing      of the Product in accordance with this Agreement on the condition that      such Third Parties agree to be bound by the confidentiality and non-use      obligations contained in this Agreement; provided, however, that      the term of confidentiality for such Third Parties shall be no less than      ten (10) years; or |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (g) | is      deemed necessary by counsel to the receiving Party to be disclosed to such      Party's attorneys, independent accountants or financial advisors for the      sole purpose of enabling such attorneys, independent accountants or      financial advisors to provide advice to the receiving Party, on the      condition that such attorneys, independent accountants and financial      advisors agree to be bound by the confidentiality and non-use obligations      contained in this Agreement; provided, however, that      the term of confidentiality for such attorneys, independent accountants      and financial advisors shall be no less than ten (1 O)    years. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (a) | One      hundred thousand dollars ($100,000) within thirty (30) days of the      Effective Date and MERCK's receipt of an invoice from    ZNOMICS; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | One      hundred thousand dollars ($100,000) within thirty (30) days of the three      month anniversary of the Effective Date and MERCK's receipt of an invoice      from ZNOMICS; |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (c) | One      hundred thousand dollars ($100,000) within thirty (30) days of the six      month anniversary of the Effective Date and MERCK's receipt of an invoice      from ZNOMICS; |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (d) | One      hundred ten thousand dollars ($110,000) within thirty (30) days of MERCK's      receipt of the Final Report delivered pursuant to Section 2.4.3 and an      invoice from ZNOMICS. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | (a) | Ten      thousand dollars ($10,000) per Target upon the earlier of (a) validation      by MERCK in a mouse model that the Target confirms the role of the      licensed Novel Obesity-related Gene; or (b) at the end of two years if      MERCK is pursuing validation in a mouse model that the Target confirms the      role of the selected Novel Obesity-related Genes. Research Milestone 3      shall be payable by MERCK only once per Novel Obesity-related      Gene. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (b) | One      hundred thousand dollars ($100,000) per Target entering HTS by or on      behalf of MERCK. |
|--------|-----|-----------------------------------------------------------------------------------------------------|

|   | (c) | Two      hundred fifty thousand dollars ($250,000) per Target      for a Product Initiated into a Phase I Clinical    Trial. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------|

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| If      to Znomics, to: | Znomics,      Inc.                       |
|-------------------------|------------------------------------------|
|                    | 2611      SW 3rd      Avenue             |
|                    | Suite      200                           |
|                    | Portland,      OR 97201                  |
|                    | Attention:      Richard Sessions, CEO    |
|                    | Facsimile      No.:503/228-3290          |
|                    |                                     |
| and:                    | Attention:      Steve Lieberman          |
|                    | Rothwell,      Figg, Ernst & Manbeck |
|                    | 1425      K Street, N.W.,                |
|                    | Suite      800                           |
|                    | Washington,      DC 20005                |
|                    | Facsimile      No.: 202/783-6031         |

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| If      to MERCK, to: | Merck      & Co., Inc.                |
|-----------------------|-------------------------------------------|
|                  | 156      E. Lincoln Highway               |
|                  | Rahway,      New Jersey 07086             |
|                  | Attention:      Tung Ming Fong, Ph.D.     |
|                  | Director      Metabolic Disorders         |
|                  | Metabolic      Disorders – Diabetes |
|                  | Facsimile      No.: (732) 594-3337        |
|                  |                                      |
| And                   | Merck      & Co., Inc.                |
|                  | One      Merck Drive                      |
|                  | P.O.      Box 100                         |
| With      copy to:    | Whitehouse      Station, NJ 08889-0100    |
|                  | Attention:      Office of Secretary       |
|                  | Facsimile      No.: (908) 735-1246        |
|                  |                                      |
| Invoices:             | Tung      Ming Fong, Ph.D.                |
|                  | Director      Metabolic Disorders         |
|                  | Metabolic      Disorders – Diabetes |
|                  | Merck      & Co., Inc.                |
|                  | 156      E. Lincoln Highway               |
|                  | Rahway,      New Jersey 07086             |
|                  | Facsimile      No.: (732) 594-3337        |

| 9.6.1 | The      Parties shall negotiate in good faith and use reasonable efforts to settle      any dispute, controversy or claim arising from or related to this      Agreement or the breach thereof. If the Parties do not fully settle, and a      Party wishes to pursue the matter, each such dispute, controversy or claim      that is not an "Excluded Claim" shall be finally resolved by binding      arbitration in accordance with the Commercial Arbitration Rules      and |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 9.6.2 | The      arbitration shall be conducted by a panel of three persons experienced in      the pharmaceutical business: within thirty (30) days after initiation of      arbitration, each Party shall select one person to act as arbitrator; and      the two Party-selected arbitrators shall select a third arbitrator within      thirty (30) days of their appointment. If the arbitrators selected by the      Parties are unable or fail to agree upon the third arbitrator, the third      arbitrator shall be appointed by the AAA. The place of arbitration shall      be New York, New York, and all proceedings and communications shall be in      English. |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.6.3 | Either      Party may apply to the arbitrators for interim injunctive relief until the      arbitration award is rendered or the controversy is otherwise resolved.      Either Party also may, without waiving any remedy under this Agreement,      seek from any court having jurisdiction any injunctive or provisional      relief necessary to protect the rights or property of that Party pending      the arbitration award. The arbitrators shall have no authority to award      punitive or any other type of damages not measured by a Party's      compensatory damages. Each Party shall bear its own costs and expenses and      attorneys' fees and an equal share of the arbitrators' fees and any      administrative fees of arbitration. |
|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.6.4 | Except      to the extent necessary to confirm an award or as may be required by law,      neither a Party nor an arbitrator may disclose the existence, content, or      results of an arbitration without the prior written consent of both      Parties. In no event shall an arbitration be initiated after the date when      commencement of a legal or equitable proceeding based on the dispute,      controversy or claim would be barred by the applicable New York statute of      limitations. |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.6.5 | The      Parties agree that, in the event of a dispute over the nature or quality      of performance under this Agreement, neither Party may terminate this      Agreement until final resolution of the dispute through arbitration or      other judicial determination. The Parties further agree that any payments      made pursuant to this Agreement pending resolution of the dispute shall be      refunded if an arbitrator or court determines that such payments are not      due. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9.6.6 | As      used in this Section, the term "Excluded Claim" shall      mean a dispute, controversy or claim that concerns (a) the validity or      infringement of a patent, trademark or copyright; or (b) any antitrust,      anti-monopoly or competition law or regulation, whether or not      statutory. |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| MERCK      & CO., INC.         | ZNOMICS,      INC.                  |
|------------------------------------|-------------------------------------|
|                               |                                |
| BY:      _________________________ | BY:      /s/ Richard  Sessions      |
|                               |                                |
| TITLE:                             | TITLE:      Chief Executive Officer |
|                               |                                |
| DATE:      27-OCT-2005             | DATE:      October 4,  2005         |

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