ex10_3.htm


    


    


    RESEARCH
AGREEMENT

    BETWEEN

    OREGON
HEALTH &SCIENCE UNIVERSITY AND ZNOMICS, INC.

    


    


    This
Agreement (“AGREEMENT”),
dated and effective as of July 1, 2008 (the “Effective
Date”), is between the Oregon Health and Science University, having
offices at 2525 SW 1st Ave,
Suite 120 Portland, Oregon 97201-4753 (“UNIVERSITY”), and Znomics, Inc., having
offices at 2611 SW 3rd Ave.,
Suite 200 Portland, Oregon 97201 (“SPONSOR”).

    


    
      	
              1.  

            	
              BACKGROUND

            


    

     

    
      	
              1.1  

            	
              SPONSOR
      desires research in accordance with the scope of work outlined per
      Attachment A, and

            


    

     

    
      	
              1.2  

            	
              The
      performance of such research is consistent, compatible, and beneficial to
      the academic role and mission of UNIVERSITY as an institution of higher
      education;

            


    

    


    
      	
              1.3  

            	
              UNIVERSITY
      is qualified to provide such research services;
  and

            


    

    


    
      	
              1.4  

            	
              As
      a benefit of funding such research, UNIVERSITY is willing to grant to
      SPONSOR an exclusive option to license inventions made during the course
      of such research in accordance with Section 13
  below.

            


    

    


    NOW,
THEREFORE, for and in consideration of the mutual covenants, conditions and
undertakings herein set forth, the parties agree as follows:

    


    
      	
              2.  

            	
              SCOPE
      OF WORK

            


    

    


    
      	
              2.1  

            	
              UNIVERSITY
      agrees to use all reasonable best efforts to perform for SPONSOR the
      research activities (“RESEARCH”) described in Attachment A, hereinafter
      the SCOPE OF WORK, under the direction and supervision of Dr. Thomas
      Scanlan, PRINCIPAL INVESTIGATOR. The Scope of Work may be modified from
      time to time by mutual Agreement of the PRINCIPAL INVESTIGATOR, UNIVERSITY
      and SPONSOR.

            


    

    


    
      	
              2.2  

            	
              UNIVERSITY
      will use all reasonable best efforts to ensure that the PRINCIPAL
      INVESTIGATOR and other personnel assisting in the RESEARCH will keep
      accurate financial and scientific records relating to the RESEARCH and
      will make such records available to SPONSOR or SPONSOR’S authorized
      representative throughout the term of this Agreement during normal
      business hours upon reasonable notice. It is understood that such records
      shall include detailed, witnessed laboratory notebooks sufficient to
      document any inventions made in the course of the RESEARCH. Upon request
      by SPONSOR, in whatever condition maintained by the PRINCIPAL INVESTIGATOR
      and his staff. Any such records, materials and copies made available to
      SPONSOR or SPONSOR’s authorized representative shall be held in confidence
      by SPONSOR.

            


    

    


    
      	
              2.3  

            	
              SPONSOR
      understands that UNIVERSITY may be involved in similar research through
      faculty other than PRINCIPAL INVESTIGATOR, on behalf of itself and others.
      UNIVERSITY shall be free to continue such similar research, provided that
      such research is conducted separate from the RESEARCH by investigators
      other than the PRINCIPAL INVESTIGATOR, or by investigators who are not
      under the supervision of the PRINCIPAL INVESTIGATOR and who are not
      participating in the RESEARCH. UNIVERSITY shall not, during the term of
      this Agreement, enter into any agreement with any other commercial party
      for support of work by the PRINCIPAL INVESTIGATOR relating to the
      RESEARCH; provided, however, it is understood that UNIVERSITY and
      PRINCIPAL INVESTIGATOR may accept funding for
    research

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    relating
to the RESEARCH from the U.S. Government and non-profit sources so long as
UNIVERSTIY does not grant any rights that conflict with the rights of SPONSOR
under Section 13 below.

    


    3.           TERM

    


    3.1           This
AGREEMENT shall be effective for a period of twelve (12) months unless mutually
agreed upon in writing between the parties or terminated early in accordance
with Section 15 below.

    


    4.           COMPENSATION

    


    
      	
              4.1

            	
              SPONSOR
      agrees to reimburse UNIVERSITY for services performed under the AGREEMENT
      in accordance with the budget itemized in Attachment A, payable as set
      forth on Attachment A. Checks to UNIVERSITY shall be made payable to
      OREGON HEALTH & SCIENCE UNIVERSITY and mailed
  to:

            


    

    


    OREGON
HEALTH & SCIENCE UNIVERSITY

    Sponsored
Projects Administration

    2525 SW
1st
Avenue, Suite 220

    Portland,
OR 97201

    Tax ID
No.:93-1176109

    


    
      	
              5.

            	
              REPORTING
      REQUIREMENTS

            


    

    


    
      	
              5.1

            	
              UNIVERSITY
      will provide reports on the progress of the RESEARCH as outlined or
      required in the SCOPE OF WORK. A final written report shall be furnished
      to SPONSOR upon completion of the RESEARCH within 60 days of the last day
      of the project period and after the final payment has been
      received.

            


    

    


    
      	
              6.

            	
              TECHNICAL
      SUPERVISION

            


    

    


    
      	
              6.1

            	
              The
      person with primary responsibility for supervision of the performance of
      the RESEARCH on behalf the SPONSOR shall be Dr. Bruce Beutel, or such
      other person as may be designated by SPONSOR, who shall have primary
      responsibility for technical supervision of the
  Project.

            


    

    


    
      	
              6.2

            	
              The
      person with primary responsibility for supervision of the performance of
      the RESEARCH on behalf of UNVIERSITY shall be the PRINCIPAL INVESTIGATOR.
      No other person shall replace or substitute for him/her in the supervisory
      responsibilities hereunder without the prior written approval of both
      UNIVERSITY and SPONSOR, which may be granted or withheld at each party’s
      sole discretion.

            


    

    


    
      	
              7.

            	
              CONFIDENTIALITY
      AND PUBLICATION

            


    

    


    
      	
              7.1

            	
              UNIVERSITY
      and PRINCIPAL INVESTIGATOR agree to keep confidential and SPONSOR
      confidential and proprietary information supplied to it in writing by
      SPONSOR and marked CONFIDENTIAL during the course of research performed by
      UNVERSITY (Confidential Information). This obligation extends for a period
      of five (5) years after the term of this AGREEMENT. Such Confidential
      Information will not be included in any published material without prior
      approval by SPONSOR. The obligations of this Section shall not apply
      to:

            


    

    


    
      	
              (a)  

            	
              Information
      which is or becomes known publicly through no fault of the UNIVERSITY or
      PRINCIPAL INVESTIGATOR;

            


    

    


    
      	
              (b)  

            	
              Information
      learned by UNIVERSITY or PRINCIPAL INVESTIGATOR through a third party
      entitled to disclose it;

            


    

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    
      	
              (c)  

            	
              Information
      developed by UNIVERSITY or PRINCIPAL INVESTIGATOR independently of
      information obtained from SPONSOR as shown by written
    records;

            


    

    


    
      	
              (d)  

            	
              Information
      already known to UNIVERSITY or PRINCIPAL INVESTIGATOR before SPONSOR’s
      disclosure as shown by witnessed prior written records;
  or

            


    

    


    
      	
              (e)  

            	
              Information
      required to be disclosed to by law, including the Oregon Public Records
      Law, to comply with government regulation, subpoenas or court orders
      provided SPONSOR receives adequate notice of such demand and provided
      UNIVERSITY or PRINCIPAL INVESTIGATOR makes any such disclosure under an
      order protecting the confidential nature of proprietary
      information.

            


    

    


    
      	
              7.2

            	
              UNIVERSITY
      agrees to provide any proposed publication to SPONSOR forty-five (45) days
      prior to submission, for confidential review for the inclusion of SPONSOR
      Confidential Information, and to determine whether patentable inventions
      of discoveries are disclosed therein. SPONSOR has the right to edit or
      remove SPONSOR Confidential Information, prior to submission for
      publication. Should the documents contain any patentable information at
      SPONSOR’s request UNIVERSITY shall withhold submission and/or publication
      for an additional forty-five (45) days to allow U.S. patent filings. In
      addition, in the event that the document includes data, information or
      material generated by SPONSOR’s scientists, and professional standards for
      authorship would be consistent with including SPONSOR’s scientists as
      co-authors of the document, the names of SPONSOR’s scientists will be
      included as co-authors.

            


    

    


    
      	
              8.

            	
              EQUIPMENT;
      MATERIAL TRANSFER

            


    

    


    
      	
              8.1

            	
              All
      equipment purchased under the terms of this AGREEMENT becomes the property
      of UNIVERSITY unless otherwise specified herein. In order for each party
      to conduct its activities and research related to the research, the
      parties may transfer to each other certain biological materials from time
      to time during the RESEARCH as set forth in Attachment A. In the case of
      the UNIVERSITY transfer of materials to SPONSOR, SPONSOR agrees that all
      materials obtained from UNIVERSITY shall be used solely for the purpose of
      conducting RESEARCH and any intellectual property arising from SPONSOR’s
      activities shall be subject to the terms of this agreement, including,
      without limitation the Option provisions set forth in Section
      13.

            


    

    


    
      	
              9.

            	
              INDEMNIFICATION

            


    

    


    
      	
              9.1

            	
              Each
      party hereto agrees to be responsible and assume liability for its own
      wrongful or negligent acts or omissions, or those of its officers, agents
      or employees to the full extent required by law, including the Oregon Tort
      Claims, ORS Sections 30.260 through
30.300.

            


    

    


    
      	
              10.

            	
              COMPLIANCE
      WITH LAWS

            


    

    


    
      	
              10.1

            	
              UNIVERSITY
      and PRINCIPAL INVESTIGATOR agree to comply with all applicable federal,
      state and local laws, codes, regulations, rules and
  orders.

            


    

    


    
      	
              11.

            	
              ASSIGNMENT

            


    

    


    
      	
              11.1

            	
              Neither
      party shall assign or transfer any interest in this AGREEMENT, nor assign
      any claims for money due for to become due during this AGREEMENT, without
      the prior written approval of the other party, provided that, SPONSOR may
      assign this Agreement in connection with the sale or transfer of
      substantially all the assets to which this Agreement relates in which case
      SPONSOR 

            


    

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    shall notify
UNIVERSITY of such assignment.

    


    
      	
              12.

            	
              PATENTS
      AND INVENTIONS

            


    

    


    
      	
              12.1

            	
              UNIVERSITY
      agrees to take appropriate steps to cause all personnel assigned to the
      RESEARCH to disclose any and all inventions and improvements conceived or
      reduced to practice by any of such personnel in the performance of the
      RESEARCH and relating to the subject matter thereof (Inventions). Within
      thirty (30) days of receiving a written inventions disclosure, UNIVERSITY
      will provide SPONSOR with a copy of the disclosure. UNIVERSITY shall
      retain all right, title, and interest in and to such inventions and
      improvements and all patent applications therefore which it may file at
      its election. Additionally, SPONSOR shall promptly disclose to UNIVERSITY
      in writing any invention of which it may become aware in the performance
      of the RESEARCH, including any derivatives developed by SPONSOR which are
      based upon compounds or compound structures transferred by UNVERSITY to
      SPONSOR.

            


    

    


    
      	
              (a)  

            	
              Inventorship
      will be determined in accordance with applicable U.S. patent laws
      regarding inventorship. Any Invention conceived and reduced to practice:
      (i) solely by UNVERSITY’s personnel shall be owned by UNVERSITY
      (“UNIVERSITY Inventions”); (ii) jointly by UNVERSITY’s and SPONSOR’s
      personnel shall by jointly owned by UNVERSITY and SPONSOR (“Joint
      Inventions”).

            


    

    


    
      	
              (b)  

            	
              UNIVERSITY
      shall be responsible for preparing, filing, prosecuting and maintaining
      patent applications for UNIVERSITY Inventions. SPONSOR shall be
      responsible for preparing, filing, prosecuting and maintaining patent
      applications for Joint Inventions. Prior to filing a patent application or
      filing or responding to any outstanding communication in connection with a
      patent application directed to an Invention as defined herein, the filing
      party will provide the other with thirty (30)days notice to review and
      provide comment thereon.

            


    

    


    
      	
              (c)  

            	
              UNVERSITY
      shall obtain appropriate written agreements from all personnel involved in
      the RESEARCH on UNIVERSITY’s behalf, including without limitation the
      PRINCIPAL INVESTIGATOR, such agreements shall require that all discoveries
      and inventions first conceived or reduced to practice using UNIVERSITY’s
      facilities, personnel, information or other resources shall be reported
      promptly and assigned to UNVERSITY, PRINCIPAL INVESTIGATOR and other
      UNIVERSITY faculty, staff and students performing the RESEARCH, agree that
      they will not collaborate with others not employed by UNVERSITY (other
      than SPONSOR) in performing the RESEARCH, without SPONSOR’s prior written
      consent.

            


    

    


    
      	
              13.

            	
              LICENSE

            


    

    


    
      	
              13.1

            	
              UNIVERSITY
      hereby grants SPONSOR an exclusive option (hereafter the “Option”) to
      negotiate an exclusive worldwide license for UNIVERSITY’s right in
      UNIVERSITY Invention(s) or Joint Invention(s). SPONSOR may exercise this
      Option at any time on or prior to sixty (60) days from disclosure of the
      Invention to SPONSOR (the “Option
Period”).

            


    

    


    
      	
              13.2

            	
              The
      parties shall have one hundred fifty (150) days (which period of time
      shall be extendible upon mutual agreement of the parties) from the date
      SPONSOR elects to negotiate for terms for an exclusive license to conclude
      a licensing agreement (the “LICENSE AGREEMENT”). Attached as Exhibit C is
      a non-binding term sheet which the parties agree represents a reasonable
      example of financial terms for compounds in an early stage of development.
      The parties shall use their good faith efforts to consider similar
      financial terms in the License Agreement. SPONSOR shall pay all patent
      costs for UNVERSITY Inventions during the one hundred fifty (150) day
      negotiation period, or any extension thereof. If at the end of such one
      hundred fifty (150) day 

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    period or any
extension thereof, the parties are unable to agree upon licensing terms, SPONSOR
shall have no further obligation to pay patent costs for the UNIVERSITY
Invention(s) for which negotiations have terminated. If SPONSOR terminates the
negotiation in writing prior to the end of the one hundred fifty (150) day
negotiation period, SPONSOR shall have no further obligation to pay patent costs
incurred after the termination date. In the even SPONSOR does not exercise its
Option rights or SPONSOR and UNVERSITY  are unable to agree to
mutually acceptable licensing terms, UNIVERSITY has the right to license its
rights to a third party on terms no more favorable than those set forth on
Appendix C for a period of eighteen (18) months. Thereafter, UNIVERSITY may
license its rights in any Invention to a third party without further obligation
to SPONSOR. UNIVERSITY shall not abandon its rights to any such Invention prior
to exercise of said Option or expiration of the Option Period.


    
      	
              14.

            	
              PUBLICITY

            


    

    


    
      	
              14.1

            	
              SPONSOR
      will not include the name of the UNIVERSITY in any advertising, sales,
      promotion, or other publicity matter without prior written approval of
      UNIVERSITY. Provided however that SPONSOR shall be permitted to issue a
      press release describing the general nature of the collaboration with
      UNIVERSITY which is substantially similar to the draft press release in
      Appendix B.

            


    

    


    
      	
              15.

            	
              TERMINATION

            


    

    


    
      	
              15.1

            	
              Either
      party may terminate this AGREEMENT at any time
  if:

            


    

    
      	
               
      

            	
              (a)

            	
              The
      other party materially breaches the terms of this AGREEMENT, provided that
      the non-breaching party shall have given the breaching party written
      notice of such breach and the breaching party shall have failed to cure
      the same within thirty (30) days after receipt of such
    notice.

            


    

    


    
      	
               
      

            	
              (b)

            	
              The
      loss or departure of PRINCIPAL INVESTIGATOR, and a mutually acceptable
      replacement cannot be found within sixty (60) days of PRINCIPAL
      INVESTIGATOR’s loss or departure.

            


    

    


    
      	
               
      

            	
              (c)

            	
              Performance
      of any part of this AGREEMENT by a party is prevented or delayed by reason
      of Force Majeure and cannot be overcome by reasonable diligence to the
      satisfaction of either party.

            


    

    


    
      	
              (d)  

            	
              The
      other party cease, discontinues or indefinitely suspends its business
      activities related to the services to be provided under this AGREEMENT, or
      the other party voluntarily or involuntarily files for
      bankruptcy.

            


    

    


    
      	
              (e)  

            	
              The
      party has given ninety (90) days notice to the other
  party.

            


    

    


    
      	
              15.2

            	
              The
      party requesting termination will provide the other party with written
      notice specifying both the reason and the effective date of termination.
      Upon the giving of such notice of termination by either party, the
      UNIVERSITY will use its reasonable best efforts to limit or terminate any
      outstanding commitments. .

            


    

    


    
      	
              15.3

            	
              Upon
      termination, UNIVERSITY shall deliver to SPONSOR in the state they exist
      as of the date of termination of all work product, and Confidential
      Information belonging to SPONSOR. SPONSOR shall within thirty (30) days
      after termination pay UNIVERSITY all payments due as of the effective date
      of the termination.

            


    

     

    
      	
              16.

            	
              NOTICES

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              16.1

            	
              All
      notices or communications given hereunder shall be in writing and shall be
      delivered by hand, or by overnight courier by facsimile with confirmation
      by mail, with

            	
              all
      delivery charges prepaid and addressed to the parties as
      follows:

            


    

    


    
      	
              TO
      SPONSOR:

            	
              Mr.
      Richard Sessions

              Znomics,
      Inc.

              2525
      SW 1st
      Ave, Suite 120 Portland,

               Oregon
      97201-4753

               

            
	
              TO
      UNIVERSITY:

            	
              Director,
      Technology & Research Collaborations

              Oregon
      Health & Science University, AD120

              2525
      SW First Avenue, Suite 120

              Portland,
      OR 97201-4753

              Telephone:
      503-494-8200

              Facsimile:   503-494-4729

               

              with
      copy

               

            
	
              TO
      PRINCIPAL INVESTIGATOR:

            	
              Dr.
      Thomas Scanlan

              Professor,
      Physiology and Pharmacology

              Oregon
      Health & Science University

              3181
      SW Sam Jackson Park Road, L334

              Portland,
      OR 97239-3098

              Telephone:
      503-494-9292

              Facsimile:  503-494-4352

            


    

    


    
      	
              17.

            	
              DISPUTE
      RESOLUTION AND GOVERNING LAW

            


    

    


    
      	
              17.1

            	
              The
      Parties agree to attempt to settle amicably any controversy or claim
      arising under this AGREEMENT or a beach of this AGREEMENT. Thereafter,
      both parties agree that all disputes between them arising out of or
      relating to this AGREEMENT, will be submitted to non-binding mediation
      unless the parties mutually agree otherwise. All parties agree to exercise
      their best effort in good faith to resolve all disputes in
      mediation.

            


    

    


    
      	
              17.2

            	
              This
      AGREEMENT will be governed by and construed in accordance with the laws of
      the State of Oregon without reference to its choice of law provisions, the
      International Convention on the Sale of Goods or any other international
      treaty. Any claim, action or suit between OHSU and SPONSOR that arises out
      of or relates to performance of this AGREEMENT will be brought and
      conducted solely and exclusively within the Circuit Court for Multnomah
      County, Oregon. However, if any such claim, action or suit may be brought
      only in a federal forum, it will be brought and conducted solely and
      exclusively within the United States District Court of
    Oregon.

            


    

    


    
      	
              18.

            	
              CHANGES
      AND AMENDMENTS

            


    

    


    
      	
              18.1

            	
              THIS
      AGREEMENT CONSTITUES THE ENTIRE AGREEMENT BETWEEN THE PARTIES. THERE ARE
      NO UNDERSTANDINGS, AGREEMENTS, OR REPRESENTATIONS, ORAL OR WRITTEN, NOT
      SPECIFIED HEREIN REGARDING THIS AGREEMENT. NO AMENDMENT, CONSENT, OR
      WAIVER OR TERMS OF THIS AGREEMENT SHALL BIND EITHER PARTY UNLESS IN
      WRITING AND SIGNED BY ALL PARTIES. ANY SUCH AMENDMENT, CONSENT, OR WAIVER
      SHALL BE 

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EFFECTIVE ONLY
IN THE SPECIFIC INSTANCE AND FOR THE SPECIFIC PURPOSE GIVEN. SPONSOR, BY THE
SIGNATURE BELOW OF ITS AUTHORIZED REPRESENTATIVE, ACKNOWLEDGES HAVING READ AND
UNDERSTOOD THE AGREEMENT AND SPONSOR AGREES TO BE BOUND BY ITS TERMS AND
CONDITIONS.


    In
Witness Whereof, the parties hereto have caused this AGREEMENT to be executed as
of the date set forth herein by their duly authorized
representatives.

     

    
      	
              OREGON
      HEALTH & SCIENCE UNIVERSITY

               

              By:
      ____________________________________

              Arundeep
      S. Pradhan,
      Director                   Date

              Technology
      & Research Collaborations

            	
              SPONSOR

               

              By:
      ____________________________________

              Name:                                                                      
      Date

              Title:

            


    

    
 

    


    Acknowledged
By: _____________________________________

    PRINCIPAL
INVESTIGATOR                                                            Date

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Attachment
A: Scope of Work/Budget

    


    I.
Project

    OHSU and
Znomics, Inc. (“Znomics”) will enter into a collaborative research agreement
with the laboratory of Dr. Thomas Scanlan of OHSU (“Scanlan lab”) to synthesize
and test small molecules that may be useful in the treatment of human disease
conditions involving chronic inflammation such as rheumatoid arthritis, asthma,
and inflammatory bowel syndrome.

    II.
Work Plan

    The
Scanlan lab will synthesize small molecules based on an aryl-pyrazole backbone
as non-steroidal dissociating glucocorticoids. Znomics will work in
collaboration with Dr. Scanlan to develop these compounds by characterizing
their efficacy and side effect profiles. The Scanlan lab and Znomics will
exchange research data and frequent progress updates.

    


    The
Scanlan lab will provide the following deliverables and research
services:

    
      	
              1)  

            	
              Dr.
      Scanlan will design novel non-steroidal dissociating glucocorticoids based
      on an aryl-pyrazole backbone.

            


    

    
      	
              2)  

            	
              The
      Scanlan lab will synthesize compounds as mutually agreed by the parties,
      anticipating two new synthetic routes will be explored to produce an
      initial panel of 15-30 analogs that carry an array of different steric and
      electronic substituted anilines, followed by an additional 15-30 compounds
      in a lead optimization program.

            


    

    
      	
              3)  

            	
              The
      structures of newly synthesized compounds will be validated by mass
      spectrometry in the Scanlan lab.

            


    

    
      	
              4)  

            	
              The
      Scanlan lab will determine the binding affinity of synthesized compounds
      for the glucocorticoid and other receptors as mutually agreed by the
      parties.

            


    

    
      	
              5)  

            	
              The
      compound structures will be transmitted to Znomics by the Scanlan lab for
      further development in consultation with Dr. Scanlan. Any and all
      derivatives of such compounds and compound structures developed by Znomics
      shall fall under the terms of the attached collaborative research
      agreement.

            


    

    
      	
              6)  

            	
              The
      Scanlan lab will transfer compounds to Znomics for efficacy testing in
      rodent and zebrafish models.

            


    

    


    III.
Effort

    Dr.
Scanlan will allocate the following effort to accomplish the deliverables
described in section II above:

    
      	
              1)  

            	
              Dr.
      Scanlan at 10% effort for supervision and management of
      project.

            


    

    
      	
              2)  

            	
              One
      (1) FTE at the postdoctoral level supervised by Dr.
    Scanlan.

            


    

    


    IV.
Timing/Payments

    Dr.
Scanlan will accomplish the deliverables in Section II above with the personnel
and supplies outlined in section III above in 6-12 months of the effective date.
All payments will be made quarterly and will be due within thirty (30) days of
the end of each quarter.

    


    V.
Research Budget

    First
year budget:

    Salaries & benefits

    
      	      
                                           
      T.
      Scanlan         

            	10%	
              $20,000

            
	      
                                           
      Postdoc             

            	100%	
              40,000

            
	
              Supplies 

            	 	
              15,000

            
	Total
      Direct Costs 	 	
              75,000

            
	
                                          
      MTDC 54%

            	 	
              40,500

            
	      
                                          
      Total

            	 	
              115,500

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Attachment
B: Draft Press Release

    


    Scanlan
Program Draft PR- 7/1/08

    


    Znomics
and Leading Chemist at Oregon Health & Science University Launch Drug
Discovery Program for Treatment of Inflammatory Diseases Without Steroidal Side
Effects

    


    Company
Funds Laboratory of Professor Thomas Scanlan, Ph.D.; Acquires Exclusive Option
to License Small Molecule Compounds from the Discovery Program

    


    Portland,
Ore., July__, 2008 (PrimeNewswire via COMTEX News Network)- Znomics, Inc.
(OTCBB:ZNOM), a pioneer in the development of the zebrafish as a vertebrate
genetic platform to accelerate drug discovery, announced today a collaborative
research program with Oregon Health & Science University (OHSU) and Thomas
Scanlan, Ph.D., Directors of its Chemical Biology Program, to design and develop
pre-clinical compounds to treat diseases such as rheumatoid arthritis, asthma
and inflammatory bowel syndrome.

    


    “This is
an important new therapeutic program for Znomics,” said Richard Sessions, Chief
Executive Officer. “Dr. Scanlan has a proven record of designing new compounds
that have progressed from the university setting into commercial development and
clinical studies. We’re extremely pleased to have a research chemist of Tom’s
caliber collaborating with us.”

    


    Under the
research agreement, Znomics will fund the program and shall have the option to
exclusively license the rights to the discoveries. Dr. Scanlan, a professor of
physiology and pharmacology at OHSU, has done leading work in biological
research and small molecule discovery in “dissociating glucocorticoid” compounds
that retain the desired anti-inflammatory action but without having the serious
side effects of steroids. His work has been recognized by the American Chemical
Society which awarded him the prestigious Arthur C. Cope Scholar Award in July
2007. Prior to his appointment at OHSU, Dr. Scanlan was a faculty member of the
University of California, San Francisco. He has been a member of Znomics’
Scientific Advisory Board since December 2007.

    


    “I’m
excited about this project and about having Tom more involved with Znomics,”
said Bruce Beutel, Chief Scientific Officer. “The factors involved in
glucocorticoid activity represent the kind of complex biology--involving
different side effects on multiple genes and organs--where our zebrafish whole
animal approach can make a difference in successful drug
discovery.”

    


    “Having
the talented Znomics group nearby for this project will be just great,” said Dr.
Scanlan. “Nothing would please me more than to find a drug that could lead to
improved long term treatment for patients suffering from debilitating
inflammation-related diseases, which is a large unmet medical
need.”

    


    //About
Znomics//

    //Forward
Looking Statements//

    //Release
contact info, etc.//

    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Attachment
C: Non-Binding example of reasonable market terms for an exclusive license
for

     compounds
that have a) composition of matter claims b) have preliminary in vitro date, and
c) may

    have
some preliminary in-vivo data.

    


    


    This
Term sheet is for illustration purposes only and is non-binding to the
parties.

    
      	
              Financial

            	 
      
	
              Option

              Exercise

               

            	
              Within
      thirty (30) days of execution of an exclusive license, ZNOMICS shall pay
      OHSU a one-time non-refundable fee of $75,000

            
	
              Milestones

            	
              The
      following milestone payments shall be paid by ZNOMICS to OHSU once the
      first time such milestone is reached for a Licensed Product:

               

            
	 
      	
              Issuance
      of US patent - $75,000

            
	 
      	
              Issuance
      of EU patent - $75,000

            
	 
      	
              Initiation
      of first phase I trial - $100,000

            
	 
      	
              Initiation
      of first phase II trial - $150,000

            
	 
      	
              Initiation
      of first phase III trial - $200,000

            
	 
      	
              First
      sale - $250,000

            
	 
      	 
      
	
              Maintenance

              Fee

            	
              ZNOMICS
      shall pay an annual maintenance fee of $5,000 on each anniversary of the
      effective date of the license agreement.

               

            
	
              Royalty

            	
              ZNOMICS
      will pay OHSU 1-2% of net sales of Licensed Product, the specific rate to
      be negotiated with the definitive license agreement. The royalty rate will
      be reduced for payments made for third party IP required for freedom to
      operate, with a floor at 1%.

               

              In
      the event of a sublicense, the ZNOMICS will pay OHSU 10% of the royalty
      received from its sublicense. In the event that the Licensed Product is
      sold in combination with other products or services that are not
      separately covered by a valid claim within the Licensed Patents, the net
      sales from the Licensed Product will be reasonably allocated between such
      Licensed Product and such other product or compound based upon the
      individual fair market values of the Licensed Product and such other
      product or component.

               

            
	
              Sublicensing

            	
              ZNOMICS
      shall pay to OHSU a percentage of the Sublicense Consideration (all
      upfront milestone payments and other consideration received by ZNOMICS
      from a bone fide sublicensee, but specifically excluding any
      reimbursements received for ZNOMIC’s R&D expenses associated with the
      Licensed Products) it receives from its sublicensee according to the
      following schedule:

              · 40%
      of all Sublicense Consideration received by ZNOMICS within first year
      after Effective Date of the license agreement

               

              · 20%
      of all Sublicense Consideration received by ZNOMICS within second year
      after Effective Date of the license agreement

               

              · 10%
      of all Sublicense Consideration received by ZNOMICS
thereafter

               

            


    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 
      	
              Provided
      that the percentage of Sublicensing Consideration paid to OHSU shall be
      reduced by 50% when, in addition to the patents licensed from OHSU,
      ZNOMICS also sublicenses additional patents or patent applications owned
      or controlled by ZNOMICS (other than OHSU licensed IP) which are required
      by the sublicensee for freedom to operate and the sale of products covered
      by the patents licensed to ZNOMICS by
OHSU