<PAGE>

                                                                   EXHIBIT 10.22

                         Option and License Agreement


This Option and License Agreement, effective as of the Effective Date, (the
"Agreement") governs the ongoing relationship between ZymoGenetics, Inc., a
Washington corporation having a principal place of business at 1201 Eastlake
Avenue East, Seattle, Washington 98102 ("ZGI") and Novo Nordisk A/S, a Danish
corporation having a principal place of business at Novo Alle, DK-2880,
Bagsvaerd, Denmark ("NN").

WHEREAS, ZGI, formerly an indirectly wholly owned subsidiary of NN, is engaged
generally in the research and development of biopharmaceutical products; and

WHEREAS, NN wishes to acquire options to license certain rights to patents,
patent applications, know-how and proprietary technology relating to
biopharmaceutical product candidates and resulting from the research and
development work carried out by or for ZGI;

NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:


                                   ARTICLE 1
                                  Definitions
                                  -----------

SECTION 1.1.  "Affiliate" shall mean any company, joint venture partnership, or
              -----------
other business entity which controls, is controlled by, or is under common
control of a party hereto. A business entity shall be deemed to control another
business entity if it possesses, directly or indirectly, the power to order or
cause the direction, management and policies of such other business entity,
whether through the ownership of voting securities, by contract or otherwise.

SECTION 1.2.  "Beta Cell Field" or "BC Field" means: [ * ]
              -------------------------------

SECTION 1.3.  "Biological Hypothesis" for a Zid Embodiment means:  a proposed
              -----------------------
biological activity involving either the natural role of the Zid Embodiment, or
another beneficial function thereof, where modulating the biological activity is
likely to lead to favorable medical intervention.

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SECTION 1.4.   "Clinical Proof of Concept" or "CPC" for a Zid Embodiment means:
               ------------------------------------
the demonstration of efficacy and adequate dose in patients with the disease in
question. The results must be statistically significant superior to placebo or
another scientifically/justified regulatory comparison.

SECTION 1.5.   "Clinical Proof of Concept Option Period" or "CPC Option Period"
               ----------------------------------------------------------------
for a given ZSS means:   the period of time commencing on the date that NN and
ZGI agree to extend beyond PLPC their collaborative effort under ARTICLE 9 of
this Agreement and ending ninety [[*] after the Phase II or foreign equivalent
data, obtained in accordance with the NN/ZGI mutually agreed upon development
plan, for a Zid Embodiment corresponding to such ZSS are available for
evaluation at NN.

SECTION 1.6.   "Commercialization Rights" means:  (a) the right to conduct
               --------------------------
research, use, sample, develop (including clinical development), promote,
manufacture, market, offer to sell, import, export, distribute, sell, and have
sold Products; and (b) the right to conduct research, use, sample, develop
(including clinical development), manufacture, promote, market, offer to sell,
import, export, distribute, sell and have sold Products together with one or
more third parties as part of a co-marketing agreement, strategic partnership,
joint venture relationship or the like in which NN continues work on research
and development of Products; and (c) the right to sublicense one or more third
parties to manufacture, promote, market, offer to sell, import, export,
distribute, sell and have sold Products.

SECTION 1.7.   "Commercialization Partner" means:  a third party to whom NN has
               ---------------------------
extended rights consistent with SECTION 1.6(b) above.

SECTION 1.8.   "Effective Date" means:  the date on which external investors
               ----------------
have first invested at least fifty million United States dollars (US$50,000,000)
in ZGI which money dilutes NN's ownership interest in ZGI to below eighty
percent (80%) and which date is noted for the sake of clarity on the signature
page of this Agreement.

SECTION 1.9.   "IND" means:  an Investigational New Drug application, or its
               -----
foreign equivalent.

SECTION 1.10.  "Kunitz Domain" means: a portion of a human protein having a
               ---------------
predicted cysteine bond pattern as described in Laskowski and Kato, Ann. Rev.
                                                                    ---------
Biochem., 49: 593-626 (1980), wherein the protein or portion has been discovered
--------  --
by ZGI.

SECTION 1.11.  "Kunitz Protein" means a protein that encompasses [*] Kunitz
                ---------------
Domain discovered by ZGI after [*], which is not otherwise dealt with in another
agreement entered into by NN and ZGI. Full or partial length polynucleotides
discovered by a third party and in licensed

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by ZGI are not Kunitz Proteins for the purposes of this Agreement. A Kunitz
Protein is a Zid Embodiment pursuant to this Agreement.

SECTION 1.12.  "Kunitz Research and Option Period" for a given Kunitz Domain or
               -----------------------------------
Kunitz Protein means:  the period of time commencing on the date of NN's receipt
of polynucleotide or polypeptide sequence information relating to such Kunitz
Domain or Kunitz Protein and ending [*] thereafter; provided however that for
each Kunitz Protein or Kunitz Domain which ZGI disclosed to NN prior to the
Effective Date, the "Kunitz Research and Option Period" shall mean the period of
time commencing on the Effective Date and ending [*] thereafter.

SECTION 1.13.  "Kunitz Research Rights" means:  the non-exclusive right, without
                ----------------------
the right to sublicense, to use Kunitz Domains and Kunitz Proteins during the
Kunitz Research and Option Period for research purposes as further described
herein, namely use of Kunitz Domains and Kunitz Proteins as scaffolds for the
construction of one or more Mutant Kunitz Proteins and use of Mutant Kunitz
Proteins, Kunitz Proteins or Kunitz Domains as reagents in biological assays.

SECTION 1.14.  "Medical Hypothesis" for a Zid Embodiment means:   a proposed use
                ------------------
for the Zid Embodiment in a clinical setting that is medically plausible, based
on the general knowledge in the field and on the particular knowledge about such
Zid Embodiment and supportive data, including raw data generated by or for ZGI.
The data set typically supporting a Medical Hypothesis includes:

     i.    [*];

     v.    results from [*] in vitro analyses of a Zid Embodiment that measure
     parameters that have relevance to the proposed medical use;

     vi.   description of all related reagents available (e.g. antibodies, DNA
     constructs, cell lines and the like);

     vii.  analysis of the Zid Embodiment patent situation; and

     viii. description of work plan to advance the Zid Embodiment to PLPC,
     including a proposed time line, to obtain data in animal model(s) that are
     predictive of (relevant to) efficacy in humans to validate or invalidate
     the proposed medical use.


SECTION 1.15.  "Medical Hypothesis Option Period" for a given ZSS means:   the
                --------------------------------
period of time commencing on the date of NN's receipt of information in support
of a Medical Hypothesis for at least one Zid Embodiment in such ZSS, and ending
[*] thereafter (unless extended for [*] pursuant to SECTION 4.3.3).

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SECTION 1.16.  "Mutant Kunitz Protein" means:  an engineered protein constructed
                ---------------------
by NN that encompasses [*] Kunitz Domain or a mutated version thereof.

SECTION 1.17.  "Net Sales" shall mean NN's and its Commercialization Partners'
                ---------
and Sublicensees' gross proceeds from sales of Products invoiced to any
independent third party, less,

     i.     any direct or indirect credits and allowances or adjustments,
     including, without limitation, credits and allowances on account of price
     adjustments or on account of rejection, recall or return of Products
     previously sold;

     ii.    any trade and cash discounts; price reductions or rebates,
     retroactive or otherwise imposed by government authorities; and third party
     distributor fees;

     iii.   any sales, excise, turnover, value added, or similar taxes and any
     duties and other governmental charges imposed upon the production,
     importation, use or sale of Product(s);

     iv.    applicable transportation, importation, insurance and other handling
     charges; and

     v.     the per unit cost of special devices used for administration of
     Product. Such special devices shall not include conventional devices (e.g.,
     tablets, standard syringes, suppositories and/or standard transdermal
     patches).

Deductions i, ii and iv in the aggregate shall not exceed fifteen percent (15%)
of gross sales of Product by NN and its Commercialization Partner(s) and
Sublicensee(s) during any reporting period.

In the event that the Product is sold as part of a Combination Product the Net
Sales of the Product, for the purposes of determining royalty payments, shall be
determined by multiplying the Net Sales of the Combination Product (as defined
in the standard Net Sales definition) by the fraction, A/(A + B) where A is the
average sale price of the Product when sold separately in finished form and B is
the average sale price of the other product(s) sold separately in finished form,
wherein the other product(s) are not moieties which are the subject of third
party patents as are dealt with in SECTION 11.2 of this Agreement.

In the event that the average sale price of the Product can be determined but
the average sale price of the other product(s) cannot be determined,  Net Sales
of the Combination Product shall be calculated on the basis of the invoice price
of the Combination Product multiplied by a fraction C/(C+D), the numerator of
which shall be the inventory cost of Product (C) in the Combination Product and
the denominator of which shall be the inventory cost of the Product

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plus the inventory cost of all the other products (D) in the Combination
Product. Inventory costs shall be determined in accordance with NN's regular
accounting methods.

The Net Sales price for a Combination Product shall be calculated once each
calendar year and such price shall be used during all applicable royalty
reporting periods for the entire calendar year.  When determining the average
sale price of a Product or product(s), the average sale price shall be
calculated using data arising from the twelve (12) months preceding the
calculation of the Net Sales price for the Combination Product. As used above,
the term "Combination Product" means any pharmaceutical product which comprises
the Product and other active compounds and/or active ingredients, the
product(s).

Notwithstanding the foregoing, the Net Sales shall never be reduced below [*] of
NN's, its Commercialization Partners' and its Sublicensees' gross proceeds.

SECTION 1.18.  "North America" or "NA" means:  Canada, Mexico and the United
               -----------------------
States of America and its territories and possessions.

SECTION 1.19.  "Option Fee" means:  $7.5M United States dollars (US$7,500,000)
               ------------
paid annually by NN to ZGI in exchange for NN's option rights granted under this
Agreement.

SECTION 1.20.  "Option Period" for a given ZSS means:  the period of time
               ---------------
commencing on the date of NN's receipt of information relating to a Medical
Hypothesis for at least one Zid Embodiment within such ZSS and ending:  (a) upon
the expiration of the Medical Hypothesis Option Period, if NN and ZGI have not
agreed to proceed to PLPC for such Zid Embodiment pursuant to ARTICLE 8 hereof;
or (b) if NN and ZGI have so agreed to proceed to PLPC, upon the expiration of
the PLPC Option Period, if NN and ZGI have not agreed to proceed to Clinical
Proof of Concept for such Zid Embodiment pursuant to ARTICLE 8 hereof; or (c) if
NN and ZGI have so agreed to proceed to CPC, upon the expiration of the CPC
Option Period.   The "Option Period" is more fully described in ARTICLE 4.

SECTION 1.21.  Phase III clinical trials ("Phase III") shall mean initiation of
               ---------------------------------------
clinical trials to demonstrate efficacy and safety following the approval by NN
senior management, in accordance with the policies and procedures as set forth
NN's Health Care Project Manual.

SECTION 1.22.  "PLA" means:  Product License Application, a Biologics License
               -----
Application or a foreign equivalent of either.

SECTION 1.23.  "PLPC" shall mean Preclinical Lead Profile candidate as defined
in Appendix 1.

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SECTION 1.24.  "PLPC Option Period" for a given ZSS means:  the period of time
               --------------------
commencing on the date that NN and ZGI agree to collaborate beyond Medical
Hypothesis stage pursuant to ARTICLE 9 of this Agreement and [*] after the PLPC
data, obtained in accordance with the mutually agreed upon NN/ZGI research plan
for a Zid Embodiment within the ZSS, are available for evaluation by NN.

SECTION 1.25.  "Product" means:  a product that is a Know-How Product, a Patent
               ---------
Product, or both.

     SUBSECTION 1.25.1.  "Know-How Product" means: [ * ]
                         ------------------

     SUBSECTION 1.25.2.  "Patent Product" means:  a product licensed from ZGI
                         ----------------
pursuant to this Agreement by NN, the making, using, importation, exportation,
offer for sale, or sale of which would infringe, in the absence of this license,
any unexpired Valid Claim of a Zid-Related Patent.

SECTION 1.26.  "Rest of World" or "RoW" means:  as relating to a given ZSS, all
               ------------------------
countries of the world except those within NA.

SECTION 1.27.  "Sublicensee" means:  a third party to whom NN has extended a
               -------------
sublicense consistent with SECTION 1.6(c) above.

SECTION 1.28.  "Term" means:  the four-year period following the Effective Date.
               ------

SECTION 1.29.  "Valid Claim" means:   a claim of a pending Zid-Related Patent or
               -------------
an unexpired, granted Zid-Related Patent that has not:  (i) been disclaimed,
withdrawn, canceled, or abandoned; or (ii) been finally rejected or held invalid
by a decision of a patent-granting authority beyond right of review or appeal;
or (iii) been held invalid or unenforceable in an unappealable decision of a
court or competent body having jurisdiction (including a decision which was
appealable, but which was not timely appealed).

SECTION 1.30.  "Zid-Related IP" means:  all Zid-Related Patents and all Zid-
               ----------------
Related Know How.

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SECTION 1.31.  "Zid-Related Know-How" means:  all inventions, discoveries, know-
               ----------------------
how, methodologies, technology, tangible materials (including nucleic acids,
peptides, vectors, proteins, and the like) that:  (a) pertain to at least one
Zid Embodiment; and (b) were invented, discovered, developed or otherwise
generated by or for ZGI. For the avoidance of doubt, Zid-Related Know-How shall
not include: (a) know-how which at the time of disclosure is in the public
domain, (b) know-how which prior to the disclosure was in NN's possession, and
(c) know-how developed independently by NN without any use of any confidential
ZGI know-how or confidential ZGI patent rights whatsoever.

SECTION 1.32.  "Zid-Related Patent" means:  a patent or patent application owned
               --------------------
or controlled by ZGI and claiming:  (1) a Zid Embodiment; (2) a formulation
and/or mixture comprising a Zid Embodiment; (3) a method of making a Zid
Embodiment (where the claim may be specific or generic to a given Zid
Embodiment); or (4) a method of using a Zid Embodiment (where the claim may be
specific or generic to a given Zid Embodiment).  A list of Zid-Related Patents
as of March 31, 2000 is appended hereto as Appendix 2.


SECTION 1.33.  "Zid Embodiment", "Zid Gene", "Zid Protein" and "Zid-Specific-
               -------------------------------------------------------------
Set" (or "ZSS").
---------------

     SUBSECTION 1.33.1.  "Zid Embodiment" with respect to a given Zid Gene or
                         ----------------
Zid Protein means:  one or more of the following:

     (a)  a Zid Gene (defined in SECTION 1.33.2 below);

     (b)  a Zid Protein (defined in SECTION 1.33.3 below) corresponding to such
     Zid  Gene;

     (c)  "Soluble Embodiments", which are further defined as soluble forms of
     such Zid Protein (e.g., soluble receptors);

     (d)  "[*];

     (e)  "[*]; or

     (f)  "[*].

     SUBSECTION 1.33.2.  "Zid Gene" means:  a full- or partial-length
                         ----------
polynucleotide coding region [*] discovered by ZGI after [*], which are not
otherwise dealt with in another agreement entered into by NN and ZGI. Full or
partial length polynucleotides discovered by a third party and in licensed by
ZGI are not Zid Genes for the purposes of this Agreement.

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     SUBSECTION 1.33.3.  "Zid Protein" means:  a protein encoded by a Zid Gene.
                         -------------

     SUBSECTION 1.33.4.  "Zid-Specific-Set" or "ZSS" means the set comprised of
                         ------------------
all Zid Embodiments of a specific Zid Gene or Zid Protein.


                                   ARTICLE 2
                          Ownership of Zid-Related IP
                          ---------------------------

As of the Effective Date, ZGI will own all Zid-Related IP and will have all
rights attendant to such ownership, subject to NN's rights described herein.
Before the Effective Date, NN and ZGI shall determine the method and vehicle by
which to transfer to ZGI such ownership of the Zid-Related IP, and ZGI and NN
shall cooperate so that such transfer is complete no later than the Effective
Date.


                                   ARTICLE 3
                                  Option Fee
                                  ----------

In consideration for the rights granted to NN herein, NN agrees that NN shall
pay the Option Fee within ten (10) business days after the Effective Date and on
or before each of the first three anniversaries of the Effective Date (i.e.,
                                                                       ----
anniversaries presumably occurring in 2001, 2002 and 2003).  If this Agreement
is extended pursuant to SECTION 17.2, NN shall pay two additional annual Option
Fees within ten (10) business days on or before each of the fourth and fifth
anniversaries of the Effective Date (i.e., anniversaries presumably occurring in
                                     ----
2004 and 2005).


                                   ARTICLE 4
                                    Options
                                    -------

SECTION 4.1.  Grant of Options.
              ----------------

     SUBSECTION 4.1.1.  RoW Option.  For each ZSS, ZGI hereby grants to NN an
                        ----------
option (the "RoW Option" for such ZSS) to obtain an exclusive license in RoW
having the pre-negotiated terms specified in ARTICLE 5 (exercise during Medical
Hypothesis Option Period), ARTICLE 6 (exercise during or before PLPC Option
Period upon ARTICLE 8 extension), or ARTICLE 7 (exercise during or before CPC
Option Period upon ARTICLE 8 extension) of this Agreement (a "RoW Pre-Negotiated
License" for such ZSS), provided that NN and ZGI have complied with ARTICLE 8
with respect to an ARTICLE 6 or ARTICLE 7 license. Notwithstanding the
aforesaid, the number of RoW Options exercisable by NN during the Term

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shall be limited to the higher of 8 (eight) or 25% of the total number of ZSS
for which a Medical Hypothesis for a Zid Embodiment therein is generated by ZGI
during the Term.

     SUBSECTION 4.1.2.  BC Option.  For each ZSS, ZGI hereby grants to NN an
                        ---------
option (the "BC Option" for such ZSS) to obtain a worldwide exclusive license in
the BC Field, wherein such license would have the pre-negotiated terms specified
in ARTICLE 5 (exercise during Medical Hypothesis Option Period), ARTICLE 6
(exercise during or before PLPC Option Period upon ARTICLE 8 extension), or
ARTICLE 7 (exercise during or before CPC Option Period upon ARTICLE 8 extension)
of this Agreement (a "BC Pre-Negotiated License" for such ZSS), provided that NN
and ZGI have complied with ARTICLE 8 with respect to an ARTICLE 6 or ARTICLE 7
license.

     SUBSECTION 4.1.3.  Single Option Exercise; Conversion from RoW to BC.
                        -------------------------------------------------
Normally, for each ZSS, NN will exercise either the RoW Option or the BC Option.
Should a ZSS, for which NN has exercised or extended an RoW Option, later show
activity in the BC Field, NN can convert such RoW Option or RoW License to a BC
Option or a BC License, provided that such BC Option or BC License is available
in accordance with SUBSECTION 4.1.4 below and subject to appropriate milestone
payments and payment of NA costs, if applicable (without such conversion
constituting an additional exercising of an option under SUBSECTION 4.1.1
above).

     SUBSECTION 4.1.4.  Clarification of ZGI's Rights.  As of the Effective Date
                        -----------------------------
and at all times thereafter, for each ZSS, ZGI shall have the sole and exclusive
right in NA to conduct research, itself and with a third party, relating to Zid
Embodiments in such ZSS and to practice all Commercialization Rights, itself or
with a third party, in all fields except the BC Field, for Products based on Zid
Embodiments in such ZSS, regardless of whether NN exercises a BC Option for such
ZSS.  Until expiration of the Option Period applicable to the RoW Option or BC
Option for any given ZSS, ZGI shall not enter into any agreement, nor offer to
enter into any agreement, with any third party, which grants any
Commercialization Rights for Products in conflict with an existing RoW Option or
BC Option of NN in such ZSS.  If NN exercises an RoW Option and enters into a
Medical Hypothesis RoW license for a given ZSS, for a period of [*] after such
exercise ("BC Grace Period at Medical Hypothesis"), ZGI shall not enter into any
agreement nor offer to enter any agreement, with any third party, which grants
any Commercialization Rights for Products in the BC Field for that ZSS.  If NN
exercises a RoW Option and enters into a PLPC RoW License for a given ZSS, for a
period of [*] after such exercise ("BC Grace Period at PLPC"), ZGI shall not
enter into any agreement nor offer to enter any agreement, with any third party,
which grants any Commercialization Rights for Products in the BC Field for that
ZSS. After the expiration of either type of applicable BC Grace Period for a
ZSS, the RoW License cannot be converted into a BC License without the consent
of ZGI.

     SUBSECTION 4.1.5.  No Other Right Granted.  Except for the RoW Options and
                        ----------------------
BC Options expressly granted in this SECTION 4.1, and the rights to Kunitz
Domains and Kunitz

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Proteins granted under ARTICLE 10 herein, no further or different right, option
or license is granted or implied to NN, under any patent or other intellectual
property, in any field, in any geographic territory.

SECTION 4.2.  Exercise of Options.
              -------------------

     SUBSECTION 4.2.1.  Manner and Timing of Exercise.  The manner by which NN
                        -----------------------------
shall exercise an RoW Option or a BC Option, in a given ZSS, shall be to timely
deliver to ZGI a written notice of: (1) NN's intent to so exercise; and (2) an
identification of at least one Zid Embodiment in the ZSS; and (3) whether NN is
exercising the RoW Option or the BC Option for such ZSS.

     SUBSECTION 4.2.2.  Timeliness of Exercise and ARTICLE 8 Extensions. For any
                        -----------------------------------------------
ZSS, NN may timely exercise an Option under ARTICLE 5 only during the Medical
Hypothesis Option Period. For any ZSS, NN may timely exercise an Option under
ARTICLE 6 at any time following the expiration of the Medical Hypothesis Option
Period and prior to the expiration of the PLPC Option Period, provided that NN
has extended the Option for that ZSS from Medical Hypothesis to PLPC pursuant to
ARTICLE 8. For any ZSS, NN may timely exercise an Option under ARTICLE 7 at any
time following the expiration of the PLPC Option Period and prior to the
expiration of the CPC Option Period, provided that NN has extended the Option
for that ZSS from Medical Hypothesis to PLPC and from PLPC to CPC pursuant to
ARTICLE 8.

     SUBSECTION 4.2.3.  Effect of Exercise.  Upon NN's timely exercise of an RoW
                        ------------------
Option or BC Option for a given ZSS, the parties shall enter into a written
license agreement for such ZSS, having the Pre-Negotiated terms set forth in
ARTICLE 5, ARTICLE 6 or ARTICLE 7 of this Agreement, depending upon the stage at
which NN so exercises.

SECTION 4.3.  Disclosure of Information.
              -------------------------

     SUBSECTION 4.3.1.  General.  In order to provide NN with information
                        -------
helpful to NN in deciding whether to exercise its options at an early stage, ZGI
agrees to disclose certain information, as further described in this SECTION
4.3, in a commercially reasonable timely manner.  Except as expressly provided
in this SECTION 4.3, the parties agree that:  (a) ZGI shall have no further
obligation to disclose to NN any data, information, Biological Hypothesis, or
Medical Hypothesis that was disclosed by ZGI to NN prior to the Effective Date;
and (b) ZGI shall have no obligation to conduct any experiments or assays, or to
generate or provide any data, information or hypothesis indicating that a given
Zid Embodiment is useful in an field (e.g., the BC Field); and (c) NN bears
responsibility for conducting its own due diligence and research (e.g.,
conducting [*]) for any given Zid Embodiment in any given ZSS. ZGI's obligation
to provide information under this SECTION 4.3 shall expire upon termination of
this Agreement.

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     SUBSECTION 4.3.2.  Disclosure of Biological Hypothesis. When a Biological
                        -----------------------------------
Hypothesis is formulated for any Zid Embodiment within a given ZSS, based on
data generated by ZGI or third parties, ZGI will promptly disclose such
Biological Hypothesis to NN, along with all the information then known to ZGI
about that Zid Embodiment and ZSS that ZGI is free to disclose (i.e.,
information that is not subject to obligations of confidentiality to a third
party), for example, information related to [*], other Biological Hypotheses
(if available), data, and relevant patent filings. ZGI and NN may, upon mutual
agreement, decide to enter into a limited material transfer agreement under
which ZGI will transfer to NN the polynucleotide sequence of a Zid Gene housed
in a vector or some other material for the express purpose of enabling NN to
produce the Zid Protein corresponding to that Zid Gene. Any approved use by NN
of such Zid Protein, if any, will be stipulated in that material transfer
agreement.

     SUBSECTION 4.3.3.  Disclosure of Medical Hypothesis. When a Medical
                        --------------------------------
Hypothesis is formulated for any Zid Embodiment within a given ZSS, based on
data generated by ZGI or third parties:  (a) ZGI will promptly disclose such
Medical Hypothesis to NN, along with all the information then known to ZGI about
that Zid Embodiment and ZSS that ZGI is free to disclose (i.e., information that
is not subject to obligations of confidentiality to a third party), for example,
information related to [*], other Medical Hypotheses (if available), data, and
relevant patent filings; and (b) to the extent that ZGI possesses or controls
tangible forms of any Zid Embodiment in such ZSS (e.g., cDNA, protein, vectors)
in sufficient quantities to enable ZGI to deliver such tangible forms to NN, and
upon written request from NN, ZGI shall deliver reasonable quantities of such
tangible forms to NN.  ZGI shall use commercially reasonable efforts to obtain
from a third party the right to disclose to NN that third party's information
that is critical for NN to be fully informed about the Medical Hypothesis.  If
ZGI is unable to obtain the third party's permission to disclose such critical
information, ZGI shall inform NN of the existence of such critical information
and the general nature thereof, and NN's Medical Hypothesis Option Period shall
be extended by an additional thirty (30) days to allow NN to enter into a
confidentiality agreement directly with such third party.  If NN cannot obtain
the critical information from the third party, NN shall make the decision in the
absence of such information prior to the expiry of the [*] Medical Hypothesis
Option Period.

     SUBSECTION 4.3.4.  Joint Committee. ZGI and NN shall form a joint
                        ---------------
committee, containing three members nominated by NN and three members nominated
by ZGI.  Unless otherwise decided by the committee, that committee shall meet at
in person as deemed necessary by the committee but not less than two times per
calendar year to ensure orderly operation of the ZGI information disclosures and
NN decision processes set forth in this Agreement.  Such committee shall agree
to the format and content of ZGI's reports to NN of Biological Hypothesis and
Medical Hypothesis.  In addition, such committee shall discuss the Zid
Embodiment(s) under consideration for each ZSS and exchange information relating
to reagents available or being generated for research use regarding such Zid
Embodiments.  The committee shall attend to other operational matters relating
to this Agreement, including assignment of tasks, budgeting,

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approval of research and/or development plans and the like when NN and ZGI are
working together under an option extension pursuant to ARTICLE 9 of this
Agreement. Disputes within the committee shall be resolved as set forth in
ARTICLE 18.

SECTION 4.4.  Expiration and Reverter.
              ------------------------

     SUBSECTION 4.4.1.  Expiration. For each ZSS, the RoW and BC Options shall
                        ----------
commence on the date that NN receives information from ZGI disclosing a Medical
Hypothesis for a Zid Embodiment within the ZSS and expire upon the expiration or
termination of the Option Period for such ZSS or the expiration or termination
of this Agreement, whichever is earlier.

     SUBSECTION 4.4.2.  Reverter. Unless, before the expiration or termination
                        --------
of the Option Period for a given ZSS, NN exercises the RoW Option for such ZSS
(pursuant to SECTION 4.2), all Commercialization Rights, in RoW, in all fields,
for Products based on Zid Embodiments in such ZSS shall revert to ZGI.
Similarly, unless, before the expiration or termination of the Option Period for
a given ZSS, NN exercises the BC Option for such ZSS (pursuant to SECTION 4.2),
all Commercialization Rights worldwide in the BC Field, for Products based on
Zid Embodiments in such ZSS shall revert to ZGI.


                                   ARTICLE 5
                  Pre-Negotiated Medical Hypothesis Licenses
                  ------------------------------------------

SECTION 5.1.  General. Each RoW Medical Hypothesis Pre-Negotiated License
              -------
entered into prior to the expiration or termination of the Medical Hypothesis
Option Period shall include the terms set forth in SECTIONs 5.3 through 5.6,
below.  Each BC Medical Hypothesis Pre-Negotiated License entered into prior to
the expiration or termination of the Medical Hypothesis Option Period shall
include the terms set forth in SECTIONs 5.7 through 5.10, below.  In addition,
each Pre-Negotiated License shall contain terms customary and reasonable in the
pharmaceutical business, including:  reporting obligations and rights of
termination upon material breach or default.

SECTION 5.2.  Preparation and Finalization of Medical Hypothesis Pre-Negotiated
              -----------------------------------------------------------------
License Agreements. Promptly after NN's exercise, under SECTION 4.2, of an RoW
------------------
Option or a BC Option for a given ZSS prior to the expiration or termination of
the Medical Hypothesis Option Period:  (a) ZGI shall deliver to NN a draft
written license agreement for the applicable Medical Hypothesis Pre-Negotiated
License(s); and (b) NN and ZGI shall commence good faith, arms' length
negotiations regarding all remaining terms of such Pre-Negotiated License.

Option and License Agreement
Page 12 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

SECTION 5.3.  NN's Rights in RoW Medical Hypothesis Pre-Negotiated Licenses.  In
              --------------------------------------------------------------
the RoW Medical Hypothesis Pre-Negotiated License for each ZSS, ZGI shall grant
to NN the exclusive right in RoW to practice all Commercialization Rights under
Zid-Related Patents and Zid-Related Know-How for all Products based on Zid
Embodiments in such ZSS, subject to NN's timely satisfying its obligations under
such RoW Medical Hypothesis Pre-Negotiated License.  Each RoW Medical Hypothesis
Pre-Negotiated License shall identify the Zid-Related Patents and Zid-Related
Know-How included in such License.

SECTION 5.4.  NN's Obligations in RoW Medical Hypothesis Pre-Negotiated
              ---------------------------------------------------------
Licenses.  Each RoW Medical Hypothesis Pre-Negotiated License shall include the
--------
following terms.

     SUBSECTION 5.4.1.  Diligence Obligations.  NN shall use commercially
                        ---------------------
reasonable efforts to achieve each of the following diligence obligations, for
at least one Zid Embodiment in the ZSS, no later than the applicable deadline.
The standard diligence time periods that ZGI and NN intend to be included in a
Pre-Negotiated License under SECTION 5.4 in the situation where a Zid Gene, Zid
Protein or a Soluble Embodiment is the Product are recited below.  However, both
ZGI and NN recognize that specific circumstances surrounding a particular Zid
Embodiment may lead the parties to negotiate one or more different diligence
time period(s) within a particular Pre-Negotiated License.  Under the standard
diligence time periods, NN must:

     (a)  obtain approval by NN's review board to make such Zid Embodiment an NN
     project which is reasonably resourced and funded in accordance with NN
     practice and taking into consideration the stage of development of the Zid
     Embodiment, no later than [*] after NN exercises the RoW Option under this
     ARTICLE 5;

     (b)  obtain PLPC approval no later than [*] from approval of the Zid
     Embodiment as an NN project;

     (c)  file an IND or administer a first human dose or pay the [*] Milestone
     Fee under SUBSECTION 5.4.2, no later than [*] after PLPC approval;

     (d)  initiate Phase III clinical trial or pay the [*] Milestone Fee under
     SUBSECTION 5.4.2 no later than [*] after fulfillment of diligence
     obligation (c) above; and

     (e)  file a PLA or pay the [*] and [*] Milestone Fees under SUBSECTION
     5.4.2 no later than [*] after the fulfillment of diligence obligation (d)
     above.

     SUBSECTION 5.4.2.  Payment of Milestone Fees.  NN will be obligated to pay
                        -------------------------
to ZGI each of the milestone fees set forth in the table below (the "Milestone
Fees").  The execution fee for the Medical Hypothesis License and for PLPC
approval shall be paid by NN to ZGI for the first Zid Embodiment within each
ZSS.  All other Milestone Fees shall be paid by NN to ZGI for

Option and License Agreement
Page 13 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

each Zid Embodiment within each ZSS that proceeds through clinical development.
If multiple members of a single Zid Embodiment proceed through development, NN
shall pay Milestone Fees only for the first such member to pass each milestone;
however, upon commercialization of a second and subsequent member of the same
Zid Embodiment by NN, or a Commercialization Partner or Sublicensee, then NN
shall pay to ZGI full sets of Milestone Fees for such second and subsequent
members of that Zid Embodiment. Each Milestone Fee shall be non-refundable and
non-creditable against any other amounts payable by NN under this Agreement,
such RoW Medical Hypothesis Pre-Negotiated License agreement or any other
agreement. Each Milestone Fee shall be payable by NN to ZGI within ten (10)
business days after achievement of the corresponding milestone. Upon actual
payment of each Milestone Fee, NN shall be considered as having fulfilled its
diligence obligations under SECTION 5.4.1 above, and the date of the payment
shall be deemed the date of occurrence of the diligence event for the purposes
of calculating the timing of the next occurring diligence obligation.

<TABLE>
<CAPTION>
                   Upon           PLPC          Upon the earlier of     Upon the earlier of    Upon the earlier   Upon the earlier
                   execution of   attained for  [*] after PLPC          [*] after IND          of [*] from        of [*] from
                   the license    each Zid      approval and IND        Filing (first human    achievement of     achievement of
                                  Embodiment    Filing (first human     dose) approval and     CPC and PLA        CPC and PLA
                                                dose) for Product       achievement of CPC     Filing in Europe   Filing in Japan
                                                based on each Zid       and Clinical Proof     for Product based  for Product based
                                                Embodiment              of Concept for         on each  Zid       on each Zid
                                                                        Product based on each  Embodiment         Embodiment
                                                                        Zid Embodiment
------------------------------------------------------------------------------------------------------------------------------------
<S>                <C>            <C>           <C>                      <C>                   <C>                  <C>
Each Zid           [*]            [*]           [*]                     [*]                    [*]                [*]
Embodiment in ZSS
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     SUBSECTION 5.4.3.  Payment of Royalties.  NN will be obligated to pay to
                        --------------------
ZGI royalties as follows:

     (a)   Patent Products. NN shall pay a royalty for each Patent Product made,
           ---------------
     used, imported, offered for sale or sold by NN, a Commercialization Partner
     or Sublicensee.  NN's obligation to pay royalties for Patent Product(s)
     shall expire on the expiration date of the last-to-expire Zid-Related
     Patent included in such RoW Medical Hypothesis Pre-Negotiated License.  The
     royalties shall be calculated in accordance with ARTICLE 11.  The
     applicable royalty rate shall be as set forth below.

                         ____________________________________________
                         Cumulative Net Sales     Royalty Rate
                         [*]


     (b)   Know-How Product.   NN shall pay a royalty for each Know-How Product
           ------------------
     made, used, imported, offered for sale or sold by NN, a Commercialization
     Partner or Sublicensee.  NN's obligation to pay royalties for Know-How
     Product(s) shall expire on

Option and License Agreement
Page 14 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

     the date [*] after the first sale of Know-How Product(s) covered by such
     RoW Medical Hypothesis Pre-Negotiated License. The royalties shall be
     calculated by multiplying the applicable royalty rate by the Net Sales of
     such Know-How Product. The applicable royalty rate shall be as set forth
     below.

                              --------------------------------
                                Royalty Rate
                              --------------------------------
                                [*]
                              --------------------------------

The Patent and Know-How royalties under this SUBSECTION 5.4.3 are not additive.
NN shall pay the highest applicable royalty rate only.  If the last-to-expire
patent expires earlier than [*] after the first sale of Patent Product(s)
covered by such RoW Medical Hypothesis Pre-Negotiated License, then NN shall pay
to ZGI Know-How Product royalties until such [*] period runs.

SECTION 5.5.  Sales Volume Bonus.  No later than April 1 of the year following
              -------------------
the first calendar year in which annual Net Sales of a Patent Product covered by
an RoW Medical Hypothesis Pre-Negotiated License [*], NN shall pay to ZGI a one-
time sales volume bonus [*]

SECTION 5.6.  General Terms in RoW Medical Hypothesis Pre-Negotiated Licenses.
              ----------------------------------------------------------------
Each party shall have the right to terminate the RoW Medical Hypothesis Pre-
Negotiated License in a ZSS upon the other party's material breach of any of its
obligations under such RoW Medical Hypothesis Pre-Negotiated License, by giving
written notice and upon the breaching party's failure to timely cure such
material breach,according to the principles set forth in SECTION 17.3.  Each
party shall have the right to assign each RoW Medical Hypothesis Pre-Negotiated
License, in accordance with the principles set forth in SECTION 19.1, and ZGI
shall have the right to assign its right to receive money under such license
upon delivery of written notice to NN.  Each RoW Medical Hypothesis Pre-
Negotiated License shall be governed by the laws of the State of Washington.
Each RoW Medical Hypothesis Pre-Negotiated License shall specify the party (or
parties) responsible for protecting the Zid-Related IP included in such License,
including filing, prosecuting, and maintaining Zid-Related Patents included in
such License, and for defending and enforcing such Zid-Related IP.  Each RoW
Medical Hypothesis Pre-Negotiated License shall specify the party (or parties)
responsible for the costs associated with such protection, filings, prosecution,
maintenance, defense and enforcement.  Each RoW Medical Hypothesis Pre-
Negotiated License shall require the parties to communicate and cooperate, in
good faith, regarding any and all extensions of patent term for the Zid-Related
Patents included in such RoW Medical Hypothesis Pre-Negotiated License.

SECTION 5.7.  NN's Rights in BC Medical Hypothesis Pre-Negotiated Licenses.  In
              -------------------------------------------------------------
the BC Medical Hypothesis Pre-Negotiated License for each ZSS, ZGI shall grant
to NN the exclusive right on a worldwide basis in the BC Field to practice all
Commercialization Rights under Zid-Related Patents and Zid-Related Know-How for
all Products based on Zid Embodiments in such

Option and License Agreement
Page 15 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

ZSS, subject to NN's timely satisfying its obligations under such BC Medical
Hypothesis Pre-Negotiated License. Each BC Medical Hypothesis Pre-Negotiated
License shall identify the Zid-Related Patents and Zid-Related Know-How included
in such License.

SECTION 5.8.  NN's Obligations in BC Medical Hypothesis Pre-Negotiated Licenses.
              -----------------------------------------------------------------
Each BC Medical Hypothesis Pre-Negotiated License shall include the following
terms.

     SUBSECTION 5.8.1.  Diligence Obligations.  NN shall use commercially
                        ---------------------
reasonable efforts to achieve each of the following diligence obligations, for
at least one Zid Embodiment in the ZSS, no later than the applicable deadline.
The standard diligence time periods that ZGI and NN intend to be included in a
Pre-Negotiated License under SECTION 5.8 in the situation where a Zid Gene, Zid
Protein or a Soluble Embodiment is the Product are recited below.  However, both
ZGI and NN recognize that specific circumstances surrounding a particular Zid
Embodiment may lead the parties to negotiate one or more different diligence
time period(s) within a particular Pre-Negotiated License.  Under the standard
diligence time periods, NN must:

     (a) obtain approval by NN's review board to make such Zid Embodiment an NN
     project which is reasonably resourced and funded in accordance with NN
     practice and taking into consideration the stage of development of the Zid
     Embodiment, no later than [*] after NN exercises the BC Option under this
     ARTICLE 5;

     (b) obtain PLPC approval no later than [*] from approval of the Zid
     Embodiment as an NN project;

     (c) file an IND or administer a first human dose or pay the [*] Milestone
     Fee under SUBSECTION 5.8.2 no later then [*] after PLPC approval;

     (d) initiate a Phase III clinical trial or pay the [*] Milestone Fee under
     SUBSECTION 5.8.2 no later than [*] after fulfillment of diligence
     obligation (c) above; and

     (e) file a PLA or pay the [*], [*] and [*] Milestone Fees under SUBSECTION
     5.8.2 no later than [*] after fulfillment of diligence obligation (d)
     above.

     SUBSECTION 5.8.2.  Payment of Milestone Fees.  NN will be obligated to pay
                        -------------------------
to ZGI each of the milestone fees set forth in the table below (the "Milestone
Fees").  The execution fee for the Medical Hypothesis License and for PLPC
approval shall be paid by NN to ZGI for the first Zid Embodiment within each
ZSS.  All other Milestone Fees shall be paid by NN to ZGI for each Zid
Embodiment within each ZSS that proceeds through clinical development.  If
multiple members of a single Zid Embodiment proceed through development, NN
shall pay Milestone Fees only for the first such member to pass each milestone;
however, upon commercialization of

Option and License Agreement
Page 16 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

a second and subsequent member of the same Zid Embodiment by NN, or a
Commercialization Partner or Sublicensee, then NN shall pay to ZGI full sets of
Milestone Fees for such second and subsequent members of that Zid Embodiment.
Each Milestone Fee shall be non-refundable and non-creditable against any other
amounts payable by NN under this Agreement, such BC Medical Hypothesis Pre-
Negotiated License agreement or any other agreement. Each Milestone Fee shall be
payable by NN to ZGI within ten (10) business days after achievement of the
corresponding milestone. Upon actual payment of each Milestone Fee, NN shall be
considered as having fulfilled its diligence obligations under SECTION 5.8.1
above, and the date of the payment shall be deemed the date of occurrence of the
diligence event for the purposes of calculating the timing of the next occurring
diligence obligation.

<TABLE>
<CAPTION>
               Upon       PLPC          Upon the earlier of  Upon the earlier of  Upon the earlier  Upon the earlier  Upon the
               execution  attained for  [*] after PLPC       [*] after IND        of [*] from       of [*] from       earlier of
               of the     each Zid      approval and IND     Filing (first human  achievement of    achievement of    [*] from
               license    Embodiment    Filing (first human  dose) and            CPC  and PLA      CPC and PLA       achievement of
                                        dose) for Product    achievement of       Filing in Europe  Filing in Japan   CPC and PLA
                                        Embodiment           Proof of Concept     on each  Zid      on each  Zid      Filing in US
                                                             for Product based    Embodiment        Embodiment        for Product
                                                             on each  Zid                                             based on each
                                                             Embodiment                                               Zid Embodiment
------------------------------------------------------------------------------------------------------------------------------------
<S>            <C>       <C>            <C>                  <C>                  <C>               <C>               <C>
Each Zid       [*]        [*]           [*]                  [*]                  [*]               [*]               [*]
Embodiment in
ZSS
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


     SUBSECTION 5.8.3.  Payment of Royalties.  NN will be obligated to pay to
                        --------------------
ZGI royalties as follows:

     (a) Patent Products.  NN shall pay a royalty for each Patent Product made,
         ---------------
used, imported, offered for sale or sold by NN, a Commercialization Partner or
Sublicensee.  NN's obligation to pay royalties for Patent Product(s) shall
expire on the expiration date of the last-to-expire Zid-Related Patent included
in such BC Medical Hypothesis Pre-Negotiated License.  The royalties shall be
calculated in accordance with ARTICLE 11.  The applicable royalty rate shall be
as set forth below.

                    ___________________________________
                    Cumulative Net Sales   Royalty Rate
                    [*]


     (b) Know-How Product.   NN shall pay a royalty for each Know-How Product
         ------------------
made, used, imported, offered for sale or sold by NN, a Commercialization
Partner or Sublicensee.  NN's obligation to pay royalties for Know-How
Product(s) shall expire on the date [*] after the first sale of Know-How
Product(s) covered by such BC Medical Hypothesis Pre-Negotiated

Option and License Agreement
Page 17 of 63
[*] designates of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the Commission.
<PAGE>

License. The royalties shall be calculated by multiplying the applicable
royalty rate by the Net Sales of such Know-How Products. The applicable royalty
rate shall be as set forth below.

                ----------------------------
                 Royalty Rate
                ----------------------------
                 [*]
                ----------------------------

The Patent and Know-How royalties under this SUBSECTION 5.8.3 are not adfditive.
NN shall pay the highest application royalty rate only. If the last-to-expire
patent expires ealier than [*] after the first sale pay to ZGI Know-how Product
royalties until such [*] period runs.

SECTION 5.9.  Sales Volume Bonus.  No later than April 1 of the year following
              -------------------
the first calendar year in which annual Net Sales of a Patent Product covered by
a BC Medical Hypothesis Pre-Negotiated License [*], NN shall pay to ZGI a one-
time sales volume bonus of [*]

SECTION 5.10. General Terms in BC Medical Hypothesis Pre-Negotiated Licenses.
              ---------------------------------------------------------------
Each party shall have the right to terminate the BC Medical Hypothesis Pre-
Negotiated License in a ZSS upon the other party's material breach of any of its
obligations under such BC Medical Hypothesis Pre-Negotiated License, by giving
written notice and upon the breaching party's failure to timely cure such
material breach, according to. the principles set forth in SECTION 17.3.  Each
party shall have the right to assign each BC Medical Hypothesis Pre-Negotiated
License, in accordance with the principles set forth in SECTION 19.1, and ZGI
shall have the right to assign its right to receive money under such license
upon delivery of written notice to NN.  Each BC Medical Hypothesis Pre-
Negotiated License shall be governed by the laws of the State of Washington.
Each BC Medical Hypothesis Pre-Negotiated License shall specify the party (or
parties) responsible for protecting the Zid-Related IP included in such License,
including filing, prosecuting, and maintaining Zid-Related Patents included in
such License, and for defending and enforcing such Zid-Related IP.  Each BC
Medical Hypothesis Pre-Negotiated License shall specify the party (or parties)
responsible for the costs associated with such protection, filings, prosecution,
maintenance, defense and enforcement.  Each BC Medical Hypothesis Pre-Negotiated
License shall require the parties to communicate and cooperate, in good faith,
regarding any and all extensions of patent term for the Zid-Related Patents
included in such BC Medical Hypothesis Pre-Negotiated License.


                                   ARTICLE 6
                         Pre-Negotiated PLPC Licenses
                         ----------------------------

SECTION 6.1.  General.  Each RoW Pre-Negotiated License entered into after the
              -------
expiration or termination of the Medical Hypothesis Option Period and prior to
the expiration or termination

Option and License Agreement
Page 18 of 63
[*] designates of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the Commission.
<PAGE>

of the PLPC Option Period shall include the terms set forth in SECTIONs 6.3
through 6.6 below. Each BC Pre-Negotiated License entered into after the
expiration or termination of the Medical Hypothesis Option Period and prior to
the expiration or termination of the PLPC Option Period shall include the terms
set forth in SECTIONs 6.7 through 6.10. below. In addition, each Pre-Negotiated
License shall contain terms customary and reasonable in the pharmaceutical
business, including: reporting obligations and rights of termination upon
material breach or default.

SECTION 6.2.  Preparation and Finalization of Pre-Negotiated License Agreements.
              -----------------------------------------------------------------
Promptly after NN's exercise, under SECTION 4.2, of an RoW Option or BC Option
for a given ZSS after the expiration or termination of the Medical Hypothesis
Option Period and prior to the expiration or termination of the PLPC Option
Period:  (a) ZGI shall deliver to NN a draft written license agreement for the
applicable PLPC Pre-Negotiated License(s); and (b) NN and ZGI shall commence
good faith, arms' length negotiations regarding all remaining terms of such PLPC
Pre-Negotiated License.

SECTION 6.3.  NN's Rights in PLPC RoW Pre-Negotiated Licenses.  In the RoW PLPC
              ------------------------------------------------
Pre-Negotiated License for each ZSS, ZGI shall grant to NN the exclusive right
in RoW to practice all Commercialization Rights under Zid-Related Patents and
Zid-Related Know-How for all Products based on Zid Embodiments in such ZSS,
subject to NN's timely satisfying its obligations under such RoW PLPC Pre-
Negotiated License.  Each RoW PLPC Pre-Negotiated License shall identify the
Zid-Related Patents and Zid-Related Know-How included in such License.

SECTION 6.4.  NN's Obligations in PLPC RoW Pre-Negotiated Licenses.  Each PLPC
              ----------------------------------------------------
RoW Pre-Negotiated License shall include the following terms.

     SUBSECTION 6.4.1.  Diligence Obligations.  NN shall use commercially
                        ---------------------
reasonable effort to achieve each of the following diligence obligations, for at
least one Zid Embodiment in the ZSS, no later than the applicable deadline.  The
standard diligence time periods that ZGI and NN intend to be included in a Pre-
Negotiated License under SECTION 6.4 in the situation where a Zid Gene, Zid
Protein or a Soluble Embodiment is the Product are recited below.  However, both
ZGI and NN recognize that specific circumstances surrounding a particular Zid
Embodiment may lead the parties to negotiate one or more different diligence
time period(s) within a particular Pre-Negotiated License.  Under the standard
diligence time periods, NN must:

     (a) obtain approval by NN's review board to make such Zid Embodiment an NN
     project which is reasonably resourced and funded in accordance with NN
     practice and taking into consideration the stage of development of the Zid
     Embodiment, no later than [*] after NN exercises the RoW Option under
     this ARTICLE 6;

Option and License Agreement
Page 19 of 63
[*] designates of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the Commission.
<PAGE>

     (b) file an IND or administer a first human dose or pay the [*] Milestone
     Fee under SUBSECTION 6.4.2 no later than [*] after PLPC approval;

     (c) initiate a Phase III clinical trial or pay the [*] Milestone Fee
     under SUBSECTION 6.4.2 no later than [*] after fulfillment of diligence
     obligation (b) above; and

     (d) file a PLA or pay the [*] and [*] Milestone Fees under SUBSECTION
     6.4.2 no later than [*] after fulfillment of diligence obligation (c)
     above.

     SUBSECTION 6.4.2.  Payment of Milestone Fees.  NN will be obligated to pay
                        -------------------------
to ZGI each of the milestone fees set forth in the table below (the "Milestone
Fees").  The execution fee for the PLPC License shall be paid by NN to ZGI only
once for each ZSS.  All other Milestone Fees shall be paid by NN to ZGI for each
Zid Embodiment within each ZSS that proceeds through clinical development.  If
multiple members of a single Zid Embodiment proceed through development, NN
shall pay Milestone Fees only for the first such member to pass each milestone;
however, upon commercialization of a second and subsequent member of the same
Zid Embodiment by NN, or a Commercialization Partner or Sublicensee, then NN
shall pay to ZGI full sets of Milestone Fees for such second and subsequent
members of that Zid Embodiment.  Each Milestone Fee shall be non-refundable and
non-creditable against any other amounts payable by NN under this Agreement,
such RoW PLPC Pre-Negotiated License agreement or any other agreement.  Each
Milestone Fee shall be payable by NN to ZGI within ten (10) business days after
achievement of the corresponding milestone. Upon actual payment of each
Milestone Fee, NN shall be considered as having fulfilled its diligence
obligations under SECTION 6.4.1 above, and the date of the payment shall be
deemed the date of occurrence of the diligence event for the purposes of
calculating the timing of the next occurring diligence obligation.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                     Upon          Upon the earlier of    Upon the earlier of       Upon the earlier of   Upon the earlier of
                     execution of  [*] after PLPC         [*] after IND Filing      [*] from              [*] from achievement of
                     the license   approval and IND       (first human dose)  and   achievement of CPC    CPC and PLA Filing in
                                   Filing (first  human   achievement of CPC and    and PLA Filing in     Japan for Product based
                                   dose) for Product      Clinical Proof of         Europe for Product    on each Zid Embodiment
                                   based on each Zid      Concept for Product       based on each Zid
                                   Embodiment             based on each  Zid        Embodiment
                                                          Embodiment
------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>           <C>                    <C>                       <C>                   <C>
Each          Zid    [*]           [*]                    [*]                       [*]                   [*]
Embodiment in ZSS
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     SUBSECTION 6.4.3.  Payment of Royalties.  NN will be obligated to pay to
                        --------------------
ZGI royalties as follows:

     (a) Patent Products.  NN shall pay a royalty for each Patent Product made,
         ---------------
used, imported, offered for sale or sold by NN, a Commercialization Partner or
Sublicensee.  NN's obligation to pay royalties for Patent Product(s) shall
expire on the expiration date of the last-to-expire Zid-Related Patent included
in such RoW PLPC Pre-Negotiated License.  The royalties shall be calculated in
accordance withARTICLE 11.  The applicable royalty rate shall be as set forth
below.

Option an dLicense Agreement
Page 20 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

obligation to pay royalties for Patent Product(s) shall expire on the expiration
date of the last-to-expire Zid-Related Patent included in such RoW PLPC Pre-
Negotiated License. The royalties shall be calculated in accordance withARTICLE
11. The applicable royalty rate shall be as set forth below.

                   ------------------------------------------------
                    Cumulative Net Sales    Royalty Rate
                    [*]

     (b)      Know-How Product.  NN shall pay a royalty for each Know-How
Product made, used, imported, offered for sale or sold by NN, a
Commercialization Partner or Sublicensee. NN's obligation to pay royalties for
Know-How Product(s) shall expire on the date [*] after the first sale of Know-
How Product(s) covered by such RoW PLPC Pre-Negotiated License. The royalties
shall be calculated by multiplying the applicable royalty rate by the Net Sales
of such Know-How Product. The applicable royalty rate shall be as set forth
below.

                   -----------------------------
                    Royalty Rate
                   -----------------------------
                    [*]
                   -----------------------------

The Patent and Know-How royalties under this SUBSECTION 6.4.3 are not additive.
NN shall pay the highest applicable royalty rate only. If the last-to-expire
patent expires earlier than [*] after the first sale of Patent Product(s)
covered by such RoW PLPC Pre-Negotiated License, then NN shall pay to ZGI Know-
How Product royalties until such [*] period runs.

SECTION 6.5.  Sales Volume Bonus.  No later than April 1 of the year following
              -------------------
the first calendar year in which annual Net Sales of a Patent Product covered by
an RoW PLPC Pre-Negotiated License exceed [*] NN shall pay to ZGI a one-time
sales volume bonus of [*]

SECTION 6.6.  General Terms in RoW Pre-Negotiated Licenses.  Each party shall
              ---------------------------------------------
have the right to terminate the RoW PLPC Pre-Negotiated License in a ZSS upon
the other party's material breach of any of its obligations under such RoW  PLPC
Pre-Negotiated License, by giving written notice and upon the breaching party's
failure to timely cure such material breach, according to. the principles set
forth in SECTION 17.3.  Each party shall have the right to assign each RoW PLPC
Pre-Negotiated License in accordance with the principles set forth in SECTION
19.1, and ZGI shall have the right to assign its right to receive money under
such license upon delivery of written notice to NN.  NN shall have the right to
assign each RoW PLPC Pre-Negotiated License upon prior written approval from
ZGI.  Each RoW PLPC Pre-Negotiated License shall be governed by the laws of the
State of Washington.  Each RoW PLPC Pre-Negotiated License shall specify the
party (or parties) responsible for protecting the Zid-Related IP included in
such License, including filing, prosecuting, and maintaining Zid-Related Patents

Option and License Agreement
Page 21 of 67
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

included in such License, and for defending and enforcing such Zid-Related IP.
Each RoW PLPC Pre-Negotiated License shall specify the party (or parties)
responsible for the costs associated with such protection, filings, prosecution,
maintenance, defense and enforcement.  Each RoW PLPC Pre-Negotiated License
shall require the parties to communicate and cooperate, in good faith, regarding
any and all extensions of patent term for the Zid-Related Patents included in
such RoW PLPC Pre-Negotiated License.

SECTION 6.7.  NN's Rights in BC PLPC Pre-Negotiated Licenses.  In every BC PLPC
              -----------------------------------------------
Pre-Negotiated License for each ZSS, ZGI shall grant to NN the exclusive right
on a worldwide basis in the BC Field to practice all Commercialization Rights
under Zid-Related Patents and Zid-Related Know-How for all Products based on Zid
Embodiments in such ZSS, subject to NN's timely satisfying its obligations under
such BC PLPC Pre-Negotiated License.  Each BC PLPC Pre-Negotiated License shall
identify the Zid-Related Patents and Zid-Related Know-How included in such
License.

SECTION 6.8.  NN's Obligations in BC PLPC Pre-Negotiated Licenses.  Each BC PLPC
              ---------------------------------------------------
Pre-Negotiated License shall include the following terms.

     SUBSECTION 6.8.1.  Diligence Obligations.  NN shall use commercially
                        ---------------------
reasonable efforts to achieve each of the following diligence obligations, for
at least one Zid Embodiment in the ZSS, no later than the applicable deadline.
The standard diligence time periods that ZGI and NN intend to be included in a
Pre-Negotiated License under SECTION 6.8 in the situation where a Zid Gene, Zid
Protein or a Soluble Embodiment is the Product are recited below.  However, both
ZGI and NN recognize that specific circumstances surrounding a particular Zid
Embodiment may lead the parties to negotiate one or more different diligence
time period(s) within a particular Pre-Negotiated License.  Under the standard
diligence time periods, NN must:

     (a)  obtain approval by NN's review board to make such Zid Embodiment an NN
     project which is reasonable resourced and funded in accordance with NN
     practice and taking into consideration the stage of development of the Zid
     Embodiment, no later than [*] after NN exercises the BC Option under this
     ARTICLE 6;

     (b)  file an IND or administer a first human dose or pay the [*] Milestone
     Fee under SUBSECTION 6.8.2 no later than [*] after PLPC approval;

     (c)  initiate a Phase III clinical trial or pay the [*] Milestone Fee under
     SUBSECTION 6.8.2 no later than [*] after fulfillment of diligence
     obligation (b) above; and

     (d)  file a PLA or pay the [*] Milestone Fees under SUBSECTION 6.8.2 no
     later than [*] after fulfillment of diligence obligation (c) above.

Option and License Agreement
Page 22 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

     SUBSECTION 6.8.2.  Payment of Milestone Fees.  NN will be obligated to pay
                        -------------------------
to ZGI each of the milestone fees set forth in the table below (the "Milestone
Fees").  The execution fee for the PLPC License shall be paid by NN to ZGI only
once for each ZSS.  All other Milestone Fees shall be paid by NN to ZGI for each
Zid Embodiment within each ZSS that proceeds through clinical development.  If
multiple members of a single Zid Embodiment proceed through development, NN
shall pay Milestone Fees only for the first such member to pass each milestone;
however, upon commercialization of a second and subsequent member of the same
Zid Embodiment by NN, or a Commercialization Partner or Sublicensee, then NN
shall pay to ZGI full sets of Milestone Fees for such second and subsequent
members of that Zid Embodiment.  Each Milestone Fee shall be non-refundable and
non-creditable against any other amounts payable by NN under this Agreement,
such BC PLPC Pre-Negotiated License agreement or any other agreement.  Each
Milestone Fee shall be payable by NN to ZGI within ten (10) business days after
achievement of the corresponding milestone. Upon actual payment of each
Milestone Fee, NN shall be considered as having fulfilled its diligence
obligations under SECTION 6.8.1 above, and the date of the payment shall be
deemed the date of occurrence of the diligence event for the purposes of
calculating the timing of the next occurring diligence obligation.

<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
<S>             <C>          <C>                   <C>                   <C>                   <C>                <C>
                Upon         Upon the earlier of   Upon the earlier of   Upon the earlier of   Upon the earlier   Upon the earlier
                execution of [*] after PLPC        [*] after IND Filing  [*] from achievement  of [*] from        of [*] from
                the license  approval and IND      (first human dose)    of CPC and PLA Filing achievement of     achievement of CPC
                             Filing (first human   and achievement of    in Europe for Product CPC and PLA Filing and PLA Filing in
                             does) for Product     CPC and Clinical      based on each Zid     in Japan for       US for Product
                             based on each Zid     Proof of Concept for  Embodiment            Product based on   based on each Zid
                             Embodiment            Product based on each                       each Zid           Embodiment
                                                   Zid Embodiment                              Embodiment
------------------------------------------------------------------------------------------------------------------------------------
Each Zid        [*]          [*]                   [*]                   [*]                   [*]                [*]
 Embodiment in
 ZSS
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

     SUBSECTION 6.8.3.  Payment of Royalties.  NN will be obligated to pay to
                        --------------------
ZGI royalties as follows:

     (a)  Patent Products.  NN shall pay a royalty for each Patent Product made,
          ---------------
used, imported, offered for sale or sold by NN, a Commercialization Partner or
Sublicensee.  NN's obligation to pay royalties for Patent Product(s) shall
expire on the expiration date of the last-to-expire Zid-Related Patent included
in such BC PLPC Pre-Negotiated License.   The royalties shall be calculated in
accordance with ARTICLE 11.  The applicable royalty rate shall be as set forth
below.

                        ---------------------------------------------
                         Cumulative Net Sales    Royalty Rate
                         [*]

Option and License Agreement
Page 23 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

     (b)  Know-How Product.   NN shall pay a royalty for each Know-How Product
          ------------------
made, used, imported, offered for sale or sold by NN, a Commercialization
Partner or Sublicensee.  NN's obligation to pay royalties for Know-How
Product(s) shall expire on the date [*] after the first sale of Know-How
Product(s) covered by such BC PLPC Pre-Negotiated License. The royalties shall
be calculated by multiplying the applicable royalty rate by the Net Sales of
such Know-How Product. The applicable royalty rate shall be as set forth below.

                        -------------------------------
                         Royalty Rate
                        -------------------------------
                         [*]
                        -------------------------------

The Patent and Know-How royalties under this SUBSECTION 6.8.3 are not additive.
NN shall pay the highest applicable royalty rate only.  If the last-to-expire
patent expires earlier than [*]after the first sale of Patent Product(s)
covered by such BC PLPC Pre-Negotiated License, then NN shall pay to ZGI Know-
How Product royalties until [*] period runs.

SECTION 6.9.   Sales Volume Bonus.  No later than April 1 of the year following
               -------------------
the first calendar year in which annual Net Sales of a Patent Product covered by
a BC PLPC Pre-Negotiated License exceed [ * ] NN shall pay to ZGI a one-time
sales volume bonus of [*]

SECTION 6.10.  General Terms in BC Pre-Negotiated Licenses.  Each party shall
               --------------------------------------------
have the right to terminate the BC PLPC Pre-Negotiated License in a ZSS upon the
other party's material breach of any of its obligations under such BC PLPC Pre-
Negotiated License, by giving written notice and upon the breaching party's
failure to timely cure such material breach, according to the principles set
forth in SECTION 17.3.  Each party shall have the right to assign each BC PLPC
Pre-Negotiated License, in accordance with the principles set forth in SECTION
19.1, and ZGI shall have the right to assign its right to receive money under
such license upon delivery of written notice to NN.  Each BC PLPC Pre-Negotiated
License shall be governed by the laws of the State of Washington.  Each BC PLPC
Pre-Negotiated License shall specify the party (or parties) responsible for
protecting the Zid-Related IP included in such License, including filing,
prosecuting, and maintaining Zid-Related Patents included in such License, and
for defending and enforcing such Zid-Related IP.  Each BC PLPC Pre-Negotiated
License shall specify the party (or parties) responsible for the costs
associated with such protection, filings, prosecution, maintenance, defense and
enforcement.  Each BC PLPC Pre-Negotiated License shall require the parties to
communicate and cooperate, in good faith, regarding any and all extensions of
patent term for the Zid-Related Patents included in such BC PLPC Pre-Negotiated
License.

Option and License Agreement
Page 24 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

                                   ARTICLE 7
               Pre-Negotiated Clinical Proof of Concept Licenses
               -------------------------------------------------

SECTION 7.1.  General.  Each RoW Pre-Negotiated License entered into after the
              -------
expiration or termination of the PLPC Option Period and prior to the expiration
or termination of the CPC Option Period shall include the terms set forth in
SECTIONs 7.3 through 7.6 below.  Each BC Pre-Negotiated License entered into
after the expiration or termination of the PLPC Option Period and prior to the
expiration or termination of the CPC Option Period shall include the terms set
forth in SECTIONs 7.7 through 7.10. below.  In addition, each Pre-Negotiated
License shall contain terms customary and reasonable in the pharmaceutical
business, including:  reporting obligations and rights of termination upon
material breach or default.

SECTION 7.2.  Preparation and Finalization of Pre-Negotiated License Agreements.
              -----------------------------------------------------------------
Promptly after NN's exercise, under SECTION 4.2, of an RoW Option or BC Option
for a given ZSS after the expiration or termination of the PLPC Option Period
and prior to the expiration or termination of the CPC Option Period:  (a) ZGI
shall deliver to NN a draft written license agreement for the applicable CPC
Pre-Negotiated License(s); and (b) NN and ZGI shall commence good faith, arms'
length negotiations regarding all remaining terms of such CPC Pre-Negotiated
License.

SECTION 7.3.  NN's Rights in CPC RoW Pre-Negotiated Licenses.  In the RoW CPC
              -----------------------------------------------
Pre-Negotiated License for each ZSS, ZGI shall grant to NN the exclusive right
in RoW to practice all Commercialization Rights under Zid-Related Patents and
Zid-Related Know-How for all Products based on Zid Embodiments in such ZSS,
subject to NN's timely satisfying its obligations under such RoW CPC Pre-
Negotiated License.  Each RoW CPC0 Pre-Negotiated License shall identify the
Zid-Related Patents and Zid-Related Know-How included in such License.

SECTION 7.4.  NN's Obligations in CPC RoW Pre-Negotiated Licenses.  Each CPC RoW
              ---------------------------------------------------
Pre-Negotiated License shall include the following terms.

     SUBSECTION 7.4.1.  Diligence Obligations.  NN shall use commercially
                        ---------------------
reasonable efforts to achieve each of the following diligence obligations, for
at least one Zid Embodiment in the ZSS, no later than the applicable deadline.
The standard diligence time periods that ZGI and NN intend to be included in a
Pre-Negotiated License under SECTION 7.4 in the situation where a Zid Gene, Zid
Protein or a Soluble Embodiment is the Product are recited below.  However, both
ZGI and NN recognize that specific circumstances surrounding a particular Zid
Embodiment may lead the parties to negotiate one or more different diligence
time period(s) within a particular Pre-Negotiated License.  Under the standard
diligence time periods, NN must:

Option and License Agreement
Page 25 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

     (a)  obtain approval by NN's review board to make such Zid Embodiment an NN
     project which is reasonably resourced and funded in accordance with NN
     practice and taking into consideration the stage of development of the Zid
     Embodiment, no later than sixty (60) days after NN exercises the RoW Option
     under this ARTICLE 7;

     (b)  initiate a Phase III clinical trial no later than [*] after CPC is
     attained;

     (c)  file a PLA or pay the [*] and [*] Milestone Fees under SUBSECTION
     7.4.2 no later than [*] after fulfillment of diligence obligation (b)
     above.

     SUBSECTION 7.4.2.  Payment of Milestone Fees.  NN will be obligated to pay
                        -------------------------
to ZGI each of the milestone fees set forth in the table below (the "Milestone
Fees").  The execution fee for the CPC License shall be paid by NN to ZGI only
once for each ZSS.  All other Milestone Fees shall be paid by NN to ZGI for each
Zid Embodiment within each ZSS that proceeds through clinical development.  If
multiple members of a single Zid Embodiment proceed through development, NN
shall pay Milestone Fees only for the first such member to pass each milestone;
however, upon commercialization of a second and subsequent member of the same
Zid Embodiment by NN, or a Commercialization Partner or Sublicensee, then NN
shall pay to ZGI full sets of Milestone Fees for such second and subsequent
members of that Zid Embodiment.  Each Milestone Fee shall be non-refundable and
non-creditable against any other amounts payable by NN under this Agreement,
such RoW CPC Pre-Negotiated License agreement or any other agreement.  Each
Milestone Fee shall be payable by NN to ZGI within ten (10) business days after
achievement of the corresponding milestone. Upon actual payment of each
Milestone Fee, NN shall be considered as having fulfilled its diligence
obligations under SECTION 7.4.1 above, and the date of the payment shall be
deemed the date of occurrence of the diligence event for the purposes of
calculating the timing of the next occurring diligence obligation.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                          Upon          Upon the earlier of [*]     Upon the earlier of [*]
                          execution of  from achievement of CPC     from achievement of CPC
                          the license   and PLA Filing in           and PLA Filing in
                                        Europe for Product          Japan for Product
                                        based on each Zid           based on each Zid
                                        Embodiment                  Embodiment
------------------------------------------------------------------------------------------------
<S>                       <C>           <C>                         <C>
Each Zid                  [*]           [*]                         [*]
Embodiment in ZSS
------------------------------------------------------------------------------------------------
</TABLE>

     SUBSECTION 7.4.3.  Payment of Royalties.  NN will be obligated to pay to
                        --------------------
ZGI royalties as follows:

     (a) Patent Products.  NN shall pay a royalty for each Patent Product made,
         ---------------
used, imported, offered for sale or sold by NN, a Commercialization Partner or
Sublicensee.  NN's

Option and License Agreement
Page 26 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

obligation to pay royalties for Patent Product(s) shall
expire on the expiration date of the last-to-expire Zid-Related Patent included
in such RoW CPC Pre-Negotiated License.  The royalties shall be calculated in
accordance with ARTICLE 11.  The applicable royalty rate shall be as set forth
below.

                         -----------------------------------
                         Cumulative Net Sales   Royalty Rate
                         [*]


     (b) Know-How Product.   NN shall pay a royalty for each Know-How Product
         ------------------
made, used, imported, offered for sale or sold by NN, a Commercialization
Partner or Sublicensee.  NN's obligation to pay royalties for Know-How
Product(s) shall expire on the date [ * ] after the first sale of Know-How
Product(s) covered by such RoW CPC Pre-Negotiated License.  The royalties shall
be calculated by multiplying the applicable royalty rate by the Net Sales of
such Know-How Product.  The applicable royalty rate shall be as set forth below.

                         ----------------------------
                         Royalty Rate
                         ----------------------------
                         [*]
                         ----------------------------

The Patent and Know-How royalties under this SUBSECTION 7.4.3 are not additive.
NN shall pay the highest applicable royalty rate only.  If the last-to-expire
patent expires earlier than [*] after the first sale of Patent Product(s)
covered by such RoW CPC Pre-Negotiated License, then NN shall pay to ZGI Know-
How Product royalties until such [*] period runs.

SECTION 7.5.  Sales Volume Bonus.  No later than April 1 of the year following
              -------------------
the first calendar year in which annual Net Sales of a Patent Product covered by
an RoW CPC Pre-Negotiated License exceed [*] NN shall pay to ZGI a one-time
sales volume bonus of [*]

SECTION 7.6.  General Terms in RoW Pre-Negotiated Licenses.  Each party shall
              ---------------------------------------------
have the right to terminate the RoW CPC Pre-Negotiated License in a ZSS upon the
other party's material breach of any of its obligations under such RoW CPC Pre-
Negotiated License, by giving written notice and upon the breaching party's
failure to timely cure such material breach, according to the principles set
forth in SECTION 17.3.  Each party shall have the right to assign each RoW CPC
Pre-Negotiated License, in accordance with the principles set forth in SECTION
19.1, and ZGI shall have the right to assign its right to receive money under
such license upon delivery of written notice to NN.  Each RoW CPC Pre-Negotiated
License shall be governed by the laws of the State of Washington.  Each RoW CPC
Pre-Negotiated License shall specify the party (or parties) responsible for
protecting the Zid-Related IP included in such License, including filing,
prosecuting, and maintaining Zid-Related Patents included in such License, and
for defending and enforcing such Zid-Related IP.  Each RoW CPC Pre-Negotiated
License shall specify the

Option and License Agreement
Page 27 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

party (or parties) responsible for the costs associated with such protection,
filings, prosecution, maintenance, defense and enforcement. Each RoW CPC Pre-
Negotiated License shall require the parties to communicate and cooperate, in
good faith, regarding any and all extensions of patent term for the Zid-Related
Patents included in such RoW CPC Pre-Negotiated License.

SECTION 7.7.  NN's Rights in BC CPC Pre-Negotiated Licenses.  In every BC CPC
              ----------------------------------------------
Pre-Negotiated License for each ZSS, ZGI shall grant to NN the exclusive right
on a worldwide basis in the BC Field to practice all Commercialization Rights
under Zid-Related Patents and Zid-Related Know-How for all Products based on Zid
Embodiments in such ZSS, subject to NN's timely satisfying its obligations under
such BC CPC Pre-Negotiated License.  Each BC CPC Pre-Negotiated License shall
identify the Zid-Related Patents and Zid-Related Know-How included in such
License.

SECTION 7.8.  NN's Obligations in BC CPC Pre-Negotiated Licenses.  Each BC CPC
              --------------------------------------------------
Pre-Negotiated License shall include the following terms.

     SUBSECTION 7.8.1.  Diligence Obligations.  NN shall use commercially
                        ---------------------
reasonable efforts to achieve each of the following diligence obligations, for
at least one Zid Embodiment in the ZSS, no later than the applicable deadline.
The standard diligence time periods that ZGI and NN intend to be included in a
Pre-Negotiated License under SECTION 7.8 in the situation where a Zid Gene, Zid
Protein or a Soluble Embodiment is the Product are recited below.  However, both
ZGI and NN recognize that specific circumstances surrounding a particular Zid
Embodiment may lead the parties to negotiate one or more different diligence
time period(s) within a particular Pre-Negotiated License.  Under the standard
diligence time periods, NN must:

     (a)  obtain approval by NN's review board to make such Zid Embodiment an NN
     project which is reasonably resourced and funded in accordance with NN
     practice and taking into consideration the stage of development of the Zid
     Embodiment, no later than sixty (60) days after NN exercises the BC Option
     under this ARTICLE 7;

     (b)  initiate a Phase III clinical trial no later [*] from IND approval;

     (c)  file a PLA or pay the [*] Milestone Fees under SUBSECTION 7.8.2 no
     later than [*] after fulfillment of diligence obligation (b) above.


     SUBSECTION 7.8.2.  Payment of Milestone Fees.  NN will be obligated to pay
                        -------------------------
to ZGI each of the milestone fees set forth in the table below (the "Milestone
Fees").  The execution fee for the CPC License shall be paid by NN to ZGI only
once for each ZSS.  All other Milestone Fees shall be paid by NN to ZGI for each
Zid Embodiment within each ZSS that proceeds through clinical development.  If
multiple members of a single Zid Embodiment proceed through

Option and License Agreement
Page 28 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

development, NN shall pay Milestone Fees only for the first such member to pass
each milestone; however, upon commercialization of a second and subsequent
member of the same Zid Embodiment by NN, or a Commercialization Partner or
Sublicensee, then NN shall pay to ZGI full sets of Milestone Fees for such
second and subsequent members of that Zid Embodiment. Each Milestone Fee shall
be non-refundable and non-creditable against any other amounts payable by NN
under this Agreement, such BC CPC Pre-Negotiated License agreement or any other
agreement. Each Milestone Fee shall be payable by NN to ZGI within ten (10)
business days after achievement of the corresponding milestone. Upon actual
payment of each Milestone Fee, NN shall be considered as having fulfilled its
diligence obligations under SECTION 7.8.1 above, and the date of the payment
shall be deemed the date of occurrence of the diligence event for the purposes
of calculating the timing of the next occurring diligence obligation.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                      Upon             Upon the earlier  of    Upon the earlier  of    Upon the earlier  of
                      execution of     [*] from                [*] from                [*] from
                      the license      achievement of CPC      achievement of CPC      achievement of CPC
                                       and PLA Filing in       and PLA Filing in       and PLA Filing in
                                       Europe for Product      Japan for Product       US for Product
                                       based on each Zid       based on each Zid       based on each Zid
                                       Embodiment              Embodiment              Embodiment
-------------------------------------------------------------------------------------------------------------
<S>                   <C>              <C>                     <C>                     <C>
Each Zid               [*]             [*]                     [*]                     [*]
Embodiment in ZSS
-------------------------------------------------------------------------------------------------------------
</TABLE>

     SUBSECTION 7.8.3.  Payment of Royalties.  NN will be obligated to pay to
                        --------------------
ZGI royalties as follows:

     (a) Patent Products.  NN shall pay a royalty for each Patent Product made,
         ---------------
used, imported, offered for sale or sold by NN, a Commercialization Partner or
Sublicensee.  NN's obligation to pay royalties for Patent Product(s) shall
expire on the expiration date of the last-to-expire Zid-Related Patent included
in such BC CPC Pre-Negotiated License.  The royalties shall be calculated in
accordance with ARTICLE 11.  The applicable royalty rate shall be as set forth
below.

                         --------------------------------------
                         Cumulative Net Sales     Royalty Rate
                         [*]


     (b) Know-How Product.   NN shall pay a royalty for each Know-How Product
         ------------------
made, used, imported, offered for sale or sold by NN, a Commercialization
Partner or Sublicensee.  NN's obligation to pay royalties for Know-How
Product(s) shall expire on the date [*] the first

Option and License Agreement
Page 29 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

sale of Know-How Product(s) covered by such BC CPC Pre-Negotiated License. The
royalties shall be calculated by multiplying the applicable royalty rate by the
Net Sales of such Know-How Product. The applicable royalty rate shall be as set
forth below.

                         ------------------------------
                         Royalty Rate
                         ------------------------------
                         [*]
                         ------------------------------

The Patent and Know-How royalties under this SUBSECTION 7.8.3 are not additive.
NN shall pay the highest applicable royalty rate only.  If the last-to-expire
patent expires earlier than [*] after the first sale of Patent Product(s)
covered by such BC CPC Pre-Negotiated License, then NN shall pay to ZGI Know-How
Product royalties until such [*] period runs.

SECTION 7.9.   Sales Volume Bonus.  No later than April 1 of the year following
               -------------------
the first calendar year in which annual Net Sales of a Patent Product covered by
a BC CPC Pre-Negotiated License exceed [*] NN shall pay to ZGI a one-time
sales volume bonus of [*]

SECTION 7.10.  General Terms in BC Pre-Negotiated Licenses.  Each party shall
               --------------------------------------------
have the right to terminate the BC CPC Pre-Negotiated License in a ZSS upon the
other party's material breach of any of its obligations under such BC CPC Pre-
Negotiated License, by giving written notice and upon the breaching party's
failure to timely cure such material breach, according to the principles set
forth in SECTION 17.3.  Each party shall have the right to assign each BC CPC
Pre-Negotiated License, in accordance with the principles set forth in SECTION
19.1, and ZGI shall have the right to assign its right to receive money under
such license upon delivery of written notice to NN.  Each BC CPC Pre-Negotiated
License shall be governed by the laws of the State of Washington.  Each BC CPC
Pre-Negotiated License shall specify the party (or parties) responsible for
protecting the Zid-Related IP included in such License, including filing,
prosecuting, and maintaining Zid-Related Patents included in such License, and
for defending and enforcing such Zid-Related IP.  Each BC CPC Pre-Negotiated
License shall specify the party (or parties) responsible for the costs
associated with such protection, filings, prosecution, maintenance, defense and
enforcement.  Each BC CPC Pre-Negotiated License shall require the parties to
communicate and cooperate, in good faith, regarding any and all extensions of
patent term for the Zid-Related Patents included in such BC CPC Pre-Negotiated
License.


                                   ARTICLE 8
                            Option Period Extension
                            -----------------------

SECTION 8.1.  Right to Extend Medical Hypothesis Option Period.  For each ZSS,
              ------------------------------------------------
ZGI hereby grants to NN the right to extend the Option Period for each RoW
Option and each BC Option

Option and License Agreement
Page 30 of 63
[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

from the end of the Medical Hypothesis Option Period to the end of the PLPC
Option Period. For a given ZSS, NN may extend the Option Period for the RoW
Option and the BC Option by notifying ZGI, in writing, of such extension, no
later than the last date of the Medical Hypothesis Option Period for such ZSS.
In order to be effective, each notice of extension must include: (a) a statement
of NN's desire to negotiate with ZGI for a research agreement to conduct further
research on at least one Zid Embodiment in the ZSS; and (b) payment of a Medical
Hypothesis to PLPC extension fee of [*] for an RoW Option, or [*] for a BC
Option. The date of ZGI's receipt of such perfected notice shall be the "Date of
SECTION 8.1 Extension" of the Medical Hypothesis Option Period through the end
of the PLPC Option Period.

SECTION 8.2.  Effect of SECTION 8.1 Extension.  Upon NN's timely extension of an
              -------------------------------
RoW Option or BC Option pursuant to SECTION 8.1, NN shall retain the option to
enter into a Pre-Negotiated License under the terms set forth in ARTICLE 6
hereof during the time period from the Date of SECTION 8.1 Extension to the end
of the PLPC Option Period. During an extended Option Period under this SECTION
8.2 for a given ZSS, ZGI shall not enter into a license or other arrangement
with any third party in conflict with NN's RoW or BC Options, as applicable, for
such ZSS.

SECTION 8.3.  Right to Extend PLPC Option Period.  For each ZSS, ZGI hereby
              -----------------------------------
grants to NN the conditional right to extend the Option Period for each RoW
Option and each BC Option from the end of the PLPC Option Period to the end of
the CPC Option Period.  For a given ZSS, NN may extend the Option Period for the
RoW Option and the BC Option after PLPC is attained by notifying ZGI, in
writing, of such extension, no later than the last date of the PLPC Option
Period for such ZSS.  In order to be effective, each notice of extension must
include:  (a) a statement of NN's desire to negotiate with ZGI for a research
and clinical development agreement to conduct further research and clinical
studies on at least one Zid Embodiment in the ZSS; and (b) payment of a PLPC to
CPC extension fee [*] for an RoW Option, or [*] for a BC Option.

SECTION 8.4.  Participation in PLPC to CPC Research and Clinical Development.
              ---------------------------------------------------------------
For each ZSS that NN delivers written notice of NN's desire to extend the Option
Period to the end of the CPC Option Period, ZGI shall have [*] from the date
upon which ZGI received NN's notice of extension to determine whether ZGI wishes
to continue beyond PLPC.  If ZGI does desire to continue, ZGI shall notify NN
with that [*] period of ZGI's decision in writing and ZGI and NN will proceed
as described in ARTICLE 9 herein.  If ZGI does not desire to continue, ZGI shall
notify NN within that [*] period of ZGI's decision in writing, and NN shall
have [*] from the date upon which NN received ZGI's notice to determine
whether NN wishes to take an RoW PLPC Pre-Negotiated License or a BC PLPC Pre-
Negotiated License.  If NN desires to enter into one of these Licenses, NN shall
exercise its option pursuant to ARTICLE 4 and the provisions of ARTICLE 6 shall
apply, and NN shall pay to ZGI the difference between the applicable ARTICLE 6
Pre-Negotiated License execution fee and the SECTION 8.3 extension fee.  If NN

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does not desire to enter into one of these Licenses, NN's RoW and BC Options
shall terminate pursuant to SECTION 4.5, and ZGI shall refund to NN the SECTION
8.3 extension fee.  The date of NN's receipt of ZGI's notice of ZGI's decision
to continue shall be the "Date of SECTION 8.3/8.4 Extension" of the PLPC Option
Period to the end of the CPC Option Period.

SECTION 8.5.  Effect of SECTION 8.3/8.4 Extension.  Upon NN's timely extension
              -----------------------------------
of an RoW Option or BC Option under SECTION 8.3, and further upon ZGI's
affirmative decision to continue under SECTION 8.4, NN shall retain the option
to take a license under the terms set forth in ARTICLE 7 hereof from the Date of
SECTION 8.3/8.4 Extension to the end of the CPC Option Period. During the
extended Option Period for a given ZSS, ZGI shall not enter into a license or
other arrangement with any third party in conflict with NN's RoW or BC Options,
as applicable, for such ZSS.

                                   ARTICLE 9
          Cooperative Research and Development upon Option Extension
          ----------------------------------------------------------

SECTION 9.1.  Negotiation of Term Sheet of Research/Clinical Development
              ----------------------------------------------------------
Agreement.  Promptly after ZGI's receipt of NN's proper written notice of
---------
extension under SECTION 8.1 or SECTIONs 8.3 and 8.4, ZGI and NN shall commence
good faith, arms' length negotiation toward a written term sheet for a research
and development agreement in the ZSS.  Each such term sheet shall include at
least the following items:

     (1) the Zid Embodiment(s) to be researched;

     (2) an outline of a research and/or clinical plan designed to reach the
     desired goal, or "End Point", for such research (i.e., PLPc or CPC);
                                                      ----

     (3) an estimate of the costs and expenses (including mutually agreed upon
     fully burdened costs per full-time employee (FTE)) for the research and/or
     clinical plan, and a statement of who is to conduct the research (i.e., NN,
                                                                       ----
     ZGI or a third party);

     (4) a commitment by NN to pay [*] of the costs and expenses related to the
     NA research plan as set forth in (2) above when NN is extending an RoW
     Option to the end of the PLPC Option Period and [*] of the costs and
     expenses related to the NA research and clinical development plan as set
     forth in (2) above when NN is extending an RoW Option to the end of the CPC
     Option Period. When NN is extending a BC Option, NN shall pay [*]of such
     costs and expenses related to NA; and

     (5) a description of ZGI's and NN's reporting requirements.

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The research and/or clinical development costs and expenses attributable to NA
shall be those accrued by or for ZGI in accordance with the work plan conducted
pursuant to the research and/or clinical development agreement.

If ZGI and NN fail to execute a written term sheet by the date [*] after the
Date of Extension, then the parties shall refer such disagreement to be settled
in accordance with the procedures set forth in ARTICLE 18.

If ZGI and NN execute a written term sheet before expiration such [*] period,
then the PLPC or CPC Option Period for such ZSS shall be extended for an
additional [*] to permit a definitive research and/or clinical development
agreement to be negotiated (i.e., the total negotiation period shall be [*] from
                            ----
the Date of Extension).

SECTION 9.2.  Negotiation of Research/Clinical Development Agreement.  If the
              ------------------------------------------------------
parties timely executed a written term sheet, they shall continue good faith,
arms' length negotiations toward executing a written research and/or clinical
development agreement, consistent with the term sheet.  Each research and/or
clinical development agreement shall include at least the following items:

     (1) the Zid Embodiment(s) to be researched;

     (2) a mutually agreed-upon work plan for the research or clinical
     development, including which party is responsible for which tasks
     thereunder, taking into account the expertise of the parties and the cost
     of each party's undertaking such tasks (e.g., NN will undertake [*]);

     (3) a description of the agreed-upon End Point(s) and a product development
     plan with the requirements for achieving the End Point clearly defined,
     which plan includes the reporting format and data to be included therein to
     support the achievement of the End Point;

     (4) an estimate of the costs and expenses (i.e., both direct and indirect
     expenses, including overhead) for the research and/or clinical studies;

     (5) a commitment by NN to pay [*] of the costs and expenses related to the
     NA research plan as agreed to in item (2) above when NN is extending an RoW
     Option to the end of the PLPC Option Period and [*] of the costs and
     expenses related to the NA research and clinical development plan as agreed
     to in item (2) above when NN is extending an RoW Option to the end of the
     CPC Option Period. When NN is extending a BC Option, NN shall pay [*] of
     such costs and expenses related to NA, and a description as to how such
     payments will be made;

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     (6) a description of ZGI's and NN's reporting obligations;

     (7) a description of each party's rights regarding inventions made in
     performance of the research and/or clinical studies;

     (8) a description of the parties' rights to amend the work plan;

     (9) a description of the parties' rights to terminate the research and/or
     clinical development agreement, and the effect of such termination, if one
     or both parties reasonably believe the desired End Point(s) is not
     attainable;

     (10) a communication plan setting forth rules regarding a each party's
     rights with respect to publication of research and clinical results; and

     (11) a dispute resolution procedure to resolve issues that arise about the
     work conducted pursuant to the agreement or about the research and/or
     clinical development agreement itself.

The research and/or clinical development costs and expenses attributable to NA
shall be those accrued by or for ZGI in accordance with the work plan conducted
pursuant to the research and/or clinical development agreement.

If ZGI and NN fail to execute a research and/or clinical development agreement
during [*] period from the Date of Extension, then the parties shall refer
such disagreement to be settled in accordance with the procedures set forth in
ARTICLE 18.

If ZGI and NN timely execute a written research agreement, then the PLPC or CPC
Option Period for such ZSS shall be extended until the End Point specified in
the research and/or clinical development agreement is reached, or until the
research and/or clinical development agreement is earlier terminated pursuant to
its terms.

SECTION 9.3.  Accounting.  Each such research and/or clinical development
              ----------
agreement shall specify that the parties shall make and endorse an annual budget
for activities pursuant to such agreement using a universal hourly rate for the
time of employees of both parties.  NN shall pre-pay to ZGI [*] of the total
budgeted amount at the beginning of each calendar quarter.  ZGI and NN shall
submit quarterly statements showing actual quarterly costs and expenses of each
party.  Within ninety (90) days after the end of each six (6) month period
during the term of the agreement, the parties shall review the past two
quarterly statements and make any adjustment that may be necessary against
advance payments made in respect of each such six (6) month period, either by
payment by NN to ZGI or by repayment by ZGI to NN, as the case may be.

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The budget for research and clinical development costs shall include direct cost
and research or development overhead, as well as committee-approved G&A
expenses. These overhead rates (research/development and G&A) shall be
negotiated when the budget is established. No prior approval of expenditure of
either party is needed if the total cost is less than [*] of the portion of the
budget allocated to that party for its activities under the research and/or
clinical development agreement. If either party should have reason to believe
that the cost will exceed [*] of the portion of the budget allocated to that
party's activities, that party shall notify the other party and obtain approval
for expenditure of such overage. Upon receipt of notice of an overage, the
receiving party shall respond within ten (10) business days as to whether that
party is prepared to continue to support the allocable percentage of the newly
proposed budget.

SECTION 9.4.  Exit Options.  If NN and ZGI mutually agree that the research
              ------------
and/or clinical development being conducted under the agreement is not likely to
lead to a favorable outcome, NN and ZGI shall terminate the agreement and all
rights to the ZSS that is the subject of that agreement shall revert to ZGI.
If NN believes that the research and/or clinical development being conducted
under the agreement is not likely to lead to a favorable outcome, NN may
terminate such agreement upon delivery of written notice to ZGI and all rights
to the ZSS that is the subject of that agreement shall revert to ZGI.  If ZGI
believes that the research and/or clinical development being conducted under the
agreement is not likely to lead to a favorable outcome, ZGI may terminate such
agreement upon delivery of written notice to NN; provided, however that NN shall
be entitled to proceed at NN's sole expense and effort to the pre-agreed End
Point and then decide whether to enter into a Pre-Negotiated License under the
terms of ARTICLE 6 or ARTICLE 7, whichever is then applicable, by timely
exercise of NN's Option in accordance with SECTION 4.2.  In the event of
termination, for whatever reason, each party shall be free to use and exploit
any and all inventions, discoveries, know-how and other results from the
collaboration that have been made jointly by the parties. In such case ZGI
shall, in addition hereto, be granted a non-exclusive right to use any
inventions, discoveries, know-how and other results generated solely by NN,
subject to paying a reasonable compensation.

                                   ARTICLE 10
                  Kunitz Research Rights, Options and Licenses
                  --------------------------------------------

SECTION 10.1. Disclosure of Kunitz Protein Sequences.  The parties contemplate
              --------------------------------------
that, from time to time, ZGI may discover one or more novel Kunitz Proteins or
Kunitz Domains.  Upon each such discovery, ZGI shall disclose to NN the sequence
of each such Kunitz Protein or Kunitz Domain ("Kunitz Protein Sequence"):  (a)
promptly after the date that ZGI files a patent application disclosing such
Kunitz Protein or Kunitz Domain; or (b) if ZGI determines not to file such a
patent application, promptly after ZGI makes such determination. In addition,
the parties

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acknowledge that ZGI has discovered novel Kunitz Proteins and Kunitz Domains and
that ZGI has disclosed such Kunitz Proteins and Kunitz Domains to NN prior to
the Effective Date.

SECTION 10.2.  Grant of Kunitz Research Rights.  During the Kunitz Research and
               --------------------------------
Option Period for each Kunitz Protein or Kunitz Domain, NN shall have the non-
exclusive right to conduct research within NN (but not with any third party)
regarding such Kunitz Protein or Kunitz Domain.  Such Kunitz Research Rights
include:  (a) use of such Kunitz Protein or Kunitz Domain as a scaffold to
generate Mutant Kunitz Proteins and other derivatives and modifications of such
Kunitz Protein or Kunitz Domains; (b) use of Mutant Kunitz Proteins, Kunitz
Proteins and Kunitz Domains as reagents in biological assays to identify product
candidates; and (c) file patent applications, in NN's name, claiming such Mutant
Kunitz Proteins, other derivatives or modifications of Kunitz Proteins and
Kunitz Domains or methods of making or using the same.

SECTION 10.3.  Expiration of the Kunitz Research and Option Period.  Upon
               ----------------------------------------------------
expiration of the Kunitz Research and Option Period for each Kunitz Protein or
Kunitz Domain or upon expiration or termination of this Agreement, whichever is
earlier, NN's rights to use such Kunitz Proteins or Kunitz Domains shall
terminate, unless NN enters into a license agreement with ZGI having the
financial terms of the Pre-Negotiated RoW License set forth in ARTICLE 5.

SECTION 10.4.  Mutant Kunitz Proteins and Other Derivatives/Modifications of
               -------------------------------------------------------------
Kunitz Domains or Kunitz Proteins.  For each Mutant Kunitz Protein or other
----------------------------------
derivative or modification of a Kunitz Domain or Kunitz Protein, NN's research,
development and commercialization rights shall not be limited by field or
territory, provided that:  (a) for Mutant Kunitz Proteins or derivatives or
modifications of Kunitz Proteins or Kunitz Domains that are covered by a Valid
Claim of a patent owned or controlled by ZGI, NN enters into a license agreement
with ZGI having the financial terms of the Pre-Negotiated RoW License set forth
in ARTICLE 5; and (b) for Mutant Kunitz Proteins or derivatives or modifications
of Kunitz Proteins or Kunitz Domains that are not covered by a Valid Claim of a
patent owned or controlled by ZGI, NN agrees to pay ZGI an enablement fee of [*]
of Net Sales of such Mutant Kunitz Proteins or derivatives or modifications of
Kunitz Proteins or Kunitz Domains, regardless of whether NN or its partner or
licensee makes such sales. In no event will NN offset any royalties paid to
third parties against royalties due and owing to ZGI for SECTION 10.4(b)
enablement fees.

                                  ARTICLE 11
              Royalty Payments, Royalty Offset and Record Keeping
              ---------------------------------------------------

SECTION 11.1.  Royalty Payments.   NN shall pay Milestone Fees and royalty
               ----------------
payments pursuant to this Agreement to ZGI, regardless of whether NN or a third
party makes the sales that accrue a royalty to ZGI.

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SECTION 11.2.  Royalty Offset For Third Party Patents.  NN is obligated to pay
               --------------------------------------
all third party royalties associated with any Patent Products commercialized in
accordance with this Agreement, regardless of whether NN or ZGI has taken such
third party license.  NN shall pay to ZGI the royalties set forth in ARTICLES 5,
6 and 7 with respect to any Patent Product, unless a third party has an issued
patent in a relevant jurisdiction claiming a composition of matter or method of
use for which NN has obtained the written opinion of independent patent counsel
that a license to such patent is required to commercialize a Patent Product and
NN and the third party have executed such a patent license.  In such event, NN
or its Commercialization Partners or Sublicensees shall be entitled to [*] of
the royalties paid to all such third parties against royalties due and owing to
ZGI pursuant to this Agreement.


SECTION 11.3.  Generic Products.  Should in any specific country in the licensed
               ----------------
territory, Generic Product(s) (as hereinafter defined) reach a market share in
such country equal to or higher than [*] of the local market for a Patent
Product, then the royalty rate on such Patent Product otherwise applicable shall
be reduced with respect to such country according to the following scale:

        ----------------------------------------------------------------
        Market share of the Generic   Percentage of reduction of the
        Product                       royalty rates otherwise applicable
                     [*]




Generic Product(s) shall mean any third party-marketed product that is identical
to a Patent Product marketed by NN, any of its Affiliates, Commericalization
Partners or Sublicensees, wherein such third party-marketed product does not
infringe a Zid-Related Patent.

SECTION 11.4.  Additive Offsets; Minimum Royalties.  The royalty offsets for
               -----------------------------------
Patent Products set forth in SECTIONs 11.2 and 11.3 shall be additive; however,
the minimum royalty payable by NN to ZGI shall never be reduced below [*] of the
royalties set forth for Patent Products in ARTICLES 5, 6 and 7 of this
Agreement. Notwithstanding Sections 11.2 and 11.3, in no event will NN offset
any royalties paid to third parties against royalties due and owing to ZGI for
Know-How Products or SECTION 10.4(b) products.

SECTION 11.5.  Royalty Accounting.  The tiered royalties under this Agreement
               -------------------
and Pre-Negotiated Licenses entered into pursuant hereto shall be paid quarterly
but calculated on an annual basis.  Only a single royalty rate shall be
applicable in any given year and that rate will be determined by the total
annual Net Sales.  An adjustment to prior quarters in any given year shall

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be made in any subsequent quarter in the same year in which a threshold into a
higher royalty bracket has been exceeded. A year end adjustment will be made, if
a royalty threshold is exceeded in the fourth quarter.

SECTION 11.6.  Payments and Reports.  Royalties payable pursuant to this
               ---------------------
Agreement shall be due quarterly within 45 days following the end of each
calendar quarter for Net Sales in such calendar quarter. All sales in foreign
currencies shall be converted into United States dollars using the rate of
exchange quoted by Bank of America and its successor(s) on the last business day
of the calendar quarter in which the sales were made.  Each such payment shall
be accompanied by a statement of Net Sales for the quarter and the calculation
of Royalties payable hereunder by Product and country.  All Milestone Fees,
Royalties and all other amounts which are overdue under this Agreement will bear
interest at the rate of 1.5% per month from the date due through the date of
payment.  NN shall keep and shall cause its Commercialization Partners and
Sublicensees to keep complete, true and accurate records for the purpose of
showing the derivation of all Milestone Fees and Royalties payable under this
Agreement.  ZGI's duly accredited representatives, which are reasonably
acceptable to NN, shall have the right to inspect and audit such records at any
time during reasonable business hours upon reasonable prior notice to NN or any
of its Commercialization Partners or Sublicensees, but such right will not be
exercised more often than annually (it being understood that a single exercise
of such right may include a series of related or continuing inspections and
audits).

SECTION 11.7.  Taxation of Payments.  ZGI shall be responsible for and shall
               --------------------
bear any taxes levied upon payments received by ZGI and ZGI hereby authorizes NN
to withhold such taxes from the payments which are payable to ZGI in accordance
with this Agreement if NN is either required to do so under the applicable tax
laws or directed to do so by an agency of the relevant government.  Upon ZGI's
written request, NN shall with respect ot the laws of Denmark, support ZGI in
its legal efforts to minimize any such withholding taxes, and provide ZGI with
information about and necessary for any documentation needed to reduce
withholding to a legal minimum.

SECTION 11.8.  Currency Blockage.  If the laws or regulations of another country
               ------------------
prevent the conversion of its currency into United States dollars for the
payment of Royalties, NN or its Commercialization Partners or Sublicensees will
either (a) pay such Royalties by depositing the currency of the other country
into a bank account designated by ZGI in that country or (b) if permitted by
law, pay such Royalties in the currency of the country in question to ZGI's
designee in that country.

SECTION 11.9.  Diligence Reporting and Audit.  With respect to the licenses
               ------------------------------
granted under ARTICLES 5, 6, 7 and 10, the parties hereby agree that this
Agreement imparts an obligation and each such license shall also impart an
obligation for NN to report semi-annually on research and development progress
for Zid Embodiments within all licensed ZSSs, Kunitz Domains or Kunitz Proteins.
Also, NN shall keep complete, true and accurate records for the purpose of
showing the research and development progress of Zid Embodiments within all
licensed ZSSs, Kunitz Domains or

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Kunitz Proteins under this Agreement. ZGI shall have the right to monitor NN's
research, development and commercialization efforts for licensed ZSSs, Kunitz
Domains and Kunitz Proteins, and NN shall promptly cooperate with ZGI's
reasonable requests for information regarding such research, development and
commercialization.

                                  ARTICLE 12
                                    Patents
                                    -------

SECTION 12.1.  Patent Filings and Prosecution.
               ------------------------------

     SUBSECTION 12.1.1.  Prior to Execution of License in ZSS.
                         ------------------------------------

     (a) RoW.  In each ZSS, during the time prior to execution of an RoW Pre-
         ---
     Negotiated License, ZGI shall have sole and exclusive responsibility for
     protecting, in RoW, all Zid-Related IP related to such ZSS, including
     filing, prosecuting, and maintaining in RoW, Zid-Related Patents related to
     such ZSS.  ZGI shall be solely responsible for the costs associated with
     such RoW protection, filings, prosecution and maintenance and the
     jurisdictions in which patent protection is sought shall be within the sole
     discretion of ZGI.

     (b) NA.  In each ZSS, during the time prior to execution of a BC Pre-
         --
     Negotiated License, ZGI shall have sole and exclusive responsibility for
     protecting, in NA, all Zid-Related IP related to such ZSS, including
     filing, prosecuting, and maintaining, in NA, Zid-Related Patents related to
     such ZSS.  ZGI shall be solely responsible for the costs associated with
     such NA protection, filings, prosecution, and maintenance and the
     jurisdictions in which patent protection is sought shall be within the sole
     discretion of ZGI.

     (c) Current Practice.  ZGI's current ex-North America patent application
         ----------------
     filing practice is set forth in Appendix 3.

     SUBSECTION 12.1.2.  As of Execution of License.    As of the date of
                         --------------------------
execution of a Pre-Negotiated License, the provisions of such License regarding
protection of the Zid-Related IP included in such License (including filing,
prosecuting, and maintaining Zid-Related Patents included in such License) and
the costs associated with such activities, shall be governed by the provisions
of the particular License.

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SECTION 12.2.  Patent Enforcement and Defense.
               ------------------------------

     SUBSECTION 12.2.1.  Prior to Execution of License in ZSS.
                         ------------------------------------

     (a) RoW.  In each ZSS, during the time prior to execution of an RoW Pre-
         ---
     Negotiated License, ZGI shall have sole and exclusive responsibility for
     defending and enforcing, in RoW, all Zid-Related IP related to such ZSS,
     including but not limited to:  sending cease & desist letters; initiating
     and participating in interference proceedings, protest proceedings, reissue
     proceedings, re-examination proceedings, and lawsuits; defending
     declaratory judgment proceedings; and settling disputes with third parties.
     ZGI shall be solely responsible for the costs associated with such defense
     and enforcement and shall retain all damages and monies awarded as a result
     of such efforts.

     (b) NA.  In each ZSS, during the time prior to execution of a BC Pre-
         --
     Negotiated License, ZGI shall have sole and exclusive responsibility for
     protecting, in NA, all Zid-Related IP related to such ZSS, including but
     not limited to:  sending cease & desist letters; initiating and
     participating in interference proceedings, protest proceedings, reissue
     proceedings, re-examination proceedings, and lawsuits; defending
     declaratory judgment proceedings; and settling disputes with third parties.
     ZGI shall be solely responsible for the costs associated with such defense
     and enforcement and shall retain all damages and monies awarded as a result
     of such efforts.

     SUBSECTION 12.2.2.  As of Execution of License.  As of the date of
                         --------------------------
execution of a Pre-Negotiated License, the provisions of such License regarding
defense and enforcement of the Zid-Related IP included in such License
(including sending cease & desist letters; initiating and participating in
interference proceedings, protest proceedings, reissue proceedings, re-
examination proceedings, and lawsuits; defending declaratory judgment
proceedings; and settling disputes with third parties) and the costs associated
with such activities, shall be governed by the provisions of the particular
License.

                                  ARTICLE 13
                                Confidentiality
                                ---------------

SECTION 13.1.  Confidential Information.  For the purposes of this Agreement,
               ------------------------
Confidential Information shall include all proprietary information and
materials, patentable or otherwise, of a party which is disclosed by or on
behalf of such disclosing party to the receiving party, such as DNA sequences,
amino acid sequences, vectors, cells, substances, formulations, techniques,
methodology, equipment, data, reports, know-how, assay results, preclinical
studies and clinical trials and the results thereof, patent positioning and
business plans, including any negative developments.

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SECTION 13.2.  Confidentiality Obligation.  Except as is otherwise authorized
               --------------------------
under this Agreement, each party shall, during the term of this Agreement and
for a period of three (3) years thereafter, maintain as secret and confidential
all Confidential Information obtained from the other pursuant to this Agreement
and prior to and in contemplation of it, and all other Confidential Information
that it may acquire from the other in the course of this Agreement.  Each party
shall respect the other's proprietary rights in such Confidential Information,
use the same exclusively for the purposes of this Agreement, and disclose the
same only to those of its employees to whom and to the extent that such
disclosure is reasonably necessary for the purposes of this Agreement.

SECTION 13.3.  Release from Confidentiality Obligation.  Notwithstanding the
               ---------------------------------------
foregoing provisions, a party shall be permitted to disclose any Confidential
Information of the other party to its patent practitioner or any patent office
in any country, as is reasonably required for filing or prosecuting any patent
application permitted to be filed by it hereunder.  Furthermore, the obligations
of SECTION 13.3 shall not apply to Confidential Information which:

     (a) were properly in the possession of the receiving party, without any
     restriction on use or disclosure, prior to receipt from the disclosing
     party, and such possession can be demonstrated by competent evidence of the
     receiving party;

     (b) are in the public domain by public use, publication, general knowledge
     or the like, or after disclosure hereunder become general or public
     knowledge through no fault of the receiving party;

     (c) are properly obtained by the receiving party from a third party not
     under a confidentiality obligation;

     (d) are independently developed by or on behalf of the receiving party
     without the assistance of the confidential information of the disclosing
     party; or

     (e) are required to be disclosed by order of any court or governmental or
     regulatory authority after notification of the providing party by the
     receiving party of the necessity to allow the providing party to seek
     protection for the providing party's confidential information from such
     court or governmental or regulatory authority.

SECTION 13.4   Survival.   The obligations under this ARTICLE 13 shall survive
               --------
the termination of this Agreement.

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                                   ARTICLE 14
                 Material Transfer and Limitation of Liability
                 ---------------------------------------------

SECTION 14.1.  Zid Embodiments.  Zid Embodiments shall be used by NN solely for
               ---------------
internal research and development in accordance with this Agreement, except that
NN may enter into arrangements with contract laboratories for contract research
provided:  (a) that the contract laboratory is under an obligation of
confidentiality to NN at least as stringent as the confidentiality obligations
hereunder; and (b) that NN owns the results of such contract laboratory's
testing.  No Zid Embodiment shall be intermingled by NN with intellectual
property or confidential information of any third party, unless NN has entered
into a Pre-Negotiated License with ZGI that contemplates and authorizes such
intermingling.  Any person using a Zid Embodiment will be advised of, and is
subject to, the terms of this Agreement.

SECTION 14.2.  Limitations.  ZID EMBODIMENTS OR OTHER MATERIALS TRANSFERRED
               -----------
PURSUANT TO THIS AGREEMENT ARE EXPERIMENTAL IN NATURE AND ARE TRANSFERRED
BETWEEN THE PARTIES AS IS.  NEITHER NN NOR ZGI 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 SUCH ZID EMBODIMENTS OR OTHER MATERIALS TRANSFERRED
PURSUANT TO THIS AGREEMENT, OR ANY LOSS WHICH MAY ARISE FROM SUCH USE.  ZID
EMBODIMENTS AND OTHER MATERIALS TRANSFERRED PURSUANT TO THIS AGREEMENT WILL BE
USED IN COMPLIANCE WITH ALL APPLICABLE RULES AND REGULATIONS INCLUDING, FOR
EXAMPLE, THOSE RELATING TO RESEARCH INVOLVING THE USE OF HUMAN AND ANIMAL
SUBJECTS OR RECOMBINANT DNA.

SECTION 14.3.  Transfer of Zid Embodiments and Other Materials.  NN shall not
               -----------------------------------------------
distribute Zid Embodiments or other materials generated or transferred pursuant
to this Agreement to third parties, unless NN has entered into a Pre-Negotiated
License with ZGI that contemplates and authorizes such transfer.  ZGI may not
distribute materials solely owned or developed by NN pursuant to this Agreement
to third parties without NN's express written permission.  All authorized
distributions of materials will only occur pursuant to a fully executed, written
Materials Transfer Agreement.


                                   ARTICLE 15
                         Representations and Warranties
                         ------------------------------

SECTION 15.1.  Representations, Warranties and Covenants of NN.  NN represents
               -----------------------------------------------
and warrants to and covenants with ZGI that:

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     (a) NN is a corporation duly organized, validly existing and in corporate
     good standing under the laws of Denmark; and

     (b) NN has the corporate and legal right, title, authority and power to
     enter into this Agreement; and

     (c) NN has taken all necessary action to authorize the execution, delivery
     and performance of this Agreement; and

     (d) upon the execution and delivery of this Agreement, this Agreement shall
     constitute a valid and binding obligation of NN, enforceable in accordance
     with its terms, except as enforceability may be limited by applicable
     bankruptcy, insolvency, reorganization, moratorium or similar laws
     affecting creditors' and contracting parties' rights generally and except
     as enforceability may be subject to general principles of equity
     (regardless of whether such enforceability is considered in a proceeding in
     equity or at law); and

     (e) the performance of its obligations under this Agreement will not
     conflict with or result in a breach of any agreements, contracts or other
     arrangements to which it is a party; and

     (f) NN will not during the term of this Agreement enter into any
     agreements, contracts or other arrangements that would prevent NN from
     meeting its obligations or adversely impact ZGI's rights under this
     Agreement; and

     (g) NN will comply with all applicable laws, regulations and guidelines in
     connection with the performance of NN's obligations pursuant to this
     Agreement, including but not limited to all applicable product safety,
     product testing, product labeling, package marking and product advertising
     laws and regulations and the regulations of the United States and any other
     relevant nation concerning any export or other transfer of technology,
     services or products.

SECTION 15.2.  Representations, Warranties and Covenants of ZGI.  ZG1 represents
               ------------------------------------------------
and warrants to and covenants with NN that:

     (a) ZGI is a corporation duly organized, validly existing and in corporate
     good standing under the laws of the state of Washington; and

     (b) ZGI has the corporate and legal right, title, authority and power to
     enter into this Agreement; and

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     (c) ZGI has taken all necessary action to authorize the execution, delivery
     and performance of this Agreement; and

     (d) upon the execution and delivery of this Agreement, this Agreement shall
     constitute a valid and binding obligation of ZGI enforceable in accordance
     with its terms, except as enforceability may be limited by applicable
     bankruptcy, insolvency, reorganization, moratorium or similar laws
     affecting creditors' and contracting parties' rights generally and except
     as enforceability may be subject to general principles of equity
     (regardless of whether such enforceability is considered in a proceeding in
     equity or, at law); and

     (e) the performance of its obligations under this Agreement will not
     conflict with or result in a breach of any agreements, contracts or other
     arrangements to which it is a party; and

     (f) ZGI will not after the Effective Date enter into any agreements,
     contracts or other arrangements that would prevent ZGI from meeting its
     obligations or adversely impact NN's rights under this Agreement; and

     (g) ZGI will comply with all applicable laws, regulations and guidelines in
     connection with the performance of ZGI's obligations pursuant to this
     Agreement, including but not limited to all applicable product safety,
     product testing, product labeling, package marking and product advertising
     laws and regulations and the regulations of the United States and any other
     relevant nation concerning any export or other transfer of technology,
     services or products.


SECTION 15.3.  Warranty Disclaimer.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
               -------------------
THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO THE ZID
EMBODIMENTS, KUNITZ PROTEINS, KUNITZ DOMAINS, PATENT RIGHTS, GOODS, SERVICES OR
OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING.

SECTION 15.4.  Limited Liability.   EXCEPT IN THE CASE OF GROSS NEGLIGENCE OR
               -----------------
WILLFUL MISCONDUCT, NEITHER NN NOR ZGI WILL BE LIABLE WITH RESPECT TO ANY MATTER
ARISING UNDER THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR
OTHER LEGAL OR EQUITABLE THEORY FOR (A) ANY PUNITIVE, EXEMPLARY, INCIDENTAL OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS OR (B) COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY OR SERVICES.

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                                   ARTICLE 16
                                Indemnification
                                ---------------

SECTION 16.1.  Personal Injury or Property Damage.  NN shall indemnify and hold
               -----------------------------------
ZGI harmless from and against any and all claims, judgments, costs, awards,
expenses (including, but not limited to, any attorney's fees) or liability of
any kind arising out of personal injury or property damage caused or alleged to
be caused by a Patent Product or Know-How Product or ARTICLE 10 product. In
addition, NN shall assume all obligations for warranties and product liability
claims that accompany or result from the sale or use of a Patent Product or a
Know-How Product or ARTICLE 10 product; and shall indemnify and hold ZGI
harmless from and against any and all claims, judgments, costs, awards, expenses
(including, but not limited to, any attorney's fees) or liability of any kind
arising from customers and relating to such warranty obligations or product
liability claims. NN's obligation to indemnify ZGI under this SECTION 16.1 shall
not apply in case of gross negligence or willful misconduct by ZGI.

SECTION 16.2.  Patent Infringement.  NN shall indemnify and hold ZGI harmless
               --------------------
from and against any and all claims, judgments, costs, awards, expenses
(including, but not limited to, any attorney's fees) or liability of any kind
arising out of or connected with the actual or alleged infringement of any
patent or other proprietary right of third parties by reason of NN's,
Commercialization Partner's or Sublicensee's having made, importation, use, sale
or having sold of any Patent Product or Know-How Product or ARTICLE 10 product,
provided, however, that in the event a suit, claim or action is brought against
NN by a third party, ZGI shall render all reasonable assistance to NN upon
request of NN, at NN's cost and expense in connection therewith. NN's obligation
to indemnify ZGI under this SECTION 16.2 shall not apply in case of gross
negligence or willful misconduct by ZGI.


SECTION 16.3.  Insurance.  NN shall maintain and cause its Commercialization
               ---------
Partners' and Sublicensee's to maintain appropriate product liability insurance
with respect to development, manufacture and sale of Patent Products, Know-How
Products and ARTICLE 10 products by NN, its Commercialization Partners and
Sublicensees in such amount as NN customarily maintains with respect to sales of
its other products.  NN shall maintain and cause its Commercialization Partners
and Sublicensees to maintain such insurance for so long as it continues to
manufacture or sell Patent Products, Know-How Products and ARTICLE 10 products,
and thereafter for so long as NN customarily maintains insurance with respect to
sales of its other products.

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SECTION 16.4.  Survival.  The obligations of this SECTION 16 shall survive the
               ---------
expiry or termination, for whatever reason, of this Agreement.


                                   ARTICLE 17
                              Term and Termination
                              --------------------

SECTION 17.1.  Term.  This Agreement shall come into force on the Effective Date
               ----
and, unless terminated earlier in accordance with the provisions hereof, shall
terminate four years thereafter.  If the condition precedent (investment by
external investors as set forth in SECTION 1.8) is not met before December 31,
2000, this Agreement shall be null and void, and all rights and obligations
hereunder shall be terminated.

SECTION 17.2.  Extension by NN.   Notwithstanding SECTION 17.1, and provided the
               ---------------
condition precedent recited in SECTION 1.8 has been met, NN shall have a
unilateral right to extend the Term for a time period of 2 (two) years (the
"Extended Term"), such right to be exercised by delivery of written notice
thereof by NN to ZGI no later than 6 (six) months prior to expiry of the
original Term. In the event of such extension by NN, the number of options
exercisable by NN under SECTION 4.1.1. above, during the Extended Term, shall be
limited to the higher of 4 (four) or 25% of the total number of ZSS for which a
Medical Hypothesis for a Zid Embodiment therein is generated by ZGI during the
Extended Term.

SECTION 17.3.  Termination for Cause.  Either party shall have the right to
               ---------------------
terminate this Agreement upon written notice to the other if:

     (a) If either party at any time materially defaults (i) in making the
     payment of any money due hereunder, or (ii) in fulfilling any of the other
     obligations or conditions hereunder, the other party may in its sole
     discretion waive the default; if not electing to waive the default, the
     other party shall notify the defaulting party in writing of the default and
     allow the defaulting party ninety (90) days from such notification to
     initiate reasonable steps to cure such default. Notwithstanding this
     SECTION 17.3, if the defaulting party disputes the existence, nature or
     extent of any default set forth above, the parties shall use good faith
     efforts to resolve the dispute pursuant to ARTICLE 18. This Agreement shall
     continue until a final decision is reached pursuant to ARTICLE 18, at which
     point this Agreement may be terminated, if applicable, in accordance with
     any decision reached under ARTICLE 18.

     (b) Such other party shall enter into liquidation, whether compulsorily or
     voluntarily otherwise than for the purposes of amalgamation or
     reconstruction, shall commit any act of bankruptcy, shall compound with its
     creditors, shall have a receiver or administrator or

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     equivalent official appointed in respect of all or any part of its property
     or undertaking, or shall be subject to any analogous proceeding under any
     foreign law; or

     (c) Such other party shall fall so far short of a future occurring
     diligence obligation pursuant to this Agreement that it is effectively
     impossible for such party to meet such diligence obligation, provided that
     the party has been so notified in writing of the existence of the
     anticipatory breach and the reasoning in support thereof and has had ninety
     (90) days to rebut the claim of anticipatory breach.  Notwithstanding this
     SECTION 17.3, if the parties have a good faith dispute as to the existence
     of an anticipatory breach, the parties shall use good faith efforts to
     resolve the dispute pursuant to ARTICLE 18. This Agreement shall continue
     until a final decision is reached pursuant to ARTICLE 18, at which point
     this Agreement may be terminated, if applicable, in accordance with any
     decision reached under ARTICLE 18.


SECTION 17.4.  Survival.  Termination for whatever reason or expiry of this
               --------
Agreement shall not affect the accrued rights of the parties or any right
arising in any way out of this Agreement as a result of or as of the date of
termination or expiration.  The right to recover damages against the other and
all provisions which are expressly stated to survive this Agreement shall remain
in full force and effect.  Notwithstanding the termination or expiration of this
Agreement, the provisions of 4.4.2, 10.4, 11, 13, 14, 15, 16 and 19 shall
                             ---------------------------------------
survive the termination or expiration and shall continue to be enforceable to
the extent provided therein.


                                   ARTICLE 18
                               Dispute Resolution
                               ------------------

The parties shall attempt to resolve through good faith discussions any dispute
that arises under this Agreement. All such disputes shall, upon receipt of
written notice from one party to the other regarding the existence and nature of
the dispute, first be referred to each party's chief executive officer or to
their authorized representative. If they are unable to resolve a dispute other
than a patent dispute within thirty (30) days after the initial meeting between
the authorized representatives then the dispute shall be referred to alternative
dispute resolution in Chicago, Illinois in accordance with the rules and
procedures set forth in Appendix 4. Patent disputes arising under this Agreement
shall be resolved in accordance with the rules set forth in Appendix 4 as
administered by the National Patent Board, wherein the decision of the National
Patent Board can be appealed to a Federal Court of competent jurisdiction.

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                                   ARTICLE 19
                                    General
                                    -------

SECTION 19.1.  Assignment.  This Agreement may not be assigned by either party
               ----------
without prior written consent of the other party, except for assignment to its
Affiliates.   However, each party may, at its discretion, assign this Agreement
to a third party as part of the sale or merger of all or substantially all of
the party's assets and business.  In the event of any permissible assignment
under this Agreement, the assignor and assignee shall be jointly and severally
liable for assignor's obligations hereunder.

SECTION 19.2.  Relationship between the Parties.  Nothing in this Agreement is
               --------------------------------
intended to create or shall be deemed to constitute a partnership, agency or
joint venture relationship between the Parties or their sublicensees,
contractors or licensees.  Neither Party shall be responsible for the acts or
omissions of the other party, and neither party shall have the authority to
speak for, represent or obligate the other party in any way without the prior
written authority of the other party.

SECTION 19.3.  Public Announcements.  Except as otherwise may be required by law
               --------------------
or regulation, neither party shall make any public announcement, written or
oral, concerning this Agreement or the subject matter hereof, without the prior
written approval of the other party, provided that ZGI and NN shall have the
right to disclose or announce information concerning the existence and general
nature of this Agreement in order to seek third party investors in ZGI.

SECTION 19.4.  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, publicity or other promotional
activities any name, trade name, trademark or other designation of the other
party hereto, including any contraction, abbreviation or simulation of any of
the foregoing, unless the express written permission of such other party has
been obtained.

SECTION 19.5.  Force Majeure.  If either party to this Agreement is prevented or
               -------------
delayed in the performance of any of its obligations under this Agreement by
force majeure, and if such party gives written notice thereof to the other party
specifying the matters constituting force majeure, together with such evidence
as it can reasonably give and specifying the period for which it is estimated
that such prevention or delay will continue, then the party in question shall be
excused from the performance of its obligations or the punctual performance
thereof as the case may be as from the date of such notice for so long as such
cause of prevention or delay shall continue.  For the purpose of this Agreement,
"force majeure" shall be deemed to be any cause affecting the performance of
this Agreement arising from or attributable to acts, events, omissions or
accidents beyond the reasonable control of the party.

SECTION 19.6.  Governing Law.  This Agreement shall be governed in all respects
               -------------
by the laws of the State of Washington.

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SECTION 19.7.  Waiver of Remedies.  No forbearance, delay or indulgence by
               ------------------
either party in enforcing the provisions of this Agreement shall prejudice or
restrict the rights of that party, nor shall any waiver of its rights operate as
a waiver of any subsequent breach, and no right, power or remedy herein
conferred upon or reserved for either party is exclusive of any other right,
power or remedy available to that party.

SECTION 19.8.  Entire Agreement.  This Agreement and the Appendices hereto
               ----------------
constitute the entire agreement between the parties and supersede all prior oral
and written agreements, understandings or arrangements relating to the subject
matter hereof.  No addition to or modification of any provision of this
Agreement shall be binding upon the parties, unless made in writing and signed
by a duly authorized representative of each of the parties.

SECTION 19.9.  Notices.  All notices, requests, demands, waivers, consents,
               -------
approvals or other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, faxed with receipt
acknowledged (and with a confirmation copy also sent by registered mail, return
receipt requested), delivered by a recognized commercial courier service with
receipt acknowledged, or mailed by registered or certified mail return receipt
requested, postage prepaid, as follows:

If to NN:        Novo Nordisk A/S
                 Novo Alle
                 DK-2880 Bagsvaerd
                 Denmark Attn: Corporate Vice President
                 Health Care Discovery and Pre-Clinical Development
                 Facsimile: +45 4442 1242

With a copy to:  Novo Nordisk Legal Department
                 Novo Alle
                 DK-2880 Bagsvaerd
                 Facsimile: +45 4498 0670

If to ZGI:       ZymoGenetics, Inc.
                 1201 Eastlake Avenue East
                 Seattle, WA  98102
                 Attn:  Legal Affairs
                 Facsimile:  (206) 442-6678

or to such other addresses as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other

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communication will be deemed effective (i) as of the date so delivered (either
personally or by courier service) or faxed; or (ii) on the third (3rd) business
day after the same has been mailed.

SECTION 19.10.  Severability.  The parties agree that, if any provision of this
                ------------
Agreement shall for any reason be held to be invalid or unenforceable, such
provision shall be enforced to the maximum extent permitted by law and the
parties' fundamental intentions hereunder, and the remaining provisions hereof
shall not be affected, impaired or invalidated and shall continue in full force
and effect.

SECTION 19.11.  Headings. 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.

SECTION 19.12.  Counterparts.  This Agreement may be executed in two or more
                ------------
counterparts each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


          IN WITNESS WHEREOF, NN and ZGI have caused this Agreement to be
executed in their names by their properly and duly authorized officers or
representatives.


Novo Nordisk A/S


/s/ Lars R Sorensen                     /s/ ILLEGIBLE
-------------------------------------   ----------------------------------------
Lars Rebien Sorensen                    Mads Krogsgaard Thomsen
Corporate Executive Vice President      Corporate Vice President, Health Care
                                        Discovery and Pre-Clinical Development


ZymoGenetics, Inc.


/s/ Bruce L.A. Carter
-------------------------------------
Bruce L.A. Carter
President & CEO


EFFECTIVE DATE: 10 November 2000
                ---------------------

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                                   APPENDIX 1
                           PLPC Approval Requirements

Current Preclinical Lead Profile Candidate (PLPc) Proposal re Guidelines for
Management of HC Discovery Projects July 14, 1999.


[*]



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                                   APPENDIX 2
                          Zid-Related Patent Families


 Case #       Sub        Filing Date                    Title       Status

[*]



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                                   APPENDIX 3
                               ZGI Patent Filing

ZGI's current patent application filing practice is as follows:

                                      [*]




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                         APPENDIX 4 Dispute Resolution

If the matter has not been resolved within thirty (30) days of the referral to
the chief executive officers, either party may initiate an ADR proceeding as
provided herein.  The parties shall have the right to be represented by counsel
in such a proceeding.

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

2.   Within 21 (twenty-one) days following receipt of the original ADR notice,
     the parties shall select a mutually acceptable neutral to preside in the
     resolution of any disputes in this ADR proceeding. If the parties are
     unable to agree on a mutually acceptable neutral within such period, either
     party may request the CPR Panels Management Group of the CPR Institute (the
     Group"), to select a neutral pursuant to the following procedures:

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

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

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

     (d)  if the parties collectively have identified fewer than 3 (three)
          candidates deemed to have conflicts, the Group immediately shall
          designate as the neutral the candidate for whom the parties collective
          have indicated the greatest preference. If a tie should result between
          2 (two) candidates, the Group may designate either candidate. If the
          parties collectively have identified 3 (three) or more candidates
          deemed to have conflicts, the Group shall review the explanations
          regarding conflicts and, in its sole discretion, may either (i)
          immediately designate as the neutral the candidate for whom the
          parties collectively have indicated the greatest preference, or (ii)
          issue a new list


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          of not less than 5 (five) candidates, in which case
          the procedures set forth in sub-paragraphs 2(a) - 2(d) shall be
          repeated.


3.   No earlier than 28 (twenty-eight) days or later than 56 (fifty-six) days
     after selection, the neutral shall hold a hearing to resolve each of the
     issues identified by the parties. The ADR proceeding shall take place in
     Chicago. Each party to the proceeding shall be entitled to make 1 (one)
     document request to the other party, subject to the right of the neutral to
     rule on any objection to such request, which shall not be subject to
     appeal.


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


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

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

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

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


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

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

     (b) Each party shall be entitled, but not required, to make an opening
         statement, to present regular and rebuttal testimony, documents or
         other evidence, to cross-examine witnesses, and to make a closing
         argument. Cross-examination of witnesses shall



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         occur immediately after their direct testimony, and cross-examination
         time shall be charged against the party conducting the cross-
         examination.

     (c) The party initiating the ADR shall begin the hearing and, if it chooses
         to make an opening statement, shall address not only issues it raised
         but also any issues raised by the responding party. The responding
         party, if it chooses to make an opening statement, also shall address
         all issues raised in the ADR. Thereafter, the presentation of regular
         and rebuttal testimony and documents, other evidence, and closing
         arguments shall proceeding the same sequence.

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

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

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

7.   The neutral shall rule on each disputed issue within 14 (fourteen) days
     following completion of the hearing.  Such ruling shall adopt in its
     entirety the proposed ruling and remedy of 1 (one) of the parties on each
     disputed issue but may adopt 1 (one) party's proposed rulings and remedies
     on some issues and the other party's proposed rulings and remedies on the
     other issues.  The neutral shall not issue any written opinion or otherwise
     explain the basis of the ruling.

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

    (a) If the neutral rules in favour of the 1 (one) party on all disputed
        issues in the ADR, the losing party shall pay 100% (one hundred percent)
        of such fees and expenses.

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

9.  The rulings of the neutral and the allocation of fees and expenses shall be
    binding, non-reviewable, and non-appealable except as provided for patent
    disputes in Article 12 of this Agreement, and may be entered as a final
    judgment in any court having jurisdiction.

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


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                             Amendment No. 1 to the
                          Option and License Agreement
                                Executed in 2000


This Amendment No. 1, effective as of June 16, 2000, (the "Amendment") amends
the Option and License Agreement executed in the year 2000 (the "Option and
License Agreement") by and between ZymoGenetics, Inc., a Washington corporation
having a principal place of business at 1201 Eastlake Avenue East, Seattle,
Washington 98102 ("ZGI") and Novo Nordisk A/S, a Danish corporation having a
principal place of business at Novo Alle, DK-2880, Bagsvaerd, Denmark ("NN").

WHEREAS, ZGI had reached Medical Hypothesis stage with respect to Zid
Embodiments of [*] and [*] (as these capitalized terms are used within the
Option and License Agreement); and

WHEREAS, ZGI offered to NN the in-licensed gene/protein known as TACI within the
scope of the Option and License Agreement, at a point where TACI had also
reached the Medical Hypothesis stage; and

WHEREAS, NN agree to evaluate, prior to execution of the Option and License
Agreement, [*], [*] and TACI and all embodiments thereof (the "Evaluated Genes")
in accordance with the Option and License Agreement; and

WHEREAS, ZGI and NN acknowledge that the condition precedent to establishing the
Effective Date of the Option and License Agreement had not yet occurred at the
time of NN's analysis of the Evaluated Genes; and

WHEREAS, NN did analyze the Evaluated Genes, and on June 16, 2000, NN finally
determined that NN did not wish to exercise its Medical Hypothesis Option or to
extend such Option with respect to such Evaluated Genes pursuant to the Option
and License Agreement;

NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

The following two SUBSECTIONS shall be amended to read as follows in their
entireties.

     SUBSECTION 1.33.2.  "Zid Gene" means:  a full- or partial-length
                         ----------
polynucleotide coding region [*] discovered by ZGI after [*], which are not
otherwise dealt with in another agreement entered into by NN and ZGI. Full or
partial length polynucleotides discovered by a third party and in licensed by
ZGI are not Zid Genes for the purposes of this Agreement. As of

Option and License Agreement
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request for confidential treatment filed separately with the Commission.
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June 16, 2000, after NN's analysis of [*], [*] and TACI, NN has determined that
[*], [*] and TACI are not Zid Genes for the purposes of this Agreement.

     SUBSECTION 4.4.2.  Reverter.  Unless, before the expiration or termination
                        --------
of the Option Period for a given ZSS, NN exercises the RoW Option for such ZSS
(pursuant to SECTION 4.2), all Commercialization Rights, in RoW, in all fields,
for Products based on Zid Embodiments in such ZSS shall revert to ZGI.
Similarly, unless, before the expiration or termination of the Option Period for
a given ZSS, NN exercises the BC Option for such ZSS (pursuant to SECTION 4.2),
all Commercialization Rights worldwide in the BC Field, for Products based on
Zid Embodiments in such ZSS shall revert to ZGI. As of June 16, 2000, after NN's
analysis of [*], [*] and TACI, NN has determined that all rights in the ZSSs for
[*], [*] and TACI have reverted to ZGI.

The following SUBSECTION 4.1.6. shall be added.

     SUBSECTION 4.1.6.  Options Declined.  Prior to the Effective Date (and
                        ----------------
pursuant to SECTION 4.3), NN received from ZGI disclosure of information related
to [*], [*] and TACI. NN analyzed this information to determine whether NN
desired to exercise an RoW Option or a BC Option (pursuant to SECTION 4.2) with
respect to [*], [*] and TACI. As of June 16, 2000 with respect to each of [*],
[*] and [*], NN declined its RoW Option under SUBSECTION 4.1.1 and its Beta Cell
Option under 4.1.2 and did not extend either such Option pursuant to ARTICLE 8.

The following table entries shall be deleted from Appendix 2.


 Case #       Sub        Filing Date                    Title           Status

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[*]

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The remainder of the Option and License Agreement remains unchanged by this
Amendment No. 1.

Option and License Agreement
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request for confidential treatment filed separately with the Commission.
<PAGE>

IN WITNESS WHEREOF, NN and ZGI have caused this Agreement to be executed in
their names by their properly and duly authorized officers or representatives.


Novo Nordisk A/S



/s/ Lars Rebien Sorensen             /s/ Mads Krogsgaard Thomsen
------------------------             ---------------------------------------
Lars Rebien Sorensen                 Mads Krogsgaard Thomsen
Corporate Executive Vice President   Corporate Vice President, Health Care
                                     Discovery and Pre-Clinical Development


ZymoGenetics, Inc.



/s/ Bruce L.A. Carter
--------------------------------
Bruce L.A. Carter
President & CEO


Option and License Agreement
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<PAGE>

                             Amendment No. 2 to the
                          Option and License Agreement
                                Executed in 2000


This Amendment No. 2, effective as of October 20, 2000, (the "Amendment") amends
the Option and License Agreement executed in the year 2000 (the "Option and
License Agreement") by and between ZymoGenetics, Inc., a Washington corporation
having a principal place of business at 1201 Eastlake Avenue East, Seattle,
Washington 98102 ("ZGI") and Novo Nordisk A/S, a Danish corporation having a
principal place of business at Novo Alle, DK-2880, Bagsvaerd, Denmark ("NN").

WHEREAS, ZGI acknowledges that the Option & License Agreement, the continuing
research by ZGI, and the timely performance of ZGI's obligations hereunder are
of material importance to NN; and

WHEREAS, ZGI is consequently willing to provide NN with additional
representations, warranties and indemnifications to safeguard the interest of NN
in the event of a breach of the Option & License Agreement by ZGI;

NOW THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

The following SECTIONS shall be amended to read as follows in their entireties.

SECTION 15.2 Representations, Warranties and Covenants of ZGI.  ZG1 represents
             ------------------------------------------------
and warrants to and covenants with NN that:

          (a)  ZGI is a corporation duly organized, validly existing and in
     corporate good standing under the laws of the state of Washington; and

          (b)  ZGI has the corporate and legal right, title, authority and power
     to enter into this Agreement; and

          (c)  ZGI has taken all necessary action to authorize the execution and
     performance of this Agreement; and

          (d)  upon the execution and delivery of this Agreement, this Agreement
     shall constitute a valid and binding obligation of ZGI enforceable in
     accordance with its terms, except as enforceability may be limited by
     applicable bankruptcy, insolvency,


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     reorganization, moratorium or similar laws affecting creditors' and
     contracting parties' rights generally and except as enforceability may be
     subject to general principles of equity (regardless of whether such
     enforceability is considered in a proceeding in equity or, at law); and

          (e)  the performance of its obligations under this Agreement will not
     conflict with ZGI's charter documents or result in a breach of any
     agreements, contracts or other arrangements to which it is a party; and

          (f)  ZGI will not after the Effective Date enter into any agreements,
     contracts or other arrangements that would (i) prevent ZGI from performing
     in all material respects its obligations under this Agreement or (ii)
     materially and adversely affect NN's rights under this Agreement; and

          (g) ZGI will comply with all applicable laws, regulations and
     guidelines in connection with the performance of ZGI's obligations pursuant
     to this Agreement, including but not limited to all applicable product
     safety, product testing, product labeling, package marking and product
     advertising laws and regulations and the regulations of the United States
     and any other relevant nation concerning any export or other transfer of
     technology, services or products.


SECTION 15.3.  Warranty Disclaimer.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN
               -------------------
THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT TO THE ZID
EMBODIMENTS, KUNITZ PROTEINS, KUNITZ DOMAINS, PATENT RIGHTS, GOODS, SERVICES OR
OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH
RESPECT TO ANY AND ALL OF THE FOREGOING.

SECTION 15.4.  Liability for Breach; Limitation of Liability.  The parties
               ---------------------------------------------
hereto agree that NN would be irreparably injured by a material breach (or by a
series of breaches that together constitute a material breach) by ZGI of the
terms of this Agreement (collectively, a "ZGI Breach").  Accordingly, the
parties hereto agree that in the event of a ZGI Breach, NN shall be entitled, in
addition to any and all other remedies, to injunctive relief and specific
performance.

EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN THE CASE OF
NEGLIGENCE OR WILLFUL MISCONDUCT, NEITHER NN NOR ZGI WILL BE LIABLE WITH RESPECT
TO ANY MATTER ARISING UNDER THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE,
STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY PUNITIVE OR
EXEMPLARY DAMAGES.

Option and License Agreement
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request for confidential treatment filed separately with the Commission.
<PAGE>

IN WITNESS WHEREOF, NN and ZGI have caused this Agreement to be executed in
their names by their properly and duly authorized officers or representatives.


Novo Nordisk A/S



/s/ Mads Ovlisen
------------------------------------
Mads Ovlisen
President and Chief Executive Officer


ZymoGenetics, Inc.



/s/ Bruce Carter
------------------------------------
Bruce L.A. Carter
President & CEO

Option and License Agreement
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[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.