**Exhibit 10.27****Certain information in this document, marked by brackets, has been omitted and filedseparately with the Securities and Exchange Commission. Confidential treatment has been requestedwith respect to the omitted portions.****CROSS LICENSE AGREEMENT**     This Cross License Agreement (the “Agreement”) dated as of July 16, 2003 (the “EffectiveDate”) is entered into by and between Avidia Research Institute, a Delaware corporation, having aplace of business at 515 Galveston Drive, Redwood City, California 94063 (“Avidia”) and Maxygen,Inc., a Delaware corporation, having a place of business at 515 Galveston Drive, Redwood City,California 94063 (“Maxygen”).**BACKGROUND**     A. In connection with the establishment of Avidia, Maxygen has assigned to Avidia certainpatent applications relating to methods for preparing novel monomeric or multimeric proteinspursuant to an Assignment Agreement of even date herewith;     B. Maxygen desires to obtain from Avidia an exclusive worldwide license under the AssignedPatent Rights (as defined below) for the Maxygen Field (as defined below); and Avidia is willing togrant such a license to Maxygen, on the terms and conditions herein;     C. Maxygen owns or Controls certain intellectual property that is necessary for the practiceof the Assigned Patent Rights, as well as intellectual property that may be useful for suchpractice, in each case, outside the Maxygen Field, and Avidia desires to obtain from Maxygennon-exclusive licenses to use such intellectual property outside the Maxygen Field; and Maxygen iswilling to grant to Avidia such licenses, on the terms and conditions herein;     D. Maxygen owns certain software and tangible property useful for the practice of the AssignedPatent Rights outside the Maxygen Field, and Avidia desires to obtain from Maxygen non-exclusivelicenses to use such software and tangible property outside the Maxygen Field; and Maxygen iswilling to grant to Avidia such licenses, on the terms and conditions herein; and     E. Maxygen wishes to obtain options to acquire exclusive licenses to Products for certainAvidia Targets (as defined below); and Avidia is willing to grant such a license to Maxygen, on theterms and conditions herein     NOW THEREFORE, in consideration of the foregoing and of the mutual covenants hereinafter setforth and other good and valuable consideration, the receipt and sufficiency of which is herebyacknowledged, the Parties hereby agree as follows:     **1. DEFINITIONS.**The following capitalized terms defined in this Article 1 shall have themeanings set forth below for purposes of this Agreement:          1.1 “Affiliate” means any corporation, firm, limited liability company, trust,partnership or other entity that directly or indirectly controls or is controlled by or is under common control with a Party to this Agreement. As used in this definition, “controls”,“controlled by” and “under common control with” means the possession, directly or indirectly, ofthe power to direct or cause the direction of the management and policies of an entity, whetherthrough the ownership of voting securities or partnership interest, by contract or otherwise. In
 

 
the case of a corporation, the direct or indirect ownership of fifty percent (50%) or more ofits outstanding voting shares, or in the case of a partnership, status as a general partner, or inthe case of any other type of legal entity, fifty percent (50%) or more of the ownership interests,shall in any event be deemed to confer control, it being understood that the direct or indirectownership of a lesser percentage of such shares or ownership interest shall not necessarilypreclude the existence of control.          1.2 “Agriculture Subfield” shall have the meaning set forth in **Exhibit A**hereto.          1.3 “Approved DBP Therapeutic Conjugate” means a particular DBP Therapeutic Conjugatethat Maxygen has agreed that Avidia may develop and commercialize pursuant to Section 2.5. TheApproved DBP Therapeutic Conjugates as of the Effective Date are listed on **Exhibit B**hereto.          1.4 “Assigned Patent Rights” means, collectively: (a) the patent applications listedon **Exhibit C**hereto; (b) all patent applications filed on an invention described in an InventionDisclosure; (c) all divisions, continuations (other than continuations-in-part), substitutions andpatents of addition of any of the preceding; (d) all foreign counterparts of any of the foregoing;and (e) all patents and/or registrations that issue from any of the foregoing patent applications(including, without limitation, all reissues, renewals, extensions, substitutions, confirmations,re-registrations, re-examinations, re-validations, supplementary protection certificates and/orother governmental actions that extend the term of any such letters patent).          1.5 “Authorized Method” means the practice of the Assigned Patent Rights and/or theSubject Improvements to generate one or more libraries of nucleic acids encoding Domain-BasedProteins by the process of: (a) **[****]**; and (b) **[****]**.          1.6 “Avidia Know-How” means all Know-How that is owned or Controlled by Avidia priorto the Trigger Date that is necessary or useful for the practice of the Assigned Patent Rightsand/or the Subject Improvements and/or Avidia Necessary Claims in the Maxygen Field.          1.7 “Avidia Necessary Claim” means a claim of any issued patent (other than thosewithin the Assigned Patent Rights) owned or Controlled by Avidia that is necessary for the practiceof the Authorized Method in the Maxygen Field. As used in this definition, “necessary” means thatthe **[****]**. The Avidia Necessary Claims shall be listed on **Exhibit D**hereto, which shall beupdated in accordance with Section 3.3.          1.8 “Avidia Target” means any Ligand (other than an Excluded Target) for whichresearch is conducted by Avidia (or its subcontractor) to develop a Product for **[****]**or **[****]**therapeutic and/or prophylactic use that **[****]**. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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          1.9 “Avidia Team” means the following individuals: **[****]**and **[****]**.          1.10 “Avidia Useful Claim” means a claim of any Patent Right owned or Controlled byAvidia (other than the Avidia Necessary Claims or any claims within the Assigned Patent Rights)that: (a) is useful, but not necessary, for the practice of the Assigned Patent Rights and/or theSubject Improvements in the Maxygen Field, or (b) becomes a “Avidia Useful Claim” pursuant toSection 3.6 below.          1.11 “Cap” shall have the meaning set forth in Section 5.1.2 below.          1.12 “Change of Control” means: (a) a dissolution or liquidation of Avidia; (b) asale of all or substantially all the assets of Avidia; or (c) any consolidation or merger of Avidiawith or into any other corporation or other entity or person, or any other corporatereorganization, in which those persons or entities that are Avidia stockholders immediately priorto such consolidation, merger or reorganization, own less than fifty percent (50%) of the survivingentity’s voting power immediately after such consolidation, merger or reorganization; in each case,in which those persons or entities that are Avidia stockholders immediately prior to the relevantevent described in clauses (a), (b) or (c) above receive cash or publicly-traded securities or somecombination thereof having an aggregate value of at least **[****]**U.S. dollars (U.S.$ **[****]**).          1.13 “Chemicals Subfield” shall have the meaning set forth in **Exhibit E**hereto.          1.14 “Confidential Information” means any and all information, whatever its form ormedium (whether written, oral, electronic, graphic or otherwise), including technical information,results, data and/or design of experiments, that is disclosed by any Party to the other Party that(a) if disclosed in written or other tangible form, is marked or labeled as “confidential” or“proprietary” or with a similar marking or legend sufficient to notify the receiving Party thatsuch information is subject to the terms of this Agreement, or (b) if disclosed orally or in otherintangible form, is identified as confidential or proprietary by the disclosing Party at the timeof disclosure.          1.15 “Control” or “Controlled” means possession of the ability to grantlicenses or sublicenses, as the case may be, to intellectual property or Know-How or to transferMaterials, in each case, without violating the terms of any agreement or other arrangement with anyThird Party. Control shall include the right to grant sublicenses or transfer Materials where thegrant or practice of such sublicense or transfer may incur a contractual payment obligation to aThird Party, but only to the extent the Party receiving the sublicense or transfer hereunder agreesto fully reimburse the granting Party for any such payments due to such Third Party, unlessotherwise expressly agreed in writing by the Parties.          1.16 “CPI” means the Consumer Price Index, All Urban Customers, as published in theU.S. Bureau of Labor Statistics. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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          1.17 “DBP Research Conjugate” means a non-naturally occurring fusion protein(s) thatcontains a protein described in Section 1.20(a) and (b) (and (c) and/or (e), as applicable) thathas fused at **[****]**of such protein **[****]**other specific protein(s) **[****]**, wherein (i) such otherspecific protein(s) **[****]**is/are **[****]**, or (ii) such fusion protein is **[****]**.          1.18 “DBP Therapeutic Conjugate” means a non-naturally occurring fusion protein (i)that contains a protein described in Section 1.20(a) and (b) (and (c) and/or (e), as applicable)that has fused at **[****]**of such protein **[****]**other specific protein(s) **[****]**that is **[****]**,and (ii) is **[****]**.          1.19 “Domain” means a protein subsequence of between **[****]**and **[****]**contiguousamino acids, that is (a) a **[****]**, or (b) a **[****]**that (i) is **[****]**, and (ii) has a **[****]**.          1.20 “Domain-Based Protein” means a non-naturally occurring protein expressed from a**[****]**that:               (a) is capable of binding specifically to one or more Ligands; and               (b) consists solely of between one (1) and **[****]**Domain(s) (from up to three (3) differentFamilies), that are covalently bound (either directly to each other or, optionally, via linkerseach of which is less than **[****]**amino acids), and consists of no other amino acid residues,except as expressly permitted in (c), (d) or (e) below; and               (c) optionally, has fused at **[****]**of the protein described in (a) and (b) above an aminoacid sequence of less than **[****]**amino acids; and               (d) optionally, has fused at **[****]**of the protein described in (a) and (b) above (and (c)and/or (e), as applicable) one or more other **[****]**proteins **[****]**, if, and only if:                    (i) **[****]**, or                    (ii) **[****]**, or                    (iii) such fusion protein is an Approved DBP Therapeutic Conjugate approved by Maxygenpursuant to Section 2.5 below; and               (e) optionally, at **[****]**of a protein described above (i.e., a protein described in anypermitted combination of (a), (b), (c) and (d) above), a linker of less than **[****]**amino acidsthat allows more rapid purification of such protein or detection of such protein in an assay (e.g.,ELISA). * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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It is understood and agreed by the Parties that, as used herein, “Domain-Based Protein” shall notinclude, except as expressly permitted in (c), (d) or (e) above, any composition of mattercontaining (however attached or bound): (x) any **[****]**, or (y) any **[****]**.As used herein, “Domain-Based Protein” shall include any composition of matter that consists solelyof (1) non-covalently bound multimers of similar or different Domain-Based Proteins or (2)Domain-Based Proteins that are bound, covalently or non-covalently, to molecules that **[****]**.          1.21 “Excluded Target” means a Ligand (a) that is proprietary to any Third Party(i.e., **[****]**); or (b) that was an Avidia Target but ceased to be an Avidia Target pursuant toSection 5.3.2 or 5.3.4; or (c) for which Avidia did not commence any research for its own benefitto develop any Product **[****]**, but with regard to which a Third Party has entered into a writtenagreement with Avidia pursuant to which such Third Party will collaborate with and sponsor researchat Avidia to develop Products **[****]**.          1.22 “Family” means a group of **[****]**sequences, in which the members of such group(a) are **[****]**, and (b) have a **[****]**and remain the same whether such a member is isolated orcovalently joined to other peptides in a larger protein.          1.23 “Invention Disclosure” means an invention disclosure listed on **Exhibit F**hereto.          1.24 “Know-How” means proprietary data, instructions, processes, formulae, materials,expert opinions and information, including, without limitation, biological, chemical,pharmacological, toxicological, pharmaceutical, physical, analytical, pre-clinical, clinical,safety, manufacturing and quality control data and information, in each case, that is not generallyknown. Know-How does not include any inventions included in the Patent Rights.          1.25 “Known” means (i) known or believed by Avidia or by Avidia’s Affiliates orLicensees who are working on the relevant Domain-Based Protein or DBP Therapeutic Conjugate, or(ii) disclosed by information in the public domain, in the form of a peer-reviewed scientificpublication or abstract or other credible scientific publication.          1.26 “Licensed Product” means a Product for the treatment or prophylaxis of **[****]**or**[****]**disease that **[****]**, for which Maxygen has exercised a Target Option with respect to suchAvidia Target and entered into a Product License Agreement.          1.27 “Licensee” means any Third Party that Avidia or Maxygen has granted a license orsublicense, as the case may be, to any of the Assigned Patent Rights.          1.28 “Ligand” means a naturally occurring biomolecule.          1.29 “Major Market Country” means **[****]**. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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          1.30 “Materials” means the biological materials listed on **Exhibit G**hereto.          1.31 “Maxygen Field” means the development, manufacture, use and/or commercializationof Maxygen Products.          1.32 “Maxygen Information” means any non-public information that was (i) disclosed,prior to the Effective Date, by or on behalf of Maxygen or its Affiliates to a member of the AvidiaTeam, or (ii) developed by any member of the Avidia Team during their employment by or consultingwith Maxygen, or (iii) learned by any member of the Avidia Team during their employment by orconsulting with Maxygen from Maxygen or a Third Party under confidentiality with Maxygen.          1.33 “Maxygen Necessary Claim” means a claim of any issued patent owned or Controlledby Maxygen that is necessary for the practice of the Authorized Method outside the Maxygen Field.As used in this definition, “necessary” means that the **[****]**. The Maxygen Necessary Claimslicensed to Avidia as of the Effective Date are listed on **Exhibit H**hereto, which shall be updatedin accordance with Section 2.3.          1.34 “Maxygen Necessary Know-How” means all Know-How owned or Controlled by Maxygenprior to the Trigger Date that is necessary to practice of the Authorized Method outside theMaxygen Field.          1.35 “Maxygen Other Know-How” means all Know-How owned or Controlled by Maxygen priorto the Trigger Date that was developed (a) by any member of the Avidia Team in the period from June1, 2001 until the Effective Date or (b) prior to the Effective Date pursuant to (i) theConsulting Agreement, entered by **[****]**and Maxygen, Inc., effective January 21,2003, or (ii) the Laboratory Services Agreement, entered by **[****]**and Maxygen, Inc.,effective February 14, 2003; provided, Maxygen Other Know-How shall not include any MaxygenNecessary Know-How or any Shuffling Technology.          1.36 “Maxygen Product” means (a) any Product in the Chemicals Subfield; (b) anyProduct in the Agriculture Subfield; and/or (c) any Reserved Therapeutic Product.          1.37 “Maxygen Useful Claim” means a claim of a Patent Right owned or Controlled byMaxygen (other than the Maxygen Necessary Claims) that: (a) is useful, but not necessary, for thepractice of the Assigned Patent Rights and/or the Subject Improvements outside the Maxygen Field,or (b) becomes a “Maxygen Useful Claim” pursuant to Section 2.4 below. The Maxygen Useful Claims existing as of the Effective Date are listed on **Exhibit I**hereto.          1.38 “Maxygen Useful Know-How” means all Know-How owned or Controlled by Maxygen priorto the Trigger Date that is necessary or useful for the practice of the Assigned Patent Rightsand/or the Subject Improvements outside the Maxygen Field; * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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provided, Maxygen Useful Know-How shall not include any Maxygen Necessary Know-How, Maxygen Other Know-How or Shuffling Technology.          1.39 “Party” means Maxygen or Avidia, and the “Parties” means Maxygen andAvidia.          1.40 “Patent Rights” means any and all United States or foreign provisional and/orutility patent applications (including, without limitation, all divisions, continuations in wholeor in part, substitutions and patents of addition), and any and all United States or foreignletters patent and/or registrations (including, without limitation, all reissues, renewals,extensions, confirmations, re-registrations, re-examinations, re-validations, supplementaryprotection certificates and/or other governmental actions that extend the term of any such letterspatent).          1.41 “Product” means any product that contains a Domain-Based Protein that is (a)claimed in one or more of the Assigned Patent Rights or (b) made, or developed with **[****]**.          1.42 “Product License Agreement” means that certain form of Product License Agreementattached hereto as **Exhibit J**.          1.43 “Qualified IPO” means a firmly underwritten public offering of shares of commonstock of Avidia for a total offering of not less than twenty million U.S. dollars ($20,000,000),before deduction of underwriter’s commissions and expenses.          1.44 “Reserved Therapeutic Product” means any Product for **[****]**therapeutic orprophylactic use, that is:               (a) a TPO **[****]**;               (b) a TPO/IL3 **[****]**;               (c) a TNF/IL-1 **[****]**;               (d) **[****]**any interferon receptor;               (e) **[****]**any interferon or any interferon receptor;               (f) a p40 (subunit of IL-12 and IL-23) **[****]**;               (g) **[****]**CD40;               (h) **[****]**CD40 ligand;               (i) **[****]**B.7.1 (CD80); * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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               (j) **[****]**B.7.2 (CD86);               (k) **[****]**CD28; or               (l) **[****]**CTLA4.For purposes of this definition, “agonist” means a **[****]**agonist of the applicable Ligand and/orcognate receptor, and “antagonist” means a **[****]**antagonist of the applicable Ligand and/orcognate receptor. The criteria for agonists and antagonists for the above targets are set forth on**Exhibit K**hereto. It is understood and agreed that an agonist and/or an antagonist functions bybinding to the applicable Ligand and/or the cognate receptor.          1.45 “Restriction Enzyme Processes” means processes involving the use of restrictionenzymes to cut nucleic acids at predetermined positions and then recombining such nucleic acids byligation.          1.46 “Shuffle”, “Shuffled” and “Shuffling” means the recombinationand/or rearrangement and/or mutation of genetic material for the creation of genetic diversity.          1.47 “Shuffling Technology” means (a) all Patent Rights owned or Controlled by Maxygenthat are necessary or useful for Shuffling and (b) all Know-How owned or Controlled by Maxygen thatis necessary or useful for Shuffling and (i) exists as of the Effective Date or (ii) is disclosedto Avidia by Maxygen during the term of this Agreement.          1.48 “Software” means each, and collectively all, of the software programs owned byMaxygen that are listed on **Exhibit L**hereto, in source and object code format, and associateddocumentation necessary for the operation of such software, but only to the extent and in the formsuch documentation exists as of the Effective Date, unless otherwise agreed in writing by theParties.          1.49 “Software Improvement” means any modification, derivative work of or improvementmade by Avidia to any aspect of the Software.          1.50 “Splicing By Overlap Extension” means a PCR-based extension process for joiningtwo or more nucleic acid molecules at defined sites at the ends of the molecules by the use ofspecially designed Bipartite Primers. By way of illustration, an example of such a process isdescribed in Horten et al., *Gene*, 77:61-68 (1989). As used in this definition, “Bipartite Primer”means an oligonucleotide primer containing solely subsequences from the ends of two different nucleic acids such that the two nucleic acids can be joined together byPCR extension.          1.51 “Subject Improvement” means any improvement of or to any invention claimed in theAssigned Patent Rights, (a) that is conceived and reduced to practice or otherwise developed, inthe period from the Effective Date until and including the Trigger Date, by (i) * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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Maxygen, (ii) Avidia, or (iii) any Licensee of either Party, provided that neither Party shall be obliged toincur additional contractual payment obligations or to engage in undue additional negotiation withsuch Licensee to obtain such rights necessary to perform its obligations under Sections 2.1(a) or3.1(a), and (b) the practice of which falls within the scope of a claim of a patent application orpatent within the Assigned Patent Rights in any country or multinational jurisdiction, which claimis entitled to filing priority based on a patent application or patent within the Assigned PatentRights that was filed on or before the Trigger Date; provided, a Subject Improvement shall (x)include any claims of Patent Rights claiming the applicable improvement and any related Know-Howfor practicing such Subject Improvement and (y) exclude the Assigned Patent Rights.          1.52 “Suspension Date” shall have the meaning set forth in Section 5.2.1(c).          1.53 “Target Option” shall have the meaning set forth in Section 5.1.1(a) below.          1.54 “Territory” means worldwide.          1.55 “Third Party” means any person or entity other than Maxygen or Avidia or anAffiliate of Maxygen or Avidia.          1.56 “Trigger Date” means the earliest of (a) the fourth anniversary of the EffectiveDate, (b) the closing date of a Qualified IPO, or (c) a Change of Control; provided, if Maxygenexercises its Target Option with respect to **[****]**or more Avidia Targets and the Parties enterinto the corresponding Product License Agreements, prior to the earliest to occur of (a), (b) or(c) above, then the Trigger Date shall automatically be extended until the earliest to occur of (x)the sixth anniversary of the Effective Date, (y) the closing date of a Qualified IPO, or (z) aChange of Control.          1.57 “Veterinary Product” means any Product for veterinary therapeutic or prophylacticuse, that is:               (a) **[****]**;               (b) **[****]**;               (c) **[****]**;               (d) **[****]**;               (e) **[****]**;               (f) **[****]**; * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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               (g) **[****]**;               (h) **[****]**;               (i) **[****]**; or               (j) **[****]**.For purposes of this definition, “agonist” means a **[****]**agonist of the applicable Ligand and/orcognate receptor, and “antagonist” means a **[****]**antagonist of the applicable Ligand and/orcognate receptor. The criteria for agonists and antagonists for the above targets are set forth on**Exhibit K**hereto. It is understood and agreed that an agonist and/or an antagonist functions bybinding to the applicable Ligand and/or the cognate receptor.     **2. LICENSE TO AVIDIA**          2.1 License Grant. In partial consideration for the Avidia stock granted to Maxygenpursuant to **[****]**and subject to the terms and conditions of this Agreement, Maxygen hereby grantsto Avidia the following licenses:               (a) a non-exclusive, **[****]**, perpetual, irrevocable, **[****]**license, under the MaxygenNecessary Claims and the Maxygen Necessary Know-How to practice the Authorized Method, solely todevelop, make, have made, use, import, have imported, offer to sell and sell Products outside theMaxygen Field in the Territory;               (b) a non-exclusive, **[****]**, perpetual, irrevocable, **[****]**license, under the Maxygen UsefulClaims and the Maxygen Useful Know-How, solely to develop, make, have made, use, import, haveimported, offer to sell and sell Products outside the Maxygen Field in the Territory;               (c) a non-exclusive, **[****]**, perpetual, irrevocable, **[****]**license to practice the MaxygenOther Know-How in the Territory to (i) develop, make, have made, use, import, have imported, offerto sell and sell Products outside the Maxygen Field, and (ii) for any other purpose, except todevelop, make, have made, use, import, have imported, offer to sell and sell any protein-basedproduct for **[****]**other than **[****]**;               (d) a non-exclusive, **[****]**, perpetual, irrevocable, **[****]**license, under Maxygen’s interestin the Subject Improvements (including any corresponding Patent Rights and/or Know-How), solely to develop, make, have made, use, import, have imported, offerto sell and sell Products outside the Maxygen Field in the Territory;               (e) a non-exclusive, **[****]**, perpetual, irrevocable license, to make, have made and use theMaterials and/or their derivatives, to develop, make, have made, use, * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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import, have imported, offer to sell and sell Products outside the Maxygen Field in the Territory; and               (f) a non-exclusive, **[****]**, perpetual, irrevocable, non-transferable (except pursuant toSection 14.2.1) license to the Software to (i) use such Software internally within Avidia, (ii)display such Software internally within Avidia, (iii) reproduce such Software, to the extentnecessary to prepare backup copies for Avidia’s internal use, and (iv) make derivative works ofsuch Software for internal use within Avidia, in each case, solely in conjunction with Avidia’sefforts to develop, make, have made, use, import, have imported, offer to sell and sell Productsoutside the Maxygen Field in the Territory.          2.2 Sublicenses. Avidia may grant and authorize sublicenses to any of the rightsgranted it in Section 2.1(a)-(e); provided, however, Avidia may only grant sublicenses underSections 2.1(a), (b), (d) and (e) in conjunction with a grant of a license of the Assigned PatentRights and solely for the purpose of allowing the practice of the Assigned Patent Rights todevelop, make, have made, use, import, have imported, offer to sell and sale of Products outsidethe Maxygen Field in the Territory. Promptly after the grant of any such sublicense, Avidia shallnotify Maxygen in writing of the identity of each such Licensee and the specific rights (by fieldand geographic region) granted to each such Licensee, provided that Avidia shall have no obligationto reveal any information that is confidential information of such Licensee.          2.3 Other Necessary Claims.               2.3.1 Notice; Decision. If during the term of this Agreement Avidia becomes aware ofany claims of any patents owned or Controlled by Maxygen that Avidia believes are necessary for thepractice of the Authorized Method, then Avidia may contact Maxygen identifying the relevant claimsof the relevant patents and requesting a license from Maxygen. In any such event, Maxygen agreesto discuss in good faith with Avidia whether Avidia requires a license to any such claims of anysuch patent for such purpose. Maxygen further agrees that, if the Parties agree that Avidiarequires a license to such claims of any patents to practice the Authorized Method, such requestwill be considered favorably by Maxygen, unless the grant of such license by Maxygen would have amaterial adverse impact on Maxygen or its Affiliates, as determined in Maxygen’s sole discretion.If Maxygen’s decision is favorable, such claims of any patents shall be added to **Exhibit H**(whichaddition shall be reflected in a writing signed by both Parties), and such claims shall be MaxygenNecessary Claims unless any payments would be owed to any Third Party for the granting or practiceof any such license, in which case the procedures set forth in Section 2.3.3 below shall apply.               2.3.2 Neutral Determination.                    (a) If the Parties are unable to agree on whether a license to any claims of any patents ownedor Controlled by Maxygen is necessary for Avidia to practice the Authorized Method, either Partyshall submit the matter to a mutually agreed independent * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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patent attorney (the “Neutral”) who shall have the authority to determine whether a license to claims of any such patent is necessary forAvidia to practice the Authorized Method. As used in this Section 2.3.2, “necessary” means thatthe methods claimed in the Assigned Patent Rights and/or Subject Improvements cannot practically bepracticed to perform the Authorized Method without infringing the applicable claims of any patentowned or Controlled by Maxygen.                    (b) The Parties shall equally share the costs associated with any such evaluation. If theNeutral determines that such a license is necessary for the practice of the Authorized Method, thensubject to Section 2.3.4, so long as the grant of such license by Maxygen would not have a materialadverse impact on Maxygen, the applicable claims of such patent shall be added to **Exhibit H**and be“Maxygen Necessary Claims” unless any payments would be owed to Third Parties for the granting orpractice of any such license, in which case the procedures set forth in Section 2.3.3 below shallapply.                    (c) The Parties shall direct the Neutral that any evaluation subject to this Section 2.3.2 becompleted within ninety (90) days and each shall reasonably cooperate to allow such evaluation tobe completed within such time period.               2.3.3 License Terms. If (a) the Parties agree or the Neutral decides that any claimsof a particular patent owned or Controlled by Maxygen are necessary for the practice of theAuthorized Method, and (b) payments would be owed to Third Parties for the granting or practice ofany such license, then Maxygen shall disclose all such payments to Avidia in writing. If Avidia isstill interested in obtaining a license to such patent, then it shall notify Maxygen in writing andthe Parties shall negotiate in good faith the scope and terms of such a license to Avidia. Anylicense granted by Maxygen to Avidia pursuant to this Section 2.3.3 must be embodied in a writtendocument signed by both Parties. In any such agreement, Avidia will agree (x) to be responsiblefor paying any amounts due to Third Parties for the practice of any such license by Avidia and itsLicensees, and (y) indemnify and hold harmless Maxygen and its Affiliates and their respectivedirectors, officers, employees and agents from and against any and all losses, injuries, damagesand/or liabilities resulting from or arising out of or in connection with the practice of suchlicense by Avidia or its Licensees.               2.3.4 Acknowledgement. It is understood and agreed by the Parties that ShufflingTechnology is one of Maxygen’s most valuable proprietary assets and that protection of ShufflingTechnology is of paramount importance to Maxygen, and notwithstanding Section 2.3.2 above, that theParties do not intend that Avidia will receive from Maxygen the grant of any license to anyShuffling Technology without Maxygen’s express written consent under this Section 2.3, whichMaxygen may provide at its sole discretion on a case-by-case basis.          2.4 Maxygen Useful Claims. If after the Effective Date Avidia becomes aware of anyclaims in Patent Rights owned or Controlled by Maxygen that Avidia believes would be useful for thepractice of the Assigned Patent Rights and/or the Subject Improvements outside the Maxygen Field,then Avidia may request a license from Maxygen thereto identifying the relevant claims and PatentRights. In any such event, Maxygen agrees to discuss in good faith with Avidia the terms of such a proposed license to Avidia; provided, Maxygen shall haveno obligation to grant to Avidia any license to such claims. If the Parties agree on the terms forsuch a license that are the same as those set forth in this Agreement, then such claims in such
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Patent Rights shall be “Maxygen Useful Claims.” If the Parties agree on the terms for such alicense that are different than those set forth in this Agreement, then the Parties will enter intoa written agreement reflecting such terms. In any such agreement, Avidia will agree (a) to beresponsible for paying any amounts due to Third Parties for the practice of any such license byAvidia and its Licensees, and (b) indemnify and hold harmless Maxygen and its Affiliates and theirrespective directors, officers, employees and agents from and against any and all losses, injuries,damages and/or liabilities resulting from or arising out of or in connection with the practice ofsuch license by Avidia or its Licensees.          2.5 DBP Therapeutic Conjugates.               2.5.1 Acknowledgement. Avidia acknowledges that it shall not have any right, withoutMaxygen’s express written consent, to directly or indirectly (a) intentionally develop any DBPTherapeutic Conjugate for **[****]**, or (b) make, use, import, sell or otherwise commercialize any DBPTherapeutic Conjugate for **[****]**.               2.5.2 Notice; Discussion. If during the term of this Agreement Avidia wishes todevelop or commercialize any DBP Therapeutic Conjugate, then Avidia shall notify Maxygen andrequest approval from Maxygen to develop or commercialize such DBP Therapeutic Conjugate,identifying in writing (a) **[****]**, and (b) **[****]**. In any such event, Maxygen agrees to discusswith Avidia in good faith Avidia’s interest in developing or commercializing such DBP TherapeuticConjugate. Maxygen further agrees that such requests by Avidia for Maxygen’s approval will beconsidered favorably by Maxygen, unless Maxygen determines, in its sole discretion, that such anapproval may have a material adverse impact on Maxygen or its Affiliates or Licensees.               2.5.3 **[****]**; Approval. If Maxygen is willing to provide Avidia its approval thatAvidia may develop and/or commercialize a particular DBP Therapeutic Conjugate, then the Partiesshall **[****]**and any such DBP Therapeutic Conjugate thereafter shall be an Approved DBP TherapeuticConjugate for purposes of this Agreement.               2.5.4 Expectation. It is understood and agreed that it is the expectation of theParties that no payments shall be required to be paid by Avidia to Maxygen for any such approval byMaxygen of any DBP Therapeutic Conjugate.          2.6 Effect of Trigger Date. Upon the occurrence of the Trigger Date:               (a) all licenses granted to Avidia (and sublicenses granted by Avidia to its Licensees) underthis Agreement in effect as of the Trigger Date shall remain in effect, subject to the terms andconditions of this Agreement; and               (b) Avidia shall not receive additional license rights to Subject Improvements conceived andreduced to practice or otherwise developed by Maxygen, except with respect to (i) patents or patentapplications filed after the Trigger Date that claim such * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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Subject Improvements or (ii) such Subject Improvements that fall within the scope of claims of patent applications or patents within theAssigned Patent Rights which were filed after the Trigger Date but are entitled to claim filingpriority based on another patent application or patent within the Assigned Patent Rights filed onor before the Trigger Date. By way of illustration and without limitation, **[****]**.          2.7 No License Rights. Notwithstanding Section 2.1, it is understood and agreed thatno license or right is granted to Avidia by Maxygen and no covenant is made by Maxygen to Avidiawith regard to any Patent Rights or Know-How or Software owned or Controlled by Maxygen:               (a) that pertain to the practice of the Shuffling Technology, except as expressly set forth inSection 2.1(a) with regard to Maxygen Necessary Claims and Maxygen Necessary Know-How, or as may beexpressly agreed by Maxygen in a further written agreement; and/or               (b) to develop, make, have made, use, import, have imported, offer for sale, sell or have sold(i) any instrument intended to perform DNA synthesis or produce DNA variants, or (ii) any kit, orset of materials or reagents, that is intended to enable a Third Party to conduct DNA synthesis orproduce DNA variants; and/or               (c) to develop, make, have made, use, import, have imported, offer for sale, sell or have soldany DBP Therapeutic Conjugate for **[****]**except an Approved DBP Therapeutic Conjugate.          2.8 Third Party Obligations. Avidia shall be solely responsible for the payment ofany amounts due to Third Parties to obtain any rights necessary for Avidia to develop orcommercialize the inventions claimed in the Assigned Patent Rights and/or in connection with thedevelopment, manufacture, use, importation or sale of Products outside the Maxygen Field.          2.9 No Implied Rights. No licenses or other rights, other than those expressly setforth in this Agreement, are granted by Maxygen to Avidia hereunder, and no additional license orother rights shall be deemed granted by Maxygen to Avidia by implication, estoppel or otherwise.     **3. LICENSE TO MAXYGEN**          3.1 License Grant. Subject to the terms and conditions of this Agreement (includingwithout limitation Section 3.8), Avidia hereby grants to Maxygen, and Maxygen hereby accepts, thefollowing licenses:               (a) an exclusive, irrevocable, perpetual, **[****]**license under the Assigned Patent Rights andthe Avidia Necessary Claims to practice the Authorized Method, * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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solely to develop, make, have made, use, import, have imported, offer to sell and sell Maxygen Products for the Maxygen Field in theTerritory;               (b) an exclusive, irrevocable, perpetual, **[****]**license under the Avidia Useful Claims andAvidia Know-How, solely to develop, make, have made, use, import, have imported, offer to sell andsell Maxygen Products for the Maxygen Field in the Territory;               (c) a non-exclusive, irrevocable, perpetual, **[****]**license under Avidia’s interest in theSubject Improvements (including any corresponding Patent Rights and/or Know-How), solely todevelop, make, have made, use, import, have imported, offer to sell and sell Maxygen Products forthe Maxygen Field in the Territory;               (d) an exclusive, irrevocable, perpetual, **[****]**license under Avidia’s interest in any PatentRights or Know-How owned or Controlled by Avidia necessary or used to develop, make, have made, usetherapeutically or prophylactically, import, have imported, offer to sell and sell, VeterinaryProducts, solely to develop, make, have made, use, import, have imported, offer to sell and sellReserved Therapeutic Products in the Territory;               (e) an exclusive, irrevocable, perpetual, **[****]**license, under Avidia’s interest in anyPatent Rights or Know-How owned or Controlled by Avidia necessary or used to develop, make, havemade, use therapeutically or prophylactically, import, have imported, offer to sell and sell anyProduct which is a DBP Research Conjugate, solely to develop, make, have made, use therapeuticallyor prophylactically, import, have imported, offer to sell and sell Maxygen Products in the MaxygenField in the Territory; and               (f) a non-exclusive, irrevocable, perpetual, **[****]**license under Avidia’s interest in anyPatent Rights owned or Controlled by Avidia (i) that claim inventions conceived or reduced topractice in the period from the Effective Date until and including the Trigger Date and (ii) thatwould be infringed, but for such license, by the practice by Maxygen and/or its Affiliates of theShuffling Technology as it exists up to and including the Trigger Date, solely to make, use,import, offer to sell and sell Maxygen Products in the Maxygen Field and products other thanProducts in the Territory.          3.2 Right to Sublicense.               (a) Maxygen may grant and authorize sublicenses to any of the rights granted it in Section3.1(a)-(c); provided, however, Maxygen may only grant such sublicenses in conjunction with a grantof a sublicense of the Assigned Patent Rights and solely for the purpose of allowing the practiceof the Assigned Patent Rights to develop, make, have made, use, import, have imported, offer tosell, and sell Maxygen Products in the Maxygen Field. Promptly after the grant of any suchsublicense, Maxygen shall notify Avidia in writing of the identity of any such Licensees and thespecific rights (by field and geographic region) granted to any such Licensee, provided thatMaxygen shall have no obligation to reveal any information that is confidential information of suchLicensee. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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               (b) Maxygen may grant and authorize sublicenses to any of the rights granted it inSection 3.1(d)-(f). Promptly after the grant of any such sublicense, Maxygen shall notify Avidiain writing of the identity of any such Licensees and the specific rights (by field and geographicregion) granted to any such Licensee, provided that Maxygen shall have no obligation to reveal anyinformation that is confidential information of such Licensee.          3.3 Other Necessary Claims.               3.3.1 Notice; Decision. If during the term of this Agreement, Maxygen becomes awareof any claims of any patents owned or Controlled by Avidia that Maxygen believes are necessary forthe practice of the Authorized Method, then Maxygen may contact Avidia identifying the relevantclaims of the relevant patents and requesting a license from Avidia with respect thereto. In anysuch event, Avidia agrees to discuss in good faith with Maxygen whether Maxygen requires a licenseto any such claims of any such patent for such purpose. Avidia further agrees that, if the Partiesagree that Maxygen requires a license to such claims of any patents to practice the AuthorizedMethod, such request will be considered favorably by Avidia, unless the grant of such license byAvidia would have a material adverse impact on Avidia or its Affiliates, as determined in Avidia’ssole discretion. If Avidia’s decision is favorable, such claims of any patents shall be added to**Exhibit D**(which addition shall be reflected in a writing signed by both Parties), and such patentshall be an Avidia Necessary Claim, unless any payments would be owed to any Third Party for thegranting or practice of any such license, in which case the procedures set forth in Section 3.3.3below shall apply.               3.3.2 Neutral Determination.                    (a) If the Parties are unable to agree on whether a license to any claims of any patents ownedor Controlled by Avidia is necessary for Maxygen to practice the Authorized Method, either Partyshall submit the matter to a mutually agreed independent patent attorney (the “Neutral”) who shallhave the authority to determine whether a license to claims of any such patent is necessary forMaxygen to practice the Authorized Method. As used in this Section 3.3.2, “necessary” means thatthe methods claimed in the Assigned Patent Rights and/or Subject Improvements cannot practically bepracticed to perform the Authorized Method without infringing the applicable claims of any patentowned or Controlled by Avidia.                    (b) The Parties shall equally share the costs associated with any such evaluation. If theNeutral determines that such a license is necessary for the practice of the Authorized Method, thensubject to Section 3.3.3, so long as the grant of such license by Avidia would not have a materialadverse impact on Avidia, the applicable claims of such patent shall be added to **Exhibit D**and bean “Avidia Necessary Claim” unless any payments would be owed to Third Parties for the granting orpractice of any such license, in which case the procedures set forth in Section 3.3.3 below shallapply.                    (c) The Parties shall direct the Neutral that any evaluation subject to this Section 3.3.2 becompleted within ninety (90) days and each shall reasonably cooperate to allow such evaluation tobe completed within such time period.               3.3.3 License Terms. If (a) the Parties agree or the Neutral decides that any claimsof a particular patent owned or Controlled by Avidia are necessary for the practice of
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the Authorized Method, and (b) payments would be owed to Third Parties for the granting or practice of any such license, then Avidia shall disclose all such payments to Maxygen in writing.If Maxygen is still interested in obtaining a license to such patent, then it shall notify Avidiain writing and the Parties shall negotiate in good faith the scope and terms of such a license toMaxygen. Any license granted by Avidia to Maxygen pursuant to this Section 3.3.3 must be embodiedin a written document signed by both Parties. In any such agreement, Maxygen will agree (x) to beresponsible for paying any amounts due to Third Parties for the practice of any such license byMaxygen and its Licensees, and (y) indemnify and hold harmless Avidia and its Affiliates and theirrespective directors, officers, employees and agents from and against any and all losses, injuries,damages and/or liabilities resulting from or arising out of or in connection with the practice ofsuch license by Maxygen or its Licensees.          3.4 Effect of Trigger Date. Upon the occurrence of the Trigger Date:               (a) all licenses granted to Maxygen (and sublicenses granted by Maxygen to its Licensees)under this Agreement in effect as of the Trigger Date shall remain in effect, subject to the termsand conditions of this Agreement; and               (b) Maxygen shall not receive additional license rights to Subject Improvements conceived andreduced to practice or otherwise developed by Avidia, except with respect to (i) patents or patentapplications filed after the Trigger Date that claim such Subject Improvements or (ii) such SubjectImprovements that fall within the scope of claims of patent applications or patents within theAssigned Patent Rights for which Avidia is entitled to claim filing priority based on anotherpatent application or patent within the Assigned Patent Rights filed on or before the Trigger Date.By way of illustration and without limitation, **[****]**.          3.5 Reserved Rights. Notwithstanding the exclusive licenses granted to Maxygen in theMaxygen Field:               (a) Avidia shall retain the right under the Assigned Patent Rights and all other intellectualproperty licensed by Avidia to Maxygen (i) to develop evidence demonstrating proof of principle forthe inventions claimed in the Assigned Patent Rights (subject to the limitations in Section 10.1.3and the further limitation that Avidia will not conduct any research or development with regard toany Reserved Therapeutic Product subject to Section 1.44(d) or (e)), and (ii) to develop, make,have made, use, import, have imported, offer to sell and sell Veterinary Products.               (b) Avidia shall have the right to (i) disclose to potential investors (or their agents) orcorporate partners, pursuant to nondisclosure agreements containing terms at least as restrictiveas those in Article 6, the results of work done by the Avidia Team in the period from June 1, 2001until the Effective Date relating to the practice of the Assigned Patent Rights, and (ii) subjectto Section 6.4, Avidia shall have the right to publish in scientific journals * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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or present at scientific meetings the results of work done by the Avidia Team from June 1,2001 relating to the practice of the Assigned Patent Rights until the Effective Date.               (c) Avidia shall have the right to file, prosecute and maintain any patent applications orpatents arising from the results of the activities performed pursuant to Section 3.5(a) above. IfAvidia determines that it will not seek patent protection for particular inventions conceived orreduced to practice in the course of such activities, then Avidia shall notify Maxygen of suchdecision in writing, and Maxygen shall have the right, for a period not to exceed sixty (60) days),to request that Avidia file, prosecute and maintain patent applications and patents on suchinvention(s), provided such invention pertains to the Maxygen Field. In the event Maxygen does notso request in such sixty (60) day period, it shall be deemed to have decided not to file a patentapplication for such particular invention. Where so requested under this Section 3.5(c), andpursuant to Section 7.1, Avidia (i) shall file, prosecute and maintain any such patent applicationsand patents as may reasonably be requested by Maxygen to protect Maxygen’s rights thereto in theMaxygen Field or (ii) shall provide Maxygen the opportunity to take responsibility for such filing,prosecution or maintenance.               (d) Upon the earlier of (i) Avidia’s or Maxygen’s filing of the applicable patentapplication(s) described in Section 3.5(c) above, or (ii) a decision of Maxygen not to have Avidiafile patent application(s) with regard to a particular invention, Avidia shall have the right to(x) disclose to potential partners or investors, and/or (y) pursuant to the procedure set forth inSection 6.4 (which shall in no event be construed as delaying publication beyond the time limitsset forth in this Section 3.5(d)), publish in scientific journals or present at scientificmeetings, the applicable results of work done pursuant to Section 3.5(a) above.               (e) At least semiannually, Avidia shall provide to Maxygen a written report **[****]**regardingany activities performed pursuant to Section 3.5(a) above and **[****]**.          3.6 Avidia Useful Claims. If after the Effective Date Maxygen becomes aware of anyclaims in Patent Rights owned or Controlled by Avidia that Maxygen believes would be useful for thepractice of the Assigned Patent Rights and/or the Subject Improvements in the Maxygen Field, thenMaxygen may request a license from Avidia thereto identifying the relevant claims and PatentRights. In any such event, Avidia agrees to discuss in good faith with Maxygen the terms of such aproposed license to Maxygen; provided, Avidia shall have no obligation to grant to Maxygen anylicense to such claims. If the Parties agree on the terms for such a license that are the same asthose set forth in this Agreement, then such claims in such Patent Rights shall be “Avidia UsefulClaims.” If the Parties agree on the terms for such a license that are different than those setforth in this Agreement, then the Parties will enter into a written agreement reflecting suchterms. In any such agreement, Maxygen will agree to (a) be responsible for paying any amounts dueto Third Parties for the practice of any such license by Maxygen and its Licensees, and (b)indemnify and hold harmless Avidia and its Affiliates and their respective directors, officers,employees and agents from and against any and all losses, * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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injuries, damages and/or liabilities resulting from or arising out of or in connection withthe practice of such license by Maxygen or its Licensees.          3.7 Third Party Obligations. Maxygen shall be solely responsible for the payment ofany amounts due to Third Parties to obtain any rights necessary for Maxygen to develop,manufacture, use, import, offer for sale or sell Maxygen Products in the Maxygen Field.          3.8 Reserved Therapeutic Products.               3.8.1 Waiver of License Rights. Maxygen may, at its sole discretion, waive itsexclusive license rights to any of the Reserved Therapeutic Products, with express written noticeto Avidia identifying the specific Reserved Therapeutic Products to which the waiver applies. Suchwaived exclusive license rights shall revert to Avidia upon receipt of such notice.               3.8.2 Other Assays for Reserved Therapeutic Products. The principles and agreedcriteria for determining whether a particular Domain-Based Protein is a Therapeutic ReservedProduct are set forth on **Exhibit K**hereto. If either Party believes that an assay not listed on**Exhibit K**is suitable for evaluating the **[****]**of a particular Domain-Based Protein to determinewhether it is a Therapeutic Reserved Product, it may notify the other Party and provide a writtendescription of the assay and an explanation of why such assay is appropriate to evaluate the **[****]**of a particular Domain-Based Protein. In any such event, the Parties shall discuss in good faithwhether such assay is appropriate for the proposed purpose with regard to the applicableDomain-Based Protein. If the Parties agree that such an assay is appropriate to evaluate **[****]**ofa Domain-Based Protein to determine if it is a Therapeutic Reserved Product, then such assay shallbe added to **Exhibit K**via written amendment. If the Parties fail to agree that such assay isappropriate for such purpose, the proposed assay shall not be added to **Exhibit K**. If the Partiesare unable to reach agreement on at least one assay for assessing the **[****]**of a Domain-BasedProtein with regard to the applicable Ligand or its cognate receptor, such an assay and the resultsin such assay that evidence **[****]**will be selected by an agreed Neutral Third Party; provided,such assay **[****]**must be consistent with the general principles and specific criteria set forth in**Exhibit K**.               3.8.3 Waiver of Assay Criteria. If Avidia generates assay results showing that aparticular Domain-Based Protein meets the criteria for a Reserved Therapeutic Product set forth in**Exhibit K**, but Avidia believes that such Domain-Based Protein should not be considered a ReservedTherapeutic Protein, then, at Avidia’s written request, Maxygen may, at its sole discretion,determine whether such assay results are sufficient (or insufficient) to demonstrate that suchDomain-Based Protein is not a Reserved Therapeutic Product. If Maxygen makes a determination thatsuch results are sufficient to demonstrate that such Domain-Based Protein is not a ReservedTherapeutic Product, it shall provide Avidia with express written notice of its decision,identifying the specific (a) assay(s), (b) Domain-Based Protein(s), and (c) Reserved TherapeuticProduct criteria to which such determination applies. If * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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Maxygen decides that the assay results are insufficient to demonstrate that such Domain-BasedProtein is not a Reserved Therapeutic Product, but Avidia believes that it has conclusivescientific evidence that demonstrates that such Domain-Based Protein is not a Reserved TherapeuticProduct, then Avidia may submit the matter to a mutually agreed independent molecular biologist(the “Neutral”) who shall have the authority to determine whether such assay results are sufficientto demonstrate that such Domain-Based Protein is not a Reserved Therapeutic Product. The Partyagainst whom the Neutral rules shall bear the costs associated with such determination.               3.8.4 Assays. At Avidia’s request, Maxygen shall cooperate with and providereasonable assistance to Avidia to facilitate the performance by Avidia of assays listed on **ExhibitK**. At Maxygen’s discretion, such assistance may include: (i) performing one or more of suchassays on behalf of Avidia, if such assays are then being performed at Maxygen; or (ii) providingto Avidia one or more of such assays and/or reagents for conducting such assays. Notwithstandingthe foregoing, Maxygen shall have no obligation to (a) incur any additional expense in providingany such assistance or materials (unless Maxygen agrees in its sole discretion to provide suchassistance or materials in exchange for reimbursement from Avidia of all associated additionalexpenses thereby incurred by Maxygen), (b) acquire, make or develop any materials or assays notthen in Maxygen’s possession, or (c) violate any agreement entered by Maxygen with any Third Party.               3.8.5 Reports. At least semiannually until and including the Trigger Date, Maxygenshall provide to Avidia a written report **[****]**performing research or development upon ReservedTherapeutic Products and **[****]**.          3.9 No Implied Rights. No licenses or other rights, other than those expressly setforth in this Agreement, are granted by Avidia to Maxygen hereunder, and no additional license orother rights shall be deemed granted by Avidia to Maxygen by implication, estoppel or otherwise.     **4. TECHNOLOGY TRANSFER; OTHER COLLABORATIVE ACTIVITIES**          4.1 Delivery. Promptly following the Effective Date, at Avidia’s written request,Maxygen shall, to the extent that they are in Maxygen’s possession and Control, deliver to Avidia(a) documents embodying Maxygen Necessary Know-How, Maxygen Team Know-How or Maxygen UsefulKnow-How, as agreed by the Parties, (b) the Software (in electronic format), and (c) samples of theMaterials sufficient to allow Avidia to establish initial stocks of the same; provided, in eachcase, Maxygen shall have no further obligation to deliver further Software, Know-How or Materials,unless otherwise agreed in writing by the Parties. All Know-How and Software provided to Avidiapursuant to this Article 4, shall be treated as Confidential Information of Maxygen that is subjectto Article 6. All Know-How provided to Maxygen pursuant to this Article 4 shall be treated asConfidential Information of Avidia that is subject to Article 6. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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          4.2 Assistance. Each Party shall, at the request of the other Party **[****]**, providetechnical assistance to the requesting Party to instruct and assist the requesting Party in thepractice of the Know-How and Patent Rights licensed it herein; provided, however, neither Partyshall be obligated to provide more than **[****]**per year of such assistance to the other Party,unless otherwise agreed in writing by the Parties.          4.3 Subject Improvements. Until the Trigger Date, Avidia and Maxygen shall eachannually notify the other of any patent applications or patents filed in the previous year by or onbehalf of such Party claiming any Subject Improvement(s) that such Party or its Licensee(s) owns orControls, and provide to the other Party copies of any of the foregoing that have not beenpreviously provided to such other Party.          4.4 Materials.               4.4.1 Use. Avidia acknowledges that the Materials are experimental in nature and mayhave unknown characteristics and properties. Avidia agrees to use prudence and all reasonable carein the use, handling, storage, transportation, disposition and containment of any and all theMaterials, and to maintain and use the Materials under suitable containment conditions incompliance with all applicable national, state and local laws, regulations, rules, ordinances,codes of practice and current good laboratory practices.               4.4.2 Bailment. All right, title and interest in and to the tangible materialscomprising the Materials is/are and shall continue to be solely owned by Maxygen. Maxygen herebygrants to Avidia, and Avidia hereby accepts, a bailment to non-exclusively use the Materialsprovided by Maxygen to Avidia to practice the license granted in Section 2.1(e).               4.4.3 Assumption of Risk. AVIDIA EXPRESSLY ACKNOWLEDGES THAT IT HEREBY ASSUMES ANYAND ALL RISKS ASSOCIATED WITH THE USE OF THE MATERIALS, AND THAT MAXYGEN SHALL HAVE NO LIABILITY TOAVIDIA OR ANY THIRD PARTY FOR ANY LIABILITY, PROBLEM, LOSS OR DAMAGE RESULTING FROM AVIDIA’S ORAVIDIA’S LICENSEES USE OF THE MATERIALS.          4.5 Software.               4.5.1 No Obligation to Correct or Update. The Parties agree that the Softwarelicensed to Avidia in Section 2.1(f) was developed by Maxygen for its internal use and not for useby Avidia or any Third Party and may have bugs, errors or other defects that may result inunreliable or incorrect results or may render it inoperative. Avidia agrees that, unless theParties otherwise agree in writing, Maxygen has (a) no obligation or duty to provide Avidia anysupport with regard to the installation, maintenance or use of the Software, unless otherwiseagreed in writing by the Parties, and (b) no obligation or duty to correct, or attempt to correct,any bugs, errors or other defects in the Software or any Software Improvement. If Maxygen in itssole discretion provides Avidia with (i) corrections for any bugs, errors or other defects in the * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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Software or (ii) any updates for the Software not in existence on the Effective Date, thensuch corrections and updates shall be deemed “Software” and Avidia shall have the license set forthin Section 2.1(f) with respect thereto.               4.5.2 No Patent Filings. Avidia agrees that the Software, including all intellectualproperty rights therein, is owned solely by Maxygen, and agrees not to file any patent applicationon any aspect of the Software, any Software Improvement and/or any derivative work based on theSoftware, without Maxygen’s prior written consent, which Maxygen may provide or withhold in itssole discretion.               4.5.3 No Transfer. Avidia covenants that Avidia will not, without Maxygen’s writtenconsent, which Maxygen may grant or withhold in its sole discretion, transfer to any Third Partyany of the Software or any Software Improvements, or any object code or source code for anySoftware or Software Improvement.               4.5.4 Assumption of Risk. AVIDIA EXPRESSLY ACKNOWLEDGES THAT IT HEREBY ASSUMES ANYAND ALL RISKS ASSOCIATED WITH THE USE OF THE SOFTWARE, AND THAT MAXYGEN SHALL HAVE NO LIABILITY TOAVIDIA OR ANY THIRD PARTY FOR ANY LIABILITY, PROBLEM, LOSS OR DAMAGE RESULTING FROM AVIDIA’S USE OFTHE SOFTWARE.          4.6 Collaborative Research. At any time, Maxygen and Avidia may agree to conductcollaborative research pursuant to a written agreement with regard to any Reserved TherapeuticProduct and/or Licensed Product licensed by Maxygen. Unless otherwise agreed by the Parties,Maxygen shall pay for any research conducted by Avidia pursuant to such research collaboration atan FTE rate of $**[****]**/FTE/year, such FTE rate to be revised annually to account for any change inthe CPI, using 2003 as the comparison year. If Maxygen and Avidia enter into such a researchcollaboration with respect to a Reserved Therapeutic Product: (a) such shall be deemed an exerciseof one of Maxygen’s **[****]**Target Options, and shall count toward the Cap, as defined in Section5.1.2; and (b) any Reserved Therapeutic Product developed or commercialized by Maxygen which isderived from the work done by Avidia pursuant to such collaboration shall be subject to suchfinancial terms, if any, set forth in such written agreement. For clarification, Maxygen shall befree to develop or commercialize any Reserved Therapeutic Product without collaborating withAvidia, and in such event Maxygen shall not have any financial obligation to Avidia with respect tosuch Reserved Therapeutic Product.          4.7 Subject Improvements. Each Party shall own any Subject Improvements made by it,and any related Patent Rights and/or Know-How.     **5. MAXYGEN OPTIONS**          5.1 Target Options. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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               5.1.1 Option Grant. Avidia hereby grants to Maxygen, and Maxygen hereby accepts,**[****]**options (each a “Target Option”), exercisable until the Trigger Date, to obtain, withrespect to a given Avidia Target, an exclusive worldwide, royalty-bearing license, with the rightto sublicense, to develop, make, have made, use, import, have imported, offer for sale and sellLicensed Products directed against the applicable Avidia Target, as set forth in the form ofProduct License Agreement attached hereto as **Exhibit I**.               5.1.2 Maximum. Maxygen may obtain such licenses with respect to the first **[****]**Avidia Targets as to which Maxygen exercises its Target Options. In no event shall the total numberof Target Options exercised by Maxygen exceed **[****]**(the “Cap”). The obligations of Avidiapursuant to this Article 5 shall expire upon the Parties’ entry into the corresponding ProductLicense Agreement pursuant to Maxygen’s exercise of its **[****]**Target Option.          5.2 Avidia Target Reports.               5.2.1 Reports.                    (a) Semiannual Reports. Until the earlier of the Trigger Date or when the Cap isreached, at least semiannually, Avidia shall notify Maxygen of all Avidia Targets outside theMaxygen Field upon which Avidia is working (directly or through a subcontractor), identifying eachsuch Avidia Target, and shall provide to Maxygen a written report **[****]**regarding such AvidiaTarget(s) and potential Licensed Products relating thereto. Avidia may, at its discretion, includein such semiannual reports other human therapeutic targets (e.g., receptors) outside the MaxygenField that Avidia has identified as suitable for the development of agonist or antagonist Productsbut upon which it has not commenced any work; provided, such targets shall not be considered AvidiaTargets.                    (b) Other Reports. If during the period between the semiannual reports describedabove, Avidia wishes to notify Maxygen of any Avidia Targets, it may so notify Maxygen, providing awritten report **[****]**. In addition, at such time as Avidia has expended **[****]**dollars ($**[****]**)on research relating to a particular Avidia Target not previously included in a semiannual reportpursuant to Section 5.2.1(a) above or any other reports pursuant to this Section 5.2.1(b),(provided that such time is before the earlier of the Trigger Date or when the Cap is reached), itshall notify Maxygen and provide to Maxygen a written report relating to such Avidia Target **[****]**,so that Maxygen will have an opportunity to determine whether it wishes to exercise its TargetOption thereto before such Avidia Target becomes an Excluded Target.                    (c) Further Information. With respect to any Avidia Target subject to a semiannualreport set forth in Section 5.2.1(a) or other report under Section 5.2.1(b) (the “Target Reports”),during the **[****]**day period referred to in Section 5.3.1 during which Maxygen is determiningwhether to exercise its Target Option with respect to such Avidia * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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Target, Avidia shall (i) update any information or data provided in such Target Reports **[****]**,up and until the earlier of Maxygen’s exercise of the Target Option, or **[****]**days fromMaxygen’s receipt of the applicable Avidia report; and (ii) use reasonable efforts to promptlyrespond to any reasonable questions raised by Maxygen with regard to the data relating to anyAvidia Target and potential Licensed Products relating thereto to allow Maxygen to determinewhether it wishes to exercise its Target Option thereto; provided however that Avidia shall not beobliged to perform any research to answer any questions raised by Maxygen.                    (d) Excluded Targets. If Avidia concludes that a Ligand should be deemed as anExcluded Target under Section 1.21(a) (except any that also qualifies as an Excluded Targetpursuant to Section 1.21(b) or (c)), prior to conducting any research on such Ligand, Avidia shallnotify Maxygen of the identity of any such Ligand and of any basis for its conclusion that such aLigand should be deemed an Excluded Target. If Maxygen disagrees, then the Parties shall submitsuch issue to a mutually agreed independent patent attorney (the “Neutral”) who shall have theauthority to determine whether **[****]**and whether such Ligand is in fact an Excluded Target.Maxygen shall bear the costs associated with any such evaluation, unless the Neutral determinesthat such Ligand is not an Excluded Target, in which case Avidia shall bear such costs. If theNeutral determines that such a Ligand is not an Excluded Target, then it shall be an Avidia Targetfor all purposes of this Agreement. Notwithstanding the foregoing, a Ligand shall be presumed tobe an Excluded Target for the purpose of this Agreement if **[****]**, and Maxygen shall not have theright to submit the issue of whether such Ligand is an Excluded Target to a Neutral for evaluationin such instances; provided Maxygen shall be entitled to have the Neutral verify that Avidia has**[****]**. Avidia shall not have any obligation hereunder to disclose to Maxygen or the Neutral any**[****]**.               5.2.2 Other Disclosures. In addition to the reports described in Section 5.2.1 above,concurrently with each such report Avidia shall also disclose to Maxygen in writing, subject toSection 7.3, all issued patents and published patent applications owned by Third Parties of whichAvidia is aware that **[****]**, in each case, that Avidia has not previously disclosed to Maxygen.The Parties acknowledge and agree that the foregoing shall not be interpreted as obligating Avidiato search for or inquire as to the existence of, such Third Party patents and patent applications. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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          5.3 Target Option Exercise.               5.3.1 Notice. Within **[****]**days of its receipt from Avidia of any report describedin Section 5.2, provided that the Cap has not been reached, Maxygen shall have the right toexercise its Target Option to obtain an exclusive license with respect to Products directed towardsuch Avidia Target(s). If Maxygen wishes to exercise its Target Option for a particular AvidiaTarget, it shall send to Avidia a completed and signed Product License Agreement for such AvidiaTarget and its corresponding Licensed Product. Maxygen shall be deemed to have exercised a TargetOption when Avidia countersigns such Product License Agreement and returns it to Maxygen.               5.3.2 Maxygen Rejection. After Avidia provides Maxygen with any report pursuant toSection 5.2, in the event that Maxygen notifies Avidia that it will not exercise its Target Optionwith respect to a particular Avidia Target, or fails to timely provide Avidia within the applicable**[****]**day period the completed and signed Product License Agreement for a particular Avidia Targetand the corresponding Licensed Products, then subject to the further notice and disclosureobligations described in Sections 5.4.1, Avidia shall be free to seek a Third Party sponsor of aproject for such Avidia Target, or any other license or collaborative arrangement with a ThirdParty with respect to such Avidia Target and/or a Product directed thereto. If Avidia enters intosuch a Third Party collaboration for a particular Avidia Target and/or Product(s) directed theretowithin **[****]**months of Maxygen’s declining or failing to exercise its Target Option for suchAvidia Target, then such target shall become an Excluded Target. However, if Avidia has notentered into such a Third Party collaboration for a particular Avidia Target and/or Product(s)directed thereto within **[****]**months of Maxygen’s declining or failing to exercise its TargetOption for such Avidia Target, then Avidia shall be obligated to present any such Avidia Target toMaxygen again in the next semiannual report or earlier, at Avidia’s option, prior to entering intoa Third Party collaboration for such Avidia Target. In any such case, Maxygen shall again have theopportunity to exercise its Target Option with respect thereto, in accordance with Section 5.3.1and on the terms set forth in the Product License Agreement.               5.3.3 Maxygen Waiver. If Avidia notifies Maxygen of any potential target upon whichAvidia has not commenced research and development using the Assigned Patent Rights, then Maxygenmay, at its sole discretion, notify Avidia in writing that Maxygen is not interested in such targetand thereby waive its right to evaluate data that may be created by Avidia relating to such target.In such case, such specific target shall never become an Avidia Target for purposes of thisAgreement.               5.3.4 Excluded Target. In the event that, with respect to a given Avidia Target,Avidia has expended greater than **[****]**U.S. Dollars (U.S.$ **[****]**) in a period of **[****]**or fewercontinuous months (the “Trigger Amount”) directly on the research and development of one or moreProducts directed against such Avidia Target, then such Avidia Target shall cease being an AvidiaTarget for purposes of this Article 5, and shall be deemed to * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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be an Excluded Target. In such event Avidia shall notify Maxygen of the identity of suchExcluded Target, and at Maxygen’s request, provide a written accounting of the expenditures meetingsuch Trigger Amount. For clarification, the Trigger Amount shall include **[****]**, in each case, asdetermined and allocated in accordance with U.S. generally accepted accounting principles,consistently applied.          5.4 Suspension Date.               5.4.1 Notification to Maxygen.                    (a) Notification. If Avidia has received **[****]**a Change of Control, and the Cap hasnot been reached by such date, then within **[****]**days after Avidia’s notification to Maxygen thatit has received **[****]**, Avidia shall notify Maxygen of (i) all new Avidia Targets (i.e., AvidiaTargets not disclosed in the previous notifications) and **[****]**relating thereto, and (ii) **[****]**any Avidia Target previously disclosed which has not become an Excluded Target pursuant to Section5.3.2 or 5.3.4, if any, **[****]**the last notification of such Avidia Target to Maxygen.                    (b) Further Information. With respect to **[****]**a report provided by Avidia pursuantto Section 5.4.1(a), Avidia shall use reasonable efforts to promptly respond to any reasonablequestions raised by Maxygen **[****]**relating to any Avidia Target and potential Licensed Productsrelating thereto to allow Maxygen to determine whether it wishes to exercise its Target Optionthereto; provided however that Avidia shall not be obliged to perform any research to answer anyquestions raised by Maxygen.                    (c) Other Disclosures. In addition to the notification described in Section 5.4.1(a)above, concurrently with each such report Avidia shall also disclose to Maxygen in writing, subjectto Section 7.3, all issued patents and published patent applications **[****]**, in each case, thatAvidia has not previously disclosed to Maxygen. The Parties acknowledge and agree that theforegoing shall not be interpreted as obligating Avidia **[****]**.               5.4.2 Notification to Avidia. Within **[****]**days of its receipt from Avidia of anyreport described in Section 5.4.1(a) above, Maxygen shall have the right to exercise its remainingTarget Option(s) with respect to Products directed toward such Avidia Target(s), provided that theCap is not exceeded. If Maxygen wishes to exercise a Target Option for a particular Avidia Target,it shall send to Avidia **[****]**. Maxygen shall be deemed to have exercised a Target Option when**[****]**. Avidia may not **[****]**with respect to any Avidia Target or Licensed Product that is thesubject to a Product License Agreement, **[****]**.               5.4.3 Suspension Date. The **[****]**day after Maxygen’s receipt from Avidia of anyreport described in Section 5.4.1(a) above shall be deemed a “Suspension Date.” After suchSuspension Date, Maxygen may not exercise any further Target Options; provided, if (i) such **[****]**Change of Control does not occur within **[****]**days of Avidia’s notice to Maxygen **[****]**, or within**[****]**thereof **[****]**, if any regulatory ruling or government consent * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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is required for such Change of Control, or (ii) Avidia has abandoned its discussionspertaining to such **[****]**Change of Control, then upon the earlier to occur of such events, Avidiashall promptly notify Maxygen and such Suspension Date shall no longer be in effect, and Maxygen’srights shall be reinstated as they were prior to such Suspension Date.          5.5 Product License Agreement.               5.5.1 Avidia acknowledges that it may not **[****]**with respect to any Licensed Product that isthe subject of a Product License Agreement, **[****]**.               5.5.2 Within **[****]**days, or such longer period as the Parties may agree in writing (the“Interim Period”), after **[****]**a Product License Agreement, Avidia shall cease all work directlyrelated to the Licensed Product to which such Product License Agreement pertains. During suchInterim Period, Avidia may **[****]**.               5.5.3 Avidia shall have the right to (a) disclose to potential investors (or their agents),under terms of confidentiality at least as restrictive as those in Article 6, the results of workdone by it with respect to the applicable Avidia Target or Licensed Product to which such ProductLicense Agreement pertains, **[****]**, and/or (b) subject to the procedures set forth in Section 6.4,publish in scientific journals or present at scientific meetings, the applicable results of workdone by it with respect to the applicable Avidia Target or Licensed Product, **[****]**; provided ineach case that Avidia has filed, pursuant to Section 7.1, patent application(s) with respect to anypatentable inventions related thereto prior to any such disclosure or publication.               5.5.4 Avidia shall have the right to disclose to potential corporate partners under terms ofconfidentiality at least as restrictive as those in Article 6, general results of work done by itwith respect to the applicable Avidia Target or Licensed Product (e.g., **[****]**) to which suchProduct License Agreement pertains, but shall not disclose (a) **[****]**of any Licensed Productsubject to the applicable Product License Agreement or (b) that Maxygen has entered into a ProductLicense Agreement with Avidia with respect to such Avidia Target.               5.5.5 In event of that one or more terms of this Agreement relating to licenses and relatedintellectual property rights set forth in this Agreement conflict with or are not entirelyconsistent with one or more terms of a particular Product License Agreement, the terms set forth insuch Product License Agreement shall prevail with regard to the Products subject to such ProductLicense Agreement. By way of example, but without limitation, **[****]**.By way of further example,**[****]**.     **6. CONFIDENTIALITY**          6.1 Confidential Information. Except as expressly provided herein, the Parties agreethat, for the term of this Agreement, the receiving Party shall keep completely confidential andshall not publish or otherwise disclose and shall not use for any purpose except for the * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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purposes contemplated by this Agreement any Confidential Information furnished to it by thedisclosing Party hereto pursuant to this Agreement, except to the extent that it can be establishedby the receiving Party by competent proof that such Confidential Information:               6.1.1 was already known to the receiving Party, other than under an obligation ofconfidentiality, at the time of disclosure;               6.1.2 was generally available to the public or otherwise part of the public domain at the timeof its disclosure to the receiving Party;               6.1.3 became generally available to the public or otherwise part of the public domain afterits disclosure to the receiving Party, other than through any act or omission of the receivingParty in breach of this Agreement or any other agreement between the Parties or in contravention ofthe disclosing Party’s rights under applicable law;               6.1.4 was independently developed by the receiving Party without reference to or use of anyConfidential Information disclosed by the disclosing Party; or               6.1.5 was subsequently disclosed to the receiving Party free of obligations of confidentialityby a Third Party without legal obligation to the disclosing Party or its Affiliates with regardthereto.          6.2 Permitted Use and Disclosures. Each Party may use and disclose ConfidentialInformation disclosed to it by the other Party as necessary, for the purposes of: prosecuting ordefending litigation, complying with applicable governmental laws, rules or regulations or courtorder issued by a court of competent jurisdiction or otherwise submitting required information totax or other governmental authorities, or negotiating and/or entering into a permitted sublicenseor otherwise exercising license rights expressly granted to it by the other Party pursuant to theterms of this Agreement, provided that if a Party is required to make any such disclosure, otherthan pursuant to a confidentiality agreement, it will give reasonable advance notice to the otherParty of such disclosure and will use its reasonable efforts to secure confidential treatment ofsuch information in consultation with the other Party prior to its disclosure (whether throughprotective orders or otherwise) and disclose only the minimum necessary to comply with suchrequirements.          6.3 Publicity. Except as expressly permitted in this Article 6, or as required by lawor regulation, each Party agrees not to disclose the terms of this Agreement to any Third Partywithout the prior written consent of the other Party, which consent shall not be unreasonablywithheld; provided, however, each Party may disclose this Agreement or its terms without suchconsent (a) to its attorneys, advisors, investors and others on a need-to-know basis, undercircumstances that reasonably ensure the confidentiality thereof, (b) in any prospectus, offeringmemorandum, or other document, filing or public announcement required by applicable securities lawsor other applicable law or regulation, and/or (c) in confidence, to actual or prospective financingsources in connection with a financing, sublicenses, actual or prospective corporate partners, orThird Parties with whom such Party may enter a strategic combination, on a need-to-know basis.
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          6.4 Public Disclosures               6.4.1 Limits on Public Disclosures. Any public disclosure (electronic or paper) byAvidia describing any method for making, using or manufacturing any Maxygen Product in the MaxygenField and/or any Maxygen Product composition in the Maxygen Field shall require Maxygen’s writtenconsent, which consent shall not be unreasonably withheld. Any public disclosure (electronic orpaper) by Maxygen describing any method for making, using or manufacturing any Product outside theMaxygen Field and/or any Product composition outside the Maxygen Field shall require Avidia’swritten consent, which consent shall not be unreasonably withheld.               6.4.2 Pre-Publication Review. To avoid loss of patent rights as a result of prematurepublic disclosure of patentable information, each Party shall submit to the other Party allmanuscripts describing scientific results obtained from the practice of the Assigned Patent Rightsthat have applicability to the receiving Party’s field, and the receiving Party shall notify thedisclosing Party in writing within thirty (30) days after receipt of any disclosure whether thereceiving Party desires to file or have filed a patent application on any invention disclosed insuch scientific results with respect to its permitted field of use. In the event that thereceiving Party desires to file such a patent application, the disclosing Party shall withholdpublication or disclosure of such scientific results until the earlier of the date upon which (i) apatent application is filed thereon, or (ii) the Parties determine after consultation that nopatentable invention exists or, alternatively, that patent protection should not be sought for suchinvention, or (iii) sixty (60) days after receipt by the disclosing Party of the receiving Party’swritten notice of the receiving Party’s desire to file such patent application. Further, if suchscientific results contain the information of the receiving Party that is subject to use and/ornondisclosure restrictions under this Article 6, the disclosing Party agrees to remove suchinformation from the proposed publication or disclosure, upon request by the receiving Party. Anypublication subject to this Section 6.4 shall include an acknowledgment of the contributions ofeach Party, in accordance with customary scientific norms.          6.5 Injunctive Relief. Each Party hereto acknowledges that the remedy at law forbreach by any Party of its obligations under this Article 6 is inadequate and that each Party shallbe entitled to equitable remedies, including injunctive relief, in the event of a breach by theother Party.          6.6 Acknowledgement. The Parties acknowledge that the members of the Avidia Team werepreviously employed by and/or were consultants to Maxygen and that in such capacity each member ofthe Avidia Team (a) had access to, and was exposed to, proprietary and valuable ConfidentialInformation of Maxygen and Third Parties, and (b) was involved in the generation of proprietary andvaluable Confidential Information at Maxygen that has been assigned to Maxygen. All MaxygenInformation shall remain at all times Confidential Information of Maxygen, subject to the terms ofthis Article 6, unless assigned by Maxygen to Avidia.
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     **7. PATENT PROSECUTION**          7.1 Avidia Rights and Responsibilities.               7.1.1 Prosecution. Avidia shall have the right, but not the obligation, to (a) file,prosecute and maintain the Assigned Patent Rights and any Patent Rights claiming the composition,or method of use or manufacture, of any Veterinary Product (“Vet Product Patents”) and (b) conductany interference, reexamination, reissue or opposition proceeding the subject of which is anyAssigned Patent Rights and/or any Vet Product Patent ((a) and (b), collectively, to “Prosecute” orthe “Prosecution” of the Assigned Patent Rights and any Vet Product Patents), in each case usingcounsel reasonably acceptable to Maxygen. Avidia shall control the Prosecution and bear the costsof any such activities undertaken by Avidia or any agent of Avidia. Avidia shall keep Maxygenfully informed of the status of each patent application and patent within the Assigned PatentRights and/or the Vet Product Patents that Avidia Prosecutes, and to that end, Avidia shall, at aminimum, furnish Maxygen with a copy of each draft submission to a patent authority of anyjurisdiction at least thirty (30) days before the date Avidia proposes to make such submission inthe condition that such draft exists at such time. Avidia shall reasonably and in good faithconsider Maxygen’s comments on each such draft submission, and shall make all reasonable proposedrevisions suggested by Maxygen that may effect the rights of Maxygen or its Licensees in theMaxygen Field without adversely affecting Avidia’s rights with respect to the Assigned PatentRights and/or Vet Product Patents. Maxygen shall reimburse Avidia for any reasonable out-of-pocketexpenses incurred by Avidia as a result of such revisions requested by Maxygen, if such revisionsrelate solely to the Maxygen Field. Avidia shall make reasonable efforts to provide Maxygen withan update to such draft prior to filing to enable Maxygen to monitor progress and further commenton the draft. Avidia shall provide Maxygen with a copy of each submission to a patent authority ofa jurisdiction within the Territory reasonably promptly after making such filing and copies of anydocuments received from any patent office with regard to any of the Assigned Patent Rights and/orVet Product Patents reasonably promptly following receipt thereof.               7.1.2 Election Not to Prosecute. In each country of the Territory, if Avidia electsnot to Prosecute the applicable Assigned Patent Rights and/or Vet Product Patent(s) in suchcountry, Avidia shall give Maxygen notice of such election promptly, but in any event at leastforty-five (45) days before the next required filing deadline, in order to maintain theavailability of patent protection for the subject matter of such Assigned Patent Rights and/or VetProduct Patent(s), or payment of fees relating to the Prosecution of such Assigned Patent Rights orVet Product Patent(s), if required in such country. If, after receiving any such notice fromAvidia, Maxygen responds with written notice to Avidia that it (or any of its Licensees) wishes totake responsibility for such Assigned Patent Rights and/or Vet Product Patent(s) in such countrythen Avidia shall (i) promptly provide Maxygen with all pertinent files, correspondence, records,information and other documents relating thereto in Avidia’s possession or control, and (ii) takeall other actions reasonably necessary to transfer to Maxygen (or its designee) the right, powerand authority to Prosecute such Assigned Patent Rights and/or Vet Product Patent(s) in suchcountry. If Maxygen (or its designee) assumes Prosecution of any patent application or patentwithin the Assigned Patent Rights and/or Vet Product Patent(s) in any country pursuant to thisSection 7.1.2 it shall be responsible for all expenses incurred in connection with such activities.
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               7.1.3 Cooperation. Each Party shall reasonably cooperate with the other Party inthe Prosecution of the Assigned Patent Rights and/or Vet Product Patent, and shall execute anddeliver to the Party that is conducting such Prosecution activities (the “Filing Party”) suchdocuments as may be reasonably necessary in the furtherance of such Prosecution. Patent counselfor each Party shall cooperate with patent counsel for the other Party in connection with thefiling, prosecution and maintenance of such patent applications and patents. The Party that is notthe Filing Party with respect to a particular patent application or patent subject to this Article7 will be granted an associate power of attorney (or its equivalent) on such applications solely toinspect the filings made by the Filing Party and not for any other purpose.               7.1.4 No Abandonment. During the term of this Agreement, neither Party shall takeactions to abandon any patent application that is within the Assigned Patent Rights and/or VetProduct Patent without at least thirty (30) days advance written notice of the other Party, buteither Party may discontinue its Prosecution activities with respect to any Assigned Patent Rightsand/or Vet Product Patent without the written consent of the other Party, subject to Section 7.1.2.               7.1.5 Limits on Patent Filings. In order to facilitate Avidia’s compliance with thecovenant in Section 10.1.6, if after a reasonable inquiry by Avidia, Avidia wishes to obtain advicefrom Maxygen whether a particular patent application that would be within the Assigned PatentRights and/or Subject Improvements (a) discloses any Maxygen Information, or (b) has claims thatfall within the scope of claims of Patent Rights within the Shuffling Technology, then Avidia mayrequest such advice from Maxygen. In such case, Maxygen shall review any such patent applicationprovided hereunder by Avidia and shall, within a reasonable time thereafter, inform Avidia whetherit believes that such patent application discloses any Maxygen Information (and if so, shallidentify such Maxygen Information) and/or falls within the scope of any claims of Patent Rightswithin the Shuffling Technology (and, if so, shall identify the relevant Shuffling Technologyclaims).               7.1.6 Notice. Each Party shall inform the other Party of any Patent Rights,information or proceeding of which it becomes aware that relate to the Assigned Patent Rights andthat may adversely impact the validity, title or enforceability of the Assigned Patent Rights inthe Territory in the other Party’s field.               7.1.7 Notice of Patent Issue. During the term of this Agreement, promptly followingthe issue or grant of any patent owned or Controlled by Maxygen or Avidia, as the case may be, thatmay be necessary for the practice of the Authorized Method, Maxygen or Avidia, as the case may be,shall provide the other Party with a copy of such patent, and at the request of either Party, theParties shall discuss the relevance of such patent to the Authorized Method.          7.2 Necessary Claims.               7.2.1 Maxygen Necessary Claims. Maxygen shall have the right, but not the obligation,at its sole discretion, to (a) seek and maintain the Maxygen Necessary Claims and (b) conduct anyinterference, reexamination, reissue or opposition proceeding the subject of which is any MaxygenNecessary Claims ((a) and (b), collectively, to “Prosecute” the Maxygen
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Necessary Claims), in each case using counsel of its choice. Maxygen shall bear the costs ofany such activities undertaken by Maxygen or any agent of Maxygen.               7.2.2 Avidia Necessary Claims. Avidia shall have the right, but not the obligation,at its sole discretion, to (a) seek and maintain the Avidia Necessary Claims and (b) conduct anyinterference, reexamination, reissue or opposition proceeding the subject of which is any AvidiaNecessary Claims ((a) and (b), collectively, to “Prosecute” the Avidia Necessary Claims), in eachcase using counsel of its choice. Avidia shall bear the costs of any such activities undertaken byAvidia or any agent of Avidia.          7.3 Common Interest Disclosures. With regard to any information or opinions or adviceof counsel disclosed by one Party to the other Party regarding intellectual property and/ortechnology owned by Third Parties, Maxygen and Avidia acknowledge that they have a common legalinterest in determining whether, and to what extent, Third Party intellectual property rights mayaffect the Assigned Patent Rights, or the Maxygen Necessary Claims or the Avidia Necessary Claimsand have a further common legal interest in defending against any actual or prospective Third Partyclaims based on allegations of misuse or infringement of intellectual property rights relating tothe Assigned Patent Rights, or the Maxygen Necessary Claims or the Avidia Necessary Claims or theiruse. Accordingly, **[****]**.**     8. PATENT ENFORCEMENT AND OTHER ACTIONS AGAINST THIRD PARTIES**          8.1 Notice. In the event that Avidia or Maxygen becomes aware of any actual orthreatened infringement of any patents within the Assigned Patent Rights (an “Infringement”), thatParty shall promptly notify the other Party in writing.          8.2 Enforcement of the Assigned Patent Rights.               8.2.1 Outside the Maxygen Field. Avidia shall have the first right, but not theobligation, at its sole expense, to bring or defend, prosecute and control any action, suit orproceeding with respect to any Infringement outside the Maxygen Field, including any declaratoryjudgment action related thereto (each an “Action”) against any Third Party involving the AssignedPatent Rights outside the Maxygen Field.               8.2.2 In the Maxygen Field. Maxygen shall have the first right, but not theobligation, at its sole expense, to bring or defend, prosecute and control any action, suit orproceeding with respect to such Infringement, including any declaratory judgment action (each an“Action”) against any Third Party involving any claims in the Assigned Patent Rights covering any(a) composition of any Maxygen Product, or (b) method of using any such Maxygen Product. Avidiaagrees to join any such Action as a party at Maxygen’s request, if Avidia is an indispensable orrequired party under applicable law, and Avidia agrees not to oppose such joinder. * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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               8.2.3 Control; Settlement. The Party conducting an Action under this Section 8.2shall have full control over its conduct, including settlement thereof; provided, such settlementshall not be made without the prior written consent of the other Party if it would adversely affectthe rights of such other Party, including without limitation, the licenses granted hereunder.               8.2.4 Recoveries. The Party bringing an Action pursuant to this Section 8.2 shallhave the right first to reimburse itself out of any sums recovered in such Action or in itssettlement for all reasonable out-of-pocket costs and expenses, including reasonable attorney’s andexpert fees and other direct costs incurred in connection with such Action or settlement. Theremainder is next to be used to reimburse the other Party for its costs and expenses incurred inproviding cooperation requested by the Party controlling such Action pursuant to Section 8.5 below.Any remaining amounts may be kept by the Party bringing such Action.          8.3 Enforcement of Maxygen Necessary Claims and Avidia Necessary Claims.               8.3.1 Maxygen. Maxygen (or its designee) shall have the exclusive right, but not theobligation, at its sole discretion, to bring or defend, prosecute and control any action, suit orproceeding with respect to any actual or threatened infringement of any Maxygen Necessary Claims,including any declaratory judgment action against any Third Party related thereto, at its ownexpense and may keep any recovery obtained in any such action, suit or proceeding.               8.3.2 Avidia. Avidia (or its designee) shall have the exclusive right, but not theobligation, at its sole discretion, to bring or defend, prosecute and control any action, suit orproceeding with respect to any actual or threatened infringement of any Avidia Necessary Claims,including any declaratory judgment action against any Third Party related thereto, at its ownexpense and may keep any recovery obtained in any such action, suit or proceeding.          8.4 Other Actions. With respect to any Patent Rights, Know-How or Software licensedhereunder not expressly described above in Sections 8.2 or 8.3, as between Maxygen and Avidia, eachParty shall have the exclusive right, at its sole expense, to commence and/or defend any action orproceeding to enforce or defend any rights it may have to any Patent Rights or Know-How ownedsolely by such Party, and to resolve such matters as it deems appropriate, subject to the licensesgranted herein.          8.5 Cooperation. In any action or proceeding subject to this Article 8, each Partyshall fully cooperate with and assist the other Party as reasonably requested, at the expense ofthe requesting Party.     **9. REPRESENTATIONS AND WARRANTIES; DISCLAIMER**          9.1 Mutual Representations and Warranties. Each of Avidia and Maxygen herebyrepresents and warrants to the other, as of the Effective Date, as follows:               9.1.1 it is a corporation duly organized and validity existing under the laws of the state ofits incorporation;
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               9.1.2 the execution, delivery and performance of this Agreement by such Party has been dulyauthorized by all requisite corporate action;               9.1.3 it has the right, power and authority to execute and deliver this Agreement and toperform its obligations hereunder, including, without limitation, in the case of Maxygen, theright, power and authority to grant the licenses under Article 2 and, in the case of Avidia, theright, power and authority to grant the licenses under Article 3; and               9.1.4 the execution, delivery and performance by such Party of this Agreement and itscompliance with the terms and provisions hereof to such Party’s best knowledge does not conflictwith or result in a breach of any of the terms and provisions of or constitute a default under (a)a loan agreement, guaranty, financing agreement, agreement affecting any Party or other agreementor instrument binding or affecting such Party or its property; (b) the provisions of its charterdocuments or bylaws; or (c) any order, writ, injunction or decree of any court or governmentalauthority entered against it or by which any of its property is bound.          9.2 Maxygen. Maxygen hereby represents and warrants to Avidia that:               9.2.1 As of the Effective Date, it owns or Controls the patents listed in Exhibit H andExhibit I.               9.2.2 As of the Effective Date, it owns or Controls the Software and Materials; and               9.2.3 As of the Effective Date, it is unaware of any claims in any issued patent owned orlicensed by Maxygen (except the Maxygen Necessary Claims listed in Exhibit H) that are necessaryfor Avidia to practice the Authorized Method outside the Maxygen Field.               9.2.4 it is unaware of any claims that are pending as of the Effective Date in any pendingU.S. patent application owned or licensed by Maxygen that, when issued, Maxygen expects will coverthe practice of the Authorized Method such that Avidia would require a license to such claims topractice the Authorized Method.               9.2.5 To the best of Maxygen’s knowledge, the practice of the Materials and Software withinthe scope of the licenses granted to Avidia in Sections 2.1(e) and (f) respectively, does notrequire the practice of the Shuffling Technology.               9.2.6 As of the Effective Date, the Excluded Technology (as defined in the License Agreementbetween Maxygen and Verdia entered into on March 30, 2002) does not include any Maxygen NecessaryClaims.               9.2.7 As of the Effective Date, the Maxygen Necessary Claims are free and clear of all liensand any encumbrances that would be inconsistent with the licenses granted to Avidia in Section2.1(a).
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               9.2.8 As of the Effective Date, neither Maxygen nor its Affiliates has received any writtennotice of any claim or allegation that the practice of the Authorized Method infringes any patentsor other intellectual property rights of any Third Party.          9.3 Disclaimers. Nothing in this Agreement is or shall be construed as:               9.3.1Mutual.                    (a) A warranty or representation that anything developed, made, used, sold or otherwisedisposed of under any license granted in this Agreement is or will be free from infringement of anypatent rights or other intellectual property right of any Third Party; or                    (b) An obligation to bring or prosecute actions or suits against any Third Parties forinfringement of any of the Patent Rights licensed by Avidia under this Agreement.               9.3.2 Avidia.                    (a) A warranty or representation by Avidia as to the validity or scope of any claim or patentwithin the Assigned Patent Rights or the Avidia Necessary Claims or the Avidia Useful Claim;                    (b) An obligation to bring or prosecute actions or suits against Third Parties forinfringement of any of the Patent Rights licensed to Maxygen under this Agreement; or                    (c) Except as expressly set forth in Sections 3.3 and 3.6, granting by implication, estoppel,or otherwise indirectly any licenses or rights under patents or other rights owned or Controlled byAvidia, regardless of whether such patents or other rights are dominant or subordinate to anypatent licensed to Maxygen hereunder.               9.3.3 Maxygen.                    (a) A warranty or representation by Maxygen as to the validity or scope of any claim or patentwithin the Maxygen Necessary Claims or the Maxygen Useful Claims;                    (b) An obligation to bring or prosecute actions or suits against Third Parties forinfringement of any of the Patent Rights licensed to Avidia under this Agreement; or                    (c) Except as expressly set forth in Sections 2.3 and 2.4, granting by implication, estoppel,or otherwise indirectly any licenses or rights under patents or other rights owned or Controlled byMaxygen, regardless of whether such patents or other rights are dominant or subordinate to anypatent licensed to Avidia hereunder.          9.4 Disclaimer of Warranties. ALL PATENT RIGHTS, SUBJECT IMPROVEMENTS, KNOW-HOW,SOFTWARE AND MATERIALS LICENSED
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HEREUNDER ARE LICENSED “AS IS” AND, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS ARTICLE 9,MAXYGEN AND AVIDIA MAKE NO REPRESENTATIONS OR EXTEND ANY WARRANTIES OF ANY KIND, EXPRESS ORIMPLIED, STATUTORY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY ORFITNESS FOR A PARTICULAR PURPOSE OR OF NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF ANYTHIRD PARTY.     **10. COVENANTS**          10.1 Avidia.               10.1.1 Avidia hereby covenants to Maxygen that Avidia will not grant during the term of thisAgreement any right, license or interest in or to the Assigned Patent Rights and/or its SubjectImprovements and/or the Avidia Necessary Claims that is in conflict with the rights and licensesgranted to Maxygen under this Agreement.               10.1.2 Avidia hereby covenants that it shall not enforce, or permit or encourage theenforcement of, against Maxygen, or its Affiliates, Licensees, successors or assigns (each, a“Maxygen Protected Entity”), any issued patent owned or Controlled by Avidia that claims any (i)method of practicing the Assigned Patent Rights and/or Subject Improvements in the Maxygen Field,or (ii) a composition of matter (including, without limitation, any genus claim) of a MaxygenProduct, or (iii) method of making such Maxygen Product, or using such a Maxygen Product in theMaxygen Field, if the Maxygen Protected Entity infringes such patent in the course of practicingthe Assigned Patent Rights and/or Subject Improvements for the development, manufacture, use,importation, offer for sale or sale of such Maxygen Product within the Maxygen Field. Suchcovenant shall also apply, solely with respect to such patent, to any person or entity to whomAvidia assigns such patent or grants a right to enforce such patent.               10.1.3 Avidia hereby covenants that it and its Affiliates and Licensees shall not, withoutMaxygen’s express prior written consent **[****]**, directly or indirectly (a) intentionally developfor **[****]**, any DBP Therapeutic Conjugate, other than an Approved DBP Therapeutic Conjugate, or (b)make, have made, use, import, have imported, offer to sell, sell or otherwise commercialize for**[****]**any DBP Therapeutic Conjugate, other than an Approved DBP Therapeutic Conjugate.               10.1.4 Avidia hereby covenants that it and its Affiliates shall not knowingly practice anyShuffling Technology, without Maxygen’s express prior written consent. Maxygen acknowledges andagrees that the foregoing covenant shall not be construed as limiting Avidia’s and its Affiliates’exercise of the licenses granted in Section 2.1(a) and (b).               10.1.5 Avidia hereby covenants that it shall not enforce, or permit or encourage theenforcement of, against Maxygen, or its Affiliates, Licensees, successors or assigns (each, a“Maxygen Protected Entity”) any patent claim owned or Controlled by Avidia that Maxygen identifiespursuant to Section 3.3.1 as being a potential Avidia Necessary Claim for activities conducted bysuch Maxygen Protected Entity with regard to such a claim in connection with the development orcommercialization of Maxygen Products in the Maxygen Field prior to the earliest to occur of (a)the completion of the process described in Section 3.3
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with regard to the relevant patent claims; (b) the execution of a license between the Partiesfor the relevant claims of such patent; or (c) twelve (12) months after the issue of the relevantpatent.               10.1.6 Avidia covenants that it and its Affiliates and Licensees (excluding Maxygen) and theirrespective agents shall not, without Maxygen’s written consent, which Maxygen may withhold in itssole discretion, file or Prosecute any patent application that would be within the Assigned PatentRights and/or Subject Improvements that (a) discloses any Maxygen Information, or (b) has claimsthat fall within the scope of claims of Patent Rights within the Shuffling Technology, to theextent that such claims are known by Avidia, or would have been known to Avidia after a reasonableinquiry, to fall within the scope of claims of Patent Rights within the Shuffling Technology.          10.2 Maxygen.               10.2.1 Maxygen hereby covenants to Avidia that Maxygen will not grant during the term of thisAgreement any right, license or interest in or to the Maxygen Necessary Claims and/or its SubjectImprovements and/or the Software and/or the Materials that is in conflict with the rights andlicenses granted to Avidia under this Agreement.               10.2.2 Maxygen hereby covenants that it shall not enforce, or permit or encourage theenforcement of, against Avidia, or its Affiliates, Licensees, successors or assigns (each, an“Avidia Protected Entity”) any issued patent owned or Controlled by Maxygen that claims any (a)method of practicing the Assigned Patent Rights and/or Subject Improvements, or (b) a compositionof matter (including, without limitation, any genus claim) of a Product outside the Maxygen Field,excluding any DBP Therapeutic Proteins other than Approved DBP Therapeutic Proteins (an “AvidiaProduct”), or (c) method of making such an Avidia Product outside the Maxygen Field, or using suchan Avidia Product outside the Maxygen Field, if the Avidia Protected Entity infringes such patentin conjunction with the practice of the Assigned Patent Rights and/or Subject Improvements for thedevelopment, manufacture, use, importation, offer for sale or sale of Products outside the MaxygenField. Such covenant shall also apply, solely with respect to such patent, to any person or entityto whom Maxygen assigns such patent or grants a right to enforce such patent. Notwithstanding theforegoing, this covenant shall not extend to any patent within the Shuffling Technology; provided,Avidia shall have the licenses granted in Section 2.1.               10.2.3 Maxygen hereby covenants that it shall not enforce, or permit or encourage theenforcement of, against Avidia, or its Affiliates, Licensees, successors or assigns (each, a“Avidia Protected Entity”) any patent claim owned or Controlled by Maxygen that Avidia identifiespursuant to Section 2.3.1 as being a potential Maxygen Necessary Claim for activities conducted bysuch Avidia Protected Entity with regard to such a claim in connection with the development orcommercialization of Products outside the Maxygen Field prior to the earliest to occur of (a) thecompletion of the process described in Section 2.3 with regard to the relevant patent claims, (b)the execution of a license between the Parties for the relevant claims of such patent; or (c)twelve (12) months after the issue of the relevant patent.          10.3 Injunctive Relief. Each Party agrees that in the event of any breach of any ofthe foregoing covenants that the non-breaching Party shall be entitled to injunctive relief,
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including specific performance, to allow it to obtain the benefit of such covenant, inaddition to any other remedies available to it at law or in equity.     **11. INDEMNIFICATION**          11.1 Avidia. Avidia agrees to indemnify, defend and hold harmless Maxygen and itsAffiliates and their respective directors, officers, employees and agents (each, an “Indemnitee”)from and against any and all liabilities, claims, actions, suits, proceedings, costs, demands,expenses (including, without limitation, attorneys and professional fees and other costs oflitigation), losses, or causes of action (each, a “Liability”) arising out of or relating in anyway to: (a) any breach by Avidia of the representations and warranties in Sections 9.1; (b) thepossession, manufacture, use, importation, sale or other disposition of Products outside theMaxygen Field by or on behalf of Avidia or its Licensees, whether based on breach of warranty,negligence, product liability or otherwise; (c) the exercise by Avidia of any right granted itpursuant to this Agreement, and/or (d) any possession or use of the Materials or the Software orSoftware Improvements; except, in each case, to the extent that such Liability is caused by thenegligence or willful misconduct of Maxygen or a Maxygen Indemnitee.          11.2 Maxygen. Maxygen agrees to indemnify, defend and hold Avidia and its Affiliatesand their respective directors, officers, employees and agents (each, also an “Indemnitee”)harmless from and against any and all liabilities, claims, actions, suits, proceedings, costs,demands, expenses (including, without limitation, attorneys and professional fees and other costsof litigation), losses, or causes of action (each, also a “Liability”) arising out of or relatingin any way to: (a) any breach by Maxygen of any of the representations and warranties in Sections9.1 or 9.2, (b) the possession, manufacture, use, importation, sale or other disposition of MaxygenProducts in the Maxygen Field by or on behalf of Maxygen or its Licensees, whether based on breachof warranty, negligence, product liability or otherwise, and/or (c) the exercise by Maxygen of anyright granted it pursuant to this Agreement; except, in each case; to the extent that suchLiability is caused by the negligence or willful misconduct of Avidia or an Avidia Indemnitee.          11.3 Procedure. Any Indemnitee that intends to claim indemnification from a Partyunder this Article 11 (the “Indemnitor”) shall provide notice in writing of any Liability inrespect of which the Indemnitee or its counsel intend to claim such indemnification, and theIndemnitor shall have the right to participate in, and, to the extent the Indemnitor so desires, toassume full control of the defense and settlement thereof with counsel mutually satisfactory to theParties. The indemnity obligations in this Article 11 shall not apply to amounts paid in anysettlement hereunder if such settlement is made without the prior written consent of theIndemnitor, which consent shall not be unreasonably withheld or delayed. At the Indemnitor’srequest, the Indemnitee under this Article 11, and its employees and agents, shall cooperate fullywith the Indemnitor and its legal representatives in the investigation and defense of any action,claim or liability covered by this indemnification and provide full information with respectthereto. The Indemnitor shall not enter into any settlement or consent to an adverse judgment inany such claim, demand, action or other proceeding that (a) admits wrongdoing on the part of theother Party or its Affiliates or their respective officers, directors, employees and agents, or (b)which imposes additional material obligations on the other Party, without the prior express writtenconsent of the other Party, which consent shall not be unreasonably withheld or delayed.
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          11.4 Conflict. In the event of any conflict between the indemnification provisionsset forth in this Agreement and the indemnification provisions set forth in a Product LicenseAgreement, the provisions of this Agreement shall govern.     **12. TERM AND TERMINATION**          12.1 Term. This Agreement shall commence on the Effective Date, and unless earlierterminated as provided in this Article 12, shall remain in full force and effect in on acountry-by-country basis until the expiration of the earlier to occur of (i) the last to expire ofthe Patent Rights licensed hereunder in the applicable country, or (ii) twenty-five (25) years fromthe Effective Date of this Agreement (“Expiration”). Following the Expiration of this Agreement,the licenses granted in Sections 2.1 and 3.1 shall become perpetual on a country-by-country basis.          12.2 Termination for Cause. A Party shall have the right to terminate this Agreementin its entirety upon the material breach by the other Party of such other Party’s materialobligations, if such breach is not cured within sixty (60) days after receipt of written noticefrom such Party thereof.          12.3 Termination for Insolvency. If voluntary or involuntary proceedings by oragainst a Party are instituted in bankruptcy under any insolvency law, or a receiver or custodianis appointed for such Party, or proceedings are instituted by or against such Party for corporatereorganization or the dissolution of such Party, which proceedings, if involuntary, shall not havebeen dismissed without prejudice within sixty (60) days after the date of filing, or if such Partymakes an assignment for the benefit of creditors, or substantially all of the assets of such Partyare seized or attached and not released within sixty (60) days thereafter, the other Party mayimmediately terminate this Agreement effective upon notice of such termination.          12.4 Permissive Termination. Either Party may, at any time, terminate any of thelicenses granted to it by the other Party hereunder with written notice of such license terminationto the other Party. Such license shall cease to be perpetual upon such notice.          12.5 Effect of Termination.               12.5.1 Accrued Rights and Obligations. Termination of this Agreement for any reasonshall not release any Party hereto from any liability that, at the time of such termination, hasalready accrued to the other Party or that is attributable to a period prior to such termination,nor preclude either Party from pursuing any rights and remedies it may have hereunder or at law orin equity that accrued or are based upon any event occurring prior to such termination.               12.5.2 Licenses. The licenses granted to Maxygen in Sections 3.1 and 3.3 and anysublicenses that Maxygen has granted pursuant to Section 3.2, and the licenses granted to Avidia inSections 2.1 and 2.3 and any sublicenses that Avidia has granted pursuant to Section 2.2 shallremain in full force and effect regardless of the Expiration or any termination of this Agreement.Notwithstanding the foregoing, either Party may terminate such licenses granted by the other Partyto itself voluntarily pursuant to Section 12.4.
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          12.6 Survival. Sections 4.4, 4.5, 4.7, 7.2, 7.3, 9.3, 9.4, 12.5 and Articles 1, 6, 8,11 (but only to the extent such claim arises from acts or omissions that occurred prior totermination), 13 and 14 of this Agreement shall survive termination of this Agreement for anyreason.     **13. DISPUTE RESOLUTION**          13.1 Mediation. If a dispute arises out of or relates to this Agreement, or theperformance or any alleged breach hereof, the Parties agree first to try in good faith to settlethe dispute by negotiation and escalation to senior representatives within their respectiveorganizations.          13.2 Proceeding. Except as set forth in Section 13.1, any dispute arising out of orrelating to this Agreement, or its performance or any alleged breach (except any dispute relatingto the validity, enforceability or infringement of any patent) that is not settled by agreement ofthe Parties shall be finally settled by binding arbitration. Such arbitration shall be conductedin accordance with the Commercial Arbitration Rules of the American Arbitration Association (exceptas specifically provided in this Article 13) and shall be held in Palo Alto, California. Unlessotherwise agreed in writing by the Parties, the arbitration shall be conducted by one neutralindependent arbitrator who shall be a former U.S. district court or California state court judge.          13.3 Discovery. The arbitrator shall determine what discovery will be permitted,consistent with the goal of limiting the cost and time that the Parties must expend for discovery;provided, however, the arbitrator shall permit such discovery as he or she deems necessary topermit an equitable resolution of the dispute. Any written evidence originally in a language otherthan English shall be submitted in English translation accompanied by the original or a true copythereof.          13.4 Costs. The costs of the arbitration, including administrative fees and fees ofthe arbitrator, shall be shared equally by the Parties, and each Party shall bear its own costs andattorneys’ and witness’ fees incurred in connection with the arbitration.          13.5 Decision. The arbitration proceedings and the decision of the arbitrator shallnot be made public without the joint consent of the Parties and each Party shall maintain theconfidentiality of such proceedings and decision unless otherwise permitted by the other Party;provided, either Party may make such disclosures as are required to comply with applicable law orregulation. The Parties agree that the decision of the arbitrator shall be binding as to any andall disputes, controversies, claims and counterclaims presented to the arbitrator. Any award ofthe arbitrator may be entered in a court of competent jurisdiction for a judicial recognition ofthe decision and an order of enforcement.          13.6 Injunctive Relief. Pending the establishment of the arbitral tribunal or pendingthe arbitral tribunal’s determination of the merits of the controversy, either Party may seek froma court of competent jurisdiction any interim or provisional relief that may be necessary toprotect the rights or property of that Party. The Parties further agree that in the event of anybreach of this Agreement for activities conducted outside the scope of the licenses granted inSections 2.1 and 3.1 or the violation of any covenant herein, in addition to any other
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remedies available to such Party at law or in equity, the non-breaching Party shall beentitled to injunctive relief to (a) prevent any continuing breach, and (b) abate any continuinginjury to the non-breaching Party resulting from any such breach.     **14. MISCELLANEOUS**          14.1 Governing Law; Jurisdiction. This Agreement and any dispute arising from theperformance or any breach hereof (except any dispute relating to the validity, enforceability orinfringement of any patent), including any arbitration proceeding subject to Article 13, shall begoverned by and construed in accordance with the laws of the State of California, without referenceto conflicts of laws principles.          14.2 Assignment.               14.2.1 Agreement. This Agreement shall not be assignable in whole or in part byeither Party to any Third Party without the written consent of the other Party; except either Partymay assign this Agreement, without such consent, to (a) an Affiliate of such Party; or (b) anentity that acquires all or substantially all of the business or assets of such Party to which thisAgreement pertains, whether by merger, reorganization, acquisition, sale or otherwise. The termsand conditions of this Agreement shall be binding on and inure to the benefit of the permittedsuccessors and assigns of each of the Parties.               14.2.2 Assignment of Sublicenses. Any sublicenses granted under this Agreement may beassigned by such sublicensee **[****]**.          14.3 Notices. Any notice required or permitted under this Agreement shall behand-delivered or sent by express delivery service or certified or registered mail, postageprepaid, or by fax with written confirmation by mail, to the following addresses of the Parties orsuch other address as a Party may provide for itself with notice to the other Party. Notice shallbe deemed served when delivered or, if delivery is not accomplished by reason or some fault of theaddressee, when tendered.   If to Maxygen Maxygen, Inc.  515 Galveston Drive  Redwood City, California 94063  Attn: General Counsel   If to Avidia Avidia Research Institute  515 Galveston Drive  Redwood City, California 94063  Attn: President          14.4 Further Assurances. At any time or from time to time on and after the EffectiveDate of this Agreement, either Party shall, at the request of the other Party, (a) deliver * Certain information on this page has beenomitted and filed separately with the Securities and Exchange Commission.Confidential treatment has been requested with respect to the omitted portions.
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to the requesting Party such records, data or other documents consistent with the provisionsof this Agreement, (b) execute, and deliver or cause to be delivered, all such consents, documentsor further instruments of assignment, transfer or license, and (c) take or cause to be taken allsuch actions, as the requesting Party may reasonably deem necessary or desirable in order for therequesting Party to obtain the full benefits of this Agreement and the transactions contemplatedhereby.          14.5 Force Majeure. Neither Party shall be held liable or responsible to the otherParty nor be deemed to have defaulted under or breached this Agreement for failure or delay infulfilling or performing any term of this Agreement, other than an obligation to make paymentshereunder, when such failure or delay is caused by or results from fire; flood; earthquake;tornado; embargo; government regulation; prohibition or intervention; war; act of war (whether warbe declared or not); insurrection; act of terrorism; riot; civil commotion; strike; act of God orany other cause where failure to perform is beyond the reasonable control and not caused by thenegligence or misconduct of the affected Party (a “Force Majeure Event”) so long as the affectedParty has used reasonable efforts to avoid, mitigate and/or overcome the effects of the ForceMajeure Event.          14.6 Independent Contractors. The Parties agree that the relationship of Maxygen andAvidia established by this Agreement is that of independent contractors. Furthermore, the Partiesagree that this Agreement does not, is not intended to, and shall not be construed to, establish apartnership or joint venture, nor shall this Agreement create or establish an employment, agency orany other relationship. Neither Party shall have any right, power or authority, nor shall theyrepresent themselves as having any authority to assume, create or incur any expense, liability orobligation, express or implied, on behalf of the other Party, or otherwise act as an agent for theother Party for any purpose.          14.7 Advice of Counsel. Avidia and Maxygen have each consulted counsel of theirchoice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not bedeemed to have been drafted by one Party or the other and will be construed accordingly.          14.8 Other Obligations. Except as expressly provided in this Agreement or asseparately agreed upon in writing between Avidia and Maxygen, each Party shall bear its own costsincurred in connection with the implementation of the obligations under this Agreement.          14.9 Waiver. Neither Party may waive or release any of its rights, remedies orinterests in or arising under this Agreement except in writing signed by the Party to be bound.The failure or delay of either Party to assert a right or remedy hereunder or to insist uponcompliance with any term or condition of this Agreement shall not constitute a waiver of that rightor excuse a similar subsequent failure to perform any such term or condition.          14.10 Severability. In the event that any provision(s) of this Agreement aredetermined to be invalid or unenforceable, in whole or in part, by a court of competentjurisdiction, the remainder of the Agreement shall remain in full force and effect without saidprovision(s). The Parties shall in good faith negotiate a substitute clause for any provision(s)
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declared invalid or unenforceable, which shall most nearly approximate the intent of theParties in entering this Agreement.          14.11 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE FOR ANY LOST REVENUES ORPROFITS OF ANY PERSON OR ENTITY OR ANY OTHER INCIDENTAL, SPECIAL, INDIRECT, OR CONSEQUENTIALDAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, EVEN IF SUCH PARTY HAS BEEN ADVISED OFTHE POSSIBILITY OF SUCH DAMAGES.          14.12 Entire Agreement; Modification. This Agreement, together with the attachedExhibits, which are hereby incorporated by reference, and the Assignment Agreement of even datehereof, constitutes the entire agreement between the Parties, with respect to the subject matterhereof, and supersedes and cancels all prior or contemporaneous understandings or agreements,whether written or oral, between Maxygen and Avidia with respect to such subject matter. ThisAgreement can only be amended or modified with a written document signed by both Parties.          14.13 Headings. The captions to the several Sections and Articles hereof are not apart of this Agreement, but are included merely for convenience of reference only and shall notaffect its meaning or interpretation.          14.14 Counterparts. This Agreement may be executed in two counterparts, each of whichshall be deemed an original and which together shall constitute one instrument.     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed by theirauthorized representatives as of the Effective Date.       MAXYGEN, INC. AVIDIA RESEARCH INSTITUTE       By: /s/ Balkrishan S. Gill By: /s/ Victor Perlroth         Name: Balkrishan S. Gill   Name: Victor Perlroth  Title:   President   Title:   President
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   Exhibit A: Agriculture SubfieldB: Approved DBP Therapeutic ConjugatesC: Assigned Patent RightsD: Avidia Necessary ClaimsE: Chemicals SubfieldF: Invention DisclosuresG: MaterialsH: Maxygen Necessary ClaimsI: Maxygen Useful ClaimsJ: Form of Product License Agreement