TECHNOLOGY TRANSFER AGREEMENT

Exhibit 2.1

Certain information in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

Technology Transfer Agreement

By and Among

Maxygen, Inc.

Maxygen Holdings Ltd.

Maxygen ApS

and

Bayer HealthCare LLC

Dated July 1, 2008

TABLE OF CONTENTS

TECHNOLOGY TRANSFER AGREEMENT

     This Technology Transfer Agreement (this “Agreement”) is made and entered into on this 1st day of July 2008 (the “Execution Date”), by and between Maxygen, Inc. (“Maxygen”), a Delaware corporation, Maxygen Holdings Ltd. (“Holdings”), a wholly owned subsidiary of Maxygen and a company organized under the laws of the Cayman Islands, Maxygen ApS, a wholly owned subsidiary of Holdings and a company organized under the laws of the Kingdom of Denmark (“ApS”), and Bayer HealthCare LLC (“Bayer”), a Delaware limited liability company.

W I T N E S S E T H :

     Whereas, Maxygen and Holdings are the owners of all right, title and interest in the Acquired Assets and the Intellectual Property licensed under the License Agreement;

     Whereas, Maxygen and Holdings desire to assign and license to Bayer, and Bayer desires to obtain, all right, title and interest in the Acquired Assets and a license to certain Intellectual Property;

     Now, therefore, in consideration of the mutual promises and obligations hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto stipulate and agree as follows:

ARTICLE 1
DEFINITIONS AND CONSTRUCTION

     As used in this Agreement, the following capitalized terms shall have the following meanings:

     1.1 “AAA” shall have the meaning set forth in Section 12.2.

     1.2 “Acquired Assets” shall have the meaning set forth in Section 2.1.

     1.3 “Acquired Books and Records” shall mean Books and Records (i) that are primarily useful for, or held for use primarily for, the research, development, manufacture or commercialization of Compounds or (ii) that are expressly identified as Acquired Books and Records in Section 4.4(d). Acquired Books and Records do not include any Books and Records that otherwise expressly meet the definition of Restricted Books and Records or Excluded Books and Records, unless such Books and Records are expressly identified as Acquired Books and Records.

     1.4 “Acquired Intellectual Property” means the Intellectual Property, including the Patent Rights, Know-How, Compounds and Assigned Third Party Agreements that is (i) owned by Maxygen, Holdings and/or their Affiliates or to which Maxygen, Holdings and/or their Affiliates otherwise have rights through the Assigned Third Party Agreements, and (ii) primarily useful for, or held for use primarily for, the research, development, manufacture or commercialization of Compounds. Acquired Intellectual Property does not include the Sublicensed Third Party Agreements or rights or licenses thereunder.

     1.5 “Affiliate” shall mean, with respect to any Person, any other Person (other than individuals in their individual capacities) that, directly or indirectly, through one or more intermediaries controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities or general partnership or managing member interests, by contract or otherwise. Without limiting the generality of the foregoing, a Person shall be deemed to control any other Person in which it owns, directly or indirectly, a majority of the ownership interests. In no event, however, shall GlaxoSmithKline plc, Conus Partners, Inc. or Codexis, Inc., or any of their respective affiliates, or any of their successors or assigns, be deemed as a result of their current equity ownership in Maxygen or Maxygen’s current equity ownership in them, as the case may be, a direct or indirect Affiliate of Maxygen or Holdings.

     1.6 “Agreement” shall have the meaning set forth in the first paragraph hereof.

     1.7 “Alternative Compound” shall have the meaning set forth in Section 2.6(d)(1)(iii).

     1.8 “Alternative Compound Fee” shall have the meaning set forth in Section 2.6(d)(2).

     1.9 “Applicable Law” shall mean any statute, law, regulation, ordinance, rule, judgment, court order, decree, permit, approval, concession, grant, franchise, license, agreement (other than commercial agreements) or requirement of any Governmental Authority having jurisdiction over the matter or matters in question.

     1.10 “Assigned Third Party Agreements” shall mean those Third Party Agreements that are listed on Schedule 1.10 as of the Execution Date.

     1.11 “Assignment and Assumption Agreements” shall mean the Assignment and Assumption Agreements for the Acquired Assets substantially in the form attached hereto as Exhibit 1.11 .

     1.12 “Assumed Liabilities” shall have the meaning set forth in Section 2.3.

     1.13 “Backup Compound Fee” shall have the meaning set forth in Section 2.6(c).

     1.14 “Backup Compounds” shall mean the Compounds identified in Schedule 1.14 as [****] or [****] , as applicable, and any other Compounds having the [****] as [****] or [****] , respectively; provided further, Backup Compounds shall not include any Compound which has a [****] from [****] or [****] , respectively.

     1.15 “ Bayer Facility ” shall mean Bayer’s or its Affiliates’ facilities located in Berkeley, California or Richmond, California.

     1.16 “ Bayer’s Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.17 “Bayer Indemnified Parties” shall have the meaning set forth in Section 5.2.

     1.18 “ Bayer’s Licensed-Back Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.19 “ Bayer’s Licensed Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.20 “Bayer Material Adverse Effect” means any material adverse change, event or circumstance with respect to, or any material adverse effect on, the ability of Bayer to consummate the transactions contemplated by this Agreement on a timely basis.

     1.21 “ Bayer’s Other Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.22 “Bills of Sale” shall mean the Bills of Sale for the Acquired Assets substantially in the form attached hereto as Exhibit 1.22 .

     1.23 “Books and Records” shall mean all records and portions thereof of Maxygen, Holdings and/or their Affiliates in written or electronic form, including (i) all business records, files, specifications, drawings and correspondence; (ii) engineering, manufacturing, maintenance, operating and production records; (iii) laboratory or research notebooks and log books; (iv) marketing or other studies; (v) adverse event and clinical trial reports; (vi) research and development records; (vii) periodic internal management and technical reports; (viii) regulatory compliance reports; (ix) communications and filings with Governmental Authorities; (x) all Emails; and (xi) all other books and records.

     1.24 “Business Day” means a day that is not a Saturday, a Sunday or a statutory or civic holiday in the United States or the State of California or any other day on which banking institutions are not required to be open in the United States or the State of California.

     1.25 “Challenge” shall mean that a Governmental Authority or a Third Party has requested in writing, or filed an action before, any Governmental Authority having jurisdiction to determine validity, enforceability or patentability of Patent Rights to hold a Valid Claim invalid, unenforceable, or unpatentable.

     1.26 “Clinical Trials” shall mean the clinical trials conducted pursuant to the following [****] in the United Kingdom, [****] .

     1.27 “Closing” shall mean the closing of the transactions contemplated by this Agreement.

     1.28 “Closing Date” shall have the meaning set forth in Section 2.9.

     1.29 “Commencement” shall mean, with respect to any Phase II study, the earlier of (i) the date upon which a protocol for such Phase II study is approved by, or notice of permission to proceed is received from, the FDA or the EMEA (or the applicable Regulatory Agency for a country within the European Union) or (ii) if formal approval by, or the permission of, the FDA or EMEA (or the applicable Regulatory Agency for a country within the European Union) with respect to such protocol is not required before performing the Phase II study, the first date following submission of such a protocol on which the sponsor is permitted to proceed with such Phase II study in the United States or in any country within the European Union without such formal approval or permission from the FDA or EMEA (or the applicable Regulatory Agency for a country within the European Union).

     1.30 “Compound” shall mean any and all chemical or biological molecules, whether naturally or synthetically created, (including small molecules, nucleic acids, polypeptides, proteins, antibodies and carbohydrates) and any analogs, derivatives, conjugations, modifications, variants, progeny, including any pharmaceutically acceptable salt, hydrate, solvate or mixture thereof, in each case that are, or which comprise, Factor VII, Factor VIII and/or Factor IX (and/or any variant of Factor VII, Factor VIII or Factor IX). A reference to a Factor in this Agreement, e.g., Factor VII shall include the factor and any active form of the factor, e.g., Factor VIIa.

     1.31 “ Compound Fee” shall mean individually the Lead Compound Fee, Alternative Compound Fee, or Backup Compound Fee.

     1.32 “Confidential Information” shall mean any information, technical data, or Know-How of one Party that is disclosed to another Party (including, but not limited to, that which relates to research, product or service plans, business practices, agreement terms, products, services, employees, suppliers, customers, technology or other strategic partners, investors, stockholders or members, markets, software, developments, inventions, processes, designs, drawings, engineering, hardware configuration information, marketing, finances, notes, analyses or studies) and all tangible and intangible embodiments thereof of any kind whatsoever, whether conveyed in writing or orally by or on its behalf, that should reasonably be understood by the receiving Party, because of markings, legends, the circumstances of disclosure or the nature of the information itself, is confidential or proprietary. Notwithstanding that Maxygen disclosed Confidential Information included within the Acquired Assets to Bayer before the Closing Date, from and after the Closing Date all (a) Confidential Information included within Licensed-Back Acquired IP as defined in the Intellectual Property Cross License (“Bayer’s Licensed-Back Confidential Information”), (b) Confidential Information as defined in the License Agreement within Bayer Other Improvements as defined in the License Agreement (“Bayer’s Licensed Confidential Information”) and (c) Confidential Information within the Acquired Intellectual Property other than the Licensed-Back Acquired IP (“Bayer’s Other Confidential Information”; collectively with Bayer’s Licensed-Back Confidential Information and Bayer’s Licensed Confidential Information, “Bayer’s Confidential Information”) shall be considered the Confidential Information of Bayer, and all (a) Confidential Information included within the Retained Intellectual Property (“Maxygen’s Retained Confidential Information”), (b) Confidential Information as defined in the License Agreement within Licensed Technology and

Maxygen Other Improvements as defined in the License Agreement (“Maxygen’s Licensed Confidential Information”) and (c) Confidential Information within Intellectual Property of Maxygen, Holdings and their Affiliates other than Retained Intellectual Property, Licensed Technology and Maxygen Other Improvements as defined in the License Agreement, or Acquired Intellectual Property (“Maxygen’s Other Confidential Information;” collectively with Maxygen’s Retained Confidential Information and Maxygen’s Licensed Confidential Information, “Maxygen’s Confidential Information”) shall be considered the Confidential Information of Maxygen, Holdings and/or their Affiliates. Confidential Information excludes any information that: (i) at the time of disclosure, is, or, after disclosure, becomes generally known or available to the public other than as a consequence of receiving Party’s breach of this Agreement; (ii) was known or otherwise available to receiving Party prior to the disclosure by disclosing Party; (iii) was disclosed by a Third Party to receiving Party after the disclosure by disclosing Party if such Third Party’s disclosure neither violates any obligation of the Third Party to disclosing Party nor is a consequence of receiving Party’s breach of this Agreement; (iv) was independently developed by the receiving Party without use of or reference to the disclosing Party’s Confidential Information; or (v) the disclosing Party authorizes, in writing, for release without obligation of confidentiality.

     1.33 “CTA” shall mean a Clinical Trial Application as defined in the EMEA’s rules and regulations, including all subsequent filings in support of the initial filing(s).

     1.34 “Disclosure Schedules” shall have the meaning set forth in Section 4.1.

     1.35 “Dispute” shall have the meaning set forth in Section 12.1.

     1.36 “Dollars” or “$” shall mean U.S. dollars.

     1.37 “DMC” shall mean a Data Monitoring Committee established pursuant to ICH Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance. For the avoidance of doubt, any member appointed by Maxygen or Holdings or any of their Affiliates prior to the Closing Date will be deemed to be appointed in accordance with such ICH Guidance.

     1.38 “Emails” shall mean electronic mail messages.

     1.39 “EMEA” means the European Medicines Agency and any successor Regulatory Agency.

     1.40 “EPO” means the European Patent Office.

     1.41 “ Europe ” shall mean collectively the countries of France, Italy, Germany, Spain and the United Kingdom.

     1.42 “ European Union ” shall mean the organization consisting of Belgium, France, Italy, Luxembourg, Netherlands, Germany, Denmark, Greece, Ireland, United Kingdom, Spain, Portugal, Austria, Finland, Sweden, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia, Bulgaria and Romania.

     1.43 “Excluded Activities ” shall have the meaning set forth in Section 3.1.

     1.44 “Excluded Books and Records” shall mean Books and Records (i) unrelated to Compounds, (ii) that are transaction documents prepared in connection with or related to the negotiation of the transactions contemplated by this Agreement or similar negotiations with any Third Party, (iii) that are Tax returns, Tax records, accounting records or financial records, (iv) that are minutes of proceedings of stockholders or boards of directors or (v) are expressly identified as Excluded Books and Records in Section 4.4(d) hereof.

     1.45 “Exclusivity Field” shall mean all uses in the Field of any of the coagulation factors, that are, or which comprise, Factor VII, Factor VIII and/or Factor IX (and/or any variant of Factor VII, Factor VIII or Factor IX).

     1.46 “Exclusivity Period” shall have the meaning set forth in Section 3.1.

     1.47 “Execution Date” shall mean the date set forth in the first paragraph of this Agreement.

     1.48 “Factor VII Compound” shall have the meaning set forth in Section 2.6(e).

     1.49 “FDA” shall mean the U.S. Food and Drug Administration and any successor Regulatory Agency.

     1.50 “Field” shall have the meaning set forth in Schedule 1.50 .

     1.51 “FTE” shall mean a full-time equivalent person year, based upon a total of [****] ( [****] ) hours per year of work, on or directly related to performing activities under the Transition Plan.

     1.52 “GLP” shall mean good laboratory practices, as set forth in 21 C.F.R. Part 58 and comparable regulations and standards of any Governmental Authority.

     1.53 “GMP” or “Good Manufacturing Practices” shall mean current good manufacturing practices, as set forth in 21 C.F.R. Parts 210, 211 and 606 and comparable regulations and standards of any Governmental Authority.

     1.54 “Governmental Approval” shall mean any permit, license, franchise, approval, consent, waiver, certification, qualification, registration or other authorization issued, granted, given or otherwise made available or the expiration or termination of any applicable waiting period by or under the authority of any Governmental Authority or pursuant to any Applicable Law.

     1.55 “Governmental Authority” shall mean any government or any agency, bureau, board, commission, court, department, political subdivision, tribunal, or other instrumentality of any government (including any regulatory or administrative agency), whether federal, state or local, domestic or foreign.

     1.56 “IND” shall mean an Investigational New Drug application, as defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated thereunder, including all subsequent filings, if any, in support of initial IND filing(s), and any corresponding foreign applications, registrations or certificates, in each case related to clinical development of a Compound.

     1.57 “Indemnified Party” shall have the meaning set forth in Section 5.3.

     1.58 “Indemnifying Party” shall have the meaning set forth in Section 5.3.

     1.59 “Initial Enrollment Period” shall have the meaning set forth in Section 2.6(f).

     1.60 “Intellectual Property” means patents (including utility, design, plant, utility model, reissues, re-examination, and patents of addition), patent applications (filed, unfiled or being prepared), records of invention, invention disclosures, trademarks (registered or unregistered), trademark applications (filed, unfiled or being prepared), trade names, copyrights (registered or unregistered), copyright applications (filed, unfiled or being prepared), mask works, service marks (registered or unregistered), service mark applications (filed, unfiled or being prepared), and database rights (registered or unregistered), all together with any extension, modification or renewal of any of the foregoing registrations and applications and together with all goodwill associated with the foregoing; trade secrets, shop and royalty rights, technology, inventions, Know-How, discoveries, processes, confidential and proprietary information, including any being developed (including but not limited to designs, manufacturing data, design data, test data, operational data, and formulae), whether or not recorded in tangible form through drawings, software, reports, manuals or other tangible expressions, whether or not subject to statutory registration, anywhere; and all rights to any of the foregoing.

     1.61 “Intellectual Property Cross License” shall mean that certain Intellectual Property Cross License Agreement, substantially in the form attached hereto as Exhibit 1.61 .

     1.62 “Inventory” shall mean any and all master cell banks for GMP production of Compounds, bulk Compounds produced in accordance with GMP and GMP final drug product containing Compounds (including work-in-process, fill-to-pack, packed/not released products, finished goods, packaging, goods in transit, goods off premises (including materials subject to process and goods held in storage), all materials related to such GMP bulk Compounds and/or GMP final drug product containing Compounds), non-GMP biological and other materials primarily relating to Compounds, including Compounds, products containing Compounds, genetic materials encoding Compounds, cell lines expressing Compounds (and genetic elements and genetic materials incorporated therein), plasmids, test materials and raw materials, in each case that exist and are the property of Maxygen, Holdings or their Affiliates, including the Scheduled Inventory. Inventory does not include the materials listed on Schedule 1.62 .

     1.63 “Know-How” shall include data, invention disclosures, information, and other know-how that exists and is owned by Maxygen, Holdings or their Affiliates or licensed to Maxygen, Holdings or their Affiliates, including any Regulatory Information, data, know-how, instrumentation, services, methodologies, processes, assays, formulae, and sources, devices, systems, notes, records, protocols, standards, patterns, compilations, programs, preparations,

methods, techniques, usage information, procedures, regulatory information, biological, chemical, biochemical, toxicological, pharmacological, metabolic, formulation, manufacturing, clinical, analytical and stability information and data, diagnostic information, prophylactic information, treatment and/or palliation of human diseases, manufacturing information, proprietary and secret ideas, technical information, trade secrets, commercial information, techniques, or other information, whether in written or verbal form.

     1.64 “Knowledge” shall mean, with respect to an entity, the knowledge of the executive officers of the entity and, in the case of Maxygen and Holdings, those individuals occupying the positions listed on Schedule 1.64 .

     1.65 “ Laboratory Notebooks ” shall have the meaning set forth in Section 4.4(d)(ii).

     1.66 “Lead Compound” shall mean the Compound identified in Schedule 1.66 as [****] and any other Compounds having the [****] as [****] as it existed on the Closing Date; provided further, Lead Compound shall not include any Compound which has a [****] from [****] .

     1.67 “Lead Compound Fee” shall have the meaning set forth in Section 2.6(b).

     1.68 “License Agreement” shall mean that certain License Agreement between Maxygen and Bayer dated as of the Closing Date.

     1.69 “Lien” shall mean, with respect to any property or other asset of any Person (or any revenues, income or profits of that Person therefrom) (in each case whether the same is consensual or nonconsensual or arises by contract, operation of law, legal process or otherwise), (i) any mortgage, lien, security interest, pledge, assignment, hypothecation, title retention, preferential right, counterclaim, attachment, seizure, embargo, levy or other charge or encumbrance of any kind thereupon or in respect thereof or (ii) any other arrangement under which the same is transferred, sequestered or otherwise identified with the intention of subjecting the same to, or making the same available for, the payment or performance of any liability in priority to the payment of the ordinary, unsecured creditors of that Person, in each case other than (A) any liens securing the payment of taxes and filing fees not yet due and payable, (B) pledges or deposits under workmen’s compensation, unemployment insurance, social security and other similar laws, (C) liens imposed by law, such as mechanics’, materialmen’s, landlords’, warehousemen’s, carriers’ and other similar liens, securing obligations in the Ordinary Course of Business, (D) applicable payment and other obligations set forth in the Assigned Third Party Agreements required to be performed by Bayer after Closing and (E) liens that, in the aggregate, do not and would not impair in any material respect the value or the continued use and operation of the assets to which they relate. For purposes of this Agreement, a Person will be deemed to own subject to a Lien any asset that it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease, synthetic lease or other title retention agreement relating to that asset.

     1.70 “Loss” shall mean any loss, cost, liability or expense, Tax, settlement, damage of any kind, judgment, obligation, charge, fee, fine, penalty, interest, court cost and/or administrative and reasonable attorneys’ fees, reasonable expert fees, reasonable consulting fees, and reasonable disbursements (at all levels, including appellate), but excluding all indirect corporate and administrative overhead costs. Losses shall be net of: (x) any Tax benefit actually recognized by the Indemnified Parties or their Affiliates as a result of the indemnified Loss and (y) any insurance proceeds actually received by the Indemnified Parties or their Affiliates in respect of the indemnified Loss.

     1.71 “Maxygen’s Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.72 “Maxygen Indemnified Parties” shall have the meaning set forth in Section 5.1.

     1.73 “ Maxygen’s Licensed Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.74 “Maxygen Material Adverse Effect” means any change, effect or circumstance that had, or would have, a material adverse effect on (1) the Acquired Assets or the Assumed Liabilities or (2) the ability of Maxygen or Holdings to consummate the transactions set forth herein on a timely basis, provided that in no event shall any of the following be taken into account in determining whether there has been or will be a Maxygen Material Adverse Effect: (i) any change, effect or circumstance that is the result of factors similarly affecting the economy as a whole or the industry or specific markets in which Maxygen or Holdings competes, provided that any such change, effect or circumstance does not disproportionately affect Maxygen or Holdings, (ii) any change, effect or circumstance that is the result of an outbreak or escalation of hostilities involving the United States or any member state of the European Union, the declaration by the United States or any member state of the European Union of a national emergency or war, or the occurrence of any acts of terrorism, (iii) any change, effect or circumstance that is the result of any change in Applicable Law or (iv) any change, effect or circumstance arising out of or resulting from actions contemplated by the Parties in connection with this Agreement or that is attributable to the announcement or performance of this Agreement or the transactions contemplated by this Agreement (including a loss of customers or employees).

     1.75 “Maxygen’s Other Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.76 “Maxygen’s Principal Business Location” shall mean 515 Galveston Drive, Redwood City, California 94063.

     1.77 “ Maxygen’s Retained Confidential Information ” shall have the meaning set forth in Section 1.32.

     1.78 “ Milestone Event ” shall have the meaning set forth in Section 2.6(e).

     1.79 “Milestone Expiration Date” shall have the meaning set forth in Section 2.6(f).

     1.80 “ Mixed-Use Notebooks ” shall have the meaning set forth in Section 4.4(d)(iii).

     1.81 “Modification” shall have the meaning set forth in Section 2.6(d)(1)(i).

     1.82 “Non-Assignable Assets” means any certificate, approval, authorization or other right of a Governmental Authority, which by its terms or by law is nonassignable without the consent of a Governmental Authority and such consent has not been received after Maxygen, Holdings or their respective Affiliates, as applicable, has taken commercially reasonable efforts to obtain such consent or waiver.

     1.83 “Ordinary Course of Business” shall mean the ordinary course of the business as currently conducted by Maxygen, Holdings or their Affiliates, consistent with past practice, including activities of Maxygen, Holdings or their Affiliates as reasonably necessary or useful with respect to entering into service agreements, site agreements, investigator agreements, shipment of clinical trial supplies, and other activities and arrangements to prepare for and/or conduct the Clinical Trials.

     1.84 “ Other Confidential Information ” shall have the meaning set forth in Section 4.4(c)(i).

     1.85 “Outside Delivery Date” shall have the meaning set forth in Section 4.4(d)(ii).

     1.86 “Party” or “Parties” shall mean Bayer, Maxygen, Holdings and/or ApS as appropriate.

     1.87 “Patent Rights” shall mean any and all existing U.S., Patent Cooperation Treaty and foreign patents and patent applications licensed to or owned by Maxygen, Holdings or their Affiliates, and any and all future patents and patent applications which claim priority from any such patent or application including all divisional, reissue, re-examination, continuations, and continuations-in-part, extensions (including governmental equivalents thereto) and renewal applications and patents thereof and any and all other counterpart applications in any countries and patents and inventors’ certificates, utility models and the like issuing therefrom.

     1.88 “Person” shall mean an individual, corporation, limited liability corporation, joint stock company, partnership, joint venture, trust, unincorporated organization, university, college, Governmental Authority or other entity.

     1.89 “Phase I” shall mean the first phase of human clinical trials using a limited number of human subjects, with no more than [****] patients in a study, to gain evidence of the safety and tolerability of a product in a new patient population and to determine one or more of the following: [****] for such product.

     1.90 “Phase II” shall mean the second phase of human clinical trials of a product in human subjects to evaluate and/or further assess the efficacy in one or more indications and to gather expanded information regarding the safety of such product, as well as an indication of the

dosage regimen required. For avoidance of doubt, no human clinical trial that meets the definition of Phase I shall be considered a Phase II clinical trial. For purposes of this Agreement, it is also understood and agreed that a Phase II/III (or later stage) clinical trial shall be considered a Phase II study.

     1.91 “Post-Payment Estimate Statement” shall have the meaning set forth in Section 2.5(c).

     1.92 “Post-Payment Statement” shall have the meaning set forth in Section 2.5(c).

     1.93 “Pre-Payment Statement” shall have the meaning set forth in Section 2.5(b).

     1.94 “Purchase Price” shall have the meaning set forth in Section 2.6(a).

     1.95 “Qualified Corporate Transaction” means any of the following transactions:

(1) any merger or consolidation between (A) Maxygen and any counterparty, if the counterparty is the surviving entity, or (B) any Qualified Counterparty and Maxygen, if Maxygen is the surviving entity;

(2) any sale or exchange of all or substantially all assets (including any sale of one or more subsidiaries) between (A) Maxygen and any counterparty, if Maxygen is the seller of such assets, or (B) any Qualified Counterparty and Maxygen, if the Qualified Counterparty is the seller of such assets; or

(3) any other transactions or series of transactions pursuant to, or as a result of which, there is a change in the identity of the holders of a majority of the voting power, between (A) Maxygen and any counterparty, if it is Maxygen or Maxygen’s stockholders that are subject to such change, or (B) any Qualified Counterparty and Maxygen, if it is the Qualified Counterparty or the Qualified Counterparty’s stockholders that are subject to such change.

     1.96 “ Qualified Counterparty ” means any Person, the outstanding equity securities of which have, as of immediately prior to the completion of, or as valued in, the applicable Qualified Corporate Transaction, an aggregate fair market value equal to or greater than [****] US Dollars (US $ [****] ).

     1.97 “Qualified Bayer Assignment” shall have the meaning set forth in Section 14.2(c).

     1.98 “Qualified Maxygen Assignment” shall have the meaning set forth in Section 14.2(d).

     1.99 “Regulatory Agency” means, with respect to any particular country or, where applicable, a multinational jurisdiction, the Governmental Authority (e.g., the EMEA with

respect to the European Union), with the primary responsibility for the approval of pharmaceutical products before a Compound or a product containing, in part, a Compound can be tested, marketed, promoted, distributed or sold in such country or multinational jurisdiction, including such governmental bodies, if any, that have jurisdiction over the pricing of such pharmaceutical product. The term “Regulatory Agency” includes the FDA and the EMEA.

     1.100 “Regulatory Filing ” means any filing with a Regulatory Agency relating to a Compound or a product containing, in part, a Compound and/or its use or potential use in humans, including any documents submitted to any Regulatory Agency and all supporting data (e.g., pharmacology, toxicology, etc.). Regulatory Filings include any IND or CTA.

     1.101 “Regulatory Information” shall mean (1) any protocol (including information about applicable assays, test materials and standards contained therein), Regulatory Filings and approvals by Regulatory Agencies, each of the foregoing with regard to any Compound, and the related dossiers and marketing authorizations (including FDA studies (Phase I or Phase II), IND or foreign equivalent studies (including, but not limited to CTA), including [****] in the United Kingdom, [****] in each case as the same may be modified or amended in accordance with this Agreement, and (2) substantive communications with respect to clinical development of the Compounds between Maxygen or its Affiliates, on the one hand, and the FDA, EMEA or other Governmental Authorities of similar jurisdiction, or institutional review boards, on the other hand.

     1.102 “Reimbursable Post-Payment” shall have the meaning set forth in Section 2.5(a).

     1.103 “Reimbursable Pre-Payment” shall have the meaning set forth in Section 2.5(a).

     1.104 “Restricted Books and Records” shall mean Books and Records that relate to Compounds and that (i) are the subject of binding confidentiality agreements with non-Affiliates of Maxygen restricting their conveyance or disclosure to Bayer, or (ii) are subject to attorney-client or other legal privilege (other than those opinion letters of legal counsel listed on Schedule 1.104 , which shall constitute Acquired Books and Records).

     1.105 “Retained Assets” shall have the meaning set forth in Section 2.2.

     1.106 “Retained Books and Records” shall mean (i) Books and Records that relate to Compounds but that do not constitute Acquired Books and Records or (ii) Books and Records that are expressly identified as Retained Books and Records in Section 4.4(d). Retained Books and Records do not include any Books and Records that otherwise meet the definition of Excluded Books and Records, unless such Books and Records are expressly identified as Retained Books and Records.

     1.107 “Retained Intellectual Property” means the Intellectual Property, including applicable Patent Rights, Know-How and Third Party agreements (other than consulting agreements, confidentiality agreements or materials transfer agreements), that (i) is owned by

Maxygen, Holdings or their Affiliates or to which Maxygen, Holdings or their Affiliates otherwise have rights and (ii) is not primarily useful for, or held for use primarily for, the research, development, manufacture or commercialization of Compounds, and which (A) in the case of Know-How, has been used or is used by Maxygen, Holdings or their Affiliates, as of the Closing Date, in connection with Compounds, and (B) in the case of Patent Rights, claims (x) the manufacture of any Compound in the Field as manufactured and formulated by or on behalf of Maxygen, Holdings or their Affiliates prior to the Effective Date or the Closing Date or (y) the sale or use of any Compound in the Field. For the avoidance of doubt, neither Retained Intellectual Property nor Acquired Intellectual Property shall include any Intellectual Property licensed under the License Agreement.

     1.108 “Retained Liabilities” shall have the meaning set forth in Section 2.4.

     1.109 “Scheduled Inventory” shall mean the Inventory listed on Schedule 1.109.

     1.110 “ Site Preparation Period ” shall have the meaning set forth in Section 2.6(f).

     1.111 “ Solvent ” means, with respect to any Person as on any date of determination, that as of such date, (i) the value of the assets of such Person is greater than the total amount of liabilities (including contingent and unliquidated liabilities) of such Person, (ii) such Person is able to pay all liabilities of such Person as such liabilities mature and (iii) such Person does not have unreasonably small capital. In computing the amount of contingent or unliquidated liabilities at any time, such liabilities shall be computed at the amount that, in light of all the facts and circumstances existing at such time, represent the amount that can reasonably be expected to become an actual or matured liability. In computing the value of the assets of a Person, the value shall be determined in the context of current facts and circumstances affecting such Person.

     1.112 “Subject Completion Period” shall have the meaning set forth in Section 2.6(f).

     1.113 “Sublicensed Third Party Agreements” shall mean those Third Party Agreements (whether or not constituting Retained Intellectual Property) listed on Schedule 1.113 as of the Execution Date, as amended for additions (or otherwise updated to reflect the change of any Third Party Agreement from a Sublicensed Third Party Agreement to an Assigned Third Party Agreement) as of the Closing Date.

     1.114 “System” shall have the meaning set forth in Section 4.4(d)(ii).

     1.115 “Taxes” means all taxes, including income, gross receipts, ad valorem, value added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment, insurance, social security, business license, business organization, environmental, workers compensation, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by any Governmental Authority, and any interest, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof, and including any liability for the Taxes of another Person.

     1.116 “Termination” shall mean the date after a Challenge has ended by withdrawal from, dismissal by, or decision of a Governmental Authority of competent jurisdiction, and such action is unappealable or unappealed within the time allowed for appeal.

     1.117 “Third Party” shall mean any Person other than Maxygen, Bayer, Holdings, ApS or their Affiliates.

     1.118 “Third Party Agreements” shall mean all licenses or agreements and amendments thereto between Maxygen, Holdings or any of their Affiliates and a Third Party, which Maxygen, Holdings or any of their Affiliates is entitled, with or without permission, to sublicense or assign to Bayer, and that are primarily useful for, or held for use primarily for, the research, development, manufacture, commercial exploitation or use of, or for use with, a Compound, other than consulting agreements, confidentiality agreements or materials transfer agreements.

     1.119 “Transition Plan” shall have the meaning set forth in Section 7.1(a).

     1.120 “Transition Services” shall have the meaning set forth in Section 7.1(b).

     1.121 “Transition Services Period” shall have the meaning set forth in Section 7.1(b).

     1.122 “Transition Services Statement” shall have the meaning set forth in Section 7.3.

     1.123 “ Valid Claim ” shall mean a claim in a patent within the Patent Rights, wherein said claim is a composition of matter claim covering all or any portion of the applicable Compound or covering DNA sequences encoding the entirety of the applicable Compound, and:

          (a) in the United States, which claim (i) is in an issued, unexpired patent, (ii) has not been held unenforceable, unpatentable, or invalid by a decision of a Governmental Authority of competent jurisdiction, unappealable, or unappealed within the time allowed for appeal, and (iii) has not been admitted to be invalid or unenforceable through abandonment, reissue, disclaimer or otherwise; or

          (b) in Europe, which claim (i) is included in an unexpired patent that has been allowed by the EPO, (ii) has not been held unenforceable or unpatentable or invalid by decision of a Governmental Authority of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and (iii) has not been admitted to be invalid or unenforceable through abandonment, reissue, disclaimer or otherwise.

     1.124 Construction of Certain Terms .

          (a) The Parties acknowledge that, where reference is made in this Agreement to Maxygen owning, transferring or licensing, or taking similar action with respect to, an Acquired Asset or Assumed Liability, or to Maxygen retaining, or taking similar action with respect to, any Retained Asset or Retained Liability, if such asset or liability is owned or held by Holdings or an Affiliate of Maxygen, such reference shall be understood to mean that Holdings or an Affiliate of Maxygen, as the case may be, owns, transfers, licenses, retains or takes similar action with respect to, such asset or liability. Without limitation to the forgoing, to the extent

that ApS owns any assets or is subject to any liability that, if held by or applicable to Maxygen or Holdings would be subject to this Agreement, ApS and such assets and liabilities shall be subject to this Agreement in accordance with this Section 1.124(a).

          (b) Except where the context requires otherwise, the following rules of construction shall apply with respect to this Agreement and its schedules and exhibits:

               (i) The word “including” shall be deemed to be followed by the words “without limitation” regardless of whether they are included or not;

               (ii) The word “will” shall be construed to have the same meaning and effect as the word “shall”;

               (iii) Definitions shall be deemed to include both the singular or plural usages of such terms, as applicable;

               (iv) Masculine pronouns shall be deemed to include references to feminine or genderless terms, as applicable;

               (v) The words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof;

               (vi) All references herein to Articles, Sections, Exhibits or Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules of this Agreement, and references to this Agreement include all Exhibits and Schedules hereto; and

               (vii) References to any specific law, rule or regulation, or article, section or other division thereof, shall be deemed to include the then-current amendments thereto or any replacement or successor law, rule or regulation thereof.

ARTICLE 2
CLOSING

     2.1 Acquired Assets . At Closing, upon the terms and subject to the conditions of this Agreement and in exchange for the consideration set forth herein and the assumption of the Assumed Liabilities by Bayer, Maxygen and Holdings shall, and shall cause their Affiliates to assign, transfer, convey and deliver (provided that such delivery shall be subject to Sections 4.4(c)(iii) and 4.4(d)) to Bayer, free and clear of all Liens, and Bayer shall acquire and receive, subject to the terms and conditions of this Agreement, from Maxygen, Holdings and each of their Affiliates, all of Maxygen’s, Holdings’ and each of their Affiliates’ right, title and interest in and to the following assets (the “Acquired Assets”):

          (a) the Acquired Intellectual Property;

          (b) the Inventory;

          (c) to the extent transferable, all Governmental Approvals and all pending applications for Governmental Approvals for the use of the Compounds;

          (d) all rights, claims, credits or rights of set-off with respect to Acquired Assets arising at any time, whether liquidated or unliquidated, fixed or contingent, including rights of indemnification, hold harmless agreements, covenants not to prosecute and other agreements;

          (e) the Regulatory Information; and

          (f) the Acquired Books and Records.

      Schedule 2.1 lists (i) the applicable entity (Maxygen, Holdings or otherwise) that will, subject to the terms and conditions of this Agreement, transfer certain specific Acquired Assets or license the Intellectual Property under the License Agreement, and (ii) the amount of the Purchase Price to be allocated to each such Acquired Asset and such Intellectual Property.

     2.2 Retained Assets . Notwithstanding Section 2.1, the following assets are not included among the Acquired Assets and are excluded from the assignment, transfer, conveyance and, subject to Section 4.4(d), delivery provided for in Section 2.1 (the “Retained Assets”):

          (a) the Retained Intellectual Property;

          (b) any and all of Maxygen’s, Holdings’ and their Affiliates’ cash and cash equivalents, bank deposits, bank accounts and similar cash items;

          (c) all rights under insurance policies of Maxygen, Holdings and their Affiliates, including rights to proceeds thereunder;

          (d) any and all of Maxygen’s, Holdings’ and their Affiliates Tax research and development credits, net operating losses, refunds, rebates, abatements or other recoveries for Taxes attributable to the business associated with the Acquired Assets, together with any interest due thereon or penalty rebate arising therefrom, the basis of which arises or accrues prior to the Closing;

          (e) any document retention software and other software of Maxygen, Holdings and their Affiliates;

          (f) rights to and under the Non-Assignable Assets;

          (g) any assets of any employee benefit plan of Maxygen, Holdings or their Affiliates, including any 401(k) plan or health insurance plan;

          (h) any real property owned or leased by Maxygen, Holdings or their Affiliates;

          (i) the Retained Books and Records, the Restricted Books and Records and the Excluded Books and Records; and

          (j) any and all assets of any kind of Maxygen, Holdings and their Affiliates that are not Acquired Assets.

     2.3 Assumed Liabilities . At Closing, Bayer shall assume the following liabilities (the “Assumed Liabilities”):

          (a) all liabilities that relate to any Acquired Asset and that arise from acts, events or omissions occurring after the Closing Date (it being understood that the specified commercial payment obligations, commercial deliverables and/or other commercial obligations under agreements, contracts and other legal arrangements shall be deemed to be Assumed Liabilities to the extent that they accrue after the Closing Date), other than those specifically addressed in Section 2.5(b) or Article 5; and

          (b) all liabilities for Taxes relating to, arising from or with respect to the Acquired Assets which are attributable to Tax periods or portions thereof commencing after the Closing Date, other than those for Taxes specifically addressed in Section 2.8(b).

     2.4 Retained Liabilities . Maxygen, Holdings and their Affiliates shall retain the following liabilities (the “Retained Liabilities”):

          (a) all liabilities that relate to any Acquired Asset and that arise from acts, events or omissions occurring on or prior to the Closing Date (it being understood that the specified commercial payment obligations, commercial deliverables and/or other commercial obligations under agreements, contracts and other legal arrangements shall be deemed to be Retained Liabilities to the extent that they accrue prior to the Closing Date), other than those specifically addressed in Section 2.5(c) or Article 5;

          (b) all liabilities for Taxes relating to, arising from or with respect to the Acquired Assets which are attributable to Tax periods or portions thereof ending on or prior to the Closing Date, other than those for Taxes specifically addressed in Section 2.8(a);

          (c) all liabilities to or with respect to officers or employees of Maxygen, Holdings and their Affiliates;

          (d) all indebtedness of Maxygen, Holdings and their Affiliates; and

          (e) any and all liabilities and obligations of any kind of Maxygen, Holdings and their Affiliates that are not Assumed Liabilities.

     2.5 Reimbursement of Certain Payments .

          (a) Neither party shall be entitled to any credit or refund of any payments made under the Assigned Third Party Agreements; provided that, notwithstanding the foregoing, Maxygen, Holdings or their Affiliates shall be entitled to a full and prompt refund of any payments made by Maxygen, Holdings or their Affiliates, as applicable, prior to the Closing Date for services or benefits to be received by Bayer or its Affiliates following the Closing Date under the Assigned Third Party Agreements (the “Reimbursable Pre-Payments”) and Bayer shall be entitled to a full and prompt refund of any payments made by Bayer after the Closing Date for

services or benefits received by Maxygen, Holdings or their Affiliates prior to the Closing Date under Assigned Third Party Agreements (the “Reimbursable Post-Payments”).

          (b) As promptly as practicable, but no later than sixty (60) days after the Closing Date, Maxygen will cause to be prepared and delivered to Bayer, at Maxygen’s expense, a “Pre-Payment Statement,” which will set forth in reasonable detail the Reimbursable Pre-Payments and the calculation thereof. The Pre-Payment Statement shall be final and binding on each of the Parties unless Bayer objects and delivers notice of disagreement to Maxygen within thirty (30) days after the delivery of the Pre-Payment Statement, which shall specify the item or items in dispute and state the amount, if any, of adjustment that Bayer believes should be made to the Reimbursable Pre-Payments set forth therein. In the event of a disagreement over the Pre-Payment Statement, the Parties shall attempt in good faith to resolve such dispute by negotiation between representatives who have the power to settle the disagreement, but if a final resolution thereof is not obtained within thirty (30) days of delivery of Bayer’s notice of disagreement, the Parties shall resolve such dispute by binding arbitration pursuant to Section 12.2. All undisputed fees shall be paid by Bayer to Maxygen, Holdings or their Affiliates, as applicable, within thirty (30) days after delivery of the Pre-Payment Statement in which such fees are described; all disputed fees shall be paid by Bayer to Maxygen, Holdings or their Affiliates, as applicable, within five (5) days of resolution of the underlying dispute.

          (c) As promptly as practicable, but no later than sixty (60) days after the Closing Date, Bayer will cause to be prepared and delivered to Maxygen, at Bayer’s expense, a “Post-Payment Estimate Statement,” which will set forth in reasonable detail the estimated Reimbursable Post-Payments and the calculation thereof. No later than one hundred eighty (180) days after the Closing Date, Bayer will cause to be prepared and delivered to Maxygen, at Bayer’s expense a “Post-Payment Statement.” The Post-Payment Statement shall be final and binding on each of the Parties unless Maxygen objects and delivers notice of disagreement to Bayer within thirty (30) days after the delivery of the Post-Payment Statement, which shall specify the item or items in dispute and state the amount, if any, of adjustment that Maxygen believes should be made to the Reimbursable Post-Payments set forth therein. In the event of a disagreement over the Post-Payment Statement, the Parties shall attempt in good faith to resolve such dispute by negotiation between representatives who have the power to settle the disagreement, but if a final resolution thereof is not obtained within thirty (30) days of delivery of Maxygen’s notice of disagreement, the Parties shall resolve such dispute by binding arbitration pursuant to Section 12.2. All undisputed fees shall be paid by Maxygen to Bayer within thirty (30) days after delivery of the Post-Payment Statement in which such fees are described; all disputed fees shall be paid by Maxygen to Bayer within five (5) days of resolution of the underlying dispute.

     2.6 Consideration to Maxygen and Holdings . Upon the terms and subject to the conditions of this Agreement and in consideration of the assignment and transfer of the Acquired Assets to Bayer, the Intellectual Property Cross License, the execution and delivery of the License Agreement, and the assumption of the Assumed Liabilities, Bayer will pay to Maxygen and Holdings the following amounts (accounts of Maxygen and Holdings designated by Maxygen and Holdings, as appropriate, and to be allocated between Maxygen and Holdings as set forth on Schedule 2.1 ):

          (a) A one-time fee of Ninety Million US Dollars US $90,000,000) at Closing (the “Purchase Price”); and

          (b) A one-time Compound Fee (which may be payable in one or more installments in accordance with Section 2.6(g)) upon first occurrence of the Milestone Event with respect to any Lead Compound, except where the Alternative Compound Fee is payable with respect to the Alternative Compound pursuant to Section 2.6(d). Bayer shall notify Maxygen of the first occurrence of any such Milestone Event within [****] days, and within [****] days of such notice it shall deliver to Maxygen the applicable payment (the “Lead Compound Fee”) of the amount set forth in Section 2.6(h), subject to the conditions set forth in Section 2.6(g).

     For clarification purposes, if Bayer institutes a Phase I study for the Lead Compound (other than an Alternative Compound), the treatment of patients with one or more of the Alternative Compound and/or any Backup Compound shall not count as part of the [****] patients for purposes of determining whether a Milestone Event has occurred for such Lead Compound (other than an Alternative Compound) pursuant to item (ii) in Section 2.6(e); provided, however, that treatment of patients with any Lead Compound (other than an Alternative Compound) shall count as part of the [****] patients (for purposes of determining whether a Milestone Event has occurred for such Lead Compound (other than an Alternative Compound) pursuant to item (ii) in Section 2.6(e)) with respect to any other Lead Compounds (other than an Alternative Compound), unless (A) the Lead Compound fails under Sections 2.6(c)(iii) or (iv); (B) Bayer modifies such Lead Compound and such modification does not meet the definition of an Alternative Lead Compound; (C) the modification requires a [****] and a [****] ; and (D) Bayer does not use the data from the previous Phase I study in support of clinical trials for the modified Lead Compound or in support of approval of the modified Lead Compound, then previous patients treated in a Phase I study with a Lead Compound shall not count as part of the [****] patients. For clarity, if Bayer does use the data from the previous Phase I study in support of clinical trials for the modified Lead Compound or in support of approval of the modified Lead Compound, then previous patients treated in a Phase I study with a Lead Compound shall count as part of the [****] patients.

          (c) A one-time Compound Fee (which may be payable in one or more installments in accordance with Section 2.6(g)) upon occurrence of the Milestone Event with respect to either of the Backup Compounds; provided that such amount shall only be payable one (1) time, regardless of whether the Milestone Event occurs with respect to both Backup Compounds, and further provided that no such Compound Fee shall be payable if one of the following occurs with respect to [****] (and development of [****] is, in fact, discontinued as a result) prior to first occurrence of the Milestone Event with respect to a Backup Compound:

               (i) the DMC overseeing Phase I clinical trials of [****] recommends discontinuation of clinical studies with respect to [****] , for safety issues, prior to completion of the protocol for the [****] human subject to receive [****] in clinical studies;

               (ii)  [****] does not demonstrate [****] , and does not have [****] , measured for the [****] dose administered in the Phase I study, when calculated using data generated using the [****] ;

               (iii) a non-affiliate Third Party asserts that the composition, manufacture or use of [****] itself infringes (and would, after projected commercial launch, continue to infringe) a valid, issued claim of a United States patent, a patent issued by the EPO validated and registered in each country in Europe, or a German National Patent (but only to the extent the manufacture of [****] infringes such German National Patent), in each case other than any patent that was licensed or sublicensed to Bayer under the Assigned Third Party Agreements or the Intellectual Property Cross License, and Bayer reasonably concludes that it would incur more than de minimis liability for such infringement and provided that the composition, manufacture or use of [****] or [****] would not so infringe; and/or

               (iv) if Bayer (or any applicable third party manufacturer) determines that, despite all reasonable efforts, the cost of goods sold (determined in accordance with Schedule 2.6(c) ) for manufacture of [****] at quantities and quality reasonably necessary for commercial supply exceeds [****] per mg.

     Bayer shall notify Maxygen of the first occurrence of the Milestone Event with respect to any Backup Compound within [****] days, and, unless the Compound Fee is not payable (x) for reasons set forth in the preceding Section 2.6(c)(i) through (iv) or (y) because such Milestone Event is first achieved after the Milestone Expiration Date, Bayer shall deliver to Maxygen the applicable payment (the “Backup Compound Fee”) of the amount set forth in Section 2.6(h), subject to the conditions set forth in Section 2.6(g).

     For clarification purposes, if Bayer institutes a Phase I study for a Backup Compound, the treatment of patients with one or more of the Lead Compound, Alternative Compound and/or the other Backup Compound shall not count as part of the [****] patients for purposes of determining whether a Milestone Event has occurred for such Backup Compound pursuant to item (ii) in Section 2.6(e).

            (d) (1) If either of the circumstances described in Section 2.6(c)(i) or 2.6(c)(ii) occurs with respect to [****] and:

                      (i) Bayer makes any alteration, modification or change (other than [****] ) (the “Modification”) to [****] ;

                      (ii) the Modification is designed to overcome the applicable circumstance described in Section 2.6(c)(i) or 2.6(c)(ii); and

                      (iii) such Modification requires that: (x) Bayer [****] on [****] with such Modification, (y) Bayer [****] with such Modification and (z) Bayer [****] with such Modification ( [****] with a Modification as described in Section 2.6(d)(1)(i), (ii) and (iii) shall be referred to herein as the “Alternative Compound”); and

               (2) then, if Bayer proceeds with development of the Alternative Compound, and, provided that:

                     (i) the [****] for the Alternative Compound referred to in Section 2.6(d)(1)(iii) is [****] ; and

                     (ii) all IND(s) and/or CTA(s) for the Lead Compound (other than for the Alternative Compound) are not pending when the first IND and/or CTA on the Alternative Compound are filed;

     then Bayer shall notify Maxygen of the first occurrence of the Milestone Event with respect to the Alternative Compound within [****] days, and, unless the Alternative Compound Fee is not payable because such Milestone Event is first achieved after the Milestone Expiration Date, Bayer shall deliver to Maxygen the applicable payment (the “Alternative Compound Fee”) of the amount set forth in Section 2.6(h), subject to the conditions set forth in Section 2.6(g).

     For clarification purposes, if Bayer institutes a Phase I study for the Alternative Compound, the treatment of patients with one or more other versions of the Lead Compound which are not the same Alternative Compound and/or with any Backup Compound shall not count as part of the [****] patients for purposes of determining whether a Milestone Event has occurred for the Alternative Compound pursuant to paragraph (ii) in Section 2.6(e).

          (e) As used herein, “Milestone Event” with respect to a Lead Compound, Alternative Compound or Backup Compound (a “Factor VII Compound”) means the earliest to occur of (i) Commencement of [****] by or under authority of Bayer, any of its Affiliates, and/or any of their licensees, for such Factor VII Compound, or (ii) dosing of the [****] human subject in any country with the same Factor VII Compound by or under authority of Bayer, any of its Affiliates, and any of their licensees (“under authority of” shall include dosing of a human subject under a physician IND under which Bayer, its Affiliate or a licensee provides, or permits any Third Party to provide, the applicable Factor VII Compound or any related biological materials, including any cell line, vector or genetic materials used to produce Factor VII Compound with Bayer’s consent), regardless of whether the applicable human subject is dosed in a clinical trial designated as a [****] or otherwise, and regardless of whether any or all of the previous [****] human subjects were dosed in the same or different clinical studies as the [****] human subject (and provided that a subject who completes the protocol and subsequently enrolls or re-enrolls in the same or another clinical trial shall be counted again, upon each such enrollment or re-enrollment, as a separate human subject for purposes of this Section 2.6). It is understood and agreed that a “Milestone Event” shall be deemed to have occurred with respect to any Factor VII Compound upon the first, if any, occurrence of the events described in this Section 2.6(e)(i) or (ii) by, or under authority of, any purchaser of assets consisting of one or more such Factor VII Compounds in one or a series of related transactions, or any affiliate or licensee of such purchaser, regardless of whether Bayer and its Affiliates has disposed of all or substantially all of the Factor VII Compounds. Bayer shall not have any diligence obligation to initiate a [****] of any Factor VII Compounds, dose any human subjects with a Factor VII

Compound, or consummate a disposition of assets consisting of one or more of the Factor VII Compounds, and Bayer may abandon any further research and development of any Factor VII Compound in its sole discretion.

          (f) As used herein, the “Milestone Expiration Date” shall be that date [****] calendar months after the date of [****] to the [****] human subject plus Site Preparation Period plus two (2) times Initial Enrollment Period plus Subject Completion Period. “Site Preparation Period” means the duration of time from having full site approval of the first site until [****] subject is dosed in [****] . “Initial Enrollment Period” means the duration of time from dosing of [****] subject until the [****] subject is dosed in [****] ; and, in the event clinical trials of [****] are discontinued before [****] subjects are dosed, the Initial Enrollment Period shall be [****] months. “Subject Completion Period” means the time required for completion of the protocol for [****] , as specified in the protocol in effect upon the completion of dosing of the [****] , starting with [****] and ending upon the completion of [****] , and, in the event that no subject completes the protocol, the Subject Completion Period shall be [****] months. For