Exhibit 10.1

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

COLLABORATION AND LICENSE AGREEMENT

 

This Collaboration and License Agreement (this “Agreement”) is entered into as
of August 27, 2009 (the “Signing Date”), by and between Facet Biotech
Corporation, a Delaware corporation having a principal place of business at 1500
Seaport Blvd., Redwood City, California 94063 (“Facet”) and Trubion
Pharmaceuticals, Inc., a Delaware corporation having a principal place of
business at 2401 4th Avenue, Suite 1050, Seattle, Washington 98121 (“Trubion”). 
Facet and Trubion may each be referred to herein individually as a “Party” and
collectively as the “Parties”.

 

WHEREAS, Facet and Trubion are engaged in the research and development of
pharmaceutical products;

 

WHEREAS, Trubion has developed a proprietary compound known as TRU-016 directed
at the CD37 Antigen (as defined below) and shall initially manufacture such
compound for the collaboration; and

 

WHEREAS, Facet and Trubion desire to collaborate on the research, development
and commercialization of products directed at the CD37 Antigen (as defined
below) as provided herein.

 

NOW THEREFORE, in consideration of the mutual promises and covenants set forth
below and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereby agree as follows:

 

1.                                      DEFINITIONS.

 

1.1                               “AAA” has the meaning set forth in
Section 15.3.

 

1.2                               “Acquired Party” has the meaning set forth in
Section 7.3.

 

1.3                               “Affiliate(s)” means, with respect to any
Person, any other Person which controls, is controlled by or is under common
control with such Person for so long as such control exists.  For the purposes
of this definition, the word “control” (including, with correlative meaning, the
terms “controlled by” or “under the common control with”) means the actual
power, either directly or indirectly through one or more intermediaries, to
direct or cause the direction of the management and policies of such entity,
whether by the ownership of more than fifty percent (50%) of the voting stock of
such entity, or by contract or other means.

 

1.4                               “Audited Party” has the meaning set forth in
Section 9.9(b).

 

1.5                               “Auditing Party” has the meaning set forth in
Section 9.9(b).

 

1.6                               “Bankrupt Party” has the meaning set forth in
Section 14.7.

 

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1.7                               “BLA” means a Biologic License Application, as
defined in the United States Public Health Service Act, as amended, and
applicable regulations promulgated thereunder by the FDA.

 

1.8                               “Bulk API” means the active pharmaceutical
ingredient form of a Product in bulk form.

 

1.9                               “Business Day” means a day other than a
Saturday, Sunday, or bank or other public holiday in the State of Washington or
California.

 

1.10                        “Calendar Quarter” means, for each Calendar Year,
the respective periods of three (3) consecutive calendar months ending on
March 31, June 30, September 30 or December 31.

 

1.11                        “Calendar Year” means, for the first calendar year,
the period commencing on the Signing Date and ending on December 31 of the
calendar year during which the Signing Date occurs, and each successive period
beginning on January 1 and ending twelve (12) consecutive calendar months later
on December 31.

 

1.12                        “CD37 Antigen” means the human protein antigen that
is known as CD37, and identified as a full length CD37 protein antigen [ * ].

 

1.13                        “CD37 Competitor” means a Third Party who is at the
applicable time Developing or Commercializing a protein therapeutic that [ * ].

 

1.14                        “Change of Control” means, with respect to a Party:
(i) the sale of all or substantially all of such Party’s assets or business
relating to this Agreement; (ii) a merger, reorganization, or consolidation
involving such Party in which the voting securities of such Party outstanding
immediately prior thereto cease to represent at least fifty percent (50%) of the
combined voting power of the surviving entity immediately after such merger,
reorganization, or consolidation; or (iii) a Person or group of Persons, acting
in concert acquire more than fifty percent (50%) of the voting equity or
management control of such Party.

 

1.15                        “CHMP” means the Committee for Medicinal Products
for Human Use that is responsible for preparing the opinions on all questions
concerning medicinal products for human use for the European Medicines Agency,
or any successor thereto.

 

1.16                        “Clinical Costs” means all costs incurred by or on
behalf of a Party that are directly attributable and reasonably allocated to the
conduct of Clinical Trials of a Collaboration Product, [ * ], whether alone or
in combination with another product or agent. [ * ], Clinical Costs shall
consist of the following: (a) the preparation for and conduct of Clinical Trials
(except for related Manufacturing Costs otherwise included in Development
Costs); (b) data collection and analysis, and report writing; and (c) clinical
laboratory work. Notwithstanding the above, Clinical Costs shall exclude costs
incurred in connection with Phase IV Clinical Studies for purposes other than
label expansion and Regulatory Approval, and post-marketing surveillance
activities, which shall be considered Sales and Marketing Costs.  Clinical Costs
shall be calculated in accordance with GAAP, consistently applied with
allocations by a Party calculated in accordance [ * ].

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

2

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1.17                        “Clinical Trial” means any human clinical trial of a
Product.

 

1.18                        “Collaboration” has the meaning set forth in
Section 2.1.

 

1.19                        “Collaboration Inventions” has the meaning set forth
in Section 10.1(a).

 

1.20                        “Collaboration Product” means a Product with respect
to which neither Party has exercised the Opt-Out Option, nor has been deemed to
have exercised its Opt-Out Option under Section 14.2(b).

 

1.21                        “Combination Product” means any product containing
as active ingredients both (a) a Royalty Product and (b) one or more other
pharmaceutically active compounds or substances.

 

1.22                        “Commercialization Budget” means the budget of
Commercialization Costs set forth in the Commercialization Plan to be incurred
by the Parties in connection with the performance of the Commercialization Plan.

 

1.23                        “Commercialization Costs” means all costs incurred
by or on behalf of a Party in performing its obligations under the then-current
Commercialization Plan that are directly attributable and reasonably allocated
to the Commercialization of a Collaboration Product in the Field in the
Territory. [ * ], Commercialization Costs shall consist of: (a) Manufacturing
Costs for a Collaboration Product for commercial sale; (b) Sales and Marketing
Costs; (c) costs associated with Medical Education Activities incurred after the
First Commercial Sale of the applicable Collaboration Product, and other
ancillary services to the foregoing; (d) Distribution Costs; (e) subject to
Section 8.7, payment to a Third Party under a Future Third Party License
incurred after the First Commercial Sale of the applicable Collaboration
Product; (f) Trademark Costs incurred after the First Commercial Sale of the
applicable Collaboration Product; (g) patent costs described in
Section 10.3(b)(i); and (h) patient assistance and indigent/expanded access
programs with respect to a Collaboration Product.  Commercialization Costs shall
specifically exclude general corporate and administrative overhead of each
Party.  In the calculation of Commercialization Costs, a Party’s FTE effort
shall be calculated at the FTE Rate. Commercialization Costs shall be calculated
in accordance with GAAP, consistently applied [ * ].

 

1.24                        “Commercialization Plan” means the written plan for
the Commercialization of a Collaboration Product described in Section 5.2.

 

1.25                        “Commercialize” means to promote, market,
distribute, sell (and offer for sale or contract to sell) or provide product
support for a Product, including by way of example: (a) detailing and other
promotional activities in support of a Product; (b) advertising and public
relations in support of a Product, including market research, development and
distribution of selling, advertising and promotional materials, field
literature, direct-to-consumer advertising campaigns, media/journal advertising,
and exhibiting at seminars and conventions; (c) developing reimbursement
programs and information and data specifically intended for national accounts,
managed care organizations, governmental agencies (e.g., federal, state and
local), and other group purchasing organizations, including pull-through
activities; (d) conducting Medical Education Activities and journal advertising;
and (e) conducting Phase IV Clinical Studies for

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

3

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purposes other than label expansion and Regulatory Approval, and post-marketing
surveillance activities. For clarity, “Commercializing” and “Commercialization”
have a correlative meaning.

 

1.26                        “Commercial Supply Agreement” has the meaning set
forth in Section 6.5.

 

1.27                        “Committee” means the JSC, the JDC, the JCC, the
JFC, the JPC, or any other committee established by the JSC in accordance with
the terms of this Agreement.

 

1.28                        “Competing Program” has the meaning set forth in
Section 8.5.

 

1.29                        “Confidential Information” of a Party means all
Know-How or other information, including, without limitation, proprietary
information and materials (whether or not patentable) regarding such Party’s
technology, products, business information or objectives, that is communicated
in any way or form by such Party to the other Party pursuant to this Agreement,
and that is identified as confidential at the time of disclosure; provided that,
information not identified as confidential by the disclosing Party shall be
deemed to be Confidential Information of the disclosing Party if the receiving
Party knows, or should have had a reasonable expectation, that such information
communicated by the disclosing Party is confidential or proprietary information
of the disclosing Party.  Notwithstanding the foregoing, [ * ].  All
confidential information disclosed by either Party pursuant to that certain
Mutual Non-Disclosure Agreement between the Parties dated December 22, 2008 (the
“Non-Disclosure Agreement”) that is related to the subject matter of this
Agreement shall be deemed to be such Party’s Confidential Information
hereunder.  The terms and conditions of this Agreement shall be considered
Confidential Information of both Parties.

 

1.30                        “Consolidated Party” and “Consolidation Party” shall
have the respective meanings set forth in Section 9.9(e).

 

1.31                        “Control” or “Controlled” means, with respect to any
item of Know-How, Patent Rights, or other intellectual property right, the
possession (whether by ownership or license, other than a license granted by one
Party to the other pursuant to this Agreement) by a Party of the ability to
grant to the other Party access, a license or a sublicense (as applicable), or
to extend other rights as provided in this Agreement, to such intellectual
property right, without violating the terms of any agreement or other
arrangements with any Third Party existing at the time such Party would be first
required to grant any such access, license or sublicense under this Agreement.

 

1.32                        “Co-Commercialization” means the joint
Commercialization of a Collaboration Product in the Field, in the Territory by
both Parties under the terms of this Agreement.  “Co-Commercialize,” when used
as a verb, means to engage in such Co-Commercialization.

 

1.33                        “Co-Development” means the joint Development of a
Collaboration Product in the Field, in the Territory by both Parties under the
terms of this Agreement.  “Co-Develop,” when used as a verb, means to engage in
such Co-Development.

 

1.34                        “Detail” or “Detailing” means an interactive
presentation ([ * ]) by a Party’s sales representative, to one or several
medical professional(s) having prescribing authority in the

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

4

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applicable territory in the Field, as well as to other mutually agreed
individuals or entities that have the ability to impact or influence prescribing
decisions in the applicable territory in the Field, where the principal
objective of such presentation is to emphasize the features and function of such
Collaboration Product in the Field in compliance with applicable Laws.  A Detail
does not include a reminder or sample drop or [ * ].

 

1.35                        “Development” or “Develop” means research,
pre-clinical and clinical drug development activities pertaining to a Product,
including, without limitation, toxicology, pharmacology, test method
development, stability testing, process development, formulation development,
delivery system development, quality assurance and quality control development,
statistical analysis, clinical studies (including pre- and post-approval
studies), regulatory affairs, pharmacovigilance and Regulatory Approval and
clinical study regulatory activities (including regulatory activities directed
to obtaining pricing and reimbursement approvals). Development shall include
development and regulatory activities for additional indications for a Product
after Regulatory Approval of such Product, but shall exclude Phase IV Clinical
Studies for purposes other than label expansion and Regulatory Approval and
post-marketing surveillance activities.

 

1.36                        “Development Budget” means the budget for
Development Costs set forth in the Development Plan which shall include a
detailed budget for the first year thereof, which budget shall be allocated
between the Parties [ * ].

 

1.37                        “Development Costs” means the costs incurred by or
on behalf of a Party in performing its obligations under the then-current
Development Plan, that are directly attributable and reasonably allocated to the
Development of a Collaboration Product, [ * ], in the Field in the Territory,
and that are directed to achieving or maintaining Regulatory Approval of such
Collaboration Product or Royalty Product.  The Development Costs shall include
amounts, without mark-up, that a Party pays to Third Parties involved in such
Development of a Collaboration Product, and all internal costs incurred by a
Party in connection with such Development of such Collaboration Product. [ * ],
Development Costs include the following: (a) preclinical costs, such as
toxicology and the creation of product assays such as those for pharmacokinetic
and immunogenicity testing; (b) formulation development, process development,
test method development, delivery system development, stability testing and
statistical analysis; (c) Clinical Costs; (d) costs associated with Medical
Education Activities incurred prior to the First Commercial Sale of the
applicable Collaboration Product, and other ancillary services to the foregoing,
(e) Manufacturing Costs for a Collaboration Product for use in preclinical and
clinical activities including the manufacture, purchase or packaging of
comparators or placebo for use in Clinical Trials of a Collaboration Product
(with the manufacturing costs for comparators or placebo to be determined in the
same manner as Manufacturing Costs are determined for any Collaboration
Product), as well as the direct costs and expenses of disposal of drugs and
other supplies used in such clinical studies; (f) subject to Section 8.7,
payment to a Third Party under a Future Third Party License incurred prior to
the First Commercial Sale of the applicable Collaboration Product; (g) losses
incurred in connection with claims set forth in Section 13.5, to the extent
provided therein; (h) development of the Manufacturing process for a
Collaboration Product (including with respect to any excipients or adjuvants
included in such Collaboration Product) and related scale-up, manufacturing
process validation, manufacturing process improvements, and qualification and
validation of Third Party contract manufacturers; (i) regulatory expenses
relating to Development activities for the

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

5

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purpose of obtaining Regulatory Approval for an indication for a Collaboration
Product; (j) patent costs described in Section 10.3(b)(i); (k) Trademark Costs
incurred prior to the First Commercial Sale of the applicable Collaboration
Product; and (l) other out-of pocket Collaboration Product Development expenses
that meet the criteria set forth above in this Section 1.37 including, without
limitation institutional and advisory review boards, investigator meetings,
quality of life studies, epidemiology and outcomes research. For clarity,
scale-up and validation costs as described in clause (h) above will be
considered Development Costs until commercial Collaboration Product that is
eligible for sale has been manufactured. Development Costs shall specifically
exclude general corporate and administrative overhead of each Party. In the
calculation of Development Costs, a Party’s FTE effort shall be calculated at
the FTE Rate.  Development Costs shall be calculated in accordance with GAAP,
consistently applied [ * ].

 

1.38                        “Development Plan” means the written plan for the
Development of a Collaboration Product described in Section 3.3.

 

1.39                        “Diligent Efforts” means, with respect to the
efforts to be expended by any Party with respect to any objective, [ * ]. With
respect to any objective relating to the Development and/or Commercialization of
a Product by any Party, “Diligent Efforts” means [ * ] taking into account [ *
].  Diligent Efforts shall be determined [ * ].  Diligent Efforts requires a
Party to: [ * ].

 

1.40                        “Distribution Costs” means the costs, excluding
general corporate and administrative overhead, incurred by or on behalf of a
Party that are directly attributable and reasonably allocated to the
distribution of a Collaboration Product in the Field in the Territory for
Commercialization purposes, including, unless otherwise determined by the JSC:
(a) handling and transportation to fulfill orders with respect to a
Collaboration Product in the Territory to the extent such costs are not included
in one or more items listed in Section 1.92 (a)-(d); (b) customer services,
including order entry, billing and adjustments, inquiry and credit and
collection with respect to a Collaboration Product in the Territory; and
(c) costs of storage and distribution of Collaboration Products for sale in the
Territory.  Distribution Costs shall be calculated in accordance with GAAP,
consistently applied [ * ].

 

1.41                        “Dollars” or “$” means the legal tender of the
United States.

 

1.42                        “Drug Approval Application” means a NDA, BLA, or any
MAA.

 

1.43                        “End-of-Phase 2 Meeting” means a meeting with FDA,
the purpose of which is to determine the safety of initiating a first Phase III
Clinical Study, to evaluate the Phase III Clinical Study plan and protocols and
the adequacy of current studies and plans to assess pediatric safety and
effectiveness, and to identify any additional information necessary to support a
Drug Approval Application for the uses under investigation, as further defined
in 21 C.F.R. 312.47(b)(1), as amended from time to time, or the corresponding
foreign equivalent.

 

1.44                        “European Union” or “EU” means all of the European
Union member states as of the applicable time during the Term.

 

1.45                        “Executive Officers” means the Chief Executive
Officer of Facet (or an executive officer of Facet designated by such Chief
Executive Officer) and the Chief Executive

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

6

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Officer of Trubion (or an executive officer of Trubion designated by such Chief
Executive Officer).

 

1.46                        “Existing Inventory” has the meaning set forth in
Section 7.5(b)(vi).

 

1.47                        “Facet Applied Know-How” means the Facet Know-How
applied, [ * ], as applicable, or [ * ], as applicable, [ * ], as applicable, to
the Development, Manufacture, use, importation or Commercialization of (a) in
the case of an Opt-Out, a Royalty Product in the Field that, [ * ], or (b) in
the case of a termination of this Agreement [ * ], a Product in the Field that,
[ * ].

 

1.48                        “Facet Applied Patent Rights” means the Facet Patent
Rights that claim [ * ], or that would otherwise be infringed, absent a license,
by [ * ] (a) in the case of an Opt-Out, a Royalty Product in the Field that, [ *
], or (b) in the case of a termination of this Agreement [ * ], a Product that,
[ * ].

 

1.49                        “Facet Applied Technology” means the Facet Applied
Know-How and Facet Applied Patent Rights.

 

1.50                        “Facet Collaboration Patent Rights” means Facet
Patent Rights that (a) claim a Collaboration Invention generated solely by
Facet, or its Affiliate(s), including through their employees, agents or
independent contractors, and (b) are not Facet Product Patent Rights.

 

1.51                        “Facet Know-How” means any Know-How that (a) is a [
* ], or is [ * ]; and (b) is [ * ] for the Development, Manufacture, use,
importation or Commercialization of Products in the Field. For clarity, the use
of “Affiliate” in this definition shall exclude any Third Party that becomes an
Affiliate due to a Third Party’s acquisition of Facet, except as provided in
Section 16.1.

 

1.52                        “Facet Patent Right” means a Patent Right that
(a) claims [ * ], or is [ * ] or is [ * ]; and (b) claims [ * ] one or more
Products in the Field or that would otherwise be infringed, absent a license, by
[ * ] any Products in the Field. For clarity, the use of “Affiliate” in this
definition shall exclude any Third Party that becomes an Affiliate due to a
Third Party’s acquisition of Facet, except as provided in Section 16.1.

 

1.53                        “Facet Product Patent Rights” means those Facet
Patent Rights that claim [ * ] one or more Products in the Field, and do not
claim [ * ].

 

1.54                        “FDA” means the United States Food and Drug
Administration or any successor agency thereto.

 

1.55                        “FD&C Act” means the United States Federal Food,
Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.), as amended, and the rules and
regulations promulgated thereunder.

 

1.56                        “Field” means all human and animal applications.

 

1.57                        “First Commercial Sale” means, with respect to a
given Product in the Field and any country in the Territory, the first sale or
transfer for value of such Product under this

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

7

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Agreement by either Party or its Affiliates or permitted sublicensees to a Third
Party for end use or consumption in such country following receipt of Regulatory
Approval from the appropriate Regulatory Authority permitting commercial sale of
such Product in such country.  First Commercial Sale excludes any sale or other
distribution for use in a Clinical Trial or other Development activities.

 

1.58                        “FTE” means the equivalent of a full-time
individual’s work, currently [ * ] per year for a twelve (12) month period, on
Development or Commercialization of Collaboration Products. In the case that any
full time personnel of a Party works partially on the Development or
Commercialization of Collaboration Products and partially on other work outside
this Agreement in a given fiscal year, then the full-time equivalent to be
attributed to such individual’s work hereunder shall be equal to the percentage
of such individual’s total work time in such fiscal year that such individual
spent working on activities related to the Development or Commercialization of
Collaboration Products.  In the event that any part-time personnel of a Party
works on the Development or Commercialization of Collaboration Products, the
full time equivalent to be attributed to such work shall reflect appropriate
adjustment for such personnel’s reduced total work time relative to full time
personnel. FTE efforts shall not include general corporate and administrative
overhead. Each Party shall track FTEs using its standard practice and normal
systems and methodologies as approved by the JFC.

 

1.59                        “FTE Rate” means the partially burdened FTE
personnel cost incurred by a Party, which for purposes of this Agreement shall
initially be set at an annual rate of [ * ] per FTE. Commencing with the
Calendar Year [ * ], the FTE Rate shall [ * ].

 

1.60                        “Future Third Party License” has the meaning set
forth in Section 8.7.

 

1.61                        “GAAP” means United States generally accepted
accounting principles, consistently applied, in accordance with the rules and
guidance of the United States Securities and Exchange Commission.

 

1.62                        “Good Clinical Practices” or “GCP” means the
then-current good clinical practice standards, practices and procedures
promulgated or endorsed by FDA as set forth in the guidelines entitled “Guidance
for Industry E6 Good Clinical Practice: Consolidated Guidance,” including
related regulatory requirements imposed by FDA, and comparable regulatory
standards, practices and procedures in jurisdictions outside the United States,
in each case as they may be updated from time to time.

 

1.63                        “Good Laboratory Practices” or “GLP” means the
then-current good laboratory practice standards promulgated or endorsed by FDA
as defined in 21 C.F.R. Part 58, and comparable regulatory standards in
jurisdictions outside the United States, in each case as they may be updated
from time to time.

 

1.64                        “Good Manufacturing Practices” or “GMP” means the
then-current good manufacturing practices required by FDA, as set forth in the
FD&C Act and the regulations promulgated thereunder, for the manufacture and
testing of pharmaceutical materials, and comparable Laws applicable to the
manufacture and testing of pharmaceutical materials in jurisdictions outside the
United States, including without limitation the guideline promulgated by

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

8

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the International Conference on Harmonization designated ICH Q7A, entitled “Q7A
Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients” and
the regulations promulgated thereunder, in each case as they may be updated from
time to time.

 

1.65                        “Governmental Authority” means any multi-national,
federal, state, local, municipal or other government authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, court or other tribunal).

 

1.66                        “ICH” has the meaning set forth in Section 4.7.

 

1.67                        “IND” means an Investigational New Drug Application,
as defined in the FD&C Act, that is required to be filed with FDA before
beginning clinical testing of a Product in human subjects, or an equivalent
foreign filing.

 

1.68                        “Initial Development Plan” has the meaning set forth
in Section 3.3(b).

 

1.69                        “Joint Commercialization Committee” or “JCC” has the
meaning set forth in Section 2.1(a).

 

1.70                        “Joint Development Committee” or “JDC” has the
meaning set forth in Section 2.1(a).

 

1.71                        “Joint Finance Committee” or “JFC” has the meaning
set forth in Section 2.1(a).

 

1.72                        “Joint Invention” has the meaning set forth in
Section 10.1(c).

 

1.73                        “Joint Patent Committee” or “JPC” has the meaning
set forth in Section 2.1(a).

 

1.74                        “Joint Patent Right” means a Patent Right that
claims a Joint Invention.

 

1.75                        “Joint Steering Committee” or “JSC” has the meaning
set forth in Section 2.1(a).

 

1.76                        “Know-How” means any data, results, and information
of any type whatsoever, in any tangible or intangible form, including, without
limitation, know-how, trade secrets, practices, techniques, methods, processes,
inventions, developments, specifications, formulations, formulae, materials or
compositions of matter of any type or kind (patentable or otherwise), software,
algorithms, marketing reports, clinical and non-clinical study reports,
regulatory submission summaries and regulatory submission documents, expertise,
technology, test data including pharmacological, biological, chemical,
biochemical, toxicological, and clinical test data, analytical and quality
control data, stability data, studies and procedures.

 

1.77                        “Laws” means all relevant laws, statutes, rules,
regulations, guidelines, ordinances and other pronouncements having the effect
of law of any federal, national, multinational, state, provincial, county, city
or other political subdivision, domestic or foreign.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

9

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1.78                        “Lead Commercialization Party” has the meaning set
forth in Section 5.1.

 

1.79                        “Lead Development Party” has the meaning set forth
in Section 3.2.

 

1.80                        “Lead Manufacturing Party” has the meaning set forth
in Section 6.1.

 

1.81                        “Lead Regulatory Party” has the meaning set forth in
Section 4.1.

 

1.82                        “Major European Countries” means [ * ].

 

1.83                        “Major Market Countries” means the United States, [
* ] Major European Countries, and [ * ].

 

1.84                        “Manufacturing” or “Manufacture” means activities
directed to producing, manufacturing, processing, filling, finishing, packaging,
labeling, quality assurance testing and release, shipping and storage of a
Product.

 

1.85                        “Manufacturing Costs” means the costs incurred by or
on behalf of a Party that are directly attributable and reasonably allocated to
the Manufacturing of Collaboration Products. [ * ], Manufacturing Costs shall
consist of (a) if the Collaboration Product is manufactured by a Third Party
manufacturer, [ * ]; or (b) if the Collaboration Product is manufactured by a
Party, [ * ].  For clarity, the [ * ] cost referenced under subsection (b) above
shall be calculated [ * ].  Manufacturing Costs shall be calculated in
accordance with GAAP, consistently applied [ * ].

 

1.86                        “Marketing Authorization Application” or “MAA” means
an application for Regulatory Approval (but excluding Pricing Approval) in any
particular jurisdiction other than the United States.

 

1.87                        “Marks” means trade marks, service marks, trade
names, service names, logos, slogans, tag lines, trade dress, and Internet
domain names and addresses.

 

1.88                        “Medical Education Activities” means activities
designed to ensure or improve appropriate medical use of, conduct medical
education of, or further research regarding, a Collaboration Product sold or to
be sold in the Territory, including by way of example: (a) activities of medical
sales liaisons; (b) grants to support continuing medical education, symposia, or
research related to a Collaboration Product in the Territory (excluding Phase IV
Clinical Studies, which, with respect to a Collaboration Product, shall be
considered Sales and Marketing Costs if conducted for a purpose other than label
expansion or Regulatory Approval and otherwise shall be considered Development
Costs); (c) development, publication and dissemination of publications relating
to a Collaboration Product in the Territory, as well as medical information
services provided in response to inquiries communicated via sales
representatives or received by letter, phone call or email; and (d) conducting
advisory board meetings or other consultant programs, the purpose of which is to
obtain advice and feedback related to the Development or Commercialization of a
Collaboration Product in the Territory.

 

1.89                        “Milestone Payment” has the meaning set forth in
Section 9.3.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

10

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1.90                        “[ * ]” means a SMIP or other protein therapeutic
that binds to the CD37 Antigen (or a portion thereof) and binds to one or more
additional biological targets that are not part of the CD37 Antigen, [ * ].

 

1.91                        “NDA” means a New Drug Application, as defined in
the FD&C Act and the regulations promulgated thereunder by the FDA.

 

1.92                        “Net Sales” means all amounts invoiced on sales of
Royalty Products by a Party, its Affiliates or permitted sublicensees to Third
Parties, less the following deductions actually allowed or taken by such Third
Parties and not otherwise recovered by or reimbursed to the seller whose sales
are being measured:

 

(a)                                  trade, quantity or volume, and cash
discounts, including amounts paid or credited to customers under distribution
and channel services agreements;

 

(b)                                  credits, rebates and chargebacks (including
those to managed-care entities and government agencies), allowances for bad debt
not to exceed [ * ] and allowances to customers on account of rejection or
returns or retroactive price reductions;

 

(c)                                  freight, postage and transportation
charges, including handling and insurance to the extent added to the sales price
and set forth separately as such in the total amount invoiced; and

 

(d)                                  sales (such as VAT or its equivalent) and
excise taxes, other consumption taxes and customs duties to the extent added to
the sales price and set forth separately as such in the total amount invoiced.

 

Sales between a Party and its Affiliates or permitted sublicensees for resale
shall be excluded from the computation of Net Sales.  In any other sale of
Royalty Products that is made on other than arms’-length terms, the amounts
invoiced shall be deemed, for purposes of this definition, to be no less than
the amount that would be invoiced in a substantially contemporaneous,
arms’-length transaction.

 

In the event a Royalty Product is sold in a country as part of a Combination
Product, for purposes of determining payments due a Party under this Agreement,
Net Sales of Combination Products shall be calculated by multiplying the Net
Sales of the Combination Product by the fraction A over A+B, in which A is the
Gross Selling Price of the Royalty Product when such Royalty Product is sold in
the relevant country in substantial quantities where the Royalty Product is the
sole therapeutically active ingredient during the applicable accounting period
in which the sales of the Royalty Product were made, and B is the Gross Selling
Price of the other therapeutically active ingredients contained in the
Combination Product sold separately in the relevant country in substantial
quantities during the accounting period in question.  All Gross Selling Prices
of the therapeutically active ingredients of the Royalty Product and Combination
Products shall be calculated as the average Gross Selling Price of the
therapeutically active ingredients in such products in the relevant country
during the applicable accounting period for which the Net Sales are being
calculated.  In the event that no separate sale of either the Royalty Product as
the sole therapeutically active ingredient or the other therapeutically active
ingredients of the Combination Product are made in the relevant country during
the accounting

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

11

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period in which the sale was made or if the Gross Selling Price for a particular
therapeutically active ingredient cannot be determined for an accounting period,
Net Sales allocable to the Royalty Product and Combination Product shall be
determined by mutual agreement reached in good faith by the Parties prior to the
end of the accounting period in question based on an equitable method of
determining same that takes into account the relative contribution of each
therapeutically active ingredient in the Combination Product, and relative value
to the end user of each therapeutically active ingredient.  For purposes of this
definition, “Gross Selling Price” means the gross price at which an active
ingredient is sold to a Third Party, before discounts, deductions, credits,
taxes or allowances.

 

1.93                        “Non-Clinical Studies” means all non-human studies
of Products.

 

1.94                        “Non-Opt-Out Party” means the Party which receives
an Opt-Out Notice pursuant to Section 7.2, 7.3 or 8.5 or provides a written
notice of continuation to the breaching Party pursuant to Section 14.2(b).

 

1.95                        “Opt-Out Effective Date” has the meaning set forth
in Section 7.4.

 

1.96                        “Opt-Out Notice” has the meaning set forth in
Section 7.1.

 

1.97                        “Opt-Out Option” has the meaning set forth in
Section 7.1.

 

1.98                        “Opt-Out Party” means the Party which has exercised
its Opt-Out Option pursuant to Sections 7.2, 7.3 or 8.5 or which is deemed to
have exercised its Opt-Out Option pursuant to Section 14.2(b).

 

1.99                        “Opt-Out Product” has the meaning set forth in
Section 7.2.

 

1.100                 “Patent Rights” means any and all (a) patents; (b) pending
patent applications, including, without limitation, all provisional
applications, substitutions, continuations, continuations-in-part, divisions,
renewals, and all patents granted thereon, (c) all patents-of-addition,
reissues, reexaminations and extensions or restorations by existing or future
extension or restoration mechanisms, including, without limitation,
supplementary protection certificates or the equivalent thereof, (d) inventor’s
certificates, and (e) all United States and foreign counterparts of any of the
foregoing.

 

1.101                 “Person” means an individual, sole proprietorship,
partnership, limited partnership, limited liability partnership, corporation,
limited liability company, business trust, joint stock company, trust,
incorporated association, joint venture or similar entity or organization,
including a government or political subdivision, department or agency of a
government.

 

1.102                 “Pharmacovigilance Agreement” has the meaning set forth in
Section 4.12.

 

1.103                 “Phase I Clinical Study” means a study of a Product in the
Field in human subjects with the endpoint of determining initial tolerance,
safety or pharmacokinetic information in single dose, single ascending dose,
multiple dose and/or multiple ascending dose regimens, which is prospectively
designed to generate sufficient data (if successful) to commence a Phase

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

12

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II Clinical Study of such Product, as further defined in 21 C.F.R. 312.21(a), as
amended from time to time, or the corresponding foreign regulations.

 

1.104                 “Phase II Clinical Study” means a study of a Product in
the Field in human patients to determine initial efficacy and dose range and/or
regimen finding before embarking on Phase III Clinical Studies, as further
defined in 21 C.F.R. 312.21(b), as amended from time to time, or the
corresponding foreign regulations.

 

1.105                 “Phase III Clinical Study” means a pivotal study (whether
or not denominated a “Phase III” clinical study under applicable regulations) in
the Field in human patients with a defined dose or a set of defined doses of a
Product designed to ascertain efficacy and safety of such Product for the
purpose of enabling the preparation and submission of Drug Approval Applications
to the competent Regulatory Authorities in a country of the Territory, as
further defined in 21 C.F.R. 312.21(c), as amended from time to time, or the
corresponding foreign regulations.

 

1.106                 “Phase IV Clinical Study” means a product support clinical
trial of a Product that is commenced after receipt of Regulatory Approval in the
country where such trial is conducted. A Phase IV Clinical Study may include
epidemiological studies, modeling and pharmacoeconomic studies, “post-marketing
surveillance trials” and investigator-sponsored Clinical Trials studying a
Product that are approved by the JCC and that otherwise fit the foregoing
definition.

 

1.107                 “Pre-BLA Meeting” means a meeting with FDA, the primary
purpose of which is to uncover any major unresolved problems, to identify those
studies that the sponsor is relying on as adequate and well-controlled to
establish the drug’s effectiveness, to identify the status of ongoing or needed
studies adequate to assess pediatric safety and effectiveness, to acquaint FDA
reviewers with the general information to be submitted in the marketing
application (including technical information), to discuss appropriate methods
for statistical analysis of the data, and to discuss the best approach to the
presentation and formatting of data in the marketing application, as further
defined in 21 C.F.R. 312.47(b)(2), as amended from time to time, or the
corresponding foreign equivalent.

 

1.108                 “Pricing Approval” means such approval, agreement,
determination or governmental decision establishing prices for the Products that
can be charged to consumers and shall be reimbursed by Governmental Authorities
in regulatory jurisdictions where the Governmental Authorities or Regulatory
Authorities approve or determine pricing of pharmaceutical products for
reimbursement or otherwise.

 

1.109                 “Product” means any SMIP or other protein therapeutic that
binds to the CD37 Antigen [ * ], including without limitation TRU-016 [ * ].

 

1.110                 “Product Labeling” means (a) the full prescribing
information for a Collaboration Product approved in the Field by the applicable
Regulatory Authority, and (b) all labels and other written, printed or graphic
information included in or placed upon any container, wrapper or package insert
used with or for the Collaboration Product in the Field.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

13

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1.111                 “Product Profit” means (a) gross sales of Collaboration
Products (i.e. all amounts invoiced on sales of Collaboration Products by a
Party or its Affiliates), less (b) Commercialization Costs, and (c) deductions
for items listed in 1.92(a)-(d) to the extent actually allowed or taken by the
Lead Commercialization Party and not otherwise recovered by or reimbursed to the
Lead Commercialization Party.  For sake of clarity, Product Profit shall be
determined prior to application of any income taxes.

 

1.112                 “Promotion” means the marketing and advertising of a
Collaboration Product in the relevant Field in the applicable territory in
accordance with the relevant Commercialization Plan, including medical
education, information and communication, market development and medical liaison
activities, but not including Detailing.  “Promote,” when used as a verb, means
to engage in such Promotion.

 

1.113                 “Promotional Materials” means all sales representative
training materials and all written, printed, graphic, electronic, audio or video
presentations of information, including, without limitation, journal
advertisements, sales visual aids, formulary binders, reprints, direct mail,
direct-to-consumer advertising, internet postings, broadcast advertisements and
sales reminder aides (for example, note pads, pens and other such items)
intended for use or used by or on behalf of the Parties or their Affiliates or
permitted sublicensees in connection with any Promotion of a Collaboration
Product, in the Field, in the Territory (all to the extent applicable for the
Commercialization in the Territory), but excluding Product Labeling.

 

1.114                 “Pursuit Notice” has the meaning set forth in
Section 7.5(b).

 

1.115                 “Recall” has the meaning set forth in Section 5.10.

 

1.116                 “Regulatory Approval” means the technical, medical and
scientific licenses, registrations, authorizations and approvals (including,
without limitation, approvals of Drug Approval Applications, supplements and
amendments, pre- and post- approvals, Pricing Approvals, and labeling approvals)
of any national, supra-national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity, necessary
for the commercial Manufacture, distribution, marketing, promotion, offer for
sale, use, import, export and sale of Product(s) in a regulatory jurisdiction in
the Field, in the Territory.  [ * ].

 

1.117                 “Regulatory Authorit(y/ies)” means any national (e.g.,
FDA), supra-national (e.g., the European Commission, the Council of the European
Union, or the European Agency for the Evaluation of Medicinal Products);
regional, state or local regulatory agency, department, bureau, commission,
council or other governmental entity in each country of the Territory that
governs the Regulatory Approval for a Product in the Field in such applicable
regulatory jurisdiction.

 

1.118                 “Regulatory Exclusivity” means any exclusive marketing
rights or data exclusivity rights conferred by any Regulatory Authority with
respect to a Product other than patents, including, without limitation, rights
conferred in the United States under the Hatch-Waxman Act or the FDA
Modernization Act of 1997 (including pediatric exclusivity), or rights similar
thereto outside the United States.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

14

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1.119                 “Regulatory Materials” means regulatory applications,
submissions, notifications, registrations, Regulatory Approvals or other
submissions made to or with a Regulatory Authority that are necessary or
reasonably desirable in order to Develop, Manufacture, and Commercialize the
Products in a particular country, territory or possession. Regulatory Materials
include, without limitation, INDs, Drug Approval Applications, and amendments
and supplements for any of the foregoing, and applications for Pricing
Approvals.

 

1.120                 “Royalty Period” means the period of time beginning on the
date of the First Commercial Sale of a Royalty Product, in the Field, in a
particular country in the Territory and, on a Royalty Product-by-Royalty Product
and country-by-country basis, extending until the later of (i) the date on which
the last Valid Claim included within the Trubion Patent Rights and the Facet
Applied Patent Rights ceases to be a Valid Claim, which Valid Claim would be
infringed by [ * ] such Royalty Product in such country, (ii) the expiration of
any Regulatory Exclusivity granted with respect to such Royalty Product in such
country and (iii) the [ * ] year anniversary of the First Commercial Sale of
such Royalty Product in such country.

 

1.121                 “Royalty Product” means a Product with respect to which a
Party has exercised or is deemed to have exercised the Opt-Out Option and the
other Party has provided or is deemed to have provided a Pursuit Notice in
accordance with Section 7.5(b) or 14.2(b).

 

1.122                 “Sales and Marketing Costs” means the direct costs that
are directly attributable and reasonably allocated to the sales and marketing of
a Collaboration Product in Field in the Territory.  [ * ], Sales and Marketing
Costs shall consist of: (a) activities directed to the advertising and marketing
of a Collaboration Product in the Territory; (b) professional education (to the
extent not performed by sales representatives), including launch meetings;
(c) costs of advertising, public relations and medical education agencies with
respect to a Collaboration Product in the Territory; (d) peer-to-peer activities
with respect to a Collaboration Product in the Territory, such as continuing
medical education, grand rounds, and lunch and dinner meetings; (e) speaker
programs with respect to a Collaboration Product in the Territory, including the
training of such speakers; (f) grants to support continuing medical education or
research (excluding costs associated with Clinical Trials other than Phase IV
Clinical Studies for a Collaboration Product for purposes other than label
expansion and Regulatory Approval); (g) development, publication and
dissemination of publications with respect to a Collaboration Product in the
Territory; (h) developing, obtaining and providing training with respect to a
Collaboration Product in the Territory, as well as training packages,
promotional literature, promotional materials and other selling materials with
respect to a Collaboration Product in the Territory; (i) developing and
performing market research with respect to a Collaboration Product in the
Territory; (j) conducting symposia and opinion leader development activities
with respect to a Collaboration Product in the Territory; (k) developing
reimbursement programs with respect to a Collaboration Product in the Territory;
(l) developing information and data specifically intended for national accounts,
managed care organizations and group purchasing organizations with respect to a
Collaboration Product in the Territory; (m) losses incurred in connection with
claims set forth in Section 13.5, to the extent provided therein; (n) costs of
transporting, housing and maintaining sales representatives for training with
respect to a Collaboration Product in the Territory; (o) conducting Phase IV
Clinical Studies for Collaboration Products for purposes other than label
expansion and Regulatory Approval; and (p) administration, operation and
maintenance of the sales force that promotes a Collaboration Product in the
Territory, sales

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

15

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bulletins and other communications, sales meetings, specialty sales forces,
consultants, call reporting and other monitoring/tracking costs, district and
regional sales management, home office personnel who support the sales force. 
Sales and Marketing Costs shall include costs of such activities that are
undertaken at any time during the Term (including prior to the initial
Regulatory Approval of a Collaboration Product in the Territory).  Sales and
Marketing Costs shall be calculated in accordance with GAAP, consistently
applied [ * ].

 

1.123                 “SMIP(s)” or “small modular immuno-pharmaceutical(s)”
means a single chain polypeptide that (i) [ * ], (ii) binds with specificity to
a target antigen, (iii) has a binding domain, and (iv) may have an effector
domain which may or may not have effector function, [ * ].

 

1.124                 “Subcommittee” has the meaning set forth in
Section 2.7(a).

 

1.125                 “Term” has the meaning set forth in Section 14.1.

 

1.126                 “Territory” means worldwide.

 

1.127                 “Third Part(y/ies)” means any Person(s) other than Facet
and its Affiliates or Trubion and its Affiliates.

 

1.128                 “Trademark Costs” mean the fees and expenses paid to
outside counsel and other Third Parties, direct costs of in-house counsel and
filing and maintenance expenses, in each case incurred in connection with the
establishment and maintenance of rights under Marks applicable to Collaboration
Product in the Territory, including costs of trademark filing and registration
fees, actions to enforce or maintain a trademark and other trademark
proceedings.  Trademark Costs shall be calculated in accordance with GAAP,
consistently applied [ * ].

 

1.129                 “Transition Assistance” shall have the meaning set forth
in Section 7.5(b)(iii).

 

1.130                 “TRU-016” means the humanized SMIP directed against the
CD37 Antigen that is currently designated by Trubion as “TRU-016,” as further
described on Exhibit A.

 

1.131                 “Trubion Know-How” means any Know-How Controlled as of the
Signing Date or thereafter during the Term by Trubion and/or its
Affiliate(s) and [ * ] for the Development, Manufacture, use, importation or
Commercialization of Products in the Field. For clarity, the use of “Affiliate”
in this definition shall exclude any Third Party that becomes an Affiliate due
to a Third Party’s acquisition of Trubion, except as provided in Section 16.1.

 

1.132                 “Trubion Core Patent Rights” means those Trubion Patent
Rights that are not Trubion Product Patent Rights.  As of the Signing Date, the
Patent Rights listed in Schedule 1.132 are Trubion Core Patent Rights.

 

1.133                 “Trubion Patent Rights” means Patent Rights that are
Controlled as of the Signing Date or thereafter during the Term by Trubion
and/or its Affiliate(s) (including without limitation Trubion’s interest in
Joint Patent Rights) and that claim [ * ] one or more Products in the Field or
that would otherwise be infringed, absent a license, by the [ * ] any Products
in the Field. For clarity, the use of “Affiliate” in this definition shall
exclude any Third Party that

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

16

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becomes an Affiliate due to a Third Party’s acquisition of Trubion except as
provided in Section 16.1.

 

1.134                 “Trubion Product Patent Rights” means those Trubion Patent
Rights that claim the composition of matter, manufacture or use of one or more
Products in the Field, and do not claim the composition of matter, manufacture
or use of any other product that is not a Product.  As of the Signing Date, the
Patent Rights listed in Schedule 1.134 are Trubion Product Patent Rights.

 

1.135                 “United States” or “U.S.” means the United States of
America and its possessions and territories.

 

1.136                 “Valid Claim” means a claim that (a) in the case of any
unexpired patent, such claim shall not have been dedicated to the public,
disclaimed, nor held invalid or unenforceable by a court or government agency of
competent jurisdiction in an unappealed or unappealable decision, or (b) in the
case of any patent application, such claim (i) shall not have been cancelled,
withdrawn or abandoned, without being refiled in another application, in the
applicable jurisdiction, (ii) shall not have been finally rejected by an
administrative agency or other governmental action from which no appeal can be
taken, and (iii) shall not have been pending [ * ] for more than [ * ] from its
filing date.  If a claim of a patent application that ceased to be a Valid Claim
under (b) due to the passage of time later issues as part of a patent described
within (a) then it shall again be considered to be a Valid Claim effective as of
the issuance of such patent.

 

2.                                      COLLABORATION MANAGEMENT.

 

2.1                               General. The Parties desire and intend to
establish a collaboration with respect to the Development, Manufacture and
Commercialization of Collaboration Products in the Field in the Territory on an
exclusive basis under the terms of this Agreement (“Collaboration”). Unless and
until a Party exercises or is deemed to have exercised its Opt-Out Option in
respect of one or more Collaboration Products, each Party shall participate in
the clinical development of TRU-016 in the Field, in the Territory and in the
preclinical and clinical development of Collaboration Products other than
TRU-016 in the Field, in the Territory pursuant to an agreed-upon Development
Plan with respect to each such Collaboration Product, as further described
below. The Parties shall share equally the costs incurred in connection with the
performance of each Development Plan, as set forth in, and in accordance with,
Article 3.  The Parties shall Co-Commercialize such Collaboration Products in
the Field and share profits equally, subject to the payment obligations in
Article 9 and the other terms of this Agreement. If either Party elects to
exercise its Opt-Out Option for a Collaboration Product as provided for under
Article 7 or Section 8.5, or is deemed to have exercised its Opt-Out Option
under Section 14.2(b), and if the other Party so elects, such other Party shall
continue and be solely responsible for the Development, Manufacturing and
Commercialization of such Product at its cost and expense pursuant to
Section 7.5(b), and shall have the exclusive right to Develop, Manufacture and
Commercialize such Product as a Royalty Product in the Field in the Territory,
subject to payments with respect to such Royalty Product pursuant to Article 9
and the other terms of this Agreement.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

17

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(a)                                  Role of Committees.  Subject to
Section 2.1(b) and the other terms and conditions of this Agreement, the Parties
shall establish: five (5) specialized joint committees consisting of: (A) one to
set the goals and strategy and approve the budgets for the Development,
Manufacture and Commercialization of Collaboration Products and to oversee the
other committees (such committee, the “Joint Steering Committee” or “JSC”);
(B) one to focus on Development, Manufacturing (for Development purposes) and
Regulatory Approval of Collaboration Products and other regulatory matters (such
committee, the “Joint Development Committee” or “JDC”); (C) one to focus on
Commercialization of Collaboration Products (such committee, the “Joint
Commercialization Committee” or “JCC”); (D) one to focus on financial matters
(such committee, the “Joint Finance Committee” or “JFC”); and (E) one to focus
on intellectual property matters (such committee, the “Joint Patent Committee”
or “JPC”).  Each Committee shall have the responsibilities and authority
allocated to it in this Article 2 and elsewhere in this Agreement.

 

(b)                                  Limitations on the Authority of
Committees.  Notwithstanding the Committee structure established pursuant to
Section 2.1(a) to oversee the Collaboration, each Party shall retain the rights,
powers and discretion granted to it under this Agreement, and no such rights,
powers, or discretion shall be delegated to or vested in a Committee unless such
delegation or vesting of rights is expressly provided for in this Agreement or
the Parties expressly so agree in writing.  Without limiting the generality of
the foregoing, no Committee shall have any authority or jurisdiction
to: (i) amend, modify, or waive compliance with this Agreement, any of which
shall require mutual written agreement of the Parties; (ii) interpret this
Agreement, or determine whether or not a Party has met its diligence or other
obligations under the Agreement or whether or not a breach of this Agreement has
occurred; (iii) make any decision on any matter that this Agreement expressly
states is an option or election to be made by a Party; (iv) make any retroactive
updates, amendments and modifications to, or waivers of provisions of, a
Development Plan or Commercialization Plan, any of which shall require the
mutual agreement of the Parties; or (v) such other matters as are reserved to
the consent, approval, agreement or other decision-making authority of one or
both Parties in this Agreement and that are not required by this Agreement to be
considered by a Committee prior to the exercise of such consent, approval or
other decision-making authority.  Notwithstanding the foregoing, neither Party
shall be restricted from bringing before any appropriate Committee for
discussion any matter relating to the Collaboration that it believes warrants
discussion between the Parties through the Committees, provided that the
consideration of any such matter by any Committee shall not infringe or limit
the exercise of a Party’s right of consent or approval or other decision-making
authority granted to it by this Agreement, nor shall any such consideration, as
contemplated by this sentence, subject any such right of consent or approval or
other decision-making authority to any dispute resolution mechanism provided for
in Section 2.7 or Article 15 or elsewhere in this Agreement.

 

(c)                                  Representatives.  Each Party shall
designate representatives to each Committee as provided for in Sections 2.2-2.6
below. Each representative may serve on more than one Committee as appropriate
in view of the individual’s expertise.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

18

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2.2                               Joint Steering Committee.

 

(a)                                  Purpose; Formation.  Within [ * ] after the
Signing Date, the Parties shall establish a Joint Steering Committee that shall
monitor and coordinate communication regarding the Parties’ performance under
this Agreement to Develop, obtain Regulatory Approval for, Manufacture, and
Commercialize Collaboration Products in the Field in the Territory. The JSC
shall have only the powers assigned expressly to it in this Section 2.2 and
elsewhere in this Agreement, and the JSC shall not have any power to amend,
modify or waive compliance with this Agreement.

 

(b)                                  Composition.  Each Party shall initially
appoint three (3) representatives to the JSC, each of whom will be an officer or
employee of such Party and will have sufficient seniority within the applicable
Party to make decisions arising within the scope of the JSC’s responsibilities.
The JSC may change its size from time to time by mutual consent of its members.
Each Party may replace its JSC representatives at any time upon written notice
to the other Party. The JSC may invite non-members (including consultants and
advisors of a Party who are under an obligation of confidentiality consistent
with this Agreement) to participate in the discussions and meetings of the JSC,
provided that such participants shall have no voting authority at the JSC. The
JSC shall have a chairperson. Each Party shall have the right, on an alternating
Calendar Year basis, to select from among its JSC representatives a
representative to serve as the chairperson of the JSC during such Calendar
Year.  Such Party shall have the right during such Calendar Year to replace the
chairperson of the JSC with one of its other JSC representatives. The initial
chairperson shall be designated by [ * ]. The role of the chairperson shall be
to convene and preside at meetings of the JSC, to prepare agendas (with due
input from the other Party’s representatives), circulate agendas and to ensure
the preparation of meeting minutes, but the chairperson shall have no additional
powers or rights beyond those held by the other JSC representatives.

 

(c)                                  Specific Responsibilities.  In addition to
its overall responsibility for monitoring and providing a forum to discuss and
coordinate the Parties’ activities under this Agreement, the JSC shall in
particular:

 

(i)                                    oversee the collaborative activities of
the Parties under this Agreement, create and review the overall strategy for
Developing and seeking Regulatory Approval for, Manufacturing, and
Commercializing Collaboration Products, in the Field in the Territory;

 

(ii)                                receive and discuss reports from the JDC,
the JCC, the JFC, and the JPC, and provide guidance thereto, approve the
Development Plan(s) (including the Development Budget(s)) and the
Commercialization Plan(s) (including the Commercialization Budget(s)), and any
amendments thereto;

 

(iii)                            establish such additional joint subcommittees
as it deems necessary to achieve the objectives and intent of this Agreement;

 

(iv)                               attempt to resolve issues presented to it by,
and disputes within, the JDC, the JCC, the JFC, and the JPC, or any other
committee;

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

19

--------------------------------------------------------------------------------

 

(v)                                   review and approve decisions to terminate
Development on any Collaboration Product, including with respect to specific
indications;

 

(vi)                               discuss and decide whether to Develop
Collaboration Products (other than TRU-016) and for which indications;

 

(vii)                           select the Lead Development Party, Lead
Regulatory Party, Lead Manufacture Party, and Lead Commercialization Party, and
review and approve any changes thereto;

 

(viii)                       review and approve the manufacturing plan [ * ]
with associated budget, resource allocation and regulatory plans;

 

(ix)                              review and approve (A) inclusion of any costs
not specifically enumerated in the definitions of Development Costs or
Commercialization Costs or any component thereof, and (B) any costs incurred by
a Party that exceed that the portion of the applicable Development Budgets or
Commercialization Budgets allocated to such Party with respect to the relevant
Calendar Quarter by more than [ * ];

 

(x)                                  review and approve any changes to the
specific responsibilities of the JDC, the JCC, the JFC, and the JPC;

 

(xi)                              discuss and make determinations regarding
material safety issues with respect to the Collaboration Product; and

 

(xii)                          perform such other functions as appropriate to
further the purposes of this Agreement as allocated to it in writing by the
Parties.

 

(d)                                  Meetings.  Unless the Parties mutually
agree in writing to a different frequency, the JSC shall hold at least [ * ]
meetings per year (at least [ * ] of which shall be held in person) on such
dates and at such times each year as it elects.  The meetings of the JSC shall
alternate between the Parties’ business locations or as otherwise decided by the
JSC.  Meetings of the JSC shall be effective only if at least two
(2) representatives of each Party are present or participating. Each Party shall
bear the expense of its respective members’ participation in JSC meetings. The
chairperson of the JSC shall be responsible for preparing and issuing minutes of
each such meeting within [ * ] thereafter. Such minutes shall not be finalized
until each Party reviews and confirms the accuracy of such minutes in writing;
provided that any minutes shall be deemed approved unless a member of the JSC
objects to the accuracy of such minutes within [ * ] after the circulation of
the minutes by the chairperson of the JSC.

 

(e)                                  Decision-Making.  The JSC shall act by
consensus. The representatives from each Party will have, collectively, one
(1) vote on behalf of that Party. If the JSC cannot reach consensus on an issue
that comes before the JSC and over which the JSC has oversight, then such matter
shall be resolved in accordance with Section 2.7.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

20

--------------------------------------------------------------------------------

 

2.3          Joint Development Committee.

 

(a)           Formation and Composition.  Within [ * ] after the Signing Date,
the Parties shall establish a Joint Development Committee that shall oversee the
Development and Manufacture (for Development) of Collaboration Products in Field
in the Territory in accordance with the Development Plans for such Collaboration
Products and to coordinate the Development and related Manufacturing activities
of the Parties with respect to such Collaboration Products. Each Party shall
initially appoint three (3) representatives to the JDC, each of whom will be an
officer or employee of such Party and will have knowledge and expertise in the
Development or Manufacture of products similar to the Collaboration Products and
sufficient seniority within the applicable Party to make decisions arising
within the scope of the JDC’s responsibilities. The JDC may change its size from
time to time by mutual consent of its members. Each Party may replace its JDC
representatives at any time upon written notice to the other Party. The JDC may
invite non-members (including consultants and advisors of a Party who are under
an obligation of confidentiality consistent with this Agreement) to participate
in the discussions and meetings of the JDC, provided that such participants
shall have no voting authority at the JDC. The JDC shall have a chairperson. 
Each Party shall have the right, on an alternating Calendar Year basis, to
select from among its JDC representatives a representative to serve as the
chairperson of the JDC during such Calendar Year.  Such Party shall have the
right during such Calendar Year to replace the chairperson of the JDC with one
of its other JDC representatives. The initial chairperson shall be designated by
[ * ]. The role of the chairperson shall be to convene and preside at meetings
of the JDC, to prepare agendas (with due input from the other Party’s
representatives), circulate agendas and to ensure the preparation of meeting
minutes, but the chairperson shall have no additional powers or rights beyond
those held by the other JDC representatives.

 

(b)           Specific Responsibilities.  In addition to its general
responsibilities set forth in Section 2.3(a), the JDC shall in particular:

 

(i)            discuss, prepare and approve for submission to the JSC annual and
interim amendments to the Development Plan and the Development Budget for each
Collaboration Product;

 

(ii)           oversee the implementation of the Development Plan for each
Collaboration Product;

 

(iii)         implement the overall strategy for Development and Manufacturing
(for Development) of Collaboration Products, create, implement and review the
design and objectives of all Clinical Trials and Non-Clinical Studies conducted
under each Development Plan;

 

(iv)          decide whether and when to initiate or discontinue, and oversee
the conduct of, any Clinical Trial and any Non-Clinical Study under each
Development Plan;

 

(v)            allocate budgeted resources and determine priorities for each
Clinical Trial and Non-Clinical Study under each Development Plan;

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

21

--------------------------------------------------------------------------------

 

(vi)          establish procedures for each Party to access records, data and
Know-How and related financial information of the other Party with respect to
work performed under the Development Plan; and

 

(vii)         perform such other functions as may be appropriate to further the
purposes of this Agreement, as directed by the JSC.

 

(c)           Meetings.  Unless the Parties mutually agree in writing to a
different frequency, the JDC shall hold at least [ * ] meetings per year (at
least [ * ] of which shall be held in person) on such dates at such times each
year as it elects.  The meetings of the JDC shall alternate between the Parties’
business locations or as otherwise decided by the JDC.  Meetings of the JDC
shall be effective only if at least two (2) representatives of each Party are
present or participating. Each Party shall bear the expense of its respective
members’ participation in JDC meetings. The chairperson of the JDC shall be
responsible for preparing and issuing minutes of each such meeting within [ * ]
days thereafter. Such minutes shall not be finalized until each Party reviews
and confirms the accuracy of such minutes in writing; provided that any minutes
shall be deemed approved unless a member of the JDC objects to the accuracy of
such minutes within [ * ] days after the circulation of the minutes by the
chairperson of the JDC.

 

(d)           Decision-Making.  The JDC shall act by consensus. The
representatives from each Party will have, collectively, one (1) vote on behalf
of that Party. If the JDC cannot reach consensus on an issue that comes before
the JDC and over which the JDC has oversight, then such matter shall be resolved
in accordance with Section 2.7.

 

2.4          Joint Commercialization Committee.

 

(a)           Formation and Composition.  At such time as determined by the JSC,
but in any event not later than [ * ], the Parties shall establish a Joint
Commercialization Committee that shall oversee the Commercialization and
Manufacturing (for Commercialization) of Collaboration Products. Each Party
shall initially appoint three (3) representatives to the JCC, each of whom will
be an officer or employee of such Party and will have knowledge and expertise in
the Commercialization and Manufacturing of products similar to the Collaboration
Products and sufficient seniority within the applicable Party to make decisions
arising with the scope of the JCC’s responsibilities. The JCC may change its
size from time to time by mutual consent of its members. Each Party may replace
its JCC representatives at any time upon written notice to the other Party. The
JCC may invite non-members (including consultants and advisors of a Party who
are under an obligation of confidentiality consistent with this Agreement) to
participate in the discussions and meetings of the JCC, provided that such
participants shall have no voting authority at the JCC. The JCC shall have a
chairperson. Each Party shall have the right, on an alternating Calendar Year
basis, to select from among its JCC representatives a representative to serve as
the chairperson of the JCC during such Calendar Year.  Such Party shall have the
right during such Calendar Year to replace the chairperson of the JCC with one
of its other JCC representatives. The role of the chairperson shall be to
convene and preside at meetings of the JCC, to prepare agendas (with due input
from the other Party’s representatives), circulate agendas and to ensure the
preparation of meeting minutes, but the chairperson shall have no additional
powers or rights beyond those held by the other JCC representatives.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

22

--------------------------------------------------------------------------------

 

(b)           Specific Responsibilities.  In addition to its general
responsibilities set forth in Section 2.4(a), the JCC shall in particular:

 

(i)            discuss, prepare and approve for submission to the JSC the
Commercialization Plan and the Commercialization Budget for each Collaboration
Product, and any amendment thereto;

 

(ii)           allocate, in a manner consistent with the Commercialization Plan,
primary responsibility as between the Parties for tasks relating to
Commercialization of Collaboration Products on a Product-by-Product basis;

 

(iii)         oversee the implementation of the Commercialization Plan for each
Collaboration Product;

 

(iv)          review and discuss the Commercialization activities of each Party
with respect to each Collaboration Product in the Territory;

 

(v)            review and update sales forecasts for Collaboration Products at
least quarterly;

 

(vi)          review strategies for obtaining, maintaining, defending and
enforcing trademark protection for Collaboration Products;

 

(vii)         review, discuss, coordinate and approve the Parties’ medical
affairs activities (the responsibility for which may be delegated by the JCC to
a subcommittee of the JCC that is comprised of medical representatives of the
Parties); and

 

(viii)        perform such other functions as may be appropriate to further the
purposes of this Agreement, as directed by the JSC.

 

(c)           Meetings.  Unless the Parties mutually agree in writing to a
different frequency, the JCC shall hold at least [ * ] meetings per year (at
least [ * ] of which shall be held in person) on such dates at such times each
year as it elects.  The meetings of the JCC shall alternate between the Parties’
business locations or as otherwise decided by the JCC.  Meetings of the JCC
shall be effective only if at least two (2) representatives of each Party are
present or participating. Each Party shall bear the expense of its respective
members’ participation in JCC meetings. The chairperson of the JCC shall be
responsible for preparing and issuing minutes of each such meeting within [ * ]
thereafter. Such minutes shall not be finalized until each Party reviews and
confirms the accuracy of such minutes in writing; provided that any minutes
shall be deemed approved unless a member of the JCC objects to the accuracy of
such minutes within [ * ] after the circulation of the minutes by the
chairperson of the JCC.

 

(d)           Decision-Making. The JCC shall act by consensus. The
representatives from each Party will have, collectively, one (1) vote on behalf
of that Party. If the JCC cannot reach consensus on an issue that comes before
the JCC and over which the JCC has oversight, then such matter shall be resolved
in accordance with Section 2.7.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

23

--------------------------------------------------------------------------------

 

2.5          Joint Finance Committee.

 

(a)           Formation and Purpose.  Within [ * ] after the Signing Date, the
Parties shall create a Joint Finance Committee that shall operate under the
direction of the JSC to provide services to and consult with the JDC and the JCC
in order to address the financial, budgetary and accounting issues that arise in
connection with the Development Plans and Commercialization Plans. 
Additionally, the JFC will lead the economic analyses to help drive decisions
regarding the collaborative activities of the Parties under this Agreement, and
lead the reporting and reconciliation processes outlined in Section 3.7 and
Section 9.4. The JFC shall operate by the procedures set forth in this
Section 2.5 and in Section 2.7.

 

(b)           Membership of the JFC.  Each Party shall appoint two
(2) representatives to the JFC each of whom will be an officer or employee of
such Party and will have appropriate knowledge and expertise and sufficient
seniority within the applicable Party to make decisions arising within the scope
of the JFC’s responsibilities.  Each Party may replace any or all of its JFC
representatives at any time upon prior written notice to the other Party.  Such
representatives will include individuals with expertise and responsibilities in
the areas of accounting, cost allocation, budgeting and financial reporting.

 

(c)           Specific Responsibility of the JFC.  In addition to its general
responsibilities set forth in Section 2.5(a), the JFC shall, in particular:

 

(i)            coordinate with the JSC and other Committees as applicable
regarding the preparation and submission of the Development Budget and the
Commercialization Budget to the JSC for review and approval;

 

(ii)           develop specific schedules, procedures and methods to implement
the financial reporting and reconciliation provisions of this Agreement, such
schedules, procedures and methods to implement the provisions of Section 3.7 and
Section 9.4 shall, unless otherwise determined by the JSC, be developed within [
* ] after the Signing Date;

 

(iii)         review and update financial forecasts, which shall be updated at
least quarterly for the remainder of each Calendar Year unless otherwise
determined by the JSC, to ensure that Development Costs and Commercialization
Costs incurred or projected to be incurred by each Party are within the approved
Development Budget and Commercialization Budget, respectively;

 

(iv)          coordinate and agree upon the calculations, allocations and
reports by each Party of Development Costs, Commercialization Costs, and Product
Profit; and

 

(v)            perform such other functions as appropriate to further the
purposes of this Agreement as determined by the JSC.

 

(d)           Meetings of the JFC.  The JFC shall meet as frequently as members
of the JSC determine is required (but in no event, less frequently than [ * ]
times every Calendar Year), on such dates and at such times as agreed to by the
Parties, with all scheduled in-person meetings to alternate between a Trubion
site and a Facet site as designated by the respective Party prior to such
meeting, or at other locations as determined by the JFC.  All meetings shall be
held in person or by audio or videoconference.  Additional representatives or
consultants, who are under an obligation of confidentiality consistent with this
Agreement, may be invited to

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

24

--------------------------------------------------------------------------------

 

attend JFC meetings from time to time by agreement of the JFC.  Each Party shall
be responsible for its own expenses for participating in the JFC.  Meetings of
the JFC shall be effective only if at least one representative of each Party is
present or participating.

 

(e)           Decision-Making.  The JFC shall act by consensus. The
representatives from each Party will have, collectively, one (1) vote on behalf
of that Party. If the JFC cannot reach consensus on an issue that comes before
the JFC and over which the JFC has oversight, then such matter shall be resolved
in accordance with Section 2.7.

 

2.6          Joint Patent Committee.

 

(a)           Formation and Purpose.  Within [ * ] after the Signing Date, the
Parties shall create a Joint Patent Committee.  The purposes of the JPC shall be
to prepare, file and prosecute the Trubion Product Patent Rights, Facet Product
Patent Rights and Joint Patent Rights, as described in and subject to the terms
of Article 10.  The JPC shall operate by the procedures set forth in this
Section 2.6 and Section 2.7.

 

(b)           Membership of the JPC.  Each Party shall appoint one
(1) representative to the JPC who will be an officer or employee of such Party
and will have appropriate knowledge and expertise and sufficient seniority
within such Party to make decisions arising within the scope of the JPC’s
responsibilities.  Each Party may replace its representative at any time upon
prior written notice to the other Party.

 

(c)           Specific Responsibilities of the JPC.  In addition to its general
responsibilities set forth in Section 2.6(a), the JPC shall, in particular be
responsible for:

 

(i)            managing the filing and prosecution of Trubion Product Patent
Rights, Facet Product Patent Rights and Joint Patent Rights as described in and
subject to the terms of Article 10;

 

(ii)           making decisions with respect to certain claims in the Trubion
Core Patent Rights as described in and subject to the terms of Article 10;

 

(iii)         keeping updated lists of the Trubion Core Patent Rights, Trubion
Product Patent Rights, Facet Product Patent Rights and Facet Patent Rights [ *
];

 

(iv)          reviewing invention disclosures in accordance with the terms of
Article 10;

 

(v)            reviewing licensing and enforcement activities and conflicts
involving intellectual property rights, and making appropriate recommendations
to the JSC regarding such matters;

 

(vi)          providing advice, periodic updates and reports to the JSC
regarding intellectual property matters;

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

25

--------------------------------------------------------------------------------

 

(vii)         using reasonable and customary efforts to monitor and timely
analyze freedom to operate and other intellectual property related issues
relating to Collaboration Products;

 

(viii)        using good faith efforts to keep the Parties informed as to
material developments with respect to the prosecution of, and any adversarial
proceedings involving intellectual property rights, to the extent a Party’s
representative on the JPC concludes that such prosecution or proceeding directly
affects a Collaboration Product; and

 

(ix)          performing such other functions as appropriate to further the
purposes of this Agreement as determined by the JSC.

 

(d)           Meetings of the JPC.  The JPC shall communicate on such dates and
at such times as agreed upon by its members but in no event, less frequently
than once every other Calendar Quarter.  Meetings may be held in person or by
audio or video conference.  The JPC may permit visitors who are under an
obligation of confidentiality consistent with this Agreement to attend meetings
of the JPC.  Each Party shall be responsible for its own expenses for
participating in the JPC.  Meetings of the JPC shall be effective only if the
representative of each Party is present or participating.

 

(e)           Decisions.  Subject to Article 10 below, any approval,
determination or other action of the JPC shall require agreement of both members
of the JPC. In the event that a decision cannot be reached by the JPC, then the
matter shall be referred to the respective senior management of the in-house
legal department of each Party.  In the event such senior management is unable
to resolve the matter, then the matter will be resolved pursuant to Section 2.7
and Article 15.

 

2.7          Resolution of Committee Disputes.

 

(a)           Within Subcommittees.  All decisions within the JDC, the JCC, the
JFC, the JPC, and any other Committee created by the JSC (each, a
“Subcommittee”) shall be made by consensus, and if a dispute arises which cannot
be resolved within such Subcommittee, then the representatives of either Party
may cause such matter to be referred to the JSC for resolution as provided in
Section 2.7(b).

 

(b)           Within The JSC.  All decisions within the JSC (whether originating
there, or referred to it by a Subcommittee) shall be made by consensus. If a
matter is referred by a Subcommittee to the JSC, the JSC shall use good faith
efforts to resolve promptly such matter. If the JSC is unable to reach consensus
on any issue, either Party may elect to submit such issue to the Parties’
Executive Officers in accordance with Section 2.7(c).

 

(c)           Referral To Executive Officers.  If a Party makes an election
under Section 2.7(b) to refer a matter to the Executive Officers, the JSC shall
submit in writing the respective positions of the Parties to the Executive
Officers. Such Executive Officers shall use good faith efforts to resolve
promptly such matter, which good faith efforts shall include at least one [ * ]
meeting between such Executive Officers within [ * ] after the JSC’s submission
of such matter to them. If the Executive Officers are unable to reach consensus
on any such matter within [ * ] after the referral of such matter to the
Executive Officers, then the dispute shall be

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

26

--------------------------------------------------------------------------------

 

resolved through arbitration as provided for (a) under Section 15.3(c), with
respect to disputes regarding: [ * ]; or (b) under Section 15.3(b), with respect
to all other disputes.

 

2.8          Discontinuation of Participation on a Committee.  Either Party may,
in its sole discretion, terminate its participation on a Committee by providing
to the other Party written notice of its intention to no longer participate in
such Committee, which may be made upon [ * ] written notice at any time during
the Co-Development or Co-Commercialization period. In the event a Party has
provided written notice as referred to in this Section 2.8, the Party electing
to terminate its participation shall have no further rights with respect to the
decisions otherwise subject to determination by the Committee and the notified
Party shall control any decisions that were previously the responsibility of the
Committee.

 

3.             DEVELOPMENT.

 

3.1          Overview.  As stated in greater detail in this Article 3, the
Parties will Co-Develop each Collaboration Product in the Field throughout the
Territory pursuant to a Development Plan and will share equally the associated
Development Costs.

 

3.2          Development Responsibilities. The JSC shall select the lead
development party (“Lead Development Party”) for each Clinical Trial of a
Collaboration Product, provided that Trubion shall be the initial Lead
Development Party for all Clinical Trials and Non-Clinical Studies of TRU-016
that are on-going as of the Signing Date. The JSC shall, in allocating Lead
Development Party responsibilities between the Parties: (a) endeavor to take
advantage of the respective resources, capabilities and expertise of Facet and
Trubion; (b) endeavor to (i) maintain, to the extent reasonably practical and
appropriate, continuity in functions and commitments of personnel and physical
resources of the Parties, (ii) avoid duplication of efforts by the Parties and
(iii) foster efficient use by the Parties of resources and personnel, consistent
with this Agreement and the Development Plan and Development Budget; and (c) act
in the best interests of the Collaboration. The Lead Development Party shall be
responsible for implementing the Development Plan with respect to the applicable
Clinical Trial, provided that the other Party shall perform all tasks with
respect to such Clinical Trial that are allocated to it pursuant to the
Development Plan and may direct and conduct certain additional Development
activities not specifically allocated to either Party pursuant to the
Development Plan, if the JDC agrees upon such allocation.  The Lead Development
Party shall not have the right to change the Development Plan or to make changes
to the Clinical Trial protocol or the statistical analysis plan or make changes
that affect study design or Clinical Trial strategy (any of the foregoing
actions falling under the authority of the JDC or JSC, as applicable).

 

3.3          Development Plan.

 

(a)           Scope. The Development of Collaboration Products shall be governed
by development plans (each, a “Development Plan”), which, unless otherwise
determined by the JSC, shall be Collaboration Product-specific,
indication-specific, multi-year and world-wide (i.e., it shall cover the
Development of each such Collaboration Product for use in the U.S., Japan, each
of the Major European Countries and the EU as a whole, and the remaining
countries in the Territory). Each Development Plan may, as determined by the
JSC: (i) provide a planned Development program that is designed to generate the
non-clinical, clinical and regulatory

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

27

--------------------------------------------------------------------------------

 

information required for submitting Drug Approval Applications and to obtain
Regulatory Approvals for the relevant indications in the Territory;
(ii) indicate the initial indications that will be pursued with respect to such
Collaboration Product; (iii) address the target product profile for each
Collaboration Product for each indication, as periodically updated; (iv) specify
all material Development activities per indication to be performed for such
Collaboration Product for such year, including without limitation, Clinical
Trial protocols, additional preclinical tests (including any and all
carcinogenicity and toxicology studies), Collaboration Product manufacturing
plan including production and supply, and stability studies, enrollment numbers,
submission dates and estimated dates of meetings with FDA for such Collaboration
Product; (v) set forth the target timelines for each indication with respect to
such Development activities; (vi) include a forecast of the amount of Bulk API
or finished Collaboration Product needed for such Development activities; and
(vii) assign tasks to each Party with respect to the performance of the
Development activities contemplated by such Development Plan.  Each Development
Plan shall include a Development Budget. Each Development Plan and updates
thereof shall be prepared by the Party appointed by the JDC, with input from the
other Party’s key clinical development personnel, and submitted pursuant to the
procedures set forth in clause (c) below to the JDC for review and submission to
the JSC for approval.

 

(b)           Initial Development Plan.  A draft of the initial Development
Plan, together with associated initial Development Budget, for TRU-016 is
attached hereto as Exhibit B (the “Initial Development Plan”).  The Parties
shall make good faith efforts to agree upon the definitive Initial Development
Plan and have it appropriately approved by the JSC within [ * ] after the
Signing Date.

 

(c)           Updates to the Development Plan.  On an annual basis (no later
than [ * ] of each Calendar Year), the Party appointed by the JDC shall prepare
amendments to each then-current Development Plan and each Development Budget. 
Each such amended Development Plan shall cover the next Calendar Year and shall
contain a corresponding Development Budget.  Each such updated and amended
Development Plan shall reflect any changes, re-prioritization of studies within,
reallocation of resources with respect to, or additions to Development of the
applicable Collaboration Product.  The amended Development Plan and Development
Budget shall be submitted to the JDC for review and, following such review, to
the JSC for its review and approval.  Once approved by the JSC, the amended
Development Plan and Development Budget shall become effective on January 1 of
each Calendar Year and shall be in full force throughout such Calendar Year
unless further amended in accordance with this Section 3.3(c).  In any event,
any amended or updated Development Plan and Development Budget shall supersede
the previous Development Plan and Development Budget.

 

3.4          Standards of Conduct; Diligence.

 

(a)           Each Party shall perform the Development activities for which it
is responsible under the Development Plan in good scientific manner and in
compliance with applicable Laws, including without limitation applicable GCP,
GLP, and GMP.  Each Party will keep the other Party fully informed regarding the
progress and results of such Party’s Development activities with respect to the
Collaboration Products through the JDC meetings on a quarterly basis and other
than through the JDC at such other time as necessary under the circumstances.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

28

--------------------------------------------------------------------------------

 

(b)           Each Party shall use Diligent Efforts to execute and carry out the
activities assigned to it in the Development Plan and shall use Diligent Efforts
to execute and carry out such activities within the Development Budget; provided
that if a Party exceeds the portion of such Development Budget allocated to it
with respect to the relevant Calendar Quarter by greater than [ * ] without the
approval of the JSC, any amount in excess of such number shall not be considered
Development Costs and such Party shall be solely responsible for payment of such
excess.

 

(c)           The Parties shall cooperate in good faith to establish appropriate
and consistent medical information support relating to Collaboration Products.

 

3.5          Third Parties.

 

(a)           Contractors.  Any Third Party retained by a Party to perform
Development activities with respect to Collaboration Products must be approved
in advance in writing by the JSC, such approval not to be unreasonably withheld
or delayed, unless such Third Party and such activities are pre-existing
obligations listed in Schedule 3.7 or are specifically approved in the
Development Plan or Development Budget.  Each Party shall remain liable for the
performance of its obligations hereunder which it delegates to such Third
Parties.

 

(b)           Obligations with Respect to Third Party Contracts.  Any Third
Parties performing Development activities hereunder shall be subject to
confidentiality and non-use obligations at least as stringent as those set forth
in Article 11 with a minimum duration of [ * ] and must comply with the terms of
Section 10.1(c) with respect to any invention or Know-How generated in the
course of performing the Development activities.  Unless otherwise determined by
the JSC, each Party shall include provisions in its contracts with Third Parties
entered into after the Signing Date and specifically related to Development or
Commercialization of a Collaboration Product that would permit, in the event
that such Collaboration Product becomes a Royalty Product (i) the assignment of
such contract by the Opt-Out Party to the Non-Opt-Out Party, or (ii) the
granting of a sublicense or equivalent right of access to the Non-Opt-Out Party.

 

(c)           Intellectual Property.  Neither Party shall knowingly introduce to
any Collaboration Product any Patent Right or Know-How that is not Controlled by
such Party, except with the prior approval of the JSC.

 

3.6          Limitations on Development.  After the Signing Date and during the
Term, neither Party nor any of its Affiliates shall, directly or through any
Third Party, sponsor, conduct or cause to be conducted, otherwise assist in, or
supply any Collaboration Product for use in connection with, or otherwise fund,
any Clinical Trial of any Collaboration Product outside of the Development Plan,
without the prior written consent of the other Party.

 

3.7          Development Costs.

 

(a)           In general.  All Development Costs incurred by either Party shall
be borne by the Parties as follows: Facet shall bear fifty percent (50%) of all
Development Costs and Trubion shall bear fifty percent (50%) of all Development
Costs, provided that such costs were incurred pursuant to the Development Plan,
and either do not exceed the portion of the Development Budget allocated to the
applicable Party with respect to the relevant Calendar

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Quarter by more than [ * ] or are otherwise approved by the JSC.  For clarity,
any costs otherwise or previously shared by the Parties shall not be double
counted or otherwise included as a Development Cost even if it meets such
definition.

 

(b)           FTE Records and Calculations.  Each Party shall record its FTE
effort for the Development of each Collaboration Product to the extent that such
FTE efforts are included in Development Costs that are, or may in the future be,
shared under this Agreement, and shall report such FTE effort to the JDC, on a
Calendar Quarterly basis, in each case in a manner that allocates such FTE
effort to the extent practicable to each applicable Collaboration Product. 
Except to the extent provided herein, each Party shall calculate and maintain
records of FTE effort incurred by it in the same manner as used for other
products developed by such Party in accordance with a methodology approved by
the JSC.  The JFC shall facilitate any reporting hereunder.

 

(c)           Other Expenses.  Any expenses incurred by a Party for Development
activities that do not fall within the definitions of Development Costs shall be
borne solely by such Party unless the JSC determines otherwise.

 

(d)           Pre-existing Obligations. Unless otherwise determined by the JSC,
any Third Party obligations of either Party in existence prior to the Signing
Date, [ * ] other than those listed in Schedule 3.7 will not be considered
Development Costs and will not be subject to expense sharing. [ * ]

 

(e)           Reports.  Each Party shall report to the other Party within [ * ]
after the end of each Calendar Quarter with regard to the Development Costs
incurred by it during such quarter.  Such report shall be prepared in accordance
with GAAP and shall specify in reasonable detail all expenses included in such
Development Costs during such quarter and shall be accompanied by invoices,
and/or such other appropriate supporting documentation in accordance with the
procedures established by the JSC.  Each Party’s report shall include, in
addition to the Development Costs incurred by it during the relevant Calendar
Quarter a comparison of the amounts budgeted in the Development Plan for such
activities and the amounts incurred by such Party for such activities.  The
Parties shall seek to resolve any questions related to such accounting
statements within [ * ] following receipt by each Party of the other Party’s
report hereunder.  The JFC shall facilitate the reporting of Development Costs
hereunder and the resolution of any questions concerning such reports.  Each
Party shall have the right at reasonable times and upon reasonable prior notice
to audit the other Party’s records as provided in Section 9.9(b) to confirm the
accuracy of the other Party’s costs and reports with respect to Development
Costs that are shared under this Agreement.

 

(f)            Development Cost Accounts.  Each Party shall charge all
Development Costs as incurred by it or its Affiliates on its books and records
in accordance with GAAP to enable the tracking of expenses incurred in
connection with each Development Plan.  Each Party shall provide the other Party
with an interim quarterly report of monthly estimates for the current Calendar
Quarter charges within [ * ] after the end of the second calendar month in each
Calendar Quarter.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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(g)           Reconciliation Payment.  Within [ * ] after the end of each of the
first three Calendar Quarters and, for the last Calendar Quarter in a Calendar
Year, within [ * ] after the end of such quarter, the Party that has incurred
less than its share of such Development Costs shall make a reconciling payment
to the other Party to achieve the appropriate allocation of Development Costs
provided for in Section 3.7(a).

 

(h)           Records.  Each Party shall keep detailed records of the
Development Costs it incurs, including all supporting documentation for such
expenses.  Each Party shall keep such records for at least [ * ] after the date
that such expense was incurred.

 

(i)            General Procedures Apply.  Any reimbursement payments made
pursuant to this Section 3.7 shall be subject to the general payment procedures
set forth in Sections 9.6-9.9.

 

3.8          Records, Reports and Information.  Each Party shall maintain
complete, current and accurate records of all work conducted by it under the
Development Plan and all data and other Know-How resulting from such work. Such
records shall fully and properly reflect all work done and results achieved in
the performance of the Development Plan in sufficient detail and in good
scientific manner appropriate for patent and regulatory purposes. Each Party
shall provide written reports to the JDC on its Development and regulatory
activities with the Collaboration Product pursuant to the Development Plan on a
quarterly basis at the end of each Calendar Quarter, at a level of detail
reasonably sufficient to enable the other Party to determine the reporting
Party’s compliance with its Diligent Efforts obligations under Section 3.4. 
Each Party shall have the right to review any such records maintained by the
other Party at reasonable times and upon written request in accordance with
procedures established by the JDC.

 

4.             REGULATORY MATTERS.

 

4.1          Transfer of Data and Regulatory Materials.  The JDC shall determine
the content and manner for sharing data and Regulatory Materials between the
Parties.  The lead Party for regulatory activities with respect to a particular
Collaboration Product in a particular country (such Party, the “Lead Regulatory
Party”), as provided in Section 4.3, shall provide the other Party with copies
of the IND and of such other Regulatory Materials Controlled by the Lead
Regulatory Party, in each case with respect to Collaboration Products.
Specifically, within [ * ] after the Signing Date, Trubion shall provide Facet
with a copy of all TRU-016 related Regulatory Materials in the form then
existing, generated as of the Signing Date and Controlled by Trubion.  The
non-Lead Regulatory Party shall have the right, without any additional
consideration, to use any and all such data and reports supplied by the Lead
Regulatory Party under this Section 4.1 in connection with the Development
and/or Commercialization of any Collaboration Products or Royalty Products in
the Field, in the Territory in accordance with the terms of this Agreement,
including the incorporation of such data or reports in any regulatory
submissions.

 

4.2          Ownership of Regulatory Dossier.  The Lead Regulatory Party will
own all regulatory filings for each Collaboration Product in each country where
such Party is the Lead Regulatory Party in order to facilitate such Party’s
interactions with Regulatory Authorities in such country with respect to each
such Collaboration Product.  Trubion, as initial Lead

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Regulatory Party for TRU-016 in the Unites States, will initially own all
Regulatory Materials for [ * ], including all Regulatory Materials related to [
* ].  Promptly upon the JSC’s decision to change the Lead Regulatory Party or
the delivery of a Pursuit Notice or a deemed Pursuit Notice if the Lead
Regulatory Party has exercised or has been deemed to have exercised its Opt-Out
Option pursuant to Article 7, Section 8.5 or Section 14.2(b), the former Lead
Regulatory Party shall transfer and assign to the other Party (and the other
Party hereby agrees to receive from the former Lead Regulatory Party) all of the
former Lead Regulatory Party’s right, title and interest to the applicable
regulatory filings.

 

4.3          Lead Regulatory Party.  The Parties intend that each Development
Plan shall set forth the regulatory strategy approved by the JSC for the
applicable Collaboration Product. The JSC shall select the Lead Regulatory Party
for each Collaboration Product, provided that Trubion shall be the initial Lead
Regulatory Party for TRU-016 in the United States and the JSC may change the
Lead Regulatory Party for any Collaboration Product at any time. The Lead
Regulatory Party shall be responsible for the implementation of such strategy in
the applicable country.  The Lead Regulatory Party shall comply with applicable
Laws and other regulatory obligations related to the submission and maintenance
of any Regulatory Materials for Regulatory Approval of a Collaboration Product,
in the Field, in the applicable country(ies) of the Territory.  The Party that
is not the Lead Regulatory Party shall have a participatory role in all material
regulatory activities that would have a potential impact on Collaboration
Products in the relevant country, including all interactions with Regulatory
Authorities.  All material regulatory decisions (including the content of any
regulatory filing or dossier, pharmacovigilance reports, patient risk management
strategies and plans, Product Labeling and safety) will be made by the JSC and
implemented by the Lead Regulatory Party. Notwithstanding any other provision of
this Agreement, the decision to [ * ] must be the result of consensus by the JSC
or, in the event that the JSC is unable to reach consensus with respect to such
a [ * ] decision and the matter is submitted to the Parties’ Executive Officers
pursuant to Section 2.7(b), the unanimous agreement of the Executive Officers
pursuant to Section 2.7(c) to [ * ]. If the Executive Officers are unable to
reach consensus on any such matter within the applicable [ * ] period, then the
JSC will be deemed to have decided not to [ * ].  In no event will a dispute
regarding whether to [ * ] be resolved through arbitration under Article 15.

 

4.4          Regulatory Filings.

 

(a)           The Lead Regulatory Party shall prepare, for timely review by the
JDC, all IND and BLA submissions (including any supplements or modifications
thereto, but excluding routine submissions such as study site documentation and
adverse event reports (i.e., not relating to serious adverse events as defined
by applicable Law)) to the applicable Regulatory Authority.  The other Party
shall have a right to review and comment upon (through its members of the JDC)
all draft material regulatory filings, including without limitation all
correspondence to be submitted to the Regulatory Authority related to Clinical
Trial design, the content and subject matter of, and strategy for, each Drug
Approval Application, all proposed Product Labeling (including the final
Regulatory Authority-approved Labeling) and post-Regulatory Approval labeling
changes.  The Lead Regulatory Party shall accept and incorporate all reasonable
comments provided by the other Party.  Each Party shall promptly provide the
other with copies of all written or electronic communications received by it
from, or sent by it to, a Regulatory Authority including IND submissions and
amendments thereof, and all communications (other

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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than routine communications) with respect to obtaining and maintaining,
Regulatory Approvals for a Collaboration Product (it being understood that
routine adverse event filings (i.e., not relating to serious adverse events as
defined by applicable Law) shall not fall within the meaning of maintenance) and
copies of all contact reports produced by such Party.  The Lead Regulatory Party
shall be the sole Party to initiate contact with any Regulatory Authorities
regarding a Collaboration Product, and shall initiate such contact at the
reasonable request of the other Party.

 

(b)           Notice of Regulatory Filing Requirements.  The Lead Regulatory
Party shall provide to the other Party, within [ * ] of discovery or receipt
thereof by the Lead Regulatory Party, notice of (i) any event with respect to
any Collaboration Product that triggers any Regulatory Authority filing
requirement, (ii) any additional requirements which the applicable Regulatory
Authority may impose with respect to obtaining or maintaining Regulatory
Approval for a Collaboration Product (including additional Clinical Trials), and
(iii) all Regulatory Authority inquiries with respect to a Collaboration Product
that require a response or for a which a response may be advisable.  The JDC
shall discuss in good faith and on a timely basis determine the most effective
and expeditious means of responding to such Regulatory Authority filing
requirements, additional requirements or inquiries.

 

4.5          Regulatory Meetings.  The Lead Regulatory Party shall provide the
other Party with notice of all meetings, conferences, and discussions (including
Regulatory Authority advisory committee meetings and any other meeting of
experts convened by the Regulatory Authority concerning any topic relevant to a
Collaboration Product, as well as Collaboration Product labeling and
post-Regulatory Approval Collaboration Product labeling discussions with any
Regulatory Authority) scheduled by the Regulatory Authority concerning any
pending Drug Approval Application or any material regulatory matters relating to
a Collaboration Product within [ * ] after the Lead Regulatory Party receives
notice of the scheduling of such meeting, conference, or discussion (or within
such shorter period as may be necessary in order to give the other Party a
reasonable opportunity to participate in such meetings, conferences and
discussions).  The other Party shall be entitled to be present at, and to
participate in, all such meetings, conferences or discussions.  Facet’s and
Trubion’s respective members of the JDC shall use reasonable efforts to agree in
advance on the scheduling of such meetings and on the objectives to be
accomplished at such meetings, conferences, and discussions and the agenda for
the meetings, conferences, and discussions with the Regulatory Authority.  The
Lead Regulatory Party shall reasonably attempt to include the other Party in any
unscheduled, ad-hoc meetings, conferences and discussions with the Regulatory
Authority concerning any pending IND, Drug Approval Application or any material
regulatory matters relating to a Collaboration Product, and will promptly copy
such other Party on a contact report.

 

4.6          Regulatory Data. In accordance with procedures established by the
JDC, each Party shall provide to the other Party on a timely basis access to or
copies of all material pre-clinical and clinical data generated or compiled
pursuant to the Development Plan with respect to Regulatory Materials maintained
by such Party (via electronic copies of such data in a form that may be analyzed
and manipulated by the other Party).

 

4.7          Common Database.  If deemed appropriate by the JDC, the Parties
will establish a common database to be controlled, maintained and administered
by the Party designated by the JDC for the receipt, investigation, recordation,
communication, and exchange (as between the

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Parties) of data arising from Clinical Trials for Collaboration Products.  The
Parties shall agree upon guidelines and procedures for such common database that
shall be in accordance with, and enable the Parties to fulfill their reporting
obligations under applicable Law.  Furthermore, such guidelines and procedures
shall be consistent with relevant International Council for Harmonisation
(“ICH”) guidelines.  The Parties’ costs incurred in connection with receiving,
investigating, recording, reviewing, communicating, and exchanging such data
shall be included as an element of Development Costs or as Commercialization
Costs, as applicable, calculated on a FTE cost (calculated at the FTE Rate) and
direct out-of-pocket cost basis.

 

4.8          Rights of Reference.  Each Party shall have the right to cross
reference, file or incorporate by reference any regulatory filing or drug master
file (as defined in 21 C.F.R. 314.420, or as amended from time to time, or the
corresponding foreign equivalent) (and any data contained therein) for any
Collaboration Product, or any component thereof, made in any country in the
Territory (including all Regulatory Approvals) in order to support regulatory
filings that such Party is permitted to make under this Agreement for any
Collaboration Product or Royalty Product and to enable either Party to fulfill
its obligations under this Agreement to Develop, Manufacture or Commercialize in
the Territory any such Collaboration Product or Royalty Product.  Each Party
shall support the other, as may be reasonably necessary, in obtaining Regulatory
Approvals for each Collaboration Product and Royalty Product, including
providing necessary documents, or other materials required by applicable Law to
obtain Regulatory Approvals, in each case in accordance with the terms and
conditions of this Agreement.

 

4.9          Costs and Expenses.  Unless otherwise agreed by the JSC and subject
to Section 3.4(b), any costs required for the Parties to prepare, submit and
maintain all Regulatory Materials in the Territory shall be treated as
Development Costs to the extent such costs are incurred in accordance with the
Development Plan and do not exceed the portion of the Development Budget
allocated to such regulatory activities to the applicable Party with respect to
the relevant Calendar Quarter by more than [ * ] or are otherwise approved by
the JSC.

 

4.10        Consultation, Reporting and Review.

 

(a)           Each Lead Regulatory Party shall keep the other Party reasonably
and regularly informed of the status of the preparation of all Regulatory
Materials, Regulatory Authority review of Regulatory Materials, and Regulatory
Approvals made by it for Collaboration Products in the Field.

 

(b)           Each Lead Regulatory Party shall provide the other Party, in a
timely manner, with copies of all Regulatory Approvals it receives for
Collaboration Products in the Field.

 

(c)           Each Party shall provide the other Party, in a timely manner, with
copies of, and all information received by it pertaining to, notices, questions,
actions and requests from or by Regulatory Authorities with respect to
Collaboration Products, in the Field, or the testing, manufacture, distribution
or facilities in relation thereto, including without limitation any notices of
non-compliance with Laws in connection with Collaboration Products in the Field
(e.g., warning letters or other notices of alleged non-compliance), audit
notices, notices of initiation by

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Regulatory Authorities of investigations, inspections, detentions, seizures or
injunctions concerning Collaboration Products (or their manufacture,
distribution, or facilities connected thereto), notice of violation letters
(i.e., an untitled letter), warning letters, service of process or other
inquiries.

 

4.11        Regulatory Inspection or Audit.  If a Regulatory Authority in the
Territory desires to conduct an inspection or audit with regard to a
Collaboration Product of a Party’s facility or a facility under contract with a
Party, or with regard to a Royalty Product of the Opt-Out Party’s facility or a
facility under contact with the Opt-Out Party when the Opt-Out Party continues
to supply the Royalty Product to the Non-Opt-Out Party pursuant to
Section 7.5(b)( vi), such Party shall promptly notify the other Party.  In such
case, the audited Party shall permit and cooperate with such inspection or
audit, and shall cause the contract facility to permit and cooperate with such
Regulatory Authority during such inspection or audit. The other Party shall have
the right to have a representative observe such inspection or audit and shall,
if requested by the audited Party, assist the audited Party in preparing for,
facilitating or enabling such inspection or audit.  Following receipt of the
inspection or audit observations of such Regulatory Authority (a copy of which
the audited Party shall immediately provide to the other Party), the audited
Party shall prepare a draft response to any such observations, in consultation
with the other Party, and the Party that holds the Regulatory Materials in the
applicable country or territory shall prepare and file the final response with
such Regulatory Authority.  If the Regulatory Authority is conducting an
inspection or audit with regard to a Party’s contract facility, such Party shall
(subject to the terms of the applicable contract with a Third Party
manufacturer) cause its contract facility to prepare, submit to both Parties for
input, and file the final response incorporating such input with such Regulatory
Authority, and copy both Parties on such submission.

 

4.12        Pharmacovigilance Agreement.  Subject to the terms of this
Agreement, and at a date to be determined by the JDC, Facet and Trubion shall
define and finalize the actions the Parties shall employ to protect patients and
promote their well-being in a written agreement (hereinafter referred to as the
“Pharmacovigilance Agreement”).  These responsibilities shall include mutually
acceptable guidelines and procedures for the receipt, investigation,
recordation, communication, and exchange (as between the Parties) of adverse
event reports, pregnancy reports, and any other information concerning the
safety of any Collaboration Product.  Such guidelines and procedures shall be in
accordance with, and enable the Parties to fulfill, local and national
regulatory reporting obligations to Governmental Authorities.  Furthermore, such
agreed procedures shall be consistent with relevant ICH guidelines, except where
said guidelines may conflict with existing local regulatory safety reporting
requirements, in which case local reporting requirements shall prevail.  The
Pharmacovigilance Agreement will provide for a worldwide safety database to be
maintained by the Party appointed by the JDC.  Each Party hereby agrees to
comply with its respective obligations under such Pharmacovigilance Agreement
(as the Parties may agree to modify it from time to time) and to cause its
Affiliates and permitted sublicensees to comply with such obligations.

 

5.             COMMERCIALIZATION.

 

5.1          Overview.  The Parties agree to collaborate with respect to the
Commercialization of Collaboration Products, in the Field, in the Territory as
provided in this

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Article 5. The JSC shall choose the Party, on a country-by-country and
Collaboration Product-by-Collaboration Product basis, with the greatest
applicable Commercial capability with respect to a particular Collaboration
Product in a particular country as the lead commercialization party (“Lead
Commercialization Party”) for such Collaboration Product in such country to
coordinate the implementation of the Commercialization Plan in accordance with
the allocation of responsibilities set forth therein.

 

5.2          Commercialization Plan.

 

(a)           Scope.  The Commercialization of Collaboration Products shall be
conducted pursuant to commercialization plans (each, a “Commercialization
Plan”), which, unless otherwise determined by the JSC, shall be Collaboration
Product-specific, multi-year, world-wide, and shall set forth the anticipated
Commercialization activities (including market studies, launch plans, Detailing
and Promotion) and timelines, shall allocate responsibility for carrying out
such activities between Facet and Trubion, and shall include the
Commercialization Budget for such activities.  Each Commercialization Plan may,
as determined by the JSC, include a lifecycle plan and the plan, with respect to
each country, for: (i) Detailing and Promotion activities for the applicable
Collaboration Product for the next [ * ] (as to the initial Commercialization
Plan, the [ * ] following launch) and timelines for performing such activities,
(ii) target audience, (iii) anticipated expenses, (iv) assumptions regarding
product profile, (v) sales force size, and (vi) Promotional efforts. Each
Commercialization Plan shall include a Commercialization Budget.  Each
Commercialization Plan and updates thereof shall be prepared by the Lead
Commercialization Party in the United States for such Collaboration Product,
with review by and input from the other Party’s key personnel for
Commercialization and Manufacturing activities, and submitted pursuant to the
procedures set forth in clauses (b) and (c) below to the JCC for review and
submission to the JSC for approval.

 

(b)           Initial Commercialization Plan. Promptly following the JSC’s
request for a Commercialization Plan for a particular Collaboration Product and
at least [ * ] prior to the then-current date of expected Regulatory Approval
for such Collaboration Product in the Field, the Lead Commercialization Party in
the United States for such Collaboration Product, with strategic guidance from
the JSC, shall prepare the initial Commercialization Plan for such Collaboration
Product and submit such plan to the JCC for review and, following such review,
to the JSC for its review and approval.  The Parties agree and acknowledge that
any such Commercialization Plan will reasonably allocate all Commercialization
activities between the Parties, giving equal consideration to each Party’s
abilities when making such allocation.

 

(c)           Updates to the Commercialization Plan.  On an annual basis (no
later than [ * ] of each Calendar Year), the Lead Commercialization Party in the
United States for such Collaboration Product shall prepare amendments to the
then-current Commercialization Plan and the Commercialization Budget.  Such
amended Commercialization Plan shall cover the next Calendar Year and shall
contain a corresponding Commercialization Budget.  Such updated and amended
Commercialization Plan shall reflect any changes, re-prioritization of
activities within, reallocation of resources with respect to, or additions to
Commercialization of the applicable Collaboration Product.  The amended
Commercialization Plan and Commercialization Budget shall be submitted to the
JCC for review and, following such recommendation, to the JSC for its review and
approval.  Once approved by the JSC, the amended Commercialization

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Plan and Commercialization Budget shall become effective on January 1 of each
Calendar Year and shall be in full force throughout such Calendar Year unless
further amended in accordance with this Section 5.2(c).  In any event, any
amended or updated Commercialization Plan and Commercialization Budget shall
supersede the previous Commercialization Plan and Commercialization Budget.

 

5.3          Commercialization Reports.  Each Party will keep the JCC fully
informed regarding the progress and results of its Commercialization activities
with respect to Collaboration Products under this Agreement.

 

5.4          Standards of Conduct.

 

(a)           Each Party shall perform, or shall ensure that its Affiliates and
permitted sublicensees and Third Party contractors perform, all
Commercialization activities assigned to it in a good scientific and ethical
business manner and in compliance with applicable Laws.

 

(b)           Each Party shall use Diligent Efforts to execute and carry out the
activities assigned to it in the Commercialization Plan and each Party shall use
Diligent Efforts to execute and carry out such activities within the
Commercialization Budget; provided that if a Party exceeds the portion of the
Commercialization Budget allocated to it with respect to the relevant Calendar
Quarter by greater than [ * ] without the approval of the JSC, any amount in
excess of such number shall not be considered Commercialization Costs hereunder
and such Party shall be solely responsible for payment of such excess.

 

5.5          Sales Force Training.  The Lead Commercialization Party shall
develop and conduct training programs for the sales representatives of one or
both Parties’ sales representatives (depending on whether one or both Parties
will be Detailing the Collaboration Product), specifically relating to the
Collaboration Products to be Commercialized.  Each Party agrees to utilize such
training programs on an ongoing basis to assure a consistent, focused
promotional strategy.

 

5.6          Product Labeling and Promotional Materials.  The JCC shall
determine which Party shall be responsible for designing and supplying the
Product Labeling and Promotional Materials for each Collaboration Product in the
Territory.  Such responsible Party shall provide samples of such labeling and
materials to the JCC for review and consultation prior to finalizing such
materials for use by the Parties’ sales representatives.  The Parties shall
describe in the applicable Commercialization Plan how and the manner in which
the Parties shall be presented and described to the medical community in any
Promotional Materials and the placement of the names and logos of the Parties
therein, in each case as permitted by applicable Law and in accordance with the
labeling for the Collaboration Product approved by the applicable Regulatory
Authority.

 

5.7          Branding.  Each Collaboration Product Commercialized under this
Agreement shall be Commercialized under and in connection with the Marks
selected in accordance with Section 10.7.  To the extent that a Party is granted
rights under this Agreement to Commercialize a Collaboration Product, it shall
Commercialize such Collaboration Product solely under and in connection with the
Marks selected and approved pursuant to the terms of Section 10.7 (except

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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for Marks that include, in whole or part, any corporate name or logo of such
Party, which Marks do not require such approval).

 

5.8          Pricing.  The JSC will determine the selling price (including
volume discounts (including those available, without limitation, to managed care
providers, indemnity plans, unions, self insured entities, and government payer,
insurance or contracting programs such as Medicare, Medicaid, or the United
States Dept. of Veterans Affairs), rebates, and similar matters, credit terms,
and return policies) for all Collaboration Products Commercialized hereunder. 
The Lead Commercialization Party for a particular Collaboration Product in a
particular country shall have the right and responsibility for proposing to the
JCC for review and submission to the JSC for approval the terms and conditions
(and any updates and revisions thereof) with respect to the sale of such
Collaboration Product in such country, including any terms and conditions
relating to or affecting the price at which the Collaboration Product shall be
sold, discounts, any discount attributable to payments on receivables,
distribution of the Collaboration Product, and credits, price adjustments, or
other discounts and allowances to be granted or refused.

 

5.9          Booking of Sales.  The Lead Commercialization Party for a
particular Collaboration Product in a particular country will book sales in
accordance with GAAP including handling inventory, receivables, managing
relationships with the trade, returns, reimbursements, and charge-backs,
trade-customer complaints and inquiries with respect to such Collaboration
Product in such country.  For clarity, each Party’s expenses in connection with
the activities described in this Section 5.9 will be included as Sales and
Marketing Costs or Distribution Costs, as appropriate.

 

5.10        Product Recalls.  Decisions with respect to recalls, withdrawals or
other corrective actions (“Recall”) with respect to any Collaboration Product
related to manufacturing or product quality issues shall be handled in
accordance with the Commercial Supply Agreement.  Decisions with respect to any
other Recall related to any Collaboration Product shall be made only upon mutual
agreement of the Parties; provided, however, [ * ]. The Parties shall cooperate
with respect to any actions taken or public statements made in connection with
any such Recall. Except as otherwise provided in this Section 5.10, the Parties
will share all costs of a Recall with respect to any Collaboration Product as
Sales and Marketing Costs.  Notwithstanding the foregoing, a Party shall bear
any and all costs of a Recall, market withdrawal or other corrective action with
respect to a Collaboration Product in the Territory, including the Manufacturing
Costs for the Collaboration Product in question, to the extent the Recall is
attributable to the fault of such Party and results from (a) a grossly negligent
or reckless act or omission or intentional misconduct of such Party (or its
Affiliate, agent or permitted sublicensee), (b) in the case such Party is the
Lead Manufacturing Party, the failure of the Lead Manufacturing Party or its
Affiliate, agent or sublicensee to perform its responsibilities and Manufacture
the Collaboration Product in compliance with the specifications (as set forth in
the Commercial Supply Agreement), or with applicable Laws, including applicable
Good Manufacturing Practices, (c) any defect or condition introduced by a Party,
its Affiliates or permitted sublicensees following delivery of the Collaboration
Product from the Lead Manufacturing Party or its contract manufacturer, into a
Collaboration Product or its packaging or labeling, or (d) a breach of any Laws
or the terms of this Agreement by such Party.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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5.11        Co-Promotion Agreement.  In the event that both Parties have their
own sales forces with appropriate expertise or that the Parties otherwise agree
to share promotional responsibilities with respect to one or more Collaboration
Products in one or more countries, the Parties shall negotiate in good faith and
enter into a co-promotion agreement for such Collaboration Product in such
countries to implement the promotional activities contemplated in the
Commercialization Plan for such Collaboration Product in such country.

 

5.12        Limitations on Commercialization.  After the Signing Date and during
the Term, neither Party nor any of its Affiliates shall, directly or through any
Third Party, Commercialize any Collaboration Product outside of the
Commercialization Plan, without the prior written consent of the other Party.

 

6.             MANUFACTURING.

 

6.1          Roles of the Parties.  The JSC shall select the lead manufacturing
Party (“Lead Manufacturing Party”) for each Collaboration Product and the Lead
Manufacturing Party shall be responsible for the supply of the Parties’ entire
requirements of such Collaboration Product in accordance with the terms set
forth below.  Trubion shall be the initial Lead Manufacturing Party for TRU-016.

 

(a)           Facet acknowledges that Trubion uses Third Party manufacturers to
Manufacture TRU-016, and Trubion confirms that it shall be solely responsible
for the performance of such Third Party manufacturers until such time as the
Parties determine to engage an alternate or additional source of supply, or the
Parties agree to amend such agreements in accordance with Section 6.4.

 

(b)           Trubion shall promptly notify existing Third Party manufacturers
of execution of this Agreement, and, if Trubion proposes to materially amend, or
to extend the term of, any existing Product manufacturing agreement with a Third
Party, use Diligent Efforts to include Facet as a party to such agreement or to
provide Facet with third party beneficiary rights with respect to such agreement
and to allow for assignment of such agreement, or, if such agreement also
applies to products that are not Products, assignment of all rights and
obligations to the extent related to such Product, in each case from Trubion to
Facet without consent from such Third Party manufacturer.

 

6.2          Pre-Clinical and Clinical Supply.  The Lead Manufacturing Party
with respect to a particular Collaboration Product shall, by itself or through
its Third Party contract manufacturers, timely supply all quantities of such
Collaboration Product agreed upon by the JDC as required by the Parties to carry
out all Development activities (pre-clinical and clinical) for such
Collaboration Product pursuant to the Development Plan. Such quantities of
Collaboration Product, and the schedule for such supply, shall be confirmed and
if necessary updated by the JDC in a manner consistent with the Development
Plan. Such supply shall be considered a Development Cost and charged on an
accrual basis; provided that [ * ].  [ * ]. The JSC shall, in allocating Lead
Manufacturing Party responsibilities between the Parties:  (a) endeavor to take
advantage of the respective resources, capabilities and expertise of Facet and
Trubion; (b) endeavor to (i) maintain, to the extent reasonably practical and
appropriate, continuity in functions and commitments of personnel and physical
resources of the Parties, (ii) 

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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avoid duplication of efforts by the Parties and (iii) foster efficient use by
the Parties of resources and personnel, consistent with this Agreement and the
applicable then-current Development Plan and Development Budget; and (c) act in
the best interests of the Collaboration.  The Lead Manufacturing Party shall
ensure that all finished Collaboration Product supplied pursuant to the
Development Plan shall, when delivered, have been manufactured, handled and
stored in compliance with all agreed-upon specifications, then-current GMP
requirements and applicable Laws, including without limitation prohibitions on
misbranding and adulteration.  The Lead Manufacturing Party shall reasonably
determine the process for quantity orders, timing for delivery and shipping
terms to permit the Parties to fulfill their obligations under the Development
Plan.

 

6.3          Pre-existing Obligations with Third-Party Manufacturers.  Unless
otherwise determined by the JSC, any Third Party obligations in existence prior
to the Signing Date for manufacturing of TRU-016, such as manufacturing capacity
reservation, other than those listed in Schedule 3.7 will not be considered
Manufacturing Costs and will not be subject to expense sharing. [ * ]

 

6.4          Alternative Supply Arrangements.  Unless otherwise determined by
the JSC, in the event that:  (a) the Lead Manufacturing Party proposes to enter
into one or more new manufacturing agreements, (b) the Lead Manufacturing Party
proposes to materially amend, to renegotiate or to renew its then existing Third
Party manufacturing agreements, or (c) the Lead Manufacturing Party notifies the
JSC that capacity or quality under the existing Third Party manufacturing
agreements will not be sufficient to meet the needs of the Parties under the
Development Plan, the JSC shall determinate the appropriate course of action,
including a determination of whether a second source of supply is appropriate. 
In any event, the Lead Manufacturing Party shall notify the other Party and the
JSC prior to entry into any such new, amended or renewed Third Party
manufacturing agreement, and the JSC shall review and approve the proposed terms
of such new, amended or renewed agreement; provided that such agreement may
include, as agreed upon by the JSC (i) attempting to order in full lot or
production run batches and otherwise reducing the Manufacturing Cost of
Collaboration Product, (ii) providing for sufficient capacity and timely supply
to satisfy the requirements of the then-current Development Plan, (iii) having
Facet and Trubion as parties (and in any event third party beneficiaries) with
respect to the rights and obligations related to Collaboration Products pursuant
to such Third Party agreement, (iv) ensuring that in the event of the exercise
or deemed exercise of an Opt-Out Option by a Party, the remaining Party shall be
the sole obligor pursuant to such Third Party Agreement, (v) providing that the
Parties shall have joint rights and obligations under the agreement with respect
to Collaboration Product, but that one Party shall be designated as the
“principal party” under such agreement, (v) providing both Parties with the
right to audit and inspect such Third Party’s facilities on at least [ * ],
which efforts shall be coordinated between the Parties in the event both Parties
desire to conduct such audit and inspection, and (vi) providing for complete
sharing of any and all information under and the terms and conditions of such
agreement between the Parties.  The Lead Manufacturing Party shall be
responsible for negotiating the terms of such agreement, with the other Party
having consultation and review rights on the terms of such Third Party
agreement.

 

6.5          Commercial Supply Agreement.  Unless a Party has already exercised
its Opt-Out Option or is deemed to have exercised its Opt-Out Option under
Section 14.2(b), at least [ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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prior to the anticipated commercial launch of a Collaboration Product, the
Parties shall negotiate in good faith and enter into a manufacturing and supply
agreement (the “Commercial Supply Agreement”) governing the commercial supply of
such Collaboration Product. Such Commercial Supply Agreement shall contain
customary terms governing such manufacturing and supply relationships, but shall
in any event provide as follows:

 

(a)                                  Collaboration Product (i) shall meet the
agreed specification, then-current GMP and be manufactured in accordance with
applicable Laws including prohibitions on adulteration and misbranding,
(ii) shall be supplied by or on behalf of the Lead Manufacturing Party in a
timely manner consistent with established and agreed manufacturing and delivery
schedules; and (iii) shall be supplied at a cost equal to the Manufacturing Cost
of such Collaboration Product.

 

(b)                                  Upon a material and uncured breach by the
Lead Manufacturing Party of its supply obligations, the other Party shall have
the right to obtain the transfer and the Lead Manufacturing Party shall have the
obligation to (i) effect such transfer [ * ], without undue delay, of any and
all manufacturing technology reasonably necessary for the Manufacture of the
applicable Collaboration Product included in the Trubion Know-How or included in
the Facet Know-How that (x) has been applied to the Manufacture of the
applicable Collaboration Product prior to Facet ceasing to be the Lead
Manufacturing Party, or (y) [ * ], as applicable, not already in the other
Party’s possession in the form and format in which such Know-How is maintained
by the Lead Manufacturing Party or its Third Party manufacturers in the ordinary
course of business, and to (ii) at the other Party’s request, use Diligent
Efforts to obtain an assignment of any Third Party manufacturing agreement in
each case as reasonably necessary to enable the other Party to Manufacture or
have Manufactured Collaboration Product in accordance with the terms of this
Agreement, provided, however, that the Lead Manufacturing Party shall be
required to assign any such agreement solely to the extent assignment is
permitted by such agreement, provided that the Lead Manufacturing Party uses
Diligent Efforts to obtain any consent necessary for such assignment, and the
Lead Manufacturing Party is not required to pay any consideration or commence
litigation in order to effect an assignment of any such agreement to the other
Party. In the event the Lead Manufacturing Party exercises or is deemed to have
exercised its Opt-Out Option pursuant to Article 7, Section 8.5 or
Section 14.2(b), then Sections 7.5(b)(iii) and 7.5(b)(x) shall apply.

 

(c)                                  The Manufacturing Costs of commercial
supplies of Collaboration Product as well as the duty, freight, postage,
shipping, transportation, insurance, warehousing and handling charges actually
allowed or paid with regard to such Collaboration Product shall be included in
the calculation of cost of goods sold as part of Commercialization Costs.

 

6.6                               Facility Audits.  The JDC shall propose and
submit to the JSC for approval a schedule for periodic audit and inspection of
the facilities of any Third Party contract manufacturer on at least an annual
basis subject to the terms of any applicable existing contract with a Third
Party contract manufacturer.  Pursuant to the schedule approved by the JSC, or
upon request of the JDC, the Lead Manufacturing Party shall conduct an
inspection or audit of the facilities of such Third Party contract
manufacturers.  The Lead Manufacturing Party shall provide not less than [ * ]
notice to the other Party of any planned inspection and such other Party shall
be permitted to participate in any audit, provided that, if the consent of the
Third

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Party contract manufacturer is required under the applicable contract to allow
such other Party to participate in such audit, the Lead Manufacturing Party
shall use Diligent Efforts to obtain such consent. Any inspection or audit
requested by the JDC (other than pursuant to the schedule approved by the JSC)
shall be conducted no more frequently than [ * ] at a given facility, and shall
occur as promptly as possible following written notice by the JDC of its desire
for such inspection or audit, but in no event shall such inspection commence
later than [ * ] thereafter (unless such audit is triggered by a material safety
or GMP non-conformance issue, in which case the audit may be conducted as
frequently as necessary and the maximum notice period shall be [ * ] if
permitted under the applicable contract).  Costs associated with auditing shall
be Development Costs or Commercialization Costs as applicable.

 

6.7                               Quality Agreement.  The Parties shall
negotiate in good faith and enter into a quality agreement governing the quality
control, quality assurance and validation of the commercial and clinical supply
of Bulk API and Product.

 

7.                                      OPT-OUT.

 

7.1                               General. Each Party shall have the right to
opt-out of all of its rights and obligations to Co-Develop and Co-Commercialize
any Collaboration Product pursuant to Sections 7.2 and 7.3 below (an “Opt-Out
Option”). In addition, each Party may also exercise its Opt-Out Option pursuant
to Section 8.5, and may be deemed to have exercised its Opt-Out Option pursuant
to Section 14.2(b). The Opt-Out Party may exercise its Opt-Out Option pursuant
to Sections 7.2, 7.3 or 8.5 by providing a written notice (an “Opt-Out Notice”)
to the Non-Opt-Out Party.

 

7.2                               Opt-Out Option.  Each Party may, on a
Product-by-Product basis, exercise its Opt-Out Option with respect to any
Collaboration Product by providing an Opt-Out Notice to the other Party during
one of the following periods: (a) the period beginning with [ * ] and ending [ *
]; (b) the period beginning with [ * ] and ending [ * ].  In addition, Trubion
may, on a Product-by-Product basis, exercise its Opt-Out Option with respect to
any Collaboration Product by providing an Opt-Out Notice to Facet at any time
after [ * ] and prior to [ * ].  Each such Opt-Out Notice shall identify the
Collaboration Product for which the Opt-Out Party is exercising the Opt-Out
Option (the “Opt-Out Product”).  If a Party is deemed to have exercised its
Opt-Out Option pursuant to Section 14.2(b), all Collaboration Products shall be
deemed Opt-Out Products and Royalty Products.

 

7.3                               Opt-Out Option Following Change of Control. 
If either Party (the “Acquired Party”) experiences a Change of Control, it shall
inform the other Party within [ * ] following the effectiveness of such Change
of Control and it shall use Diligent Efforts to arrange for the acquiring entity
to discuss with the other Party the acquiring entity’s (a) intentions with
respect to the Development and Commercialization of the Collaboration Products
and (b) contemplated proposals for amending the Development Plan and, if
applicable, Commercialization Plan for each Collaboration Product, and the other
Party may exercise its Opt-Out Option with respect to all Collaboration Products
by providing an Opt-Out Notice to the Acquired Party or its successor in
interest within [ * ] of such Change of Control and all Collaboration Products
shall become Opt-Out Products on the Opt-Out Effective Date.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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7.4                               Opt-Out Effective Date. An Opt-Out Option
shall become effective [ * ] after the Non-Opt-Out Party’s receipt of such
Opt-Out Notice (the “Opt-Out Effective Date”).  Notwithstanding the foregoing,
if a Party, after uncured material breach, is deemed to have exercised its
Opt-Out Option pursuant to Section 14.2(b), then both the date of the Opt-Out
Notice and the Opt-Out Effective Date for such Opt-Out Option shall be deemed to
be the date on which the other Party provides the notice under
Section 14.2(b) to continue this Agreement and all Collaboration Products shall
become Royalty Products on such date.

 

7.5                               Consequences of Opt-Out.

 

(a)                                  The Opt-Out Party’s obligations and rights
to Co-Develop and Co-Commercialize a particular Opt-Out Product shall terminate
upon the applicable Opt-Out Effective Date, and the Opt-Out Party shall have no
liability for Development Costs or Commercialization Costs incurred by the
Non-Opt-Out Party in respect of the Opt-Out Product(s) following the Opt-Out
Effective Date, provided, however, that the Opt-Out Party shall remain liable
for its share of [ * ].

 

(b)                                  The Non-Opt-Out Party may, in its sole
discretion, elect to continue the Development and Commercialization of the
Opt-Out Product by notice (the “Pursuit Notice”) to the Opt-Out Party.  [ * ].
Notwithstanding the foregoing, if a Party is deemed to have exercised its
Opt-Out Option pursuant to Section 14.2(b), then the Non-Opt-Out Party shall be
deemed to have provided a Pursuit Notice to the Opt-Out-Party by providing a
written notice of continuation of the Agreement pursuant to Section 14.2(b).  If
the Non-Opt-Out Party delivers a Pursuit Notice with respect to an Opt-Out
Product [ * ] or is deemed to have delivered such Pursuit Notice, such Opt-Out
Product shall become a Royalty Product, and:

 

(i)                                    the Non-Opt-Out Party shall be solely
responsible, at its sole cost and expense (except for those costs for which the
Opt-Out Party remains responsible pursuant to Section 7.5(a)) for the
Development of such Royalty Product, the preparation and filing of Regulatory
Materials for such Royalty Product, the receipt of Regulatory Approval for such
Royalty Product, and the Commercialization of such Royalty Product, in each case
in the Field in the Territory.  The Non-Opt-Out Party shall use Diligent Efforts
to Develop and obtain Regulatory Approval for Royalty Products and to
Commercialize such Royalty Products in the Field in the Major Market Countries;

 

(ii)                                the Non-Opt-Out Party will inform the
Opt-Out Party of the status of the Non-Opt-Out Party’s Development and
Commercialization of Royalty Products through [ * ] progress reports submitted
in writing to the Opt-Out Party, provided that if the Opt-Out Party remains
responsible for the costs [ * ] pursuant to Section 7.5(a), the Non-Opt-Out
Party shall additionally provide [ * ] reports and invoices with respect to such
[ * ];

 

(iii)                            the Opt-Out Party shall provide reasonable
consultation and assistance during a period of [ * ] following the Opt-Out
Party’s receipt of the Pursuit Notice or written notice of continuation of the
Agreement pursuant to Section 14.2(b), (“Transition Assistance”) for the purpose
of transferring or transitioning to the Non-Opt-Out Party, (i) all Facet Applied
Know-How or Trubion Know-How, as applicable, which is reasonably necessary for
the continued Development, Manufacture or Commercialization of the Royalty
Product not

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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already in the Non-Opt-Out Party’s possession in the form and format in which
such Know-How is maintained by the Opt-Out Party or its Affiliate or
subcontractor in the ordinary course of business, and (ii) at the Non-Opt-Out
Party’s request, the Opt-Out Party shall use Diligent Efforts to assign to the
Non-Opt-Out Party all then-existing Third Party agreements that relate solely to
the Royalty Product, in the Territory, in the Field and are reasonably necessary
for the Non-Opt-Out Party to continue researching, Developing, Manufacturing, or
Commercializing such Royalty Product in the Territory, in the Field; provided,
however, that the Opt-Out Party shall be required to assign any such agreement
solely to the extent assignment is permitted by such agreement provided that the
Opt-Out Party uses Diligent Efforts to obtain any consent necessary for such
assignment, and the Opt-Out Party is not required to pay any consideration or
commence litigation in order to effect an assignment of any such agreement to
the Non-Opt-Out Party;

 

(iv)                               the Opt-Out Party shall transfer and assign
to the Non-Opt-Out Party, in the form and format in which such materials are
maintained by the Opt-Out-Party in the ordinary course of business, all
Regulatory Materials for such Royalty Product, in the Territory, in the Field,
that are Controlled by the Opt-Out-Party or its Affiliates or permitted
sublicensees; the Non-Opt-Out Party shall have the right, without any additional
consideration, to use any and all such data and reports supplied by the Lead
Regulatory Party under this Section 7.5(b)(iv) or pursuant to Section 4.1 in
connection with the Development, Manufacture and/or Commercialization of such
Royalty Product in the Field, in the Territory in accordance with the terms of
this Agreement, including the incorporation of such data or reports in any
regulatory submissions; and the Opt-Out Party’s rights to participate in
regulatory activities and meetings shall terminate;

 

(v)                                   all Committees except the JPC shall cease
to have any rights, obligations or decision-making capabilities with respect to
such Royalty Product and, if there are no Collaboration Products still being
pursued at such time, shall disband until such time, if ever, that a
Collaboration Product is being pursued.  All decisions that were made by such
Committees under this Agreement with respect to the Royalty Product prior to the
Opt-Out Effective Date shall thereafter be made solely by the Non-Opt-Out Party
consistent with such Party’s obligations under Section 7.5(b)(i). The JPC shall
continue subject to Section 10.3 unless a Party has exercised or is deemed to
have exercised its Opt-Out Option in respect of all Collaboration Products, in
which case all decisions that were made by the JPC prior to the Opt-Out
Effective Date shall be made solely by the Non-Opt-Out Party consistent with
such Party’s obligations under Section 7.5(b)(i);

 

(vi)                               if the Opt-Out Party is the Lead
Manufacturing Party of the Royalty Product(s), as part of and during the period
of the Transition Assistance (1) the Non-Opt-Out Party shall have the right to
require the Opt-Out Party to continue supplying Bulk API and finished Product
for such Royalty Product(s) under the terms of Article 6 for a period of up to
eighteen (18) months (provided that the Non-Opt-Out Party shall use Diligent
Efforts to find one or more alternative suppliers for Bulk API and finished
Product as soon as reasonably possible following the exercise of the Opt-Out
Option), and (2) the Non-Opt-Out Party shall have the right to obtain transfer,
and the Opt-Out-Party shall have the obligation to effect transfer, without
undue delay, of any and all manufacturing technology included in the Facet
Applied Know-How or Trubion Know-How, as applicable, that is reasonably
necessary to enable

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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the Non-Opt-Out Party to Manufacture, or have Manufactured such Royalty
Product(s). The Non-Opt-Out Party automatically owns one-half (1/2) of any or
all of the inventory in existence as of the Opt-Out Effective Date of Bulk API
and/or finished Product for such Royalty Product (such inventory, the “Existing
Inventory”).  In addition, the Non-Opt-Out Party shall have the right to
purchase the other half of the Existing Inventory from the Opt-Out Party by
reimbursing the Opt-Out Party for the Manufacturing Costs with respect to such
Existing Inventory. The Non-Opt-Out Party shall notify the Opt-Out Party within
[ * ] after the Effective Opt-Out Date whether the Non-Opt-Out Party elects to
exercise such right to purchase the other half of the Existing Inventory;

 

(vii)                           the Opt-Out Party shall, as promptly as
commercially practicable, assign to the Non-Opt-Out Party all right, title and
interest in and to the Marks owned by the Opt-Out Party that were used or
intended to be used with the Royalty Products (excluding any such Marks that
include, in whole or part, any corporate name or logo of the Opt-Out Party or
its Affiliates or permitted sublicensees), including any goodwill associated
therewith. For the avoidance of doubt, only those Marks that have been
(A) identified as the single designated lead candidate Mark for a
non-commercialized Royalty Product, or (B) actually used in connection with a
Commercialized Royalty Product, shall be assigned. The Non-Opt-Out Party shall
be responsible for recording such assignment in the Territory with the
appropriate Governmental Authority and will bear all costs associated with such
assignment and recordation. The Opt-Out Party shall cooperate in facilitating
such assignment and recordation by timely executing all necessary documents
provided to it by the Non-Opt-Out Party;

 

(viii)                       in lieu of the Product Profit payments it would
have received if the Opt-Out Party had not exercised its Opt-Out Option or the
Opt-Out Party had not been deemed to have exercised its Opt-Out Option under
Section 14.2(b) with respect to such Royalty Product, the Opt-Out Party shall
receive from the Non-Opt-Out Party royalties on the Net Sales of the Royalty
Product(s) as provided for under Section 9.5;

 

(ix)                              the Opt-Out Party shall use Diligent Efforts
to effect the assignment or the granting of a sublicense or equivalent right of
access to the Non-Opt-Out Party, whether through novation or sublicensing of
such contracts or otherwise, of any and all rights under any contract between
the Opt-Out Party and any Third Party that are reasonably necessary for the
Non-Opt-Out Party to continue with Development or Commercialization of such
Royalty Product, and the Non-Opt-Out Party shall reasonably cooperate in
connection therewith, provided that if such assignment, novation or sublicense
is not permissible, the Parties shall discuss in good faith potential
alternatives that would enable the Non-Opt-Out Party to exercise at the
Non-Opt-Out Party’s expense (on a pass-through basis) the rights and perform the
obligations of the Opt-Out Party under such contracts with respect to such
Royalty Product while minimizing the continuing obligations of the Opt-Out Party
under such contract with respect to such Royalty Product, and, unless the
Non-Opt-Out Party informs the Opt-Out Party in writing that [ * ], the Opt-Out
Party shall [ * ]; and

 

(x)

 

a.                                       in the event of an Opt-Out pursuant to
Section 7.2 or Section 8.5, the Non-Opt-Out Party shall reimburse the Opt-Out
Party for [ * ] of the reasonable

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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expenses incurred by the Opt-Out Party in the course of performing its transfer
obligations pursuant to Sections 7.5(b)(iii), 7.5(b)(iv), 7.5(vi)(2) and
7.5(vii), provided that any request for reimbursement of such expenses is
accompanied by invoices, and/or such other appropriate supporting documentation
evidencing in reasonable detail the expenses for which reimbursement is allowed
under this Section 7.5(b)(x); and

 

b.                                       in the event of an Opt-Out pursuant to
Section 7.3, the Non-Opt-Out Party shall reimburse the Opt-Out Party for [ * ]
of the reasonable expenses incurred by the Opt-Out Party in the course of
performing its transfer obligations pursuant to Sections 7.5(b)(iii),
7.5(b)(iv), 7.5(vi)(2) and 7.5(vii), provided that any request for reimbursement
of such expenses is accompanied by invoices, and/or such other appropriate
supporting documentation evidencing in reasonable detail the expenses for which
reimbursement is allowed under this Section 7.5(b)(x).

 

8.                                      LICENSES.

 

8.1                               License to Facet.  Subject to the terms and
conditions of this Agreement, Trubion, effective as of the Signing Date, hereby
grants to Facet an exclusive license (exclusive even as to Trubion, except to
the extent necessary for Trubion to perform its obligations and exercise its
rights under this Agreement), with the right to grant sublicenses in accordance
with the provisions of Section 8.3, under the Trubion Patent Rights and Trubion
Know-How, to research Develop, use, make, Manufacture, import, export
distribute, market, offer for sale, sell and Commercialize Products, in the
Field, in the Territory in accordance with the terms of this Agreement. 
Notwithstanding the foregoing, the rights granted to Facet under this
Section 8.1 shall terminate with respect to an Opt-Out Product effective (a) as
of the Opt-Out Effective Date for such Product if Facet exercises or is deemed
to have exercised its Opt-Out Option, and (b) [ * ].  For clarity, the rights
granted to Facet under this Section 8.1 shall remain in full force and effect if
Trubion is deemed to have exercised its Opt-Out Option pursuant to
Section 14.2(b).

 

8.2                               Licenses to Trubion.

 

(a)                                  Subject to the terms and conditions of this
Agreement, Facet, effective as of the Signing Date, hereby grants to Trubion a
license, with the right to grant sublicenses in accordance with the provisions
of Section 8.3, under the Facet Patent Rights and the Facet Know-How, which
license shall be non-exclusive, except with respect to Facet’s interest in Joint
Patent Rights for which such license shall be co-exclusive, solely for the
purpose of, and limited to, Trubion’s exercise of its rights and performance of
its obligations under this Agreement, to Develop, use, make, Manufacture,
import, export, distribute, market, offer for sale, sell and Commercialize
Collaboration Products, in the Field, in the Territory in accordance with the
terms of this Agreement.

 

(b)                                  Subject to the terms and conditions of this
Agreement, Facet, effective as of the date of the delivery or deemed delivery of
Trubion’s Pursuit Notice with respect to an Opt-Out Product, hereby grants to
Trubion an exclusive, royalty-bearing license, with the right to grant
sublicenses in accordance with the provisions of Section 8.3, under the Facet
Applied Technology, to Develop, use, make, Manufacture, import, export,
distribute, market, offer for

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

46

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sale, sell and Commercialize such Royalty Product, in the Field, in the
Territory in accordance with the terms of this Agreement.

 

8.3                               Sublicensing.

 

(a)                                  No Sublicensing.  Except as set forth in
Sections 8.3(b) and 8.3(c), neither Party shall sublicense any of the rights
granted to it under this Agreement to any Third Party without the prior written
consent of the other Party, provided that either Party may sublicense such
rights:  (i) to its Affiliates, further provided that any such sublicense to an
Affiliate shall immediately terminate if and when such entity ceases to be an
Affiliate of such Party, and (ii) subject to Sections 3.5(a) and 3.5(b), to
subcontractors or consultants to perform such Party’s assigned Development,
Manufacturing or Commercialization responsibilities under this Agreement with
respect to Collaboration Products, further provided that (A) such Party remains
responsible for the work allocated to, and payment to, such subcontractors and
consultants to the same extent it would if it were doing such work itself,
(B) such sublicense shall be subject and subordinate to, and consistent with,
the terms and conditions of this Agreement, (C) such sublicense shall not in any
way diminish, reduce or eliminate any of such Party’s obligations under this
Agreement, and (D) such Party uses Diligent Efforts to include in such
sublicense agreement a provision which permits such Party to provide a copy of
such sublicense agreement to the other Party, which copy may be redacted to
exclude confidential information not related to the applicable Collaboration
Product.  Unless prohibited by the terms of the sublicense, such Party shall
provide the other Party with a copy of each such sublicense agreement entered
into after the Signing Date within [ * ] after the execution thereof, which
agreement may be redacted to exclude confidential information not related to the
applicable Collaboration Product.

 

(b)                                  Joint Sublicense.  The Parties acknowledge
that they may, upon mutual agreement, both grant sublicenses to a Third Party
with respect to a particular Collaboration Product, including with respect to a
particular country or indication.

 

(c)                                  Upon Opt-Out.  At any time after its
delivery or deemed delivery of a Pursuit Notice with respect to a particular
Royalty Product, the Non-Opt-Out Party may grant to one or more Third Parties
sublicenses of some or all of the rights granted to it under Section 8.1 or
8.2(b), as applicable, but only with respect to such Royalty Product; provided
that the Non-Opt-Out Party shall execute a written agreement with each such
permitted sublicensee, which sublicense (i) shall be subject and subordinate to,
and consistent with, the terms and conditions of this Agreement, (ii) shall not
in any way diminish, reduce or eliminate any of the Non-Opt-Out Party’s
obligations under this Agreement, (iii) shall require each such permitted
sublicensee to comply with all applicable terms of this Agreement, including to
keep books and records, and (iv) shall permit the Non-Opt-Out Party to audit
(either directly or through an independent auditor) such books and records.  The
Non-Opt-Out Party shall provide the Opt-Out Party with a copy of each such
sublicense agreement within [ * ] after the execution thereof.  Such copy may be
redacted to exclude confidential, non-Royalty Product-related information and
financial information (other than such financial information that is necessary
for assessing the obligations to the Opt-Out Party under this Agreement).  Upon
the Opt-Out Party’s request and at the Opt-Out Party’s expense, the Non-Opt-Out
Party shall exercise its right to conduct an audit of a sublicensee’s books and
records pertaining to the sale of the applicable Royalty Product under any such
sublicense agreement at the next time that conducting such an audit is
permissible

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

47

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under such sublicense agreement.  The Non-Opt-Out Party shall provide the
Opt-Out Party with a copy of the report of the findings made in any such audit. 
If such audit reveals that such sublicensee has understated its Net Sales by [ *
] or more, the Non-Opt-Out Party shall be responsible for the reasonable
out-of-pocket costs of the Opt-Out Party in conducting the audit.  The
Non-Opt-Out Party shall remain responsible for its obligations hereunder and for
the performance of its sublicensees (including, without limitation, making all
payments due to the Opt-Out Party by reason of any Net Sales of Royalty
Product), and shall ensure that any such sublicensees comply with all relevant
provisions of this Agreement.  In the event of any uncured material breach by
any sublicensee under a sublicense agreement that would constitute a material
breach of the Non-Opt-Out Party’s obligations under this Agreement, the
Non-Opt-Out Party will promptly inform the Opt-Out Party in writing and shall
take such action which in the Non-Opt-Out Party’s reasonable business judgment
will address such default; provided, however, any such uncured material breach
by such sublicensee of an obligation that would constitute a material breach of
the Non-Opt-Out Party’s obligations under this Agreement shall be deemed an
uncured material breach of the Non-Opt-Out Party hereunder unless the
Non-Opt-Out Party cures such material breach within the time provided under
Section 14.2.

 

8.4                               No Implied Rights.  Except as expressly
provided in this Agreement, neither Party shall be deemed by estoppel or
implication to have granted the other Party any license or other right with
respect to any intellectual property of such Party.

 

8.5                               Exclusivity.  Except for the Development and
Commercialization of Products pursuant to the terms of this Agreement, during
the Term neither Party shall Develop or Commercialize any protein therapeutic,
including any [ * ], that binds to the CD37 Antigen [ * ] (a “Competing
Program”).  In the event that, due to a Change of Control of a Party, such
Party, or its successor in interest, is conducting a Competing Program during
the Term of this Agreement, then such Party, or its successor in interest, shall
either (a) exercise its Opt-Out Option with respect to all Collaboration
Products by providing an Opt-Out Notice to the other Party; or (b) divest such
Competing Program to a Third Party, in each case within [ * ] of such Change of
Control.

 

8.6                               [ * ].  Each Party shall promptly bring to the
attention of the JSC (or the other Party if there is no JSC in place at the
time) any [ * ] that such Party wishes to Develop and Commercialize during the
Term. Upon the recommendation of the JSC (or the mutual agreement of the Parties
if there is no JSC in place at the time), the Parties shall negotiate in good
faith an agreement to Develop and Commercialize such [ * ] on commercially
reasonable terms.

 

8.7                               Third Party Licenses.  If the JPC determines
that it is advisable or necessary to obtain a license (“Future Third Party
License”) to any intellectual property right that is owned or controlled by a
Third Party and is reasonably necessary or useful to the Development,
Manufacture, or Commercialization of a Collaboration Product, the JPC shall so
advise the JSC.  If the JSC determines to seek a license, the JSC shall
designate a Party to negotiate the terms on which such a Third Party license
would be granted and to serve as the primary point of contact with the
applicable Third Party licensor following the execution of the license
agreement.  Upon approval of the terms of such Future Third Party License by the
JSC, the designated Party may execute such Future Third Party License and any
payments that become due pursuant to a Future Third Party License agreement
executed pursuant to this Section 8.7 will be treated as

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

48

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Development Costs or Commercialization Costs, as applicable, if incurred prior
to the Opt-Out Effective Date or after the Opt-Out Effective Date but with
respect to a Collaboration Product. If a Party delivers or is deemed to have
delivered a Pursuit Notice for a Collaboration Product, any payments arising
under a Future Third Party License from the Development, Manufacturing or
Commercialization of the applicable Royalty Product shall be paid by such
Non-Opt-Out Party, subject to Section 9.5(e)(iii).

 

9.                                      CONSIDERATION.

 

9.1                               Upfront Payment.  Facet shall pay to Trubion
Twenty Million Dollars ($20,000,000.00) within ten (10) days after the Signing
Date, which payment shall be non-refundable and non-creditable.

 

9.2                               Equity Investment.  Facet and Trubion have
entered into the Stock Purchase Agreement attached hereto as Exhibit C, pursuant
to which Facet will purchase from Trubion and Trubion will sell to Facet Ten
Million Dollars ($10,000,000.00) of newly issued shares of common stock of
Trubion at a purchase price per share equal to One Hundred Thirty-Five Percent
(135%) of the average closing price of a share of common stock of Trubion over
the sixty (60) trading days prior to the Signing Date provided that such
purchase price (including the 35% premium) shall not be greater than $[ *
]/share or lower than $[ * ]/share of common stock of Trubion.

 

9.3                               Development Milestone Payments.  Facet shall
make milestone payments (each a “Milestone Payment”) to Trubion based on the
first achievement of each milestone event in the Field, in the Territory for
each Product as set forth in this Section 9.3. No Milestone Payment shall be
made twice with respect to the same Product. For the purposes of this
Section 9.3, two Products are deemed the “same Product” if one Product contains,
as its active pharmaceutical ingredient, [ * ].  Facet shall pay to Trubion the
amounts set forth below, within [ * ] after the first achievement of the
corresponding milestone event with respect to the Product.  Each Milestone
Payment is non-refundable and non-creditable against any other payments due
hereunder, provided that if the Development of a Product is abandoned, any
Milestone Payments made with respect to such abandoned Product may be credited
against the corresponding Milestone Payments payable on a Product which achieves
such milestones after the abandonment of the other Product. For the purposes of
this Section 9.3, the “[ * ]” of a Clinical Trial shall occur upon [ * ], “[ *
]” and “[ * ]” shall be [ * ] or, [ * ]. Notwithstanding anything to the
contrary in this Agreement, if Trubion is deemed pursuant to Section 14.2(b) to
have exercised its Opt-Out Option with respect to all Products on account of an
uncured material breach by Trubion, the amount of the milestone payments due
pursuant to this Section 9.3 with respect to milestone events achieved by all
Products after Facet has provided Trubion with written notice of continuation in
accordance with Section 14.2(b) shall be reduced by [ * ].

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

49

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Milestone Event

 

Milestone
Payment

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

[ * ]

 

$

[ * ]

 

 

9.4                               Sharing of Product Profit.

 

(a)                                  Allocation.  Facet and Trubion shall share
equally in Product Profit (which, for the avoidance of doubt, includes sharing
of losses in a given period if the calculation of Product Profit for such period
is negative) arising from the sale of each Collaboration Product in the Field in
the Territory.

 

(b)                                  FTE Records and Calculations.  Each Party
shall record its FTE effort for the Commercialization of each Collaboration
Product to the extent that such FTE efforts are included in Commercialization
Costs that are, or may in the future be, shared under this Agreement, and shall
report such FTE effort to the JCC, on a Calendar Quarterly basis, in each case
in a manner that allocates such FTE effort to the extent practicable to each
applicable Collaboration Product.  Except to the extent provided herein, each
Party shall calculate and maintain records of FTE effort incurred by it in the
same manner as used for other products commercialized by such Party in
accordance with a methodology approved by the JSC.  The JFC shall facilitate any
reporting hereunder.

 

(c)                                  Commercialization Costs Accounts.  Each
Party shall charge all Commercialization Costs as incurred by it or its
Affiliates on its books and records in connection with each Commercialization
Plan.  Each Party shall provide the other Party with an interim

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

50

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quarterly report of monthly estimates for the current Calendar Quarter charges
within [ * ] after the end of the second calendar month in each Calendar
Quarter.

 

(d)           Other Expenses.  Any expenses incurred by a Party for
Commercialization activities that do not fall within the definitions of
Commercialization Costs shall be borne solely by such Party unless the JSC
determines otherwise. In addition, each Party shall bear all costs incurred
pursuant to the Commercialization Plan, that exceed the portion of the
Commercialization Budget allocated to the Party with respect to the relevant
Calendar Quarter by more than [ * ] unless otherwise approved by the JSC.

 

(e)           Pre-existing Obligations. Unless otherwise determined by the JSC,
any manufacturing obligations in existence prior to the Signing Date, such as
manufacturing capacity reservation or other obligations described in
Section 6.3, other than those disclosed in writing by the obligated Party prior
to the Signing Date and specifically agreed upon by the Parties, will not be
considered Commercialization Costs and will not be subject to expense sharing.

 

(f)            Reporting.  Within [ * ] after the end of each Calendar Quarter,
commencing with the first Calendar Quarter in which the Parties are implementing
a Commercialization Plan for a particular Collaboration Product, each Party
shall report to the JCC and the JFC its gross sales and Commercialization Costs
for such Collaboration Product in the Territory.  In addition, each Party shall
provide the JCC and the JFC with a monthly statement on a Product-by-Product and
country-by-country basis of the amount of gross sales of Collaboration Products.

 

(g)           Payment.  Within [ * ] after receipt of such reports, the JFC
shall provide for such Collaboration Product a consolidated financial statement
setting forth the Product Profit for such Collaboration Product and calculating
each Party’s fifty percent (50%) share of such Product Profit. Thereafter the
following remittance obligations shall apply for such Collaboration Product
depending on whether such Product Profit is positive or negative:

 

(i)            If there is positive Product Profit for such Calendar Quarter,
then one Party shall make a payment to the other Party within [ * ] following
delivery of the financial statement referenced above in an amount that will
cause each Party to have received an equal share of the Product Profit for such
Calendar Quarter.

 

(ii)           If there is negative Product Profit for such Calendar Quarter,
then one Party shall make a payment to the other Party so that each Party will
bear an equal share of the Product Profit for such Calendar Quarter.  Such
payment shall be made within [ * ] following delivery of the financial statement
referenced above.

 

(h)           Records.  Each Party shall keep detailed records of the
Commercialization Costs it incurs, including all supporting documentation for
such expenses, and remits for payment. Each Party shall keep such records for at
least [ * ] after the date that such expense was incurred.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

51

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9.5          Royalties.

 

(a)           Base Royalties.

 

(i)            Trubion Royalties.  Subject to Section 9.5(e), if Trubion has
exercised its Opt-Out Option pursuant to Section 7.2, Facet shall pay Trubion
royalties on the Net Sales of Royalty Products during the applicable Royalty
Period as follows:

 

Date of Trubion Opt-Out Notice:

 

Royalty Rate:

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

 

(ii)           Facet Royalties.  Subject to Section 9.5(e) if Facet has
exercised its Opt-Out Option pursuant to Section 7.2 Trubion shall pay Facet
royalties on the Net Sales of Royalty Products during the applicable Royalty
Period as follows:

 

Date of Facet Opt-Out Notice:

 

Royalty Rate:

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

 

(b)           Royalties after Opt-Out due to Competing Program.  Subject to
Section 9.5(e), if the Opt-Out Party exercised its Opt-Out Option pursuant to
Section 8.5 (i.e., due to a Competing Program following a Change of Control of
the Opt-Out Party), the Non-Opt-Out Party shall pay the Opt-Out Party royalties
on the Net Sales of Royalty Products during the applicable Royalty Period, as
follows:

 

Date of Opt-Out Notice:

 

Royalty Rate:

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

 

(c)           Royalties after Opt-Out Following Change of Control.  Subject to
Section 9.5(e), if the Opt-Out Party exercised its Opt-Out Option pursuant to
Section 7.3 following a Change of Control of the Non-Opt-Out Party, the
Non-Opt-Out Party (or its successor in interest) shall pay the Opt-Out Party
royalties on the Net Sales of Royalty Products during the applicable Royalty
Period, as follows:

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

52

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Date of Opt-Out Notice:

 

Royalty Rate:

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

 

(d)           Royalties after Opt-Out Following Uncured Breach.

 

(i) Trubion Royalties.  Subject to Section 9.5(e), if Trubion is deemed pursuant
to Section 14.2(b) to have exercised its Opt-Out Option with respect to all
Products on account of an uncured material breach by Trubion, Facet shall pay
Trubion royalties on the Net Sales of Royalty Products during the applicable
Royalty Period, as follows:

 

Date of Trubion Deemed Opt-Out:

 

Royalty Rate:

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

 

(ii) Facet Royalties.  Subject to Section 9.5(e), if Facet is deemed pursuant to
Section 14.2(b) to have exercised its Opt-Out Option with respect to all
Products on account of an uncured material breach by Facet, Trubion shall pay
Facet royalties on the Net Sales of Royalty Products during the applicable
Royalty Period, as follows:

 

Date of Facet Deemed Opt-Out:

 

Royalty Rate:

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

[ * ]

 

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

53

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(e)           Reduced Royalty Rate.

 

(i)            If a Royalty Product is generating Net Sales in a country during
the applicable Royalty Period at a time when there is no Valid Claim covering
such Royalty Product in such country of sale within the Trubion Patent Rights or
the Facet Applied Patent Rights, then the royalty rate applicable to Net Sales
of such Royalty Product in such country shall be reduced by [ * ] of the
applicable royalty rate set forth in Section 9.5(a)-(d).

 

(ii)           If a Royalty Product is generating Net Sales in a country during
the applicable Royalty Period at a time when a competing product is being
actively marketed and sold in such country, then the royalty rate applicable to
Net Sales of such Royalty Product in such country shall be reduced by [ * ] of
the applicable royalty rate set forth in Section 9.5(a)-(d). For purposes of
this Section 9.5(e)(ii), “competing product” shall mean a third party protein
therapeutic that [ * ].

 

(iii)         The Non-Opt-Out Party may, subject to Section 9.5(e)(iv), deduct
from the royalties it would otherwise owe to the Opt-Out Party pursuant to this
Section 9.5 for Third Party licenses entered into after the Signing Date,
including Future Third Party Licenses, an amount equal to [ * ] of the amounts
paid to Third Parties in consideration for intellectual property rights that the
Non-Opt-Out Party reasonably believes are necessary in connection with the
Development, Manufacture or Commercialization of a Royalty Product in the Field
in the Territory.

 

(iv)          During the Royalty Period, the operation of Sections [ * ]
individually or in combination shall not reduce by more than [ * ] the royalties
that would otherwise have been due under in Section 9.5(a)-(d).

 

(f)            Expiration of Royalty Period.  After the expiration of the
Royalty Period for any Royalty Product in any country in the Territory, no
further royalties shall be payable in respect of sales of such Royalty Product
in such country and thereafter the licenses granted to the Non-Opt-Out Party
under Section 8.1 or 8.2, as applicable, with respect to such Royalty Product in
such country shall be fully paid-up, perpetual, irrevocable, royalty-free,
non-exclusive licenses.

 

(g)           Cumulative Royalties.  The obligation to pay royalties under
Section 9.5 shall be imposed only once with respect to a single unit of a
Royalty Product, regardless of how many Valid Claims included within the Trubion
Patent Rights, or Facet Applied Patent Rights would, but for this Agreement, be
infringed by the Manufacture, use, import, offer for sale or sale of such
Royalty Product in the countr(y)ies in the Territory of such Manufacture, use or
sale.

 

(h)           Royalty Product Reports and Payments.  During the Royalty Period,
within [ * ] after the end of each Calendar Quarter, the Non-Opt-Out Party shall
deliver to the Opt-Out Party a report setting forth for such Calendar Quarter
the following information, on a Royalty Product-by-Royalty Product and
country-by-country basis: (a) the gross sales amount

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

54

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(by the Non-Opt-Out Party, its Affiliates and permitted sublicensees) for each
Royalty Product sold in the Field in the Territory, on a country-by-country
basis; (b) the Net Sales for each Royalty Product; and (c) the royalty amount
due hereunder for the sale of each Royalty Product.  No such reports shall be
due for any Royalty Product before the First Commercial Sale of such Royalty
Product in the Territory.  The total royalty due for the sale of Royalty
Products during such Calendar Quarter shall be remitted at the time such report
is made.

 

9.6          Taxes and Withholding.  All payments due from one Party to another
under this Agreement will be made without any deduction or withholding for or on
account of any tax unless such deduction or withholding is required by
applicable Laws to be assessed against the receiving Party.  If the paying Party
is so required to deduct or withhold, the paying Party will (a) promptly notify
the receiving Party of such requirement, (b) pay to the relevant authorities the
full amount required to be deducted or withheld promptly upon the earlier of
determining that such deduction or withholding is required or receiving notice
that such amount has been assessed against the receiving Party, (c) promptly
forward to the receiving Party an official receipt (or certified copy) or other
documentation reasonably acceptable to the receiving Party evidencing such
payment to such authorities, and (d) otherwise reasonably cooperate with the
receiving Party in connection with the receiving Party’s attempts to obtain
favorable tax treatment and credit therefor (where appropriate) in accordance
with applicable Laws.

 

9.7          Currency.  All amounts payable and calculations hereunder shall be
in Dollars. Conversion of sales recorded in local currencies to Dollars will be
performed in a manner consistent with a Party’s normal practices used to prepare
its financial statements and consistent with GAAP, provided that such practices
use a widely accepted source of published exchange rates (and are approved by
the JCC as applicable).

 

9.8          Interest on Past Due Payments.  If either Party fails to pay any
payment due under this Agreement on or before the date such payment is due, as
provided in this Agreement, such late payment shall bear interest, to the extent
permitted by applicable Law, at [ * ], effective for the first date on which
payment was delinquent and calculated on the number of days such payment is
overdue or, if [ * ] as the Parties agree.

 

9.9          Maintenance of Records; Audits; Consolidation.

 

(a)           Record Keeping.  Each Party shall keep accurate books and accounts
of record in accordance with GAAP in connection with the Development,
Manufacture and Commercialization of Products, and the calculation of payments
to be made under this Agreement in sufficient detail to permit accurate
determination of all amounts necessary for verification of royalties and other
payments to be paid from one Party to another under this Agreement.  Each Party
shall maintain such records for a period of at least [ * ] after the end of the
Calendar Year in which they were generated.

 

(b)           Audits.  Upon thirty (30) days prior written notice, a Party (the
“Auditing Party”) may conduct and the other Party (the “Audited Party”) shall
permit an independent certified public accounting firm of nationally recognized
standing selected by the Auditing Party and reasonably acceptable to the Audited
Party, to examine, at the Auditing Party’s sole expense, the relevant books and
records of the Audited Party as may be reasonably necessary to verify the

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

55

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accuracy of (a) reports for Development Costs, (b) Manufacturing Costs,
(c) Commercialization Costs and (d) the reports submitted by the Audited Party
in accordance with this Agreement in connection with the payment of royalties
and other amounts hereunder.  An examination by the Auditing Party under this
Section 9.9(b) shall occur not more than once in any Calendar Year and shall be
limited to the pertinent books and records for any Calendar Year ending not more
than [ * ] before the date of the request.  The accounting firm shall be
provided access to such books and records at the Audited Party’s facility(ies)
where such books and records are normally kept and such examination shall be
conducted during the Audited Party’s normal business hours.  The Audited Party
may require the accounting firm to sign a standard non-disclosure agreement
before providing the accounting firm access to the Audited Party’s facilities or
records.  Upon completion of the audit, the accounting firm shall provide both
the Audited Party and the Auditing Party a written report disclosing whether the
reports submitted by the Audited Party are correct or incorrect, whether the
amounts paid are correct or incorrect, and in each case, the specific details
concerning any discrepancies.  No other information shall be provided to the
Auditing Party.

 

(c)           Underpayments/Overpayments.  If such accounting firm concludes
that additional royalties or other payments were due to the Auditing Party, the
Audited Party shall pay to the Auditing Party the additional amounts within [ *
] of the date the Audited Party receives such accountant’s written report so
concluding.  If an underpayment exceeds [ * ] of the amounts that were to be
paid to the Auditing Party, the Audited Party also shall reimburse the Auditing
Party for all costs and reasonable out-of-pocket expenses incurred in conducting
the audit.  If such accounting firm concludes that the Audited Party overpaid
the Auditing Party, the Auditing Party, within [ * ] of the date the Auditing
Party receives such account’s report so concluding, will refund such
overpayments to the Audited Party less the reasonable out-of-pocket costs
incurred by the Auditing Party in conducting the audit.

 

(d)           Confidentiality.  All financial information of the Audited Party
with respect to a Royalty Product which is subject to review under this
Section 9.9 shall be deemed to be the Audited Party’s Confidential Information
subject to the provisions of Article 11, and the Auditing Party shall not
disclose such Confidential Information to any Third Party or use such
Confidential Information for any purpose other than verifying payments to be
made by the Audited Party with respect to such Royalty Product; provided,
however, that such Confidential Information may be disclosed by the Auditing
Party to Third Parties only to the extent necessary to enforce the Auditing
Party’s rights under this Agreement. All financial information of the Audited
Party with respect to a Collaboration Product which is subject to review under
this Section 9.9 shall be deemed to be the Confidential Information of both
Parties subject to the provisions of Article

 

(e)           Consolidation.  In the event that a Party is, in the opinion of
its independent registered accounting firm, reasonably required to consolidate
or otherwise report in the financial statements of such Party (the
“Consolidating Party”), all or a portion of the financial performance of the
other Party (the “Consolidated Party”) for any financial reporting periods, then
the Consolidating Party shall promptly notify the Consolidated Party of such
determination in writing, and the Consolidated Party agrees to cooperate and
promptly provide reasonable access to its books and records in order for the
Consolidating Party to fulfill its financial reporting obligations.

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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10.          INTELLECTUAL PROPERTY.

 

10.1        Ownership of Collaboration Inventions.

 

(a)           The JPC shall, within a reasonable time after the Signing Date,
establish and oversee a mutually agreeable procedure for (i) identifying and
disclosing all inventions and Know-How generated by one or both Parties, their
Affiliates or their respective employees, agents, or independent contractors in
the course of conducting activities under this Agreement (“Collaboration
Inventions”); and (ii) determining inventorship of each such Collaboration
Invention, provided that such determination shall be made in accordance with
United States patent laws.

 

(b)           Each Party shall solely own all Collaboration Inventions invented
solely by its and/or its Affiliates’ respective employees, agents and/or
independent contractors.

 

(c)           All Collaboration Inventions invented jointly by one or more
employees, agents, or independent contractors of Trubion and/or its Affiliates
and one or more employees, agents, or independent contractors of Facet and/or
its Affiliates (collectively, “Joint Inventions”) shall be owned jointly by the
Parties in accordance with joint ownership interests of co-inventors under
United States patent laws (that is, each Party shall have full rights to
license, assign and exploit such Joint Inventions (and any patents arising
therefrom) anywhere in the world, without any requirement of gaining the consent
of, or accounting to, the other Party), subject to the licenses granted herein
and subject to any other intellectual property held by such other Party.

 

(d)           This Agreement is intended by the Parties to be entered into
pursuant to 35 U.S.C. 103(c), as such section may be amended from time to time. 
For clarity, Collaboration Inventions are intended by the Parties to be subject
to 35 U.S.C. 103(c)(1) and this Agreement is intended by the Parties to be
deemed a “joint research agreement” as defined in 35 U.S.C. 103(c)(3), as such
sections may be amended from time to time.

 

10.2        Disclosure of Inventions.  Each Party shall promptly disclose to the
JPC all Collaboration Inventions, including all invention disclosures or other
similar documents submitted to such Party by its, or its Affiliates’ employees,
agents or independent contractors describing Collaboration Inventions.

 

10.3        Prosecution of Patents.

 

(a)           Trubion Core Patent Rights. Except as otherwise provided in this
Section 10.3, as between the Parties, Trubion shall have the sole right and
authority to prepare, file, prosecute (including any oppositions, interferences,
reissue proceedings, reexaminations and post-grant proceedings) and maintain the
Trubion Core Patent Rights in any jurisdiction in the Territory, provided that
decisions regarding any claims within the Trubion Core Patent Rights that claim
[ * ] and do not claim [ * ] shall be made by the JPC. Trubion shall provide
Facet (i) a reasonable opportunity to review and comment on such filing and
prosecution efforts regarding the Trubion Core Patent Rights in the Territory;
(ii) a copy of each material communication received from any patent authority in
the Territory regarding the Trubion Core Patent Rights, and (iii) drafts of any
material filings or material responses to be made to such patent authorities a

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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reasonable amount of time in advance of submitting such filings or responses. If
Trubion determines in its sole discretion to abandon, cease prosecution or not
maintain any Trubion Core Patent Right anywhere in the Territory, then Trubion
shall provide Facet written notice of such determination at least [ * ] before
any deadline for taking action to avoid abandonment (or other loss of rights)
and shall provide Facet with the opportunity to prepare, file, prosecute and
maintain such Trubion Core Patent Right in the affected countries of the
Territory on behalf of Trubion. If Facet desires Trubion to file, in a
particular jurisdiction in the Territory, a Trubion Core Patent Right that
claims priority to (or is based on the subject matter of) another Trubion Core
Patent Right, Facet shall provide written notice to Trubion requesting that
Trubion file such patent application in such jurisdiction. If Facet provides
such written notice to Trubion, Trubion shall either (i) file and prosecute such
patent application and maintain any patent issuing thereon in such jurisdiction,
or (ii) notify Facet that Trubion does not desire to file such patent
application and provide Facet with the opportunity to file and prosecute such
patent application and maintain any patent issuing thereon on behalf of Trubion.
Facet’s rights under this Section 10.3 with respect to any Trubion Core Patent
Right licensed to Trubion by a Third Party shall be subject to the rights of
such Third Party to file, prosecute, and/or maintain such Trubion Core Patent
Right.  Facet shall be responsible for [ * ] of the out-of-pocket costs incurred
by Trubion in the course of preparing, filing, prosecuting and maintaining the
Trubion Core Patent Rights and such costs shall not be included in Development
Costs or Commercialization Costs.  If Facet provides written notice to Trubion
that Facet is no longer interested in maintaining a license to a particular
Trubion Core Patent Right in a particular country, Facet will not be responsible
for any portion of the costs incurred by Trubion after the date of such notice
in connection with the preparation, filing, prosecution or maintenance of such
Trubion Core Patent Right in such country, and the license granted to Facet
under such Trubion Core Patent Right in such country shall terminate upon the
delivery of such notice.  If Facet assumes responsibility for any Trubion Core
Patent Rights, then all costs incurred by Facet in the course of preparing,
filing, prosecuting and maintaining such Trubion Core Patent Rights shall be
borne by Facet, without reimbursement by Trubion, and such costs shall not be
included in Development Costs or Commercialization Costs.  If Trubion has
exercised or is deemed to have exercised its Opt-Out Option in respect of all
Products under this Agreement pursuant to Section 7.2, 7.3, 8.5 or 14.2(b),
following the Opt-Out Effective Date, all costs incurred by Trubion in the
course of preparing, filing, prosecuting and maintaining the Trubion Core Patent
Rights shall be borne solely by Trubion.  If Facet has exercised or is deemed to
have exercised its Opt-Out Option in respect of all Products under this
Agreement pursuant to Section 7.2, 7.3, 8.5 or 14.2(b), following the Opt-Out
Effective Date, all costs incurred by Trubion in the course of preparing,
filing, prosecuting and maintaining the Trubion Core Patent Rights shall be
borne solely by Trubion and Facet shall not have any rights pursuant to this
Section 10.3(a) with respect to the Trubion Core Patent Rights; provided,
however, if Facet notifies Trubion in writing within [ * ] following the Opt-Out
Effective Date, with respect to one or more Trubion Core Patent Rights, that
Facet will continue to be responsible for [ * ] of the out-of-pocket costs
incurred by Trubion in the course of preparing, filing, prosecuting and
maintaining such Trubion Core Patent Right(s), then Facet will continue to have
all rights set forth in this Section 10.3(a) with respect to such Trubion Core
Patent Right(s).

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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(b)           Trubion Product Patent Rights, Facet Product Patent Rights and
Joint Patent Rights.

 

(i)            This Section 10.3(b)(i) shall apply if neither Party has
exercised its Opt-Out Option, or is deemed to have exercised its Opt-Out Option
under Section 14.2(b).  Decisions regarding the preparation, filing,
prosecution, and maintenance of Trubion Product Patent Rights, Facet Product
Patent Rights and Joint Patent Rights, as well as any claims within the Trubion
Core Patent Rights that claim [ * ] and do not claim [ * ], in any jurisdiction
in the Territory shall be made by the JPC.  The JPC shall designate a Party (the
“Implementing Party”) to be responsible, using its in-house counsel or outside
patent counsel reasonably acceptable to the other Party, to implement the
decisions of the JPC regarding the preparation, filing, prosecution, and
maintenance of such Patent Rights, provided that Trubion shall be the
Implementing Party for Trubion Product Patent Rights and Facet shall be the
Implementing Party for Facet Product Patent Rights.  The Implementing Party
shall provide the JPC (i) a reasonable opportunity to review and comment on such
prosecution efforts regarding such Patent Rights in the Territory, (ii) a copy
of each material communication received from any patent authority in the
Territory regarding such Patent Rights, and (iii) drafts of any material filings
or material responses to be made to such patent authorities a reasonable amount
of time in advance of submitting such filings or responses.  Each Party shall be
responsible for fifty percent (50%) of the out-of-pocket costs incurred by the
Parties in the course of preparing, filing, prosecuting and maintaining such
Patent Rights and such costs shall be included in Development Costs if incurred
prior to First Commercial Sale of a Collaboration Product or Commercialization
Costs if incurred after First Commercial Sale of a Collaboration Product.

 

(ii)           This Section 10.3(b)(ii) shall apply if a Party has exercised its
Opt-Out Option, or is deemed to have exercised its Opt-Out Option under
Section 14.2(b), the Non-Opt-Out Party has delivered or is deemed to have
delivered a Pursuit Notice, and the Parties are not actively Developing or
Commercializing any Collaboration Products.  Subject to this
Section 10.3(b)(ii), the Non-Opt-Out Party shall make and implement decisions
regarding the preparation, filing, prosecution, and maintenance of Trubion
Product Patent Rights, Facet Product Patent Rights and Joint Patent Rights, as
well as any claims within the Trubion Core Patent Rights that claim [ * ] and do
not claim [ * ], in any jurisdiction in the Territory.  The Non-Opt-Out Party
shall provide the Opt-Out Party: (i) a reasonable opportunity to review and
comment on such prosecution efforts regarding such Patent Rights in the
Territory; (ii) a copy of material communications from any patent authority in
the Territory regarding such Patent Rights; and (iii) drafts of any material
filings or material responses to be made to such patent authorities a reasonable
amount of time in advance of submitting such filings or responses. If the
Non-Opt-Out Party determines to abandon, cease prosecution or not maintain any
such Patent Right anywhere in the Territory, then it shall provide the Opt-Out
Party written notice of such determination at least [ * ] before any deadline
for taking action to avoid abandonment (or other loss of rights) and shall
provide the Opt-Out Party with the opportunity to assume the preparation,
filing, prosecution and maintenance of such Patent Right in the affected
countries of the Territory.  Each Party shall be responsible for one hundred
percent (100%) of the costs it incurs in the course of preparing, filing,
prosecuting and maintaining such Patent Rights and such costs shall not be
included in Development Costs or Commercialization Costs.

 

(iii)         If a Party has exercised its Opt-Out Option and the Non-Opt-Out
Party has delivered a Pursuit Notice, but the Parties still are actively
Developing or Commercializing one or more Collaboration Products (i.e. Products
for which neither Party has exercised its Opt-Out Option), then (i) the
provisions of Section 10.3(b)(ii) shall apply to (1) all

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Joint Patent Rights, Trubion Product Patent Rights and Facet Product Patent
Rights that claim [ * ] and [ * ] in each case in all jurisdictions in the
Territory and (2) all claims within the Trubion Core Patent Rights that claim [
* ] and do not claim [ * ], and (ii) the provisions of Section 10.3(b)(i) shall
apply to (1) any other Joint Patent Right, Trubion Product Patent Rights and
Facet Product Patent Rights and (2) all claims within the Trubion Core Patent
Rights that claim [ * ] and do not claim [ * ].

 

(c)           Divisional Patent Application.  At the request of Facet or at
Trubion’s election, Trubion shall file a continuation or divisional patent
application of any Trubion Core Patent Right that contains a claim that claims [
* ] and does not claim [ * ], including U.S. Patent Application Serial Number [
* ], if permitted by applicable Laws, shall pursue in such continuation or
divisional patent applications claims specifically directed to one or more
Products and shall not pursue in such continuation or divisional patent
applications any claims specifically directed to the product known [ * ] or any
other product that is not a Product.  Such continuation or divisional patent
applications shall be deemed Trubion Product Patent Rights.

 

(d)           Patents Licensed from Third Parties.  If either Party licenses
after the Signing Date any Patent Rights from a Third Party and such Patent
Rights qualify as Trubion Patent Rights or Facet Product Patent Rights, then
each Party’s rights under this Section 10.3 with respect to such Patent Rights
shall be subject to the rights of such Third Party to prosecute, maintain and
extend such Patent Rights.

 

10.4                        Infringement Actions.

 

(a)           Notification of Litigation.  In the event of the institution of
any suit by a Third Party against either Trubion or Facet or otherwise, in
respect of patent infringement involving the manufacture, use, sale, license,
offer for sale, marketing, import or export of a Product within the Field
anywhere in the Territory, any Party sued or to whom notice or knowledge of such
proceeding shall arise, shall promptly notify the other Party in writing.

 

(b)           Information and Settlement.  Each Party shall keep the other Party
informed of the status of any patent infringement litigation or settlement
thereof concerning the Products within the Field in the Territory.

 

10.5        Enforcement of Patent Rights.

 

(a)           Notice and Consultation.  If either Facet or Trubion becomes aware
of any infringement, anywhere in the Territory, of any issued patent within the
Trubion Patent Rights, Facet Product Patent Rights, Facet Collaboration Patent
Rights, or Joint Patent Rights, which infringing activity adversely affects or
is reasonably expected to adversely affect any Product, it will promptly notify
the other Party in writing to that effect and the Parties will consult with each
other regarding any actions to be taken with respect to such infringing
activity.

 

(b)           Enforcement of Patent Rights Before Opt-Out.  If neither Party has
exercised or is deemed to have exercised its Opt-Out Option, the Parties shall
have the joint right, but neither Party shall be obligated, to take action to
obtain a discontinuance of infringement or bring suit against a Third Party
infringer of (1) the Trubion Patent Rights, Facet Collaboration Patent Rights,
or Facet Product Patent Rights, [ * ] or (2) the Joint Patent Rights, [

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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* ].  If both Parties wish to so enforce such Patent Rights, Trubion and Facet
shall be jointly responsible for, and shall bear equally, all the costs and
expenses of any such suit brought by them.  Any recoveries obtained by the
Parties as a result of any proceeding against such Third Party infringer shall
be allocated as follows:

 

(i)            [ * ]; and

 

(ii)           [ * ].

 

If one Party elects not to participate in the infringement action and the
Parties have not obtained a discontinuance of the infringement of such Patent
Rights, then the other Party shall have the right, but not the obligation, to
bring suit against such Third Party infringer of (3) the Trubion Patent Rights,
Facet Collaboration Patent Rights or Facet Product Patent Rights, [ * ] or
(4) the Joint Patent Rights, [ * ]; provided in each case that the pursuing
Party shall bear all of the expenses of such suit.  The other Party will
cooperate with the pursuing Party in any such suit and shall have the right to
consult with the pursuing Party and to participate in and be represented by
independent counsel in such litigation at its own expense.  Any recoveries
obtained by the pursuing Party as a result of any such proceeding against a
Third Party infringer shall be allocated as follows:

 

(iii)                            [ * ];

 

(iv)                             [ * ];

 

(c)           Enforcement of Patent Rights After Opt-Out.  If a Party has
exercised or is deemed to have exercised its Opt-Out Option with respect to a
Collaboration Product under this Agreement and the Non-Opt-Out Party has
delivered or is deemed to have delivered a Pursuit Notice and is pursuing the
resulting Royalty Product, the Non-Opt-Out Party shall have the first right, but
not the obligation, to take action to obtain a discontinuance of infringement or
bring suit against a Third Party infringer of (1) the Trubion Patent Rights,
Facet Collaboration Patent Rights or Facet Product Patent Rights that are
licensed to the Non-Opt-Out Party, [ * ] or (2) the Joint Patent Rights, [ * ]. 
If the Non-Opt-Out Party does not wish to enforce such Patent Rights, it shall
timely notify the Opt-Out Party in writing and the Opt-Out Party shall have the
right, but not the obligation, to take action to obtain a discontinuance of
infringement or bring suit against a Third Party infringer of (3) the Trubion
Patent Rights, Facet Collaboration Patent Rights or Facet Product Patent Rights
that are licensed to the Non-Opt-Out Party, [ * ] or (4) the Joint Patent
Rights, [ * ]. The pursuing Party shall bear all of the expenses of such suit. 
The other Party will cooperate with the pursuing Party in any such suit and
shall have the right to consult with the pursuing Party and to participate in
and be represented by independent counsel in such litigation at its own
expense.  Any recoveries obtained by the Parties as a result of any proceeding
against such Third Party infringer shall be allocated as follows:

 

(i)            [ * ]; and

 

(ii)           The remainder of the recovery will be allocated as follows:

 

a.             [ * ];

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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b.             [ * ].

 

(d)           Patents Licensed from Third Parties.  If either Party licenses any
Patent Rights from a Third Party and such Patent Rights qualify as Trubion
Patent Rights or Facet Product Patent Rights, then each Party’s rights under
this Section 10.5 with respect to such Patent Rights shall be subject to the
rights of such Third Party to enforce such Patent Rights against infringers.

 

10.6        Patent Term Extensions.

 

(a)           All Products.  The Parties hereto shall cooperate with each other
and provide reasonable assistance to each other to obtain a patent term
extension, or its equivalent anywhere in the Territory, including under 35
U.S.C. Section 156 and its foreign counterparts, of any Trubion Patent Right,
Facet Collaboration Patent Rights or Facet Product Patent Right with respect to
a Product.  Subject to Section 10.6(b), to the extent reasonably and legally
required in order to obtain any such extension in a particular country, each
Party shall make available to the other a copy of the necessary documentation to
enable such other Party to use the same for the purpose of obtaining the
extension in such country.

 

(b)           Collaboration Products.  The JPC shall make all patent term
extension decisions with respect to a Collaboration Product.  Each Party shall
consult with the other Party before applying for or obtaining any patent term
extension or related extension of rights, including supplementary protection
certificates and similar rights for any Trubion Patent Rights, Facet
Collaboration Patent Rights or Facet Product Patent Rights with respect to a
Collaboration Product.  Neither Party shall proceed with such an extension until
the Parties have agreed to a strategy therefor (with any disagreements on such
strategy to be resolved by the JPC).

 

(c)           Royalty Products.  The Non-Opt-Out Party shall make all elections
with respect to obtaining such patent term extension with respect to a Royalty
Product for all Joint Patent Rights, Trubion Product Patent Rights and Facet
Product Patent Rights that (i) claim [ * ] and (ii) are licensed to the
Non-Opt-Out Party.

 

10.7        Trademarks.

 

(a)           The JCC shall decide on a Product-by-Product basis which Party
shall be responsible for the selection, registration, maintenance and defense of
all Marks for use in connection with the sale or marketing of a Collaboration
Product in the Field in the Territory.  Such Party shall own such Marks and
shall grant the other Party a license with respect thereto to conduct its
obligations pursuant to the Commercialization Plan.  The Parties shall share
equally all Trademark Costs, which shall be Development Costs if incurred prior
to the First Commercial Sale of such Collaboration Product and Commercialization
Costs if incurred thereafter.  All uses of such Marks shall be reviewed by the
JCC and shall comply with all applicable Laws and regulations (including,
without limitation, those laws and regulations particularly applying to the
proper use and designation of trademarks in the applicable countries).

 

(b)           The Non-Opting-Out Party shall be responsible for the selection,
registration, maintenance and defense of all Marks for use in connection with
the sale or marketing of the applicable Royalty Product in the Field in the
Territory, as well as all

 

--------------------------------------------------------------------------------

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Trademark Costs associated therewith.  Such Party shall own such Marks.  All
uses of such Marks shall comply with all applicable Laws and regulations
(including, without limitation, those laws and regulations particularly applying
to the proper use and designation of trademarks in the applicable countries).

 

(c)           Neither Party shall, without the other Party’s prior written
consent, use any Mark or Marks that include, in whole or part, any corporate
name or logo of the other Party, or marks confusingly similar thereto, in
connection with such Party’s marketing or promotion of Products under this
Agreement, except as may be expressly authorized in a co-promotion agreement
between the Parties pursuant to Section 5.11 and except to the extent required
to comply with applicable Laws and regulations.

 

11.                               CONFIDENTIALITY.

 

11.1        Confidentiality.

 

(a)           During the Term and [ * ] thereafter, each Party shall not use or
reveal or disclose to Third Parties any Confidential Information of the other
Party without first obtaining the written consent of the other Party, except as
may be otherwise provided in, or required in order for a Party to fulfill its
obligations or exercise its rights under this Agreement.  This confidentiality
obligation shall not apply to such information that (i) is or becomes a matter
of public knowledge (other than by breach of this Agreement by the receiving
Party), (ii) the receiving Party can establish was already known to it or was in
its possession, other than under an obligation of confidentiality, at the time
of disclosure, (iii) is disclosed to the receiving Party, without any
restrictions on further disclosure, by a Third Party having the right to do so
and that did not obtain such information from the disclosing Party, or (iv) is
subsequently independently developed or discovered by employees or agents of the
receiving Party or its Affiliates who have had no access to such Confidential
Information. [ * ].  The Parties shall take reasonable measures to assure that
no unauthorized use or disclosure is made by others to whom access to such
information is granted.

 

(b)           Each Party may disclose Confidential Information of the other
Party to the extent such disclosure is reasonably necessary in any of the
following situations:

 

(i)            filing or prosecuting Trubion Patent Rights, Facet Product Patent
Rights or Joint Patent Rights;

 

(ii)           regulatory filings and other filings with Governmental
Authorities (including Regulatory Authorities), including filings with the SEC
or FDA, with respect to a Product;

 

(iii)         prosecuting or defending litigation;

 

(iv)          complying with applicable Laws and regulations, including
regulations promulgated by securities exchanges, court order, and administrative
subpoena or order;

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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(v)            disclosure to its Affiliates, employees, agents, sublicensees,
and independent contractors, to the extent necessary for the purposes of
enabling the receiving Party to fulfill its obligations under this Agreement,
provided, the receiving Party shall be responsible for breaches of the
confidentiality obligations by such Affiliate, employees, agents, and
independent contractors, and provided further that, each disclosee must be bound
by obligations of confidentiality and non-use at least as equivalent in scope as
those set forth in this Article 11 (except with a minimum duration of [ * ] for
independent contractors) prior to any such disclosure; and

 

(vi)          disclosure of the material terms of this Agreement and/or of any
collaboration results or status reports (including unblinded data from any
Clinical Trials) to any bona fide potential or actual investor, investment
banker, acquirer, merger partner, sublicensee, or other potential or actual
financial or commercial partner; provided that each disclosee must be bound by
obligations of confidentiality and non-use at least as equivalent in scope as
those set forth in this Article 11 (except with a minimum duration of [ * ])
prior to any such disclosure.

 

(c)           In the event it is necessary for a Party to disclose Confidential
Information of the other Party to comply with a court order or administrative
subpoena or order, such Party must first use its reasonable efforts to obtain an
order preserving the confidentiality of the information and must give the other
Party timely notice of the contemplated disclosure to allow the other Party to
intervene to preserve the confidentiality of the information by, for example,
seeking an appropriate protective order.

 

11.2        Scientific Information.  During the Term, each Party will submit to
the other Party for review and approval all proposed academic, scientific and
medical publications and public presentations relating to Products within the
Field for review in connection with preservation of patent rights and/or to
determine whether any of such other Party’s Confidential Information should be
modified or deleted.  Written copies of such proposed publications and
presentations shall be submitted to the non-publishing Party no later than [ * ]
before submission for publication or presentation and the non-publishing Party
shall provide its comments with respect to such publications and presentations
within [ * ] of its receipt of such written copy.  The publishing Party shall
delay the submission for publication or presentation for a period of up to [ * ]
in the event the non-publishing Party can demonstrate reasonable need for such
delay, including without limitation, the preparation and filing of patent
applications.  By mutual agreement, this period may be further extended.  In
addition, upon the non-publishing Party’s request, the publishing Party shall
delete from the proposed submission any Confidential Information of the
non-publishing Party; provided, however, [ * ].  Trubion and Facet will each
comply with standard academic practice regarding authorship of scientific
publications and recognition of contribution of other parties in any
publications relating to Products within the Field. Notwithstanding the rest of
this Section 11.2, the Opt-Out Party may not publish any academic, scientific or
medical publications or make any public presentations regarding the Royalty
Product without the prior written consent of the Non-Opt-Out Party.

 

11.3        SEC Filings. Before disclosing this Agreement or any of the terms
hereof pursuant to this Section 11.3, the Parties will consult with each other
and agree upon the terms of this Agreement to be redacted in making any such
disclosure. The Parties shall separately submit confidential treatment request
to the SEC but file the same redacted Agreement in such filings.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Notwithstanding the foregoing, either Party may disclose the terms of this
Agreement and any Confidential Information related to this Agreement, including,
without limitation, clinical data, to the extent required, in the reasonable
opinion of such Party’s legal counsel, to comply with applicable Laws,
including, without limitation, the rules and regulations promulgated by the
United States Securities and Exchange Commission (“SEC”), including comment
letters received from the SEC related to SEC periodic reports and other
filings.  .

 

11.4        Public Announcements.  The Parties will make a joint public
announcement of this Agreement substantially in the form of the draft press
release reviewed and approved by them prior to the signing of this Agreement. 
No other public announcement or other disclosure to Third Parties concerning the
terms of this Agreement shall be made, either directly or indirectly, by either
Party, except as may be legally required or as may be required for financial
reporting purposes, without first obtaining the written approval of the other
Party and agreement upon the nature and text of such announcement or disclosure.

 

11.5        Non-Solicitation.  Without the prior written consent of the other
Party, each of Trubion and Facet agrees that during the Term and for [ * ]
thereafter, neither it nor any of its Affiliates will directly or indirectly
solicit for purposes of hiring any person employed by the other Party or any of
its Affiliates or who was employed by the other Party or any of its Affiliates
within the then prior [ * ], or in any manner seek to induce any such person to
leave his or her employment; provided, however, that nothing in this
Section 11.5 shall prohibit Facet or Trubion, as the case may be, from hiring
any employees of the other who respond to general employment solicitations not
targeted at employees of a Party or any of its Affiliates, including general
advertisements.

 

12.                               REPRESENTATIONS AND WARRANTIES.

 

12.1        Representations of Trubion.  Trubion represents and warrants as of
the Signing Date that (i) it is a corporation or entity duly organized and
validly existing under the laws of the state or other jurisdiction of its
incorporation or formation, (ii) the execution, delivery and performance of this
Agreement by Trubion has been duly authorized by all requisite corporate action
and does not require any shareholder action or approval, (iii) it has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations and to grant the licenses granted by it to the other
Party pursuant to this Agreement, and (iv) the execution, delivery and
performance by Trubion of this Agreement and its compliance with the terms and
provisions of this Agreement does not and will not conflict with or result in a
breach of any of the terms and provisions of or constitute a default under
(A) any agreement or instrument binding or affecting it or the subject matter of
this Agreement; (B) the provisions of its charter or operative documents or
bylaws; or (C) any order, writ, injunction or decree of any court or
governmental authority entered against it or by which any of its property is
bound except where such conflict, breach or default would not materially impact
(I) Trubion’s ability to meet its obligations hereunder or (II) the rights
granted to Facet hereunder.

 

12.2        Additional Representations of Trubion.  In addition, except as
disclosed in Schedule 12.2, Trubion hereby represents and warrants as of the
Signing Date that:

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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(a)           it has provided a complete and accurate list of all Third Party
vendor contracts and Third Party licenses in effect as of the Signing Date to
which Trubion or a Trubion Affiliate is a Party (i) that are reasonably
necessary for the Development, Manufacture or Commercialization of TRU-016 or
any other Product in the Field in the Territory in accordance with the terms of
this Agreement or (ii) pursuant to which Development, Manufacture or
Commercialization services are being provided or have been ordered as of the
Signing Date with respect to TRU-016 or any other Product in the Field in the
Territory, all such contracts and licenses are in full force in accordance with
their terms except as would not reasonably be expected to, individually or in
the aggregate, materially impair the ability of the Parties to exercise the
rights and perform the obligations under this Agreement and Trubion is not in
breach of any material term thereof;

 

(b)           except for the intellectual property licensed to Trubion pursuant
the license agreements listed in Schedule 12.2(b), it owns all right, title and
interest in and to all of the Trubion Patent Rights and Trubion Know-How; such
license agreements do not and will not require Trubion to make any royalty
payments or other payments (other than services fees or other payments not
expressly identified as fees for the use of intellectual property rights) to the
applicable Third Party licensors in consideration for the exercise of the rights
licensed to Trubion as of the Signing Date under such licenses;

 

(c)           it does not own and has not licensed any intellectual property
that in each case would otherwise qualify as Trubion Patent Rights or material
Trubion Know-How that is reasonably necessary for the Development, Manufacture,
use, importation or Commercialization of Products in the Field under the terms
of this Agreement, but for the fact that such intellectual property is not
licensable to Facet hereunder and therefore not Controlled by Trubion (and, due
solely to such lack of Control despite owning or holding a license thereto, does
not meet the definition of Trubion Patent Rights or Trubion Know-How);

 

(d)           it has not received any written notice asserting or alleging that
the research or Development of any Product by or on behalf Trubion prior to the
Signing Date infringed or misappropriated the intellectual property rights of
any Third Party;

 

(e)           to Trubion’s knowledge, the Development, Manufacture and
Commercialization after the Signing Date of TRU-016 can be carried out in the
manner reasonably contemplated as of the Signing Date without (i) infringing any
Patent Rights owned or controlled by a Third Party or (ii) misappropriating any
Know-How owned or controlled by a Third Party; provided, however, that Trubion
is not making any representation or warranty pursuant to this
Section 12.2(e) with respect to [ * ] or [ * ] ;

 

(f)            to Trubion’s knowledge, there is no unauthorized use,
infringement or misappropriation of any of the Trubion Patent Rights or Trubion
Know-How by any person;

 

(g)           to Trubion’s knowledge, it has not used in the Development of
TRU-016 any employee, agent or independent contractor who has been debarred by
any Regulatory Authority, or is the subject of debarment proceedings by a
Regulatory Authority;

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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(h)           there are no actions or proceedings (including any inventorship
challenges or interferences) pending or, to the knowledge of Trubion, threatened
with respect to (i) any of the Trubion Patent Rights and Trubion Know-How or
(ii) the Development or Manufacture of TRU-016;

 

(i)            it has made available to Facet a complete and accurate copy of
any IND and other related Regulatory Materials for TRU-016 and has not omitted
any material data from such IND or Regulatory Materials; and

 

(j)            no Regulatory Authority has, to Trubion’s knowledge, commenced or
threatened to initiate any action or proceeding to refuse to file, reject, not
approve, or withdraw any Regulatory Material related to the Product(s), nor has
Trubion received any notice to such effect; and to Trubion’s knowledge, Trubion
is not in violation of any applicable Laws that could reasonably be expected to
form the basis for such an action; and

 

(k)           Trubion believes in good faith, based upon due inquiry, that the
Development, Manufacture and Commercialization after the Signing Date of TRU-016
can be carried out in the manner reasonably contemplated as of the Signing Date
without infringing (taking into account the provisions of 35 U.S.C.
Section 271(e)) [ * ] or [ * ], provided that, in the case of [ * ], due inquiry
means due inquiry given the length of time since the date Trubion was made aware
of [ * ].

 

12.3        Representations of Facet.  Facet represents and warrants as of the
Signing Date that (i) it is a corporation or entity duly organized and validly
existing under the laws of the state or other jurisdiction of its incorporation
or formation, (ii) the execution, delivery and performance of this Agreement by
Facet has been duly authorized by all requisite corporate action and does not
require any shareholder action or approval, (iii) it has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
and to grant the licenses granted by it to the other Party pursuant to this
Agreement, and (iv) the execution, delivery and performance by Facet of this
Agreement and its compliance with the terms and provisions of this Agreement
does not and will not conflict with or result in a breach of any of the terms
and provisions of or constitute a default under (A) any agreement or instrument
binding or affecting it or the subject matter of this Agreement; (B) the
provisions of its charter or operative documents or bylaws; or (C) any order,
writ, injunction or decree of any court or governmental authority entered
against it or by which any of its property is bound except where such conflict,
breach or default would not materially impact (I) Facet’s ability to meet its
obligations hereunder or (II) the rights granted to Trubion hereunder.

 

12.4        Disclaimer.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN SECTIONS
12.1, 12.2 AND 12.3, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY THAT
PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF PRODUCTS ARE
DEVELOPED, WITH RESPECT TO SUCH PRODUCTS, THE PARTIES DISCLAIM ALL IMPLIED
WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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12.5        Mutual Covenant. Each Party covenants to the other Party that it
shall at all times comply in all material respects with all applicable Laws
relating to its activities under this Agreement.

 

13.                               LIABILITY AND INDEMNIFICATION.

 

13.1        Limitation on Liability.  Except for breaches of Section 8.5 or
Article 11, neither Party shall be liable to the other Party under this
Agreement for any indirect, incidental, punitive, exemplary, special or
consequential damages of any kind whatsoever sustained as a result of a breach
of this Agreement; provided, however, that this limitation will not reduce or
affect the Parties’ obligations in respect of Third Party claims under
Section 13.2 or Section 13.3.

 

13.2        Mutual Indemnification.  Each Party shall defend, indemnify and hold
harmless the other Party and its Affiliates and their officers, directors,
shareholders, employees, agents, representatives, successors and assigns from
and against all Third Party claims, complaints, recall obligations and
liabilities, or lawsuits for damages (collectively referred to as “Claims”)
arising out of (i) any negligent act or omission, or willful wrongdoing by the
indemnifying Party, its Affiliate or sublicensees in the performance of this
Agreement, (ii) the failure by the indemnifying Party, its Affiliate or
sublicensees to comply with any applicable Law or governmental requirement,
and/or (iii) any breach of any representation or warranty of the indemnifying
Party contained in this Agreement.  The indemnifying Party shall not be
obligated under this Section 13.2 to the extent that the Claim was the result of
the non-performance, negligence or willful misconduct of the indemnified Party
or anyone acting on behalf of the indemnified Party, including its Affiliates
and sublicensees, and its and their officers, directors, shareholders,
employees, agents, representatives, successors and assigns.

 

13.3        Indemnification After Opt-Out.  In addition to its obligations under
Section 13.2, if a Party has exercised or is deemed to have exercised its
Opt-Out Option with respect to a Product and the Non-Opt-Out Party has delivered
or is deemed to have delivered a Pursuit Notice with respect thereto, the
Non-Opt-Out Party shall defend, indemnify and hold harmless the Opt-Out Party
and its Affiliates and their officers, directors, shareholders, employees,
agents, representatives, successors and assigns from and against all Claims
arising out of the Development, manufacture, use, handling, storage, promotion,
use, sale, license, offer for sale, marketing, import or export of such Royalty
Product (other than to the extent the Opt-Out Party is responsible for the Claim
under Section 13.2) on or after the Opt-Out Effective Date.  The Non-Opt-Out
Party shall not be obligated under this Section 13.3 to the extent that the
Claim was the result of the nonperformance, negligence or willful misconduct of
the Opt-Out Party or anyone acting on behalf of the Opt-Out Party, including its
Affiliates or sublicensees, and their officers, directors, shareholders,
employees, agents, representatives, successors and assigns.

 

13.4        Limitations on Indemnification.  The obligations to indemnify,
defend, and hold harmless set forth in Sections 13.2 and 13.3 shall be
contingent upon the Party seeking indemnification (the “Indemnitee”):
(i) notifying the indemnifying Party of a claim, demand or suit within ten
(10) days of receipt of same; provided, however, that Indemnitee’s failure or
delay in providing such notice shall not relieve the indemnifying Party of its
indemnification obligation except to the extent the indemnifying Party is
prejudiced thereby; (ii) allowing the indemnifying Party and/or its insurers the
right to assume direction and control of the defense of any such

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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claim, demand or suit; (iii) using its [ * ] to cooperate with the indemnifying
Party and/or its insurers, at the indemnifying Party’s expense, in the defense
of such claim, demand or suit; and (iv) agreeing not to settle or compromise any
claim, demand or suit without prior written authorization of the indemnifying
Party.  The Indemnitee shall have the right to participate in the defense of any
such claim, demand or suit referred to in this Section 13.4 utilizing attorneys
of its choice, at its own expense, provided, however, that the indemnifying
Party shall have full authority and control to handle any such claim, demand or
suit.

 

13.5        Other Third Party Claims.  In the event of the institution after the
Signing Date of any suit by a Third Party against either Trubion or Facet, in
respect of the Development, Manufacture, use, handling, storage, promotion, use,
sale, license, offer for sale, marketing, import or export of a Collaboration
Product within the Field anywhere in the Territory for such activities during
the Term for which neither Party is responsible under Section 13.2 or
Section 13.3 the Parties shall cooperate and jointly control the defense and
settlement of the suit and all out-of-pocket litigation expenses incurred by the
Parties in the defense or settlement of the suit as well as all damages awarded
against a Party or agreed to by the Parties in a settlement shall be considered
Development Costs, if incurred prior to the First Commercial Sale of such
Collaboration Product, or Commercialization Costs, if incurred after the First
Commercial Sale of such Collaboration Product, or [ * ].

 

13.6        Insurance.  During the Term and for a period of [ * ] after the
Term, or, in the case of a Party that has exercised or is deemed to have
exercised its Opt-Out Option in respect of all Products under this Agreement
until [ * ] after the final Opt-Out Effective Date, each Party shall obtain
and/or maintain, respectively, at its sole cost and expense, product liability
insurance in amounts, respectively, which are reasonable and customary in the
pharmaceutical industry for companies of comparable size and activities at the
respective place of business of each Party; provided that such amounts shall not
be less than [ * ] before the first dosing of the first patient in the initial
Phase III Clinical Study (or the transition to the pivotal phase of a Phase
II/III Clinical Study) of a Product and shall not be less than [ * ]
thereafter.  Such product liability insurance shall insure against all
liability, including personal injury, physical injury, or property damage
arising out of the manufacture, sale, distribution, or marketing of the
Collaboration Products and the Royalty Products (solely in the event that the
policy holder is the Non-Opt-Out Party with respect thereto) in the Territory. 
Each Party shall provide written proof of the existence of such insurance to the
other Party upon request.

 

14.                               TERM AND TERMINATION.

 

14.1        Term.  This Agreement shall become effective on the Signing Date
and, unless earlier terminated pursuant to this Article 14, shall expire on a
Product-by-Product and country-by-country basis (a) in respect of Royalty
Products, upon expiration of the Royalty Period for the Royalty Product in the
country and (b) in respect of Collaboration Products, at such time as Facet and
Trubion and their Affiliates and permitted sublicensees have all stopped selling
the Collaboration Product in the country and the Commercialization Plan does not
contemplate future sales of the Collaboration Product in the country (the
“Term”).  If the Term or license has not been earlier terminated, upon the
expiration of the Term on a Product-by-Product and country-by-country basis, the
licenses granted to each Party hereunder shall, with respect to such

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Product(s) and country(ies), upon and after such expiration, become
nonexclusive, royalty-free, paid-up and irrevocable.

 

14.2        Termination by Either Party for Breach.

 

(a)           Breach. Subject to Section 14.2(c), each Party shall have the
right to terminate this Agreement upon written notice to the other Party if the
other Party materially breaches its obligations under this Agreement and, after
receiving written notice from the non-breaching Party identifying such material
breach in reasonable detail, fails to cure such material breach within [ * ]
from the date of such notice (or within [ * ] from the date of such notice in
the event such material breach is solely based upon the breaching Party’s
failure to pay any amounts due hereunder); provided that if such material breach
is not reasonably subject to cure within the [ * ] period from notice, then the
breaching Party shall have an additional [ * ] to effect such cure if it is
undertaking Diligent Efforts to cure such breach and shall have provided a
written plan reasonably acceptable to the non-breaching Party to cure such
breach within such additional period.  Notwithstanding anything to the contrary
in this Agreement, the breaching Party shall not have the right to exercise its
Opt-Out Option pursuant to Section 7.2 and Facet shall not have the right to
terminate the Agreement under Section 14.3 during the period between its receipt
of the notice of a material breach and its cure of such material breach or the
resolution of any dispute with respect thereto pursuant to Section 14.2(c);
provided that if such dispute is resolved in the favor of such alleged breaching
Party, such Party shall be entitled to exercise its Opt-Out Option pursuant to
Section 7.2 or, in the case of Facet, its right to terminate the Agreement under
Section 14.3 within [ * ] of such resolution if it was deprived of the ability
to exercise its Opt-Out Option on account of this sentence.

 

(b)           Continuation. If the non-breaching Party has the right to
terminate this Agreement under Section 14.2(a), then, instead of terminating
this Agreement, the non-breaching Party may elect to continue this Agreement by
notice to the breaching Party, provided, however, if the non-breaching Party
elects to continue this Agreement, upon written notice of continuation from the
non-breaching Party, then the breaching Party shall be deemed to have exercised
its Opt-Out Option and the notice pursuant to this Section 14.2(b) shall be
deemed an “Opt-Out Notice” and a “Pursuit Notice” with respect to all Products
under this Agreement regardless of whether such breach related to any particular
Product and the provisions of Section 7.5 shall apply with respect to all
Products under this Agreement and the breaching Party shall bear [ * ] of the
reasonable expenses incurred by the non-breaching Party in the course of
performing its transfer obligations pursuant to Sections 7.5(b)(iii),
7.5(b)(iv), 7.5(vi)(2) and 7.5(vii). The preceding sentence shall not in any
event limit in any manner the non-breaching Party’s other remedies for an
uncured material breach of this Agreement.

 

(c)           Disputed Breach. If the alleged breaching Party disputes in good
faith the existence or materiality of a breach specified in a notice provided by
the other Party in accordance with Section 14.2(a), and such alleged breaching
Party provides the other Party notice of such dispute and its intention to seek
arbitration or judgment by a court pursuant to Article 15 within such [ * ]
period (or [ * ] period for failure to make any payment), then the non-breaching
Party shall not have the right to terminate this Agreement under
Section 14.2(a) unless and until an arbitrator or court, in accordance with
Article 15, has determined that the alleged breaching Party has materially
breached this Agreement and that such Party fails to cure such

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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breach within [ * ] following such decision of such arbitrator or court (except
to the extent such breach involves the failure to make a payment when due, which
breach must be cured within [ * ] following such decision of such arbitrator or
court). It is understood and agreed that during the pendency of such dispute,
all of the terms and conditions of this Agreement shall remain in effect and the
Parties shall continue to perform all of their respective obligations hereunder.

 

14.3        Termination by Facet at Will.  Facet shall have the right to
terminate this Agreement in its entirety upon [ * ] prior written notice to
Trubion, provided that, within eighteen (18) months after the Signing Date, such
notice shall only be effective if accompanied by the payment of a termination
fee equal to Ten Million Dollars ($10,000,000.00).  Notwithstanding anything to
the contrary in this Agreement, Facet shall have no right to terminate this
Agreement pursuant to the preceding sentence after Facet has been deemed to have
exercised its Opt-Out Option on account of an uncured breach pursuant to
Section 14.2(b).

 

14.4        Effects of Termination by Facet at Will.  Upon termination of this
Agreement by Facet under Section 14.3, the following shall apply (in addition to
any other rights and obligations under this Agreement with respect to such
termination):

 

(a)           Licenses. The licenses granted in Article 8 shall terminate.
Notwithstanding the foregoing, Facet hereby grants to Trubion, effective only
upon such termination, a [ * ] license, [ * ], under the [ * ] to Develop, make,
have made, use, import, export, offer for sale, sell and Commercialize any
Products that are in active clinical development or are Commercialized as of the
date of termination for the Field in the Territory, provided that [ * ]. In all
cases where any element of the Facet Applied Technology is licensed to Facet by
a Third Party, as a condition precedent for a license to be granted to Trubion
pursuant to this Section 14.4(a), Trubion shall be required to agree in writing
within [ * ] of the effective date of termination to pay any payments, including
royalties on sales by Trubion or its permitted sublicensees, that accrue and
become payable to such Third Party licensor after the effective date of the
license to Trubion. Facet will not be obligated to maintain any Third Party
license agreement in effect unless Trubion timely exercises its rights as
provided in the foregoing sentence or to grant sublicenses under this
Section 14.4(a), if Facet is prohibited from granting such sublicenses under its
agreement(s) with its licensor(s), but shall be required to use Diligent Efforts
to obtain permission to grant such a sublicense from any such licensor(s).

 

(b)           Marks. Facet shall, as promptly as commercially practicable,
assign to Trubion all of Facet’s right, title and interest in and to the Marks
used or to be used with the Products (excluding any such Marks that include, in
whole or part, any corporate name or logo of Facet or its Affiliates or
permitted sublicensees), including any goodwill associated therewith. For the
avoidance of doubt, only those Marks which have been (i) identified prior to the
effective date of termination of this Agreement as the single designated lead
candidate Mark for a non-commercialized Product, or (ii) actually used in
connection with a Commercialized Product, shall be assigned. Trubion shall be
responsible for recording such assignment in the Territory with the appropriate
Governmental Authority and will bear all costs associated with such assignment
and recordation. Facet shall cooperate in facilitating such assignment and
recordation by timely executing all necessary documents provided to it by
Trubion.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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(c)           Regulatory Materials. Facet shall transfer and assign to Trubion
in the form and format in which such materials are maintained by Facet in the
ordinary course of business, all Regulatory Materials for Products in the
Territory that are Controlled by Facet or its Affiliates or permitted
sublicensees.

 

(d)           Transition Assistance. Facet shall, [ * ], provide Transition
Assistance for the purpose of transferring or transitioning to Trubion, (i) in
the form and format in which such Facet Applied Know-How is maintained by Facet
in the ordinary course of business, all Facet Applied Know-How not already in
Trubion’s possession, and (ii) at Trubion’s request, all then-existing Third
Party agreements relating solely to Products hereunder and that Facet is able,
using Diligent Efforts to, assign to Trubion, in each case, to the extent
reasonably necessary for Trubion to continue researching, Developing,
Manufacturing, or Commercializing Products, provided, however, that Facet shall
be required to assign any such agreement solely to the extent assignment is
permitted by such agreement, and Facet is not required to pay any consideration
or commence litigation in order to effect an assignment of any such agreement to
Trubion.

 

(e)           Remaining Inventories. Trubion shall have the right to purchase
from Facet [ * ] (less any portion of the cost previously shared by Trubion as a
Development Cost or Commercialization Cost) any or all of the inventory of Bulk
API and/or Products held by or for Facet or its Affiliates as of the effective
date of termination pursuant to the terms of this Agreement or the Commercial
Supply Agreement, as applicable. Trubion shall notify Facet within [ * ] after
the effective date of termination whether Trubion elects to exercise such right.

 

14.5        Effect of Termination by Trubion for Uncured Breach.  Upon
termination of this Agreement by Trubion under Section 14.2(a), the licenses
granted under Article 8 shall terminate.  Notwithstanding the foregoing, Facet
hereby grants Trubion, effective only upon such termination, a [ * ] license, [
* ], under [ * ], to Develop, make, have made, use, import, export, offer for
sale, sell and Commercialize any Products that are [ * ].  In addition, Facet
shall comply with Section 14.4(c).

 

14.6        Other Remedies.  Termination or expiration of this Agreement for any
reason shall not release either Party from any liability or obligation that
already has accrued prior to such expiration or termination, nor affect the
survival of any provision of this Agreement to the extent it is expressly stated
to survive such termination. Termination or expiration of this Agreement for any
reason shall not constitute a waiver or release of, or otherwise be deemed to
prejudice or adversely affect, any rights, remedies or claims, whether for
damages or otherwise, that a Party may have hereunder or that may arise out of
or in connection with such termination or expiration.

 

14.7        Rights in Bankruptcy.  All rights and licenses granted under or
pursuant to this Agreement by Trubion and Facet are, and shall otherwise be
deemed to be, for purposes of Section 365(n) of the United States Bankruptcy
Code, licenses of rights to “intellectual property” as defined under Section 101
of the United States Bankruptcy Code. The Parties agree that each Party, as
licensee of certain rights under this Agreement, shall retain and may fully
exercise all of its rights and elections under the United States Bankruptcy
Code. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against a Party (such Party, the “Bankrupt Party”)
under the United States Bankruptcy Code, (a) the other Party shall be

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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entitled to a complete duplicate of (or complete access to, as appropriate) any
intellectual property licensed to such other Party and all embodiments of such
intellectual property, which, if not already in such other Party’s possession,
shall be promptly delivered to it (x) upon any such commencement of a bankruptcy
proceeding upon such other Party’s written request therefor, unless the Bankrupt
Party elects to continue to perform all of its obligations under this Agreement
or (y) if not delivered under clause (x), following the rejection of this
Agreement by the Bankrupt Party upon written request therefor by the other Party
and (b) the Bankrupt Party shall not interfere with the other Party’s rights to
intellectual property and all embodiments of intellectual property, and shall
assist and not interfere with the other Party in obtaining intellectual property
and all embodiments of intellectual property from another entity. The
“embodiments” of intellectual property includes all tangible, intangible,
electronic or other embodiments of rights and licenses hereunder, including all
compounds and products embodying intellectual property, Products, filings with
Regulatory Authorities and related rights and Trubion Know-How in the case that
Trubion is the Bankrupt Party and Facet Applied Know-How in the case Facet is
the Bankrupt Party.

 

14.8        Continuing Rights and Obligations.  Termination or expiration of
this Agreement shall not affect rights or obligations of the Parties under this
Agreement that have accrued prior to the date of termination or expiration of
this Agreement. Notwithstanding anything to the contrary, the following
provisions shall survive and apply after expiration or termination of this
Agreement: [ * ]. In addition, the other applicable provisions of Article 9
shall survive to the extent required to make final reimbursements,
reconciliations or other payments with respect to Product Profits, Net Sales and
costs and expenses incurred or accrued prior to the date of termination or
expiration. Furthermore, any other provision required to interpret or to enforce
the Parties’ remaining rights and obligations under this Agreement shall also
survive, but only to the extent required for the full observation and
performance of this Agreement. All provisions not surviving in accordance with
the foregoing shall terminate upon expiration or termination of this Agreement
and be of no further force and effect.

 

15.                               DISPUTE RESOLUTION; LIABILITY.

 

15.1        General.  Any controversy, claim or dispute arising out of or
relating to this Agreement shall be settled, if possible, through good faith
negotiations between the Parties.  If, however, the Parties are unable to settle
such dispute after good faith negotiations, the matter shall be referred to the
Executive Officers to be resolved by negotiation in good faith as soon as is
practicable but in no event later than [ * ] after referral.

 

15.2        Failure of Executive Officers to Resolve Dispute.  If the Executive
Officers are unable to settle the dispute after good faith negotiation in the
manner set forth above or in Section 2.7, the matter (a) shall be resolved in
accordance with Section 15.3, and (b) either Party may seek injunctive or other
equitable relief in any court in any jurisdiction where appropriate.

 

15.3        Arbitration.  Matters under Section 15.2 which are to be resolved
through binding arbitration shall be settled by traditional arbitration or, for
matters specifically identified in Section 2.7(c)(a), baseball arbitration, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (“AAA”) then in effect, except to the extent such rules are
inconsistent with this Section 15.3. The proceedings and decisions of the
arbitrators shall be

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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confidential, final and binding on the Parties, and judgment upon the award of
such arbitrator(s) may be entered in any court having jurisdiction thereof.

 

(a)           The arbitration shall take place in [ * ].

 

(b)           Traditional arbitration shall be conducted by an arbitration panel
consisting of three (3) independent arbitrators, and the award or decision shall
be rendered by a majority of the members of the arbitration panel.  Each
arbitrator shall have not less than fifteen (15) years of experience in the
biotechnology or pharmaceutical industry and subject matter expertise with
respect to the matter subject to arbitration.  Each Party shall appoint one
arbitrator, and the third arbitrator shall be selected jointly by the two
arbitrators appointed by the Parties, unless the Parties otherwise agree as to
the identity of the third arbitrator.  If the two arbitrators appointed by the
Parties are unable to agree upon the third arbitrator within [ * ] of any
request for arbitration, such arbitrator shall be selected by the AAA.  Any
arbitrator chosen hereunder shall have educational training and industry
experience sufficient to demonstrate a reasonable level of scientific,
financial, medical and industry knowledge relevant to the particular dispute. 
The written decision of the arbitrators shall state the panel’s findings of
material facts and the grounds for its conclusions and shall be final,
conclusive and binding on the Parties and enforceable by any court of competent
jurisdiction.

 

(c)           Baseball Arbitration will be conducted by one (1) arbitrator who
shall be reasonably acceptable to the Parties and who shall be appointed in
accordance with AAA rules.  If the Parties are unable to select an arbitrator
within [ * ] of the notice that initiated the baseball arbitration, then the
arbitrator shall be appointed in accordance with AAA rules. Any arbitrator
chosen hereunder shall have educational training and industry experience
sufficient to demonstrate a reasonable level of scientific, financial, medical
and industry knowledge relevant to the particular dispute. Within [ * ] after
the selection of the arbitrator, each Party shall submit to the arbitrator and
the other Party a proposed resolution of the dispute that is the subject of the
arbitration, together with any relevant evidence in support thereof (the
“Proposals”).  Within [ * ] after the delivery of the last Proposal to the
arbitrator, each Party may submit a written rebuttal of the other Party’s
Proposal and may also amend and re-submit its original Proposal.  The Parties
and the arbitrator shall meet within [ * ] after the Parties have submitted
their final Proposals (and rebuttals, if any), at which time each Party shall
have [ * ] to argue in support of its Proposal.  The Parties shall not have the
right to call any witnesses in support of their arguments, nor compel any
production of documents or take any discovery from the other Party in
preparation for the meeting. Within [ * ] after such meeting, the arbitrator
shall select one of the final Proposals so submitted by one of the Parties as
the resolution of the dispute, but may not alter the terms of either final
Proposal and may not resolve the dispute in a manner other than by selection of
one of the submitted final Proposals. If a Party fails to submit a Proposal
within the initial [ * ] time frame set forth in the fourth sentence of this
Section 15.3(c), the arbitrator shall select the Proposal of the other Party as
the resolution of the dispute. Any time period set forth in this
Section 15.3(c) may be extended by mutual agreement of the Parties.

 

(d)           Each Party shall bear its own costs and expenses (including legal
fees and expenses) relating to the arbitration proceeding, except that the fees
of the arbitrator(s) and other related costs of the arbitration shall be shared
equally by the Parties, unless the arbitrator(s) determine(s) that a Party has
incurred unreasonable expenses due to vexatious or bad faith

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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positions taken by the other Party, in which event the arbitrator(s) may make an
award of all or any portion of such expenses so incurred.

 

(e)           The arbitrator(s) shall be required to render their decision in
writing and to comply with, and their award shall be limited by, any express
provisions of this Agreement relating to damages or the limitation thereof. No
arbitrator shall have the power to award punitive damages under this Agreement
regardless of whether any such damages are contained in a Proposal, and such
award is expressly prohibited.

 

15.4        Patent and Trademark Disputes.  Notwithstanding Section 15.2, any
dispute, controversy or claim relating to the scope, validity, enforceability or
infringement of any Patent Rights or trademark rights covering the manufacture,
use, importation, offer for sale or sale of Products shall be submitted to a
court of competent jurisdiction in the country in which such Patent Rights or
trademark rights were granted or arose.

 

16.                               MISCELLANEOUS.

 

16.1        Assignment.  Except as provided in subsections (a) and (b) below,
neither this Agreement nor any interest hereunder shall be assignable by either
Party, without the prior written consent of the other Party, which consent shall
not be unreasonably withheld or delayed. This Agreement shall be binding upon
the successors and permitted assigns of the Parties, and the name of a Party
appearing herein shall be deemed to include the names of such Party’s successors
and permitted assigns to the extent necessary to carry out the intent of this
Agreement.  In addition to the foregoing, each Party may assign its right, in
whole or part, to receive payments under this Agreement.  Any assignment not in
accordance with this Section 16.1 shall be void. Notwithstanding anything to the
contrary in this Agreement, in the event that a Party undergoes an acquisition
by a Third Party, no intellectual property rights of the Third Party assignee,
acquiror or successor of such Party or any Affiliate of such Third Party shall
be included in the subject matter licensed hereunder, to the extent that such
intellectual property rights were held by the Third Party prior to the
acquisition, or are created outside of any activities under this Agreement by
personnel who were not employees of the acquired Party at the time of the
acquisition. Notwithstanding anything to the contrary in this Agreement, in the
event that a Party makes an assignment pursuant to subsection (b) below to a
Third Party, no intellectual property rights of the Third Party assignee or any
Affiliate of such Third Party shall be included in the subject matter licensed
hereunder, to the extent that such intellectual property rights were held by the
Third Party prior to the assignment, or are created outside of any activities
under this Agreement by personnel who were not employees of the assigning Party
at the time of the assignment.

 

(a)           Each Party may assign all of its rights and delegate all of its
obligations under this Agreement without the other Party’s consent to an
Affiliate or to a successor to substantially all of the business of such Party
to which this Agreement relates, whether in merger, sale of stock, sale of
assets or other transaction.

 

(b)           Each Party may assign all of its rights and delegate all of its
obligations under this Agreement without the other Party’s consent to a Third
Party who is not a successor to such Party as described in Section 16.1(a), if
such Third Party is not a CD37 Competitor,

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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provided that: (i) before commencing negotiations with such a Third Party for
such an assignment, the assigning Party shall notify the other Party, and the
Parties shall have [ * ] to negotiate in good faith a non-binding term sheet
setting forth the principal terms and conditions under which the assigning Party
would assign such rights and delegate such obligations to the other Party.  If
the Parties agree on such non-binding term sheet within the [ * ]-period, then
the Parties shall have an additional time period, not to exceed [ * ] from the
receipt of the notice from the assigning Party, to enter into a definitive
agreement based on the terms of the non-binding term sheet. Notwithstanding
anything to the contrary above, the assigning Party shall at all times be free
to engage in concurrent negotiations with one or more Third Parties but shall
not conclude an assignment with a Third Party during the [ * ] period described
above during which the Parties are negotiating the term sheet and/or during the
[ * ] period described above during which the Parties are negotiating the
definitive agreement; and (iii) the assigning Party shall also assign or
otherwise grant a license to such Third Party assignee to all of its Patent
Rights and Know-How under its Control that are specific to the Products, and
grant to such Third Party assignee all other rights and deliver to such Third
Party assignee all information and materials in each case that is reasonably
necessary for such Third Party assignee to perform the assigning Party’s
obligations under this Agreement.

 

16.2        Further Actions.  Each Party agrees to execute, acknowledge and
deliver such further instruments, and to do all such other acts, as may be
necessary or appropriate in order to carry out the purposes and intent of this
Agreement.

 

16.3        Government Approvals.  Trubion and Facet will cooperate and use
respectively Diligent Efforts to make all registrations, filings and
applications, to give all notices and to obtain as soon as practicable all
governmental or other consents, transfers, approvals, orders, qualifications
authorizations, permits and waivers, if any, and to do all other things
necessary or desirable for the consummation of the transactions as contemplated
hereby.

 

16.4        Force Majeure.  Neither Party shall be liable to the other for delay
or failure in the performance of the obligations on its part contained in this
Agreement if and to the extent that such failure or delay is due to
circumstances beyond its control which it could not have avoided by the exercise
of reasonable diligence.  It shall notify the other Party promptly should such
circumstances arise, giving an indication of the likely extent and duration
thereof, and shall use all Diligent Efforts to resume performance of its
obligations as soon as practicable; provided, however, that neither Party shall
be required to settle any labor dispute or disturbance.

 

16.5        Correspondence and Notices.

 

(a)           Ordinary Notices.  Correspondence, reports, documentation, and any
other communication in writing between the Parties in the course of ordinary
implementation of this Agreement shall be delivered by hand, or sent by
facsimile transmission, email or airmail to the employee or representative of
the other Party who is designated by such other Party to receive such written
communication.

 

(b)           Extraordinary Notices.  Extraordinary notices and other
communications hereunder (including without limitation, any notice of force
majeure, breach, termination, change of address, etc.) shall be in writing and
shall be deemed given if delivered personally or by

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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facsimile transmission (receipt verified), mailed by registered or certified
mail (return receipt requested), postage prepaid, or sent by nationally
recognized express courier service, to the Parties at the following addresses
(or at such other address for a Party as shall be specified by like notice;
provided, however, that notices of a change of address shall be effective only
upon receipt thereof):

 

All correspondence to Facet shall be addressed as follows:

 

Facet Biotech Corporation

1500 Seaport Blvd.

Redwood City, CA  94063

Attn: Chief Executive Officer

Fax: (650) 454-2000

 

with a copy to:

 

Facet Biotech Corporation

1500 Seaport Blvd.

Redwood City, CA  94063

Attn: General Counsel

Fax: (650) 454-2000

 

and a copy to:

 

Cooley Godward Kronish LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA  94306-2155

Attn: Glen Sato

Fax: (650) 849-7400

 

All correspondence to Trubion shall be addressed as follows:

 

Trubion Pharmaceuticals, Inc.

2401 4th Avenue

Suite 1050

Seattle, Washington 98121

Attn: President & CEO

Fax: (206) 838-0503

 

with a copy to:

 

Trubion Pharmaceuticals, Inc.

2401 4th Avenue

Suite 1050

Seattle, Washington 98121

Attn: General Counsel

Fax: (206) 838-0503

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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and a copy to: Fenwick & West LLP

1191 Second Avenue

10th Floor

Seattle, WA  98101

Attn:  Alan C. Smith

Fax:  (206) 389-4511

 

16.6        Representation by Legal Counsel.  Each Party hereto represents that
it has been represented by legal counsel in connection with this Agreement and
acknowledges that it has participated in the drafting of this Agreement.  In
interpreting and applying the terms and provisions of this Agreement, the
Parties agree that no presumption shall exist or be implied against the Party
which drafted such terms and provisions.

 

16.7        Amendment.  No amendment, modification or supplement of any
provision of this Agreement shall be valid or effective unless made in writing
and signed by a duly authorized officer of each Party.

 

16.8        Waiver.  Except as expressly limited by the terms of this Agreement,
no failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right privilege or remedy shall preclude any
other or further exercise thereof or of any other power, right, privilege or
remedy. No provision of this Agreement shall be waived by any act, omission or
knowledge of a Party or its agents or employees except by an instrument in
writing expressly waiving such provision and signed by a duly authorized officer
of the waiving Party.  The waiver by either of the Parties of any breach of any
provision of this Agreement by the other Party shall not be construed to be a
waiver of any succeeding breach of such provision or a waiver of the provision
itself.

 

16.9        Severability.  If any clause or portion thereof in this Agreement is
for any reason held to be invalid, illegal or unenforceable, the same shall not
affect any other portion of this Agreement, as it is the intent of the Parties
that this Agreement shall be construed in such fashion as to maintain its
existence, validity and enforceability to the greatest extent possible.  In any
such event, this Agreement shall be construed as if such clause of portion
thereof had never been contained in this Agreement, and there shall be deemed
substituted therefor such provision as will most nearly carry out the intent of
the Parties as expressed in this Agreement to the fullest extent permitted by
applicable Law.

 

16.10      Construction

 

(a)           The descriptive headings of this Agreement are for convenience
only, and shall be of no force or effect in construing or interpreting any of
the provisions of this Agreement.

 

(b)           Any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not be applied in the construction or
interpretation of this Agreement.

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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(c)           Except as otherwise indicated, all references in this Agreement to
“Articles”, “Sections,” “Exhibits” and “Schedules” are intended to refer to
Articles and Sections of this Agreement, and Exhibits and Schedules to this
Agreement.

 

16.11      Governing Law.  This Agreement shall be governed by and interpreted
in accordance with the substantive laws of the State of California, without
regard to conflict of law principles thereof.

 

16.12      Entire Agreement of the Parties.  This Agreement constitutes and
contains the complete, final and exclusive understanding and agreement of the
Parties and cancels and supersedes any and all prior negotiations,
correspondence, understandings and agreements, whether oral or written, among
the Parties respecting the subject matter of this Agreement and thereof.  For
clarity, the rights and obligations of the Parties on and after the Signing Date
with respect to disclosures made under the Non-Disclosure Agreement that relate
to the subject matter of this Agreement shall be solely as set forth in this
Agreement but the Non-Disclosure Agreement shall remain in full force and effect
with respect to all other disclosures made thereunder.

 

16.13      Independent Contractors.  Both Parties are independent contractors
under this Agreement.  Nothing herein contained shall be deemed to create an
employment, agency, joint venture or partnership relationship between the
Parties hereto or any of their agents or employees, or any other legal
arrangement that would impose liability upon one Party for the act or failure to
act of the other Party.  Neither Party shall have any express or implied power
to enter into any contracts or commitments or to incur any liabilities in the
name of, or on behalf of, the other Party, or to bind the other Party in any
respect whatsoever.

 

16.14      Counterparts.  This Agreement may be executed in any number of
counterparts, each of which need not contain the signature of more than one
Party but all such counterparts taken together shall constitute one and the same
agreement.  Any signature page delivered by facsimile or electronic image
transmission shall be binding upon the Parties and shall be treated as if
originals. Any Party that delivers a signature page by facsimile or electronic
image transmission shall deliver an original counterpart to any other Party that
requests such original counterpart.

 

[SIGNATURE PAGE FOLLOWS]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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IN WITNESS WHEREOF, duly authorized representatives of the Parties have duly
executed this Agreement as of the Signing Date.

 

FACET BIOTECH CORPORATION

TRUBION PHARMACEUTICALS, INC.

 

 

By

/s/ Faheem Hasnain

 

By

/s/ Peter A. Thompson

 

 

 

 

 

Name:

 Faheem Hasnain

Name:

 Peter A. Thompson

 

 

 

 

Title:

President and Chief Executive Officer

Title:

 President and Chief Executive Officer

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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List of Exhibits

 

Exhibit A

 

— TRU-016 Description

Exhibit B

 

— Initial Development Plan

Exhibit C

 

— Stock Purchase Agreement

 

List of Schedules

 

Schedule 1.132

 

— Trubion Core Patent Rights

Schedule 1.134

 

— Trubion Product Patent Rights

Schedule 3.7

 

— Pre-existing Obligations

Schedule 12.2

 

— Disclosure Schedule

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Exhibit A (TRU-016 Description)

 

[ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Exhibit B (Initial Development Plan)

 

[ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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EXHIBIT C (Stock Purchase Agreement)

 

[ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Schedule 1.132 (Trubion Core Patent Rights)

 

[ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Schedule 1.134 (Trubion Product Patent Rights)

 

[ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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Schedule 3.7 (Pre-existing Obligations)

 

[ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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 Schedule 12.2 (Disclosure Schedule)

 

[ * ]

 

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[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

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