EXHIBIT 10.3

 

CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT IN ACCORDANCE WITH RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. SUCH INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH OMITTED INFORMATION
HAS BEEN INDICATED WITH ASTERISKS (*****).

 

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ANCILLARY DEVELOPMENT & LICENSING AGREEMENT

 

By and Between

 

NOVARTIS PHARMA AG

 

AND

 

TANOX, INC.

 

Dated as of February 25, 2004

 

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TABLE OF CONTENTS

 

          Page

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ARTICLE 1 DEFINITIONS

   2

ARTICLE 2 PURPOSE AND EFFECT OF THIS AGREEMENT

   6

2.1

   Outline of Terms and Original D&L Agreement    6

2.2

   Other Agreements    6

2.3

   Costs    6

ARTICLE 3 COOPERATION

   6

3.1

   Cooperation in EA Generally    6

3.2

   Commercially Reasonable Efforts    7

3.3

   *****    7

3.4

   Scope of Cooperation    7

3.5

   Compliance With Legal Requirements    7

3.6

   Information Sharing    7

ARTICLE 4 GOVERNANCE

   8

4.1

   Governance For East Asia Generally    8

4.2

   Governance For Rest of World    8

4.3

   The TanNov Joint Management Committee    8

4.4

   The TanNov Joint Commercialization Committee    10

4.5

   Alliance Management Representatives    12

4.6

   TanNov JCC Sub-Committees    13

4.7

   Disclosure of Information    14

4.8

   Certain Limitations on TanNov Committees    14

ARTICLE 5 DEVELOPMENT

   14

5.1

   Development of Anti-IgE Products Generally    14

5.2

   Development in East Asia    15

5.3

   Development in ROW    15

5.4

   Information Sharing    16

ARTICLE 6 REGULATORY ACTIVITIES

   16

6.1

   Regulatory Development Activities in East Asia    16

6.2

   Regulatory Development Activities in the Rest of World    17

6.3

   Regulatory Development Information Sharing and Safety Management    18

ARTICLE 7 COMMERCIALIZATION

   18

7.1

   Commercialization in East Asia    18

7.2

   Commercialization in the Rest of World    19

7.3

   Product Trade Dress in East Asia and Rest of World    19

7.4

   Preparation and Review of Promotional Materials in East Asia and the Rest of
World    19

 

i

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7.5

   Anti-IgE Product Marketing and Distribution in East Asia and the Rest of
World    19

7.6

   Booking of Sales in East Asia and the Rest of World    20

7.7

   Sales Force in East Asia and the Rest of World    20

7.8

   Anti-IgE Product Samples in East Asia and the Rest of World    20

7.9

   Pricing and Pricing Approvals in East Asia and the Rest of World    20

7.10

   Customer Service    20

ARTICLE 8 MANUFACTURING

   20

8.1

   Products Manufactured Under the TCA    20

8.2

   Products Not Manufactured Under the TCA    21

8.3

   Supply Price    22

ARTICLE 9 PAYMENTS

   23

9.1

   Sales of Anti-IgE Products in East Asia    23

9.2

   Sales of Anti-IgE Products in the Rest of World    23

9.3

   Milestone Payments    24

9.4

   Credits for Milestone Payments and Legal Fees    24

9.5

   No Other Payments    25

9.6

   Reports    25

9.7

   Books    25

9.8

   Timing and Method of Payment; Currency    25

9.9

   Reconciliation    25

9.10

   Audit Rights    26

9.11

   Invoices and Documentation    27

9.12

   Taxes    27

9.13

   Interest    27

ARTICLE 10 DISPUTE RESOLUTION

   27

10.1

   Resolution of Disputes    27

10.2

   Arbitration    28

10.3

   *****    28

ARTICLE 11 INTELLECTUAL PROPERTY

   28

11.1

   Trademarks    28

11.2

   Ownership of Intellectual Property    28

11.3

   Infringement of Intellectual Property    28

11.4

   Third Party Rights    29

11.5

   Infringement of Third Party Patents    30

11.6

   No Implied License    30

ARTICLE 12 REPRESENTATIONS AND WARRANTIES

   30

12.1

   Disclaimer    30

ARTICLE 13 CONFIDENTIALITY

   31

13.1

   Company Information    31

13.2

   Academic and Scientific Publications    31

 

ii

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ARTICLE 14 LIMITATIONS ON LIABILITY

   31

ARTICLE 15 FORCE MAJEURE

   31

ARTICLE 16 TERM AND TERMINATION

   32

16.1

   Term    32

16.2

   Termination Rights    32

16.3

   Required Termination of this Agreement    33

16.4

   No Termination for Breach    33

16.5

   Termination at Will    33

16.6

   Effect of Termination; Survival    34

ARTICLE 17 INDEMNIFICATION AND INSURANCE

   35

17.1

   Indemnities Generally    35

17.2

   Product Liability and Infringement Indemnity for ROW    35

17.3

   Litigation Costs and Damages    35

17.4

   Indemnification Procedure    36

17.5

   Insurance    36

ARTICLE 18 MISCELLANEOUS

   36

18.1

   Governing Law; Submission to Jurisdiction    36

18.2

   Notices    36

18.3

   No Third Party Beneficiary    37

18.4

   Integration and Conflict    37

18.5

   Amendments    38

18.6

   No Assignment and Binding Effect    38

18.7

   Headings    38

18.8

   Schedules Incorporated    38

18.9

   Severability    38

18.10

   No Waiver    38

18.11

   Counterparts    38

18.12

   Bankruptcy Acknowledgment    39

18.13

   Publicity    39

18.14

   No Partnership or Agency    40

18.15

   Further Assurances    40

 

Schedule A – EA/ROW Financial Appendix

 

iii

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ANCILLARY DEVELOPMENT & LICENSING AGREEMENT

 

THIS ANCILLARY DEVELOPMENT & LICENSING AGREEMENT (together with Schedule A
hereto, the “Agreement”) is dated as of February 25, 2004 (the “Effective
Date”), by and among Novartis Pharma AG, a company organized and existing under
the laws of Switzerland (“Novartis”) and Tanox, Inc. (formerly known as Tanox
Biosystems, Inc.), originally a Texas corporation and reincorporated as a
Delaware corporation (“Tanox”). (Each of Novartis and Tanox is referred to
herein individually as a “Party” and all are referred to collectively herein as
the “Parties.”)

 

W I T N E S S E T H:

 

WHEREAS, Tanox and Ciba-Geigy Limited (“Ciba-Geigy”) entered into a certain
Development and Licensing Agreement dated as of May 11, 1990 (the “Original D&L
Agreement”), providing for cooperation in the research, development and
commercialization of anti-IgE antibody-based treatments in humans for
IgE-mediated diseases; and

 

WHEREAS, Genentech Inc., a Delaware corporation (“Genentech”), Genentech
International Limited, Tanox, and Ciba-Geigy entered into a certain Outline of
Terms for Settlement of the Litigations among Genentech, Genentech International
Limited, Tanox and Ciba-Geigy, dated as of July 8, 1996, relating to anti-IgE
inhibiting antibodies (the “Outline of Terms”), which contemplates that the
Parties will negotiate and enter into (a) detailed agreement(s) implementing and
completing the terms contained in the Outline of Terms; and

 

WHEREAS, Tanox and Ciba-Geigy entered into a certain Supplemental Agreement
dated as of July 8, 1996, which modified and amended the Original D&L Agreement
(the “Supplemental Agreement”); and

 

WHEREAS, subsequent to the execution of the Original D&L Agreement, the Outline
of Terms and the Supplemental Agreement, Ciba-Geigy has been succeeded by
Novartis with respect to the research, development, manufacture and
commercialization of pharmaceutical specialty products and with respect to all
the rights and obligations relevant to Ciba-Geigy under the Original D&L
Agreement, the Outline of Terms and the Supplemental Agreement, as a result of
its merger with Sandoz Ltd.; and

 

WHEREAS, certain disputes have arisen between Novartis, Genentech and Tanox
concerning their respective rights regarding anti-IgE inhibiting monoclonal
antibodies and certain lawsuits and arbitration proceedings have been initiated
by the Parties to resolve certain of those disputes; and

 

WHEREAS, Novartis, Genentech and Tanox intend to enter into a Tripartite
Cooperation Agreement (the “TCA”) for the purpose of resolving those

 

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disputes, terminating such lawsuits and arbitration proceedings, implementing
certain aspects of the Outline of Terms and cooperating with each other with
respect to the development and commercialization of Anti-IgE Antibodies and
Anti-IgE Products (each as defined in the TCA) throughout the world on the terms
and subject to the conditions set forth in such Tripartite Cooperation
Agreement; and

 

WHEREAS, the Parties intend this Agreement, together with Schedule A hereto, to
represent: (a) all aspects of the Original D&L Agreement related to Anti-IgE
Antibodies and Anti-IgE Products in East Asia and the Rest of World (each as
defined in the TCA); (b) Sections 1 and 2 of the Supplemental Agreement; and (c)
all bipartite aspects (as between Novartis and Tanox) of the Detailed Agreement
envisaged by the Outline of Terms relating to the development and
commercialization of Anti-IgE Antibodies and Anti-IgE Products in East Asia and
the Rest of World; and

 

WHEREAS, the Parties enter into this Agreement for the purpose of cooperating
with respect to the development and commercialization of Anti-IgE Antibodies and
Anti-IgE Products in East Asia and the Rest of World on the terms and conditions
set forth herein; and

 

WHEREAS, in connection with entering into this Agreement, Tanox and Novartis
shall, on the date hereof, amend and restate the Original D&L Agreement (such
amended and restated D&L Agreement being the “Amended and Restated D&L
Agreement”) such that, with effect from the date hereof, the Amended and
Restated D&L Agreement applies only to Potential Products (as defined in the
Amended and Restated D&L Agreement) other than Anti-IgE Antibodies and Anti-IgE
Products (each as defined in the TCA) and such that the Amended and Restated D&L
Agreement represents: (a) all aspects of the Original D&L Agreement related to
such Potential Products; and (b) Section 3 of the Supplemental Agreement.

 

NOW, THEREFORE, in consideration of the following mutual promises and
obligations, and for other good and valuable consideration the adequacy and
sufficiency of which is hereby acknowledged, the Parties hereto hereby agree as
follows:

 

ARTICLE 1

 

DEFINITIONS

 

Unless otherwise expressly defined in this Agreement, capitalized terms used in
this Agreement shall have the meanings set forth in the Tripartite Cooperation
Agreement:

 

“Allocable Manufacturing Overhead” shall have the meaning set forth in the
EA/ROW Financial Appendix.

 

“Breaching Party” shall have the meaning set forth in Section 16.4 herein.

 

“Cost of Goods” shall have the meaning set forth within the “Fully Burdened
Manufacturing Cost” definition in the EA/ROW Financial Appendix.

 

2

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“Cost of Sales” shall have the meaning set forth in the EA/ROW Financial
Appendix.

 

“Develop” shall mean to develop, to use for development purposes, or to conduct
Clinical Trials, in each case in support of any Approval Application, including
without limitation, any post-marketing clinical trial or Phase IV clinical trial
intended to support expanded labeling or to satisfy requirements of a Public
Authority in connection with any Approval or Pricing Approval, or to the extent
permitted under this Agreement or any Ancillary Agreement, have any of those
things done, and “Development” and “Developing” shall have a corresponding
meaning. Notwithstanding the foregoing, unless otherwise expressly indicated,
the term “Develop” shall exclude manufacturing development except with respect
to the definition of “Development Costs,” the activities contemplated by the “EA
Development Plan” and for purposes of operation of the TanNov Committees with
respect to any EA Development Plan (except as otherwise expressly set forth in
Article 4).

 

“Development Costs” shall have the meaning set forth in the EA/ROW Financial
Appendix.

 

“Distribution/Warehousing Costs” shall have the meaning set forth in the EA/ROW
Financial Appendix.

 

“Dispute” shall mean any dispute, controversy or claim arising on or after the
Effective Date out of or in connection with this Agreement or the Parties’
activities hereunder.

 

“EA Commercialization Plan” shall have the meaning set forth in Section
4.4(a)(ii) herein.

 

“EA Development Plan” shall have the meaning set forth in Section 4.4(a)(i)
herein.

 

“EA Manufacturing and Supply Plan” shall have the meaning set forth in Section
4.4(a)(iii) herein.

 

“EA Finance Sub-Committee” or “EA FSC” shall have the meaning set forth in
Section 4.6(b) herein.

 

“EA Plans” shall mean such plans and budgets as may be developed and approved by
the TanNov Committees hereunder in accordance with Article 4 with respect to
East Asia, including, without limitation, the EA Development Plan and the EA
Commercialization Plan.

 

“EA/ROW Financial Appendix” shall mean the EA/ROW Financial Appendix attached as
Schedule A hereto.

 

“Effective Date” shall have the meaning set forth in the introductory paragraph
of this Agreement.

 

3

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“Excluded Costs” shall have the meaning set forth in the EA/ROW Financial
Appendix.

 

“Force Majeure Events” shall have the meaning set forth in Article 15 herein.

 

“Fully Burdened Manufacturing Cost” or “FBMC” shall have the meaning set forth
in the EA/ROW Financial Appendix.

 

“General and Administrative Costs (East Asia)” shall have the meaning set forth
in the EA/ROW Financial Appendix.

 

“Gross Profit (East Asia)” shall have the meaning set forth in the EA/ROW
Financial Appendix.

 

“Gross Sales (East Asia)” and “Gross Sales (ROW)” shall have the meanings given
thereto respectively as set forth in the EA/ROW Financial Appendix.

 

“Marketing Costs” shall have the meaning set forth in the EA/ROW Financial
Appendix.

 

“Net Profits (East Asia)” or “Net Losses (East Asia)” shall have the meanings
given thereto respectively as set forth in the EA/ROW Financial Appendix.

 

“Net Sales”, “Net Sales (East Asia)” and “Net Sales (ROW)” shall have the
meanings given thereto respectively as set forth in the EA/ROW Financial
Appendix.

 

“Non-JCA Anti-IgE Products” shall have the meaning set forth in Section 8.2.

 

“Other Operating Income/Expense” shall have the meaning set forth in the EA/ROW
Financial Appendix.

 

“Outline of Terms” shall have the meaning set forth in the recitals to this
Agreement.

 

“Product Trade Dress” shall mean the product trade dress and the distinctive
appearance of primary and secondary packaging of each Anti-IgE Product in
Finished Product form, including samples, selected pursuant to this Agreement
and JCA (if applicable), including the proprietary Anti-IgE Trademarks used in
EA and the ROW in connection with any Anti-IgE Product.

 

“Required Third Party Rights” shall mean such Third Party intellectual property
rights as are necessary for, or material to, the Development, Manufacture or
Commercialization of any Anti-IgE Antibody or Anti-IgE Product pursuant to this
Agreement.

 

“Rest of World” and “ROW” shall mean any countries or territories other than the
United States, Europe and East Asia.

 

4

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“Royalty Period” shall mean, on an Anti-IgE Product-by-Anti-IgE Product and
country-by-country basis, the period commencing on the first sale to a Third
Party of each Anti-IgE Product in such country, and ending on the later of: (a)
expiration of all Valid Claims of each of the Tanox Anti-IgE Patents which would
be infringed by the Manufacture, Development or Commercialization of such
Anti-IgE Product in such country; and (b) the date which is ***** from
Commercial Launch of such Anti-IgE Product in such country.

 

“Sales Costs (East Asia)” shall have the meaning set forth in the EA/ROW
Financial Appendix.

 

“Sales Returns and Allowances (East Asia)” and “Sales Returns and Allowances
(ROW)” shall have the meanings given thereto respectively as set forth in the
EA/ROW Financial Appendix.

 

“Senior Officer” shall mean the Chief Executive Officers of each of the Parties,
or their respective designees in each case.

 

“TanNov Committee” means any committee, sub-committee or team contemplated by
Article 4 of this Agreement.

 

“TanNov Joint Commercialization Committee” or “TanNov JCC” shall mean the Joint
Commercialization Committee as described in Section 4.4 herein.

 

“TanNov Joint Management Committee” or “TanNov JMC” shall mean the Joint
Management Committee as described in Section 4.3 herein.

 

“TanNov JCC Chairperson” shall have the meaning set forth in Section 4.4(d)
herein.

 

“TanNov JMC Chairperson” shall have the meaning set forth in Section 4.3(c)
herein.

 

“Tanox Profit Share” shall have the meaning set forth in the EA/ROW Financial
Appendix.

 

“Term” shall mean the period beginning on the Effective Date and ending on the
expiration of this Agreement as described in Section 16.1 herein or, if earlier,
termination of this Agreement as set forth in Article 16.

 

“Third Party” shall mean any Person other than Novartis, Tanox or their
respective Affiliates.

 

5

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ARTICLE 2

 

PURPOSE AND EFFECT OF THIS AGREEMENT

 

2.1 Outline of Terms and Original D&L Agreement. This Agreement, including
Schedule A hereto, is intended by the Parties to represent (a) all aspects of
the Original D&L Agreement related to Anti-IgE Antibodies and Anti-IgE Products
in East Asia and the Rest of World; (b) Sections 1 and 2 of the Supplemental
Agreement; and (c) all bipartite aspects (as between Novartis and Tanox) of the
“Detailed Agreement” as described in Section 2.1 of the TCA envisaged by the
Outline of Terms relating to the development and commercialization of Anti-IgE
Antibodies and Anti-IgE Products in East Asia and the Rest of World. Concurrent
with the execution of this Agreement, the Parties are entering into: (i) the
Tripartite Cooperation Agreement, together with Genentech, which, together with
the Ancillary Agreements, is intended to represent all aspects of the Detailed
Agreement and to implement and complete such provisions of the Outline of Terms
and to supercede the Outline of Terms; and (ii) the Amended and Restated D&L
Agreement, which is intended to represent all aspects of the Original D&L
Agreement relating to Potential Products (as defined therein) other than
Anti-IgE Antibodies and Anti-IgE Products and Section 3 of the Supplemental
Agreement. The Amended and Restated D&L Agreement and this Agreement are
together intended to supercede the Original D&L Agreement and the Supplemental
Agreement in their entireties.

 

2.2 Other Agreements. This Agreement, including Schedule A hereto, is intended
by the Parties to complement the Tripartite Cooperation Agreement, the Amended
and Restated D&L Agreement and the JCA (which agreements, as amended and
restated, remain in full force and effect). In the event of any inconsistency
between the terms of this Agreement and the Tripartite Cooperation Agreement,
the terms of the TCA shall prevail. In the event of any inconsistency between
the terms of this Agreement and the Amended and Restated D&L Agreement, the
terms of this Agreement shall prevail with respect to the development and
commercialization (as such terms are generally construed rather than as strictly
defined hereunder) of Anti-IgE Antibodies and Anti-IgE Products in East Asia and
the Rest of World.

 

2.3 Costs. Each Party hereto shall bear all costs and expenditures incurred by
it in connection with drafting and negotiation of this Agreement and any
Ancillary Agreement or Related Agreement, including, without limitation,
attorney’s fees.

 

ARTICLE 3

 

COOPERATION

 

3.1 Cooperation in EA Generally. Subject to the express rights and obligations
of each of the Parties in this Agreement, each of Novartis and Tanox (including,
without limitation, through their respective members on the TanNov Committees)
shall, and shall use commercially reasonable efforts to cause its relevant

 

6

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Affiliates performing obligations hereunder to, cooperate in good faith in
Developing and Commercializing Anti-IgE Antibodies and Anti-IgE Products in East
Asia in accordance with, and to the extent such Development and
Commercialization complies with, the terms and conditions of this Agreement.

 

3.2 Commercially Reasonable Efforts. Subject to the express rights and
obligations of each of the Parties in this Agreement, each of Novartis and Tanox
(including, without limitation, through their respective members on Committees)
shall, and shall use commercially reasonable efforts to cause its relevant
Affiliates performing obligations hereunder to, use Commercially Reasonable
Efforts to Develop, Manufacture (if applicable) and Commercialize Anti-IgE
Products in East Asia and the Rest of World in accordance with this Agreement;
provided, however, that:

 

(a) no Party shall be held in breach of its obligation to use Commercially
Reasonable Efforts to the extent that such Party is constrained from exercising
such Commercially Reasonable Efforts because of the exercise by another Party of
its voting rights pursuant to Article 4 or of any other rights pursuant to this
Agreement;

 

(b) *****;

 

(c) *****;

 

(d) *****

 

(d) *****.

 

3.3 ***** . *****.

 

3.4 Scope of Cooperation. This Agreement and the Parties’ cooperation hereunder
shall apply only to Anti-IgE Antibodies and Anti-IgE Products, and shall not
extend to any other compounds, molecules or products.

 

3.5 Compliance With Legal Requirements. The Parties, and their respective
Affiliates, shall perform their obligations under this Agreement, including any
Development or Commercialization of Anti-IgE Antibodies or Anti-IgE Products
hereunder, in compliance with applicable Legal Requirements. No Party or any of
its Affiliates shall, or shall be required to, undertake any activity under or
in connection with this Agreement which violates, or which it believes, in good
faith and on the advice of counsel, may violate, any applicable Legal
Requirements. *****

 

3.6 Information Sharing. The provisions of Section 4.4 of the TCA shall apply to
this Agreement as if set out in full in this Agreement.

 

7

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ARTICLE 4

 

GOVERNANCE

 

4.1 Governance For East Asia Generally. Subject to the express provisions of
this Agreement, the Parties’ Manufacture, Development and Commercialization of
Anti-IgE Antibodies and Anti-IgE Products in East Asia, and their cooperation
hereunder with respect thereto, will be subject to the governance, approval,
direction, facilitation and oversight of the TanNov Committees described in
Sections 4.3-4.8 (inclusive) below. Without limiting the foregoing, the Parties
acknowledge and agree that all decisions with respect to the selection of
Anti-IgE Antibodies and Anti-IgE Products for Development and Commercialization
in East Asia, and the selection of indications for which particular Anti-IgE
Antibodies and Anti-IgE Products shall be Developed and Commercialized in East
Asia, shall be made through the TanNov Committees described below.

 

4.2 Governance For Rest of World. The Development and Commercialization of
Anti-IgE Antibodies and Anti-IgE Products in the Rest of World will be conducted
by Novartis (and its relevant Affiliates) in its (or their) sole discretion
subject to Novartis’ obligations to use Commercially Reasonable Efforts under
this Agreement with respect thereto. Tanox acknowledges and agrees that it shall
have no right to participate in decisions relating to the Development or
Commercialization of Anti-IgE Antibodies or Anti-IgE Products in the Rest of
World; provided, however, that *****:

 

(a) *****

 

(b) *****

 

Novartis shall provide to Tanox, through its members of the TanNov JCC,
information as to: (i) the nature of any ongoing or planned Clinical Trials for
Anti-IgE Antibodies or Anti-IgE Products in the Rest of World, and the results
thereof; (ii) the anticipated Launch dates for Anti-IgE Products in countries in
the Rest of World; and (iii) its sales expectations and sales results for the
Rest of World.

 

4.3 The TanNov Joint Management Committee.

 

(a) Functions of the TanNov JMC. Overall governance of the Parties’ cooperation
hereunder with respect to East Asia and the Parties’ Development and
Commercialization of Anti-IgE Antibodies and Anti-IgE Products in East Asia will
be approved, directed and facilitated by the TanNov JMC, which shall be
established by the Parties to supervise the performance of the Parties hereunder
with respect to those matters. The specific functions of the TanNov JMC within
the foregoing scope shall be determined by the TanNov JMC subject to the terms
and conditions of this Agreement, but in any event shall include the following:

 

(i) review and approval of the EA Commercialization Plan and the EA Development
Plan, each of which shall be recommended by the TanNov JCC under Section 4.4(a)
below and subject to TanNov JMC approval hereunder;

 

(ii) review and approval of any Non-JCA Anti-IgE Products or with respect to
formulations specific to EA of Anti-IgE Products which are also Developed or
Commercialized in Europe or the US, which EA Manufacturing and Supply Plan shall
be recommended by the TanNov JCC under Section 4.4(a) below and subject to
TanNov JMC approval hereunder;

 

8

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(iii) coordination of the Parties’ various functional representatives in
developing and executing EA Plans for Anti-IgE Products in East Asia in an
effort to ensure consistency and efficiency;

 

(iv) resolving disputes among members of the TanNov JCC and identifying
unresolved disputes between members of the TanNov JMC to the Senior Officers of
each of Novartis and Tanox, if applicable, for resolution in accordance with
Article 10 of this Agreement;

 

(v) planning and coordinating cooperative efforts between the Parties and each
of the TanNov Committees for East Asia; and

 

(vi) approving strategies for internal and external communications by the
Parties with respect to the Anti-IgE Products in East Asia.

 

No EA Plan shall be acted upon until it is approved by the TanNov JMC.

 

In addition, the TanNov JMC shall have the Dispute resolution functions
described in Section 10.1 with respect to the ROW.

 

(b) Composition of the TanNov JMC. The TanNov JMC shall have members appointed
by each Party, all of which shall be senior executives of the Parties (or of a
Party’s Affiliate) with an understanding of development, clinical, regulatory,
manufacturing and marketing issues. As of the Effective Date, the TanNov JMC
shall be comprised of up to ***** members, with each Party being entitled to
appoint up to ***** members to the TanNov JMC and with each Party having
identified to the other in writing its initial members of the TanNov JMC. Each
Party shall notify the other Party of any change in the identities of its
appointed members prior to making any such change. The total number of TanNov
JMC members may be changed by unanimous vote of the TanNov JMC with the proviso
that in all cases each Party shall have the right to appoint an equal number of
members. Each Party will use commercially reasonable efforts to limit changes in
the identities of its representatives. A TanNov JMC member may not, concurrently
with TanNov JMC membership, be a member of the TanNov JCC or any subcommittee of
the TanNov JCC (although a TanNov JMC member may participate in a non-voting
capacity at any meetings of TanNov JCC or any subcommittee of the TanNov JCC
provided that notice of such attendance has been provided in advance).

 

(c) Chairperson of the TanNov JMC. The TanNov JMC shall be chaired by a TanNov
JMC Chairperson selected by Novartis from the TanNov JMC members appointed by
Novartis. The responsibilities of the TanNov JMC Chairperson shall be determined
by the TanNov JMC but shall in any event include the following: (i) setting
meeting agendas; (ii) calling emergency meetings of the TanNov JMC; (iii)
coordinating presentation of TanNov JMC disputes that have been unresolved for
***** to the Parties’ respective Senior Officers pursuant to Article 10 of this
Agreement; and (iv) recording, preparing and, within a reasonable time, issuing
minutes of the TanNov JMC meetings, which meeting minutes shall be submitted for
approval of the members of the TanNov JMC. The TanNov JMC Chairperson’s
responsibilities and authority shall be limited to administrative matters and
shall not include any right or responsibility to make decisions for, or
otherwise act on behalf of, the TanNov JMC itself.

 

(d) Meetings of the TanNov JMC. The TanNov JMC shall meet as often as the TanNov
JMC determines to be necessary to ensure the effective

 

9

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

implementation of this Agreement and the Parties’ cooperation hereunder, but in
no event less than twice per calendar year, on such dates and at such places to
be unanimously agreed upon by the members of the TanNov JMC. Meetings of the
TanNov JMC may be held in person or in any reasonable manner including without
limitation, by telephone or video conference. Each Party shall bear its own
costs of participating in TanNov JMC meetings and such costs will not be
reimbursable as part of costs and expenses to be shared hereunder. Decisions of
the TanNov JMC shall be made*****. It is contemplated that a reasonable number
of additional representatives of the Parties may attend and participate in a
non-voting capacity in the TanNov JMC meetings where such additional
representatives are reasonably required to address specific issues to be
discussed at such meeting of the TanNov JMC. The procedures which will govern
the operation of the TanNov JMC and its decision making process and the specific
criteria to be used to resolve disputes as contemplated herein will be
determined *****.

 

4.4 The TanNov Joint Commercialization Committee.

 

(a) Functions of the TanNov JCC; Preparation of EA Plans. The TanNov JCC shall
be established by the Parties for the purpose of reviewing, and recommending for
approval by the TanNov JMC (as provided in Section 4.3(a)(i) above), an EA
Commercialization Plan and an EA Development Plan (and, if applicable, an EA
Manufacturing and Supply Plan, as contemplated in Section 4.3(a)(ii) above), and
overseeing the execution of those EA Plans approved by the TanNov JMC.

 

(i) The EA Development Plan, shall be prepared by Tanox, subject to review by,
and revision at the direction of, the TanNov JCC, and shall be subject to the
approval of the TanNov JMC. The EA Development Plan shall comprise: (A) a
detailed EA Plan (including without limitation, a detailed budget setting forth
the total expenditures expected to be incurred during each quarter of the
upcoming year) for the Development (including manufacturing development) of
Anti-IgE Products in each applicable Regulatory Jurisdiction for East Asia, and
(B) a detailed EA Plan (including without limitation, a detailed budget setting
forth the total expenditures expected to be incurred during each quarter of the
upcoming year) for regulatory affairs, including without limitation,
determination of Approval Application filings of Anti-IgE Products in each
applicable Regulatory Jurisdiction for East Asia.

 

(ii) The EA Commercialization Plan shall be prepared by Novartis, subject to
review by, and revision at the direction of, the TanNov JCC, and shall be
subject to the approval of the TanNov JMC. The EA Commercialization Plan shall
comprise a detailed EA Plan (including without limitation, a detailed budget
setting forth the total expenditures expected to be incurred during each quarter
of the upcoming year) for the Commercialization of Anti-IgE Products in each
applicable Regulatory Jurisdiction for East Asia.

 

(iii) The EA Manufacturing and Supply Plan shall be prepared by the Party
nominated by the TanNov JMC, subject to review by, and revision at the direction
of, the TanNov JCC, and shall be subject to the approval of the TanNov JMC.
Notwithstanding any other provision of this Agreement, such EA Manufacturing and
Supply Plan shall be consistent with the corresponding

 

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Manufacturing and Supply Plan approved by the applicable Committees pursuant to
the TCA. The EA Manufacturing and Supply Plan shall comprise a detailed EA Plan
(including without limitation, a detailed budget setting forth the total
expenditures expected to be incurred during each quarter of the upcoming year)
for the Manufacture (excluding manufacturing development, which for the
avoidance of doubt shall be included in the EA Development Plan) and supply of
Non-JCA Anti-IgE Products and/or formulations specific to EA of Anti-IgE
Products which are also Developed or Commercialized in Europe or the US.

 

(b) Other Functions of the TanNov JCC. In addition to the duties set forth in
Section 4.4(a) above, the TanNov JCC’s responsibilities will include:

 

(i) monitoring compliance with all EA Plans (including but not limited to the EA
Development Plan and EA Commercialization Plan);

 

(ii) reviewing and approving all protocols, including concept sheets and
protocol summaries, for studies in East Asia involving any Anti-IgE Product;
provided, however, that such protocols are consistent with the EA Development
Plan;

 

(iii) overseeing, reviewing and approving studies for Anti-IgE Products for East
Asia in accordance with the EA Development Plan, including protocols,
specifications, timelines and priorities;

 

(iv) overseeing, monitoring and coordinating all Approval Applications;
regulatory actions, communications and filings with, and submissions to,
including filings and submission of supplements and amendments thereto, Public
Authorities in East Asia with respect to the Anti-IgE Products;

 

(v) facilitating the exchange of all regulatory information and data necessary
or useful to be exchanged hereunder for purposes of the conduct of clinical
studies, preparation or filing of Approval Applications or other regulatory
submissions, to meet safety reporting requirements, or otherwise in East Asia;

 

(vi) reviewing and overseeing the implementation of positioning and market
strategies for East Asia, so long as the foregoing are consistent with the EA
Commercialization Plan and the EA Development Plan, including without
limitation, making decisions to seek or include any new indication for an
Anti-IgE Product in East Asia;

 

(vii) developing strategies with respect to, and planning and coordinating,
external communications by the Parties with respect to Commercialization and
Development of Anti-IgE Products in East Asia; and

 

(viii) approving actual calendar year spending by any Party that exceeds the
total calendar year approved budget for that Party in any EA Plan (including all
approved budget modifications) by ***** as shareable costs under the
collaboration (with such amounts to be approved or disapproved as shareable
costs by the unanimous approval of Tanox and Novartis).

 

(c) Composition of the TanNov JCC. The TanNov JCC shall have members appointed
by each of the Parties, provided that each of the Parties must select as

 

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one (1) of its appointments to the TanNov JCC each of the following: (i) its
Alliance Manager for the TCA; (ii) a representative of such Party with expertise
in development and regulatory matters; and (iii) a representative of such Party
with expertise in commercialization matters. As of the Effective Date, the
TanNov JCC shall be comprised of up to ***** members, with each Party being
entitled to appoint up to ***** members and with each Party having identified to
the other in writing its initial members of the TanNov JCC. Each Party shall
notify the other Parties of any change in the identities of its appointed
members prior to making any such change. The total number of TanNov JCC members
may be changed by the TanNov JMC with the proviso that in all cases each Party
shall be entitled to appoint an equal number of members from each Party. Each
Party will use commercially reasonable efforts to limit changes in the
identities of its representatives. A TanNov JCC member may not, concurrently
with TanNov JCC membership, be a member of the TanNov JMC.

 

(d) Chairperson of the TanNov JCC. The TanNov JCC shall be chaired for one (1)
year terms, commencing April 1st of each year, by a TanNov JCC Chairperson
selected from one of the Alliance Managers appointed by either Tanox or
Novartis. Such TanNov JCC Chairperson shall be selected for each successive year
by either Tanox or Novartis so that each of them will have the right to select
the TanNov JCC Chairperson in alternate years. The responsibilities of the
TanNov JCC Chairperson shall be determined by the TanNov JCC but shall in any
event include the following: (i) setting meeting agendas; (ii) calling emergency
meetings of the TanNov JCC; (iii) coordinating presentation of disputes between
members of the TanNov JCC that have been unresolved for ***** to the TanNov JMC
pursuant to Section 4.4(e) below; and (iv) recording, preparing and, within a
reasonable time, issuing minutes of the TanNov JCC meetings, which meeting
minutes shall be submitted for approval by the members of the TanNov JCC. The
TanNov JCC Chairperson’s responsibilities and authority shall be limited to
administrative matters and shall not include any right or responsibility to make
decisions for, or otherwise act on behalf of, the TanNov JCC itself.

 

(e) Meetings. The TanNov JCC shall meet as often as the TanNov JCC determines to
be necessary to meet its objectives under this Agreement or as directed by the
TanNov JMC but in no event less than twice every calendar year, or more often as
needed, on such dates and at such places as are agreed upon between Tanox and
Novartis. Meetings of the TanNov JCC may be held in person or in any reasonable
manner, including, without limitation, by telephone or video conference. Each
Party shall bear its own costs of participating in TanNov JCC meetings and such
costs will not be reimbursable as part of costs and expenses to be shared
hereunder. Decisions of the TanNov JCC shall be made *****.

 

4.5 Alliance Management Representatives. Each Alliance Manager shall be
primarily responsible for facilitating the flow of information and otherwise
promoting communications and collaboration within and among the TanNov
Committees, between the Parties and internally within the Parties. Each Alliance
Manager will also be responsible for:

 

(a) facilitating coordination among the various functional representatives of
their appointing Party;

 

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(b) providing single-point communication for seeking consensus both internally
within the respective Party’s organization and together regarding key strategy
and EA Plan issues, as appropriate, including facilitating review of external
corporate communications in accordance with Section 18.13 of this Agreement and
Section 15.2 of the TCA; and

 

(c) raising and facilitating the resolution of cross-country, cross-Party and/or
cross-functional disputes to the appropriate Committee or forum (including, but
not limited to the TanNov JMC or TanNov JCC, as appropriate), in a timely
manner.

 

4.6 TanNov JCC Sub-Committees.

 

(a) The TanNov JCC may from time to time establish such sub-committees as it
considers appropriate to facilitate its responsibilities with respect to the
Parties’ cooperation under this Agreement in so far as it applies with respect
to the Parties’ Development and Commercialization of Anti-IgE Antibodies and
Anti-IgE Products in East Asia; provided, however, that the EA FSC described in
paragraph (b) below shall in any event be maintained at all times during the
Term of this Agreement. Unless otherwise agreed between the Parties, the number
of members of such sub-committees or any others appropriately created by the
TanNov JCC shall rest in the TanNov JCC’s discretion; provided, however, that
each Party shall have the right to appoint an equal number of representatives to
each such sub-committee. The sub-committees of the TanNov JCC shall meet as
frequently as they determine to be necessary to accomplish their objectives, or
as required by the TanNov JCC. Decisions of sub-committees of the TanNov JCC
shall be made *****. Unless otherwise provided herein, the procedures and
operation of all TanNov JCC sub-committees shall be determined by such
sub-committees.

 

(b) An EA Finance Sub-Committee (the “EA FSC”) shall be established as an
informal sub-committee of the TanNov JCC and tasked with supporting the TanNov
JCC, the TanNov JMC and the Parties with respect to accounting and financial
determinations relating to cost and profit sharing hereunder and other financial
matters, all in accordance with the EA/ROW Financial Appendix and the terms of
this Agreement. The EA FSC shall have at least ***** members, and each Party
shall appoint an equal number of members to the EA FSC. The members of the EA
FSC shall be responsible for administering operations under the EA/ROW Financial
Appendix in accordance with the provisions thereof and the terms of this
Agreement including, without limitation, advising the TanNov JCC and the TanNov
JMC with respect to the following matters: (i) actual financial results; (ii)
forecasts; (iii) budgets and long range plans; (iv) inventory levels; (v) Net
Profits (East Asia) and Net Losses (East Asia) and the calculation thereof; and
(vi) other financial matters arising under the EA/ROW Financial Appendix or
otherwise relating to the Parties’ cooperation in East Asia hereunder,
including, without limitation, each Party’s methodologies for charging costs for
determination of actual financial results, forecasts, budgets and long range
plans and the results of applying such methodologies. The EA FSC shall (I)
coordinate the presentation to the TanNov JCC of disputes to be resolved in
accordance herewith arising between the Parties under the EA/ROW Financial
Appendix for resolution in accordance with this Agreement; and (II) develop and
analyze proposals for reasonably amending and revising the provisions of the
EA/ROW Financial Appendix and this Agreement

 

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relating to accounting and reporting matters so as to permit the Parties (and
their relevant Affiliates) to obtain proper and advantageous tax and accounting
treatment, subject to all applicable Legal Requirements, and each Party agrees
to reasonably cooperate in such reasonable revisions and amendments to the
extent such revisions and amendments do not prejudice or negatively affect such
Party (or its relevant Affiliates) financially or otherwise with respect to the
terms of the EA/ROW Financial Appendix in effect on the Effective Date. For the
avoidance of doubt, all revisions and modifications to the EA/ROW Financial
Appendix require the written consent of both Parties. Notwithstanding the
foregoing, no determination of the FSC shall limit a Party’s rights to audit the
books and records of the other Party under Section 9.10 and no approval of any
financial reports by the FSC shall limit the determination of any such audit.

 

4.7 Disclosure of Information. The TanNov Committees shall provide the Parties
(through their member(s) of the applicable Committee) with copies of all
information, documents, presentations and reports submitted to or issued by such
TanNov Committee. Without limiting the generality of the foregoing, each Party
shall provide to the other Party (to the extent not already received by such
other Party through their member(s) of the applicable Committee) any
information, documents, presentations or reports submitted by the Party to, or
received by the Party from, such TanNov Committee. In no event shall a Party be
required to provide copies of privileged or attorney-work-product information,
documents, presentations or reports that are not actually submitted to or issued
by a TanNov Committee. The provisions of this Section 4.7 shall be subject to
Section 5.10(b) of the TCA as if such section were reproduced hereunder.

 

4.8 Certain Limitations on TanNov Committees. For the avoidance of doubt,
approval from the TanNov JMC or any other TanNov Committee is not required
before any Party can avail itself of the Dispute resolution procedures hereunder
with respect to any Dispute or otherwise seek redress or resolution of a given
Dispute in accordance with Article 10 of this Agreement. Notwithstanding any of
the foregoing to the contrary, no TanNov Committee shall have the authority or
ability to amend the express provisions of this Agreement.

 

ARTICLE 5

 

DEVELOPMENT

 

5.1 Development of Anti-IgE Products Generally. The Parties acknowledge and
agree that any or all Anti-IgE Antibodies and Anti-IgE Products are available
for Development, and may be Developed, in East Asia and the Rest of World solely
pursuant to this Agreement. As set forth in Article 4, all decisions with
respect to the selection of Anti-IgE Antibodies and Anti-IgE Products for
Development and Commercialization in East Asia, and the selection of indications
for which particular Anti-IgE Antibodies and Anti-IgE Products shall be
Developed and Commercialized in East Asia, shall be made through the TanNov
Committees described in this Agreement. Tanox acknowledges and agrees that all
decisions with respect to the selection of Anti-IgE Antibodies and Anti-IgE
Products for Development and Commercialization in the

 

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Rest of World, and the selection of indications for which particular Anti-IgE
Antibodies and Anti-IgE Products shall be Developed and Commercialized in the
Rest of World, shall be made by Novartis in its sole discretion; provided,
however, that, as set forth in Section 4.2 above, Novartis shall consult with
Tanox, through the applicable TanNov Committee, regarding its plans for, and
activities with respect to, the Development of Anti-IgE Antibodies and Anti-IgE
Products in the ROW.

 

5.2 Development in East Asia.

 

(a) Tanox shall have the primary responsibility for planning and conducting such
Development activities for East Asia relating to Anti-IgE Antibodies or Anti-IgE
Products as are agreed by the TanNov JMC, at the direction of and under the
oversight of the TanNov JMC and in accordance with applicable EA Plans. Novartis
shall assist and conduct such additional Development activities for East Asia
relating to Anti-IgE Antibodies or Anti-IgE Products as are agreed by the TanNov
JMC, at the direction of and under the oversight of the TanNov JMC and in
accordance with applicable EA Plans. Subject to the foregoing, each Party’s
responsibilities with respect to such Development in East Asia, and EA Plans
relating thereto, will be determined by the TanNov JMC. Development activities
in East Asia shall be subject to review and approval by the TanNov JMC as set
forth in Article 4 above, and protocols for Clinical Trials and other studies
with respect to any Anti-IgE Antibody or Anti-IgE Product in East Asia shall be
subject to review and approval by the TanNov JCC and TanNov JMC.

 

(b) Subject to the terms of this Agreement, Novartis, as official holder of the
Approvals for Anti-IgE Products in East Asia, shall have primary responsibility
for planning and conducting, with input from and in consultation with Tanox, all
post-marketing clinical trials or Phase IV clinical trials intended to support
expanded labeling or required to satisfy requirements imposed by a Public
Authority in connection with any Approval of Anti-IgE Products in East Asia. The
TanNov JCC shall decide, subject to TanNov JMC approval, which Party (or in the
case of Novartis, its Affiliate designee) has primary responsibility for
planning and conducting Phase IV clinical trials (other than any post-marketing
clinical trial or Phase IV clinical trial intended to support expanded labeling
or required to satisfy requirements imposed by a Public Authority in connection
with any Approval). The TanNov JMC will determine which of Novartis (or its
Affiliate designee) or Tanox shall have the primary responsibility for planning
and conducting all other clinical trials of Anti-IgE Products in East Asia.

 

(c) *****

 

5.3 Development in ROW. Novartis shall be responsible for all Development
activities relating to Anti-IgE Antibodies or Anti-IgE Products in the Rest of
World, and such activities shall be conducted in Novartis’ sole discretion
subject to its obligation to use Commercially Reasonable Efforts with respect
thereto; provided, however, that Novartis shall consult with Tanox, through the
applicable TanNov Committee, regarding its plans for, and activities with
respect to, the Development of Anti-IgE Antibodies and Anti-IgE Products in the
ROW. All Development Costs incurred by Novartis in Developing Anti-IgE Products
for the Rest of World *****.

 

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Tanox shall have no rights or obligations with respect to the Development of
Anti-IgE Antibodies or Anti-IgE Products in ROW.

 

5.4 Information Sharing. Novartis agrees to exercise its rights under Section
6.2 of the JCA as reasonably appropriate to plan and implement Development
activities hereunder in accordance with this Article 5.

 

ARTICLE 6

 

REGULATORY ACTIVITIES

 

6.1 Regulatory Development Activities in East Asia.

 

(a) Generally. Subject to the remainder of this Section 6.1, each Party’s
responsibilities with respect to regulatory Development activities regarding
Anti-IgE Products in East Asia, and EA Plans relating thereto, will be as
determined by the TanNov JMC. Each Party agrees to use Commercially Reasonable
Efforts to pursue such regulatory Development activities for obtaining Approval
and Pricing Approval of any Anti-IgE Product(s) in East Asia and all such
activities shall be conducted in accordance with applicable EA Plan(s) approved
by the TanNov JMC.

 

(b) Approvals for Anti-IgE Products in East Asia. Novartis or one or more
Novartis-designated Affiliates shall be solely responsible for and shall use
Commercially Reasonable Efforts to apply for, obtain and maintain any Approvals
and any other licenses, permits, approvals or registrations as may be required
by any relevant Public Authority for Manufacturing or Commercializing Anti-IgE
Products in East Asia. Unless otherwise required by Legal Requirements,
Novartis, or its designee, will be exclusively responsible for complying with
all regulatory requirements and maintaining all government agency contacts
relating to Anti-IgE Products in East Asia. Such activities shall include
maintaining and updating any Approvals, developing and submitting Approval
Applications for new indications (if any, and after approval by the TanNov JCC
and TanNov JMC), reporting of any adverse incidents or drug reactions to the
Public Authority in any Regulatory Jurisdiction in East Asia and filing the
appropriate Public Authority in a Regulatory Jurisdiction in East Asia of any
Promotional Materials and other materials necessary to comply with Legal
Requirements. Novartis, or its designee, will hold any Approvals (including any
licenses or marketing approvals) for Anti-IgE Products. Tanox agrees that it
shall use Commercially Reasonable Efforts to cooperate with Novartis, or its
designee, to obtain and maintain the effectiveness of any Approvals for Anti-IgE
Products in East Asia and any other Approvals obtained in East Asia in
connection with the performance of this Agreement, including by providing
materials, Company Information and necessary personnel in connection with
regulatory approval functions. Novartis shall promptly notify Tanox or its
designee of any meetings or communications between Novartis and any Public
Authority of a Regulatory Jurisdiction in East Asia, and Tanox or its designee
shall be entitled to attend such meetings and review and comment upon any such
communications, including without limitation, draft documents, meeting
materials, letters and submissions to such Public Authorities, provided, however
that Novartis’ obligations in this respect shall only extend to material
activities.

 

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(c) Anti-IgE Product Recall in East Asia. Novartis shall observe at all times
Legal Requirements in order to maintain an effective system for the recall from
the market of any Anti-IgE Product in East Asia. Notwithstanding anything herein
to the contrary, if Novartis deems it necessary to initiate a recall (as defined
in Section 8.2(b) of the TCA) of an Anti-IgE Product in East Asia, it shall
notify the TanNov JCC and Tanox using reasonable notice under the circumstances
of such intended recall and allow an appropriate time, to the extent practicable
and subject to the following sentence, for Tanox and Novartis to discuss and
agree on such intended recall. In the event that agreement cannot be reached on
initiating the recall within *****, the Parties shall immediately present the
issue for determination by the Senior Officers; provided, however, that if
either Party notifies the other Party that it reasonably believes that any such
recall may involve a serious health risk, then the Parties will attempt to reach
agreement on whether to initiate the recall within *****, failing which they
shall immediately present the issue for determination by the Senior Officers. As
the Party that is the Approval holder, Novartis shall be responsible for the
recall of the Anti-IgE Product in East Asia, *****. Tanox shall not take any
action contrary to the recall and shall reasonably cooperate such that it does
not hinder the activities of Novartis in initiating the recall.

 

6.2 Regulatory Development Activities in the Rest of World.

 

(a) Approvals for Anti-IgE Products in the Rest of World. Novartis shall have
the exclusive right to undertake regulatory Development activities required to
obtain Approvals of Anti-IgE Products in the Rest of World and shall retain
exclusive authority and responsibility for complying with all regulatory
requirements relating to Anti-IgE Products in the Rest of World. Without
limiting the foregoing, Novartis shall be responsible for, and shall use
Commercially Reasonable Efforts in, obtaining, maintaining and updating all
required Approvals for Anti-IgE Products in Rest of World, including, without
limitation: (i) filing all Approval Applications and supporting documentation
necessary for obtaining Approvals in the Rest of World; (ii) maintaining all
contacts with Public Authorities responsible for granting such Approvals in the
Rest of World; and (iii) reporting any adverse drug reactions to such Public
Authorities in the Rest of World.

 

(b) Anti-IgE Product Recall in the Rest of World. Novartis shall observe at all
times Legal Requirements in order to maintain an effective system for the recall
from the market of any Anti-IgE Product in the Rest of World. Notwithstanding
anything herein to the contrary, if Novartis deems it necessary to initiate a
recall (as defined in Section 8.2(b) of the TCA) of an Anti-IgE Product in the
Rest of World, it shall notify Tanox using reasonable notice under the
circumstances of such intended recall and allow an appropriate time, to the
extent practicable and subject to the following sentence, for Tanox and Novartis
to discuss such intended recall. As the Party that is the Approval holder,
Novartis shall be responsible for the recall of the Anti-IgE Product in the Rest
of World. Tanox shall not take any action contrary to the recall and shall
reasonably cooperate such that it does not hinder the activities of Novartis in
initiating the recall.

 

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6.3 Regulatory Development Information Sharing and Safety Management.

 

(a) The Parties acknowledge and agree that the provisions of Sections 8.5(a) and
(b) of the TCA shall apply with respect to the sharing of regulatory Development
information and the exchange of adverse event reports and safety information
associated with Anti-IgE Products. Without limiting the Parties’ respective
obligations thereunder, the Parties shall act in accordance with the provisions
and specifications of the Safety Addendum (as defined in Section 8.5 of the TCA)
in reporting, without delay, to each other, or their respective designees,
adverse events or drug reactions it becomes aware of to ensure compliance with
regulatory reporting obligations with respect to any Approval or Approval
Application for an Anti-IgE Antibody or Anti-IgE Product.

 

(b) As set forth in Section 8.5(b) of the TCA, during the Term of this
Agreement, each Party shall notify the other and the TanNov JCC immediately of
any information received regarding any threatened or pending action by any
Public Authority which may affect the safety, efficacy or other labeling claims
of any Anti-IgE Product. Upon receipt of any such information, the Parties
hereto shall discuss such information and possible actions with respect thereto
in East Asia and the Rest of World. The TanNov JCC shall determine a procedure
for taking appropriate action in East Asia, and Novartis shall determine a
procedure for taking appropriate action in the Rest of World. Notwithstanding
the foregoing, Novartis, as the Approval holder for Anti-IgE Products in each
country or regulatory jurisdiction in East Asia and the Rest of World, shall
have the sole right and responsibility for communicating and reporting adverse
experiences to health authorities in each such country or jurisdiction.
Notwithstanding the foregoing, nothing contained herein shall be construed as
restricting any Party’s right to make a timely report of such matter to any
Public Authority or take other action that it deems to be appropriate or
required by Legal Requirements.

 

ARTICLE 7

 

COMMERCIALIZATION

 

7.1 Commercialization in East Asia.

 

(a) All Anti-IgE Products selected by the Parties for Development for East Asia
hereunder and Approved for marketing in East Asia, shall be Commercialized in
East Asia exclusively by Novartis in accordance with applicable EA Plans
hereunder and subject to the oversight of the TanNov JMC, and Novartis shall use
Commercially Reasonable Efforts to Commercialize such Anti-IgE Products.

 

(b) All Net Profits (East Asia) and Net Losses (East Asia) for Anti-IgE Products
for East Asia shall be ***** in accordance with the EA/ROW Financial Appendix.

 

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7.2 Commercialization in the Rest of World.

 

(a) Novartis shall be exclusively responsible for, and shall use Commercially
Reasonable Efforts with respect to, the Commercialization in the Rest of World
of Anti-IgE Products selected by Novartis for Development for the Rest of World
and Approved for marketing in the Rest of World; provided, however, that, as set
forth in Section 4.2 above, Novartis shall discuss with Tanox, through the
applicable TanNov Committee, its general Commercialization activities relating
to Anti-IgE Antibodies and Anti-IgE Products in the ROW.

 

(b) All costs and expenses associated with Commercialization of Anti-IgE
Products in the Rest of World shall be *****.

 

7.3 Product Trade Dress in East Asia and Rest of World. Novartis will be
responsible for developing and adopting draft Product Trade Dress for inclusion
in any Approval Application in East Asia and the Rest of World. Product Trade
Dress in East Asia and the Rest of World will, in all circumstances during the
Term of this Agreement, unless otherwise agreed by the Parties in writing: (i)
list Novartis (in appropriate capacities); (ii) list the applicable Party
(either directly or through its Affiliate) or Genentech, as manufacturer if
required by Legal Requirements; and (iii) list Novartis (or its designee) as
owner of the Anti-IgE Trademarks, in each case subject to all Legal
Requirements. Without limiting the foregoing, Novartis may, at its option, have
its logo included on all Product Trade Dress for East Asia and the Rest of World
and Promotional Materials for East Asia and the Rest of World (including,
without limitation, package inserts), subject to Legal Requirements. In
addition, subject to applicable Legal Requirements, Novartis shall reasonably
consider including Tanox’s name on Product Trade Dress for Anti-IgE Products in
East Asia, which inclusion shall be in a form mutually agreed between the
Parties.

 

7.4 Preparation and Review of Promotional Materials in East Asia and the Rest of
World. Novartis shall develop Promotional Materials and/or programs, product
management, market research and any other marketing activity in respect of
Anti-IgE Product in East Asia and the Rest of World in its sole discretion;
provided, however, that Tanox shall be entitled to review and comment upon
proposed Promotional Materials for East Asia.

 

7.5 Anti-IgE Product Marketing and Distribution in East Asia and the Rest of
World. Novartis (itself or through its Affiliates and designated Third Parties),
shall have the exclusive right to market or have marketed Anti-IgE Products in
East Asia (in accordance with applicable EA Plans (including budgets) approved
by the applicable TanNov Committee(s)) and the Rest of World and shall
exclusively perform or have performed all marketing, distribution and sales
support functions relating to Anti-IgE Products in East Asia and the Rest of
World. Such functions shall include processing and invoicing all Third Party
customers for Anti-IgE Product orders received by the Parties, maintaining
appropriate storage facilities for Anti-IgE Products, and providing for the
delivery of Anti-IgE Products from appropriate warehouse or storage facilities
to all Third Party customers. Novartis and its Affiliates shall further have the
right to enter into

 

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arrangements as it in its sole discretion deems appropriate with any one or more
Third Parties regarding the marketing of Anti-IgE Products in East Asia and the
Rest of World, including without limitation, through co-promotion or
co-marketing, subject, with respect to East Asia, to the applicable EA
Commercialization Plan.

 

7.6 Booking of Sales in East Asia and the Rest of World. Novartis shall invoice
and book as sales of its own product all sales of Anti-IgE Products in East Asia
and the Rest of World. Novartis shall appropriately record all sales of Anti-IgE
Products in East Asia and the Rest of World in accordance with the EA/ROW
Financial Appendix.

 

7.7 Sales Force in East Asia and the Rest of World. Novartis shall be
responsible (itself or through an Affiliate or Third Party) for maintaining an
experienced sales force capable of effectively detailing Anti-IgE Products in
countries in East Asia (in accordance with applicable EA Plans (including
budgets) approved by the applicable TanNov Committee(s)) and the Rest of World
selected by Novartis.

 

7.8 Anti-IgE Product Samples in East Asia and the Rest of World. The Parties
agree that in the event that a program of providing samples of any Anti-IgE
Product to doctors, hospitals and other potential customers at no charge is
initiated in East Asia or the Rest of World, neither they nor their Affiliates
shall resell (or otherwise use other than as contemplated herein) any Anti-IgE
Products provided for sampling purposes. In such event, Novartis will establish
an appropriate policy regarding samples and sample accountability that satisfies
Legal Requirements.

 

7.9 Pricing and Pricing Approvals in East Asia and the Rest of World. Subject to
Section 3.5, pricing of Anti-IgE Products in East Asia, including without
limitation, ranges and general strategies for pricing changes, reimbursements
and discounts or rebates, shall be set forth in the EA Commercialization Plan.
Pricing of Anti-IgE Products the Rest of World, including without limitation,
the timing of pricing changes, reimbursement strategies and the offering of
discounts or rebates, shall be determined by Novartis in its sole discretion. In
those countries in East Asia and the Rest of World where a Pricing Approval is
required or determined by Novartis to be desirable, Novartis shall be solely
responsible for seeking and obtaining such Pricing Approval. Tanox shall provide
Novartis (or its Affiliates) with any reasonable assistance required by Novartis
for the purpose of obtaining such Pricing Approvals.

 

7.10 Customer Service. Novartis shall be responsible for all customer service
activities relating to Anti-IgE Products in East Asia and the Rest of World.

 

ARTICLE 8

 

MANUFACTURING

 

8.1 Products Manufactured Under the TCA. With respect to Anti-IgE Antibodies or
Anti-IgE Products Developed or Commercialized hereunder, the provisions of
Article 10 of the TCA shall apply with respect to the Manufacture and supply of
such

 

20

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Anti-IgE Antibody or Anti-IgE Product if it is then being Developed for or
Commercialized in the US or Europe. Novartis and, if applicable, Tanox, shall
reasonably take into account the supply requirements of Anti-IgE Antibodies and
Anti-IgE Products for East Asia and the ROW hereunder in connection with their
respective actions under the TCA with respect to Manufacturing of such Anti-IgE
Products. For the avoidance of doubt, ***** and that portion of the
Manufacturing payments made to Tanox under Section 11.6(b) of the TCA which is
allocable to East Asia (as determined under the Financial Appendix to the TCA)
shall be included in the calculation of Net Profits (East Asia) and Net Losses
(East Asia) as provided for in the EA/ROW Financial Appendix.

 

8.2 Products Not Manufactured Under the TCA. With respect to Anti-IgE Antibodies
or Anti-IgE Products Developed or Commercialized hereunder, which are not then
being Manufactured for Development or Commercialization in the US or Europe
(such Anti-IgE Products being “Non-JCA Anti-IgE Products”):

 

(a) Without limiting any of the rights and obligations of the parties to the
TCA, Novartis and Tanox (to the extent each is obligated to Manufacture and
supply under this Section 8.2) agree that they shall use Commercially Reasonable
Efforts, through the mechanisms set forth in this Agreement (including through
an EA Manufacturing and Supply Plan approved by the TanNov JMC) and any
Manufacturing and Supply Agreement(s), to ensure that an adequate supply of
Non-JCA Anti-IgE Products is available to meet Clinical Requirements and
Commercial Requirements therefor in East Asia and, if applicable, the ROW. The
Parties’ specific obligations and responsibilities with respect to Manufacture
and supply of Clinical Requirements and Commercial Requirements of Non-JCA
Anti-IgE Product shall be as set forth in this Section 8.2, the Manufacturing
and Supply Agreements and any approved EA Manufacturing and Supply Plan
(provided, however, that in no event shall any EA Manufacturing and Supply Plan
modify or amend any provision of this Agreement or any Manufacturing and Supply
Agreement or impose a new obligation on any Party without its consent);

 

(b) the costs of any Manufacturing or process development required with respect
for the Manufacture of any Non-JCA Anti-IgE Products ***** as set forth in the
EA/ROW Financial Appendix;

 

(c) to the extent that it is Manufacturing any Non-JCA Anti-IgE Product as
provided in this Section 8.2, each Party shall *****;

 

(d) the TanNov JMC shall have the responsibility and authority to allocate
available supplies of Non-JCA Anti-IgE Products between different markets in
East Asia and, if applicable, the ROW on a basis consistent with the principle
of *****;

 

(e) Without limiting any of the rights and obligations of the parties to the
TCA: (i) Tanox shall Manufacture supplies of Non-JCA Anti-IgE Product(s) which
include an Anti-IgE Antibody originally identified and synthesized by Tanox
(such Non-JCA Anti-IgE Product(s) being “Tanox Non-JCA Anti-IgE Product(s)”)
required for

 

21

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pre-clinical and Phase I and Phase II (excluding any Phase II(b)) clinical
trials pursuant to an EA Development Plan and budget approved by the TanNov JMC;
and (ii) Novartis (itself or through an Affiliate) shall Manufacture supplies of
Non-JCA Anti-IgE Product(s) other than Tanox Non-JCA Anti-IgE Product(s)
required for pre-clinical and Phase I and Phase II (excluding any Phase II(b))
clinical trials pursuant to an EA Development Plan and budget approved by the
TanNov JMC. Such pre-clinical and Clinical Requirements shall be supplied at
*****;

 

(f) in the event that Tanox desires to Manufacture and supply all or some
portion of a given Tanox Non-JCA Anti-IgE Product as required for Phase II(b)
and Phase III clinical Development and Commercialization in East Asia and ROW,
it shall *****.

 

(g) In the event that Tanox does not Manufacture and supply such Tanox Non-JCA
Anti-IgE Product required for post-Phase II clinical trials and
Commercialization as provided for under (a) above, without limiting any of the
rights and obligations of the parties to the TCA, Novartis shall have the right
and obligation to Manufacture and supply (itself or through an Affiliate), or
procure the supply of, the post-Phase II Development and Commercial Requirements
for such Tanox Non-JCA Anti-IgE Product for East Asia and the ROW, in accordance
with Sections 8.2(g) and (h) of this Agreement. Without limiting any of the
rights and obligations of the parties to the TCA, Novartis shall have the right
and obligation to Manufacture and supply (itself or through an Affiliate), or
procure the supply of, the post-Phase II Development and Commercial Requirements
for any Non-JCA Anti-IgE Product for East Asia and the ROW, in accordance with
Sections 8.2(g) and (h) of this Agreement. All such Non-JCA Anti-IgE Products
shall be supplied by Novartis at *****;

 

(h) In the event Novartis determines or by default has the right and obligation
to Manufacture and supply any Tanox Non-JCA Anti-IgE Product hereunder, and in
consideration for Tanox waiving its right to Manufacture 50% of Commercial
Requirements of such Tanox Non-JCA Anti-IgE Product under the Original D&L
Agreement, Novartis shall pay Tanox, in the aggregate for each calendar year and
for each Tanox Non-JCA Anti-IgE Product not Manufactured by Tanox (on a Tanox
Non-JCA Anti-IgE Product-by-Tanox Non-JCA Anti-IgE Product basis), commencing in
the year of the first commercial production, an amount equal to *****. For the
avoidance of doubt, the payments set forth in this Section 8.2(h) shall be in
lieu of any amount payable to Tanox pursuant to Section 11.6(b) of the TCA with
respect to any Tanox Non-JCA Anti-IgE Product, and with respect to other Non-JCA
Anti-IgE Products the provisions of Section 11.6(b) of the TCA shall apply as
between Novartis and Tanox.

 

8.3 Supply Price. For the avoidance of doubt, for the purposes of calculation of
Net Profits (EA) or Net Losses (EA), all Commercial Requirements for Anti-IgE
Antibodies and Anti-IgE Products for East Asia and ROW will be supplied at a
supply price calculated as *****, and all Clinical Requirements for East Asia
and ROW will be supplied at a supply price calculated as *****, each as set
forth in the EA/ROW Financial Appendix. For the purposes of such calculation,
the cost of supplies of Anti-IgE Antibodies and Anti-IgE Products sold in East
Asia (which cost of supplies, *****

 

22

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and the cost of supplies of Anti-IgE Antibodies and Anti-IgE Products sold in
ROW shall be *****.

 

ARTICLE 9

 

PAYMENTS

 

9.1 Sales of Anti-IgE Products in East Asia.

 

(a) Subject to Section 9.4 and in consideration of the rights and licenses
granted by Tanox under the TCA and hereunder, for each country in East Asia, for
the applicable Royalty Period, on an Anti-IgE Product-by-Anti-IgE Product basis,
Novartis shall pay Tanox a royalty equal to:

 

(i) ***** of Net Sales (East Asia) of any Anti-IgE Products, the manufacture,
importation, use or sale of which in a Patent Protected Country in East Asia
would infringe (absent a license) a Valid Claim of a Tanox Anti-IgE Patent in
such Patent Protected Country (with it being understood that any Net Sales (East
Asia) of an Anti-IgE Antibody shall be deemed Net Sales (East Asia) of an
Anti-IgE Product for purposes of this Article 9); and

 

(ii) ***** of Net Sales (East Asia) of any Anti-IgE Products which are not
included in the foregoing ***** royalty category in subclause 9.1(a)(i).

 

(b) Subject to the other terms and conditions of this Agreement (including,
without limitation, Section 5.2(c)), the Parties shall ***** all Net Profits
(East Asia) and Net Losses (East Asia), as the case may be, resulting from the
Development and Commercialization of Anti-IgE Products in East Asia, as set
forth in greater specificity in the EA/ROW Financial Appendix.

 

9.2 Sales of Anti-IgE Products in the Rest of World. Subject to Section 9.4, all
revenues from the sale of Anti-IgE Products in the Rest of the World shall
*****; provided, however, that in consideration of the rights and licenses
granted by Tanox hereunder and under the TCA:

 

(a) for all Patent Protected Countries in the Rest of World (aggregated
together), for the applicable Royalty Period with respect to each such country,
on an Anti-IgE Product-by-Anti-IgE Product basis, Novartis shall pay Tanox, in
the aggregate, the following royalties with respect to Net Sales (ROW) of each
Anti-IgE Product:

 

(i) ***** of Net Sales (ROW), on that portion of the aggregate Net Sales (ROW)
in that calendar year which does not exceed ***** of all units of such Anti-IgE
Product, the manufacture, importation, use or sale of which in a Patent
Protected Country in ROW for such Anti-IgE Product would infringe (absent a
license) a Valid Claim of a Tanox Anti-IgE Patent in such Patent Protected
Country;

 

23

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(ii) ***** of Net Sales (ROW), on that portion of the aggregate Net Sales (ROW)
in that calendar year which is greater than ***** but does not exceed ***** of
all units of such Anti-IgE Product, the manufacture, importation, use or sale of
which in a Patent Protected Country in ROW for such Anti-IgE Product would
infringe (absent a license) a Valid Claim of a Tanox Anti-IgE Patent in such
Patent Protected Country; and

 

(iii) ***** of Net Sales (ROW), on that portion of the aggregate Net Sales (ROW)
in that calendar year which is greater than ***** of all units of such Anti-IgE
Products, the manufacture, importation, use or sale of which in a Patent
Protected Country in ROW for such Anti-IgE Product would infringe (absent a
license) a Valid Claim of a Tanox Anti-IgE Patent in such Patent Protected
Country; and

 

(b) for all Net Sales (ROW) of Anti-IgE Products which are not included within
Section 9.2(a) above, Novartis shall pay Tanox, in the aggregate, a royalty of
***** of Net Sales (ROW) of such Anti-IgE Products for the applicable Royalty
Period.

 

9.3 Milestone Payments. Novartis shall pay Tanox the following milestone
payments with respect to Anti-IgE Products and/or Anti-IgE Antibodies Developed
and/or Commercialized in Japan:

 

1.     

*****

 

*****

2.     

*****

 

*****

 

The above payments shall be due within ***** after occurrence of the event
specified.

 

The above payments shall be made on an Anti-IgE Antibody-by-Anti-IgE Antibody
basis for each different Anti-IgE Antibody Developed and/or Commercialized
hereunder *****.

 

9.4 Credits for Milestone Payments and Legal Fees.

 

(a) For each Anti-IgE Product Approved for marketing in Japan, Novartis shall be
entitled to a credit equal to ***** which shall be applied against ***** of the
total amount of each royalty payment under Section 9.2 for sales of such
Anti-IgE Products in Japan.

 

(b) Novartis shall be entitled to a credit equal ***** which credit shall be
applied against: (i) ***** of the total amount of each royalty payment under
Sections 9.1(a) and 9.2 of this Agreement for sales of Anti-IgE Products in East
Asia and the Rest

 

24

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of World; (ii) ***** of the total amount of each profit-sharing payment due to
Tanox under Section 9.1(b) of this Agreement; and (iii) ***** of the total
amount of each profit-sharing payment due to Tanox under Section 11.1(c) of the
TCA.

 

(c) Notwithstanding the provisions of paragraphs (a) and (b) above, in no event
shall the credits set forth in paragraphs (a) and (b) above be applied by
Novartis such that any royalty payment due to Tanox under Sections 9.1 or 9.2 of
this Agreement is reduced by an amount ***** of the total amount of such royalty
payment.

 

9.5 No Other Payments. Except as otherwise expressly set forth in this Agreement
or the TCA or any Related Agreement or Ancillary Agreement, no payments
(including, without limitation, any milestone payment) will be due by any Party
to any other Party for the exercise of any rights or performance of any
obligation herein, including, without limitation, by way of reimbursement for
costs and expenses in Manufacturing, Developing, obtaining Approvals and
Commercializing any Anti-IgE Antibodies or Anti-IgE Products.

 

9.6 Reports. The Parties will provide to each other the reports set forth in the
EA/ROW Financial Appendix.

 

9.7 Books. Each Party shall maintain, and shall cause its Affiliates and
sublicensees to maintain, complete and accurate books and records in connection
with its Manufacture, Development and Commercialization of Anti-IgE Antibodies
and Anti-IgE Products, including, in any event, sufficient detail so that each
Party may properly ascertain and confirm the amounts payable to or by it
hereunder. Such books and records shall be maintained for a period of at least
***** years after the end of the calendar year in which they were generated. If
the books and records of a Party (or its Affiliates or sublicensees) are the
subject of a Dispute which has been submitted for resolution under Article 10 of
this Agreement, such Party, Affiliate or sublicensee shall keep the records
until the Dispute is resolved. Each Party shall ensure that the EA FSC obtains
from each Party, and from each applicable TanNov Committee, such adequate,
accurate and complete information and documentation as the EA FSC shall
reasonably require to perform its duties under this Agreement and the EA/ROW
Financial Appendix.

 

9.8 Timing and Method of Payment; Currency. Each of the payments due under
Sections 9.1 and 9.2 shall be paid on a ***** basis, are due and payable within
***** of the end of the applicable *****, and shall be made by wire transfer of
immediately available funds to the account or accounts designated in writing by
the payee. Payment by a Party shall be deemed to have been made as of the day on
which such payment is received in such account. All payments hereunder shall be
in U.S. Dollars.

 

9.9 Reconciliation. The ***** payments under Section 9.8 shall be subject to
***** reconciliation by the Parties within ***** of the end of each ***** (to
account for deduction items within Net Sales that were originally estimates). In
the event that such reconciliation reveals any overpayment or underpayment, the
applicable

 

25

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Party or Parties shall pay to the other Party or Parties the amount of the
discrepancy within ***** after notice of determination of the discrepancy amount
from the payee.

 

9.10 Audit Rights.

 

(a) Each of the Parties shall, at its expense (except as provided below), have
the right to audit the books and records maintained by the other Party under
Section 9.7 in order to determine, with respect to any calendar year during the
Term for which the books have closed (that is, any year for which annual
financial statements have issued), the accuracy of any report or payment made or
required to be made under this Agreement; provided, however, that a Party shall
only be entitled to audit books and records of the other Party from the *****
prior to the calendar year in which the audit request is made.

 

(b) If a Party desires to audit such books and records, it shall engage an
internationally-recognized independent accounting firm reasonably acceptable to
the other Party to examine such books and records during normal business hours;
provided, however, that such right to audit shall be exercised only on *****
advance written notice and shall not occur more than once in any twelve (12)
month period. Such accounting firm may not be paid on a contingency or other
basis related to the outcome of the audit. Furthermore, such accounting firm
shall, prior to the audit, enter into a confidentiality agreement with the
audited Party prohibiting such accounting firm from disclosing or using
information obtained in connection with the audit; provided, however, that the
accounting firm shall be permitted to provide to the auditing Party information
which should properly have been contained in any report required hereunder or
otherwise disclosable to such Party.

 

(c) The audit report and basis for any determination shall be made available for
review and comment by the audited Party, and the audited Party shall have the
right, at its expense, to request a further determination by the other Party’s
auditor as to matters which the audited Party disputes (to be completed no more
than ***** after the first determination is provided to the audited Party and to
be limited to the disputed matters). If the Parties disagree as to such further
determination, the Parties shall mutually select an internationally-recognized
independent accounting firm that shall make a final determination as to the
remaining matters in dispute that shall be binding upon the Parties. Such
independent accounting firm shall enter into a confidentiality agreement with
the audited Party prohibiting such accounting firm from disclosing or using
information obtained in connection with the audit; provided, however, that the
accounting firm shall be permitted to provide to the auditing Party information
which should properly have been contained in any report required hereunder or
otherwise disclosable to such Party.

 

(d) If the audit shows any under-reporting or underpayment, or overcharging by
any Party, that under-reporting, underpayment or overcharging shall be reported
to the other Party and the underpaying or overcharging Party(s) shall remit such
underpayment or reimburse such overcompensation (together with interest as
provided below with respect to any underpayment or overcharge) to the underpaid
or overcharged

 

26

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Party(s) within ***** of receiving the audit report. The expense of such audit
shall be borne by the auditing Party; provided, however, that if an error of
***** in favor of the audited Party is discovered, then such expenses shall be
paid by the audited Party.

 

9.11 Invoices and Documentation. The Parties shall agree upon the timing and
form of any necessary documentation relating to any payments hereunder so as to
afford the Parties appropriate accounting treatment in relation to any of the
transactions or payments contemplated hereunder, which documentation may
include, without limitation, invoices, bills of account and work orders, and
which documentation shall refer to the date on which payments are due
thereunder.

 

9.12 Taxes. Any withholding or other taxes that any Party is required by Legal
Requirements to withhold or pay on behalf of any other Party, with respect to
any payments to such other Party hereunder, shall be deducted from such payments
and paid to the relevant taxing authority contemporaneously with the remittance
to the other Party; provided, however, that the withholding Party shall furnish
the other Parties with (i) reasonably satisfactory evidence that such payment or
withholding is required, (ii) reasonable assistance to enable or assist such
Party to claim exemption from any such deduction, and (iii) proper evidence that
the taxes have been paid. Each Party shall furnish the other Parties with
appropriate documents to secure application of the most favorable rate of
withholding tax under applicable Legal Requirements.

 

9.13 Interest. Should any Party fail to make any payment to another Party under
this Agreement when due, unless and to the extent that the payment obligation is
disputed (in good faith), the unpaid amount shall bear interest from the date
due until paid at a rate equal to ***** per annum, where the ***** on the last
date such payment could be timely made before becoming overdue.

 

ARTICLE 10

 

DISPUTE RESOLUTION

 

10.1 Resolution of Disputes.

 

(a) Subject to securing preliminary injunctive relief pursuant to Section 15.3
of the TCA and subject to Section 9.10(c) of this Agreement and Section 11.12(e)
of the TCA with respect to audits, the Parties agree that all Disputes with
respect to East Asia or the Rest of World shall be resolved only as set forth in
this Article 10. Notwithstanding anything to the contrary in this Article 10, in
the event that a Party reasonably requires relief on a more expedited basis than
would be possible pursuant to the procedure set forth in this Article 10, such
Party may seek a temporary injunction or other interim equitable relief in a
court of competent jurisdiction pending the ability of the arbitrators to review
the decision under this Article 10.

 

(b) The Parties agree that, subject to securing preliminary injunctive relief
pursuant to Section 15.3 of the TCA or as provided in Section 10.1(a) above and
subject to Section 9.10(c) of this Agreement and Section 11.12(e) of the TCA
with

 

27

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respect to audits, the Parties shall attempt to resolve any Dispute with respect
to East Asia or the Rest of World through good faith negotiation and discussion
through the respective Alliance Managers of the Parties. If a Party believes
that the Dispute has not been resolved after such Party’s Alliance Manager uses
reasonable efforts to consult the Alliance Manager(s) of the other Party, then
such Party may send a written Notice of Dispute to the Chairman of the TanNov
JMC, specifying therein the nature of the Dispute and the relief requested, and
requesting that the Senior Officers of the Parties meet to attempt to resolve
the Dispute. The Chairman of the TanNov JMC shall promptly forward the Notice of
Dispute to the Senior Officers of the Parties. The Senior Officers of the
Parties shall diligently attempt to resolve the referred Dispute by mutual
consent of the Parties, including, without limitation, by means of an in-person
meeting. In the event that the Senior Officers of the Parties are unable to
resolve any Dispute within ***** from the date that the Notice of Dispute was
delivered to the Chairman of the TanNov JMC, any Party shall be free to file a
notice of arbitration with respect to the Dispute, and pursue resolution
thereof, pursuant to Section 10.2.

 

10.2 Arbitration. Subject to securing injunctive relief pursuant to Section 15.3
of the TCA or as provided in Section 10.1(a) above, the Parties agree that all
Disputes arising under or pursuant to this Agreement shall be resolved in
accordance with Section 12.2 of the TCA.

 

10.3 ***** *****

 

ARTICLE 11

 

INTELLECTUAL PROPERTY

 

11.1 Trademarks.

 

(a) Novartis (or its designated Affiliate) shall have the sole right to select
(subject to Section 13.1 of the Tripartite Cooperation Agreement), and shall
own, all Anti-IgE Trademarks in East Asia and the Rest of World.

 

(b) Subject to Tanox’s prior review and approval of a plan relating to trademark
registrations in East Asia and the Rest of World, the out-of-pocket costs of
filing, prosecuting and maintaining trademark registrations and applications for
trademark registration with respect to the Anti-IgE Trademarks: (i) in East Asia
shall be ***** as set forth in the EA/ROW Financial Appendix; and (ii) in the
Rest of World shall be *****.

 

11.2 Ownership of Intellectual Property. Section 13.2 of the Tripartite
Cooperation Agreement sets forth the terms governing ownership, prosecution and
maintenance of intellectual property (other than Anti-IgE Trademarks) relating
to the Manufacture, Development and Commercialization of any Anti-IgE Antibody
or Anti-IgE Product under this Agreement and the Tripartite Cooperation
Agreement.

 

11.3 Infringement of Intellectual Property. Section 13.4 of the Tripartite
Cooperation Agreement sets forth the terms governing the Parties’ actions

 

28

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relating to Third Party infringement of any Anti-IgE Patents, Anti-IgE
Trademarks or misappropriation of any Know-How or any action by a Third Party
for a declaration that any of the Anti-IgE Patents or Anti-IgE Trademarks
hereunder are not infringed, are invalid or unenforceable.

 

11.4 Third Party Rights.

 

(a) In the event that either Party becomes aware of any patent or other
proprietary right of one or more Third Parties that may be infringed by the
Development, Manufacture or Commercialization of any Anti-IgE Product by the
Parties under this Agreement, that Party shall follow the procedures set forth
in Section 6.8 of the Tripartite Cooperation Agreement. Section 6.8 of the
Tripartite Cooperation Agreement sets forth the terms governing the Parties’
obligations to ensure that any licenses or other rights obtained from Third
Parties necessary or material to the Manufacture, Development and
Commercialization of Anti-IgE Antibody or Anti-IgE Products which are Developed
or Commercialized in the United States and/or Europe may be licensed or
sublicensed to the other Party under the licenses in Article 6 of the Tripartite
Cooperation Agreement.

 

(b) The Parties agree to cooperate in determining the necessity and availability
of licenses to any Third Party Rights necessary for or material to the
Manufacture, Development or Commercialization of Anti-IgE Products or Anti-IgE
Antibodies which are Developed or Commercialized in East Asia but are not
Developed or Commercialized in the United States or Europe (including, without
limitation, through the extension of existing licenses). Without limiting the
foregoing, any Party which believes that a license is required under any such
Third Party Rights for the Manufacture, Development or Commercialization of any
such Anti-IgE Products or Anti-IgE Antibodies in East Asia shall provide notice
thereof to the TanNov JMC. The TanNov JMC shall determine whether, how, and by
which Party, any approach to a Third Party to obtain any such license should be
made, and all negotiations and discussions with any such Third Party with
respect thereto shall be conducted at the general direction of and in
consultation with the TanNov JMC; provided, however, that if a license is
negotiated to cover products other than Anti-IgE Products, the terms applying to
Anti-IgE Products shall not be more onerous with respect to Anti-IgE Antibodies
and Anti-IgE Products without the consent of the TanNov JMC. Subject to the
terms and conditions herein, any Party designated by the TanNov JMC to obtain a
license to Third Party Rights shall use reasonably diligent efforts to do so in
accordance with TanNov JMC instructions and the other terms and conditions of
this Agreement. The terms and conditions of any such license shall be subject to
the approval of the TanNov JMC in so far as such terms and conditions relate to
Anti-IgE Antibodies or Anti-IgE Products, and upon such approval being given,
such licenses shall be deemed to be within the scope of the applicable Party’s
Anti-IgE Patents, Company Information and Biological Materials, and sublicensed
pursuant to Article 6 of the TCA with respect to East Asia and the Rest of World
only, *****.

 

(c) Novartis shall be responsible for determining the necessity and availability
of licenses to any Third Party rights necessary for or material to the
Manufacture, Development or Commercialization of Anti-IgE Products or Anti-IgE

 

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Antibodies which are Developed or Commercialized in Rest of World but are not
Developed or Commercialized in the United States, Europe or East Asia. Novartis
shall determine, in its sole discretion, whether and how to approach a Third
Party to obtain any such license, and all negotiations and discussions with any
such Third Party with respect thereto shall be conducted at by Novartis in its
sole discretion (and all fees, royalties and other payments, costs and expenses
in connection therewith shall ***** with respect to Anti-IgE Antibodies or
Anti-IgE Products sold (or intended to be sold) in ROW.

 

(d) *****

 

(e) *****

 

11.5 Infringement of Third Party Patents.

 

(a) In the event that a Party is sued or threatened with suit by a Third Party
who claims that the importation, manufacture, use, offer for sale or sale of an
Anti-IgE Antibody or Anti-IgE Product in East Asia or the ROW is an infringement
of one or more claims of a patent owned or controlled by such Third Party, the
sued or threatened Party shall immediately notify the other Party including the
available evidence of such suit or threat, and the Parties shall then reach a
determination regarding defense of the action.

 

(b) ***** notwithstanding anything in this Section 11.5, in the event that a
Party wishes to settle any suit or action on a voluntary basis, the other Party
shall not be required to share in any settlement amounts (including, without
limitation, any costs in obtaining or maintaining any license granted as part of
any such settlement) unless such other Party has first approved the terms of any
such settlement.

 

11.6 No Implied License. Article 6 of the Tripartite Cooperation Agreement sets
forth the licenses granted by and to each of the Parties with respect to
Anti-IgE Antibodies and Anti-IgE Products in East Asia and the Rest of World.
Except as expressly provided in this Agreement, the TCA, the Ancillary
Agreements or the Related Agreements, no rights, licenses, title or interests,
implied or otherwise, in, to or under any Anti-IgE Patents or Company
Information (including, without limitation, Know-How or Biological Materials)
are granted or provided to any Party hereto, through implication, estoppel or
otherwise.

 

ARTICLE 12

 

REPRESENTATIONS AND WARRANTIES

 

12.1 Disclaimer. Except as expressly set forth herein or in the TCA, no Party
makes any, and each Party expressly disclaims any and all, express or implied
warranties, statutory or otherwise, concerning the subject matter of this
Agreement, including, without limitation, the value, adequacy, quality,
efficiency, stability, characteristics or usefulness of, or non-infringement,
merchantability or fitness for a particular purpose of, any Anti-IgE Antibody or
Anti-IgE Product.

 

30

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ARTICLE 13

 

CONFIDENTIALITY

 

13.1 Company Information. Sections 15.1 and 15.3 of the Tripartite Cooperation
Agreement set forth the terms governing the Parties’ rights and obligations
regarding the disclosure and use of Company Information.

 

13.2 Academic and Scientific Publications. Section 15.2 of the Tripartite
Cooperation Agreement sets forth the procedure to be followed in the event that
either Party desires to publish or to make a public presentation of any Company
Information.

 

ARTICLE 14

 

LIMITATIONS ON LIABILITY

 

IN NO EVENT SHALL ANY PARTY OR ITS AFFILIATES BE LIABLE TO ANY OTHER PARTY OR
SUCH OTHER PARTY’S AFFILIATES OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES
OR AGENTS FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES
(INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS) SUFFERED BY THE OTHER PARTY OR
SUCH OTHER PARTY’S AFFILIATES OR THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES
OR AGENTS UNDER THIS AGREEMENT OR THE TCA, except to the extent of any such
damages paid to a Third Party as compensation for a claim by a Third Party.
Notwithstanding any of the foregoing in this Article 14 to the contrary, nothing
in this Article 14 shall limit a Party’s right to seek and recover royalties,
profit share or milestone payments which would have been payable or due under
Article 9 of this Agreement but for a Party’s breach of this Agreement.

 

ARTICLE 15

 

FORCE MAJEURE

 

No Party shall be held liable or responsible to any other Party or be deemed to
have breached or defaulted under this Agreement for failure or delay in
performing its obligations hereunder or thereunder to the extent, and as long
as, such failure or delay is caused by or results from causes beyond the
reasonable control of the affected Party, which would not have been avoided by
the exercise of due care and reasonable prudence, and the observance of
reasonable standards in the pharmaceutical industry, including, without
limitation but subject to the foregoing, fire, floods, earthquakes, hurricanes,
tornadoes, embargoes, war, acts of terrorism, insurrections, sabotage, riots,
civil commotions, strikes, lockouts or other labor disturbances, acts of God,
incapacitation (including without limitation, contamination) of manufacturing
facilities, omissions or delays in acting by any governmental authority, and
acts of a government or agency thereof and judicial orders or decrees (“Force
Majeure Events”).

 

31

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

In the event of occurrence of the foregoing, each Party must use Commercially
Reasonable Efforts to mitigate the adverse consequence of such cause or Force
Majeure Event.

 

ARTICLE 16

 

TERM AND TERMINATION

 

16.1 Term. Unless otherwise terminated pursuant to other express provisions set
forth herein, this Agreement shall expire:

 

(a) as to East Asia, on the later ***** and such time as no Anti-IgE Antibody or
Anti-IgE Product is any longer being Developed (including manufacturing
development) hereunder by or for Novartis or Tanox (or a sublicensee) for, or
Commercialized by or for Novartis (or a sublicensee) in, East Asia (except and
unless the lack of any such activity constitutes a material breach hereunder);
and

 

(b) as to the Rest of the World, on the later ***** and such time as no Anti-IgE
Antibody or Anti-IgE Product is any longer being Developed (including
manufacturing development) hereunder or Commercialized by or for Novartis (or a
sublicensee) in the Rest of the World (except and unless the lack of any such
activity constitutes a material breach hereunder).

 

16.2 Termination Rights.

 

(a) This Agreement may be terminated (including, without limitation, with
respect to the rights and obligations of the Parties after the effective date of
such termination, subject to the provisions of Section 16.6): (i) by mutual
written agreement of the Parties; (ii) by any Party, by giving written notice to
the other Party, upon the liquidation, dissolution, winding-up, insolvency,
bankruptcy, or filing of any petition therefore, appointment of a receiver,
custodian or trustee, or any other similar proceeding (other than a dissolution
or winding up for the purposes of reconstruction or amalgamation), by or of such
other Party where such petition, assignment or similar proceeding is not
dismissed or vacated within *****, or upon or after rejection of any license
under the TCA by the bankrupt Party; or (iii) otherwise as expressly specified
in this Article 16.

 

(b) Upon termination under subsection 16.2(a)(ii) above, if the Bankrupt Party
is Tanox, subject to Section 16.6, (i) Tanox’s rights and obligations under this
Agreement shall be treated as set forth in Section 16.5(b) below (other than
Section 16.5(b)(iv)), and *****, (ii) Tanox’s right to receive payments under
Section 9 (other than Section 9.1(b)) shall survive, and (iii) all of Novartis’
rights under this Agreement shall survive.

 

(c) Upon termination under subsection 16.2(a)(ii) above, if the Bankrupt Party
is Novartis, subject to Section 16.6, (i) Novartis’ rights and obligations under
this Agreement shall be treated as set forth in Section 16.5(a) below *****, and
(ii) all of Tanox’s rights under this Agreement shall survive.

 

32

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16.3 Required Termination of this Agreement. As set forth in the applicable
provisions of the TCA:

 

(a) in the event that Novartis exercises its right to terminate the TCA at will
pursuant to Section 18.3(b) of the TCA, Novartis must also terminate this
Agreement, which termination shall be affected by notice in writing delivered to
Tanox, as contemplated in Section 18.3(b) of the TCA; and

 

(b) in the event that the TCA is terminated by written agreement, as set forth
in Section 18.2 of the TCA, either Party may terminate this Agreement by written
notice to the other Party.

 

16.4 No Termination for Breach. Upon the material failure of a Party (“Breaching
Party”) to comply with any of its material obligations contained in this
Agreement, all remedies in law and in equity shall be available to the other
Party, except that the other Party may not terminate this Agreement as to the
Breaching Party. *****.

 

16.5 Termination at Will.

 

(a) Subject to Section 16.5(c) below, Novartis may terminate this Agreement
(including, without limitation, its rights and obligations after the effective
date of such termination, subject to the provisions of Section 16.6), at any
time after the date which is *****, by giving ***** prior written notice to
Tanox and paying all amounts it is financially responsible for hereunder up to
such termination date; provided, however, that within ***** of receipt of such
notice, Tanox may, by notice in writing to Novartis, accelerate the effective
date of such termination to a date not less than ***** from the date of
Novartis’ notice of termination under this Section 16.5(a). If Novartis
terminates this Agreement pursuant to this Section 16.5(a), Novartis’ rights to
Develop and Commercialize Anti-IgE Products in East Asia and ROW under this
Agreement and the TCA shall be transferred or granted, as the case may be, to
Tanox, Tanox shall have and retain exclusive rights for the Development and
Commercialization of Anti-IgE Antibodies and Anti-IgE Products in East Asia and
the Rest of the World and the provisions of Sections 18.3(b)(i) and 18.3(b)(iii)
of the TCA shall apply to the extent reasonably required for Tanox to continue
Development and Commercialization in East Asia and ROW.

 

(b) Subject to Section 16.5(c) below, Tanox may terminate this Agreement
(including, without limitation, its rights and obligations after the effective
date of such termination, subject to the provisions of Section 16.6 and the
remainder of this Section 16.5(b)), at any time after the date which is *****,
by giving ***** prior written notice to Novartis and paying all amounts it is
financially responsible for hereunder up to such termination date; provided,
however, that within ***** of receipt of such notice, Novartis may, by notice in
writing to Tanox, accelerate the effective date of such termination to a date
not less than ***** from the date of Tanox’s notice of termination under this
Section 16.5(b). If Tanox terminates this Agreement pursuant to this Section
16.5(b):

 

(i) Tanox’s rights to Develop and Commercialize Anti-IgE Products in East Asia
under this Agreement and the TCA shall be transferred or granted, as the case
may be, to Novartis;

 

33

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

(ii) Novartis shall have and retain exclusive rights for the Development and
Commercialization of Anti-IgE Antibodies and Anti-IgE Products in East Asia and
the Rest of the World;

 

(iii) The applicable provisions of Section 18.3(b)(i) of the TCA, as applied in
the event of a Novartis termination under Section 16.5(a), shall apply hereunder
with Tanox and Novartis switched under such provisions so that Tanox owes the
relevant transitional assistance obligations to Novartis thereunder (all to the
extent applicable to a Tanox termination under this Section 16.5(b)); and

 

(iv) Article 9 and the relevant payment obligations of Novartis thereunder shall
survive and remain in full force and effect, except that Section 9.1(b) shall
terminate.

 

(c) In the event that either party terminates this Agreement as set forth in
Section 16.5(a) or 16.5(b), as the case may be, the terminating Party shall
provide all cooperation and assistance reasonably requested by the other Party
to enable the other Party (or its designee) to assume with as little disruption
as reasonably possible, the continued Development and Commercialization of the
Anti-IgE Products then being Commercialized or Developed hereunder (and only in
the form and formulation then being Commercialized or Developed hereunder) (the
“Active Products”), if the other Party so chooses to pursue such continued
Development and/or Commercialization. Such cooperation and assistance shall be
provided in a prompt and timely manner (having regard to the nature of the
cooperation or assistance requested) and shall include, without limitation, the
matters set forth in Section 18.3(d) of the TCA in so far as applicable to East
Asia and the ROW (with Tanox and Novartis switched under such provisions so that
Tanox owes the relevant transitional assistance obligations to Novartis
thereunder (to the extent applicable) in the event of a Tanox termination under
Section 16.5(b)).

 

16.6 Effect of Termination; Survival. Termination or expiration of this
Agreement shall not affect or limit the rights or obligations of the Parties
(including the obligation to pay amounts due hereunder) that have accrued or
were incurred prior to the effective date of such expiration or termination. In
addition, the following sections and articles of this Agreement shall survive
any expiration or termination of this Agreement: 9 (“Payments”) (with respect to
only amounts owing or accrued as of the effective date of termination), 10
(“Dispute Resolution”), 13 (“Confidentiality”) (but only for such period of time
as is provided for in Section 18.6 of the TCA), and 14 (“Limitations on
Liability”), this Article 16, and Articles 17 (“Indemnification and Insurance”)
(with respect only to events occurring prior to the effective date of
termination) and 18 (“Miscellaneous”). All other provisions, unless expressly
provided otherwise herein, shall terminate and be of no further force or effect
upon expiration or termination of this Agreement. Expiration of this Agreement
in a given territory shall

 

34

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

release the Parties from any duties or obligations imposed in this Agreement
with respect to such territory, including, for example, restrictions on
independent development of Anti-IgE Antibodies or Anti-IgE Products in that
territory, except that the foregoing surviving clauses specified above shall
remain in effect with respect to such territories. In the event of expiration in
a particular territory, however, all terms and conditions of this Agreement
shall remain in effect in accordance with their terms with respect to all other,
non-expired territories.

 

ARTICLE 17

 

INDEMNIFICATION AND INSURANCE

 

17.1 Indemnities Generally. Sections 19.1 and 19.3(a) and (c) of the Tripartite
Cooperation Agreement shall apply with respect to the Parties’ activities
pursuant to this Agreement as if set out in full in this Agreement.
Notwithstanding the foregoing, or Section 17.2 below, indemnification by
Novartis under this Agreement does not diminish or affect the indemnification by
Tanox under the Hu-901 Extension Agreements and such Hu-901 Extension Agreement
indemnification shall remain in full force and effect.

 

17.2 Product Liability and Infringement Indemnity for ROW. Novartis shall
indemnify, defend and hold harmless the Tanox Indemnitees from and against any
and all Damages to the extent arising from any *****:

 

(a) *****

 

(b) *****

 

(c) *****

 

(d) *****

 

(e) *****

 

17.3 Litigation Costs and Damages.

 

(a) Notwithstanding any other provision of this Agreement or the EA/ROW
Financial Appendix (but without limiting the indemnity obligations of the
Parties under Sections 17.1 and 17.2 and subject to the treatment of Excluded
Costs under the EA/ROW Financial Appendix), the Parties acknowledge and agree
that all Damages incurred by any Party with respect to any product liability
claim, action, suit, proceeding or investigation by a Third Party (including
without limitation claims by or on behalf of patients for personal injury or
wrongful death) with respect to any Anti-IgE Antibody or Anti-IgE Product
Developed or Commercialized under this Agreement in East Asia shall be treated
as *****

 

(b) Notwithstanding any other provision of this Agreement or the EA/ROW
Financial Appendix (but without limiting the indemnity obligations of the

 

35

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

Parties under Sections 17.1 through 17.2 and subject to the treatment of
Excluded Costs under the EA/ROW Financial Appendix), the Parties acknowledge and
agree that all Damages incurred by any Party with respect to any Third Party
claim, action, suit or proceeding for patent infringement in East Asia based on
the manufacture, use, sale or import of any Anti-IgE Antibody or Anti-IgE
Product, shall be treated as *****.

 

17.4 Indemnification Procedure. Section 19.4 of the TCA shall apply with respect
to the indemnities granted hereunder as if set forth in full in this Agreement.

 

17.5 Insurance. Prior to a Party hereunder initiating human clinical trials or
the Manufacture, marketing or sale of Anti-IgE Products or Anti-IgE Antibodies
hereunder, such Party shall self-insure for, or procure and maintain, liability
insurance in such amounts and having such limits and terms as are reasonable and
consistent with its performance under this Agreement and sound business
practices of similarly situated companies or institutions in the industry.

 

ARTICLE 18

 

MISCELLANEOUS

 

18.1 Governing Law; Submission to Jurisdiction. This Agreement shall be governed
by and construed in accordance with laws of the State of New York without giving
effect to the principles of conflict of laws thereunder (other than Section
5-1401 of the General Obligations Law). Further, the Parties hereby consent to
the personal jurisdiction of the courts of the State of New York, County of New
York, and the United States Federal District Court for the Southern District of
New York over any claim for enforcement of an award of the arbitrators pursuant
to Article 12 of the TCA and will waive any claims of forum non conveniens or
objection to the laying of venue in any of such courts.

 

18.2 Notices. Any notices to be given hereunder shall be in writing and shall be
delivered by one of the following means: personal delivery, certified or
registered airmail, facsimile with confirmed receipt or confirmed delivery by an
overnight commercial courier service:

 

  (a) if to Novartis, to:

 

Novartis Pharma AG

Lichtstrasse 35

CH 4002 Basel, Switzerland

Attention: Head, Global Business Development and Licensing

Telephone: 41 61 324 5416

Facsimile: 41 61 324 2100

 

36

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

with a required copy to:

 

Novartis Pharma AG

Lichtstrasse 35

CH 4002 Basel, Switzerland

Attention: General Counsel

Telephone: 41 61 324 6877

Facsimile: 41 61 324 6859

 

  (b) if to Tanox, to:

 

Tanox, Inc.

10301 Stella Link Drive

Houston, Texas 77025

Attention: President

Telephone: 713-578-4000

Facsimile: 713-578-5002

 

with a required copy to:

 

Tanox, Inc.

10301 Stella Link Drive

Houston, Texas 77025

Attention: General Counsel

Telephone: 713-578-4000

Facsimile: 713-578-5002

 

A notice shall be deemed to be given at the time of delivery in the case of
personal delivery, or upon confirmed receipt (including machine confirmation) in
the case of facsimile delivery or upon receipt in the case of delivery by
certified or registered airmail or upon confirmed receipt (including courier
confirmation) in the case of commercial courier.

 

18.3 No Third Party Beneficiary. Nothing herein expressed or implied is intended
to or shall be construed to confer upon or give to any Person other than the
Parties hereto and their successors and permitted assigns any rights or remedies
under, or by reason of, this Agreement.

 

18.4 Integration and Conflict. This Agreement, including Schedule A hereto,
together with the TCA (together with all exhibits and schedules thereto),
constitutes the entire agreement of the Parties hereto regarding the subject
matter hereof and, except as otherwise specified herein, supersedes all prior
agreements of the Parties with respect to such subject matter. In the event of
any conflict between the provisions of this Agreement and the TCA, the
provisions of the TCA shall control as between the Parties; provided, however,
that as between the Parties to the extent that the Tripartite Cooperation
Agreement is silent as to a matter expressly dealt with in this Agreement, the
terms of this Agreement shall prevail.

 

37

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

18.5 Amendments. No provision in this Agreement shall be supplemented, deleted
or amended except in a writing executed by each of the Parties.

 

18.6 No Assignment and Binding Effect. Any Party may freely assign this
Agreement or any of its rights, interests, duties or obligations hereunder, in
whole or in part, to an Affiliate, provided that such assignment shall not
relieve in any way the obligations of an assigning Party hereunder. Subject to
the Parties’ respective rights to grant sublicenses pursuant to Section 6.7 of
the TCA, no Party shall assign this Agreement or any of its rights, interests,
duties or obligations hereunder to a Third Party without the prior written
consent of the other Parties (and any attempt to do so shall be null and void)
unless such assignment is part of a merger, acquisition or sale of such Party or
substantially all of its assets (in which case no consent is required). This
Agreement shall be binding upon and inure to the benefit of the successors and
permitted assigns of each of the Parties. Notwithstanding any other provision of
this Section 18.6, this Agreement may only be assigned together with the TCA in
so far as it relates to East Asia and the ROW.

 

18.7 Headings. The headings and the Table of Contents in this Agreement are for
convenience of reference only and shall not affect the meaning or interpretation
of the provisions hereof.

 

18.8 Schedules Incorporated. Schedule A annexed hereto is hereby incorporated
herein as a part of this Agreement with the same effect as if set forth in the
body hereof, except as otherwise specified in such Schedule.

 

18.9 Severability. If any provision herein shall be held invalid or
unenforceable by a court of competent jurisdiction or other authority in any
Regulatory Jurisdiction, the remainder of the provisions herein shall remain in
full force and effect with respect to such Regulatory Jurisdiction and shall not
be affected thereby. To the extent that any provision hereof shall be held to be
wholly or partially invalid or unenforceable in any Regulatory Jurisdiction, the
Parties shall use their best efforts to replace the invalidated provision with a
valid and enforceable provision which, insofar as practicable, implements the
intent of the invalidated, or partially invalidated, provision with respect to
such Regulatory Jurisdiction.

 

18.10 No Waiver. The failure from time to time by any Party to exercise, or the
waiver by such Party of, any of such Party’s rights or remedies hereunder shall
not operate or be construed as a continuing waiver of the same or of any other
of such Party’s rights or remedies provided under this Agreement. No waiver of a
provision of this Agreement will be effective unless made in writing and signed
by an authorized representative of the waiving Party.

 

18.11 Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by the Parties in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from

 

38

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

multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.

 

18.12 Bankruptcy Acknowledgment. Each of the Parties hereto acknowledges and
agrees that this Agreement (i) constitutes a license of Intellectual Property
(as such term is defined in the United States Bankruptcy Code, as amended (the
“Code”)), and (ii) is an executory contract, with significant obligations to be
performed by each Party hereto. The Parties agree that each may fully exercise
all of its rights and elections under the Code following any event of bankruptcy
affecting the other, including, without limitation, those set forth in Section
365(n) of the Code.

 

18.13 Publicity. No Party shall, without the prior written consent of the other
Parties, issue any press release or make any other public announcement or
furnish any written or oral statement to any Third Party, which makes reference
to this Agreement, any of the transactions contemplated hereby or thereby, or
any other Party or its Affiliates; provided, however, that such consent shall
not be unreasonably withheld to the extent such disclosure is required by
securities disclosure requirements or otherwise by an authorized Public
Authority. Each Party shall provide a draft of any of the aforementioned
documents containing any such reference (including without limitation, a copy of
this Agreement or any excerpt hereof, proposed to be filed with any securities
regulatory authority or any securities exchange) to the other Parties and their
counsel as far in advance of release thereof and in sufficient time for review
of such documents by the other Parties and their counsel, and in any event not
less that ***** prior to release thereof unless otherwise required by order of a
Public Authority. In the event any Party objects to any such reference, the
applicable document will be modified to such Party’s reasonable satisfaction. If
a Party does not deliver its written comments on such documents within ***** of
receipt thereof with respect to press releases (or such shorter time as may be
agreed by the Parties) and ***** with respect to all other materials (or such
shorter time as may be agreed by the Parties), such Party shall be deemed to
have consented to any such references therein. When a Party has obtained the
other Parties’ consent for a public announcement or statement, it will not be
required to obtain the other Parties’ consent for a subsequent public
announcement or statement of the same subject matter which does not disclose any
additional or materially different information from that contained in any
previously approved disclosure; provided, however, that: (i) such subsequent
public announcement or statement does not characterize such subject matter in a
materially different way to such previously approved disclosure; (ii) such Party
provides to each of the other Parties a copy of any such subsequent public
announcement or statement not less than two (2) Business Days prior to its
proposed disclosure; and (iii) information concerning the other Parties and
their respective Affiliates may not be used without obtaining consent to each
such disclosure. Nothing herein contained shall be construed to impose upon any
Party any liability or other obligation (to any other Party or any other Person)
in respect of any such references in any such documents. In the event that one
Party reasonably concludes that a given disclosure is required by law and
another Party disagrees with the substance or extent of the disclosure, then the
Party seeking such disclosure shall either (i) limit said disclosure to address
the concerns of the other Party, or (ii) such dispute if not resolved by
corporate counsel to the Parties, shall be resolved in accordance with the legal
opinion received from a law firm that is reasonably acceptable

 

39

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

to the Parties and has no material relationship with any of the Parties or their
Affiliates, with the fees to such law firm to be paid equally by the Party
seeking to make the disclosure and the Party objecting to the disclosure. With
respect to any required filing of this Agreement with a Public Authority, the
filing Party shall seek confidential treatment of portions of this Agreement and
the other Parties shall have the right to review and comment on such an
application for confidential treatment prior to its being filed.

 

18.14 No Partnership or Agency. The Parties hereby acknowledge that while the
Parties intend to cooperate as set forth in this Agreement, the Parties are
independent contractors and nothing provided in this Agreement or the
performance of the Parties under this Agreement is intended or may be deemed to
form (or be deemed to constitute in law or in equity) a partnership, agency,
joint venture, distributorship, fiduciary, or any other similar relationship
between any of the Parties. The Parties are not affiliated and no Party has any
right or authority to bind any other Party in any way.

 

18.15 Further Assurances. Each Party agrees to take or cause to be taken such
further actions, and to execute, deliver and file or cause to be executed,
delivered and filed such further documents and instruments, and to obtain such
consents, as may be reasonably required or requested by another Party in order
to effectuate fully the purposes, terms and conditions of this Agreement.

 

40

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

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
triplicate by their duly authorized representatives as of the day and year first
above written.

 

NOVARTIS PHARMA AG

By:

       

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

Name:

  Daniel J. Weston

Title:

 

Global Head, Alliance Management,

Business Development & Licensing

By:        

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

Name:

  Kimberly J. Urdahl

Title:

  Head of Legal, Primary Care

TANOX, INC.

By:        

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

Name:

  Nancy T. Chang

Title:

  President and Chief Executive Officer

 

41

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SCHEDULE A

 

EA/ROW FINANCIAL APPENDIX

 

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

CERTAIN INFORMATION IN THIS EXHIBIT IS SUBJECT TO A REQUEST FOR CONFIDENTIAL
TREATMENT IN ACCORDANCE WITH RULE 24B-2 UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED. SUCH INFORMATION HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF SUCH OMITTED INFORMATION
HAS BEEN INDICATED WITH ASTERISKS (*****).

 

SCHEDULE A

 

EA/ROW FINANCIAL APPENDIX

 

TO ANCILLARY D&L AGREEMENT

 

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

SCHEDULE A

 

Financial Planning, Accounting and Reporting

For the Ancillary D&L Agreement

 

TABLE OF CONTENTS

 

1.

  

Principles of Reporting

   i

2.

  

Duties of the Finance Sub-Committee

   iii

3.

  

Frequency of Reporting and Other Information Exchange

   iv

4.

  

Budget, Forecast and Long Range Plan

   vi

5.

  

Definitions

   vi

6.

  

Foreign Exchange

   viii

7.

  

Responsibility for TanNov Reporting; Payment between the TanNov Parties

   viii

8.

  

Payments to Tanox

   ix

9.

  

Effective Accounting Date Termination for TanNov

   ix

10.

  

Guidelines for Charging Development Costs

   ix

11.

  

Guideline for Product Sampling

   ix

 

i

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

This EA Financial Appendix (the “EA Financial Appendix”) is Schedule A attached
to and incorporated into the Ancillary D&L Agreement (the “Agreement”) dated as
of February 25, 2004 by and among Novartis Pharma AG (“Novartis”) and Tanox,
Inc. (“Tanox”) (each also singularly referred to herein as a “Party” and
collectively as the “Parties”).

 

This EA Financial Appendix covers the financial planning, accounting practices
and procedures to be followed in determining the “Net Sales” and related payment
of royalties in the Rest of the World and the “Net Profit” or “Net Loss” (as
defined below) and sharing of revenue and costs and expenses in East Asia, each
pursuant to the Agreement. For such purpose, this EA Financial Appendix sets
out, among other things, the principles of reporting among the Parties the
actual results and budgeted plans, forecasts and long range plans of “TanNov”
(as defined below), the frequency of reporting, the use of a single “Functional
Currency” (as defined below) for determining and reporting payments to the
Parties, and other matters. The consolidated accounting construct consisting of
certain Tanox and Novartis operations under the Agreement will be referred to as
“TanNov”. It should be noted that “TanNov” is not a legal entity and has been
defined for identification purposes only.

 

The functionality of “TanNov” relates only to East Asia (as defined in the
Agreement), and to the operations of Tanox and Novartis in East Asia. Thus,
references in this EA Financial Appendix to a “TanNov Party” or “TanNov Parties”
shall be construed to mean Tanox and/or Novartis (and its Affiliates), as the
case may be, for purposes of this EA Financial Appendix and the Agreement,
including the application of the financial definitions herein. “TanNov” is a
virtual account and not a separate auditable entity.

 

This EA Financial Appendix also provides agreed upon definitions of financial
terms applicable to the Parties for purposes of the Agreement, and, subject to
the terms of the Agreement, sets forth roles and responsibilities of the EA
Finance Sub-Committee. All capitalized terms used herein without definition
shall have the meanings ascribed thereto in the Agreement, unless otherwise
expressly provided herein. In the event of a conflict between the terms and
provisions of this EA Financial Appendix and the Agreement, the terms and
provisions of the Agreement shall govern.

 

The contents of this EA Financial Appendix, and all activities hereunder, are to
be governed by the terms and conditions of the Agreement, including the
confidentiality provisions set forth therein.

 

1. Principles of Reporting

 

(a) East Asia

 

For purposes of the sharing of costs and sharing of “Net Profit” or “Net Loss”
(as the case may be) in East Asia among the Parties as provided under the
Agreement and this EA Financial Appendix, the presentation of results of
operations of the TanNov Parties for East Asia will be based on each TanNov
Party’s respective financial information for East Asia for the applicable period
in the reporting format depicted as follows:

 

     Novartis

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

   Tanox

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

   Total

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

Gross Sales (East Asia)

              

less *****

              

=        Net Sales (East Asia)

              

less *****

              

=        Gross Profit (East Asia)

              

less *****

              

=        Net Profit (East Asia) or Net Loss (East Asia) for purpose of TanNov
profit share.

              

 

i

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

(b) Rest of World

 

For purposes of the payment by Novartis to Tanox of royalties for the Rest of
World as provided under the Agreement and this EA Financial Appendix, the
presentation of results of operations of Novartis for the Rest of World will be
based on Novartis’ financial information for the Rest of World for the
applicable period in the reporting format depicted as follows:

 

Gross Sales (ROW)

less *****

=        Net Sales (ROW).

 

(c) Generally

 

It is the intention of Novartis and Tanox that the interpretation of these
definitions and other matters under this EA Financial Appendix will be: (a)
consistent with the U.S. generally accepted accounting principles (“GAAP”)
consistently applied for Tanox; and (b) international accounting standards as
consistently applied (“IAS”) for Novartis. The EA Finance Sub-Committee shall
ensure consistency in accounting treatment between GAAP and IAS, where possible.

 

If necessary a Party will make the appropriate adjustments to the formatting of
financial information it supplies under the Agreement to conform to the format
of reporting results of operations for purposes of TanNov as set forth in this
EA Financial Appendix.

 

For purposes of the definitions in this EA Financial Appendix and the
calculation of applicable profit, cost, revenue and other amounts hereunder and
under the Agreement, the Parties shall eliminate, and not include in any such
amounts, any inter- and intra-company transactions ***** within or among the
Parties (and/or their respective Affiliates or sublicensees), including without
limitation with respect to transfer pricing, except to the extent expressly
provided otherwise in the Agreement or this EA Financial Appendix.

 

Notwithstanding anything to the contrary in the Agreement or this EA Financial
Appendix (but without limiting any of the provisions in Article 17 (Indemnity
and Insurance) of the Agreement or Article 19 (Indemnity and Insurance) of the
TCA), if any Party suffers*****:

 

  (i) *****

 

  (ii) *****

 

  (iii) *****

 

  (iv) *****

 

(collectively “Excluded Costs”), then any such Excluded Costs shall be solely
for the account of such Party, and shall not be included in any costs or
expenses for the purpose of calculating of Net Profits (East Asia) (or Net Loss
(East Asia), as the case may be), to be shared under the Agreement or this EA
Financial Appendix.

 

ii

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2. Duties of the EA Finance Sub-Committee

 

As set forth in the Agreement, the EA Finance Sub-Committee (EA FSC) shall
support the TanNov JCC and the TanNov JMC with respect to accounting and
financial determinations relating to cost and profit sharing under the Agreement
and other financial matters, all in accordance with the Agreement and this EA
Financial Appendix. The EA FSC shall be responsible for review and
administration of operations under this EA Financial Appendix, including
reviewing and recommending for approval by the TanNov JCC and TanNov JMC
financial statements of TanNov and including reviewing and advising the TanNov
JCC and the TanNov JMC with respect to the following matters, all in accordance
with the terms of the Agreement and this EA Financial Appendix:

 

(i) coordination and reporting of actual and forecasted financial results for
Anti-IgE Products in East Asia on a ***** basis as provided herein;

 

(ii) coordination on preparation, approval and administration of budgets and
forecasts for Development and Commercialization of Anti-IgE Products in East
Asia, including, without limitation, identification, analysis and reporting with
respect to budgets, forecasts and variances, all subject to final approval as
provided in the Agreement;

 

(iii) coordination on preparation, approval, administration and forecasting of
long range plans relating to Anti-IgE Products in East Asia;

 

(iv) modification of reporting cycles and deadlines under this EA Financial
Appendix as may be unanimously agreed upon by all the Parties; provided,
however, that in the event that a Party substantially or materially changes its
internal reporting cycles and deadlines generally (that is, for Anti-IgE
Products and for products other than Anti-IgE Products), then the Parties will
discuss in good faith appropriate revisions to the foregoing reporting cycles
and deadlines to reasonably accommodate such change;

 

(v) review of the costs and expenses charged to TanNov by the Parties to
determine in the first instance, subject to the terms of the Agreement and, as
applicable, final approval or disapproval by the TanNov JCC and the TanNov JMC,
whether such costs and expenses are authorized to be shared by the Parties under
the Agreement (including, without limitation, in accordance with the defined
terms in Section 5 below, in accordance with provisions in the Agreement
relating to budget changes and variances and approvals therefore, and in
accordance with the definition of “Excluded Costs” in Section 1 of this EA
Financial Appendix);

 

(vi) review of appropriate allocation of costs and expenses to the various cost
and expense categories under Section 5 below, and between East Asia and the ROW,
and to the extent applicable US and Europe (with each Party acknowledging that
any costs proposed to be allocated to the US and Europe are subject to the
review and unanimous approval of such allocation by the TCA Finance
Sub-Committee, subject to the provisions of Section 2. (v) and (vi) of the TCA
Financial Appendix);

 

(vii) review and assistance in calculation of Net Profits (East Asia) (and
corresponding Net Losses), subject to TanNov JMC approval, and coordination with
respect to means balancing and other payments between the Parties hereunder;

 

iii

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

(viii) review to ensure consistent treatment, where possible, under GAAP and IAS
accounting standards (including, without limitation, with respect to “Fully
Burdened Manufacturing Cost” and “Sales Returns and Allowances”);

 

(ix) review of each Party’s cost and/or project accounting systems and
methodologies to ensure consistent treatment for purpose of TanNov reporting;

 

(x) from time to time, monitor whether reimbursement of General and
Administrative Expenses (East Asia), as provided for in this EA Financial
Appendix, is in proportion to each Party’s relative effort in managing outside
vendors;

 

(xi) review of ***** (subject to the terms of the Manufacturing and Supply
Agreement(s) and to this EA Financial Appendix) and other items to be included
in*****, subject to TanNov JCC and TanNov JMC approval as provided below;

 

(xii) review and facilitation of the resolution of financial matters (if any)
arising among the Parties with respect to the time period from start of Parties
collaboration (under the Outline of Terms) until the Effective Date of the
Agreement;

 

(xiii) coordination of the presentation of disputes arising between the Parties
under the EA Financial Appendix, for resolution in accordance with the terms of
the Agreement;

 

(xiv) review actual inventory levels, Sales Returns and Allowances and Novartis’
methodologies for charging costs to TanNov for determination of actual results,
forecasts, budgets and long range plans and the results of applying such
methodologies; and

 

(xv) review and coordination with respect to all other financial matters arising
under the EA Financial Appendix or otherwise relating to the Parties’
cooperation under the Agreement, including, without limitation, each Party’s
methodologies for charging costs for determination of actual financial results,
forecasts, budgets and long range plans and the results of applying such
methodologies.

 

Review results and recommendations of the EA FSC shall be presented to the Tanov
JCC or other appropriate Committee as necessary.

 

3. Frequency of Reporting and Other Information Exchange

 

The fiscal year of TanNov will be a calendar year. Reporting and other
information exchange by and between each TanNov Party for TanNov revenues,
expenses, budgets, forecasts and long range plans will be performed as follows,
subject to Section 5.10(b) of the TCA:

 

Reporting Event

(Responsible Party)

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

  

Frequency

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

  

Timing of Submission**

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

*****

         

*****

         

*****

         

*****

         

*****

         

*****

         

 

iv

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

*****

*****

*****

*****

*****

*****

*****

*****

 

* The applicable Parties shall provide a narrative explaining variances to
budgets, forecasts or long range plans for planning, settlement and
decision-support purposes.

 

** The Parties may agree unanimously to modify the foregoing reporting cycles
and deadlines. In the event that a Party substantially or materially changes its
internal reporting cycles and deadlines generally (that is, for Anti-IgE
Products and for products other than Anti-IgE Products), then the Parties will
discuss in good faith appropriate revisions to the foregoing reporting cycles
and deadlines to reasonably accommodate such change.

 

On a monthly basis, Novartis will supply Tanox with *****.

 

On a monthly basis, Novartis will supply Tanox with *****.

 

On a quarterly basis, within ***** of the last day of each quarter, Novartis
shall prepare and supply to Tanox *****.

 

On a quarterly basis (within ***** of the last day of each quarter), Novartis
will provide Tanox with *****. In addition, at quarter-closes and year-ends, the
Parties shall reasonably cooperate with each other, as reasonably requested, in
providing each other with available and estimated results and expenditures for
East Asia and the ROW, to meet the Parties’ respective public reporting
requirements, subject always to Article 13 and Sections 18.13 of the Agreement
and 5.10(b) of theTCA. After review by the EA Finance Sub-Committee as to the
amounts, the EA Finance Sub-Committee will forward each such report to the
TanNov JCC and TanNov JMC for their approval as required under, and subject to,
the Agreement. *****.

 

On a quarterly basis, together with the reports of actual results, Novartis
shall provide Tanox with *****. In addition, on a quarterly or semi-annually
basis as requested, the TanNov Parties shall provide each other with information
as provided in Section 8 below.

 

Novartis will be responsible for the preparation of consolidated reporting of
TanNov for East Asia (including the quarterly calculation of Net Profit (East
Asia) or Net Loss (East Asia), as the case may be, calculated as provided in
this EA Financial Appendix and the Agreement) for purposes of the determination
of the cash settlement between Tanox and Novartis for East Asia, subject to the
review and approval of the TanNov JCC and the TanNov JMC. Review of draft
statements, payments and related matters are set forth in Section 7 below.

 

v

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

4. Budget, Forecast and Long Range Plan

 

All budgets (which will be prepared annually), forecasts and long range plans
will be supplemented with detailed EA Plans for clinical trials, Approval
Applications, Commercial Launch, marketing, promotion and sales efforts, subject
to and in accordance with the applicable terms of the Agreement.

 

With respect to East Asia, members of the EA FSC shall be responsible for
preparation of the annual East Asia budgets for Development, and
Commercialization of Anti-IgE Products in East Asia, per annual EA Plans
developed pursuant to the Agreement. The Parties shall exchange draft and
preliminary budgets, budget confirmations and other budget information for East
Asia in accordance with Section 3 above.

 

As set forth in Section 3 above (regarding “Forecasts”), within ***** after the
end of each calendar quarter Novartis shall provide Tanox with: *****.

 

The EA FSC, with the assistance of Tanox and Novartis, will be responsible for
identifying, analyzing and reporting all budget variances for East Asia.

 

A ***** long-range plan (*****) for East Asia will be established on a yearly
basis during the Term of the Agreement, under the direction of the TanNov JCC,
and will be provided to the Parties and submitted to the TanNov JMC for approval
by ***** of each year, in accordance with Section 3 above.

 

The obligations of Novartis to disclose Forward-Looking Information to Tanox
under this section or any other provision of the Financial Appendix shall be
subject to Section 5.10(b) of the TCA.

 

5. Definitions

 

For purposes of determining Net Sales, costs and expenses, and Net Profit and
Net Loss, as the case may be (the calculation of which shall be consistent with
the Agreement and this EA Financial Appendix), to be recorded on the TanNov
books and records and to be shared by the TanNov Parties under the Agreement
with respect to East Asia, each TanNov Party will use its respective internal
accounting systems. As a general matter, except for costs and expenses
specifically authorized to be shared by the TanNov Parties or otherwise
allocated to a particular Party, as provided in the definitions and other terms
of this EA Financial Appendix or in accordance with the express terms of the
Agreement, all other costs and expenses incurred by any Party in connection with
the Development, manufacture or Commercialization of Anti-IgE Products in East
Asia and the ROW shall be *****.

 

For purposes of TanNov accounting and the definitions set forth herein, costs
and expenses incurred by a Party shall include costs and expenses incurred by a
Party’s Affiliate or by a Third Party on such Party’s behalf or for its account.

 

“Allocable Manufacturing Overhead” shall have the meaning set forth in the
Financial Appendix to the TCA.

 

“Cost of Sales” shall mean *****.

 

“Commercialization Successor” means the successor to some or all of a Party’s
Commercialization rights under the Agreement.

 

vi

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

“Development Costs” shall mean an amount equal to:

 

  (a) *****

 

  (b) *****,

 

*****.

 

“Distribution/Warehousing Costs” means *****.

 

“Excluded Cost” shall have the meaning given thereto in Section 1 of this EA
Financial Appendix.

 

“Fully Burdened Manufacturing Cost” means *****

 

  a) *****

 

  b) *****

 

  c) *****

 

  d) *****

 

For the avoidance of doubt, “Fully Burdened Manufacturing Cost” shall not
include *****

 

“General and Administrative Costs (East Asia)” means *****

 

“TanNov Party” or “TanNov Parties” shall have the meaning set forth in the
introduction to this EA Financial Appendix.

 

“Gross Profit (East Asia)” means *****.

 

“Gross Sales (East Asia)” means *****.

 

“Gross Sales (ROW)” means *****.

 

“Marketing Costs (East Asia)” means *****.

 

“Net Profits (East Asia)” or “Net Losses (East Asia)”, as illustrated in
paragraph 1 above, means *****.

 

“Net Sales” means Net Sales (East Asia) and/or Net Sales (ROW), as applicable.

 

“Net Sales (East Asia)” means *****.

 

“Net Sales (ROW)” means *****

 

“Other Operating Income/Expense” means *****:

 

  (i) *****

 

vii

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

  (ii) *****

 

  (iii) *****

 

  (iv) *****

 

  (v) *****

 

  (vi) *****

 

“Sales Costs (East Asia)”, in East Asia, means *****.

 

“Sales Returns and Allowances (East Asia)” means, *****.

 

“Sales Returns and Allowances (ROW)” means *****.

 

“Tanox Costs and Expenses” shall mean *****.

 

“Tanox Profit Share” shall mean, for a given period, the amount of Net Profits
(East Asia) payable to Tanox pursuant to Section 9.1(b) of the Agreement.

 

6. Foreign Exchange

 

The “Functional Currency” for accounting for Net Profits or Net Losses will be
U.S. dollars.

 

For the purpose of this EA Financial Appendix, for Novartis all currencies will
be converted using the then Novartis official currency conversion system *****.

 

For the purpose of this Financial Appendix, for Tanox all currencies will be
converted using a standard currency conversion system.

 

7. Responsibility for TanNov Reporting; Payment between the TanNov Parties

 

The responsibility for the reporting to the EA Finance Sub-Committee, TanNov JCC
and TanNov JMC shall be with Novartis (in close cooperation with Tanox) with
respect to East Asia. This will be the basis for the TanNov accounting and
determining of payments to the TanNov Parties for East Asia, as provided in this
Section 7.

 

The TanNov Parties shall share costs and expenses hereunder, Net Profit or Net
Losses (as the case may be) hereunder, for East Asia by making ***** means
balancing payments in U.S. dollars between each TanNov Party such that such
*****. Each TanNov Party agrees to make such payments as provided hereunder.

 

Necessary cash settlements between the TanNov Parties, including means balancing
payments by one Party to reimburse another Party’s *****, will be prepared by
Novartis for East Asia, for review by the EA Finance Sub-Committee and review
and approval by the TanNov JCC and the TanNov JMC as provided in the Agreement.

 

All payments will be made by any TanNov Party owing funds to the other for a
given *****, within ***** after the end of such *****, subject to netting for
any previous cash payment(s) made by either TanNov Party on behalf of the
collaboration which have been approved in accordance with the Agreement and this
EA Financial Appendix to be shared through TanNov.

 

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

8. Payments to Tanox

 

The royalty, milestone, development compensation and manufacturing compensation
payments with respect to East Asia and the ROW provided under Sections 11.1,
11.2, 11.4, 11.6(a) and 11.6(b) of the TCA and Sections 9.1(a), 9.2 and 9.3 of
the Agreement shall be paid to Tanox by Novartis, as set forth in such Sections
and Section 11.9 of the TCA and Section 9.8 of the Agreement and as further
provided below.

 

As regards payments due to Tanox pursuant to Section 11.6(b) of the TCA, the
amount of any such payment attributable to East Asia in the *****. In the event
that Novartis is obligated to make manufacturing payments under Section 8.2(h)
of the Agreement, such payments shall be calculated, reported and paid in a
manner substantially similar to the manufacring payments under Section 11.6(b)
of the TCA.

 

9. Effective Accounting Date Termination for TanNov

 

For reporting and accounting purposes with respect to TanNov, the end of TanNov
will be the nearest month end to the effective termination date of the
Agreement.

 

10. Guidelines for Charging Costs

 

Subject to the express provisions of this EA Financial Appendix and the
Agreement, with respect to any costs or expenses to be included in the
calculation of Net Profits (East Asia) or Net Losses (East Asia) hereunder which
are not 100% attributable to activities in East Asia with respect to Anti-IgE
Products or 100% attributable to the manufacture and supply of Anti-IgE Products
to be sold in East Asia (ie also incurred in part for activities in other
territories and/or with respect to other products), then the Parties shall meet
and agree, through the EA FSC, on a fair and accurate allocation of such costs
and expenses to TanNov and outside TanNov.

 

11. Guideline for Product Sampling

 

The EA Finance Sub-Committee will determine how and when to pass through TanNov
as a Marketing Cost in East Asia, the cost of sampling of Anti-IgE Products in
East Asia, with the cost of such Anti-IgE Product samples to be calculated on
the basis of the ***** of the Anti-IgE Product *****.

 

ix