**1.6**“**Bankrupt Party**” has the meaning set forth in Section 14.7.     **1.7**“**BLA**” means a Biologic License Application, as defined in the United States Public HealthService Act, as amended, and applicable regulations promulgated thereunder by the FDA.     **1.8**“**Bulk API**” means the active pharmaceutical ingredient form of a Product in bulk form.     **1.9**“**Business Day**” means a day other than a Saturday, Sunday, or bank or other public holidayin the State of Washington or California.     **1.10**“**Calendar Quarter**” means, for each Calendar Year, the respective periods of three(3) consecutive calendar months ending on March 31, June 30, September 30 or December 31.     **1.11**“**Calendar Year**” means, for the first calendar year, the period commencing on the SigningDate and ending on December 31 of the calendar year during which the Signing Date occurs, and eachsuccessive period beginning on January 1 and ending twelve (12) consecutive calendar months lateron December 31.     **1.12**“**CD37 Antigen**” means the human protein antigen that is known as CD37, and identified as afull length CD37 protein antigen [*].     **1.13**“**CD37 Competitor**” means a Third Party who is at the applicable time Developing orCommercializing a protein therapeutic that [*].     **1.14**“**Change of Control**” means, with respect to a Party: (i) the sale of all or substantiallyall of such Party’s assets or business relating to this Agreement; (ii) a merger, reorganization,or consolidation involving such Party in which the voting securities of such Party outstandingimmediately prior thereto cease to represent at least fifty percent (50%) of the combined votingpower of the surviving entity immediately after such merger, reorganization, or consolidation; or(iii) a Person or group of Persons, acting in concert acquire more than fifty percent (50%) of thevoting equity or management control of such Party.     **1.15**“**CHMP**” means the Committee for Medicinal Products for Human Use that is responsible forpreparing the opinions on all questions concerning medicinal products for human use for theEuropean Medicines Agency, or any successor thereto.     **1.16**“**Clinical Costs**” means all costs incurred by or on behalf of a Party that are directlyattributable and reasonably allocated to the conduct of Clinical Trials of a Collaboration Product,[*], whether alone or in combination with another product or agent. [*], Clinical Costs shallconsist of the following: (a) the preparation for and conduct of Clinical Trials (except forrelated Manufacturing Costs otherwise included in Development Costs); (b) data collection andanalysis, and report writing; and (c) clinical laboratory work. Notwithstanding the above, ClinicalCosts shall exclude costs incurred in connection with Phase IV Clinical Studies for purposes otherthan label expansion and Regulatory Approval, and post-marketing surveillance activities, whichshall be considered Sales and Marketing Costs. Clinical Costs shall be***Confidential Treatment Requested.**
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calculated in accordance with GAAP, consistently applied with allocations by a Partycalculated in accordance [*].     **1.17**“**Clinical Trial**” means any human clinical trial of a Product.     **1.18**“**Collaboration**” has the meaning set forth in Section 2.1.     **1.19**“**Collaboration Inventions**” has the meaning set forth in Section 10.1(a).     **1.20**“**Collaboration Product**” means a Product with respect to which neither Party has exercisedthe Opt-Out Option, nor has been deemed to have exercised its Opt-Out Option under Section 14.2(b).     **1.21**“**Combination Product**” means any product containing as active ingredients both (a) aRoyalty Product and (b) one or more other pharmaceutically active compounds or substances.     **1.22**“**Commercialization Budget**” means the budget of Commercialization Costs set forth in theCommercialization Plan to be incurred by the Parties in connection with the performance of theCommercialization Plan.     **1.23**“**Commercialization Costs**” means all costs incurred by or on behalf of a Party inperforming its obligations under the then-current Commercialization Plan that are directlyattributable and reasonably allocated to the Commercialization of a Collaboration Product in theField in the Territory. [*], Commercialization Costs shall consist of: (a) Manufacturing Costs fora Collaboration Product for commercial sale; (b) Sales and Marketing Costs; (c) costs associatedwith Medical Education Activities incurred after the First Commercial Sale of the applicableCollaboration Product, and other ancillary services to the foregoing; (d) Distribution Costs; (e)subject to Section 8.7, payment to a Third Party under a Future Third Party License incurred afterthe First Commercial Sale of the applicable Collaboration Product; (f) Trademark Costs incurredafter the First Commercial Sale of the applicable Collaboration Product; (g) patent costs describedin Section 10.3(b)(i); and (h) patient assistance and indigent/expanded access programs withrespect to a Collaboration Product. Commercialization Costs shall specifically exclude generalcorporate and administrative overhead of each Party. In the calculation of CommercializationCosts, a Party’s FTE effort shall be calculated at the FTE Rate. Commercialization Costs shall becalculated in accordance with GAAP, consistently applied [*].     **1.24**“**Commercialization Plan**” means the written plan for the Commercialization of aCollaboration Product described in Section 5.2.     **1.25**“**Commercialize**” means to promote, market, distribute, sell (and offer for sale orcontract to sell) or provide product support for a Product, including by way of example: (a)detailing and other promotional activities in support of a Product; (b) advertising and publicrelations in support of a Product, including market research, development and distribution ofselling, advertising and promotional materials, field literature, direct-to-consumer advertisingcampaigns, media/journal advertising, and exhibiting at seminars and conventions; (c) developingreimbursement programs and information and data specifically intended for national accounts,managed care organizations, governmental agencies (e.g., federal, state and local), and***Confidential Treatment Requested.**
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other group purchasing organizations, including pull-through activities; (d) conductingMedical Education Activities and journal advertising; and (e) conducting Phase IV Clinical Studiesfor purposes other than label expansion and Regulatory Approval, and post-marketing surveillanceactivities. For clarity, “**Commercializing**” and “**Commercialization**” have a correlative meaning.     **1.26**“**Commercial Supply Agreement**” has the meaning set forth in Section 6.5.     **1.27**“**Committee**” means the JSC, the JDC, the JCC, the JFC, the JPC, or any other committeeestablished by the JSC in accordance with the terms of this Agreement.     **1.28**“**Competing Program**” has the meaning set forth in Section 8.5.     **1.29**“**Confidential Information**” of a Party means all Know-How or other information, including,without limitation, proprietary information and materials (whether or not patentable) regardingsuch Party’s technology, products, business information or objectives, that is communicated in anyway or form by such Party to the other Party pursuant to this Agreement, and that is identified asconfidential at the time of disclosure; *provided*that, information not identified as confidentialby the disclosing Party shall be deemed to be Confidential Information of the disclosing Party ifthe receiving Party knows, or should have had a reasonable expectation, that such informationcommunicated by the disclosing Party is confidential or proprietary information of the disclosingParty. Notwithstanding the foregoing, [*]. All confidential information disclosed by either Partypursuant to that certain Mutual Non-Disclosure Agreement between the Parties dated December 22,2008 (the “**Non-Disclosure Agreement**”) that is related to the subject matter of this Agreement shallbe deemed to be such Party’s Confidential Information hereunder. The terms and conditions of thisAgreement shall be considered Confidential Information of both Parties.     **1.30 “Consolidated Party”**and **“Consolidation Party”**shall have the respective meanings setforth in Section 9.9(e).     **1.31**“**Control**” or “**Controlled**” means, with respect to any item of Know-How, Patent Rights, orother intellectual property right, the possession (whether by ownership or license, other than alicense granted by one Party to the other pursuant to this Agreement) by a Party of the ability togrant to the other Party access, a license or a sublicense (as applicable), or to extend otherrights as provided in this Agreement, to such intellectual property right, without violating theterms of any agreement or other arrangements with any Third Party existing at the time such Partywould be first required to grant any such access, license or sublicense under this Agreement.     **1.32**“**Co-Commercialization**” means the joint Commercialization of a Collaboration Product inthe Field, in the Territory by both Parties under the terms of this Agreement. “**Co-Commercialize**,”when used as a verb, means to engage in such Co-Commercialization.     **1.33**“**Co-Development**” means the joint Development of a Collaboration Product in the Field, inthe Territory by both Parties under the terms of this Agreement. “**Co-Develop**,” when used as averb, means to engage in such Co-Development.***Confidential Treatment Requested.**
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     **1.34**“**Detail**” **or**“**Detailing**” means an interactive presentation ([*]) by a Party’s salesrepresentative, to one or several medical professional(s) having prescribing authority in theapplicable territory in the Field, as well as to other mutually agreed individuals or entities thathave the ability to impact or influence prescribing decisions in the applicable territory in theField, where the principal objective of such presentation is to emphasize the features and functionof such Collaboration Product in the Field in compliance with applicable Laws. A Detail does notinclude a reminder or sample drop or [*].     **1.35**“**Development**” or “**Develop**” means research, pre-clinical and clinical drug developmentactivities pertaining to a Product, including, without limitation, toxicology, pharmacology, testmethod development, stability testing, process development, formulation development, deliverysystem development, quality assurance and quality control development, statistical analysis,clinical studies (including pre- and post-approval studies), regulatory affairs, pharmacovigilanceand Regulatory Approval and clinical study regulatory activities (including regulatory activitiesdirected to obtaining pricing and reimbursement approvals). Development shall include developmentand regulatory activities for additional indications for a Product after Regulatory Approval ofsuch Product, but shall exclude Phase IV Clinical Studies for purposes other than label expansionand Regulatory Approval and post-marketing surveillance activities.     **1.36**“**Development Budget**” means the budget for Development Costs set forth in the DevelopmentPlan which shall include a detailed budget for the first year thereof, which budget shall beallocated between the Parties [*].     **1.37**“**Development Costs**” means the costs incurred by or on behalf of a Party in performing itsobligations under the then-current Development Plan, that are directly attributable and reasonablyallocated to the Development of a Collaboration Product, [*], in the Field in the Territory, andthat are directed to achieving or maintaining Regulatory Approval of such Collaboration Product orRoyalty Product. The Development Costs shall include amounts, without mark-up, that a Party paysto Third Parties involved in such Development of a Collaboration Product, and all internal costsincurred by a Party in connection with such Development of such Collaboration Product. [*],Development Costs include the following: (a) preclinical costs, such as toxicology and the creationof product assays such as those for pharmacokinetic and immunogenicity testing; (b) formulationdevelopment, process development, test method development, delivery system development, stabilitytesting and statistical analysis; (c) Clinical Costs; (d) costs associated with Medical EducationActivities incurred prior to the First Commercial Sale of the applicable Collaboration Product, andother ancillary services to the foregoing, (e) Manufacturing Costs for a Collaboration Product foruse in preclinical and clinical activities including the manufacture, purchase or packaging ofcomparators or placebo for use in Clinical Trials of a Collaboration Product (with themanufacturing costs for comparators or placebo to be determined in the same manner as ManufacturingCosts are determined for any Collaboration Product), as well as the direct costs and expenses ofdisposal of drugs and other supplies used in such clinical studies; (f) subject to Section 8.7,payment to a Third Party under a Future Third Party License incurred prior to the First CommercialSale of the applicable Collaboration Product; (g) losses incurred in connection with claims setforth in Section 13.5, to the extent provided therein; (h) development of the Manufacturing processfor a Collaboration Product (including with respect to any excipients or adjuvants included in suchCollaboration Product) and related scale-up, manufacturing process***Confidential Treatment Requested.**
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validation, manufacturing process improvements, and qualification and validation of ThirdParty contract manufacturers; (i) regulatory expenses relating to Development activities for thepurpose of obtaining Regulatory Approval for an indication for a Collaboration Product; (j) patentcosts described in Section 10.3(b)(i); (k) Trademark Costs incurred prior to the First CommercialSale of the applicable Collaboration Product; and (l) other out-of pocket Collaboration ProductDevelopment expenses that meet the criteria set forth above in this Section 1.37 including, withoutlimitation institutional and advisory review boards, investigator meetings, quality of lifestudies, epidemiology and outcomes research. For clarity, scale-up and validation costs asdescribed in clause (h) above will be considered Development Costs until commercial CollaborationProduct that is eligible for sale has been manufactured. Development Costs shall specificallyexclude general corporate and administrative overhead of each Party. In the calculation ofDevelopment Costs, a Party’s FTE effort shall be calculated at the FTE Rate. Development Costsshall be calculated in accordance with GAAP, consistently applied [*].     **1.38**“**Development Plan**” means the written plan for the Development of a Collaboration Productdescribed in Section 3.3.     **1.39**“**Diligent Efforts**” means, with respect to the efforts to be expended by any Party withrespect to any objective, [*]. With respect to any objective relating to the Development and/orCommercialization of a Product by any Party, “Diligent Efforts” means [*] taking into account [*].Diligent Efforts shall be determined [*]. Diligent Efforts requires a Party to: [*].     **1.40**“**Distribution Costs**” means the costs, excluding general corporate and administrativeoverhead, incurred by or on behalf of a Party that are directly attributable and reasonablyallocated to the distribution of a Collaboration Product in the Field in the Territory forCommercialization purposes, including, unless otherwise determined by the JSC: (a) handling andtransportation to fulfill orders with respect to a Collaboration Product in the Territory to theextent such costs are not included in one or more items listed in Section 1.92 (a)-(d); (b)customer services, including order entry, billing and adjustments, inquiry and credit andcollection with respect to a Collaboration Product in the Territory; and (c) costs of storage anddistribution of Collaboration Products for sale in the Territory. Distribution Costs shall becalculated in accordance with GAAP, consistently applied [*].     **1.41 “Dollars”**or **“$”**means the legal tender of the United States.     **1.42**“**Drug Approval Application**” means a NDA, BLA, or any MAA.     **1.43**“**End-of-Phase 2 Meeting**” means a meeting with FDA, the purpose of which is to determinethe safety of initiating a first Phase III Clinical Study, to evaluate the Phase III Clinical Studyplan and protocols and the adequacy of current studies and plans to assess pediatric safety andeffectiveness, and to identify any additional information necessary to support a Drug ApprovalApplication for the uses under investigation, as further defined in 21 C.F.R. 312.47(b)(1), asamended from time to time, or the corresponding foreign equivalent.     **1.44**“**European Union**” or “**EU**” means all of the European Union member states as of theapplicable time during the Term.***Confidential Treatment Requested.**
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     **1.45**“**Executive Officers**” means the Chief Executive Officer of Facet (or an executive officerof Facet designated by such Chief Executive Officer) and the Chief Executive Officer of Trubion (oran executive officer of Trubion designated by such Chief Executive Officer).     **1.46**“**Existing Inventory**” has the meaning set forth in Section 7.5(b)(vi).     **1.47**“**Facet Applied Know-How**” means the Facet Know-How applied, [*], as applicable, or [*], asapplicable, [*], as applicable, to the Development, Manufacture, use, importation orCommercialization of (a) in the case of an Opt-Out, a Royalty Product in the Field that, [*], or(b) in the case of a termination of this Agreement [*], a Product in the Field that, [*].     **1.48**“**Facet Applied Patent Rights**” means the Facet Patent Rights that claim [*], or that wouldotherwise be infringed, absent a license, by [*] (a) in the case of an Opt-Out, a Royalty Productin the Field that, [*], or (b) in the case of a termination of this Agreement [*], a Product that,[*].     **1.49**“**Facet Applied Technology**” means the Facet Applied Know-How and Facet Applied PatentRights.     **1.50 “Facet Collaboration Patent Rights”**means Facet Patent Rights that (a) claim aCollaboration Invention generated solely by Facet, or its Affiliate(s), including through theiremployees, agents or independent contractors, and (b) are not Facet Product Patent Rights.     **1.51**“**Facet Know-How**” means any Know-How that (a) is a [*], or is [*]; and (b) is [*] for theDevelopment, Manufacture, use, importation or Commercialization of Products in the Field. Forclarity, the use of “Affiliate” in this definition shall exclude any Third Party that becomes anAffiliate due to a Third Party’s acquisition of Facet, except as provided in Section 16.1.     **1.52**“**Facet Patent Right**” means a Patent Right that (a) claims [*], or is [*] or is [*]; and(b) claims [*] one or more Products in the Field or that would otherwise be infringed, absent alicense, by [*] any Products in the Field. For clarity, the use of “Affiliate” in this definitionshall exclude any Third Party that becomes an Affiliate due to a Third Party’s acquisition ofFacet, except as provided in Section 16.1.     **1.53**“**Facet Product Patent Rights**” means those Facet Patent Rights that claim [*] one or moreProducts in the Field, and do not claim [*].     **1.54**“**FDA**” means the United States Food and Drug Administration or any successor agencythereto.     **1.55**“**FD&C Act**” means the United States Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301*et seq*.), as amended, and the rules and regulations promulgated thereunder.     **1.56**“**Field**” means all human and animal applications.***Confidential Treatment Requested.**
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     **1.57**“**First Commercial Sale**” means, with respect to a given Product in the Field and anycountry in the Territory, the first sale or transfer for value of such Product under this Agreementby either Party or its Affiliates or permitted sublicensees to a Third Party for end use orconsumption in such country following receipt of Regulatory Approval from the appropriateRegulatory Authority permitting commercial sale of such Product in such country. First CommercialSale excludes any sale or other distribution for use in a Clinical Trial or other Developmentactivities.     **1.58**“**FTE**” means the equivalent of a full-time individual’s work, currently [*] per year for atwelve (12) month period, on Development or Commercialization of Collaboration Products. In thecase that any full time personnel of a Party works partially on the Development orCommercialization of Collaboration Products and partially on other work outside this Agreement in agiven fiscal year, then the full-time equivalent to be attributed to such individual’s workhereunder shall be equal to the percentage of such individual’s total work time in such fiscal yearthat such individual spent working on activities related to the Development or Commercialization ofCollaboration Products. In the event that any part-time personnel of a Party works on theDevelopment or Commercialization of Collaboration Products, the full time equivalent to beattributed to such work shall reflect appropriate adjustment for such personnel’s reduced totalwork time relative to full time personnel. FTE efforts shall not include general corporate andadministrative overhead. Each Party shall track FTEs using its standard practice and normal systemsand methodologies as approved by the JFC.     **1.59**“**FTE Rate**” means the partially burdened FTE personnel cost incurred by a Party, which forpurposes of this Agreement shall initially be set at an annual rate of [*] per FTE. Commencing withthe Calendar Year [*], the FTE Rate shall [*].     **1.60**“**Future Third Party License**” has the meaning set forth in Section 8.7.     **1.61**“**GAAP**” means United States generally accepted accounting principles, consistentlyapplied, in accordance with the rules and guidance of the United States Securities and ExchangeCommission.     **1.62**“**Good Clinical Practices**” or “**GCP**” means the then-current good clinical practicestandards, practices and procedures promulgated or endorsed by FDA as set forth in the guidelinesentitled “Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” includingrelated regulatory requirements imposed by FDA, and comparable regulatory standards, practices andprocedures in jurisdictions outside the United States, in each case as they may be updated fromtime to time.     **1.63**“**Good Laboratory Practices**” or “**GLP**” means the then-current good laboratory practicestandards promulgated or endorsed by FDA as defined in 21 C.F.R. Part 58, and comparable regulatorystandards in jurisdictions outside the United States, in each case as they may be updated from timeto time.     **1.64**“**Good Manufacturing Practices**” or “**GMP**” means the then-current good manufacturingpractices required by FDA, as set forth in the FD&C Act and the regulations promulgated thereunder,for the manufacture and testing of pharmaceutical materials, and***Confidential Treatment Requested.**
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comparable Laws applicable to the manufacture and testing of pharmaceutical materials injurisdictions outside the United States, including without limitation the guideline promulgated bythe International Conference on Harmonization designated ICH Q7A, entitled “Q7A Good ManufacturingPractice Guidance for Active Pharmaceutical Ingredients” and the regulations promulgatedthereunder, in each case as they may be updated from time to time.     **1.65**“**Governmental Authority**” means any multi-national, federal, state, local, municipal orother government authority of any nature (including any governmental division, subdivision,department, agency, bureau, branch, office, commission, council, court or other tribunal).     **1.66**“**ICH**” has the meaning set forth in Section 4.7.     **1.67 “IND**” means an Investigational New Drug Application, as defined in the FD&C Act, that isrequired to be filed with FDA before beginning clinical testing of a Product in human subjects, oran equivalent foreign filing.     **1.68**“**Initial Development Plan**” has the meaning set forth in Section 3.3(b).     **1.69**“**Joint Commercialization Committee**” or “**JCC**” has the meaning set forth in Section 2.1(a).     **1.70**“**Joint Development Committee**” or “**JDC**” has the meaning set forth in Section 2.1(a).     **1.71**“**Joint Finance Committee**” or “**JFC**” has the meaning set forth in Section 2.1(a).     **1.72**“**Joint Invention”**has the meaning set forth in Section 10.1(c).     **1.73**“**Joint Patent Committee**” or “**JPC**” has the meaning set forth in Section 2.1(a).     **1.74 “Joint Patent Right”**means a Patent Right that claims a Joint Invention.     **1.75**“**Joint Steering Committee**” or “**JSC**” has the meaning set forth in Section 2.1(a).     **1.76**“**Know-How**” means any data, results, and information of any type whatsoever, in any tangible orintangible form, including, without limitation, know-how, trade secrets, practices, techniques,methods, processes, inventions, developments, specifications, formulations, formulae, materials orcompositions of matter of any type or kind (patentable or otherwise), software, algorithms,marketing reports, clinical and non-clinical study reports, regulatory submission summaries andregulatory submission documents, expertise, technology, test data including pharmacological,biological, chemical, biochemical, toxicological, and clinical test data, analytical and qualitycontrol data, stability data, studies and procedures.** **
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     **1.77**“**Laws**” means all relevant laws, statutes, rules, regulations, guidelines, ordinances andother pronouncements having the effect of law of any federal, national, multinational, state,provincial, county, city or other political subdivision, domestic or foreign.     **1.78**“**Lead Commercialization Party**” has the meaning set forth in Section 5.1.     **1.79**“**Lead Development Party**” has the meaning set forth in Section 3.2.     **1.80**“**Lead Manufacturing Party**” has the meaning set forth in Section 6.1.     **1.81**“**Lead Regulatory Party**” has the meaning set forth in Section 4.1.     **1.82**“**Major European Countries**” means [*].     **1.83**“**Major Market Countries**” means the United States, [*] Major European Countries, and [*].     **1.84**“**Manufacturing**” or “**Manufacture**” means activities directed to producing, manufacturing,processing, filling, finishing, packaging, labeling, quality assurance testing and release,shipping and storage of a Product.     **1.85**“**Manufacturing Costs**” means the costs incurred by or on behalf of a Party that aredirectly attributable and reasonably allocated to the Manufacturing of Collaboration Products. [*],Manufacturing Costs shall consist of (a) if the Collaboration Product is manufactured by a ThirdParty manufacturer, [*]; or (b) if the Collaboration Product is manufactured by a Party, [*].  Forclarity, the [*] cost referenced under subsection (b) above shall be calculated [*]. ManufacturingCosts shall be calculated in accordance with GAAP, consistently applied [*].     **1.86**“**Marketing Authorization Application**” or “**MAA**” means an application for RegulatoryApproval (but excluding Pricing Approval) in any particular jurisdiction other than the UnitedStates.     **1.87**“**Marks**” means trade marks, service marks, trade names, service names, logos, slogans, taglines, trade dress, and Internet domain names and addresses.     **1.88 “Medical Education Activities”**means activities designed to ensure or improve appropriatemedical use of, conduct medical education of, or further research regarding, a CollaborationProduct sold or to be sold in the Territory, including by way of example: (a) activities of medicalsales liaisons; (b) grants to support continuing medical education, symposia, or research relatedto a Collaboration Product in the Territory (excluding Phase IV Clinical Studies, which, withrespect to a Collaboration Product, shall be considered Sales and Marketing Costs if conducted fora purpose other than label expansion or Regulatory Approval and otherwise shall be consideredDevelopment Costs); (c) development, publication and dissemination of publications relating to aCollaboration Product in the Territory, as well as medical information services provided inresponse to inquiries communicated via sales representatives or received by letter, phone call oremail; and (d) conducting advisory board meetings or other consultant programs, the purpose ofwhich is to obtain advice and feedback related to the Development or Commercialization of aCollaboration Product in the Territory.***Confidential Treatment Requested.**
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     **1.89**“**Milestone Payment**” has the meaning set forth in Section 9.3.     **1.90 “[*]**” means a SMIP or other protein therapeutic that binds to the CD37 Antigen (or aportion thereof) and binds to one or more additional biological targets that are not part of theCD37 Antigen, [*].     **1.91 “NDA**” means a New Drug Application, as defined in the FD&C Act and the regulationspromulgated thereunder by the FDA.     **1.92**“**Net Sales**” means all amounts invoiced on sales of Royalty Products by a Party, itsAffiliates or permitted sublicensees to Third Parties, less the following deductions actuallyallowed or taken by such Third Parties and not otherwise recovered by or reimbursed to the sellerwhose sales are being measured:          **(a)**trade, quantity or volume, and cash discounts, including amounts paid or credited tocustomers under distribution and channel services agreements;          **(b)**credits, rebates and chargebacks (including those to managed-care entities and governmentagencies), allowances for bad debt not to exceed [*] and allowances to customers on account ofrejection or returns or retroactive price reductions;          **(c)**freight, postage and transportation charges, including handling and insurance to theextent added to the sales price and set forth separately as such in the total amount invoiced; and          **(d)**sales (such as VAT or its equivalent) and excise taxes, other consumption taxes andcustoms duties to the extent added to the sales price and set forth separately as such in the totalamount invoiced.Sales between a Party and its Affiliates or permitted sublicensees for resale shall be excludedfrom the computation of Net Sales. In any other sale of Royalty Products that is made on otherthan arms’-length terms, the amounts invoiced shall be deemed, for purposes of this definition, tobe no less than the amount that would be invoiced in a substantially contemporaneous, arms’-lengthtransaction.In the event a Royalty Product is sold in a country as part of a Combination Product, for purposesof determining payments due a Party under this Agreement, Net Sales of Combination Products shallbe calculated by multiplying the Net Sales of the Combination Product by the fraction A over A+B,in which A is the Gross Selling Price of the Royalty Product when such Royalty Product is sold inthe relevant country in substantial quantities where the Royalty Product is the soletherapeutically active ingredient during the applicable accounting period in which the sales of theRoyalty Product were made, and B is the Gross Selling Price of the other therapeutically activeingredients contained in the Combination Product sold separately in the relevant country insubstantial quantities during the accounting period in question. All Gross Selling Prices of thetherapeutically active ingredients of the Royalty Product and Combination Products shall becalculated as the average Gross Selling Price of the therapeutically active ingredients in suchproducts in the relevant country during the applicable accounting period for which the Net Salesare being calculated. In the event that no separate sale of either the Royalty***Confidential Treatment Requested.**
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Product as the sole therapeutically active ingredient or the other therapeutically activeingredients of the Combination Product are made in the relevant country during the accountingperiod in which the sale was made or if the Gross Selling Price for a particular therapeuticallyactive ingredient cannot be determined for an accounting period, Net Sales allocable to the RoyaltyProduct and Combination Product shall be determined by mutual agreement reached in good faith bythe Parties prior to the end of the accounting period in question based on an equitable method ofdetermining same that takes into account the relative contribution of each therapeutically activeingredient in the Combination Product, and relative value to the end user of each therapeuticallyactive ingredient. For purposes of this definition, “**Gross Selling Price**” means the gross price atwhich an active ingredient is sold to a Third Party, before discounts, deductions, credits, taxesor allowances.     **1.93**“**Non-Clinical Studies**” means all non-human studies of Products.     **1.94**“**Non-Opt-Out Party**” means the Party which receives an Opt-Out Notice pursuant to Section7.2, 7.3 or 8.5 or provides a written notice of continuation to the breaching Party pursuant toSection 14.2(b).     **1.95**“**Opt-Out Effective Date**” has the meaning set forth in Section 7.4.     **1.96**“**Opt-Out Notice**” has the meaning set forth in Section 7.1.     **1.97**“**Opt-Out Option**” has the meaning set forth in Section 7.1.     **1.98**“**Opt-Out Party**” means the Party which has exercised its Opt-Out Option pursuant toSections 7.2, 7.3 or 8.5 or which is deemed to have exercised its Opt-Out Option pursuant toSection 14.2(b).     **1.99**“**Opt-Out Product**” has the meaning set forth in Section 7.2.     **1.100**“**Patent Rights**” means any and all (a) patents; (b) pending patent applications,including, without limitation, all provisional applications, substitutions, continuations,continuations-in-part, divisions, renewals, and all patents granted thereon, (c) allpatents-of-addition, reissues, reexaminations and extensions or restorations by existing or futureextension or restoration mechanisms, including, without limitation, supplementary protectioncertificates or the equivalent thereof, (d) inventor’s certificates, and (e) all United States andforeign counterparts of any of the foregoing.     **1.101**“**Person**” means an individual, sole proprietorship, partnership, limited partnership,limited liability partnership, corporation, limited liability company, business trust, joint stockcompany, trust, incorporated association, joint venture or similar entity or organization,including a government or political subdivision, department or agency of a government.     **1.102**“**Pharmacovigilance Agreement**” has the meaning set forth in Section 4.12.     **1.103**“**Phase I Clinical Study**” means a study of a Product in the Field in human subjects with theendpoint of determining initial tolerance, safety or pharmacokinetic information***Confidential Treatment Requested.**
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in single dose, single ascending dose, multiple dose and/or multiple ascending dose regimens,which is prospectively designed to generate sufficient data (if successful) to commence a Phase IIClinical Study of such Product, as further defined in 21 C.F.R. 312.21(a), as amended from time totime, or the corresponding foreign regulations.**1.104**“**Phase II Clinical Study**” means a study of a Product in the Field in human patients todetermine initial efficacy and dose range and/or regimen finding before embarking on Phase IIIClinical Studies, as further defined in 21 C.F.R. 312.21(b), as amended from time to time, or thecorresponding foreign regulations.     **1.105**“**Phase III Clinical Study**” means a pivotal study (whether or not denominated a“Phase III” clinical study under applicable regulations) in the Field in human patients with adefined dose or a set of defined doses of a Product designed to ascertain efficacy and safety ofsuch Product for the purpose of enabling the preparation and submission of Drug ApprovalApplications to the competent Regulatory Authorities in a country of the Territory, as furtherdefined in 21 C.F.R. 312.21(c), as amended from time to time, or the corresponding foreignregulations.     **1.106 “Phase IV Clinical Study”**means a product support clinical trial of a Product that iscommenced after receipt of Regulatory Approval in the country where such trial is conducted. APhase IV Clinical Study may include epidemiological studies, modeling and pharmacoeconomic studies,“post-marketing surveillance trials” and investigator-sponsored Clinical Trials studying a Productthat are approved by the JCC and that otherwise fit the foregoing definition.     **1.107 “Pre-BLA Meeting”**means a meeting with FDA, the primary purpose of which is to uncoverany major unresolved problems, to identify those studies that the sponsor is relying on as adequateand well-controlled to establish the drug’s effectiveness, to identify the status of ongoing orneeded studies adequate to assess pediatric safety and effectiveness, to acquaint FDA reviewerswith the general information to be submitted in the marketing application (including technicalinformation), to discuss appropriate methods for statistical analysis of the data, and to discussthe best approach to the presentation and formatting of data in the marketing application, asfurther defined in 21 C.F.R. 312.47(b)(2), as amended from time to time, or the correspondingforeign equivalent.     **1.108**“**Pricing Approval**” means such approval, agreement, determination or governmentaldecision establishing prices for the Products that can be charged to consumers and shall bereimbursed by Governmental Authorities in regulatory jurisdictions where the GovernmentalAuthorities or Regulatory Authorities approve or determine pricing of pharmaceutical products forreimbursement or otherwise.     **1.109**“**Product**” means any SMIP or other protein therapeutic that binds to the CD37 Antigen[*], including without limitation TRU-016 [*].     **1.110**“**Product Labeling**” means (a) the full prescribing information for a CollaborationProduct approved in the Field by the applicable Regulatory Authority, and (b) all***Confidential Treatment Requested.**
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labels and other written, printed or graphic information included in or placed upon anycontainer, wrapper or package insert used with or for the Collaboration Product in the Field.     **1.111 “Product Profit”**means (a) gross sales of Collaboration Products (i.e. all amountsinvoiced on sales of Collaboration Products by a Party or its Affiliates), less (b)Commercialization Costs, and (c) deductions for items listed in 1.92(a)-(d) to the extent actuallyallowed or taken by the Lead Commercialization Party and not otherwise recovered by or reimbursedto the Lead Commercialization Party. For sake of clarity, Product Profit shall be determined priorto application of any income taxes.     **1.112 “Promotion”**means the marketing and advertising of a Collaboration Product in therelevant Field in the applicable territory in accordance with the relevant Commercialization Plan,including medical education, information and communication, market development and medical liaisonactivities, but not including Detailing. “**Promote**,” when used as a verb, means to engage in suchPromotion.     **1.113**“**Promotional Materials**” means all sales representative training materials and allwritten, printed, graphic, electronic, audio or video presentations of information, including,without limitation, journal advertisements, sales visual aids, formulary binders, reprints, directmail, direct-to-consumer advertising, internet postings, broadcast advertisements and salesreminder aides (for example, note pads, pens and other such items) intended for use or used by oron behalf of the Parties or their Affiliates or permitted sublicensees in connection with anyPromotion of a Collaboration Product, in the Field, in the Territory (all to the extent applicablefor the Commercialization in the Territory), but excluding Product Labeling.     **1.114**“**Pursuit Notice**” has the meaning set forth in Section 7.5(b).     **1.115**“**Recall**” has the meaning set forth in Section 5.10.     **1.116**“**Regulatory Approval**” means the technical, medical and scientific licenses,registrations, authorizations and approvals (including, without limitation, approvals of DrugApproval Applications, supplements and amendments, pre- and post- approvals, Pricing Approvals, andlabeling approvals) of any national, supra-national, regional, state or local regulatory agency,department, bureau, commission, council or other governmental entity, necessary for the commercialManufacture, distribution, marketing, promotion, offer for sale, use, import, export and sale ofProduct(s) in a regulatory jurisdiction in the Field, in the Territory. [*].     **1.117**“**Regulatory Authorit(y/ies)**” means any national (*e.g.*, FDA), supra-national (*e.g.*, theEuropean Commission, the Council of the European Union, or the European Agency for the Evaluationof Medicinal Products); regional, state or local regulatory agency, department, bureau, commission,council or other governmental entity in each country of the Territory that governs the RegulatoryApproval for a Product in the Field in such applicable regulatory jurisdiction.     **1.118**“**Regulatory Exclusivity**” means any exclusive marketing rights or data exclusivity rightsconferred by any Regulatory Authority with respect to a Product other than patents, including,without limitation, rights conferred in the United States under the Hatch-***Confidential Treatment Requested.**
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Waxman Act or the FDA Modernization Act of 1997 (including pediatric exclusivity), or rightssimilar thereto outside the United States.     **1.119**“**Regulatory Materials**” means regulatory applications, submissions, notifications,registrations, Regulatory Approvals or other submissions made to or with a Regulatory Authoritythat are necessary or reasonably desirable in order to Develop, Manufacture, and Commercialize theProducts in a particular country, territory or possession. Regulatory Materials include, withoutlimitation, INDs, Drug Approval Applications, and amendments and supplements for any of theforegoing, and applications for Pricing Approvals.     **1.120**“**Royalty Period**” means the period of time beginning on the date of the First CommercialSale of a Royalty Product, in the Field, in a particular country in the Territory and, on a RoyaltyProduct-by-Royalty Product and country-by-country basis, extending until the later of (i) the dateon which the last Valid Claim included within the Trubion Patent Rights and the Facet AppliedPatent Rights ceases to be a Valid Claim, which Valid Claim would be infringed by [*] such RoyaltyProduct in such country, (ii) the expiration of any Regulatory Exclusivity granted with respect tosuch Royalty Product in such country and (iii) the [*] year anniversary of the First CommercialSale of such Royalty Product in such country.     **1.121**“**Royalty Product**” means a Product with respect to which a Party has exercised or isdeemed to have exercised the Opt-Out Option and the other Party has provided or is deemed to haveprovided a Pursuit Notice in accordance with Section 7.5(b) or 14.2(b).     **1.122**“**Sales and Marketing Costs**” means the direct costs that are directly attributable andreasonably allocated to the sales and marketing of a Collaboration Product in Field in theTerritory. [*], Sales and Marketing Costs shall consist of: (a) activities directed to theadvertising and marketing of a Collaboration Product in the Territory; (b) professional education(to the extent not performed by sales representatives), including launch meetings; (c) costs ofadvertising, public relations and medical education agencies with respect to a CollaborationProduct in the Territory; (d) peer-to-peer activities with respect to a Collaboration Product inthe Territory, such as continuing medical education, grand rounds, and lunch and dinner meetings;(e) speaker programs with respect to a Collaboration Product in the Territory, including thetraining of such speakers; (f) grants to support continuing medical education or research(excluding costs associated with Clinical Trials other than Phase IV Clinical Studies for aCollaboration Product for purposes other than label expansion and Regulatory Approval); (g)development, publication and dissemination of publications with respect to a Collaboration Productin the Territory; (h) developing, obtaining and providing training with respect to a CollaborationProduct in the Territory, as well as training packages, promotional literature, promotionalmaterials and other selling materials with respect to a Collaboration Product in the Territory; (i)developing and performing market research with respect to a Collaboration Product in the Territory;(j) conducting symposia and opinion leader development activities with respect to a CollaborationProduct in the Territory; (k) developing reimbursement programs with respect to a CollaborationProduct in the Territory; (l) developing information and data specifically intended for nationalaccounts, managed care organizations and group purchasing organizations with respect to aCollaboration Product in the Territory; (m) losses incurred in connection with claims set forth inSection 13.5, to the extent provided therein; (n) costs of transporting, housing and maintainingsales representatives for training with respect to a Collaboration Product in the***Confidential Treatment Requested.**
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Territory; (o) conducting Phase IV Clinical Studies for Collaboration Products for purposesother than label expansion and Regulatory Approval; and (p) administration, operation andmaintenance of the sales force that promotes a Collaboration Product in the Territory, salesbulletins and other communications, sales meetings, specialty sales forces, consultants, callreporting and other monitoring/tracking costs, district and regional sales management, home officepersonnel who support the sales force. Sales and Marketing Costs shall include costs of suchactivities that are undertaken at any time during the Term (including prior to the initialRegulatory Approval of a Collaboration Product in the Territory). Sales and Marketing Costs shallbe calculated in accordance with GAAP, consistently applied [*].     **1.123**“**SMIP(s)**” or “**small modular immuno-pharmaceutical(s)**” means a single chain polypeptidethat (i) [*], (ii) binds with specificity to a target antigen, (iii) has a binding domain, and(iv) may have an effector domain which may or may not have effector function, [*].     **1.124**“**Subcommittee**” has the meaning set forth in Section 2.7(a).     **1.125**“**Term**” has the meaning set forth in Section 14.1.     **1.126**“**Territory**” means worldwide.     **1.127**“**Third Part(y/ies**)” means any Person(s) other than Facet and its Affiliates or Trubionand its Affiliates.     **1.128**“**Trademark Costs**” mean the fees and expenses paid to outside counsel and other ThirdParties, direct costs of in-house counsel and filing and maintenance expenses, in each caseincurred in connection with the establishment and maintenance of rights under Marks applicable toCollaboration Product in the Territory, including costs of trademark filing and registration fees,actions to enforce or maintain a trademark and other trademark proceedings. Trademark Costs shallbe calculated in accordance with GAAP, consistently applied [*].     **1.129**“**Transition Assistance**” shall have the meaning set forth in Section 7.5(b)(iii).     **1.130**“**TRU-016**” means the humanized SMIP directed against the CD37 Antigen that is currentlydesignated by Trubion as “TRU-016,” as further described on Exhibit A.     **1.131**“**Trubion Know-How**” means any Know-How Controlled as of the Signing Date or thereafterduring the Term by Trubion and/or its Affiliate(s) and [*] for the Development, Manufacture, use,importation or Commercialization of Products in the Field. For clarity, the use of “Affiliate” inthis definition shall exclude any Third Party that becomes an Affiliate due to a Third Party’sacquisition of Trubion, except as provided in Section 16.1.     **1.132**“**Trubion Core Patent Rights**” means those Trubion Patent Rights that are not TrubionProduct Patent Rights. As of the Signing Date, the Patent Rights listed in Schedule 1.132are Trubion Core Patent Rights.     **1.133**“**Trubion Patent Rights**” means Patent Rights that are Controlled as of the Signing Dateor thereafter during the Term by Trubion and/or its Affiliate(s) (including without limitationTrubion’s interest in Joint Patent Rights) and that claim [*] one or more Products in***Confidential Treatment Requested.**
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the Field or that would otherwise be infringed, absent a license, by the [*] any Products inthe Field. For clarity, the use of “Affiliate” in this definition shall exclude any Third Partythat becomes an Affiliate due to a Third Party’s acquisition of Trubion except as provided inSection 16.1.     **1.134 “Trubion Product Patent Rights**” means those Trubion Patent Rights that claim thecomposition of matter, manufacture or use of one or more Products in the Field, and do not claimthe composition of matter, manufacture or use of any other product that is not a Product. As ofthe Signing Date, the Patent Rights listed in Schedule 1.134 are Trubion Product PatentRights.     **1.135**“**United States**” or “**U.S.**” means the United States of America and its possessions andterritories.     **1.136**“**Valid Claim**” means a claim that (a) in the case of any unexpired patent, such claimshall not have been dedicated to the public, disclaimed, nor held invalid or unenforceable by acourt or government agency of competent jurisdiction in an unappealed or unappealable decision, or(b) in the case of any patent application, such claim (i) shall not have been cancelled, withdrawnor abandoned, without being refiled in another application, in the applicablejurisdiction, (ii) shall not have been finally rejected by an administrative agency or othergovernmental action from which no appeal can be taken, and (iii) shall not have been pending [*]for more than [*] from its filing date. If a claim of a patent application that ceased to be aValid Claim under (b) due to the passage of time later issues as part of a patent described within(a) then it shall again be considered to be a Valid Claim effective as of the issuance of suchpatent.**2. COLLABORATION MANAGEMENT.**     **2.1 General.**The Parties desire and intend to establish a collaboration with respect to theDevelopment, Manufacture and Commercialization of Collaboration Products in the Field in theTerritory on an exclusive basis under the terms of this Agreement (“**Collaboration**”). Unless anduntil a Party exercises or is deemed to have exercised its Opt-Out Option in respect of one or moreCollaboration Products, each Party shall participate in the clinical development of TRU-016 in theField, in the Territory and in the preclinical and clinical development of Collaboration Productsother than TRU-016 in the Field, in the Territory pursuant to an agreed-upon Development Plan withrespect to each such Collaboration Product, as further described below. The Parties shall shareequally the costs incurred in connection with the performance of each Development Plan, as setforth in, and in accordance with, Article 3. The Parties shall Co-Commercialize such CollaborationProducts in the Field and share profits equally, subject to the payment obligations in Article 9and the other terms of this Agreement. If either Party elects to exercise its Opt-Out Option for aCollaboration Product as provided for under Article 7 or Section 8.5, or is deemed to haveexercised its Opt-Out Option under Section 14.2(b), and if the other Party so elects, such otherParty shall continue and be solely responsible for the Development, Manufacturing andCommercialization of such Product at its cost and expense pursuant to Section 7.5(b), and shallhave the exclusive right to Develop, Manufacture and Commercialize such Product as a RoyaltyProduct in the Field in the Territory, subject to***Confidential Treatment Requested.**
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payments with respect to such Royalty Product pursuant to Article 9 and the other terms ofthis Agreement.          **(a) Role of Committees.**Subject to Section 2.1(b) and the other terms and conditions of thisAgreement, the Parties shall establish: five (5) specialized joint committees consisting of: (A)one to set the goals and strategy and approve the budgets for the Development, Manufacture andCommercialization of Collaboration Products and to oversee the other committees (such committee,the “**Joint Steering Committee**” or “**JSC**”); (B) one to focus on Development, Manufacturing (forDevelopment purposes) and Regulatory Approval of Collaboration Products and other regulatorymatters (such committee, the “**Joint Development Committee**” or “**JDC**”); (C) one to focus onCommercialization of Collaboration Products (such committee, the **“Joint CommercializationCommittee**” or **“JCC**”); (D) one to focus on financial matters (such committee, the “**Joint FinanceCommittee**” or “**JFC**”); and (E) one to focus on intellectual property matters (such committee, the“**Joint Patent Committee**” or **“JPC**”).  Each Committee shall have the responsibilities and authorityallocated to it in this Article 2 and elsewhere in this Agreement.           **(b) Limitations on the Authority of Committees.**  Notwithstanding the Committee structureestablished pursuant to Section 2.1(a) to oversee the Collaboration, each Party shall retain therights, powers and discretion granted to it under this Agreement, and no such rights, powers, ordiscretion shall be delegated to or vested in a Committee unless such delegation or vesting ofrights is expressly provided for in this Agreement or the Parties expressly so agree in writing. Without limiting the generality of the foregoing, no Committee shall have any authority orjurisdiction to: (i) amend, modify, or waive compliance with this Agreement, any of which shallrequire mutual written agreement of the Parties; (ii) interpret this Agreement, or determinewhether or not a Party has met its diligence or other obligations under the Agreement or whether ornot a breach of this Agreement has occurred; (iii) make any decision on any matter that thisAgreement expressly states is an option or election to be made by a Party; (iv) make anyretroactive updates, amendments and modifications to, or waivers of provisions of, a DevelopmentPlan or Commercialization Plan, any of which shall require the mutual agreement of the Parties; or(v) such other matters as are reserved to the consent, approval, agreement or other decision-makingauthority of one or both Parties in this Agreement and that are not required by this Agreement tobe considered by a Committee prior to the exercise of such consent, approval or otherdecision-making authority. Notwithstanding the foregoing, neither Party shall be restricted frombringing before any appropriate Committee for discussion any matter relating to the Collaborationthat it believes warrants discussion between the Parties through the Committees, *provided*that theconsideration of any such matter by any Committee shall not infringe or limit the exercise of aParty’s right of consent or approval or other decision-making authority granted to it by thisAgreement, nor shall any such consideration, as contemplated by this sentence, subject any suchright of consent or approval or other decision-making authority to any dispute resolution mechanismprovided for in Section 2.7 or Article 15 or elsewhere in this Agreement.          **(c) Representatives.**Each Party shall designate representatives to each Committee as providedfor in Sections 2.2-2.6 below. Each representative may serve on more than one Committee asappropriate in view of the individual’s expertise.
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     **2.2 Joint Steering Committee.**          **(a) Purpose; Formation.**Within [*] after the Signing Date, the Parties shall establish aJoint Steering Committee that shall monitor and coordinate communication regarding the Parties’performance under this Agreement to Develop, obtain Regulatory Approval for, Manufacture, andCommercialize Collaboration Products in the Field in the Territory. The JSC shall have only thepowers assigned expressly to it in this Section 2.2 and elsewhere in this Agreement, and the JSCshall not have any power to amend, modify or waive compliance with this Agreement.          **(b) Composition.**Each Party shall initially appoint three (3) representatives to the JSC,each of whom will be an officer or employee of such Party and will have sufficient seniority withinthe applicable Party to make decisions arising within the scope of the JSC’s responsibilities. TheJSC may change its size from time to time by mutual consent of its members. Each Party may replaceits JSC representatives at any time upon written notice to the other Party. The JSC may invitenon-members (including consultants and advisors of a Party who are under an obligation ofconfidentiality consistent with this Agreement) to participate in the discussions and meetings ofthe JSC, *provided*that such participants shall have no voting authority at the JSC. The JSC shallhave a chairperson. Each Party shall have the right, on an alternating Calendar Year basis, toselect from among its JSC representatives a representative to serve as the chairperson of the JSCduring such Calendar Year. Such Party shall have the right during such Calendar Year to replacethe chairperson of the JSC with one of its other JSC representatives. The initial chairperson shallbe designated by [*]. The role of the chairperson shall be to convene and preside at meetings ofthe JSC, to prepare agendas (with due input from the other Party’s representatives), circulateagendas and to ensure the preparation of meeting minutes, but the chairperson shall have noadditional powers or rights beyond those held by the other JSC representatives.          **(c) Specific Responsibilities.**In addition to its overall responsibility for monitoring andproviding a forum to discuss and coordinate the Parties’ activities under this Agreement, the JSCshall in particular:               **(i) **oversee the collaborative activities of the Parties under this Agreement, create andreview the overall strategy for Developing and seeking Regulatory Approval for, Manufacturing, andCommercializing Collaboration Products, in the Field in the Territory;               **(ii) **receive and discuss reports from the JDC, the JCC, the JFC, and the JPC, and provideguidance thereto, approve the Development Plan(s) (including the Development Budget(s)) and theCommercialization Plan(s) (including the Commercialization Budget(s)), and any amendments thereto;               **(iii) **establish such additional joint subcommittees as it deems necessary to achieve theobjectives and intent of this Agreement;               **(iv) **attempt to resolve issues presented to it by, and disputes within, the JDC, the JCC, theJFC, and the JPC, or any other committee;***Confidential Treatment Requested.**
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               **(v) **review and approve decisions to terminate Development on any Collaboration Product,including with respect to specific indications;               **(vi) **discuss and decide whether to Develop Collaboration Products (other than TRU-016) and forwhich indications;               **(vii) **select the Lead Development Party, Lead Regulatory Party, Lead Manufacture Party, andLead Commercialization Party, and review and approve any changes thereto;               **(viii) **review and approve the manufacturing plan [*] with associated budget, resourceallocation and regulatory plans;               **(ix) **review and approve (A) inclusion of any costs not specifically enumerated in thedefinitions of Development Costs or Commercialization Costs or any component thereof, and (B) anycosts incurred by a Party that exceed that the portion of the applicable Development Budgets orCommercialization Budgets allocated to such Party with respect to the relevant Calendar Quarter bymore than [*];               **(x) **review and approve any changes to the specific responsibilities of the JDC, the JCC, theJFC, and the JPC;               **(xi) **discuss and make determinations regarding material safety issues with respect to theCollaboration Product; and               **(xii) **perform such other functions as appropriate to further the purposes of this Agreement asallocated to it in writing by the Parties.          **(d) Meetings.**Unless the Parties mutually agree in writing to a different frequency, the JSCshall hold at least [*] meetings per year (at least [*] of which shall be held in person) on suchdates and at such times each year as it elects. The meetings of the JSC shall alternate betweenthe Parties’ business locations or as otherwise decided by the JSC. Meetings of the JSC shall beeffective only if at least two (2) representatives of each Party are present or participating. EachParty shall bear the expense of its respective members’ participation in JSC meetings. Thechairperson of the JSC shall be responsible for preparing and issuing minutes of each such meetingwithin [*] thereafter. Such minutes shall not be finalized until each Party reviews and confirmsthe accuracy of such minutes in writing; *provided*that any minutes shall be deemed approved unlessa member of the JSC objects to the accuracy of such minutes within [*] after the circulation of theminutes by the chairperson of the JSC.          **(e) Decision-Making.**The JSC shall act by consensus. The representatives from each Party willhave, collectively, one (1) vote on behalf of that Party. If the JSC cannot reach consensus on anissue that comes before the JSC and over which the JSC has oversight, then such matter shall beresolved in accordance with Section 2.7.***Confidential Treatment Requested.**
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     **2.3 Joint Development Committee.**          **(a) Formation and Composition.**Within [*] after the Signing Date, the Parties shall establisha Joint Development Committee that shall oversee the Development and Manufacture (for Development)of Collaboration Products in Field in the Territory in accordance with the Development Plans forsuch Collaboration Products and to coordinate the Development and related Manufacturing activitiesof the Parties with respect to such Collaboration Products. Each Party shall initially appointthree (3) representatives to the JDC, each of whom will be an officer or employee of such Party andwill have knowledge and expertise in the Development or Manufacture of products similar to theCollaboration Products and sufficient seniority within the applicable Party to make decisionsarising within the scope of the JDC’s responsibilities. The JDC may change its size from time totime by mutual consent of its members. Each Party may replace its JDC representatives at any timeupon written notice to the other Party. The JDC may invite non-members (including consultants andadvisors of a Party who are under an obligation of confidentiality consistent with this Agreement)to participate in the discussions and meetings of the JDC, *provided*that such participants shallhave no voting authority at the JDC. The JDC shall have a chairperson. Each Party shall have theright, on an alternating Calendar Year basis, to select from among its JDC representatives arepresentative to serve as the chairperson of the JDC during such Calendar Year. Such Party shallhave the right during such Calendar Year to replace the chairperson of the JDC with one of itsother JDC representatives. The initial chairperson shall be designated by [*]. The role of thechairperson shall be to convene and preside at meetings of the JDC, to prepare agendas (with dueinput from the other Party’s representatives), circulate agendas and to ensure the preparation ofmeeting minutes, but the chairperson shall have no additional powers or rights beyond those held bythe other JDC representatives.          **(b) Specific Responsibilities.**In addition to its general responsibilities set forth inSection 2.3(a), the JDC shall in particular:               **(i) **discuss, prepare and approve for submission to the JSC annual and interim amendments tothe Development Plan and the Development Budget for each Collaboration Product;               **(ii) **oversee the implementation of the Development Plan for each Collaboration Product;               **(iii) **implement the overall strategy for Development and Manufacturing (for Development) ofCollaboration Products, create, implement and review the design and objectives of all ClinicalTrials and Non-Clinical Studies conducted under each Development Plan;               **(iv) **decide whether and when to initiate or discontinue, and oversee the conduct of, anyClinical Trial and any Non-Clinical Study under each Development Plan;               **(v) **allocate budgeted resources and determine priorities for each Clinical Trial andNon-Clinical Study under each Development Plan;***Confidential Treatment Requested.**
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               **(vi) **establish procedures for each Party to access records, data and Know-How and relatedfinancial information of the other Party with respect to work performed under the Development Plan;and               **(vii) **perform such other functions as may be appropriate to further the purposes of thisAgreement, as directed by the JSC.          **(c) Meetings.**Unless the Parties mutually agree in writing to a different frequency, the JDCshall hold at least [*] meetings per year (at least [*] of which shall be held in person) on suchdates at such times each year as it elects. The meetings of the JDC shall alternate between theParties’ business locations or as otherwise decided by the JDC. Meetings of the JDC shall beeffective only if at least two (2) representatives of each Party are present or participating. EachParty shall bear the expense of its respective members’ participation in JDC meetings. Thechairperson of the JDC shall be responsible for preparing and issuing minutes of each such meetingwithin [*] days thereafter. Such minutes shall not be finalized until each Party reviews andconfirms the accuracy of such minutes in writing; *provided*that any minutes shall be deemedapproved unless a member of the JDC objects to the accuracy of such minutes within [*] days afterthe circulation of the minutes by the chairperson of the JDC.          **(d) Decision-Making.**The JDC shall act by consensus. The representatives from each Party willhave, collectively, one (1) vote on behalf of that Party. If the JDC cannot reach consensus on anissue that comes before the JDC and over which the JDC has oversight, then such matter shall beresolved in accordance with Section 2.7.     **2.4 Joint Commercialization Committee.**          **(a) Formation and Composition.**At such time as determined by the JSC, but in any event notlater than [*], the Parties shall establish a Joint Commercialization Committee that shall overseethe Commercialization and Manufacturing (for Commercialization) of Collaboration Products. EachParty shall initially appoint three (3) representatives to the JCC, each of whom will be an officeror employee of such Party and will have knowledge and expertise in the Commercialization andManufacturing of products similar to the Collaboration Products and sufficient seniority within theapplicable Party to make decisions arising with the scope of the JCC’s responsibilities. The JCCmay change its size from time to time by mutual consent of its members. Each Party may replace itsJCC representatives at any time upon written notice to the other Party. The JCC may invitenon-members (including consultants and advisors of a Party who are under an obligation ofconfidentiality consistent with this Agreement) to participate in the discussions and meetings ofthe JCC, *provided*that such participants shall have no voting authority at the JCC. The JCC shallhave a chairperson. Each Party shall have the right, on an alternating Calendar Year basis, toselect from among its JCC representatives a representative to serve as the chairperson of the JCCduring such Calendar Year. Such Party shall have the right during such Calendar Year to replacethe chairperson of the JCC with one of its other JCC representatives. The role of the chairpersonshall be to convene and preside at meetings of the JCC, to prepare agendas (with due input from theother Party’s representatives), circulate agendas and to ensure the preparation of meeting minutes,but the chairperson shall have no additional powers or rights beyond those held by the other JCCrepresentatives.***Confidential Treatment Requested.**
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          **(b) Specific Responsibilities.**In addition to its general responsibilities set forth inSection 2.4(a), the JCC shall in particular:               **(i) **discuss, prepare and approve for submission to the JSC the Commercialization Plan and theCommercialization Budget for each Collaboration Product, and any amendment thereto;               **(ii) **allocate, in a manner consistent with the Commercialization Plan, primary responsibilityas between the Parties for tasks relating to Commercialization of Collaboration Products on aProduct-by-Product basis;               **(iii) **oversee the implementation of the Commercialization Plan for each Collaboration Product;               **(iv) **review and discuss the Commercialization activities of each Party with respect to eachCollaboration Product in the Territory;               **(v) **review and update sales forecasts for Collaboration Products at least quarterly;               **(vi) **review strategies for obtaining, maintaining, defending and enforcing trademarkprotection for Collaboration Products;               **(vii) **review, discuss, coordinate and approve the Parties’ medical affairs activities (theresponsibility for which may be delegated by the JCC to a subcommittee of the JCC that is comprisedof medical representatives of the Parties); and               **(viii) **perform such other functions as may be appropriate to further the purposes of thisAgreement, as directed by the JSC.          **(c) Meetings.**Unless the Parties mutually agree in writing to a different frequency, the JCCshall hold at least [*] meetings per year (at least [*] of which shall be held in person) on suchdates at such times each year as it elects. The meetings of the JCC shall alternate between theParties’ business locations or as otherwise decided by the JCC. Meetings of the JCC shall beeffective only if at least two (2) representatives of each Party are present or participating. EachParty shall bear the expense of its respective members’ participation in JCC meetings. Thechairperson of the JCC shall be responsible for preparing and issuing minutes of each such meetingwithin [*] thereafter. Such minutes shall not be finalized until each Party reviews and confirmsthe accuracy of such minutes in writing; *provided*that any minutes shall be deemed approved unlessa member of the JCC objects to the accuracy of such minutes within [*] after the circulation of theminutes by the chairperson of the JCC.          **(d) Decision-Making.**The JCC shall act by consensus. The representatives from each Party willhave, collectively, one (1) vote on behalf of that Party. If the JCC cannot reach consensus on anissue that comes before the JCC and over which the JCC has oversight, then such matter shall beresolved in accordance with Section 2.7.***Confidential Treatment Requested.**
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     **2.5 Joint Finance Committee.**          **(a) Formation and Purpose.**Within [*] after the Signing Date, the Parties shall create aJoint Finance Committee that shall operate under the direction of the JSC to provide services toand consult with the JDC and the JCC in order to address the financial, budgetary and accountingissues that arise in connection with the Development Plans and Commercialization Plans.Additionally, the JFC will lead the economic analyses to help drive decisions regarding thecollaborative activities of the Parties under this Agreement, and lead the reporting andreconciliation processes outlined in Section 3.7 and Section 9.4. The JFC shall operate by theprocedures set forth in this Section 2.5 and in Section 2.7.          **(b) Membership of the JFC**. Each Party shall appoint two (2) representatives to the JFC eachof whom will be an officer or employee of such Party and will have appropriate knowledge andexpertise and sufficient seniority within the applicable Party to make decisions arising within thescope of the JFC’s responsibilities. Each Party may replace any or all of its JFC representativesat any time upon prior written notice to the other Party. Such representatives will includeindividuals with expertise and responsibilities in the areas of accounting, cost allocation,budgeting and financial reporting.          **(c) Specific Responsibility of the JFC.**In addition to its general responsibilities set forthin Section 2.5(a), the JFC shall, in particular:               **(i) **coordinate with the JSC and other Committees as applicable regarding the preparation andsubmission of the Development Budget and the Commercialization Budget to the JSC for review andapproval;               **(ii) **develop specific schedules, procedures and methods to implement the financial reportingand reconciliation provisions of this Agreement, such schedules, procedures and methods toimplement the provisions of Section 3.7 and Section 9.4 shall, unless otherwise determined by theJSC, be developed within [*] after the Signing Date;               **(iii) **review and update financial forecasts, which shall be updated at least quarterly for theremainder of each Calendar Year unless otherwise determined by the JSC, to ensure that DevelopmentCosts and Commercialization Costs incurred or projected to be incurred by each Party are within theapproved Development Budget and Commercialization Budget, respectively;               **(iv) **coordinate and agree upon the calculations, allocations and reports by each Party ofDevelopment Costs, Commercialization Costs, and Product Profit; and               **(v) **perform such other functions as appropriate to further the purposes of this Agreement asdetermined by the JSC.          **(d) Meetings of the JFC.**The JFC shall meet as frequently as members of the JSC determine isrequired (but in no event, less frequently than [*] times every Calendar Year), on such dates andat such times as agreed to by the Parties, with all scheduled in-person meetings to alternatebetween a Trubion site and a Facet site as designated by the respective Party prior to suchmeeting, or at other locations as determined by the JFC. All meetings shall be held in person orby audio or videoconference. Additional representatives or consultants, who are under anobligation of confidentiality consistent with this Agreement, may be invited to***Confidential Treatment Requested.**
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attend JFC meetings from time to time by agreement of the JFC. Each Party shall beresponsible for its own expenses for participating in the JFC. Meetings of the JFC shall beeffective only if at least one representative of each Party is present or participating.          **(e) Decision-Making.**The JFC shall act by consensus. The representatives from each Party willhave, collectively, one (1) vote on behalf of that Party. If the JFC cannot reach consensus on anissue that comes before the JFC and over which the JFC has oversight, then such matter shall beresolved in accordance with Section 2.7.     **2.6 Joint Patent Committee.**          **(a) Formation and Purpose.**Within [*] after the Signing Date, the Parties shall create aJoint Patent Committee. The purposes of the JPC shall be to prepare, file and prosecute theTrubion Product Patent Rights, Facet Product Patent Rights and Joint Patent Rights, as described inand subject to the terms of Article 10. The JPC shall operate by the procedures set forth in thisSection 2.6 and Section 2.7.          **(b) Membership of the JPC.**Each Party shall appoint one (1) representative to the JPC whowill be an officer or employee of such Party and will have appropriate knowledge and expertise andsufficient seniority within such Party to make decisions arising within the scope of the JPC’sresponsibilities. Each Party may replace its representative at any time upon prior written noticeto the other Party.          **(c) Specific Responsibilities of the JPC.**In addition to its general responsibilities setforth in Section 2.6(a), the JPC shall, in particular be responsible for:               **(i) **managing the filing and prosecution of Trubion Product Patent Rights, Facet Product PatentRights and Joint Patent Rights as described in and subject to the terms of Article 10;               **(ii) **making decisions with respect to certain claims in the Trubion Core Patent Rights asdescribed in and subject to the terms of Article 10;               **(iii) **keeping updated lists of the Trubion Core Patent Rights, Trubion Product Patent Rights,Facet Product Patent Rights and Facet Patent Rights [*];               **(iv) **reviewing invention disclosures in accordance with the terms of Article 10;               **(v) **reviewing licensing and enforcement activities and conflicts involving intellectualproperty rights, and making appropriate recommendations to the JSC regarding such matters;               **(vi) **providing advice, periodic updates and reports to the JSC regarding intellectual propertymatters;***Confidential Treatment Requested.**
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               **(vii) **using reasonable and customary efforts to monitor and timely analyze freedom to operateand other intellectual property related issues relating to Collaboration Products;               **(viii) **using good faith efforts to keep the Parties informed as to material developments withrespect to the prosecution of, and any adversarial proceedings involving intellectual propertyrights, to the extent a Party’s representative on the JPC concludes that such prosecution orproceeding directly affects a Collaboration Product; and               **(ix) **performing such other functions as appropriate to further the purposes of this Agreementas determined by the JSC.          **(d) Meetings of the JPC.**The JPC shall communicate on such dates and at such times as agreedupon by its members but in no event, less frequently than once every other Calendar Quarter.Meetings may be held in person or by audio or video conference. The JPC may permit visitors whoare under an obligation of confidentiality consistent with this Agreement to attend meetings of theJPC. Each Party shall be responsible for its own expenses for participating in the JPC. Meetingsof the JPC shall be effective only if the representative of each Party is present or participating.          **(e) Decisions.**Subject to Article 10 below, any approval, determination or other action ofthe JPC shall require agreement of both members of the JPC. In the event that a decision cannot bereached by the JPC, then the matter shall be referred to the respective senior management of thein-house legal department of each Party. In the event such senior management is unable to resolvethe matter, then the matter will be resolved pursuant to Section 2.7 and Article 15.     **2.7 Resolution of Committee Disputes.**          **(a) Within Subcommittees.**All decisions within the JDC, the JCC, the JFC, the JPC, and anyother Committee created by the JSC (each, a **“Subcommittee”**) shall be made by consensus, and if adispute arises which cannot be resolved within such Subcommittee, then the representatives ofeither Party may cause such matter to be referred to the JSC for resolution as provided in Section2.7(b).          **(b) Within The JSC.**All decisions within the JSC (whether originating there, or referred toit by a Subcommittee) shall be made by consensus. If a matter is referred by a Subcommittee to theJSC, the JSC shall use good faith efforts to resolve promptly such matter. If the JSC is unable toreach consensus on any issue, either Party may elect to submit such issue to the Parties’ ExecutiveOfficers in accordance with Section 2.7(c).          **(c) Referral To Executive Officers.**If a Party makes an election under Section 2.7(b) torefer a matter to the Executive Officers, the JSC shall submit in writing the respective positionsof the Parties to the Executive Officers. Such Executive Officers shall use good faith efforts toresolve promptly such matter, which good faith efforts shall include at least one [*] meetingbetween such Executive Officers within [*] after the JSC’s submission of such matter to them. Ifthe Executive Officers are unable to reach consensus on any such matter within [*] after thereferral of such matter to the Executive Officers, then the dispute shall be***Confidential Treatment Requested.**
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resolved through arbitration as provided for (a) under Section 15.3(c), with respect todisputes regarding: [*]; or (b) under Section 15.3(b), with respect to all other disputes.     **2.8 Discontinuation of Participation on a Committee.**Either Party may, in its solediscretion, terminate its participation on a Committee by providing to the other Party writtennotice of its intention to no longer participate in such Committee, which may be made upon [*]written notice at any time during the Co-Development or Co-Commercialization period. In the event aParty has provided written notice as referred to in this Section 2.8, the Party electing toterminate its participation shall have no further rights with respect to the decisions otherwisesubject to determination by the Committee and the notified Party shall control any decisions thatwere previously the responsibility of the Committee.**3. DEVELOPMENT.**     **3.1 Overview**. As stated in greater detail in this Article 3, the Parties will Co-Develop eachCollaboration Product in the Field throughout the Territory pursuant to a Development Plan and willshare equally the associated Development Costs.     **3.2 Development Responsibilities.**The JSC shall select the lead development party (**“LeadDevelopment Party”**) for each Clinical Trial of a Collaboration Product, *provided*that Trubion shallbe the initial Lead Development Party for all Clinical Trials and Non-Clinical Studies of TRU-016that are on-going as of the Signing Date. The JSC shall, in allocating Lead Development Partyresponsibilities between the Parties: (a) endeavor to take advantage of the respective resources,capabilities and expertise of Facet and Trubion; (b) endeavor to (i) maintain, to the extentreasonably practical and appropriate, continuity in functions and commitments of personnel andphysical resources of the Parties, (ii) avoid duplication of efforts by the Parties and (iii)foster efficient use by the Parties of resources and personnel, consistent with this Agreement andthe Development Plan and Development Budget; and (c) act in the best interests of theCollaboration. The Lead Development Party shall be responsible for implementing the DevelopmentPlan with respect to the applicable Clinical Trial, *provided*that the other Party shall perform alltasks with respect to such Clinical Trial that are allocated to it pursuant to the Development Planand may direct and conduct certain additional Development activities not specifically allocated toeither Party pursuant to the Development Plan, if the JDC agrees upon such allocation. The LeadDevelopment Party shall not have the right to change the Development Plan or to make changes to theClinical Trial protocol or the statistical analysis plan or make changes that affect study designor Clinical Trial strategy (any of the foregoing actions falling under the authority of the JDC orJSC, as applicable).     **3.3 Development Plan.**          **(a) Scope.**The Development of Collaboration Products shall be governed by development plans(each, a **“Development Plan”**), which, unless otherwise determined by the JSC, shall be CollaborationProduct-specific, indication-specific, multi-year and world-wide (i.e., it shall cover theDevelopment of each such Collaboration Product for use in the U.S., Japan, each of the MajorEuropean Countries and the EU as a whole, and the remaining countries in the Territory). EachDevelopment Plan may, as determined by the JSC: (i) provide a planned Development program that isdesigned to generate the non-clinical, clinical and regulatory***Confidential Treatment Requested.**
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information required for submitting Drug Approval Applications and to obtain RegulatoryApprovals for the relevant indications in the Territory; (ii) indicate the initial indications thatwill be pursued with respect to such Collaboration Product; (iii) address the target productprofile for each Collaboration Product for each indication, as periodically updated; (iv) specifyall material Development activities per indication to be performed for such Collaboration Productfor such year, including without limitation, Clinical Trial protocols, additional preclinical tests(including any and all carcinogenicity and toxicology studies), Collaboration Product manufacturingplan including production and supply, and stability studies, enrollment numbers, submission datesand estimated dates of meetings with FDA for such Collaboration Product; (v) set forth the targettimelines for each indication with respect to such Development activities; (vi) include a forecastof the amount of Bulk API or finished Collaboration Product needed for such Development activities;and (vii) assign tasks to each Party with respect to the performance of the Development activitiescontemplated by such Development Plan. Each Development Plan shall include a Development Budget.Each Development Plan and updates thereof shall be prepared by the Party appointed by the JDC, withinput from the other Party’s key clinical development personnel, and submitted pursuant to theprocedures set forth in clause (c) below to the JDC for review and submission to the JSC forapproval.          **(b) Initial Development Plan.**A draft of the initial Development Plan, together withassociated initial Development Budget, for TRU-016 is attached hereto as Exhibit B (the“**Initial Development Plan**”). The Parties shall make good faith efforts to agree upon thedefinitive Initial Development Plan and have it appropriately approved by the JSC within [*] afterthe Signing Date.          **(c) Updates to the Development Plan.**On an annual basis (no later than [*] of each CalendarYear), the Party appointed by the JDC shall prepare amendments to each then-current DevelopmentPlan and each Development Budget. Each such amended Development Plan shall cover the next CalendarYear and shall contain a corresponding Development Budget. Each such updated and amendedDevelopment Plan shall reflect any changes, re-prioritization of studies within, reallocation ofresources with respect to, or additions to Development of the applicable Collaboration Product.The amended Development Plan and Development Budget shall be submitted to the JDC for review and,following such review, to the JSC for its review and approval. Once approved by the JSC, theamended Development Plan and Development Budget shall become effective on January 1 of eachCalendar Year and shall be in full force throughout such Calendar Year unless further amended inaccordance with this Section 3.3(c). In any event, any amended or updated Development Plan andDevelopment Budget shall supersede the previous Development Plan and Development Budget.     **3.4 Standards of Conduct; Diligence.**          **(a)**Each Party shall perform the Development activities for which it is responsible under theDevelopment Plan in good scientific manner and in compliance with applicable Laws, includingwithout limitation applicable GCP, GLP, and GMP. Each Party will keep the other Party fullyinformed regarding the progress and results of such Party’s Development activities with respect tothe Collaboration Products through the JDC meetings on a quarterly basis and other than through theJDC at such other time as necessary under the circumstances.***Confidential Treatment Requested.**
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          **(b)**Each Party shall use Diligent Efforts to execute and carry out the activities assigned toit in the Development Plan and shall use Diligent Efforts to execute and carry out such activitieswithin the Development Budget; *provided*that if a Party exceeds the portion of such DevelopmentBudget allocated to it with respect to the relevant Calendar Quarter by greater than [*] withoutthe approval of the JSC, any amount in excess of such number shall not be considered DevelopmentCosts and such Party shall be solely responsible for payment of such excess.          **(c)**The Parties shall cooperate in good faith to establish appropriate and consistent medicalinformation support relating to Collaboration Products.     **3.5 Third Parties.**          **(a) Contractors.**Any Third Party retained by a Party to perform Development activities withrespect to Collaboration Products must be approved in advance in writing by the JSC, such approvalnot to be unreasonably withheld or delayed, unless such Third Party and such activities arepre-existing obligations listed in Schedule 3.7 or are specifically approved in theDevelopment Plan or Development Budget. Each Party shall remain liable for the performance of itsobligations hereunder which it delegates to such Third Parties.          **(b) Obligations with Respect to Third Party Contracts.**Any Third Parties performingDevelopment activities hereunder shall be subject to confidentiality and non-use obligations atleast as stringent as those set forth in Article 11 with a minimum duration of [*] and must complywith the terms of Section 10.1(c) with respect to any invention or Know-How generated in the courseof performing the Development activities. Unless otherwise determined by the JSC, each Party shallinclude provisions in its contracts with Third Parties entered into after the Signing Date andspecifically related to Development or Commercialization of a Collaboration Product that wouldpermit, in the event that such Collaboration Product becomes a Royalty Product (i) the assignmentof such contract by the Opt-Out Party to the Non-Opt-Out Party, or (ii) the granting of asublicense or equivalent right of access to the Non-Opt-Out Party.          **(c) Intellectual Property.**Neither Party shall knowingly introduce to any CollaborationProduct any Patent Right or Know-How that is not Controlled by such Party, except with the priorapproval of the JSC.     **3.6 Limitations on Development.**After the Signing Date and during the Term, neither Party norany of its Affiliates shall, directly or through any Third Party, sponsor, conduct or cause to beconducted, otherwise assist in, or supply any Collaboration Product for use in connection with, orotherwise fund, any Clinical Trial of any Collaboration Product outside of the Development Plan,without the prior written consent of the other Party.     **3.7 Development Costs.**          **(a) In general.**All Development Costs incurred by either Party shall be borne by the Partiesas follows: Facet shall bear fifty percent (50%) of all Development Costs and Trubion shall bearfifty percent (50%) of all Development Costs, *provided*that such costs were incurred pursuant tothe Development Plan, and either do not exceed the portion of the Development Budget allocated tothe applicable Party with respect to the relevant Calendar***Confidential Treatment Requested.**
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Quarter by more than [*] or are otherwise approved by the JSC. For clarity, any costsotherwise or previously shared by the Parties shall not be double counted or otherwise included asa Development Cost even if it meets such definition.          **(b) FTE Records and Calculations.**Each Party shall record its FTE effort for the Developmentof each Collaboration Product to the extent that such FTE efforts are included in Development Coststhat are, or may in the future be, shared under this Agreement, and shall report such FTE effort tothe JDC, on a Calendar Quarterly basis, in each case in a manner that allocates such FTE effort tothe extent practicable to each applicable Collaboration Product. Except to the extent providedherein, each Party shall calculate and maintain records of FTE effort incurred by it in the samemanner as used for other products developed by such Party in accordance with a methodology approvedby the JSC. The JFC shall facilitate any reporting hereunder.          **(c) Other Expenses.**Any expenses incurred by a Party for Development activities that do notfall within the definitions of Development Costs shall be borne solely by such Party unless the JSCdetermines otherwise.          **(d) Pre-existing Obligations.**Unless otherwise determined by the JSC, any Third Partyobligations of either Party in existence prior to the Signing Date, [*] other than those listed inSchedule 3.7 will not be considered Development Costs and will not be subject to expensesharing. [*]          **(e) Reports**. Each Party shall report to the other Party within [*] after the end of eachCalendar Quarter with regard to the Development Costs incurred by it during such quarter.  Suchreport shall be prepared in accordance with GAAP and shall specify in reasonable detail allexpenses included in such Development Costs during such quarter and shall be accompanied byinvoices, and/or such other appropriate supporting documentation in accordance with the proceduresestablished by the JSC.  Each Party’s report shall include, in addition to the Development Costsincurred by it during the relevant Calendar Quarter a comparison of the amounts budgeted in theDevelopment Plan for such activities and the amounts incurred by such Party for such activities.The Parties shall seek to resolve any questions related to such accounting statements within [*]following receipt by each Party of the other Party’s report hereunder.  The JFC shall facilitatethe reporting of Development Costs hereunder and the resolution of any questions concerning suchreports.  Each Party shall have the right at reasonable times and upon reasonable prior notice toaudit the other Party’s records as provided in Section 9.9(b) to confirm the accuracy of the otherParty’s costs and reports with respect to Development Costs that are shared under this Agreement.          **(f) Development Cost Accounts.**Each Party shall charge all Development Costs as incurred byit or its Affiliates on its books and records in accordance with GAAP to enable the tracking ofexpenses incurred in connection with each Development Plan. Each Party shall provide the otherParty with an interim quarterly report of monthly estimates for the current Calendar Quartercharges within [*] after the end of the second calendar month in each Calendar Quarter.***Confidential Treatment Requested.**
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          **(g) Reconciliation Payment**. Within [*] after the end of each of the first three CalendarQuarters and, for the last Calendar Quarter in a Calendar Year, within [*] after the end of suchquarter, the Party that has incurred less than its share of such Development Costs shall make areconciling payment to the other Party to achieve the appropriate allocation of Development Costsprovided for in Section 3.7(a).           **(h) Records.**Each Party shall keep detailed records of the Development Costs it incurs,including all supporting documentation for such expenses. Each Party shall keep such records forat least [*] after the date that such expense was incurred.          **(i) General Procedures Apply.**Any reimbursement payments made pursuant to this Section 3.7shall be subject to the general payment procedures set forth in Sections 9.6-9.9.     **3.8 Records, Reports and Information.**Each Party shall maintain complete, current andaccurate records of all work conducted by it under the Development Plan and all data and otherKnow-How resulting from such work. Such records shall fully and properly reflect all work done andresults achieved in the performance of the Development Plan in sufficient detail and in goodscientific manner appropriate for patent and regulatory purposes. Each Party shall provide writtenreports to the JDC on its Development and regulatory activities with the Collaboration Productpursuant to the Development Plan on a quarterly basis at the end of each Calendar Quarter, at alevel of detail reasonably sufficient to enable the other Party to determine the reporting Party’scompliance with its Diligent Efforts obligations under Section 3.4. Each Party shall have theright to review any such records maintained by the other Party at reasonable times and upon writtenrequest in accordance with procedures established by the JDC.**4. REGULATORY MATTERS.**     **4.1 Transfer of Data and Regulatory Materials.**The JDC shall determine the content and mannerfor sharing data and Regulatory Materials between the Parties. The lead Party for regulatoryactivities with respect to a particular Collaboration Product in a particular country (such Party,the **“Lead Regulatory Party”**), as provided in Section 4.3, shall provide the other Party with copiesof the IND and of such other Regulatory Materials Controlled by the Lead Regulatory Party, in eachcase with respect to Collaboration Products. Specifically, within [*] after the Signing Date,Trubion shall provide Facet with a copy of all TRU-016 related Regulatory Materials in the formthen existing, generated as of the Signing Date and Controlled by Trubion. The non-Lead RegulatoryParty shall have the right, without any additional consideration, to use any and all such data andreports supplied by the Lead Regulatory Party under this Section 4.1 in connection with theDevelopment and/or Commercialization of any Collaboration Products or Royalty Products in theField, in the Territory in accordance with the terms of this Agreement, including the incorporationof such data or reports in any regulatory submissions.     **4.2 Ownership of Regulatory Dossier.**The Lead Regulatory Party will own all regulatoryfilings for each Collaboration Product in each country where such Party is the Lead RegulatoryParty in order to facilitate such Party’s interactions with Regulatory Authorities in such countrywith respect to each such Collaboration Product. Trubion, as initial Lead***Confidential Treatment Requested.**
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Regulatory Party for TRU-016 in the Unites States, will initially own all Regulatory Materialsfor [*], including all Regulatory Materials related to [*]. Promptly upon the JSC’s decision tochange the Lead Regulatory Party or the delivery of a Pursuit Notice or a deemed Pursuit Notice ifthe Lead Regulatory Party has exercised or has been deemed to have exercised its Opt-Out Optionpursuant to Article 7, Section 8.5 or Section 14.2(b), the former Lead Regulatory Party shalltransfer and assign to the other Party (and the other Party hereby agrees to receive from theformer Lead Regulatory Party) all of the former Lead Regulatory Party’s right, title and interestto the applicable regulatory filings.     **4.3 Lead Regulatory Party.**The Parties intend that each Development Plan shall set forth theregulatory strategy approved by the JSC for the applicable Collaboration Product. The JSC shallselect the Lead Regulatory Party for each Collaboration Product, *provided*that Trubion shall be theinitial Lead Regulatory Party for TRU-016 in the United States and the JSC may change the LeadRegulatory Party for any Collaboration Product at any time. The Lead Regulatory Party shall beresponsible for the implementation of such strategy in the applicable country. The Lead RegulatoryParty shall comply with applicable Laws and other regulatory obligations related to the submissionand maintenance of any Regulatory Materials for Regulatory Approval of a Collaboration Product, inthe Field, in the applicable country(ies) of the Territory. The Party that is not the LeadRegulatory Party shall have a participatory role in all material regulatory activities that wouldhave a potential impact on Collaboration Products in the relevant country, including allinteractions with Regulatory Authorities. All material regulatory decisions (including the contentof any regulatory filing or dossier, pharmacovigilance reports, patient risk management strategiesand plans, Product Labeling and safety) will be made by the JSC and implemented by the LeadRegulatory Party. Notwithstanding any other provision of this Agreement, the decision to [*] mustbe the result of consensus by the JSC or, in the event that the JSC is unable to reach consensuswith respect to such a [*] decision and the matter is submitted to the Parties’ Executive Officerspursuant to Section 2.7(b), the unanimous agreement of the Executive Officers pursuant to Section2.7(c) to [*]. If the Executive Officers are unable to reach consensus on any such matter withinthe applicable [*] period, then the JSC will be deemed to have decided not to [*]. In no eventwill a dispute regarding whether to [*] be resolved through arbitration under Article 15.     **4.4 Regulatory Filings.**          **(a)**The Lead Regulatory Party shall prepare, for timely review by the JDC, all IND and BLAsubmissions (including any supplements or modifications thereto, but excluding routine submissionssuch as study site documentation and adverse event reports (i.e.*,*not relating to serious adverseevents as defined by applicable Law)) to the applicable Regulatory Authority. The other Partyshall have a right to review and comment upon (through its members of the JDC) all draft materialregulatory filings, including without limitation all correspondence to be submitted to theRegulatory Authority related to Clinical Trial design, the content and subject matter of, andstrategy for, each Drug Approval Application, all proposed Product Labeling (including the finalRegulatory Authority-approved Labeling) and post-Regulatory Approval labeling changes. The LeadRegulatory Party shall accept and incorporate all reasonable comments provided by the other Party.Each Party shall promptly provide the other with copies of all written or electronic communicationsreceived by it from, or sent by it to, a Regulatory Authority including IND submissions andamendments thereof, and all communications (other***Confidential Treatment Requested.**
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than routine communications) with respect to obtaining and maintaining, Regulatory Approvalsfor a Collaboration Product (it being understood that routine adverse event filings (i.e., notrelating to serious adverse events as defined by applicable Law) shall not fall within the meaningof maintenance) and copies of all contact reports produced by such Party. The Lead RegulatoryParty shall be the sole Party to initiate contact with any Regulatory Authorities regarding aCollaboration Product, and shall initiate such contact at the reasonable request of the otherParty.          **(b) Notice of Regulatory Filing Requirements.**  The Lead Regulatory Party shall provide to theother Party, within [*] of discovery or receipt thereof by the Lead Regulatory Party, notice of (i)any event with respect to any Collaboration Product that triggers any Regulatory Authority filingrequirement, (ii) any additional requirements which the applicable Regulatory Authority may imposewith respect to obtaining or maintaining Regulatory Approval for a Collaboration Product (includingadditional Clinical Trials), and (iii) all Regulatory Authority inquiries with respect to aCollaboration Product that require a response or for a which a response may be advisable. The JDCshall discuss in good faith and on a timely basis determine the most effective and expeditiousmeans of responding to such Regulatory Authority filing requirements, additional requirements orinquiries.     **4.5 Regulatory Meetings.**The Lead Regulatory Party shall provide the other Party with noticeof all meetings, conferences, and discussions (including Regulatory Authority advisory committeemeetings and any other meeting of experts convened by the Regulatory Authority concerning any topicrelevant to a Collaboration Product, as well as Collaboration Product labeling and post-RegulatoryApproval Collaboration Product labeling discussions with any Regulatory Authority) scheduled by theRegulatory Authority concerning any pending Drug Approval Application or any material regulatorymatters relating to a Collaboration Product within [*] after the Lead Regulatory Party receivesnotice of the scheduling of such meeting, conference, or discussion (or within such shorter periodas may be necessary in order to give the other Party a reasonable opportunity to participate insuch meetings, conferences and discussions). The other Party shall be entitled to be present at,and to participate in, all such meetings, conferences or discussions. Facet’s and Trubion’srespective members of the JDC shall use reasonable efforts to agree in advance on the scheduling ofsuch meetings and on the objectives to be accomplished at such meetings, conferences, anddiscussions and the agenda for the meetings, conferences, and discussions with the RegulatoryAuthority.  The Lead Regulatory Party shall reasonably attempt to include the other Party in anyunscheduled, ad-hoc meetings, conferences and discussions with the Regulatory Authority concerningany pending IND, Drug Approval Application or any material regulatory matters relating to aCollaboration Product, and will promptly copy such other Party on a contact report.     **4.6 Regulatory Data.**In accordance with procedures established by the JDC, each Party shallprovide to the other Party on a timely basis access to or copies of all material pre-clinical andclinical data generated or compiled pursuant to the Development Plan with respect to RegulatoryMaterials maintained by such Party (via electronic copies of such data in a form that may beanalyzed and manipulated by the other Party).     **4.7 Common Database.**If deemed appropriate by the JDC, the Parties will establish a commondatabase to be controlled, maintained and administered by the Party designated by the JDC for thereceipt, investigation, recordation, communication, and exchange (as between the***Confidential Treatment Requested.**
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Parties) of data arising from Clinical Trials for Collaboration Products.  The Parties shallagree upon guidelines and procedures for such common database that shall be in accordance with, andenable the Parties to fulfill their reporting obligations under applicable Law.  Furthermore, suchguidelines and procedures shall be consistent with relevant International Council for Harmonisation(“**ICH**”) guidelines.  The Parties’ costs incurred in connection with receiving, investigating,recording, reviewing, communicating, and exchanging such data shall be included as an element ofDevelopment Costs or as Commercialization Costs, as applicable, calculated on a FTE cost(calculated at the FTE Rate) and direct out-of-pocket cost basis.     **4.8 Rights of Reference.**Each Party shall have the right to cross reference, file orincorporate by reference any regulatory filing or drug master file (as defined in 21 C.F.R.314.420, or as amended from time to time, or the corresponding foreign equivalent) (and any datacontained therein) for any Collaboration Product, or any component thereof, made in any country inthe Territory (including all Regulatory Approvals) in order to support regulatory filings that suchParty is permitted to make under this Agreement for any Collaboration Product or Royalty Productand to enable either Party to fulfill its obligations under this Agreement to Develop, Manufactureor Commercialize in the Territory any such Collaboration Product or Royalty Product.  Each Partyshall support the other, as may be reasonably necessary, in obtaining Regulatory Approvals for eachCollaboration Product and Royalty Product, including providing necessary documents, or othermaterials required by applicable Law to obtain Regulatory Approvals, in each case in accordancewith the terms and conditions of this Agreement.     **4.9 Costs and Expenses.**Unless otherwise agreed by the JSC and subject to Section 3.4(b), anycosts required for the Parties to prepare, submit and maintain all Regulatory Materials in theTerritory shall be treated as Development Costs to the extent such costs are incurred in accordancewith the Development Plan and do not exceed the portion of the Development Budget allocated to suchregulatory activities to the applicable Party with respect to the relevant Calendar Quarter by morethan [*] or are otherwise approved by the JSC.     **4.10 Consultation, Reporting and Review.**          **(a)**Each Lead Regulatory Party shall keep the other Party reasonably and regularly informed ofthe status of the preparation of all Regulatory Materials, Regulatory Authority review ofRegulatory Materials, and Regulatory Approvals made by it for Collaboration Products in the Field.          **(b)**Each Lead Regulatory Party shall provide the other Party, in a timely manner, with copiesof all Regulatory Approvals it receives for Collaboration Products in the Field.          **(c)**Each Party shall provide the other Party, in a timely manner, with copies of, and allinformation received by it pertaining to, notices, questions, actions and requests from or byRegulatory Authorities with respect to Collaboration Products, in the Field, or the testing,manufacture, distribution or facilities in relation thereto, including without limitation anynotices of non-compliance with Laws in connection with Collaboration Products in the Field (e.g.,warning letters or other notices of alleged non-compliance), audit notices, notices of initiationby***Confidential Treatment Requested.**
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Regulatory Authorities of investigations, inspections, detentions, seizures or injunctionsconcerning Collaboration Products (or their manufacture, distribution, or facilities connectedthereto), notice of violation letters (i.e., an untitled letter), warning letters, service ofprocess or other inquiries.     **4.11 Regulatory Inspection or Audit.**If a Regulatory Authority in the Territory desires toconduct an inspection or audit with regard to a Collaboration Product of a Party’s facility or afacility under contract with a Party, or with regard to a Royalty Product of the Opt-Out Party’sfacility or a facility under contact with the Opt-Out Party when the Opt-Out Party continues tosupply the Royalty Product to the Non-Opt-Out Party pursuant to Section 7.5(b)( vi), such Partyshall promptly notify the other Party. In such case, the audited Party shall permit and cooperatewith such inspection or audit, and shall cause the contract facility to permit and cooperate withsuch Regulatory Authority during such inspection or audit. The other Party shall have the right tohave a representative observe such inspection or audit and shall, if requested by the auditedParty, assist the audited Party in preparing for, facilitating or enabling such inspection oraudit. Following receipt of the inspection or audit observations of such Regulatory Authority (acopy of which the audited Party shall immediately provide to the other Party), the audited Partyshall prepare a draft response to any such observations, in consultation with the other Party, andthe Party that holds the Regulatory Materials in the applicable country or territory shall prepareand file the final response with such Regulatory Authority. If the Regulatory Authority isconducting an inspection or audit with regard to a Party’s contract facility, such Party shall(subject to the terms of the applicable contract with a Third Party manufacturer) cause itscontract facility to prepare, submit to both Parties for input, and file the final responseincorporating such input with such Regulatory Authority, and copy both Parties on such submission.     **4.12 Pharmacovigilance Agreement**. Subject to the terms of this Agreement, and at a date to bedetermined by the JDC, Facet and Trubion shall define and finalize the actions the Parties shallemploy to protect patients and promote their well-being in a written agreement (hereinafterreferred to as the **“Pharmacovigilance Agreement”**). These responsibilities shall include mutuallyacceptable guidelines and procedures for the receipt, investigation, recordation, communication,and exchange (as between the Parties) of adverse event reports, pregnancy reports, and any otherinformation concerning the safety of any Collaboration Product. Such guidelines and proceduresshall be in accordance with, and enable the Parties to fulfill, local and national regulatoryreporting obligations to Governmental Authorities. Furthermore, such agreed procedures shall beconsistent with relevant ICH guidelines, except where said guidelines may conflict with existinglocal regulatory safety reporting requirements, in which case local reporting requirements shallprevail. The Pharmacovigilance Agreement will provide for a worldwide safety database to bemaintained by the Party appointed by the JDC. Each Party hereby agrees to comply with itsrespective obligations under such Pharmacovigilance Agreement (as the Parties may agree to modifyit from time to time) and to cause its Affiliates and permitted sublicensees to comply with suchobligations.**5. COMMERCIALIZATION.**     **5.1 Overview.**The Parties agree to collaborate with respect to the Commercialization ofCollaboration Products, in the Field, in the Territory as provided in this***Confidential Treatment Requested.**
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Article 5. The JSC shall choose the Party, on a country-by-country and CollaborationProduct-by-Collaboration Product basis, with the greatest applicable Commercial capability withrespect to a particular Collaboration Product in a particular country as the lead commercializationparty (“**Lead Commercialization Party**”) for such Collaboration Product in such country to coordinatethe implementation of the Commercialization Plan in accordance with the allocation ofresponsibilities set forth therein.     **5.2 Commercialization Plan.**          **(a) Scope.**The Commercialization of Collaboration Products shall be conducted pursuant tocommercialization plans (each, a **“Commercialization Plan”**), which, unless otherwise determined bythe JSC, shall be Collaboration Product-specific, multi-year, world-wide, and shall set forth theanticipated Commercialization activities (including market studies, launch plans, Detailing andPromotion) and timelines, shall allocate responsibility for carrying out such activities betweenFacet and Trubion, and shall include the Commercialization Budget for such activities. EachCommercialization Plan may, as determined by the JSC, include a lifecycle plan and the plan, withrespect to each country, for: (i) Detailing and Promotion activities for the applicableCollaboration Product for the next [*] (as to the initial Commercialization Plan, the [*] followinglaunch) and timelines for performing such activities, (ii) target audience, (iii) anticipatedexpenses, (iv) assumptions regarding product profile, (v) sales force size, and (vi) Promotionalefforts. Each Commercialization Plan shall include a Commercialization Budget. EachCommercialization Plan and updates thereof shall be prepared by the Lead Commercialization Party inthe United States for such Collaboration Product, with review by and input from the other Party’skey personnel for Commercialization and Manufacturing activities, and submitted pursuant to theprocedures set forth in clauses (b) and (c) below to the JCC for review and submission to the JSCfor approval.          **(b) Initial Commercialization Plan.**Promptly following the JSC’s request for aCommercialization Plan for a particular Collaboration Product and at least [*] prior to thethen-current date of expected Regulatory Approval for such Collaboration Product in the Field, theLead Commercialization Party in the United States for such Collaboration Product, with strategicguidance from the JSC, shall prepare the initial Commercialization Plan for such CollaborationProduct and submit such plan to the JCC for review and, following such review, to the JSC for itsreview and approval. The Parties agree and acknowledge that any such Commercialization Plan willreasonably allocate all Commercialization activities between the Parties, giving equalconsideration to each Party’s abilities when making such allocation.          **(c) Updates to the Commercialization Plan.**On an annual basis (no later than [*] of eachCalendar Year), the Lead Commercialization Party in the United States for such CollaborationProduct shall prepare amendments to the then-current Commercialization Plan and theCommercialization Budget. Such amended Commercialization Plan shall cover the next Calendar Yearand shall contain a corresponding Commercialization Budget. Such updated and amendedCommercialization Plan shall reflect any changes, re-prioritization of activities within,reallocation of resources with respect to, or additions to Commercialization of the applicableCollaboration Product. The amended Commercialization Plan and Commercialization Budget shall besubmitted to the JCC for review and, following such recommendation, to the JSC for its review andapproval. Once approved by the JSC, the amended Commercialization Plan and***Confidential Treatment Requested.**
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Commercialization Budget shall become effective on January 1 of each Calendar Year and shallbe in full force throughout such Calendar Year unless further amended in accordance with thisSection 5.2(c). In any event, any amended or updated Commercialization Plan and CommercializationBudget shall supersede the previous Commercialization Plan and Commercialization Budget.     **5.3 Commercialization Reports.**Each Party will keep the JCC fully informed regarding theprogress and results of its Commercialization activities with respect to Collaboration Productsunder this Agreement.     **5.4 Standards of Conduct.**          **(a)**Each Party shall perform, or shall ensure that its Affiliates and permitted sublicenseesand Third Party contractors perform, all Commercialization activities assigned to it in a goodscientific and ethical business manner and in compliance with applicable Laws.          **(b)**Each Party shall use Diligent Efforts to execute and carry out the activities assigned toit in the Commercialization Plan and each Party shall use Diligent Efforts to execute and carry outsuch activities within the Commercialization Budget; *provided*that if a Party exceeds the portionof the Commercialization Budget allocated to it with respect to the relevant Calendar Quarter bygreater than [*] without the approval of the JSC, any amount in excess of such number shall not beconsidered Commercialization Costs hereunder and such Party shall be solely responsible for paymentof such excess.     **5.5 Sales Force Training.**The Lead Commercialization Party shall develop and conduct trainingprograms for the sales representatives of one or both Parties’ sales representatives (depending onwhether one or both Parties will be Detailing the Collaboration Product), specifically relating tothe Collaboration Products to be Commercialized. Each Party agrees to utilize such trainingprograms on an ongoing basis to assure a consistent, focused promotional strategy.     **5.6 Product Labeling and Promotional Materials.**The JCC shall determine which Party shall beresponsible for designing and supplying the Product Labeling and Promotional Materials for eachCollaboration Product in the Territory. Such responsible Party shall provide samples of suchlabeling and materials to the JCC for review and consultation prior to finalizing such materialsfor use by the Parties’ sales representatives. The Parties shall describe in the applicableCommercialization Plan how and the manner in which the Parties shall be presented and described tothe medical community in any Promotional Materials and the placement of the names and logos of theParties therein, in each case as permitted by applicable Law and in accordance with the labelingfor the Collaboration Product approved by the applicable Regulatory Authority.     **5.7 Branding.**Each Collaboration Product Commercialized under this Agreement shall beCommercialized under and in connection with the Marks selected in accordance with Section 10.7. Tothe extent that a Party is granted rights under this Agreement to Commercialize a CollaborationProduct, it shall Commercialize such Collaboration Product solely under and in connection with theMarks selected and approved pursuant to the terms of Section 10.7 (except***Confidential Treatment Requested.**
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for Marks that include, in whole or part, any corporate name or logo of such Party, whichMarks do not require such approval).     **5.8 Pricing.**The JSC will determine the selling price (including volume discounts (includingthose available, without limitation, to managed care providers, indemnity plans, unions, selfinsured entities, and government payer, insurance or contracting programs such as Medicare,Medicaid, or the United States Dept. of Veterans Affairs), rebates, and similar matters, creditterms, and return policies) for all Collaboration Products Commercialized hereunder. The LeadCommercialization Party for a particular Collaboration Product in a particular country shall havethe right and responsibility for proposing to the JCC for review and submission to the JSC forapproval the terms and conditions (and any updates and revisions thereof) with respect to the saleof such Collaboration Product in such country, including any terms and conditions relating to oraffecting the price at which the Collaboration Product shall be sold, discounts, any discountattributable to payments on receivables, distribution of the Collaboration Product, and credits,price adjustments, or other discounts and allowances to be granted or refused.     **5.9 Booking of Sales.**The Lead Commercialization Party for a particular Collaboration Productin a particular country will book sales in accordance with GAAP including handling inventory,receivables, managing relationships with the trade, returns, reimbursements, and charge-backs,trade-customer complaints and inquiries with respect to such Collaboration Product in such country.For clarity, each Party’s expenses in connection with the activities described in this Section 5.9will be included as Sales and Marketing Costs or Distribution Costs, as appropriate.     **5.10 Product Recalls.**Decisions with respect to recalls, withdrawals or other correctiveactions (**“Recall"**) with respect to any Collaboration Product related to manufacturing or productquality issues shall be handled in accordance with the Commercial Supply Agreement. Decisions withrespect to any other Recall related to any Collaboration Product shall be made only upon mutualagreement of the Parties; *provided*, *however*, [*]. The Parties shall cooperate with respect to anyactions taken or public statements made in connection with any such Recall. Except as otherwiseprovided in this Section 5.10, the Parties will share all costs of a Recall with respect to anyCollaboration Product as Sales and Marketing Costs. Notwithstanding the foregoing, a Party shallbear any and all costs of a Recall, market withdrawal or other corrective action with respect to aCollaboration Product in the Territory, including the Manufacturing Costs for the CollaborationProduct in question, to the extent the Recall is attributable to the fault of such Party andresults from (a) a grossly negligent or reckless act or omission or intentional misconduct of suchParty (or its Affiliate, agent or permitted sublicensee), (b) in the case such Party is the LeadManufacturing Party, the failure of the Lead Manufacturing Party or its Affiliate, agent orsublicensee to perform its responsibilities and Manufacture the Collaboration Product in compliancewith the specifications (as set forth in the Commercial Supply Agreement), or with applicable Laws,including applicable Good Manufacturing Practices, (c) any defect or condition introduced by aParty, its Affiliates or permitted sublicensees following delivery of the Collaboration Productfrom the Lead Manufacturing Party or its contract manufacturer, into a Collaboration Product or itspackaging or labeling, or (d) a breach of any Laws or the terms of this Agreement by such Party.***Confidential Treatment Requested.**
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     **5.11 Co-Promotion Agreement.**In the event that both Parties have their own sales forces withappropriate expertise or that the Parties otherwise agree to share promotional responsibilitieswith respect to one or more Collaboration Products in one or more countries, the Parties shallnegotiate in good faith and enter into a co-promotion agreement for such Collaboration Product insuch countries to implement the promotional activities contemplated in the Commercialization Planfor such Collaboration Product in such country.     **5.12 Limitations on Commercialization.**After the Signing Date and during the Term, neitherParty nor any of its Affiliates shall, directly or through any Third Party, Commercialize anyCollaboration Product outside of the Commercialization Plan, without the prior written consent ofthe other Party.**6. MANUFACTURING.**     **6.1 Roles of the Parties.**The JSC shall select the lead manufacturing Party (“**LeadManufacturing Party**”) for each Collaboration Product and the Lead Manufacturing Party shall beresponsible for the supply of the Parties’ entire requirements of such Collaboration Product inaccordance with the terms set forth below. Trubion shall be the initial Lead Manufacturing Partyfor TRU-016.          **(a)**Facet acknowledges that Trubion uses Third Party manufacturers to Manufacture TRU-016, andTrubion confirms that it shall be solely responsible for the performance of such Third Partymanufacturers until such time as the Parties determine to engage an alternate or additional sourceof supply, or the Parties agree to amend such agreements in accordance with Section 6.4.          **(b)**Trubion shall promptly notify existing Third Party manufacturers of execution of thisAgreement, and, if Trubion proposes to materially amend, or to extend the term of, any existingProduct manufacturing agreement with a Third Party, use Diligent Efforts to include Facet as aparty to such agreement or to provide Facet with third party beneficiary rights with respect tosuch agreement and to allow for assignment of such agreement, or, if such agreement also applies toproducts that are not Products, assignment of all rights and obligations to the extent related tosuch Product, in each case from Trubion to Facet without consent from such Third Partymanufacturer.     **6.2 Pre-Clinical and Clinical Supply.**The Lead Manufacturing Party with respect to aparticular Collaboration Product shall, by itself or through its Third Party contractmanufacturers, timely supply all quantities of such Collaboration Product agreed upon by the JDC asrequired by the Parties to carry out all Development activities (pre-clinical and clinical) forsuch Collaboration Product pursuant to the Development Plan. Such quantities of CollaborationProduct, and the schedule for such supply, shall be confirmed and if necessary updated by the JDCin a manner consistent with the Development Plan. Such supply shall be considered a DevelopmentCost and charged on an accrual basis; *provided*that [*]. [*]. The JSC shall, in allocating LeadManufacturing Party responsibilities between the Parties: (a) endeavor to take advantage of therespective resources, capabilities and expertise of Facet and Trubion; (b) endeavor to (i)maintain, to the extent reasonably practical and appropriate, continuity in functions andcommitments of personnel and physical resources of the Parties, (ii) avoid***Confidential Treatment Requested.**
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duplication of efforts by the Parties and (iii) foster efficient use by the Parties ofresources and personnel, consistent with this Agreement and the applicable then-current DevelopmentPlan and Development Budget; and (c) act in the best interests of the Collaboration. The LeadManufacturing Party shall ensure that all finished Collaboration Product supplied pursuant to theDevelopment Plan shall, when delivered, have been manufactured, handled and stored in compliancewith all agreed-upon specifications, then-current GMP requirements and applicable Laws, includingwithout limitation prohibitions on misbranding and adulteration. The Lead Manufacturing Partyshall reasonably determine the process for quantity orders, timing for delivery and shipping termsto permit the Parties to fulfill their obligations under the Development Plan.     **6.3 Pre-existing Obligations with Third-Party Manufacturers.**Unless otherwise determined bythe JSC, any Third Party obligations in existence prior to the Signing Date for manufacturing ofTRU-016, such as manufacturing capacity reservation, other than those listed in Schedule3.7 will not be considered Manufacturing Costs and will not be subject to expense sharing. [*]     **6.4 Alternative Supply Arrangements.**Unless otherwise determined by the JSC, in the eventthat: (a) the Lead Manufacturing Party proposes to enter into one or more new manufacturingagreements, (b) the Lead Manufacturing Party proposes to materially amend, to renegotiate or torenew its then existing Third Party manufacturing agreements, or (c) the Lead Manufacturing Partynotifies the JSC that capacity or quality under the existing Third Party manufacturing agreementswill not be sufficient to meet the needs of the Parties under the Development Plan, the JSC shalldeterminate the appropriate course of action, including a determination of whether a second sourceof supply is appropriate. In any event, the Lead Manufacturing Party shall notify the other Partyand the JSC prior to entry into any such new, amended or renewed Third Party manufacturingagreement, and the JSC shall review and approve the proposed terms of such new, amended or renewedagreement; *provided*that such agreement may include, as agreed upon by the JSC (i) attempting toorder in full lot or production run batches and otherwise reducing the Manufacturing Cost ofCollaboration Product, (ii) providing for sufficient capacity and timely supply to satisfy therequirements of the then-current Development Plan, (iii) having Facet and Trubion as parties (andin any event third party beneficiaries) with respect to the rights and obligations related toCollaboration Products pursuant to such Third Party agreement, (iv) ensuring that in the event ofthe exercise or deemed exercise of an Opt-Out Option by a Party, the remaining Party shall be thesole obligor pursuant to such Third Party Agreement, (v) providing that the Parties shall havejoint rights and obligations under the agreement with respect to Collaboration Product, but thatone Party shall be designated as the “principal party” under such agreement, (v) providing bothParties with the right to audit and inspect such Third Party’s facilities on at least [*], whichefforts shall be coordinated between the Parties in the event both Parties desire to conduct suchaudit and inspection, and (vi) providing for complete sharing of any and all information under andthe terms and conditions of such agreement between the Parties. The Lead Manufacturing Party shallbe responsible for negotiating the terms of such agreement, with the other Party havingconsultation and review rights on the terms of such Third Party agreement.     **6.5 Commercial Supply Agreement.**Unless a Party has already exercised its Opt-Out Option oris deemed to have exercised its Opt-Out Option under Section 14.2(b), at least [*]***Confidential Treatment Requested.**
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prior to the anticipated commercial launch of a Collaboration Product, the Parties shallnegotiate in good faith and enter into a manufacturing and supply agreement (the “**Commercial SupplyAgreement**”) governing the commercial supply of such Collaboration Product. Such Commercial SupplyAgreement shall contain customary terms governing such manufacturing and supply relationships, butshall in any event provide as follows:          **(a)**Collaboration Product (i) shall meet the agreed specification, then-current GMP and bemanufactured in accordance with applicable Laws including prohibitions on adulteration andmisbranding, (ii) shall be supplied by or on behalf of the Lead Manufacturing Party in a timelymanner consistent with established and agreed manufacturing and delivery schedules; and (iii) shallbe supplied at a cost equal to the Manufacturing Cost of such Collaboration Product.          **(b)**Upon a material and uncured breach by the Lead Manufacturing Party of its supplyobligations, the other Party shall have the right to obtain the transfer and the Lead ManufacturingParty shall have the obligation to (i) effect such transfer [*], without undue delay, of any andall manufacturing technology reasonably necessary for the Manufacture of the applicableCollaboration Product included in the Trubion Know-How or included in the Facet Know-How that (x)has been applied to the Manufacture of the applicable Collaboration Product prior to Facet ceasingto be the Lead Manufacturing Party, or (y) [*], as applicable, not already in the other Party’spossession in the form and format in which such Know-How is maintained by the Lead ManufacturingParty or its Third Party manufacturers in the ordinary course of business, and to (ii) at the otherParty’s request, use Diligent Efforts to obtain an assignment of any Third Party manufacturingagreement in each case as reasonably necessary to enable the other Party to Manufacture or haveManufactured Collaboration Product in accordance with the terms of this Agreement, *provided*,*however*, that the Lead Manufacturing Party shall be required to assign any such agreement solely tothe extent assignment is permitted by such agreement, *provided*that the Lead Manufacturing Partyuses Diligent Efforts to obtain any consent necessary for such assignment, and the LeadManufacturing Party is not required to pay any consideration or commence litigation in order toeffect an assignment of any such agreement to the other Party. In the event the Lead ManufacturingParty exercises or is deemed to have exercised its Opt-Out Option pursuant to Article 7, Section8.5 or Section 14.2(b), then Sections 7.5(b)(iii) and 7.5(b)(x) shall apply.          **(c)**The Manufacturing Costs of commercial supplies of Collaboration Product as well as theduty, freight, postage, shipping, transportation, insurance, warehousing and handling chargesactually allowed or paid with regard to such Collaboration Product shall be included in thecalculation of cost of goods sold as part of Commercialization Costs.     **6.6 Facility Audits.**The JDC shall propose and submit to the JSC for approval a schedule forperiodic audit and inspection of the facilities of any Third Party contract manufacturer on atleast an annual basis subject to the terms of any applicable existing contract with a Third Partycontract manufacturer. Pursuant to the schedule approved by the JSC, or upon request of the JDC,the Lead Manufacturing Party shall conduct an inspection or audit of the facilities of such ThirdParty contract manufacturers. The Lead Manufacturing Party shall provide not less than [*] noticeto the other Party of any planned inspection and such other Party shall be permitted to participatein any audit, *provided*that, if the consent of the Third Party***Confidential Treatment Requested.**
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contract manufacturer is required under the applicable contract to allow such other Party toparticipate in such audit, the Lead Manufacturing Party shall use Diligent Efforts to obtain suchconsent. Any inspection or audit requested by the JDC (other than pursuant to the schedule approvedby the JSC) shall be conducted no more frequently than [*] at a given facility, and shall occur aspromptly as possible following written notice by the JDC of its desire for such inspection oraudit, but in no event shall such inspection commence later than [*] thereafter (unless such auditis triggered by a material safety or GMP non-conformance issue, in which case the audit may beconducted as frequently as necessary and the maximum notice period shall be [*] if permitted underthe applicable contract). Costs associated with auditing shall be Development Costs orCommercialization Costs as applicable.     **6.7 Quality Agreement.**The Parties shall negotiate in good faith and enter into a qualityagreement governing the quality control, quality assurance and validation of the commercial andclinical supply of Bulk API and Product.**7. OPT-OUT.**     **7.1 General.**Each Party shall have the right to opt-out of all of its rights and obligationsto Co-Develop and Co-Commercialize any Collaboration Product pursuant to Sections 7.2 and 7.3 below(an **“Opt-Out Option”**). In addition, each Party may also exercise its Opt-Out Option pursuant toSection 8.5, and may be deemed to have exercised its Opt-Out Option pursuant to Section 14.2(b).The Opt-Out Party may exercise its Opt-Out Option pursuant to Sections 7.2, 7.3 or 8.5 by providinga written notice (an **“Opt-Out Notice”**) to the Non-Opt-Out Party.     **7.2 Opt-Out Option.**Each Party may, on a Product-by-Product basis, exercise its Opt-OutOption with respect to any Collaboration Product by providing an Opt-Out Notice to the other Partyduring one of the following periods: (a) the period beginning with [*] and ending [*]; (b) theperiod beginning with [*] and ending [*]. In addition, Trubion may, on a Product-by-Product basis,exercise its Opt-Out Option with respect to any Collaboration Product by providing an Opt-OutNotice to Facet at any time after [*] and prior to [*]. Each such Opt-Out Notice shall identifythe Collaboration Product for which the Opt-Out Party is exercising the Opt-Out Option (the“**Opt-Out Product**”). If a Party is deemed to have exercised its Opt-Out Option pursuant to Section14.2(b), all Collaboration Products shall be deemed Opt-Out Products and Royalty Products.     **7.3 Opt-Out Option Following Change of Control.**If either Party (the **“Acquired Party”**)experiences a Change of Control, it shall inform the other Party within [*] following theeffectiveness of such Change of Control and it shall use Diligent Efforts to arrange for theacquiring entity to discuss with the other Party the acquiring entity’s (a) intentions with respectto the Development and Commercialization of the Collaboration Products and (b) contemplatedproposals for amending the Development Plan and, if applicable, Commercialization Plan for eachCollaboration Product, and the other Party may exercise its Opt-Out Option with respect to allCollaboration Products by providing an Opt-Out Notice to the Acquired Party or its successor ininterest within [*] of such Change of Control and all Collaboration Products shall become Opt-OutProducts on the Opt-Out Effective Date.***Confidential Treatment Requested.**
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     **7.4 Opt-Out Effective Date.**An Opt-Out Option shall become effective [*] after the Non-Opt-OutParty’s receipt of such Opt-Out Notice (the **“Opt-Out Effective Date”**). Notwithstanding theforegoing, if a Party, after uncured material breach, is deemed to have exercised its Opt-OutOption pursuant to Section 14.2(b), then both the date of the Opt-Out Notice and the Opt-OutEffective Date for such Opt-Out Option shall be deemed to be the date on which the other Partyprovides the notice under Section 14.2(b) to continue this Agreement and all Collaboration Productsshall become Royalty Products on such date.     **7.5 Consequences of Opt-Out.**          **(a)**The Opt-Out Party’s obligations and rights to Co-Develop and Co-Commercialize a particularOpt-Out Product shall terminate upon the applicable Opt-Out Effective Date, and the Opt-Out Partyshall have no liability for Development Costs or Commercialization Costs incurred by theNon-Opt-Out Party in respect of the Opt-Out Product(s) following the Opt-Out Effective Date,*provided*, *however*, that the Opt-Out Party shall remain liable for its share of [*].          **(b)**The Non-Opt-Out Party may, in its sole discretion, elect to continue the Development andCommercialization of the Opt-Out Product by notice (the “**Pursuit Notice**”) to the Opt-Out Party.[*]. Notwithstanding the foregoing, if a Party is deemed to have exercised its Opt-Out Optionpursuant to Section 14.2(b), then the Non-Opt-Out Party shall be deemed to have provided a PursuitNotice to the Opt-Out-Party by providing a written notice of continuation of the Agreement pursuantto Section 14.2(b). If the Non-Opt-Out Party delivers a Pursuit Notice with respect to an Opt-OutProduct [*] or is deemed to have delivered such Pursuit Notice, such Opt-Out Product shall become aRoyalty Product, and:               **(i) **the Non-Opt-Out Party shall be solely responsible, at its sole cost and expense (exceptfor those costs for which the Opt-Out Party remains responsible pursuant to Section 7.5(a)) for theDevelopment of such Royalty Product, the preparation and filing of Regulatory Materials for suchRoyalty Product, the receipt of Regulatory Approval for such Royalty Product, and theCommercialization of such Royalty Product, in each case in the Field in the Territory. TheNon-Opt-Out Party shall use Diligent Efforts to Develop and obtain Regulatory Approval for RoyaltyProducts and to Commercialize such Royalty Products in the Field in the Major Market Countries;               **(ii) **the Non-Opt-Out Party will inform the Opt-Out Party of the status of the Non-Opt-OutParty’s Development and Commercialization of Royalty Products through [*] progress reportssubmitted in writing to the Opt-Out Party, provided that if the Opt-Out Party remains responsiblefor the costs [*] pursuant to Section 7.5(a), the Non-Opt-Out Party shall additionally provide [*]reports and invoices with respect to such [*];               **(iii) **the Opt-Out Party shall provide reasonable consultation and assistance during a periodof [*] following the Opt-Out Party’s receipt of the Pursuit Notice or written notice ofcontinuation of the Agreement pursuant to Section 14.2(b), (“**Transition Assistance**”) for thepurpose of transferring or transitioning to the Non-Opt-Out Party, (i) all Facet Applied Know-Howor Trubion Know-How, as applicable, which is reasonably necessary for the continued Development,Manufacture or Commercialization of the Royalty Product not***Confidential Treatment Requested.**
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already in the Non-Opt-Out Party’s possession in the form and format in which such Know-How ismaintained by the Opt-Out Party or its Affiliate or subcontractor in the ordinary course ofbusiness, and (ii) at the Non-Opt-Out Party’s request, the Opt-Out Party shall use Diligent Effortsto assign to the Non-Opt-Out Party all then-existing Third Party agreements that relate solely tothe Royalty Product, in the Territory, in the Field and are reasonably necessary for theNon-Opt-Out Party to continue researching, Developing, Manufacturing, or Commercializing suchRoyalty Product in the Territory, in the Field; *provided*, *however*, that the Opt-Out Party shall berequired to assign any such agreement solely to the extent assignment is permitted by suchagreement provided that the Opt-Out Party uses Diligent Efforts to obtain any consent necessary forsuch assignment, and the Opt-Out Party is not required to pay any consideration or commencelitigation in order to effect an assignment of any such agreement to the Non-Opt-Out Party;               **(iv) **the Opt-Out Party shall transfer and assign to the Non-Opt-Out Party, in the form andformat in which such materials are maintained by the Opt-Out-Party in the ordinary course ofbusiness, all Regulatory Materials for such Royalty Product, in the Territory, in the Field, thatare Controlled by the Opt-Out-Party or its Affiliates or permitted sublicensees; the Non-Opt-OutParty shall have the right, without any additional consideration, to use any and all such data andreports supplied by the Lead Regulatory Party under this Section 7.5(b)(iv) or pursuant to Section4.1 in connection with the Development, Manufacture and/or Commercialization of such RoyaltyProduct in the Field, in the Territory in accordance with the terms of this Agreement, includingthe incorporation of such data or reports in any regulatory submissions; and the Opt-Out Party’srights to participate in regulatory activities and meetings shall terminate;               **(v) **all Committees except the JPC shall cease to have any rights, obligations or decision-makingcapabilities with respect to such Royalty Product and, if there are no Collaboration Products stillbeing pursued at such time, shall disband until such time, if ever, that a Collaboration Product isbeing pursued. All decisions that were made by such Committees under this Agreement with respectto the Royalty Product prior to the Opt-Out Effective Date shall thereafter be made solely by theNon-Opt-Out Party consistent with such Party’s obligations under Section 7.5(b)(i). The JPC shallcontinue subject to Section 10.3 unless a Party has exercised or is deemed to have exercised itsOpt-Out Option in respect of all Collaboration Products, in which case all decisions that were madeby the JPC prior to the Opt-Out Effective Date shall be made solely by the Non-Opt-Out Partyconsistent with such Party’s obligations under Section 7.5(b)(i);               **(vi) **if the Opt-Out Party is the Lead Manufacturing Party of the Royalty Product(s), as partof and during the period of the Transition Assistance (1) the Non-Opt-Out Party shall have theright to require the Opt-Out Party to continue supplying Bulk API and finished Product for suchRoyalty Product(s) under the terms of Article 6 for a period of up to eighteen (18) months(*provided*that the Non-Opt-Out Party shall use Diligent Efforts to find one or more alternativesuppliers for Bulk API and finished Product as soon as reasonably possible following the exerciseof the Opt-Out Option), and (2) the Non-Opt-Out Party shall have the right to obtain transfer, andthe Opt-Out-Party shall have the obligation to effect transfer, without undue delay, of any and allmanufacturing technology included in the Facet Applied Know-How or Trubion Know-How, as applicable,that is reasonably necessary to enable** **
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the Non-Opt-Out Party to Manufacture, or have Manufactured such Royalty Product(s). TheNon-Opt-Out Party automatically owns one-half (1/2) of any or all of the inventory in existence asof the Opt-Out Effective Date of Bulk API and/or finished Product for such Royalty Product (suchinventory, the “**Existing Inventory**”). In addition, the Non-Opt-Out Party shall have the right topurchase the other half of the Existing Inventory from the Opt-Out Party by reimbursing the Opt-OutParty for the Manufacturing Costs with respect to such Existing Inventory. The Non-Opt-Out Partyshall notify the Opt-Out Party within [*] after the Effective Opt-Out Date whether the Non-Opt-OutParty elects to exercise such right to purchase the other half of the Existing Inventory;               **(vii) **the Opt-Out Party shall, as promptly as commercially practicable, assign to theNon-Opt-Out Party all right, title and interest in and to the Marks owned by the Opt-Out Party thatwere used or intended to be used with the Royalty Products (excluding any such Marks that include,in whole or part, any corporate name or logo of the Opt-Out Party or its Affiliates or permittedsublicensees), including any goodwill associated therewith. For the avoidance of doubt, only thoseMarks that have been (A) identified as the single designated lead candidate Mark for anon-commercialized Royalty Product, or (B) actually used in connection with a CommercializedRoyalty Product, shall be assigned. The Non-Opt-Out Party shall be responsible for recording suchassignment in the Territory with the appropriate Governmental Authority and will bear all costsassociated with such assignment and recordation. The Opt-Out Party shall cooperate in facilitatingsuch assignment and recordation by timely executing all necessary documents provided to it by theNon-Opt-Out Party;               **(viii) **in lieu of the Product Profit payments it would have received if the Opt-Out Party hadnot exercised its Opt-Out Option or the Opt-Out Party had not been deemed to have exercised itsOpt-Out Option under Section 14.2(b) with respect to such Royalty Product, the Opt-Out Party shallreceive from the Non-Opt-Out Party royalties on the Net Sales of the Royalty Product(s) as providedfor under Section 9.5;               **(ix) **the Opt-Out Party shall use Diligent Efforts to effect the assignment or the granting ofa sublicense or equivalent right of access to the Non-Opt-Out Party, whether through novation orsublicensing of such contracts or otherwise, of any and all rights under any contract between theOpt-Out Party and any Third Party that are reasonably necessary for the Non-Opt-Out Party tocontinue with Development or Commercialization of such Royalty Product, and the Non-Opt-Out Partyshall reasonably cooperate in connection therewith, provided that if such assignment, novation orsublicense is not permissible, the Parties shall discuss in good faith potential alternatives thatwould enable the Non-Opt-Out Party to exercise at the Non-Opt-Out Party’s expense (on apass-through basis) the rights and perform the obligations of the Opt-Out Party under suchcontracts with respect to such Royalty Product while minimizing the continuing obligations of theOpt-Out Party under such contract with respect to such Royalty Product, and, unless the Non-Opt-OutParty informs the Opt-Out Party in writing that [*], the Opt-Out Party shall [*]; and               **(x)**                    **a. **in the event of an Opt-Out pursuant to Section 7.2 or Section 8.5, the Non-Opt-Out Partyshall reimburse the Opt-Out Party for [*] of the reasonable***Confidential Treatment Requested.**
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expenses incurred by the Opt-Out Party in the course of performing its transfer obligationspursuant to Sections 7.5(b)(iii), 7.5(b)(iv), 7.5(vi)(2) and 7.5(vii), provided that any requestfor reimbursement of such expenses is accompanied by invoices, and/or such other appropriatesupporting documentation evidencing in reasonable detail the expenses for which reimbursement isallowed under this Section 7.5(b)(x); and               **b. **in the event of an Opt-Out pursuant to Section 7.3, the Non-Opt-Out Party shall reimbursethe Opt-Out Party for [*] of the reasonable expenses incurred by the Opt-Out Party in the course ofperforming its transfer obligations pursuant to Sections 7.5(b)(iii), 7.5(b)(iv), 7.5(vi)(2) and7.5(vii), provided that any request for reimbursement of such expenses is accompanied by invoices,and/or such other appropriate supporting documentation evidencing in reasonable detail the expensesfor which reimbursement is allowed under this Section 7.5(b)(x).**8. LICENSES.**     **8.1 License to Facet.**Subject to the terms and conditions of this Agreement, Trubion,effective as of the Signing Date, hereby grants to Facet an exclusive license (exclusive even as toTrubion, except to the extent necessary for Trubion to perform its obligations and exercise itsrights under this Agreement), with the right to grant sublicenses in accordance with the provisionsof Section 8.3, under the Trubion Patent Rights and Trubion Know-How, to research Develop, use,make, Manufacture, import, export distribute, market, offer for sale, sell and CommercializeProducts, in the Field, in the Territory in accordance with the terms of this Agreement.Notwithstanding the foregoing, the rights granted to Facet under this Section 8.1 shall terminatewith respect to an Opt-Out Product effective (a) as of the Opt-Out Effective Date for such Productif Facet exercises or is deemed to have exercised its Opt-Out Option, and (b) [*]. For clarity,the rights granted to Facet under this Section 8.1 shall remain in full force and effect if Trubionis deemed to have exercised its Opt-Out Option pursuant to Section 14.2(b).     **8.2 Licenses to Trubion.**          **(a)**Subject to the terms and conditions of this Agreement, Facet, effective as of the SigningDate, hereby grants to Trubion a license, with the right to grant sublicenses in accordance withthe provisions of Section 8.3, under the Facet Patent Rights and the Facet Know-How, which licenseshall be non-exclusive, except with respect to Facet’s interest in Joint Patent Rights for whichsuch license shall be co-exclusive, solely for the purpose of, and limited to, Trubion’s exerciseof its rights and performance of its obligations under this Agreement, to Develop, use, make,Manufacture, import, export, distribute, market, offer for sale, sell and CommercializeCollaboration Products, in the Field, in the Territory in accordance with the terms of thisAgreement.          **(b)**Subject to the terms and conditions of this Agreement, Facet, effective as of the date ofthe delivery or deemed delivery of Trubion’s Pursuit Notice with respect to an Opt-Out Product,hereby grants to Trubion an exclusive, royalty-bearing license, with the right to grant sublicensesin accordance with the provisions of Section 8.3, under the Facet Applied Technology, to Develop,use, make, Manufacture, import, export, distribute, market, offer for***Confidential Treatment Requested.**
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sale, sell and Commercialize such Royalty Product, in the Field, in the Territory inaccordance with the terms of this Agreement.     **8.3 Sublicensing.**          **(a) No Sublicensing.**Except as set forth in Sections 8.3(b) and 8.3(c), neither Party shallsublicense any of the rights granted to it under this Agreement to any Third Party without theprior written consent of the other Party, *provided*that either Party may sublicense such rights:(i) to its Affiliates, *further provided*that any such sublicense to an Affiliate shall immediatelyterminate if and when such entity ceases to be an Affiliate of such Party, and (ii) subject toSections 3.5(a) and 3.5(b), to subcontractors or consultants to perform such Party’s assignedDevelopment, Manufacturing or Commercialization responsibilities under this Agreement with respectto Collaboration Products, *further provided*that (A) such Party remains responsible for the workallocated to, and payment to, such subcontractors and consultants to the same extent it would if itwere doing such work itself, (B) such sublicense shall be subject and subordinate to, andconsistent with, the terms and conditions of this Agreement, (C) such sublicense shall not in anyway diminish, reduce or eliminate any of such Party’s obligations under this Agreement, and (D)such Party uses Diligent Efforts to include in such sublicense agreement a provision which permitssuch Party to provide a copy of such sublicense agreement to the other Party, which copy may beredacted to exclude confidential information not related to the applicable Collaboration Product.Unless prohibited by the terms of the sublicense, such Party shall provide the other Party with acopy of each such sublicense agreement entered into after the Signing Date within [*] after theexecution thereof, which agreement may be redacted to exclude confidential information not relatedto the applicable Collaboration Product.          **(b) Joint Sublicense.**The Parties acknowledge that they may, upon mutual agreement, bothgrant sublicenses to a Third Party with respect to a particular Collaboration Product, includingwith respect to a particular country or indication.          **(c) Upon Opt-Out.**At any time after its delivery or deemed delivery of a Pursuit Notice withrespect to a particular Royalty Product, the Non-Opt-Out Party may grant to one or more ThirdParties sublicenses of some or all of the rights granted to it under Section 8.1 or 8.2(b), asapplicable, but only with respect to such Royalty Product; *provided*that the Non-Opt-Out Partyshall execute a written agreement with each such permitted sublicensee, which sublicense (i) shallbe subject and subordinate to, and consistent with, the terms and conditions of this Agreement,(ii) shall not in any way diminish, reduce or eliminate any of the Non-Opt-Out Party’s obligationsunder this Agreement, (iii) shall require each such permitted sublicensee to comply with allapplicable terms of this Agreement, including to keep books and records, and (iv) shall permit theNon-Opt-Out Party to audit (either directly or through an independent auditor) such books andrecords. The Non-Opt-Out Party shall provide the Opt-Out Party with a copy of each such sublicenseagreement within [*] after the execution thereof. Such copy may be redacted to excludeconfidential, non-Royalty Product-related information and financial information (other than suchfinancial information that is necessary for assessing the obligations to the Opt-Out Party underthis Agreement). Upon the Opt-Out Party’s request and at the Opt-Out Party’s expense, theNon-Opt-Out Party shall exercise its right to conduct an audit of a sublicensee’s books and recordspertaining to the sale of the applicable Royalty Product under any such sublicense agreement at thenext time that conducting such an audit is permissible***Confidential Treatment Requested.**
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under such sublicense agreement. The Non-Opt-Out Party shall provide the Opt-Out Party with acopy of the report of the findings made in any such audit. If such audit reveals that suchsublicensee has understated its Net Sales by [*] or more, the Non-Opt-Out Party shall beresponsible for the reasonable out-of-pocket costs of the Opt-Out Party in conducting the audit.The Non-Opt-Out Party shall remain responsible for its obligations hereunder and for theperformance of its sublicensees (including, without limitation, making all payments due to theOpt-Out Party by reason of any Net Sales of Royalty Product), and shall ensure that any suchsublicensees comply with all relevant provisions of this Agreement. In the event of any uncuredmaterial breach by any sublicensee under a sublicense agreement that would constitute a materialbreach of the Non-Opt-Out Party’s obligations under this Agreement, the Non-Opt-Out Party willpromptly inform the Opt-Out Party in writing and shall take such action which in the Non-Opt-OutParty’s reasonable business judgment will address such default; *provided*, *however*, any such uncuredmaterial breach by such sublicensee of an obligation that would constitute a material breach of theNon-Opt-Out Party’s obligations under this Agreement shall be deemed an uncured material breach ofthe Non-Opt-Out Party hereunder unless the Non-Opt-Out Party cures such material breach within thetime provided under Section 14.2.     **8.4 No Implied Rights.**Except as expressly provided in this Agreement, neither Party shall bedeemed by estoppel or implication to have granted the other Party any license or other right withrespect to any intellectual property of such Party.     **8.5 Exclusivity.**Except for the Development and Commercialization of Products pursuant to theterms of this Agreement, during the Term neither Party shall Develop or Commercialize any proteintherapeutic, including any [*], that binds to the CD37 Antigen [*] (a **“Competing Program”**). In theevent that, due to a Change of Control of a Party, such Party, or its successor in interest, isconducting a Competing Program during the Term of this Agreement, then such Party, or its successorin interest, shall either (a) exercise its Opt-Out Option with respect to all CollaborationProducts by providing an Opt-Out Notice to the other Party; or (b) divest such Competing Program toa Third Party, in each case within [*] of such Change of Control.     **8.6 [*].**Each Party shall promptly bring to the attention of the JSC (or the other Party ifthere is no JSC in place at the time) any [*] that such Party wishes to Develop and Commercializeduring the Term. Upon the recommendation of the JSC (or the mutual agreement of the Parties ifthere is no JSC in place at the time), the Parties shall negotiate in good faith an agreement toDevelop and Commercialize such [*] on commercially reasonable terms.     **8.7 Third Party Licenses.**If the JPC determines that it is advisable or necessary to obtain alicense (“**Future Third Party License**”) to any intellectual property right that is owned orcontrolled by a Third Party and is reasonably necessary or useful to the Development, Manufacture,or Commercialization of a Collaboration Product, the JPC shall so advise the JSC. If the JSCdetermines to seek a license, the JSC shall designate a Party to negotiate the terms on which sucha Third Party license would be granted and to serve as the primary point of contact with theapplicable Third Party licensor following the execution of the license agreement. Upon approval ofthe terms of such Future Third Party License by the JSC, the designated Party may execute suchFuture Third Party License and any payments that become due pursuant to a Future Third PartyLicense agreement executed pursuant to this Section 8.7 will be treated as***Confidential Treatment Requested.**
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Development Costs or Commercialization Costs, as applicable, if incurred prior to the Opt-OutEffective Date or after the Opt-Out Effective Date but with respect to a Collaboration Product. Ifa Party delivers or is deemed to have delivered a Pursuit Notice for a Collaboration Product, anypayments arising under a Future Third Party License from the Development, Manufacturing orCommercialization of the applicable Royalty Product shall be paid by such Non-Opt-Out Party,subject to Section 9.5(e)(iii).**9. CONSIDERATION.**     **9.1 Upfront Payment.**Facet shall pay to Trubion Twenty Million Dollars ($20,000,000.00)within ten (10) days after the Signing Date, which payment shall be non-refundable andnon-creditable.     **9.2 Equity Investment.**Facet and Trubion have entered into the Stock Purchase Agreementattached hereto as Exhibit C, pursuant to which Facet will purchase from Trubion andTrubion will sell to Facet Ten Million Dollars ($10,000,000.00) of newly issued shares of commonstock of Trubion at a purchase price per share equal to One Hundred Thirty-Five Percent (135%) ofthe average closing price of a share of common stock of Trubion over the sixty (60) trading daysprior to the Signing Date provided that such purchase price (including the 35% premium) shall notbe greater than $[*]/share or lower than $[*]/share of common stock of Trubion.     **9.3 Development Milestone Payments.**Facet shall make milestone payments (each a **“MilestonePayment”**) to Trubion based on the first achievement of each milestone event in the Field, in theTerritory for each Product as set forth in this Section 9.3. No Milestone Payment shall be madetwice with respect to the same Product. For the purposes of this Section 9.3, two Products aredeemed the “**same Product**” if one Product contains, as its active pharmaceutical ingredient, [*].Facet shall pay to Trubion the amounts set forth below, within [*] after the first achievement ofthe corresponding milestone event with respect to the Product. Each Milestone Payment isnon-refundable and non-creditable against any other payments due hereunder, *provided*that if theDevelopment of a Product is abandoned, any Milestone Payments made with respect to such abandonedProduct may be credited against the corresponding Milestone Payments payable on a Product whichachieves such milestones after the abandonment of the other Product. For the purposes of thisSection 9.3, the “[*]” of a Clinical Trial shall occur upon [*], “[*]” and “[*]” shall be [*] or,[*]. Notwithstanding anything to the contrary in this Agreement, if Trubion is deemed pursuant toSection 14.2(b) to have exercised its Opt-Out Option with respect to all Products on account of anuncured material breach by Trubion, the amount of the milestone payments due pursuant to thisSection 9.3 with respect to milestone events achieved by all Products after Facet has providedTrubion with written notice of continuation in accordance with Section 14.2(b) shall be reduced by[*].***Confidential Treatment Requested.**
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     **Milestone****Milestone Event** **Payment**[*] $[*]   [*] $[*][*] $[*]   [*] $[*]   [*] $[*]   [*] $[*][*] $[*]   [*] $[*][*] $[*]   [*] $[*]   [*] $[*]   [*] $[*]   [*] $[*][*] $[*][*] $[*]     **9.4 Sharing of Product Profit.**          **(a) Allocation.**Facet and Trubion shall share equally in Product Profit (which, for theavoidance of doubt, includes sharing of losses in a given period if the calculation of ProductProfit for such period is negative) arising from the sale of each Collaboration Product in theField in the Territory.          **(b) FTE Records and Calculations.**Each Party shall record its FTE effort for theCommercialization of each Collaboration Product to the extent that such FTE efforts are included inCommercialization Costs that are, or may in the future be, shared under this Agreement, and shallreport such FTE effort to the JCC, on a Calendar Quarterly basis, in each case in a manner thatallocates such FTE effort to the extent practicable to each applicable Collaboration Product.Except to the extent provided herein, each Party shall calculate and maintain records of FTE effortincurred by it in the same manner as used for other products commercialized by such Party inaccordance with a methodology approved by the JSC. The JFC shall facilitate any reportinghereunder.          **(c) Commercialization Costs Accounts.**Each Party shall charge all Commercialization Costs asincurred by it or its Affiliates on its books and records in connection with each CommercializationPlan. Each Party shall provide the other Party with an interim***Confidential Treatment Requested.**
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quarterly report of monthly estimates for the current Calendar Quarter charges within [*]after the end of the second calendar month in each Calendar Quarter.          **(d) Other Expenses.**Any expenses incurred by a Party for Commercialization activities that donot fall within the definitions of Commercialization Costs shall be borne solely by such Partyunless the JSC determines otherwise. In addition, each Party shall bear all costs incurred pursuantto the Commercialization Plan, that exceed the portion of the Commercialization Budget allocated tothe Party with respect to the relevant Calendar Quarter by more than [*] unless otherwise approvedby the JSC.          **(e) Pre-existing Obligations.**Unless otherwise determined by the JSC, any manufacturingobligations in existence prior to the Signing Date, such as manufacturing capacity reservation orother obligations described in Section 6.3, other than those disclosed in writing by the obligatedParty prior to the Signing Date and specifically agreed upon by the Parties, will not be consideredCommercialization Costs and will not be subject to expense sharing.          **(f) Reporting.**Within [*] after the end of each Calendar Quarter, commencing with the firstCalendar Quarter in which the Parties are implementing a Commercialization Plan for a particularCollaboration Product, each Party shall report to the JCC and the JFC its gross sales andCommercialization Costs for such Collaboration Product in the Territory. In addition, each Partyshall provide the JCC and the JFC with a monthly statement on a Product-by-Product andcountry-by-country basis of the amount of gross sales of Collaboration Products.          **(g) Payment.**Within [*] after receipt of such reports, the JFC shall provide for suchCollaboration Product a consolidated financial statement setting forth the Product Profit for suchCollaboration Product and calculating each Party’s fifty percent (50%) share of such ProductProfit. Thereafter the following remittance obligations shall apply for such Collaboration Productdepending on whether such Product Profit is positive or negative:               **(i) **If there is positive Product Profit for such Calendar Quarter, then one Party shall make apayment to the other Party within [*] following delivery of the financial statement referencedabove in an amount that will cause each Party to have received an equal share of the Product Profitfor such Calendar Quarter.               **(ii) **If there is negative Product Profit for such Calendar Quarter, then one Party shall makea payment to the other Party so that each Party will bear an equal share of the Product Profit forsuch Calendar Quarter. Such payment shall be made within [*] following delivery of the financialstatement referenced above.          **(h) Records.**Each Party shall keep detailed records of the Commercialization Costs it incurs,including all supporting documentation for such expenses, and remits for payment. Each Party shallkeep such records for at least [*] after the date that such expense was incurred.     **9.5 Royalties.**          **(a) Base Royalties.*****Confidential Treatment Requested.**
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               **(i) Trubion Royalties.**Subject to Section 9.5(e), if Trubion has exercised its Opt-Out Optionpursuant to Section 7.2, Facet shall pay Trubion royalties on the Net Sales of Royalty Productsduring the applicable Royalty Period as follows:   **Date of Trubion Opt-Out Notice:** **Royalty Rate:**[*] [*][*] [*][*] [*]               **(ii) Facet Royalties.**Subject to Section 9.5(e) if Facet has exercised its Opt-Out Optionpursuant to Section 7.2 Trubion shall pay Facet royalties on the Net Sales of Royalty Productsduring the applicable Royalty Period as follows:   **Date of Facet Opt-Out Notice:** **Royalty Rate:**[*] [*][*] [*]          **(b) Royalties after Opt-Out due to Competing Program.**Subject to Section 9.5(e), if theOpt-Out Party exercised its Opt-Out Option pursuant to Section 8.5 (i.e., due to a CompetingProgram following a Change of Control of the Opt-Out Party), the Non-Opt-Out Party shall pay theOpt-Out Party royalties on the Net Sales of Royalty Products during the applicable Royalty Period,as follows:   **Date of Opt-Out Notice:** **Royalty Rate:**[*] [*][*] [*]          **(c) Royalties after Opt-Out Following Change of Control.**Subject to Section 9.5(e), if theOpt-Out Party exercised its Opt-Out Option pursuant to Section 7.3 following a Change of Control ofthe Non-Opt-Out Party, the Non-Opt-Out Party (or its successor in interest) shall pay the Opt-OutParty royalties on the Net Sales of Royalty Products during the applicable Royalty Period, asfollows:***Confidential Treatment Requested.**
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   **Date of Opt-Out Notice:** **Royalty Rate:**[*] [*][*] [*][*] [*][*] [*][*] [*]          **(d) Royalties after Opt-Out Following Uncured Breach.**               **(i) Trubion Royalties.**Subject to Section 9.5(e), if Trubion is deemed pursuant to Section14.2(b) to have exercised its Opt-Out Option with respect to all Products on account of an uncuredmaterial breach by Trubion, Facet shall pay Trubion royalties on the Net Sales of Royalty Productsduring the applicable Royalty Period, as follows:   **Date of Trubion Deemed Opt-Out:** **Royalty Rate:**[*] [*][*] [*][*] [*][*] [*][*] [*]               **(ii) Facet Royalties.**Subject to Section 9.5(e), if Facet is deemed pursuant to Section14.2(b) to have exercised its Opt-Out Option with respect to all Products on account of an uncuredmaterial breach by Facet, Trubion shall pay Facet royalties on the Net Sales of Royalty Productsduring the applicable Royalty Period, as follows:   **Date of Facet Deemed Opt-Out:** **Royalty Rate:**[*] [*][*] [*][*] [*][*] [*][*] [*]***Confidential Treatment Requested.**
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          **(e) Reduced Royalty Rate.**               **(i) **If a Royalty Product is generating Net Sales in a country during the applicable RoyaltyPeriod at a time when there is no Valid Claim covering such Royalty Product in such country of salewithin the Trubion Patent Rights or the Facet Applied Patent Rights, then the royalty rateapplicable to Net Sales of such Royalty Product in such country shall be reduced by [*] of theapplicable royalty rate set forth in Section 9.5(a)-(d).               **(ii) **If a Royalty Product is generating Net Sales in a country during the applicable RoyaltyPeriod at a time when a competing product is being actively marketed and sold in such country, thenthe royalty rate applicable to Net Sales of such Royalty Product in such country shall be reducedby [*] of the applicable royalty rate set forth in Section 9.5(a)-(d). For purposes of this Section9.5(e)(ii), **“competing product”**shall mean a third party protein therapeutic that [*].               **(iii) **The Non-Opt-Out Party may, subject to Section 9.5(e)(iv), deduct from the royalties itwould otherwise owe to the Opt-Out Party pursuant to this Section 9.5 for Third Party licensesentered into after the Signing Date, including Future Third Party Licenses, an amount equal to [*]of the amounts paid to Third Parties in consideration for intellectual property rights that theNon-Opt-Out Party reasonably believes are necessary in connection with the Development, Manufactureor Commercialization of a Royalty Product in the Field in the Territory.               **(iv) **During the Royalty Period, the operation of Sections [*] individually or in combinationshall not reduce by more than [*] the royalties that would otherwise have been due under in Section9.5(a)-(d).          **(f) Expiration of Royalty Period.**After the expiration of the Royalty Period for any RoyaltyProduct in any country in the Territory, no further royalties shall be payable in respect of salesof such Royalty Product in such country and thereafter the licenses granted to the Non-Opt-OutParty under Section 8.1 or 8.2, as applicable, with respect to such Royalty Product in such countryshall be fully paid-up, perpetual, irrevocable, royalty-free, non-exclusive licenses.          **(g) Cumulative Royalties.**The obligation to pay royalties under Section 9.5 shall be imposedonly once with respect to a single unit of a Royalty Product, regardless of how many Valid Claimsincluded within the Trubion Patent Rights, or Facet Applied Patent Rights would, but for thisAgreement, be infringed by the Manufacture, use, import, offer for sale or sale of such RoyaltyProduct in the countr(y)ies in the Territory of such Manufacture, use or sale.          **(h) Royalty Product Reports and Payments.**During the Royalty Period, within [*] after the endof each Calendar Quarter, the Non-Opt-Out Party shall deliver to the Opt-Out Party a report settingforth for such Calendar Quarter the following information, on a Royalty Product-by-Royalty Productand country-by-country basis: (a) the gross sales amount***Confidential Treatment Requested.**
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(by the Non-Opt-Out Party, its Affiliates and permitted sublicensees) for each Royalty Product soldin the Field in the Territory, on a country-by-country basis; (b) the Net Sales for each RoyaltyProduct; and (c) the royalty amount due hereunder for the sale of each Royalty Product. No suchreports shall be due for any Royalty Product before the First Commercial Sale of such RoyaltyProduct in the Territory. The total royalty due for the sale of Royalty Products during suchCalendar Quarter shall be remitted at the time such report is made.     **9.6 Taxes and Withholding.**All payments due from one Party to another under this Agreementwill be made without any deduction or withholding for or on account of any tax unless suchdeduction or withholding is required by applicable Laws to be assessed against the receiving Party.If the paying Party is so required to deduct or withhold, the paying Party will (a) promptlynotify the receiving Party of such requirement, (b) pay to the relevant authorities the full amountrequired to be deducted or withheld promptly upon the earlier of determining that such deduction orwithholding is required or receiving notice that such amount has been assessed against thereceiving Party, (c) promptly forward to the receiving Party an official receipt (or certifiedcopy) or other documentation reasonably acceptable to the receiving Party evidencing such paymentto such authorities, and (d) otherwise reasonably cooperate with the receiving Party in connectionwith the receiving Party’s attempts to obtain favorable tax treatment and credit therefor (whereappropriate) in accordance with applicable Laws.     **9.7 Currency.**All amounts payable and calculations hereunder shall be in Dollars. Conversionof sales recorded in local currencies to Dollars will be performed in a manner consistent with aParty’s normal practices used to prepare its financial statements and consistent with GAAP,*provided*that such practices use a widely accepted source of published exchange rates (and areapproved by the JCC as applicable).     **9.8 Interest on Past Due Payments.**If either Party fails to pay any payment due under thisAgreement on or before the date such payment is due, as provided in this Agreement, such latepayment shall bear interest, to the extent permitted by applicable Law, at [*], effective for thefirst date on which payment was delinquent and calculated on the number of days such payment isoverdue or, if [*] as the Parties agree.     **9.9 Maintenance of Records; Audits; Consolidation.**          **(a) Record Keeping.**Each Party shall keep accurate books and accounts of record in accordancewith GAAP in connection with the Development, Manufacture and Commercialization of Products, andthe calculation of payments to be made under this Agreement in sufficient detail to permit accuratedetermination of all amounts necessary for verification of royalties and other payments to be paidfrom one Party to another under this Agreement. Each Party shall maintain such records for aperiod of at least [*] after the end of the Calendar Year in which they were generated.          **(b) Audits.**Upon thirty (30) days prior written notice, a Party (the “**Auditing Party**”) mayconduct and the other Party (the “**Audited Party**”) shall permit an independent certified publicaccounting firm of nationally recognized standing selected by the Auditing Party and reasonablyacceptable to the Audited Party, to examine, at the Auditing Party’s sole expense, the relevantbooks and records of the Audited Party as may be reasonably necessary to verify the***Confidential Treatment Requested.**
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accuracy of (a) reports for Development Costs, (b) Manufacturing Costs, (c) CommercializationCosts and (d) the reports submitted by the Audited Party in accordance with this Agreement inconnection with the payment of royalties and other amounts hereunder. An examination by theAuditing Party under this Section 9.9(b) shall occur not more than once in any Calendar Year andshall be limited to the pertinent books and records for any Calendar Year ending not more than [*]before the date of the request. The accounting firm shall be provided access to such books andrecords at the Audited Party’s facility(ies) where such books and records are normally kept andsuch examination shall be conducted during the Audited Party’s normal business hours. The AuditedParty may require the accounting firm to sign a standard non-disclosure agreement before providingthe accounting firm access to the Audited Party’s facilities or records. Upon completion of theaudit, the accounting firm shall provide both the Audited Party and the Auditing Party a writtenreport disclosing whether the reports submitted by the Audited Party are correct or incorrect,whether the amounts paid are correct or incorrect, and in each case, the specific detailsconcerning any discrepancies. No other information shall be provided to the Auditing Party.          **(c) Underpayments/Overpayments.**If such accounting firm concludes that additional royaltiesor other payments were due to the Auditing Party, the Audited Party shall pay to the Auditing Partythe additional amounts within [*] of the date the Audited Party receives such accountant’s writtenreport so concluding. If an underpayment exceeds [*] of the amounts that were to be paid to theAuditing Party, the Audited Party also shall reimburse the Auditing Party for all costs andreasonable out-of-pocket expenses incurred in conducting the audit. If such accounting firmconcludes that the Audited Party overpaid the Auditing Party, the Auditing Party, within [*] of thedate the Auditing Party receives such account’s report so concluding, will refund such overpaymentsto the Audited Party less the reasonable out-of-pocket costs incurred by the Auditing Party inconducting the audit.          **(d) Confidentiality.**All financial information of the Audited Party with respect to a RoyaltyProduct which is subject to review under this Section 9.9 shall be deemed to be the Audited Party’sConfidential Information subject to the provisions of Article 11, and the Auditing Party shall notdisclose such Confidential Information to any Third Party or use such Confidential Information forany purpose other than verifying payments to be made by the Audited Party with respect to suchRoyalty Product; *provided*, *however*, that such Confidential Information may be disclosed by theAuditing Party to Third Parties only to the extent necessary to enforce the Auditing Party’s rightsunder this Agreement. All financial information of the Audited Party with respect to aCollaboration Product which is subject to review under this Section 9.9 shall be deemed to be theConfidential Information of both Parties subject to the provisions of Article          **(e) Consolidation.**In the event that a Party is, in the opinion of its independent registeredaccounting firm, reasonably required to consolidate or otherwise report in the financial statementsof such Party (the **“Consolidating Party”**), all or a portion of the financial performance of theother Party (the **“Consolidated Party”**) for any financial reporting periods, then the ConsolidatingParty shall promptly notify the Consolidated Party of such determination in writing, and theConsolidated Party agrees to cooperate and promptly provide reasonable access to its books andrecords in order for the Consolidating Party to fulfill its financial reporting obligations.***Confidential Treatment Requested.**
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**10. INTELLECTUAL PROPERTY.**     **10.1 Ownership of Collaboration Inventions.**          **(a)**The JPC shall, within a reasonable time after the Signing Date, establish and oversee amutually agreeable procedure for (i) identifying and disclosing all inventions and Know-Howgenerated by one or both Parties, their Affiliates or their respective employees, agents, orindependent contractors in the course of conducting activities under this Agreement (“**CollaborationInventions**”); and (ii) determining inventorship of each such Collaboration Invention, *provided*thatsuch determination shall be made in accordance with United States patent laws.          **(b)**Each Party shall solely own all Collaboration Inventions invented solely by its and/or itsAffiliates’ respective employees, agents and/or independent contractors.          **(c)**All Collaboration Inventions invented jointly by one or more employees, agents, orindependent contractors of Trubion and/or its Affiliates and one or more employees, agents, orindependent contractors of Facet and/or its Affiliates (collectively, “**Joint Inventions**”) shall beowned jointly by the Parties in accordance with joint ownership interests of co-inventors underUnited States patent laws (that is, each Party shall have full rights to license, assign andexploit such Joint Inventions (and any patents arising therefrom) anywhere in the world, withoutany requirement of gaining the consent of, or accounting to, the other Party), subject to thelicenses granted herein and subject to any other intellectual property held by such other Party.          **(d)**This Agreement is intended by the Parties to be entered into pursuant to 35 U.S.C. 103(c),as such section may be amended from time to time. For clarity, Collaboration Inventions areintended by the Parties to be subject to 35 U.S.C. 103(c)(1) and this Agreement is intended by theParties to be deemed a “joint research agreement” as defined in 35 U.S.C. 103(c)(3), as suchsections may be amended from time to time.     **10.2 Disclosure of Inventions.**Each Party shall promptly disclose to the JPC allCollaboration Inventions, including all invention disclosures or other similar documents submittedto such Party by its, or its Affiliates’ employees, agents or independent contractors describingCollaboration Inventions.     **10.3 Prosecution of Patents.**          **(a) Trubion Core Patent Rights.**Except as otherwise provided in this Section 10.3, as betweenthe Parties, Trubion shall have the sole right and authority to prepare, file, prosecute (includingany oppositions, interferences, reissue proceedings, reexaminations and post-grant proceedings) andmaintain the Trubion Core Patent Rights in any jurisdiction in the Territory, provided thatdecisions regarding any claims within the Trubion Core Patent Rights that claim [*] and do notclaim [*] shall be made by the JPC. Trubion shall provide Facet (i) a reasonable opportunity toreview and comment on such filing and prosecution efforts regarding the Trubion Core Patent Rightsin the Territory; (ii) a copy of each material communication received from any patent authority inthe Territory regarding the Trubion Core Patent Rights, and (iii) drafts of any material filings ormaterial responses to be made to such patent authorities a***Confidential Treatment Requested.**
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reasonable amount of time in advance of submitting such filings or responses. If Trubiondetermines in its sole discretion to abandon, cease prosecution or not maintain any Trubion CorePatent Right anywhere in the Territory, then Trubion shall provide Facet written notice of suchdetermination at least [*] before any deadline for taking action to avoid abandonment (or otherloss of rights) and shall provide Facet with the opportunity to prepare, file, prosecute andmaintain such Trubion Core Patent Right in the affected countries of the Territory on behalf ofTrubion. If Facet desires Trubion to file, in a particular jurisdiction in the Territory, a TrubionCore Patent Right that claims priority to (or is based on the subject matter of) another TrubionCore Patent Right, Facet shall provide written notice to Trubion requesting that Trubion file suchpatent application in such jurisdiction. If Facet provides such written notice to Trubion, Trubionshall either (i) file and prosecute such patent application and maintain any patent issuing thereonin such jurisdiction, or (ii) notify Facet that Trubion does not desire to file such patentapplication and provide Facet with the opportunity to file and prosecute such patent applicationand maintain any patent issuing thereon on behalf of Trubion. Facet’s rights under this Section10.3 with respect to any Trubion Core Patent Right licensed to Trubion by a Third Party shall besubject to the rights of such Third Party to file, prosecute, and/or maintain such Trubion CorePatent Right. Facet shall be responsible for [*] of the out-of-pocket costs incurred by Trubion inthe course of preparing, filing, prosecuting and maintaining the Trubion Core Patent Rights andsuch costs shall not be included in Development Costs or Commercialization Costs. If Facetprovides written notice to Trubion that Facet is no longer interested in maintaining a license to aparticular Trubion Core Patent Right in a particular country, Facet will not be responsible for anyportion of the costs incurred by Trubion after the date of such notice in connection with thepreparation, filing, prosecution or maintenance of such Trubion Core Patent Right in such country,and the license granted to Facet under such Trubion Core Patent Right in such country shallterminate upon the delivery of such notice. If Facet assumes responsibility for any Trubion CorePatent Rights, then all costs incurred by Facet in the course of preparing, filing, prosecuting andmaintaining such Trubion Core Patent Rights shall be borne by Facet, without reimbursement byTrubion, and such costs shall not be included in Development Costs or Commercialization Costs. IfTrubion has exercised or is deemed to have exercised its Opt-Out Option in respect of all Productsunder this Agreement pursuant to Section 7.2, 7.3, 8.5 or 14.2(b), following the Opt-Out EffectiveDate, all costs incurred by Trubion in the course of preparing, filing, prosecuting and maintainingthe Trubion Core Patent Rights shall be borne solely by Trubion. If Facet has exercised or isdeemed to have exercised its Opt-Out Option in respect of all Products under this Agreementpursuant to Section 7.2, 7.3, 8.5 or 14.2(b), following the Opt-Out Effective Date, all costsincurred by Trubion in the course of preparing, filing, prosecuting and maintaining the TrubionCore Patent Rights shall be borne solely by Trubion and Facet shall not have any rights pursuant tothis Section 10.3(a) with respect to the Trubion Core Patent Rights; *provided, however*, if Facetnotifies Trubion in writing within [*] following the Opt-Out Effective Date, with respect to one ormore Trubion Core Patent Rights, that Facet will continue to be responsible for [*] of theout-of-pocket costs incurred by Trubion in the course of preparing, filing, prosecuting andmaintaining such Trubion Core Patent Right(s), then Facet will continue to have all rights setforth in this Section 10.3(a) with respect to such Trubion Core Patent Right(s).***Confidential Treatment Requested.**
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          **(b) Trubion Product Patent Rights, Facet Product Patent Rights and Joint Patent Rights.**               **(i) **This Section 10.3(b)(i) shall apply if neither Party has exercised its Opt-Out Option, oris deemed to have exercised its Opt-Out Option under Section 14.2(b). Decisions regarding thepreparation, filing, prosecution, and maintenance of Trubion Product Patent Rights, Facet ProductPatent Rights and Joint Patent Rights, as well as any claims within the Trubion Core Patent Rightsthat claim [*] and do not claim [*], in any jurisdiction in the Territory shall be made by the JPC.The JPC shall designate a Party (the “**Implementing Party**”) to be responsible, using its in-housecounsel or outside patent counsel reasonably acceptable to the other Party, to implement thedecisions of the JPC regarding the preparation, filing, prosecution, and maintenance of such PatentRights, *provided*that Trubion shall be the Implementing Party for Trubion Product Patent Rights andFacet shall be the Implementing Party for Facet Product Patent Rights. The Implementing Partyshall provide the JPC (i) a reasonable opportunity to review and comment on such prosecutionefforts regarding such Patent Rights in the Territory, (ii) a copy of each material communicationreceived from any patent authority in the Territory regarding such Patent Rights, and (iii) draftsof any material filings or material responses to be made to such patent authorities a reasonableamount of time in advance of submitting such filings or responses. Each Party shall be responsiblefor fifty percent (50%) of the out-of-pocket costs incurred by the Parties in the course ofpreparing, filing, prosecuting and maintaining such Patent Rights and such costs shall be includedin Development Costs if incurred prior to First Commercial Sale of a Collaboration Product orCommercialization Costs if incurred after First Commercial Sale of a Collaboration Product.               **(ii) **This Section 10.3(b)(ii) shall apply if a Party has exercised its Opt-Out Option, or isdeemed to have exercised its Opt-Out Option under Section 14.2(b), the Non-Opt-Out Party hasdelivered or is deemed to have delivered a Pursuit Notice, and the Parties are not activelyDeveloping or Commercializing any Collaboration Products. Subject to this Section 10.3(b)(ii), theNon-Opt-Out Party shall make and implement decisions regarding the preparation, filing,prosecution, and maintenance of Trubion Product Patent Rights, Facet Product Patent Rights andJoint Patent Rights, as well as any claims within the Trubion Core Patent Rights that claim [*] anddo not claim [*], in any jurisdiction in the Territory. The Non-Opt-Out Party shall provide theOpt-Out Party: (i) a reasonable opportunity to review and comment on such prosecution effortsregarding such Patent Rights in the Territory; (ii) a copy of material communications from anypatent authority in the Territory regarding such Patent Rights; and (iii) drafts of any materialfilings or material responses to be made to such patent authorities a reasonable amount of time inadvance of submitting such filings or responses. If the Non-Opt-Out Party determines to abandon,cease prosecution or not maintain any such Patent Right anywhere in the Territory, then it shallprovide the Opt-Out Party written notice of such determination at least [*] before any deadline fortaking action to avoid abandonment (or other loss of rights) and shall provide the Opt-Out Partywith the opportunity to assume the preparation, filing, prosecution and maintenance of such PatentRight in the affected countries of the Territory. Each Party shall be responsible for one hundredpercent (100%) of the costs it incurs in the course of preparing, filing, prosecuting andmaintaining such Patent Rights and such costs shall not be included in Development Costs orCommercialization Costs.               **(iii) **If a Party has exercised its Opt-Out Option and the Non-Opt-Out Party has delivered aPursuit Notice, but the Parties still are actively Developing or Commercializing one or moreCollaboration Products (i.e. Products for which neither Party has exercised its Opt-Out Option),then (i) the provisions of Section 10.3(b)(ii) shall apply to (1) all***Confidential Treatment Requested.**
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Joint Patent Rights, Trubion Product Patent Rights and Facet Product Patent Rights that claim[*] and [*] in each case in all jurisdictions in the Territory and (2) all claims within theTrubion Core Patent Rights that claim [*] and do not claim [*], and (ii) the provisions of Section10.3(b)(i) shall apply to (1) any other Joint Patent Right, Trubion Product Patent Rights and FacetProduct Patent Rights and (2) all claims within the Trubion Core Patent Rights that claim [*] anddo not claim [*].          **(c) Divisional Patent Application.**At the request of Facet or at Trubion’s election, Trubionshall file a continuation or divisional patent application of any Trubion Core Patent Right thatcontains a claim that claims [*] and does not claim [*], including U.S. Patent Application SerialNumber [*], if permitted by applicable Laws, shall pursue in such continuation or divisional patentapplications claims specifically directed to one or more Products and shall not pursue in suchcontinuation or divisional patent applications any claims specifically directed to the productknown [*] or any other product that is not a Product. Such continuation or divisional patentapplications shall be deemed Trubion Product Patent Rights.          **(d) Patents Licensed from Third Parties.**If either Party licenses after the Signing Date anyPatent Rights from a Third Party and such Patent Rights qualify as Trubion Patent Rights or FacetProduct Patent Rights, then each Party’s rights under this Section 10.3 with respect to such PatentRights shall be subject to the rights of such Third Party to prosecute, maintain and extend suchPatent Rights.     **10.4 Infringement Actions.**          **(a) Notification of Litigation.**In the event of the institution of any suit by a Third Partyagainst either Trubion or Facet or otherwise, in respect of patent infringement involving themanufacture, use, sale, license, offer for sale, marketing, import or export of a Product withinthe Field anywhere in the Territory, any Party sued or to whom notice or knowledge of suchproceeding shall arise, shall promptly notify the other Party in writing.          **(b) Information and Settlement.**Each Party shall keep the other Party informed of the statusof any patent infringement litigation or settlement thereof concerning the Products within theField in the Territory.     **10.5 Enforcement of Patent Rights.**          **(a) Notice and Consultation.**If either Facet or Trubion becomes aware of any infringement,anywhere in the Territory, of any issued patent within the Trubion Patent Rights, Facet ProductPatent Rights, Facet Collaboration Patent Rights, or Joint Patent Rights, which infringing activityadversely affects or is reasonably expected to adversely affect any Product, it will promptlynotify the other Party in writing to that effect and the Parties will consult with each otherregarding any actions to be taken with respect to such infringing activity.          **(b) Enforcement of Patent Rights Before Opt-Out.**If neither Party has exercised or is deemedto have exercised its Opt-Out Option, the Parties shall have the joint right, but neither Partyshall be obligated, to take action to obtain a discontinuance of infringement or bring suit againsta Third Party infringer of (1) the Trubion Patent Rights, Facet Collaboration Patent Rights, orFacet Product Patent Rights, [*] or (2) the Joint Patent Rights,***Confidential Treatment Requested.**
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[*]. If both Parties wish to so enforce such Patent Rights, Trubion and Facet shall bejointly responsible for, and shall bear equally, all the costs and expenses of any such suitbrought by them. Any recoveries obtained by the Parties as a result of any proceeding against suchThird Party infringer shall be allocated as follows:               **(i) **[*]; and               **(ii) **[*].If one Party elects not to participate in the infringement action and the Parties have not obtaineda discontinuance of the infringement of such Patent Rights, then the other Party shall have theright, but not the obligation, to bring suit againstsuch Third Party infringer of (3) the Trubion Patent Rights, Facet Collaboration Patent Rightsor Facet Product Patent Rights, [*] or (4) the Joint Patent Rights, [*]; *provided*in each case thatthe pursuing Party shall bear all of the expenses of such suit. The other Party will cooperatewith the pursuing Party in any such suit and shall have the right to consult with the pursuingParty and to participate in and be represented by independent counsel in such litigation at its ownexpense. Any recoveries obtained by the pursuing Party as a result of any such proceeding againsta Third Party infringer shall be allocated as follows:               **(iii) **[*];               **(iv) **[*];          **(c) Enforcement of Patent Rights After Opt-Out.**If a Party has exercised or is deemed to haveexercised its Opt-Out Option with respect to a Collaboration Product under this Agreement and theNon-Opt-Out Party has delivered or is deemed to have delivered a Pursuit Notice and is pursuing theresulting Royalty Product, the Non-Opt-Out Party shall have the first right, but not theobligation, to take action to obtain a discontinuance of infringement or bring suit against a ThirdParty infringer of (1) the Trubion Patent Rights, Facet Collaboration Patent Rights or FacetProduct Patent Rights that are licensed to the Non-Opt-Out Party, [*] or (2) the Joint PatentRights, [*]. If the Non-Opt-Out Party does not wish to enforce such Patent Rights, it shall timelynotify the Opt-Out Party in writing and the Opt-Out Party shall have the right, but not theobligation, to take action to obtain a discontinuance of infringement or bring suit against a ThirdParty infringer of (3) the Trubion Patent Rights, Facet Collaboration Patent Rights or FacetProduct Patent Rights that are licensed to the Non-Opt-Out Party, [*] or (4) the Joint PatentRights, [*]. The pursuing Party shall bear all of the expenses of such suit. The other Party willcooperate with the pursuing Party in any such suit and shall have the right to consult with thepursuing Party and to participate in and be represented by independent counsel in such litigationat its own expense. Any recoveries obtained by the Parties as a result of any proceeding againstsuch Third Party infringer shall be allocated as follows:               **(i) **[*]; and               **(ii) **The remainder of the recovery will be allocated as follows:                    **a. **[*];                    **b. **[*].***Confidential Treatment Requested**
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          **(d) Patents Licensed from Third Parties.**If either Party licenses any Patent Rights from aThird Party and such Patent Rights qualify as Trubion Patent Rights or Facet Product Patent Rights,then each Party’s rights under this Section 10.5 with respect to such Patent Rights shall besubject to the rights of such Third Party to enforce such Patent Rights against infringers.     **10.6 Patent Term Extensions.**          **(a) All Products.**The Parties hereto shall cooperate with each other and provide reasonableassistance to each other to obtain a patent term extension, or its equivalent anywhere in theTerritory, including under 35 U.S.C. Section 156 and its foreign counterparts, of any TrubionPatent Right, Facet Collaboration Patent Rights or Facet Product Patent Right with respect to aProduct. Subject to Section 10.6(b), to the extent reasonably and legally required in order toobtain any such extension in a particular country, each Party shall make available to the other acopy of the necessary documentation to enable such other Party to use the same for the purpose ofobtaining the extension in such country.          **(b) Collaboration Products.**The JPC shall make all patent term extension decisions withrespect to a Collaboration Product. Each Party shall consult with the other Party before applyingfor or obtaining any patent term extension or related extension of rights, including supplementaryprotection certificates and similar rights for any Trubion Patent Rights, Facet CollaborationPatent Rights or Facet Product Patent Rights with respect to a Collaboration Product. NeitherParty shall proceed with such an extension until the Parties have agreed to a strategy therefor(with any disagreements on such strategy to be resolved by the JPC).          **(c) Royalty Products.**The Non-Opt-Out Party shall make all elections with respect toobtaining such patent term extension with respect to a Royalty Product for all Joint Patent Rights,Trubion Product Patent Rights and Facet Product Patent Rights that (i) claim [*] and (ii) arelicensed to the Non-Opt-Out Party.     **10.7 Trademarks.**          **(a) **The JCC shall decide on a Product-by-Product basis which Party shall be responsible forthe selection, registration, maintenance and defense of all Marks for use in connection with thesale or marketing of a Collaboration Product in the Field in the Territory. Such Party shall ownsuch Marks and shall grant the other Party a license with respect thereto to conduct itsobligations pursuant to the Commercialization Plan. The Parties shall share equally all TrademarkCosts, which shall be Development Costs if incurred prior to the First Commercial Sale of suchCollaboration Product and Commercialization Costs if incurred thereafter. All uses of such Marksshall be reviewed by the JCC and shall comply with all applicable Laws and regulations (including,without limitation, those laws and regulations particularly applying to the proper use anddesignation of trademarks in the applicable countries).          **(b) **The Non-Opting-Out Party shall be responsible for the selection, registration, maintenanceand defense of all Marks for use in connection with the sale or marketing of the applicable RoyaltyProduct in the Field in the Territory, as well as all***Confidential Treatment Requested**
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Trademark Costs associated therewith. Such Party shall own such Marks. All uses of suchMarks shall comply with all applicable Laws and regulations (including, without limitation, thoselaws and regulations particularly applying to the proper use and designation of trademarks in theapplicable countries).          **(c) **Neither Party shall, without the other Party’s prior written consent, use any Mark orMarks that include, in whole or part, any corporate name or logo of the other Party, or marksconfusingly similar thereto, in connection with such Party’s marketing or promotion of Productsunder this Agreement, except as may be expressly authorized in a co-promotion agreement between theParties pursuant to Section 5.11 and except to the extent required to comply with applicable Lawsand regulations.**11. CONFIDENTIALITY.**     **11.1 Confidentiality.**          **(a) **During the Term and [*] thereafter, each Party shall not use or reveal or disclose toThird Parties any Confidential Information of the other Party without first obtaining the writtenconsent of the other Party, except as may be otherwise provided in, or required in order for aParty to fulfill its obligations or exercise its rights under this Agreement. This confidentialityobligation shall not apply to such information that (i) is or becomes a matter of public knowledge(other than by breach of this Agreement by the receiving Party), (ii) the receiving Party canestablish was already known to it or was in its possession, other than under an obligation ofconfidentiality, at the time of disclosure, (iii) is disclosed to the receiving Party, without anyrestrictions on further disclosure, by a Third Party having the right to do so and that did notobtain such information from the disclosing Party, or (iv) is subsequently independently developedor discovered by employees or agents of the receiving Party or its Affiliates who have had noaccess to such Confidential Information. [*]. The Parties shall take reasonable measures to assurethat no unauthorized use or disclosure is made by others to whom access to such information isgranted.          **(b) **Each Party may disclose Confidential Information of the other Party to the extent suchdisclosure is reasonably necessary in any of the following situations:               **(i) **filing or prosecuting Trubion Patent Rights, Facet Product Patent Rights or Joint PatentRights;               **(ii) **regulatory filings and other filings with Governmental Authorities (including RegulatoryAuthorities), including filings with the SEC or FDA, with respect to a Product;               **(iii) **prosecuting or defending litigation;               **(iv) **complying with applicable Laws and regulations, including regulations promulgated bysecurities exchanges, court order, and administrative subpoena or order;***Confidential Treatment Requested**
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               **(v) **disclosure to its Affiliates, employees, agents, sublicensees, and independentcontractors, to the extent necessary for the purposes of enabling the receiving Party to fulfillits obligations under this Agreement, *provided*, the receiving Party shall be responsible forbreaches of the confidentiality obligations by such Affiliate, employees, agents, and independentcontractors, and *provided further*that, each disclosee must be bound by obligations ofconfidentiality and non-use at least as equivalent in scope as those set forth in this Article 11(except with a minimum duration of [*] for independent contractors) prior to any such disclosure;and               **(vi) **disclosure of the material terms of this Agreement and/or of any collaboration results orstatus reports (including unblinded data from any Clinical Trials) to any bona fide potential oractual investor, investment banker, acquirer, merger partner, sublicensee, or other potential oractual financial or commercial partner; *provided*that each disclosee must be bound by obligationsof confidentiality and non-use at least as equivalent in scope as those set forth in this Article11 (except with a minimum duration of [*]) prior to any such disclosure.          **(c) **In the event it is necessary for a Party to disclose Confidential Information of the otherParty to comply with a court order or administrative subpoena or order, such Party must first useits reasonable efforts to obtain an order preserving the confidentiality of the information andmust give the other Party timely notice of the contemplated disclosure to allow the other Party tointervene to preserve the confidentiality of the information by, for example, seeking anappropriate protective order.     **11.2 Scientific Information.**During the Term, each Party will submit to the other Party forreview and approval all proposed academic, scientific and medical publications and publicpresentations relating to Products within the Field for review in connection with preservation ofpatent rights and/or to determine whether any of such other Party’s Confidential Information shouldbe modified or deleted. Written copies of such proposed publications and presentations shall besubmitted to the non-publishing Party no later than [*] before submission for publication orpresentation and the non-publishing Party shall provide its comments with respect to suchpublications and presentations within [*] of its receipt of such written copy. The publishingParty shall delay the submission for publication or presentation for a period of up to [*] in theevent the non-publishing Party can demonstrate reasonable need for such delay, including withoutlimitation, the preparation and filing of patent applications. By mutual agreement, this periodmay be further extended. In addition, upon the non-publishing Party’s request, the publishingParty shall delete from the proposed submission any Confidential Information of the non-publishingParty; provided, however, [*]. Trubion and Facet will each comply with standard academic practiceregarding authorship of scientific publications and recognition of contribution of other parties inany publications relating to Products within the Field. Notwithstanding the rest of this Section11.2, the Opt-Out Party may not publish any academic, scientific or medical publications or makeany public presentations regarding the Royalty Product without the prior written consent of theNon-Opt-Out Party.     **11.3 SEC Filings.**Before disclosing this Agreement or any of the terms hereof pursuant to thisSection 11.3, the Parties will consult with each other and agree upon the terms of this Agreementto be redacted in making any such disclosure. The Parties shall separately submit confidentialtreatment request to the SEC but file the same redacted Agreement in such filings.***Confidential Treatment Requested**
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Notwithstanding the foregoing, either Party may disclose the terms of this Agreement and anyConfidential Information related to this Agreement, including, without limitation, clinical data,to the extent required, in the reasonable opinion of such Party’s legal counsel, to comply withapplicable Laws, including, without limitation, the rules and regulations promulgated by the UnitedStates Securities and Exchange Commission (“**SEC**”), including comment letters received from the SECrelated to SEC periodic reports and other filings. .     **11.4 Public Announcements.**The Parties will make a joint public announcement of thisAgreement substantially in the form of the draft press release reviewed and approved by them priorto the signing of this Agreement. No other public announcement or other disclosure to ThirdParties concerning the terms of this Agreement shall be made, either directly or indirectly, byeither Party, except as may be legally required or as may be required for financial reportingpurposes, without first obtaining the written approval of the other Party and agreement upon thenature and text of such announcement or disclosure.     **11.5 Non-Solicitation.**Without the prior written consent of the other Party, each of Trubionand Facet agrees that during the Term and for [*] thereafter, neither it nor any of its Affiliateswill directly or indirectly solicit for purposes of hiring any person employed by the other Partyor any of its Affiliates or who was employed by the other Party or any of its Affiliates within thethen prior [*], or in any manner seek to induce any such person to leave his or her employment;*provided*, *however*, that nothing in this Section 11.5 shall prohibit Facet or Trubion, as the casemay be, from hiring any employees of the other who respond to general employment solicitations nottargeted at employees of a Party or any of its Affiliates, including general advertisements.**12. REPRESENTATIONS AND WARRANTIES.**     **12.1 Representations of Trubion.**Trubion represents and warrants as of the Signing Date that(i) it is a corporation or entity duly organized and validly existing under the laws of the stateor other jurisdiction of its incorporation or formation, (ii) the execution, delivery andperformance of this Agreement by Trubion has been duly authorized by all requisite corporate actionand does not require any shareholder action or approval, (iii) it has the corporate power andauthority to execute and deliver this Agreement and to perform its obligations and to grant thelicenses granted by it to the other Party pursuant to this Agreement, and (iv) the execution,delivery and performance by Trubion of this Agreement and its compliance with the terms andprovisions of this Agreement does not and will not conflict with or result in a breach of any ofthe terms and provisions of or constitute a default under (A) any agreement or instrument bindingor affecting it or the subject matter of this Agreement; (B) the provisions of its charter oroperative documents or bylaws; or (C) any order, writ, injunction or decree of any court orgovernmental authority entered against it or by which any of its property is bound except wheresuch conflict, breach or default would not materially impact (I) Trubion’s ability to meet itsobligations hereunder or (II) the rights granted to Facet hereunder.     **12.2 Additional Representations of Trubion**. In addition, except as disclosed in Schedule12.2, Trubion hereby represents and warrants as of the Signing Date that:***Confidential Treatment Requested**
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          **(a) **it has provided a complete and accurate list of all Third Party vendor contracts and ThirdParty licenses in effect as of the Signing Date to which Trubion or a Trubion Affiliate is a Party(i) that are reasonably necessary for the Development, Manufacture or Commercialization of TRU-016or any other Product in the Field in the Territory in accordance with the terms of this Agreementor (ii) pursuant to which Development, Manufacture or Commercialization services are being providedor have been ordered as of the Signing Date with respect to TRU-016 or any other Product in theField in the Territory, all such contracts and licenses are in full force in accordance with theirterms except as would not reasonably be expected to, individually or in the aggregate, materiallyimpair the ability of the Parties to exercise the rights and perform the obligations under thisAgreement and Trubion is not in breach of any material term thereof;          **(b) **except for the intellectual property licensed to Trubion pursuant the license agreementslisted in Schedule 12.2(b), it owns all right, title and interest in and to all of theTrubion Patent Rights and Trubion Know-How; such license agreements do not and will not requireTrubion to make any royalty payments or other payments (other than services fees or other paymentsnot expressly identified as fees for the use of intellectual property rights) to the applicableThird Party licensors in consideration for the exercise of the rights licensed to Trubion as of theSigning Date under such licenses;          **(c) **it does not own and has not licensed any intellectual property that in each case wouldotherwise qualify as Trubion Patent Rights or material Trubion Know-How that is reasonablynecessary for the Development, Manufacture, use, importation or Commercialization of Products inthe Field under the terms of this Agreement, but for the fact that such intellectual property isnot licensable to Facet hereunder and therefore not Controlled by Trubion (and, due solely to suchlack of Control despite owning or holding a license thereto, does not meet the definition ofTrubion Patent Rights or Trubion Know-How);          **(d) **it has not received any written notice asserting or alleging that the research orDevelopment of any Product by or on behalf Trubion prior to the Signing Date infringed ormisappropriated the intellectual property rights of any Third Party;          **(e) **to Trubion’s knowledge, the Development, Manufacture and Commercialization after theSigning Date of TRU-016 can be carried out in the manner reasonably contemplated as of the SigningDate without (i) infringing any Patent Rights owned or controlled by a Third Party or (ii)misappropriating any Know-How owned or controlled by a Third Party; *provided, however*, that Trubionis not making any representation or warranty pursuant to this Section 12.2(e) with respect to [*]or [*] ;          **(f) **to Trubion’s knowledge, there is no unauthorized use, infringement or misappropriation ofany of the Trubion Patent Rights or Trubion Know-How by any person;          **(g) **to Trubion’s knowledge, it has not used in the Development of TRU-016 any employee, agentor independent contractor who has been debarred by any Regulatory Authority, or is the subject ofdebarment proceedings by a Regulatory Authority;***Confidential Treatment Requested**
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          **(h) **there are no actions or proceedings (including any inventorship challenges orinterferences) pending or, to the knowledge of Trubion, threatened with respect to (i) any of theTrubion Patent Rights and Trubion Know-How or (ii) the Development or Manufacture of TRU-016;          **(i) **it has made available to Facet a complete and accurate copy of any IND and other relatedRegulatory Materials for TRU-016 and has not omitted any material data from such IND or RegulatoryMaterials; and          **(j) **no Regulatory Authority has, to Trubion’s knowledge, commenced or threatened to initiateany action or proceeding to refuse to file, reject, not approve, or withdraw any RegulatoryMaterial related to the Product(s), nor has Trubion received any notice to such effect; and toTrubion’s knowledge, Trubion is not in violation of any applicable Laws that could reasonably beexpected to form the basis for such an action; and          **(k) **Trubion believes in good faith, based upon due inquiry, that the Development, Manufactureand Commercialization after the Signing Date of TRU-016 can be carried out in the manner reasonablycontemplated as of the Signing Date without infringing (taking into account the provisions of 35U.S.C. Section 271(e)) [*] or [*], provided that, in the case of [*], due inquiry means due inquirygiven the length of time since the date Trubion was made aware of [*].     **12.3 Representations of Facet.**Facet represents and warrants as of the Signing Date that (i)it is a corporation or entity duly organized and validly existing under the laws of the state orother jurisdiction of its incorporation or formation, (ii) the execution, delivery and performanceof this Agreement by Facet has been duly authorized by all requisite corporate action and does notrequire any shareholder action or approval, (iii) it has the corporate power and authority toexecute and deliver this Agreement and to perform its obligations and to grant the licenses grantedby it to the other Party pursuant to this Agreement, and (iv) the execution, delivery andperformance by Facet of this Agreement and its compliance with the terms and provisions of thisAgreement does not and will not conflict with or result in a breach of any of the terms andprovisions of or constitute a default under (A) any agreement or instrument binding or affecting itor the subject matter of this Agreement; (B) the provisions of its charter or operative documentsor bylaws; or (C) any order, writ, injunction or decree of any court or governmental authorityentered against it or by which any of its property is bound except where such conflict, breach ordefault would not materially impact (I) Facet’s ability to meet its obligations hereunder or (II)the rights granted to Trubion hereunder.     **12.4 Disclaimer.**EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN SECTIONS 12.1, 12.2 AND 12.3, THEPARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,AND PARTICULARLY THAT PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF PRODUCTS AREDEVELOPED, WITH RESPECT TO SUCH PRODUCTS, THE PARTIES DISCLAIM ALL IMPLIED WARRANTIES OF TITLE,NON-INFRINGEMENT, MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.***Confidential Treatment Requested**
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     **12.5 Mutual Covenant.**Each Party covenants to the other Party that it shall at all timescomply in all material respects with all applicable Laws relating to its activities under thisAgreement.**13. LIABILITY AND INDEMNIFICATION.**     **13.1 Limitation on Liability.**Except for breaches of Section 8.5 or Article 11, neither Partyshall be liable to the other Party under this Agreement for any indirect, incidental, punitive,exemplary, special or consequential damages of any kind whatsoever sustained as a result of abreach of this Agreement; *provided*, *however*, that this limitation will not reduce or affect theParties’ obligations in respect of Third Party claims under Section 13.2 or Section 13.3.     **13.2 Mutual Indemnification.**Each Party shall defend, indemnify and hold harmless the otherParty and its Affiliates and their officers, directors, shareholders, employees, agents,representatives, successors and assigns from and against all Third Party claims, complaints, recallobligations and liabilities, or lawsuits for damages (collectively referred to as “**Claims**”) arisingout of (i) any negligent act or omission, or willful wrongdoing by the indemnifying Party, itsAffiliate or sublicensees in the performance of this Agreement, (ii) the failure by theindemnifying Party, its Affiliate or sublicensees to comply with any applicable Law or governmentalrequirement, and/or (iii) any breach of any representation or warranty of the indemnifying Partycontained in this Agreement. The indemnifying Party shall not be obligated under this Section 13.2to the extent that the Claim was the result of the non-performance, negligence or willfulmisconduct of the indemnified Party or anyone acting on behalf of the indemnified Party, includingits Affiliates and sublicensees, and its and their officers, directors, shareholders, employees,agents, representatives, successors and assigns.     **13.3 Indemnification After Opt-Out.**In addition to its obligations under Section 13.2, if aParty has exercised or is deemed to have exercised its Opt-Out Option with respect to a Product andthe Non-Opt-Out Party has delivered or is deemed to have delivered a Pursuit Notice with respectthereto, the Non-Opt-Out Party shall defend, indemnify and hold harmless the Opt-Out Party and itsAffiliates and their officers, directors, shareholders, employees, agents, representatives,successors and assigns from and against all Claims arising out of the Development, manufacture,use, handling, storage, promotion, use, sale, license, offer for sale, marketing, import or exportof such Royalty Product (other than to the extent the Opt-Out Party is responsible for the Claimunder Section 13.2) on or after the Opt-Out Effective Date. The Non-Opt-Out Party shall not beobligated under this Section 13.3 to the extent that the Claim was the result of thenonperformance, negligence or willful misconduct of the Opt-Out Party or anyone acting on behalf ofthe Opt-Out Party, including its Affiliates or sublicensees, and their officers, directors,shareholders, employees, agents, representatives, successors and assigns.     **13.4 Limitations on Indemnification.**The obligations to indemnify, defend, and hold harmless setforth in Sections 13.2 and 13.3 shall be contingent upon the Party seeking indemnification (the“**Indemnitee**”): (i) notifying the indemnifying Party of a claim, demand or suit within ten (10) daysof receipt of same; *provided*, *however*, that Indemnitee’s failure or delay in providing such noticeshall not relieve the indemnifying Party of its indemnification obligation except to the extent theindemnifying Party is prejudiced thereby; (ii) allowing the indemnifying Party and/or its insurersthe right to assume direction and control of the defense of any such
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claim, demand or suit; (iii) using its [*] to cooperate with the indemnifying Party and/or itsinsurers, at the indemnifying Party’s expense, in the defense of such claim, demand or suit; and(iv) agreeing not to settle or compromise any claim, demand or suit without prior writtenauthorization of the indemnifying Party. The Indemnitee shall have the right to participate in thedefense of any such claim, demand or suit referred to in this Section 13.4 utilizing attorneys ofits choice, at its own expense, *provided*, *however*, that the indemnifying Party shall have fullauthority and control to handle any such claim, demand or suit.     **13.5 Other Third Party Claims.**In the event of the institution after the Signing Date of anysuit by a Third Party against either Trubion or Facet, in respect of the Development, Manufacture,use, handling, storage, promotion, use, sale, license, offer for sale, marketing, import or exportof a Collaboration Product within the Field anywhere in the Territory for such activities duringthe Term for which neither Party is responsible under Section 13.2 or Section 13.3 the Partiesshall cooperate and jointly control the defense and settlement of the suit and all out-of-pocketlitigation expenses incurred by the Parties in the defense or settlement of the suit as well as alldamages awarded against a Party or agreed to by the Parties in a settlement shall be consideredDevelopment Costs, if incurred prior to the First Commercial Sale of such Collaboration Product, orCommercialization Costs, if incurred after the First Commercial Sale of such Collaboration Product,or [*].     **13.6 Insurance.**During the Term and for a period of [*] after the Term, or, in the case of aParty that has exercised or is deemed to have exercised its Opt-Out Option in respect of allProducts under this Agreement until [*] after the final Opt-Out Effective Date, each Party shallobtain and/or maintain, respectively, at its sole cost and expense, product liability insurance inamounts, respectively, which are reasonable and customary in the pharmaceutical industry forcompanies of comparable size and activities at the respective place of business of each Party;provided that such amounts shall not be less than [*] before the first dosing of the first patientin the initial Phase III Clinical Study (or the transition to the pivotal phase of a Phase II/IIIClinical Study) of a Product and shall not be less than [*] thereafter. Such product liabilityinsurance shall insure against all liability, including personal injury, physical injury, orproperty damage arising out of the manufacture, sale, distribution, or marketing of theCollaboration Products and the Royalty Products (solely in the event that the policy holder is theNon-Opt-Out Party with respect thereto) in the Territory. Each Party shall provide written proofof the existence of such insurance to the other Party upon request.**14. TERM AND TERMINATION.**     **14.1 Term.**This Agreement shall become effective on the Signing Date and, unless earlierterminated pursuant to this Article 14, shall expire on a Product-by-Product and country-by-countrybasis (a) in respect of Royalty Products, upon expiration of the Royalty Period for the RoyaltyProduct in the country and (b) in respect of Collaboration Products, at such time as Facet andTrubion and their Affiliates and permitted sublicensees have all stopped selling the CollaborationProduct in the country and the Commercialization Plan does not contemplate future sales of theCollaboration Product in the country (the “**Term**”). If the Term or license has not been earlierterminated, upon the expiration of the Term on a Product-by-Product and country-by-country basis,the licenses granted to each Party hereunder shall, with respect to such***Confidential Treatment Requested**
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Product(s) and country(ies), upon and after such expiration, become nonexclusive, royalty-free, paid-up and irrevocable.     **14.2 Termination by Either Party for Breach.**          **(a) Breach.**Subject to Section 14.2(c), each Party shall have the right to terminate thisAgreement upon written notice to the other Party if the other Party materially breaches itsobligations under this Agreement and, after receiving written notice from the non-breaching Partyidentifying such material breach in reasonable detail, fails to cure such material breach within[*] from the date of such notice (or within [*] from the date of such notice in the event suchmaterial breach is solely based upon the breaching Party’s failure to pay any amounts duehereunder); provided that if such material breach is not reasonably subject to cure within the [*]period from notice, then the breaching Party shall have an additional [*] to effect such cure if itis undertaking Diligent Efforts to cure such breach and shall have provided a written planreasonably acceptable to the non-breaching Party to cure such breach within such additional period.Notwithstanding anything to the contrary in this Agreement, the breaching Party shall not have theright to exercise its Opt-Out Option pursuant to Section 7.2 and Facet shall not have the right toterminate the Agreement under Section 14.3 during the period between its receipt of the notice of amaterial breach and its cure of such material breach or the resolution of any dispute with respectthereto pursuant to Section 14.2(c); provided that if such dispute is resolved in the favor of suchalleged breaching Party, such Party shall be entitled to exercise its Opt-Out Option pursuant toSection 7.2 or, in the case of Facet, its right to terminate the Agreement under Section 14.3within [*] of such resolution if it was deprived of the ability to exercise its Opt-Out Option onaccount of this sentence.          **(b) Continuation.**If the non-breaching Party has the right to terminate this Agreement underSection 14.2(a), then, instead of terminating this Agreement, the non-breaching Party may elect tocontinue this Agreement by notice to the breaching Party, *provided*, *however*, if the non-breachingParty elects to continue this Agreement, upon written notice of continuation from the non-breachingParty, then the breaching Party shall be deemed to have exercised its Opt-Out Option and the noticepursuant to this Section 14.2(b) shall be deemed an “Opt-Out Notice” and a “Pursuit Notice” withrespect to all Products under this Agreement regardless of whether such breach related to anyparticular Product and the provisions of Section 7.5 shall apply with respect to all Products underthis Agreement and the breaching Party shall bear [*] of the reasonable expenses incurred by thenon-breaching Party in the course of performing its transfer obligations pursuant to Sections7.5(b)(iii), 7.5(b)(iv), 7.5(vi)(2) and 7.5(vii). The preceding sentence shall not in any eventlimit in any manner the non-breaching Party’s other remedies for an uncured material breach of thisAgreement.          **(c) Disputed Breach.**If the alleged breaching Party disputes in good faith the existence ormateriality of a breach specified in a notice provided by the other Party in accordance withSection 14.2(a), and such alleged breaching Party provides the other Party notice of such disputeand its intention to seek arbitration or judgment by a court pursuant to Article 15 within such [*]period (or [*] period for failure to make any payment), then the non-breaching Party shall not havethe right to terminate this Agreement under Section 14.2(a) unless and until an arbitrator orcourt, in accordance with Article 15, has determined that the alleged breaching Party hasmaterially breached this Agreement and that such Party fails to cure such***Confidential Treatment Requested**
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breach within [*] following such decision of such arbitrator or court (except to the extentsuch breach involves the failure to make a payment when due, which breach must be cured within [*]following such decision of such arbitrator or court). It is understood and agreed that during thependency of such dispute, all of the terms and conditions of this Agreement shall remain in effectand the Parties shall continue to perform all of their respective obligations hereunder.     **14.3 Termination by Facet at Will.**Facet shall have the right to terminate this Agreement inits entirety upon [*] prior written notice to Trubion, *provided*that, within eighteen (18) monthsafter the Signing Date, such notice shall only be effective if accompanied by the payment of atermination fee equal to Ten Million Dollars ($10,000,000.00). Notwithstanding anything to thecontrary in this Agreement, Facet shall have no right to terminate this Agreement pursuant to thepreceding sentence after Facet has been deemed to have exercised its Opt-Out Option on account ofan uncured breach pursuant to Section 14.2(b).     **14.4 Effects of Termination by Facet at Will.**Upon termination of this Agreement by Facetunder Section 14.3, the following shall apply (in addition to any other rights and obligationsunder this Agreement with respect to such termination):          **(a) Licenses.**The licenses granted in Article 8 shall terminate. Notwithstanding theforegoing, Facet hereby grants to Trubion, effective only upon such termination, a [*] license,[*], under the [*] to Develop, make, have made, use, import, export, offer for sale, sell andCommercialize any Products that are in active clinical development or are Commercialized as of thedate of termination for the Field in the Territory, *provided*that [*]. In all cases where anyelement of the Facet Applied Technology is licensed to Facet by a Third Party, as a conditionprecedent for a license to be granted to Trubion pursuant to this Section 14.4(a), Trubion shall berequired to agree in writing within [*] of the effective date of termination to pay any payments,including royalties on sales by Trubion or its permitted sublicensees, that accrue and becomepayable to such Third Party licensor after the effective date of the license to Trubion. Facet willnot be obligated to maintain any Third Party license agreement in effect unless Trubion timelyexercises its rights as provided in the foregoing sentence or to grant sublicenses under thisSection 14.4(a), if Facet is prohibited from granting such sublicenses under its agreement(s) withits licensor(s), but shall be required to use Diligent Efforts to obtain permission to grant such asublicense from any such licensor(s).          **(b) Marks.**Facet shall, as promptly as commercially practicable, assign to Trubion all ofFacet’s right, title and interest in and to the Marks used or to be used with the Products(excluding any such Marks that include, in whole or part, any corporate name or logo of Facet orits Affiliates or permitted sublicensees), including any goodwill associated therewith. For theavoidance of doubt, only those Marks which have been (i) identified prior to the effective date oftermination of this Agreement as the single designated lead candidate Mark for a non-commercializedProduct, or (ii) actually used in connection with a Commercialized Product, shall be assigned.Trubion shall be responsible for recording such assignment in the Territory with the appropriateGovernmental Authority and will bear all costs associated with such assignment and recordation.Facet shall cooperate in facilitating such assignment and recordation by timely executing allnecessary documents provided to it by Trubion.***Confidential Treatment Requested**
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          **(c) Regulatory Materials.**Facet shall transfer and assign to Trubion in the form and format inwhich such materials are maintained by Facet in the ordinary course of business, all RegulatoryMaterials for Products in the Territory that are Controlled by Facet or its Affiliates or permittedsublicensees.          **(d) Transition Assistance.**Facet shall, [*], provide Transition Assistance for the purpose oftransferring or transitioning to Trubion, (i) in the form and format in which such Facet AppliedKnow-How is maintained by Facet in the ordinary course of business, all Facet Applied Know-How notalready in Trubion’s possession, and (ii) at Trubion’s request, all then-existing Third Partyagreements relating solely to Products hereunder and that Facet is able, using Diligent Efforts to,assign to Trubion, in each case, to the extent reasonably necessary for Trubion to continueresearching, Developing, Manufacturing, or Commercializing Products, *provided*, *however*, that Facetshall be required to assign any such agreement solely to the extent assignment is permitted by suchagreement, and Facet is not required to pay any consideration or commence litigation in order toeffect an assignment of any such agreement to Trubion.          **(e) Remaining Inventories.**Trubion shall have the right to purchase from Facet [*] (less anyportion of the cost previously shared by Trubion as a Development Cost or Commercialization Cost)any or all of the inventory of Bulk API and/or Products held by or for Facet or its Affiliates asof the effective date of termination pursuant to the terms of this Agreement or the CommercialSupply Agreement, as applicable. Trubion shall notify Facet within [*] after the effective date oftermination whether Trubion elects to exercise such right.     **14.5 Effect of Termination by Trubion for Uncured Breach.**Upon termination of this Agreementby Trubion under Section 14.2(a), the licenses granted under Article 8 shall terminate.Notwithstanding the foregoing, Facet hereby grants Trubion, effective only upon such termination, a[*] license, [*], under [*], to Develop, make, have made, use, import, export, offer for sale, selland Commercialize any Products that are [*]. In addition, Facet shall comply with Section 14.4(c).     **14.6 Other Remedies.**Termination or expiration of this Agreement for any reason shall notrelease either Party from any liability or obligation that already has accrued prior to suchexpiration or termination, nor affect the survival of any provision of this Agreement to the extentit is expressly stated to survive such termination. Termination or expiration of this Agreement forany reason shall not constitute a waiver or release of, or otherwise be deemed to prejudice oradversely affect, any rights, remedies or claims, whether for damages or otherwise, that a Partymay have hereunder or that may arise out of or in connection with such termination or expiration.     **14.7 Rights in Bankruptcy.**All rights and licenses granted under or pursuant to thisAgreement by Trubion and Facet are, and shall otherwise be deemed to be, for purposes of Section365(n) of the United States Bankruptcy Code, licenses of rights to “intellectual property” asdefined under Section 101 of the United States Bankruptcy Code. The Parties agree that each Party,as licensee of certain rights under this Agreement, shall retain and may fully exercise all of itsrights and elections under the United States Bankruptcy Code. The Parties further agree that, inthe event of the commencement of a bankruptcy proceeding by or against a Party (such Party, the“**Bankrupt Party**”) under the United States Bankruptcy Code, (a) the other Party shall be***Confidential Treatment Requested**
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entitled to a complete duplicate of (or complete access to, as appropriate) any intellectualproperty licensed to such other Party and all embodiments of such intellectual property, which, ifnot already in such other Party’s possession, shall be promptly delivered to it (x) upon any suchcommencement of a bankruptcy proceeding upon such other Party’s written request therefor, unlessthe Bankrupt Party elects to continue to perform all of its obligations under this Agreement or (y)if not delivered under clause (x), following the rejection of this Agreement by the Bankrupt Partyupon written request therefor by the other Party and (b) the Bankrupt Party shall not interferewith the other Party’s rights to intellectual property and all embodiments of intellectualproperty, and shall assist and not interfere with the other Party in obtaining intellectualproperty and all embodiments of intellectual property from another entity. The “embodiments” ofintellectual property includes all tangible, intangible, electronic or other embodiments of rightsand licenses hereunder, including all compounds and products embodying intellectual property,Products, filings with Regulatory Authorities and related rights and Trubion Know-How in the casethat Trubion is the Bankrupt Party and Facet Applied Know-How in the case Facet is the BankruptParty.     **14.8 Continuing Rights and Obligations.**Termination or expiration of this Agreement shall notaffect rights or obligations of the Parties under this Agreement that have accrued prior to thedate of termination or expiration of this Agreement. Notwithstanding anything to the contrary, thefollowing provisions shall survive and apply after expiration or termination of this Agreement:[*]. In addition, the other applicable provisions of Article 9 shall survive to the extent requiredto make final reimbursements, reconciliations or other payments with respect to Product Profits,Net Sales and costs and expenses incurred or accrued prior to the date of termination orexpiration. Furthermore, any other provision required to interpret or to enforce the Parties’remaining rights and obligations under this Agreement shall also survive, but only to the extentrequired for the full observation and performance of this Agreement. All provisions not survivingin accordance with the foregoing shall terminate upon expiration or termination of this Agreementand be of no further force and effect.**15. DISPUTE RESOLUTION; LIABILITY.**     **15.1 General.**Any controversy, claim or dispute arising out of or relating to this Agreementshall be settled, if possible, through good faith negotiations between the Parties. If, however,the Parties are unable to settle such dispute after good faith negotiations, the matter shall bereferred to the Executive Officers to be resolved by negotiation in good faith as soon as ispracticable but in no event later than [*] after referral.     **15.2 Failure of Executive Officers to Resolve Dispute.**If the Executive Officers are unableto settle the dispute after good faith negotiation in the manner set forth above or in Section 2.7,the matter (a) shall be resolved in accordance with Section 15.3, and (b) either Party may seekinjunctive or other equitable relief in any court in any jurisdiction where appropriate.     **15.3 Arbitration.**Matters under Section 15.2 which are to be resolved through bindingarbitration shall be settled by traditional arbitration or, for matters specifically identified inSection 2.7(c)(a), baseball arbitration, in accordance with the Commercial Arbitration Rules of theAmerican Arbitration Association (“**AAA**”) then in effect, except to the extent such rules areinconsistent with this Section 15.3. The proceedings and decisions of the arbitrators shall be***Confidential Treatment Requested**
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confidential, final and binding on the Parties, and judgment upon the award of sucharbitrator(s) may be entered in any court having jurisdiction thereof.          **(a) **The arbitration shall take place in [*].          **(b) **Traditional arbitration shall be conducted by an arbitration panel consisting of three (3)independent arbitrators, and the award or decision shall be rendered by a majority of the membersof the arbitration panel. Each arbitrator shall have not less than fifteen (15) years ofexperience in the biotechnology or pharmaceutical industry and subject matter expertise withrespect to the matter subject to arbitration. Each Party shall appoint one arbitrator, and thethird arbitrator shall be selected jointly by the two arbitrators appointed by the Parties, unlessthe Parties otherwise agree as to the identity of the third arbitrator. If the two arbitratorsappointed by the Parties are unable to agree upon the third arbitrator within [*] of any requestfor arbitration, such arbitrator shall be selected by the AAA. Any arbitrator chosen hereundershall have educational training and industry experience sufficient to demonstrate a reasonablelevel of scientific, financial, medical and industry knowledge relevant to the particular dispute.The written decision of the arbitrators shall state the panel’s findings of material facts and thegrounds for its conclusions and shall be final, conclusive and binding on the Parties andenforceable by any court of competent jurisdiction.          **(c) **Baseball Arbitration will be conducted by one (1) arbitrator who shall be reasonablyacceptable to the Parties and who shall be appointed in accordance with AAA rules. If the Partiesare unable to select an arbitrator within [*] of the notice that initiated the baseballarbitration, then the arbitrator shall be appointed in accordance with AAA rules. Any arbitratorchosen hereunder shall have educational training and industry experience sufficient to demonstratea reasonable level of scientific, financial, medical and industry knowledge relevant to theparticular dispute. Within [*] after the selection of the arbitrator, each Party shall submit tothe arbitrator and the other Party a proposed resolution of the dispute that is the subject of thearbitration, together with any relevant evidence in support thereof (the “**Proposals**”). Within [*]after the delivery of the last Proposal to the arbitrator, each Party may submit a written rebuttalof the other Party’s Proposal and may also amend and re-submit its original Proposal. The Partiesand the arbitrator shall meet within [*] after the Parties have submitted their final Proposals(and rebuttals, if any), at which time each Party shall have [*] to argue in support of itsProposal. The Parties shall not have the right to call any witnesses in support of theirarguments, nor compel any production of documents or take any discovery from the other Party inpreparation for the meeting. Within [*] after such meeting, the arbitrator shall select one of thefinal Proposals so submitted by one of the Parties as the resolution of the dispute, but may notalter the terms of either final Proposal and may not resolve the dispute in a manner other than byselection of one of the submitted final Proposals. If a Party fails to submit a Proposal within theinitial [*] time frame set forth in the fourth sentence of this Section 15.3(c), the arbitratorshall select the Proposal of the other Party as the resolution of the dispute. Any time period setforth in this Section 15.3(c) may be extended by mutual agreement of the Parties.          **(d) **Each Party shall bear its own costs and expenses (including legal fees and expenses)relating to the arbitration proceeding, except that the fees of the arbitrator(s) and other relatedcosts of the arbitration shall be shared equally by the Parties, unless the arbitrator(s)determine(s) that a Party has incurred unreasonable expenses due to vexatious or bad faith***Confidential Treatment Requested**
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positions taken by the other Party, in which event the arbitrator(s) may make an award of allor any portion of such expenses so incurred.          **(e) **The arbitrator(s) shall be required to render their decision in writing and to complywith, and their award shall be limited by, any express provisions of this Agreement relating todamages or the limitation thereof. No arbitrator shall have the power to award punitive damagesunder this Agreement regardless of whether any such damages are contained in a Proposal, and suchaward is expressly prohibited.     **15.4 Patent and Trademark Disputes.**Notwithstanding Section 15.2, any dispute, controversy orclaim relating to the scope, validity, enforceability or infringement of any Patent Rights ortrademark rights covering the manufacture, use, importation, offer for sale or sale of Productsshall be submitted to a court of competent jurisdiction in the country in which such Patent Rightsor trademark rights were granted or arose.**16. MISCELLANEOUS.**     **16.1 Assignment.**Except as provided in subsections (a) and (b) below, neither this Agreementnor any interest hereunder shall be assignable by either Party, without the prior written consentof the other Party, which consent shall not be unreasonably withheld or delayed. This Agreementshall be binding upon the successors and permitted assigns of the Parties, and the name of a Partyappearing herein shall be deemed to include the names of such Party’s successors and permittedassigns to the extent necessary to carry out the intent of this Agreement. In addition to theforegoing, each Party may assign its right, in whole or part, to receive payments under thisAgreement. Any assignment not in accordance with this Section 16.1 shall be void. Notwithstandinganything to the contrary in this Agreement, in the event that a Party undergoes an acquisition by aThird Party, no intellectual property rights of the Third Party assignee, acquiror or successor ofsuch Party or any Affiliate of such Third Party shall be included in the subject matter licensedhereunder, to the extent that such intellectual property rights were held by the Third Party priorto the acquisition, or are created outside of any activities under this Agreement by personnel whowere not employees of the acquired Party at the time of the acquisition. Notwithstanding anythingto the contrary in this Agreement, in the event that a Party makes an assignment pursuant tosubsection (b) below to a Third Party, no intellectual property rights of the Third Party assigneeor any Affiliate of such Third Party shall be included in the subject matter licensed hereunder, tothe extent that such intellectual property rights were held by the Third Party prior to theassignment, or are created outside of any activities under this Agreement by personnel who were notemployees of the assigning Party at the time of the assignment.          **(a) **Each Party may assign all of its rights and delegate all of its obligations under thisAgreement without the other Party’s consent to an Affiliate or to a successor to substantially allof the business of such Party to which this Agreement relates, whether in merger, sale of stock,sale of assets or other transaction.          **(b) **Each Party may assign all of its rights and delegate all of its obligations under thisAgreement without the other Party’s consent to a Third Party who is not a successor to such Partyas described in Section 16.1(a), if such Third Party is not a CD37 Competitor,
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provided that: (i) before commencing negotiations with such a Third Party for such anassignment, the assigning Party shall notify the other Party, and the Parties shall have [*] tonegotiate in good faith a non-binding term sheet setting forth the principal terms and conditionsunder which the assigning Party would assign such rights and delegate such obligations to the otherParty. If the Parties agree on such non-binding term sheet within the [*]-period, then the Partiesshall have an additional time period, not to exceed [*] from the receipt of the notice from theassigning Party, to enter into a definitive agreement based on the terms of the non-binding termsheet. Notwithstanding anything to the contrary above, the assigning Party shall at all times befree to engage in concurrent negotiations with one or more Third Parties but shall not conclude anassignment with a Third Party during the [*] period described above during which the Parties arenegotiating the term sheet and/or during the [*] period described above during which the Partiesare negotiating the definitive agreement; and (iii) the assigning Party shall also assign orotherwise grant a license to such Third Party assignee to all of its Patent Rights and Know-Howunder its Control that are specific to the Products, and grant to such Third Party assignee allother rights and deliver to such Third Party assignee all information and materials in each casethat is reasonably necessary for such Third Party assignee to perform the assigning Party’sobligations under this Agreement.     **16.2 Further Actions.**Each Party agrees to execute, acknowledge and deliver such furtherinstruments, and to do all such other acts, as may be necessary or appropriate in order to carryout the purposes and intent of this Agreement.     **16.3 Government Approvals.**Trubion and Facet will cooperate and use respectively DiligentEfforts to make all registrations, filings and applications, to give all notices and to obtain assoon as practicable all governmental or other consents, transfers, approvals, orders,qualifications authorizations, permits and waivers, if any, and to do all other things necessary ordesirable for the consummation of the transactions as contemplated hereby.     **16.4 Force Majeure.**Neither Party shall be liable to the other for delay or failure in theperformance of the obligations on its part contained in this Agreement if and to the extent thatsuch failure or delay is due to circumstances beyond its control which it could not have avoided bythe exercise of reasonable diligence. It shall notify the other Party promptly should suchcircumstances arise, giving an indication of the likely extent and duration thereof, and shall useall Diligent Efforts to resume performance of its obligations as soon as practicable; *provided*,*however*, that neither Party shall be required to settle any labor dispute or disturbance.     **16.5 Correspondence and Notices.**          **(a) Ordinary Notices.**Correspondence, reports, documentation, and any other communication inwriting between the Parties in the course of ordinary implementation of this Agreement shall bedelivered by hand, or sent by facsimile transmission, email or airmail to the employee orrepresentative of the other Party who is designated by such other Party to receive such writtencommunication.          **(b) Extraordinary Notices.**Extraordinary notices and other communications hereunder(including without limitation, any notice of force majeure, breach, termination, change of address,etc.) shall be in writing and shall be deemed given if delivered personally or by***Confidential Treatment Requested.**
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facsimile transmission (receipt verified), mailed by registered or certified mail (returnreceipt requested), postage prepaid, or sent by nationally recognized express courier service, tothe Parties at the following addresses (or at such other address for a Party as shall be specifiedby like notice; *provided*, *however*, that notices of a change of address shall be effective only uponreceipt thereof):All correspondence to Facet shall be addressed as follows:Facet Biotech Corporation