Document:

Exhibit 10.2

 

Execution Version

 

FOURTH AMENDMENT TO CREDIT AGREEMENT

 

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is made and entered into
as of August 21, 2009, by and among BUCKEYE PARTNERS, L.P., a Delaware
limited partnership (the “Borrower”),
the Lenders (as defined below) party hereto, and SUNTRUST BANK, in its capacity
as administrative agent for the Lenders (the “Administrative
Agent”).

 

W  I  T  N  E
S  S  E  T  H:

 

WHEREAS,
the Borrower, the several banks and other financial institutions party thereto
(collectively, the “Lenders”) and the
Administrative Agent are parties to that certain Credit Agreement, dated as of November 13,
2006 (as amended, supplemented and modified from time to time, the “Credit Agreement”; capitalized terms
used herein and not otherwise defined shall have the meanings assigned to such
terms in the Credit Agreement as amended hereby), pursuant to which the Lenders
have made certain financial accommodations available to the Borrower; and

 

WHEREAS,
the Borrower has requested that the Lenders and the Administrative Agent amend
certain provisions of the Credit Agreement and consent to the waiver of certain
requirements of the Credit Agreement, and subject to the terms and conditions
hereof, the Lenders executing this Amendment are willing to do so;

 

NOW,
THEREFORE, for good and valuable consideration, the sufficiency and receipt of
all of which are acknowledged, the Borrower, the Lenders executing this
Amendment and the Administrative Agent agree as follows:

 

1.             Amendments.

 

(a)           Section 1.1 of the Credit
Agreement is hereby amended by adding the following definitions of “Cash
Collateralize”, “Defaulting Lender”, “Lender Insolvency Event”, “Non-Defaulting
Lender”, “Parent Company”, “Potential Defaulting Lender”, “Revolving Credit
Exposure” and “Swing Line Exposure” in the appropriate alphabetical order:

 

“Cash Collateralize” shall
mean, in respect of any obligations, to provide and pledge (as a first priority
perfected security interest) cash collateral for such obligations in Dollars,
with a depository institution and pursuant to documentation in form and
substance, reasonably satisfactory to the Administrative Agent (and “Cash Collateralization” has a
corresponding meaning).

 

“Defaulting Lender” shall
mean, at any time, a Lender as to which the Administrative Agent has notified
the Borrower that (i) such Lender has failed for 

 

 

three
or more Business Days to comply with its obligations under this Agreement to
make a Loan and/or make a payment to the Issuing Bank in respect of a Letter of
Credit or to the Swing Line Lender in respect of a Swing Line Loan (each a “funding obligation”), (ii) such
Lender has notified the Administrative Agent or has stated publicly that it (a) will
not comply with any such funding obligation hereunder, or (b) has
defaulted on, its obligation to fund generally under any other loan agreement,
credit agreement or other financing agreement, (iii) such Lender has, for
three or more Business Days, failed to confirm in writing to the Administrative
Agent, in response to a written request of the Administrative Agent, that it
will comply with its funding obligations hereunder, or (iv) a Lender
Insolvency Event has occurred and is continuing with respect to such
Lender.  Any determination that a Lender
is a Defaulting Lender under clauses (i) through (iv) above will be
made by the Administrative Agent in its sole discretion acting in good
faith.  The Administrative Agent will
promptly send to all parties hereto a copy of any notice to the Borrower
provided for in this definition.

 

“Lender Insolvency Event”
shall mean that (i) a Lender or its Parent Company is insolvent, or is
generally unable to pay its debts as they become due, or admits in writing its
inability to pay its debts as they become due, or makes a general assignment
for the benefit of its creditors, or (ii) such Lender or its Parent
Company is the subject of a bankruptcy, insolvency, reorganization, liquidation
or similar proceeding, or a receiver, trustee, conservator, intervener or
sequestrator or the like has been appointed for such Lender or its Parent
Company, or such Lender or its Parent Company has taken any action in
furtherance of or indicating its consent to or acquiescence in any such
proceeding or appointment, or (iii) such Lender or its Parent Company has
been adjudicated as, or determined by any Governmental Authority having
regulatory authority over such Person or its assets to be, insolvent; provided
that, for the avoidance of doubt, a Lender Insolvency Event  shall not be
deemed to have occurred  solely by virtue of the ownership or acquisition
of any equity interest in or control of such Lender or a parent company thereof
by a governmental authority or an instrumentality thereof.

 

“Non-Defaulting Lender” shall
mean, at any time, a Lender that is not a Defaulting Lender or a Potential
Defaulting Lender.

 

“Parent Company” shall mean,
with respect to a Lender, the bank holding company (as defined in Federal
Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially
or of record, directly or indirectly, a majority of the shares of such Lender.

 

“Potential Defaulting Lender”
shall mean, at any time, a Lender (i) as to which the Administrative Agent
has notified the Borrower that an event of the kind referred to in the
definition of “Lender Insolvency Event” has occurred and is continuing in
respect of any material financial institution affiliate of such Lender, (ii) that
has (or its Parent Company or a material financial institution affiliate
thereof has) notified the Administrative Agent or has stated publicly that

 

 

it
will not comply with its funding obligations under any other loan agreement or
credit agreement or other similar/other financing agreement or (iii) that
has, or whose Parent Company has, a non-investment grade rating from Moody’s or
S&P or another nationally recognized rating agency.  Any determination that a Lender is a
Potential Defaulting Lender under any of clauses (i) through (iii) above
will be made by the Administrative Agent in its sole discretion acting in good
faith.  The Administrative Agent will
promptly send to all parties hereto a copy of any notice to the Borrower
provided for in this definition.

 

“Revolving Credit Exposure”
shall mean, with respect to any Lender at any time, the sum of the outstanding
principal amount of such Lender’s Revolving Credit Loans, LC Exposure and Swing
Line Exposure.

 

“Swing Line Exposure” shall
mean, with respect to each Lender, the principal amount of the Swing Line Loans
in which such Lender is legally obligated either to make a Base Rate Loan or to
purchase a participation in accordance with Section 2.01, which
shall equal such Lender’s Pro Rata Share of all outstanding Swing Line Loans.

 

(b)           Section 1.1 of the Credit
Agreement is hereby amended by replacing the definitions of “Base Rate” and “BGH
Holdings” in their entirety with the following:

 

“Base Rate”
shall mean, with respect to any Base Rate Loan, for any day, the highest of (i) the
Federal Funds Rate for any such day plus 1/2 of 1%, (ii) the Prime Rate
for such day and (iii) the LIBOR Rate determined on a daily
basis for an Interest Period of one (1) month, plus the Applicable Margin
in effect from time to time for LIBOR Loans.  Each change in any interest rate provided for
herein based upon the Base Rate resulting from a change in the Base Rate shall
take effect at the time of such change in the Base Rate.

 

“BGH Holdings” shall mean BGH
GP Holdings, LLC, a Delaware limited liability company.

 

(c)           Section 1.02 of the Credit Agreement is hereby
amended by adding the following sentence to the end of such Section:

 

Notwithstanding
any other provision contained herein, all terms of an accounting or financial
nature used herein shall be construed, and all computations of amounts and
ratios referred to herein shall be made, without giving effect to any election
under Statement of Financial Accounting Standards 159 (or any other Financial
Accounting Standard having a similar result or effect) to value any
Indebtedness or other liabilities of  any
Loan Party or any Subsidiary of any Loan Party at “fair value”, as defined
therein.

 

(d)           Section 5.06 of the Credit
Agreement is hereby amended by replacing subsection (a) of such Section in
its entirety with the following:

 

 

(a)           If
any Lender has notified the Borrower and the Agent of its incurring additional
costs under Section 5.01, has required the Borrower to make payments for
Taxes under Section 4.06 or is a Defaulting Lender, then the Borrower may,
unless such Lender has notified the Borrower and the Agent that the
circumstances giving rise to such notice no longer apply, terminate, in whole
but not in part, the Revolving Credit Commitment of any Lender (other than the
Agent) (the “Terminated Lender”) at any
time upon five Business Days’ prior written notice to the Terminated Lender and
the Agent (such notice referred to herein as a “Notice
of Termination”).

 

(e)           Article V of the Credit
Agreement is hereby amended by adding the following Section 5.07 to the
end of such Article:

 

Section 5.07.        Defaulting Lenders.

 

(a)           If a Lender becomes,
and during the period it remains, a Defaulting Lender or Potential Defaulting
Lender, the following provisions shall apply, notwithstanding anything to the
contrary in this Agreement:

 

(1)           the
LC Exposure and Swing Line Exposure of such Defaulting Lender will, subject to
the limitation in the first proviso below, automatically be reallocated
(effective on the day such Lender becomes a Defaulting Lender) among the
Non-Defaulting Lenders pro  rata in accordance with their respective
Revolving Credit Commitments;  provided
that (a) the sum of each Non-Defaulting Lender’s total Revolving Credit
Exposure may not in any event exceed the Revolving Credit Commitment of such
Non-Defaulting Lender as in effect at the time of such reallocation and (b) neither
such reallocation nor any payment by a Non-Defaulting Lender pursuant thereto
will constitute a waiver or release of any claim the Borrower, the
Administrative Agent, the Issuing Bank, the Swing Line Lender or any other
Lender may have against such Defaulting Lender or cause such Defaulting Lender
to be a Non-Defaulting Lender;

 

(2)           to
the extent that any portion (the “unreallocated portion”) of the
Defaulting Lender’s LC Exposure and Swing Line Exposure cannot be so
reallocated, for any reason, or with respect to the LC Exposure and Swing Line
Exposure of any Potential Defaulting Lender, the Borrower will, not later than
two (2) Business Days after demand by the Administrative Agent (at the
direction of the Issuing Bank and/or the Swing Line Lender), (a) Cash
Collateralize the obligations of the Borrower to the Issuing Bank or the Swing
Line Lender in respect of such LC Exposure or Swing Line Exposure, as the case
may be, in an amount at least equal to the aggregate amount of the unreallocated
portion of the LC Exposure and Swing Line Exposure of such Defaulting Lender or
the LC 

 

 

Exposure
and Swing Line Exposure of such Potential Defaulting Lender, or (b) in the
case of such Swing Line Exposure, prepay (subject to clause (5) below)
and/or Cash Collateralize in full the unreallocated portion thereof, or (c) make
other arrangements satisfactory to the Administrative Agent, the Issuing Bank
and the Swing Line Lender in their sole discretion to protect them against the
risk of non-payment by such Defaulting Lender or Potential Defaulting Lender;

 

(3)           in
addition to the other conditions precedent set forth in Section 3.2,
the Issuing Bank will not be required to issue, amend or increase any Letter of
Credit and the Swing Line Lender will not be required to make any Swing Line
Loans unless they are satisfied that 100% of the related LC Exposure and Swing
Line Exposure is fully covered or eliminated by any combination satisfactory to
the Issuing Bank or the Swing Line Lender, as the case may be, of the
following:

 

(i) in the case of a Defaulting Lender, the LC
Exposure and Swing Line Exposure of such Defaulting Lender is reallocated as to
outstanding and future Letters of Credit and Swing Line Loans to the
Non-Defaulting Lenders as provided in clause (1) above;

 

(ii) in the case of a Defaulting Lender or a
Potential Defaulting Lender, without limiting the provisions of clause (3)(i),
the Borrower Cash Collateralizes the obligations of the Borrower in respect of
such Letter of Credit or Swing Line Loan in an amount at least equal to the
aggregate amount of the unreallocated obligations (contingent or otherwise) of
such Defaulting Lender or Potential Defaulting Lender in respect of such Letter
of Credit or Swing Line Loan, or the Borrower makes other arrangements
satisfactory to the Administrative Agent, the Issuing Bank and the Swing Line
Lender, as the case may be, in their sole discretion to protect them against
the risk of non-payment by such Defaulting Lender or Potential Defaulting Lender;

 

provided that (a) the sum of each Non-Defaulting Lender’s
total Revolving Credit Exposure  may not
in any event exceed the Revolving Credit Commitment of such Non-Defaulting
Lender, and (b) neither any such reallocation nor any payment by a
Non-Defaulting Lender pursuant thereto nor any such Cash Collateralization or
reduction will constitute a waiver or release of any claim the Borrower, the
Administrative Agent, the Issuing Bank, the Swing Line Lender or any other
Lender may have against such Defaulting Lender or Potential Defaulting Lender,
or cause such Defaulting Lender or Potential Defaulting Lender to be a
Non-Defaulting Lender;

 

 

(4)           with
the written approval of the Administrative Agent, the Borrower may terminate
(on a non-ratable basis) the unused amount of the Revolving Credit Commitment
of a Defaulting Lender, provided that such termination will not be
deemed to be a waiver or release of any claim the Borrower, the Administrative
Agent, the Issuing Bank, the Swing Line Lender or any Lender may have against
such Defaulting Lender;

 

(5)           any
amount paid by the Borrower for the account of a Defaulting Lender under this
Agreement (whether on account of principal, interest, fees, indemnity payments
or other amounts) will not be paid or distributed to such Defaulting Lender,
but will instead be applied by the Administrative Agent, to the fullest extent
permitted by law, in the following order of priority:  first to the payment of any amounts
owing by such Defaulting Lender to the Administrative Agent under this
Agreement, second to the payment of any amounts owing by such Defaulting
Lender to the Issuing Bank under this Agreement, and third to pay
amounts owing under this Agreement to such Defaulting Lender or as a court of
competent jurisdiction may otherwise direct; and

 

(6)           such
Defaulting Lender will not be entitled to fees accruing during such period
pursuant to Section 2.04(b) (without prejudice to the rights
of the Lenders other than Defaulting Lenders in respect of such fees) to the
extent that a portion of the LC Exposure of such Defaulting Lender is
reallocated to the Non-Defaulting Lenders pursuant to clause (2), such fees
that would have accrued for the benefit of such Defaulting Lender will instead
accrue for the benefit of and be payable to such Non-Defaulting Lenders, pro
rata in accordance with their respective Revolving Credit Commitments.

 

(b)           If the Borrower, the
Administrative Agent, the Issuing Bank and the Swing Line Lender agree in
writing in their discretion that a Lender that is a Defaulting Lender or a
Potential Defaulting Lender should no longer be deemed to be a Defaulting
Lender or Potential Defaulting Lender, as the case may be, the Administrative
Agent will so notify the parties hereto, whereupon as of the effective date specified
in such notice and subject to any conditions set forth therein, the LC Exposure
and Swing Line Exposure of the other Lenders shall be readjusted to reflect the
inclusion of such Lender’s Revolving Credit Commitment, and such Lender will
purchase at par such portion of outstanding Revolving Credit Loans of the other
Lenders and/or make such other adjustments as the Administrative Agent may
determine to be necessary to cause the Revolving Credit Exposure of the Lenders
to be on a pro  rata basis in accordance with their respective
Revolving Credit Commitments, whereupon such Lender will cease to be a
Defaulting Lender or Potential Defaulting Lender and will be a Non-Defaulting
Lender (and such Revolving Credit Exposure of each Lender will automatically be
adjusted on a prospective basis to reflect the foregoing) and if any cash
collateral has been posted with respect to such Defaulting Lender or

 

 

Potential
Defaulting Lender, the Administrative Agent will promptly return such cash
collateral to the Borrower; provided that no adjustments will be made
retroactively with respect to fees accrued or payments made by or on behalf of
the Borrower while such Lender was a Defaulting Lender; and provided,
further, that except to the extent otherwise expressly agreed by the affected
parties, no change hereunder from Defaulting Lender or Potential Defaulting
Lender to Non-Defaulting Lender will constitute a waiver or release of any
claim of any party hereunder arising from such Lender’s having been a
Defaulting Lender or Potential Defaulting Lender.

 

(f)            Section 11.01 of the Credit
Agreement is hereby amended by the addition of the following subsection (e) to
such Section:

 

(e)           In addition to the
foregoing, if a Lender becomes, and during the period it remains, a Defaulting
Lender, and if any Default has arisen from a failure of the Borrower to comply
with Section 5.07(a), then the Issuing Bank and the Swing Line
Lender may, upon prior written notice to the Borrower and the Administrative
Agent, resign as Issuing Bank or as Swing Line Lender, as the case may be,
effective at the close of business Atlanta, Georgia time on a date specified in
such notice (which date may not be less than five Business Days after the date
of such notice).

 

2.             Acknowledgment. The Lenders executing this Amendment
acknowledge and agree that, notwithstanding anything in the Credit Agreement or
any other Loan Document to the contrary, (i) the Revolving Credit Loans
held by Aurora Bank FSB (formerly known as Lehman Brothers Bank, FSB, “Aurora
Bank”) in an aggregate principal amount of up to $4,333,333.33 and (ii) the
unfunded Revolving Credit Commitments held by Aurora Bank in an aggregate
principal amount of up to $15,666,666.67, will be assigned to Buckeye Energy
Holdings LLC, an Affiliate of the Borrower (the “Borrower’s Affiliate”),
provided that all Revolving Credit Loans then outstanding are immediately and
permanently repaid in full by the Borrower (collectively, all transactions
described in this Section 2, the “Affiliate Sale”).

 

3.             Consents.  As requested by the Borrower, notwithstanding
anything to the contrary set forth in the Credit Agreement, the Lenders
executing this Amendment agree that immediately upon the Affiliate Sale having
been consummated, the Revolving Credit Commitment held by the Borrower’s
Affiliate may (and shall) be terminated in full, with no corresponding
termination or reduction in the Revolving Credit Commitments of the other
Lenders;

 

provided, however,
the foregoing consent from the Lenders is subject to (i) all (and not less
than all) of the steps set forth below in this Section 3 occurring
substantially contemporaneously and on or prior to August 31, 2009, and (ii) satisfaction
of the conditions precedent set forth in Section 4 below.

 

Immediately
upon the termination of the Revolving Credit Commitment held by the Borrower’s
Affiliate as contemplated in the immediately preceding sentence, the Percentage
Share of the 

 

 

Borrower’s
Affiliate’s LC Exposure and the Percentage Share of the Borrower’s Affiliate’s  Swing Line Exposure will automatically be
reallocated among all other Lenders pro  rata in accordance with
their respective Revolving Credit Commitments.

 

The
foregoing consents shall in no way be deemed to waive, alter or otherwise
modify the provisions of Section 2.04, relating to the payment of facility
fees or any other provisions under the Credit Agreement relating to the payment
of any other amounts thereunder, in each case, on a ratable basis according to
the amount of each Lender’s respective Revolving Credit Commitment thereunder,
all of which remain in full force and effect as written.  In that regard, any portion of the facility
fees or any other amounts owing to Aurora Bank with respect to its Revolving
Credit Commitment through the effective date of the Affiliate Sale, shall be
paid on the date on which such facility fees or other amounts, as applicable,
are paid to the other Lenders pursuant to the Credit Agreement, and, for the
avoidance of doubt, shall cease to accrue from and after the effective date of
the Affiliate Sale.

 

4.             Conditions
to Effectiveness of this Amendment. Notwithstanding any other
provision of this Amendment and without affecting in any manner the rights of
the Lenders hereunder, it is understood and agreed that this Amendment shall not
become effective, and the Borrower shall have no rights under this Amendment,
until the Administrative Agent shall have received (i) reimbursement or
payment of its costs and expenses incurred in connection with the preparation,
execution and delivery of this Amendment, including,
without limitation, the reasonable fees and out-of-pocket expenses of outside
counsel for the Administrative Agent with respect thereto or otherwise
outstanding and (ii) executed counterparts to this Amendment from
the Borrower, the Guarantors and the Required Lenders.

 

5.             Representations
and Warranties.  To induce
the Lenders and the Administrative Agent to enter into this Amendment, each of
the Borrower, the General Partner and the Guarantors (collectively, the “Loan Parties”) hereby represents and
warrants to the Lenders and the Administrative Agent that:

 

(a)           The execution and delivery by such
Loan Party of this Amendment and the performance of this Amendment and the
Credit Agreement as amended hereby (i) are within such Loan Party’s power
and authority; (ii) have been duly authorized by all necessary
partnership, limited liability company, partner and/or member action; (iii) are
not in contravention of any provision of such Loan Party’s certificate of
formation, certificate of partnership, partnership agreement, operating
agreement or other organizational documents; (iv) do not violate any law
or regulation, or any order or decree of any Governmental Authority; (v) do
not conflict with or result in the breach or termination of, constitute a
default under or accelerate any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which such
Loan Party or any of its Subsidiaries is a party or by which such Loan Party or
any such Subsidiary or any of their respective property is bound; (vi) do
not result in the creation or imposition of any Lien upon any of the property
of such Loan Party or any of its Subsidiaries; and (vii) do not require
the consent or approval of any Governmental Authority or any other Person;

 

 

(b)           This Amendment has been duly executed
and delivered for the benefit of or on behalf of each Loan Party and
constitutes a legal, valid and binding obligation of each Loan Party,
enforceable against such Loan Party in accordance with its terms except as the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and other similar laws of general application
relating to or affecting creditors’ rights and general principles of equity;
and

 

(c)           After giving effect to this
Amendment, the representations and warranties contained in the Credit Agreement
and the other Loan Documents are true and correct in all material respects, and
no Default or Event of Default has occurred and is continuing as of the date
hereof.

 

6.             Reaffirmations
and Acknowledgments.

 

Each
Guarantor consents to the execution and delivery by the Borrower of this
Amendment and jointly and severally ratifies and confirms the terms of its
Guaranty with respect to the Debt now or hereafter outstanding under the Credit
Agreement as amended hereby and all promissory notes issued thereunder. Each
Guarantor acknowledges that, notwithstanding anything to the contrary contained
herein or in any other document evidencing any Debt of the Borrower to the
Lenders or any other obligation of the Borrower, or any actions now or
hereafter taken by the Lenders with respect to any obligation of the Borrower,
its Guaranty (i) is and shall continue to be a primary obligation of such
Guarantor, (ii) is and shall continue to be an absolute, unconditional,
joint and several, continuing and irrevocable guaranty of payment, and (iii) is
and shall continue to be in full force and effect in accordance with its
terms.  Nothing contained herein to the
contrary shall release, discharge, modify, change or affect the original
liability of the Guarantors under the Guaranties.

 

7.             Effect of Amendment.  Except as set forth
expressly herein, all terms of the Credit Agreement, as amended hereby, and the
other Loan Documents shall be and remain in full force and effect and shall
constitute the legal, valid, binding and enforceable obligations of the
Borrower to the Lenders and the Administrative Agent.  The
execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
the Lenders under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement.  This
Amendment shall constitute a Loan Document for all purposes of the Credit
Agreement.

 

8.             Governing
Law.   This Amendment
shall be governed by, and construed in accordance with, the internal laws of
the State of New York and all applicable federal laws of the United States of
America.

 

9.             No
Novation.  This Amendment
is not intended by the parties to be, and shall not be construed to be, a
novation of the Credit Agreement or an accord and satisfaction in regard
thereto.

 

10.           Counterparts.  This Amendment may be executed by one or more
of the parties hereto in any number of separate counterparts, each of which
shall be deemed an original and all 

 

 

of
which, taken together, shall be deemed to constitute one and the same
instrument.  Delivery of an executed
counterpart of this Amendment by facsimile transmission or by electronic mail
in pdf form shall be as effective as delivery of a manually executed
counterpart hereof.

 

11.           Costs
and Expenses.  The Borrower agrees to pay on demand all
reasonable costs and expenses of the Administrative Agent in connection with
the preparation, execution and delivery of this Amendment, including, without
limitation, the reasonable fees and out-of-pocket expenses of outside counsel
for the Administrative Agent with respect thereto.

 

12.           Binding Nature.  This Amendment shall be binding upon and
inure to the benefit of the parties hereto, their respective successors,
successors-in-titles, and assigns.

 

13.           Entire Understanding.  This Amendment sets forth the entire
understanding of the parties with respect to the matters set forth herein, and
shall supersede any prior negotiations or agreements, whether written or oral,
with respect thereto.

 

[Signature Pages To Follow]

 

 

IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed, under seal in the case of the Borrower and the Guarantors, by their
respective authorized officers as of the day and year first above written.

 

	
   

  	
   

  	
  BORROWER:

  
	
   

  	
   

  	
  BUCKEYE
  PARTNERS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Buckeye
  GP LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  GUARANTORS:    BUCKEYE PIPE LINE COMPANY, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By
  

  	
  MAINLINE
  L.P.

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By
  MAINLINE GP, INC.

  
	
   

  	
   

  	
        its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  BUCKEYE
  PIPE LINE HOLDINGS, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By
  

  	
  MAINLINE
  L.P.

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By
  MAINLINE GP, INC.

  
	
   

  	
   

  	
        its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  BUCKEYE
  GULF COAST HOLDINGS I, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  

 

 

	
   

  	
  BUCKEYE
  GULF COAST HOLDINGS II, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  BUCKEYE
  GULF COAST PIPE LINES, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By
  

  	
  BUCKEYE
  GULF COAST HOLDINGS I, LLC

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  BUCKEYE
  TERMINALS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  NORCO
  PIPE LINE COMPANY, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  EVERGLADES
  PIPE LINE COMPANY, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By
  

  	
  MAINLINE
  L.P.

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By
  MAINLINE GP, INC.

  
	
   

  	
   

  	
        its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  

 

 

	
   

  	
  WOOD
  RIVER PIPE LINES LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  BUCKEYE
  PIPE LINE TRANSPORTATION LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  BUCKEYE
  TEXAS PIPE LINE COMPANY, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By
  

  	
  BUCKEYE
  GULF COAST HOLDINGS I, LLC

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  BUCKEYE
  NGL PIPE LINES LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
  FERRYSBURG
  TERMINAL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/  William H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Name:

  	
  William
  H. Schmidt, Jr.

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice
  President, General Counsel and Secretary

  

 

 

	
  LENDER,
  ISSUING BANK

  	
   

  	
   

  
	
  AND
  AGENT:

  	
  SUNTRUST
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Carmen J. Malizia

  
	
   

  	
   

  	
  Name:

  	
  Carmen
  J. Malizia

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Adam H. Fey

  
	
   

  	
   

  	
  Name:

  	
  Adam
  H. Fey

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  CITIBANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Todd Mogil

  
	
   

  	
   

  	
  Name:

  	
  Todd
  Mogil

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  BNP PARIBAS

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Richard Hawthorne

  
	
   

  	
   

  	
  Name:

  	
  Richard
  Hawthorne

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

	
   

  	
  By:

  	
  /s/  Juan Carlos Sandoval

  
	
   

  	
   

  	
  Name:

  	
  Juan
  Carlos Sandoval

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Thomas Okamoto

  
	
   

  	
   

  	
  Name:

  	
  Thomas
  Okamoto

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  WACHOVIA BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Christina Faith

  
	
   

  	
   

  	
  Name:

  	
  Christina
  Faith

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  DEUTSCHE
  BANK AG NEW YORK BRANCH

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  THE ROYAL BANK OF SCOTLAND plc

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Matthew Main

  
	
   

  	
   

  	
  Name:

  	
  Matthew
  Main

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  

 

 

	
   

  	
  THE
  BANK OF TOKYO-MITSUBISHI UFJ, LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

	
   

  	
  MORGAN STANLEY BANK

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Melissa James

  
	
   

  	
   

  	
  Name:

  	
  Melissa
  James

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  Signatory

  

 

 

	
   

  	
  WELLS FARGO BANK, N.A.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Christina Faith

  
	
   

  	
   

  	
  Name:

  	
  Christina
  Faith

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  UBS
  AG, STAMFORD BRANCH

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Irja R. Otsa

  
	
   

  	
   

  	
  Name:

  	
  Irja
  R. Otsa

  
	
   

  	
   

  	
  Title:

  	
  Associate
  Director, Banking Products Services, U.S.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Mary E. Evans

  
	
   

  	
   

  	
  Name:

  	
  Mary
  E. Evans

  
	
   

  	
   

  	
  Title:

  	
  Associate
  Director, Banking Products Services, U.S.

  

 

 

	
   

  	
  BANK OF AMERICA, N.A. successor by merger to MERRILL
  LYNCH BANK USA

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Adam H. Fey

  
	
   

  	
   

  	
  Name:

  	
  Adam
  H. Fey

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

 

	
   

  	
  WILLIAM STREET CREDIT CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John Makrinos

  
	
   

  	
   

  	
  Name:

  	
  John
  Makrinos

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  Signatory

  

 

 

	
   

  	
  AURORA
  BANK FSB

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  Theodore Janulis

  
	
   

  	
   

  	
  Name:

  	
  Theodore
  Janulis

  
	
   

  	
   

  	
  Title:

  	
  ChairmanExhibit 10.1

 

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

 

COLLABORATION AND LICENSE
AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

1.                                      DEFINITIONS.

 

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

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1.56                        “Field” means all human and animal applications.

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

1.82                        “Major European Countries”
means [ * ].

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

1.126                 “Territory” means worldwide.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

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

 

2.                                      COLLABORATION MANAGEMENT.

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

18

 

2.2                               Joint Steering Committee.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

2.3          Joint Development Committee.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

2.4          Joint Commercialization Committee.

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

23

 

2.5          Joint Finance Committee.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

24

 

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

 

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

 

2.6          Joint Patent Committee.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

25

 

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

 

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

 

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

 

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

 

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

 

2.7          Resolution of Committee Disputes.

 

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

 

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

 

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

 

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

 

26

 

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

 

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

 

3.             DEVELOPMENT.

 

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

 

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

 

3.3          Development Plan.

 

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

 

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

 

27

 

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

 

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

 

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

 

3.4          Standards of Conduct; Diligence.

 

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

 

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

 

28

 

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

 

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

 

3.5          Third Parties.

 

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

 

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

 

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

 

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

 

3.7          Development Costs.

 

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

 

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

 

29

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

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

 

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

 

4.             REGULATORY
MATTERS.

 

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

 

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

 

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

 

31

 

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

 

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

 

4.4          Regulatory Filings.

 

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

 

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

 

32

 

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

 

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

 

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

 

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

 

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

 

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

 

33

 

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

 

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

 

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

 

4.10        Consultation, Reporting
and Review.

 

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

 

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

 

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

 

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

 

34

 

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

 

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

 

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

 

5.             COMMERCIALIZATION.

 

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

 

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

 

35

 

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

 

5.2          Commercialization Plan.

 

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

 

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

 

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

 

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

 

36

 

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

 

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

 

5.4          Standards
of Conduct.

 

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

 

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

 

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

 

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

 

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

 

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

 

37

 

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

 

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

 

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

 

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

 

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

 

38

 

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

 

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

 

6.             MANUFACTURING.

 

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

 

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

 

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

 

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

 

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

 

39

 

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

 

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

 

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

 

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

 

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

 

40

 

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

 

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

 

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

 

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

 

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

 

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

 

41

 

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

 

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

 

7.                                      OPT-OUT.

 

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

 

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

 

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

 

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

 

42

 

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

 

7.5                               Consequences of Opt-Out.

 

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

 

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

 

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

 

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

 

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

 

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

 

43

 

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

 

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

 

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

 

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

 

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

 

44

 

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

 

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

 

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

 

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

 

(x)

 

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

 

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

 

45

 

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

 

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

 

8.                                      LICENSES.

 

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

 

8.2                               Licenses to Trubion.

 

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

 

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

 

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

 

46

 

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

 

8.3                               Sublicensing.

 

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

 

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

 

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

 

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

 

47

 

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

 

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

 

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

 

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

 

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

 

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

 

48

 

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

 

9.                                      CONSIDERATION.

 

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

 

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

 

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

 

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

 

49

 

	
  Milestone Event

  	
   

  	
  Milestone

  Payment

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  $

  	
  [ * ]

  	
   

  

 

9.4                               Sharing of Product Profit.

 

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

 

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

 

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

 

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

 

50

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

51

 

9.5          Royalties.

 

(a)           Base
Royalties.

 

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

 

	
  Date of Trubion Opt-Out Notice:

  	
   

  	
  Royalty Rate:

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

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

 

	
  Date of Facet Opt-Out Notice:

  	
   

  	
  Royalty Rate:

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

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

 

	
  Date of Opt-Out Notice:

  	
   

  	
  Royalty Rate:

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

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

 

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

 

52

 

	
  Date of Opt-Out Notice:

  	
   

  	
  Royalty Rate:

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

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

 

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

 

	
  Date of Trubion Deemed Opt-Out:

  	
   

  	
  Royalty Rate:

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

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

 

	
  Date of Facet Deemed Opt-Out:

  	
   

  	
  Royalty Rate:

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  
	
  [ * ]

  	
   

  	
  [ * ]

  	
   

  

 

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

 

53

 

(e)           Reduced Royalty Rate.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

54

 

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

 

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

 

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

 

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

 

9.9          Maintenance of Records; Audits; Consolidation.

 

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

 

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

 

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

 

55

 

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

 

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

 

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

 

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

 

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

 

56

 

10.          INTELLECTUAL PROPERTY.

 

10.1        Ownership of Collaboration Inventions.

 

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

 

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

 

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

 

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

 

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

 

10.3        Prosecution of Patents.

 

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

 

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

 

57

 

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

 

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

 

58

 

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

 

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

 

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

 

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

 

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

 

59

 

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

 

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

 

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

 

10.4                        Infringement Actions.

 

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

 

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

 

10.5        Enforcement of Patent Rights.

 

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

 

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

 

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

 

60

 

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

 

(i)            [ * ]; and

 

(ii)           [ * ].

 

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

 

(iii)                            [ * ];

 

(iv)                             [ * ];

 

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

 

(i)            [ * ]; and

 

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

 

a.             [ * ];

 

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

 

61

 

b.             [ * ].

 

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

 

10.6        Patent Term Extensions.

 

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

 

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

 

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

 

10.7        Trademarks.

 

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

 

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

 

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

 

62

 

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

 

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

 

11.                               CONFIDENTIALITY.

 

11.1        Confidentiality.

 

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

 

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

 

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

 

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

 

(iii)         prosecuting or defending litigation;

 

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

 

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

 

63

 

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

 

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

 

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

 

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

 

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

 

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

 

64

 

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

 

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

 

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

 

12.                               REPRESENTATIONS AND WARRANTIES.

 

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

 

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

 

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

 

65

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

66

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

67

 

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

 

13.                               LIABILITY AND INDEMNIFICATION.

 

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

 

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

 

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

 

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

 

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

 

68

 

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

 

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

 

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

 

14.                               TERM AND TERMINATION.

 

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

 

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

 

69

 

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

 

14.2        Termination by Either Party for Breach.

 

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

 

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

 

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

 

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

 

70

 

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

 

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

 

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

 

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

 

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

 

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

 

71

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

72

 

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

 

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

 

15.                               DISPUTE
RESOLUTION; LIABILITY.

 

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

 

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

 

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

 

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

 

73

 

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

 

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

 

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

 

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

 

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

 

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

 

74

 

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

 

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

 

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

 

16.                               MISCELLANEOUS.

 

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

 

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

 

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

 

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

 

75

 

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

 

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

 

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

 

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

 

16.5        Correspondence and Notices.

 

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

 

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

 

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

 

76

 

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

 

All correspondence to Facet shall be addressed as follows:

 

Facet Biotech Corporation

1500 Seaport Blvd.

Redwood City, CA  94063

Attn: Chief Executive Officer

Fax: (650) 454-2000

 

with a copy to:

 

Facet Biotech Corporation

1500 Seaport Blvd.

Redwood City, CA  94063

Attn: General Counsel

Fax: (650) 454-2000

 

and a copy to:

 

Cooley Godward Kronish LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA  94306-2155

Attn: Glen Sato

Fax: (650) 849-7400

 

All correspondence to Trubion shall be addressed as follows:

 

Trubion Pharmaceuticals, Inc.

2401 4th Avenue

Suite 1050

Seattle, Washington 98121

Attn: President & CEO

Fax: (206) 838-0503

 

with a copy to:

 

Trubion Pharmaceuticals, Inc.

2401 4th Avenue

Suite 1050

Seattle, Washington 98121

Attn: General Counsel

Fax: (206) 838-0503

 

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

 

77

 

and a copy to: Fenwick & West LLP

1191 Second Avenue

10th Floor

Seattle, WA  98101

Attn:  Alan C. Smith

Fax:  (206) 389-4511

 

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

 

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

 

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

 

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

 

16.10      Construction

 

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

 

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

 

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

 

78

 

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

 

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

 

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

 

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

 

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

 

[SIGNATURE PAGE FOLLOWS]

 

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

 

79

 

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

 

	
  FACET BIOTECH CORPORATION

  	
  TRUBION PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
  By

  	
  /s/ Faheem Hasnain

  	
   

  	
  By 

  	
  /s/ Peter A. Thompson

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   Faheem Hasnain

  	
  Name:

  	
   Peter A. Thompson

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  President and Chief Executive Officer

  	
  Title:

  	
   President and Chief Executive
  Officer

  
										

 

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

 

80

 

List of
Exhibits

 

	
  Exhibit A

  	
   

  	
  — TRU-016 Description

  
	
  Exhibit B

  	
   

  	
  — Initial Development Plan

  
	
  Exhibit C

  	
   

  	
  — Stock Purchase Agreement

  

 

List of
Schedules

 

	
  Schedule 1.132

  	
   

  	
  — Trubion Core Patent Rights

  
	
  Schedule 1.134

  	
   

  	
  — Trubion Product Patent Rights

  
	
  Schedule 3.7

  	
   

  	
  — Pre-existing Obligations

  
	
  Schedule 12.2

  	
   

  	
  — Disclosure Schedule

  

 

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

 

81

 

Exhibit A (TRU-016
Description)

 

[ * ]

 

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

 

82

 

Exhibit B (Initial
Development Plan)

 

[ * ]

 

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

 

83

 

EXHIBIT C (Stock Purchase
Agreement)

 

[ * ]

 

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

 

84

 

Schedule 1.132 (Trubion Core Patent Rights)

 

[ * ]

 

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

 

85

 

Schedule 1.134 (Trubion Product Patent
Rights)

 

[ * ]

 

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

 

86

 

Schedule 3.7 (Pre-existing
Obligations)

 

[ * ]

 

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

 

87

 

 Schedule
12.2 (Disclosure Schedule)

 

[ * ]

 

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

 

88

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