Sample Business Contracts

    1.2.1  General.  Under the direction and supervision of the Steering Committee, the Parties shall use Commercially Reasonable Efforts to conduct their respective research activities in accordance with this Agreement, each Project Plan and each Project Budget.

    1.2.2  Identification of Collaboration Targets.  Seattle Genetics shall use its Commercially Reasonable Efforts to identify and provide Collaboration Targets to the Collaboration. The list of Antigens attached hereto as Appendix C sets forth the initial list of Collaboration Targets. Such list may be amended pursuant to Section 1.8 or 5.1.2, by the express written agreement of Medarex and Seattle Genetics or as follows:

a Third Party acquires Seattle Genetics by merger, consolidation or transfer of all or substantially all of Seattle Genetics' assets, any [*] shall not be subject to the [*]. The "Antigen Evaluation Materials" shall include:

    (b) Each Antigen described in Section 1.2.2(a), including any portion thereof, shall automatically become a Collaboration Target under this Agreement, and Appendix C shall be deemed to be amended accordingly, unless Medarex provides Seattle Genetics with written notice within thirty (30) days following receipt of all Antigen Evaluation Material with respect to such Antigen, that it [*] on the basis described below, whereupon such [*] to be a Collaboration Target and Medarex shall [*] with respect thereto under this Agreement and Seattle Genetics shall [*] with respect thereto under this Agreement and shall be [*]. Medarex shall have the right to [*] identified by Seattle Genetics pursuant to Section 1.2.2(a) if (i) as of the date of Medarex's receipt of the Antigen Evaluation Materials for such Antigen, (A) Medarex is [*], either [*] or [*] with a Third Party, [*], (B) Medarex is [*] with respect to such Antigen or Antibodies relating thereto, or (C) Medarex has [*] relating thereto, or (ii) Medarex makes a good faith determination that there is a [*] of Antibodies against such Antigen. In the event Medarex receives Antigen Evaluation Materials for a given Antigen pursuant to Section 1.2.2(a), but does not believe the materials provided pursuant to clauses (i), (ii), (iii), (v) or (x) of Section 1.2.2(a) are sufficiently complete to enable Medarex to reasonably determine whether to [*], Medarex shall provide written notice to Seattle Genetics with respect thereto. If, within thirty (30) days of such notice, Seattle Genetics [*] specified in such notice, Medarex shall have [*], provided that such [*]. Once an Antigen becomes a Collaboration Target pursuant to this Section, the Collaboration shall have the right, in accordance with this Agreement, to Exploit Collaboration Products with respect to such Collaboration Target for all purposes, whether inside or outside of the field of breast cancer.

    1.2.3  Identification of Applicable Assays and Success Criteria.  As part of the Project Plan for a given Collaboration Target, the Steering Committee will:

    1.2.4  Allocation of Costs.  [*] associated with identifying Collaboration Targets, preparing and furnishing to Medarex complete Antigen Evaluation Materials with respect thereto, and creating and delivering the Immunogen(s) to Medarex (the "Seattle Genetics Research Activities") shall be borne [*]% by [*]. [*] associated with immunizing the HuMAb Mice and raising a panel of different Antibodies to the applicable Collaboration Target pursuant to the last sentence of Section 1.2.5 (the "Medarex Research Activities") shall be borne [*]% by [*]. [*] associated with developing and performing the Assays shall be borne [*]% by [*] and [*]% by [*]. The Parties acknowledge and agree that the Seattle Genetics Research Activities and the Medarex Research Activities are deemed to be and are [*] and neither Party shall have any right to [*] for the cost and expenses associated with such research activities.

    1.2.5  Raising of Antibodies by Medarex.  The Party designated under Section 1.2.3(b) shall provide to Medarex sufficient Immunogen for each Collaboration Target to enable Medarex to perform its activities pursuant to this Section 1.2.5. Upon the delivery of such Immunogen, Medarex shall use Commercially Reasonable Efforts to immunize the HuMAb Mice and raise a panel of different Antibodies to the applicable Collaboration Target.

    1.2.6  Selection of Assay Candidates; Assay Screening; Selection of Collaboration Antibodies.  

    1.2.7  Effect of Designation of Collaboration Antibodies.  Any Antibody that is designated a Collaboration Antibody in accordance with Section 1.2.6 shall be exclusive to the Collaboration. Except as otherwise provided in this Agreement, once an Antibody is designated a Collaboration Antibody, [*] associated with the research, development and commercialization of such Antibody shall be [*], as more fully described in Section 4.1.

    1.2.8  Lead Collaboration Antibodies.  Out of the pool of Collaboration Antibodies against a given Collaboration Target, the Steering Committee will select the Collaboration Antibody that [*] and it will then move such Collaboration Antibody into [*]. Each Collaboration Antibody that is put into [*] shall be deemed to be a "Lead Collaboration Antibody". It is understood that the Steering Committee may, over time, select more than one Lead Collaboration Antibody against a given Collaboration Target, or substitute one Lead Collaboration Antibody for another. Upon designation of each Lead Collaboration Antibody, [*] shall commit to support [*] percent ([*]%) of the cost of [*] for such Lead Collaboration Antibody. If the Steering Committee [*], then such [*] shall be performed at [*].

    1.2.9  Identification of Restrictions on Exploitation of Collaboration Products.  Upon the designation of the first Collaboration Antibody with respect to a Collaboration Target, the Collaboration shall solicit a formal patent review and opinion regarding such Collaboration Target

from an outside law firm selected by the Steering Committee. The costs of such formal opinion shall be [*].

    2.1.1  Formation of Steering Committee.  The Parties shall establish a joint committee (the "Steering Committee"), which shall oversee the research, development and commercialization activities hereunder. [*] shall appoint an [*] representatives with the requisite experience and seniority to enable them to make decisions on behalf of the Parties with respect to the Collaboration. From time to time, Seattle Genetics and Medarex each may substitute any of its representatives to the Steering Committee.

    2.1.2  Responsibilities.  The Steering Committee shall, in addition to its other responsibilities described in this Agreement: (a) prioritize the research, development, manufacturing and commercialization activities with respect to Collaboration Targets, Collaboration Antibodies and Collaboration Products; (b) subject to Section 1.3, allocate responsibility for such activities between Seattle Genetics and Medarex taking into consideration their relevant expertise and available resources; (c) develop and implement a strategy for researching, developing, manufacturing, obtaining and maintaining Regulatory Approvals for, and commercializing the Collaboration Products; (d) establish such subcommittees as deemed appropriate by the Steering Committee; and (e) take such other actions as are set forth in this Article 2 or as the Parties may unanimously agree. The Steering Committee may evaluate additional technologies that may be necessary or beneficial to the Collaboration and may recommend the acquisition or in-licensing of these technologies to the Parties.

    2.1.3  Procedural Rules for the Steering Committee.  

    2.3.1  Disputes.  Any dispute that may arise relating to the terms of this Agreement or the activities of the Parties hereunder shall be brought to the attention of the Steering Committee, which shall attempt in good faith to achieve a resolution. Either Party may convene a special meeting of the Steering Committee for the purpose of resolving disputes. If the Steering Committee is unable to resolve such a dispute within twenty (20) days of the first presentation of

such dispute to the Steering Committee, and with respect to all other disputes, such dispute shall be referred to the Chief Executive Officers of each of the Parties (or their respective designees) who shall use their good faith efforts to mutually agree upon the proper course of action to resolve the dispute. If any dispute is not resolved by the Chief Executive Officers of the Parties (or their designees) within ten (10) days after such dispute is referred to them, then either Party shall have the right (x) if such dispute relates to the substance of a Project Plan or Project Budget or the scope of the Parties' activities pursuant to Section 1.2, to refer such dispute to an Expert for expedited arbitration as set forth in subparagraphs (a) through (c) below, or (y) with respect to any other dispute, including with respect to a Party's interpretation of, or performance under, this Agreement, to litigate such dispute in accordance with Section 11.5 or to pursue such other dispute resolution mechanism as the Parties may agree.

    3.1.1  Medarex Grant.  Subject to Section 3.3 and the other terms and conditions of this Agreement, Medarex hereby grants to Seattle Genetics and its Affiliates a co-exclusive (with Medarex and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Sections 3.3.5 and 3.4, under the Medarex Technology and the Joint Technology, in each case to (a) perform Seattle Genetics' activities under Section 1.2, and (b) jointly Exploit the Collaboration Products in accordance with this Agreement.

    3.1.2  Seattle Genetics Grant.  Subject to the terms and conditions of this Agreement, Seattle Genetics hereby grants to Medarex and its Affiliates a co-exclusive (with Seattle Genetics and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Section 3.4, under the Seattle Genetics Technology and the Joint Technology, in each case to (a) perform Medarex's activities under Section 1.2, and (b) jointly Exploit the Collaboration Products in accordance with this Agreement.

    3.2.1  Medarex Grant.  Subject to the terms and conditions of this Agreement, Medarex hereby grants to Seattle Genetics and its Affiliates a co-exclusive (with Medarex and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Section 3.4, to use the Product Trademarks to Exploit the Collaboration Products in accordance with this Agreement.

    3.2.2  Seattle Genetics Grant.  Subject to the terms and conditions of this Agreement, Seattle Genetics hereby grants to Medarex and its Affiliates a co-exclusive (with Seattle Genetics and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Section 3.4, to use the Product Trademarks to Exploit the Collaboration Products in accordance with this Agreement.

    3.3.1  Antigen Exclusivity.  Subject to Sections 3.3.2, 3.3.3 and 3.3.4, the Parties acknowledge and agree that this Collaboration shall be exclusive with respect to the Collaboration Targets and that no Party shall engage, directly or indirectly, on behalf of itself or any other party, in the research, development, commercialization or other Exploitation of antibody-based products with respect to any Collaboration Target other than the Collaboration Products and Unilateral Products as provided in this Agreement and any related agreements between the Parties.

    3.3.2  Research and Commercialization Agreements.  Medarex shall have the right to (a) grant licenses and other rights to other parties, under the Medarex Technology for such parties to Exploit Antibody Products (but not Collaboration Products) with respect to Antigens, including [*], provided that such Antigens are [*] and [*] of or [*] to any [*], (b) [*] to such parties in connection therewith, including [*] with respect to the [*] and [*] with respect to the [*], (c) develop [*], such Antibody Products, and (d) receive license fees, milestone payments, royalties and other remuneration in connection therewith, but, in connection with clause (a), (b), (c) or (d) above, [*] (each agreement with respect to the foregoing, a "Research and Commercialization Agreement").

    3.3.3  Retained Rights.  

    3.3.4  Existing Grants.  The Parties further acknowledge and agree that pursuant to the Cross-License Agreement, Medarex has granted a non-exclusive license under certain Medarex Patents to Exploit Antibody Products, including Collaboration Products, with respect to Antigens, including the Collaboration Targets, in the Territory.

    3.3.5  Cross License Agreement.  The Cross-License Agreement prohibits Medarex from [*], whether by [*], under certain Medarex Technology to [*]. The Parties shall structure their

respective commercialization rights in each country in the Territory, in accordance with this Section 3.3.5, so as to comply with the requirements of the Cross-License Agreement and shall use good faith efforts to ensure that any such structure preserves the intended economic benefits of the Collaboration to the Parties.

    4.1.1  Net Profits and Net Losses.  Except as otherwise provided in this Agreement, the [*] ([*]%) in the Net Profits and Net Losses, as applicable, with respect to the Collaboration Products, as set forth in this Section. Within thirty (30) days after the end of each calendar quarter in which Net Profits or Net Losses are recognized with respect to a Collaboration Product, each Party shall provide the other Party with a statement detailing its Net Profits or Net Losses for such

Collaboration Product for such calendar quarter on a country-by-country basis, which statement shall set forth in reasonable detail any Net Sales by such Party or its Affiliates, any Commercialization Expenses and any Other Operating (Income)/Expense, including a detailed breakdown of the components of the foregoing, with respect to such Collaboration Product, provided that such Commercialization Expenses (including the components thereof) [*] set forth in the applicable Project Budget with respect to the commercialization activities set forth in the applicable Project Plan by more than [*] percent ([*]%) without the approval of the Steering Committee ("Authorized Commercialization Expenses"). Within forty-five (45) days after the end of each calendar quarter, the Parties shall [*] to [*] so that [*] ([*]%) in the Net Profits or Net Losses, as applicable, for such calendar quarter for each Collaboration Product.

    4.1.2  Research and Development Expenses.  Except as otherwise provided in this Agreement, [*] and [*] shall [*] ([*]%) [*] the cost and expense of all Authorized R&D Expenses (as defined below) incurred by or on behalf of the Parties in connection with their activities other than the Seattle Genetics Research Activities and the Medarex Research Activities. Within thirty (30) days after the end of each calendar quarter, each Party shall furnish the Steering Committee with a statement (a) detailing the costs and expenses actually incurred in connection with the research and development activities (including Phase IV and any other post-Regulatory Approval research and development activities) performed by or on behalf of such Party during such calendar quarter, provided that such costs or expenses [*] set forth in the relevant Project Budget with respect to such research and development activities by more than [*] ([*]%) without the approval of the Steering Committee (the "Authorized R&D Expenses") and (b) comparing such expenses to date with the projections set forth in the Project Budget. Within forty-five (45) days after the end of each calendar quarter, Medarex and Seattle Genetics shall [*] to [*] so that [*] ([*]%) of the total Authorized R&D Expenses for such calendar quarter.

    4.5.1  Record Retention.  Each Party shall maintain (and shall ensure that its Affiliates and sublicensees shall maintain) complete and accurate books, records and accounts that fairly reflect their respective (a) Authorized R&D Expenses, Authorized Commercialization Expenses, Other Operating (Income)/Expenses, any costs and expenses reimbursable under Article 7, and any other costs and expenses reimbursable or otherwise shared by the Parties hereunder (collectively, the "Collaboration Expenses"), and (b) Net Sales of Collaboration Products and Net Profits and Net Losses with respect to Collaboration Products, in each case in sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with GAAP, which books, records and accounts shall be retained by such party until the later of (i) three (3) years after the end of the period to which such books, records and accounts pertain, and (ii) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law.

    4.5.2  Audit.  Each Party shall have the right to have an independent certified public accounting firm of nationally recognized standing, reasonably acceptable to the audited Party, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of the other Party (and its Affiliates and sublicensees) as may be reasonably necessary to verify the accuracy of such Collaboration Expenses, Net Sales, or Net Profits or Net Losses, as applicable, for any calendar quarter ending not more than thirty-six (36) months prior to the date of such request; provided, however, that neither Party shall have the right to conduct more than one such audit in any twelve (12)-month period. The accounting firm shall disclose to each Party whether such Collaboration Expenses, Net Sales, or Net Profits or Net Losses, as applicable, are correct or incorrect and the specific details concerning any discrepancies. No other information shall be provided to the requesting Party. The requesting Party shall bear the cost of such audit unless the audit reveals a variance of more than [*] percent ([*]%) from the reported results, in which case the audited Party shall bear the cost of the audit. The results of such accounting firm shall be final, absent manifest error.

    4.5.3  Payment of Additional Amounts.  If, based on the results of such audit, additional payments are owed by a Party under this Agreement, such Party shall make such additional payments, with interest from the date originally due at the rate of [*] percent ([*]%) per month, within sixty (60) days after the date on which such accounting firm's written report is delivered to such Party.

    4.5.4  Confidentiality.  The auditing Party shall treat all information subject to review under this Section 4.5 in accordance with the confidentiality provisions of Article 6 and shall cause its accounting firm to enter into a reasonably acceptable confidentiality agreement with the audited Party obligating such firm to maintain all such financial information in confidence pursuant to such confidentiality agreement.

    5.1.1  Opting-Out by a Party.  Each Party (i.e., Medarex, on the one hand, and Seattle Genetics, on the other hand) (the "Opting-Out Party") shall have the right, on [*] ([*]) [*]' written notice to the other (an "Opt-Out Notice"), to elect not to proceed with the research, development and commercialization ("Opt-Out") of all Collaboration Products with respect to a given Collaboration Target at any time up until [*] ([*]) [*] after [*] with respect to the first Collaboration Product with respect to such Collaboration Target, provided that such Party shall be

responsible for [*] associated with the research and development activities with respect to such Collaboration Product(s) that such Party has committed to in the applicable Project Budget as necessary to [*] that was [*] such Party Opted-Out. By way of clarification, if a Party Opts-Out of a Collaboration Product with respect to a Collaboration Target, such Party will be deemed to have Opted-Out with respect to all Antibody Products with respect to the same Collaboration Target.

    5.1.2  Rights and Obligations of Parties with Respect To Unilateral Products.  Upon receipt by a Party of an Opt-Out Notice, the receiving Party shall have the right, on written notice to the Opting-Out Party within [*] following receipt of the Opt-Out Notice (an "Election Notice"), to proceed unilaterally with the research, development and commercialization of all Collaboration Antibodies to the applicable Collaboration Target (each, a "Unilateral Product") pursuant to a separate agreement with the Opting-Out Party embodying the terms and conditions attached hereto as Appendix D (and other terms as may be appropriate), which agreement shall be entered into by the Parties and attached hereto as Appendix D-1 or Appendix D-2, as applicable, within [*] ([*]) [*] of the Effective Date (each, a "Unilateral Development and Commercialization Agreement"). Upon receipt by Medarex of an Election Notice from Seattle Genetics with respect to a Collaboration Target, the Unilateral Development and Commercialization Agreement set forth in Appendix D-1 shall be automatically amended to include such Collaboration Target and any Antibody Products with respect thereto. Upon receipt by Seattle Genetics of an Election Notice from Medarex with respect to a Collaboration Target, the Unilateral Development and Commercialization Agreement set forth in Appendix D-2 shall be automatically amended to include such Collaboration Target and any Antibody Products with respect thereto. Upon such amendment of a Unilateral Development and Commercialization Agreement pursuant to this Section 5.1.2, the applicable Antigen shall cease to be a Collaboration Target and Appendix C shall be amended accordingly, and any licenses granted pursuant to Article 3, with respect to such Antigen and any Antibodies and Antibody Products with respect thereto, shall terminate. Except for the payment obligations provided for in Section 5.1.1, the Opting-Out Party shall have (x) [*] in respect of such Unilateral Product, and (y) [*], or [*] regarding such [*] in respect of such Unilateral Product. In the event that neither Party elects to proceed with the research, development or commercialization of any Collaboration Product with respect to a Collaboration Target, the rights and obligations of the Parties with respect to such Collaboration Target shall be governed by Sections 5.2 and 5.3.

    (a) was already known to the receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, at the time of disclosure to, or, with respect to Know-How, discovery or development by, such receiving Party;

    (b) was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to, or, with respect to Know-How, discovery or development by, such receiving Party;

    (c) became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to, or, with respect to Know-How, discovery or development by, such receiving Party through no fault of a Party other than the Party that Controls such information and know-how;

    (d) was disclosed to such receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, by a third party who had no obligation to the Party that Controls such information and know-how not to disclose such information or know-how to others; or

    (e) was independently discovered or developed by such receiving Party or its Affiliates, as evidenced by their written records, without the use of Confidential Information belonging to the Party that Controls such information and know-how, except with respect to the Mice-Related Know-How, which shall be and remain Confidential Information of Medarex.

    6.3.1  Required by Governmental Order.  Made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial or local governmental or regulatory body of competent jurisdiction; provided, however, that such Party shall first have given notice to such other Party and given such other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order;

    6.3.2  Required by Law.  Otherwise required by law; provided, however, that the disclosing Party shall provide such other Party with notice of such disclosure in advance thereof to the extent practicable;

    6.3.3  Required by Regulatory Authority.  Made by such Party to the Regulatory Authorities as required in connection with any filing, application or request for Regulatory Approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information;

    6.3.4  Required by Agreement.  Made by such Party, in connection with the performance of this Agreement, to Affiliates, permitted sublicensees, research Parties, employees, consultants, representatives or agents, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 6; or

    6.3.5  Required by Certain Third Parties.  Made by such Party to existing or potential acquirers; existing or potential pharmaceutical collaborators (to the extent contemplated hereunder); investment bankers; existing or potential investors, merger candidates, partners, venture capital firms or other financial institutions or investors for purposes of obtaining financing; bona fide strategic potential partners; or Affiliates, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 6.

    7.1.1  Ownership of Medarex Technology.  Subject to the license grants to Seattle Genetics under Article 3, as between the Parties, Medarex shall own and retain all right, title and interest in and to any and all: (a) Information and Inventions that are conceived, discovered, developed or otherwise made, as necessary to establish authorship, inventorship or ownership under Applicable Law, by or on behalf of Medarex (or its Affiliates or, to the extent permitted, its licensees or sublicensees (other than Seattle Genetics and its Affiliates)), whether or not patented or patentable, and any and all Patent and other intellectual property rights with respect thereto, except to the extent that any such Information and Inventions, or any Patent or other intellectual property rights with respect thereto, are Joint Technology or Collaboration Target Technology; (b) other Information and Inventions, and Patent and other intellectual property rights that are Controlled (other than pursuant to the license grants set forth in Article 3) by Medarex, its Affiliates or, to the extent permitted, its licensees or sublicensees (other than Seattle Genetics); and (c) other Medarex Technology.

    7.1.2  Ownership of Seattle Genetics Technology.  Subject to Section 7.1.3 and the license grants to Medarex under Article 3, as between the Parties, Seattle Genetics shall own and retain all right, title and interest in and to any and all: (a) Information and Inventions that are conceived, discovered, developed or otherwise made, as necessary to establish authorship, inventorship or ownership under Applicable Law, by or on behalf of Seattle Genetics (or its Affiliates or, to the extent permitted, its licensees or sublicensees (other than Medarex and its Affiliates)), whether or not patented or patentable, and any and all Patent and other intellectual property rights with respect thereto, except to the extent that any such Information and Inventions, or any Patent or other intellectual property rights with respect thereto, are Joint Technology or Mice Materials or Mice-Related Technology; (b) other Information and Inventions, and Patent and other intellectual property rights that are Controlled (other than pursuant to the license grants set forth in Article 3) by Seattle Genetics, its Affiliates or, to the extent permitted, its licensees or sublicensees (other than Medarex); and (c) other Seattle Genetics Technology.

    7.1.3  Ownership of Mice-Related Technology.  Subject to the license grants to Seattle Genetics under Article 3, as between the Parties, Medarex shall own and retain all right, title and interest in and to all Mice Materials and Mice-Related Technology, including any and all Information and Inventions with respect to the Mice Materials or the Mice-Related Technology

(including any Improvements thereto) that are conceived, discovered, developed or otherwise made, as necessary to establish authorship, inventorship or ownership under Applicable Law, by or on behalf of Seattle Genetics, its Affiliates or, to the extent permitted, its licensees or sublicensees (other than Medarex and its Affiliates), whether or not patented or patentable, and any and all Patent and other intellectual property rights with respect thereto. Seattle Genetics acknowledges and agrees that (a) the licenses granted to it pursuant to Article 3 permit Seattle Genetics to use Mice Materials and Mice-Related Technology solely for the Exploitation of Collaboration Products as provided in this Agreement, (b) Seattle Genetics has no right to use the HuMAb Mice or to discover, develop or otherwise make Improvements with respect to Mice Materials and Mice-Related Technology under such grants, and (c) neither it, nor any of its Affiliates, licensees or sublicensees, will engage, directly or indirectly, in activities designed to, or otherwise undertake or attempt, either on behalf of itself or another, to discover, develop or make any Information and Inventions that relate to the Mice Materials or the Mice-Related Technology. Accordingly, Seattle Genetics shall promptly disclose to Medarex in writing, the conception or reduction to practice, or the discovery, development or making of any Mice Material or Mice-Related Technology and shall, and does hereby, assign, and shall cause its Affiliates, licensees and sublicensees to so assign, to Medarex, without additional compensation, all of their respective rights, titles and interests in and to any Mice Material or Mice-Related Technology.

    7.1.4  Ownership of Production Technology.  Each Party shall own and retain all right, title and interest in and to such Party's Production Technology, including any and all Information and Inventions with respect to such Production Technology (including any Improvements thereto) that are conceived, discovered, developed or otherwise made, as necessary to establish authorship, inventorship or ownership under Applicable Law, by or on behalf of such Party, its Affiliates or, to the extent permitted, its sublicensees, whether or not patented or patentable, and any and all Patent and other intellectual property rights with respect thereto. Except as the Parties may otherwise expressly agree, neither Party shall have any rights, express or implied, under this Agreement with respect to the other Party's Production Technology and nothing in this Agreement is intended to or shall be interpreted as granting a Party any license to any Production Technology of the other Party, whether subordinate or dominant to any other Technology of such other Party. Each Party shall have the right to submit any of its Production Know-How with respect to a Collaboration Product directly to the Regulatory Authorities using a drug master file, or any foreign equivalent that is designed to protect a Party's Confidential Information, which Know-How and filing shall, notwithstanding Section 7.1.7 or any other provision of this Agreement, be and remain the sole and exclusive property of such Party.

    7.1.5  Ownership of Joint Technology.  Subject to Sections 7.1.3 and 7.1.4 and the license grants under Article 3, the Parties shall each own [*] in any Joint Technology; provided, however, that, except as otherwise expressly provided in this Agreement, neither a Party nor any of its Affiliates, licensees or sublicensees shall, directly or indirectly, Exploit any Joint Technology, or any intellectual property rights with respect thereto, without the consent of the other Party, not to be unreasonably withheld or delayed, except that each Party shall have the right to Exploit such Joint Technology for research and discovery purposes (as opposed to the development, commercialization or other Exploitation of products or technology resulting therefrom), and to license others to do so, without the consent of the other Party. Each Party shall promptly disclose to the other Party in writing, and shall cause its Affiliates, licensees and sublicensees to so disclose, the development, making, conception or reduction to practice of any Joint Technology.

    7.1.6  Ownership of Product Trademarks.  Subject to the license grants in Article 3, the Parties shall [*] in each Product Trademark with respect to a Collaboration Product. In the event that a Party Opts-Out with respect to a Collaboration Product, it shall, without any additional consideration, assign all of its right, title and interest in and to any Product Trademark with respect

to such Collaboration Product or Unilateral Product to the non-Opting-Out Party; provided, however, that each Party shall retain all of its right, title and interest in and to any Product Trademarks with respect to Dormant Products.

    7.1.7  Ownership of Regulatory Documentation.  Subject to the license grants in Article 3, all Regulatory Approvals with respect to a Collaboration Product shall be owned by [*], with [*] on a [*] with respect to [*]. With respect to [*] and any other Collaboration Products with respect to the same Collaboration Target, the Regulatory Approvals shall [*]. Subject to the license grants in Article 3, [*], to the extent permitted by law, [*] other Regulatory Documentation, provided that Regulatory Documentation containing or comprising Production Know-How of a Party shall be and remain the sole and exclusive property of such Party. With respect to [*] to [*], and any other Collaboration Products with respect to the same Collaboration Target, [*] shall be [*]. Each non-Opting-Out Party shall have the right to own all right, title and interest in and to all Regulatory Approvals with respect to its Unilateral Products. In the event that a Party Opts-Out with respect to a Collaboration Product, it shall assign all of its right, title and interest in and to all Regulatory Documentation with respect to such Collaboration Product, including any Regulatory Approvals and applications therefor, to the non-Opting Out Party (or its designee); provided, however, that each Party shall retain any of its right, title and interest in and to any Regulatory Documentation with respect to a Dormant Product. Notwithstanding the ownership of any Regulatory Approval or any other Regulatory Documentation, each Party shall have the right to use and reference any of the Regulatory Documentation in connection with the Exploitation of Collaboration Products as provided in this Agreement.

    7.2.1  Medarex Rights.  As between the Parties, Medarex shall, subject to Section 7.2.5, have the sole right, at its cost and expense, to obtain, prosecute and maintain throughout the world the Medarex Patents, including the Mice-Related Patents and its Production Patents.

    7.2.2  Seattle Genetics Rights.  As between the Parties, Seattle Genetics shall, subject to Section 7.2.5, have the sole right, at its cost and expense, to obtain, prosecute and maintain throughout the world the Seattle Genetics Patents, including its Production Patents.

    7.2.3  Joint Technology and Product Trademarks.  

    7.2.4  Cooperation.  Each Party shall, and shall cause its Affiliates, licensees and sublicensees, as applicable, to, cooperate fully in the preparation, filing, prosecution, and maintenance of the other Party's Patents and the Product Trademarks. Such cooperation includes (a) promptly executing all papers and instruments and requiring employees to execute such papers and instruments as reasonable and appropriate so as to enable such other Party or the Steering Committee, as applicable, to file, prosecute, and maintain its Patents in any country; and (b) promptly informing such other Party of matters that may affect the preparation, filing, prosecution, or maintenance of any such Patents.

    7.2.5  Patent Filings.  Seattle Genetics covenants not to, and to cause its Affiliates, licensees and sublicensees, as applicable, not to, file any patent application disclosing or claiming any Information and Inventions comprising any Medarex Technology or the Exploitation thereof, without Medarex's prior written consent, which consent shall not be unreasonably withheld or delayed. Medarex covenants not to, and to cause its Affiliates, licensees and sublicensees, as applicable, not to, file any patent application disclosing or claiming any Information and Inventions comprising any Seattle Genetics Technology or the Exploitation thereof, without Seattle Genetics' prior written consent, which consent shall not be unreasonably withheld or delayed.

    7.2.6  Election not to Prosecute.  If a Party elects not (a) to pursue the filing, prosecution or maintenance of a Joint Patent in a particular country, (b) to pursue the registration, prosecution or maintenance of a Product Trademark in a particular country, or (c) to take any other action with respect to Joint Technology or a Product Trademark in a particular country that is necessary or reasonably useful to establish or preserve rights thereto, then in each such case such Party shall so notify the other Party promptly in writing and in good time to enable such other Party to meet any deadlines by which an action must be taken to establish or preserve any such rights in such Joint Technology or Product Trademark, as applicable, in such country. Upon receipt of each such notice by such other Party or if, at any time, such Party fails to initiate any such action within thirty (30) days after a request by such other Party that it do so (and thereafter diligently pursue such action), such other Party shall have the right, but not the obligation, to pursue the filing or registration, or support the continued prosecution or maintenance, of such Patent or Product Trademark, as applicable, at its expense in such country. If such other Party elects to pursue such filing or registration, as the case may be, or continue such support, then such other Party shall notify such Party of such election and such Party shall, and shall cause its Affiliates, licensees and sublicensees, as applicable, to, (x) reasonably cooperate with such other Party in this regard, and (y) subject to Article 3, promptly release or assign to such other Party, without compensation, all right, title and interest in and to such Patent or Product Trademark, as applicable, in such country.

    7.3.1  Rights and Procedures.  If Medarex or Seattle Genetics determines that any Technology or Product Trademark is being infringed by a Third Party's activities and that such infringement could affect the exercise by the Parties of their respective rights and obligations under this Agreement, it shall promptly notify the other Party in writing and provide such other Party with any evidence of such infringement that is reasonably available.

    7.3.2  Cooperation.  The Party not enforcing the applicable Technology or Product Trademark shall provide reasonable assistance to the other Party, including providing access to relevant documents and other evidence, making its employees available at reasonable business hours, and joining the action to the extent necessary to allow the enforcing Party to maintain the action.

    7.3.3  Recovery.  Any amounts recovered by a Party pursuant to Section 7.3.1, whether by settlement or judgment, shall be used to reimburse the Parties for their reasonable costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses), with any remainder being retained by the Party that has exercised its right to bring the enforcement action; provided, however, that to the [*] that [*] is [*] to [*] of a [*], the Parties shall negotiate in good faith [*] of such [*] to [*] the [*] of the Parties under this Agreement with respect to such Collaboration Product.

    7.4.1  Third Party Licenses.  If (a) in the Collective Opinion of Counsel, a Party, or any of its Affiliates, licensees or permitted sublicensees, cannot Exploit a Collaboration Product in a country in the Territory without infringing one or more Patents that have issued to a Third Party in such country, or (b) as a result of any claim made against a Party, or any of its Affiliates, licensees or permitted sublicensees, alleging that the Exploitation of a Collaboration Product infringes or misappropriates any Patent or any other intellectual property right of a Third Party in a country in the Territory, a judgment is entered by a court of competent jurisdiction from which no appeal is taken within the time permitted for appeal, such that a Party cannot Exploit such Collaboration Product in such country without infringing the Patent or other proprietary rights of such Third Party, then, in either case, the Parties shall use Commercially Reasonable Efforts to obtain a license in the names of the Parties from such Third Party as necessary for the Exploitation of any Collaboration Products hereunder in such country; provided, however, that Medarex shall have the sole right to seek any such license with respect to Mice-Related Technology or any of its Production Technology, and shall use Commercially Reasonable Efforts to obtain such a license in

its own name from such Third Party in such country, under which Medarex shall, to the extent permissible under such license, grant a sublicense to Seattle Genetics as necessary for Seattle Genetics, and any of its Affiliates and permitted sublicensees, to Exploit the Collaboration Products as provided hereunder in such country; and provided further that Seattle Genetics shall have the sole right to seek any such license with respect to any of its Production Technology, and shall use Commercially Reasonable Efforts to obtain such a license in its own name from such Third Party in such country, under which Seattle Genetics shall, to the extent permissible under such license, grant a sublicense to Medarex as necessary for Medarex, and any of its Affiliates and permitted sublicensees, to Exploit the Collaboration Products as provided hereunder in such country. The Parties shall [*] percent ([*]%) of any [*] under such [*], except with respect to the Medarex Technology or the Seattle Genetics Technology, where Seattle Genetics and Medarex, respectively, shall only be responsible for [*] percent ([*]%) of those [*] and other [*] with respect to the [*] and the other activities of the Parties hereunder. For purposes of this Section 7.4.1, "Collective Opinion of Counsel" shall mean the final joint opinion of patent counsel selected by Seattle Genetics and patent counsel selected by Medarex, after review of all data and information reasonably available at the time such opinion is rendered. If patent counsel for the Parties cannot agree on a final joint opinion within twenty (20) days after submission of the matter to such counsel, the patent counsel of the Parties shall agree on a third patent counsel who shall offer an independent opinion on the subject matter, which independent opinion shall be deemed the Collective Opinion of Counsel.

    7.4.2  Third Party Litigation.  In the event that a Third Party institutes a Patent, Trademark or other infringement suit (including any suit alleging the invalidity or unenforceability of the Patents of a Party or its Affiliates, or claiming confusion, deception or dilution of a Trademark by a Product Trademark) against either Party or its respective Affiliates, licensees or permitted sublicensees during the Term, alleging that the Exploitation of the Collaboration Products in the Territory or any other activities hereunder, infringes one or more Patent, Trademark or other intellectual property rights held by such Third Party (an "Infringement Suit"), the Parties shall cooperate with one another in defending such suit. Except with respect to the Medarex Technology or the Seattle Genetics Technology, the Parties shall jointly direct and control any Infringement Suit with respect to Collaboration Products or any Joint Patents; provided, however, that no Party shall cease to defend, settle or otherwise dispose of a suit with respect to any intellectual property of the other Party without the prior written consent of such other Party. Each Party shall have the sole right to direct and control (including the right to cease to defend, settle or compromise) any Infringement Suit with respect to its Technology. The Parties shall [*] percent ([*]%) of any costs and expenses of such defense, except with respect to the Medarex Technology or the Seattle Genetics Technology, where Seattle Genetics and Medarex, respectively, shall only [*] percent ([*]%) of those costs and expenses with respect to the Exploitation of Collaboration Products and the other activities of the Parties hereunder.

    7.4.3  Retained Rights.  Nothing in this Section 7.4 shall prevent either Party, at its own expense, from obtaining any license or other rights from Third Parties it deems appropriate in order to permit the full and unhindered exercise of its rights under this Agreement.

    7.5.1  Information Disclosure.  Each Party shall, and shall cause its Affiliates, licensees and sublicensees, as applicable, to, without additional compensation and at such Party's sole expense, disclose and make available to the other Party, in whatever form each such other Party may reasonably request, all Regulatory Documentation, all of its other Know-How, all Information and Inventions included in the Joint Technology and any other Information and Inventions relating, directly or indirectly, to the Exploitation of any Collaboration Products immediately after the Effective Date and thereafter immediately upon the earlier of the conception or reduction to

practice, discovery, development or making of each such Regulatory Documentation, Know-How, or other Information and Inventions.

    7.5.2  Cooperation.  With respect to the research, development, commercialization or other Exploitation of the Collaboration Products, each Party, shall cooperate with any and all reasonable requests for assistance from the other Party, including by making its employees, consultants and other scientific staff available upon reasonable notice during normal business hours at their respective places of employment to consult with such other Party, as applicable, on issues arising during such research, development, commercialization or Exploitation.

    7.5.3  Biological Materials.  For purposes of facilitating the conduct of the research and development activities under this Agreement, Medarex and Seattle Genetics shall each provide to the other tissues, cells, cell lines, organisms, blood samples, genetic material, and other biological substances and materials, including the Mice Materials, the Collaboration Targets and other Antigens (collectively, "Biological Materials") specified from time to time in this Agreement or the applicable Project Plan. Each Party agrees to provide all such Biological Materials to the other in accordance with the applicable Project Plan, and under the supervision of the Steering Committee. The Parties agree that: (a) all Biological Materials provided by one Party to the other Party and any Biological Material (including Collaboration Products and other Mice Materials) produced against or with, or derived from, such Biological Materials shall be used solely for the research and development activities as provided in the Project Plan, and in material compliance with all Applicable Law; (b) all such Biological Materials shall be provided without any warranties, express or implied; (c) the Party providing such Biological Materials shall obtain (or cause its Third Party collaborators to obtain or certify that they have obtained) all appropriate and required consents from the source of such Biological Materials; (d) Biological Materials provided by one Party to the other Party (other than Collaboration Products) shall not be made available by such other Party to any Third Party except as expressly provided in the Project Plan, unless the prior written consent of the Party providing such Biological Materials is first obtained; and (e) subject to the license grants in Article 3 and other provisions in this Agreement, all right, title and interest in and to (i) the Mice Materials and the Mice-Related Technology shall be, and remain, vested in Medarex, and (ii) the Collaboration Targets shall be, and remain, vested in Seattle Genetics.

    7.5.4  Regulatory Records.  With respect to the subject matter of this Agreement, each Party shall maintain, or cause to be maintained, records of its respective research, development, manufacturing and commercialization activities, including all Regulatory Documentation, in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, which shall be complete and accurate and shall fully and properly reflect all work done and results achieved in the performance of such activities, and which shall be retained during the term of this Agreement and for a period of five (5) years thereafter, or for such longer period as may be required by Applicable Law. Each Party shall have the right, during normal business hours and upon reasonable notice, to inspect and copy any such records, except to the extent that such records contain proprietary information with respect to the other Party's Production Technology or, with respect to Medarex's records, the HuMAb Mice.

    7.5.5  Production Technology.  Notwithstanding anything to the contrary in this Section 7.5 or elsewhere in this Agreement, neither Party shall be obligated to disclose or provide any of its Production Technology, including Biological Materials, to the other Party or any Third Party; provided, however, that each Party shall provide such Production Know-How to the Regulatory Authorities as is necessary to obtain and maintain Regulatory Approval for Collaboration Products supplied by it pursuant to Section 1.6. Each Party shall have the right to provide such Know-How to the Regulatory Authorities in a drug master file, or any foreign equivalent that is designed to protect a Party's Confidential Information.

    8.6.1  Licenses.  Upon expiration of the full term of this Agreement in accordance with Section 8.1 and payment of all amounts owed pursuant to Section 4.1, the licenses granted by Medarex to Seattle Genetics, and by Seattle Genetics to Medarex, hereunder shall be deemed fully-paid up.

    8.6.2  Return of Information and Materials.  Upon expiration of this Agreement pursuant to Section 8.1 or upon termination of this Agreement in its entirety by either Party pursuant to this Article 8, each Party, at the request of the other Party, shall return Biological Materials of such other Party and all data, files, records and other materials in its possession or control relating to such other Party's Technology, or containing or comprising such other Party's Information and Inventions or other Confidential Information (as defined in Article 6) and, in each case, to which the returning Party does not retain rights hereunder (except one copy of which may be retained solely for archival purposes).

    8.7.1  Accrued Rights.  Termination or expiration of this Agreement for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination or expiration of this Agreement.

    8.7.2  Survival.  Articles 4, 6, 7 and 9, and Sections 2.3, 8.6, 11.5 and 11.6 of this Agreement and this Section 8.7 shall survive expiration or termination of this Agreement for any reason.

    9.3.1  Notice of Claim.  The indemnified Party shall give the indemnifying Party prompt written notice (an "Indemnification Claim Notice") of any Losses or discovery of fact upon which such indemnified Party intends to base a request for indemnification under Section 9.1 or Section 9.2, but in no event shall the indemnifying Party be liable for any Losses that result from any delay in providing such notice. Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of such Loss (to the extent that the nature and amount of such Loss are known at such time). The indemnified Party shall furnish promptly to the indemnifying Party copies of all papers and official documents received in respect of any Losses. All indemnification claims in respect of a Party, its Affiliates or their respective directors, officers, employees and agents (collectively, the "Indemnitees" and each an "Indemnitee") shall be made solely by such Party to this Agreement (the "Indemnified Party").

    9.3.2  Third Party Claims.  The obligations of an indemnifying Party under this Article 9 with respect to Losses arising from claims of any Third Party that are subject to indemnification as provided for in Section 9.1 or 9.2 (a "Third Party Claim") shall be governed by and be contingent upon the following additional terms and conditions:

writing the obligation to indemnify the Indemnitee hereunder, the indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of the Third Party Claim in accordance with Section 9.3.2(a), the indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss provided it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed). The indemnifying Party shall not be liable for any settlement or other disposition of a Loss by an Indemnitee that is reached without the written consent of the indemnifying Party. Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnitee shall admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the prior written consent of the indemnifying Party.

    (d)  Cooperation.  Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, the Indemnified Party shall, and shall cause each other Indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business hours afforded to the indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnitees and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder, and the indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.

    (e)  Expenses.  Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any claim shall be reimbursed on a calendar quarter basis by the indemnifying Party, without prejudice to the indemnifying Party's right to contest the Indemnified Party's right to indemnification and subject to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.

    10.1.1  Corporate Authority.  Such Party (a) has the power and authority and the legal right to enter into this Agreement and perform its obligations hereunder, and (b) has taken all necessary action on its part required to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such Party and constitutes a legal, valid and binding obligation of such Party and is enforceable against it in accordance with its terms subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights and

judicial principles affecting the availability of specific performance and general principles of equity, whether enforceability is considered a proceeding at law or equity.

    10.1.2  Litigation.  Such Party is not aware of any pending or threatened litigation (and has not received any communication) that alleges that such Party's activities related to this Agreement have violated, or that by conducting the activities as contemplated herein such Party would violate, any of the intellectual property rights of any other party.

    10.1.3  Consents, Approvals, etc.  All necessary consents, approvals and authorizations of all Regulatory Authorities and other parties required to be obtained by such Party in connection with the execution and delivery of this Agreement and the performance of its obligations hereunder have been obtained.

    10.1.4  Conflicts.  The execution and delivery of this Agreement and the performance of such Party's obligations hereunder (a) do not conflict with or violate any requirement of Applicable Law or any provision of the articles of incorporation, bylaws or any similar instrument of such Party, as applicable, in any material way, and (b) do not conflict with, violate, or breach or constitute a default or require any consent under, any contractual obligation or court or administrative order by which such Party is bound.

    10.1.5  Debarment.  No such Party nor any of its Affiliates has been debarred or is subject to debarment and neither such Party nor any of its Affiliates will use in any capacity, in connection with the services to be performed under this Agreement, any party who has been debarred pursuant to Section 306 of the Federal Food, Drug, and Cosmetic Act, as amended, or who is the subject of a conviction described in such section. Each Party will inform the other Party in writing immediately if it or any party who is performing services hereunder is debarred or is the subject of a conviction described in Section 306, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to such Party's knowledge, is threatened, relating to the debarment or conviction of such Party or any party performing services hereunder.

If to Seattle Genetics, to:

If to Medarex, to:

Covington & Burling
1201 Pennsylvania Ave., N.W.
Washington, D.C. 20004
Attention: John A. Hurvitz, Esq.
Facsimile: (202) 778-5319

    1.  "Net Sales" shall mean, for any period, the gross amount invoiced by the Parties and their Affiliates and sublicensees for the sale of Collaboration Product(s) to Third Parties, less deductions for: (a) normal and customary trade, quantity and cash discounts and sales returns and allowances (other than allowances for doubtful accounts), including (i) those granted on account of price adjustments, billing errors, rejected goods, damaged goods, returns and rebates, (ii) administrative and other fees and reimbursements and similar payments directly related to the sale or delivery of Collaboration Product(s) paid to wholesalers and other distributors, buying groups, pharmacy benefit management organizations, health care insurance carriers and other institutions, (iii) allowances, rebates and fees directly related to the sale or delivery of Collaboration Product(s) paid to distributors and (iv) chargebacks; (b) freight, postage, shipping and insurance costs to the extent that such items are included in the gross amount invoiced; (c) customs and excise duties and other duties related to the sales to the extent that such items are included in the gross amount invoiced; (d) rebates and similar payments made with respect to sales paid for or reimbursed by any governmental or regulatory authority such as, by way of illustration and not in limitation of the Parties' rights hereunder, Federal or state Medicaid, Medicare or similar state program or equivalent foreign governmental program; (e) sales and other taxes and duties directly related to the sale or delivery of Collaboration Product(s) (but not including taxes assessed against the income derived from such sale); (f) distribution costs and expenses to the extent that such items are included in the gross amount invoiced; and (g) any such invoiced amounts that are not collected by the Parties or their Affiliates or sublicensees; provided, however, that an amount shall be deducted only once regardless of how many categories may apply to it. Any of the deductions listed above that involves a payment by a Party or its Affiliates or sublicensees shall be taken as a deduction in the calendar quarter in which the payment is accrued by such entity. Deductions pursuant to subsection (g) above shall be taken in the calendar quarter in which such sales are no longer recorded as a receivable. For purposes of determining Net Sales, the Collaboration Product(s) shall be deemed to be sold when invoiced and a "sale" shall not include transfers or dispositions for charitable, promotional, pre-clinical, clinical, regulatory or governmental purposes.

    2.  "Net Profits" and, with correlative meaning, "Net Losses", shall mean, with respect to a Collaboration Product, Net Sales of such Collaboration Product less Authorized Commercialization Expenses (to the extent not already deducted from Net Sales) and Other Operating (Income)/Expense with respect to such Collaboration Product, all for a given period.

    3.  "Commercialization Expenses" shall mean all Cost of Sales, Distribution Costs, Marketing Costs, Sales Costs, General and Administrative Costs (in each case, to the extent not

deducted from Net Sales under Section 1 hereof) of the Parties and their Affiliates with respect to the Collaboration Products.

    4.    "Other Operating (Income)/Expense" shall mean (a) payments and other consideration received from Third Parties with respect to the commercialization of a Collaboration Product, including any license fees, milestone payments, royalties or other payments (including the fair market value of any consideration received) in connection with the license, sublicense, assignment or transfer of rights with respect to such Collaboration Product (to the extent not included in Net Sales), and (b) any other operating income received from or expense owed to Third Parties in connection with an activity that is not part of the primary business activity of a Party under the Agreement but is considered and approved by the Parties as income or expense for purposes of the Agreement, which may include: (i) actual inventory write-offs of any Collaboration Product; (ii) the cost and expense of prosecuting, maintaining and enforcing patent, trademark and other intellectual property rights and defending against claims of infringement; and (iii) product liability insurance to the extent the Parties obtain a joint policy.

    5.  "Fully-Burdened Production Process Development Cost" shall mean, with respect to each Collaboration Antibody, One Hundred Percent (100%) of the consolidated fully burdened cost of Production Process Development of such Collaboration Antibody, which shall include (a) direct labor and material costs, (b) substrate and product quality assurance/control costs, (c) costs of any stability studies, (d) costs of losses or wastage in process development, to the extent not the result of negligence or the use of non-standard operating procedures, (e) facility and equipment depreciation costs, (f) facility and equipment validation and control costs, (g) costs associated with evaluation of safety profile, activity and quality of material in in vitro and in vivo uses, (g) costs required for manufacturing material for in vitro and in vivouses, (h) costs associated with submission and maintenance of regulatory documentation, (i) shipping costs, (j) costs related to subcontracted work, (k) expenses with respect to each of the foregoing, and (l) applicable allocable overhead, as determined in accordance with GAAP as applied by Medarex; (m) [*] percent ([*]%) of the sum of the components (a) through (l); (n) all of the manufacturer's allocable intellectual property and technology acquisition and license costs and expenses (including royalties, license fees, milestone payments and other payment obligations) paid to Third Parties with respect to Production Process Development of a Collaboration Antibody.

Royalties