EXHIBIT 10.6

***Text Omitted and Filed Separately
with the Securities and Exchange Commission.
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4)
and 240.24b-2.

EXECUTION VERSION

COLLABORATION AND LICENSE AGREEMENT

by and between

XENCOR, INC.

and

NOVARTIS INSTITUTES FOR BIOMEDICAL RESEARCH, INC.

TABLE OF CONTENTS

COLLABORATION and license AGREEMENT

THIS COLLABORATION AND LICENSE AGREEMENT (this “Agreement”), entered into as of June 26, 2016 (the “Effective Date”), is entered into by and between Xencor, Inc., a corporation organized and existing under the Laws of the State of Delaware (“Xencor”), and Novartis Institutes for BioMedical Research, Inc., a corporation organized and existing under the Laws of the State of Delaware (“Novartis”).  Xencor and Novartis are referred to in this Agreement individually as a “Party” and collectively as the “Parties”.

RECITALS:

WHEREAS, Xencor has developed expertise in engineering Antibodies (as defined below);

WHEREAS, Xencor has developed and controls Patents and Know-How directed to its half-life extension, IIb immune inhibitor, and cytotoxic Fc Region-related technologies, which are point mutations to the constant region of an antibody that can be introduced to extend the half-life in vivo of an Antibody, inhibit immune cell function and clear bound antigens from the circulation, or increase antibody-dependent cellular cytotoxicity of an Antibody (respectively);

WHEREAS, Novartis and its Affiliates possess expertise in discovering, developing, manufacturing, marketing, and selling pharmaceutical products worldwide, including with respect to discovering, developing, and manufacturing Antibodies and has developed and controls the Novartis Biological Material IP;

WHEREAS, Novartis desires to obtain from Xencor, and Xencor desires to grant to Novartis, a non-exclusive license to incorporate Xencor’s Fc Region-related technologies into certain biopharmaceuticals of Novartis; and

WHEREAS, Novartis desires to obtain from Xencor, and Xencor desires to grant to Novartis, an exclusive license to Research, Develop, Manufacture and Commercialize Licensed Antibodies and Licensed Products (each, as defined below), subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the Parties hereby agree as follows:

1.DEFINITIONS

1.1.Definitions.

Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, will have the respective meanings set forth below:

1.1.1.“AAA” has the meaning set forth in Section 16.4.3. 

1.1.2.“Accounting Standards” means, GAAP, with respect to Xencor and IFRS, with respect to Novartis, in each case, as generally and consistently applied throughout the Party’s organization.  Each Party shall promptly notify the other in the event that it changes the Accounting Standards pursuant to which its records are maintained, provided however, that each Party may only use internationally recognized accounting principles (e.g., IFRS, GAAP, etc.).

1.1.3.“Acquirer” means, collectively, the Third Party referenced in the definition of Change of Control and such Third Party’s Affiliates, other than the applicable Party in the definition of Change of Control and such Party’s Affiliates, determined as of immediately prior to the closing of such Change of Control. 

1.1.4.“Additional Development Activities” has the meaning set forth in Section 5.1.2.4(a).

1.1.5.“Additional Development Data Package” has the meaning set forth in Section 5.1.2.4(d).

1.1.6.“Additional Development Opt-In Date” has the meaning set forth in Section 5.1.2.4(d).

1.1.7.“Additional Development Opt-In Notice” has the meaning set forth in Section 5.1.2.4(d).

1.1.8.“Additional Development Proposal” has the meaning set forth in Section 5.1.2.4(a).

1.1.9.“Affiliate” means, with respect to a Person, any other Person that controls, is controlled by, or is under common control with such Person.  For purposes of this Agreement, a Person will be deemed to control another Person if it owns or controls, directly or indirectly, more than 50% of the equity securities of such other Person entitled to vote in the election of directors (or, in the case that such other Person is not a corporation, for the election of the corresponding managing authority), or otherwise has the power to direct the management and policies of such other Person.  The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than 50%, and that in such case such lower percentage will be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management and policies of such entity.

1.1.10.“Alliance Manager” has the meaning set forth in Section 2.1.

1.1.11.“Annual Net Sales” means Net Sales recorded in a given Calendar Year.

1.1.12.“Antibody” means a protein comprising an [...***...].  For clarity, an Antibody that differs in [...***...] will be treated as a

separate Antibody.  Notwithstanding the foregoing, solely with respect to Fc Licensed Antibodies, the term Antibody shall include [...***...].

1.1.13.“Antitrust Laws” means any federal, state or foreign law, regulation or decree, including the HSR Act, designed to prohibit, restrict or regulate actions for the purpose or effect of monopolization or restraint of trade.

1.1.14.“Audited Party” has the meaning set forth in Section 10.10.

1.1.15.“Auditing Party” has the meaning set forth in Section 10.10.

1.1.16.“Auditor” has the meaning set forth in Section 10.10.

1.1.17.“Available” means, with respect to a:

1.1.17.1.[...***...].

1.1.17.2.[...***...]. 

1.1.18.  “Availability” has the correlative meaning to “Available”.

1.1.19.“Bankruptcy Code” has the meaning set forth in Section 15.4.

1.1.20.“Bankrupt Party” has the meaning set forth in Section 9.6.

1.1.21.“[...***...]”  means the human [...***...] protein [...***...].

1.1.22.“Biosimilar Application” means an application submitted to the FDA under subsection (k) of Section 351 of the PHSA, or any analogous application submitted to a Regulatory Authority in the United States or in another country in the world.

1.1.23.“Biosimilar Product” means, [...***...]

[...***...]. 

1.1.24.“Bispecific Antibody(ies)” means an Antibody that [...***...]. 

1.1.25.“BLA” means (a) a Biologics License Application as defined in the FD&C Act and the regulations promulgated thereunder, (b) a Marketing Authorization Application (“MAA”) in the EU, or (c) any equivalent or comparable application, registration or certification in any other country or region.

1.1.26.“Brief” has the meaning set forth in Section 16.4.4.2(b).

1.1.27.“Business Day” means a day other than a Saturday, Sunday or a bank or other public holiday in California or Massachusetts in the United States or Basel, Switzerland.

1.1.28.“Calendar Quarter” means the respective periods of three consecutive calendar months ending on March 31, June 30, September 30 and December 31 of each Calendar Year.

1.1.29.“Calendar Year” means each successive period of 12 months commencing on January 1 and ending on December 31.

1.1.30.[...***...].

1.1.31.[...***...].

1.1.32.[...***...].

1.1.33.  “cGCP” means the then-current ethical, scientific and quality standards required by FDA for designing, conducting, recording and reporting trials that involve the participation of human subjects, as set forth in FDA regulations in 21 C.F.R. Parts 11, 50, 54, 56, and 312 and related FDA guidance documents, and by the International Conference on Harmonization E6: Good Clinical Practices Consolidated Guideline, or as otherwise required by Laws.

1.1.34.“cGLP” means the then-current good laboratory practice as required by the FDA under 21 C.F.R. Part 58 and all applicable FDA rules, regulations, orders and guidances, and the requirements with respect to current good laboratory practices prescribed by the European Community, the OECD (Organization for Economic Cooperation and Development Council) and the ICH Guidelines, or as otherwise required by Laws.

1.1.35.“cGMP” means the then-current good manufacturing practices as required by the FDA under provisions of 21 C.F.R. Parts 210 and 211 and all applicable FDA rules, regulations, orders and guidances, and the requirements with respect to current good manufacturing practices prescribed by the European Community under provisions of “The Rules Governing Medicinal Products in the European Community, Volume 4, Good Manufacturing Practices, Annex 13, Manufacture of Investigational Medicinal Products, July 2003,” or as otherwise required by Laws.

1.1.36.“Change of Control” means, with respect to a Party, (a) a merger or consolidation of such Party with a Third Party that results in the voting securities of such Party outstanding immediately prior thereto, or any securities into which such voting securities have been converted or exchanged, ceasing to represent at least 50% of the combined voting power of the surviving entity or the parent of the surviving entity immediately after such merger or consolidation, (b) a transaction or series of related transactions in which a Third Party, together with its Affiliates, becomes the direct or indirect beneficial owner of more than 50% of the combined voting power of the outstanding securities of such Party, or (c) the sale or other transfer to a Third Party of all or substantially all of such Party’s and its controlled Affiliates’ assets.

1.1.37.“Clinical Study” means a Phase 1 Study, Phase 2 Study, Phase 3 Study, Post-Marketing Study, Supplemental Study or other study (including a non-interventional study) in humans to obtain information regarding a product, including information relating to the safety, tolerability, pharmacological activity, pharmacokinetics, dose ranging or efficacy of the product.

1.1.38.“Clinical Trial Budget” has the meaning set forth in Section 5.1.2.2.

1.1.39.“CMC” means chemistry, manufacturing and controls.

1.1.40.[...***...].

1.1.41.“Co-Detail Notice” has the meaning set forth in Section 6.3.2.1.

1.1.42.“Co-Detail Option Exercise Notice” has the meaning set forth in Section 6.3.2.1.

1.1.43.“Co-Detail Option” has the meaning set forth in Section 6.3.2.1.

1.1.44.“Co-Detailed Optioned Licensed Product” has the meaning set forth in Section 6.3.2.1.

1.1.45.[...***...].

1.1.46.“Collaboration” means the collaboration of the Parties under this Agreement, including the Research, Development, Commercialization and Manufacture of Licensed Antibodies and Licensed Products (other than Fc Licensed Antibodies and Fc Licensed Products) in the Field.

1.1.47.“Collaboration In-License” has the meaning set forth in Section 9.5.1.4(a).

1.1.48.“Collaboration IP” means Novartis Collaboration IP, Xencor Collaboration IP, and each Party’s interest in Joint Collaboration IP.

1.1.49.“Combination Product” means any pharmaceutical preparations, in any dosage strengths, formulations and methods of administration, that combine the Licensed Product and one or more other active ingredients (other than another Licensed Product) in fixed dose combination, whether co-formulated or co-packaged.  The Parties agree that nothing in this definition is intended to limit the possibility of the Parties from Developing, Manufacturing or Commercializing, as part of this Agreement, any product comprising a combination of two or more Licensed Products.

1.1.50.“Combination Therapy” means a therapy that includes a Licensed Product and at least one additional active ingredient that is not a Licensed Product (an “Other Product”) sold separately but approved (or being Developed for approval) for use in combination, whether sold at a single price point or under separate price points or as part of a course of treatment.

1.1.51.“Commercialization” or “Commercialize” means any and all activities directed to marketing, promoting, distributing, importing, exporting, using, offering to sell or selling a product, and activities directed to obtaining Pricing Approvals, as applicable.

1.1.52.“Commercialization Costs” [...***...].

1.1.53.“Commercialization Cost Calculation Report” has the meaning set forth in Section 6.3.4.

1.1.54.“Commercialization Plans” means, collectively, the Novartis Territory Commercialization Plans, the Xencor Territory Commercialization Plans and the OLP Commercialization Plan.

1.1.55.“Commercially Reasonable Efforts” means, with respect to a Party, the efforts and resources typically used by biotechnology or pharmaceutical companies similar in size and scope to such Party to perform the obligation at issue, which efforts will not be less than those efforts made with respect to other products at a similar stage of development or in a similar stage of product life, with similar developmental risk profiles, of similar market and commercial potential, taking into account the proprietary position of the products relative to the products of Third Parties, the regulatory structure involved, Regulatory Authority-approved labeling, product profile, the profitability of the applicable products, issues of safety and efficacy, the likely timing of the product’s entry into the market, the likelihood of receiving Regulatory Approval, and other relevant scientific, technical and commercial factors.  [...***...]. 

1.1.56.“Committee” means the Joint Steering Committee, Joint Development Committee or Joint Commercialization Committee, or any other subcommittee established under Section 2.2.3.13, as applicable.

1.1.57.“Competing Program” means a Xencor Competing Program or a Novartis Competing Program, as applicable.

1.1.58.“Confidential Information” means any and all confidential or proprietary information and data and all other scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data, whether communicated in writing or orally or by any other method, which is or has been provided by or on behalf of one Party to the other Party or its designee in connection with this Agreement.  “Confidential Information” includes the following, which are transferred, disclosed or made available by the disclosing Party: confidential and proprietary technical and commercial information, Know-How, amino acid and nucleic acid sequences, biochemical, cell based and animal assays, animal models, dosages, dosage schedules, drawings, specifications, models and/or designs relating to development, manufacture, production, registration, promotion, distribution, marketing, performance or sale(s); experimental, manufacturing, process, analytical, packaging, product,

warehousing, quality control and quality assurance and marketing specifications, standards, procedures, processes, methods, instructions and techniques, samples, prototypes, formulae, writings of any kind, opinions or otherwise unwritten data or in the form of computer software or computer programs; biological, chemical or physical materials provided under this Agreement; and reports provided under this Agreement.

1.1.59.“Control” means, with respect to any Patents, Know-How or other intellectual property right, the possession, legal authority or right (whether by ownership, license or sublicense, other than by a license, sublicense or other right granted (but not assignment) pursuant to this Agreement) by a Party of the ability to assign or grant to the other Party the licenses, sublicenses or rights to access and use or disclose such Patents or Know-How as provided for in this Agreement, without, other than with respect to any In-Licenses, paying any consideration to any Third Party (now or in the future) or violating the terms of any agreement or other arrangement with any Third Party in existence as of the time such Party would be required hereunder to grant such license, sublicense or rights of access and use.  Notwithstanding anything in this Agreement to the contrary, a Party will be deemed not to Control any Patents or Know-How that are owned or in-licensed by an Acquirer except (a) with respect to any such Patents or Know-How arising from active participation by employees or consultants of the Acquirer in the Collaboration after such Change of Control, which Patents and Know-How shall be owned in accordance with Section 14.2, (b) to the extent that any such Patents or Know-How are included in or used in furtherance of the Collaboration by the Acquirer after such Change of Control, which Patents and Know-How shall be owned in accordance with Section 14.2, or (c) for Know-How and Patents constituting improvements (or direct improvements to such improvements) to the Xencor Technology or the Novartis Technology (as applicable) in existence prior to such Change of Control developed or conceived by any employees or consultants of the Acquirer in connection with the Collaboration, which Patents and Know-How shall be owned in accordance with Section 14.2.

1.1.60.“Cost of Goods Sold” or “COGS” means costs incurred by a Party in the actual Manufacturing of the Optioned Licensed Product, established on a regular, standard basis in accordance with the Manufacturing Party’s Accounting Standards as consistently applied by such Party, expressed on a per unit basis.  COGS shall include the following elements:

1.1.60.1.[...***...];

1.1.60.2.[...***...];

1.1.60.3.[...***...]

[...***...];

1.1.60.4.[...***...];

1.1.60.5.[...***...]; and

1.1.60.6.[...***...].

1.1.61.“Cover”, “Covering” or “Covered” means, with respect to each Licensed Product, that, but for a license granted to a Person under a claim included in a Patent, the Research, Development, Manufacture, or Commercialization of such Licensed Product in the Field in the Territory by such Person would infringe, or contribute to or induce the infringement of, such claim, or with respect to a Patent application, as if such claim was contained in an issued Patent. 

1.1.62.“CREATE Act” has the meaning set forth in Section 14.1.2.

1.1.63.“Current ex-US RLP Patents” mean those Patents within Xencor Technology in existence as of the Effective Date that solely and specifically Cover the sale, offer for sale, manufacture, use or import of any Regional Licensed Product in the Novartis Territory, including, to the extent possible, Xencor Patents bifurcated after the Effective Date in accordance with Section 14.2.4.

1.1.64.“Detail” or “Detailing” means, with respect to each Optioned Licensed Product launched by Novartis in the United States, a selling presentation for such product by a representative of each Party’s sales force, or another employee of each Party who may be deemed to be part of the Commercialization effort for such Optioned Licensed Product (e.g., such as a key account manager, etc.). 

1.1.65.“Develop” and “Development” means any and all clinical drug development activities conducted before or after obtaining Regulatory Approval that are reasonably related to or leading to the development, preparation and submission of data and information to a Regulatory Authority for the purpose of obtaining, supporting or expanding Regulatory Approval or to the appropriate body for obtaining, supporting or expanding Pricing Approval, including all activities related to pharmacokinetic profiling, design and conduct of Clinical Studies, regulatory affairs, statistical analysis, report writing, and regulatory filing creation and submission (including the services of outside advisors and consultants in connection therewith).

1.1.66.“Development Budget” means the OLP Development Budget and the RLP Development Budget.

1.1.67.“Development Costs” means, with respect to each of the Regional Target Pairs and the Optioned Target Pair, those costs and expenses directly incurred in connection with the performance of any Development activities for the applicable Licensed Antibodies or Licensed Products in accordance with the applicable Development Plans, including FTE Costs, fees charged by Third Party service providers, costs related to study drug, placebo, or comparator supply, and other Out-of-Pocket Costs reasonably incurred in connection with the performance of any Clinical Study with respect to such Licensed Antibodies or Licensed Products, costs related to preparing and filing applications for Regulatory Approval or submissions to Regulatory Authorities (including associated filing fees, translation expenses and legal and other professional service fees), but excluding (a) overhead costs and capital expenditures, and (b) costs associated with Supplemental Studies (other than for Supplemental Studies added to the RLP Development Plan for such Regional Target pursuant to Section 5.1.2.4).

1.1.68.“Development Plan” means each of the RLP Development Plan and the OLP Development Plan.

1.1.69.“Developmental Milestone Event” has the meaning set forth in Section 10.4.

1.1.70.“Developmental Milestone Payment” has the meaning set forth in Section 10.4.

1.1.71.“Disputes” has the meaning set forth in Section 16.4.1.

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

1.1.73.“Effective Date” has the meaning set forth in the preamble. 

1.1.74.“EMA” means the European Medicines Agency and any successor Governmental Authority having substantially the same function.

1.1.75.“EU” means the European Union, as its membership may be constituted from time to time, and any successor thereto; provided, that, for purposes of this Agreement the EU will be deemed to include any of France, Germany, Italy, Spain, or the United Kingdom, should any such country leave the European Union.

1.1.76.“Excluded Target Pairs” means each of those Target pairs set forth on Schedule 1.1.76.

1.1.77.“Exclusivity Period” means, [...***...].

1.1.78.“Executive Officer” means, for Xencor, its Chief Executive Officer, and for Novartis, its President or another senior executive designee with responsibilities and seniority comparable thereto, provided that any of the foregoing individuals may designate the Chief Financial Officer of his/her Party as his/her designee for financial related matters.  In the event that the position of any of the Executive Officers no longer exists due to a Change of Control, corporate reorganization, corporate restructuring or the like, the applicable Executive Officer will be replaced with another executive officer with responsibilities and seniority comparable to the eliminated Executive Officer.

1.1.79.“Existing Novartis In-License” means (a) any agreements entered into by Novartis or an Affiliate with a Third Party prior to the Effective Date pursuant to which Novartis or any of its Affiliates Controls any Novartis Technology, and (b) any agreement entered into by Novartis or an Affiliate with a Third Party pursuant to Sections 3.1.9, 5.1.6, 5.2.5 and 5.3.6, which are deemed to be Existing Novartis In-Licenses under such Sections; and, with respect to both (a) and (b) any amendments or restatements thereto during the Term in accordance with Section 12.5.3, but excluding any Collaboration In-License to which Novartis or its Affiliates is a party.

1.1.80.“Existing Xencor In-License” means (a) any agreements entered into by Xencor or an Affiliate with a Third Party prior to the Effective Date as set forth on Exhibit A-3 pursuant to which Xencor or any of its Affiliates Controls any Xencor Technology, and (b) any agreement entered into by Xencor or an Affiliate with a Third Party pursuant to Sections 3.1.9, 5.1.6 and 5.3.6, which are deemed to be Existing Xencor In-Licenses under such Sections; and, with respect to both (a) and (b) any amendments or restatements thereto during the Term in

accordance with Section 12.5.3, but excluding any Collaboration In-License to which Xencor or its Affiliates is a party.

1.1.81.“Expedited Arbitration” has the meaning set forth in Section 16.4.4.1.

1.1.82.“Expedited Dispute” has the meaning set forth in Section 16.4.4.1.

1.1.83.“Fc Gatekeeper” has the meaning set forth in 3.2.1.1.

1.1.84.“Fc GLP Tox Milestone” has the meaning set forth in Section 10.4.4.

1.1.85.“Fc Know-How” means Know-How Controlled by Xencor or its Affiliates during the Fc Target Selection Period that is reasonably necessary to Research, Develop, Manufacture or Commercialize Fc Licensed Antibodies or Fc Licensed Products in the Field in the Territory.

1.1.86.“Fc Licensed Antibody” means an Antibody (other than a Regional Licensed Antibody, Global Licensed Antibody or Optioned Licensed Antibody) for which all of the following hold true: (a) Novartis has provided timely written notice under Section 3.2.1.3 identifying a Target (including a Target that would be Specifically Bound by a Bispecific Antibody) that it wishes to designate as a Fc Target, (b) the Antibody must contain an Fc Licensed Component, and (c) the Antibody must not Specifically Bind any other Target other than the Fc Target that is the subject of the foregoing subclause (a). 

1.1.87.“Fc Licensed Component” means [...***...]. 

1.1.88.“Fc Licensed Product” means on an Fc Target-by-Fc Target basis, a product containing an Fc Licensed Antibody as an active ingredient, and all formulations, dosages and delivery systems thereof; provided that, an Fc Licensed Product does not include any Antibodies, compounds or products of Xencor or any of its Affiliates other than the Fc License Antibody, Global Licensed Product or Regional Licensed Product, as applicable, contained in or comprising such Fc Licensed Product.

1.1.89.“Fc Notice” has the meaning set forth in Section 3.2.1.3.

1.1.90.“Fc Patents” means those Patents listed on Exhibit A-1 and any Patents Controlled by Xencor or its Affiliates during the Term that Cover any Fc Licensed Component in the Field in the Territory.

1.1.91.“Fc Region” means the [...***...] and any variant, fragment or portion thereof, including naturally occurring fragments, naturally occurring variants of such fragments and non-naturally occurring variants of such fragments.

1.1.92.“Fc Target” means a target that is selected by Novartis and confirmed by the Fc Gatekeeper pursuant to Section 3.2.1.

1.1.93.“Fc Target Selection Period” means the period beginning on the Effective Date and ending upon the [...***...] anniversary of the Effective Date. 

1.1.94.“Fc Target Unavailable List” has the meaning set forth in Section 3.2.1.2.

1.1.95.“Fc Technology” means the Fc Know-How and Fc Patents.

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

1.1.97.“FD&C Act” means the United States Federal Food, Drug and Cosmetic Act, as amended.

1.1.98.“Field” means the treatment, diagnosis (including companion diagnostics) or prevention of all human or animal diseases or disorders.

1.1.99.“Finance Officers” has the meaning set forth in Section 10.3.1.

1.1.100.“First Commercial Sale” means, on a Licensed Product-by-Licensed Product, and country-by-country basis, the first commercial sale in an arms’-length transaction of a Licensed Product to a Third Party by a Party or any of its Related Parties in such country following receipt of applicable Regulatory Approval of such Licensed Product in such country.  For clarity, the First Commercial Sale shall not include (a) any distribution or other sale solely for patient assistance, named patient use, compassionate use, or test marketing programs or non-registrational studies or similar programs or studies where the Licensed Product is supplied without charge or at the actual manufacturing cost thereof (without allocation of indirect costs or any markup); or (b) any sale by a Party to its Affiliates or Sublicensees. 

1.1.101.“FTE” means a full-time employee, or in the case of less than a full-time employee, a full-time equivalent employee year, carried out by an appropriately qualified employee of a Party or its Related Parties, based on [...***...] person-hours per year.  For clarity, indirect personnel (including support functions such as managerial, financial, legal or business development) shall not constitute FTEs.

1.1.102.“FTE Costs” means, for any period, the FTE Rate multiplied by the number of FTEs in such period.

1.1.103.“FTE Rate” means $[...***...] per one full FTE per full 12 month Calendar Year, which rate includes all direct and indirect costs of a Party’s FTE, including personnel and travel expenses, provided that, starting January 1, 2017, such rate will adjust on January 1 of each Calendar Year by an amount equal to the change, if any, in the Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average, 1982-84 = 100, calculated by the Bureau of Labor Statistics during the immediately preceding Calendar Year.  Notwithstanding the foregoing, for any Calendar Year during the Term that is less than a full year, the above referenced rate will be proportionately reduced to reflect such portion of FTEs for such full Calendar Year.

1.1.104.“Fv Region” means an [...***...].

1.1.105.“GAAP” means generally accepted accounting principles as practiced in the United States, as consistently applied.

1.1.106.“Global Licensed Antibody” means, on a Global Target Pair-by-Global Target Pair basis, any Bispecific Antibody that (a) Specifically Binds to such Global Target Pair and (b) is (i) Researched by or on behalf of Xencor or its Related Parties under a Research Program, and/or (ii) Researched, Developed or Commercialized by or on behalf of Novartis or its Related Parties pursuant to this Agreement, provided that after a Change of Control of a Party, [ ...***...]. 

1.1.107.“Global Licensed Product” means, on a Global Target Pair-by-Global Target Pair basis, a product containing or comprising (or using as part of a Combination Product) a Global Licensed Antibody as an active ingredient, and all formulations, dosages and delivery systems thereof; provided that, a Global Licensed Product does not include any Antibodies, compounds or products of Xencor or any of its Affiliates other than the Global Licensed Antibody contained in or comprising such Global Licensed Product.

1.1.108.“Global Target Pair” means [...***...] or such other Target pair as is identified or substituted pursuant to Section 3.1, subject to a total of four such Target pairs at

any one time or, in the case where Xencor has exercised its Opt-In Right and not exercised its Opt-Out Right pursuant to Section 5.3.7, three such Target pairs at any one time.

1.1.109.“Global Target Pair Selection/Replacement Period” means the period beginning on the Effective Date and ending upon the [...***...] of the Effective Date.

1.1.110.“GLP Toxicology Study” means a toxicology study, in species that satisfies applicable regulatory requirements, using applicable cGLP that meets the standard necessary for submission as part of an IND Filing with the applicable Regulatory Authority.

1.1.111.“Governmental Authority” means any applicable government authority, court, tribunal, arbitrator, agency, department, legislative body, commission or other instrumentality of (a) any government of any country or territory, (b) any nation, state, province, county, city or other political subdivision thereof or (c) any supranational body.

1.1.112.“Gross Profits” means Net Sales in the United States less Cost of Goods Sold in the United States for sales of Optioned Licensed Products by Novartis or its Related Parties to Third Parties in the United States. 

1.1.113.“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

1.1.114.“IFRS” means International Financial Reporting Standards, the set of accounting standards and interpretations as promulgated by the International Standards Accounting Board and as they may be updated for time to time, as consistently applied.

1.1.115.“IND” means an investigational new drug application, clinical trial application or similar application or submission for approval to conduct human clinical investigations filed with or submitted to a Regulatory Authority in conformance with the requirement of such Regulatory Authority, and any amendments thereto.

1.1.116.“IND Acceptance” means the acceptance by a Regulatory Authority in a Major Market Country of an IND.

1.1.117.“IND Filing” means the filing with a Regulatory Authority in a Major Market Country of an IND.

1.1.118.“Indemnified Party” has the meaning set forth in Section 13.4.

1.1.119.“Indemnifying Party” has the meaning set forth in Section 13.4

1.1.120.“Indication” means a disease or pathological condition for which a BLA application or an efficacy supplement (or other addition) to an existing BLA application is required for the purpose of obtaining Regulatory Approval in a country.

1.1.121.“Infringement” means, where the making, using, selling, offering for sale or importing by any Third Party (other than any Sublicensee or authorized purchaser or other transferee of a Licensed Product) of any pharmaceutical product is Covered by a Valid Claim of a Patent licensed under Xencor Technology or Novartis Technology.  For clarity, the filing of a Biosimilar Application with respect to a Licensed Product as the reference product by any such Third Party will be deemed to be Infringement.

1.1.122.“Initiation” means, with respect to a Clinical Study of a Licensed Product, the first dosing of the first human subject pursuant to the protocol for such Clinical Study.

1.1.123.“In-Licenses” means, collectively, all Existing Xencor In-Licenses and all Existing Novartis In-Licenses.

1.1.124.“Internal Program” means, [...***...].

1.1.125.“Invention Period” means, [...***...].

1.1.126.“IP Committee” means the intellectual property advisory committee as more fully described in Section 14.3.1.

1.1.127.“JCC” or “Joint Commercialization Committee” has the meaning set forth in Section 2.4.1.

1.1.128.“JDC” or “Joint Development Committee” has the meaning set forth in Section 2.3.1.

1.1.129.“Joint Collaboration IP” has the meaning set forth in Section 14.2.3.

1.1.130.“JSC” has the meaning set forth in Section 2.2.1.

1.1.131.“Know-How” means all commercial, technical, scientific and other know-how and information, amino acid and nucleic acid sequences, biochemical, cellular and animal assays, animal models, trade secrets, knowledge, technology, methods, processes, practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical

assistance, designs, drawings, assembly procedures, computer programs, specifications, data and results (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, preclinical, clinical, safety, manufacturing and quality control data and know-how, including regulatory data, study designs and protocols), and Materials, in all cases, whether or not confidential, proprietary, patented or patentable, in written, electronic or any other form now known or hereafter developed.

1.1.132.“Landed Costs” mean, [...***...].

1.1.133.“Laws” means all applicable laws, statutes, rules, regulations, orders, judgments, injunctions, ordinances or other pronouncements having the binding effect of law of any Governmental Authority.

1.1.134.“Lead Party” has the meaning set forth in Section 14.4.2.4(a).

1.1.135.“Licensed Antibody” means any Regional Licensed Antibody, Global Licensed Antibody, Optioned Licensed Antibody or Fc Licensed Antibody.  For clarity, a Licensed Antibody shall be synonymous with the Licensed Product containing or comprising such Licensed Antibody.

1.1.136.“Licensed Product” means any Regional Licensed Product, Global Licensed Product, Optioned Licensed Product or Fc Licensed Product.

1.1.137.“Licensed Target Pair” means any Regional Target Pair, Global Target Pair or Optioned Target Pair.

1.1.138.“Losses” has the meaning set forth in Section 13.1.

1.1.139.“Loss of Market Exclusivity” means, with respect to any Licensed Product in any country, the following has occurred (a) the Net Sales of such Licensed Product in that country in any Calendar Year are less than [...***...] and (b) the decline in such sales is [...***...].

1.1.140.“MAA” has the meaning set forth in Section 1.1.25.

1.1.141.“Major Market Countries” means the United States, France, Germany, Italy, Spain, the United Kingdom and Japan.

1.1.142.“Manufacturing” or “Manufacture” means all activities related to the manufacture of Licensed Antibodies or Licensed Products, including manufacturing supplies for Research, Development or Commercialization, packaging, in-process and finished product

testing, release of product or any component or ingredient thereof, quality assurance and quality control activities related to manufacturing and release of product, ongoing stability tests, storage, shipment, and regulatory activities related to any of the foregoing.

1.1.143.“Manufacturing Proposing Party” has the meaning set forth in Section 8.3.

1.1.144.“Materials” mean all tangible compositions of matter, devices, articles of manufacture, assays, biological, chemical or physical materials and other similar materials.

1.1.145.“material communications” has the meaning set forth in Section 7.1.1.1(b).

1.1.146.“Medical Affairs Activities” means design, strategies, oversight and implementation of activities designed to ensure or improve appropriate medical use of, conduct medical education of, or further research regarding, a Licensed Product, including by way of example (i) activities of medical liaisons, (ii) grants to support continuing independent medical education (including independent symposia and congresses), and (iii) development, publication and dissemination of publications in support of an approved indication for a Licensed Product, as well as medical information services (and the content thereof) provided in response to inquiries communicated via the sales representatives or received by letter, phone call or email.

1.1.147.“Milestone Payments” has the meaning set forth in Section 10.5.

1.1.148.“Net Sales”  means the net sales recorded by or on behalf of Novartis or any of its Affiliates or Sublicensees, excluding distributors and wholesalers, for any Licensed Product sold to Third Parties other than Sublicensees, as determined in accordance with Novartis’ Accounting Standards as consistently applied, less a deduction of [...***...] percent ([...***...]%) for direct expenses related to the sales of such Licensed Product, distribution and warehousing expenses and uncollectible amounts on previously sold products.  The deductions booked on an accrual basis by Novartis and its Affiliates and Sublicensees under its Accounting Standards to calculate the recorded net sales from gross sales include the following:

1.1.148.1.[...***...],

1.1.148.2.[...***...],

1.1.148.3.[...***...],

1.1.148.4.[...***...],

1.1.148.5.[...***...],

1.1.148.6.[...***...],

1.1.148.7.[...***...]; and

1.1.148.8.[...***...].

1.1.148.9.[...***...]:

(a)[...***...];

(b)[...***...];

(c)In the event the Licensed Product is sold as a Combination Product, the Net Sales of the Licensed Product, for the purposes of determining royalty payments, shall be determined in good faith by multiplying the Net Sales of the Combination Product by the fraction A/(A+B) where A is the weighted (by sales volume) average sale price in a particular country of the Licensed Product containing the Licensed Antibody as the sole active ingredient when sold separately in finished form and B is the weighted (by sales volume) average sale price in that country of the products containing the other component(s) as the sole active ingredient(s) when sold separately in finished form. Regarding prices comprised in the weighted average price when sold separately referred to above, if these are available for different dosages from the dosages of Licensed Antibody and other active ingredient components that are included in the Combination Product, then Novartis shall be entitled to make a proportional adjustment to such prices in calculating the royalty-bearing Net Sales of the Combination Product.  In the event that such weighted average sale price cannot be determined for both the Licensed Product and the other product(s) in combination, the calculation of Net Sales for purposes of determining royalty payments shall be agreed by the Parties based on the relative value contributed by each component, such agreement not to be unreasonably withheld or delayed.

(d)[...***...]

[...***...].

1.1.149.“New RLP Patents” mean those Patents within Xencor Technology created after the Effective Date that solely and specifically Cover the sale, offer for sale, manufacture, use or import of any Regional Licensed Product in the Novartis Territory. 

1.1.150.“Non-Bankrupt Party” has the meaning set forth in Section 9.6.

1.1.151.“Non-Proposing Party” has the meaning set forth in Section 5.1.2.4(a).

1.1.152.“Non-Withholding Party” has the meaning set forth in Section 10.9.4.

1.1.153.“Novartis Biological Material Inventions” means, all Know-How (and Patents specifically claiming inventions therein) first developed or conceived as part of the Collaboration during the Term, whether by on behalf of employee(s), agent(s) or consultant(s) of Xencor or its Affiliates or Novartis or its Affiliates, individually or jointly, that primarily relates to any Novartis Biological Material IP, including any Patent that claims inventions therein.

1.1.154.“Novartis Biological Material IP” means all Know-How, including all tangible biological materials, vectors, cell banks, cells (including any derivatives or progeny thereof), cell culture processes and purification processes, reference standards, and cell culture media (including any Patents covering such Know-How) used in Manufacturing products that is Controlled by Novartis or its Affiliates as of the Effective Date, or any improvement developed thereto outside of the Collaboration. 

1.1.155.“Novartis Collaboration IP” has the meaning set forth in Section 14.2.2.

1.1.156.“Novartis Competing Program” has the meaning set forth in Section 12.6.2.2(a).

1.1.157.“Novartis Core Inventions” mean, (a) Novartis Biological Material Inventions; and (b) all other Know-How first developed or conceived as part of the Collaboration during the applicable Invention Period, whether by or on behalf of employee(s), agent(s) or consultant(s) of Xencor or its Affiliates or Novartis or its Affiliates, individually or jointly, that specifically and solely relates to a Licensed Target Pair, Licensed Antibody or Licensed Product, including any Patent that specifically and solely claims such Know-How therein. 

1.1.158.“Novartis GLP and OLP Infringement” means any Infringement by a Third Party with respect to a Global Licensed Product or Optioned Licensed Product in the Novartis Territory.

1.1.159.“Novartis Indemnitees” has the meaning set forth in Section 13.2.

1.1.160.“Novartis In-Licenses” means any Existing Novartis In-License or any Collaboration In-License to which Novartis is a party.

1.1.161.“Novartis Know-How” means Know-How Controlled by Novartis or its Affiliates as of the Effective Date or during the applicable Invention Period to the extent contributed to the Collaboration by Novartis and that is reasonably necessary for Xencor to Research, Develop or Commercialize Licensed Antibodies or Licensed Products (other than Fc Licensed Antibodies and Fc Licensed Products) in the Field, other than Novartis’ interest in Joint Collaboration IP and Novartis Collaboration IP. For clarity, Novartis will be deemed to have contributed Know-How to the Collaboration to the extent that it is (i) provided to Xencor or (ii) used by Novartis in the performance of its obligations or exercise of its rights under this Agreement.

1.1.162.“Novartis Patents” means those Patents Controlled by Novartis or its Affiliates as of the Effective Date or during the applicable Invention Period to the extent contributed to the Collaboration by Novartis and that are reasonably necessary to Research, Develop or Commercialize Licensed Antibodies or Licensed Products in the Field.  Novartis Patents excludes Patents included in Novartis Collaboration IP and Novartis’ interest in Joint Collaboration IP. For clarity, Novartis will be deemed to have contributed Patents to the Collaboration to the extent that it is (i) provided to Xencor or (ii) used by Novartis in the performance of its obligations or exercise of its rights under this Agreement.

1.1.163.“Novartis RLP Product Infringement” means any Infringement by a Third Party with respect to a Regional Licensed Product (excluding any Fc Licensed Product) in the Novartis Territory.

1.1.164.  “Novartis RLP Trademarks” has the meaning set forth in Section 14.8.1.2.

1.1.165.“Novartis Technology” means, collectively, Novartis Know-How, Novartis Patents, Novartis Collaboration IP and Novartis’ interest in Joint Collaboration IP; provided however, that Novartis Technology shall only include Novartis Biological Material IP to the extent contributed to the Collaboration by Novartis.  For clarity, Novartis will be deemed to have contributed Novartis Biological Material IP to the Collaboration to the extent that it is (i) provided to Xencor or (ii) used by Novartis in the performance of its obligations or exercise of its rights under this Agreement.

1.1.166.“Novartis Territory” means (a) with respect to any Global Licensed Product, Optioned Licensed Product or Fc Licensed Product, worldwide, and (b) with respect to

any Regional Licensed Product, all countries and territories of the world other than the Xencor Territory.

1.1.167.“Novartis Territory Commercialization Plan” has the meaning set forth in Section 6.1.3.

1.1.168.“OLP Commercialization Plan” has the meaning set forth in Section 6.3.3.

1.1.169.“OLP Development Budget” has the meaning set forth in Section 5.3.2.2.

1.1.170.“OLP Development Plan” has the meaning set forth in Section 5.3.2.1.

1.1.171.“Opt-In Right” has the meaning set forth in Section 4.1.1.

1.1.172.“Opt-Out Right” means each of Xencor’s rights to opt-out of the Development and Commercialization of all Regional Licensed Antibodies and Regional Licensed Products for a Regional Target Pair in accordance with Section 5.1.8 or all Optioned Licensed Antibodies and Optioned Licensed Products for the Optioned Target Pair in accordance with Section 5.3.7.

1.1.173.“Option Package” means, with respect to a given Global Licensed Product that Specifically Binds the applicable Global Target Pair, (a) the documents and information provided by or on behalf of Novartis or its Affiliates to the Regulatory Authority or from such Regulatory Authority to Novartis in connection with any IND Filing for such Global Licensed Product; and (b) the proposed development plan [...***...] in connection with such Global Target Pair.

1.1.174.“Optioned Licensed Antibody” means any Bispecific Antibody that (a) Specifically Binds to the Optioned Target Pair, and (b) (i) was Researched by or on behalf of Xencor or its Related Parties pursuant to this Agreement under the applicable Research Program prior to being selected as an Optioned Target Pair and/or (ii) is Researched, Developed or Commercialized by or on behalf of Novartis or its Related Parties pursuant to this Agreement, provided that after a Change of Control of a Party, [...***...]

[...***...].

1.1.175.“Optioned Licensed Product” means a product containing or comprising (or using as part of a Combination Product) an Optioned Licensed Antibody as an active ingredient, and all formulations, dosages and delivery systems thereof; provided that, an Optioned Licensed Product does not include any Antibodies, compounds or products of Xencor or any of its Affiliates other than the Optioned Licensed Antibody contained in or comprising such Optioned Licensed Product.

1.1.176.“Optioned Target Pair” has the meaning set forth in Section 4.1.1.

1.1.177.“Other Combination Therapy Product” has the meaning set forth in Section 5.1.7.

1.1.178.“Other Product” has the meaning set forth in Section 1.1.50.

1.1.179.“Out-of-Pocket Costs” means, with respect to certain activities hereunder, direct expenses paid or payable by either Party or its Affiliates to Third Parties and specifically identifiable and incurred to conduct such activities for a Regional Licensed Antibody or a Regional Licensed Product, or an Optioned Licensed Antibody or an Optioned Licensed Product, as applicable, including payments to contract personnel (including contractors, consultants and subcontractors) in each case, pursuant to the applicable Development Plan or Commercialization Plan.

1.1.180.“Patent” means all patents and patent applications and all substitutions, divisions, continuations, continuations-in-part, any patent issued with respect to any such patent applications, any reissue, reexamination, utility models or designs, renewal or extension (including any supplementary protection certificate) of any such patent, and any confirmation patent or registration patent or patent of addition based on any such patent, and all counterparts thereof in any country.

1.1.181.“Patent Costs” means the out-of-pocket costs and expenses paid to outside legal counsel and other Third Parties (including to any licensor pursuant to any in-license), and filing and maintenance expenses, incurred in Prosecuting and Maintaining Patents and enforcing and defending them.

1.1.182.“Person” means any natural person, corporation, unincorporated organization, partnership, association, sole proprietorship, joint stock company, joint venture, limited liability company, trust or government, or Governmental Authority, or any other similar entity.

1.1.183.“Phase 1 Study” means a clinical study of an investigational product in human patients with the primary objective of characterizing its safety, tolerability, and

pharmacokinetics and identifying a recommended dose and regimen for future studies as described in 21 C.F.R. 312.21(a), or a comparable Clinical Study prescribed by the relevant Regulatory Authority in a country other than the United States.  The investigational product can be administered to patients as a single agent or in combination with other investigational or marketed agents and a Phase 1 Study shall be deemed commenced when Initiated.

1.1.184.“Phase 2 Study” means a clinical study of an investigational product in human patients with the primary objective of characterizing its activity in a specific disease state as well as generating more detailed safety, tolerability, and pharmacokinetics information as described in 21 C.F.R. 312.21(b), or a comparable Clinical Study prescribed by the relevant Regulatory Authority in a country other than the United States including a human clinical trial that is also designed to satisfy the requirements of 21 C.F.R. 312.21(a) or corresponding foreign regulations and is subsequently optimized or expanded to satisfy the requirements of 21 C.F.R. 312.21(b) (or corresponding foreign regulations) or otherwise to enable a Phase 3 Clinical Study (e.g., a phase 1/2 trial).  The investigational product can be administered to patients as a single agent or in combination with other investigational or marketed agents and a Phase 2 Study shall be deemed commenced when Initiated.

1.1.185.“Phase 2b Study” means a phase 2b Study carried out prior to the initiation of pivotal Phase 3 Studies that is intended to be the definitive dose range finding study in patients with efficacy as primary endpoint, as well as safety, initiated after completion of a Phase I Clinical Study (or phase IIa Clinical Study, if performed), that will evaluate the dose-dependent effectiveness of a pharmaceutical product for a particular indication or indications in patients with the disease or condition under study, as well as to collect further adverse effects and safety data to assess the risks associated with the pharmaceutical product, and further pharmacokinetic data.

1.1.186.“Phase 3 Study” means a clinical study of an investigational product in human patients that incorporates accepted endpoints for confirmation of statistical significance of efficacy and safety with the aim to obtain Regulatory Approval in any country as described in 21 C.F.R. 312.21I, or a comparable Clinical Study prescribed by the relevant Regulatory Authority in a country other than the United States.  The investigational product can be administered to patients as a single agent or in combination with other investigational or marketed agents and a Phase 3 Study shall be deemed commenced when Initiated.

1.1.187.“PHSA” means the United States Public Health Service Act, as amended.

1.1.188.“Potential In-License” has the meaning set forth in Section 9.5.1.4(a).

1.1.189.“Post-Marketing Study” means a non-human or human clinical study of a Licensed Product initiated after receipt of Regulatory Approval for such Licensed Product in a country or territory, that is required by the Regulatory Authority in such country or territory to maintain the Regulatory Approval for such Licensed Product in such country or territory, but excluding any Supplemental Study.

1.1.190.“Pricing Approval” means such governmental approval, agreement, determination or decision establishing prices for a Licensed Product that can be charged or reimbursed in regulatory jurisdictions where the applicable Governmental Authorities approve or determine the price or reimbursement of pharmaceutical products.

1.1.191.“Pricing Matters” means all issues and decisions regarding (a) price, price terms and other contract terms with respect to Licensed Product sales, including discounts, rebates, other price concessions and service fees to payors and purchasers and (b) reimbursement programs applicable to a Licensed Product.  For clarity, Pricing Matters includes all financial issues and financial decisions with respect to contracting with managed care entities, hospitals, pharmacies, group purchasing organizations, pharmacy benefit managers and government, and specifically includes issues and decisions about the offer of discounts or rebates for formulary placement for Licensed Products.

1.1.192.“Primary RLP Supplier” has the meaning set forth in Section 8.3.

1.1.193.“Product Global Trademarks” means the Trademarks used, or intended for use, in connection with the distribution, marketing, promotion and sale of the Global Licensed Products, Optioned Licensed Products and Fc Licensed Products by Novartis and its Related Parties in the Novartis Territory.  Product Global Trademarks specifically exclude the corporate names and logos of the Parties and their Affiliates. 

1.1.194.“Promotional Materials” has the meaning set forth in Section 6.1.5.2.

1.1.195.“Proposed Fc Target” has the meaning set forth in Section 3.2.1.3.

1.1.196.“Proposed Global Target Pair” has the meaning set forth in Section 3.1.2.

1.1.197.“Proposing Party” has the meaning set forth in Section 5.1.2.4(a).

1.1.198.“Proprietary Product” has the meaning set forth in Section 5.1.7.

1.1.199.“Proposed Xencor Sublicense” has the meaning set forth in Section 9.1.2.2(d).

1.1.200.“Prosecution and Maintenance” means, with regard to a particular Patent, the preparation, filing, prosecution and maintenance of such Patent in any jurisdictions, as well as re-examinations, reviews, reissues and the like with respect to that Patent, together with the conduct of interferences, the defense of oppositions, defending post-grant reviews, defending inter partes reviews, and other similar proceedings with respect to that Patent and further including Patent management and litigation strategy.  For clarity, Prosecution and Maintenance does not include instituting post-grant reviews or inter partes review with respect to Patents of Third Parties. 

1.1.201.“Public Official” means (i) any officer, employee (including physicians, hospital administrators, or other healthcare professionals), agent, representative, department, agency, de facto official, representative, corporate entity, instrumentality or subdivision of any government, military or international organization, including any ministry or department of health or any state-owned or affiliated company or hospital, or (ii) any candidate for political office, any political party or any official of a political party.

1.1.202.“Regional Licensed Antibody” means, on a Regional Target Pair-by-Regional Target Pair basis, any Bispecific Antibody that (a) Specifically Binds to such Regional Target Pair, and (b) is (i) Controlled by Xencor or its Related Parties, including those Antibodies known as XmAb13676 and XmAb14045, and/or (ii) Researched, Developed or Commercialized by or on behalf of Novartis or its Related Parties pursuant to this Agreement, provided that after a Change of Control of a Party, no Antibodies of the Acquirer will be included as Regional Licensed Antibodies except to the extent [...***...].

1.1.203.“Regional Licensed Product” means, on a Regional Target Pair-by-Regional Target Pair basis, a product containing or comprising (or using as part of a Combination Product) a Regional Licensed Antibody as an active ingredient, and all formulations, dosages and delivery systems thereof; provided that, a Regional Licensed Product does not include any Antibodies, compounds or products of Xencor or any of its Affiliates other than the Regional Licensed Antibody contained in or comprising such Regional Licensed Product.

1.1.204.“Regional Target Pair” means each of (a) the Target pair CD3xCD20, and (b) the Target pair CD3xCD123.

1.1.205.“Regulatory Approval” means a BLA, together with all other approvals or establishment licenses, registrations or authorizations (including marketing authorizations) of any Regulatory Authority that may be necessary for the marketing, sale and commercialization of a pharmaceutical product in any country or region in the Territory.

1.1.206.“Regulatory Authority” means any Governmental Authority involved in granting approvals for the Development, Manufacturing and Commercialization, including Pricing Approval of Licensed Products, including the FDA, the EMA, the Japanese Ministry of Health, Labour and Welfare and the Pharmaceuticals and Medical Devices Agency in Japan.

1.1.207.“Regulatory Materials” means any regulatory application, submission, notification, communication, correspondence, registration, Regulatory Approvals and other filings made to, received from or otherwise conducted with a Regulatory Authority related to Developing, Manufacturing, obtaining marketing authorization, marketing, selling or otherwise Commercializing a pharmaceutical product in a particular country or jurisdiction.

1.1.208.“Related Party” means a Party’s Affiliates and permitted Sublicensees.

1.1.209.“Research” or “Researching” means activities, other than Development, related to the design, discovery, generation, identification, profiling, characterization, production, process development, cell line development, pre-clinical development or non-clinical or pre-clinical studies of drug candidates and products.

1.1.210.“Research Failure” means, [...***...].

1.1.211.“Research Plan” means the plan for conducting the Research Programs as set forth in Exhibit C.

1.1.212.“Research Program” means each of the programs for conducting Research in connection with the Global Licensed Antibodies for each of the Global Target Pairs.

1.1.213.“Research Term” means the time period commencing on the Effective Date and ending on the fifth anniversary of such date. 

1.1.214.“Restricted Licensed Antibody” means [...***...].

1.1.215.“Restricted Technology” means Xencor Technology, Novartis Technology (excluding Novartis Biological Material IP), and any Confidential Information of either Party or its Related Parties provided under or developed in connection with the Collaboration.

1.1.216.[...***...].

1.1.217.[...***...].

1.1.218.[...***...].

1.1.219.“Right of Reference” has the meaning set forth in Section 7.1.3. 

1.1.220.“RLP Branding Strategy” has the meaning set forth in Section 6.1.5.1.

1.1.221.“RLP Commercial Strategy” has the meaning set forth in Section 6.1.2.

1.1.222.“RLP Development Activities” means collectively, (a) those Development activities that are reasonably necessary to obtain initial Regulatory Approval of the applicable Regional Licensed Products in the applicable Major Market Country, and (b) any Additional Development Activities included in the initial RLP Development Plan or added pursuant to Section 5.1.2.4.

1.1.223.“RLP Development Budget” has the meaning set forth in Section 5.1.2.2.

1.1.224.“RLP Development Plan” has the meaning set forth in Section 5.1.2.1.

1.1.225.“RLP Patents” means Current ex-US RLP Patents and New RLP Patents.

1.1.226.“RLP Trademarks” means the Trademarks used, or intended for use, in connection with the Development and Commercialization of the Regional Licensed Products.  RLP Trademarks specifically exclude the corporate names and logos of the Parties and their Affiliates and Sublicensees.  RLP Trademarks include both the Xencor RLP Trademarks and the Novartis RLP Trademarks.

1.1.227.“Royalty Patents” means Xencor Patents, Patents within Xencor Collaboration IP, Patents within Novartis Collaboration IP (for clarity, including Patents that Cover Novartis Core Inventions), and Patents within Joint Collaboration IP, but excluding Patents within Novartis Biological Material IP.

1.1.228.“Royalty Term” has the meaning set forth in Section 10.7.1.

1.1.229.“Sales & Profit Share Report” means, with respect to a Calendar Quarter, a written report showing each of (a) the Gross Profits on sales of each Optioned Licensed Product in the United States during such Calendar Quarter, including Novartis’ calculation to arrive at Gross Profits which comprise Net Sales less COGS, and (b) the amounts payable by Novartis under Section 10.2, in United States Dollars, which shall have accrued hereunder with respect to such Gross Profits, including the exchange rates used to calculate such amounts. 

1.1.230.“Sales Milestone Event” has the meaning set forth in Section 10.5.

1.1.231.“Sales Milestone Payment” has the meaning set forth in Section 10.5.

1.1.232.“SDEA” means the Safety Data Exchange Agreement to be entered into by the Parties in accordance with Section 7.4. 

1.1.233.“Secondary RLP Supplier” has the meaning set forth in Section 8.3.

1.1.234.“Specifically Bind” means, [...***...].

1.1.235.“Sublicensee” means a Third Party to which a Party or its Affiliate has granted or grants rights, as permitted under this Agreement, to Research, Develop, Manufacture or Commercialize any Licensed Antibody or Licensed Product, or any further permitted sublicensee of such rights (regardless of the number of tiers, layers or levels of sublicenses of such rights).

1.1.236.“Supplemental Study” is any Clinical Study (other than any Post-Marketing Study) for an additional indication or other label expansion for a Regional Licensed Product beyond the initial Indication(s) contemplated by the applicable Development Plan or involving the Regional Licensed Product and one or more other products.

1.1.237.“Supply Agreement” has the meaning set forth in Section 8.5.2.1(a).

1.1.238.“Target” means a specific human protein that is bound by an Fv Region of an Antibody.  For clarity, CD3, CD20, CD123 and [...***...], and any specific human protein that is bound by an Fv Region of a Bispecific Antibody and that is added or substituted pursuant to Section 3.1, are each a Target.

1.1.239.“Tax” and “Taxation” means any form of tax or taxation, levy, duty, charge or withholding (including any related fine, penalty, addition to tax, surcharge or interest) imposed by, or payable to, a governmental authority.

1.1.240.“Tech Transfer Costs” has the meaning set forth in Section 8.3.

1.1.241.“Territory” means (a) with respect to Xencor, the Xencor Territory and (b) with respect to Novartis, the Novartis Territory.

1.1.242.“Term” has the meaning set forth in Section 15.1.

1.1.243.“Third Party” means any Person other than Novartis, Xencor or their respective Affiliates.

1.1.244.“Third Party Acquisition” has the meaning set forth in Section 12.6.2.1(a).

1.1.245.“Third Party Payment” has the meaning set forth in Section 9.5.1.

1.1.246.“Trademark” means any trademark, trade name, service mark, service name, brand, domain name, trade dress, logo, slogan or other indicia of origin or ownership, including the goodwill and activities associated with each of the foregoing.

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

1.1.248.“Valid Claim” means a claim of a Patent that (a) has not been rejected, revoked or held to be invalid or unenforceable by a court or other authority of competent jurisdiction, from which no appeal can be further taken, or (b) has not been finally abandoned, disclaimed or admitted to be invalid or unenforceable through reissue or disclaimer.  In order to be a Valid Claim, any claim being prosecuted in a pending patent application must be prosecuted in good faith and not have been pending for more than [...***...] years from the filing date of the first utility patent application (or equivalent concept in any such country) in the patent application family in the country in question, in which case it will cease to be considered a Valid Claim until the patent issues and recites said claim (from and after which time the same would be deemed a Valid Claim).

1.1.249.“Withdrawal Notice” has the meaning set forth in Section 2.7.

1.1.250.“Withholding Party” has the meaning set forth in Section 10.9.4.

1.1.251.[...***...].

1.1.252.[...***...].

1.1.253.“Xencor Collaboration IP” has the meaning set forth in Section 14.2.1.

1.1.254.“Xencor Competing Program” has the meaning set forth in Section 12.6.2.1(a).

1.1.255.“Xencor Core Inventions”  means, excluding Novartis Core Inventions, all Know-How first developed or conceived as part of the Collaboration during the applicable Invention Period, whether by on behalf of employee(s), agent(s) or consultant(s) of Xencor or its Affiliates or Novartis or its Affiliates, individually or jointly, that primarily relates to Xencor Know-How in existence as of the Effective Date, including any Patent that primarily claims such Know-How therein. 

1.1.256.“Xencor Indemnitees” has the meaning set forth in Section 13.1.

1.1.257.“Xencor In-Licenses” means any Existing Xencor In-License or any Collaboration In-License to which Xencor is a party.

1.1.258.“Xencor Know-How” means Know-How Controlled by Xencor or its Affiliates as of the Effective Date or during the Invention Period that is reasonably necessary to Research, Develop, Manufacture or Commercialize any Licensed Antibody (other than an Fc Licensed Antibody) or Licensed Product (other than an Fc Licensed Product) in the Field, other than Xencor’s interest in Joint Collaboration IP and Xencor Collaboration IP.  For clarity, and notwithstanding the foregoing, in all cases, Xencor Know-How [...***...].  Xencor Know-How excludes Know-How included in Fc Know-How.

1.1.259.“Xencor Patents” means those Patents listed on Exhibit A-2 and those Patents Controlled by Xencor or its Affiliates as of, the Effective Date or during the applicable Invention Period that are reasonably necessary to Research, Develop, Commercialize or Manufacture any Licensed Antibody (other than an Fc Licensed Antibody) or Licensed Product (other than an Fc Licensed Product) in the Field, including for clarity, RLP Patents.  Xencor Patents excludes Patents included in Fc Patents, Xencor Collaboration IP and Xencor’s interest in Joint Collaboration IP, and excludes Patents that cover Fv Regions other than CD3, CD20 or CD123.

1.1.260.“Xencor RLP Product Infringement” means any Infringement by a Third Party with respect to a Regional Licensed Product in the Xencor Territory.

1.1.261.“Xencor RLP Trademarks” has the meaning set forth in Section 14.8.1.2.

1.1.262.“Xencor Technology” means Xencor Know-How, Xencor Patents, Xencor Collaboration IP and Xencor’s interest in Joint Collaboration IP.

1.1.263.“Xencor Territory” means, with respect to any Regional Licensed Product, the United States, unless Xencor exercises its Opt-Out Right with respect to such Regional Licensed Product as set forth in Section 5.1.8.

1.1.264.“Xencor Territory Commercialization Plan” has the meaning set forth in Section 6.1.4.

2.GOVERNANCE

2.1.Alliance Manager.  Promptly following the Effective Date, each Party will designate an individual to facilitate communication and coordination of the Parties’ activities under this Agreement relating to Licensed Target Pairs, Licensed Antibodies and Licensed Products and to provide support and guidance to the JSC (each, an “Alliance Manager”).  Each Alliance Manager may also serve as a representative of its respective Party on one or more Committees.

2.2.Joint Steering Committee.

2.2.1.Purpose, Formation.  Within [...***...] after the Effective Date, the Parties will establish a joint steering committee (the “JSC”) that will monitor, make decisions, and provide strategic oversight of the activities under this Agreement and facilitate communications between the Parties with respect to the Research, Development, Manufacture and Commercialization of Licensed Antibodies and Licensed Products, all in accordance with this Section 2.2. 

2.2.2.Composition.  Each Party will initially appoint three representatives to the JSC, all of whom will have sufficient seniority within the applicable Party to make decisions arising within the scope of the JSC’s responsibilities.  The Parties’ initial representatives to the JSC are set forth on Exhibit B.  The JSC may change its size from time to time by mutual consent of its members, provided that the JSC will consist at all times of an equal number of representatives of each of Xencor and Novartis.  Each Party may replace its JSC representatives at any time upon written notice to the other Party.  The JSC may invite non-members to participate in the discussions and meetings of the JSC, provided that such participants have no voting authority at the JSC and are bound under written obligation of confidentiality no less protective of the Parties’ Confidential Information than those set forth in this Agreement.  For clarity, the Alliance Managers should attend meetings of the JSC.  The JSC will be co-chaired, with one chairperson designated by Xencor and one chairperson designated by Novartis, whose responsibilities will include conducting meetings, including, when feasible, ensuring that objectives for each meeting are set and achieved.  Responsibility for running each meeting of the JSC will alternate between the chairpersons from meeting-to-meeting, with Xencor’s chairperson running the first meeting.  The Alliance Managers will work with the chairpersons to prepare and circulate agendas and to ensure the preparation of minutes.  The chairpersons have no additional powers or rights beyond those held by the other JSC representatives.

2.2.3.Specific Responsibilities.  In addition to its overall responsibility for monitoring and providing strategic oversight with respect to the Parties’ activities under this Agreement, the JSC will in particular have the following responsibilities: 

2.2.3.1.discuss, prepare and approve amendments to the Research Plan,

2.2.3.2.review, discuss and oversee the conduct of the Research Programs,

2.2.3.3.review, discuss and oversee the Development of Regional Licensed Antibodies, including to discuss a plan for the Development of backups to the lead Regional Licensed Antibodies,

2.2.3.4.review, discuss and oversee the Commercialization of Regional Licensed Products and any other ongoing related activities, including approving the Commercialization Plans submitted by the JCC, 

2.2.3.5.review and discuss the Commercialization of Regional Licensed Products and any other ongoing related activities,

2.2.3.6.review, discuss and oversee the Manufacturing for the Licensed Antibodies (other than Fc Licensed Antibodies), including the supply chain,

2.2.3.7.facilitate the flow of information between the Parties with respect to Licensed Antibodies and Licensed Products,

2.2.3.8.review and discuss reports from the JDC and JCC, provide guidance thereto, direct the activities of such Committees, and review and approve each RLP Development Plan and OLP Development Plan, and, in each case, all amendments thereto,

2.2.3.9.review, discuss and approve the entry into any Collaboration In-Licenses with respect to the Research, Development, Manufacture or Commercialization of any Regional Licensed Antibodies, Regional Licensed Products, Optioned Licensed Antibodies and Licensed Products, 

2.2.3.10.review, discuss and coordinate the Parties’ scientific presentation and publication strategy relating to the Regional Licensed Products,

2.2.3.11.review and facilitate discussion of proposed publications and resolve disputes with respect thereto pursuant to Section 11.2.1,

2.2.3.12.attempt to resolve issues presented to it by, and disputes within, the JDC or JCC, or any other subcommittee,

2.2.3.13.establish such additional joint subcommittees as it deems necessary to achieve the objectives and intent of this Agreement, and

2.2.3.14.perform such other functions as appropriate, and direct each other Committee to perform such other functions as appropriate, to further the purposes of this Agreement, in each case as agreed in writing by the Parties or as expressly provided in this Agreement.

2.2.4.Meetings.  The JSC will meet at least once per [...***...] during the Term unless the Parties mutually agree in writing to a different frequency.  No later than [...***...] prior to any meeting of the JSC (or such shorter time period as the Parties may agree), the Alliance Managers will prepare and circulate an agenda for such meeting, provided however, that either Party may propose additional topics to be included on such agenda, either prior to or in the course of such meeting.  Either Party may also call a special meeting of the JSC (by videoconference, teleconference or in person) by providing at least [...***...] prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed prior to the next scheduled meeting, in which event such Party will work

with the co-chairs of the JSC and the Alliance Managers of both Parties to provide the members of the JSC no later than [...***...] prior to the special meeting with an agenda for the meeting and materials reasonably adequate to enable an informed decision on the matters to be considered.  The JSC may meet in person, by videoconference or by teleconference.  Notwithstanding the foregoing, at least one meeting per Calendar Year will be in person unless the Parties mutually agree in writing to waive such requirement.  In-person JSC meetings will be held at locations in the United States alternately selected by Xencor and by Novartis.  Each Party will bear the expense of its respective JSC members’ participation in JSC meetings.  Meetings of the JSC will be effective only if at least one representative of each Party (which representative is not such Party’s Alliance Manager) is present or participating in such meeting.  The Alliance Managers will be responsible for preparing reasonably detailed written minutes of all JSC meetings that reflect material decisions made and action items identified at such meetings.  The Alliance Managers will send draft meeting minutes to each member of the JSC for review and approval within [...***...] after each JSC meeting.  Such minutes will be deemed approved unless [...***...] members of the JSC objects to the accuracy of such minutes within [...***...] of receipt.  Minutes will be officially endorsed by the JSC at the next JSC meeting, including reflecting any differences noted by the Parties, and will be signed by the Alliance Managers.

2.3.Joint Development Committee.

2.3.1.Formation, Composition, Dissolution.  No later than [...***...] after the Effective Date the Parties will establish a committee to (a) oversee the Development of Regional Licensed Antibodies and Regional Licensed Products and Optioned Licensed Antibodies and Optioned Licensed Products in accordance with the applicable Development Plans and to coordinate the Development activities of the Parties with respect thereto, and (b) facilitate the flow of information between the Parties with respect to, and provide a forum to discuss, the Development of Optioned Licensed Antibodies, Optioned Licensed Products, Global Licensed Antibodies and Global Licensed Products (the “JDC”).  Each Party will initially appoint [...***...] representatives to the JDC, with each representative having knowledge and expertise in the Development of compounds and products similar to the Licensed Antibodies and Licensed Products and having 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, provided that the JDC will consist at all times of an equal number of representatives of each of Xencor and Novartis.  Each Party may replace its JDC representatives at any time upon written notice to the other Party.  The JDC may invite non-members to participate in the discussions and meetings of the JDC, provided that such participants have no voting authority at the JDC and are bound under written obligation of confidentiality no less protective of the Parties’ Confidential Information than those set forth in this Agreement.  For clarity, the Alliance Managers should attend all meetings of the JDC.  The JDC will be co-chaired, with one chairperson designated by Xencor and one chairperson designated by Novartis, whose responsibilities will include conducting meetings, including, when feasible, ensuring that objectives for each meeting are set and achieved.  Responsibility for running each meeting of the JDC will alternate between the chairpersons from meeting-to-meeting, with Novartis’

chairperson running the first meeting. Upon the later of (a) first commercial sale of the final Regional Licensed Product or Optioned Licensed Product, or (b) removal of any requirement for any Clinical Study established by a Regulatory Authority upon Regulatory Approval for the final Regional Licensed Product or Optioned Licensed Product in any country, the Parties agree that the JDC will be automatically dissolved with no further action required by either Party.

2.3.2.Specific Responsibilities of the JDC.  The JDC has the following responsibilities:

2.3.2.1.oversee and review Development responsibilities for each Regional Licensed Antibody, Regional Licensed Product, Optioned Licensed Antibody and Optioned Licensed Product,

2.3.2.2.discuss, prepare and approve for submission to the JSC all RLP Development Plans and OLP Development Plans, and all amendments thereto,

2.3.2.3.oversee and direct the conduct of all RLP Development Plans and OLP Development Plans,

2.3.2.4.create, implement and review the overall strategy for Development, including the design of all Clinical Studies for Regional Licensed Antibodies, Regional Licensed Products, Optioned Licensed Antibodies and Optioned Licensed Products,

2.3.2.5.decide whether and when to initiate or discontinue any Clinical Study under each RLP Development Plan or OLP Development Plan, as applicable,

2.3.2.6.allocate budgeted resources and determine priorities for each Clinical Study included under each RLP Development Plan or OLP Development Plan,

2.3.2.7.oversee and direct the conduct of all Clinical Studies under each RLP Development Plan or OLP Development Plan,

2.3.2.8.facilitate the flow of information between the Parties with respect to the Development of Licensed Antibodies and Licensed Products,

2.3.2.9.allocate primary responsibility as between the Parties for tasks relating to the Development of Regional Licensed Antibodies and Optioned Licensed Antibodies where not already specified in the applicable RLP Development Plans or OLP Development Plan,

2.3.2.10.review, discuss, oversee and direct Manufacturing for the Development of Regional Licensed Antibodies, Regional Licensed Products, Optioned Licensed Antibodies and Optioned Licensed Products including the supply chain,

2.3.2.11.determine and oversee the implementation of the overall strategy regarding, and facilitate the flow of information between the Parties with respect to

obtaining, Regulatory Approval of Regional Licensed Products and Optioned Licensed Products, 

2.3.2.12.without limitation to Section 2.3.2.1, review the regulatory strategy with respect to discussions with and commitments to or agreements with Regulatory Authorities (including post-approval commitments) with respect to Regional Licensed Product and Optioned Licensed Product labeling, risk management or Clinical Studies, and

2.3.2.13.perform such other functions as may be appropriate to further the purposes of this Agreement, as directed by the JSC in accordance with Section 2.2.3 or as expressly provided in this Agreement.

2.3.3.Meetings.  The JDC will meet at least once per [...***...], unless the Parties mutually agree in writing to a different frequency.  No later than [...***...] prior to any meeting of the JDC (or such shorter time period as the Parties may agree), the Alliance Managers will prepare and circulate an agenda for such meeting, provided however, that either Party will be free to propose additional topics to be included on such agenda, either prior to or in the course of such meeting.  Either Party may also call a special meeting of the JDC (by videoconference, teleconference or in person) by providing at least [...***...] prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed prior to the next scheduled meeting, in which event such Party will work with the Alliance Manager to provide the members of the JDC no later than [...***...] prior to the special meeting with an agenda for the meeting and materials reasonably adequate to enable an informed decision.  The JDC may meet in person, by videoconference, or by teleconference.  In-person JDC meetings will be held at locations in the United States alternately selected by Xencor and by Novartis or at any other location mutually agreed by the members of the JDC.  Each Party will report to the JDC on all material issues relating to the Development of Licensed Antibodies and Licensed Products for and in the Territory promptly after such issues arise.  Each Party will bear the expense of its respective JDC members’ participation in JDC meetings.  The JDC co chairs will be responsible for preparing reasonably detailed written minutes of JDC meetings that reflect all decisions made and action items identified at such meetings.  The JDC co chairs will send meeting minutes to each member of the JDC for review and approval within [...***...] after each JDC meeting.  Minutes will be deemed approved unless one or more members of the JDC objects to the accuracy of such minutes within [...***...] of receipt.  Minutes will be officially endorsed by the JDC at the next JDC meeting, including reflecting any differences noted by the Parties, and will be signed by the Alliance Managers.

2.3.4.Decision-Making.  Subject to the remainder of this Section 2.3.4 and Section 2.5, the JDC will act by unanimous agreement.  The representatives from each Party have, collectively, [...***...] vote on behalf of that Party.  If the JDC cannot reach unanimous agreement on an issue that comes before the JDC within [...***...] of the meeting such issue was raised and over which the JDC has oversight, then the Parties will refer such matter to the JSC for resolution in accordance with Section 2.5.

2.4.Joint Commercialization Committee.

2.4.1.General.  The Parties will establish a committee, no later than completion of the first Phase 2 Clinical Study for the first Regional Licensed Product or Optioned Licensed Product, to (a) oversee Commercialization of Regional Licensed Products and Optioned Licensed Products in the Territory, and (b) facilitate the flow of information between the Parties with respect to, and provide a forum to discuss, the Commercialization of Regional Licensed Products and Optioned Licensed Products (the “JCC”).

2.4.2.Formation, Composition.  Each Party will initially appoint [...***...] representatives to the JCC, with each representative having knowledge and expertise in the commercialization of products similar to the Regional Licensed Products or Optioned Licensed Products and having sufficient seniority within the applicable Party to make decisions arising within the scope of the JCC’s responsibilities.  The JCC may change its size from time to time by mutual consent of its members, provided that the JCC will consist at all times of an equal number of representatives of each of Xencor and Novartis.  Each Party may replace its JCC representatives at any time upon written notice to the other Party.  The JCC may invite non-members to participate in the discussions and meetings of the JCC, provided that such participants have no voting authority at the JCC and are bound under written obligation of confidentiality no less protective of the Parties’ Confidential Information than those set forth in this Agreement.  For clarity, the Alliance Managers should attend all meetings of the JCC.  The JCC will be co-chaired, with one chairperson designated by Xencor and one chairperson designated by Novartis, whose responsibilities will include conducting meetings, including, when feasible, ensuring that objectives for each meeting are set and achieved.  Responsibility for running each meeting of the JCC will alternate between the chairpersons from meeting-to-meeting, with Novartis’ chairperson running the first meeting.

2.4.3.Specific Responsibilities of the JCC.  Subject to any limitations under Law, including Antitrust Laws, the JCC has the following responsibilities:

2.4.3.1.review, update and approve for submission to the JSC the RLP Commercial Strategy for each Regional Licensed Product and Optioned Licensed Product,

2.4.3.2.discuss, prepare and approve for submission to the JSC the Commercialization Plan for each Regional Licensed Product and Optioned Licensed Product, including, in each case, any amendments thereto,

2.4.3.3.oversee implementation of each Commercialization Plan for each Regional Licensed Product, in accordance with the RLP Commercial Strategy, and Optioned Licensed Product,

2.4.3.4.discuss, prepare, update and approve for submission to the JSC the RLP Commercialization Budget,

2.4.3.5.review, discuss and direct Commercialization activities with respect to Regional Licensed Products and Optioned Licensed Products,

2.4.3.6.facilitate the flow of information between the Parties with respect to the Commercialization of Regional Licensed Products and Optioned Licensed Products,

2.4.3.7.oversee forecasting and market planning with respect to Regional Licensed Products and Optioned Licensed Products,

2.4.3.8.review and discuss strategies with respect to Pricing Matters for Regional Licensed Products and Optioned Licensed Products in the Territory, to the extent operationally feasible and not prohibited by Law,

2.4.3.9.review, discuss and oversee Manufacturing for the Commercialization of Regional Licensed Products and Optioned Licensed Products, including the supply chain,

2.4.3.10.manage Trademarks as contemplated by Section 14.8, and

2.4.3.11.perform such other functions as appropriate to further the purposes of this Agreement, as directed by the JSC in accordance with Section 2.2.3 or as expressly provided in this Agreement.

2.4.4.Meetings.  The JCC will meet at least once per [...***...], unless the Parties mutually agree in writing to a different frequency.  No later than [...***...] prior to any meeting of the JCC (or such shorter time period as the Parties may agree), the Alliance Managers will prepare and circulate an agenda for such meeting, provided however, that either Party will be free to propose additional topics to be included on such agenda, either prior to or in the course of such meeting.  Either Party may also call a special meeting of the JCC (by videoconference, teleconference or in person) by providing at least [...***...] prior written notice to the other Party if such Party reasonably believes that a significant matter must be addressed prior to the next scheduled meeting, in which event such Party will work with the chairperson of the JCC to provide the members of the JCC no later than [...***...] prior to the special meeting with an agenda for the meeting and materials reasonably adequate to enable an informed decision.  The JCC may meet in person, by videoconference, or by teleconference.  In-person JCC meetings will be held at locations in the United States alternately selected by Xencor and by Novartis or at any other location mutually agreed by the members of the JCC.  Meetings of the JCC will be effective only if at least one representative of each Party is present or participating in such meeting.  Each Party will report to the JCC on all material issues relating to the Commercialization of Regional Licensed Products and Optioned Licensed Products promptly after such issues arise.  Each Party will bear the expense of its respective JCC members’ participation in JCC meetings.  The JCC co-chairs will be responsible for preparing reasonably detailed written minutes of JCC meetings that reflect all decisions made and action items identified at such meetings.  The JCC co-chairs will send meeting minutes to each member of the JCC for review and approval within [...***...]

after each JCC meeting.  Minutes will be deemed approved unless one or more members of the JCC object to the accuracy of such minutes within [...***...] of receipt.  Minutes will be officially endorsed by the JCC at the next JCC meeting, including reflecting any differences noted by the Parties, and will be signed by the Alliance Managers.

2.4.5.Decision-Making.  Subject to the remainder of this Section 2.4.5 and Section 2.5, the JCC will act by unanimous agreement.  The representatives from each Party have, collectively, one vote on behalf of that Party.  If the JCC cannot reach unanimous agreement on an issue that comes before the JCC within [...***...] of the meeting such issue was raised and over which the JCC has oversight, then the Parties will refer such matter to the JSC for resolution in accordance with Section 2.5, provided that any issues arising under Section 2.4.3.8 shall not be subject to such escalation or decision-making authority, and instead shall be determined by each Party in its respective Territory.  For clarity, any and all such communications or strategy involving the Commercialization activities shall be limited to those permitted under Law, including Antitrust Laws.

2.5.Resolution of Committee Disputes.

2.5.1.Within Operating Committees.  All decisions within the JDC and JCC will be made by unanimous agreement and all decisions within the other Committees, other than the JSC, will be made by unanimous agreement unless escalated as set forth in this Section 2.5.  If a dispute arises which cannot be resolved within the JDC, JCC or such other Committees, then if such dispute relates to a matter within the jurisdiction of the applicable Committee, the representatives of either Party may cause such matter to be referred to the JSC for resolution as provided in Section 2.5.2.

2.5.2.Decision Making Within the JSC.  In addition to resolving issues specifically delegated to it, the JSC has the authority to resolve disputes within the jurisdiction of the JDC, JCC and any other Committees (excluding the IP Committee) that the Parties may subsequently create to assist in governance of this Agreement, but otherwise has no authority except where expressly specified elsewhere in this Agreement or mutually agreed to by the Parties in writing.  The representatives from each Party have, collectively, one vote on behalf of that Party, and all decisions within the JSC (whether originating there, or referred to it by an operating Committee) will be made by unanimous agreement.  If a matter is referred by an operating Committee to the JSC, the JSC will use good faith efforts, in compliance with this Section 2.5.2, to resolve promptly such matter.  If the JSC is unable to reach unanimous agreement, within [...***...] after a Party affirmatively states that a decision needs to be made, on any issue for which it is responsible, either Party may elect to submit such issue to the Parties’ Executive Officers in accordance with Section 2.5.3.

2.5.3.Referral to Executive Officers.  If a Party makes an election under Section 2.5.2 to refer a matter to the Executive Officers, the JSC will submit in writing the respective positions of the Parties to their respective Executive Officers.  Such Executive Officers will use good faith efforts, in compliance with this Section 2.5.3, to resolve promptly such matter, which good faith efforts will 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 unanimous agreement on any such matter within [...***...] of such matter being referred to them, the matter will be decided in accordance with Section 2.5.4.

2.5.4.Dispute Resolution Within the JSC.    If the Parties’ Executive Officers are unable to reach unanimous agreement in accordance with Section 2.5.3, then: 

2.5.4.1.the following matters will be decided by Novartis’ Executive Officer subject to the remainder of this Section 2.5.4 and Section 2.5.5.

(a)[...***...];

(b)[...***...]; and

(c)[...***...]; and

(d)[...***...].

2.5.4.2.the following matters will be decided by Xencor’s Executive Officer subject to the remainder of this Section 2.5.4 and Section 2.5.5, subject to Section 2.5.4.1[...***...]; and

2.5.4.3.the following matters will be decided pursuant to Expedited Arbitration: 

(a)[...***...];

(b)[...***...]; and

(c)[...***...]. 

2.5.4.4.with respect to disputes regarding the conduct of Additional Development Activities, as set forth in Section 5.1.2.4,

2.5.4.5.with respect to the approval of any Potential In-License, such Potential In-License will be deemed not to have been approved, with the consequences as provided in Section 9.5.1.4,

2.5.4.6.with respect to disputes arising out of Section 14, as set forth therein, and

2.5.4.7.with respect to any other matter before the JSC that is not expressly subject to a dispute resolution process identified in this Section 2.5.4, the status quo will be maintained unless and until the Parties mutually agree on such matter.

Notwithstanding anything herein to the contrary, (i) no exercise of a Party’s decision-making authority (which, for clarity does not include decision-making by Expedited Arbitration) on any such matters may, without the other Party’s prior written consent,  result in a material decrease or increase in the other Party’s or its Related Parties’ obligations, costs or expenses under this Agreement, the Research Plan, any Development Plan or Commercialization Plan or require the other Party to perform additional activities not contemplated by this Agreement, and  (ii) no exercise of decision-making authority on any such matters may, whether made by a Party or Expedited Arbitration, conflict with or amend this Agreement without both Parties’ prior written consent.

2.5.5.Good Faith.  In conducting themselves on committees, and in exercising their rights under this Section 2.5, all representatives of both Parties will consider diligently, reasonably and in good faith all input received from the other Party, and will use reasonable efforts to reach unanimous agreement on all matters before them.  In exercising any decision-making authority granted to it under this Section 2.5, each Party will act based on its good faith judgment taking into consideration such Party’s obligations to use Commercially Reasonable Efforts with respect to Research, Development or Commercialization activities and [...***...] as provided in this Agreement.

2.6.General Committee Authority.  Each Committee has solely the powers expressly assigned to it in this Section 2.  No Committee will have any power to amend, modify, or waive compliance with this Agreement.  It is expressly understood and agreed that the control of decision-making authority by Xencor or Novartis, as applicable, pursuant to Section 2.5, so as to resolve a disagreement or deadlock on a Committee for any matter will not authorize either Party to perform any function or exercise any decision-making right not delegated to a Committee or such Party, and that neither Xencor nor Novartis has any right to unilaterally modify, amend or waive its own compliance with, the terms of this Agreement.

2.7.Withdrawal2.8..  At any time during the Term and for any reason, Xencor shall have the right to withdraw from participation in each Committee upon written notice to Novartis, which notice shall be effective immediately upon receipt (“Withdrawal Notice”).  Following the issuance of a Withdrawal Notice, Xencor’s representatives to the applicable Committee shall not participate in any meetings of such Committee.  Following Xencor’s issuance of a Withdrawal Notice:  (i) all meetings of the applicable Committee shall be held at Novartis’ facilities; (ii) Xencor shall have the right to continue to receive the minutes of such Committee but shall not have the right to approve the minutes for, or vote on any matter before, such Committee with respect to any meeting held after Xencor’s issuance of a Withdrawal Notice and (iii) all decisions specified herein to be made by a Committee shall be made by Novartis.

3.GLOBAL TARGET RESEARCH ACTIVITIES; FC TARGETS

3.1.Global Target Pairs. 

3.1.1.Initial Global Target.  The Parties agree that the Target pair known as [...***...] is hereby designated as the first Global Target Pair.

3.1.2.Maximum Number of Global Target Pairs, Selection Right.  At any given time under this Agreement, Novartis may only hold rights to a maximum of four Global Target Pairs (or, in the case where Xencor has exercised its Opt-In Right and not exercised its Opt-Out Right pursuant to Section 5.3.7, three such Global Target Pairs).  From time to time during the Global Target Selection /Replacement Period, Novartis may notify Xencor in writing of Targets that Novartis desires to designate as a Global Target Pair for the purposes of this Agreement (each, a “Proposed Global Target Pair”) and, within [...***...], Xencor will advise Novartis whether such Target pairs are Available.  If the Target pair is available, then such Target pair will be deemed to be a Global Target Pair. If the Proposed Global Target Pair is not Available, then such Proposed Global Target Pair will not be deemed a Global Target Pair.  If Novartis questions why a Proposed Global Target Pair is not Available, upon  request, Xencor shall promptly provide reasonable evidence of such un-Availability, which evidence may be provided to outside counsel or outside consultant engaged by Novartis (and who will enter an appropriate confidentiality agreement with Xencor prior to receipt of such evidence) to confirm such status, with such outside counsel or consultant engaged by Novartis  permitted to disclose to Novartis only whether or not it agrees with the Xencor determination as to Availability.  In the event of a dispute with regard to Availability, such dispute shall be resolved by Expedited Arbitration.

3.1.3.Substitution Rights.  For each Global Target Pair, Novartis shall have the one-time right, during the Global Target Pair Selection/Replacement Period, to substitute another Target pair that are Available Target pairs for such Global Target Pair, provided that (i) Novartis may only make such substitution once per Global Target Pair (i.e., Novartis may make four such substitutions) and (ii) a given Global Target Pair cannot be substituted once a Global Licensed Antibody against such Global Target Pair achieves [...***...].  Without limiting the foregoing, Novartis shall also have the right to substitute up to [...***...] Global Target Pairs at any time due to a Research Failure.  Any Global Target Pairs that are abandoned by Novartis as a result of such a substitution shall no longer be considered as Global Target Pairs for the

purposes of this Agreement unless subsequently substituted for a Global Target Pair pursuant to this Section 3.1.3.  In the event that Novartis desires to undertake a substitution, Novartis will notify Xencor in writing regarding its desired Target pair and Xencor, within [...***...] will advise Novartis whether such Target pair is an Available Target.  If such Target pair is available, then such Target pair will be deemed to be a Global Target Pair (subject to the four Global Target Pair limitation).  If such Target pair is not Available, then the substitution shall not take effect and the Global Target Pair proposed to be substituted for will remain a Global Target Pair unless and until substituted for in accordance with this Section 3.1.3.  If Novartis questions why a Proposed Global Target Pair is not Available, upon  request, Xencor shall promptly provide reasonable evidence of such un-Availability, which evidence may be provided to outside counsel or outside consultant engaged by Novartis (and who will enter an appropriate confidentiality agreement with Xencor prior to receipt of such evidence) to confirm such status, with such outside counsel or consultant engaged by Novartis permitted to disclose to Novartis only whether or not it agrees with the Xencor determination as to Availability.  In the event of a dispute with regard to Availability, such dispute shall be resolved by Expedited Arbitration.

3.1.4.Research Program for Global Target Pairs.  Each Party will be responsible for performing the Research Programs in accordance with this Agreement and the Research Plan during the Research Term.  In the event of any inconsistency between the Research Plan and this Agreement, the terms of this Agreement will prevail.  For clarity, Xencor’s obligations with respect to the performance of the Research Programs and Development of the Global Target Pairs and, as applicable, the Optioned Target Pair, is expressly limited to the activities set forth in the Research Plan and shall conclusively expire upon the expiration of the Research Term. 

3.1.5.Diligence, Standards of Conduct.  During the Research Term, each Party (itself or through its Affiliates or by permitted subcontracting pursuant to Section 3.1.9) will use Commercially Reasonable Efforts to Research Global Licensed Antibodies in accordance with the Research Plan.  Each Party will conduct its activities under the Research Plan in a good scientific manner and in compliance with Law. 

3.1.6.Research Costs.  During the Research Term, each Party will be responsible for [...***...]% of all costs and expenses incurred by it or on its behalf or its Related Parties in connection with each Research Program.  After the expiration of the Research Term, Novartis will be responsible for [...***...]% of all costs and expenses incurred by or on behalf of Novartis or its Related Parties in connection with any further Research of Global Licensed Antibodies.

3.1.7.Research Reports.  Each Party will keep the JSC informed regarding the progress of Research activities for each Research Program, including a review of results and progress against timelines in the Research Plan on a [...***...] basis.

3.1.8.Research Records.  Each Party will maintain scientific records in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, and with respect to activities that require cGLP compliance to be submitted in regulatory filings, in compliance with cGLPs, which records will fully and accurately reflect work done and results

achieved in the performance of the Research activities by or on behalf of such Party with respect to Global Licensed Antibodies.

3.1.9.Third Parties.  Each Party will be entitled to utilize the services of Third Parties to perform its Research activities under this Section 3.1, provided that (a) a Party will require that such Third Party operates in a manner consistent with the terms of this Agreement, and (b) such Party will remain at all times fully liable for its responsibilities hereunder, and such Party hereby expressly waives any requirement that the other Party exhaust any right, power or remedy, or proceed against such Third Party, for any obligation or performance hereunder prior to proceeding directly against such Party.  The subcontracting Party will require that any Third Party agreement entered into pursuant to this Section 3.1.9 (i) include confidentiality and non-use provisions that are no less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality agreements entered into for a similar purpose), and (ii) obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) under and to, any Know-How and Patents that are developed by such Third Party in the performance of its obligations under such agreement and are reasonably necessary to Research, Develop, Manufacture or Commercialize Global Licensed Antibodies or Global Licensed Products in the Field, and any such license shall be deemed to be a Novartis Existing In-License or Xencor Existing In-License, as applicable, for all purposes of this Agreement.  For clarity, the foregoing requirement to obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) shall not apply to any improvements to the proprietary core or platform technology owned or in-licensed by any such Third Party or its Affiliates, unless such improvements are reasonably necessary to Research, Develop, Manufacture or Commercialize those Global Licensed Antibodies or Global Licensed Products with respect to which such Third Party or its Affiliate conducted its activities under such Third Party agreement.  The subcontracting Party will be solely responsible for direction of and communications with such Third Party.    

3.1.10.Material Transfer.  From time to time during, and within [...***...] following the earlier of the expiration of the Research Term generally or the completion of a Research Program for a given Global Target Pair, Xencor shall transfer to Novartis all tangible Materials, and copies of all material data, results, and research records in its Control relating to such Global Licensed Antibodies, including any such tangible Materials, data, results, and records developed by a Third Party on behalf of Xencor pursuant to Section 3.1.9.

3.2.Fc Targets.

3.2.1.Selection Process.

3.2.1.1.Fc Gatekeeper.  The Parties shall jointly engage a mutually agreeable law firm, to serve as the “Fc Gatekeeper” under this Agreement.  The Parties shall endeavor to sign an engagement letter with the Fc Gatekeeper within [...***...] after the Effective Date.  The engagement letter shall be in a form reasonably acceptable to both Parties and consistent with this Agreement.  The engagement letter will require the Fc Gatekeeper to keep all Confidential Information related to Novartis’ inquiries

concerning potential reservation of potential Targets, including the identity of any Target proposed to be an Fc Target in confidence and the Fc Gatekeeper will not disclose any such information to Xencor, its Related Parties, or to any Third Party unless specifically instructed to do so by Novartis.  Novartis shall be solely responsible for all invoices by the Fc Gatekeeper and shall timely pay the Fc Gatekeeper’s invoices as set forth in the Fc Gatekeeper engagement letter.  

3.2.1.2.Fc Target Unavailable List.  [...***...].

3.2.1.3.Novartis Selection Notice and Process.  From time to time during the Fc Target Selection Period, Novartis may submit to the Fc Gatekeeper a written notice (the “Fc Notice”) identifying a Target (including a Target that would be Specifically Bound by a Bispecific Antibody) that it wishes to designate as a Fc Target for the purposes of this Agreement (each, a “Proposed Fc Target”). 

(a)Within [...***...] after receiving such Fc Notice, the Fc Gatekeeper shall inform Novartis if such Proposed Fc Target is Available.  Such Proposed Fc Target shall be confirmed as an Fc Target for the purposes of this Agreement if such Target or Bispecific (including a Target that would be Specifically Bound by a Bispecific Antibody) does not appear on the then-current Fc Target Unavailable List.  If such Proposed Fc Target does appear on the then-current Fc Target Unavailable List then the Fc Gatekeeper shall so notify Novartis, without providing additional details, and such Proposed Fc Target shall not become an Fc Target.    

(b)If Novartis questions why a Proposed Fc Target is on the Fc Target Unavailable List, Xencor shall promptly provide reasonable evidence of such un-Availability, which evidence may be provided to an outside counsel or outside consultant engaged by Novartis who is reasonably acceptable to Xencor (and who will enter an appropriate confidentiality agreement with Xencor prior to receipt of such evidence) to confirm such status, with such outside counsel or consultant permitted to disclose to Novartis only whether or not it agrees with the Xencor determination as to Availability.  In the event of a dispute with regard to Availability, such dispute shall be resolved by Expedited Arbitration.

3.2.1.4.Maximum Number of Fc Targets, Substitution Rights.  Notwithstanding Section 3.2.1.3 above, at any given time during the Fc Target Selection Period, Novartis may only hold rights to a maximum of 10 Fc Targets.  Novartis shall have the right, every [...***...], on or about [...***...], of each Calendar Year, during the Fc Target Selection Period, to substitute an Fc Target for another Target (including a Target that would be Specifically Bound by a Bispecific Antibody)  pursuant to the selection mechanism in Section 3.2.1.3.  Any Fc Targets that are abandoned by Novartis as a result of such a substitution shall no longer be considered as Fc Targets for the purposes of this Agreement.  Any Fc Target for which Novartis has [...***...] may not be substituted.  For clarity, Novartis shall not have the right to substitute any Fc Target until such time, if ever, as there are 10 Fc Targets.

3.2.1.5.Xencor Confirmed Target Inquiry.  From time to time, Xencor may query the Fc Gatekeeper to determine whether a given Target has been confirmed as an Fc Target.  The Fc Gatekeeper shall respond within [...***...] to each such query by Xencor, specifying whether the Target is or is not an Fc Target.  Xencor shall only make such queries in good faith, in planning for the grant of an exclusive license grant related to the applicable Target or the initiation of a discovery program for Antibody(ies) that Specifically Bind the applicable Target.

3.2.1.6.Fc Target Identification.  Novartis will identify each Fc Target to Xencor in writing upon the earlier of (i) expiration of the Fc Target Selection Period or (ii) the date on which an Fc Product that Specifically Binds such Fc Target [...***...].

4.OPT-IN RIGHT

4.1.Grant, Exercise Mechanism.

4.1.1.Grant.  Xencor shall have the right, but not the obligation, to share in 50% of Gross Profits, Commercialization Costs and Medical Affairs Activities Costs in the United States (and 25% of the global Development Costs) for one Global Target Pair (other than the Global Target Pair CD3xBCMA) (the “Opt-In Right”).  The Global Target Pair that is the subject of an exercised Opt-In Right is referred to herein as the “Optioned Target Pair.”

4.1.2.Exercise Mechanism.  The mechanism for exercise of such Opt-in Right is as follows:

4.1.2.1.[...***...] First Global Target Pair.  Promptly after [...***...] with respect to a Global Licensed Product that Specifically Binds the first Global Target Pair, Novartis will either (a) notify Xencor that such Global Target Pair is not eligible for Xencor’s Opt-in Right, or (b) in Novartis’ sole discretion, provide Xencor with an Option Package with respect to such Global Target Pair, and afford reasonable access during normal business hours to Novartis’ personnel by Xencor and its representatives as Xencor may reasonably

request to assist Xencor in deciding whether to exercise the Opt-In Right for such Global Target Pair.  In the event that Novartis provides the Option Package as set forth in subsection (b), then Xencor shall have [...***...] from the receipt of such Option Package to exercise its Opt-In Right by providing written notice to Novartis.  Upon receipt of such written notice, such Global Target Pair shall be deemed to be an Optioned Target Pair for the purposes of this Agreement, and Xencor shall not have any further right to Opt-In to any additional Global Target Pairs.  If Xencor does not exercise its Opt-In Right with respect to such Global Target Pair, such Global Target Pair shall remain a Global Target Pair and shall thereafter not be subject to Xencor’s Opt-In Right.

4.1.2.2.[...***...] Second Global Target Pair.  If Xencor has not exercised its Opt-In Right, then, promptly after [...***...] with respect to a Global Licensed Product that Specifically Binds the second Global Target Pair, Novartis will provide Xencor with an Option Package with respect to such Global Target Pair, and afford reasonable access during normal business hours to Novartis’ personnel by Xencor and its representatives as Xencor may reasonably request to assist Xencor in deciding whether to exercise the Opt-In Right for such Global Target Pair.  Xencor shall have [...***...] from the receipt of such Option Package to exercise its Opt-In Right by providing written notice to Novartis.  Upon receipt of such written notice, such Global Target Pair shall be deemed to be an Optioned Target Pair for the purposes of this Agreement, and Xencor shall not have any further right to Opt-In to any additional Global Target Pairs.  If Xencor does not exercise its Opt-In Right with respect to such Global Target Pair, such Global Target Pair shall remain a Global Target Pair and shall thereafter not be subject to Xencor’s Opt-In Right.

4.1.2.3.[...***...] Third Global Target Pair.  If Xencor has not exercised its Opt-In Right, then, promptly after [...***...] with respect to a Global Licensed Product that Specifically Binds the third Global Target Pair, Novartis will provide Xencor with an Option Package with respect to such Global Target Pair, and afford reasonable access during normal business hours to Novartis’ personnel by Xencor and its representatives as Xencor may reasonably request to assist Xencor in deciding whether to exercise the Opt-In Right for such Global Target Pair.  Xencor shall have [...***...] from the receipt of such Option Package to exercise its Opt-In Right by providing written notice to Novartis.  Upon receipt of such written notice, such Global Target Pair shall be deemed to be an Optioned Target Pair for the purposes of this Agreement, and Xencor shall not have any further right to Opt-In to any additional Global Target Pairs.  If Xencor does not exercise its Opt-In Right with respect to such Global Target Pair, such Global Target Pair shall remain a Global Target Pair, and Xencor’s Opt-In Right shall terminate.

5.DEVELOPMENT

5.1.Regional Licensed Antibodies and Regional Licensed Products.

5.1.1.Overview.  Subject to the oversight of the JSC and the JDC, on a Regional Target Pair-by-Regional Target Pair basis, the Parties will collaborate on further global Development of Regional Licensed Antibodies and Regional Licensed Products in accordance with this Agreement and the RLP Development Plan with each Party’s responsibility for Development activities specifically related to obtaining Regulatory Approval in its Territory.

5.1.2.Development Plans, Budgets.

5.1.2.1.RLP Development Plans. On a Regional Target Pair-by-Regional Target Pair basis, the Development activities that are anticipated to be necessary or useful to be undertaken over the next [...***...] for the applicable Regional Licensed Antibodies and Regional Licensed Products to achieve Regulatory Approvals will be set forth in a written work plan and time table to be agreed by the Parties within [...***...] of the Effective Date, along with a preliminary RLP Development Budget that satisfies the requirements of Section 5.1.2.2 (each, as updated from time to time, a “RLP Development Plan”).  Each RLP Development Plan will (i) allocate responsibility for the performance of each RLP Development Activity to one or both of the Parties in their respective Territories or on a global basis, which allocation shall provide for each Party to be responsible for the performance of certain Phase 2 Studies and certain Phase 3 Studies, and (ii) focus on obtaining Regulatory Approval of the Regional Licensed Products.  The terms of, and Development activities set forth in each RLP Development Plan will at all times be designed to be in compliance with all Laws and in accordance with professional and ethical standards customary in the pharmaceutical industry.  The Parties will update the applicable RLP Development Plan for such Regional Licensed Antibodies and Regional Licensed Products [...***...] and will provide such updated RLP Development Plan to the JDC.  The JDC will review and approve each RLP Development Plan submitted to it for submission to the JSC in accordance with Section 2.3.

5.1.2.2.RLP Development Budgets.  Each RLP Development Plan will contain (i) a [...***...] rolling budget covering costs associated with, and not subject to the following subclause (ii), the anticipated RLP Development Activities to be performed during the then-current Calendar Year (broken down by Calendar Quarter) and the next Calendar Year (broken down by Calendar Quarter), and a forecast of the budgets for each subsequent Calendar Year thereafter through completion of all RLP Development Activities set forth in any such RLP Development Plan and (ii) a specific budget for the entirety of each Clinical Trial that the Parties include in the RLP Development Plan (“Clinical Trial Budget”), provided that each initial RLP Development Plan will also include such a budget for the partial Calendar Year commencing as of the date of such RLP Development Plan and ending December 31 of such Calendar Year (each such budget plus any such partial Calendar Year is a “RLP Development Budget”).  Each RLP Development Budget will be updated [...***...] by the JDC in accordance with Section 5.1.2.3; provided that, a Clinical Trial Budget shall

not be further revised thereafter until the next [...***...] update without the Parties’ mutual agreement.  The initial RLP Development Budget for a Regional Target Pair, and each update thereto, will be prepared by the JDC, based on (a) the Parties’ good faith estimation of the anticipated RLP Development Activities to be conducted during the relevant [...***...] and (b) information prepared by the Parties in good faith for their own internal planning processes relating to anticipated RLP Development Activities for such Regional Target Pair, a summary of which will be provided to the JDC for review and incorporation into the RLP Development Budget.  Each RLP Development Budget will include an itemized list of the applicable RLP Development Activities to be performed during the [...***...] covered by such RLP Development Budget, with detailed line item entries for each RLP Development Activity setting forth the costs directly related to such RLP Development Activity (broken out to show Out-of-Pocket Costs and FTE Costs for FTEs directly engaged to perform such RLP Development Activity) and specifying what Party or Third Party is responsible for performing the applicable RLP Development Activity, which itemized list may include:

(i) Any material preclinical, non-clinical studies or GLP toxicology studies, itemized by study,

(ii)Clinical Studies, including (A) the following costs itemized by Clinical Study, if applicable: itemized cost of study drug (if available), per-patient costs (if available), study initiation costs, per-protocol costs, investigator payments, monthly study fixed costs, statistical analysis costs, study report development costs and study close-out expenses and (B) the following information itemized by Clinical Study: number of study sites and number of patients, and

(iii)allocation of responsibility for Manufacturing the applicable Regional Licensed Antibodies and Regional Licensed Products.

Each RLP Development Budget will also include a high level summary of the Parties’ plans with respect to the Development of such Regional Target Pair as they relate to such budget for the years following the [...***...] of such RLP Development Budget.

5.1.2.3.Managing and Amending RLP Development Plans and RLP Development Budgets.  The JDC will update and amend the applicable RLP Development Plan from time-to-time as it deems necessary and, until such time as no further RLP Development Activities are occurring or expected to occur with respect to a given Regional Target Pair.    Each RLP Development Budget will be updated [...***...] by the JDC and agreed to at least [...***...] prior to the commencement of the then-next Calendar Year or sooner should there be a change in the RLP Development Plan; provided that, a Clinical Trial Budget shall not be further revised thereafter until the next [...***...] update without the Parties’ mutual agreement. 

5.1.2.4.Supplemental Studies.

(a)Additional Development Proposals.  If a Party desires to conduct a Supplemental Study of a Regional Licensed Product for a Regional Target Pair such Party (the “Proposing Party” and such other Party, the “Non-Proposing Party”) will submit to the JDC a proposal to add such Supplemental Study to the applicable RLP Development Plan (an “Additional Development Proposal”).  Each Additional Development Proposal will describe in reasonable detail the applicable Regional Target Pair and the Supplemental Study(ies) that the Proposing Party desires to conduct, including a synopsis of the trial or activities, the proposed enrollment criteria, number of patients to be included, endpoints to be measured, estimated drug supply requirements and statistical design and powering (the “Additional Development Activities”), as well as a proposed timeline and budget and an analysis of the business opportunity and revenue potential for such Additional Development Activities. 

(b)JDC Decision Regarding Additional Development Activities.  The JDC will approve or reject an Additional Development Proposal within [...***...] after receipt thereof from the Proposing Party as set forth in this Section 5.1.2.4. 

(i)If the JDC approves an Additional Development Proposal, upon such an approval, the applicable RLP Development Plan will be amended to include the Additional Development Activities, including the proposed timeline and budget for such Additional Development Activities, set forth in such Additional Development Proposal (as may be amended by the JDC) upon such approval.  Any Additional Development Activities included in a RLP Development Plan pursuant to this Section 5.1.2.4 will be deemed to be RLP Development Activities for all purposes under Section 5.1.4.

(ii)If the JDC fails to approve an Additional Development Proposal, the Supplemental Study proposed in the Additional Development Proposal will not be deemed an RLP Development Activity for any purpose under this Agreement, and Sections 5.1.2.4(c) and 5.1.2.4(d) will apply.

(c)Independent Performance of Additional Development Activities.

(i)If the JDC fails to approve for inclusion in the RLP Development Plan a Proposing Party’s Additional Development Proposal for a Supplemental Study(ies) for such Regional Licensed Product, the Proposing Party may, upon notice to the Non-Proposing Party, conduct the proposed Supplemental Study(ies) at its own expense, provided however, that if the Non-Proposing Party determines

reasonably and in good faith that the performance of such proposed Supplemental Study(ies) would pose safety concerns or other ethical concerns, then the Proposing Party will not undertake such Supplemental Study(ies) unless and until the Non-Proposing Party determines that such Additional Development Activities should be permitted.

(ii)Notwithstanding anything in Sections 7.1.3 and 7.3 to the contrary, if the JDC does not approve an Additional Development Proposal, unless and until the Non-Proposing Party delivers an Additional Development Opt-In Notice with respect to such Additional Development Activity, as described in Section 5.1.2.4(d), the Non-Proposing Party will not have any rights under Section 7.1.3 and 7.3, as applicable, with respect to any information or data generated from any Supplemental Study that was the subject of the unapproved Additional Development Proposal or from any future information or data generated from any future Clinical Studies with respect to the same Indication, other than (A) to use such information or data to determine whether to deliver an Additional Development Opt-In Notice in accordance with Section 5.1.2.4(d), (B) as permitted pursuant to the SDEA, (C) as required by Law and (D) [...***...].

(d)Opt-In for Additional Development Activities.  In the event that the Proposing Party conducts a Supplemental Study pursuant to Section 5.1.2.4(c), the Proposing Party will provide to the Non-Proposing Party (i) a summary of the information or data generated from such Supplemental Study, including the final Clinical Study report, (ii) a summary of the proposed Development activities, which shall be required to include the next Clinical Study Phase after such Supplemental Study for such Regional Licensed Product, (iii) the costs and expenses specified in clause (1) below, and (iv) a budget for such proposed new Clinical Study for such Regional Licensed Product (the “Additional Development Data Package”).  The Non-Proposing Party shall have the [...***...] right to elect, in its sole discretion and upon written notice to the Proposing Party no later than [...***...] after the date the Additional Development Data Package is made available to the Non-Proposing Party (an “Additional Development Opt-In Notice”), to opt in with respect to any Supplemental Study that was the subject of such Additional Development

Proposal that the Proposing Party elected to conduct in accordance with Section 5.1.2.4(c), and then (A) such Supplemental Study will be deemed to be an RLP Development Activity under the RLP Development Plan for the applicable Regional Target Pair from and after the date on which such Additional Development Opt-In Notice is received by the Proposing Party (the “Additional Development Opt-In Date”), (B) the then-current plan and budget of the Proposing Party with respect to such Supplemental Study will be deemed to be included within, and part of, the RLP Development Plan for such Regional Licensed Product as of the Additional Development Opt-In Date, and will control with respect to such Supplemental Study unless and until an amendment to the RLP Development Plan providing for a different or modified plan and budget is approved by the JDC, and (C) the Non-Proposing Party will have all rights granted to it under Section 7.1.3 and 7.3 with respect to the information and data generated from such Supplemental Study as if such Supplemental Study was conducted under the RLP Development Plan for such Regional Licensed Product, provided that, (1) the Non-Proposing Party’s right to so opt-in with respect to such Additional Development Activities, triggering the results described in the foregoing clauses (A) through (C), is conditioned on the payment by the Non-Proposing Party to the Proposing Party of a payment of [...***...]% of those costs and expenses incurred by the Proposing Party prior to the Additional Development Opt-in Date that the Non-Proposing Party should have paid in connection with such Additional Development Activities had such Additional Development Activities been included in the RLP Development Plan pursuant to Section 5.1.2.4(b)(i), and (2) any future Development Costs with respect to such Regional Licensed Product, including any future Clinical Studies, will be allocated in accordance with Section 5.1.4.

5.1.3.Diligence.  On a Regional Target Pair-by-Regional Target Pair basis, (a) Novartis will use Commercially Reasonable Efforts to Develop Regional Licensed Antibodies and Regional Licensed Products for such Regional Target Pair and obtain Regulatory Approval therefor in the Novartis Territory, and (b) Novartis and Xencor will each use Commercially Reasonable Efforts to perform the RLP Development Activities allocated to it under the RLP Development Plan for such Regional Licensed Antibodies and Regional Licensed Products for such Regional Target Pair in accordance with the RLP Development Plan. 

5.1.4.Development Costs.    With respect to each Regional Target Pair, Xencor will be responsible for 50% of all Development Costs and Novartis will be responsible for 50% of all Development Costs, in each case for the Development of all Regional Licensed Antibodies or Regional Licensed Products.  For clarity, Development Costs will be reconciled and paid in accordance with the procedure described in Section 10.3.

5.1.5.Records, Reports, Information Sharing.  On a Regional Target Pair-by-Regional Target Pair basis, each Party will provide to the JDC, on a [...***...] basis, or more frequently as reasonably requested by the JDC, an update regarding Development activities

conducted by or on behalf of such Party, as well as any Supplemental Studies and Post-Marketing Studies conducted by or on behalf of such Party.  In addition, each Party will promptly share with the other Party all material developments and information that it comes to possess relating to the Development of any Regional Licensed Antibodies and Regional Licensed Products, including (a) safety concerns, and (b) study reports and data generated from Clinical Studies, provided however, that excluding (i) safety concerns or as required under the SDEA,) or (ii) as required under Section 5.1.2.4(c)(ii)(D) a Party as Proposing Party will not be obligated to share any study reports and data generated from Clinical Studies for any Additional Development Activities conducted by or on behalf of the Proposing Party where the Non-Proposing Party has not exercised an Additional Development Opt-in Notice other than to permit the Non-Proposing Party data to determine whether to deliver an Additional Development Opt-In Notice in accordance with Section 5.1.2.4(d) or to exercise its rights under Section 5.1.2.4(c)(ii)(D).

5.1.5.1.Scientific Records.  Each Party will maintain scientific records, in sufficient detail and in sound scientific manner appropriate for Patent and regulatory purposes and in compliance with cGLP with respect to activities that require cGLP compliance to be submitted in regulatory filings (including INDs and BLAs), which will accurately reflect work done and results achieved in the performance of the Development activities, Clinical Studies, and Supplemental Studies.

5.1.5.2.Information Exchange and Development Assistance.  Until the expiration or termination of the final RLP Development Plan, upon the reasonable request of the other Party, each Party will provide to the other Party, without additional compensation and in a commercially reasonable format, Know-How Controlled by such Party or its Related Parties that is licensed to the other Party under this Agreement to the extent that it is reasonably necessary for Development of Regional Licensed Antibodies or Regional Licensed Products in the requesting Party’s Territory in accordance with the applicable RLP Development Plan or for obtaining or maintaining Regulatory Approval for Regional Licensed Products in the requesting Party’s Territory, including copies of (a) all material scientific information and data related to such Regional Licensed Antibodies or Regional Licensed Products (including all material data made, collected or otherwise generated in the conduct of any pre-clinical studies, Clinical Studies, or  Supplemental Studies for which a Party as Non-Proposing Party has exercised its Additional Development Opt-In Notice, or early access/named patient programs, as well as CMC information), and (b) protocols and investigator brochures, in each case, that are reasonably necessary for the other Party (or its Related Parties) to perform its obligations or exploit its rights under this Agreement with respect to such Regional Licensed Antibodies or Regional Licensed Products.  Notwithstanding the foregoing, or anything to the contrary herein, neither Party shall be required to disclose information that is subject to bona fide confidentiality obligations to a Third Party; provided that if the rights granted to the other Party hereunder would reasonably be expected to be adversely affected or such Party otherwise would be prejudiced hereunder by such failure to disclose, the Party bound by such confidentiality obligations will use commercially reasonable efforts to obtain the consent of such Third Party to disclose such information.

5.1.5.3.Personnel.    Each Party may request, through the JDC or the other Party’s Alliance Manager, that the other Party reasonably make available for consultation regarding the Development of such Regional Licensed Antibodies or Regional Licensed Products certain of its employees engaged in Development activities and Supplemental Studies for which a Party as Non-Proposing Party has exercised its Additional Development Opt-In Notice.  The JDC or the Alliance Managers will reasonably coordinate, upon reasonable notice during normal business hours and at their respective places of employment, consultation between the Parties on the progress of the Development, including any Supplemental Studies for which a Party as Non- Proposing Party has exercised its Additional Development Opt-In Notice. 

5.1.6.Third Parties.  The Parties will be entitled to utilize the services of Third Parties to perform their respective Development under this Section 5.1, provided that (a) each Party will require that such Third Party operates in a manner consistent with this Agreement, (b) each Party will remain at all times fully liable for its respective responsibilities, and such Party hereby expressly waives any requirement that the other Party exhaust any right, power or remedy, or proceed against such Third Party, for any obligation or performance hereunder prior to proceeding directly against the Party who engaged such Third Party and (c) the Parties will make reasonable efforts to share, through the JDC, information regarding any prior experience with specific contract research organizations that are anticipated to be engaged to perform work under the RLP Development Plan.  Each Party will require that any Third Party agreement entered into pursuant to this Section 5.1.6 (x) include confidentiality and non-use provisions that are no less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality agreements entered into for a similar purpose), and (y) obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) under and to, any Know-How and Patents that are developed by such Third Party in the performance of such agreement and are reasonably necessary or useful to Research, Develop, Manufacture or Commercialize Regional Licensed Antibodies or Regional Licensed Products in the Field, and any such license shall be deemed to be a Novartis Existing In-License or Xencor Existing In-License, as applicable, for all purposes of this Agreement, unless otherwise agreed by the JDC.  For clarity, the foregoing requirement to obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) shall not apply to any improvements to the proprietary core or platform technology owned or in-licensed by any such Third Party or its Affiliates unless such improvements are reasonably necessary to Research, Develop, Manufacture or Commercialize those Licensed Antibodies or Licensed Products with respect to which such Third Party or its Affiliate conducted its activities under such Third Party agreement.  The Party utilizing the services of a Third Party service provider will be solely responsible for direction of and communications with such Third Party.

5.1.7.Combination Therapy.  Notwithstanding anything to the contrary herein, on a Regional Licensed Product-by-Regional Licensed Product basis, in the event a Party desires to

Develop, Manufacture and Commercialize a Combination Therapy containing or comprising a Regional Licensed Product and one or more other products (an “Other Combination Therapy Product(s)”), such Party shall provide notice of its interest with respect thereto to the other Party and a proposed plan for the Development of such Combination Therapy and the Parties shall discuss such proposal.  In the event that the Development of such Combination Therapy is approved by the JSC, it shall be included in the RLP Development Plan; provided that in the event that the Other Combination Therapy Product(s) is proprietary to one of the Parties (a “Proprietary Product”), then the Development Costs associated with such Combination Therapy shall be apportioned [...***...].  For clarity, in the event that the Development of such Combination Therapy is not approved by the JSC, such Development of a Combination Therapy may be conducted as Additional Development Activities pursuant to Section 5.1.2.4(c).

5.1.8.Opt-Out Right.  On a Regional Target Pair-by-Regional Target Pair basis, Xencor has the right, at its sole discretion, to opt-out of further Development and Commercialization of all Regional Licensed Antibodies or Regional Licensed Products for such Regional Target Pair upon [...***...] prior written notice to Novartis.  Upon the delivery of such notice, (a) Xencor’s then on-going funding commitments and Development Activities will continue until [...***...] of the date of the notice; provided that [...***...], (b) the Novartis Territory for such Regional Target Pair will be worldwide for all purposes of this Agreement and the term Xencor Territory shall no longer have any applicability for such Regional Target Pair, (c) all Regional Licensed Antibodies and Regional Licensed Products with respect to such Regional Target Pair will convert to Global Licensed Antibodies and Global Licensed Products (subject to sub-clause (a) above and royalty payments in accordance with Section 10.6.1.2 and not 10.6.2), respectively, and (d) the licenses set forth in Section 9.1.2.1 will terminate.  For the sake of clarity, Xencor will have no further obligations with respect to the Development of, or Development Costs associated with, such Regional Target Pair from and after the end of [...***...] described in sub-clause (a) above; provided that the Parties will use Commercially Reasonable Efforts to transition on-going activities for which Xencor was responsible to Novartis during [...***...].

5.2.Global Licensed Antibodies and Global Licensed Products.

5.2.1.Overview.  On a Global Target Pair-by-Global Target Pair basis, Novartis will be responsible for all Development of Global Licensed Antibodies and Global Licensed Products.    

5.2.2.Diligence, Standards of Conduct.    On a Global Target Pair-by-Global Target Pair basis, Novartis will use Commercially Reasonable Efforts to Develop Global Licensed Antibodies and Global Licensed Products for such Global Target Pair and obtain Regulatory Approval thereof in the Novartis Territory. 

5.2.3.Development Costs.  With respect to each Global Target Pair, Novartis will be responsible for 100% of all Development Costs for the Development of Global Licensed Antibodies and Global Licensed Products for such Global Target Pair.

5.2.4.Records, Reports, Information Sharing.

5.2.4.1.Development Activities, Reports.  On a Global Target Pair-by-Global Target Pair basis, Novartis will provide to the JDC, on a [...***...] basis, an update regarding Development activities for such Global Target Pair, including any material Research or pre-clinical Development activities or Clinical Studies conducted by Novartis.  Without limiting the foregoing, on a Global Target Pair-by-Global Target Pair basis, Novartis shall provide Xencor with annual written reports within [...***...] after the end of each Calendar Year, summarizing Novartis’ and its Affiliates’ and Sublicensees’ Development efforts with respect to such Global Target Pair during such Calendar Year, including significant preclinical, clinical and regulatory events such as initiation and results of Clinical Studies and filing of significant Regulatory Materials and a description of planned activities for the following Calendar Year.  In addition to such report and during such same period, at Xencor’s reasonable request, Xencor and Novartis will meet in-person or remotely by telephone or video-conference at least [...***...] in order for Novartis to update Xencor regarding the matters described in this Section 5.2.4.1.

5.2.4.2.Information Exchange and Development Assistance.  Upon the reasonable request of Novartis, Xencor will provide to Novartis, without additional compensation and in a commercially reasonable format, a copy of Know-How Controlled by Xencor or its Related Parties that is licensed to Novartis under this Agreement (i.e., Know-How included in Xencor Technology for Xencor) to the extent that it is reasonably necessary for Development of Global Licensed Antibodies or Global Licensed Products or for obtaining or maintaining Regulatory Approval or Pricing Approval for Global Licensed Products, including copies of all scientific information and data related to such Global Licensed Antibodies or Global Licensed Products (including all data made, collected or otherwise generated in the conduct of any pre-clinical studies).  Notwithstanding the foregoing, or anything to the contrary herein, Xencor shall not be required to disclose information that is subject to bona fide

confidentiality obligations to a Third Party; provided that if the rights granted to Novartis hereunder would reasonably be expected to be adversely affected or Novartis otherwise would be prejudiced hereunder by such failure to disclose, Xencor will use commercially reasonable efforts to obtain the consent of such Third Party to disclose such information.

5.2.4.3.Personnel.  Novartis may request that Xencor reasonably make available for consultation regarding the Development of Global Licensed Antibodies and Global Licensed Products certain of its employees engaged in Research and Development activities with respect to such Global Licensed Antibodies and Global Licensed Products.  Xencor will reasonably cooperate (and subject to capacity restraints at Xencor) with Novartis to provide (a) up to [...***...] of consultation without charge to Novartis, and (b) any additional hours of consultation as Novartis may reasonably request, for which Novartis will pay Xencor a rate of [...***...] of such consultation services.

5.2.5.Third Parties. Novartis will be entitled to utilize the services of Third Parties to perform its Development activities under this Section 5.2.5, provided that (a) Novartis will require that such Third Party operates in a manner consistent with the terms of this Agreement and (b) Novartis will remain at all times fully liable for its responsibilities and Novartis hereby expressly waives any requirement that Xencor exhaust any right, power or remedy, or proceed against such Third Party, for any obligation or performance hereunder prior to proceeding directly against Novartis.  Novartis will require that any such Third Party agreement entered into pursuant to this Section 5.2.5 (x) include confidentiality and non-use provisions that are no less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality agreements entered into for a similar purpose), and (y) obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) under and to, any Know-How and Patents that are developed by such Third Party in the performance of such agreement and are reasonably necessary or useful to Research, Develop, Manufacture or Commercialize Global Licensed Antibodies or Global Licensed Products in the Field, and any such license shall be deemed to be a Novartis Existing In-License for all purposes of this Agreement, unless otherwise agreed by the JDC.   For clarity, the foregoing requirement to obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) shall not apply to any improvements to the proprietary core or platform technology owned or in-licensed by any such Third Party or its Affiliates.  Novartis will be solely responsible for direction of and communications with such Third Party.    

5.3.Optioned Licensed Antibodies and Optioned Licensed Products.

5.3.1.Overview.  Subject to the oversight of the JSC and the JDC, the Parties will collaborate on further global Development of Optioned Licensed Antibodies and Optioned Licensed Products in accordance with this Agreement and the OLP Development Plan.

5.3.2.Development Plan, Budgets.

5.3.2.1.OLP Development Plan.  Promptly upon exercise by Xencor of its Opt-In Right with respect to an Optioned Target Pair, the JDC will generate a written work plan and time table that sets forth the Development activities that are necessary or useful to be undertaken over the next [...***...] for the applicable Optioned Licensed Antibodies and Optioned Licensed Products to achieve initial Regulatory Approval (as updated from time to time, the “OLP Development Plan”).  The terms of, and Development activities set forth in, each OLP Development Plan will at all times be designed to be in compliance with all Laws and in accordance with professional and ethical standards customary in the pharmaceutical industry.  The Parties will update the applicable OLP Development Plan for such Optioned Licensed Antibodies and Optioned Licensed Products [...***...] and will provide such updated OLP Development Plan to the JDC.  The JDC will review and approve the OLP Development Plan submitted to it in accordance with Section 2.3.4.

5.3.2.2.OLP Development Budgets.  The OLP Development Plan will contain a [...***...] rolling budget covering the anticipated Development activities to be performed during the then-current Calendar Year (broken down by Calendar Quarter) and the next Calendar Year (broken down by Calendar Quarter), and a forecast of the budgets for each subsequent Calendar Year thereafter through completion of all Development activities set forth in any such OLP Development Plan, provided that the initial OLP Development Plan will also include such a budget for the partial Calendar Year commencing as of the date of such OLP Development Plan and ending December 31 of such Calendar Year (each such one year budget plus any such partial Calendar Year is a “OLP Development Budget”).  Each OLP Development Budget will be updated [...***...] by the JDC in accordance with Section 5.3.2.1.  The OLP Development Budget, and each update thereto, will be prepared by the JDC, based on (a) the Parties’ good faith estimation of the anticipated OLP Development Activities to be conducted during the relevant [...***...] period and (b) information prepared by the Parties in good faith for their own internal planning processes relating to anticipated Development activities, a summary of which will be provided to the JDC for review and incorporation into the OLP Development Budget.  The OLP Development Budget will include an itemized list of the applicable Development activities to be performed during the [...***...] covered by such OLP Development Budget, with detailed line item entries for each Development activity setting forth the costs directly related to such Development activity (broken out to show Out-of-Pocket Costs and FTE Costs for FTEs directly engaged to perform such Development activity) and specifying what Party or Third Party is responsible for performing the applicable Development activity, which itemized list may include: 

(a)Any material preclinical, non-Clinical Studies or GLP toxicology studies, itemized by study, and

(b)Clinical Studies, including (A) the following costs itemized by Clinical Study, if applicable: itemized cost of study drug (if available), per-

patient costs (if available), study initiation costs, per-protocol costs, investigator payments, monthly study fixed costs, statistical analysis costs, study report development costs and study close-out expenses and (B) the following information itemized by Clinical Study: number of study sites and number of patients.

5.3.2.3.Managing and Amending OLP Development Plans and OLP Development Budgets.  The JDC will update and amend the OLP Development Plan from time-to-time as it deems necessary and, until such time as no further Development activities are occurring or expected to occur with respect to such Optioned Target Pair.  

5.3.3.Diligence.  Novartis will use Commercially Reasonable Efforts to (a) Develop Optioned Licensed Antibodies and Optioned Licensed Products for the Optioned Target Pair and obtain Regulatory Approval therefor in the Novartis Territory, and (b) perform the Development activities pursuant to the OLP Development Plan for such Optioned Licensed Antibodies and Optioned Licensed Products for such Optioned Target Pair in accordance with the OLP Development Plan.

5.3.4.Development Costs.  With respect to each Optioned Target Pair, Xencor will be responsible for 25% of all Development Costs and Novartis will be responsible for 75% of all Development Costs, in each case for the Development of all Optioned Licensed Antibodies or Optioned Licensed Products from and after the date that Xencor exercises its Opt-In Right with respect thereto.  For clarity, Development Costs will be reconciled and paid in accordance with the procedure described in Section 10.3.

5.3.5.Records, Reports, Information Sharing.

5.3.5.1.Development Activities Reports.  Novartis will provide to the JDC, on a [...***...] basis, or more frequently as reasonably requested by the JDC, an update regarding Development activities conducted by or on its behalf.  In addition, Novartis will promptly share with Xencor all material developments and information that it comes to possess relating to the Development of any Optioned Licensed Antibodies and Optioned Licensed Products, including (a) safety concerns, and (b) study reports and data generated from Clinical Studies. 

5.3.5.2.Scientific Records.  Novartis will maintain scientific records, in sufficient detail and in sound scientific manner appropriate for Patent and regulatory purposes and in compliance with cGLP with respect to activities that require cGLP compliance to be submitted in regulatory filings (including INDs and BLAs), which will fully and accurately reflect all work done and results achieved in the performance of the Development activities and Clinical Studies.

5.3.5.3.Information Exchange and Development Assistance.  Until the expiration or termination of the final OLP Development Plan, upon the reasonable request of Novartis, Xencor will provide to Novartis, without additional compensation

and in a commercially reasonable format, Know-How Controlled by Xencor or its Related Parties that is licensed to Novartis under this Agreement to the extent that it is reasonably necessary for Development of Optioned Licensed Antibodies or Optioned Licensed Products in accordance with the applicable OLP Development Plan or for obtaining or maintaining Regulatory Approval for Optioned Licensed Products, including copies of all material scientific information and data related to such Optioned Licensed Antibodies or Optioned Licensed Products (including all material data made, collected or otherwise generated in the conduct of any pre-clinical studies).  Notwithstanding the foregoing, or anything to the contrary herein, neither Party shall be required to disclose information that is subject to bona fide confidentiality obligations to a Third Party; provided that if the rights granted to the other Party hereunder would reasonably be expected to be adversely affected or such Party otherwise would be prejudiced hereunder by such failure to disclose, the Party bound by such confidentiality obligations will use commercially reasonable efforts to obtain the consent of such Third Party to disclose such information. 

5.3.5.4.Personnel.    Novartis may request that Xencor reasonably make available for consultation regarding the Development of Optioned Licensed Antibodies and Optioned Licensed Products certain of its employees engaged in Research and Development activities with respect to such Optioned Licensed Antibodies and Optioned Licensed Products.  Xencor will reasonably cooperate (and subject to capacity restraints at Xencor) with Novartis to provide (a) up to [...***...] of consultation without charge to Novartis, and (b) any additional hours of consultation as Novartis may reasonably request, for which Novartis will pay Xencor a rate of [...***...] of such consultation services.

5.3.6.Third Parties.  Novartis will be entitled to utilize the services of Third Parties to perform its Development activities under this Section 5.3, provided that (a) Novartis will require that such Third Party operates in a manner consistent with this Agreement, (b) Novartis will remain at all times fully liable for its respective responsibilities.  Novartis hereby expressly waives any requirement that Xencor exhaust any right, power or remedy, or proceed against such Third Party, for any obligation or performance hereunder prior to proceeding directly against Novartis and (c) Novartis will make reasonable efforts to share, through the JDC, information regarding any prior experience with specific contract research organizations that are anticipated to be engaged to perform work under the OLP Development Plan.  Novartis will (x) require that any Third Party agreement entered into pursuant to this Section 5.3.6 include confidentiality and non-use provisions that are no less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality agreements entered into for a similar purpose), and (y) obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) under and to, any Know-How and Patents that are developed by such Third Party in the performance of such agreement and are reasonably necessary or useful to Research, Develop, Manufacture or Commercialize Optioned Licensed Antibodies or Optioned Licensed Products in the Field, and any such license shall be deemed to be a Novartis Existing In-License for all purposes of this Agreement, unless otherwise agreed by the JDC.  For clarity, the

foregoing requirement to obtain ownership of, or a fully sublicensable license (or an exclusive option to obtain such license) shall not apply to any improvements to the proprietary core or platform technology owned or in-licensed by any such Third Party or its Affiliates unless such improvements are reasonably necessary to Research, Develop, Manufacture or Commercialize those Optioned Licensed Antibodies or Optioned Licensed Products with respect to which such Third Party or its Affiliate conducted its activities under such Third Party agreement.  Novartis will be solely responsible for direction of and communications with such Third Party.

5.3.7.Opt-Out Right.  Xencor has the right, at its sole discretion, to opt-out of further cost sharing and any activities, if any, allocated to it pursuant to the OLP Development Plan with respect to all Optioned Licensed Antibodies and Optioned Licensed Products for the Optioned Target Pair upon [...***...] prior written notice to Novartis.  Upon the delivery of such notice, (a) Xencor’s then on-going funding commitments and Development Activities will continue until the [...***...] anniversary of the date of the notice; provided that during such [...***...] period, Xencor’s responsibility for Development Costs with respect to such Optioned Target Pair shall not exceed [...***...]% of the Development Costs included in the OLP Development Budget in effect as of the date of Xencor’s notice, notwithstanding any increases that may be made to such OLP Development Budget during such [...***...] period (for clarity, if Novartis reduces the OLP Development Budget during such [...***...] then Xencor shall only be responsible for [...***...]% of the Development Costs included in such updated OLP Development Budget), (b) the Optioned Target Pair will convert to a Global Target Pair, (c) all Optioned Licensed Antibodies and Optioned Licensed Products will convert to Global Licensed Antibodies and Global Licensed Products, respectively, and (d) the licenses set forth in Section 9.2 will apply to such new Global Target Pair, Global Licensed Antibodies and Global Licensed Products; provided that, notwithstanding the foregoing, in the event that Xencor exercises its Opt-Out Right with respect to the Optioned Licensed Antibodies and Optioned Licensed Products within [...***...] days of Xencor’s receipt of the [...***...] updated OLP Development Plan, then Xencor will have no obligation to share in any further Development Costs with respect thereto beyond those committed in the previously applicable OLP Development Budget for the next year.  For example, if the prior OLP Development Budget provided for a single Clinical Study budgeted for $[...***...] and the updated OLP Development budget provides for such Clinical Study, but with a budget of $[...***...] and adds a new Clinical Study budgeted at $[...***...], Xencor would remain obligated to share its portion of the Development Costs for the first Clinical Study only and only at the originally budgeted amount (i.e., [...***...]% of $[...***...] or $[...***...]).  For the sake of clarity, Xencor will have no further obligations with respect to the Development Costs associated with such Optioned Target Pair from and after the end of such [...***...] notice period. 

5.4.Fc Licensed Antibodies and Fc Licensed Products.

5.4.1.Overview.  Novartis will be responsible for all Development of Fc Licensed Antibodies and Fc Licensed Products.

5.4.2.Diligence, Standards of Conduct.    Novartis will use Commercially Reasonable Efforts to Develop Fc Licensed Antibodies and Fc Licensed Products and obtain Regulatory Approval thereof in the Novartis Territory. 

5.4.3.Development Costs.  Novartis will be responsible for 100% of all Development Costs for the Development of Fc Licensed Antibodies and Fc Licensed Products.

5.4.4.Reports.  On an Fc Licensed Antibodies-by-Fc Licensed Antibodies and Fc Licensed Product-by-Fc Licensed Product basis, Novartis shall provide Xencor with annual written reports within [...***...] after the end of each Calendar Year, summarizing Novartis’ and its Affiliates’ and Sublicensees’ Development efforts with respect to such Fc Licensed Antibody or Fc Licensed Product during such Calendar Year, including significant preclinical, clinical and regulatory events such as initiation and results of Clinical Studies and filing of significant Regulatory Materials and a description of planned activities for the following Calendar Year.

5.4.5.Third Parties.  Novartis will be entitled to utilize the services of Third Parties to perform its Development activities under this Section 5.4.5, provided that (a) Novartis will require that such Third Party operates in a manner consistent with the terms of this Agreement and (b) Novartis will remain at all times fully liable for its responsibilities and Novartis hereby expressly waives any requirement that Xencor exhaust any right, power or remedy, or proceed against such Third Party, for any obligation or performance hereunder prior to proceeding directly against Novartis.  Novartis will require that any such Third Party agreement entered into pursuant to this Section 5.4.5 include confidentiality and non-use provisions that are no less stringent than those set forth in Section 11.1 (but of duration customary in confidentiality agreements entered into for a similar purpose).  Novartis will be solely responsible for direction of and communications with such Third Party.

6.COMMERCIALIZATION

6.1.Regional Licensed Products.

6.1.1.Responsibility, Cost and Diligence.    On a Regional Target Pair-by-Regional Target Pair basis, each Party will be solely responsible, at its expense, for all Commercialization activities relating to Regional Licensed Products in the Field in its Territory.  On a Regional Target Pair-by-Regional Target Pair basis, Novartis will use Commercially Reasonable Efforts to (a) Commercialize each Regional Licensed Product for which it has obtained Regulatory Approval (including where required by Law to Commercialize the Regional Licensed Product, Pricing Approval) in its Territory, and (b) perform all Commercialization activities for such Regional Licensed Product in accordance with the RLP Commercial Strategy.

6.1.2.RLP Commercial Strategy.    Within [...***...] before the anticipated Initiation of the first Phase 3 Study for a Regional Licensed Product, Novartis will provide and within [...***...] after such provision the JCC will, subject to Law including Antitrust Laws, review, update and approve a written summary of the global Commercial strategy for such Regional Licensed Product (the “RLP Commercial Strategy”); provided that, until the RLP Commercial Strategy

is approved by the JCC or, if no such approval is obtained, neither Party shall be bound by the global Commercial strategy proposed by Novartis.  For clarity, any and all such communications and strategy involving the Commercialization of Regional Licensed Products shall be limited to those permitted under Law, including Antitrust Laws.

6.1.3.Novartis Territory Commercialization Plan.  No less than [...***...] in advance of the reasonably expected first Regulatory Approval in the Novartis Territory with respect to a Regional Licensed Product, Novartis will prepare and deliver to the JCC for review a reasonable written plan that summarizes the Commercialization activities to be undertaken with respect to such Regional Licensed Product in the Novartis Territory in the next Calendar Year (the “Novartis Territory Commercialization Plan”).  The Novartis Territory Commercialization Plan for a Regional Licensed Product will subsequently be updated and modified by Novartis, from time to time at its discretion and no less frequently than [...***...], based upon, among other things, Novartis’ Commercialization activities with respect to such Regional Licensed Product in the Novartis Territory, a copy of which updated plan Novartis will provide to the JCC.  Notwithstanding the foregoing, in the event of any disagreement between the Parties regarding the Novartis Territory Commercialization Plan for a Regional Licensed Product pursuant to Section 2.4.5, the Novartis representatives on the JCC will have final decision-making authority over the preparation and updating of such Novartis Territory Commercialization Plan, provided that such decisions do not materially adversely affect the Commercialization of such Regional Licensed Product in the Xencor Territory. 

6.1.4.Xencor Territory Commercialization Plan.  No less than [...***...] in advance of the reasonably expected first Regulatory Approval in the Xencor Territory with respect to a Regional Licensed Product, Xencor will prepare and deliver to the JCC for review a reasonable written plan that summarizes the Commercialization activities to be undertaken with respect to such Regional Licensed Product in the Xencor Territory in the next Calendar Year (the “Xencor Territory Commercialization Plan”).  The Xencor Territory Commercialization Plan for a Regional Licensed Product will subsequently be updated and modified by Xencor, from time to time at its discretion and no less frequently than [...***...] per [...***...], based upon, among other things, Xencor’s Commercialization activities with respect to such Regional Licensed Product in the Xencor Territory, a copy of which updated plan Xencor will provide to the JCC.  Notwithstanding the foregoing, in the event of any disagreement between the Parties regarding the Xencor Territory Commercialization Plan for a Regional Licensed Product pursuant to Section 2.4.5, the Xencor representatives on the JCC will have final decision-making authority over the preparation and updating of such Xencor Territory Commercialization Plan, provided that such decisions do not materially adversely affect the Commercialization of such Regional Licensed Product in the Novartis Territory.

6.1.5.Advertising and Promotional Materials.

6.1.5.1.RLP Branding.  Each Party will use Commercially Reasonable Efforts to develop (and thereafter modify and update) a branding strategy (including positioning, colors, other visual branding elements and Novartis RLP Trademarks and Xencor RLP Trademarks in accordance with Section 14.8.1) for each Regional

Licensed Product for use in the Field for such Party’s Territory (each a “RLP Branding Strategy”), which the JCC will, in accordance with Sections 2.4.3.5 and 2.4.5, review, coordinate and approve, and which the Parties will, following such review and approval, implement.  Each Party will submit its RLP Branding Strategy for a Regional Licensed Product to the JCC at least [...***...] (or more frequently if agreed to by the Parties).  Each Party will consider in good faith any timely comments by the other Party with respect to its RLP Branding Strategy, but will have final decision-making authority with respect to such its RLP Branding Strategy in its Territory.  Notwithstanding the foregoing, each Party will use Commercially Reasonable Efforts to ensure that (a) its RLP Branding Strategy complies with Laws in its Territory, and (b) that any branding elements selected for inclusion in its RLP Branding Strategy do not infringe any Third Party trademarks or other intellectual property rights.  If any such RLP Branding Strategy infringes Third Party trademarks or other intellectual property rights or otherwise does not comply with Law in the Territory in which such RLP Branding Strategy is used, the affected  Party will take action to end such infringement or other noncompliance (including by modifying its RLP Branding Strategy) in its Territory and the other Party will not be obligated to implement its RLP Branding Strategy in its Territory pursuant to this Section 6.1.5.1 unless and until such infringement or noncompliance is ended. 

6.1.5.2.Xencor Advertising & Promotion.    Xencor will be responsible for the creation, preparation, production, reproduction and filing with the applicable Regulatory Authorities, of relevant written sales, promotion and advertising materials (“Promotional Materials”) relating to each Regional Licensed Product for use in the Xencor Territory.  All such Promotional Materials will be compliant with applicable Law and, if applicable, consistent in all material respects with the Xencor Territory Commercialization Plan and, if applicable, consistent in all material respects with the RLP Branding Strategy for such Regional Licensed Product in the Xencor Territory.  Xencor will submit representative samples of its Promotional Materials developed by it for use in the Xencor Territory to the JCC at least [...***...] (or more frequently if agreed to by the Parties).  Xencor will consider in good faith any timely comments Novartis may have with respect to any such Promotional Materials, but will have final decision-making authority in the Xencor Territory with respect to such Promotional Materials. 

6.1.5.3.Novartis Advertising & Promotion.    Novartis will be responsible for the creation, preparation, production, reproduction and filing with the applicable Regulatory Authorities, of relevant Promotional Materials relating to each Regional Licensed Product for use in the Novartis Territory.  All such Promotional Materials will be compliant with Law, consistent in all material respects with the Novartis Territory Commercialization Plan and, if applicable, consistent in all material respects with the RLP Branding Strategy for such Regional Licensed Product in the Novartis Territory.  Novartis will submit representative samples of its Promotional Materials developed by it for use in the Novartis Territory to the JCC at least [...***...] thereafter (or more frequently if agreed to by the Parties).  Novartis will consider in good faith any timely

comments Xencor may have with respect to any such Promotional Materials, but will have final decision-making authority in the Novartis Territory with respect to such Promotional Materials.    

6.1.5.4.Reporting Obligations.    Each Party will report to the JCC in writing, on an [...***...] basis in the first [...***...] of the [...***...] following the first Regulatory Approval of such Regional Licensed Product in the Field in such Party’s Territory (for the period ending December 31 of the prior Calendar Year), summarizing in reasonable detail such Party’s Commercialization activities for such Regional Licensed Product performed to date (or updating such report for activities performed since the last such report was given hereunder, as applicable).  In addition, each Party will provide the other Party with written notice of the First Commercial Sale of each Regional Licensed Product in such Party’s Territory as soon as reasonably practicable after such event, provided however, that such Party will inform the other Party of such event prior to general public disclosure of such event by such Party.  Subject to Law, each Party will provide such other information to the JCC as the other Party may reasonably request with respect to Commercialization of such Regional Licensed Product and will keep such JCC reasonably informed of such Party’s Commercialization activities with respect to such Regional Licensed Product. 

6.1.6.Commercialization Obligations.  Each Party and its Related Parties will be responsible for booking sales of the Regional Licensed Products sold in its Territory.  Each Party and its Related Parties may warehouse Regional Licensed Products both inside and outside of such Party’s Territory, provided that any sales with respect to such Regional Licensed Products are booked in such Party’s Territory.  If a Party receives any orders for any Regional Licensed Product in the other Party’s Territory, it will refer such orders to the other Party, to the extent it is not prohibited from doing so under Law.  Moreover, each Party and its Related Parties will, using Commercially Reasonable Efforts, be solely responsible for handling all returns of any Regional Licensed Product sold in its Territory, as well as all aspects of Regional Licensed Product order processing, invoicing and collection, distribution, inventory and receivables of Regional Licensed Products sold in its Territory. 

6.1.7.Recalls, Market Withdrawals or Corrective Actions.  In the event that any Regulatory Authority issues or requests a recall or takes a similar action in connection with a Regional Licensed Product in a Territory, or in the event either Party determines that an event, incident or circumstance has occurred that may result in the need for a recall or market withdrawal of a Regional Licensed Product in its Territory, the Party notified of such recall or similar action, or the Party that desires such recall or similar action, will as promptly as possible, notify the other Party’s Alliance Manager thereof by telephone or e-mail.  Each Party, in consultation with the other Party, will decide whether to conduct a recall of a Regional Licensed Product in its own Territory and the manner in which any such recall will be conducted (except in the case of a government mandated recall, when such Party may act without such advance notice but will notify the other Party as soon as possible thereafter).  Except as may otherwise be agreed to by the Parties, and subject to the Parties’ respective indemnification obligations

hereunder or under any ancillary agreements between the Parties, each Party will bear the expense of any such recall in its own Territory.  Each Party will make available all of its pertinent records that may be reasonably requested by the other Party that are necessary for a Party to effect a recall of a Regional Licensed Product in its Territory.  The Parties’ rights and obligations under this Section 6.1.7 will be subject to the terms of any supply agreement(s), SDEA or quality related agreements entered into between the Parties.  In the event of a conflict between the provisions of any such supply agreement, SDEA or quality related agreements and this Section 6.1.7, the provisions of such supply agreement, SDEA or quality related agreements will govern. 

6.1.8.Ex-Territory Sales, Export Monitoring.    

6.1.8.1.Ex-Territory Sales.    Subject to Law, neither Party will engage in any advertising or promotional activities relating to any Regional Licensed Product directed primarily to customers or other buyers or users of such Regional Licensed Product located outside its Territory or accept orders for Regional Licensed Products from or sell Regional Licensed Products into such other Party’s Territory for its own account, and if a Party receives any order for any Regional Licensed Product in the other Party’s Territory, it will refer such orders to the other Party.  The Parties expressly acknowledge and agree that Law may prevent or limit a Party from taking action to prevent exports from one EU country to another.

6.1.8.2.Export Monitoring.    Each Party and its Related Parties will use Commercially Reasonable Efforts to monitor and prevent exports of Regional Licensed Products from its own Territory for Commercialization in the other Party’s Territory using methods permitted under Law that are commonly used in the industry for such purpose (if any), and will promptly inform the other Party of any such exports of Regional Licensed Products from its Territory, and any actions taken to prevent such exports.  Each Party agrees to take reasonable actions requested in writing by the other Party that are consistent with Law to prevent exports of Regional Licensed Products from its Territory for Commercialization in the other Party’s Territory.  The Parties expressly acknowledge and agree that Law may prevent or limit a Party from taking action to prevent exports from one EU country to another.

6.2.Global Licensed Products.

6.2.1.Responsibility, Cost and Diligence.  Novartis will be solely responsible, at its expense, for all Commercialization activities relating to Global Licensed Products in the Field in the Novartis Territory.  Novartis will use Commercially Reasonable Efforts to Commercialize each Global Licensed Product for which Novartis has obtained Regulatory Approval within the Novartis Territory.

6.2.2.Advertising and Promotional Materials.

6.2.2.1.Global Licensed Product.  Novartis will have the sole right, from time to time during the Term, to develop (and thereafter modify and update) a global branding strategy (including global positioning, messages, logo, colors and other visual