Common use of Principles of Reporting Clause in Contracts

Principles of Reporting. For purposes of the sharing of costs and sharing of “Net Profit” or “Net Loss” (as the case may be) among the Parties as provided under the Agreement and this Financial Appendix, the presentation of results of operations of the GenNov Parties for each of the United States and Europe will be based on each GenNov Party’s respective financial information for each territory for the applicable period in the reporting format depicted as follows *****: For the United States Novartis Genentech Total Gross Sales (U.S.) less ***** = Net Sales (U.S.) less ***** = Gross Profit (U.S.) less ***** ***** = Net Profit (U.S.) or Net Loss (U.S.) for purpose of GenNov profit share; and For Novartis and Tanox only: Novartis’ share of Net Profit (U.S.) in accordance with the Agreement and this Financial Appendix; less *****. = Net Profit (TANOX) for purpose of calculating the Tanox Profit Share For Europe Novartis Genentech Total Gross Sales (EUR) less ***** = Net Sales (EUR) less ***** = Gross Profit (EUR) less ***** less ***** = Net Profit (EUR) or Net Loss (EUR) for purpose of GenNov profit share It is the intention of Genentech, Novartis and Tanox that the interpretation of these definitions and other matters under this Financial Appendix will be: (a) consistent with the U.S. generally accepted accounting principles (“GAAP”) consistently applied for Genentech; and (b) international accounting standards as consistently applied (“IAS”) for Novartis. The Finance Sub-Committee shall ensure consistency in accounting treatment between GAAP and IAS, where possible. If necessary a Party will make the appropriate adjustments to the formatting of financial information it supplies under the Agreement to conform to the format of reporting results of operations for purposes of GenNov as set forth in this Financial Appendix. For purposes of the definitions in this Financial Appendix and the calculation of applicable profit, cost, revenue and other amounts hereunder and under the Agreement, the Parties shall eliminate, and not include in any such amounts, any inter- and intra-company transactions ***** within or among the Parties (and/or their respective Affiliates or sublicensees), including without limitation with respect to transfer pricing, except to the extent expressly provided otherwise in the Agreement or this Financial Appendix. Notwithstanding anything to the contrary in the Agreement or this Financial Appendix (but without limiting any of the provisions in Article 19 (Indemnity and Insurance) of the Agreement), if any Party suffers*****: (iv) (collectively “Excluded Costs”), then any such Excluded Costs shall be solely for the account of such Party, and shall not be included in any costs or expenses for the purpose of calculating of Net Profits (U.S.), Net Profits (EUR) or Net Profits (TANOX) (or the corresponding Net Losses, as the case may be), to be shared under the Agreement or this Financial Appendix.