Exhibit 10.7

 

CONFIDENTIAL PROVISIONS REDACTED

 

COLLABORATION AGREEMENT

 

BY AND BETWEEN

 

PDL BIOPHARMA, INC.

 

AND

 

BRISTOL-MYERS SQUIBB COMPANY

 

AUGUST 18, 2008

 

EXECUTION COPY

 

CONFIDENTIAL TREATMENT REQUESTED

 

1

--------------------------------------------------------------------------------

 

COLLABORATION AGREEMENT

 

THIS COLLABORATION AGREEMENT (the “Agreement”) is made and entered into as of
August 18, 2008 (the “Execution Date”) by and between PDL Biopharma, Inc., a
Delaware corporation having its principal place of business at 1400 Seaport
Blvd., Redwood City, CA  94063 (“PDL”) and Bristol-Myers Squibb Company, a
Delaware corporation headquartered at 345 Park Avenue, New York, New York 10154
(“BMS”), effective as of the Effective Date (as defined in Section 12.6), except
for Article 10 and Section 12.6, which shall be effective as of the Execution
Date. PDL and BMS are sometimes referred to herein individually as a “Party” and
collectively as the “Parties.”

 

RECITALS

 

WHEREAS, PDL is a biotechnology company engaged in the research and development
of antibodies in order to develop and commercialize antibody-based products
based on or incorporating such antibodies;

 

WHEREAS, PDL has generated and is developing antibodies that bind to CS1 (the
“Target”), including antibodies known as “HuLuc63” and “PDL-241”;

 

WHEREAS, BMS is a worldwide, research-based pharmaceutical company, engaged in
the discovery, development, manufacturing and marketing of new therapies and
treatment programs;

 

WHEREAS, BMS and PDL desire to collaborate in the development of certain CS1
antibodies, including HuLuc63, all on the terms and conditions set forth below;

 

WHEREAS, BMS desires to receive an option to collaborate with PDL with respect
to other CS1 antibodies, including PDL-241, all on the terms and conditions set
forth below;

 

WHEREAS, BMS desires to obtain exclusive rights to commercialize and distribute
such products throughout the world, and PDL is willing to provide BMS with such
rights, all on the terms and conditions set forth below; and

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, agree as follows:

 

2

--------------------------------------------------------------------------------

 

1.             DEFINITIONS

 

Capitalized terms used in this Agreement (other than the headings of the
Sections or Articles) have the following meanings set forth in this Article 1,
or, if not listed in this Article 1, the meanings as designated in the text of
this Agreement.

 

1.1          “Affiliate” means, with respect to a particular Party, a person,
corporation, partnership, or other entity that controls, is controlled by or is
under common control with such Party. For the purposes of the definition in this
Section 1.1, the word “control” (including, with correlative meaning, the terms
“controlled by” or “under the common control with”) means the actual power,
either directly or indirectly through one (1) or more intermediaries, to direct
or cause the direction of the management and policies of such entity, whether by
the ownership of at least fifty percent (50%) of the voting stock of such
entity, or by contract or otherwise. In the event that PDL completes a
Separation Transaction pursuant to Section 14.18 and this Agreement is assigned
to or retained by PDL Operating Company (as defined in Section 1.74), PDL
Holding Company (as defined in Section 1.74) shall not be deemed to be an
Affiliate of PDL Operating Company.

 

1.2          “Allowable Expenses” means those expenses incurred by a Party in
performing its obligations under the U.S. Commercialization Plan then in effect
and that are specifically attributable to Commercialization of a Product in the
U.S. and that consist of: (a) Manufacturing Costs for a Product for commercial
sale in the U.S.; (b) Regulatory Expenses; (c) Sales and Marketing Costs;
(d) costs associated with Medical Education Activities, and other ancillary
services to the foregoing; (e) Distribution Costs; (f) Third Party Payments with
respect to the U.S. (except as set forth in Sections 8.6(a) and 8.6(b));
(g) Trademark Costs; (h) patent costs described in Section 9.3(g); and
(i) patient assistance and indigent/expanded access programs with respect to a
Product in the U.S. To the extent that any of the forgoing expenses apply to
both the U.S. and the Royalty Territory, such costs shall be reasonably
allocated between the U.S. and the Royalty Territory (y) where such costs are
clearly allocable to the U.S. or Royalty Territory, according to such clear
allocation or (z) where such costs are not clearly allocable to the U.S. or
Royalty Territory, according to a methodology agreed upon by the Parties prior
to Launch of such Product and consistently applied, all as calculated in
accordance with GAAP.

 

1.3          “Antibody” means any (i) antibody, (ii) protein comprising at least
one CDR portion thereof (including bispecific antibodies, single chain
antibodies, domain antibodies and immunoconjugated antibodies) or
(iii) adnectin; in each of (i), (ii) and (iii), whether human, humanized,
chimeric, murine, synthetic or from any other source, that (a) has been raised,
engineered or otherwise optimized to bind specifically and directly to the
Target (whether exclusively or in addition to any other target such Antibody may
modulate) and (b) competes for binding to the Target with a naturally occurring
ligand of the Target, interferes with Target-Target interaction, or, once bound
to the Target, exhibits antagonistic activity against the Target, agonist
activity against the Target, ADCC (antibody dependent cellular cytotoxity)
and/or other Fc-mediated effector function.

 

1.4          “Approved Plan” means, with respect to a Product, any one or more
of the Global Development Plans, each Annual Development Plan, and the U.S.
Commercialization Plan, in each case as adopted or approved under the terms of
this Agreement.

 

3

--------------------------------------------------------------------------------

 

1.5          “BioBetter Technology” means [****]*.

 

1.6          “BMS Licensed Know-How” means all Information (other than Patents)
that is:

 

(a)           Controlled by BMS and its Affiliates, including Information
Controlled jointly with PDL, as of the Effective Date that: (i) covers a
Licensed Antibody, a composition containing a Licensed Antibody (e.g., a
formulation containing a Licensed Antibody), or the manufacture or use of a
Licensed Antibody (or a composition containing a Licensed Antibody); or (ii) is
necessary or reasonably useful for PDL to perform its obligations to the
Collaboration under the Agreement; or

 

(b)           Controlled by BMS and its Affiliates during the term of this
Agreement, including Information Controlled jointly with PDL, and is an
Invention.

 

1.7          “BMS Licensed Patents” means all Patents that are:

 

(a)           Controlled by BMS and its Affiliates, including patents Controlled
jointly with PDL, as of the Effective Date and (i) claim a Licensed Antibody, a
composition containing a Licensed Antibody (e.g., a formulation containing a
Licensed Antibody), or the manufacture or use of a Licensed Antibody (or a
composition containing a Licensed Antibody); or (ii) are necessary or reasonably
useful for PDL to perform its obligations to the Collaboration under the
Agreement; or

 

(b)           Controlled by BMS and its Affiliates, including Patents Controlled
jointly with PDL, during the term of this Agreement and (i) claim an Invention;
or (ii) are a continuation, divisional, continuation-in-part (solely to the
extent claiming subject matter disclosed in a Patent described in clause
(a) above), foreign counterpart, substitution, extension, registration,
confirmation, reissue, re-examination, supplementary protection certificates,
confirmation patents, patent of additions or renewal of, or issue from, any
Patent described in clause (a) above.

 

1.8          “Change of Control” means any transaction in which a Party:
(a) sells, conveys or otherwise disposes of all or substantially all of its
property or business; or (b)(i) merges, consolidates with, acquires or is
acquired by any other Person (other than a wholly-owned subsidiary of such
Party); or (ii) effects any other transaction or series of transactions; in each
case of clause (i) or (ii), such that the stockholders of such Party (or the
Person acquired by such Party) immediately prior thereto, in the aggregate, no
longer own, directly or indirectly, beneficially or legally, at least fifty
percent (50%) of the outstanding voting securities or capital stock of the
surviving Person following the closing of such merger, consolidation, other
transaction or series of transactions. As used in this Section 1.8, “Person”
means any corporation, firm, partnership or other legal entity. Notwithstanding
the foregoing, the transaction or transactions whereby PDL completes a
Separation Transaction pursuant to Section 14.18 shall not be a “Change of
Control.”

 

1.9          “Clinical Costs” means the costs incurred by a Party or for its
account, during the term and pursuant to this Agreement, in connection with
clinical studies of a Product, whether alone or in combination with another
product or agent, including the following: (a) the preparation for and conduct
of clinical trials (except for related Manufacturing Costs otherwise included in
Development Costs); (b) data collection and analysis, and report writing; and
(c) clinical laboratory work. The Clinical Costs shall exclude costs incurred in
connection with Phase IV Clinical Trials and investigator

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

4

--------------------------------------------------------------------------------

 

sponsored clinical trials, and post-marketing surveillance activities, which
shall be considered Sales and Marketing Costs.

 

1.10        “Collaboration” means the collaborative research, development, and
commercialization program between the Parties that is contemplated by this
Agreement.

 

1.11        “Commencement” means, with respect to a Phase I Clinical Trial,
Phase II Clinical Trial, Phase III Clinical Trial, Phase IIIb Clinical Trial, or
Registrational Trial, the first enrollment of a human volunteer or patient in
such trial.

 

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

 

1.13        “Committee” means the JDC or the USJCC, as the case may be.

 

1.14        “Compete(s)” means, [****]*.

 

1.15        “Controlled” means, with respect to any molecule, material,
Information or intellectual property right, that the Party owns or has a license
to such molecule, material, Information or intellectual property right and has
the ability to grant to the other Party access, a license or a sublicense (as
applicable) to such molecule, material, Information or intellectual property
right as provided for herein without violating the terms of any agreement or
other arrangements with any Third Party existing at the time such Party would be
first required hereunder to grant the other Party such access, license or
sublicense.

 

1.16        “Development” means, with respect to a Product (whether alone or in
combination with another product or agent), those activities, including
research, pre-clinical development activities, clinical trials and supporting
laboratory studies, supporting manufacturing activities and related regulatory
activities, that are necessary or useful to: (a) obtain the approval by the
applicable Regulatory Authorities of the Drug Approval Application with respect
to such Product in the applicable regulatory jurisdiction, whether alone or for
use together, or in combination, with another active agent or pharmaceutical
product; (b) maintain such approvals; or (c) obtain or maintain compendia
listings with respect to such Product. For clarity, “Co-Develop,” “Develop” and
“Developing” have a correlative meaning.

 

1.17        “Development Costs” means the costs incurred by a Party or for its
account, as calculated in accordance with GAAP consistently applied, during the
term and pursuant to performing

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

5

--------------------------------------------------------------------------------

 

its obligations under the then-current Annual Development Plan (without regard
to the budget set forth in such Annual Development Plan), that are specifically
identifiable (or reasonably and consistently allocable) to the Development of a
Product and that are directed to achieving or maintaining Regulatory Approval of
such Product. The Development Costs shall include amounts, without mark-up, that
a Party pays to Third Parties involved in such Development of a Product, and all
internal costs incurred by a Party in connection with such Development of such
Product. Development Costs include the following: (a) Research Costs; (b) costs
relating to the application of BioBetter Technology to Existing Antibodies and,
subsequent to BMS’ exercise of the BMS Option (if applicable), Option Antibodies
(existing as of the date of such exercise) and any Future Antibodies resulting
from such application; (c) preclinical costs such as toxicology and the creation
of product assays such as those for pharmacokinetic and immunogenicity testing;
(d) formulation development, test method development, delivery system
development, stability testing and statistical analysis; (e) Clinical Costs;
(f) expenses related to adverse event reporting; (g) Manufacturing Costs for a
Product for use in preclinical and clinical activities including the
manufacture, purchase or packaging of comparators or placebo for use in clinical
studies of a Product (with the manufacturing costs for comparators or placebo to
be determined in the same manner as Manufacturing Costs are determined for any
Product), as well as the direct costs and expenses of disposal of drugs and
other supplies used in such clinical studies; (h) Losses incurred in connection
with claims set forth in Section 13.3, to the extent provided therein; and
(i) development of the Manufacturing process for a Product (including with
respect to any excipients or adjuvants included in such Products) and related
scale-up, manufacturing process validation, manufacturing process improvements,
and qualification and validation of Third Party contract manufacturers;
(j) regulatory expenses relating to Development activities for the purpose of
obtaining Regulatory Approval for an indication for a Product; and (k) other
out-of pocket Product Development expenses that meet the criteria set forth
above in this Section 1.17 including, without limitation institutional and
advisory review boards, investigator meetings, quality of life studies,
epidemiology and outcomes research.

 

For clarity, scale-up and validation costs as described in clause (i) above will
be considered Development Costs until commercial Product that is eligible for
sale is manufactured.

 

1.18        “Diligent Efforts” [****]*.

 

1.19        “Distribution Costs” means the costs, excluding corporate and
administrative overhead, incurred by a Party or for its account, during the term
and pursuant to the Agreement that are reasonably and consistently allocable to
the distribution of a Product in the U.S. for Commercialization purposes,
including: (a) handling and transportation to fulfill orders with respect to a
Product in the U.S. (but excluding such costs to the extent they are treated as
a deduction in the definition of Net Sales); (b) customer services, including
order entry, billing and adjustments, inquiry and credit and collection with
respect to a Product in the U.S.; and (c) costs of storage and distribution of
Products for sale in the U.S.

 

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

 

1.21        “Drug Approval Application” or “DAA” means a Biologics License
Application or a New Drug Application (each, a “BLA”), as defined in the United
States Public Health Service Act or

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

6

--------------------------------------------------------------------------------

 

the United States Food, Drug, and Cosmetic Act, as amended, and the regulations
promulgated thereunder, or any corresponding foreign application in the Royalty
Territory, including, with respect to the European Union, a Marketing
Authorization Application (“MAA”) filed with the European Medicines Agency
pursuant to the centralized approval procedure or with the applicable Regulatory
Authority of a country in the European Union with respect to the mutual
recognition or any other national approval procedure.

 

1.22        “EMEA” means BMS’ European, Central and Eastern European, Middle
Eastern and African commercial territory, consisting of the following countries
and regions: Algeria, Andorra, Austria, Baltic States, Belgium, Bulgaria,
Cyprus, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece,
Hungary, Iceland, Ireland, Israel, Italy, Liechtenstein, Luxembourg, Malta,
Morocco, Netherlands, Norway, Poland, Portugal, Romania, Russia, Saudi Arabia,
Slovakia Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Tunisia,
Turkey, U.K., Ukraine, Vatican City, Lebanon, Jordan, Syria, Kuwait, Bahrain,
Oman, UAE and Qatar.  The EMEA also includes: (a) the former Soviet Union and
commonwealth of independent states such as Georgia, Armenia and central Asian
republics; and (b) exports from France to English and French speaking African
countries not separately identified in the list. For clarity, the specific list
of countries and regions may change to align with any corresponding changes to
BMS’ business structures.

 

1.23        “EU” means the European Union, as its membership may be altered from
time to time, and any successor thereto. The member countries of the European
Union as of the Execution Date are Belgium, Denmark, Germany, Greece, Spain,
France, Ireland, Italy, Luxembourg, The Netherlands, Austria, Portugal, Finland,
Sweden, the United Kingdom, Estonia, Latvia, Lithuania, Poland, Czech Republic,
Slovakia, Hungary, Slovenia, Malta, and Cyprus.

 

1.24        “Executive Officers” means: (a) in the case of PDL, the Chief
Executive Officer of PDL (or an interim designee); and (b) in the case of BMS,
the SVP of Discovery and Exploratory Clinical Development or the SVP of Global
Development and Medical Affairs depending on the stage of the asset in dispute.

 

1.25        “Existing Antibody” means an Antibody: (a) that is set forth on
Schedule 1.25, (b) if BMS exercises the BMS Option pursuant to Section 3.7, that
(i) was produced from a cloned hybridoma cell line that was identified and
tested by PDL prior to the Effective Date and (ii) is not set forth on Schedule
1.25 or Schedule 1.50, or (c) if BMS does not exercise the BMS Option pursuant
to Section 3.7, that (i) was produced from a cloned hybridoma cell line that was
identified and tested by PDL prior to the Effective Date and (ii) when tested
pursuant to Section 3.10 after the Effective Date, did not Compete with PDL-241
for binding to the Target, or any derivative of any of the foregoing that is an
Antibody.

 

1.26        “FDA” means the U.S. Food and Drug Administration, and any successor
thereto.

 

1.27        “FTE” means the equivalent of the work of one (1) employee full time
for one (1) year consisting of a total of [****]* working hours per year (or
such other number as may be agreed to by the JDC) directly related to the
Development or Commercialization of any Product pursuant to the Annual
Development Plan or U.S. Commercialization Plan then in effect.  Any individual
who devotes

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

7

--------------------------------------------------------------------------------

 

less than [****]* working hours per year (or such other number as may be agreed
by the JDC) to the Development or Commercialization of any Product pursuant to
the Annual Development Plan or U.S. Commercialization Plan then in effect shall
be treated as an FTE on a pro-rata basis based upon: (a) if a Party customarily
accounts for employee time on an hourly basis, the actual number of hours worked
divided by [****]* (or such other number as may be agreed by the JDC) or (b) if
a Party customarily accounts for employee time on a percentage allocation basis,
the percentage of a full-time schedule such person devoted to the Development or
Commercialization of any Product pursuant to the Annual Development Plan or U.S.
Commercialization Plan then in effect.  Unless modified by the JDC, the [****]*
figure shall be used without regard to the Parties’ own internal definition of
the number of hours that comprises an FTE.

 

1.28        “Future Antibody” means any Antibody, other than an Existing
Antibody, that was first produced and identified or tested by either Party after
the Effective Date in the course of performing work pursuant to an Approved Plan
(a) after BMS’ exercise of the BMS Option pursuant to Section 3.7 or (b) after
BMS’ failure to exercise the BMS Option pursuant to Section 3.7 and such
Antibody did not Compete with PDL-241 for binding to the Target when tested
pursuant to Section 3.10.

 

1.29        “GAAP” means U.S. generally accepted accounting principles,
consistently applied.

 

1.30        “Generic Product” means, with respect to a particular Product in a
country, a pharmaceutical product that (a) contains the same active
ingredient(s) as such Product, and (b) is approved for use in such country
pursuant to an expedited regulatory approval process governing approval of
generic biologics based on the then-current standards for regulatory approval in
such country and where such regulatory approval was based in significant part
upon clinical data generated by the Parties pursuant to an Approved Plan.

 

1.31        “HSR Act” means the U.S. Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended from time to time, and the rules, regulations, guidance
and requirements promulgated thereunder as may be in effect from time to time.

 

1.32        “HuLuc63” means the Antibody that (i) contains the amino acid
sequence set forth in Schedule 1.32 and (ii) is the subject of an existing IND
of PDL prior to the Effective Date.

 

1.33        “HuLuc63 Product” means any Product that contains or incorporates
HuLuc63.

 

1.34        “Immunology” means [****]*.

 

1.35        “IND” means an Investigational New Drug Application submitted to the
FDA in conformance with applicable laws and regulations, or the foreign
equivalent of any such application in any other country.

 

1.36        “Information” means information, results and data of any type
whatsoever, in any tangible or intangible form whatsoever, including databases,
practices, methods, techniques, specifications, formulations, formulae,
knowledge, know-how, skill, experience, test data including

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

8

--------------------------------------------------------------------------------

 

pharmacological, biological, chemical, biochemical, toxicological and clinical
test data, analytical and quality control data, stability data, studies and
procedures.

 

1.37        “Invention” means any and all inventions and improvements thereto,
that are conceived, reduced to practice or discovered by or on behalf of a Party
(and/or its Affiliates) in the performance of its obligations under this
Agreement.

 

1.38        “Joint Invention” means any Invention invented or discovered jointly
by or on behalf of the employee(s), contractor(s) or agent(s) of both Parties
(and/or their Affiliates).

 

1.39        “Joint Development and Regulatory Committee” or “JDC” means the
committee described in Section 2.2.

 

1.40        “Knowledge” means, with respect to a Party, the good faith
understanding of the facts and information in the possession of an officer of
such Party, or any in-house legal counsel of, or in-house patent agents employed
by, such Party or its Affiliates, without any duty to conduct any additional
investigation with respect to such facts and information by reason of the
execution of this Agreement. For purposes of this definition, an “officer” means
any person in the position of vice president, senior vice president, president
or chief executive officer of a Party.

 

1.41        “Launch” means, for each Product in each country, the first
arm’s-length sale to a Third Party for use or consumption by the public of such
Product in such country after Regulatory Approval of such Product in such
country. A Launch shall not include any Product sold for use in clinical trials,
for research or for other non-commercial uses, or that is supplied as part of a
compassionate use or similar program.

 

1.42        “Licensed Antibody” means an Existing Antibody or Future Antibody
or, solely if BMS exercises the BMS Option pursuant to Section 3.7, an Option
Antibody.

 

1.43        “Major European Countries” means [****]*.

 

1.44        “Manufacturing” means all activities related to the production,
manufacture, processing, filling, finishing, packaging, labeling, inspection,
receiving, holding and shipping of Licensed Antibodies and/or Products, or any
raw materials or packaging materials with respect thereto, or any intermediate
of any of the foregoing, including process and cost optimization, process
qualification and validation, commercial manufacture, stability and release
testing, quality assurance and quality control. For clarity, “Manufacture” has a
correlative meaning.

 

1.45        “Manufacturing Costs” means, with respect to a Licensed Antibody or
Product during any period after the Effective Date, the costs calculated in
accordance with a Party’s internal accounting policies and principles, which are
in accordance with GAAP and applied consistently to other biologics products a
Party produces as described below that relate to such Licensed Antibody or
Product that is either (a) supplied by a Third Party; or (b) manufactured
directly by a Party or an Affiliate of a Party, determined as follows:

 

In the case of clause (a) above, Manufacturing Costs means [****]*.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

9

--------------------------------------------------------------------------------

 

In the case of clause (b) above, Manufacturing Costs means [****]*.

 

In addition to [****]*, Manufacturing Costs will include [****]*.

 

For clarity, [****]*.

 

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

 

1.47        “Net Sales” means the amount invoiced or otherwise billed by BMS or
its Affiliate or sublicensee for sales or other commercial disposition of a
Product to a Third Party purchaser, less the following to the extent included in
such billing: (a) discounts, including cash, trade and quantity discounts, price
reduction programs, retroactive price adjustments with respect to sales of such
Product, charge-back payments and rebates granted to managed health care
organizations or to federal, state and local governments (or their respective
agencies, purchasers and reimbursers) or to trade customers, including but not
limited to, wholesalers and chain and pharmacy buying groups; (b) credits or
allowances taken upon rejections or returns of Products, including for recalls
or damaged goods; (c) freight, postage, shipping and insurance charges actually
allowed or paid for delivery of such Product; (d) customs duties, surcharges and
other governmental charges incurred in connection with the exportation or
importation of such Product; (e) bad debts relating to sales of Products that
are actually written off by BMS in accordance with GAAP during the applicable
calculation period; (f) discounts (but not transaction fees) due to factoring of
receivables; and (g) taxes, duties or other governmental charges levied on,
absorbed or otherwise imposed on sale of such Product, including value-added
taxes, or other governmental charges otherwise measured by the billing amount,
as adjusted for rebates and refunds, but specifically excluding taxes based on
net income of the seller; provided that all of the foregoing deductions are
calculated in accordance with generally accepted accounting principles
consistently applied throughout the seller’s organization.

 

Notwithstanding the foregoing, if any Product is sold under a bundled or
capitated arrangement with other BMS products, then, solely for the purpose of
calculating Net Sales under this Agreement, any discount on such Products sold
under such an arrangement shall be no greater, on a percentage basis based on
the gross selling price prior to discount, than the largest percentage discount
applied on any other ethical biologic pharmaceutical product sold within such
bundled arrangement for the applicable accounting period. In case of any dispute
as to the applicable discount numbers under the preceding

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

10

--------------------------------------------------------------------------------

 

sentence, the determination of same shall be calculated and certified by an
independent public accountant selected by PDL and reasonably acceptable to BMS,
whose decision shall be binding.

 

A sale of a Product is deemed to occur upon transfer of risk-of-loss with
respect to the Product.

 

For sake of clarity and avoidance of doubt, sales by BMS, its Affiliates or
sublicensees of a Product to a Third Party distributor of such Product in a
given country shall be considered a sale to a Third Party customer. Any Products
used (but not sold for consideration) for promotional or advertising purposes or
used (but not sold for consideration) for clinical or other research purposes
shall not be considered in determining Net Sales hereunder.

 

In the event a Product is sold as an end-user product consisting of a
combination of independently active pharmaceutical ingredients, Net Sales, for
purposes of determining royalty payments on such Product, shall be calculated by
multiplying the Net Sales of the end-user product by the fraction A over A+B, in
which A is the net selling price of the Product portion of the end-user product
when such Product is sold separately during the applicable accounting period in
which the sales of the end-user product were made, and B is the net selling
price of the other independently active pharmaceutical ingredients of the
end-user product sold separately during the accounting period in question. All
net selling prices of the independently active pharmaceutical ingredients of
such end-user product shall be calculated as the average net selling price of
the said ingredients during the applicable accounting period for which the Net
Sales are being calculated. In the event that, in any country or countries, no
separate sale of either such above-designated Product or such above designated
other independently active pharmaceutical ingredients of the end-user product
are made during the accounting period in which the sale was made or if net
retail selling price for an independently active pharmaceutical ingredient
cannot be determined for an accounting period, Net Sales allocable to the
Product in each such country shall be determined by mutual agreement reached in
good faith by the Parties prior to the end of the accounting period in question
based on an equitable method of determining same that takes into account, on a
country-by-country basis, variations in potency, the relative contribution of
each independently active pharmaceutical ingredient in the combination, and
relative value to the end user of each such independently active pharmaceutical
ingredient. Notwithstanding the foregoing, the Parties agree that, for purposes
of this paragraph, drug delivery vehicles, adjuvants, half-life extenders,
solubilizers and excipients shall not be deemed to be “independently active
pharmaceutical ingredients.”

 

1.48        “Oncology” means [****]*.

 

1.49        “Operating Profit (or Loss)” means Net Sales of Products in the U.S.
less Allowable Expenses in the U.S. For sake of clarity, Operating Profit (or
Loss) shall be determined prior to application of any income taxes, and if such
terms are used individually, “Operating Profit” shall mean a positive Operating
Profit (or Loss), and “Operating Loss” shall mean a negative Operating Profit
(or Loss).

 

1.50        “Option Antibody” means an Antibody: (a) that is set forth on
Schedule 1.50, or (b) if BMS does not exercise the BMS Option pursuant to
Section 3.7, that (i) was produced, identified and tested for binding to the
Target by PDL prior to the Effective Date or outside the Collaboration after

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

11

--------------------------------------------------------------------------------

 

BMS’ failure to exercise the BMS Option pursuant to Section 3.7 and (ii) when
tested pursuant to Section 3.10 after the Effective Date, Competed with PDL-241
for binding to the Target.

 

1.51        “Other Product” means any Product that is not a HuLuc63 Product.

 

1.52        “Patent” means all: (a) unexpired letters patent (including
inventor’s certificates and utility models) which have not been held invalid or
unenforceable by a court of competent jurisdiction from which no appeal can be
taken or has been taken within the required time period (and which have not been
admitted to be invalid or unenforceable through reissue, disclaimer or
otherwise, or been abandoned in accordance with or as permitted by the terms of
this Agreement or by mutual written agreement); and (b) pending applications for
letters patent which have not been canceled, withdrawn from consideration,
finally determined to be unallowable by the applicable governmental authority or
court for whatever reason (and from which no appeal is or can be taken), and/or
abandoned in accordance with or as permitted by the terms of this Agreement or
by mutual written consent.

 

1.53        “PDL-241” means the Antibody containing the amino acid sequence set
forth in Schedule 1.53.

 

1.54        “PDL-241 Product” means any Product that contains or incorporates
PDL-241.

 

1.55        “PDL Licensed Know-How” means all Information (other than Patents)
that is:

 

(a)           Controlled by PDL and its Affiliates, including Information
Controlled jointly with BMS, as of the Effective Date that: (i) covers a
Licensed Antibody, a composition containing a Licensed Antibody (e.g., a
formulation containing a Licensed Antibody), or the manufacture or use of a
Licensed Antibody (or a composition containing a Licensed Antibody); or (ii) is
necessary or reasonably useful for BMS to perform its obligations to the
Collaboration under the Agreement; or

 

(b)           Controlled by PDL and its Affiliates during the term of this
Agreement, including Information Controlled jointly with BMS, and is an
Invention.

 

Notwithstanding the foregoing, PDL Licensed Know-How shall exclude any
Information pertaining to BioBetter Technology.

 

1.56        “PDL Licensed Patents” means all Patents that are:

 

(a)           Controlled by PDL and its Affiliates, including patents Controlled
jointly with BMS, as of the Effective Date and (i) claim a Licensed Antibody, a
composition containing a Licensed Antibody (e.g., a formulation containing a
Licensed Antibody), or the manufacture or use of a Licensed Antibody (or a
composition containing a Licensed Antibody); or (ii) are necessary or reasonably
useful for BMS to perform its obligations to the Collaboration under the
Agreement; or

 

(b)           Controlled by PDL and its Affiliates, including Patents Controlled
jointly with BMS, during the term of this Agreement and (i) claim an Invention;
or (ii) are a continuation, divisional, continuation-in-part (solely to the
extent claiming subject matter disclosed in a Patent described in clause
(a) above), foreign counterpart, substitution, extension, registration,
confirmation, reissue, re-examination, supplementary protection certificates,
confirmation patents, patent of additions or renewal of, or issue from, any
Patent described in clause (a) above.

 

Notwithstanding the foregoing, PDL Licensed Patents shall exclude (1) the Queen
Patents and (2) all

 

12

--------------------------------------------------------------------------------

 

Patents claiming BioBetter Technology. The PDL Licensed Patents, include,
without limitation, the Patents set forth on Schedule 1.56 hereto.

 

1.57                        “Phase I Clinical Trial” means a clinical trial of a
Product on sufficient numbers of normal volunteers and/or patients that is
designed to establish that such Product is safe for its intended use and to
support its continued testing in Phase II Clinical Trials.

 

1.58                        “Phase II Clinical Trial” means a Phase IIa Clinical
Trial or a Phase IIb Clinical Trial.

 

1.59                        “Phase IIa Clinical Trial” means a controlled
clinical trial of a Product that utilizes the pharmacokinetic and
pharmacodynamic information obtained from one (1) or more previously conducted
Phase I Clinical Trial(s) and/or other Phase IIa Clinical Trial(s) in order to
confirm the optimal manner of use of such Product (dose and dose regimens) and
to better determine safety and efficacy.

 

1.60                        “Phase IIb Clinical Trial” means a clinical trial of
a Product on sufficient numbers of patients that is designed to provide a
preliminary determination of safety and efficacy of such Product in the target
patient population over a range of doses and dose regimens.

 

1.61                        “Phase III Clinical Trial” means a clinical trial of
a Product on sufficient numbers of patients that is designed to establish that
such Product is safe and efficacious for its intended use, and to define
warnings, precautions and adverse reactions that are associated with such
Product in the dosage range to be prescribed, and to support Regulatory Approval
of such Product or label expansion of such Product.

 

1.62                        “Phase IIIb Clinical Trial” means a clinical trial
of a Product, initiated before regulatory approval and is not required for same,
but which may provide data that further defines how and where the drug should be
used.  A Phase IIIb Clinical Trial may be a clinical trial that is advised or
required by a Regulatory Authority as a condition of or in connection with
obtaining or maintaining Regulatory Approval (whether commenced prior to or
after receipt of such Regulatory Approval). They may include epidemiological
studies, modeling and pharmacoeconomic studies, and investigator-sponsored
clinical trials that are approved by the JDC and that otherwise fit the
foregoing definition.

 

1.63                        “Phase IV Clinical Trial” means a product support
clinical trial of a Product that (a) is commenced after receipt of Regulatory
Approval in the country where such trial is conducted and (b) that is not a
Phase IIIb Clinical Trial. A Phase IV Clinical Trial may include epidemiological
studies, modeling and pharmacoeconomic studies, “post-marketing surveillance
trials” and investigator-sponsored clinical trials studying a Product that are
approved by the JDC and that otherwise fit the foregoing definition.

 

1.64                        “Product” means any pharmaceutical product that
contains or incorporates a Licensed Antibody.

 

1.65                        “Queen Patent” means any Patent that (a) is set
forth on Schedule 1.65; or (b) is a continuation, divisional,
continuation-in-part, substitution, extension, registration, confirmation,
reissue, re-examination, supplementary protection certificates, confirmation
patents, patent of additions or renewal of, or issues from, any Patent described
in clause (a) above; or (c)  is a foreign counterpart of any of (a) or
(b) above.

 

13

--------------------------------------------------------------------------------

 

1.66                        “Region” means [****]*.

 

1.67                        “Registrational Trial” means, with respect to a
given Product, either (i) a Phase III Clinical Trial with such Product or (ii) a
Phase IIb Clinical Trial that, at the time of Commencement, is expected to be
the basis for initial Regulatory Approval of such Product.

 

1.68                        “Regulatory Approval” means any and all approvals
(including Drug Approval Applications, supplements, amendments, pre- and
post-approvals, pricing and reimbursement approvals), licenses, registrations or
authorizations of any Regulatory Authority, national, supra-national (e.g., the
European Commission or the Council of the EU), regional, state or local
regulatory agency, department, bureau, commission, council or other governmental
entity, that are necessary for the Manufacture, distribution, use or sale of a
Product in a regulatory jurisdiction.

 

1.69                        “Regulatory Authority” means the applicable national
(e.g., the FDA), supra-national (e.g., the European Commission or the Council of
the EU), regional, state or local regulatory agency, department, bureau,
commission, council or other governmental entity that, in each case, governs the
approval of a Product in such applicable regulatory jurisdiction.

 

1.70                        “Regulatory Expenses” means costs incurred to
prepare Product regulatory submissions to maintain Regulatory Approval in the
U.S. and to comply with post-Regulatory Approvals requirements of the FDA,
including FDA user and other fees, reporting and regulatory affairs activities,
and recalls and withdrawals for Products (other than costs for Products that are
deductible from Net Sales or that are included as Development Costs).

 

1.71                        “Research Costs” means research costs relating to
identification, biological characterization and optimization of (a) Future
Antibodies, and (b) subsequent to BMS’ exercise of the BMS Option (if
applicable), new Option Antibodies, and scientific investigation of mechanisms
of action, non-clinical rationales for indication selections, and biomarkers,
provided that costs relating to the application of BioBetter Technology to
Existing Antibodies and, subsequent to BMS’ exercise of the BMS Option (if
applicable), Option Antibodies (existing as of the date of such exercise) and
any Future Antibodies resulting from such application shall not be treated as
Research Costs. For clarity, Research Costs do not include the costs of any
Competition Testing pursuant to Section 3.10.

 

1.72                        “Royalty Territory” means the world, excluding the
U.S.

 

1.73                        “Sales and Marketing Costs” means the direct costs
that are specifically identifiable to the sales and marketing of a Product in
the U.S. and that are compliant with U.S. federal regulations, including:
(a) activities directed to the advertising and marketing of a Product in the
U.S.; (b) professional education in the U.S. for U.S.-based professionals (to
the extent not performed by sales representatives), including launch meetings;
(c) costs of advertising, public relations and medical education agencies with
respect to a Product in the U.S.; (d) peer-to-peer activities with respect to a
Product in the U.S., such as continuing medical education, grand rounds, and
lunch and dinner meetings; (e) speaker programs with respect to a Product in the
U.S., including the training of such speakers; (f) grants to support continuing
medical education or research (excluding Clinical Costs); (g) development,
publication and dissemination of publications with respect to a Product in the
U.S.; (h) developing, obtaining and providing training with respect to a Product
in the U.S., as well as training

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

14

--------------------------------------------------------------------------------

 

packages, promotional literature, promotional materials and other selling
materials with respect to a Product in the U.S.; (i) developing and performing
market research with respect to a Product in the U.S.; (j) conducting symposia
and opinion leader development activities with respect to a Product in the U.S.;
(k) developing reimbursement programs with respect to a Product in the U.S.;
(l) developing information and data specifically intended for national accounts,
managed care organizations and group purchasing organizations with respect to a
Product in the U.S.; (m) Losses incurred in connection with claims set forth in
Section 13.3, to the extent provided therein; (n)  costs of transporting,
housing and maintaining sales representatives for training with respect to a
Product in the U.S.; (o) conducting Phase IV Clinical Trials for Products, and
clinical trials performed on the Product for U.S. marketing purposes and
post-marketing surveillance activities; and (p) administration, operation and
maintenance of the sales force that promotes a Product in the U.S., sales
bulletins and other communications, sales meetings, specialty sales forces,
consultants, call reporting and other monitoring/tracking costs, district and
regional sales management, home office personnel who support the sales force.
Sales and Marketing Costs shall include costs of such activities that are
undertaken at any time during the term of this Agreement (including prior to the
initial Regulatory Approval of a Product in the U.S.).

 

1.74                        “Separation Transaction” means a transaction or
transactions whereby PDL separates its antibody humanization royalty assets from
its biotechnology operations, forming (i) an entity that will conduct such
biotechnology operations (“PDL Operating Company”) and (ii) an entity that owns
the antibody humanization royalty assets (“PDL Holding Company”).

 

1.75                        “Sole Invention” means any Invention invented or
discovered solely by or on behalf of a Party (or its Affiliate) and its
employees, contractors and/or agents.

 

1.76                        “[****]*” means [****]*.

 

1.77                        “Territory” means the world.

 

1.78                        “Third Party” means any entity other than: (a) PDL;
(b) BMS; or (c) an Affiliate of either Party.

 

1.79                        “Third Party Payments” means royalties and other
payments (including upfront fees and milestone payments) paid to a Third Party
in consideration for a license or other rights to intellectual property
necessary or useful for the Manufacture, Development, Commercialization, use, or
sale of Product.

 

1.80                        “Trademark Costs” mean the fees and expenses paid to
outside counsel and other Third Parties, direct costs of in-house counsel and
filing and maintenance expenses, in each case incurred in connection with the
establishment and maintenance of rights under trademarks applicable to Product
in the U.S., including costs of U.S. trademark filing and registration fees,
actions to enforce or maintain a U.S. trademark and other U.S. trademark
proceedings.

 

1.81                        “United States” or “U.S.” means the fifty states of
the United States of America and the District of Columbia.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

15

--------------------------------------------------------------------------------

 

1.82                        “US Joint Commercialization Committee” or “USJCC”
means the committee described in Section 2.3.

 

1.83                        “Valid Claim” means (a) a claim in an issued Patent
that has not: (i) expired or been canceled; (ii) been declared invalid by an
unreversed and unappealable or unappealed decision of a court or other
appropriate body of competent jurisdiction; (iii) been admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise; or (iv) been abandoned
in accordance with or as permitted by the terms of this Agreement or by mutual
written agreement of the Parties; or (b) a claim under an application for a
Patent that has been pending for [****]* or less from its date of filing for
applications ([****]*), and, in any case, which has not been canceled, withdrawn
from consideration, finally determined to be unallowable by the applicable
governmental authority or court for whatever reason (and from which no appeal is
or can be taken), or abandoned.

 

Additional Definitions

 

The following table identifies the location of definitions set forth in various
Sections of the Agreement.

 

Definition

 

Location (Section)

Alliance Manager

 

2.6(a)

Annual Development Plan

 

3.2(a)

Bankrupt Party

 

14.14(a)

BMS Decisions

 

2.4(c)(iv)

BMS Option

 

3.7

BMS Prosecuted Patent

 

9.3(b)

Competing Product

 

7.6(b)(i)

Competing Program

 

7.6(a)

Competition Testing

 

1.14

Confidential Information

 

10.1

Cost-Terminated Patent Right

 

9.3(f)(iii)

EDI

 

14.19

Effective Date

 

12.6

Exclusivity Term

 

7.6(a)

Existing License Agreement

 

7.1(f)

First Product

 

7.6(b)(i)

Global Development Plan

 

3.1(a)

ICH

 

4.3(f)

Indemnitee

 

13.4

JAMS

 

14.2

JAMS Rules

 

14.2

Joint Invention Patent

 

9.1(b)

Joint Patent

 

9.3(f)

Losses

 

13.1

Non-Compete Period

 

7.6(c)

Opt-Out Notice

 

3.6(b)(ii)

Other Joint Patent

 

9.4(b)(i)

Party Implementation Matter

 

2.4(c)(ii)

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

16

--------------------------------------------------------------------------------

 

Party Vote

 

2.4(c)(i)

PDL Holding Company

 

1.74

PDL Operating Company

 

1.74

PDL Prosecuted Patent

 

9.3(a)(i)

PDL-241 Pre-Clinical Testing

 

3.7(a)

Pharmacovigilance Agreement

 

4.7

Prior CDA

 

10.4

Regulatory Lead Party

 

4.1

Royalty Term

 

8.9

Sales Threshold

 

8.4(c)

Sole Invention Patent

 

9.1(b)

Target

 

Recitals

Term

 

11.1

Title 11

 

14.14(a)

U.S. Commercialization Plan

 

5.2(a)

Working Group

 

2.4(e)

 

2.                                      MANAGEMENT OF COLLABORATION

 

2.1                               General.

 

(a)                                  Role of Committees.  Subject to
Section 2.1(b) and the other terms and conditions of this Agreement, the Parties
shall establish: two (2) specialized joint committees consisting of one to focus
on each of the following areas arising out of the Collaboration: (A) Development
and Regulatory Approval and other regulatory matters (such committee, the “Joint
Development and Regulatory Committee” or “JDC”); and (B) Commercialization in
the U.S. (such committee, the “US Joint Commercialization Committee” or
“USJCC”).  Each Committee shall have the responsibilities and authority
allocated to it in this Article 2 and elsewhere in this Agreement.

 

(b)                                  Limitations on the Authority of
Committees.  Notwithstanding the Committee structure established pursuant to
Section 2.1(a) to oversee the Collaboration, each Party shall retain the rights,
powers and discretion granted to it under this Agreement, and no such rights,
powers, or discretion shall be delegated to or vested in a Committee unless such
delegation or vesting of rights is expressly provided for in this Agreement or
the Parties expressly so agree in writing.  Without limiting the generality of
the foregoing, no Committee shall have any authority or jurisdiction to: 
(i) amend, modify, or waive compliance with this Agreement, any of which shall
require mutual written agreement of the Parties; (ii) interpret this Agreement,
or determine whether or not a Party has met its diligence or other obligations
under the Agreement or whether or not a breach of this Agreement has occurred;
(iii) make any decision on any matter that this Agreement expressly states is an
option or election to be made by a Party; (iv) make any retroactive updates,
amendments and modifications to, or waivers of provisions of, an Approved Plan,
any of which shall require the mutual agreement of the Parties; or (v) such
other matters as are reserved to the consent, approval, agreement or other
decision-making authority of one or both Parties in this Agreement and that are
not required by this Agreement to be considered by the JDC prior to the exercise
of such consent, approval or other decision-making authority. Notwithstanding
the foregoing, neither Party shall be restricted from bringing before any
appropriate Committee for discussion any matter relating to the Collaboration
that it believes warrants discussion between the Parties through the Committees,
provided that the consideration of any such matter by any Committee shall not
infringe or limit the exercise of a Party’s right of consent or

 

17

--------------------------------------------------------------------------------

 

approval or other decision-making authority granted to it by this Agreement nor
shall any such consideration, as contemplated by this sentence, subject any such
right of consent or approval or other decision-making authority to any dispute
resolution mechanism provided for in Section 2.4(c) or Article 14 or elsewhere
in this Agreement.

 

2.2                               Joint Development and Regulatory Committee.

 

(a)                                  Formation and Purpose.  PDL and BMS shall
establish the JDC within [****]* after the Effective Date.  Subject to Sections
2.1(b) and 2.4(c), with respect to each Product in the U.S. for which PDL has
not opted-out pursuant to Section 3.6 or for which PDL’s profit-sharing rights
have not been terminated pursuant to Section 11.3(b), the JDC shall oversee,
coordinate and expedite the Development of, and the making of regulatory filings
for, each Product worldwide in order to obtain Regulatory Approvals.  The JDC
will also facilitate the flow of information with respect to Development
activities being conducted for each Product and oversee Development activities
required to support Regulatory Approvals.  The JDC shall have the membership and
shall operate by the procedures set forth in Section 2.4.

 

(b)                                  Specific Responsibilities of the JDC.  In
support of its responsibility for overseeing, coordinating and expediting the
Development of, and regulatory filings for, each Product, but subject to
Sections 2.1(b) and 2.4(c), the JDC shall, in particular:

 

(i)                                    monitor Development activities;

 

(ii)                                review and approve the Global Development
Plans and Annual Development Plans prepared by BMS with input from key PDL
clinical development personnel, as well as interim updates to such plans;

 

(iii)                            review all material information generated in
the course of implementing the Global Development Plan and the Annual
Development Plans;

 

(iv)                               assist in coordinating scientific
interactions and division of responsibilities with respect to Development
Activities, and resolving disagreements during the course of implementing the
Global Development Plan and the Annual Development Plans;

 

(v)                                   review and determine whether, and when, to
obtain any licenses to intellectual property necessary or reasonably useful for
the Development, Commercialization or Manufacture of a Product, other than as
set forth in Section 7.7;

 

(vi)                               design, in collaboration with the USJCC,
pharmacoeconomic studies or Phase IV Clinical Trials;

 

(vii)                           discuss all regulatory plans, communications and
submissions for Products, including the schedule and implementation strategy for
all regulatory filings for Products, it being understood that BMS shall have
responsibility for preparing and submitting DAAs and for seeking all Regulatory
Approvals;

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

18

--------------------------------------------------------------------------------

 

(viii)                       discuss BMS’ plans and activities for the life
cycle management of, and co-ordinate with respect to the intellectual property
protection for, a Product;

 

(ix)                              provide an initial forum for dispute
resolution; and

 

(x)                                  such other responsibilities as may be
assigned to the JDC pursuant to the Agreement or as may be agreed between the
Parties from time to time.

 

2.3                               US Joint Commercialization Committee. PDL and
BMS shall establish the USJCC within [****]* after Commencement of the first
Registrational Trial, which Committee shall, subject to Section 2.1(b), with
respect to each Product in the U.S. for which PDL has not opted-out pursuant to
Section 3.6 or for which PDL’s profit-sharing rights have not been terminated
pursuant to Section 11.3(b), (a) monitor Commercialization of such Product(s) ,
(b) review the U.S. Commercialization Plans prepared by BMS, (c) review the
results and effectiveness of activities performed pursuant to the U.S.
Commercialization Plan then in effect, and (d) discuss current and potential
future Product Commercialization activities in the U.S. The USJCC shall have the
membership and shall operate by the procedures set forth in Section 2.4.

 

2.4                               General Committee Membership and Procedures.

 

(a)                                  Membership. Each Committee shall be
composed of such number of representatives as may be agreed by the Parties. Each
of BMS and PDL shall designate representatives with appropriate expertise to
serve as members of each Committee, and each representative may serve on more
than one Committee as appropriate in view of the individual’s expertise.  Each
Party may replace its Committee representatives at any time upon written notice
to the other Party.  Each Committee shall have co-chairpersons.  BMS and PDL
shall each select from their representatives a co-chairperson for each of the
Committees, and each Party may change its designated co-chairpersons from time
to time upon written notice to the other Party.  The Alliance Managers shall be
responsible for calling meetings, preparing and circulating an agenda in advance
of each meeting of such Committee, and preparing and issuing minutes of each
meeting within [****]* thereafter; provided that a Committee co-chairperson
shall call a meeting of the applicable Committee promptly upon the written
request of the other co-chairperson to convene such a meeting.  With respect to
the JDC, the minutes of each Committee meeting shall, among other things, record
all matters acted upon and approved or disapproved by the Committee, actions to
be taken, and any matters the Committee failed to resolve.  Such minutes will
not be finalized until both Alliance Managers review and confirm in writing the
accuracy of such minutes.

 

(b)                                  Meetings. Each Committee shall hold
meetings at such times as it elects to do so, but in no event shall such
meetings be held less frequently than once every [****]* for the JDC, and once
every [****]*, until the date which is [****]* subsequent to initial Launch of a
Product, and once every [****]* thereafter, for the USJCC. Each Committee shall
meet alternately at PDL’s facilities at its corporate headquarters (located in
Redwood City, California as of the Execution Date), and BMS’ facilities at its
research and development headquarters (located in Princeton, New Jersey as of
the Execution Date), or at such other locations as the Parties may agree. The
Alliance Managers shall, and other employees of each Party involved in the
Development, Manufacture or

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

19

--------------------------------------------------------------------------------

 

Commercialization of any Product may as needed, attend meetings of each
Committee (as nonvoting participants unless they are members of such Committee),
and consultants, representatives or advisors involved in the Development,
Manufacture or Commercialization of any Product may attend meetings of each
Committee as observers; provided that such Third Party representatives are under
obligations of confidentiality and non-use applicable to the Confidential
Information of each Party that are at least as stringent as those set forth in
Article 10, and in the case of non-employees of a Party, subject to the consent
of the other Party, which shall not be unreasonably withheld or delayed. Each
Party shall be responsible for all of its own expenses of participating in any
Committee (including in any Working Group). Meetings of any Committee may be
held by audio or video teleconference with the consent of each Party, which
shall not be unreasonably withheld or delayed; provided that at least one
(1) meeting per year of such Committee shall be held in person. No action taken
at any meeting of a Committee shall be effective unless a representative of each
Party is participating.

 

(c)                                  Decision-Making.

 

(i)                                    Voting on JDC Decisions.  Subject to
Section 2.1(b), each Party’s designees on the JDC shall, collectively, have one
(1) vote (the “Party Vote”) on all matters brought before the JDC, which Party
Vote shall be determined by consensus of such Party’s designees present (in
person or otherwise) at the meeting.  Except as expressly provided in this
Section 2.4(c) and subject to Section 2.1(b), the JDC shall operate as to
matters within its jurisdiction by unanimous Party Vote. All decisions of the
JDC shall be documented in writing in the minutes of the JDC meeting by the
Alliance Managers.

 

(ii)                                Operational Decisions. Day-to-day
operational level decisions concerning the Development and Commercialization of
Products shall be made by the Party to which responsibility for such decisions
has been allocated under the Agreement (each such decision, a “Party
Implementation Matter”). Unless otherwise specified in this Agreement or
directed by the appropriate Committee(s), BMS shall be the lead Party, and shall
be primarily responsible for, all Development, regulatory activities and
Manufacturing and Commercialization activities with respect to a Product. Any
disputes with respect to a Party Implementation Matter shall first be referred
to the Alliance Managers, and, if the dispute is not resolved within [****]*
after such referral to the Alliance Managers, then, (A) with respect to
Development and Regulatory Approval matters, the dispute shall be referred to
the JDC for resolution, the JDC shall have final decision-making authority with
respect to such matter, and BMS shall have the tie-breaking vote on such
Committee with respect to such matter, subject to Section 2.4(c)(iv) and
(B) with respect to Commercialization matters, the dispute shall be referred to
the USJCC for discussion, after which BMS shall have the right to decide such
matter.

 

(iii)                            Disagreements on Committees.  Except for:
(A) matters outside the jurisdiction and authority of the Committees as provided
in Section 2.1(b); and (B) any Party Implementation Matter, and in any event
without limiting the other rights and obligations of the Parties under this
Agreement, any disagreement between the designees of BMS and PDL on the JDC as
to matters within such Committee’s jurisdiction shall, at the election of either
Party, be addressed, first, with the Alliance Managers, and, if the dispute is
not resolved within [****]* after such referral to the Alliance Managers, then
it shall, upon written notice by a Party to the other, submit the respective

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

20

--------------------------------------------------------------------------------

 

positions of the Parties with respect to such matter for discussion in good
faith by the Executive Officers of the Parties. If such individuals are not able
to mutually agree upon the resolution to such matter within [****]* after
submission of the matter to them, then the Executive Officer of BMS shall have
the right to decide such matter, subject to Section 2.4(c)(iv).

 

(iv)                               BMS Decisions. BMS’ right to exercise final
decision-making authority pursuant to Sections 2.4(c)(ii) and (iii) (“BMS
Decisions”) shall be subject to the following limitations:

 

(1)                                 All BMS Decisions shall be made in good
faith, with due regard for the impact of such decisions on Products in the
United States, and, consistent in all material respects with the applicable
Approved Plan and the terms of this Agreement. No such decision by BMS shall
violate or breach any term or condition of this Agreement. BMS shall make all
BMS Decisions only after reasonably considering PDL’s comments on such matters.

 

(2)                                 BMS shall have no right to make a BMS
Decision on: (A) any decision that would require PDL to breach any obligation or
agreement that PDL may have with or to a Third Party; (B) any decision that
would amend, violate or breach any provision of this Agreement; (C) [****]*; or
(E) any decision concerning methods of calculation of amounts owed by a Party to
the other Party. Resolution of disputes relating to the foregoing matters shall
require mutual agreement of the Parties (except as otherwise expressly set forth
in this Agreement) and shall be subject to dispute resolution pursuant to
Section 14.1.

 

(d)                                  Meeting Agendas and Minutes. Each Party
shall disclose to the other Party proposed agenda items along with appropriate
information at least [****]* in advance of each meeting of the applicable
Committee; provided that under exigent circumstances requiring Committee input,
a Party may provide its agenda items to the other Party within a shorter period
of time in advance of the Committee meeting, or may propose that there not be a
specific agenda for a particular meeting, so long as such other Party consents
to such later addition of such agenda items or the absence of a specific agenda
for such Committee meeting.

 

(e)                                  Working Groups.  From time to time, a
Committee may establish and delegate duties to other committees, sub-committees
or directed teams (each, a “Working Group”) on an “as-needed” basis to oversee
particular projects or activities, which delegation shall be reflected in the
minutes of the meetings of such Committee. Each such Working Group shall be
constituted and shall operate as such Committee determines. The Working Groups
may be established on an ad hoc basis for purposes of a specific project, for
the life of a Product, or on such other basis as such Committee may determine.
Each Working Group and its activities shall be subject to the oversight, review
and approval of, and shall report to, the Committee that formed such Working
Group. In no event shall the authority of a Working Group exceed that specified
in this Article 2 for the Committee that formed such Working Group. Any
disagreement between the designees of BMS and PDL on a Working Group shall be
referred for resolution to the Committee that formed such Working Group.

 

(f)                                    Interactions Between Committees and
Internal Teams. The Parties recognize that each Party possesses an internal
structure (including various committees, teams and

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

21

--------------------------------------------------------------------------------

 

review boards) that will be involved in administering such Party’s activities
under this Agreement. Each Committee shall establish procedures to facilitate
communications between such Committee or Working Group and the relevant internal
committee, team or board of each of the Parties in order to maximize the
efficiency of the Collaboration, including by requiring appropriate members of
such Committee to be available at reasonable times and places and upon
reasonable prior notice for making appropriate oral reports to, and responding
to reasonable inquiries from, the relevant internal committee, team or board.

 

2.5                               Discontinuation of Participation on a
Committee. Each Committee shall continue to exist until the first to occur of
(a) the Parties mutually agreeing to disband the Committee, or (b) PDL providing
to BMS written notice of its intention to disband and no longer participate in
such Committee. Once PDL has provided written notice as referred to in subclause
(b) above, such Committee shall have no further obligations under this Agreement
and BMS shall have the right to solely decide, without consultation, any matters
previously before such Committee, subject to the other terms of this Agreement.

 

2.6                               Alliance Managers.

 

(a)                                  Appointment. Each of the Parties shall
appoint a single individual to act as a single point of contact between the
Parties to assure a successful Collaboration (each, an “Alliance Manager”). Each
Party may change its designated Alliance Manager from time to time upon written
notice to the other Party. Any Alliance Manager may designate a substitute to
temporarily perform the functions of that Alliance Manager by written notice to
the other Party.

 

(b)                                  Responsibilities. The Alliance Managers
shall use good faith efforts to attend all Committee meetings and support the
co-chairpersons of each Committee in the discharge of their responsibilities.
Alliance Managers shall be nonvoting participants in such Committee meetings,
unless they are also appointed members of such Committee pursuant to
Section 2.4(a). An Alliance Manager may bring any matter to the attention of any
Committee if such Alliance Manager reasonably believes that such matter warrants
such attention. Each Alliance Manager shall be charged with creating and
maintaining a collaborative work environment within and among the Committees. In
addition, each Alliance Manager: (i) will be the point of first referral in all
matters of conflict resolution; (ii) will provide a single point of
communication for seeking consensus both internally within the respective
Parties’ organizations and between the Parties regarding key strategy and plan
issues; (iii) will identify and bring Development and regulatory disputes to the
attention of the JDC in a timely manner; (iv) will identify and bring
Commercialization disputes to the attention of the USJCC in a timely manner;
(v) will plan and coordinate cooperative efforts and internal and external
communications; and (vi) will take responsibility for ensuring that governance
activities, such as the conduct of required Committee meetings and production of
meeting minutes, occur as set forth in this Agreement, and that relevant action
items resulting from such meetings are appropriately carried out or otherwise
addressed.

 

2.7                               Collaboration Guidelines.

 

(a)                                  General. Each Party, in working with the
other to Develop each Product and otherwise as set forth herein, shall assign
responsibilities for the various operational aspects of the Collaboration to
those portions of its organization that have the appropriate resources,
expertise and responsibility for such functions and, consistent with this
Agreement, treat each Product as if it were a proprietary product solely of its
own organization. In all matters related to the Collaboration, the

 

22

--------------------------------------------------------------------------------

 

Parties shall strive to balance as best they can the legitimate interests and
concerns of the Parties and to realize the full economic potential of each
Product (taking into account the risks and costs of further Development and
Commercialization).

 

(b)                                  Independence. Subject to the terms of this
Agreement, the activities and resources of each Party shall be managed by such
Party, acting independently and in its individual capacity. The relationship
between PDL and BMS is that of independent contractors and neither Party shall
have the power to bind or obligate the other Party in any manner.

 

2.8                               Overview of Accounting.

 

(a)                                  Development Costs and Allowable Expenses.
For purposes of determining Development Costs and Allowable Expenses, any
expense allocated by either Party to a particular category under Development
Costs or Allowable Expenses for a particular Product shall not be allocated to
another category under Development Costs or Allowable Expenses for such Product.
Any royalties payable to Third Parties that are subject to Section 8.6(a) or
Section 8.6(b) shall not be allocable to Development Costs or Allowable
Expenses. Each Party agrees to determine Development Costs and Allowable
Expenses for Products using its standard accounting procedures, consistently
applied, to the maximum extent practical as if such Product were a solely owned
Product of such Party, except as specifically provided in this Agreement. The
Parties also recognize that such procedures may change from time to time and
that any such changes may affect the definition of Development Costs or
Allowable Expenses. The Parties agree that, where such changes are economically
material to either Party, and consistent with GAAP, adjustments shall be made to
compensate the affected Party to preserve the same economics as reflected under
this Agreement under such Party’s accounting procedures in effect as of the date
on which the activity in question (e.g., Development, Commercialization or
Manufacturing) first commences under this Agreement. Where the change is or
would be material to the other Party, the Party proposing to make the change
shall provide the other Party with an explanation for the proposed change and an
accounting of the effect of the change on the relevant expense category. Should
the Parties disagree on the adjustment, the matter shall be placed before the
JDC to resolve. Transfers between a Party and its Affiliates (or between its
Affiliates) shall not have effect for purposes of calculating revenues, costs,
profits, royalties or other payments or expenses under this Agreement.

 

(b)                                  Affiliates. If either Party enters into any
agreement with any of its Affiliates for the provision of materials or services
pursuant to this Agreement, all costs incurred for the provision of such
materials or services that are shared by the Parties under this Agreement shall
be accounted for on the basis of the cost thereof to such Affiliate and not on
the basis of any higher transfer price in effect between such Party and such
Affiliate.

 

2.9                               Compliance with Law. Each Party hereby
covenants and agrees to comply with applicable law in performing its activities
connected with the Development, manufacture and Commercialization (as
applicable) of each Product.

 

2.10                        Records. Each Party shall maintain complete and
accurate records of all work conducted under the Collaboration and all results,
data and developments made pursuant to its efforts under the Collaboration. Such
records shall be complete and accurate and shall fully and properly reflect all
work done and results achieved in the performance of the Collaboration in
sufficient detail

 

23

--------------------------------------------------------------------------------

 

and in good scientific manner appropriate for patent and regulatory purposes.
Each Party shall maintain such records for a period of [****]* after such
records are created; provided that the following records may be maintained for
at least [****]* from the date of creation of such records or, if longer, for
the period mandated by such Party’s internal policies on record retention:
(a) scientific notebooks; and (b) any other records that the other Party
reasonably requests be retained in order to ensure the preservation,
prosecution, maintenance or enforcement of intellectual property rights. Either
Party shall have the right to review and copy such records of the other Party at
reasonable times to the extent necessary or useful for it to conduct its
obligations or enforce its rights under this Agreement.

 

3.                                      DEVELOPMENT OF PRODUCTS

 

3.1                               Global Development Plans.

 

(a)                                  Scope. The Development of each Product
shall be governed by a comprehensive, multi-year, worldwide plan (each, a
“Global Development Plan”) covering the Development of such Product for use in
the U.S., Japan, each of the Major European Countries and the EU as a whole,
and, broken out on a region-by-region or country-by-country basis only to the
extent BMS does so for its own internal products, the remaining countries in the
Territory. Each Global Development Plan shall: (i) provide a planned Development
program that is designed to generate the non-clinical, clinical and regulatory
information required for submitting Drug Approval Applications and to obtain
Regulatory Approvals for the relevant indications in the U.S.; (ii) provide a
planned Development program that is designed to generate the non-clinical,
clinical and regulatory information required for submitting Drug Approval
Applications and to achieve Regulatory Approvals for the relevant indications in
the Royalty Territory; and (iii) indicate the initial indications that will be
pursued with respect to such Product.

 

(b)                                  Product Global Development Plan. The
initial Global Development Plan with respect to HuLuc63 Products is attached
hereto as Schedule 3.1(b). BMS shall prepare, with input from key PDL clinical
development personnel, a Global Development Plan for each Other Product for
approval by the JDC no later than [****]* subsequent to the Commencement of the
first Phase I Clinical Trial of such Other Product, in a manner consistent with
BMS’ then-current practice. For clarity, it is anticipated that the Global
Development Plan with respect to Japan shall not be prepared prior to a decision
to commence Phase II Clinical Trials in the U.S.

 

(c)                                  Updates to the Global Development Plan.
Subsequent to the Effective Date, BMS shall prepare, with input from key PDL
clinical development personnel, and submit to the JDC for approval, updates,
amendments or modifications to each Global Development Plan then in effect.

 

3.2                               Annual Development Plans.

 

(a)                                  Scope. The Development of each Product for
a given calendar year shall be governed by a detailed and specific worldwide
Development plan (each, an “Annual Development Plan”) covering (i) all material
Development activities to be performed for such Product for such year;
(ii) budgets covering all Development Costs for those Development activities for
such Product conducted in support of Regulatory Approvals in the Territory; and
(iii) those obligations assigned to

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

24

--------------------------------------------------------------------------------

 

each Party with respect to the performance of the Development activities
contemplated by such Annual Development Plan. Each Annual Development Plan shall
be prepared by BMS, with input from key PDL clinical development personnel, and
submitted pursuant to the procedures set forth in clauses (b), (c), and
(d) below, for approval by the JDC. Each Annual Development Plan for a Product,
and any modifications thereto, shall cover, and be consistent in all material
respects with, all the Development activities and budgets in the then-current
Global Development Plan for such Product that are to be performed in that
particular calendar year. Notwithstanding the foregoing, the JDC shall prepare
and adopt an Annual Development Plan for each Other Product upon which the
Parties plan to conduct Development work, regardless of whether there is a
Global Development Plan for such Other Product.

 

(b)                                  Initial Annual Development Plan for the
HuLuc63 Product. The initial Annual Development Plan for the HuLuc63 Product,
covering the period from approximately the [****]*, is attached hereto as
Schedule 3.2(b) and consists of a section covering the period from approximately
[****]* (“Part A”), which shall be effective as of the Effective Date, and a
section covering the period from [****]* (“Part B”), which is provided in draft
form. PDL shall submit an updated version of Part B to the JDC no later than
[****]*, with a goal of having Part B approved, and any disputes resolved, by
[****]*. Thereafter, BMS shall submit Annual Development Plans for HuLuc63
Products in accordance with Section 3.2(d).

 

(c)                                  Annual Development Plan for Other Products.
Within [****]* after the date on which a Global Development Plan (or an
amendment to an existing Global Development Plan, as the case may be) is first
approved with respect to a particular Other Product, BMS shall submit for
approval by the JDC an Annual Development Plan for such Other Product, covering
the activities contemplated by the Global Development Plan with respect thereto
for the remainder of such calendar year and the next subsequent calendar year.
Thereafter, BMS shall submit Annual Development Plans for such Other Product in
accordance with Section 3.2(d).

 

(d)                                  New Annual Development Plans. BMS shall
submit, on an annual basis, a new Annual Development Plan for the HuLuc63
Product and for each Other Product, if any, to the JDC for its review, comment,
and approval. Each such submission shall be no later than [****]* of the
calendar year immediately preceding the year covered by such Annual Development
Plan, with a goal of having the Annual Development Plan approved, and any
disputes resolved, by [****]* of such immediately preceding calendar year.

 

(e)                                  Diligence. Additionally, each Party shall
use Diligent Efforts to carry out, in a timely fashion and in good scientific
manner, its responsibilities under any Global Development Plan, Annual
Development Plan(s), or U.S. Commercialization Plan in effect at such time.

 

3.3                               Lead Development Party. PDL shall be the lead
development Party for all studies of the HuLuc63 Product that are ongoing as of
the Effective Date. In the event BMS exercises the BMS Option pursuant to
Section 3.7, PDL shall be the lead development Party for all studies of the
PDL-241 Product until the completion of all Phase I Clinical Trials of the
PDL-241 Product. For clarity, if BMS does not exercise the BMS Option, PDL shall
have the right to develop PDL-241 Products,

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

25

--------------------------------------------------------------------------------

 

without BMS’ consent and consistent with PDL’s rights as provided in
Section 3.8. [****]*. The JDC shall, in allocating responsibilities between the
Parties with respect to Development activities under this Agreement: 
(a) endeavor to take advantage of the respective resources, capabilities and
expertise of PDL and BMS, and (b) endeavor to (i) maintain, to the extent
reasonably practical and appropriate, continuity in functions and commitments of
personnel and physical resources of the Parties, (ii) avoid duplication of
efforts by the Parties and (iii) foster efficient use by the Parties of
resources and personnel, consistent with this Agreement and the applicable
Global Development Plan and budget and the applicable Annual Development Plan
and budget; provided, in any case, that the JDC shall allocate to BMS
responsibilities for the Development of  Products solely with respect to the
Royalty Territory. Any agreements relating to clinical studies or other testing,
research services, or Development that were entered into between PDL and a
clinical site or a Third Party service provider before the Effective Date shall
become part of the initial Global Development Plan and initial Annual
Development Plan.

 

3.4                               Diligence. BMS shall use Diligent Efforts to
Develop and Commercialize at least [****]* containing an Existing Antibody or a
Future Antibody and, if BMS exercises the BMS Option, at least [****]*
containing an Option Antibody, in each case in: [****]*. Any failure by BMS to
comply with the obligations set forth in this Section 3.4 shall be deemed to be
a material breach of this Agreement, for which PDL may exercise its termination
rights under Section 11.3 or any other available remedies at law or in equity.

 

3.5                               Limitations on Development. After the
Effective Date and during the term of this Agreement, neither Party nor any of
its Affiliates shall, directly or through any Third Party, sponsor, conduct or
cause to be conducted, otherwise assist in, supply any Product for use in
connection with, or otherwise fund, any clinical trial or clinical study of any
Product outside of the Global Development Plan or any Annual Development Plan,
without the prior written consent of the other Party.

 

3.6                               Development Costs.

 

(a)                                  In general. All Development Costs incurred
by either Party shall be borne by the Parties as follows: BMS shall bear [****]*
of all Development Costs and PDL shall bear [****]* of all Development Costs.
BMS shall, even for those Development activities for which PDL is lead
development party, use commercially reasonable efforts to use its contractual
relationships with clinical research organizations to minimize Development
Costs.

 

(b)                                  Terminating Co-Development.

 

(i)                                    Prior to Commencement of Development for
Certain Licensed Antibodies. PDL shall have the option to terminate its
Co-Development rights and obligations, on a Licensed-Antibody-by-Licensed
Antibody basis, for any Licensed Antibody other than HuLuc63 or, if BMS has
exercised the BMS Option, the first PDL-241 Licensed Antibody under Development
pursuant to this Agreement, which option shall be exercisable by prior written
notice to BMS at least [****]* prior to the commencement of [****]* of such
Licensed Antibody. PDL shall not be liable for any Development Costs or
Allowable Expenses associated with any Product containing such Licensed Antibody
(including any costs incurred by BMS in preparing a Global Development Plan or
Annual Development Plan for such Product) and BMS shall thereafter pay to PDL
royalties on Net Sales of

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

26

--------------------------------------------------------------------------------

 

such Product by BMS (or its Affiliates or sublicensees) in the Territory at a
royalty rate of [****]*, rather than according to Sections 8.2, 8.3 or 8.5. For
clarity, (A) PDL’s election to terminate its Co-Development rights and
obligations under this Section 3.6(b) shall not alter PDL’s rights to receive
milestone payments pursuant to Section 8.4, for any such Product, and (B) the
U.S. shall be deemed to be part of the Royalty Territory with respect to such
Product and the terms and conditions of this Agreement that otherwise relate to
Products in the Royalty Territory shall apply with respect to such Product.

 

(ii)                                Subsequent to Commencement of Development.

 

(1)                                 PDL shall have the option to terminate its
Co-Development rights and obligations, under the applicable Approved Plan(s), on
a Product-by-Product basis, which option shall be exercisable by giving written
notice to BMS (such notice, the “Opt-Out Notice”) no earlier than [****]* and no
later than the date which is [****]* subsequent to such date.

 

(2)                                 During the [****]* period after the date of
the Opt-Out Notice, (a) PDL shall remain responsible for its share of
Development Costs and Allowable Expenses, if any, that relate to Development or
Commercialization activities with respect to such Product that were ongoing at
the time of such notice; and (b) PDL and BMS shall continue their respective
Development responsibilities pursuant to ongoing activities under the Approved
Plan for such Product; provided that PDL shall not have any obligation (A) to
fund or perform activities with respect to such Product commencing subsequent to
the date of the Opt-Out Notice, (B) for Manufacturing Costs that are expensed
during such [****]* period [****]*, or (C) [****]*.

 

(3)                                 After the expiration of such [****]* period
in Section 3.6(b)(ii)(2), provided that BMS has not terminated this Agreement
pursuant to Section 11.2 with respect to such Product, at least in the U.S., the
licenses granted to BMS in Sections 7.1(a)(i)(1), 7.1(a)(i)(2), 7.1(a)(ii)(1),
and 7.1(a)(ii)(2) shall become exclusive with respect to the Development of such
Product (and such Licensed Antibody incorporated therein), PDL shall no longer
have any obligations to perform activities under the Approved Plan or to bear
any Development Costs or Allowable Expenses, in each case with respect to such
Product, and PDL shall cease any other ongoing Development of such Product. BMS
shall thereafter compensate PDL with respect to such Product by paying royalties
on the Net Sales of such Product at the royalty rates provided in
Section 8.5(b), rather than by profit-sharing according to Sections 8.2 and 8.3.
In any event, PDL shall continue to be responsible for its payment obligations
under Sections 8.6(a) and 8.6(b) with respect to such Product. In no event,
(Y) with respect to each Product for which PDL has exercised its option to
opt-out pursuant to this Section 3.6(b)(ii), shall the royalty payments received
by PDL pursuant to Section 8.5(b)(i), after any applicable deduction of
royalties pursuant to Section 8.6(d), be less than [****]* of the Net Sales of
such Product, where such Product is the HuLuc63 Product, or [****]* of the Net
Sales of such Product, where such Product is an Other Product and (Z) with
respect to each Product for which PDL’s profit-sharing rights have been
terminated by BMS pursuant to Section 11.3(b), shall the royalty payments
received by PDL pursuant to Section 8.5(b)(ii) for such Product in a given
[****]*, after any applicable deduction of royalties pursuant to Section 8.6(d),
be less than the aggregate royalties payable to Third Parties for which PDL is
responsible, pursuant to Sections 8.6(a) and 8.6(b), in such [****]*, for such
Product; provided, that, with respect to clause (Z), application of the

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

27

--------------------------------------------------------------------------------

 

foregoing shall only limit the operation of Section 8.6(d) and shall not
increase the base royalty rates specified in Sections 8.5(b)(i) and 8.5(b)(ii).
For clarity, PDL’s election to terminate its Co-Development rights and
obligations under this Section 3.6(b) shall not alter PDL’s rights to receive
milestone payments pursuant to Section 8.4 for such Product. For further
clarity, in the event of any opt-out by PDL with respect to a Product under this
Section 3.6(b)(ii), the U.S. shall be deemed to be part of the Royalty Territory
with respect to such Product and, except as otherwise provided in this
Section 3.6(b)(ii), the terms and conditions of this Agreement that otherwise
relate to Products in the Royalty Territory shall apply with respect to such
Product.

 

(c)                                  FTE Records and Calculations; Adjustments
to FTE Rate. Each Party shall record and account for its FTE effort for the
Development of each Product to the extent that such FTE efforts are included in
Development Costs or Allowable Expenses that are, or may in the future be,
shared under this Agreement, and shall report such FTE effort to the JDC or the
USJCC, as applicable, on a quarterly basis, in each case in a manner that
allocates such FTE effort to the extent practicable to each applicable
indication. Except to the extent provided herein, each Party shall calculate and
maintain records of FTE effort incurred by it in the same manner as used for
other products developed by such Party. The JDC shall facilitate any reporting
hereunder. The FTE rate shall initially be [****]* for the calendar years
[****]* and [****]*, and shall thereafter be increased [****]*, by [****]*, with
the first such [****]* adjustment to be effective as of [****]*.

 

(d)                                  Research Costs. As of the Effective Date,
it is the Parties’ mutual understanding and expectation that the Parties will
not incur Research Costs that exceed [****]*.

 

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

 

(f)                                    Reports. Each Party shall report to the
other Party within [****]* after the end of each [****]* with regard to the
Development Costs incurred by it during [****]*.  Such report shall specify in
reasonable detail all expenses included in such Development Costs during [****]*
and shall be accompanied by invoices, and/or such other appropriate supporting
documentation.  Within [****]* after the end of each of the [****]* and, for the
[****]*, within [****]* after the end of [****]*, the Party that has incurred
less than its share of such Development Costs shall make a reconciling payment
to the other Party to achieve the appropriate allocation of Development Costs
provided for in Section 3.6(a).  Each Party’s report shall include, in addition
to the Development Costs incurred by it during the relevant [****]* a comparison
of the amounts budgeted in the Annual Development Plan for such activities and
the amounts  incurred by such Party for such activities. The Parties shall seek
to resolve any questions related to such accounting statements within [****]*
following receipt by each Party of the other Party’s report hereunder.  The
Parties shall facilitate the reporting of Development Costs hereunder and the
resolution of any questions concerning such reports.  Each Party shall have the
right at reasonable times and upon reasonable prior notice to audit the other
Party’s records as provided in Section 8.16 to confirm the accuracy of the other
Party’s costs and reports with respect to Development Costs that are shared
under this Agreement.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

28

--------------------------------------------------------------------------------

 

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

 

3.7                               BMS Option to Develop the Option Antibodies.
BMS shall have the option, at its sole discretion, to include the Option
Antibodies within the Collaboration, on the terms set forth below (the “BMS
Option”):

 

(a)                                  As promptly as practicable following the
Effective Date, PDL shall conduct, at its own cost, certain pre-clinical testing
activities with respect to PDL-241, which activities are set forth on Schedule
3.7(a) (the “PDL-241 Pre-Clinical Testing”). Unless mutually agreed otherwise,
PDL and BMS shall have a teleconference [****]* per [****]* on the interim
results of the PDL-241 Pre-Clinical Testing as well as other non-clinical data
that may be generated by PDL during the PDL-241 Pre-Clinical Testing period,
including but not limited to tissue binding, mechanistic data or in vitro
toxicology assessments of PDL-241.

 

(b)                                  Within [****]* subsequent to the completion
by PDL of the PDL-241 Pre-Clinical Testing, PDL shall deliver to BMS a report
detailing the results of the PDL-241 Pre-Clinical Testing. For clarity, prior to
BMS’ exercise of the BMS Option, PDL shall have no obligation to perform any
activities with respect to the Option Antibodies other than those set forth on
Schedule 3.7(a).

 

(c)                                  Within [****]* subsequent to BMS’ receipt
of the report described in clause (b) above, BMS shall provide written notice to
PDL as to whether BMS has elected to exercise the BMS Option. In the event that
BMS fails to provide such notice within such [****]*, the BMS Option shall be
deemed to have expired.

 

(d)                                  In the event that BMS exercises the BMS
Option:

 

(i)                                    BMS shall pay to PDL the option exercise
fee set forth in Section 8.1(b);

 

(ii)                                the Option Antibodies shall be deemed to be
Licensed Antibodies; and

 

(iii)                            the terms and conditions of clause (e) below
and Section 3.9 shall not apply and shall be of no force or effect.

 

(e)                                  In the event that BMS does not exercise the
BMS Option within [****]* of BMS’ receipt of the report described in clause
(b) above:

 

(i)                                    PDL shall retain all rights to the Option
Antibodies, as further provided in Section 3.8; and

 

(ii)                                the BMS Option shall terminate.

 

3.8                               Retained Rights. Notwithstanding anything to
the contrary in this Agreement, in the event that BMS fails to exercise the BMS
Option pursuant to Section 3.7, PDL shall have the right to

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

29

--------------------------------------------------------------------------------

 

conduct (directly or indirectly, and either with or without a bona fide
collaborator) outside of the Collaboration, research, development, manufacture
and/or commercialization of the Option Antibodies; provided that PDL shall not
develop or commercialize the Option Antibodies in [****]*.

 

3.9                               Covenant by BMS. BMS hereby covenants that BMS
shall not Develop, Commercialize, make, use, sell, offer for sale and import any
Antibody or Product in the Territory in [****]*, except with the prior written
consent of PDL and solely with respect to Development and Commercialization of
such Antibody or Product jointly by the Parties pursuant to an Approved Plan.

 

3.10                        Competition Testing.

 

(a)                                  If BMS does not exercise the BMS Option
pursuant to Section 3.7 and either Party wishes to determine whether any
Antibody that was produced from a cloned hybridoma cell line that was identified
and tested by PDL prior to the Effective Date and is not set forth on Schedule
1.25 or Schedule 1.50 is an Existing Antibody or an Option Antibody, then the
Party desiring such a determination shall notify the other Party in writing and
PDL shall perform Competition Testing to determine whether each such Antibody
Competes with PDL-241 for binding to the Target. If such Antibody Competes with
PDL-241 for binding to the Target, then it shall be deemed to be an Option
Antibody. If such Antibody does not Compete with PDL-241 for binding to the
Target, then it shall be deemed to be an Existing Antibody. PDL shall provide
the results of such Competition Testing to the JDC. BMS shall be responsible for
[****]* and PDL shall be responsible for [****]* of the costs of Competition
Testing pursuant to this Section 3.10(a), which costs shall not be included in
Development Costs.

 

(b)                                  As of the Effective Date, the Parties do
not anticipate identifying additional Antibodies (that is, Antibodies that were
not in existence as of the Effective Date) for future Development and
Commercialization by the Parties. However, if BMS does not exercise the BMS
Option pursuant to Section 3.7 and the JDC adopts an Approved Plan calling for
such identification or PDL decides in its sole discretion to identify Antibodies
outside the Collaboration, then PDL shall perform Competition Testing to
determine whether each such newly identified Antibody Competes with PDL-241 for
binding to the Target. An Antibody that is identified by PDL outside of the
Collaboration and Competes with PDL-241 for binding to the Target shall be
deemed to be an Option Antibody. An Antibody that is generated by either Party
pursuant to an Approved Plan and does not Compete with PDL-241 for binding to
the Target shall be deemed to be a Future Antibody. PDL shall provide the
results of the Competition Testing with respect to Antibodies identified
pursuant to an Approved Plan to the JDC. The costs of Competition Testing
pursuant to this Section 3.10(b) for new Antibodies generated pursuant to an
Approved Plan shall be included in Development Cost. PDL shall be solely
responsible for costs of Competition Testing pursuant to this Section 3.10 for
all Antibodies identified in PDL’s discretion outside the Collaboration.

 

(c)                                  Any dispute as to whether an Antibody
Competes with PDL-241 for binding to the Target shall be settled in accordance
with Section 14.3.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

30

--------------------------------------------------------------------------------

 

4.                                      REGULATORY

 

4.1                               Ownership of Regulatory Dossier. The lead
Party for regulatory activities with respect to a Product (such Party, the
“Regulatory Lead Party”), as provided in Section 4.2, will own all regulatory
filings for such Product in order to facilitate such Party’s interactions with
Regulatory Authorities. PDL will initially own all regulatory filings for the
HuLuc63 Product, including all regulatory filings related to studies ongoing as
of the Effective Date. PDL will be responsible for filing the first IND for the
PDL-241 Product and will initially own all regulatory filings for the PDL-241
Product. PDL hereby agrees to transfer and assign to BMS (and BMS hereby agrees
to receive from PDL) all of PDL’s right, title and interest to the
IND(s) (i) for the HuLuc63 Product, no later than the Commencement of the first
Phase II Clinical Trial for the HuLuc63 Product and (ii) in the event BMS
exercises the BMS Option pursuant to Section 3.7, for the PDL-241 Product, no
later than the completion of all Phase I Clinical Trials for the PDL-241
Product. Additionally, PDL shall notify the applicable Regulatory Authorities in
writing at the time that it is transferring such IND(s) for the HuLuc63 Product
or the PDL-241 Product, as applicable, to BMS, and BMS shall notify the
applicable Regulatory Authorities in writing that it is accepting such
IND(s) and all responsibilities associated therewith, including without
limitation, the responsibility for reporting adverse events. BMS shall own all
other regulatory filings with respect to Products.

 

4.2                               Regulatory Lead Party. PDL shall be the
Regulatory Lead Party for the HuLuc63 Product until all studies ongoing as of
the Effective Date have been completed and the IND(s) has been transferred to
BMS in accordance with Section 4.1. Thereafter, BMS shall be the Regulatory Lead
Party for the HuLuc63 Product. In the event BMS exercises the BMS Option
pursuant to Section 3.7, and subject to the JDC’s approval of the Phase I
Clinical Trial program design and costs, PDL shall be the Regulatory Lead Party
for the PDL-241 Product until all Phase I Clinical Trials for the PDL-241
Product have been completed and the IND(s) has been transferred to BMS in
accordance with Section 4.1, and, thereafter, BMS shall be the Regulatory Lead
Party for the PDL-241 Product. BMS shall be the Regulatory Lead Party, as of the
Effective Date, for all Other Products (other than PDL-241 Products). PDL shall
have a participatory role in all material regulatory activities that would have
a potential impact on Licensed Antibodies and Products in the U.S. All material
regulatory decisions would be made and implemented by the JDC, provided that
routine interactions with Regulatory Authorities, as well as any interaction
with respect to a country outside of the U.S. that would not have a potential
impact on obtaining or maintaining Regulatory Approval in the U.S., will be
excluded from the requirement of conferring through the JDC. BMS shall be the
lead Party for worldwide pharmacovigilance. Notwithstanding any other provision
of this Agreement, in the event any dispute with respect to the content of any
regulatory filing or dossier, pharmacovigilance reports, patient risk management
strategies and plans, Core Data Sheet, Product labeling, safety, and the
decision to file any DAA is not resolved by the JDC, BMS shall have final
decision-making authority with respect to such matters at the JDC, submitting
such dispute to any dispute resolution procedures provided for in
Section 2.4(c).

 

4.3                               Regulatory Matters Relating to Products in the
United States.  With respect to Products in the United States:

 

(a)                                  Regulatory Filings.  The Regulatory Lead
Party shall prepare, for review by the JDC, all submissions (including any
supplements or modifications thereto, but excluding routine adverse event
filings (i.e., not relating to serious adverse events as defined by applicable
law)) to the FDA (including the preparation of an electronic submission of a
Drug Approval Application to the

 

31

--------------------------------------------------------------------------------

 

FDA, with BMS having primary responsibility for preparing the electronic dossier
for each indication). The other Party shall have a right to review and comment
upon (through its members of the appropriate Committee), the content and subject
matter of, and strategy for, each Drug Approval Application to be filed in the
United States, all correspondence submitted to the FDA related to clinical trial
design, all proposed Product labeling (including the final FDA-approved
labeling) and post-Regulatory Approval labeling changes. Prior to filing with
the FDA, the Regulatory Lead Party shall afford the other Party a reasonable
opportunity for review and comment with respect to any material regulatory
filings, and shall take such comments into account, but without any obligation
to accept or incorporate such comments. Each Party shall promptly provide the
other with copies of all written or electronic communications received by it
from, or sent by it to, the FDA with respect to obtaining and maintaining,
Regulatory Approvals for a Product in the United States (it being understood
that routine adverse event filings (i.e., not relating to serious adverse events
as defined by applicable law) shall not fall within the meaning of maintenance)
and copies of all contact reports produced by such Party. The Regulatory Lead
Party shall be the sole point of contact with any Regulatory Authorities.

 

(b)                                  Notice of Regulatory Filing Requirements. 
The Regulatory Lead Party shall provide to the other Party, within [****]* of
discovery by the Regulatory Lead Party, notice of any event with respect to any
Product that triggers any FDA filing requirement that is subject to a deadline
imposed by applicable law of less than [****]* after the discovery of such an
event. The co-chairpersons of the JDC shall discuss in good faith and on a
timely basis determine the most effective and expeditious means of responding to
such FDA filing requirement.

 

(c)                                  Notice of Changed Regulatory Requirements. 
The Regulatory Lead Party shall provide notice to other Party of any additional
requirements which the FDA may impose with respect to obtaining or maintaining
Regulatory Approval for a Product (including additional clinical trials), and,
within [****]* of receipt thereof by the Regulatory Lead Party, of all FDA
inquiries with respect to a Product that require a response or for a which a
response may be advisable.

 

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

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

32

--------------------------------------------------------------------------------

 

(e)           Regulatory Data.  Each Party shall provide to the other Party on a
timely basis copies of all material pre-clinical and clinical data generated or
compiled pursuant to a Global Development Plan, Annual Development Plan or U.S.
Commercialization Plan (via electronic copies of such data in a form that may be
analyzed and manipulated by the other Party).

 

(f)            Common Database.  If deemed appropriate by the JDC, the Parties
will establish a common database to be controlled, maintained and administered
by BMS for the receipt, investigation, recordation, communication, and exchange
(as between the Parties) of data arising from clinical trials for Products.  The
Parties shall agree upon guidelines and procedures for such common database that
shall be in accordance with, and enable the Parties and their Affiliates to
fulfill their reporting obligations under applicable law.  Furthermore, such
guidelines and procedures shall be consistent with relevant International
Council for Harmonisation (“ICH”) guidelines.  The Parties’ costs incurred in
connection with receiving, investigating, recording, reviewing, communicating,
and exchanging such efficacy data shall be included as an element of Development
Costs or as Allowable Expenses, calculated on a FTE cost and direct
out-of-pocket cost basis.

 

(g)           Rights of Reference.  Each Party shall have the right to cross
reference, file or incorporate by reference any regulatory filing or drug master
file (as defined in the Code of Federal Regulations) (and any data contained
therein) for any Product, or any component thereof, made in any country in the
Territory (including all Approvals) in order to support regulatory filings that
such Party is permitted to make under this Agreement for any Product in the
United States and to enable either Party to fulfill its obligations under this
Agreement to Develop or manufacture (anywhere in the world) any such Product for
use in the United States or Commercialize any such Product in the United
States.  Each Party shall support the other, as may be reasonably necessary, in
obtaining Regulatory Approvals for each Product in the United States, including
providing necessary documents, or other materials required by applicable law to
obtain Regulatory Approvals, in each case in accordance with the terms and
conditions of this Agreement.

 

4.4          Recalls in the United States.  Any decision to initiate a recall or
withdrawal of a Product in the United States shall be made by BMS, after
consultation with the JDC; provided, however, that if, as a result of patient
safety concerns, there is not sufficient time for the JDC to meet, and in any
event before BMS initiates a recall or withdrawal, the Parties shall promptly
and in good faith discuss the reasons therefor and the strategy for implementing
any such recall or withdrawal.  The costs of any such recall or withdrawal
relating to: (i) the Development of a Product for an indication prior to the
approval of the Drug Approval Application (or compendia listing, as the case may
be) for such indication; or (ii) the Commercialization of a Product shall each
be included in Regulatory Expenses. Notwithstanding the preceding sentence, to
the extent that any such recall or withdrawal is attributable to the negligence
of a Party, such Party shall bear such costs, and such costs shall be excluded
from Development Costs and Allowable Expenses.  Under no circumstances shall
either Party unreasonably object to a recall or withdrawal requested by the
other Party, and neither Party shall have any right to object to a recall or
withdrawal requested by the other Party for failure of a Product to meet the
applicable specifications, for material safety concerns, for the manufacture of
such Product in a manner that does not comply with applicable law or as
requested by Regulatory Authorities.  In the event of any recall or withdrawal
of a Product in the U.S., BMS shall take any and all necessary action to
implement such recall or withdrawal in accordance with applicable law, with
assistance from PDL as reasonably requested.

 

4.5          Regulatory Matters Relating Products in the Royalty Territory. 
With respect to Products in the Royalty Territory:

 

33

--------------------------------------------------------------------------------

 

(a)           Preparation of Regulatory Filings.  BMS shall prepare and draft
all filings (including any supplements or modifications thereto and including
the preparation of any electronic submission of a Drug Approval Application) to
Regulatory Authorities in the Royalty Territory, with input from key PDL
regulatory personnel.  BMS shall keep PDL informed with respect to, and shall
promptly provide to PDL copies of, all material written or electronic
communications received by it from, or sent by it to: (a) a Regulatory Authority
in Japan, a Major European Country or for the EU; and (b) a Regulatory Authority
outside the Major European Countries to the extent that the substance of such
communications: (i) varies materially from what BMS has already disclosed to PDL
with respect to Japan, a Major European Country or for the EU under this
Section 4.5(a); and (ii) is material to the Collaboration.

 

(b)           Pricing and Reimbursement Approvals.  BMS and its Affiliates shall
take the lead in all pricing and reimbursement approval proceedings relating to
each Product in the Royalty Territory, and BMS shall have decision-making
authority with respect to Product pricing in the U.S.

 

(c)           Rights of Reference.  BMS shall have the right to cross reference,
file or incorporate by reference any regulatory filing or drug master file (as
defined in the Code of Federal Regulations) (and any data contained therein) for
any Product made in any country in the Territory (including all Approvals) in
order to support regulatory filings that BMS is permitted to make under this
Agreement for any such Product in the Royalty Territory and to enable BMS to
fulfill its obligations under this Agreement to Develop, Manufacture (anywhere
in the world), or Commercialize any such Product for use in the Royalty
Territory.

 

4.6          Recalls in the Royalty Territory.  Any decision to initiate a
recall or withdrawal of a Product in the Royalty Territory shall be made by BMS.
In the event of any recall or withdrawal, BMS shall take any and all necessary
action to implement such recall or withdrawal in accordance with applicable law,
with assistance from PDL as reasonably requested by BMS and at BMS’ sole
expense.  The costs of any such recall or withdrawal in the Royalty Territory
shall be borne solely by BMS, except to the extent that the recall or withdrawal
is attributable to: (a) the negligence of PDL, in which event PDL shall bear
such costs; or (b) the negligence of both Parties, in which event each Party
shall bear such costs to the extent of its respective responsibility, and in
either case ((a) or (b)), such costs shall be excluded from Development Costs
and Allowable Expenses.

 

4.7          Pharmacovigilance Agreement. Subject to the terms of this
Agreement, and within [****]* after the Effective Date, BMS and PDL (under the
guidance of their respective Pharmacovigilance Departments, or equivalent
thereof) shall define and finalize the responsibilities the Parties shall employ
to protect patients and promote their well-being in a written Agreement
(hereafter referred to as the “Pharmacovigilance Agreement”). These
responsibilities shall include mutually acceptable guidelines and procedures for
the receipt, investigation, recordation, communication, and exchange (as between
the Parties) of adverse event reports, pregnancy reports, and any other
information concerning the safety of any Product. Such guidelines and procedures
shall be in accordance with, and enable the Parties and their Affiliates to
fulfill, local and national regulatory reporting obligations to government
authorities. Furthermore, such agreed procedures shall be consistent with
relevant ICH guidelines, except where said guidelines may conflict with existing
local regulatory safety reporting requirements, in which case local reporting
requirements shall prevail. The

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

34

--------------------------------------------------------------------------------

 

Pharmacovigilance Agreement will provide for a worldwide safety database to be
maintained by BMS. Each Party hereby agrees to comply with its respective
obligations under such Pharmacovigilance Agreement (as the Parties may agree to
modify it from time to time) and to cause its Affiliates and Sublicensees to
comply with such obligations.

 

5.                                      COMMERCIALIZATION

 

5.1          Overview. As between the Parties, BMS shall be solely responsible
for all (and PDL shall have no responsibility for any) Commercialization
activities throughout the world, and BMS shall book sales of all Products in all
countries.

 

5.2          Commercialization Plans.

 

(a)           Commercialization Plans. For each Product, BMS shall be
responsible for creating a [****]* forecast and a comprehensive [****]*
commercialization plan setting forth the anticipated Commercialization
activities in the U.S. (including without limitation market research, launch
plans, product positioning, and detailing activities) (the “U.S.
Commercialization Plan”) consistent with BMS then-current internal practices.

 

(b)           No later than [****]* after Commencement of the first
Registrational Trial for a particular Product, and on [****]* basis thereafter,
BMS shall prepare, and present to the USJCC for review and discussion, a U.S.
Commercialization Plan that meets the requirements of Section 5.2(a) and is
consistent with the terms of this Agreement. Each  updated U.S.
Commercialization Plan for a particular Product shall become effective and
supersede the previous U.S. Commercialization Plan for such Product.

 

(c)           Notwithstanding the foregoing clauses (a) and (b), in the event
that PDL is actively developing or commercializing a Competing Product, then BMS
shall have no obligation to present a U.S. Commercialization Plan to the USJCC
for review.

 

5.3          Commercialization Costs. All Allowable Expenses incurred by BMS in
connection with the Commercialization of Products in the U.S. shall be included
in the calculation of Operating Profit (or Losses), and shall be allocated
between the Parties, in accordance with Sections 8.2 and 8.3.

 

5.4          Commercialization Reports. BMS shall keep the USJCC fully informed
regarding the progress and results of its Commercialization activities and those
of its Affiliates, sublicensees, and Third Party contractors in the Royalty
Territory. On [****]* basis, BMS shall provide the USJCC with a written report
that summarizes, in reasonable detail, all Commercialization activities
performed in the Royalty Territory during the preceding [****]*.

 

5.5          Standards of Conduct. BMS shall perform, or shall ensure that its
Affiliates, sublicensees and Third Party contractors perform, all
Commercialization activities in a good scientific and ethical business manner
and in compliance with applicable laws and regulations.

 

5.6          Sales Force Training. BMS shall develop and conduct training
programs specifically relating to the Products for its sales representatives.
BMS agrees to utilize such training programs on

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

35

--------------------------------------------------------------------------------

 

an ongoing basis to assure a consistent, focused promotional strategy, that
complies with all applicable laws, rules, and regulations.

 

6.                                      MANUFACTURING

 

6.1          Clinical and Commercial Supply.

 

(a)           HuLuc63 Product. Prior to the completion of PDL’s transfer under
Section 6.2 of the Manufacturing technology for HuLuc63, PDL shall Manufacture,
or arrange with Third Parties for the Manufacture of (or shall maintain existing
agreements with Third Parties for the Manufacture of), HuLuc63 Product for the
purpose of transitional supply of HuLuc63 Product for any ongoing Phase I
Clinical Trials or Phase II Clinical Trials with respect to HuLuc63 Product and
any pre-clinical Development activities set forth in the initial Global
Development Plan. As part of such Phase I Clinical Trial and Phase II Clinical
Trial supply, and prior to the technology transfer to BMS described in
Section 6.2, PDL shall be responsible for testing the supplies of HuLuc63
Product.  Prior to transfer of the IND to BMS, PDL shall be responsible for
release and stability testing.  Once the IND is transferred to BMS, then PDL
will enable BMS’ manufacturing and quality units to review manufacturing records
and test results performed and to release supplies of HuLuc63 Product.   Upon
such technology transfer (which shall include the transfer of all test methods),
BMS shall be responsible for all testing and releasing of supplies of HuLuc63
Product.  PDL shall continue and complete stability studies with respect to the
materials manufactured prior to technology transfer to BMS. From and after the
Effective Date, PDL shall not enter into any agreements with Third Parties for
the manufacture of HuLuc63 Product without the prior written consent of BMS. The
costs and expenses incurred by PDL in carrying out such Manufacturing (or the
costs associated with any such agreements with Third Parties) shall be treated
as Development Costs. After the completion of PDL’s transfer of the applicable
Manufacturing technology under Section 6.2(a), BMS shall be responsible for
Manufacturing, or arranging with Third Parties for the Manufacture of, HuLuc63
Product, in bulk and finished form, for use in Development and for commercial
sale.

 

(b)           PDL-241 Product. In the event of BMS’ exercise of the BMS Option,
and prior to the completion of PDL’s transfer under Section 6.2 of the
Manufacturing technology for PDL-241, PDL shall Manufacture, or arrange with
Third Parties for the Manufacture of PDL-241 Product for the purpose of
transitional supply of PDL-241 Product for any ongoing Phase I Clinical Trials
with respect to PDL-241 Product and any pre-clinical PDL-241 Product Development
activities set forth in an Approved Plan. As part of such Phase I Clinical Trial
supply, and prior to the technology transfer to BMS described in Section 6.2,
PDL shall be responsible for testing the supplies of PDL-241 Product and PDL
will enable BMS’ manufacturing and quality units to review manufacturing records
and test results performed and to release supplies of PDL-241 Product.   Upon
such technology transfer (which shall include the transfer of all test methods),
BMS shall be responsible for all testing and releasing of supplies of PDL-241
Product.  PDL shall continue and complete stability studies with respect to the
materials manufactured prior to technology transfer to BMS. From and after the
exercise by BMS of the BMS Option, PDL shall not enter into any agreements with
Third Parties for the Manufacture of PDL-241 Product without the prior written
consent of BMS. The costs and expenses incurred by PDL in carrying out such
Manufacturing (or the costs associated with any such agreements with Third
Parties) shall be treated as Development Costs. For clarity, if BMS does not
exercise the BMS Option, PDL shall have the right to Manufacture, or retain
Third Parties to Manufacture, PDL-241 Product, without BMS’ consent and
consistent with PDL’s rights as provided in Section 3.8. After the completion of
PDL’s transfer of the applicable Manufacturing technology under Section 6.2(a),
BMS shall be responsible for Manufacturing, or arranging with Third Parties for
the Manufacture of, PDL-241

 

36

--------------------------------------------------------------------------------

 

Product, in bulk and finished form, for use in Development and for commercial
sale.

 

(c)           Other Products (other than PDL-241 Product). BMS shall be
responsible for Manufacturing, or arranging with Third Parties for the
Manufacture of, all Other Products (other than PDL-241 Product), in bulk and
finished form, for use in Development and for commercial sale. For clarity, if
BMS does not exercise the BMS Option, PDL shall have the right to Manufacture,
or retain Third Parties to Manufacture, all Products containing Option
Antibodies, without BMS’ consent and consistent with PDL’s rights as provided in
Section 3.8.

 

(d)           Manufacturing Decisions. [****]*.

 

6.2          Transfer of Manufacturing Right.

 

(a)           At dates determined by the JDC (or a manufacturing Working Group
thereof), PDL shall transfer the Manufacturing technology for (i) HuLuc63 and
any other Existing Antibodies and Future Antibodies for which PDL has developed
Manufacturing technology and (ii) provided that BMS has exercised the BMS
Option, PDL-241 and any other Option Antibodies for which PDL has developed
Manufacturing technology, to either (y) BMS or (z) a Third Party manufacturer
chosen by BMS. The Parties expect that the transfer of Manufacturing technology
for HuLuc63 shall occur no later than [****]* and, provided that [****]*, that
the transfer of Manufacturing technology for PDL-241 shall occur no later than
[****]* with respect to PDL-241. In connection with such transfer, PDL shall
transfer to BMS or such Third Party manufacturer, as the case may be, all PDL
Licensed Know-How that is related to the Manufacturing of, and is reasonably
necessary or useful to enable BMS or such Third Party manufacturer (as
appropriate) to Manufacture, each such Licensed Antibody and Products containing
or incorporating them. PDL shall use reasonable efforts to ensure that any Third
Party manufacturer retained by PDL is obligated to assist with respect to such
technology transfer. The costs and expenses incurred by the Parties in carrying
out such transfer shall be treated as Development Costs.

 

(b)           BMS and/or its Third Party manufacturer shall use any Information
transferred pursuant to Section 6.2(a) solely for the purpose of Manufacturing
Products for use by PDL or BMS under this Agreement, and for no other purpose.

 

(c)           BMS acknowledges and agrees that PDL may condition its agreement
to transfer of any Manufacturing technology or Information to a Third Party
manufacturer on the execution of a confidentiality agreement between such Third
Party manufacturer and PDL that contains terms substantially equivalent to those
of Article 10 of this Agreement.

 

7.                                      LICENSES; EXCLUSIVITY

 

7.1          Licenses to BMS. Subject to the terms and conditions of this
Agreement:

 

(a)           Development and Commercialization under PDL Licensed Patents and
PDL Licensed Know-How.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

37

--------------------------------------------------------------------------------

 

(i)            PDL hereby grants to BMS a revenue-bearing license under the PDL
Licensed Patents and the PDL Licensed Know-How to (1) Develop Licensed
Antibodies and Products in the U.S., (2) Manufacture and use Licensed Antibodies
and Products in the U.S. solely for Development purposes, (3) Commercialize,
sell, offer for sale and import Products in the U.S. and (4) Manufacture and use
Products in the U.S. solely for Commercialization purposes. The licenses set
forth in subparts (1) and (2) above shall be co-exclusive and the licenses set
forth in subparts (3) and (4) above shall be exclusive.

 

(ii)           PDL hereby grants to BMS a royalty-bearing license under the PDL
Licensed Patents and the PDL Licensed Know-How to (1) Develop Licensed
Antibodies and Products in the Royalty Territory, (2) Manufacture and use
Licensed Antibodies and Products in the Royalty Territory solely for Development
purposes, (3) Commercialize, sell, offer for sale and import Products in the
Royalty Territory and (4) Manufacture and use Products in the Royalty Territory
solely for Commercialization purposes. The licenses set forth in subparts
(1) and (2) above shall be co-exclusive and the licenses set forth in subparts
(3) and (4) above shall be exclusive.

 

(b)           Development and Commercialization under the Queen Patents. PDL
hereby grants to BMS a non-exclusive license under the Queen Patents to
(1) Develop Licensed Antibodies and Products in the Territory, (2) Manufacture
and use Licensed Antibodies and Products in the Territory solely for Development
purposes, (3) Commercialize, sell, offer for sale and import Products in the
Territory and (4) Manufacture and use Products in the Territory solely for
Commercialization purposes. Such license shall be revenue-bearing with respect
to Products Commercialized in the U.S. and royalty-bearing with respect to
Products Commercialized in the Royalty Territory.

 

(c)           Development and Commercialization under the BioBetter Technology.
In the event the JDC decides that it is in the best interests of the
Collaboration to Develop a Licensed Antibody through the application of
BioBetter Technology and the resulting Licensed Antibody would, in the absence
of a license from PDL infringe or misappropriate the BioBetter Technology, PDL
hereby grants to BMS a non-exclusive license under the BioBetter Technology to
(1) Develop such Licensed Antibody and Products incorporating such Licensed
Antibody in the Territory, (2) Manufacture and use such Licensed Antibody and
Products incorporating such Licensed Antibody in the Territory solely for
Development purposes, (3) Commercialize, sell, offer for sale and import
Products incorporating such Licensed Antibody in the Territory and
(4) Manufacture and use Products incorporating such Licensed Antibody in the
Territory solely for Commercialization purposes; provided, however, that BMS
shall not have the right to practice the BioBetter Technology (except for
purposes of Manufacturing Licensed Antibodies or Products to which BioBetter
Technology has already been applied). Such license shall be revenue-bearing with
respect to Products Commercialized in the U.S. and royalty-bearing with respect
to Products Commercialized in the Royalty Territory.

 

(d)           Sublicensing. The licenses granted to BMS in Sections 7.1(a),
7.1(b) and 7.1(c) are, subject to Section 7.1(f) and Section 7.5, freely
sublicensable by BMS only with respect to (i) the Manufacture and use for
Commercialization purposes and Commercialization of Products in the Royalty
Territory and (ii) Products for which Co-Development has been terminated
pursuant to Section 3.6(b) or Section 11.3(b), and is otherwise sublicenseable
by BMS solely with the prior written consent of PDL, which consent shall not be
unreasonably withheld. For clarity, BMS shall have the right to engage contract
service providers (including without limitation clinical trial services
providers, pre-clinical and clinical research services providers, contract
manufacturers and institutions) for the purpose of exercising its rights and
performing its obligations hereunder, without providing

 

38

--------------------------------------------------------------------------------

 

notice to or obtaining the consent of PDL, and otherwise subject to the terms
and conditions of this Agreement.

 

(e)           PDL Retained Rights. PDL retains all rights to use the PDL
Licensed Know-How and PDL Patents, subject to the terms of this Agreement.

 

(f)            Pre-existing Third Party IP. The Parties acknowledge that the
licenses granted by PDL to BMS under this Section 7.1 include sublicenses of
pre-existing Third Party intellectual property licensed to PDL under the
agreements set forth on Schedule 7.1(f) (the “Existing License Agreements”).
Notwithstanding anything to the contrary in this Agreement, the licenses granted
under the provisions of this Section 7.1 are (i) subject to the applicable terms
and conditions of the Existing License Agreements, and (ii) BMS shall, in
exercising such sublicense rights, comply with all applicable provisions of the
Existing License Agreements other than any obligations to make payments to such
Third Party. The Parties further agree that to the extent that any PDL Licensed
Patents and PDL Licensed Know-How is non-exclusively licensed to PDL by a Third
Party, the licenses granted to BMS in Section 7.1 shall include exclusive or
co-exclusive (as the case may be) sublicenses of PDL’s interest in such licensed
technology.

 

(g)           Option Agreements. [****]*.

 

7.2          Licenses to PDL.

 

(a)           Development. Subject to the terms and conditions of this
Agreement, BMS hereby grants to PDL a co-exclusive license under the BMS
Licensed Patents and the BMS Licensed Know-How to Develop, Manufacture and use
Licensed Antibodies and Products in the Territory.

 

(b)           Sublicensing. The license granted to PDL in Section 7.2(a) is,
subject to Section 7.5, sublicensable solely with the prior written consent of
BMS. Notwithstanding the foregoing PDL shall have the right to engage contract
service providers (including without limitation clinical trial services
providers, pre-clinical and clinical research services providers, contract
manufacturers and institutions) for the purpose of exercising its rights and
performing its obligations hereunder, without providing notice to or obtaining
the consent of BMS, and otherwise subject to the terms and conditions of this
Agreement.

 

(c)           BMS Retained Rights. BMS retains all rights to use the BMS
Licensed Know-How and BMS Licensed Patents, subject to the terms of this
Agreement.

 

7.3          Mutual Covenants.

 

(a)           BMS hereby covenants that BMS shall not (and shall ensure that any
of its permitted sublicensees shall not) use any PDL Licensed Know-How, PDL
Licensed Patents, BioBetter Technology or Queen Patents for a purpose other than
that expressly permitted in Section 7.1.

 

(b)           PDL hereby covenants that PDL shall not (and shall ensure that any
of its permitted sublicensees shall not) use any BMS Licensed Know-How or BMS
Licensed Patents for a purpose other than that expressly permitted in
Section 7.2.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

39

--------------------------------------------------------------------------------

 

7.4          No Additional Licenses. Except as expressly provided in Sections
7.1, 7.2, and Article 11, nothing in this Agreement grants either Party any
right, title or interest in and to the intellectual property rights of the other
Party (either expressly or by implication or estoppel).

 

7.5          Sublicensing. Each Party shall provide the other Party with the
name of each permitted sublicensee of its rights under this Article 7 and a copy
of the applicable sublicense agreement; provided that each Party may redact
confidential or proprietary terms from such copy, including financial terms. The
sublicensing Party shall remain responsible for each permitted sublicensee’s
compliance with the applicable terms and conditions of this Agreement.

 

7.6          Exclusivity.

 

(a)           Exclusivity Term. For a period commencing on the Effective Date
and ending [****]* subsequent to BMS’ receipt from PDL of the report on PDL-241
Pre-Clinical Testing, described in Section 3.7(b) (the “Exclusivity Term”),
subject to Section 3.8 and Section 7.6(d), neither PDL nor BMS shall conduct
(directly or indirectly, and either with or without a bona fide collaborator)
outside of the Collaboration any programs that are intended to identify,
optimize, develop and/or commercialize Antibodies (any such program, a
“Competing Program”); provided that the foregoing shall not prevent either Party
from conducting pre-clinical research with respect to the discovery or
optimization of Antibodies.

 

(b)           Commercial Launch of Competing Product.

 

(i)            No Competing Products for [****]*. (A) Subject to Section 3.8 and
Section 7.6(d), neither Party may commercialize in any country in the Territory
a product comprising or incorporating an Antibody (other than BMS’
Commercialization of a Product pursuant to the Collaboration) (any such product,
a “Competing Product”), until the date which is [****]* subsequent to Launch in
such country of the first Product to achieve Launch in such country (the “First
Product”); and (B) if BMS does not exercise the BMS Option pursuant to
Section 3.7, BMS may not commercialize a Competing Product in the [****]* until
the date which is [****]* subsequent to the first arm’s length sale by PDL or
its Affiliate or licensee of a product incorporating an Option Antibody to a
Third Party for use or consumption by the public of such product in any country
in which such product has obtained regulatory approval.

 

(ii)           Royalty on Net Sales of a Competing Product. In the event of any
commercialization of a Competing Product in a particular country that is
permitted under clause (b)(i) above, the Party commercializing such Competing
Product in such country shall pay to the other Party a royalty equivalent to
(A) [****]* of net sales of such Competing Product in such country during the
period beginning [****]* subsequent to initial launch of the First Product in
such country and ceasing at the end of the [****]* subsequent to initial launch
of the First Product in such country; and (B) if such country is not the U.S.,
[****]* of net sales of such Competing Product in such country for a period
beginning [****]* subsequent to initial launch of the First Product in such
country and ceasing upon the expiration of the Royalty Term in such country with
respect to the First Product; and (C) if such country is the U.S., [****]* of
net sales of any such Competing Product in the U.S. for a period beginning
[****]* subsequent to initial launch of the First Product in the U.S. and
ceasing at such time

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

40

--------------------------------------------------------------------------------

 

as there is no Valid Claim within a Patent Controlled by a Party covering the
composition of matter, formulation containing, or approved method of use of the
First Product in the U.S.

 

(c)           Acquisition of Competing Program or Competing Product Due to a
Change of Control. In the event that, due to a Change of Control transaction, a
Party is either (A) conducting (directly or indirectly, and either with or
without a bona fide collaborator), outside the scope of this Collaboration and
during the Exclusivity Term any Competing Programs; or (B) commercializing a
Competing Product in any country in the Territory during the period prior to or
within the [****]* after Launch in such country of the First Product (such
period, a “Non-Compete Period”), then the following terms and conditions shall
apply:

 

(i)            In the event that a Party controls a Competing Program or
Competing Product during the Exclusivity Term as a result of, and subsequent to,
a Change of Control, such Party must within [****]* of such Change of Control,
either:

 

(1)           (A) if such Party is BMS, return all Product(s) to PDL on the
terms set forth in Sections 11.6(a), 11.6(c), 11.6(d), 11.6(e), and 11.6(g),
except that a royalty shall be payable to BMS on net sales of such Product(s) on
a worldwide basis, of (i) [****]* of the net sales of such Product(s) if such
return is made prior to the [****]* with respect to such Product(s), and
(ii) [****]* of the net sales of such Product(s) if such return is made
subsequent to the [****]* with respect to any Product(s); or (B) if such Party
is PDL, forfeit its profit-sharing rights as described in Sections 8.2 and 8.3
as well as its obligation to pay part of the Development Costs pursuant to
Section 3.6, in which case the U.S. shall be deemed to be part of the Royalty
Territory; provided that royalties payable on net sales in the U.S. shall be
calculated using the sales thresholds set forth in the table set forth below
being applied to the U.S. only, and royalties payable on net sales in the
Royalty Territory but outside the U.S. shall be calculated using the sales
thresholds set forth in Section 8.5(a) being applied only to the Royalty
Territory outside the U.S.;

 

 

Calendar year Net Sales of HuLuc63 Products
in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

 

Calendar year Net Sales of Other Products
in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

(2)           divest such Competing Program or Competing Product to a Third
Party; or

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

41

--------------------------------------------------------------------------------

 

(3)           discontinue such Competing Program or development or
commercialization of such Competing Product until the end of the Exclusivity
Term or, if longer, as long as necessary to comply with Section 7.6(b);

 

For clarity, in the event that PDL controls a Competing Program or Competing
Product during the Exclusivity Term as a result of, and subsequent to, a Change
of Control, BMS shall continue to owe milestone payments to PDL pursuant to
Section 8.4, regardless of whether PDL chooses option (1), (2) or (3) above. For
further clarity, in the event PDL is owed royalties pursuant to
Section 7.6(c)(i)(1)(B), PDL shall continue to be responsible for its payment
obligations under Sections 8.6(a) and 8.6(b) with respect to such Product(s). In
no event shall the royalty payments received by PDL based on Net Sales of a
Product during a [****]*, after any applicable deduction of royalties pursuant
to Section 8.6(d), be less than the aggregate royalties payable to Third Parties
for which PDL is responsible, pursuant to Sections 8.6(a) and 8.6(b), in such
[****]*, for such Product; provided, that, application of the foregoing shall
only limit the operation of Section 8.6(d) and shall not increase the base
royalty rates specified in Section 7.6(c)(i).

 

(ii)           In the event that a Party controls in at least one country in the
Territory a Competing Product as a result of, and subsequent to, a Change of
Control, during the Non-Compete Period for such Competing Product in such
country, then solely with respect to each such country, such Party must within
[****]* of such Change of Control either:

 

(1)           (A) if such Party is BMS, return all Product(s) to PDL with
respect to such countries on the terms set forth in Sections 11.6(a), 11.6(c),
11.6(d), 11.6(e), and 11.6(g), except that a royalty shall be payable to BMS on
net sales of such Product(s) in such countries of (i) [****]* of the net sales
of such Product(s) if such return is made prior to the [****]* with respect to
such Product(s), and (ii) [****]* of the net sales of such Product(s) if such
return is made subsequent to the [****]* with respect to any Product(s); or
(B) if such Party is PDL and one such country is the U.S., forfeit its
profit-sharing rights (and Allowable Expense sharing obligations) as described
in Sections 8.2 and 8.3 as well as its obligation to pay part of the Development
Costs pursuant to Section 3.6, in which case the U.S. shall be deemed to be part
of the Royalty Territory; provided that royalties payable on net sales in the
U.S. shall be calculated using the sales thresholds set forth in the table below
being applied to the U.S. only, and royalties payable on net sales in the
Royalty Territory but outside the U.S. shall be calculated using the sales
thresholds set forth in Section 8.5(a) being applied only to the Royalty
Territory outside the U.S.; or

 

 

Calendar year Net Sales of HuLuc63
Products in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

 

Calendar year Net Sales of Other Products
in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

42

--------------------------------------------------------------------------------

 

(2)           divest or outlicense to a Third Party at least its
commercialization rights with respect to such Competing Product in such
countries; or

 

(3)           discontinue or delay commercialization of such Competing Product
in each such country until the end of the Non-Compete Period in such country.

 

For clarity, in the event that PDL controls a Competing Product during a
Non-Compete Period as a result of, and subsequent to, a Change of Control, BMS
shall continue to owe milestone payments to PDL pursuant to Section 8.4,
regardless of whether PDL chooses option (1), (2) or (3) above. For further
clarity, in the event PDL is owed royalties pursuant to
Section 7.6(c)(ii)(1)(B) above, PDL shall continue to be responsible for its
payment obligations under Sections 8.6(a) and 8.6(b) with respect to such
Product(s). In no event shall the royalty payments received by PDL based on Net
Sales of a Product during a [****]*, after any applicable deduction of royalties
pursuant to Section 8.6(d), be less than the aggregate royalties payable to
Third Parties for which PDL is responsible, pursuant to Sections 8.6(a) and
8.6(b), in such [****]*, for such Product; provided, that, application of the
foregoing shall only limit the operation of Section 8.6(d) and shall not
increase the base royalty rates specified in Section 7.6(c)(ii).

 

(iii)         In the event that a Party controls in at least one country in the
Territory a Competing Product as a result of, and subsequent to, a Change of
Control, after the expiration of the Non-Compete Period with respect to such
country, then, solely with respect to each such country in which the Non-Compete
Period has expired, the terms of Section 7.6(b)(ii) shall apply to such
Competing Product in each such country.

 

(d)           For clarification, if BMS does not exercise the BMS Option, PDL’s
and its Affiliate’s and sublicensee’s work on any Option Antibody shall not be
considered work on a Competing Program, and PDL’s or its Affiliate’s or
sublicensee’s commercialization of a product containing or including an Option
Antibody shall not be considered a Competing Product.

 

7.7          License to [****]*. [****]*.

 

8.                                      COMPENSATION

 

8.1          Upfront Payment and Option Exercise Fee.

 

(a)           BMS shall pay to PDL a one-time upfront fee of Thirty Million
Dollars ($30,000,000) within [****]* after the Effective Date. Such fee shall be
noncreditable and nonrefundable.

 

(b)           In the event that BMS exercises the BMS Option pursuant to
Section 3.7, BMS shall pay to PDL a one-time option exercise fee of Fifteen
Million Dollars ($15,000,000) within

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

43

--------------------------------------------------------------------------------

 

[****]* after the date of such exercise by BMS. Such fee shall be noncreditable
and nonrefundable.

 

8.2          Profit Sharing in the U.S. The terms and conditions of this
Section 8.2 shall govern each Party’s rights and obligations with respect to
Operating Profits (or Losses) relating to each Product in the U.S. For clarity,
PDL shall have no right to share Operating Profits, and  no obligation to bear
any Operating Losses, in each case pursuant to this Section 8.2, with respect to
any Product in the Royalty Territory and PDL shall instead be entitled to
receive from BMS royalties pursuant to Section 8.5(a).

 

(a)           Basic Concept. Subject to Sections 8.6(a) and 8.6(b), the Parties
shall share all Operating Profits and all Operating Losses (as applicable) for
each Product in the U.S. on a [****]* to BMS, [****]* to PDL basis.
Specifically, the Net Sales of Product in the U.S. shall be allocated first to
reimburse each Party for its share of Allowable Expenses for Product in the
U.S., which shall be allocated [****]* to BMS and [****]* to PDL, and any
remaining sums, shall be Operating Profit or Operating Loss (as applicable),
which shall be shared as follows: [****]* by BMS and [****]* by PDL. For
clarity, any upfront fees, milestone payments or royalties payable to Third
Parties that are subject to Section 8.6(a) or 8.6(b) shall not be allocable to
Development Costs or Allowable Expenses.

 

8.3          Calculation and Payment of Profit or Loss Share.

 

(a)           Reports and Payments in General. With respect to each Product, BMS
shall report to PDL, within [****]* after the end of each [****]*, with regard
to Net Sales and Allowable Expenses (including any Allowable Expenses that are
incurred by BMS prior to Launch of such Product) for such Product during such
quarter in the U.S. Each such report shall specify in reasonable detail all
deductions allowed in the calculation of such Net Sales and all expenses
included in Allowable Expenses, and, if requested by PDL, any invoices or other
supporting documentation for any payments to a Third Party that individually
exceed [****]* shall be promptly provided. Within [****]* after the end of each
[****]* (or for the last [****]* in a [****]*,[****]* after the end of [****]*),
BMS shall reconcile all Net Sales and Allowable Expenses to ascertain whether
there is an Operating Profit or an Operating Loss and payments shall be made as
set forth in paragraphs (i) and (ii) below, as applicable.

 

(i)            If there is an Operating Profit for such quarter, then BMS shall
pay to PDL an amount equal to [****]* of the Operating Profit for such quarter
within [****]* subsequent to BMS’ preparation of such reconciliation; or

 

(ii)           If there is an Operating Loss for such quarter, then PDL shall
make a reconciling payment to BMS to assure that PDL bears its share of such
Operating Loss during such quarter within [****]* subsequent to PDL’s receipt of
such reconciliation.

 

(b)           Last Calendar Quarter. No separate payment shall be made for the
last calendar quarter in any calendar year. Instead, at the end of each such
year, a final annual reconciliation shall be conducted by comparing the share of
Operating Profit (or Loss) to which a Party is otherwise entitled for such year
pursuant to Section 8.2 against the sum of all amounts (if any) previously paid
or retained by such Party for prior quarters during such year, and the Parties
shall make

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

44

--------------------------------------------------------------------------------

 

reconciling payments to one another no later than [****]* after the end of such
quarter, if and as necessary to ensure that each Party receives for such year
its share of Operating Profits and bears its share of Operating Losses in
accordance with Section 8.2.

 

8.4          Milestone Payments to PDL.

 

(a)           Development Milestone Payments to PDL. For each Licensed Antibody
or Product, BMS shall make the development milestone payments set forth below to
PDL within [****]* after the first achievement of each indicated event by PDL or
BMS or any of its Affiliates or sublicensees with respect to such Licensed
Antibody or Product. All development milestone payments made by BMS to PDL
hereunder shall be noncreditable and nonrefundable. In the event a Licensed
Antibody or Product achieves a development milestone with respect to a
particular indication without having achieved a prior milestone with respect to
such indication, then BMS will make the prior milestone payment together with
the payment of the milestone payment for the achieved subsequent milestone
event.

 

[****]*

 

(b)           Milestone Payment Restrictions. Each milestone payment set forth
in Section 8.4(a) shall be paid only once with respect to a given Product,
regardless of the number of indications sought or approved beyond the first
[****]* such indications for that Product, or the number of presentations,
dosages or formulations developed for that Product. Where milestones are payable
for the achievement of [****]* indication(s) with respect to a Product, such
[****]* indications must be, with respect to all Products, therapeutically
distinct, from both the clinical development and commercialization standpoints,
to the previous indication(s) on which such milestone payment was made.

 

(c)           Sales Milestone Payments to PDL. For each Product, BMS shall make
the milestone payments set forth below to PDL after the achievement of each of
the following events by BMS or any of its Affiliates or sublicensees. Each
milestone payment shall be made by BMS in [****]* equal installments, with the
first installment due and payable [****]* after the end of the first [****]* in
which such milestone event is met. BMS shall pay the second installment to PDL
on the [****]*.

 

(i)            $[****]* upon the first time the worldwide, aggregate Net Sales
of a Product over [****]* reach or exceed $[****]*;

 

(ii)           $[****]* upon the first time the worldwide, aggregate Net Sales
of a Product over [****]* reach or exceed $[****]*; and

 

(iii)         $[****]* upon the first time the worldwide, aggregate Net Sales of
a Product over [****]* reach or exceed $[****]*.

 

For example, if the worldwide, aggregate Net Sales of a Product over [****]*.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

45

--------------------------------------------------------------------------------

 

For clarity, the milestone payments under this Section 8.4(c) shall be additive
such that if [****]* milestones described in clauses (i), (ii), and (iii) are
met in the [****]* period, BMS shall owe to PDL installment payments under each
of clauses (i), (ii), and (iii), as applicable.

 

8.5          Royalty Payments to PDL.

 

(a)           Sales of Products in the Royalty Territory. For each Product, BMS
shall pay to PDL royalties on Net Sales of such Product by BMS (or its
Affiliates or sublicensees) in the Royalty Territory at a royalty rate
determined by aggregate Net Sales in the Royalty Territory of such Product in a
calendar year as follows:

 

 

Calendar year Net Sales of HuLuc63
Products in Royalty Territory

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

 

 

 

 

 

Calendar year Net Sales of Other Products
in Royalty Territory

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

(b)           Sales of Products in the U.S.

 

(i)            For each Product for which PDL’s Co-Development rights and
obligations have been terminated pursuant to Section 3.6(b), BMS shall pay to
PDL royalties on Net Sales of such Product by BMS (or its Affiliates or
sublicensees) in the U.S. at a royalty rate determined by aggregate Net Sales in
the U.S. of such Product in a calendar year as follows:

 

 

Calendar year Net Sales of HuLuc63
Products in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

 

 

 

 

 

Calendar year Net Sales of Other Products
in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

(ii)           For each Product for which PDL’s Co-Development rights and
obligations have been terminated pursuant to Section 11.3(b), BMS shall pay to
PDL royalties on Net Sales of such Product by BMS (or its Affiliates or
sublicensees) in the U.S. at a royalty rate determined

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

46

--------------------------------------------------------------------------------

 

by aggregate Net Sales in the U.S. of such Product in a calendar year as
follows:

 

 

Calendar year Net Sales of HuLuc63
Products in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

 

Calendar year Net Sales of Other Products
in the U.S.

 

Royalty Rate

 

 

 

 

 

 

 

[****]*

 

[****]*

 

 

(c)           Clarification. With respect to clause (a) and clause (b) above,
Net Sales shall be aggregated only with respect to a given Product, and not
aggregated for all Products that may be Commercialized. All royalty payments
made by BMS to PDL hereunder shall be noncreditable and nonrefundable, except in
the event that an audit pursuant to Section 8.16 confirms that BMS had overpaid
royalties to PDL, in which case such overpayment shall be credited (after
deduction for PDL’s reasonable expenses for such audit) against future royalties
due to PDL (or, in the event that such audit takes place subsequent to the
Royalty Term, such overpayment shall be refunded to BMS).

 

8.6          Third Party Royalties

 

(a)           Pre-existing Third Party IP. [****]* shall bear [****]* Third
Party milestones and royalties owed with respect to a Product, on intellectual
property that: (i) is licensed by PDL as of the Effective Date pursuant to the
Existing License Agreements; or (ii) is intellectual property that: (A) PDL
received written notice of potential infringement from a Third Party prior to
the Effective Date, did not disclose same to BMS in writing prior to the
Effective Date (B) covers the composition of matter, method of making or method
of using an Antibody, a Collaboration Target and/or related animal models.

 

(b)           [****]*.

 

(c)           Other Third Party IP. Subject to clause (d) below, [****]* shall
be responsible for the payment of [****]* royalties and other payments owed to
Third Parties, other than amounts payable pursuant to Sections 8.6(a) and
8.6(b), in consideration of intellectual property rights that BMS reasonably
believes are necessary or reasonably useful in connection with the Development
or Commercialization or Manufacture of a Product in the Territory; provided,
that any such royalties and other payments (including upfront fees and milestone
payments) shall be treated as Allowable Expenses with respect to the U.S.; and
provided, further, that each Party shall bear all Third Party royalties arising
from any infringing activities by such Party prior to the Effective Date. For
avoidance of doubt, this clause (c) shall apply to payments owed to Third
Parties under (i) any license to [****]* or U.S. and ex-U.S. patents and pending
patent applications that claim priority thereto, have a common priority claim
therewith or are a foreign equivalent thereof, to the extent such patents and
pending patent applications claim [****]*; (ii) any license taken as a result of
exercising an option under

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

47

--------------------------------------------------------------------------------

 

[****]*, entered into as of [****]*; and (iii) any license taken as a result of
exercising an option under the [****]* entered into as of [****]*.

 

(d)           Subject to Sections 3.6(b) and 7.6(c), BMS may deduct from the
royalties it would otherwise owe to PDL pursuant to Sections 7.6(c) or 8.5, as
applicable, for a particular Product for a particular [****]*, an amount equal
to [****]* of all royalties owed to Third Parties pursuant to
Section 8.6(c) with respect to such Product in such [****]*, up to a maximum
deduction of [****]* of the royalties due PDL for such Product in such [****]*.

 

8.7          Generic Competition. During the applicable Royalty Term for a
particular Product in a particular country in the Royalty Territory, if any
Third Parties are: (a) selling a Generic Product in any given country in any
year; and (b) such sales of such Generic Product(s) in such country for such
year are, in the aggregate (on a unit equivalent basis):

 

(i)            greater than [****]*, but less than or equal to [****]* of the
sum of the entire market for such Product in such country, then the royalties
due to PDL for such country in such year shall be reduced by [****]* from what
would otherwise have been due under Section 8.5; or

 

(ii)           greater than [****]* of the sum of the entire market for such
Product in such country, then the royalties due to PDL for such country in such
year shall be reduced by [****]* from what would otherwise have been due under
Section 8.5;

 

[****]*.

 

8.8          Quarterly Payments and Reports. All royalties due under Section 8.5
shall be paid quarterly, on a country-by-country basis, within [****]* of the
end of the relevant [****]* for which royalties are due. BMS shall also provide
to PDL within [****]* after the end of each [****]* a report that summarizes the
Net Sales of each Product in the Royalty Territory during such quarter, provided
that to the extent additional information is reasonably required by PDL to
comply with its obligations to any of its licensors, the Parties shall work
together in good faith to timely compile and produce such additional
information.  Such reports shall also include detailed information regarding the
calculation of royalties due pursuant to Section 8.5, including allowable
deductions pursuant to Section 8.6(d), in the calculation of Net Sales of each
Product on which royalties are paid, and, to the extent Section 8.7 is
applicable, the calculation of sales and market share (by volume) of Generic
Products.

 

8.9          Term of Royalties. PDL’s right to receive royalties under
Section 8.5 shall expire on a country-by-country and Product-by-Product basis
upon the later of: (a) [****]* from the Launch of such Product in such country;
or (b) expiration in such country of the last Valid Claim of the last to expire
Patent that is Controlled by PDL or BMS (either solely or jointly) and that
covers the composition, manufacture or method of use of such Product (the
“Royalty Term”). Upon the expiration of the Royalty Term with respect to a
Product in a country, BMS shall have a fully-paid-up perpetual license under
Section 7.1 for the making, using, selling, offering for sale and importing of
such Product in such country.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

48

--------------------------------------------------------------------------------

 

8.10        Payment Method. All payments due under this Agreement to PDL shall
be made by bank wire transfer in immediately available funds to an account
designated by PDL. All payments hereunder shall be made in Dollars.

 

8.11        Taxes. PDL shall pay any and all taxes levied on account of all
payments it receives under this Agreement. If laws or regulations require that
taxes be withheld, BMS shall: (a) deduct those taxes from the remittable
payment; (b) pay the taxes to the proper taxing authority; and (c) send evidence
of the obligation together with proof of tax payment to PDL within [****]*
following that tax payment. The Parties shall discuss appropriate mechanisms for
minimizing such taxes to the extent possible in compliance with applicable law.

 

8.12        Blocked Currency. In each country where the local currency is
blocked and cannot be removed from the country, royalties accrued in that
country shall be paid to PDL in Dollars based on the Dollar reported sales for
the quarter (translated for such country per Statement of Financial Standards
No. 52), unless otherwise mutually agreed.

 

8.13        Sublicenses.  In the event BMS grants any permitted licenses or
sublicenses to Third Parties to sell Products that are subject to royalty
payments under Section 8.5, BMS shall have the responsibility to account for and
report sales of any Product by a licensee or a sublicensee on the same basis as
if such sales were Net Sales by BMS.  BMS shall pay to PDL (or cause the
licensee or sublicensee to pay to PDL, with BMS remaining responsible for any
failure of the licensee or sublicensee to pay amounts when due under this
Agreement): (a) royalties on such sales as if such sales of the licensee or
sublicensee were Net Sales of BMS or any of its Affiliates; and (b) milestones
payments pursuant to Section 8.4 based on the achievement by such licensee or
sublicensee of any milestone event contemplated in such Sections as if such
milestone event had been achieved by BMS or any of its Affiliates hereunder.

 

8.14        Foreign Exchange. Conversion of sales recorded in local currencies
to Dollars shall be performed in a manner consistent with BMS’ normal practices
used to prepare its audited financial statements for internal and external
reporting purposes, which uses a widely accepted source of published exchange
rates.

 

8.15        Records. Each Party shall keep (and shall ensure that its Affiliates
and sublicensees shall keep) such records as are required to determine, in
accordance with GAAP and this Agreement, the sums or credits due under this
Agreement, including Development Costs, Allowable Expenses and Net Sales. All
such books, records and accounts shall be retained by such Party until the later
of (a) [****]* after the end of the period to which such books, records and
accounts pertain and (b) the expiration of the applicable tax statute of
limitations (or any extensions thereof), or for such longer period as may be
required by applicable law. Each Party shall require its sublicensees to provide
to it a report detailing the foregoing expenses and calculations incurred or
made by such sublicensee, which report shall be made available to the other
Party in connection with any audit conducted by such other Party pursuant to
Section 8.16.

 

8.16        Audits. Each Party shall have the right to have an independent
certified public accountant, reasonably acceptable to the audited Party, to have
access during normal business hours,

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

49

--------------------------------------------------------------------------------

 

and upon reasonable prior written notice, to examine only those records of the
audited Party (and its Affiliates and sublicensees) as may be reasonably
necessary to determine, with respect to any [****]* ending not more than [****]*
prior to such Party’s request, the correctness or completeness of any report or
payment made under this Agreement. The foregoing right of review may be
exercised [****]* with respect to each such periodic report and payment. Results
of any such examination shall be (a) limited to information relating to the
Products, (b) made available to both Parties and (c) subject to Article 10. The
Party requesting the audit shall bear the full cost of the performance of any
such audit, unless such audit discloses a variance to the detriment of the
auditing Party of more than [****]* from the amount of the original report,
royalty or payment calculation, in which case the audited Party shall bear the
full cost of the performance of such audit. The results of such audit shall be
final, absent manifest error.

 

8.17        Interest. Any payments or portions thereof due hereunder that are
not paid on the date such payments are due under this Agreement shall bear
interest at a rate equal to the lesser of: (a) [****]* above the Prime Rate as
published by Citibank, N.A., New York, New York, or any successor thereto, at
12:01 a.m. on the first day of each [****]* in which such payments are overdue;
or (b) the maximum rate permitted by law, in each case calculated on the number
of days such payment is delinquent, compounded [****]*.

 

8.18        Non-Monetary Consideration.  Neither Party shall sell a Product for
any consideration other than cash except on terms specified in the
Annual Commercialization Plan then in effect.  In the event a Party receives any
non-monetary consideration in connection with the sale of a Product or Competing
Product, such Party’s payment obligations under this Article 8 or Section 7.6,
as applicable, shall be based on the fair market value of such other
consideration.  In such case, the selling Party shall disclose the terms of such
arrangement to the other Party and the Parties shall endeavor in good faith to
agree on such fair market value.

 

8.19        Payments to or Reports by Affiliates.  Any payment required under
any provision of this Agreement to be made to either Party or any report
required to be made by any Party shall be made to or by an Affiliate of that
Party if designated in writing by that Party as the appropriate recipient or
reporting entity.

 

9.                                      INTELLECTUAL PROPERTY

 

9.1          Ownership.

 

(a)           The inventorship of all Sole Inventions and Joint Inventions shall
be determined under the U.S. patent laws.

 

(b)           Each Party shall own the entire right, title and interest in and
to any and all of its Sole Inventions, and Patents claiming only such Sole
Inventions (and no Joint Inventions) (“Sole Invention Patents”). BMS and PDL
shall be each own an undivided one-half interest in and to any and all Joint
Inventions and Patents claiming such Joint Inventions (“Joint Invention
Patents”). BMS and PDL as joint owners each shall have the right to exploit and
to grant licenses under such Joint Inventions without accounting for profits or
other consideration, or sharing of any proceeds, to

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

50

--------------------------------------------------------------------------------

 

the other Party, in each case without the consent of the other Party, unless
otherwise specified in this Agreement.

 

(c)           All employees, agents and contractors of each Party shall be under
written obligation to assign any Inventions and related intellectual property
rights (including Patents) to such Party.

 

(d)           The Parties acknowledge and agree that this Agreement shall be
deemed to be a “Joint Research Agreement” as defined under 35 U.S.C. 103(c).

 

9.2          Disclosure. Each Party shall submit a written report to the JDC, no
less frequently than within [****]* of the end of each [****]*, describing any
Sole Invention or Joint Invention arising during the prior quarter in the course
of the Collaboration or thereafter in accordance with this Agreement (or at such
earlier time as may be necessary to preserve patentability of such invention)
or, if no such Sole Invention or Joint Invention has arisen during such time
period, reporting such information. Each Party shall provide to the other Party
such assistance and execute such documents as are reasonably necessary to permit
the filing and prosecution of such patent application to be filed claiming such
Sole Invention or Joint Invention, or the issuance, maintenance or extension of
any resulting Patent.

 

9.3          Patent Prosecution and Maintenance; Abandonment.

 

(a)           Filing, Prosecution and Maintenance of Invention Patents
Controlled by PDL.

 

(i)            Subject to Section 9.3(a)(ii) below, PDL shall be responsible for
the preparation, filing, prosecution (including any interferences, reissue
proceedings and reexaminations) and maintenance of all Joint Invention Patents,
Sole Invention Patents Controlled by PDL, and PDL Licensed Patents that in each
case are co-exclusively or exclusively licensed to BMS under Section 7.1(a) (the
“PDL Prosecuted Patents”), provided that such responsibilities shall be carried
out by external patent counsel selected by PDL, or by PDL’s internal patent
counsel in conjunction with external patent counsel selected by it, and provided
further that, in each case, such external patent counsel shall be subject to
BMS’ approval (such approval not to be unreasonably withheld). PDL, or its
outside counsel, shall use commercially reasonable efforts to consult with and
cooperate with BMS with respect to the filing, prosecution and maintenance of
the PDL Prosecuted Patents, including providing BMS with drafts of material
proposed filings to allow BMS a reasonable opportunity for review and comment
before such filings are due (with such comments to be considered in good faith
by PDL). PDL, or its outside counsel, shall provide to BMS copies of any
material papers relating to the filing, prosecution and maintenance of the PDL
Prosecuted Patents promptly upon their being filed and received. BMS’ rights
under this Section 9.3(a) with respect to any PDL Prosecuted Patent licensed to
PDL by a Third Party shall be subject to the rights of such Third Party to file,
prosecute, and/or maintain such PDL Prosecuted Patent.

 

(ii)           Abandonment. In no event shall PDL knowingly permit any of the
PDL Prosecuted Patents to be abandoned in any country, or elect not to file a
new patent application within the PDL Prosecuted Patents or a new patent
application claiming priority to a patent application

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

51

--------------------------------------------------------------------------------

 

within the PDL Prosecuted Patents either before such patent application’s
issuance or within the time period required for the filing of an international
(i.e., Patent Cooperation Treaty), regional (including European Patent Office)
or national application, without BMS’ written consent (such consent to not be
unreasonably withheld, delayed or conditioned) or BMS otherwise first being
given an opportunity to assume full responsibility (at BMS’ expense) for the
continued prosecution and maintenance of such PDL Prosecuted Patents or the
filing of such new patent application, provided that it qualifies as a PDL
Prosecuted Patent. Accordingly, PDL, or its outside counsel, shall provide BMS
with notice of the allowance and expected issuance date of any patent within the
PDL Prosecuted Patents, or any of the aforementioned filing deadlines or
deadlines for preventing abandonment, and BMS shall provide PDL with prompt
notice as to whether BMS desires PDL to file such new patent application or
maintain such application. In the event that PDL decides either: (A) not to
continue the prosecution or maintenance of a patent application or patent within
the PDL Prosecuted Patents in any country; or (B) not to file such new patent
application requested to be filed by BMS that would qualify as a PDL Prosecuted
Patent, PDL shall provide BMS with notice of this decision at least [****]*
prior to any pending lapse or abandonment thereof, and BMS shall thereafter have
the right to assume responsibility for the filing, prosecution and maintenance
of such patent or patent application. In the event that BMS assumes such
responsibility for such filing, prosecution and maintenance, BMS shall have the
right to transfer the responsibility for such filing, prosecution and
maintenance of such patent applications and patents to patent counsel selected
by BMS and, where such counsel is external, approved by PDL (such approval not
to be unreasonably withheld), and PDL shall cooperate as reasonably requested by
BMS to facilitate control of such filing, prosecution and maintenance by BMS.
PDL shall, at the expense of BMS, provide such assistance and execute such
documents as are reasonably necessary to continue or permit the filing,
prosecution or maintenance of such patent or patent application or the issuance,
maintenance or extension of any resulting patent or permit enforcement of such
patent application or any such patent.

 

(b)           Filing, Prosecution and Maintenance of Sole Invention Patents
Controlled by BMS. BMS shall be responsible for the filing, prosecution
(including any interferences, reissue proceedings and reexaminations) and
maintenance of all Sole Invention Patents Controlled by BMS and that are
co-exclusively or exclusively licensed to PDL under this Agreement (the “BMS
Prosecuted Patents”). BMS, or its outside counsel, shall use commercially
reasonable efforts to consult with and cooperate with PDL with respect to the
filing, prosecution and maintenance of the BMS Prosecuted Patents, including
providing PDL with drafts of material proposed filings to allow PDL a reasonable
opportunity for review and comment before such filings are due (with such
comments to be considered in good faith by BMS). BMS, or its outside counsel,
shall provide to PDL copies of any material papers relating to the filing,
prosecution and maintenance of the BMS Prosecuted Patents promptly upon their
being filed and received.

 

(c)           Patent Term Extension. PDL and BMS shall each cooperate with each
another and shall use commercially reasonable efforts in obtaining patent term
extension (including any pediatric exclusivity extensions as may be available)
or supplemental protection certificates or their equivalents in any country with
respect to patent rights covering the Products. If elections with respect to
obtaining such patent term extensions are to be made, PDL and BMS shall discuss
and make reasonable efforts to agree upon such elections; provided that BMS
shall have final decision-making authority with respect any such elections to
seek patent term extension or supplemental protection.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

52

--------------------------------------------------------------------------------

 

(d)           Payment of Prosecution Costs. BMS shall bear the out-of-pocket
expenses (including reasonable fees for any outside counsel, but not PDL’s
inside counsel fees) associated with the filing, prosecution (including any
interferences, reissue proceedings and reexaminations) and maintenance of:
(X) the BMS Prosecuted Patents; and (Y) the PDL Prosecuted Patents, provided
that:

 

(i)            if PDL or a Third Party licensee of PDL is practicing a
particular Joint Invention or Sole Invention of PDL outside the scope of any of
the licenses set forth in Section 7.1(a), and such Joint Invention or Sole
Invention is covered by a Patent for which BMS would otherwise bear the
out-of-pocket patent expenses pursuant to Section 9.3(d) above, then, subject to
Section 9.3(d)(ii) below, PDL shall provide written notice to BMS and the
Parties shall mutually agree on the percentage of such expenses that each Party
shall bear (which, in the absence of any other agreement between the Parties,
shall be divided evenly); and

 

(ii)           if any Sole Invention of PDL or Joint Invention covered by this
Section 9.3(d) is part of a patent application or patent that covers other
inventions that are not subject to Section 9.3(d) and that are not licensed to
BMS under Section 7.1(a), then the Parties shall mutually agree upon an
appropriate allocation of the expenses so that BMS does not bear any portion of
the out-of-pocket expenses attributable to such other inventions.

 

(e)           PDL and BMS shall mutually agree on the percentage of expenses
that each Party shall bear with respect to Joint Inventions for which the cost
of filing, prosecuting or maintaining such Joint Invention is not the
responsibility of a Party under Section 9.3(d) hereof (which, in the absence of
any other agreement between the Parties, shall be divided evenly).

 

(f)            Non-payment of Expenses.

 

(i)            If PDL elects not to pay its share of any expenses with respect
to a Patent covering a Joint Invention in a given country under any of
Section 9.3(d) or (e) (each such Patent, a “Joint Patent”), PDL shall inform BMS
in writing not less than [****]* before any relevant deadline (or, in the event
of a shorter period in which to respond to a patent office, as soon as
reasonably practicable), and, if BMS assumes the expenses associated with the
Joint Patent, then BMS shall be entitled to credit such expenses against current
or future royalties payable on Net Sales of Products in such country, if any,
pursuant to Section 8.5(a).

 

(ii)           If BMS elects not to pay its share of any expenses with respect
to a Joint Patent, BMS shall inform PDL in writing not less than [****]* before
any relevant deadline (or, in the event of a shorter period in which to respond
to a patent office, as soon as reasonably practicable), and, if PDL assumes the
expenses associated with the Joint Patent, then PDL shall thereby become the
sole owner of such Joint Patent in such country and BMS shall assign to PDL its
rights, title and interests in such Joint Patent in such country.

 

(iii)         If a Party is the licensee of a Patent (other than a Joint Patent)
under any of Section 7.1(a) or Section 7.2, and such Party elects not to pay its
share of expenses pursuant to Sections 9.3(d) or 9.3(e) in a given country, such
Party shall inform the other Party in writing not less than [****]* before any
relevant deadline (or, in the event of a shorter period in which to respond to a
patent office, as soon as reasonably practicable) (such Patent(s) in such
countries, as identified in such

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

53

--------------------------------------------------------------------------------

 

notice, being a “Cost-Terminated Patent Right”), and shall no longer have any
rights under such Section 7.1(a) or Section 7.2, as applicable, with respect to
the relevant Patent in such country, provided that all remaining rights and
licenses under all other Patent(s) within such licensed Patents would remain in
effect. It is also understood that such licensee shall have the opportunity to
assume its share of the responsibility for the costs of filing, prosecution and
maintenance of any Patent(s) claiming priority directly or indirectly from any
such Cost-Terminated Patent Right, and that where such expenses are assumed by
such licensee, it shall be afforded all the rights and licenses as provided
under this Agreement for the licensed Patents (other than the Cost-Terminated
Patent Right) with respect to such Patent(s) claiming priority directly or
indirectly from any such Cost-Terminated Patent Right.

 

(g)           Notwithstanding Sections 9.3(d), 9.3(e) and 9.3(f), any costs
incurred by the Parties associated with the filing, prosecution (including any
interferences, reissue proceedings and reexaminations) and maintenance of a U.S.
Patent in the PDL Prosecuted Patents or the BMS Licensed Patents shall, solely
to the extent such Patent claims the composition of matter, use, manufacture, or
sale of a Product in the U.S., be included as an element of Allowable Expenses.

 

(h)           Reports. Each Party shall provide to the other Party, on a
quarterly basis, a patent report that includes the serial number, docket number
and status of each Patent for which, pursuant to Section 9.3(a) or
Section 9.3(b), such Party has the right to direct the filing, prosecution and
maintenance.

 

9.4          Enforcement of Patent Rights.

 

(a)           Enforcement of PDL Licensed Patents.

 

(i)            Enforcement by BMS. In the event that management or in-house
counsel for either Party becomes aware of a suspected infringement by a Third
Party of a PDL Licensed Patent that claims the composition of matter (including
formulation), manufacture or use of one or more Products that are being
Developed or Commercialized using Diligent Efforts and which is co-exclusively
or exclusively licensed to BMS under Section 7.1(a), such Party shall notify the
other Party promptly, and following such notification, the Parties shall confer.
Each Party shall provide the same level of disclosure to the other Party’s
in-house counsel (or designated outside counsel if such Party does not have
in-house counsel at such time) concerning suspected infringement of such PDL
Licensed Patent as such Party would provide with respect to suspected
infringement of its own issued Patent or an exclusively licensed issued Patent
claiming a product it is developing or commercializing independent of this
Agreement. Provided that the suspected infringement involves the Third Party’s
manufacture, use, offer for sale, sale or import of an Antibody or a product
containing an Antibody, BMS shall have the right, but shall not be obligated, to
bring an infringement action against such Third Party or to defend such
proceedings at its own expense, in its own name and entirely under its own
direction and control. PDL shall reasonably assist BMS (at BMS’ expense) in such
actions or proceedings if so requested, and shall lend its name to such actions
or proceedings if requested by BMS or required by law, and BMS shall hold PDL
harmless from any liability incurred by PDL arising out of any such proceedings
or actions at BMS’ request. PDL shall have the right to participate and be
represented in any such suit by its own counsel at its own expense. No
settlement of any such action or defense which restricts the scope, or adversely
affects the enforceability, of any such PDL Licensed Patent may be entered into
by BMS without the prior consent of PDL (such consent to not be unreasonably
withheld, delayed or conditioned).

 

54

--------------------------------------------------------------------------------

 

(ii)           Enforcement by PDL. If BMS elects not to bring any action for
infringement or to defend any proceeding described in Section 9.4(a)(i) and so
notifies PDL, or where PDL (or any other party other than BMS who is licensed
under such PDL Licensed Patent) otherwise desires to bring an action or to
defend any proceeding directly involving a PDL Licensed Patent, then PDL may
bring such action or defend such proceeding at its own expense, in its own name
and entirely under its own direction and control. BMS shall reasonably assist
PDL (at PDL’s expense) in any action or proceeding being prosecuted or defended
by PDL, if so requested by PDL or required by law, and PDL shall hold BMS
harmless from any liability incurred by BMS arising out of any such proceedings
or actions. BMS shall have the right to participate and be represented in any
such suit by its own counsel at its own expense. No settlement of any such
action or defense which restricts the scope, or adversely affects the
enforceability, of such PDL Licensed Patent with respect to Licensed Antibodies
or Products may be entered into by PDL without the prior consent of BMS (such
consent to not be unreasonably withheld, delayed or conditioned).

 

(b)           Enforcement of Joint Patents.

 

(i)            Enforcement by BMS. In the event that management or in-house
counsel for either Party becomes aware of a suspected infringement by a Third
Party of a Patent that claims a Joint Invention but is not subject to
Section 9.4(a) (an “Other Joint Patent”), such Party shall notify the other
Party promptly, and following such notification, the Parties shall confer. Each
Party shall provide the same level of disclosure to the other Party’s in-house
counsel concerning suspected infringement of an Other Joint Patent as such Party
would provide with respect to suspected infringement of its own issued Patent or
an exclusively licensed issued Patent claiming a product it is developing or
commercializing independent of this Agreement. BMS shall have the right, but
shall not be obligated, to prosecute an infringement action or to defend such
proceedings at its own expense, in its own name and entirely under its own
direction and control. PDL shall reasonably assist BMS (at BMS’ expense) in such
actions or proceedings if so requested, and shall lend its name to such actions
or proceedings if requested by BMS or required by law, and BMS shall hold PDL
harmless from any liability incurred by PDL arising out of any such proceedings
or actions. PDL shall have the right to participate and be represented in any
such suit by its own counsel at its own expense. No settlement of any such
action or defense which restricts the scope or affects the enforceability of an
Other Joint Patent may be entered into by BMS without the prior consent of PDL
(such consent to not be unreasonably withheld, delayed or conditioned).

 

(ii)           Enforcement by PDL. If BMS elects not to bring any action for
infringement or to defend any proceeding described in Section 9.4(b)(i) and so
notifies PDL in writing or fails to bring such an action within [****]* after
the initial notice of suspected infringement pursuant to Section 9.4(b)(i), then
PDL may bring such action or defend such proceeding at its own expense, in its
own name and entirely under its own direction and control. BMS shall reasonably
assist PDL (at PDL’s expense) in any action or proceeding being prosecuted or
defended by PDL, if so requested by PDL or required by law, and PDL shall hold
BMS harmless from any liability incurred by BMS arising out of any such
proceedings or actions. BMS shall have the right to participate and be
represented in any such suit by its own counsel at its own expense. No
settlement of any such action or defense which restricts the scope or affects
the enforceability of an Other Joint Patent may be entered into by PDL without
the prior consent of BMS (such consent to not be unreasonably withheld, delayed
or

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

55

--------------------------------------------------------------------------------

 

conditioned).

 

(c)           General Provisions Relating to Enforcement of Patents.

 

(i)            Withdrawal. If either Party brings such an action or defends such
a proceeding under this Section 9.4 and subsequently ceases to pursue or
withdraws from such action or proceeding, it shall promptly notify the other
Party and the other Party may substitute itself for the withdrawing Party under
the terms of this Section 9.4 (including such prior written consent as provided
for under this Section 9.4) at its own expense.

 

(ii)           Recoveries. In the event either Party exercises the rights
conferred in this Section 9.4 and recovers any damages or other sums in such
action, suit or proceeding or in settlement thereof, such damages or other sums
recovered shall first be applied to all out-of-pocket costs and expenses
incurred by the Parties in connection therewith, including attorneys fees. If
such recovery is insufficient to cover all such costs and expenses of both
Parties, it shall be shared in proportion to the total such costs and expenses
incurred by each Party. If after such reimbursement any funds shall remain from
such damages or other sums recovered, such amount shall be included in Net
Sales, for actions, suits, proceedings, or settlements thereof occurring in the
Royalty Territory, for the purpose of calculating sales milestone payments due
under Section 8.4(c) and royalty payments due under Section 8.5.

 

(iii)         Patent Enforcement in the U.S. Notwithstanding any cost
allocations set forth in Sections 9.4(a) and (b), and notwithstanding the
allocation of recoveries set forth in Section 9.4(c)(ii):  (1) any costs
incurred by either Party in connection with actions taken under this Section 9.4
against suspected infringement by a Third Party in the U.S. that involves such
Third Party’s development, manufacture, use or sale of a product reasonably
likely to materially affect sales of a Product shall constitute Patent Costs and
shall be included as an element of Allowable Expenses; and (2) any recoveries
received by either Party in connection with such actions shall, solely for the
purpose of calculating Operating Profit (or Loss) and sales milestone payments
due under Section 8.4(c), be included in Net Sales.

 

(d)           Data Exclusivity. With respect to data exclusivity periods
(including any available pediatric extensions) or periods under national
implementations of Article 9.1(a)(iii) of Directive 2001/EC/83, any future laws
or regulations covering similar subject matter, and all international
equivalents), BMS shall use commercially reasonable efforts consistent with its
obligations under applicable law (including any applicable consent order) to
seek, maintain and enforce all such data exclusivity periods available for the
Products.

 

(e)           Patents Licensed By PDL From Third Parties. BMS’ rights under this
Section 9.4 with respect to any PDL Licensed Patent licensed to PDL by a Third
Party shall be subject to the rights of such Third Party to enforce such PDL
Licensed Patent and/or defend against any claims that such PDL Licensed Patent
is invalid or unenforceable.

 

(f)            No Action in Violation of Law. Neither Party shall be required to
take any action pursuant to this Section 9.4 that such Party reasonably
determines in its sole judgment and discretion conflicts with or violates any
court or government order or decree applicable to such Party.

 

(g)           Notification of Patent Certification. PDL shall notify and provide
BMS with copies of any allegations of alleged patent invalidity,
unenforceability or non-infringement of any PDL Licensed Patent pursuant to a
certification by a Third Party under any applicable law governing the

 

56

--------------------------------------------------------------------------------

 

filing of an expedited new drug application for a biological product (similar to
a Paragraph IV Patent Certification by a Third Party filing an Abbreviated New
Drug Application). Such notification and copies shall be provided to BMS by PDL
as soon as practicable and at least within [****]* after PDL receives such
certification, and shall be sent by facsimile and overnight courier to the
address set forth below:

 

Bristol-Myers Squibb Company

P.O. Box 4000

Route 206 & Province Line Road

Princeton, New Jersey 08543-4000

Attention: Vice President and Chief Intellectual Property Counsel

Telephone: 609-252-4825

Facsimile: 609-252-7884

 

9.5          Defense of Third Party Claims. If a claim is brought by a Third
Party that any activity related to work performed by a Party under the
Collaboration infringes the intellectual property rights of such Third Party,
each Party shall give prompt written notice to the other Party of such claim,
and following such notification, the Parties shall confer on how to respond.

 

9.6          Patent Marking. BMS shall, and shall require its Affiliates and
sublicensees to, mark Products sold by it hereunder with appropriate Patent
numbers or indicia to the extent permitted by applicable law and regulations, in
those countries in which such markings or such notices impact recoveries of
damages or equitable remedies available with respect to infringements of
Patents.

 

9.7          Copyright Registrations. Copyrights and copyright registrations on
copyrightable subject matter shall be filed, prosecuted, defended, and
maintained, and the Parties shall have the right to pursue infringers of any
copyrights owned or Controlled by it, in substantially the same manner as the
Parties have allocated such responsibilities, and the expenses therefor, for
patent rights under this Article 9.

 

10.                               CONFIDENTIALITY

 

10.1        Nondisclosure of Confidential Information. All Information disclosed
by one Party to the other Party pursuant to this Agreement shall be
“Confidential Information” of the disclosing Party for all purposes hereunder.
Subject to Section 10.6, Information that is generated in furtherance of the
Collaboration pursuant to this Agreement with respect to Licensed Antibodies or
Products, shall be “Confidential Information” of both Parties for all purposes
hereunder. The Parties agree that during the term of this Agreement and for a
period of [****]* thereafter, a Party receiving Confidential Information of the
other Party shall: (a) maintain in confidence such Confidential Information and
not to disclose such Confidential Information to any Third Party without prior
written consent of the other Party (such consent to not be unreasonably
withheld, delayed or conditioned), except for disclosures made in confidence to
any Third Party under terms consistent with this Agreement and made in
furtherance of this Agreement or of rights granted to a Party hereunder; and
(b) not use such other Party’s Confidential Information for any purpose except
those permitted by this Agreement (it being

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

57

--------------------------------------------------------------------------------

 

understood that this Section 10.1 shall not create or imply any rights or
licenses not expressly granted under Article 7 hereof).

 

10.2        Exceptions. The obligations in Section 10.1 shall not apply with
respect to any portion of the Confidential Information of the disclosing Party
that the receiving Party can show by competent written proof:

 

(a)           Is publicly disclosed by the disclosing Party, either before or
after it is disclosed to the receiving Party hereunder; or

 

(b)           Was known to the receiving Party or any of its Affiliates, without
obligation to keep it confidential, prior to disclosure by the disclosing Party;
or

 

(c)           Is subsequently disclosed to the receiving Party or any of its
Affiliates by a Third Party lawfully in possession thereof and without
obligation to keep it confidential; or

 

(d)           Is published by a Third Party or otherwise becomes publicly
available or enters the public domain, either before or after it is disclosed to
the receiving Party, and is not directly or indirectly supplied by the receiving
Party in violation of this Agreement; or

 

(e)           Has been independently developed by employees or contractors of
the receiving Party or any of its Affiliates without the aid, application or use
of the disclosing Party’s Confidential Information.

 

10.3        Authorized Disclosure. A Party may disclose the Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary in the following instances, provided that prior written
notice of any such disclosure shall be provided to the other Party:

 

(a)           Filing or prosecuting Patents relating to Sole Inventions or Joint
Inventions, in each case pursuant to activities under this Agreement;

 

(b)           Regulatory filings for Products pursuant to activities under this
Agreement;

 

(c)           Prosecuting or defending litigation with respect to this
Agreement;

 

(d)           Complying with applicable governmental laws and regulations; and

 

(e)           Disclosure, in connection with the performance of this Agreement,
to Affiliates, potential collaborators, partners, and actual and potential
licensees (including potential co-marketing and co-promotion contractors,
research contractors and manufacturing contractors), research collaborators,
potential investment bankers, investors, lenders, and investors, employees,
consultants, or agents, in each case to the extent permitted by this Agreement,
each of whom prior to disclosure must be bound by similar obligations of
confidentiality and non-use at least equivalent in scope to those set forth in
this Article 10.

 

The Parties acknowledge that the terms of this Agreement shall be treated as
Confidential Information of both Parties. Such terms may be disclosed by a Party
to individuals or entities covered by Section 10.3(e) above, each of whom prior
to disclosure must be bound by similar obligations of confidentiality and
non-use at least equivalent in scope to those set forth in this Article 10. In
addition, a copy of this Agreement may be filed by either Party with the
Securities and Exchange

 

58

--------------------------------------------------------------------------------

 

Commission in connection with any public offering of such Party’s securities or
as otherwise necessary under applicable law or regulations. In connection with
any such filing, such Party shall endeavor to obtain confidential treatment of
economic, competitively sensitive, and trade secret information.

 

In any event, each Party agrees to take all reasonable action to avoid
disclosure of Confidential Information of the other Party except as permitted
hereunder.

 

10.4        Termination of Prior Agreements. This Agreement supersedes the
Confidential Disclosure Agreement between PDL and BMS effective as of [****]*
(such confidential disclosure agreement, the “Prior CDA”). All Information
disclosed by one Party to the other Party under the Prior CDA shall be deemed
Confidential Information of such disclosing Party and shall be subject to the
terms of this Article 10.

 

10.5        Publicity. The Parties agree that the public announcement of the
execution of this Agreement shall be substantially in the form of the press
release attached as Schedule 10.5. Any other publication, news release or other
public announcement relating to this Agreement or to the performance hereunder,
shall first be reviewed and approved by both Parties; provided, however, that
any disclosure which is required by law, including disclosures required by the
U.S. Securities and Exchange Commission or made pursuant to the requirements of
the national securities exchange or other stock market on which such Party’s
securities are traded, as advised by the disclosing Party’s counsel may be made
without the prior consent of the other Party, although the other Party shall be
given prompt notice of any such legally required disclosure and shall, to the
extent practicable, be provided an opportunity to comment on the proposed
disclosure.

 

10.6        Publications.

 

(a)           Neither Party shall publish or present the results of studies
performed in connection with the Development of a Product without the
opportunity for prior review by the other Party. Publication decisions regarding
the results of studies performed in connection with Products shall be made by
the JDC or USJCC, as appropriate, and, in all cases, in accordance with both
Parties’ corporate policies with respect to the disclosure of clinical trial
results. For clarity, BMS shall not use its final decision-making authority
pursuant to Section 2.4(c) to withhold publication of negative clinical trial
results where such decision would not be in accordance with both Parties’
corporate policy with respect to the disclosure of clinical trial results.

 

(b)           Subject to paragraph (a) above and Section 10.3, each Party agrees
to provide the other Party the opportunity to review any proposed disclosure
which contains Confidential Information of the other Party and would or may
constitute an oral, written or electronic public disclosure if made (including
the full content of proposed abstracts, manuscripts or presentations), which
relate to any Inventions, or which otherwise may contain Confidential
Information of the other Party, at least [****]* prior to its intended
submission for publication and agrees, upon request, not to submit any such
abstract or manuscript for publication until the other Party is given a
reasonable period of time to secure patent protection (or communicate to the
prosecuting Party that patent protection should be secured) for any material in
such publication which it believes to be patentable. Both Parties understand
that a reasonable commercial strategy may require delay of publication of

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

59

--------------------------------------------------------------------------------

 

information or filing of patent applications. The Parties agree to review and
consider delay of publication and filing of patent applications under certain
circumstances. The JDC shall review such requests and recommend subsequent
action. Subject to clause (a) above and Section 10.3, neither Party shall have
the right to publish or present Confidential Information of the other Party
which is subject to Section 10.1. Any disputes between the Parties regarding
delaying a publication or presentation to permit the filing of a patent
application shall be referred to the JDC.

 

11.                               TERM AND TERMINATION

 

11.1        Term. This Agreement shall become effective on the Effective Date
and shall remain in effect until terminated in accordance with Sections 11.2,
11.3, or 11.4, or by mutual written agreement, or until the expiration of all
payment obligations under Article 8 and Section 7.6 (the “Term”).

 

11.2        BMS’ Right to Terminate.

 

(a)           With respect to each Product arising from the Collaboration
pursuant to the terms of this Agreement, BMS shall have the right to terminate
this Agreement [****]*. If PDL notifies BMS, within [****]* of BMS’ notice
pursuant to this Section 11.2, that PDL does not intend to further Develop or
Commercialize such Product in the applicable Region (either directly or through
a new licensee), then (X) the Parties shall wind down all Development and
Commercialization activities with respect to such Product in the applicable
Region, and each Party shall pay its applicable share of the Development Costs
and Allowable Expenses, if any, arising from such wind-down, effective as of the
earliest notice from a Party pursuant to Section 3.6(b) or this Section 11.2(a),
as applicable; and (Y) [****]*.

 

(b)           Notwithstanding the foregoing, in the event that, subsequent to
BMS’ termination of a Product pursuant to clause (a) of this Section 11.2,
[****]*.

 

11.3        Termination for Material Breach.

 

(a)           If either Party believes that the other Party is in material
breach of this Agreement (including any material breach of a representation or
warranty made in this Agreement), then the non-breaching Party may deliver
written notice of such breach to the other Party. In such notice the
non-breaching Party shall identify the actions or conduct that such Party would
consider to be an acceptable cure of such breach. For all breaches other than a
failure to make a payment set forth in Article 8 or Section 7.6, the allegedly
breaching Party shall have [****]* to cure such breach. Subject to
Section 11.3(b), for any breach arising from a failure to make a payment set
forth in Article 8 or Section 7.6, the allegedly breaching Party shall have
[****]* to cure such breach.

 

(b)           Subject to Section 11.3(c), if the Party receiving notice of
breach fails to cure such breach within the [****]* period or [****]* period (as
applicable, and subject to the remainder of this Section 11.3(b)), or the Party
providing the notice reasonably determines that the proposed corrective plan or
the actions being taken to carry it out are not commercially practicable, the
Party originally delivering the notice may terminate this Agreement upon [****]*
advance written notice; provided, that if the breach applies only to a given
Product or to a given Region, the non-breaching

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

60

--------------------------------------------------------------------------------

 

Party may only terminate the breaching Party’s rights with respect to such
Product or such Region; and provided further, that the failure of PDL to cure,
within [****]* of BMS’ notice pursuant to Section 11.3(a), a material breach by
PDL of its obligations to pay Development Costs under Section 3.6, or Operating
Losses under Section 8.3 with respect to a Product, shall not give BMS any right
to terminate this Agreement, but shall give BMS the right, upon [****]* advance
written notice to PDL, to terminate PDL’s right to Co-Develop such Product (in
the manner set forth in Section 3.6(b)) and to convert PDL’s profit-sharing
rights in such Product to rights to receive royalties under Section 8.5(b)(ii).
In the event BMS converts PDL’s profit-sharing rights to rights to receive
royalties pursuant to the foregoing, the terms of Section 11.6(e) shall apply
with respect to such Product as though PDL were the terminating Party.

 

(c)           If a Party gives notice of material breach under
Section 11.3(a) and the other Party disputes whether such notice was proper, or
if a Party determines under Section 11.3(b) that the other Party’s proposed
corrective plan or the actions being taken to carry it out is not commercially
practicable and such other Party disputes such determination, then the issues
of: (i) whether a breach has occurred; or (ii) whether a proposed corrective
plan or the related actions are commercially practicable, shall in any case be
resolved in accordance with Section 14.1. If as a result of such dispute
resolution process it is determined that the notice of breach was proper, then
such termination (or conversion of profit-sharing rights) shall be deemed to
have been effective if the breaching Party fails thereafter to cure such breach
in accordance with the determination made in the resolution process under
Section 14.1 within the time period set forth in Section 11.3(a) for the
applicable breach following such determination. If as a result of such dispute
resolution process it is determined that the notice of breach was improper, then
no termination (or conversion of profit-sharing rights) shall have occurred and
this Agreement shall have remained in effect.

 

11.4        Termination for Patent Challenge. PDL may terminate this Agreement
in its entirety if BMS or its Affiliates or sublicensees, directly or
indirectly, individually or in association with any other person or entity,
challenge the validity, enforceability or scope of any PDL Licensed Patent(s) or
Queen Patent(s) anywhere in the Territory; provided that, if BMS, due to a
Change of Control transaction, acquires control of a company that is
challenging, directly or indirectly, individually or in association with another
person or entity, the validity, enforceability or scope of a PDL Licensed
Patent(s) or Queen Patent(s), BMS shall have [****]* from the date of such
acquisition to terminate shall challenge to such PDL Licensed Patent(s) or Queen
Patent(s) before PDL’s right to terminate under this Section 11.4 becomes
effective. For clarity, any dispute as to whether a given Patent is within the
scope of PDL Licensed Patents, such matter shall be subject to dispute
resolution as set forth in Section 14.1.

 

11.5        Survival; Effect of Termination.

 

(A)          In the event of termination of this Agreement, the following
provisions of this Agreement shall survive:  Articles 1, 10, 13, and 14 and
Sections 3.6(g), 8.15, 8.16, 9.1, 9.4(b), 11.5, and 11.6. In addition, the
following provisions of this Agreement shall survive solely to the extent
required to make final reimbursements, reconciliations or other payments with
respect to Net Sales and costs and expenses incurred or accrued prior to the
date of termination or expiration:  Article 8 (excluding Sections 8.15 and 8.16)
and Sections 3.6 (excluding 3.6(g)), 7.6(b), 7.6(c), and 11.2.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

61

--------------------------------------------------------------------------------

 

(b)           In any event, termination of this Agreement shall not relieve the
Parties of any liability which accrued hereunder prior to the effective date of
such termination nor preclude either Party from pursuing all rights and remedies
it may have hereunder or at law or in equity with respect to any breach of this
Agreement nor prejudice either Party’s right to obtain performance of any
obligation.

 

11.6        Licenses and Payments on Termination.

 

(a)           Termination by BMS (Section 11.2). If BMS terminates this
Agreement pursuant to Section 11.2, with respect to a particular Product in one
or more Regions, then the licenses granted to BMS under Section 7.1 shall
automatically terminate solely with respect to such Product in such Region(s),
and BMS shall, and hereby does, grant to PDL a royalty-free license, with the
right to grant sublicenses, under the BMS Licensed Patents and BMS Licensed
Know-How to clinically develop, make, use, sell, offer for sale and import such
Product in such Region(s). The license described in this Section 11.6(a) shall
be exclusive (even as to BMS). PDL and its Affiliates and sublicensees shall
have the right to Develop and Commercialize such Product in such Region(s) and
shall not be subject to the restrictions set forth in Sections 3.5 and 7.6 with
respect to such Product in such Region and such Product shall not be considered
a Competing Product or part of a Competing Program.

 

(b)           Termination by PDL (Section 11.3 and Section 11.4). If PDL
terminates this Agreement pursuant to Section 11.3, with respect to a particular
Product in one or more Regions, or pursuant to Section 11.4, then the licenses
granted to BMS under Section 7.1 shall automatically terminate solely with
respect to such Product in such Region(s), and BMS shall, and hereby does, grant
to PDL a license, with the right to grant sublicenses, under the BMS Licensed
Patents and BMS Licensed Know-How to clinically develop, make, use, sell, offer
for sale and import such Product in such Region(s). The license described in
this Section 11.6(b) shall be exclusive (even as to BMS). PDL and its Affiliates
and sublicensees shall have the right to Develop and Commercialize such Product
in such Region(s) and shall not be subject to the restrictions set forth in
Sections 3.5 and 7.6 with respect to such Product in such Region and such
Product shall not be considered a Competing Product or part of a Competing
Program. For Products on which BMS has not initiated a Registrational Trial
prior to termination, the license described in this Section 11.6(b) shall be
fully-paid and royalty-free. For Products on which BMS has initiated a
Registrational Trial but which has not received Regulatory Approval prior to
termination and that are covered by a Valid Claim of a PDL Licensed Patent or
BMS Licensed Patent that, in either case, covers the Product or the manufacture,
use or sale of such Product, the license described in this Section 11.6(b) shall
bear a royalty of [****]* of PDL’s Net Sales of such Product. For Products on
which BMS has received Regulatory Approval prior to termination and that are
covered by a Valid Claim of a PDL Licensed Patent or BMS Licensed Patent that,
in either case, covers the Product or the manufacture or use of such Product,
the license described in this Section 11.6(b) shall bear a royalty of [****]* of
PDL’s Net Sales of such Product. BMS’ right to receive royalties under this
Section 11.6(b) shall expire on a country-by-country and Product-by-Product
basis upon the later of: (i) [****]* from the Launch of such Product in such
country; or (ii) expiration of the last Valid Claim of the last to expire BMS
Licensed Patent in such country that, in either case, claims the Product or the
manufacture or use of such Product.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

62

--------------------------------------------------------------------------------

 

(c)           Transfers Related to Licenses. For each license granted under
Sections 11.6(a) and 11.6(b), the licensing Party shall transfer via assignment,
license or sublicense to the licensee Party: (i) all Information reasonably
necessary for the development and commercialization of the Product to which such
license relates; (ii) all regulatory filings (including any Regulatory
Approvals, drug dossiers, and drug master files) that specifically relate to
such Product and that are in the name of the licensing Party; (iii) at PDL’s
request, agreements with Third Parties that specifically relate to such Product;
(iv) trademark rights Controlled by the licensing Party that specifically relate
to such Product; and (v) supplies of such Product (including any intermediates,
retained samples and reference standards), that, in each case ((i) through (v))
are existing and in the Control of the licensing Party. Any such
transfer(s) shall be at the sole expense of the licensing Party.

 

(d)           Interim Supply. In the event of any termination pursuant to
Section 11.2, Section 11.3, or Section 11.4, at PDL’s request, BMS shall supply,
or cause to be supplied, to PDL sufficient quantities of Product to satisfy
PDL’s and its Affiliate’s requirements for Product for a period of up to [****]*
following the effective date of termination, as PDL may require until PDL can
itself assume or transition to a Third Party such manufacturing
responsibilities; provided that PDL shall use commercially reasonable efforts to
affect such assumption (or transition) as promptly as practicable. Such supply
shall be at a price equal to BMS’ fully-burdened manufacturing costs for such
Product(s). Any such supply will be made pursuant to a supply agreement between
the parties with typical provisions relating to quality, forecasting and
ordering to forecast, force majeure and product liability and indemnity. In the
event that BMS has one or more agreements with Third Party manufacturers with
respect to the manufacture of a Licensed Product, at PDL’s request, BMS shall
use commercially reasonable efforts to transfer its rights and obligations under
such agreement(s) to PDL upon any such termination.

 

(e)           Technology Transfer. Promptly after the effective date of any
termination, pursuant to Section 11.2, Section 11.3, or Section 11.4, the
terminating Party, to the extent that it has responsibility for the
Manufacturing of such Product(s), pursuant to Section 6.1, prior to the
effective date of termination, shall provide (or, in the event that such Party’s
agreement with a Third Party manufacturer is not assignable to the other Party,
shall ensure that any Third Party manufacturer shall provide), at its sole
expense, technical assistance and technology transfer as necessary or useful for
the other Party or its Third Party designee to manufacture Products. Each Party
hereby grants the other Party, effective upon the effective date of such
termination, a non-exclusive, royalty-free, perpetual, sublicensable, worldwide
license, under any Information disclosed by such Party to the other Party in the
course of such activities and all Patents Controlled by such Party that claim
such Information, to manufacture or have manufactured Products.

 

(f)            Exception for Termination for Safety Reasons. Any license granted
to PDL under Sections 11.5(a)-(e) shall be of no force or effect with respect to
any given Product where BMS’ termination of Development and/or Commercialization
of such Product was due to Safety Reasons. For purposes of this Section 11.5(f),
“Safety Reasons” means it is BMS’ or any of its Affiliates’ or sublicensee’s
reasonable belief, after due inquiry and in a manner consistent with BMS’
then-current decision-making policies and procedures with respect to such a
determination, that there is an unacceptable risk for harm in humans based upon:
(i) pre-clinical safety data, including data from animal toxicology studies; or
(ii) the observation of serious adverse effects in humans after a Product

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

63

--------------------------------------------------------------------------------

 

has been administered to or taken by humans, such as during a clinical trial or
after the launch of a Product. BMS shall provide PDL with all relevant data for
such terminated Product but shall not be obligated to assign to PDL any
regulatory documents/filings relating to such terminated Product. If PDL does
not agree with BMS’ opinion that BMS’ termination was due to Safety Reasons,
such dispute shall be handled in accordance with Section 14.1.

 

(g)           Additional Effects of Termination. In the event of any termination
pursuant to Section 11.2 or Section 11.4, or pursuant to Section 11.3 where BMS
is the breaching Party, BMS shall transfer and assign to PDL: (i) all
Information relating to the Product, and all regulatory filings and Regulatory
Approvals (including all INDs, NDAs, drug dossiers and master files) with
respect to Product in BMS’ name; (ii) upon PDL’s request, any agreement with a
Third Party related to the Product, provided such agreement is assignable;
(iii) all trademarks related to the Product; and (iv) all supplies of Product
(including any intermediates, retained samples and reference standards) that in
each case are in BMS’ Control and that relate to the Product. BMS shall take
such other actions and execute such other instruments, assignments and documents
as may be necessary to effect the transfer of rights hereunder to PDL.

 

12.                               REPRESENTATIONS AND WARRANTIES AND COVENANTS

 

12.1        Mutual Authority. PDL and BMS each represents and warrants to the
other as of the Execution Date that: (a) it has the authority and right to enter
into and perform this Agreement, (b) this Agreement is a legal and valid
obligation binding upon it and is enforceable in accordance with its terms,
subject to applicable limitations on such enforcement based on bankruptcy laws
and other debtors’ rights, (c) its execution, delivery and performance of this
Agreement neither conflicts in any material fashion with the terms of any other
agreement or instrument to which it is or becomes a party nor shall it conflict
in any material fashion with the terms of any other agreement or instrument,
(d) its execution, delivery, and performance of this Agreement does not and will
not conflict in any material fashion with any law or regulation of any court,
governmental body or administrative or other agency having authority over it,
and (e) in the course of Development of Products, it has not used during the
Term, any employee, agent or independent contractor who has been debarred by any
Regulatory Authority, or, to the best of such Party’s Knowledge, is the subject
of debarment proceedings by a Regulatory Authority.

 

12.2        Rights in Technology.

 

(a)           During the term of this Agreement, each Party shall use
commercially reasonable efforts to maintain (but without an obligation to renew)
and not to breach any agreements with Third Parties that provide a grant of
rights from such Third Party to a Party that are Controlled by such Party and
are licensed and/or would become subject to a license from such Party to the
other Party under Article 7. Each Party agrees to provide promptly the other
Party with notice of any such alleged breach or obligation to renew. As of the
Execution Date, each Party is in compliance in all material respects with any
aforementioned agreements with Third Parties, and, in the case of PDL, PDL has
disclosed the existence of any such agreements with Third Parties (or options to
enter into any such agreements with Third Parties) to BMS.

 

(b)           PDL represents and warrants that it has as of the Execution Date
full legal or beneficial title to, or a sublicensable license to, the PDL
Licensed Patents that have been listed on Schedule 1.56 to this Agreement. Each
Party represents and warrants to the other that it (i)  has no Knowledge as of
the Execution Date of claims to inventorship by persons not already listed as

 

64

--------------------------------------------------------------------------------

 

inventors with respect to any PDL Licensed Patents owned by PDL, except as set
forth on Schedule 12.2(b) to this Agreement; (ii) does not own or have a license
to practice any intellectual property rights that would constitute PDL Licensed
Patents but for an agreement with a Third Party that precludes PDL from
Controlling such intellectual property; (iii) has the ability to grant the
licenses contained in or required by this Agreement; and (iv) is not currently
subject to any agreement with any Third Party or to any outstanding order,
judgment or decree of any court or administrative agency that prohibits it in
any way from granting to the other Party such licenses or the right to exercise
its rights hereunder.

 

(c)           PDL represents and warrants that, to its Knowledge as of the
Execution Date, all fees required to maintain the PDL Licensed Patents owned by
PDL have been paid to date; and that there are no pending litigations or patent
re-examinations ongoing with respect to the PDL Licensed Patents owned by PDL.

 

(d)           Each Party represents and warrants that: (i) except as provided in
one or more material transfer agreements, clinical trial agreements or sponsored
research agreements entered into by PDL prior to the Effective Date or [****]*,
it has not granted, and covenants that it shall not grant after the Execution
Date and during the term of this Agreement, any right, license or interest in or
to, or an option to acquire any of the foregoing with respect to, the
intellectual property rights licensed to the other Party hereunder (including
the PDL Licensed Patents, the PDL Licensed Know-How, the BMS Licensed Patents,
and the BMS Licensed Know-How, as the case may be) that is in conflict with the
rights (including the rights set forth in Article 9) or licenses granted or to
be granted (including any conditional license rights) to the other Party under
this Agreement; and (ii) it has not granted any lien, security interest or other
encumbrance (excluding any licenses) with respect to any of the intellectual
property rights licensed to the other Party hereunder that would prevent it from
performing its obligations under this Agreement.

 

(e)           PDL represents and warrants that, to its Knowledge as of the
Execution Date, no Third Party has infringed any of the PDL Licensed Patents
owned by PDL as they relate to the Licensed Antibodies.

 

12.3        Performance by Affiliates. Each Party recognizes that the other may
perform some or all of its obligations under this Agreement through Affiliates
controlled by such other Party; provided, however, that each Party shall remain
responsible and be guarantor of the performance by such Affiliates under its
control and shall cause such Affiliates to comply with the provisions of this
Agreement in connection with such performance. In particular, if any Affiliate
controlled by a Party participates under this Agreement with respect to
Products: (a) the restrictions of this Agreement which apply to the activities
of a Party with respect to Antibodies shall apply equally to the activities of
such Affiliates under its control; and (b) the Party affiliated with such
controlled Affiliate shall assure, and hereby guarantees, that any intellectual
property developed by such controlled Affiliate shall be governed by the
provisions of this Agreement (and subject to the licenses set forth in
Article 7) as if such intellectual property had been developed by the Party.

 

12.4        Third Party Rights. Each Party represents and warrants to the other
Party that, to its Knowledge as of the Execution Date, it will not violate a
contractual or fiduciary obligation owed to a

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

65

--------------------------------------------------------------------------------

 

Third Party (including misappropriation of trade secrets) by performing its work
under the Collaboration as contemplated by this Agreement.

 

12.5        Notice of Infringement or Misappropriation. Each Party represents
and warrants to the other Party that, as of the Execution Date, it has received
no notice of infringement or misappropriation of any alleged rights asserted by
any Third Party in relation to any technology that such Party intends, as of the
Execution Date, for use in connection with the Collaboration.

 

12.6        HSR Act Filing; Effective Date. The Parties shall each, prior to or
as promptly as practicable after the Execution Date of this Agreement, file or
cause to be filed with the U.S. Federal Trade Commission and the U.S. Department
of Justice and any relevant foreign governmental authority any notifications
required to be filed under the HSR Act and any applicable foreign equivalent
thereof with respect to the transactions contemplated hereby; provided that the
Parties shall each file the notifications required to be filed under the HSR Act
no later than [****]* after the Execution Date of this Agreement. [****]*. The
Parties shall use commercially reasonable efforts to respond promptly to any
requests for additional information made by either of such agencies, and to
cause the waiting periods under the HSR Act and any applicable foreign
equivalent thereof to terminate or expire at the earliest possible date after
the date of filing. Each Party shall use its commercially reasonable efforts to
ensure that its representations and warranties set forth in this Agreement
remain true and correct at and as of the Effective Date as if such
representations and warranties were made at and as of the Effective Date. 
Notwithstanding anything in this Agreement to the contrary, this Agreement
(other than Article 10 and this Section 12.6) shall not become effective until
the expiration or earlier termination of the waiting period under the HSR Act in
the U.S., the expiration or earlier termination of any applicable waiting period
under the antitrust or competition laws of any other jurisdiction, and the
approval or clearance of the transactions contemplated by this Agreement in any
jurisdiction requiring advance approval or clearance (the “Effective Date”).

 

13.                               INDEMNIFICATION AND LIMITATION OF LIABILITY

 

13.1        Mutual Indemnification. Subject to Section 13.4, each Party hereby
agrees to indemnify, defend and hold harmless the other Party, its Affiliates,
and their respective directors, employees and agents from and against any and
all Third Party suits, claims, actions, demands, liabilities, expenses and/or
losses, including reasonable legal expenses and reasonable attorneys’ fees
(“Losses”) to the extent such Losses result from any: (a) breach of warranty by
the indemnifying Party contained in the Agreement; (b) breach of the Agreement
or applicable law by such indemnifying Party; (c) negligence or willful
misconduct of the indemnifying Party, its Affiliates or (sub)licensees, or their
respective directors, employees and agents in the performance of the Agreement;
(d) criminal investigations of, defense of criminal charges against, and
criminal penalties levied on, such Party, its Affiliates, and their respective
directors, employees and agents; and/or (e) breach of a contractual or fiduciary
obligation owed by it to a Third Party (including misappropriation of trade
secrets).

 

13.2        Indemnification by BMS. Subject to Section 13.4, BMS hereby agrees
to indemnify, defend and hold harmless PDL and its directors, employees and
agents from and against any and all Losses to the extent such Losses result from
the manufacture, use, handling, storage, sale or other disposition of Products
(other than Products in the U.S. for which Co-Development has been not been

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. confidential treatment has been requested with respect to the omitted
portions.

 

66

--------------------------------------------------------------------------------

 

terminated pursuant to Section 3.6(b) or Section 11.3(b)) by a Party or its
Affiliates, agents or sublicensees, except to the extent such Losses result from
any: (a) breach of warranty by PDL contained in the Agreement; (b) breach of the
Agreement or applicable law by PDL; (c) negligence or willful misconduct by PDL,
its Affiliates or (sub)licensees, or their respective directors, employees and
agents in the performance of the Agreement; and/or (d) breach of a contractual
or fiduciary obligation owed by PDL to a Third Party (including misappropriation
of trade secrets).

 

13.3        Certain Losses. Any Losses resulting from the manufacture, use,
handling, storage, sale or other disposition of Products in the U.S. by a Party
or its Affiliates, agents or sublicensees with respect to which neither Party
owes an indemnification obligation under Section 13.1 shall be included as:
(a) a Development Cost, if incurred prior to the first Regulatory Approval of a
Product to which such Loss relates; or (b) a Sales and Marketing Cost, if
incurred after such Regulatory Approval of a Product to which such Loss relates.

 

13.4        Conditions to Indemnification. As used herein, “Indemnitee” shall
mean a party entitled to indemnification under the terms of Sections 13.1 or
13.2. A condition precedent to each Indemnitee’s right to seek indemnification
under such Sections 13.1 or 13.2 is that such Indemnitee shall:

 

(a)           inform the indemnifying Party under such applicable Section of a
Loss as soon as reasonably practicable after it receives notice of the Loss;

 

(b)           if the indemnifying Party acknowledges that such Loss falls within
the scope of its indemnification obligations hereunder, permit the indemnifying
Party to assume direction and control of the defense, litigation, settlement,
appeal or other disposition of the Loss (including the right to settle the claim
solely for monetary consideration); provided, that the indemnifying Party shall
seek the prior written consent (such consent to not be unreasonably withheld,
delayed or conditioned) of any such Indemnitee as to any settlement which would
materially diminish or materially adversely affect the scope, exclusivity or
duration of any Patents licensed under this Agreement, would require any payment
by such Indemnitee, would require an admission of legal wrongdoing in any way on
the part of an Indemnitee, or would effect an amendment of this Agreement; and

 

(c)           fully cooperate (including providing access to and copies of
pertinent records and making available for testimony relevant individuals
subject to its control) as reasonably requested by, and at the expense of, the
indemnifying Party in the defense of the Loss.

 

Provided that an Indemnitee has complied with all of the conditions described in
subsections (a) – (c), as applicable, the indemnifying Party shall provide
attorneys reasonably acceptable to the Indemnitee to defend against any such
Loss. Subject to the foregoing, an Indemnitee may participate in any proceedings
involving such Loss using attorneys of the Indemnitee’s choice and at the
Indemnitee’s expense. In no event may an Indemnitee settle or compromise any
Loss for which the Indemnitee intends to seek indemnification from the
indemnifying Party hereunder without the prior written consent of the
indemnifying Party (such consent to not be unreasonably withheld, delayed or
conditioned), or the indemnification provided under such Section 13.1 or 13.2 as
to such Loss shall be null and void.

 

13.5        Limitation of Liability. EXCEPT FOR AMOUNTS PAYABLE TO THIRD PARTIES
BY A PARTY FOR WHICH IT SEEKS REIMBURSEMENT OR INDEMNIFICATION PROTECTION FROM
THE OTHER PARTY PURSUANT TO SECTIONS 13.1 AND 13.2, AND

 

67

--------------------------------------------------------------------------------

 

EXCEPT FOR BREACH OF SECTION 7.6 or 10.1 HEREOF, IN NO EVENT SHALL EITHER PARTY,
ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES, WHETHER BASED UPON A CLAIM OR ACTION OF CONTRACT,
WARRANTY, NEGLIGENCE, STRICT LIABILITY OR OTHER TORT, OR OTHERWISE, ARISING OUT
OF THE AGREEMENT, UNLESS SUCH DAMAGES ARE DUE TO THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE LIABLE PARTY (INCLUDING GROSS NEGLIGENCE OR WILLFUL BREACH
WITH RESPECT TO A PARTY’S REPRESENTATIONS AND WARRANTIES IN ARTICLE 12).

 

13.6        Collaboration Disclaimer. EXCEPT AS PROVIDED IN ARTICLE 12 ABOVE,
PDL EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES WITH RESPECT TO ANY COMPOUNDS OR INFORMATION (AND ANY PATENT
RIGHTS OBTAINED THEREON) IDENTIFIED, MADE OR GENERATED BY PDL AS PART OF THE
COLLABORATION OR OTHERWISE MADE AVAILABLE TO BMS PURSUANT TO THE TERMS OF THE
AGREEMENT. EXCEPT AS PROVIDED IN ARTICLE 12 ABOVE, BMS EXPRESSLY DISCLAIMS ANY
AND ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING THE
WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES WITH
RESPECT TO ANY COMPOUNDS OR INFORMATION (AND ANY PATENT RIGHTS OBTAINED THEREON)
IDENTIFIED, MADE OR GENERATED BY BMS AS PART OF THE COLLABORATION OR OTHERWISE
MADE AVAILABLE TO PDL PURSUANT TO THE TERMS OF THE AGREEMENT.

 

14.                               MISCELLANEOUS

 

14.1        Dispute Resolution. Unless otherwise set forth in this Agreement and
excluding in particular any dispute over matters within the authority of the JDC
pursuant to Article 2 (which will be handled exclusively in accordance with
Section 2.4(c)), in the event of any dispute, controversy or claim arising out
of, relating to or in connection with any provision of the Agreement, the
Parties shall try to settle their differences amicably between themselves first,
by referring the disputed matter to the Party’s respective Executive Officers.
Either Party may initiate such informal dispute resolution by sending written
notice of the dispute to the other Party, and, within [****]* after such notice,
such Executive Officers shall meet for attempted resolution by good faith
negotiations. If such Executive Officers are unable to resolve such dispute
within [****]* of their first meeting for such negotiations, either Party may
seek to have such dispute resolved in accordance with Section 14.2.

 

14.2        Arbitration. Any dispute, controversy or claim arising out of or
relating to the validity, construction, interpretation, enforceability, breach,
performance, application or termination of this Agreement that is not resolved
pursuant to Section 14.1, except for a dispute, claim or controversy under
Section 14.9, shall be settled by binding arbitration administered by JAMS
(formerly, the Judicial Arbitration and Mediation Service) (“JAMS”) pursuant to
its Comprehensive Arbitration

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

68

--------------------------------------------------------------------------------

 

Rules and Procedures of JAMS then in effect (the “JAMS Rules”), except as
otherwise provided herein and applying the substantive law specified in
Section 14.5. The United States Federal Rules of Civil Procedure shall govern
discovery and the rules of evidence for the arbitration. The arbitration will be
conducted in California and the Parties consent to the personal jurisdiction of
the United States federal courts, for any case arising out of or otherwise
related to this arbitration, its conduct and its enforcement. Any situation not
expressly covered by this Agreement shall be decided in accordance with the JAMS
Rules.

 

14.3        Disputes Relating to Competition Testing and Calculation of Payment
Obligations. Any dispute arising out of the determination of (i) whether an
Antibody Competes with PDL-241 for binding of the Target that is not resolved by
the JDC pursuant to Section 3.10 or (ii) the method for calculating a payment
owed by a Party to the other Party under this Agreement shall be resolved in
accordance with Section 14.2; provided that JAMS’ Streamlined Arbitration
Rules and Procedures in effect at the time the dispute arises shall be followed.
Either Party may initiate arbitration under this Section 14.3 by written notice
to the other Party of its intention to arbitrate, and such notice shall specify
in reasonable detail the nature of the dispute. For each arbitration: (A) each
Party shall submit to the arbitrator its proposal for resolving such dispute,
such proposal based on available scientific or financial evidence, as
applicable, and shall provide a copy of such proposal to the other Party;
(B) each Party may, within [****]* of receipt of the other Party’s proposal,
provide a rebuttal to such other Party’s proposal to the arbitrator (which
rebuttal shall be limited to responding to arguments or evidence presented in
such other Party’s proposal), and shall provide a copy of such rebuttal to the
other Party; (C) the arbitrator shall select the proposal that is the most
reasonable in light of the available evidence; and (D) such proposal shall
become the final determination as to (i) whether an Antibody Competes with
PDL-241 for binding of the Target or (ii) the appropriate method for calculating
of such payment obligation. Notwithstanding anything to the contrary, the
arbitrator will not have the ability to change the terms of either Party’s
proposal.

 

14.4        Arbitrator. The arbitrator shall be one (1) neutral, independent and
impartial arbitrator selected from a pool of retired federal judges to be
presented to the Parties by JAMS. Failing the agreement of the Parties as to the
selection of the arbitrator within [****]*, the arbitrator shall be appointed by
JAMS in accordance with the JAMS Rules.

 

14.5        Governing Law. Resolution of all disputes, controversies or claims
arising out of, relating to or in connection with the Agreement or the
performance, enforcement, breach or termination of the Agreement and any
remedies relating thereto, shall be governed by and construed under the
substantive laws of the State of Delaware, without regard to conflicts of law
rules.

 

14.6        Decision. The power of the arbitrator to fashion procedures and
remedies within the scope of this Agreement is recognized by the Parties as
essential to the success of the arbitration process. The arbitrator shall not
have the authority to fashion remedies which would not be available to a federal
judge hearing the same dispute. The arbitrator is encouraged to operate on this
premise in an effort to reach a fair and just decision. Reasons for the
arbitrator’s decisions should be complete and explicit, including all
determinations of law and fact. The written reasons should also include the
basis for any damages awarded and a statement of how the damages were
calculated. Such a written decision shall be rendered by the arbitrator
following a full comprehensive hearing, no later than

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

69

--------------------------------------------------------------------------------

 

[****]* following the selection of the arbitrator as provided for in
Section 14.4; provided, that with respect to a dispute under Section 14.3, a
written decision shall be rendered no later than [****]* following the selection
of the arbitrator.

 

14.7        Award. Any award shall be promptly paid in United States dollars
free of any tax, deduction or offset; and any costs, fees or taxes incident to
enforcing the award shall, to the maximum extent permitted by law, be charged
against the Party resisting enforcement. If as to any issue the arbitrator
should determine under the applicable law that the position taken by a Party is
frivolous or otherwise irresponsible or that any wrongdoing they find is in
callous disregard of law and equity or the rights of the other Party, the
arbitrator shall also award an appropriate allocation of the adversary’s
reasonable attorney fees, costs and expenses to be paid by the offending Party,
the precise sums to be determined after a bill of attorney fees, expenses and
costs consistent with such award has been presented following the award on the
merits. Each Party agrees to abide by the award rendered in any arbitration
conducted pursuant to Sections 14.1 – 14.11, and agrees that judgment may be
entered upon the final award in the Federal District Court in Delaware and that
other courts may award full faith and credit to such judgment in order to
enforce such award. The award shall include interest from the date of any
damages incurred for breach of the Agreement, and from the date of the award
until paid in full, at a rate fixed by the arbitrator. With respect to money
damages, nothing contained herein shall be construed to permit the arbitrator or
any court or any other forum to award punitive or exemplary damages.

 

14.8        Costs. Except as set forth in Section 14.7, each Party shall bear
its own legal fees. The arbitrator shall assess his or her costs, fees and
expenses against the Party losing the arbitration unless he or she believes that
neither Party is the clear loser, in which case the arbitrator shall divide his
or her fees, costs and expenses according to his or her sole discretion.

 

14.9        Disputes Relating to Patents and Trademarks and Equitable Relief.

 

(a)           Any dispute, controversy or claim arising out of, relating to or
in connection with: (i) the scope, validity, enforceability or infringement of
any Patent rights covering the research, development, manufacture, use or sale
of any Product; or (ii) any trademark rights related to any Product, shall in
each case be submitted to a court of competent jurisdiction in the territory in
which such Patent or trademark rights were granted or arose.

 

(b)           Any dispute, controversy or claim arising out of, relating to or
in connection with the need to seek preliminary or injunctive measures or other
equitable relief (e.g., in the event of a potential or actual breach of the
confidentiality and non-use provisions in Article 10) need not be resolved
through the procedure described in Section 14.1 but may be immediately brought
in a court of competent jurisdiction.

 

14.10      Injunctive Relief; Remedy for Breach of Exclusivity. Provided a Party
has made a sufficient showing under the rules and standards set forth in the
Federal Rules of Civil Procedure and applicable case law, the arbitrator shall
have the freedom to invoke, and the Parties agree to abide by, injunctive
measures after either Party submits in writing for arbitration claims requiring
immediate relief. Additionally, nothing in this Article 14 will preclude either
Party from seeking equitable relief

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

70

--------------------------------------------------------------------------------

 

or interim or provisional relief from a court of competent jurisdiction,
including a temporary restraining order, preliminary injunction or other interim
equitable relief, concerning a dispute either prior to or during any arbitration
if necessary to protect the interests of such Party or to preserve the status
quo pending the arbitration proceeding. Specifically, the Parties agree that a
material breach by either Party of its obligations in Section 7.6 of this
Agreement is likely to cause irreparable harm to the other Party, for which
damages would not be an adequate remedy. Therefore, in addition to its rights
and remedies otherwise available at law, including, without limitation, the
recovery of damages for breach of this Agreement, upon an adequate showing of
material breach of such Section 7.6, and without further proof of irreparable
harm other than this acknowledgement, such non-breaching Party shall be entitled
to (a) immediate equitable relief, specifically including, but not limited to,
both interim and permanent restraining orders and injunctions, and (b) such
other and further equitable relief as the court may deem proper under the
circumstances.

 

14.11      Confidentiality. The arbitration proceeding shall be confidential and
the arbitrator shall issue appropriate protective orders to safeguard each
Party’s Confidential Information. Except as required by law, no Party shall make
(or instruct the arbitrator to make) any public announcement with respect to the
proceedings or decision of the arbitrator without prior written consent of the
other Party. The existence of any dispute submitted to arbitration, and the
award, shall be kept in confidence by the Parties and the arbitrator, except as
required in connection with the enforcement of such award or as otherwise
required by applicable law.

 

14.12      Entire Agreement; Amendments. This Agreement sets forth the complete,
final and exclusive agreement and all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
hereto and supersedes and terminates all prior agreements and understandings
between the Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as are set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties unless reduced to writing and signed by an authorized officer
of each Party.

 

14.13      Export Control. This Agreement is made subject to any restrictions
concerning the export of products or technical information from the U.S. or
other countries which may be imposed upon or related to PDL or BMS from time to
time. Each Party agrees that it shall not export, directly or indirectly, any
technical information acquired from the other Party under this Agreement or any
products using such technical information to a location or in a manner that at
the time of export requires an export license or other governmental approval,
without first obtaining the written consent to do so from the appropriate agency
or other governmental entity.

 

14.14      Bankruptcy.

 

(a)           All rights and licenses granted under or pursuant to this
Agreement, including amendments hereto, by each Party to the other Party are,
for all purposes of Section 365(n) of Title 11 of the U.S. Code (“Title 11”),
licenses of rights to intellectual property as defined in Title 11. Each Party
agrees during the term of this Agreement to create and maintain current copies
or, if not amenable to copying, detailed descriptions or other appropriate
embodiments, to the extent feasible, of all such intellectual property. If a
case is commenced by or against either Party (the “Bankrupt Party”) under Title
11, then, unless and until this Agreement is rejected as provided in Title 11,
the

 

71

--------------------------------------------------------------------------------

 

Bankrupt Party (in any capacity, including debtor-in-possession) and its
successors and assigns (including a Title 11 Trustee) shall, at the election of
the Bankrupt Party made within [****]* after the commencement of the case (or,
if no such election is made, immediately upon the request of the non-Bankrupt
Party) either (i) perform all of the obligations provided in this Agreement to
be performed by the Bankrupt Party including, where applicable, providing to the
non-Bankrupt Party portions of such intellectual property (including embodiments
thereof) held by the Bankrupt Party and such successors and assigns or otherwise
available to them or (ii) provide to the non-Bankrupt Party all such
intellectual property (including all embodiments thereof) held by the Bankrupt
Party and such successors and assigns or otherwise available to them.

 

(b)           If a Title 11 case is commenced by or against the Bankrupt Party
and this Agreement is rejected as provided in Title 11 and the non-Bankrupt
Party elects to retain its rights hereunder as provided in Title 11, then the
Bankrupt Party (in any capacity, including debtor-in-possession) and its
successors and assigns (including a Title 11 Trustee) shall provide to the
non-Bankrupt Party all such intellectual property (including all embodiments
thereof) held by the Bankrupt Party and such successors and assigns or otherwise
available to them immediately upon the non-Bankrupt Party’s written request
therefor. Whenever the Bankrupt Party or any of its successors or assigns
provides to the non-Bankrupt Party any of the intellectual property licensed
hereunder (or any embodiment thereof) pursuant to this Section 14.14, the
non-Bankrupt Party shall have the right to perform the obligations of the
Bankrupt Party hereunder with respect to such intellectual property, but neither
such provision nor such performance by the non-Bankrupt Party shall release the
Bankrupt Party from any such obligation or liability for failing to perform it.

 

(c)           All rights, powers and remedies of the non-Bankrupt Party provided
herein are in addition to and not in substitution for any and all other rights,
powers and remedies now or hereafter existing at law or in equity (including
Title 11) in the event of the commencement of a Title 11 case by or against the
Bankrupt Party. The non-Bankrupt Party, in addition to the rights, power and
remedies expressly provided herein, shall be entitled to exercise all other such
rights and powers and resort to all other such remedies as may now or hereafter
exist at law or in equity (including under Title 11) in such event. The Parties
agree that they intend the foregoing non-Bankrupt Party rights to extend to the
maximum extent permitted by law and any provisions of applicable contracts with
Third Parties, including for purposes of Title 11, (i) the right of access to
any intellectual property (including all embodiments thereof) of the Bankrupt
Party or any Third Party with whom the Bankrupt Party contracts to perform an
obligation of the Bankrupt Party under this Agreement, and, in the case of the
Third Party, which is necessary for the development, registration and
manufacture of licensed products and (ii) the right to contract directly with
any Third Party described in (i) in this sentence to complete the contracted
work. Any intellectual property provided pursuant to the provisions of this
Section 14.14 shall be subject to the licenses set forth elsewhere in this
Agreement and the payment obligations of this Agreement, which shall be deemed
to be royalties for purposes of Title 11.

 

(d)           In the event that PDL enters into a license agreement with a Third
Party with respect to intellectual property that will be sublicensed to BMS
hereunder, PDL will use commercially reasonable efforts to enable BMS to
concurrently enter arrangements with PDL and any such Third Party whereby BMS
will receive a direct license from any such Third Party in the event that PDL
becomes a Bankrupt Party.

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

72

--------------------------------------------------------------------------------

 

14.15      Force Majeure. Each Party shall be excused from the performance of
its obligations under this Agreement to the extent that such performance is
prevented by force majeure (defined below) and the nonperforming Party promptly
provides notice of the prevention to the other Party. Such excuse shall be
continued so long as the condition constituting force majeure continues and the
nonperforming Party takes reasonable efforts to remove the condition. For
purposes of this Agreement, “force majeure” shall include conditions beyond the
control of the Parties, including an act of God, acts of terrorism, voluntary or
involuntary compliance with any regulation, law or order of any government, war,
civil commotion, labor strike or lock-out, epidemic, failure or default of
public utilities or common carriers, destruction of production facilities or
materials by fire, earthquake, storm or like catastrophe. The payment of
invoices due and owing hereunder shall in no event be delayed by the payer
because of a force majeure affecting the payer.

 

14.16      Notices. Any notices given under this Agreement shall be in writing,
addressed to the Parties at the following addresses, and delivered by person, by
facsimile (with receipt confirmation), or by FedEx or other reputable courier
service. Any such notice shall be deemed to have been given: (a) as of the day
of personal delivery; (b) one (1) day after the date sent by facsimile service;
or (c) on the day of successful delivery to the other Party confirmed by the
courier service. Unless otherwise specified in writing, the mailing addresses of
the Parties shall be as described below.

 

 

For PDL:

 

PDL BioPharma, Inc.

 

 

 

1400 Seaport Blvd.

 

 

 

Redwood City, CA  94063

 

 

 

Attention: Chief Executive Officer

 

 

 

Phone: 650-454-2999

 

 

 

Fax: 650-454-1438

 

 

 

 

 

With a copy to:

 

PDL BioPharma, Inc.

 

 

 

1400 Seaport Blvd.

 

 

 

Redwood City, CA  94063

 

 

 

Attention: General Counsel

 

 

 

Phone: 650-454-2569

 

 

 

Fax: 650-399-8569

 

 

 

 

 

For BMS:

 

Bristol-Myers Squibb Company

 

 

 

P.O. Box 4000

 

 

 

Route 206 and Province Line Road

 

 

 

Princeton, NJ 08543-4000

 

 

 

Attention: Vice President, Business Development

 

 

 

Phone: 609-252-4418

 

 

 

Fax: 609-252-6880

 

 

 

 

 

With a copy to:

 

Bristol-Myers Squibb Company

 

 

 

P.O. Box 4000

 

 

 

Route 206 and Province Line Road

 

 

 

Princeton, NJ 08543-4000

 

 

 

Attention: Vice President and Senior Counsel, Business Development

 

 

 

Phone: 609-252-5328

 

 

 

Fax: 609-252-4232

 

73

--------------------------------------------------------------------------------

 

Furthermore, a copy of any notices required or given under Article 9 of this
Agreement shall also be addressed to the Vice President and Chief Intellectual
Property Counsel of BMS at the address set forth in Section 9.4(g).

 

14.17      Maintenance of Records Required by Law or Regulation. Each Party
shall keep and maintain all records required by law or regulation with respect
to Products and shall make copies of such records available to the other Party
upon request.

 

14.18      Assignment. Neither Party may assign or transfer this Agreement or
any rights or obligations hereunder without the prior written consent of the
other (such consent to not be unreasonably withheld, delayed or conditioned),
except a Party may make such an assignment without the other Party’s consent to
an Affiliate or to a Third Party successor to all or substantially all of the
business of such Party to which this Agreement relates, whether in a merger,
sale of stock, sale of assets or other transaction; provided that any such
permitted successor or assignee of rights and/or obligations hereunder is
obligated, by reason of operation of law or pursuant to a written agreement with
the other Party, to assume performance of this Agreement or such rights and/or
obligations; and provided, further, that if assigned to an Affiliate, the
assigning Party shall remain jointly and severally responsible for the
performance of this Agreement by such Affiliate. Notwithstanding the foregoing,
in the event of a Separation Transaction, PDL may assign this Agreement to PDL
Operating Company, without the prior written consent of BMS. In such event, PDL
Holding Company shall not be jointly and severally liable for the performance of
this Agreement by PDL Operating Company. Any permitted assignment shall be
binding on the successors of the assigning Party. Any assignment or attempted
assignment by either Party in violation of the terms of this Section 14.18 shall
be null and void and of no legal effect.

 

14.19      Electronic Data Interchange. If both Parties elect to facilitate
business activities hereunder by electronically sending and receiving data in
agreed formats (also referred to as Electronic Data Interchange or “EDI”) in
substitution for conventional paper-based documents, the terms and conditions of
this Agreement shall apply to such EDI activities.

 

14.20      Non-Solicitation of Employees. [****]*, each Party agrees that
neither it nor any of its divisions, operating groups or Affiliates shall
recruit, solicit or induce any employee of the other Party directly involved in
the activities conducted pursuant to this Agreement to terminate his or her
employment with such other Party and become employed by or consult for such
Party, whether or not such employee is a full-time employee of such other Party,
and whether or not such employment is pursuant to a written agreement or is
at-will. For purposes of the foregoing, “recruit,” “solicit” or “induce” shall
not be deemed to mean: (a) circumstances where an employee of a Party initiates
contact with the other Party or any of its Affiliates with regard to possible
employment; or (b) general solicitations of employment not specifically targeted
at employees of a Party or any of its Affiliates, including responses to general
advertisements.

 

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

 

--------------------------------------------------------------------------------

* Certain information on this page has been omitted and filed separately with
the SEC. Confidential treatment has been requested with respect to the omitted
portions.

 

74

--------------------------------------------------------------------------------

 

14.22      Severability. If any of the provisions of this Agreement are held to
be invalid or unenforceable by any court of competent jurisdiction from which no
appeal can be or is taken, the provision shall be considered severed from this
Agreement and shall not serve to invalidate any remaining provisions hereof. The
Parties shall make a good faith effort to replace any invalid or unenforceable
provision with a valid and enforceable one such that the objectives contemplated
by the Parties when entering this Agreement may be realized.

 

14.23      No Waiver. Any delay in enforcing a Party’s rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such Party’s rights to the future enforcement of its
rights under this Agreement, excepting only as to an express written and signed
waiver as to a particular matter for a particular period of time.

 

14.24      Construction of this Agreement. Except where the context otherwise
requires, wherever used, the use of any gender shall be applicable to all
genders, and the word “or” are used in the inclusive sense. When used in this
Agreement, “including” means “including without limitation.”  References to
either Party include the successors and permitted assigns of that Party. The
headings of this Agreement are for convenience of reference only and in no way
define, describe, extend or limit the scope or intent of this Agreement or the
intent of any provision contained in this Agreement. The Parties have each
consulted counsel of their choice regarding this Agreement, and, accordingly, no
provisions of this Agreement shall be construed against either Party on the
basis that the Party drafted this Agreement or any provision thereof. If the
terms of this Agreement conflict with the terms of any Exhibit, then the terms
of this Agreement shall govern. The official text of this Agreement and any
Exhibits hereto, any notice given or accounts or statements required by this
Agreement, and any dispute proceeding related to or arising hereunder, shall be
in English. In the event of any dispute concerning the construction or meaning
of this Agreement, reference shall be made only to this Agreement as written in
English and not to any other translation into any other language.

 

14.25      Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document. Counterparts may be signed and delivered
by facsimile, each of which shall be binding when sent.

 

Signature page follows.

 

75

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Parties have executed this Agreement in duplicate
originals by their proper officers as of the Execution Date.

 

BRISTOL-MYERS SQUIBB COMPANY

 

PDL BIOPHARMA, INC.

 

 

 

By:

/s/ Jeremy Levin

 

By:

/s/ Andrew Guggenhime

Name: Jeremy Levin

 

Name: Andrew Guggenhime

Title: Sr. VP, Strategic Transactions Group

 

Title: Chief Financial Officer

Date: August 18, 2008

 

Date: August 18, 2008

 

 

 

 

 

By:

/s/ Mark McCamish

 

 

Name: Mark A. McCamish

 

 

Title: Sr. VP & Chief Medical Officer

 

 

Date: August 18, 2008

 

76

--------------------------------------------------------------------------------