Exhibit 10.1

 

Separation and Distribution Agreement

 

between

 

PDL BioPharma, Inc.,

a Delaware corporation

 

and

 

Facet Biotech Corporation,

a Delaware corporation

 

Dated as of December 17, 2008

 

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Table of Contents

 

 

Page

 

 

Article I Definitions

1

Article II The Separation

11

2.1

General

11

2.2

Transfer of Facet Assets and Assumption of Facet Liabilities

11

2.3

Governmental Approvals; Consents

12

2.4

Deferred Transfers/Assumptions

12

2.5

Calculation, Adjustment and Payment of Selected Liabilities

13

2.6

Termination of Agreements

14

2.7

Disclaimer of Representations and Warranties

14

Article III The Distribution

15

3.1

The Distribution

15

3.2

Actions in Connection with the Distribution

16

3.3

Conditions to Distribution

17

3.4

Fractional Shares

18

Article IV Insurance

18

4.1

Policies and Rights Included Within the Facet Assets

18

4.2

Post-Effective Time Claims

18

4.3

PDL Policies

19

Article V Releases And Indemnification

19

5.1

Release of Pre-Distribution Claims

19

5.2

Indemnification by Facet

21

5.3

Indemnification by PDL

21

5.4

Reduction for Insurance Proceeds and Other Recoveries

22

5.5

Procedures For Indemnification of Third-Party Claims

22

5.6

Additional Matters

24

5.7

Survival of Indemnities

24

Article VI Certain Covenants And Other Agreements Of The Parties

25

6.1

Restriction on Employee Solicitation and Hiring

25

6.2

Legal Names

25

6.3

Preparation of Opening Facet Balance Sheet

25

6.4

Amendment of Patent Licensing Master Agreements

25

6.5

Payment of Accrued Merit Bonuses

26

Article VII Confidentiality

26

7.1

Confidentiality

26

7.2

Protective Arrangements

27

Article VIII Access To Information And Services

27

8.1

Provision of Books and Records

27

8.2

Access to Information

28

8.3

Production of Witnesses

28

8.4

Privileged Matters

28

Article IX Dispute Resolution

30

9.1

Disputes and Negotiation

30

9.2

Dispute Resolution and Arbitration

30

Article X Further Assurances

31

10.1

Further Assurances

31

 

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Article XI Termination

32

11.1

Termination

32

Article XII Miscellaneous

32

12.1

Governing Law; Jurisdiction

32

12.2

Assignability

32

12.3

Third Party Beneficiaries

33

12.4

Notices

33

12.5

Severability

34

12.6

Expenses

34

12.7

Survival of Covenants

34

12.8

Waivers of Default

34

12.9

Specific Performance

34

12.10

Amendments

34

12.11

Schedules

35

12.12

Construction

35

12.13

Counterparts

35

 

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Separation and Distribution Agreement

 

This Separation and Distribution Agreement (this “Agreement”), dated as of
December 17, 2008, is entered into by and between PDL BioPharma, Inc., a
Delaware corporation (“PDL”), and Facet Biotech Corporation, a Delaware
corporation (“Facet”) (each a “Party” and collectively, the “Parties”). 
Capitalized terms used herein and not otherwise defined shall have the
respective meanings assigned to them in Article I.

 

Recitals

 

WHEREAS, the Board of Directors of PDL has determined that it is appropriate,
desirable and in the best interests of PDL and its stockholders to separate its
two businesses, the PDL Business and the Facet Business, into PDL and Facet
respectively, two publicly traded companies, by means of the transfer/assumption
of certain assets and liabilities from PDL to Facet, all as more fully described
in this Agreement and the Ancillary Agreements (the “Separation”);

 

WHEREAS, in order to effect the Separation, the Board of Directors of PDL has
further determined that it is appropriate, desirable and in the best interests
of PDL and its stockholders to distribute to holders of shares of PDL Common
Stock, on a pro rata basis, all of the issued and outstanding shares of common
stock, par value $0.01 per share, of Facet, all as more fully described in this
Agreement and the Ancillary Agreements (such shares, the “Facet Common Stock”,
and such distribution, the “Distribution”); and

 

WHEREAS, the Parties intend in this Agreement to set forth the principal
corporate arrangements between the Parties with respect to the Separation and
the Distribution.

 

NOW, THEREFORE, in consideration of the foregoing and the terms, conditions,
covenants and provisions of this Agreement, PDL and Facet mutually covenant and
agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1                                 “Action” shall mean any demand, action,
cause of action, suit, countersuit, arbitration, inquiry, proceeding or
investigation by or before any federal, state, local, foreign or international
Governmental entity or any arbitration or mediation tribunal.

 

1.2                                 “Affiliate” of a Person shall mean any firm,
individual, corporation, business trust, joint venture, association, company,
limited liability company, partnership, or other organization or entity, that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control (provided that such common control is
not by a natural person) with such specified Person.  As used herein, “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities or other interests, by contract or otherwise;
provided that if control is

 

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deemed solely on the basis of ownership of voting securities or other interests,
such ownership must be in excess of twenty percent (20%) of the then-outstanding
shares of common stock or the combined voting power of such Person.  For the
sake of clarity, neither Facet nor any of its subsidiaries shall be considered
Affiliates of PDL and its subsidiaries under this Agreement and vice versa.

 

1.3                                 “Agent” shall have the meaning set forth in
Section 3.1(a).

 

1.4                                 “Ancillary Agreements” shall mean all of the
contracts, obligations, indentures, agreements, leases, purchase orders,
commitments, permits, licenses, notes, bonds, mortgages, arrangements or
undertakings (whether written or oral and whether express or implied) that are
legally binding on either Party or any part of its property under applicable Law
entered into in connection with the transactions contemplated hereby, including
the documents listed on Attachment 1.4, to be delivered by Facet and PDL in
connection with the Separation.

 

1.5                                 “Clinical Trial” shall mean a pre-clinical
or clinical trial related to the Products.

 

1.6                                 “Clinical Trial Materials” shall mean the
Products and the placebo for each of these Products for use in Clinical Trials,
whether in bulk, formulated or finished form and whether in existence at the
Effective Time.

 

1.7                                 “Clinical Trial Study Reports” shall mean
all reports or summaries of all data, records and documents resulting from the
Clinical Trials.

 

1.8                                 “Combined Books and Records” shall have the
meaning set forth in Section 8.1(b).

 

1.9                                 “Consents” shall mean any and all consents,
waivers or approvals from, or notification requirements to, any Third Parties,
including those set forth on Attachment 1.9.

 

1.10                           “Contract” shall mean any contract, obligation,
indenture, agreement, lease, purchase order, commitment, permit, license, note,
bond, mortgage, arrangement or undertaking (whether written or oral and whether
express or implied) that is legally binding on any Person or any part of its
property under applicable Law, but excluding this Agreement and any Ancillary
Agreement save as otherwise expressly provided in this Agreement or any
Ancillary Agreement.

 

1.11                           “Convertible Debt” shall mean the (i) 2.75%
Convertible Subordinated Notes due 2023 issued by PDL, and (ii) 2.00%
Convertible Senior Notes due February 15, 2012 issued by PDL.

 

1.12                           “Distribution” shall have the meaning set forth
in the recitals hereto.

 

1.13                           “Distribution Date” shall mean the date on which
the Distribution to the stockholders of PDL is effective, which is December 18,
2008.

 

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1.14                           “Effective Time” shall mean 11:59 p.m. Eastern
Standard Time on the day immediately preceding the Distribution Date.

 

1.15                           “Environmental Laws” shall mean any environmental
laws, rules and regulations of any jurisdiction.

 

1.16                           “Environmental Liabilities” shall mean any
Liabilities relating to Environmental Laws.

 

1.17                           “Exchange” shall mean the NASDAQ Global Market.

 

1.18                           “Exchange Act” shall mean the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time that reference is made thereto.

 

1.19                           “Excluded Assets” shall mean all assets solely
relating to the PDL Business, including the Excluded Intellectual Property and
the Queen Royalties, and any and all Contracts of PDL other than the Assumed
Contracts and the Leases, and all of PDL’s rights, title and interest in and to
any and all other assets that are expressly contemplated to be retained by PDL
by this Agreement or any Ancillary Agreement (or the Attachments and Schedules
hereto or thereto).

 

1.20                           “Excluded Intellectual Property” shall mean
(a) the Trademarks listed in Attachment 1.20(a); (b) the patents and patent
applications listed in Attachment 1.20(b), and any patents of addition,
re-examinations, reissues, extensions, granted supplementary protection
certifications, substitutions, confirmations, registrations, revalidations,
revisions, additions and the like, of or to said patents and any and all
divisionals, continuations and continuations-in-part, and any patents issuing
therefrom, as well as any patent applications related thereto (together, the
“Queen et al. Patents”); (c) all U.S. and foreign copyrights and copyrightable
subject matter solely related to the PDL Business (but excluding the Facet
Copyrights), whether registered or unregistered, published or unpublished,
statutory or common law, and all Actions against past, present, and future
infringement, misappropriation, or other violation of the foregoing; and (d) all
other Intellectual Property solely related to the PDL Business.

 

1.21                           “Excluded Liabilities” shall mean (a) any and all
Liabilities of PDL and its Affiliates, relating solely to the PDL Business or
arising out of or relating to the Excluded Assets, (b) any and all Liabilities
of PDL and its Affiliates relating to, arising out of or resulting from PDL’s
performance or obligations under any Ancillary Agreement or this Agreement and
(c) the Convertible Debt.

 

1.22                           “Facet Assets” shall mean:

 

(A)                                  ALL CATEGORIES OF ASSETS THAT ARE REFLECTED
AS ASSETS OF FACET IN THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
OF FACET, DATED SEPTEMBER 30, 2008, INCLUDED IN THE FORM 10, WITH THE VALUE OF
SUCH ASSET AS REFLECTED IN THE OPENING FACET BALANCE SHEET.

 

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(B)                                 ALL OF PDL’S RIGHTS, TITLE AND INTEREST IN
AND TO THE PATENTS AND PATENT APPLICATIONS LISTED IN ATTACHMENT 1.22(B), AND ANY
PATENTS OF ADDITION, RE-EXAMINATIONS, REISSUES, EXTENSIONS, GRANTED
SUPPLEMENTARY PROTECTION CERTIFICATIONS, SUBSTITUTIONS, CONFIRMATIONS,
REGISTRATIONS, REVALIDATIONS, REVISIONS, ADDITIONS AND THE LIKE, OF OR TO SAID
PATENTS AND ANY AND ALL DIVISIONALS, CONTINUATIONS AND CONTINUATIONS-IN-PART,
AND ANY PATENTS ISSUING THEREFROM, AS WELL AS ANY PATENT APPLICATIONS RELATED
THERETO AND ALL ACTIONS AGAINST PAST, PRESENT, AND FUTURE INFRINGEMENT,
MISAPPROPRIATION, OR OTHER VIOLATION OF THE FOREGOING.

 

(C)                                  ALL OF PDL’S RIGHTS, TITLE AND INTEREST IN
AND TO THE TRADEMARKS LISTED ON ATTACHMENT 1.22(C), TOGETHER WITH (I) ALL COMMON
LAW RIGHTS TO SUCH TRADEMARKS, (II) THE GOODWILL OF THE FACET BUSINESS
SYMBOLIZED BY SUCH TRADEMARKS, (III) ALL ACTIONS FOR, OR ARISING FROM ANY
INFRINGEMENT, DILUTION, UNFAIR COMPETITION, OR OTHER VIOLATION, INCLUDING PAST
INFRINGEMENT, DILUTION, UNFAIR COMPETITION, OR OTHER VIOLATION, OF SUCH
TRADEMARKS, AND (III) ALL RIGHTS CORRESPONDING THERETO THROUGHOUT THE WORLD.

 

(D)                                 ALL OF PDL’S RIGHTS, TITLE AND INTEREST IN
AND TO THE DOMAIN NAMES LISTED IN ATTACHMENT 1.22(D) AND ALL ACTIONS AGAINST
PAST, PRESENT, AND FUTURE INFRINGEMENT, MISAPPROPRIATION, OR OTHER VIOLATION OF
THE FOREGOING.

 

(E)                                  ALL U.S. AND FOREIGN COPYRIGHTS AND
COPYRIGHTABLE SUBJECT MATTER RELATED TO THE FACET BUSINESS, WHETHER REGISTERED
OR UNREGISTERED, PUBLISHED OR UNPUBLISHED, STATUTORY OR COMMON LAW, INCLUDING
ALL RELATED REGISTRATIONS, APPLICATIONS AND COMMON LAW RIGHTS, IN ANY LABELS,
PRODUCT MARKETING MATERIALS OR OTHER COPYRIGHTED WORKS RELATED TO THE FACET
BUSINESS AND ALL ACTIONS AGAINST PAST, PRESENT, AND FUTURE INFRINGEMENT,
MISAPPROPRIATION, OR OTHER VIOLATION OF THE FOREGOING (“FACET COPYRIGHTS”).

 

(F)                                    ALL OF PDL’S RIGHTS, TITLE AND INTEREST
IN AND TO ALL INTELLECTUAL PROPERTY, INCLUDING TRADE SECRETS, NOT HERETO FORTH
DESCRIBED IN THE DEFINITION OF FACET ASSETS THAT ARE REASONABLY LIKELY TO BE
USED IN THE FACET BUSINESS, BUT EXCLUDING THE EXCLUDED INTELLECTUAL PROPERTY.

 

(G)                                 WITH RESPECT TO THE PRODUCTS, ALL
(I) REGULATORY FILINGS AND APPROVALS, REGISTRATIONS AND GOVERNMENTAL
AUTHORIZATIONS, (II) EACH NDA, (III) EACH IND OR EQUIVALENT, (IV) ALL COMPLIANCE
NOTICES, LICENSES AND PERMITS, (V) ALL APPLICATIONS TO THE FDA OR THE COMPARABLE
FOREIGN LAW OR BODIES IN EFFECT OR PENDING AT THE EFFECTIVE TIME, AND (VI) ALL
MATERIALS AND INFORMATION RELATING TO THE FDA AND OTHER GOVERNMENTAL APPROVALS
FOR THE FACET BUSINESS, ALL AS SET FORTH ON ATTACHMENT 1.22(G), AND ALL
INFORMATION CONTAINED THEREIN (COLLECTIVELY, THE “REGISTRATIONS”).

 

(H)                                 ALL FACET BOOKS AND RECORDS.  “FACET BOOKS
AND RECORDS” SHALL MEAN BOOKS AND RECORDS WHICH RELATE TO FACET, THE FACET
ASSETS, THE FACET LIABILITIES OR THE CONDUCT OF THE FACET BUSINESS.

 

(I)                                     ALL PRE-CLINICAL AND CLINICAL DATA
RELATED TO THE FACET BUSINESS AND WHICH IS CONTAINED IN PDL’S DATABASES OR
OTHERWISE IN PDL’S POSSESSION OR CONTROL.

 

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(J)                                     ALL FIXED ASSETS OF PDL AS OF THE
EFFECTIVE TIME EXCEPT FOR THE PDL FIXED ASSETS.

 

(K)                                  ALL RIGHTS AND BENEFITS OF PDL IN EXISTENCE
AS OF THE EFFECTIVE TIME OR ARISING AFTER THE EFFECTIVE TIME UNDER THE CONTRACTS
LISTED IN ATTACHMENT 1.22(K) (THE “ASSUMED CONTRACTS”), INCLUDING ANY RIGHTS TO
INTELLECTUAL PROPERTY OR FACET COPYRIGHTS CONTAINED THEREIN.  THE ASSUMED
CONTRACTS SHALL BE DEEMED TO INCLUDE ALL PURCHASE, WORK AND CHANGE ORDERS
RELATED THERETO.

 

(L)                                     ALL OF PDL’S RIGHTS, TITLE AND INTEREST
IN AND TO THE CLINICAL TRIAL MATERIALS.

 

(M)                               ALL OF PDL’S RIGHTS, TITLE AND INTEREST IN AND
TO THE CLINICAL TRIAL STUDY REPORTS.

 

(N)                                 CASH AND CASH EQUIVALENTS IN THE AMOUNT OF
FOUR HUNDRED FIVE MILLION U.S. DOLLARS ($405,000,000) IN THE AGGREGATE PLUS THE
AMOUNT OF THE POST-CLOSING CASH, AS DETERMINED IN ACCORDANCE WITH SECTION 2.5.

 

(O)                                 ALL OF PDL’S RIGHTS UNDER THE LEASES,
INCLUDING THE RIGHT TO POSSESS, USE AND OCCUPY THE PREMISES AND THE SUBLEASED
PREMISES (AS DEFINED IN THE LEASES), AND ALL OF PDL’S RIGHTS, TITLE AND INTEREST
IN AND TO THE LESSEE IMPROVEMENTS AND THE SUBLESSEE IMPROVEMENTS (AS THOSE TERMS
ARE DEFINED IN THE LEASES) CONSTRUCTED AT 1400 AND 1500 SEAPORT BOULEVARD.

 

(P)                                 ANY AND ALL INTEREST IN THE FACET
SUBSIDIARIES, INCLUDING THIRTY SEVEN THOUSAND (37,000) SHARES IN PDL BIOPHARMA
FRANCE S.A.S. (ONE EURO PER SHARE), ONE THOUSAND (1000) SHARES IN FREMONT
MANAGEMENT, INC. (PAR VALUE $.01 PER SHARE) AND ALL OF THE MEMBERSHIP INTERESTS
IN FREMONT HOLDINGS, LLC.

 

(Q)                                 ANY AND ALL INTEREST IN OPHTHOTECH
CORPORATION, INCLUDING 1,835,000 SHARES OF SERIES A-1 PREFERRED STOCK ($0.001
PAR VALUE PER SHARE).

 

(R)                                    FACET POLICIES.

 

(S)                                  ALL OF PDL’S RIGHTS, TITLE AND INTEREST IN
AND TO ANY AND ALL OTHER ASSETS THAT ARE EXPRESSLY CONTEMPLATED BY THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT (OR THE ATTACHMENTS AND SCHEDULES HERETO OR
THERETO) TO BE TRANSFERRED TO FACET.

 

For the avoidance of doubt and notwithstanding anything to the contrary herein,
Facet Assets shall not include (i) any cash or cash equivalents other than as
described in clause (n) above, (ii) any net operating losses, net operating loss
carry-forwards or other Tax attributes of PDL, whether or not relating to Facet
or the Facet Business, or (ii) the Excluded Assets.

 

1.23                           “Facet Business” shall mean the business of PDL
related to the research, development, commercialization and optimization of
human therapeutics and technologies related thereto, including the Products, as
conducted or proposed to be conducted by PDL prior to or as of the Effective
Time.

 

1.24                           “Facet Employees” shall mean all employees listed
on Attachment 1.24.

 

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1.25                           “Facet Liabilities” shall mean:

 

(A)                                  ALL CATEGORIES OF LIABILITIES THAT ARE
REFLECTED AS LIABILITIES OF FACET IN THE UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET OF FACET, DATED SEPTEMBER 30, 2008, INCLUDED IN THE FORM 10 WITH
THE VALUE OF SUCH LIABILITIES AS REFLECTED IN THE OPENING FACET BALANCE SHEET.

 

(B)                                 ALL LIABILITIES UNDER THE ASSUMED CONTRACTS.

 

(C)                                  ALL LIABILITIES UNDER THE LEASES.

 

(D)                                 ALL LIABILITIES UNDER THE REGISTRATIONS
ARISING AFTER THE EFFECTIVE TIME.

 

(E)                                  ALL OTHER LIABILITIES (OTHER THAN EXCLUDED
LIABILITIES) ARISING OUT OF THE CONDUCT OF PDL’S BUSINESS PRIOR TO THE EFFECTIVE
TIME, OTHER THAN LIABILITIES SOLELY RELATED TO THE PDL BUSINESS, INCLUDING
LIABILITIES ARISING OUT OF THE CONDUCT OF THE FACET BUSINESS OR ARISING OUT OF
OR RELATED TO THE FACET ASSETS.

 

(F)                                    ANY AND ALL ENVIRONMENTAL LIABILITIES.

 

(G)                                 ANY AND ALL LIABILITIES EXPRESSLY SET FORTH
ON ATTACHMENT 1.25(G).

 

(H)                                 THE SELECTED LIABILITIES, AS DESCRIBED IN
SECTION 2.5.

 

(I)                                     ANY AND ALL OTHER LIABILITIES OF FACET
RELATING TO, ARISING OUT OF OR RESULTING FROM FACET’S PERFORMANCE OR OBLIGATIONS
UNDER ANY ANCILLARY AGREEMENT OR THIS AGREEMENT.

 

(J)                                     ANY AND ALL OTHER LIABILITIES THAT ARE
EXPRESSLY CONTEMPLATED BY THIS AGREEMENT OR ANY ANCILLARY AGREEMENT (OR THE
ATTACHMENTS AND SCHEDULES HERETO OR THERETO) TO BE TRANSFERRED TO AND ASSUMED BY
FACET.

 

For the avoidance of doubt, Facet Liabilities shall not include the Excluded
Liabilities.

 

1.26                           “Facet Policies” shall mean all Policies, current
or past, which are owned or maintained by or on behalf of PDL or its
Subsidiaries, which relate solely to the Facet Business and are assignable to
Facet, as listed on Attachment 1.26.

 

1.27                           “Facet Subsidiaries” shall mean PDL BioPharma
France S.A.S., Fremont Management, Inc. and Fremont Holdings, LLC.

 

1.28                           “Form 10” shall mean the registration statement
on Form 10 filed by Facet with the SEC relating to the Facet Common Stock, as
amended from time to time.

 

1.29                           “Former Facet Employee” shall mean, as of the
Effective Time, any individual who, before the Effective Time, terminated
employment with PDL or its predecessors and whose principal services to PDL were
related to the Facet Business.

 

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1.30                           “Former PDL Employee” shall mean, as of the
Effective Time, any individual who, before the Effective Time, terminated
employment with PDL or its predecessors and is not listed on Attachment 1.24 to
this Agreement, other than any Former Facet Employee.

 

1.31                           “Governmental Approvals” shall mean any notices,
reports or other filings to be made, or any consents, registrations, approvals,
permits or authorizations to be obtained from, any Governmental Entity.

 

1.32                           “Governmental Entity” shall mean any federal,
state, local, foreign or international court, government department, commission,
board, bureau, agency, official or other regulatory, administrative or
governmental entity.

 

1.33                           “IND” shall mean an investigational new drug
application, including any amendments and supplements thereto, and all reports,
correspondence and other submissions related thereto.

 

1.34                           “Indemnifying Party” shall have the meaning set
forth in Section 5.4(a).

 

1.35                           “Indemnitee” shall have the meaning set forth in
Section 5.4(a).

 

1.36                           “Indemnity Payment” shall have the meaning set
forth in Section 5.4(a).

 

1.37                           “Information” shall mean information, whether or
not patentable or copyrightable, in written, oral, electronic or other tangible
or intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), communications and materials
otherwise related to or made or prepared in connection with or in preparation
for any legal proceeding, and other technical, financial, employee or business
information or data.

 

1.38                           “Insurance Proceeds” shall mean those monies
(a) received by an insured from an unaffiliated Third Party insurer under any
PDL Pre-Distribution Policy, or (b) paid by such Third Party insurer on behalf
of an insured under any PDL Pre-Distribution Policy, in either case net of any
applicable premium adjustment, retrospectively-rated premium, deductible,
retention, or cost of reserve paid or held by or for the benefit of such
insured.

 

1.39                           “Intellectual Property” shall mean all
intellectual property and industrial property rights of any kind or nature,
including all United States and foreign (a) patents, patent applications, patent
disclosures, and all related continuations, continuations-in-part, divisionals,
reissues, re-examinations, substitutions and extensions thereof, (b) Trademarks
and all goodwill associated therewith, (c) rights of publicity, (d) moral rights
and rights of attribution and integrity, (g) rights in Software, (h) trade
secrets and

 

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all other confidential and proprietary information, know-how, inventions,
improvements, processes, formulae, models and methodologies, (i) rights to
domain names, (j) rights to personal information, (k) telephone numbers and
internet protocol addresses, (l) applications and registrations for the
foregoing, and (m) Actions against past, present, and future infringement,
misappropriation, or other violation of the foregoing.

 

1.40         “Law” shall mean any United States or non-United States federal,
national, supranational, state, provincial, local or similar statute, law,
ordinance, regulation, rule, code, order, requirement or rule of law (including
common law).

 

1.41         “Leases” shall mean (a) that certain Sublease, effective July 6,
2006, between Openwave Systems Inc. and PDL, (b) that certain Triple Net Lease,
effective July 6, 2006, between Pacific Shores Investors, LLC and PDL (regarding
1400 Seaport Boulevard) and (c) that certain Triple Net Lease, effective July 6,
2006, between the Pacific Shores Investors, LLC and PDL (regarding 1500 Seaport
Boulevard).

 

1.42         “Liabilities” shall mean any and all debts, liabilities, and
obligations, whether accrued or fixed, known or unknown, absolute or contingent,
matured or unmatured, reserved or unreserved, or determined or determinable of
any kind or nature whatsoever, including those arising under any Law or Action,
whether asserted or unasserted, or order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental entity,
and those arising under any Contract or any fines, damages or equitable relief
which may be imposed in connection with any of the foregoing and including all
costs and expenses related thereto.

 

1.43         “NDA” shall mean a new drug application, including any amendments
or supplements thereto, and all reports, correspondence and other submissions
related thereto.

 

1.44         “Opening Facet Balance Sheet” shall mean the combined balance sheet
of Facet, dated as of the Distribution Date, prepared on the same basis as the
unaudited pro forma condensed combined balance sheet, dated September 30, 2008,
included in the Form 10.

 

1.45         “Party” shall have the meaning set forth in the preamble hereof.

 

1.46         “PDL Business” shall mean the antibody humanization patent royalty
business of PDL, other than the Facet Business, as conducted or proposed to be
conducted by PDL prior to or as of the Effective Time.  For the avoidance of
doubt, the PDL Business includes the operation of the antibody humanization
royalty assets business, including the Queen Royalties, Queen et al. Patents,
and other assets, Contracts and Liabilities related thereto.

 

1.47         “PDL Common Stock” shall mean the Common Stock, $0.01 par value per
share, of PDL.

 

1.48         “PDL Consolidated Balance Sheet” shall have the meaning set forth
in Section 2.5(a).

 

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1.49         “PDL Employee” shall mean an active employee or an employee on
vacation or on approved leave of absence (including maternity, paternity,
family, sick leave, salary continuation, qualified military service under the
Uniformed Services Employment and Reemployment Rights Act of 1994, and leave
under the Family Medical Leave Act and other approved leaves) who, on the
Distribution Date, is employed or will be employed by PDL.

 

1.50         “PDL Fixed Assets” shall mean the fixed assets listed on Attachment
1.50 and such other fixed assets of Facet with an aggregate value of no more
than $100,000 that the parties may determine within four (4) months after the
Effective Time are reasonably required by PDL for the PDL Business.

 

1.51         “PDL General Liability Policies” shall mean all PDL
Pre-Distribution Policies that respond to claims on an occurrence basis.

 

1.52         “PDL Policies” shall mean all PDL Pre-Distribution Policies that
respond to claims on a claims-made basis.

 

1.53         “PDL Pre-Distribution Policies” shall mean all Policies, other than
the Facet Policies and including the PDL General Liability Policies and the PDL
Policies, entered prior to or as of the Effective Time, which are between or
among PDL and one or more Third Parties, that benefit either or both the PDL
Business and the Facet Business.

 

1.54         “Person” shall mean any natural person, firm, individual,
corporation, business trust, joint venture, association, company, limited
liability company, partnership, or other organization or entity, whether
incorporated or unincorporated, or any governmental entity.

 

1.55         “Policies” shall mean insurance policies and insurance Contracts of
any kind (other than life and benefits policies or Contracts), including
primary, excess and umbrella policies, comprehensive general liability policies,
director and officer liability, fiduciary liability, automobile, aircraft,
property and casualty, business interruption, workers’ compensation and employee
dishonesty insurance policies, bonds and self-insurance and captive insurance
company arrangements, together with the rights, benefits and privileges
thereunder.

 

1.56         “Post-Closing Cash” shall have the meaning set forth in
Section 2.5(d).

 

1.57         “Products” shall mean, individually and collectively, the human
therapeutics (a) under development, regardless of the state of development, by
PDL, including daclizumab, elotuzumab (HuLuc63), PDL192, volociximab (M200),
visilizumab (Nuvion), fontilizumab (HuZAF), PDL41 and PDL252 and (b) outlicensed
by PDL to a Third Party, including Liv-1, PR-1, IL-12 (fully human) and HuM195.

 

1.58         “Queen Royalties” shall mean any and all receivables or cash
received pursuant to Contracts, other than any Assumed Contract, pursuant to
which PDL licensed to a Third Party rights to practice the Queen et al.
Patents.  For the sake of clarity, the Parties agree that: (i) certain of the
Assumed Contracts that involve collaborative

 

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development of Products provide for a license to Third Parties of rights to
practice the Queen et al. Patents; (ii) no receivable or cash received under any
such Assumed Contract shall be deemed a Queen Royalty and (iii) to the extent
that a license to the Queen et al. Patents may be necessary for such
development, Facet and PDL have entered or shall enter into separate agreements
covering any royalty payments.

 

1.59         “Record Date” shall mean the close of business on the date to be
determined by the PDL Board of Directors as the record date for the
Distribution.

 

1.60         “SEC” shall mean the United States Securities and Exchange
Commission or any successor agency thereto.

 

1.61         “Security Interest” shall mean any mortgage, security interest,
pledge, lien, charge, claim, option, right to acquire, voting or other
restriction, right-of-way, covenant, condition, easement, encroachment,
restriction on transfer, or other encumbrance of any nature whatsoever,
excluding restrictions on transfer under security Laws.

 

1.62         “Selected Liabilities” shall have the meaning set forth in
Section 2.5(b).

 

1.63         “Selected Liabilities Statement” shall have the meaning set forth
in Section 2.5(d).

 

1.64         “Separation” shall have the meaning set forth in the recitals
hereto.

 

1.65         “Software” shall mean all computer programs (whether in source
code, object code, or other form), algorithms, databases, compilations and data,
and technology supporting the foregoing, and all documentation, including
flowcharts and other logic and design diagrams, technical, functional and other
specifications, and user manuals and training materials related to any of the
foregoing.

 

1.66         “Subsidiary” of a Person shall mean any firm, individual,
corporation, business trust, joint venture, association, company, limited
liability company, partnership, or other organization or entity, whether
incorporated or unincorporated of which at least a majority of the securities or
interests having by the terms thereof ordinary voting power to elect at least a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization, that is directly or
indirectly owned or controlled by such Person or by any one or more of its
Subsidiaries, or by such Person and one or more of its Subsidiaries; provided,
however, that no Person that is not directly or indirectly wholly owned by any
other Person shall be a Subsidiary of such other Person unless such other Person
controls, or has the right, power or ability to control, that Person.  For the
sake of clarity, Facet shall not be considered a Subsidiary of PDL under this
Agreement.

 

1.67         “Third Party” shall mean any Person other than PDL, any PDL
Affiliate, Facet and any Facet Affiliate.

 

1.68         “Third-Party Claim” shall have the meaning set forth in
Section 5.5(a).

 

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1.69         “Trademarks” shall mean all trademarks, service marks, trade names,
names, slogans, taglines, logos, design marks, trade dress, product designs, and
product packaging, including all applications for and registrations of the
foregoing, and including those at common law.

 

1.70         “Transfer” shall have the meaning set forth in Section 2.2(a).

 

ARTICLE II

 

THE SEPARATION

 

2.1           GENERAL.  SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT,
THE PARTIES SHALL USE, AND SHALL CAUSE ANY RESPECTIVE SUBSIDIARIES TO USE, THEIR
RESPECTIVE REASONABLE BEST EFFORTS TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED
HEREBY.

 

2.2           TRANSFER OF FACET ASSETS AND ASSUMPTION OF FACET LIABILITIES. 
SUBJECT TO SECTIONS 2.3, 2.4 AND 2.5:

 

(A)           AT THE EFFECTIVE TIME, PDL SHALL, AND HEREBY DOES, TRANSFER,
CONTRIBUTE, ASSIGN, AND CONVEY, OR CAUSE TO BE TRANSFERRED, CONTRIBUTED,
ASSIGNED, AND CONVEYED, TO FACET ALL OF PDL’S RIGHT, TITLE AND INTEREST IN AND
TO THE FACET ASSETS (THE “TRANSFER”).

 

(B)           AT THE EFFECTIVE TIME, FACET SHALL, AND HEREBY DOES, ACCEPT THE
TRANSFER FROM PDL.

 

(C)           ON OR BEFORE THE DISTRIBUTION DATE, PDL SHALL TRANSFER THE FACET
EMPLOYEES TO FACET.

 

(D)           EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT OR
ANY ANCILLARY AGREEMENT, AT THE EFFECTIVE TIME FACET SHALL, AND HEREBY DOES,
ACCEPT, ASSUME OR, AS APPLICABLE, RETAIN ALL THE FACET LIABILITIES AND SHALL
AFTER THE EFFECTIVE TIME PERFORM, DISCHARGE AND FULFILL, IN ACCORDANCE WITH
THEIR RESPECTIVE TERMS, ALL THE FACET LIABILITIES, IN EACH CASE, UNLESS
SPECIFIED OTHERWISE IN THE DEFINITION OF FACET LIABILITIES, REGARDLESS OF
(I) WHEN OR WHERE SUCH LIABILITIES AROSE OR ARISE, (II) WHERE OR AGAINST WHOM
SUCH LIABILITIES ARE ASSERTED OR DETERMINED, (III) WHICH ENTITY IS NAMED IN ANY
ACTION ASSOCIATED WITH ANY LIABILITY, AND (IV) WHETHER THE FACTS ON WHICH THEY
ARE BASED OCCURRED PRIOR TO, ON OR AFTER THE EFFECTIVE TIME (THE “ASSUMPTION”). 
NOTWITHSTANDING THE FOREGOING, FACET SHALL NOT ASSUME ANY LIABILITY ATTRIBUTABLE
TO THE FAILURE OF PDL OR ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS OR
AFFILIATES TO MATERIALLY PERFORM PDL’S OBLIGATIONS TO FACET PURSUANT TO THIS
AGREEMENT OR THE ANCILLARY AGREEMENTS.

 

(E)           IF AT ANY TIME, AFTER THE EFFECTIVE TIME, THE PARTIES AGREE THAT
PDL OR ITS SUBSIDIARIES POSSESS ANY ASSETS OR LIABILITIES RELATED TO THE FACET
BUSINESS, PDL SHALL AS PROMPTLY AS PRACTICABLE TRANSFER OR CAUSE TO BE
TRANSFERRED, AT FACET’S EXPENSE, AND FACET SHALL ACCEPT SUCH TRANSFER AND/OR
ASSUME, FOR NO ADDITIONAL CONSIDERATION, SUCH FACET ASSET AND/OR LIABILITY,
INCLUDING ANY AND ALL ECONOMIC BENEFITS GENERATED FROM SUCH FACET ASSET AND/OR
LIABILITIES AFTER THE EFFECTIVE TIME, TO FACET.  EACH SUCH

 

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TRANSFERRED ASSET OR LIABILITY SHALL BE DEEMED A FACET ASSET OR A FACET
LIABILITY, RESPECTIVELY, AND SHALL BE SUBJECT TO THE TERMS AND CONDITIONS OF
THIS AGREEMENT APPLICABLE THERETO.

 

(F)            IF AT ANY TIME, AFTER THE EFFECTIVE TIME, THE PARTIES AGREE THAT
FACET OR ITS SUBSIDIARIES POSSESS ANY ASSETS OR LIABILITIES SOLELY RELATED TO
THE PDL BUSINESS, FACET SHALL AS PROMPTLY AS PRACTICABLE TRANSFER OR CAUSE TO BE
TRANSFERRED, AT PDL’S EXPENSE, AND PDL SHALL ACCEPT SUCH TRANSFER AND/OR ASSUME,
FOR NO CONSIDERATION, SUCH PDL ASSET AND/OR LIABILITY, INCLUDING ANY AND ALL
ECONOMIC BENEFITS GENERATED FROM SUCH PDL ASSET AND/OR LIABILITIES AFTER THE
EFFECTIVE TIME, TO PDL.  EACH SUCH TRANSFERRED ASSET OR LIABILITY SHALL BE
DEEMED A PDL ASSET OR A PDL LIABILITY, RESPECTIVELY, AND SHALL BE SUBJECT TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT APPLICABLE THERETO.

 

(G)           IN FURTHERANCE OF THE TRANSFER AND THE ASSUMPTION OF THE FACET
LIABILITIES BY FACET AS SET FORTH ABOVE, AND SIMULTANEOUSLY WITH THE EXECUTION
AND DELIVERY OF THIS AGREEMENT (I) PDL SHALL EXECUTE AND DELIVER SUCH BILLS OF
SALE, STOCK POWERS, CERTIFICATES OF TITLE, ASSIGNMENTS OF CONTRACTS AND OTHER
INSTRUMENTS OF TRANSFER, CONVEYANCE AND ASSIGNMENT AS AND TO THE EXTENT
NECESSARY TO EVIDENCE THE TRANSFER, AND (II) FACET SHALL EXECUTE AND DELIVER TO
PDL SUCH BILLS OF SALE, STOCK POWERS, CERTIFICATES OF TITLE, ASSUMPTIONS OF
CONTRACTS, INDEMNITY AGREEMENTS AND OTHER INSTRUMENTS OF ASSUMPTION AS AND TO
THE EXTENT NECESSARY TO EVIDENCE THE VALID AND EFFECTIVE ASSUMPTION.

 

2.3          GOVERNMENTAL APPROVALS; CONSENTS.

 

(A)           TO THE EXTENT THAT THE TRANSFER OR THE ASSUMPTION REQUIRES ANY
GOVERNMENTAL APPROVALS, THE PARTIES SHALL USE REASONABLE BEST EFFORTS TO OBTAIN
ANY SUCH GOVERNMENTAL APPROVALS.  IF AND TO THE EXTENT THAT THE TRANSFER OR THE
ASSUMPTION WOULD BE A VIOLATION OF APPLICABLE LAWS OR REQUIRE ANY GOVERNMENTAL
APPROVAL IN CONNECTION WITH THE SEPARATION OR THE DISTRIBUTION, THEN, UNLESS PDL
SHALL OTHERWISE DETERMINE, THE TRANSFER TO OR ASSUMPTION BY FACET OF SUCH FACET
ASSETS OR FACET LIABILITIES, AS THE CASE MAY BE, SHALL BE AUTOMATICALLY DEEMED
DEFERRED AND ANY SUCH PURPORTED TRANSFER OR THE ASSUMPTION SHALL BE NULL AND
VOID UNTIL SUCH TIME AS ALL LEGAL IMPEDIMENTS ARE REMOVED AND/OR EACH OF SUCH
GOVERNMENTAL APPROVAL HAS BEEN OBTAINED.

 

(B)           THE PARTIES SHALL USE REASONABLE BEST EFFORTS TO OBTAIN ANY
CONSENTS REQUIRED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.  NOTWITHSTANDING THE FOREGOING, NO PARTY SHALL BE OBLIGATED TO PAY
ANY CONSIDERATION THEREFOR TO ANY THIRD PARTY FROM WHOM ANY SUCH CONSENT,
SUBSTITUTION OR AMENDMENT IS REQUESTED (UNLESS SUCH PARTY IS FULLY REIMBURSED BY
THE REQUESTING PARTY).

 

2.4          DEFERRED TRANSFERS/ASSUMPTIONS.

 

(A)           IF THE TRANSFER OF ANY FACET ASSET OR ASSUMPTION INTENDED TO BE
TRANSFERRED AND ASSUMED HEREUNDER IS NOT CONSUMMATED PRIOR TO OR AT THE
EFFECTIVE TIME, WHETHER AS A RESULT OF THE PROVISIONS OF SECTION 2.3 OR FOR ANY
OTHER REASON, THEN PDL SHALL THEREAFTER HOLD SUCH FACET ASSET FOR THE USE AND
BENEFIT OF FACET IF PERMITTED BY LAW.

 

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(B)           IF AND WHEN THE CONSENTS AND/OR GOVERNMENTAL APPROVALS, OR ANY
OTHER IMPEDIMENTS TO TRANSFER OR ASSUMPTION, THE ABSENCE OF WHICH CAUSED THE
DEFERRAL OF TRANSFER OF ANY FACET ASSET OR ASSUMPTION PURSUANT TO SECTION 2.3 OR
OTHERWISE, ARE OBTAINED OR REMOVED (AS APPROPRIATE), THE TRANSFER OF THE
APPLICABLE FACET ASSET OR ASSUMPTION SHALL BE EFFECTED IN ACCORDANCE WITH THE
TERMS OF THIS AGREEMENT AND/OR THE APPLICABLE ANCILLARY AGREEMENT.

 

(C)           WITH RESPECT TO ANY FACET ASSET RETAINED BY PDL DUE TO THE
DEFERRAL OF THE TRANSFER OF SUCH FACET ASSET, PDL SHALL TAKE SUCH ACTIONS WITH
RESPECT TO SUCH FACET ASSET AS MAY BE REASONABLY REQUESTED BY FACET.

 

(D)           IF THE PARTIES ARE UNABLE TO OBTAIN, OR TO CAUSE TO BE OBTAINED,
ANY SUCH REQUIRED GOVERNMENTAL APPROVALS, CONSENTS, RELEASE, SUBSTITUTION OR
AMENDMENT PURSUANT TO SECTION 2.3 OR OTHERWISE, PDL SHALL (I) CONTINUE TO BE
BOUND BY SUCH CONTRACT, LICENSE OR OTHER OBLIGATION, WHICH SHALL NOT CONSTITUTE
A LIABILITY OF PDL (UNLESS NOT PERMITTED BY LAW OR THE TERMS THEREOF), (II) AS
AGENT OR SUBCONTRACTOR FOR FACET, PAY, PERFORM AND DISCHARGE FULLY ALL THE
OBLIGATIONS OR OTHER FACET LIABILITIES THEREUNDER AFTER THE EFFECTIVE TIME, AND
(III) DELIVER TO FACET ANY PAYMENTS, BENEFITS OR OTHER CONSIDERATION RECEIVED BY
PDL UNDER SUCH CONTRACT, LICENSE OR OTHER OBLIGATION; PROVIDED, HOWEVER, THAT
PDL SHALL NOT BE OBLIGATED TO EXTEND, RENEW OR OTHERWISE CAUSE SUCH CONTRACT,
LICENSE OR OTHER OBLIGATION TO REMAIN IN EFFECT BEYOND THE TERM IN EFFECT AS OF
THE EFFECTIVE TIME.  FACET SHALL HAVE THE RIGHT TO DIRECT PDL TO EXERCISE PDL’S
RIGHTS UNDER SUCH CONTRACT, LICENSE OR OTHER OBLIGATION FOR THE BENEFIT OF
FACET.  FACET SHALL FULLY INDEMNIFY PDL AND ITS AFFILIATES, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND HOLD EACH OF THEM HARMLESS AGAINST ANY AND ALL OBLIGATIONS
OR FACET LIABILITIES ARISING IN CONNECTION THEREWITH AND ALSO FOR ANY ACTIONS
REQUESTED BY FACET PURSUANT TO SECTION 2.4(C), PROVIDED, HOWEVER, THAT FACET
SHALL HAVE NO OBLIGATION TO INDEMNIFY PDL WITH RESPECT TO ANY MATTER TO THE
EXTENT THAT PDL HAS ENGAGED IN ANY VIOLATION OF LAW OR FRAUD IN CONNECTION
THEREWITH.  PDL SHALL, WITHOUT FURTHER CONSIDERATION, PROMPTLY PAY AND REMIT, OR
CAUSE TO BE PROMPTLY PAID OR REMITTED, TO FACET, ALL MONEY, RIGHTS AND OTHER
CONSIDERATION RECEIVED BY IT OR ANY OF ITS SUBSIDIARIES IN RESPECT OF SUCH
PERFORMANCE ON BEHALF OF FACET (UNLESS ANY SUCH CONSIDERATION IS AN EXCLUDED
ASSET OF PDL PURSUANT TO THIS AGREEMENT).  IF AND WHEN ANY SUCH GOVERNMENTAL
APPROVAL, CONSENT, RELEASE, SUBSTITUTION OR AMENDMENT SHALL BE OBTAINED OR SUCH
AGREEMENT, LEASE, LICENSE OR OTHER RIGHTS OR OBLIGATIONS SHALL OTHERWISE BECOME
ASSIGNABLE OR CAPABLE OF NOVATION, PDL SHALL PROMPTLY ASSIGN, OR CAUSE TO BE
ASSIGNED, ALL RIGHTS, OBLIGATIONS AND OTHER FACET LIABILITIES THEREUNDER OF
PDL’S TO FACET WITHOUT PAYMENT OF ANY FURTHER CONSIDERATION AND FACET, WITHOUT
THE PAYMENT OF ANY FURTHER CONSIDERATION, SHALL ASSUME SUCH RIGHTS AND
OBLIGATIONS AND OTHER FACET LIABILITIES.

 

2.5          CALCULATION, ADJUSTMENT AND PAYMENT OF SELECTED LIABILITIES.

 

(A)           “PDL CONSOLIDATED BALANCE SHEET” SHALL MEAN THE UNAUDITED
CONSOLIDATED BALANCE SHEET OF PDL, DATED AS OF THE DAY IMMEDIATELY PRECEDING THE
DISTRIBUTION DATE, PREPARED ON A BASIS CONSISTENT WITH THE BASIS ON WHICH THE
UNAUDITED CONSOLIDATED BALANCE SHEET INCLUDED IN PDL’S QUARTERLY REPORT ON
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008 AND FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 2008 WAS PREPARED.  AS SOON
AS REASONABLY PRACTICABLE AFTER THE EFFECTIVE TIME, THE PARTIES SHALL COORDINATE
IN THE PREPARATION OF THE PDL CONSOLIDATED BALANCE SHEET.

 

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(B)           “SELECTED LIABILITIES” SHALL MEAN CERTAIN CURRENT LIABILITIES THAT
ARE BOTH RECORDED ON THE PDL CONSOLIDATED BALANCE SHEET IN ACCORDANCE WITH U.S.
GENERALLY ACCEPTED ACCOUNTING PRINCIPALS (“GAAP”) AND UNPAID AS OF THE EFFECTIVE
TIME, IN THE FOLLOWING CATEGORIES: ACCRUED VACATION, ACCRUED PRECLINICAL AND
CLINICAL TRIAL EXPENSES, PERSONNEL-RELATED RESTRUCTURING ACCRUALS AND ACCRUED
POST-EMPLOYMENT BENEFITS.  FOR CLARITY, THE SELECTED LIABILITIES SHALL BE
RECORDED ON THE OPENING FACET BALANCE SHEET.

 

(C)           PAYMENT OF CURRENT LIABILITIES.  PDL SHALL UNDER THE TERMS OF EACH
RESPECTIVE CONTRACT REMIT PAYMENT TO VENDORS FOR ALL CURRENT LIABILITIES THAT
ARE BOTH RECORDED ON THE PDL CONSOLIDATED BALANCE SHEET IN ACCORDANCE WITH GAAP
AND UNPAID AS OF THE EFFECTIVE TIME, WITH THE EXCEPTION OF (I) THE SELECTED
LIABILITIES AND (II) ANY DEFERRED REVENUE AND DEBT ACCOUNTS THAT ARE RECORDED ON
THE OPENING FACET BALANCE SHEET.  FACET SHALL REMIT PAYMENT FOR THE SELECTED
LIABILITIES TO THE PAYEES IDENTIFIED BY PDL UNDER THE TERMS OF EACH RESPECTIVE
CONTRACT.

 

(D)           INITIAL SELECTED LIABILITIES STATEMENT AND POST-CLOSING CASH. 
FACET SHALL PROVIDE PDL IN WRITING WITH ITS ESTIMATE FOR THE AMOUNT OF THE
SELECTED LIABILITIES WITHIN FIFTEEN (15) BUSINESS DAYS AFTER THE EFFECTIVE TIME
(THE “SELECTED LIABILITIES STATEMENT”).  PDL SHALL HAVE TEN (10) BUSINESS DAYS
FOLLOWING THE RECEIPT OF THE SELECTED LIABILITIES STATEMENT TO REVIEW AND
ANALYZE FACET’S CALCULATION OF THE AMOUNT SET FORTH IN THE SELECTED LIABILITIES
STATEMENT (THE “POST-CLOSING CASH”) AND PDL SHALL THEN PAY TO FACET ANY
UNDISPUTED PART OF THE POST-CLOSING CASH.  IF PDL DOES NOT AGREE WITH FACET’S
CALCULATION OF THE POST-CLOSING CASH, THE PARTIES SHALL WORK IN GOOD FAITH TO
RESOLVE THE DISAGREEMENT.  AFTER RESOLUTION OF SUCH DISAGREEMENT, ANY PAYMENTS
OWING EITHER TO FACET AS A RESULT OF SUCH ADJUSTMENT SHALL BE MADE WITHIN FIVE
(5) BUSINESS DAYS AFTER THE AGREEMENT OF THE PARTIES.

 

2.6           TERMINATION OF AGREEMENTS.  EXCEPT WITH RESPECT TO THIS AGREEMENT
AND THE ANCILLARY AGREEMENTS (AND AGREEMENTS EXPRESSLY CONTEMPLATED HEREIN OR
THEREIN TO SURVIVE BY THEIR TERMS), THE PARTIES HEREBY TERMINATE ANY AND ALL
WRITTEN OR ORAL AGREEMENTS, ARRANGEMENTS, COMMITMENTS OR UNDERSTANDINGS, BETWEEN
OR AMONG THEM, EFFECTIVE AS OF THE EFFECTIVE TIME; AND EACH PARTY SHALL, AT THE
REASONABLE REQUEST OF THE OTHER PARTY, TAKE, OR CAUSE TO BE TAKEN, SUCH OTHER
ACTIONS AS MAY BE NECESSARY TO EFFECT THE FOREGOING.

 

2.7           DISCLAIMER OF REPRESENTATIONS AND WARRANTIES.  THE PARTIES
UNDERSTAND AND AGREE THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN ANY
ANCILLARY AGREEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT OR ANY
OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT HEREBY OR THEREBY, IS
REPRESENTING OR WARRANTING IN ANY WAY AS TO THE FACET ASSETS, FACET BUSINESS OR
FACET LIABILITIES CONTRIBUTED, TRANSFERRED, DISTRIBUTED OR ASSUMED AS
CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS
REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM
ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY FACET ASSETS,
FACET BUSINESS OR FACET

 

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LIABILITIES OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SETOFF OR FREEDOM
FROM COUNTERCLAIM WITH RESPECT TO ANY CLAIM, INCLUDING ANY ACCOUNTS RECEIVABLE,
OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, DISTRIBUTION,
ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY
TITLE TO ANY FACET ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND
FILING HEREOF OR THEREOF.  EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY
ANCILLARY AGREEMENT, ALL SUCH FACET ASSETS ARE BEING TRANSFERRED ON AN “AS IS,”
“WHERE IS” BASIS AND SO LONG AS THE TRANSFEROR IS IN COMPLIANCE WITH THE TERMS
OF THIS AGREEMENT RELATING TO THE TRANSFER, THE TRANSFEREE SHALL BEAR THE
ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT
TO VEST IN THE TRANSFEREE GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY
SECURITY INTEREST, AND (II) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE
NOT OBTAINED OR THAT THE REQUIREMENTS OF LAWS, CONTRACTS, OR JUDGMENTS ARE NOT
COMPLIED WITH.

 

ARTICLE III

 

THE DISTRIBUTION

 

3.1          THE DISTRIBUTION.

 

(A)           SUBJECT TO SECTION 3.3, ON OR PRIOR TO THE DISTRIBUTION DATE, FOR
THE BENEFIT OF AND DISTRIBUTION TO THE HOLDERS OF PDL COMMON STOCK ON THE RECORD
DATE, PDL WILL DELIVER STOCK CERTIFICATES, ENDORSED BY PDL IN BLANK, TO THE
DISTRIBUTION AGENT, BNY MELLON SHAREOWNER SERVICES (THE “AGENT”), REPRESENTING
ALL OF THE OUTSTANDING AND ISSUED SHARES OF FACET COMMON STOCK THEN OWNED BY
PDL.  PDL SHALL INSTRUCT THE AGENT TO ELECTRONICALLY DISTRIBUTE ON THE
DISTRIBUTION DATE THE APPROPRIATE NUMBER OF SUCH SHARES OF FACET COMMON STOCK TO
EACH SUCH HOLDER OR DESIGNATED TRANSFEREE OR TRANSFEREES OF SUCH HOLDER.

 

(B)           SUBJECT TO SECTION 3.4, EACH HOLDER OF PDL COMMON STOCK ON THE
RECORD DATE (OR SUCH HOLDER’S DESIGNATED TRANSFEREE OR TRANSFEREES) WILL BE
ENTITLED TO RECEIVE IN THE DISTRIBUTION ONE (1) SHARE OF FACET COMMON STOCK FOR
EVERY FIVE (5) SHARES OF PDL COMMON STOCK.  NO INVESTMENT DECISION OR ACTION BY
ANY SUCH STOCKHOLDER SHALL BE NECESSARY FOR SUCH STOCKHOLDER (OR SUCH
STOCKHOLDER’S DESIGNATED TRANSFEREE OR TRANSFEREES) TO RECEIVE THE APPLICABLE
NUMBER OF SHARES OF FACET COMMON STOCK.

 

(C)           FACET AND PDL, AS THE CASE MAY BE, WILL PROVIDE TO THE AGENT ANY
AND ALL INFORMATION REQUIRED IN ORDER TO COMPLETE THE DISTRIBUTION.

 

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3.2          ACTIONS IN CONNECTION WITH THE DISTRIBUTION.

 

(A)           FACET SHALL PREPARE AND, IN ACCORDANCE WITH APPLICABLE LAW, FILE
WITH THE SEC AND CAUSE TO BECOME EFFECTIVE THE FORM 10, INCLUDING AMENDMENTS,
SUPPLEMENTS, EXHIBITS AND ANY SUCH OTHER DOCUMENTATION WHICH IS NECESSARY OR
DESIRABLE TO EFFECTUATE THE SEPARATION AND THE DISTRIBUTION, AND PDL AND FACET
SHALL EACH USE REASONABLE BEST EFFORTS TO OBTAIN ALL NECESSARY APPROVALS FROM
THE SEC WITH RESPECT THERETO AS SOON AS PRACTICABLE.

 

(B)           IN CONNECTION WITH THE DISTRIBUTION, PDL AND FACET SHALL PREPARE
AND MAIL TO THE HOLDERS OF PDL COMMON STOCK SUCH INFORMATION CONCERNING FACET,
THE FACET BUSINESS, THE FACET ASSETS, THE FACET LIABILITIES, OPERATIONS AND
MANAGEMENT, THE DISTRIBUTION, THE SEPARATION AND SUCH OTHER MATTERS AS PDL SHALL
REASONABLY DETERMINE AND AS MAY BE REQUIRED BY LAW.

 

(C)           FACET SHALL ALSO PREPARE, FILE WITH THE SEC AND CAUSE TO BECOME
EFFECTIVE ANY REGISTRATION STATEMENTS OR AMENDMENTS THERETO REQUIRED TO EFFECT
THE ESTABLISHMENT OF, OR AMENDMENTS TO, ANY EMPLOYEE BENEFIT AND OTHER PLANS
NECESSARY OR APPROPRIATE IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT, OR ANY OF THE ANCILLARY AGREEMENTS.

 

(D)           PDL AND FACET SHALL TAKE ALL SUCH ACTION AS MAY BE NECESSARY OR
APPROPRIATE UNDER THE SECURITIES OR BLUE SKY LAWS OF THE STATES OR OTHER
POLITICAL SUBDIVISIONS OF THE UNITED STATES OR OF OTHER FOREIGN JURISDICTIONS IN
CONNECTION WITH THE DISTRIBUTION.

 

(E)           PDL AND FACET SHALL TAKE ALL REASONABLE STEPS NECESSARY AND
APPROPRIATE TO CAUSE THE CONDITIONS SET FORTH IN SECTION 3.3 TO BE SATISFIED AND
TO EFFECT THE DISTRIBUTION ON THE DISTRIBUTION DATE.

 

(F)            FACET SHALL PREPARE AND FILE, AND SHALL USE REASONABLE BEST
EFFORTS TO HAVE APPROVED AND MADE EFFECTIVE, AN APPLICATION FOR THE ORIGINAL
LISTING ON THE EXCHANGE OF THE FACET COMMON STOCK TO BE DISTRIBUTED IN THE
DISTRIBUTION, SUBJECT TO OFFICIAL NOTICE OF DISTRIBUTION.

 

(G)           PDL SHALL GIVE THE EXCHANGE NOT LESS THAN TEN (10) DAYS’ ADVANCE
NOTICE OF THE RECORD DATE IN COMPLIANCE WITH RULE 10B-17 UNDER THE EXCHANGE ACT.

 

(H)           PDL AND FACET SHALL TAKE ALL ACTIONS NECESSARY TO CAUSE,
IMMEDIATELY PRIOR TO THE DISTRIBUTION, THE NUMBER OF SHARES OF FACET COMMON
STOCK ISSUED AND OUTSTANDING TO BE INCREASED TO EQUAL THE NUMBER OF SHARES OF
FACET COMMON STOCK TO BE DISTRIBUTED TO HOLDERS OF PDL COMMON STOCK IN
ACCORDANCE WITH THIS AGREEMENT.

 

(I)            PDL AND FACET SHALL COOPERATE TO CHANGE THE NAME, EFFECTIVE ON OR
PRIOR TO THE DISTRIBUTION DATE, OF ANY ENTITY THAT IS PART OF (I) FACET AND ANY
OF ITS AFFILIATES SO THAT THE WORDS “PDL,” OR DERIVATIONS THEREOF ARE NOT
INCLUDED IN ANY SUCH NAME, AND (II) PDL AND ITS AFFILIATES SO THAT THE WORD
“FACET” OR DERIVATIONS THEREOF ARE NOT INCLUDED IN ANY SUCH NAME. 
NOTWITHSTANDING THE FOREGOING, FACET MAY CONTINUE TO OPERATE PDL BIOPHARMA
FRANCE S.A.S. UNDER THAT NAME DURING THE PERIOD IN WHICH FACET

 

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WINDS DOWN THE ACTIVITIES OF PDL BIOPHARMA FRANCE S.A.S., SUCH PERIOD NOT TO
EXCEED TWELVE (12) MONTHS AFTER THE EFFECTIVE TIME.

 

3.3           CONDITIONS TO DISTRIBUTION.  SUBJECT TO SECTION 3.2, THE FOLLOWING
ARE CONDITIONS TO THE CONSUMMATION OF DISTRIBUTION.  THE CONDITIONS ARE FOR THE
SOLE BENEFIT OF PDL AND SHALL NOT GIVE RISE TO OR CREATE ANY DUTY ON THE PART OF
PDL OR THE BOARD OF DIRECTORS OF PDL TO WAIVE OR NOT WAIVE ANY SUCH CONDITION:

 

(A)           THE FORM 10 SHALL HAVE BEEN DECLARED EFFECTIVE BY THE SEC, WITH NO
STOP ORDER IN EFFECT WITH RESPECT THERETO;

 

(B)           ALL PERMITS, REGISTRATIONS AND CONSENTS REQUIRED UNDER THE
SECURITIES OR BLUE SKY LAWS OF THE STATES OR OTHER POLITICAL SUBDIVISIONS OF THE
UNITED STATES OR OF OTHER FOREIGN JURISDICTIONS IN CONNECTION WITH THE
SEPARATION AND THE DISTRIBUTION SHALL HAVE BEEN OBTAINED AND BE IN FULL FORCE
AND EFFECT;

 

(C)           ALL MATERIAL GOVERNMENT APPROVALS AND OTHER CONSENTS NECESSARY TO
CONSUMMATE THE SEPARATION AND THE DISTRIBUTION SHALL HAVE BEEN OBTAINED AND BE
IN FULL FORCE AND EFFECT;

 

(D)           NO ORDER, INJUNCTION OR DECREE ISSUED BY ANY COURT OR AGENCY OF
COMPETENT JURISDICTION OR OTHER LEGAL RESTRAINT OR PROHIBITION PREVENTING THE
CONSUMMATION OF THE SEPARATION AND THE DISTRIBUTION SHALL BE IN EFFECT AND NO
OTHER EVENT OUTSIDE THE CONTROL OF PDL SHALL HAVE OCCURRED OR FAILED TO OCCUR
THAT PREVENTS THE CONSUMMATION OF THE DISTRIBUTION;

 

(E)           THE BOARD OF DIRECTORS OF PDL SHALL HAVE AUTHORIZED AND APPROVED
THE DISTRIBUTION AND NOT WITHDRAWN SUCH AUTHORIZATION AND APPROVAL;

 

(F)            THE BOARD OF DIRECTORS OF PDL SHALL HAVE APPROVED THE BASIS OF
THE DETERMINATION OF THE SELECTED LIABILITIES AND CATEGORIES OF ASSETS AND
LIABILITIES INCLUDED IN BOTH THE OPENING FACET BALANCE SHEET AND THE PDL
CONSOLIDATED BALANCE SHEET.

 

(G)           THE FACET COMMON STOCK TO BE DELIVERED IN THE DISTRIBUTION SHALL
HAVE BEEN APPROVED FOR LISTING ON THE EXCHANGE;

 

(H)           PDL SHALL HAVE COMPLETED THE TRANSFER OF FACET ASSETS AND TRANSFER
OF FACET EMPLOYEES TO FACET, AND THE ASSUMPTION OF ALL THE FACET LIABILITIES BY
FACET SHALL BE COMPLETED;

 

(I)            ALL ANCILLARY AGREEMENTS SHALL HAVE BEEN ENTERED INTO BY THE
PARTIES AND ALL OTHER PARTIES THERETO, AS APPLICABLE, AND SHALL REMAIN IN FULL
FORCE AND EFFECT; AND

 

(J)            NO OTHER EVENTS OR DEVELOPMENTS SHALL HAVE OCCURRED THAT, IN THE
SOLE DISCRETION OF THE BOARD OF DIRECTORS OF PDL, WOULD RESULT IN THE
DISTRIBUTION HAVING A MATERIAL ADVERSE EFFECT ON PDL OR ON THE STOCKHOLDERS OF
PDL OR NOT BEING IN THE BEST INTEREST OF PDL AND ITS STOCKHOLDERS.

 

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3.4                                 FRACTIONAL SHARES.  THE AGENT AND PDL SHALL,
AS SOON AS PRACTICABLE AFTER THE DISTRIBUTION DATE (A) DETERMINE THE NUMBER OF
WHOLE SHARES AND FRACTIONAL SHARES OF FACET COMMON STOCK ALLOCABLE TO EACH
HOLDER OF RECORD OR BENEFICIAL OWNER OF PDL COMMON STOCK AS OF CLOSE OF BUSINESS
ON THE RECORD DATE, (B) AGGREGATE ALL SUCH FRACTIONAL SHARES INTO WHOLE SHARES
AND SELL THE WHOLE SHARES OBTAINED THEREBY IN OPEN MARKET TRANSACTIONS AT
THEN-PREVAILING TRADING PRICES ON BEHALF OF HOLDERS WHO WOULD OTHERWISE BE
ENTITLED TO FRACTIONAL SHARE INTERESTS, AND (C) DISTRIBUTE TO EACH SUCH HOLDER,
OR FOR THE BENEFIT OF EACH SUCH BENEFICIAL OWNER, SUCH HOLDER’S OR OWNER’S
RATABLE SHARE OF THE NET PROCEEDS OF SUCH SALE, BASED UPON THE AVERAGE GROSS
SELLING PRICE PER SHARE OF FACET COMMON STOCK AFTER MAKING APPROPRIATE
DEDUCTIONS FOR ANY AMOUNT REQUIRED TO BE WITHHELD FOR UNITED STATES FEDERAL
INCOME TAX PURPOSES.  THE AGENT, IN ITS SOLE DISCRETION, WILL DETERMINE THE
TIMING AND METHOD OF SELLING SUCH FRACTIONAL SHARES, THE SELLING PRICE OF SUCH
FRACTIONAL SHARES AND THE BROKER-DEALER TO WHICH SUCH FRACTIONAL SHARES WILL BE
SOLD, PROVIDED THAT THE DESIGNATED BROKER-DEALER IS NOT AN AFFILIATE OF PDL OR
FACET.  NEITHER PDL NOR FACET WILL PAY ANY INTEREST ON THE PROCEEDS FROM THE
SALE OF FRACTIONAL SHARES.

 

ARTICLE IV

 

INSURANCE

 

4.1                                 POLICIES AND RIGHTS INCLUDED WITHIN THE
FACET ASSETS.  WITHOUT LIMITING THE GENERALITY OF THE DEFINITION OF THE FACET
ASSETS, THE FACET ASSETS SHALL INCLUDE (A) THE FACET POLICIES AND (B) ANY AND
ALL RIGHTS OF AN INSURED PARTY OR ITS AFFILIATES UNDER EACH OF THE PDL
PRE-DISTRIBUTION POLICIES, TO THE EXTENT ALLOWABLE UNDER SUCH POLICIES,
INCLUDING RIGHTS OF INDEMNITY AND THE RIGHT TO BE DEFENDED BY OR AT THE EXPENSE
OF THE INSURER, WITH RESPECT TO ALL INJURIES, LOSSES, LIABILITIES, DAMAGES AND
EXPENSES INCURRED OR CLAIMED TO HAVE BEEN INCURRED PRIOR TO THE EFFECTIVE TIME
BY ANY PARTY OR ANY OF ITS AFFILIATES IN CONNECTION WITH THE FACET BUSINESS
(PROVIDED PDL SHALL HAVE EQUAL RIGHTS WITH RESPECT TO INDEMNITY AND THE RIGHT TO
BE DEFENDED TO THE EXTENT PRACTICAL AND APPROPRIATE) AND WHICH INJURIES, LOSSES,
LIABILITIES, DAMAGES AND EXPENSES MAY ARISE OUT OF INSURED OR INSURABLE
OCCURRENCES OR EVENTS UNDER ONE OR MORE OF THE PDL PRE-DISTRIBUTION POLICIES;
PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION 4.1 SHALL BE DEEMED TO
CONSTITUTE (OR TO REFLECT) THE ASSIGNMENT OF THE PDL PRE-DISTRIBUTION POLICIES,
OR ANY OF THEM, TO FACET.

 

4.2                                 POST-EFFECTIVE TIME CLAIMS.

 

(A)                                  IF, SUBSEQUENT TO THE EFFECTIVE TIME, ANY
PERSON SHALL ASSERT A CLAIM AGAINST FACET OR ITS AFFILIATES WITH RESPECT TO ANY
INJURY, LOSS, LIABILITY, DAMAGE OR EXPENSE INCURRED OR CLAIMED TO HAVE BEEN
INCURRED PRIOR TO THE EFFECTIVE TIME, INCLUDING CLAIMS RELATED TO THE FACET
BUSINESS, OR IN CONNECTION WITH THE DISTRIBUTION, AND SUCH INJURY, LOSS,
LIABILITY, DAMAGE OR EXPENSE MAY HAVE OR HAS ARISEN OUT OF INSURED OR INSURABLE
OCCURRENCES, CLAIMS OR EVENTS UNDER ONE OR MORE OF THE PDL PRE-DISTRIBUTION
POLICIES, PDL SHALL AT THE TIME SUCH CLAIM IS ASSERTED (EXCEPT TO THE EXTENT
INCONSISTENT WITH SECTION 4.1 AND TO THE EXTENT ALLOWABLE UNDER THE PDL
PRE-DISTRIBUTION POLICIES) BE DEEMED TO ASSIGN, WITHOUT NEED OF FURTHER
DOCUMENTATION, TO FACET OR ITS AFFILIATES, ANY AND ALL RIGHTS OF AN INSURED
PARTY UNDER THE APPLICABLE PDL PRE-DISTRIBUTION POLICY WITH RESPECT TO SUCH
ASSERTED CLAIM, INCLUDING RIGHTS OF INDEMNITY AND THE RIGHT TO BE DEFENDED

 

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BY OR AT THE EXPENSE OF THE INSURER; PROVIDED, HOWEVER, THAT NOTHING IN THIS
SECTION 4.2 SHALL BE DEEMED TO CONSTITUTE (OR TO REFLECT) THE ASSIGNMENT OF THE
PDL PRE-DISTRIBUTION POLICIES, OR ANY OF THEM, TO FACET.

 

(B)                                 IN THE EVENT THAT ANY PDL PRE-DISTRIBUTION
POLICY DOES NOT ALLOW SUCH ASSIGNMENT OF A CLAIM TO FACET OR ITS AFFILIATES, AT
FACET’S SOLE OPTION, COST AND EXPENSE, CLAIMS FOR COVERAGE OF INSURED FACET
LIABILITIES SHALL BE TENDERED BY PDL AS NECESSARY TO INVOKE THE BENEFIT OF THE
PDL PRE-DISTRIBUTION POLICIES.  IF SUCH INSURERS DO NOT PROMPTLY ACKNOWLEDGE
INSURANCE COVERAGE IN CONNECTION WITH SUCH INSURED FACET LIABILITIES, THEN, WITH
RESPECT TO SUCH INSURED FACET LIABILITIES, FACET, ON AN AS-INCURRED BASIS
(I) SHALL ADVANCE ALL AMOUNTS EXPENDED BY PDL, INCURRED AT THE REQUEST OF FACET,
FOR OR WITH RESPECT TO SUCH INSURED FACET LIABILITIES, INCLUDING ALL COSTS AND
EXPENSES IN CONNECTION WITH THE DEFENSE AND SETTLEMENT AND IN SATISFACTION OF
ANY JUDGMENT INCURRED, AND AMOUNTS SUFFICIENT TO COVER ANY LIABILITIES REQUIRED
TO BE PAID BY PDL OR ITS SUBSIDIARIES, AND (II) SHALL PAY ALL COSTS INCURRED IN
CONNECTION WITH PURSUING AND RECOVERING INSURANCE PROCEEDS WITH RESPECT TO THE
INSURED FACET LIABILITIES, BUT ONLY TO THE EXTENT SO REQUESTED BY FACET, WHICH
SHALL BE ENTITLED TO DIRECT SUCH RECOVERY EFFORTS.  ANY PAYMENTS MADE TO PDL OR
ITS SUBSIDIARIES BY FACET OR THE FACET SUBSIDIARIES ON ACCOUNT OF SUCH INSURED
FACET LIABILITIES SHALL BE DEEMED TO BE ADVANCES PURSUANT TO THIS SECTION 4.2. 
FACET AND THE FACET SUBSIDIARIES SHALL HAVE THE RIGHT TO RECOVER ANY ADVANCES
MADE PURSUANT TO SECTION 4.3 FROM PDL AND ITS SUBSIDIARIES, AND PDL AND ITS
SUBSIDIARIES SHALL HAVE THE OBLIGATION PROMPTLY TO REIMBURSE FACET AND THE FACET
SUBSIDIARIES FOR SUCH ADVANCES, SOLELY FROM THE INSURANCE PROCEEDS OF THE PDL
PRE-DISTRIBUTION POLICIES THAT COVER SUCH INSURED FACET LIABILITIES AND THAT ARE
RECEIVED BY PDL OR ITS SUBSIDIARIES.  PDL AND ITS SUBSIDIARIES (I) SHALL, AT ALL
TIMES UNTIL PAID TO FACET, HOLD INSURANCE PROCEEDS RECEIVED FOR OR WITH RESPECT
TO INSURED FACET LIABILITIES IN TRUST FOR THE BENEFIT OF FACET; AND (II) SHALL
PROMPTLY REMIT SUCH INSURANCE PROCEEDS TO FACET.

 

4.3                                 PDL POLICIES.  PDL SHALL, TO THE EXTENT THAT
THE PDL POLICIES COVER THE FACET LIABILITIES, AFTER DISCUSSION WITH FACET,
EITHER (A) MAINTAIN THE PDL POLICIES, (B) BUY REPLACEMENT INSURANCE, OR
(C) PURCHASE AN EXTENDED REPORTING PERIOD ENDORSEMENT FOR THE PDL POLICIES.  IN
EACH OF (A), (B) AND (C), SUCH COVERAGE SHALL BE AT THE EXPENSE OF FACET AND BE
OF A TYPE AND WITH A LIMIT AND TERMS AND CONDITIONS SIMILAR TO THOSE IN FORCE
UNDER THE PDL POLICIES AS OF THE EFFECTIVE TIME AND SHALL BE MAINTAINED FOR A
MINIMUM OF SIX (6) YEARS AFTER THE EFFECTIVE TIME.

 

ARTICLE V

 

RELEASES AND INDEMNIFICATION

 

5.1                                 RELEASE OF PRE-DISTRIBUTION CLAIMS.

 

(A)                                  EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT, FACET, TOGETHER WITH ITS SUBSIDIARIES,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS, DOES HEREBY, EFFECTIVE AS OF
THE EFFECTIVE TIME, REMISE, RELEASE AND FOREVER DISCHARGE PDL, ITS RESPECTIVE
AFFILIATES AND ALL PERSONS WHO AT ANY TIME PRIOR TO THE EFFECTIVE TIME WERE
STOCKHOLDERS, DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF PDL OR ANY

 

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OF ITS AFFILIATES (IN EACH CASE, IN THEIR RESPECTIVE CAPACITIES AS SUCH), IN
EACH CASE, TOGETHER WITH THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS,
SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES EXISTING OR ARISING FROM ANY ACTS
OR EVENTS OCCURRING OR FAILING TO OCCUR OR ALLEGED TO HAVE OCCURRED OR TO HAVE
FAILED TO OCCUR OR ANY CONDITIONS EXISTING OR ALLEGED TO HAVE EXISTED ON OR
BEFORE THE EFFECTIVE TIME.

 

(B)                                 EXCEPT AS OTHERWISE PROVIDED IN THIS
AGREEMENT OR ANY ANCILLARY AGREEMENT, PDL, TOGETHER WITH ITS RESPECTIVE
SUBSIDIARIES, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS, DOES HEREBY,
EFFECTIVE AS OF THE EFFECTIVE TIME, REMISE, RELEASE AND FOREVER DISCHARGE FACET,
ITS RESPECTIVE AFFILIATES AND ALL PERSONS WHO AT ANY TIME PRIOR TO THE EFFECTIVE
TIME WERE STOCKHOLDERS, DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF FACET OR ANY
OF ITS AFFILIATES (IN EACH CASE, IN THEIR RESPECTIVE CAPACITIES AS SUCH), IN
EACH CASE, TOGETHER WITH THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS,
SUCCESSORS AND ASSIGNS, FROM ALL LIABILITIES EXISTING OR ARISING FROM ANY ACTS
OR EVENTS OCCURRING OR FAILING TO OCCUR OR ALLEGED TO HAVE OCCURRED OR TO HAVE
FAILED TO OCCUR OR ANY CONDITIONS EXISTING OR ALLEGED TO HAVE EXISTED ON OR
BEFORE THE EFFECTIVE TIME.

 

(C)                                  NOTHING CONTAINED IN SECTION 5.1(A) AND
SECTION 5.1(B) SHALL IMPAIR OR OTHERWISE AFFECT ANY RIGHT OF ANY PARTY TO
ENFORCE THIS AGREEMENT OR ANY ANCILLARY AGREEMENT.  IN ADDITION, NOTHING
CONTAINED IN SECTION 5.1(A) AND SECTION 5.1(B) SHALL RELEASE ANY PARTY FROM:

 

(i)                                     any Liability assumed by, or
transferred, or assigned or allocated to, a Party or its respective Affiliates
pursuant to or contemplated by this Agreement or any Ancillary Agreement;

 

(ii)                                  any Liability provided in or resulting
from any other Contract or understanding that is entered into after the
Effective Time between one Party (and/or a member of such Party’s Affiliates),
on the one hand, and the other Party (and/or a member of such Party’s
Affiliates), on the other hand; and

 

(iii)                               any Liability that the Parties may have with
respect to indemnification or contribution pursuant to this Agreement or
otherwise for claims brought against the Parties by a Third Party, which
Liability shall be governed by the provisions of this Article V and, if
applicable, the appropriate provisions of the Ancillary Agreements.

 

(D)                                 EACH PARTY SHALL NOT, AND SHALL NOT PERMIT
ANY OF ITS SUBSIDIARIES TO, MAKE ANY CLAIM OR DEMAND, OR COMMENCE ANY ACTION
ASSERTING ANY CLAIM OR DEMAND, INCLUDING ANY CLAIM OF CONTRIBUTION OR
INDEMNIFICATION, AGAINST THE OTHER PARTY OR ANY MEMBER OF THE OTHER PARTY’S
AFFILIATES, OR ANY OTHER PERSON RELEASED PURSUANT TO SECTION 5.1(A) AND
SECTION 5.1(B), WITH RESPECT TO ANY AND ALL LIABILITIES RELEASED PURSUANT TO
SECTION 5.1(A) AND SECTION 5.1(B).  IF A PARTY BREACHES THIS SECTION 5.1(D),
SUCH BREACHING PARTY SHALL BE LIABLE FOR ALL RELATED EXPENSES, INCLUDING COURT
COSTS, ATTORNEYS’ FEES, AND ALL OTHER LEGAL EXPENSES OF THE OTHER PARTY.

 

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(E)                                  IT IS THE INTENT OF EACH PARTY, BY VIRTUE
OF THE PROVISIONS OF THIS SECTION 5.1, TO PROVIDE FOR A FULL AND COMPLETE
RELEASE AND DISCHARGE OF ALL LIABILITIES EXISTING OR ARISING FROM ALL ACTS AND
EVENTS OCCURRING OR FAILING TO OCCUR OR ALLEGED TO HAVE OCCURRED OR TO HAVE
FAILED TO OCCUR AND ALL CONDITIONS EXISTING OR ALLEGED TO HAVE EXISTED ON OR
BEFORE THE EFFECTIVE TIME, WHETHER KNOWN OR UNKNOWN, BETWEEN ONE PARTY (AND/OR
ANY AFFILIATE OF SUCH PARTY) AND THE OTHER PARTY (AND/OR A MEMBER OF SUCH OTHER
PARTY) (INCLUDING ANY CONTRACTUAL AGREEMENTS OR ARRANGEMENTS EXISTING OR ALLEGED
TO EXIST BETWEEN OR AMONG ANY SUCH MEMBERS ON OR BEFORE THE EFFECTIVE TIME),
EXCEPT AS OTHERWISE SET FORTH IN THIS SECTION 5.1.

 

(F)                                    IF ANY PERSON ASSOCIATED WITH A PARTY
(INCLUDING ANY DIRECTOR, OFFICER OR EMPLOYEE OF A PARTY) INITIATES AN ACTION
WITH RESPECT TO CLAIMS RELEASED BY THIS SECTION 5.1, THE PARTY WITH WHICH SUCH
PERSON IS ASSOCIATED SHALL INDEMNIFY THE OTHER PARTY AGAINST SUCH ACTION IN
ACCORDANCE WITH THE PROVISIONS SET FORTH IN THIS ARTICLE V.

 

(G)                                 AT ANY TIME, AT THE REQUEST OF A PARTY, EACH
PARTY SHALL, AND TO THE EXTENT PRACTICABLE, CAUSE EACH OTHER PERSON ON WHOSE
BEHALF IT RELEASED LIABILITIES PURSUANT TO THIS SECTION 5.1, TO EXECUTE AND
DELIVER RELEASES REFLECTING THE PROVISIONS HEREOF.

 

5.2                                 INDEMNIFICATION BY FACET.  EXCEPT AS
OTHERWISE PROVIDED IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, FOLLOWING THE
EFFECTIVE TIME, FACET SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS PDL AND ITS
AFFILIATES AND ALL PERSONS WHO AT ANY TIME PRIOR TO THE EFFECTIVE TIME WERE
DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF PDL OR ANY OF ITS AFFILIATES (IN
EACH CASE, IN THEIR RESPECTIVE CAPACITIES AS SUCH), IN EACH CASE, TOGETHER WITH
THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS
(COLLECTIVELY, THE “PDL INDEMNITEES”), FROM AND AGAINST ANY AND ALL LIABILITIES
AND RELATED LOSSES OF THE PDL INDEMNITEES RELATING TO, ARISING OUT OF OR
RESULTING FROM ANY OF THE FOLLOWING:

 

(A)                                  THE FAILURE OF FACET, AND ITS AFFILIATES OR
ANY OTHER PERSON TO PAY, PERFORM OR OTHERWISE PROMPTLY DISCHARGE AFTER THE
EFFECTIVE TIME ANY FACET LIABILITIES IN ACCORDANCE WITH THEIR RESPECTIVE TERMS;

 

(B)                                 THE FACET LIABILITIES (INCLUDING ANY
SUBSEQUENTLY IDENTIFIED FACET LIABILITIES UNDER SECTION 2.2(E));

 

(C)                                  ANY UNTRUE STATEMENT, ALLEGED UNTRUE
STATEMENT, OMISSION OR ALLEGED OMISSION OF A MATERIAL FACT IN THE FORM 10,
RESULTING IN A MISLEADING STATEMENT, WITH RESPECT TO ALL INFORMATION CONTAINED
IN THE FORM 10; AND

 

(D)                                 ANY BREACH BY FACET OF THIS AGREEMENT OR ANY
OF THE ANCILLARY AGREEMENTS.

 

5.3                                 INDEMNIFICATION BY PDL.  EXCEPT AS OTHERWISE
PROVIDED IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, FOLLOWING THE EFFECTIVE
TIME, PDL SHALL INDEMNIFY, DEFEND AND HOLD HARMLESS FACET, AND ITS AFFILIATES
AND ALL PERSONS WHO ARE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF FACET OR ANY
OF ITS AFFILIATES (IN EACH CASE, IN THEIR RESPECTIVE

 

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CAPACITIES AS SUCH), IN EACH CASE, TOGETHER WITH THEIR RESPECTIVE HEIRS,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “FACET
INDEMNITEES”), FROM AND AGAINST ANY AND ALL LIABILITIES AND RELATED LOSSES OF
THE FACET INDEMNITEES RELATING TO, ARISING OUT OF OR RESULTING FROM ANY OF THE
FOLLOWING ITEMS:

 

(A)                                  THE FAILURE OF PDL, ITS AFFILIATES OR ANY
OTHER PERSON TO PAY, PERFORM OR OTHERWISE PROMPTLY DISCHARGE AFTER THE EFFECTIVE
TIME ANY EXCLUDED LIABILITIES;

 

(B)                                 THE EXCLUDED LIABILITIES; AND

 

(C)                                  ANY BREACH BY PDL OF THIS AGREEMENT OR ANY
OF THE ANCILLARY AGREEMENTS.

 

5.4                                 REDUCTION FOR INSURANCE PROCEEDS AND OTHER
RECOVERIES.

 

(A)                                  THE AMOUNT THAT ANY PARTY IS REQUIRED TO
PROVIDE INDEMNIFICATION (THE “INDEMNIFYING PARTY”) TO OR ON BEHALF OF THE PARTY
ENTITLED TO SUCH INDEMNIFICATION (THE “INDEMNITEE”) PURSUANT TO THIS ARTICLE V,
SHALL BE REDUCED (RETROACTIVELY OR PROSPECTIVELY) BY INSURANCE PROCEEDS OR OTHER
AMOUNTS ACTUALLY RECOVERED FROM THIRD PARTIES ON BEHALF OF SUCH INDEMNITEE IN
RESPECT OF THE LIABILITY OR RELATED LOSS.  IF AN INDEMNITEE RECEIVES A PAYMENT
AS REQUIRED BY THIS AGREEMENT FROM AN INDEMNIFYING PARTY IN RESPECT OF ANY
LIABILITY OR RELATED LOSS (AN “INDEMNITY PAYMENT”) AND SUBSEQUENTLY RECEIVES
INSURANCE PROCEEDS IN RESPECT OF SUCH LIABILITY OR RELATED LOSS, THEN SUCH
INDEMNITEE SHALL HOLD SUCH INSURANCE PROCEEDS IN TRUST FOR THE BENEFIT OF THE
INDEMNIFYING PARTY (OR INDEMNIFYING PARTIES) AND SHALL PAY TO THE INDEMNIFYING
PARTY, AS PROMPTLY AS PRACTICABLE AFTER RECEIPT, A SUM EQUAL TO THE AMOUNT OF
SUCH INSURANCE PROCEEDS RECEIVED, UP TO THE AGGREGATE AMOUNT OF ANY PAYMENTS
RECEIVED FROM THE INDEMNIFYING PARTY PURSUANT TO THIS AGREEMENT IN RESPECT OF
SUCH INDEMNIFIABLE LOSS OF SUCH INSURANCE PROCEEDS.

 

(B)                                 AN INSURER WHO WOULD OTHERWISE BE OBLIGATED
TO PAY ANY CLAIM SHALL NOT BE RELIEVED OF THE RESPONSIBILITY WITH RESPECT
THERETO OR, SOLELY BY VIRTUE OF THE INDEMNIFICATION PROVISIONS HEREOF, HAVE ANY
SUBROGATION RIGHTS WITH RESPECT THERETO, IT BEING EXPRESSLY UNDERSTOOD AND
AGREED THAT NO INSURER OR ANY OTHER THIRD PARTY SHALL BE ENTITLED TO A
“WINDFALL” (I.E., A BENEFIT THEY WOULD NOT BE ENTITLED TO RECEIVE IN THE ABSENCE
OF THE INDEMNIFICATION PROVISIONS) BY VIRTUE OF THE INDEMNIFICATION PROVISIONS
HEREOF.  NOTWITHSTANDING THE FOREGOING, EACH PARTY SHALL BE REQUIRED TO USE
REASONABLE BEST EFFORTS TO COLLECT OR RECOVER ANY AVAILABLE INSURANCE PROCEEDS.

 

5.5                                 PROCEDURES FOR INDEMNIFICATION OF
THIRD-PARTY CLAIMS.

 

(A)                                  IF AN INDEMNITEE SHALL RECEIVE NOTICE OR
OTHERWISE LEARN OF THE ASSERTION BY A THIRD PARTY (INCLUDING ANY GOVERNMENTAL
ENTITY) OF ANY CLAIM OR OF THE COMMENCEMENT BY ANY SUCH PERSON OF ANY ACTION
(COLLECTIVELY, A “THIRD-PARTY CLAIM”) WITH RESPECT TO WHICH AN INDEMNIFYING
PARTY MAY BE OBLIGATED TO PROVIDE INDEMNIFICATION TO SUCH INDEMNITEE, SUCH
INDEMNITEE SHALL GIVE SUCH INDEMNIFYING PARTY AND EACH PARTY TO THIS AGREEMENT,
WRITTEN NOTICE THEREOF AS SOON AS REASONABLY PRACTICABLE, BUT NO LATER

 

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THAN THIRTY (30) DAYS AFTER BECOMING AWARE OF SUCH THIRD-PARTY CLAIM.  ANY SUCH
NOTICE SHALL DESCRIBE THE THIRD-PARTY CLAIM IN REASONABLE DETAIL.  IF ANY PARTY
SHALL RECEIVE NOTICE OR OTHERWISE LEARN OF THE ASSERTION OF A THIRD-PARTY CLAIM
WHICH MAY REASONABLY BE DETERMINED TO BE A LIABILITY OF THE PARTIES, SUCH PARTY
SHALL GIVE THE OTHER PARTY TO THIS AGREEMENT WRITTEN NOTICE THEREOF WITHIN
THIRTY (30) DAYS AFTER BECOMING AWARE OF SUCH THIRD-PARTY CLAIM.  ANY SUCH
NOTICE SHALL DESCRIBE THE THIRD-PARTY CLAIM IN REASONABLE DETAIL. 
NOTWITHSTANDING THE FOREGOING, THE FAILURE OF ANY INDEMNITEE OR OTHER PARTY TO
GIVE NOTICE AS PROVIDED IN THIS SECTION 5.5(A) SHALL NOT RELIEVE THE RELATED
INDEMNIFYING PARTY OF ITS OBLIGATIONS UNDER THIS ARTICLE V, EXCEPT TO THE EXTENT
THAT SUCH INDEMNIFYING PARTY IS ACTUALLY PREJUDICED BY SUCH FAILURE TO GIVE
NOTICE.

 

(B)                                 AN INDEMNIFYING PARTY SHALL BE ENTITLED TO
PARTICIPATE IN THE DEFENSE OF ANY THIRD-PARTY CLAIM, AT SUCH INDEMNIFYING
PARTY’S OWN EXPENSE AND BY SUCH INDEMNIFYING PARTY’S OWN COUNSEL; PROVIDED THAT
IF THE DEFENDANTS IN ANY SUCH CLAIM INCLUDE BOTH THE INDEMNIFYING PARTY AND ONE
OR MORE INDEMNITEES AND IN SUCH INDEMNITEES’ REASONABLE JUDGMENT A CONFLICT OF
INTEREST BETWEEN SUCH INDEMNITEES AND SUCH INDEMNIFYING PARTY EXISTS IN RESPECT
OF SUCH CLAIM, SUCH INDEMNITEES SHALL HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL
AND IN THAT EVENT THE REASONABLE FEES AND EXPENSES OF SUCH SEPARATE COUNSEL (BUT
NOT MORE THAN ONE SEPARATE COUNSEL REASONABLY SATISFACTORY TO THE INDEMNIFYING
PARTY) SHALL BE PAID BY SUCH INDEMNIFYING PARTY.  WITHIN THIRTY (30) DAYS AFTER
THE RECEIPT OF NOTICE FROM AN INDEMNITEE IN ACCORDANCE WITH SECTION 5.5(A) (OR
SOONER, IF THE NATURE OF SUCH THIRD-PARTY CLAIM SO REQUIRES), THE INDEMNIFYING
PARTY SHALL NOTIFY THE INDEMNITEE OF ITS ELECTION WHETHER THE INDEMNIFYING PARTY
WILL ASSUME RESPONSIBILITY FOR DEFENDING SUCH THIRD-PARTY CLAIM.  AFTER NOTICE
FROM AN INDEMNIFYING PARTY TO AN INDEMNITEE OF ITS ELECTION TO ASSUME THE
DEFENSE OF A THIRD-PARTY CLAIM, SUCH INDEMNITEE SHALL HAVE THE RIGHT TO EMPLOY
SEPARATE COUNSEL AND TO PARTICIPATE IN (BUT NOT CONTROL) THE DEFENSE,
COMPROMISE, OR SETTLEMENT THEREOF, BUT THE FEES AND EXPENSES OF SUCH COUNSEL
SHALL BE THE EXPENSE OF SUCH INDEMNITEE.

 

(C)                                  WITH RESPECT TO ANY THIRD-PARTY CLAIM, THE
INDEMNIFYING PARTY AND INDEMNITEES AGREE, AND SHALL CAUSE THEIR RESPECTIVE
COUNSEL (IF APPLICABLE), TO COOPERATE FULLY (IN A MANNER THAT WILL PRESERVE ALL
ATTORNEY-CLIENT PRIVILEGE OR OTHER PRIVILEGES) TO MITIGATE ANY SUCH CLAIM AND
MINIMIZE THE DEFENSE COSTS ASSOCIATED THEREWITH.

 

(D)                                 IF AN INDEMNIFYING PARTY FAILS TO ASSUME THE
DEFENSE OF A THIRD-PARTY CLAIM WITHIN THIRTY (30) DAYS AFTER RECEIPT OF WRITTEN
NOTICE OF SUCH CLAIM, THE INDEMNITEE WILL, UPON DELIVERING NOTICE TO SUCH EFFECT
TO THE INDEMNIFYING PARTY, HAVE THE RIGHT TO UNDERTAKE THE DEFENSE, COMPROMISE
OR SETTLEMENT OF SUCH THIRD-PARTY CLAIM ON BEHALF OF AND FOR THE ACCOUNT OF THE
INDEMNIFYING PARTY SUBJECT TO THE LIMITATIONS AS SET FORTH IN THIS SECTION 5.5;
PROVIDED, HOWEVER, THAT SUCH THIRD-PARTY CLAIM SHALL NOT BE COMPROMISED OR
SETTLED WITHOUT THE WRITTEN CONSENT OF THE INDEMNIFYING PARTY, WHICH CONSENT
SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED.  IF THE INDEMNITEE
ASSUMES THE DEFENSE OF ANY THIRD-PARTY CLAIM, IT SHALL KEEP THE INDEMNIFYING
PARTY REASONABLY INFORMED OF THE PROGRESS OF ANY SUCH DEFENSE, COMPROMISE OR
SETTLEMENT.  THE INDEMNIFYING PARTY SHALL REIMBURSE ALL SUCH COSTS AND EXPENSES
OF THE INDEMNITEE IN THE EVENT IT IS ULTIMATELY DETERMINED THAT THE INDEMNIFYING
PARTY IS OBLIGATED TO INDEMNIFY THE INDEMNITEE WITH RESPECT TO SUCH THIRD-PARTY
CLAIM.  IN NO EVENT SHALL AN INDEMNIFYING

 

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PARTY BE LIABLE FOR ANY SETTLEMENT EFFECTED WITHOUT ITS CONSENT, WHICH CONSENT
WILL NOT BE UNREASONABLY WITHHELD, DELAYED OR CONDITIONED.

 

5.6                                 ADDITIONAL MATTERS.

 

(A)                                  ANY CLAIM ON ACCOUNT OF A LIABILITY WHICH
DOES NOT RESULT FROM A THIRD-PARTY CLAIM SHALL BE ASSERTED BY WRITTEN NOTICE
GIVEN BY THE INDEMNITEE TO THE RELATED INDEMNIFYING PARTY.  SUCH INDEMNIFYING
PARTY SHALL HAVE A PERIOD OF THIRTY (30) DAYS AFTER THE RECEIPT OF SUCH NOTICE
WITHIN WHICH TO RESPOND THERETO.  IF SUCH INDEMNIFYING PARTY DOES NOT RESPOND
WITHIN SUCH SIXTY (60) DAY PERIOD, SUCH INDEMNIFYING PARTY SHALL BE DEEMED TO
HAVE ACCEPTED RESPONSIBILITY TO MAKE PAYMENT.  IF SUCH INDEMNIFYING PARTY
REJECTS SUCH CLAIM IN WHOLE OR IN PART, SUCH INDEMNITEE SHALL BE FREE TO PURSUE
SUCH REMEDIES AS MAY BE AVAILABLE TO SUCH PARTY AS CONTEMPLATED BY THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS.

 

(B)                                 IN THE EVENT OF PAYMENT BY OR ON BEHALF OF
ANY INDEMNIFYING PARTY TO ANY INDEMNITEE IN CONNECTION WITH ANY THIRD-PARTY
CLAIM, SUCH INDEMNIFYING PARTY SHALL BE SUBROGATED TO AND SHALL STAND IN THE
PLACE OF SUCH INDEMNITEE AS TO ANY EVENTS OR CIRCUMSTANCES IN RESPECT OF WHICH
SUCH INDEMNITEE MAY HAVE ANY RIGHT, DEFENSE OR CLAIM RELATING TO SUCH
THIRD-PARTY CLAIM AGAINST ANY CLAIMANT OR PLAINTIFF ASSERTING SUCH THIRD-PARTY
CLAIM OR AGAINST ANY OTHER PERSON.  SUCH INDEMNITEE SHALL COOPERATE WITH SUCH
INDEMNIFYING PARTY IN A REASONABLE MANNER, AND AT THE COST AND EXPENSE
(INCLUDING ALLOCATED COSTS OF IN-HOUSE COUNSEL AND OTHER IN-HOUSE PERSONNEL) OF
SUCH INDEMNIFYING PARTY, IN PROSECUTING ANY SUBROGATED RIGHT, DEFENSE OR CLAIM.

 

(C)                                  IN THE EVENT OF AN ACTION IN WHICH THE
INDEMNIFYING PARTY IS NOT A NAMED DEFENDANT, IF THE INDEMNIFYING PARTY SHALL SO
REQUEST, THE PARTIES SHALL ENDEAVOR TO SUBSTITUTE THE INDEMNIFYING PARTY FOR THE
NAMED DEFENDANT, AND ADD THE INDEMNIFYING PARTY AS A NAMED DEFENDANT IF AT ALL
PRACTICABLE.  IF SUCH SUBSTITUTION OR ADDITION CANNOT BE ACHIEVED FOR ANY REASON
OR IS NOT REQUESTED, THE NAMED DEFENDANT SHALL ALLOW THE INDEMNIFYING PARTY TO
MANAGE THE ACTION AS SET FORTH IN THIS SECTION AND SUBJECT TO SECTION 5.5 WITH
RESPECT TO LIABILITIES, THE INDEMNIFYING PARTY SHALL FULLY INDEMNIFY THE NAMED
DEFENDANT AGAINST ALL COSTS OF DEFENDING THE ACTION (INCLUDING COURT COSTS,
SANCTIONS IMPOSED BY A COURT, ATTORNEYS’ FEES, EXPERTS’ FEES AND ALL OTHER
EXTERNAL EXPENSES, AND THE ALLOCATED COSTS OF IN- HOUSE COUNSEL AND OTHER
IN-HOUSE PERSONNEL), THE COSTS OF ANY JUDGMENT OR SETTLEMENT, AND THE COST OF
ANY INTEREST OR PENALTIES RELATING TO ANY JUDGMENT OR SETTLEMENT.

 

5.7                                 SURVIVAL OF INDEMNITIES.  THE RIGHTS AND
OBLIGATIONS OF EACH PARTY AND THEIR RESPECTIVE INDEMNITEES UNDER THIS ARTICLE V
SHALL SURVIVE THE SALE OR OTHER TRANSFER BY ANY PARTY OR ITS AFFILIATES OF ANY
ASSETS OR BUSINESSES OR THE ASSIGNMENT BY IT OF ANY AND ALL LIABILITIES.

 

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ARTICLE VI

 

CERTAIN COVENANTS AND OTHER AGREEMENTS OF THE PARTIES

 

6.1                                 RESTRICTION ON EMPLOYEE SOLICITATION AND
HIRING.  FOLLOWING THE TRANSFER OF THE FACET EMPLOYEES FROM PDL TO FACET
PURSUANT TO THIS AGREEMENT, NONE OF PDL OR FACET OR THEIR RESPECTIVE
SUBSIDIARIES FROM THE DISTRIBUTION DATE THROUGH AND INCLUDING THE ONE (1) YEAR
ANNIVERSARY OF THE DISTRIBUTION DATE, WITHOUT PRIOR WRITTEN CONSENT OF THE
APPLICABLE PARTY, MAY SOLICIT, AID, ENCOURAGE OR INDUCE ANY EMPLOYEE TO
TERMINATE OR BREACH AN EMPLOYMENT, CONTRACTUAL OR OTHER RELATIONSHIP WITH THE
OTHER PARTY (OR ITS AFFILIATES), HIRE OR OTHERWISE EMPLOY ANY EMPLOYEE OF THE
OTHER PARTY; PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION 6.1 SHALL BE DEEMED
TO PROHIBIT ANY HIRING RESULTING FROM A GENERAL SOLICITATION FOR EMPLOYMENT
THROUGH ADVERTISEMENTS AND SEARCH FIRMS NOT SPECIFICALLY DIRECTED AT EMPLOYEES
OF SUCH OTHER APPLICABLE PARTY; PROVIDED, FURTHER, THAT THE APPLICABLE PARTY HAS
NOT ENCOURAGED OR ADVISED SUCH FIRM TO APPROACH ANY SUCH EMPLOYEE.

 

6.2                                 LEGAL NAMES.  AS SOON AS REASONABLY
PRACTICABLE AND IN ANY EVENT WITHIN ONE HUNDRED EIGHTY (180) DAYS AFTER THE
DISTRIBUTION DATE, EACH PARTY SHALL (I) CEASE TO MAKE ANY USE OF THE OTHER
PARTY’S RESPECTIVE NAME AND ANY TRADEMARKS RELATED THERETO OR CONTAINING OR
COMPRISING THE FOREGOING, INCLUDING ANY NAME OR MARK CONFUSINGLY SIMILAR THERETO
OR DILUTIVE THEREOF (THE “MARKS”), (II) TAKE ALL STEPS NECESSARY, AND FULLY
COOPERATE WITH THE OTHER PARTY AND ITS AFFILIATES, TO REMOVE THE MARKS FROM ANY
CORPORATE, TRADE, AND ASSUMED NAMES AND CANCEL ANY RECORDATION OF SUCH NAMES
WITH ANY GOVERNMENTAL ENTITY, AND CHANGE ANY CORPORATE, TRADE, AND ASSUMED NAME
THAT USES THE MARKS TO A NAME THAT DOES NOT INCLUDE THE MARKS OR ANY VARIATION,
DERIVATION, OR COLORABLE IMITATION THEREOF, AND (III) REMOVE, STRIKE OVER OR
OTHERWISE OBLITERATE ALL MARKS FROM (OR OTHERWISE NOT USE) IN ALL MATERIALS
OWNED BY EACH PARTY AND ITS AFFILIATES, INCLUDING WITHOUT LIMITATION, ANY
BUSINESS CARDS, STATIONARY, PACKAGING MATERIALS, DISPLAYS, SIGNS, PROMOTIONAL
AND ADVERTISING MATERIALS, AND OTHER MATERIALS OR MEDIA INCLUDING ANY INTERNET
USAGE OR DOMAIN NAMES THAT INCLUDE THE MARKS.

 

6.3                                 PREPARATION OF OPENING FACET BALANCE SHEET. 
AS SOON AS PRACTICABLE AFTER THE DISTRIBUTION DATE, THE PARTIES SHALL COOPERATE
IN THE PREPARATION OF THE OPENING FACET BALANCE SHEET, PREPARED ON THE SAME
BASIS AS THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF FACET,
DATED AS OF SEPTEMBER 30, 2008, INCLUDED IN THE FORM 10.

 

6.4                                 Amendment of Patent Licensing Master
Agreements.  The Parties shall cooperate and shall each use commercially
reasonable efforts to:

 

(A)                                  AMEND AND RESTATE THE PATENT LICENSING
MASTER AGREEMENT BETWEEN PDL AND GENENTECH, INC. (“GENENTECH”), DATED
SEPTEMBER 25, 1998, AS AMENDED (THE “GENENTECH PLMA”), AND CAUSE FACET TO BECOME
A PARTY TO AN AGREEMENT WITH GENENTECH THAT WILL ALLOW FACET TO OBTAIN LICENSES
TO THE GNE LICENSED PATENTS (AS THAT TERM IS DEFINED IN THE GENENTECH PLMA) ON
THE SAME TERMS AND CONDITIONS PROVIDED TO PDL UNDER THE GENENTECH PLMA; AND

 

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(b)                                 amend and restate the Patent Licensing
Master Agreement between PDL and Celltech Therapeutics Limited (now UCB
Celltech, “Celltech”), dated December 23, 1999 (the “Celltech PLMA”), and cause
Facet to become a party to an agreement with Celltech that will allow Facet to
obtain licenses to the Celltech Licensed Patents (as that term is defined in the
Celltech PLMA) on the same terms and conditions provided to PDL under the
Celltech PLMA.

 

6.5        PAYMENT OF ACCRUED MERIT BONUSES.  FACET SHALL RECOMMEND THE AMOUNT,
IF ANY, OF THE MERIT BONUS WITH RESPECT TO 2008 SERVICE TO PDL PRIOR TO THE
EFFECTIVE TIME (A “2008 MERIT BONUS”) EARNED BY EACH FACET EMPLOYEE AND EACH PDL
EMPLOYEE WHOSE EMPLOYMENT PDL TERMINATED AFTER JULY 1, 2008 BUT BEFORE THE
EFFECTIVE TIME BECAUSE PDL ELIMINATED SUCH EMPLOYEE’S EMPLOYMENT POSITION IN
CONNECTION WITH A REDUCTION IN FORCE (EACH SUCH TERMINATED EMPLOYEE, A
“TERMINATED TRANSITION EMPLOYEE”), WHICH RECOMMENDATION SHALL BE MADE IN A
MANNER CONSISTENT WITH THE TERMS OF PDL'S 2008 BONUS PROGRAM AND PDL'S PAST
PRACTICES.  ON OR BEFORE JANUARY 31, 2009, FACET SHALL DELIVER TO PDL THE LIST
OF FACET EMPLOYEES AND TERMINATED TRANSITION EMPLOYEES WHO HAVE EARNED A 2008
MERIT BONUS, ALONG WITH ANY SUPPORTING DOCUMENTATION REQUESTED BY PDL, WHICH
LIST SHALL SET FORTH OPPOSITE EACH SUCH PERSON'S NAME THE AMOUNT OF THE 2008
MERIT BONUS RECOMMENDED FOR EACH SUCH FACET EMPLOYEE OR TERMINATED TRANSITION
EMPLOYEE (THE “MERIT BONUS LIST”).  PDL WILL REVIEW THE MERIT BONUS LIST
PROMPTLY, CONSIDER THE RECOMMENDATIONS OF FACET AND PRIOR TO FEBRUARY 15, 2009,
PDL SHALL PAY TO EACH FACET EMPLOYEE AND EACH TERMINATED TRANSITION EMPLOYEE
LISTED ON THE MERIT BONUS LIST SUCH 2008 MERIT BONUS AS PDL DEEMS APPROPRIATE;
PROVIDED, HOWEVER, THAT THE AGGREGATE AMOUNT OF SUCH 2008 MERIT BONUSES WHICH
PDL SHALL PAY TO ALL FACET EMPLOYEES AND TERMINATED TRANSITION EMPLOYEES SHALL
BE SIX MILLION SIX HUNDRED SEVENTY-FIVE THOUSAND EIGHT HUNDRED TWENTY-EIGHT
DOLLARS ($6,675,828).

 

ARTICLE VII

 

CONFIDENTIALITY

 

7.1                                 CONFIDENTIALITY.

 

(A)                                  NOTWITHSTANDING ANY TERMINATION OF THIS
AGREEMENT AND SUBJECT TO SECTION 7.2, FOR A PERIOD OF SEVEN (7) YEARS AFTER THE
DISTRIBUTION DATE, EACH PARTY AGREES TO HOLD, AND TO CAUSE ITS RESPECTIVE
SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ACCOUNTANTS, COUNSEL AND
OTHER ADVISORS AND REPRESENTATIVES TO HOLD, IN STRICT CONFIDENCE, AND UNDERTAKE
ALL REASONABLE PRECAUTIONS TO SAFEGUARD AND PROTECT THE CONFIDENTIALITY OF, ALL
INFORMATION CONCERNING THE OTHER PARTY THAT IS IN ITS POSSESSION AFTER THE
DISTRIBUTION DATE OR FURNISHED BY THE OTHER PARTY OR ITS RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ACCOUNTANTS, COUNSEL AND OTHER ADVISORS AND
REPRESENTATIVES AT ANY TIME PURSUANT TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT
OR OTHERWISE, AND SHALL NOT USE ANY SUCH INFORMATION OTHER THAN FOR SUCH
PURPOSES AS SHALL BE EXPRESSLY PERMITTED HEREUNDER OR THEREUNDER, EXCEPT, IN
EACH CASE, TO THE EXTENT THAT SUCH INFORMATION HAS BEEN (I) IN THE PUBLIC DOMAIN
THROUGH NO FAULT OF SUCH PARTY, THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ACCOUNTANTS, COUNSEL AND OTHER ADVISORS AND REPRESENTATIVES,
(II) LAWFULLY ACQUIRED FROM OTHER SOURCES, WHICH ARE NOT BOUND BY A
CONFIDENTIALITY OBLIGATION, BY SUCH PARTY OR THEIR RESPECTIVE SUBSIDIARIES, OR
(III) INDEPENDENTLY GENERATED WITHOUT REFERENCE TO ANY PROPRIETARY OR
CONFIDENTIAL INFORMATION OF THE OTHER PARTY.

 

(B)                                 EACH PARTY AGREES NOT TO RELEASE OR
DISCLOSE, OR PERMIT TO BE RELEASED OR DISCLOSED, ANY SUCH INFORMATION TO ANY
OTHER PERSON, EXCEPT ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ACCOUNTANTS,
COUNSEL AND OTHER ADVISORS AND REPRESENTATIVES

 

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WHO NEED TO KNOW SUCH INFORMATION AND WHO ARE INFORMED AND ADVISED THAT THE
INFORMATION IS CONFIDENTIAL AND SUBJECT TO THE OBLIGATIONS HEREUNDER, EXCEPT IN
COMPLIANCE WITH SECTION 7.2.  WITHOUT LIMITING THE FOREGOING, WHEN ANY
INFORMATION IS NO LONGER NEEDED FOR THE PURPOSES CONTEMPLATED BY THIS AGREEMENT
OR ANY ANCILLARY AGREEMENT, EACH PARTY WILL PROMPTLY AFTER REQUEST OF THE OTHER
PARTY EITHER (I) DESTROY ALL COPIES OF THE INFORMATION IN SUCH PARTY’S
POSSESSION, CUSTODY OR CONTROL (INCLUDING ANY THAT MAY BE STORED IN ANY
COMPUTER, WORD PROCESSOR, OR SIMILAR DEVICE, TO THE EXTENT NOT COMMERCIALLY
IMPRACTICAL TO DESTROY SUCH COPIES) INCLUDING ANY COPIES, SUMMARIES, ANALYSES,
COMPILATIONS, REPORTS, EXTRACTS OR OTHER REPRODUCTIONS, IN WHOLE OR IN PART, OF
SUCH WRITTEN, ELECTRONIC OR OTHER TANGIBLE MATERIAL OR ANY OTHER MATERIALS IN
WRITTEN, ELECTRONIC OR OTHER TANGIBLE FORMAT BASED ON, REFLECTING OR CONTAINING
INFORMATION PREPARED BY SUCH PARTY, AND/OR (II) RETURN TO THE REQUESTING PARTY,
AT THE EXPENSE OF THE REQUESTING PARTY, ALL COPIES OF THE INFORMATION FURNISHED
TO SUCH PARTY BY OR ON BEHALF OF THE REQUESTING PARTY.  NOTWITHSTANDING THE
FOREGOING, EACH PARTY MAY MAINTAIN THE CONFIDENTIAL INFORMATION OF THE OTHER
PARTY THAT IS CONTAINED IN SUCH PARTY’S ELECTRONIC BACK-UP FILES THAT ARE
CREATED IN THE NORMAL COURSE OF BUSINESS PURSUANT TO SUCH PARTY’S STANDARD
PROTOCOL FOR PRESERVING ITS ELECTRONIC RECORDS.

 

7.2                                 PROTECTIVE ARRANGEMENTS.  IN THE EVENT THAT
EITHER PARTY OR THEIR RESPECTIVE AFFILIATES, EITHER (I) DETERMINES AFTER
CONSULTATION WITH COUNSEL, IN THE OPINION OF SUCH COUNSEL THAT IT IS REQUIRED BY
LAW TO DISCLOSE ANY INFORMATION, OR (II) RECEIVES ANY DEMAND UNDER LAWFUL
PROCESS OR FROM ANY GOVERNMENTAL ENTITY TO DISCLOSE OR PROVIDE INFORMATION OF
THE OTHER PARTY OR THEIR RESPECTIVE SUBSIDIARIES THAT IS SUBJECT TO THE
CONFIDENTIALITY PROVISIONS HEREOF, SUCH PARTY SHALL NOTIFY THE OTHER PARTY PRIOR
TO DISCLOSING OR PROVIDING SUCH INFORMATION AND SHALL COOPERATE AT THE EXPENSE
OF THE REQUESTING PARTY (AND TO THE EXTENT LEGALLY PERMISSIBLE) IN SEEKING ANY
REASONABLE PROTECTIVE ARRANGEMENTS REQUESTED BY SUCH OTHER PARTY.  SUBJECT TO
THE FOREGOING, THE PARTY THAT RECEIVED SUCH REQUEST MAY THEREAFTER (I) FURNISH
ONLY THAT PORTION OF THE CONFIDENTIAL INFORMATION THAT IS LEGALLY REQUIRED,
(II) GIVE NOTICE TO THE OTHER PARTY OF THE INFORMATION TO BE DISCLOSED AS FAR IN
ADVANCE AS IS PRACTICAL, AND (III) EXERCISE REASONABLE BEST EFFORTS TO OBTAIN
RELIABLE ASSURANCE THAT THE CONFIDENTIAL NATURE OF SUCH INFORMATION SHALL BE
MAINTAINED.

 

ARTICLE VIII

 

ACCESS TO INFORMATION AND SERVICES

 

8.1                                 PROVISION OF BOOKS AND RECORDS.

 

(A)                                  EXCEPT AS OTHERWISE PROVIDED IN ANY
ANCILLARY AGREEMENT, AS SOON AS PRACTICABLE AFTER THE DISTRIBUTION DATE, PDL AND
FACET SHALL COOPERATE TO PROVIDE THAT ORIGINALS OF FACET BOOKS AND RECORDS
(INCLUDING ALL DOCUMENTS AND ELECTRONICALLY STORED INFORMATION EXCEPT E-MAILS OR
OTHER ELECTRONIC CORRESPONDENCE NOT READILY AVAILABLE IN HARD COPY) WHICH SOLELY
RELATE TO FACET OR THE CONDUCT OF THE FACET BUSINESS, AS THE CASE MAY BE, UP TO
THE EFFECTIVE TIME, ARE IN THE POSSESSION OR CONTROL OF FACET OR A FACET
SUBSIDIARY.

 

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(B)                                 WITH RESPECT TO FACET BOOKS AND RECORDS
(INCLUDING E-MAILS AND OTHER ELECTRONIC CORRESPONDENCE NOT READILY AVAILABLE IN
HARD COPY) THAT RELATE TO BOTH THE FACET BUSINESS AND THE PDL BUSINESS (THE
“COMBINED BOOKS AND RECORDS”), (I) THE PARTIES SHALL USE GOOD FAITH EFFORTS TO
DIVIDE AS SOON AS PRACTICABLE BUT NO LATER THAN SIX (6) MONTHS FOLLOWING THE
DISTRIBUTION DATE SUCH COMBINED BOOKS AND RECORDS INTO THE BOOKS AND RECORDS
WHICH SOLELY RELATE TO PDL OR THE CONDUCT OF THE PDL BUSINESS AND THOSE THAT
RELATE SOLELY TO FACET AND THE FACET BUSINESS, AS THE CASE MAY BE, UP TO THE
EFFECTIVE TIME, AS APPROPRIATE, AND (II) TO THE EXTENT SUCH COMBINED BOOKS AND
RECORDS ARE NOT SO DIVIDED, EACH PARTY SHALL KEEP AND MAINTAIN COPIES OF SUCH
COMBINED BOOKS AND RECORDS AS REASONABLY APPROPRIATE UNDER THE CIRCUMSTANCES,
SUBJECT TO APPLICABLE CONFIDENTIALITY PROVISIONS HEREOF AND OF ANY ANCILLARY
AGREEMENT.

 

8.2                                 ACCESS TO INFORMATION.  EXCEPT AS OTHERWISE
PROVIDED IN ANY ANCILLARY AGREEMENT, AFTER THE DISTRIBUTION DATE, EACH PARTY
SHALL PROVIDE THE OTHER PARTY AND SUCH OTHER PARTY’S AUTHORIZED ACCOUNTANTS,
COUNSEL AND OTHER DESIGNATED REPRESENTATIVES REASONABLE ACCESS AND DUPLICATING
RIGHTS DURING NORMAL BUSINESS HOURS TO ALL RECORDS, BOOKS, CONTRACTS,
INSTRUMENTS, COMPUTER DATA AND OTHER DATA AND INFORMATION RELATING TO
PRE-DISTRIBUTION OPERATIONS OF THE FACET BUSINESS OR PDL BUSINESS, AS
APPLICABLE, OR WITHIN SUCH PARTY’S POSSESSION OR CONTROL OR SUCH OTHER
INFORMATION REASONABLY NECESSARY FOR THE PREPARATION, REVIEW OR AUDITING FOR
SPIN-OUT FINANCIALS FOR SUCH OTHER PARTY (INCLUDING USING REASONABLE BEST
EFFORTS TO GIVE ACCESS TO PERSONS OR FIRMS POSSESSING INFORMATION) INSOFAR AS
SUCH ACCESS IS REASONABLY REQUIRED BY SUCH OTHER PARTY FOR THE CONDUCT OF THE
FACET BUSINESS OR PDL BUSINESS, AS APPLICABLE, SUBJECT TO APPROPRIATE
RESTRICTIONS FOR CLASSIFIED OR PRIVILEGED INFORMATION.

 

8.3                                 PRODUCTION OF WITNESSES.  AT ALL TIMES AFTER
THE EFFECTIVE TIME, EACH OF FACET AND PDL SHALL USE REASONABLE BEST EFFORTS TO
MAKE AVAILABLE TO THE OTHER, UPON PRIOR WRITTEN REQUEST, ITS AND ITS
SUBSIDIARIES’ OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS AS WITNESSES TO THE
EXTENT THAT SUCH PERSONS MAY REASONABLY BE REQUIRED IN CONNECTION WITH ANY
ACTION.

 

8.4                                 PRIVILEGED MATTERS.  TO ALLOCATE THE
INTERESTS OF EACH PARTY WITH RESPECT TO PRIVILEGED INFORMATION, THE PARTIES
AGREE AS FOLLOWS:

 

(A)                                  PDL SHALL BE ENTITLED, IN PERPETUITY, TO
CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED
INFORMATION WHICH RELATES SOLELY TO THE PDL BUSINESS, WHETHER OR NOT THE
PRIVILEGED INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF PDL OR
FACET.  PDL SHALL ALSO BE ENTITLED, IN PERPETUITY, TO CONTROL THE ASSERTION OR
WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED INFORMATION THAT RELATES
SOLELY TO THE SUBJECT MATTER OF ANY CLAIMS CONSTITUTING LIABILITIES OF PDL AND
ITS AFFILIATES AND ALL PERSONS WHO AT ANY TIME PRIOR TO OR AS OF THE EFFECTIVE
TIME WERE DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES OF PDL OR ANY OF ITS
AFFILIATES (IN EACH CASE, IN THEIR RESPECTIVE CAPACITIES AS SUCH), IN EACH CASE,
TOGETHER WITH THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS, SUCCESSORS AND
ASSIGNS, NOW PENDING OR WHICH MAY BE ASSERTED IN THE FUTURE, IN ANY LAWSUITS OR
OTHER ACTIONS INITIATED AGAINST OR BY PDL, WHETHER OR NOT THE PRIVILEGED
INFORMATION IS IN THE POSSESSION OF OR UNDER THE CONTROL OF PDL OR FACET.

 

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(B)           FACET SHALL BE ENTITLED, IN PERPETUITY, TO CONTROL THE ASSERTION
OR WAIVER OF ALL PRIVILEGES IN CONNECTION WITH PRIVILEGED INFORMATION WHICH
RELATES SOLELY TO THE FACET BUSINESS, WHETHER OR NOT THE PRIVILEGED INFORMATION
IS IN THE POSSESSION OF OR UNDER THE CONTROL OF PDL OR FACET.  FACET SHALL ALSO
BE ENTITLED, IN PERPETUITY, TO CONTROL THE ASSERTION OR WAIVER OF ALL PRIVILEGES
IN CONNECTION WITH PRIVILEGED INFORMATION WHICH RELATES SOLELY TO THE SUBJECT
MATTER OF ANY CLAIMS CONSTITUTING FACET LIABILITIES, NOW PENDING OR WHICH MAY BE
ASSERTED IN THE FUTURE, IN ANY LAWSUITS OR OTHER ACTIONS INITIATED AGAINST OR BY
FACET, WHETHER OR NOT THE PRIVILEGED INFORMATION IS IN THE POSSESSION OF FACET
OR UNDER THE CONTROL OF PDL OR FACET.

 

(C)           PDL AND FACET AGREE THAT THEY SHALL HAVE A SHARED PRIVILEGE, WITH
EQUAL RIGHT TO ASSERT OR WAIVE, SUBJECT TO THE RESTRICTIONS OF THIS SECTION 8.4,
WITH RESPECT TO ALL PRIVILEGES NOT ALLOCATED PURSUANT TO THE TERMS OF
SECTIONS 8.4(A) AND (B).  ALL PRIVILEGES RELATING TO ANY CLAIMS, PROCEEDINGS,
LITIGATION, DISPUTES OR OTHER MATTERS WHICH INVOLVE BOTH PDL AND FACET IN
RESPECT OF WHICH PDL AND FACET RETAIN ANY RESPONSIBILITY OR LIABILITY UNDER THIS
AGREEMENT SHALL BE SUBJECT TO A SHARED PRIVILEGE.

 

(D)           NO PARTY MAY WAIVE ANY PRIVILEGE WHICH COULD BE ASSERTED UNDER ANY
APPLICABLE LAW, IF THE OTHER PARTY HAS A SHARED PRIVILEGE, WITHOUT THE CONSENT
OF THE OTHER PARTY, EXCEPT TO THE EXTENT REASONABLY REQUIRED IN CONNECTION WITH
ANY LITIGATION WITH THIRD PARTIES OR AS PROVIDED IN SECTION 8.4(E).  SUCH
CONSENT SHALL BE IN WRITING, OR SHALL BE DEEMED TO BE GRANTED UNLESS WRITTEN
OBJECTION IS MADE WITHIN TWENTY (20) DAYS AFTER NOTICE UPON THE OTHER PARTY
REQUESTING SUCH CONSENT.

 

(E)           IN THE EVENT OF ANY LITIGATION OR DISPUTE BETWEEN THE PARTIES AND
ANY OF ITS AFFILIATES, EITHER PARTY MAY WAIVE A PRIVILEGE IN WHICH THE OTHER
PARTY HAS A SHARED PRIVILEGE, WITHOUT OBTAINING THE CONSENT OF THE OTHER PARTY,
PROVIDED THAT SUCH WAIVER OF A SHARED PRIVILEGE SHALL BE EFFECTIVE ONLY AS TO
THE USE OF INFORMATION WITH RESPECT TO THE LITIGATION OR DISPUTE BETWEEN THE
PARTIES AND ANY OF ITS AFFILIATES, AND SHALL NOT OPERATE AS A WAIVER OF THE
SHARED PRIVILEGE WITH RESPECT TO THIRD PARTIES.

 

(F)            IF A DISPUTE ARISES BETWEEN THE PARTIES REGARDING WHETHER A
PRIVILEGE SHOULD BE WAIVED TO PROTECT OR ADVANCE THE INTEREST OF EITHER PARTY,
EACH PARTY AGREES THAT IT SHALL NEGOTIATE IN GOOD FAITH, SHALL ENDEAVOR TO
MINIMIZE ANY PREJUDICE TO THE RIGHTS OF THE OTHER PARTY, AND SHALL NOT
UNREASONABLY WITHHOLD CONSENT TO ANY REQUEST FOR WAIVER BY THE OTHER PARTY. 
EACH PARTY SPECIFICALLY AGREES THAT IT WILL NOT WITHHOLD CONSENT TO WAIVER FOR
ANY PURPOSE EXCEPT TO PROTECT ITS OWN LEGITIMATE INTERESTS.

 

(G)           UPON RECEIPT BY ANY PARTY OF ANY SUBPOENA, DISCOVERY OR OTHER
REQUEST WHICH ARGUABLY CALLS FOR THE PRODUCTION OR DISCLOSURE OF INFORMATION
SUBJECT TO A SHARED PRIVILEGE OR AS TO WHICH THE OTHER PARTY HAS THE SOLE RIGHT
HEREUNDER TO ASSERT A PRIVILEGE, OR IF ANY PARTY OBTAINS KNOWLEDGE THAT ANY OF
ITS CURRENT OR FORMER DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES HAS RECEIVED ANY
SUBPOENA, DISCOVERY OR OTHER REQUEST WHICH ARGUABLY CALLS FOR THE PRODUCTION OR
DISCLOSURE OF SUCH PRIVILEGED INFORMATION, SUCH PARTY SHALL PROMPTLY NOTIFY THE
OTHER PARTY OF THE EXISTENCE OF THE REQUEST AND SHALL PROVIDE THE OTHER PARTY A
REASONABLE OPPORTUNITY TO REVIEW THE INFORMATION AND TO ASSERT

 

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ANY RIGHTS IT MAY HAVE UNDER THIS SECTION 8.4 OR OTHERWISE TO PREVENT THE
PRODUCTION OR DISCLOSURE OF SUCH PRIVILEGED INFORMATION.

 

(H)           THE TRANSFER OF ALL INFORMATION PURSUANT TO THIS AGREEMENT IS MADE
IN RELIANCE ON THE AGREEMENT OF PDL AND FACET, AS SET FORTH IN THIS SECTION 8.4
AND ELSEWHERE IN THIS AGREEMENT, TO MAINTAIN THE CONFIDENTIALITY OF PRIVILEGED
INFORMATION AND TO ASSERT AND MAINTAIN APPLICABLE PRIVILEGES.  THE ACCESS TO
INFORMATION BEING GRANTED PURSUANT TO SECTIONS 8.1 AND 8.2, THE AGREEMENT TO
PROVIDE WITNESSES AND INDIVIDUALS PURSUANT TO SECTION 8.3 AND THE TRANSFER OF
PRIVILEGED INFORMATION BETWEEN THE PARTIES PURSUANT TO THIS AGREEMENT SHALL NOT
BE DEEMED A WAIVER OF ANY PRIVILEGE THAT HAS BEEN OR MAY BE ASSERTED UNDER THIS
AGREEMENT OR OTHERWISE.

 

ARTICLE IX

 

DISPUTE RESOLUTION

 

9.1           DISPUTES AND NEGOTIATION.  PDL AND FACET RECOGNIZE THAT DISPUTES
AS TO CERTAIN MATTERS MAY FROM TIME TO TIME ARISE DURING THE EFFECTIVENESS OF
THIS AGREEMENT AND THE ANCILLARY AGREEMENTS WHICH RELATE TO EITHER PARTY’S
RIGHTS AND OBLIGATIONS HEREUNDER OR THEREUNDER.  IT IS THE OBJECTIVE OF THE
PARTIES TO ESTABLISH PROCEDURES TO FACILITATE THE RESOLUTION OF DISPUTES ARISING
UNDER THIS AGREEMENT AND THE ANCILLARY AGREEMENTS IN AN EXPEDIENT MANNER BY
MUTUAL COOPERATION AND WITHOUT RESORT TO LITIGATION.  TO ACCOMPLISH THIS
OBJECTIVE, THE PARTIES AGREE TO FOLLOW THE PROCEDURES SET FORTH IN THIS
ARTICLE IX IF AND WHEN A DISPUTE ARISES UNDER THIS AGREEMENT OR THE ANCILLARY
AGREEMENTS.  IN THE EVENT OF A DISPUTE BETWEEN THE PARTIES, A DESIGNATED
REPRESENTATIVE OF EACH OF PDL AND FACET WILL MEET AS REASONABLY REQUESTED BY
EITHER PARTY TO REVIEW ANY SUCH DISPUTE.  IF THE DISAGREEMENT IS NOT RESOLVED BY
THE DESIGNATED REPRESENTATIVES BY MUTUAL AGREEMENT WITHIN THIRTY (30) DAYS AFTER
A MEETING TO DISCUSS THE DISAGREEMENT, EITHER PARTY MAY AT ANY TIME THEREAFTER
PROVIDE THE OTHER PARTY WRITTEN NOTICE SPECIFYING THE TERMS OF SUCH DISAGREEMENT
IN REASONABLE DETAIL.  UPON RECEIPT OF SUCH NOTICE, THE CHIEF EXECUTIVE OFFICERS
OF PDL AND FACET SHALL MEET AT A MUTUALLY AGREED UPON TIME AND LOCATION FOR THE
PURPOSE OF RESOLVING SUCH DISAGREEMENT.  THE CHIEF EXECUTIVE OFFICERS OF PDL AND
FACET WILL DISCUSS SUCH DISAGREEMENT AND/OR NEGOTIATE FOR A PERIOD OF UP TO
SIXTY (60) DAYS IN AN EFFORT TO RESOLVE SUCH DISAGREEMENT OR NEGOTIATE AN
ACCEPTABLE INTERPRETATION OR REVISION OF THE APPLICABLE PORTION OF THIS
AGREEMENT OR THE ANCILLARY AGREEMENTS MUTUALLY AGREEABLE TO BOTH PARTIES,
WITHOUT THE NECESSITY OF FORMAL PROCEDURES RELATING THERETO.  DURING THE COURSE
OF SUCH NEGOTIATIONS, THE PARTIES WILL REASONABLY COOPERATE AND PROVIDE
INFORMATION THAT IS NOT MATERIALLY CONFIDENTIAL IN ORDER THAT EACH OF THE
PARTIES MAY BE FULLY INFORMED WITH RESPECT TO THE ISSUES IN DISPUTE.  THE
INSTITUTION OF A FORMAL PROCEEDING, INCLUDING ARBITRATION UNDER SECTION 9.2, TO
RESOLVE THE DISAGREEMENT MAY OCCUR BY WRITTEN NOTICE TO THE OTHER PARTY ONLY
AFTER THE EARLIER OF: (I) THE CHIEF EXECUTIVE OFFICERS OF PDL AND FACET MUTUALLY
AGREEING THAT RESOLUTION OF THE DISAGREEMENT THROUGH CONTINUED NEGOTIATION IS
NOT LIKELY TO OCCUR; OR (II) THE EXPIRATION OF THE SIXTY (60) DAY NEGOTIATION
PERIOD.

 

9.2           DISPUTE RESOLUTION AND ARBITRATION.  EXCEPT AS PROVIDED IN THE
NON-EXCLUSIVE CROSS-LICENSE AGREEMENT FOR ANY DISPUTES CONCERNING INTELLECTUAL
PROPERTY,

 

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DISPUTES ARISING OUT OF, RELATING TO OR IN CONNECTION WITH THIS AGREEMENT OR THE
ANCILLARY AGREEMENTS, OR IN RELATIONS BETWEEN THE PARTIES WITH RESPECT TO THE
SUBJECT MATTER HEREOF, FOR ANY REASON OR UNDER ANY CIRCUMSTANCES, WILL BE
FINALLY SETTLED BY A SINGLE ARBITRATOR IN A BINDING ARBITRATION IN ACCORDANCE
WITH THE JUDICIAL ARBITRATION AND MEDIATION SERVICES (“JAMS”) COMPREHENSIVE
ARBITRATION RULES AND PROCEDURES (THE “JAMS RULES”).  UPON RECEIPT OF WRITTEN
NOTICE BY ONE PARTY TO THE OTHER OF THE EXISTENCE OF A DISPUTE, THE PARTIES
SHALL, WITHIN THIRTY (30) DAYS CONDUCT A MEETING OF ONE OR MORE SENIOR
EXECUTIVES OF EACH PARTY, WITH FULL SETTLEMENT AUTHORITY, IN AN ATTEMPT TO
RESOLVE THE DISPUTE.  EACH PARTY SHALL MAKE AVAILABLE APPROPRIATE PERSONNEL TO
MEET AND CONFER WITH THE OTHER PARTY REASONABLY WITHIN THE THIRTY-DAY PERIOD. 
UPON THE EXPIRATION OF THE THIRTY-DAY PERIOD, OR UPON THE TERMINATION OF
DISCUSSIONS BETWEEN THE SENIOR EXECUTIVES, EITHER PARTY MAY ELECT ARBITRATION OF
ANY DISPUTE BY WRITTEN NOTICE TO THE OTHER (THE “ARBITRATION NOTICE”).  THE
ARBITRATION SHALL BE HELD IN SAN FRANCISCO, CALIFORNIA BEFORE ONE (1) ARBITRATOR
FROM JAMS HAVING SUBSTANTIAL EXPERIENCE AS A JURIST AND MEDIATOR WITH
SIGNIFICANT DISPUTES IN THE BIOTECHNOLOGY AND/OR PHARMACEUTICALS INDUSTRY
SELECTED BY THE MUTUAL AGREEMENT OF THE FACET AND THE PDL; PROVIDED, HOWEVER,
THAT IF SUCH PARTIES CANNOT AGREE ON AN ARBITRATOR WITHIN THIRTY (30) DAYS OF
THE ARBITRATION NOTICE, EITHER PARTY MAY REQUEST JAMS SELECT THE ARBITRATOR, AND
JAMS SHALL SELECT AN ARBITRATOR PURSUANT TO THE PROCEDURE SET OUT BY THE JAMS
RULES; PROVIDED, HOWEVER, THAT THE ARBITRATOR SELECTED BY JAMS SHALL BE A FORMER
JUDGE WITH AT LEAST FIFTEEN (15) YEARS EXPERIENCE ADDRESSING AS A JURIST AND/OR
MEDIATOR SIGNIFICANT DISPUTES IN THE BIOTECHNOLOGY AND/OR PHARMACEUTICAL
INDUSTRY.  THE ARBITRATION SHALL BE ADMINISTERED BY JAMS PURSUANT TO ITS AAA
RULES.  JUDGMENT ON THE ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION.  THE ARBITRATOR MAY, IN THE ARBITRATION AWARD, ALLOCATE FOR
PAYMENT BY THE NON-PREVAILING PARTY ALL OR PART OF THE COSTS OF THE ARBITRATION,
INCLUDING FEES OF THE ARBITRATOR AND THE REASONABLE ATTORNEYS’ FEES AND COSTS
INCURRED BY THE PREVAILING PARTY.  THIS SECTION SHALL NOT PRECLUDE THE PARTIES
FROM SEEKING PROVISIONAL REMEDIES IN AID OF ARBITRATION FROM A COURT OF
APPROPRIATE JURISDICTION.  IN RESPECT OF ANY ACTIONS FOR INJUNCTIVE OR OTHER
EQUITABLE RELIEF HEREUNDER, ANY ACTION OR PROCEEDING MAY BE BROUGHT AGAINST ANY
PARTY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF SAN MATEO,
CALIFORNIA AND EACH OF THE PARTIES CONSENTS TO THE JURISDICTION OF SUCH COURTS
IN ANY SUCH ACTION OR PROCEEDING AND WAIVES ANY OBJECTION TO VENUE LAID THEREIN.

 

ARTICLE X

 

FURTHER ASSURANCES

 

10.1         FURTHER ASSURANCES.

 

(A)           IN ADDITION TO AND WITHOUT LIMITING THE ACTIONS SPECIFICALLY
PROVIDED IN THIS AGREEMENT, EACH OF THE PARTIES SHALL USE ITS REASONABLE BEST
EFFORTS, PRIOR TO, ON AND AFTER THE DISTRIBUTION DATE, TO TAKE, OR CAUSE TO BE
TAKEN, ALL ACTIONS, AND TO DO, OR CAUSE TO BE DONE, ALL THINGS, REASONABLY
NECESSARY, PROPER OR ADVISABLE UNDER APPLICABLE LAWS, REGULATIONS AND AGREEMENTS
TO CONSUMMATE AND MAKE EFFECTIVE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
AND THE ANCILLARY AGREEMENTS.

 

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(B)           WITHOUT LIMITING THE FOREGOING, PRIOR TO, ON AND AFTER THE
DISTRIBUTION DATE, EACH PARTY SHALL COOPERATE WITH THE OTHER PARTY, AND WITHOUT
ANY FURTHER CONSIDERATION, BUT AT THE EXPENSE OF THE REQUESTING PARTY, TO
EXECUTE AND DELIVER, OR USE ITS REASONABLE BEST EFFORTS TO CAUSE TO BE EXECUTED
AND DELIVERED, ALL INSTRUMENTS, INCLUDING INSTRUMENTS OF CONVEYANCE, ASSIGNMENT
AND TRANSFER, AND TO MAKE ALL FILINGS WITH, AND TO OBTAIN ALL CONSENTS,
APPROVALS OR AUTHORIZATIONS OF, ANY GOVERNMENTAL ENTITY OR ANY OTHER PERSON
UNDER ANY PERMIT, LICENSE, AGREEMENT, INDENTURE OR OTHER INSTRUMENT (INCLUDING
ANY CONSENTS OR GOVERNMENTAL APPROVALS), AND TO TAKE ALL SUCH OTHER ACTIONS AS
SUCH PARTY MAY REASONABLY BE REQUESTED TO TAKE BY THE OTHER PARTY FROM TIME TO
TIME, CONSISTENT WITH THE TERMS OF THIS AGREEMENT AND THE ANCILLARY AGREEMENTS,
IN ORDER TO EFFECTUATE THE PROVISIONS AND PURPOSES OF THIS AGREEMENT AND THE
ANCILLARY AGREEMENTS AND THE TRANSFERS OF THE FACET ASSETS AND THE ASSIGNMENT
AND ASSUMPTION OF THE FACET LIABILITIES AND THE OTHER TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY.

 

ARTICLE XI

 

TERMINATION

 

11.1         TERMINATION.  NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS
AGREEMENT (INCLUDING ARTICLE V (INDEMNIFICATION)) MAY BE TERMINATED AND THE
SEPARATION AND DISTRIBUTION MAY BE AMENDED, MODIFIED OR ABANDONED AT ANY TIME
PRIOR TO THE DISTRIBUTION BY AND IN THE SOLE DISCRETION OF PDL WITHOUT THE
APPROVAL OF FACET OR THE STOCKHOLDERS OF PDL.    IN THE EVENT OF SUCH
TERMINATION, NO PARTY SHALL HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY OTHER
PERSON.  AFTER THE DISTRIBUTION, THIS AGREEMENT MAY NOT BE TERMINATED EXCEPT BY
AN AGREEMENT IN WRITING SIGNED BY EACH PARTY.

 

ARTICLE XII

 

MISCELLANEOUS

 

12.1         GOVERNING LAW; JURISDICTION.  THIS AGREEMENT SHALL BE DEEMED TO
HAVE BEEN MADE IN THE STATE OF DELAWARE AND ITS FORM, EXECUTION, VALIDITY,
CONSTRUCTION AND EFFECT SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF.

 

12.2         ASSIGNABILITY.  THE PROVISIONS OF THIS AGREEMENT, EACH ANCILLARY
AGREEMENT AND THE OBLIGATIONS AND RIGHTS HEREUNDER SHALL BE BINDING UPON, INURE
TO THE BENEFIT OF AND BE ENFORCEABLE BY (AND AGAINST) THE PARTIES AND THEIR
RESPECTIVE SUCCESSORS AND PERMITTED TRANSFEREES AND ASSIGNS.  NOTWITHSTANDING
THE FOREGOING, THIS AGREEMENT SHALL NOT BE ASSIGNABLE, IN WHOLE OR IN PART, BY
ANY PARTY WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER PARTY, AND ANY ATTEMPT
TO ASSIGN ANY RIGHTS OR OBLIGATIONS ARISING UNDER THIS AGREEMENT WITHOUT SUCH
CONSENT SHALL BE NULL AND VOID; PROVIDED, HOWEVER, THAT A PARTY MAY ASSIGN THIS
AGREEMENT TO AN AFFILIATE CONTROLLED BY SUCH PARTY OR IN CONNECTION WITH A
MERGER TRANSACTION IN WHICH SUCH PARTY IS NOT THE SURVIVING ENTITY OR IN
CONNECTION WITH THE SALE OR OTHER TRANSFER BY SUCH PARTY OF ALL OR SUBSTANTIALLY
ALL OF ITS ASSETS, AND UPON THE EFFECTIVENESS OF SUCH ASSIGNMENT, THE ASSIGNING
PARTY SHALL BE RELEASED FROM ALL OF ITS OBLIGATIONS UNDER THIS AGREEMENT IF THE
SURVIVING ENTITY OF SUCH MERGER OR THE TRANSFEREE

 

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OF SUCH ASSETS SHALL AGREE IN WRITING, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO THE OTHER PARTY, TO BE BOUND BY ALL TERMS OF THIS AGREEMENT AS
IF NAMED AS A “PARTY” HERETO.

 

12.3         THIRD PARTY BENEFICIARIES.  EXCEPT FOR THE INDEMNIFICATION RIGHTS
UNDER THIS AGREEMENT OF ANY PDL INDEMNITEE OR FACET INDEMNITEE IN THEIR
RESPECTIVE CAPACITIES AS SUCH, (A) THE PROVISIONS OF THIS AGREEMENT AND EACH
ANCILLARY AGREEMENT ARE SOLELY FOR THE BENEFIT OF THE PARTIES AND ARE NOT
INTENDED TO CONFER UPON ANY PERSON EXCEPT THE PARTIES ANY RIGHTS OR REMEDIES
HEREUNDER, AND (B) THERE ARE NO THIRD PARTY BENEFICIARIES OF THIS AGREEMENT OR
ANY ANCILLARY AGREEMENT AND NEITHER THIS AGREEMENT NOR ANY ANCILLARY AGREEMENT
SHALL PROVIDE ANY THIRD PARTY WITH ANY REMEDY, CLAIM, LIABILITY, REIMBURSEMENT,
CLAIM OF ACTION OR OTHER RIGHT IN EXCESS OF THOSE EXISTING WITHOUT REFERENCE TO
THIS AGREEMENT OR ANY ANCILLARY AGREEMENT.

 

12.4         NOTICES.  ALL NOTICES AND OTHER COMMUNICATIONS GIVEN OR MADE
PURSUANT TO THIS AGREEMENT SHALL BE IN WRITING AND SHALL BE DEEMED EFFECTIVELY
GIVEN:  (A) UPON PERSONAL DELIVERY TO THE PARTY TO BE NOTIFIED, (B) WHEN SENT BY
CONFIRMED FACSIMILE, (C) FIVE (5) DAYS AFTER HAVING BEEN SENT BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID OR (C) ONE (1) DAY
AFTER DEPOSIT WITH A NATIONALLY RECOGNIZED OVERNIGHT COURIER, SPECIFYING NEXT
DAY DELIVERY, WITH WRITTEN VERIFICATION OF RECEIPT.  ALL COMMUNICATIONS SHALL BE
SENT TO THE RESPECTIVE PARTIES AT THE ADDRESSES SET FORTH BELOW (OR AT SUCH
OTHER ADDRESSES AS SHALL BE SPECIFIED BY NOTICE GIVEN IN ACCORDANCE WITH THIS
SECTION):

 

If to PDL, to:

 

PDL BioPharma, Inc.

 

 

Attention: General Counsel

 

 

932 Southwood Boulevard

 

 

Incline Village, NV 89451

 

 

Facsimile: 775-832-8501

 

 

 

 

 

 

with a copy to:

 

Shearman & Sterling LLP

(not to constitute notice)

 

Attention: Peter Lyons

 

 

599 Lexington Avenue

 

 

New York, NY 10022

 

 

Facsimile: 212-848-7179

 

 

 

 

 

 

If to Facet, to:

 

Facet Biotech Corporation

 

 

Attention: General Counsel

 

 

1400 Seaport Boulevard

 

 

Redwood City, CA  94063

 

 

Facsimile: 650-454-1468

 

 

 

 

 

 

with a copy to:

 

DLA Piper LLP (US)

(not to constitute notice)

 

Attention: Howard Clowes

 

 

153 Townsend Street, Suite 800

 

 

San Francisco, CA 94107-1957

 

 

Facsimile: 415- 659-7410

 

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12.5         SEVERABILITY.  IF ANY PROVISION OF THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT OR THE APPLICATION THEREOF TO ANY PERSON OR CIRCUMSTANCE IS DETERMINED
BY A COURT OF COMPETENT JURISDICTION TO BE INVALID, VOID OR UNENFORCEABLE, THE
REMAINING PROVISIONS HEREOF OR THEREOF, OR THE APPLICATION OF SUCH PROVISION TO
PERSONS OR CIRCUMSTANCES OR IN JURISDICTIONS OTHER THAN THOSE AS TO WHICH IT HAS
BEEN HELD INVALID OR UNENFORCEABLE, SHALL REMAIN IN FULL FORCE AND EFFECT AND
SHALL IN NO WAY BE AFFECTED, IMPAIRED OR INVALIDATED THEREBY, SO LONG AS THE
ECONOMIC OR LEGAL SUBSTANCE OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
AS THE CASE MAY BE, IS NOT AFFECTED IN ANY MANNER ADVERSE TO ANY PARTY.  UPON
SUCH DETERMINATION, THE PARTIES SHALL NEGOTIATE IN GOOD FAITH IN AN EFFORT TO
AGREE UPON SUCH A SUITABLE AND EQUITABLE PROVISION TO AFFECT THE ORIGINAL INTENT
OF THE PARTIES.

 

12.6         EXPENSES.  EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN
ANY ANCILLARY AGREEMENT, WHETHER OR NOT THE SEPARATION OR THE DISTRIBUTION IS
CONSUMMATED, ALL THIRD PARTY FEES, COSTS AND EXPENSES PAID OR INCURRED IN
CONNECTION WITH THE SEPARATION AND DISTRIBUTION SHALL BE PAID BY PDL BUT ONLY TO
THE EXTENT SUCH FEES ARISE OR WERE PAID OR INCURRED PRIOR TO THE EFFECTIVE TIME.

 

12.7         SURVIVAL OF COVENANTS.  EXCEPT AS EXPRESSLY SET FORTH IN ANY
ANCILLARY AGREEMENT, ALL COVENANTS, REPRESENTATIONS AND WARRANTIES CONTAINED IN
THIS AGREEMENT AND EACH ANCILLARY AGREEMENT, AND LIABILITY FOR THE BREACH OF ANY
OBLIGATIONS CONTAINED HEREIN, SHALL SURVIVE THE EFFECTIVE TIME AND REMAIN IN
FULL FORCE AND EFFECT IN ACCORDANCE WITH THEIR APPLICABLE TERMS.

 

12.8         WAIVERS OF DEFAULT.  THE FAILURE OF EITHER PARTY TO REQUIRE STRICT
PERFORMANCE BY THE OTHER PARTY OF ANY PROVISION IN THIS AGREEMENT OR ANY
ANCILLARY AGREEMENT WILL NOT WAIVE OR DIMINISH SUCH PARTY’S RIGHT TO DEMAND
STRICT PERFORMANCE THEREAFTER OF THAT OR ANY OTHER PROVISION HEREOF.

 

12.9         SPECIFIC PERFORMANCE.  THE PARTIES AGREE THAT IRREPARABLE DAMAGE
WOULD OCCUR IN THE EVENT THAT THE PROVISIONS OF THIS AGREEMENT WERE NOT
PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS.  ACCORDINGLY, IT IS HEREBY
AGREED THAT THE PARTIES SHALL BE ENTITLED TO (A) AN INJUNCTION OR INJUNCTIONS TO
ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS HEREOF IN ANY ARBITRATION IN
ACCORDANCE WITH ARTICLE IX, (B) PROVISIONAL OR TEMPORARY INJUNCTIVE RELIEF IN
ACCORDANCE THEREWITH IN THE DISTRICT OF DELAWARE, AND (III) ENFORCEMENT OF ANY
SUCH AWARD OF AN ARBITRAL TRIBUNAL IN ANY COURT OF THE UNITED STATES, OR ANY
OTHER ANY COURT OR TRIBUNAL SITTING IN ANY STATE OF THE UNITED STATES OR IN ANY
FOREIGN COUNTRY THAT HAS JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER
REMEDY OR RELIEF TO WHICH THEY MAY BE ENTITLED.

 

12.10       AMENDMENTS.  THIS AGREEMENT MAY NOT BE MODIFIED OR AMENDED EXCEPT BY
AN AGREEMENT IN WRITING SIGNED BY EACH OF THE PARTIES.

 

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12.11       SCHEDULES.  ALL SCHEDULES ATTACHED HERETO ARE HEREBY INCORPORATED IN
AND MADE A PART OF THIS AGREEMENT AS IF SET FORTH IN FULL HEREIN.  CAPITALIZED
TERMS USED IN THE SCHEDULES HERETO BUT NOT OTHERWISE DEFINED THEREIN WILL HAVE
THE RESPECTIVE MEANINGS ASSIGNED TO SUCH TERMS IN THIS AGREEMENT.

 

12.12       CONSTRUCTION.

 

(A)           THIS AGREEMENT HAS BEEN PREPARED JOINTLY AND SHALL NOT BE STRICTLY
CONSTRUED AGAINST EITHER PARTY.

 

(B)           FOR PURPOSES OF THIS AGREEMENT, WHENEVER THE CONTEXT REQUIRES: 
THE SINGULAR NUMBER SHALL INCLUDE THE PLURAL, AND VICE VERSA; THE MASCULINE
GENDER SHALL INCLUDE THE FEMININE AND NEUTER GENDERS; THE FEMININE GENDER SHALL
INCLUDE THE MASCULINE AND NEUTER GENDERS; AND THE NEUTER GENDER SHALL INCLUDE
THE MASCULINE AND FEMININE GENDERS.

 

(C)           EXCEPT AS OTHERWISE INDICATED, ALL REFERENCES IN THIS AGREEMENT TO
“ARTICLES,” “SECTIONS,” “EXHIBITS” AND “ATTACHMENTS” ARE INTENDED TO REFER TO
ARTICLES AND SECTIONS OF , AND EXHIBITS AND ATTACHMENTS, TO THIS AGREEMENT.

 

(D)           THE WORDS “INCLUDE” AND “INCLUDING,” SHALL NOT BE DEEMED TO BE
TERMS OF LIMITATION, BUT RATHER SHALL BE DEEMED TO BE FOLLOWED BY THE WORDS
“WITHOUT LIMITATION.”

 

(E)           THE TABLE OF CONTENTS AND HEADINGS CONTAINED IN THIS AGREEMENT ARE
FOR REFERENCE PURPOSES ONLY AND SHALL NOT AFFECT IN ANY WAY THE MEANING OR
INTERPRETATION OF THIS AGREEMENT.

 

12.13       COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT WHICH TOGETHER
SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.  ANY EXECUTED COUNTERPART
DELIVERED BY FACSIMILE OR OTHER MEANS OF ELECTRONIC TRANSMISSION SHALL BE DEEMED
AN ORIGINAL FOR ALL PURPOSES.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the Parties have caused this Separation and Distribution
Agreement to be executed by their duly authorized representatives as of the day
and year first above written.

 

 

 

 

PDL BioPharma, Inc.,

 

 

a Delaware corporation

 

 

 

 

 

 

 

 

By:

/s/ John P. McLaughlin

 

 

Name:

John P. McLaughlin

 

 

Title:

Senior Advisor

 

 

 

 

 

 

 

 

By:

/s/ Andrew Guggenhime

 

 

Name:

Andrew Guggenhime

 

 

Title:

Senior Vice President and

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

Facet Biotech Corporation,

 

 

a Delaware corporation

 

 

 

 

 

 

 

 

By:

/s/ Faheem Hasnain

 

 

Name:

Faheem Hasnain

 

 

Title:

President and Chief Executive Officer

 

SEPARATION AND DISTRIBUTION AGREEMENT

SIGNATURE PAGE

 

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