Exhibit
10.1


 


CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2
OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.


 


CO-DEVELOPMENT AND COMMERCIALIZATION AGREEMENT


 


This
Co-Development and Commercialization Agreement is entered into as of September
14, 2004 (the “Effective Date”), by and among
PROTEIN DESIGN LABS, INC., a Delaware corporation having offices at 34801
Campus Drive, Fremont, California  94555 (“PDL”),
and HOFFMANN-LA ROCHE INC., a New Jersey corporation having offices at 340
Kingsland Street, Nutley, New Jersey 07110 (“Roche-Nutley”)
and F. HOFFMANN-LA ROCHE LTD of Basel, Switzerland (“F. Roche”)
(Roche-Nutley and F. Roche are hereinafter individually and collectively
referred to as “Roche”).


 


RECITALS


 


Whereas, Roche
currently markets a humanized antibody against the interleukin-2 (IL-2)
receptor (Daclizumab), under the trademark Zenapax®, for the prevention of
acute organ rejection in patients receiving kidney transplants;


 


Whereas, pursuant to that certain Amended and
Restated Worldwide Agreement between PDL and Roche dated October 1, 2003 (the “Worldwide Daclizumab Agreement”), certain rights previously
granted to Roche reverted to PDL, and PDL acquired, among other rights, the
sole and exclusive worldwide rights to develop, market and sell Daclizumab for
autoimmune and other non-transplant indications, including asthma, and PDL has
the obligation to make certain royalty payments to Roche; and


 


Whereas, PDL and
Roche now wish to enter into a worldwide collaboration for the joint
development and commercialization of Daclizumab for the treatment of asthma and
other respiratory diseases.


 


Now therefore, the Parties
agree as follows:


 





















 


ARTICLE 1


 


DEFINITIONS


 


1.1          “Affiliate” means any corporation or other business
entity controlled by, controlling, or under common control with another entity,
with “control” meaning direct or indirect
beneficial ownership of more than fifty percent (50%) of the voting stock of,
or more than a fifty percent (50%) interest in the income of, such corporation
or other business entity. 
Notwithstanding anything to the contrary in this paragraph, Genentech,
Inc., a Delaware corporation, and Chugai Pharmaceutical Company, a Japanese
company, shall not be deemed an Affiliate of Roche unless Roche provides
written notice to PDL of its desire to include Genentech and/or Chugai as an
Affiliate.


 


1.2          “Asthma Field” means the treatment and/or prevention of
asthma or other respiratory diseases.


 


1.3          “Autoimmune Indications” or “AI”
means all indications that involve pathogenic consequences,
including tissue injury, produced by autoantibodies or autoreactive T
lymphocytes interacting with self epitopes, i.e., autoantigens. 
Autoimmune Indications shall include, without limitation, asthma, psoriasis,
rheumatoid arthritis, systemic lupus erythematosus, scleroderma, juvenile
rheumatoid arthritis, polymytosis, Type I diabetes, sarcoidosis, Sjogrens syndrome,
chronic active non-pathogenic hepatitis, non-infectious uveitis (Behcets),
aplastic anemia, regional non-pathogenic enteritis (including ulcerative
colitis, Crohn’s Disease and inflammatory bowel disease), Kawasaki’s disease,
post-infectious encephalitis, multiple sclerosis, and tropic spastic
paraparesis.


 


1.4          “Change of Control” shall mean a transaction in which a
Party: (a) sells, conveys or otherwise disposes of all or substantially all of
its property or business; or (b)(i) merges or consolidates with any other
entity (other than a wholly-owned subsidiary of such Party); or (ii) effects
any other transaction or series of transactions; in each case of clause (i) or
(ii), such that the stockholders of such Party immediately prior thereto, in


 


2





















 


the aggregate, no longer own,
directly or indirectly, beneficially or legally, at least fifty percent (50%)
of the outstanding voting securities or capital stock of the surviving entity
following the closing of such merger, consolidation, other transaction or
series of transactions.


 


1.5          “Collaboration Inventions” means all inventions that (a) relate to
or are useful with [*] that [*] the [*]
and (b) are made during the term of this Agreement by employees of Roche or
persons contractually required to assign or license patent rights covering such
inventions to Roche, in the course of performing Roche’s obligations, or
exercising Roche’s rights, under this Agreement.


 


1.6          “Combination Product” means a Licensed Product that contains
one or more therapeutically active ingredients in addition to Daclizumab.


 


1.7          “Commercial Supply Agreement” shall have
the meaning set forth in Section 8.2.


 


1.8          “Commercialization Plan” shall have the meaning set forth in
Section 6.1.


 


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


 


1.10        “Co-Promotion Term” shall have the meaning set forth in
Section 6.4.


 


1.11        “Cost of Goods Sold” or “COGS” means,
with respect to a Licensed Product (in bulk, vialed or finished product form,
as the case may be), the sum of the following, all of which shall be calculated
in accordance with U.S. generally accepted accounting principles consistently
applied by PDL to all of its products:


 


3





















 


(a)           [*]


 


provided, however, that
Cost of Goods Sold shall not include any costs or expenses included or
includible in Distribution Expenses.


 


1.12        “Daclizumab” means that certain humanized murine
monoclonal antibody directed against the p55 component of IL-2R and given the
generic name “Daclizumab” by the United States Adopted Names Council.  Daclizumab does not include fragments of such
antibody or any antibodies having a different amino acid sequence from such
antibody.


 


1.13        “Data Services” shall have the meaning set forth in
Section 7.6(b).


 


1.14        “Detail” or “Detailing” shall mean a [*] presentation by a Party’s sales representative, to one or
several medical professional(s) having prescribing authority in the U.S.
Territory in the Asthma Field, as well as to other individuals or entities that
have significant impact or influence on prescribing decisions in the U.S.
Territory in the Asthma Field, as identified in the Commercialization Plan
approved by the JDC (collectively, the “Target Audience”),
in which the principal objective of such presentation is to emphasize the
features and function of such Licensed Product in the Asthma Field.  [*]


 


1.15        “Development” means all activities that relate to (a)
obtaining, maintaining or expanding Regulatory Approval of a Licensed Product
in the Asthma Field or (b) developing the ability to manufacture the same.  This includes, without limitation, (i)
preclinical testing, toxicology, formulation, manufacturing-related technology
development, and clinical studies of a Licensed Product in the Asthma Field;
(ii) preparation, submission, review, and development of data or information
for the purpose of submission to a governmental authority to obtain and/or
maintain Regulatory Approval of a Licensed Product in the Asthma Field, and
outside counsel regulatory legal services related thereto; and (iii)
manufacturing process development and scale-up, bulk production and fill/finish
work associated with the supply of Licensed Products


 


4





















 


for preclinical and clinical
studies, and related quality assurance technical support activities.


 


1.16        “Development Expenses” shall have the meaning set forth in
Exhibit A.


 


1.17        “Development Plan” shall have the meaning set forth in
Section 4.1.


 


1.18        “Diligent Efforts” means the carrying out of obligations or
tasks in a diligent, sustained manner using efforts equivalent to the efforts a
Party devotes to a product of similar market potential, profit potential and
strategic value resulting from its own research efforts, based on conditions
then prevailing.  Diligent Efforts requires
that the Party:  (a) promptly assign
responsibility for such obligations to specific employee(s) who are held
accountable for progress and monitor such progress on an on-going basis, (b)
set and consistently seek to achieve specific and meaningful objectives for
carrying out such obligations, and (c) consistently make and implement
decisions and allocate resources designed to advance progress with respect to
such objectives.  The Parties acknowledge
that Roche does not, as of the Effective Date, develop, register, market, and
sell its products in every country in the Territory, and it is understood that
the exercise by Roche of Diligent Efforts shall be judged in light of this
fact.


 


1.19        “Distribution Expenses” means the costs, excluding
administration costs, incurred by a Party or for its account, specifically
attributable to the distribution of a Licensed Product in the U.S. Territory,
to be calculated in the manner set forth in Exhibit A.


 


1.20        “Dollars” or “$” means the legal tender of the U.S.


 


1.21        “Drug Approval Application” means a Biologics
License Application or an equivalent application for Regulatory Approval
required before commercial sale or use of a Licensed Product in the Asthma
Field in a regulatory jurisdiction.


 


1.22        “European Union” means all countries that are officially
recognized as member states of the European Union.  There are twenty-five (25) such member states


 


5





















 


as of the Effective Date,
namely:  Austria, Belgium, Cyprus, Czech
Republic, Denmark, Estonia, Germany, Greece, Finland, France, Hungary, Ireland,
Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal,
Slovakia, Slovenia, Spain, Sweden, and United Kingdom.


 


1.23        “Exclusive Field” means, with respect to Roche, Roche’s
Exclusive Field and, with respect to PDL, PDL’s Exclusive Field.


 


1.24        “Executive Officers” means, for Roche, the Head of the Roche
Pharma Division (or such individual’s designee), and, for PDL, the Chief
Executive Officer of PDL (or such individual’s designee).  If either position is vacant or either
position does not exist, then the person having the most nearly equivalent
position (or such individual’s designee) shall be deemed to be the Executive
Officer of the relevant Party.


 


1.25        “Failure to Supply” shall have the meaning set forth in
Section 8.2.


 


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


 


1.27        “First Commercial Sale” means,
for each Licensed Product in each country, the first sale to a Third Party of
the Licensed Product in the Asthma Field in the country by a Party, its
Affiliate, or its sublicensee, after the granting by the relevant governing
authorities of all Regulatory Approvals required for commercial sale of the
Licensed Product in the Asthma Field in such country.


 


1.28        “FTE” means the equivalent of one employee
working full time in a Development-related capacity, for or on behalf of a
Party for one 12-month period.


 


1.29        “Generic Product” means a Third Party product (a) that
contains Daclizumab or an antibody with a substantially identical amino acid
sequence, whether or not the glycosylation pattern of such antibody is
identical to Daclizumab; and (b) that has received Regulatory Approval for use
in the Asthma Field through an expedited regulatory approval process governing
approval of generic biologics. 
Notwithstanding


 


6





















 


the foregoing, Generic Products
do not include Licensed Products sold by either Party’s sublicensees or
distributors pursuant to this Agreement or the Worldwide Daclizumab Agreement
or otherwise sold for use outside of the Asthma Field.


 


1.30        “Global Net Sales” means PDL Net Sales plus Roche Net Sales.


 


1.31        “Gross Margin” means, with respect to a particular
calendar quarter during the Co-Promotion Term, PDL Adjusted Gross Sales for
such quarter minus COGS for Licensed Products sold in the U.S. Territory during
such quarter.


 


1.32        “Incremental Development Expenses” means the
expenses incurred by Roche or for its account that are attributable to Development
performed solely in support of Regulatory Approval with respect to the ROW
Territory and that were not requested by the JDC to support Regulatory Approval
with respect to the U.S. Territory or the European Union.  Such expenses shall include the transfer
price paid by Roche, pursuant to Section 8.1(c), for Licensed Product supplied
by PDL for such Development.


 


1.33        “Information” means information, results and data of
any type whatsoever, in any tangible or intangible form whatsoever, including
without limitation, databases, inventions, practices, methods, techniques,
specifications, formulations, formulae, knowledge, know-how, skill, experience,
test data including pharmacological, physical, biological, chemical,
biochemical, toxicological, clinical and veterinary test data, analytical and
quality control data, stability data, studies and procedures, dosage regimens
and control assays, financial information, procurement requirements, purchasing
information, manufacturing information, customer lists, business and
contractual relationships, business forecasts, sales and merchandising
information, marketing plans, and patent and other legal information or
descriptions.


 


1.34        “Joint Development Committee” or “JDC” shall have the meaning set forth in Section 3.6.


 


7





















 


1.35        “Joint Finance Committee” or “JFC” means
that subcommittee of the JSC established pursuant to Section 3.3(g).


 


1.36        “Joint Inventions” means any inventions:


 


(a)           related to
humanized or chimeric antibodies that bind to IL-2R, whether patented or not,
that are jointly made during the period beginning on January 31, 1989 and
continuing until the Effective Date by at least one (1) PDL employee or person
contractually required to assign or license patent rights covering such
inventions to PDL and at least one (1) Roche employee or person contractually
required to assign or license patent rights covering such inventions to Roche;
or


 


(b)           related to
antibodies that bind to IL-2R, whether patented or not, that are jointly made
during the period beginning on the Effective Date and continuing until the
expiration or termination of this Agreement by at least one (1) PDL employee or
person contractually required to assign or license patent rights covering such
inventions to PDL and at least one (1) Roche employee or person contractually
required to assign or license patent rights covering such inventions to Roche.


 


1.37        “Joint Patent Committee” or “JPC” means
that subcommittee of the JSC established pursuant to Section 3.3(f).


 


1.38        “Joint Roche-PDL Patents” means all patent applications and
patents claiming Joint Inventions.


 


1.39        “Joint Steering Committee” or “JSC” shall
have the meaning set forth in Section 3.1.


 


1.40        “Know-How” means all inventions, discoveries, trade
secrets, information, experience, data, formulas, procedures and results
related to antibodies that bind to IL-2R, and improvements thereon, including
any information regarding the physical, chemical, biological, toxicological,
pharmacological, clinical, and veterinary data, dosage regimens, control assays
and specifications of Licensed Products.


 


8





















 


1.41        “Licensed Product” shall mean any pharmaceutical product
having as an active ingredient Daclizumab.


 


1.42        “Major Pharmaceutical Company” shall mean
any entity that, together with its Affiliates, has annual worldwide
pharmaceutical sales of [*] or more for
the last full fiscal year preceding the date of consummation of a Change of
Control.


 


1.43        “Major Regulatory Jurisdiction” means the
U.S., the United Kingdom, France, Italy, Germany, Spain and Japan.


 


1.44        “Non-Registrational Trial” means a clinical trial in the Asthma
Field for a Licensed Product that (a) is initiated or ongoing after completion of
the first Phase III Trial, and (b) is not conducted to obtain, maintain or
expand Regulatory Approval of the Licensed Product in the Asthma Field.  A Non-Registrational Trial shall be deemed
initiated upon the enrollment of the first patient.


 


1.45        “Operating Expenses” shall have the meaning set forth in
Exhibit A.


 


1.46        “Other Indications” means all indications other than
Transplant Indications and Autoimmune Indications.


 


1.47        “Party” means PDL or Roche individually, and “Parties” means PDL and Roche collectively.


 


1.48        “PDL Adjusted Gross Sales” means the gross invoice price of
Licensed Products sold or otherwise disposed of for consideration in the U.S.
Territory by PDL, its Affiliates or sublicensees (other than Roche and its
Affiliates hereunder) to independent Third Parties (not Affiliates of the
seller) for use in the Asthma Field, reduced by the following amounts: (a) the
amounts actually allowed as volume or quantity discounts, rebates, price
reductions, or returns (including withdrawals and recalls); and (b) sales,
excise and turnover taxes imposed directly on and actually paid by PDL, its
Affiliates or sublicensees.


 


9





















 


In the case of the sale by PDL, its
Affiliates or sublicensees (other than Roche and its Affiliates hereunder) in
the Asthma Field in the U.S. Territory of Combination Products for which a
Licensed Product and each of the other therapeutically active ingredients
contained in the Combination Product have established market prices when sold
separately, PDL Adjusted Gross Sales shall be determined by multiplying the PDL
Adjusted Gross Sales for each such Combination Product by a fraction, the
numerator of which shall be the established market price for the form and
formulation of the Licensed Product contained in the Combination Product, and
the denominator of which shall be the sum of the established market prices for
such form and formulation of the Licensed Product plus the other active
ingredients contained in the Combination Product.  When such separate
market prices are not established, then the Parties shall negotiate in good
faith to determine the method of calculating PDL Adjusted Gross Sales for such
Combination Product.


 


If PDL or its Affiliates or sublicensees
receive non-cash consideration for Licensed Products sold or otherwise
transferred to an independent Third Party (not an Affiliate of the seller or
transferor), the fair market value of such non-cash consideration on the date
of the transfer will be the gross invoice price that PDL currently charges
independent Third Parties and shall be deemed the PDL Adjusted Gross Sales for
such Licensed Products sold or otherwise transferred.


 


1.49        “PDL House Marks” means the corporate name of PDL and
associated logos and designs.


 


1.50        “PDL Inventions” means all inventions made during the
term of this Agreement by employees of PDL or persons contractually required to
assign or license patent rights covering such inventions to PDL, either alone
or together with Third Parties, that (a) are not PDL Know-How or PDL Patents
and (b) relate to Licensed Products or antibodies that bind to IL-2R.


 


1.51        “PDL Know-How” means, except as otherwise set forth in
this Section 1.51, all Know-How that is possessed, as of the Effective
Date, by PDL or by any entity


 


10





















 


that is a PDL Affiliate as of
the Effective Date, or that is developed during the term of this Agreement by
PDL or by any entity while it is a PDL Affiliate, and which Know-How is
Controlled by PDL or its Affiliates and is reasonably required or useful for
seeking registration of, using or selling Licensed Products in the Asthma
Field; provided, however, that PDL Know-How excludes any know-how of any kind
concerning generic methods of manufacturing, designing, developing or preparing
antibodies including, but not limited to, methods of humanizing antibodies,
methods of reducing the immunogenicity of antibodies, and methods of increasing
the affinity of antibodies.


 


1.52        “PDL Net Sales” means the amount determined by deducting [*] from PDL Adjusted Gross Sales to
account for standard deductions from gross sales such as shipping, insurance,
taxes (to the extent not included in calculations of PDL Adjusted Gross Sales).


 


1.53        “PDL Patents” means all patent applications owned or
Controlled by PDL or its Affiliates alone or with a Third Party (“Sole PDL Patents”) and all Joint Roche-PDL
Patents claiming Licensed Products or their manufacture or use in the Asthma
Field, which are filed prior to or during the term of this Agreement in the
U.S. or any foreign jurisdiction, including any addition, continuation,
continuation-in-part or division thereof or any substitute application
therefor; any patent issued with respect to such patent application, any reissue,
extension or patent term extension of any such patent, and any confirmation
patent or registration patent or patent of addition based on any such patent;
and any other U.S. or foreign patent or inventor’s certificate covering
Licensed Products in the Asthma Field.


 


1.54        “PDL Technology” means PDL Know-How and PDL Patents.


 


1.55        “PDL Trademarks” means all trademarks owned by PDL
(except for any PDL House Marks or trade names) and used by PDL or its
sublicensee(s) in connection with the marketing, promotion, and sale of
Licensed Products in the Asthma Field and all trademark registrations and
applications therefor, and all goodwill associated therewith.  Prior to any
assignment of the Zenapax Trademark to PDL pursuant to the


 


11





















 


Worldwide Daclizumab Agreement,
the PDL Trademarks shall not include the Zenapax Trademark.  If the Zenapax Trademark is assigned to PDL
pursuant to the Worldwide Daclizumab Agreement, then the term “PDL Trademarks”
shall also include the trademark “Zenapax®,” and all trademark registrations
and applications therefor, and all goodwill associated therewith.


 


1.56        “PDL’s Exclusive Field” means the Autoimmune Indications
(excluding the Asthma Field), Other Indications and, upon the first to occur of
the Reversion Effective Date or the Put Right Effective Date, the Transplant
Indications.


 


1.57        “Phase III Trial” means a human clinical trial in the
Asthma Field performed to gain evidence of the efficacy of a Licensed Product
in a target population, and to obtain expanded evidence of safety for such
Licensed Product that is needed to evaluate the overall benefit-risk
relationship of such Licensed Product and provide an adequate basis for
physician labeling, as described in 21 CFR 312.21(c).  For the purposes of Section 9.2, a Phase III
Trial shall be deemed initiated upon the dosing of the first patient.


 


1.58        “Phase IV Trial” means a clinical trial in the Asthma
Field for a Licensed Product that (a) is initiated or ongoing after completion
of the first Phase III Trial and (b) is not a Non-Registrational Trial.  A Phase IV Trial shall be deemed initiated
upon the enrollment of the first patient.


 


1.59        “Post-Launch Product R&D Expenses” shall have
the meaning set forth in Exhibit A.


 


1.60        “Promotion” or “Promote” shall mean the marketing and advertising of a
Licensed Product in the Asthma Field in the U.S. Territory in accordance with
the Commercialization Plan, including medical education, information and
communication, market development and medical liaison activities, but not
including Detailing.


 


1.61        “Put Right Effective Date” shall have the meaning set forth in
Section 5.3(a) of the Worldwide Daclizumab Agreement.


 


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1.62        “Queen Patents” means those PDL Patents claiming priority
under 35 U.S.C. § 120 to U.S. Patent Application Serial No. 07/290,975,
filed December 28, 1988.


 


1.63        “Region” shall mean each region set forth in
Exhibit G, provided that such Exhibit may be modified by Roche with PDL’s
written consent, such consent not to be unreasonably withheld, if Roche
modifies the regions that it uses to generally manage its pharmaceuticals
business.


 


1.64        “Regulatory Approval” means all approvals (including pricing
and reimbursement approvals), product and/or establishment licenses,
registrations or authorizations of any regional, federal, state or local
regulatory agency, department, bureau or other governmental entity, necessary
for the manufacture, use, storage, import, export, transport or sale of
Licensed Products in the Asthma Field in a regulatory jurisdiction.


 


1.65        “Reversion Effective Date” shall have the meaning set forth in
Section 5.2(b) of the Worldwide Daclizumab Agreement.


 


1.66        “Roche Adjusted Gross Sales” means the
gross invoice price of Licensed Products sold or otherwise disposed of for
consideration in the ROW Territory by Roche, its Affiliates or sublicensees
(other than PDL and its Affiliates hereunder) to independent Third Parties (not
Affiliates of the seller) for use in the Asthma Field, reduced by the following
amounts: (a) the amounts actually allowed as volume or quantity discounts,
rebates, price reductions, returns (including withdrawals and recalls); and (b)
sales, excise and turnover taxes imposed directly on and actually paid by
Roche, its Affiliates or sublicensees.


 


When calculating the Roche Adjusted Gross
Sales, the amount of such sales in foreign currencies shall be converted into
Dollars at the average rate of exchange at the time for the applicable calendar
quarter in accordance with Roche’s then-current standard practices.  Roche shall provide reasonable documentation
of the calculation


 


13





















 


and reconciliation of the
conversion figures on a country-by-country basis as part of its report of Roche
Adjusted Gross Sales for the period covered under the report.


 


In the case of the sale by Roche, its
Affiliates or sublicensees (other than PDL and its Affiliates hereunder) in the
Asthma Field in the ROW Territory of Combination Products for which a Licensed
Product and each of the other therapeutically active ingredients contained in
the Combination Product have established market prices when sold separately,
Roche Adjusted Gross Sales shall be determined by multiplying the Roche
Adjusted Gross Sales for each such Combination Product by a fraction, the
numerator of which shall be the established market price for the form and
formulation of the Licensed Product contained in the Combination Product, and
the denominator of which shall be the sum of the established market prices for
such form and formulation of the Licensed Product plus the other active
ingredients contained in the Combination Product.  When such separate
market prices are not established, then the Parties shall negotiate in good
faith to determine the method of calculating Roche Adjusted Gross Sales for
such Combination Product.


 


If Roche or its Affiliates or
sublicensees receive non-cash consideration for Licensed Products sold or
otherwise transferred to an independent Third Party (not an Affiliate of the
seller or transferor), the fair market value of such non-cash consideration on
the date of the transfer will be the gross invoice price that Roche currently
charges independent Third Parties and shall be deemed the Roche Adjusted Gross
Sales for such Licensed Products sold or otherwise transferred.


 


1.67        “Roche Fill/Finish Costs” shall have the meaning set forth in
Section 8.3(a).


 


1.68        “Roche Know-How” means, except as otherwise set forth in
this Section 1.68, all Know-How that is possessed, as of the Effective Date, by
Roche or by any entity that is a Roche Affiliate as of the Effective Date, or
that is developed during the term of this Agreement by Roche or by any entity
while it is a Roche Affiliate, and which Know-How is Controlled by Roche or its
Affiliates and is reasonably required or useful


 


14





















 


for seeking registration of,
manufacturing, using or selling the Licensed Products; provided, however, that
Roche Know-How excludes any Know-How of any kind concerning generic methods of
manufacturing, designing, developing or preparing antibodies including, but not
limited to, methods of humanizing antibodies, methods of reducing the
immunogenicity of antibodies, and methods of increasing the affinity of
antibodies.


 


1.69        “Roche Net Sales” means the amount determined by deducting [*] from Roche Adjusted Gross Sales to
account for standard deductions from gross sales such as shipping, insurance,
taxes (to the extent not included in calculations of Roche Adjusted Gross
Sales).


 


1.70        “Roche Patents” means all patent applications owned or
Controlled by Roche or its Affiliates (“Sole
Roche Patents”) alone or with a Third Party, and all Joint Roche-PDL
Patents claiming Licensed Products or their manufacture or use in the Asthma
Field, which are filed prior to or during the term of this Agreement in the
U.S. or any foreign jurisdiction, including any addition, continuation,
continuation-in-part or division thereof or any substitute application
therefor; any patent issued with respect to such patent application, any
reissue, extension or patent term extension of any such patent, and any
confirmation patent or registration patent or patent of addition based on any
such patent; and any other U.S. or foreign patent or inventor’s certificate
covering Licensed Products in the Asthma Field.


 


1.71        “Roche Technology” means Roche Know-How and Roche Patents.


 


1.72        “Roche’s Exclusive Field” means the Transplant Indications.  Notwithstanding the foregoing, upon the first
to occur of the Reversion Effective Date or the Put Right Effective Date, the
term “Roche’s Exclusive Field” shall have no meaning.


 


1.73        “ROW Commercialization Activities” has the
meaning set forth in Section 7.1.


 


15





















 


1.74        “ROW Territory” means all parts of the Territory not
included in the U.S. Territory.


 


1.75        “[*] Daclizumab” means a [*]
humanized murine monoclonal antibody prepared against the p55 component of
IL-2R [*] and covered by claims
under [*]


 


1.76        “Sole PDL Patents” shall have the meaning set forth in
Section 1.53.


 


1.77        “Sole Roche Patents” shall have the meaning set forth in
Section 1.70.


 


1.78        “Successful GMP Audit” shall have the meaning set forth in Exhibit
B.


 


1.79        “Territory” means all countries of the world.


 


1.80        “Third Party” means any person or entity other than a
Party or its Affiliates.


 


1.81        “Third Party License” means (a) any of the license agreements
set forth on Exhibit C and (b) any license agreement entered into by a Party
with a Third Party after the Effective Date that the Parties agree in writing
is necessary for the use, manufacture, sale, offering for sale, or importation
of Licensed Product in the Asthma Field in the Territory under this Agreement.


 


1.82        “Transfer Price” means, with respect to a particular unit
of Licensed Product, the amount paid by Roche to PDL for supply of such unit of
Licensed Product pursuant to the Commercial Supply Agreement in either bulk or
finished form.


 


1.83        “Transplant Indications” means all indications that involve the
suppression of rejection of transplanted organs, bone marrow or other tissue,
including, without limitation, solid organ transplantation (including tolerance
induction and xenotransplantation), bone marrow transplantation, graft versus
host disease and cell transplantation.  In any event, if a given
indication satisfies the criteria for both an Autoimmune Indication and a
Transplant Indication, such indication shall be deemed a Transplant Indication
and not an Autoimmune Indication, provided that an Autoimmune


 


16





















 


Indication shall not be deemed
a Transplant Indication merely because it may cause the need for a transplant
(e.g., Type I diabetes, even if it causes the need for an organ transplant).


 


1.84        “U.S.” means the United States of America.


 


1.85        “U.S. Territory” means the U.S. and its territories and
possessions.


 


1.86        “Valid Claim” means a claim in any unexpired and issued
patent in the PDL Patents or Roche Patents that has not been disclaimed,
revoked, or held invalid or unenforceable by a final unappealable decision of a
court or government agency of competent jurisdiction.


 


1.87        “Zenapax Trademark” means the trademark “Zenapax®,” and all
trademark registrations and applications therefor, and all goodwill associated
therewith.  If the Zenapax Trademark is
assigned to PDL pursuant to the Worldwide Daclizumab Agreement, then the
license set forth in Section 2.2(c) shall automatically terminate.


 


ARTICLE
2


 


LICENSES
AND OPTION


 


2.1          Grants to Roche.


 


(a)           U.S. Territory


 


(i)            Technology License. 
Subject to the terms and conditions of this Agreement, PDL hereby grants
to Roche a co-exclusive license (together with PDL), under the PDL Technology, to
develop Licensed Products in the Asthma Field with respect to the U.S.
Territory and the European Union, in accordance with the Development Plan, and
to import and use Licensed Products for such purposes.  The foregoing licenses include the right to
perform Development outside the U.S. Territory


 


17





















 


and European Union in
accordance with the Development Plan with respect to any Licensed Product
solely in order to obtain Regulatory Approval of such Licensed Product in the
Asthma Field in the U.S. Territory or the European Union.


 


(ii)           Promotion Right. 
Subject to the terms and conditions of this Agreement, PDL hereby grants
to Roche a co-exclusive (together with PDL), non-transferable (subject to
Section 19.1) right to Promote and Detail Licensed Products in the Asthma Field
in the U.S. Territory during the Co-Promotion Term, in accordance with
applicable law and the Commercialization Plan.


 


(iii)         Sublicenses. 
The rights granted to Roche in Sections 2.1(a)(i) and 2.1(a)(ii) are
sublicensable, without the prior written consent of PDL, only to Roche’s
Affiliates.


 


(b)           ROW Territory


 


(i)            Technology License. 
Subject to the terms and conditions of this Agreement, PDL hereby grants
to Roche and Roche’s Affiliates the exclusive (even as to PDL) license, under
the PDL Technology, to (1) develop Licensed Products in the Asthma Field in the
ROW Territory (other than the European Union), (2) to use and import Licensed
Products in the Asthma Field in the ROW Territory (other than the European
Union) for such Development purposes, (3) offer for sale and sell Licensed
Products in the Asthma Field in the ROW Territory, (4) to use and import
Licensed Products in the Asthma Field in the ROW Territory for such
commercialization purposes; provided, however, that the license granted under
this Section 2.1(b)(i) with respect to the Queen Patents shall be
nonexclusive.  Notwithstanding the
exclusivity of the foregoing license, PDL retains the right to perform
Development activities in the ROW Territory (other than the European Union)
with respect to the Licensed Product solely in order to obtain Regulatory
Approval of the Licensed Product in the Asthma Field in the U.S. Territory or
the European Union, in accordance with the Development Plan or as approved by
the JSC.


 


18





















 


(ii)           Trademark License. 
Subject to the terms and conditions of this Agreement, PDL hereby grants
to Roche, the exclusive right and license to use the PDL Trademarks solely in
connection with the development, use, marketing, promotion, detailing, offer
for sale and sale of Licensed Products in the Asthma Field in the ROW
Territory; provided, however, that Roche’s license under this Section
2.1(b)(ii) shall be co-exclusive (together with PDL) with respect to
Development in the European Union.  PDL
agrees to execute any required documents, to provide on request any required
records, and otherwise to cooperate fully with Roche as may be necessary to
accomplish the recordation of the license set forth in this Section 2.1(b)(ii)
in any jurisdiction in the ROW Territory that Roche seeks such
recordation.  In such event, the
documented expenses for recordation (not including any PDL internal costs) will
be borne by Roche.


 


(iii)         Sublicenses. 
The licenses granted to Roche in Sections 2.1(b)(i) and 2.1(b)(ii) are
sublicensable only with the prior written consent of PDL, which shall not be
unreasonably withheld.  It shall be
deemed reasonable for PDL to withhold consent with respect to sublicense by
Roche of the license set forth in Section 2.1(b)(i) to any other entity that is
[*] (in at least one [*], [*]
in a [*] any [*] for [*]
or any other [*] in the [*] for which the Parties are selling,
developing or planning to develop the Licensed Product, where the term [*] means a [*] performed to gain [*],
and to establish [*].  Roche and its Affiliates may use Third Party
distributors in the ROW Territory in accordance with their customary
practices.  The license granted to Roche
in Section 2.1(b)(ii) is sublicensable only to a sublicensee of the licenses
set forth in Section 2.1(b)(i).


 


2.2          Grants to PDL.


 


(a)           Technology License. 
Subject to the terms and conditions of this Agreement, Roche hereby
grants to PDL, under the Roche Technology, Collaboration Inventions, and all
patents claiming Collaboration Inventions, (i) a co-exclusive license (together
with Roche) to develop in accordance with the Development Plan and use


 


19





















 


Licensed Products in the Asthma
Field with respect to U.S. Territory and the European Union, (ii) a
co-exclusive license (together with Roche) to import Licensed Products in the
Asthma Field into the European Union for such Development purposes, (iii) an
exclusive license to import, offer for sale and sell Licensed Products in the
Asthma Field in the U.S. Territory, and (iv) an exclusive license to make
Licensed Products in the Asthma Field in the Territory.  The foregoing licenses include the right to
perform Development outside the U.S. Territory and the European Union in
accordance with the Development Plan with respect to any Licensed Product
solely in order to obtain Regulatory Approval of such Licensed Product in the
Asthma Field in the U.S. Territory or the European Union.  The license granted to PDL in Section
2.2(a)(i) shall automatically convert from a co-exclusive license to an
exclusive license with respect to the U.S. Territory at the end of the
Co-Promotion Term.  Roche hereby
covenants that it and its Affiliates will not grant to any Third Party a
license that overlaps with the scope of the licenses granted to PDL under
Sections 2.2(a)(i) and 2.2(a)(ii) and that it and its Affiliates will not
practice the Roche Technology and Collaboration Inventions within the scope of
the licenses granted to PDL under Sections 2.2(a)(i) and 2.2(a)(ii) on behalf
of or for the benefit of any Third Party.


 


(b)           Additional Licenses to Collaboration Inventions.  Subject to the terms and conditions of
this Agreement, Roche hereby grants to PDL, under the Collaboration Inventions
and all patents claiming Collaboration Inventions (i) a co-exclusive license to
develop, make, use, import, offer for sale and sell products (other than
Licensed Products or Excluded Products) containing antibodies that bind to
IL-2R in the Asthma Field in the Territory; and (ii) a co-exclusive license to
develop, make, use, import, offer for sale, and sell Licensed Products and
other products containing antibodies that bind to IL-2R (other than Excluded
Products) in PDL’s Exclusive Field in the Territory.  For the purpose of this Section 2.2(b), the
term “Excluded Products” shall
have the meaning given to such term in Section 1.16 of the Worldwide Daclizumab
Agreement.  Roche hereby covenants that
it and its Affiliates will not grant to any Third Party a license that overlaps
with the scope of the licenses granted to PDL under Section 2.2(b)(i) and
Section 2.2(b)(ii) and that it and its Affiliates will not practice the


 


20





















 


Collaboration Inventions within
the scope of the licenses granted to PDL under Sections 2.2(b)(i) and
2.2(b)(ii) on behalf of or for the benefit of any Third Party.


 


(c)           Trademark License. 
Subject to the terms and conditions of this Agreement, Roche hereby
grants to PDL, (i) the co-exclusive right and license (together with Roche) to
use the Zenapax Trademark solely in connection with the development, use,
marketing, promotion, and detailing of Licensed Products in the Asthma Field in
the U.S. Territory, (ii) the co-exclusive right and license (together with
Roche) to use the Zenapax Trademark solely in connection with the development
of Licensed Products in the Asthma Field with respect to the European Union,
and (iii) the exclusive right and license to use the Zenapax Trademark solely
in connection with the offer for sale and sale of Licensed Products in the
Asthma Field in the U.S. Territory. 
Roche agrees to execute any required documents, to provide on request
any required records, and otherwise to cooperate fully with PDL as may be
necessary to accomplish the recordation of the license set forth in this
Section 2.2(c) in any jurisdiction in the U.S. Territory that PDL seeks such
recordation.  In such event, the expenses
for recordation (not including any internal Roche expenses) will be borne by
PDL.  The license set forth in this
Section 2.2(c) shall automatically terminate upon assignment of the Zenapax
Trademark to PDL pursuant to the Worldwide Daclizumab Agreement. Subject to the
preceding sentence, the license granted to PDL in Section 2.2(c)(i) shall
automatically convert from a co-exclusive license to an exclusive license at
the end of the Co-Promotion Term.  Roche
hereby covenants that it and its Affiliates will not grant to any Third Party a
license that overlaps with the scope of the licenses granted to PDL under
Sections 2.2(c)(i) and 2.2(c)(ii).


 


(d)           Sublicenses. 
Prior to the end of the Co-Promotion Term, the license granted to PDL in
Section 2.2(a) is sublicensable:  (i)
without the prior written consent of Roche, only to PDL’s Affiliates; and (ii)
with Roche’s consent (such consent not to be unreasonably withheld) to
subcontractors performing, on behalf of PDL, PDL’s obligations under, and
consistent with, the Development Plan or the Commercialization Plan.  After the Co-Promotion Term, PDL may grant
sublicenses under the license


 


21





















 


granted to PDL in Section
2.2(a) without the consent of Roche.  PDL
may grant sublicenses under the license granted to PDL in Section 2.2(b)
without the consent of Roche.  The
license granted to PDL in Section 2.2(c) is sublicensable only to a sublicensee
of the licenses set forth in Section 2.2(a).


 


2.3          Negative Covenants


 


(a)           Roche hereby
covenants that it shall not, nor shall it cause any Affiliate or sublicensee to
knowingly use or practice, directly or indirectly, any PDL Know-How, PDL
Patents or PDL Trademarks for any other purposes other than those expressly
permitted by this Agreement or any other written agreements between the Parties
which are currently in existence (including, without limitation, the Worldwide
Daclizumab Agreement), or which may later be entered into by the Parties; or


 


(b)           PDL hereby
covenants that it shall not, nor shall it cause any Affiliate or sublicensee
to:  knowingly use or practice, directly
or indirectly, any Roche Know-How, Roche Patents, Collaboration Inventions or
Zenapax Trademark for any other purposes other than those expressly permitted
by this Agreement or any other written agreements between the Parties which are
currently in existence (including, without limitation, the Worldwide Daclizumab
Agreement), or which may later be entered into by the Parties.


 


2.4          [*] Daclizumab.  For the
purpose of keeping Roche informed as to the status and results of any [*] involving [*] Daclizumab, PDL’s presentation of an update on such
matters shall be specifically listed as an agenda item for up to two (2) JDC
meetings per year.  When  PDL first obtains [*]
in the Asthma Field from a [*] for
a product containing [*]
Daclizumab, PDL shall notify Roche in writing and provide a detailed summary of
such data to Roche.  Upon Roche’s
request, Roche may [*] on [*] Daclizumab in the Asthma Field for up
to [*], and PDL shall reasonably
cooperate with Roche with respect to such [*]
activities.  Upon Roche’s further
request, PDL and Roche shall [*].  If the Parties do not [*], then PDL is [*], provided that PDL does not [*] with respect to the [*]
of such [*].  If Roche has previously provided [*] to PDL to [*] and the


 


22





















 


Parties have not [*], then within [*]
of [*], PDL shall [*]. 
Roche shall have [*] following
receipt to notify PDL [*] that [*] 
For clarity, PDL shall not [*]
until the earlier of:  (i) expiration of
the [*] period after Roche’s receipt of PDL’s
summary of [*], without Roche [*], and (ii) expiration of the [*] after Roche’s receipt of such summary,
without [*] in the [*].


 


ARTICLE 3


 


GOVERNANCE


 


3.1          Joint Steering Committee; Minutes.  Within thirty (30)  days
after the Effective Date, PDL and Roche shall form a Joint Steering Committee (“JSC”) consisting of [*]  representatives from PDL and [*] representatives from Roche.  Each Party may replace its JSC
representatives at any time upon prior written notice to the other Party.  Roche shall have the right to designate the
first chairperson of the JSC, whose term shall run until December 31, 2005, and
such right shall thereafter alternate between the Parties on a calendar year
basis.  The JSC chairperson shall be
responsible for providing an agenda for each JSC meeting at least ten (10)
business days in advance of such meeting. 
The Party not chairing the JSC shall prepare written draft minutes of
all JSC meetings in reasonable detail and distribute such draft minutes to all
members of the JSC for comment and review within twenty (20) business days
after the relevant meeting.  The members
of the JSC shall have ten (10) business days to provide comments.  The Party preparing the minutes shall
incorporate timely received comments and distribute revised minutes to all
members of the JSC for their final review and approval within thirty-five (35)
business days of the relevant meeting.


 


3.2          Meetings of the JSC. 
The JSC shall meet at least [*],
on such dates and at such times as agreed to by Roche and PDL, with all
scheduled in-person meetings to alternate between Fremont, California and a
Roche site to be designated by Roche prior to such meeting, or at such other
locations as determined by the Joint Steering


 


23





















 


Committee.  Meetings may be held by audio or video
conference with the consent of each Party, provided that at least [*] per calendar year shall be held in
person.  Each
Party may permit such visitors to attend meetings of the Joint Steering
Committee.  Each Party shall be
responsible for its own expenses for participating in the JSC.  Meetings of the JSC shall be effective only
if at least one representative of each Party is present or participating.


 


3.3          Responsibilities of the JSC.  The JSC
shall have the responsibility and authority to:


 


(a)           define and
oversee the implementation of the strategy for developing and commercializing
Licensed Products in the Asthma Field;


 


(b)           review the
efforts of the JDC in the conduct of the development and commercialization
programs for Licensed Products in the Asthma Field;


 


(c)            review
and revise, as required, the budget forecasts for the Development Plan and the
Commercialization Plan, including any [*]
with respect to [*], all in
accordance with the schedule set forth in Exhibit A.


 


(d)           review and
approve the Commercialization Plan and any proposed amendments or updates to
the Development Plan or Commercialization Plan;


 


(e)           review and
approve the [*] and [*] of the [*] for Licensed Products in the Asthma Field, and the
commercialization of Licensed Products in the Asthma Field in the U.S.
Territory; and review the commercialization of Licensed Products in the Asthma
Field in the ROW Territory, including the [*]
of such [*] and such [*] and the [*] of the Licensed Products in the Asthma Field;


 


(f)            create and
oversee a Joint Patent Committee which will address intellectual property
issues with respect to Licensed Products in the Asthma Field;


 


24





















 


(g)           create and
oversee a Joint Finance Committee which will address [*] and related finance and accounting issues with respect to
the Development Plan and Commercialization Plan;


 


(h)           address
disputes or disagreements arising in the JDC, JPC, or JFC;


 


(i)            relax any
deadlines and timeframes specified in this Article 3;


 


(j)            select a
Trademark in accordance with Section 13.1; and


 


(k)           perform such
other functions as the Parties may agree in writing.


 


3.4          Areas Outside the JSC’s Authority.    The JSC shall have no authority
other than that expressly set forth in Section 3.3 and, specifically, shall
have no authority to amend this Agreement. 
The JSC shall have no authority to make any decisions that would commit
a Party to incur an expense that it had not previously agreed to incur or that
would increase any expenses a Party is otherwise responsible for, without
obtaining the agreement of that Party as evidenced by written notice of
approval by the appropriate internal decision-making bodies of that Party.  For clarity, each Party, by its entry into
this Agreement, has agreed to pay [*]
of those expenses, to the extent incurred, that are set forth in the budget
associated with the Development Plan attached hereto as Exhibit D as of the
Effective Date.


 


3.5          JSC Decisions.


 


(a)           Consensus; Good Faith; Action Without Meeting.  The JSC shall decide all matters by [*], with each Party having [*]. 
Consistent with Section 3.12, the members of the JSC shall act in good
faith to cooperate with one another and to reach agreement with respect to
issues to be decided by the JSC.  Action
that may be taken at a meeting of the Joint Steering Committee also may be
taken without a meeting if a written consent setting forth the action so taken
is signed by all members of the Joint Steering Committee.


 


25





















 


(b)           Failure to Reach Consensus.  In the event that the members of the JSC
cannot come to consensus within thirty (30) days with respect to any matter
over which the JSC has authority and responsibility, the JSC shall submit the
respective positions of the Parties with respect to such matter for discussion
in good faith by the [*].  If such [*]
are not able to mutually agree upon the resolution to such matter within [*] of its submission to them, then PDL
shall have the right to decide such matter in good faith, giving due
consideration to the input of [*]
and the economic interests of both Parties under this Agreement, except that
any decision that primarily pertains to (i) the sale and marketing of Licensed
Products in the Asthma Field in the ROW Territory, (ii) the Development of
Licensed Products in the Asthma Field [*]
that are not [*], or (iii) the
determination of a revised anticipated commercial launch date for the purpose
of [*], shall be decided by [*] in good faith, giving due consideration
to the input of [*] and the
economic interests of both Parties under this Agreement.  Notwithstanding the foregoing, any decision
to initiate a development program for [*]
for Licensed Products in the Asthma Field or [*]
shall be made solely by [*], and [*] shall have the right to make such
decision if the JSC and the Executive Officers fail to reach agreement.  Furthermore, nothing in this Section 3.5(b)
shall be interpreted to limit Roche’s rights under Section 17.3 as a result of
a delay in Development.


 


3.6          Joint Development Committee; Minutes.  Within thirty (30)  days
after the Effective Date, PDL and Roche shall form a Joint Development
Committee (“JDC”) consisting of [*] representatives from PDL and [*] representatives from Roche, or such
number(s) of representatives as set from time to time by the JSC.  Each Party may replace its JDC
representatives at any time upon prior written notice to the other Party.  [*]
shall have the right to designate the [*]
the JDC, whose term shall run until [*],
and such right shall thereafter alternate between the Parties on a calendar
year basis.  The JDC chairperson shall be
responsible for providing an agenda for each JDC meeting at least ten (10)
business days in advance of such meeting. 
PDL shall prepare written draft minutes of all JDC meetings in
reasonable detail and distribute such draft minutes to all members of the JDC
for comment and review within twenty (20) business days after the relevant
meeting.  The
members of the JDC shall have ten (10) business days


 


26





















 


to provide comments.  PDL shall incorporate timely received
comments and distribute revised minutes to all members of the JDC for their
final review and approval within thirty-five (35) business days of the relevant
meeting.


 


3.7          Subcommittees.  The JDC
shall have the right to establish subcommittees, which may include, but will
not be limited, to the following:  a [*] subcommittee, a [*] subcommittee, a [*] subcommittee, a [*] subcommittee, and a [*] subcommittee.


 


3.8          Meetings of the JDC. 
The JDC shall meet as frequently as members of the Joint Development
Committee determine is required (but in no event, less frequently than [*] following the Effective Date and [*] thereafter), on such dates and at such
times as agreed to by Roche and PDL, with all scheduled in-person meetings to
alternate between Fremont, California and a Roche site to be designated by
Roche prior to such meeting, or at such other locations as determined by the
JDC.  Meetings may be held by audio or
video conference with the consent of each Party, provided that at least [*] shall be held in person at locations to
which both Parties have mutually consented.  Each Party may permit such
visitors to attend meetings of the Joint Development Committee as the Joint
Development Committee determines.  All
out-of-pocket expenses incurred by a Party as a result of its participation in
the JDC, to the extent not captured in the FTE rate set forth in Section 4.6(b)
(which shall only apply to JDC members), shall be borne solely by such
Party.  Meetings of the JDC shall be
effective only if at least [*] of
each Party are present or participating.


 


3.9          Responsibilities of the JDC.  The JDC
shall have the responsibility and authority to:


 


(a)           oversee all
aspects of the execution of the JSC-approved Development and commercialization
of Licensed Products in the Asthma Field;


 


27





















 


(b)           review and
comment upon, and where appropriate, recommend to the JSC for approval, all
updates or amendments to the Development Plan thereto, in accordance with
Sections 4.1 and 4.2;


 


(c)           review and
comment upon, and where appropriate, recommend to the JSC for approval, the
Commercialization Plan and amendments and updates thereto, in accordance with
Section 6.1;


 


(d)           monitor the
Development of Licensed Products in the Territory against the applicable
Development Plan;


 


(e)           review the
overall strategy for and design of all clinical trials and other studies
conducted under the Development Plan;


 


(f)            discuss the
requirements for Regulatory Approval in applicable countries in the Territory
and oversee and coordinate regulatory matters with respect to Licensed Products
in the Territory;


 


(g)           establish
subcommittees pursuant to Section 3.7, oversee the activities of all
subcommittees so established, and address disputes or disagreements arising in
all such subcommittees;


 


(h)           oversee and
approve a multi-year estimate of supply requirements to be used for capacity
planning purposes;


 


(i)            present
disputes not resolvable by the JDC to the JSC for resolution;


 


(j)            discuss
Roche Development activities in the ROW Territory;


 


(k)           select CROs
and other non-manufacturing vendors needed to carry out the Development Plan,
except for any CRO or other non-manufacturing vendor whose agreement with the
relevant Party has, or is anticipated to have, [*];


 


28





















 


(l)            propose and
discuss possible manufacturing vendors to carry out activities associated with
clinical or commercial supply of the Licensed Product (provided that [*] alone shall be responsible for
ultimately selecting such manufacturing vendors);


 


(m)          perform the
functions set forth in Sections 1.14, 4.6(a), 4.6(c), 5.1(a), 5.6, 6.3(b), and
8.1(a) and Exhibits D and E; and


 


(n)           perform such
other functions as the Parties may agree in writing.


 


3.10        Areas Outside the JDC’s Authority. 
  The JDC shall
have no authority other than that expressly set forth in Section 3.9.


 


3.11        JDC Decisions.


 


(a)           Consensus; Good Faith; Action Without Meeting.  The JDC shall decide all matters by
consensus, with each Party having one collective vote.  Consistent with Section 3.12, the members of
the JDC shall act in good faith to cooperate with one another and to reach
agreement with respect to issues to be decided by the JDC.  Action that may be taken at a meeting of the
JDC also may be taken without a meeting if a written consent setting forth the
action so taken is signed by all of the JDC members.


 


(b)           Failure to Reach Consensus.  In the event that the members of the JDC
cannot come to consensus within [*]
with respect to any matter over which the JDC has authority and responsibility,
the JDC shall submit the respective positions of the Parties with respect to
such matter to the JSC for decision.


 


3.12        Operating Principles. 
The Parties hereby acknowledge and agree that the deliberations and
decision-making of the JSC, JDC, JPC, JFC and any subcommittee established by
the JDC shall be in accordance with the following operating principles:


 


29





















 


(a)           Time is of
the essence in addressing the market for Licensed Products in the Asthma Field.


 


(b)           The Parties’
mutual objective is to maximize the clinical and commercial success of the
Licensed Products in the Asthma Field, consistent with sound and ethical
business and scientific practices.


 


ARTICLE 4


 


DEVELOPMENT


 


4.1          Development Plan. 
Development with respect to the U.S. Territory and the European Union
shall be governed by an asthma development plan (“Development
Plan”), which shall set forth all anticipated Development activities
and timelines for obtaining, maintaining, or expanding (to the extent mutually
agreed) Regulatory Approval in such countries or jurisdictions, allocate
responsibility for carrying out such activities between PDL and Roche
(including the anticipated minimum and maximum number of FTEs to be expended by
each Party on Development with respect to the U.S. Territory and the European
Union on a quarterly basis), include an associated twelve (12) month
development budget, and specify the extent to which each Party is anticipated
to use internal or external (i.e. subcontractors) resources to fulfill its
obligations.  As of the Effective Date,
the Parties have agreed to an initial Development Plan, a copy of which is
attached hereto as Exhibit D.  The
Parties anticipate that promptly following the Effective Date and the formation
of the JDC and JSC, the JDC shall review in detail the initial Development Plan
and propose appropriate revisions, if needed, for adoption by and approval of
the JSC.


 


4.2          Updating the Development Plan.  The JDC may decide from time to time to
propose for approval by the JSC updates to the Development Plan on a rolling
basis as necessary to reflect changes in the progress, strategy, or costs of
Development with


 


30





















 


respect to the U.S. Territory
and the European Union.  In any event, so
long as the JSC intends to continue Development with respect to the U.S.
Territory and the European Union, the JDC shall confirm, or propose for JSC
approval an update to, the Development Plan in accordance with the schedule set
forth in Exhibit A.  Any proposed change
shall, for the appropriate time period as determined by the JSC, set forth all
anticipated Development activities and timelines for obtaining, maintaining, or
expanding (to the extent mutually agreed) Regulatory Approval in such countries
or jurisdictions, allocate responsibility for carrying out such activities
between PDL and Roche (including a maximum number of FTEs to be expended by
each Party on Development with respect to the U.S. Territory and the European
Union on a quarterly basis), and include an associated development budget.  All mutually agreed activities directed
toward the expansion of Regulatory Approval with respect to the U.S. Territory
and/or the European Union shall be included in the updated Development
Plan.  The JSC shall not approve an
updated Development Plan that is inconsistent with or contradicts the terms of
this Agreement without the written consent of the Parties, and in the event of
any inconsistency between the Development Plan and this Agreement, the terms of
this Agreement shall prevail.


 


4.3          Goals of Joint Development.  The Parties hereby acknowledge and agree that
the goals for joint development of Licensed Products hereunder will be to
obtain and maintain Regulatory Approval for the treatment of asthma for the
Licensed Product in the U.S. Territory and the European Union.


 


4.4          Standards of Conduct. 
Each Party shall perform, or shall ensure that its Third Party
contractors perform, the Development activities for which it is responsible
under the Development Plan or which it undertakes independent of the
Development Plan in good scientific manner and in compliance with applicable
laws, rules and regulations.  At each JDC
meeting, each Party will keep the JDC fully informed regarding the progress and
results of such Party’s Development activities with respect to Licensed
Products in the Territory.


 


31





















 


4.5          Diligent Development.  Each of the
Parties shall use Diligent Efforts to achieve the goals set forth in Section
4.3 and to execute and carry out the Development Plan within the associated
budget.  Roche shall use Diligent Efforts
to obtain Regulatory Approval for the treatment of asthma for the Licensed
Product in each country in the ROW Territory (other than the European
Union).  Roche’s efforts in this regard
shall be discussed with PDL through the JDC. 
Roche from time to time (but in any event no less frequently than
yearly) shall  provide PDL with written updates
discussing in reasonable detail its clinical trial activities and plans with
respect to Development for all countries of the ROW Territory outside the
European Union for which Roche has current or contemplated activities and
plans.  Each of the Parties agrees to
cooperate with the other in carrying out the Development Plan.


 


4.6          Development Expenses.


 


(a)           All
Development Expenses shall be shared [*]
by the Parties as set forth in greater detail in Section 4.6(c).  [*]
shall be responsible for [*] of
all Incremental Development Expenses. 
Any expenses incurred by a Party for Development activities that do not
fall within the definitions of Development Expenses or Incremental Development
Expenses shall be borne solely by such Party unless the JDC determines otherwise.


 


(b)           The
Development Expenses of each Party that are attributable to Development
activities performed by its employees pursuant to the Development Plan shall be
calculated on an FTE basis.  Each Party
shall keep accurate records of its FTEs expended with respect to such
Development activities, and shall report such FTE expenditures to the JDC on a
quarterly basis as part of the report filed pursuant to Section 4.6(c).  All FTE expenditures shall be converted to
Development Expenses at an initial rate of [*],
subject to [*] of [*] effective as of [*],
beginning [*].  There shall be no [*] until after the [*]
of this Agreement.


 


(c)           Each Party
shall keep detailed records of the Development Expenses it incurs, including
all supporting documentation for such expenses. 
Each


 


32





















 


Party shall keep such records
for at least [*] after the date
that such expense was incurred.  Within [*] after the end of each calendar quarter,
each Party shall provide a report to the JDC (with a copy to the other Party)
specifying and documenting, both in reasonable detail, such Party’s Development
Expenses during such quarter.  Each Party
shall promptly provide all additional information and documentation requested
by the JDC to verify such Development Expenses. 
Within [*] after the end of
each such calendar quarter, the JDC shall provide each Party with an accounting
in reasonable detail of the Parties’ Development Expenses for such quarter and
the JDC shall send [*] during such
quarter an invoice for an amount equal to [*].  Such Party shall pay the amount specified in
such invoice to the other Party within [*] of its
receipt of such invoice.


 


(d)           To the
extent a Party has previously paid a share of the cost of any item included in
Development Expenses (including the cost of manufacturing clinical supply of
Licensed Product), then that Party shall receive a credit for the amounts paid
in the event that such item is subsequently used for [*] or [*].


 


ARTICLE 5


 


REGULATORY


 


5.1          Drug Approval Applications in U.S. Territory.


 


(a)           Consistent
with the Development Plan but subject to the remainder of this Section 5.1, PDL
shall be responsible for preparing and filing Drug Approval Applications and
seeking Regulatory Approvals for Licensed Products in the Asthma Field in the
U.S. Territory.  All such Drug Approval
Applications shall be filed in the name of PDL, and PDL alone shall be
responsible for all communications and other dealings with the regulatory
agencies relating to the Licensed Products in the Asthma Field in the U.S.
Territory.  The JDC shall develop and
implement procedures for drafting and review of such Drug Approval
Applications, which shall provide sufficient time for Roche to provide
substantive comments.  PDL shall be responsible
for


 


33





















 


obtaining appropriate
regulatory approvals in the U.S. Territory for the manufacture of bulk Licensed
Product by PDL or its Third Party manufacturer(s).  Roche shall have the right of cross-reference
to all such Drug Approval Applications for the purposes set forth in Section
5.2.


 


(b)           After
receipt of Regulatory Approval of the Drug Approval Application for the
Licensed Product in the Asthma Field in the U.S. Territory hereunder, PDL shall
retain primary responsibility for dealings with any regulatory agency with
respect thereto, including filing all supplements and other documents with such
agency with respect to such Drug Approval Application.  Notwithstanding the foregoing, the reporting
of all adverse drug experiences and other safety issues relating to Licensed
Products shall be handled in accordance with Sections 5.3, 5.5 and 5.6.  In the event that any regulatory agency
threatens or initiates any action to remove a Licensed Product from the market
in the Asthma Field in the U.S. Territory during the Co-Promotion Term, PDL
shall notify Roche of such communication within one business day of receipt by
PDL.  PDL agrees to provide Roche with a
copy (which may be wholly or partly in electronic form) of all filings to
regulatory agencies with respect to Licensed Products in the Asthma Field in
the U.S. Territory that it makes hereunder. 
PDL shall provide Roche with reasonable advance notice of any scheduled
meeting with a regulatory agency relating to Development and/or a Drug Approval
Application in the U.S. Territory, and Roche shall have the right to observe
and, if the Parties mutually agree in advance, participate in any such
meeting.  PDL shall promptly furnish
Roche with copies of all material correspondence or minutes of material
meetings with any regulatory agency in each case relating to Development and/or
a Drug Approval Application in the U.S. Territory.  As between the Parties, PDL shall be the
legal and beneficial owner of all Drug Approval Applications and related
approvals in the U.S. Territory.


 


5.2          Drug Approval Applications in ROW Territory.


 


34





















 


(a)           Roche shall
be responsible for preparing and filing Drug Approval Applications and seeking
Regulatory Approvals for Licensed Products in the Asthma Field in the ROW
Territory.  The Parties intend that such
Drug Approval Applications will be comprised of the Drug Approval Application
submitted to the FDA, plus such additional data and reports not required to be
submitted to the FDA.  All such Drug
Approval Applications shall be filed in the name of Roche, and Roche alone
shall be responsible for all communications and other dealings with the regulatory
agencies relating to the Licensed Products in the Asthma Field in the ROW
Territory. The JDC shall develop and implement procedures for review of such
Drug Approval Applications, which procedures shall be equivalent to those
procedures developed pursuant to Section 5.1(a) with respect to Roche’s review
of Drug Approval Applications for the U.S. Territory and shall provide
sufficient time for PDL to provide substantive comments.  Roche shall be responsible for obtaining
appropriate regulatory approvals in the ROW Territory for the manufacture of
bulk Licensed Product by PDL or its Third Party manufacturer(s).  PDL shall have the right of cross reference
to all such Drug Approval Applications filed in the ROW Territory.


 


(b)           If required
to support Regulatory Approvals in the ROW Territory, PDL shall be responsible
for providing to Roche, in the format required by the FDA, the data and
information required to be submitted to the FDA, and such additional data and
information relating to the Development activities for which it was
responsible, including all clinical trials performed by it and all
manufacturing and controls information.


 


(c)           In
connection with all Drug Approval Applications being prosecuted by Roche
hereunder, Roche agrees to provide PDL with a copy (which may be wholly or
partly in electronic form) of all filings to regulatory agencies in each Major
Regulatory Jurisdiction that it makes hereunder.  Roche will provide PDL with reasonable
advance notice of any scheduled meeting with any regulatory agency relating to
Development and/or any Drug Approval Application in the ROW Territory, and PDL
shall have the right to observe and, if the Parties mutually agree in advance,
participate in any such meeting.  Roche
also shall promptly furnish PDL with copies of all material


 


35





















 


correspondence or minutes of
material meetings with any regulatory agency in each case relating to
Development and/or a Drug Approval Application in the ROW Territory.  Within thirty (30) days following the end of
each calendar quarter, Roche shall report to PDL regarding the status of each
pending and proposed Drug Approval Application in the ROW Territory.  In the event that any regulatory agency
threatens or initiates any action to remove such Licensed Product from the
market in any country in the Asthma Field in the ROW Territory, Roche shall
notify PDL of such communication within one business day of receipt by
Roche.  As between the Parties, Roche
shall be the legal and beneficial owner of all Drug Approval Applications and
related approvals in the ROW Territory.


 


5.3          Adverse Event Reporting.  Each Party shall notify the other
of all information coming into its possession concerning any and all side
effects, injury, toxicity, pregnancy or sensitivity event associated with
commercial or clinical uses, studies, investigations or tests with Licensed
Products, throughout the world, whether or not determined to be attributable to
Licensed Products (“Adverse Event Reports”). 
Pursuant to the Worldwide Daclizumab Agreement, the Parties have already
identified a person from each Party to coordinate the exchange of Adverse Event
Reports (“Report Coordinators”) so as to enable
timely reporting of such Adverse Event Reports to appropriate governmental and
regulatory authorities consistent with all laws, rules and regulations. The
Parties, through their Report Coordinators, have agreed in writing on formal
procedures for such exchange, which are embodied in the PDL-Roche Procedure for
the Exchange of Licensed Products Adverse Event Reports, dated December 2000  (“Pharmacovigilance
Agreement”).  Promptly after
the Effective Date, Roche and PDL agree to cause their respective Report
Coordinators to (a) review the Pharmacovigilance Agreement and (b) negotiate in
good faith an amendment to the Pharmacovigilance Agreement to reflect the terms
of this Agreement, if the Report Coordinators agree that such an amendment is
required.  Such Pharmacovigilance Agreement (as amended, if applicable)
shall survive the end of the Co-Promotion Term.


 


36





















 


5.4          Copies of Responses.  Within a reasonable time frame
prior to submission of responses to any regulatory authority on product safety
issues regarding Licensed Products, a copy of a near final draft response will
be provided to the other Party for review.  Final copies of responses
submitted to any regulatory authority will be provided to the other Party
within [*] of document
finalization.


 


5.5          Regulatory Actions.  The Party responsible for
interacting with regulators on a specific safety issue regarding Licensed
Products must communicate any action requested by regulators to the other Party
without delay.  Such actions may include, for example, change in label,
Dear Doctor letter, trial on hold for clinical safety reasons and the like.


 


5.6          Other Safety Issues.  At the request of either Party,
the JDC shall establish a subcommittee to handle the discussion of specific
safety issues, advise each Party concerning the collection and evaluation of
safety data, and respond to any significant safety issues raised, or requests
made, by regulatory authorities.  If the
Parties have established a Joint Safety Committee pursuant to the Worldwide
Daclizumab Agreement, they may agree to have such issues handled by the Joint
Safety Committee rather than establishing a separate subcommittee of the JDC to
do so.


 


ARTICLE 6


 


COMMERCIALIZATION IN U.S. TERRITORY


 


6.1          Commercialization Plan.  During the
Co-Promotion Term, all commercialization of Licensed Products in the Asthma
Field in the U.S. Territory shall be conducted pursuant to a commercialization
plan (the “Commercialization Plan”), which shall
set forth the anticipated activities (including without limitation market
studies, launch plans, Detailing and Promotion) and timelines, shall allocate
responsibility for


 


37





















 


carrying out such activities
between PDL and Roche, and shall include an associated budget.  No later than [*] after [*] for
a Licensed Product, and on an annual basis thereafter until the end of the
Co-Promotion Term, PDL (or, at the JDC’s election, a subcommittee established
by the JDC) shall submit to the JDC an initial or updated Commercialization
Plan, which the JDC and JSC shall review and the JSC (after consulting with the
JDC) shall approve or reject on a timely basis. 
It is understood that the initial Commercialization Plan may be very
preliminary but nevertheless shall be effective for the purposes of commencing the
Party’s sharing of Operating Expenses. 
Each updated Commercialization Plan shall include the plan for Detailing
and Promotion activities for the Licensed Product in the Asthma Field in the
U.S. Territory for the next [*]
and timelines for performing such activities. 
Once approved by the JSC, such updated Commercialization Plan shall
become effective and supersede the previous Commercialization Plan as of the
date of such approval or at such other time decided by the JSC.  The JSC shall not approve an updated
Commercialization Plan that is inconsistent with or contradicts the terms of
this Agreement without the written consent of the Parties, and in the event of
any inconsistency between the Commercialization Plan and this Agreement, the
terms of this Agreement shall prevail.


 


6.2          Commercialization in the U.S. Territory; Co-Promotion.


 


(a)           PDL will be
solely responsible for the booking of sales of Licensed Products in the Asthma
Field in the U.S. Territory and the supply and distribution of Licensed Product
in respect to such sales.  PDL shall
determine the U.S. Territory selling price (including volume discounts,
rebates, and similar matters), credit terms, and return policies for all
formulations of Licensed Products that are sold for use in the Asthma Field but
not for use in the Transplant Indications.


 


(b)           During the
Co-Promotion Term, PDL and Roche will co-promote Licensed Products in the
Asthma Field in the U.S. Territory in accordance with the Commercialization
Plan.  As part of this co-promotion, PDL
shall contribute [*] of the
Details required by the Commercialization Plan (measured as an average across
each


 


38





















 


calendar quarter), and Roche
shall be responsible for the remaining [*]
of such Details.  Each Party’s sales
force shall promote the Licensed Product in the U.S. Territory in a manner that
reflects such Party’s capacities and that is consistent with such Party’s
promotional efforts for its own products of similar market potential.


 


(c)           During the
Co-Promotion Term, Roche and PDL agree to deploy their respective sales forces
to Detail Licensed Product in the Asthma Field in the U.S. Territory (i) at
such level of effort as is required pursuant to Section 6.2(b) and (ii) in a
manner consistent with the Commercialization Plan and applicable law.  The Parties shall agree upon a sales calling
plan, which plan shall include mechanisms to address possible underperformance
and failure to perform Detailing at the agreed upon levels.


 


(d)           Each party
agrees to permit its Detailing records to be examined by the other Party for
the purpose of verifying each Parties’ compliance with the Detailing
requirements set forth in this Section 6.2. 
Such audit shall be performed at the request of either Party, but in any
event shall not be performed more frequently than [*] per [*] nor
more frequently than [*] with
respect to Detailing records covering any specific period of time.  The expense of any such examination shall be
borne by the auditing Party unless such examination reveals a discrepancy of [*] or more in favor of the audited Party,
in which case such expense shall be borne by the audited Party.


 


(e)           Following
the end of the Co-Promotion Term, PDL shall have sole responsibility and
decision-making authority for the Detailing, marketing, Promotion, sale and
distribution of Licensed Product in the Asthma Field in the U.S.
Territory.  Except as explicitly provided
in Section 10.2, PDL shall owe Roche no consideration in respect to sales of
Licensed Product in the Asthma Field in the U.S. Territory after the end of the
Co-Promotion Term.  In particular, PDL
shall not have any obligation to make the payments specified in Section 7.2(c)
of the Worldwide Daclizumab Agreement on account of any sales of Licensed
Product for use in the Asthma Field in the U.S. Territory after the end of the
Co-Promotion Term.


 


6.3          Sharing of Operating Expenses


 


39





















 


(a)           During the
Co-Promotion Term, all Operating Expenses shall be shared [*]. 
[*] will be solely
responsible for [*] Sales Force
Expenses, unless the sales calling plan specifies otherwise [*].


 


(b)           During the
Co-Promotion Term, each Party shall keep detailed records of the Operating
Expenses it incurs, including all supporting documentation for such expenses,
in accordance with procedures to be agreed upon between the Parties.  Each Party shall keep such records for at
least [*] after the date that such expense
was incurred.  Within [*] after the end of each calendar quarter during the
Co-Promotion Term, each Party shall provide a report to the JDC (with a copy to
the other Party) specifying and documenting, in reasonable detail, such Party’s
Operating Expenses during such quarter. 
Each Party shall promptly provide all additional information and
documentation requested by the JDC to verify such Operating Expenses.  Within [*] after the
end of each such calendar quarter, the JDC shall provide each Party with an
accounting of the Parties’ Operating Expenses for such quarter and the JDC
shall send [*] during such quarter
an invoice for an amount equal to [*].  Such Party shall pay the amount specified in
such invoice to the other Party within [*] of its
receipt of such invoice.


 


(c)           For each
quarter during the Co-Promotion Term that falls (in whole or in part) in the
period commencing on [*] in the
U.S. Territory and ending on [*]
in the U.S. Territory, if the budget for such quarter specifies that Operating
Expenses will be greater than [*]
and if [*] for such quarter exceed
[*] for such quarter, then [*] an amount equal to [*] for such quarter and [*] for such quarter, which payment shall
be due within [*] after [*] receipt of a written invoice from [*] specifying the amount of such
payment.  Payments advanced under this
Section 6.3(c) shall be credited against any amounts owed by [*] under Section 6.3(b) for the quarter
with respect to which [*].  Within [*] following
the end of each calendar year to which this Section 6.3(c) applies, [*] shall [*]
any payments [*] under this
Section 6.3(c) during such calendar year [*].


 


40





















 


6.4          Co-Promotion
Term.  The Parties’ co-promotion of
the License Products in the U.S. Territory shall commence on the date that the
first Operating Expense is incurred by a Party and shall initially continue
until [*] after the First
Commercial Sale of Licensed Product in the Asthma Field in the U.S. Territory,
subject to any early termination in the U.S. Territory or the Territory
pursuant to Section 17.2, 17.3, 17.4, 17.5 or 17.6.  At the end of this initial term and each
extension thereof, [*] may, at its
option, elect to extend the co-promotion for an additional year, provided that [*] makes such election in writing to [*] no later than [*]
prior to the end of the initial term or extension term (as the case may be) and
provided further that [*] for the [*] prior to such election [*].  The initial term of co-promotion and any
extensions thereof (in each case, taking into account any early termination in
the U.S. Territory or the Territory pursuant to Section 17.2, 17.3, 17.4, 17.5
or 17.6) shall be referred to herein as the “Co-Promotion
Term.”


 


6.5          Sales
Force Training.  During the
Co-Promotion Term, each Party’s relevant U.S. Territory operating entities
shall be responsible for the development and conduct of training programs
specifically relating to the co-promoted Licensed Products for the sales
representatives of such Party.  The
Parties agree to utilize such training programs on an ongoing basis to assure a
consistent, focused promotional strategy. 
The costs of transporting, housing and maintaining personnel of a Party
for such training shall be treated as Sales Force Expenses of such Party and
shall be borne [*] pursuant to
Section 6.3(a).  The Parties shall
establish joint training programs as specified by the JSC and shall share the
direct incremental cost of such training [*].  Information transmitted pursuant to this
Section 6.5 shall be treated as Confidential Information of both Parties.


 


6.6          Joint U.S.
Marketing Subcommittee.  The joint U.S. marketing subcommittee
of the JDC shall specify in detail each Party’s obligations, consistent with
Sections 6.1 through 6.5, with respect to Licensed Product Promotion and
Detailing in the Asthma Field in the U.S. Territory during the Co-Promotion
Term.


 


41





















 


6.7          Negative
Covenant.  Roche hereby covenants
that it shall not, nor shall it cause any Affiliate or sublicensee to [*] Licensed Products in the U.S. Territory
[*], except as expressly permitted
by any other written agreement between the Parties which is currently in
existence (including, without limitation, the Worldwide Daclizumab Agreement),
or which may later be entered into by the Parties.


 


ARTICLE 7


 


COMMERCIALIZATION IN ROW
TERRITORY


 


7.1          Commercialization
by Roche in ROW Territory.  Except as
expressly set forth in this Article 7, Roche shall have sole responsibility and
decision-making authority for the marketing, promotion, sale and distribution
of the Licensed Product in the Asthma Field in the ROW Territory (collectively,
the “ROW Commercialization Activities”),
including post-registration clinical and marketing studies that are not
conducted in order to obtain, expand (as mutually agreed with PDL) and/or
maintain Regulatory Approval of a Licensed Product in the Asthma Field in the
U.S. Territory or European Union.  Roche
shall be responsible for all costs and expenses associated with the ROW
Commercialization Activities.  Roche’s
sales force shall promote the Licensed Product in the ROW Territory in a manner
that reflects Roche’s capacities and that is consistent with Roche’s
promotional efforts for its own products of similar market potential.


 


7.2          Roche
Diligence in ROW Territory.


 


(a)           During
the term of this Agreement, Roche will provide PDL with its draft plan for
Roche’s, its Affiliates’ and sublicensees’ commercialization of the Licensed
Products in the Asthma Field in the ROW Territory.  PDL shall have the opportunity to comment on
such draft plan, and Roche shall take such comments into account when
finalizing the plan.  Roche shall comply
and ensure the compliance of its Affiliates and


 


42





















 


sublicensees with such
finalized plan.  Roche shall provide PDL,
upon PDL’s request, with reasonable documentation of such compliance.


 


(b)           Roche,
directly or through its Affiliates and/or sublicensees, shall use Diligent
Efforts to commercialize the Licensed Products in the Asthma Field in each
country in the ROW Territory.  Roche
shall provide PDL, upon PDL’s request (such request not to be made more than
once per calendar year), with a written summary specifying in reasonable
detail, on a country-by-country basis, how it has used such Diligent Efforts.


 


7.3          Negative
Covenant.  Roche hereby covenants
that it shall not, nor shall it cause any Affiliate or sublicensee to, [*] Licensed Products in the ROW Territory [*], except as expressly permitted by any
other written agreement between the Parties which is currently in existence
(including, without limitation, the Worldwide Daclizumab Agreement), or which
may later be entered into by the Parties.


 


7.4          [*].  Roche and PDL shall cooperate fully under
[*] to [*] and other [*] for the
U.S. Territory and the ROW Territory in order to optimize global penetration of
the Licensed Product in the Asthma Field.


 


7.5          [*]  In
order to most effectively establish a [*] for the
Licensed Product with the benefit of Roche’s experience in the areas of [*] the Licensed Product for Transplant Indications, the
Parties may participate in discussions regarding the [*]
of the Licensed Product within and outside the Asthma Field to the extent [*].


 


7.6          Tracking
of Sales.  The Parties recognize that
(i) pursuant to other agreements between the Parties, each Party has the right,
as of the Effective Date, to market Licensed Products for certain mutually
exclusive indications outside the Asthma Field; and (ii) Roche currently
markets Licensed Products in the Territory under the trademark Zenapax® for the
prevention of acute organ rejection in patients receiving kidney transplants.  As a result, Licensed Products marketed by
PDL and/or Roche now or in the future for indications outside the Asthma Field
may nonetheless be sold in the


 


43





















 


Asthma Field or in the other
Party’s Exclusive Field, and Licensed Products marketed by PDL and/or Roche now
or in the future for indications in the Asthma Field may nonetheless be sold
outside the Asthma Field (collectively, “Cross-Field Sales”).  In order to detect and limit these
Cross-Field Sales of Licensed Products, the Parties agree as follows:


 


(a)           If at
any time during the term of this Agreement, a Party, its Affiliate, licensee or
sublicensee (the “Marketing Party”) has filed in a
Major Regulatory Jurisdiction to obtain regulatory approval for or is marketing
a Licensed Product for an indication in its Exclusive Field (an “Exclusive Field Product”) or in the Asthma Field (an “Asthma Field Product”) in a particular
territory, and the other Party (the “Non-Marketing
Party”) believes that (i) sales of an Exclusive Field Product or
Asthma Field Product (as the case may be) are occurring or will occur for use
in the Exclusive Field of the Non-Marketing Party; or (ii) solely with respect
to territories in which the Non-Marketing Party has the right to sell Licensed
Product in the Asthma Field, sales of the Exclusive Field Product are occurring
or will occur for use in the Asthma Field, then the Non-Marketing Party may
provide notice to the Marketing Party of its desire to track sales of the
Exclusive Field Product or Asthma Field Product (as the case may be) for the
relevant indications in such territory.


 


(b)           Upon
receipt of notice under Section 7.6(a), PDL and Roche shall meet and agree upon
a method of tracking sales of each such product for use in its respective
indications including (i) the acquisition of one or more [*] (including, by way of example, [*]) or other [*] (including, for example, [*])
generally recognized in the pharmaceutical industry as having a [*] in the tracking of sales of
pharmaceutical products that have a similar nature as and are prescribed by
similar physicians as such Exclusive Field Product or Asthma Field Product (as
the case may be) in the U.S. Territory and, if applicable, outside the U.S.
Territory (the “Data Services”), and (ii) the
methodology for applying any such [*]
to determine the extent to which sales of the Exclusive Field Product or Asthma
Field Product (as the case may be) are Cross-Field Sales in the relevant
territory.


 


44





















 


(c)           All
costs associated with the acquisition and application of such [*] shall be shared by the Parties [*]. 
In addition, the Parties shall also meet and confer with respect to: (i)
how to account for prescriptions to patients with multiple afflictions (e.g.
transplant patients with asthma), both within and outside the indications for
which the Exclusive Field Product or Asthma Field Product (as the case may be)
has received Regulatory Approval; (ii) the right for each Party to audit, on a
periodic basis, the application of the [*];
and (iii) a mechanism for addressing prescriptions that are tracked back to
sole source purchasing agreements.


 


(d)           If in
the course of applying the foregoing [*]
to track sales of the Exclusive Field Product or Asthma Field Product (as the
case may be) pursuant to this Section 7.6, or in the course of performing an
audit of such application by the other Party, a Party determines that
Cross-Field Sales are occurring at [*]
of annual sales in [*], or [*] annually for sales in [*]), the Parties shall confer regarding an
appropriate method either to curtail such Cross-Field Sales and/or to
compensate any affected Party for the economic effects thereof.


 


(e)           In
the event of any unresolved issues, dispute or disagreement under this Section
7.6, the Parties will submit such dispute, issue or disagreement for resolution
pursuant to Article 18.


 


7.7          Transplant
Indications.


 


(a)           The
Parties anticipate that under the Worldwide Daclizumab Agreement, the right to
market and sell Daclizumab, which is a Licensed Product, in the Transplant
Indications will revert to PDL in [*].  Accordingly, the Parties intend to continue
to maintain the competitive vitality and value of Daclizumab in the Transplant
Indications and to facilitate eventual transfer of such marketing and selling
activities to PDL.  To that end, the
Parties have agreed to further discussions and collaboration regarding the [*] Daclizumab (as such term is defined in the Worldwide
Daclizumab Agreement) in the Transplant Indications in the U.S. Territory.  This collaboration will allow PDL to form a
nascent commercial organization before the reversion of


 


45





















 


Daclizumab with a view to
providing customer and product support in a rapid and effective manner at the
time of transfer of ownership to PDL of Daclizumab as provided under the
Worldwide Daclizumab Agreement.


 


(b)           The
Parties desire to contribute their respective product and marketing expertise
to best position Daclizumab competitively. 
To that end, the Parties agree to establish a process for discussion of
the positioning of Daclizumab (as such term is defined in the Worldwide
Daclizumab Agreement) in accordance with this Section 7.7.  In order to facilitate these discussions, if
at any time prior to the earliest of (i) [*]
or [*] and (ii) [*], Roche desires to [*]
for Daclizumab for the [*] in the U.S.
Territory, then Roche shall notify PDL immediately in writing and the Parties
shall meet in person within a reasonable time period following notification to
discuss the [*].  Roche shall give due consideration to any
recommendations or opinions offered by PDL regarding the impact of the [*].  The Parties
shall have a period of up to [*]
to further confer, but Roche shall have the right to effect such [*] unless PDL notifies Roche in writing, supported by a [*], of its request for further consideration pursuant to
subparagraph (c) below.


 


(c)           If
PDL notifies Roche in writing that it wishes further consideration of its
views, then the Parties shall refer the matter for discussion by a specially
constituted subcommittee of the JDC consisting of [*] members from each of PDL and Roche with experience in
sales and marketing in the Transplant Indications (the “JDC Special Committee”).  The JDC Special Committee shall prepare an
analysis of the impact of the [*] for
Daclizumab on the Licensed Product. The JDC Special Committee shall have access
to information and personnel from both Parties reasonably required to prepare
its analysis and assessment for review by the full JDC.  The analysis shall be prepared as soon as
practically feasible, in no event later than [*]
of the date of notification from Roche hereunder.  The full JDC shall consider such analysis and
assessment and agree upon a recommendation to the JSC within a reasonable
period of time after receipt of such analysis and assessment.  Thereafter, the JSC shall review and consider
the recommendation of the JDC.  If the
JSC is unable to agree on  the [*],


 


46





















 


then the matter shall be
submitted for discussion and resolution by [*]
and [*] (the “Officers”).  The JSC shall within [*] days prepare an executive summary for
submission to the Officers.  The Officers
shall then, within a reasonable period of time, meet to resolve the
matter.  If the Officers are unable to
agree on appropriate resolution within [*]
thereafter, then [*] shall have
the sole right to effect the [*] for
Daclizumab.


 


(d)           The term “[*]” in Section 7.7(b) shall mean proposals to: [*] in the U.S. Territory; proceed with development of [*]; 
change by more than [*] for
the U.S. Territory to the [*],
other than in response to [*] by a
[*] or in response to [*]; use
a [*] for Daclizumab other
than [*]; change [*]
other than in accordance with [*] applicable
to similar products; or change in [*].


 


(e)           As of
the Effective Date, Roche shall have no further diligence obligations in the
U.S. Territory under Section 4.6 of the Worldwide Daclizumab Agreement.  In addition, the Parties agree to discuss in
good faith the possibility of amending the Worldwide Daclizumab Agreement to
provide for a Reversion Exercise Fee (as such term is defined in the Worldwide
Daclizumab Agreement) that is independent of AAGS (as such term is defined in
the Worldwide Daclizumab Agreement).


 


(f)            The
Worldwide Daclizumab Agreement shall be deemed to be amended as necessary to
give effect to the provisions of this Section 7.7.


 


ARTICLE 8


 


MANUFACTURE AND SUPPLY


 


8.1          Clinical
Supply.


 


(a)           With
respect to Licensed Product, PDL shall supply the Active Pharmaceutical
Ingredient (“API”),
Investigational Medicinal Product (“IMP”),
and


 


47





















 


placebo for Development
purposes in accordance with the Development Plan, which shall set forth
appropriate milestones to ensure conformance with the Development Plan.  These milestones, in general, will be based
on [*] to conduct the planned
clinical trials in accordance with the projected schedule at each stage in the
Development Plan.  A milestone based on [*] should include the quantities of and
specifications for [*] for
Development purposes and an approximate delivery schedule therefor.  PDL shall review current and proposed
manufacturing subcontractors for clinical supply with the JDC.  The JDC shall consider using Roche as a
subcontractor for various clinical manufacturing steps, including formulation,
filling, finishing, and distribution. 
This consideration of Roche as the formulation, filling, finishing
and/or distribution subcontractor for the clinical supply shall be based on
capacity, quality, compliance, cost, capability, distribution, and the
strategic needs of the Parties, and subject to the normal supplier
qualification process at PDL.  If Roche
is selected as a subcontractor, the Parties shall negotiate in good faith to
enter into an appropriate toll manufacturing agreement.


 


(b)           The
COGS associated with supplying all API, IMP, and placebo pursuant to this
Section 8.1 for the purposes of obtaining Regulatory Approval in the U.S.
Territory and the European Union shall be [*],
consisting of [*] for such
clinical supplies for the phase I and phase II clinical program (the “Phase I/II [*] Price”) and [*] for such clinical supplies for the
phase III clinical program (the “Phase III
[*] Price”).  The Phase I/II [*] Price shall be included as a
Development Expense in [*] in the [*] beginning with [*].  
The Phase III [*] Price
shall be included as a Development Expense in [*]
in the [*] after Roche decides to
proceed with phase III development (i.e., such decision is currently identified
as the Roche “Full Development Decision Point [FDDP]” determination as approved
by the “Life Cycle Committee [LCC]”). 
Roche shall promptly inform PDL of its decision whether or not to
proceed with phase III development.  If
the non-manufacturing aspects of the initial Development Plan are modified in
any manner that results in an increase in the quantity of API, IMP, or placebo
to be manufactured for purposes of obtaining Regulatory Approval in the U.S.
Territory and the European Union, then the Parties shall [*] in the Phase I/II [*] Price and/or Phase III [*] Price, as


 


48





















 


appropriate, or agree upon an
alternative method of [*] the
costs resulting from such change.


 


(c)           With
respect to API, IMP, or placebo supplied by PDL to Roche pursuant to this
Section 8.1 for use in any Development activities not required to obtain
Regulatory Approval in the U.S. Territory or the European Union, Roche shall
pay PDL, within the later of [*]
of acceptance of the shipment or [*]
of receipt of the applicable invoice, a transfer price equal to (i) [*], as the case may be, minus (ii) [*] for the production of such
material.  Such amount shall be deemed an
Incremental Development Expense.


 


8.2          Commercial
Supply.  Within [*] after the Effective Date, Roche and PDL
shall negotiate in good faith a definitive commercial supply agreement (the “Commercial Supply Agreement”) that will govern the exact
terms and conditions of the commercial supply of API or other finished form of
Licensed Product by PDL to Roche for sale in the ROW Territory for use in the
Asthma Field.  The Parties acknowledge
and agree that the Commercial Supply Agreement will address Roche’s remedies in
the event that PDL is unable to supply or have supplied API or other finished
form of Licensed Product in quantities desired by Roche (a “Failure to
Supply”).  All such remedies
set forth in the Commercial Supply Agreement shall be Roche’s sole remedies
with respect to a Failure to Supply.


 


8.3          Transfer
Price for Commercial Supply of API.


 


(a)           If
Roche desires to perform the fill/finish step of the manufacturing process of
Licensed Product for sale in the Asthma Field in the ROW Territory, it shall
notify PDL of its desire and commitment based on capacity, quality, compliance,
cost, capability and the strategic needs of the Parties. The Parties shall
discuss and agree upon the amounts which Roche would [*] for the fill/finish step under different reasonably
contemplated supply requirements if Roche were to perform such fill/finish (the
“Roche Fill/Finish Cost”).  If [*]
provides a corresponding fill/finish cost that is [*], based on the same assumptions with respect to the
calculations of such cost, then [*]


 


49





















 


shall perform such fill/finish
step and the Parties shall agree upon the appropriate commitment for continued
fill/finish by [*] (including the
frequency and lead times with which [*])
with a view to ensuring uninterrupted supply of Licensed Product in the ROW
Territory.


 


(b)           Roche
will pay PDL a Transfer Price based on [*]
calculated as follows:  Transfer Price = [*]), where the Target Price is determined
based on the [*] as shown
below.  The total [*] is determined by combining [*] with [*].  For [*]
intermediate to those shown below, [*]
will be used to determine the Target Price. 
If total [*] are [*] or [*],
the Target Price will be [*].




	
  Target
  Price

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  






 


The
Transfer Price for API will be fixed [*]
as described in the Commercial Supply Agreement to be negotiated between the
Parties.


 


8.4          Transfer
Price for Commercial Supply of Finished Product.  If PDL or its subcontractor performs the
fill/finish step, then Roche will pay PDL a Transfer Price based on the [*] Licensed Product [*] calculated as follows:  Transfer Price = [*], where


 


50





















 


the Target Price is determined
based on the [*] as shown
below.  The total [*] is determined by combining [*] with [*].  For [*]
intermediate to those shown below, [*]
will be used to determine the Target Price. 
If total annual order quantities are [*]
or [*], the Parties will [*].  For the purpose of all calculations under this
Section 8.4, finished Licensed Product [*]
shall be handled separately from finished Licensed Product [*].


 


 


	
  [*]

  	
   

  	
  Target Price

  for [*]

  	
   

  	
  Target Price

  for [*]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  	
  [*]

  



 


For the purpose of this Section 8.4:


 


(a)           the
term [*] indicates a [*] that contains  [*],
which would be labeled and bulk packaged for shipment only;


 


(b)           the
term [*] indicates a [*] that contains [*] (exact package to be determined), which
would be labeled and bulk packaged for shipment only.


 


(c)           In
the event that the [*]
configurations differ from those specified above, the Parties shall negotiate
in good faith a new Target Price table.


 


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(d)           The
Transfer Price for finished Licensed Product will be fixed [*] in accordance with the procedure
described in the Commercial Supply Agreement to be negotiated between the
Parties.


 


8.5          Transfer Price Following Expiration of
Royalty Obligations.    Following expiration of Roche’s royalty
obligations in a given country in the ROW Territory pursuant to Section
10.3(b), PDL will continue to supply Licensed Product to Roche under the terms
of the Commercial Supply Agreement, except that the Transfer Price shall be [*]


 


8.6          Delivery
Terms.  The Parties acknowledge and agree that the Target Prices set forth in
Sections 8.3 and 8.4, and the Transfer Price set forth in Section 8.5, (a) are
based on PDL delivering API or other finished form Ex Works (Incoterms 2000)
PDL’s or its Third Party manufacturer’s facilities and (b) do not
include the cost of any shipping fees, freight charges, insurance, import and
export compliance fees, consumption taxes, withholding taxes, customs, duties
and other taxes imposed by any government taxing authority in connection with
API or other finished form supplied
by PDL for the ROW Territory.


 


8.7          Transition Services After Expiration.  If Roche or its Affiliate or  sublicensee is still selling the Licensed
Product in the ROW Territory in the Asthma Field at the time of expiration of
this Agreement and Roche wishes to assume the responsibility for supplying the
Licensed Product for such sales, then Roche shall notify PDL in writing at
least [*] prior to the expiration of this
Agreement and PDL for a reasonable transition period thereafter shall supply
Licensed Product to Roche and provide Roche with certain transition services
related to the transfer of manufacturing from PDL to Roche or its designee, all
under the terms of (and subject to the execution of) a separate written
agreement to be negotiated by the Parties in good faith.


 


52





















 


ARTICLE 9


 


R&D REIMBURSEMENT PAYMENT AND
DEVELOPMENT PAYMENTS


 


9.1          [*].  Roche shall pay to PDL a non-refundable,
non-creditable payment of Seventeen Million Five Hundred Thousand Dollars
($17,500,000) [*] within [*] after the Effective Date.


 


9.2          Development
Payments.  Roche shall pay to PDL the
following non-refundable and non-creditable amounts no later than [*] after the later of (i) first occurrence
of the indicated event with respect to a Licensed Product in the Asthma Field
or (ii) receipt by Roche of an invoice for such amount:


 


	
  Event

  	
   

  	
  Payment

  
	
   

  	
   

  	
   

  
	
  (a)

  	
  [*] (as defined
  and specified in Exhibit E)

  	
   

  	
  [*]

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  (b)

  	
  [*] (as defined
  and specified in Exhibit E) 

  	
   

  	
  [*]

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  (c)

  	
  [*] (as described
  in Exhibit B) prior to [*]

  	
   

  	
  [*] 

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  (d)

  	
  [*]

  	
   

  	
  [*] 

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  (e)

  	
  [*]

  	
   

  	
  [*] 

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  (f)

  	
  [*]

  	
   

  	
  [*] 

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  (g)

  	
  [*]

  	
   

  	
  [*]

  	 




 


If Roche is responsible for achieving an event listed
in this Section 9.2, then Roche shall provide PDL with written notice of the
first occurrence of such event within [*]
of such occurrence.  If Roche fails to
provide such notice within such [*]
period, then Roche’s associated payment shall be due no later than [*] after such event.  If any of the payments specified in [*] have not been made at the time the
payment specified in


 


53





















 


[*]
becomes due and payable, then Roche shall make all such unpaid payments no
later than the due date for the payment specified in Section [*], regardless of whether the events
specified in [*] have occurred.


 


ARTICLE 10




PAYMENTS BASED ON SALES OF
PRODUCTS


 


10.1        Profit Share
in the U.S. Territory.  PDL shall pay
Roche, within [*] after the end of
each calendar quarter during the Co-Promotion Term, an amount equal to [*] of the [*] for such calendar quarter.    The Parties acknowledge and agree that the
payments set forth in this Section 10.1 are in lieu of, rather than in addition
to, any payments that would otherwise have been due to Roche pursuant to
Section 7.2(c) of the Worldwide Daclizumab Agreement on account of the [*].


 


10.2        [*] in the
U.S. Territory.


 


(a)           For
each of the [*] following the [*], PDL shall pay to Roche [*] on a quarterly basis on PDL Net Sales
of the Licensed Product [*], at
the following rates:


 


	
  Year

  	
   

  	
  Royalty Rate

  
	
  For the [*]
  following the [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  For the [*]
  following the [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  For the [*]
  following the [*]

  	
   

  	
  [*]

  



 


If in the U.S. Territory,
sales of units of Generic Products in the aggregate total at least [*] of the aggregate sales of units of all
Generic Products and Licensed Products as measured [*], then PDL shall have the right to [*] due under [*] by [*] in the
[*], [*] in the [*],
and [*] in the [*] (in each case rounded to the nearest [*]). 
For clarity, if such [*]
are


 


54





















 


applicable, then the
actual [*] paid by PDL shall be [*] in the [*], [*] in the [*], and [*]
in the [*].


 


(b)           For
clarity, the [*] specified in
Section 10.2(a) are [*]), the
first of which commences on [*].  The Parties acknowledge and agree that the
payments set forth in Section 10.2(a) are in lieu of, rather than in addition
to, any payments that would otherwise have been due to Roche pursuant to
Section 7.2(c) of the Worldwide Daclizumab Agreement on account of [*].


 


10.3        Royalties in
the ROW Territory.


 


(a)           For
each calendar year or portion thereof during the term specified below, Roche
shall pay to PDL incremental royalties on Roche Net Sales, at a royalty rate
determined by annual Roche Net Sales of all Licensed Products as follows:


 


	
  Annual Roche Net Sales (US$)

  	
   

  	
  Royalty Rate

  
	
   

  	
   

  	
   

  
	
  Up to and including [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  Above [*]
  but not exceeding [*]

  	
   

  	
  [*]

  
	
   

  	
   

  	
   

  
	
  Above [*]

  	
   

  	
  [*]

  



 


Roche shall have the
right to deduct from any royalties payable under this Section 10.3(a) the
following:  (i) [*] for Licensed Products sold in the ROW
Territory (on a first-in, first-out basis) during the royalty reporting period
for which such royalties are due; and (ii) any [*] for Licensed Product sold in the ROW Territory (on a
first-in, first-out basis) during the royalty reporting period for which such
royalties are due.


 


(b)           Roche’s
obligation to pay a royalty under Section 10.3(a) for a particular Licensed
Product shall expire, on a country-by-country basis, on the later of (i) [*] following the First Commercial Sale of
such Licensed Product in such country and (ii)


 


55





















 


the last date on which the
making, using, selling, or importing of Licensed Product, but for the licenses
granted herein, would infringe a Valid Claim. 
If required by law, the First Commercial Sale in the European Union will
be considered the First Commercial Sale in each country of the European Union.


 


(c)           The
Parties acknowledge and agree that no payments will be owed to Roche pursuant
to Section 7.2(c) of the Worldwide Daclizumab Agreement on account of those
sales of Licensed Products included in Roche Net Sales hereunder.


 


10.4        Adjustments
Related to Third Party Competition. 
If in a country of the ROW Territory sales of units of Generic Products
in aggregate total at least [*] of
the aggregate sales of units of all Generic Products and Licensed Products as
measured [*], then Roche shall
have the right to [*] any
royalties due under Section 10.3 (after the applicable [*], if applicable) by: (a) [*] in the [*] in which such Generic Product sales achieve such sales
levels; (b) [*] in the [*], and (c) [*] in the [*]
and all subsequent such years during the royalty term (in each case rounded to
the nearest [*]).


 


10.5        Adjustments for Third Party Licenses.  Roche and PDL shall share all
costs associated with Third Party Licenses in the ROW Territory as set forth in
this Section 10.5.  Roche shall be
responsible for [*] of all
payments under Third Party Licenses that are not included in the Transfer Price
and are allocable to the use, development, sale, manufacture, or import of
Licensed Products in the ROW Territory, including without limitation all
payments under Third Party Licenses (a) calculated based on sales of Licensed
Products in the ROW Territory; (b) made on account of the achievement of particular
events relating to development or commercialization of Licensed Products in the
ROW Territory; and (c) as consideration for a grant of a license or other
rights in the ROW Territory (collectively, “ROW
License Payments”).  PDL shall
be responsible for the remaining [*]
of ROW License Payments.  The Parties
shall, within [*] after the end of
each [*], reimburse each other to
effect the sharing of ROW License Payments set forth in this Section 10.5.  For each license agreement that is included
in Third Party Licenses pursuant to Section 1.81(b) and that is also


 


56





















 


necessary for the use, manufacture, sale, offering for
sale, or importation of products outside the Asthma Field, the Parties will [*] of payments under such license
agreement to determine the portion of such payments [*], which portion alone shall be includable in ROW License
Payments.  This Section 10.5 shall
supersede Section 7.4 of the Worldwide Daclizumab Agreement to the extent
Section 7.4 of the Worldwide Daclizumab Agreement is applicable to any ROW
License Payments.


 


10.6        [*] Payments.  Roche shall pay to PDL the following
one-time, non-refundable and non-creditable amounts within [*] after the later of (i) the first
achievement of the indicated events with respect to [*] of all Licensed Products in the Territory, and (ii)
receipt by Roche of an invoice for such amount:


 


	
  Event

  	
   

  	
  Payment

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  
	
  [*]

  	
   

  	
  [*]

  	
   

  



 


For clarity, if more than
one of the indicated [*] events
occurs in the same calendar year, then Roche shall pay PDL the sum of all
payments corresponding to such [*] events.  Roche shall provide PDL with written notice
of the first achievement of each event listed in this Section 10.6 within [*] of such achievement.  If Roche fails to provide such notice within
such [*] period, then Roche’s
associated payment shall be due no later than [*]
after such event.


 


57





















 


ARTICLE 11



PAYMENT; REPORTS; AUDITS


 


11.1        Roche
Quarterly Royalty Payments and Reports.


 


(a)           Until
the expiration of Roche’s royalty obligations under Section 10.3, Roche agrees
to make payments and written reports to PDL within [*] after the end of each calendar quarter covering all sales
of the Licensed Products in the Asthma Field in the ROW Territory by Roche, its
Affiliates or sublicensees (except PDL, its Affiliates and sublicensees) for
which invoices were sent during such calendar quarter, each such written report
stating for the period in question:


 


(i)            for
Licensed Products disposed of by sale, the description of Licensed Products and
the calculation of Roche Net Sales,


 


(ii)           for
Licensed Products disposed of other than by sale, the description and nature of
the disposition, and


 


(iii)         the
calculation of the amount due to PDL for such quarter pursuant to Sections
10.3, 10.4, 10.5 and 10.6.


 


(b)           The
information contained in each report under Section 11.1(a) shall be considered
Confidential Information of Roche. 
Concurrent with the delivery of each quarterly report, Roche shall make
the payment due PDL hereunder for the calendar quarter covered by such report.


 


(c)           It is
understood that only one royalty payment under Article 10 shall be payable on a
given unit of Licensed Product disposed of under this Agreement.  In the case of transfers or sales of any
Licensed Product between Roche and an Affiliate sublicensee of Roche, such
royalty shall be payable with respect to, the sale of such Licensed Product to
(i) an independent Third Party not an Affiliate of the seller or (ii) if the
end user is an Affiliate of the seller, then such end user.


 


58





















 


11.2        PDL
Quarterly Royalty Payments and Reports.


 


(a)           During
the [*] period of PDL’s royalty
obligations under Section 10.2, PDL agrees to make payments and written reports
to Roche within [*] after the end
of each calendar quarter covering all sales of the relevant Licensed Product in
the Asthma Field in the U.S. Territory by PDL for which invoices were sent
during such calendar quarter, or, in the case of royalties from the PDL Net
Sales of PDL’s Affiliates or sublicensees (except Roche, its Affiliates and
sublicensees), within [*]
following the end of the quarter in which PDL receives the royalty report from
the Affiliate sublicensee.  Each report
shall state for the period in question:


 


(i)            for
such Licensed Products disposed of by sale, the description of Licensed
Products and the calculation of PDL Net Sales therefor,


 


(ii)           for
such Licensed Products disposed of other than by sale, the description and
nature of the disposition, and


 


(iii)         the
calculation of the amount due to Roche for such quarter pursuant to Section
10.2.


 


(b)           The
information contained in each report under Section 11.2(a) shall be considered
Confidential Information of PDL. 
Concurrent with the delivery of each quarterly report, PDL shall make
the payment due Roche hereunder for the calendar quarter covered by such
report.


 


(c)           It is
understood that only one royalty payment under Section 10.2 shall be payable on
a given unit of Licensed Product disposed of under this Agreement.  In the case of transfers or sales of any
Licensed Product between PDL and an Affiliate sublicensee of PDL which is
subject to royalties under Section 10.2, such royalty shall be payable with
respect to the sale of such Licensed Product to (i) an independent Third Party
not an Affiliate of the seller or (ii) if the end user is an Affiliate of the
seller, then such end user.


 


59





















 


11.3        Gross Margin
Reports.  Along with the payment
specified in Section 10.1, PDL shall provide Roche with a written report (the “Gross Margin Report”) containing the  PDL Adjusted Gross Sales, COGS and the
calculation of the amount due to Roche. 
The information contained in each report under this Section 11.3 shall
be considered Confidential Information of the Parties.


 


11.4        Other
Reports.  The Parties’ reporting
obligations with respect to Development Expenses and Operating Expenses are set
forth in Sections 4.6(c) and 6.3(b).  The
information contained in such reports shall be considered Confidential
Information of both Parties.


 


11.5        Accounting.


 


(a)           Product
Sales Records.  Each Party (the “Royalty Paying Party”) agrees to keep full, clear and
accurate records for a period of at least [*]
after the relevant payment is owed pursuant to this Agreement, setting forth
the manufacturing, sales and other disposition of Licensed Products sold or
otherwise disposed of in sufficient detail to enable royalties and compensation
payable to the other Party (the “Royalty Receiving Party”)
hereunder to be determined.  Each Royalty
Paying Party further agrees to permit its books and records to be examined by
an independent accounting firm selected by the Royalty Receiving Party to
verify reports provided for in Sections 11.1, 11.2, or 11.3.  Unless the Royalty Receiving Party obtains
the prior written consent of the Royalty Paying Party, such accounting firms
must be selected from among the four largest global accounting firms.  Such audit shall not be performed more
frequently that [*] per calendar
year nor more frequently than [*]
with respect to records covering any specific period of time.  Such examination is to be made at the expense
of the Royalty Receiving Party, except in the event that the results of the
audit reveal a discrepancy in favor of the Royalty Paying Party of [*] or more over the period being audited,
in which case reasonable audit fees for such examination shall be paid by the
Royalty Paying Party.


 


60





















 


(b)           Expense
Records.  Each Party (the “Expense Incurring Party”) agrees to keep full, clear and
accurate records for a period of at least [*]
after the relevant report is made pursuant to Section 4.6(c) or 6.3(b) setting
forth its Development Expenses or Operating Expenses, as applicable, incurred
in sufficient detail to enable royalties and compensation payable to the other
Party (the “Expense Reimbursing Party”)
hereunder to be determined.  Each Expense
Incurring Party further agrees to permit its books and records to be examined
by an independent accounting firm selected by the Expense Reimbursing Party to
verify reports made pursuant to Section 4.6(c) or 6.3(b), as applicable.  Unless the Expense Reimbursing Party obtains
the prior written consent of the Expense Incurring Party, such accounting firms
must be selected from among the four largest global accounting firms.  Such audit shall not be performed more
frequently that [*] per calendar
year nor more frequently than [*]
with respect to records covering any specific period of time.  Such examination is to be made at the expense
of the Expense Reimbursing Party, except in the event that the results of the
audit reveal a discrepancy in favor of the Expense Incurring Party of [*] or more over the period being audited,
in which case reasonable audit fees for such examination shall be paid by the
Expense Incurring Party.


 


11.6        Methods of
Payments.  All payments due to either
PDL or Roche under this Agreement shall be paid in Dollars by wire transfer to
a bank in the U.S. designated in writing by the Party to which the payment is
due.


 


11.7        Taxes.  If provision is made in law or regulation of
any country of the Territory for withholding of taxes of any type, levies or other
charges with respect to the any amounts payable hereunder to a Party or its
Affiliates, the other Party or its Affiliates (“Withholding
Party”) shall promptly pay such tax, levy or charge for and on
behalf of the Party to the proper governmental authority, and shall promptly
furnish the Party with receipt of such payment. 
The Withholding Party shall have the right to deduct any such tax, levy
or charge actually paid from payment due the Party or be promptly reimbursed by
the Party if no further payments are due the Party.  Each Withholding Party agrees to assist the
other Party in claiming exemption from such


 


61





















 


deductions or withholdings under double taxation or
similar agreement or treaty from time to time in force and in minimizing the
amount required to be so withheld or deducted.


 


11.8        Currency.  All payments under this Agreement shall be in
Dollars.


 


11.9        Late Payments.  Any amount owed by one Party to
the other Party under this Agreement that is not paid within the applicable
time period set forth herein shall accrue interest at the [*] as reported by Bloomberg (or a
successor or similar organization).


 


ARTICLE 12



PATENTS AND KNOW-HOW


 


12.1        PDL Technology.  Ownership of
the PDL Inventions, PDL Know-How and PDL Patents shall remain vested at all
times in PDL.


 


12.2        Joint Inventions and Joint Roche-PDL Patents. 
Subject to Section 12.6(e), ownership of Joint Inventions and Joint Roche-PDL
Patents shall be vested jointly in PDL and Roche.  Except where such activities would conflict
with an exclusive license granted to a Party in this Agreement or in the
Worldwide Daclizumab Agreement, both Parties shall at all times have the
co-exclusive right within the Territory to practice, or to make, have made, use,
import, offer for sale or sell any Joint Invention under any Joint Roche-PDL
Patent, and neither Party shall be obligated to account to the
other.   As used herein, a right to
practice any Joint Roche-PDL Patent for a particular purpose without any obligation
to account shall include the right to grant licenses for such purpose without
the consent of the other Party.  To the extent either Party needs the
consent of the other Party to exploit its co-exclusive or exclusive rights with
respect to Joint Roche-PDL Patents, including the right to sublicense or
enforce


 


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such Joint Roche-PDL Patents, the other Party shall
cooperate with the Party making such a request and promptly supply all needed
consents, signatures and the like.


 


12.3        Roche Technology.  Except as
expressly provided in this Agreement or the Worldwide Daclizumab Agreement,
ownership of the Roche Know-How, Roche Patents and Collaboration Inventions
shall remain vested at all times in Roche.


 


12.4        Disclosure of New Inventions.  At a regular interval to be agreed by the
Parties (but no less than quarterly), the Parties shall disclose to each other
any Joint Inventions, Collaboration Inventions, or other inventions that
constitute or will constitute new PDL Know-How, Roche Know-How, PDL Patents (if
a patent application is filed), or Roche Patents (if a patent application is
filed), to extent that any of the foregoing were conceived or reduced to
practice since the previous new invention disclosure.


 


12.5        Prosecution of Sole PDL Patents and Sole
Roche Patents.


 


(a)           PDL
agrees to prosecute and reasonably maintain all of the patents and applications
included within the Sole PDL Patents (except for [*]), to the extent it has the rights to do so, consistent
with the patent strategy developed by the JPC, and Roche agrees to prosecute
and reasonably maintain the Sole Roche Patents, to the extent it has the rights
to do so from any co-owner of such Sole Roche Patents, consistent with the
patent strategy developed by the JPC.  
The costs and expenses for such prosecution and maintenance shall be
allocated between the Parties as set forth in Section 12.7.


 


(b)           The
Party responsible for such patent (“Responsible
Party”) shall provide the other Party with a reasonable opportunity
to comment on all draft filings prior to their submission to the relevant
patent authority.  On the reasonable
request of the Responsible Party, the other Party shall cooperate, in all
reasonable ways, in connection with the prosecution of all patent applications
included within the Sole PDL Patents or Roche Sole Patents, as the case may
be.  Should the Responsible Party decide that it is no longer interested
in maintaining or prosecuting a Sole PDL Patent


 


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(except for those [*])
or Sole Roche Patent, as the case may be, it shall promptly advise the other
Party thereof and, at the request of such other Party, PDL and Roche shall
negotiate in good faith to determine an appropriate course of action in the
interests of both Parties.  If any Sole PDL Patents are assigned to Roche,
Roche will thereafter prosecute and reasonably maintain such Sole PDL Patents
at Roche’s own cost to the extent that Roche desires to do so, provided that to
the extent such Sole PDL Patent contains claims outside the Asthma Field, PDL
and its Affiliates shall have a worldwide immunity from suit thereunder. 
If Roche’s interest in any Sole Roche Patent is assigned to PDL, PDL will
thereafter prosecute and reasonably maintain such Sole Roche Patent at PDL’s
own cost to the extent that PDL desires to do so, provided that to the extent
such Sole Roche Patent contains claims outside the Asthma Field, Roche and its
Affiliates shall have a worldwide immunity from suit thereunder.   In the event Roche’s interest in the
Sole Roche Patents is assigned to PDL pursuant to Section 5.4(e) of the
Worldwide Daclizumab Agreement, Roche shall have no further rights with respect
thereto.


 


12.6        Prosecution of Joint Inventions.


 


(a)           PDL
will have the first right of election to file priority patent applications for
Joint Inventions in any country in the Territory.  If PDL declines to file
such applications then Roche may do so.  
Such filings and all subsequent prosecution and maintenance shall be
consistent with the patent strategy developed by the JPC.


 


(b)           The
Party not performing the priority patent filings for Joint Inventions pursuant
to this Section 12.6 undertakes without cost to the filing Party to obtain all
necessary assignment documents for the filing Party, to render all signatures
that shall be necessary for such patent filings and to assist the filing Party
in all other reasonable ways that are necessary for the issuance of the patents
involved as well as for the maintenance and prosecution of such patents. 
The Party not performing the patent filings shall on request be authorized by
the other Party to have access to the files concerning such patents in any
patent offices in the world.


 


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(c)           The
Party performing the priority patent filings for Joint Inventions pursuant to
this Section 12.6 undertakes to perform the corresponding convention filings
from case to case, after having discussed the countries for foreign filings
with the other Party.


 


(d)           The
costs and expenses for prosecution and maintenance of Joint Roche-PDL Patents
shall be allocated between the Parties as set forth in Section 12.7.


 


(e)           Should
the Responsible Party decide that it is no longer interested in maintaining or
prosecuting a Joint Roche-PDL Patent, it shall promptly advise the other Party
thereof and the Parties shall discuss whether the Responsible Party shall
assign such Joint Roche-PDL Patent to the other Party at no cost to the
assignee.  If any such patents or patent applications are assigned to
Roche, they shall then be deemed to be a Sole Roche Patent and, to the extent
such Joint Roche-PDL Patent contains claims outside the Asthma Field, PDL and
its Affiliates shall have a worldwide immunity from suit thereunder.  If
any such patents or patent applications are assigned to PDL, they shall then be
deemed to be a Sole PDL Patent and, to the extent such Joint Roche-PDL Patents
contain claims outside the Field, Roche and its Affiliates shall have a worldwide
immunity from suit thereunder.


 


12.7        Allocation of Patent Prosecution Expenses.  The costs incurred by the Parties with
respect to the prosecution and maintenance of PDL Patents and Roche Patents in
the U.S. Territory and the European Union, or in connection with the
international phase of PCT applications that designate the U.S. and/or European
Union countries, shall be included in [*]
and shall be shared [*] by the
Parties until the end of the Co-Promotion Term. 
Thereafter, [*] shall be
solely responsible for such costs in the [*]
or in connection with the international phase of PCT applications that
designate the [*], and [*] shall be solely responsible for such
costs in the [*] or in connection
with the international phase of PCT applications that designate one or more [*] countries but not [*]. 
PDL shall bear [*] of the
costs incurred by the Parties with respect to the post-issuance  maintenance of PDL Patents in the ROW Territory (except for
the European


 


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Union).  Except
as set forth in the preceding sentence, Roche shall bear [*] of the costs incurred by the Parties
with respect to the prosecution and maintenance of PDL Patents and Roche
Patents in the ROW Territory (except for the European Union) until the
termination of Roche’s royalty obligations under Section 10.3.  Thereafter, PDL will be solely responsible
for such costs with respect to the PDL Patents and Roche shall be solely
responsible for such costs with respect to Sole Roche Patents.  Notwithstanding anything to the contrary set
forth above, PDL will be solely responsible for all costs with respect to the
prosecution and maintenance of the [*].


 


12.8        Enforcement and Defense of Sole Patents.


 


(a)           In
the event of any action against a Third Party for infringement of any claim in
any issued patent within the Sole PDL Patents or Sole Roche Patents, as the
case may be, or the institution by a Third Party of any proceedings for the
revocation of any such claim, each Party will notify the other promptly and,
following such notification, the Parties shall confer.  In the [*] Territory, [*]
shall have the right, but not the obligation, to prosecute such actions or to
defend such proceedings involving the [*] in the
Asthma Field, in its own name and entirely under its own direction and
control.  The Parties shall share [*] all expenses associated with such
action or proceeding, provided it is commenced prior to [*].  [*]
shall bear all costs associated with any such action or proceeding commenced
after [*]. 
In the [*] Territory, [*] shall have the right, but not the
obligation, to prosecute such actions or to defend such proceedings involving
the [*] (other than the [*]) in the Asthma Field at [*], in its own name and entirely under its
own direction and control.  [*] shall have the right, but not the
obligation, to prosecute such actions or to defend such proceedings involving
the [*] at [*], in its own name and entirely under its own direction and
control.


 


(b)           If a
Party with the first right hereunder elects not to prosecute any action for
infringement or to defend any proceeding for revocation of any claims in any
issued patent within the [*]
(other than the [*] and those [*] for which [*]) in the Asthma Field or [*]
(other than those [*]), as the
case may be, within [*] of being
requested by


 


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the other Party to do so, the
other Party may prosecute such action or defend such proceeding at its own
expense, in its own name and entirely under its own direction and control,
provided however, that the Parties shall [*]
all expenses associated with actions or proceeding brought in the U.S.
Territory prior to [*] with
respect to [*] in the Asthma
Field.  After [*], [*] shall
not have any right to bring any action or defend any proceeding in the U.S.
Territory with respect to a [*].


 


(c)           In
any event, the Party bringing an action (“Acting
Party”) pursuant to this Section 12.8 shall solicit, and seriously
consider in good faith the non-acting Party’s input with respect to all
material aspects of such action, including without limitation, the development
of the litigation strategy and the execution thereof.  In furtherance and
not in limitation of the foregoing, the Acting Party shall keep the other Party
promptly and fully informed of the status of any such action, and the
non-acting Party shall have the right to review and comment on the Acting Party’s
activities related thereto.


 


(d)           Each
Party will reasonably assist the Acting Party in any such action or proceeding
being prosecuted or defended by the Acting Party, if so requested by the Acting
Party or required by law.  Without limiting the generality of the
foregoing, the non-acting Party agrees to join such action or proceeding if
required by law to maintain such action or proceeding.  The Acting Party
will pay or reimburse the assisting Party for all costs, expenses and
liabilities that the assisting Party may incur or suffer in affording
assistance to such actions or proceedings.  No settlement of any such action
or defense that restricts the scope or affects the enforceability of PDL
Know-How or Sole PDL Patents may be entered into by either PDL (if it would
affect Roche’s rights under this Agreement) or Roche without the prior consent
of the other Party hereto, [*]. 
No settlement of any such action or defense that restricts the scope or affects
the enforceability of Roche Know-How or Sole Roche Patents may be entered into
by either PDL or Roche without the prior consent of the other Party hereto (if
it would affect the other Party’s rights under this Agreement), [*].


 


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(e)           If
either Party elects to prosecute an action for infringement or to defend any
proceedings for revocation of any claims pursuant to this Section 12.8 and
subsequently ceases to continue or withdraws from such action or defense, it
shall forthwith so notify the other Party in writing and the other Party may
substitute itself for the withdrawing Party and the Parties’ respective rights
and obligations under this Section 12.8 shall be reversed.


 


(f)            Notwithstanding
the foregoing, at PDL’s request [*],
Roche shall assist PDL with respect to enforcement or revocation actions
outside the Asthma Field with respect to a Sole PDL Patent claiming the composition
of matter of a Licensed Product.


 


12.9        Enforcement and Defense of Joint Roche-PDL
Patents.  In the event of any action against a Third Party for
infringement of any claim in any issued patent within the Joint Roche-PDL
Patents, or the institution by a Third Party of any proceedings for the
revocation of any such claim, each Party will notify the other promptly and,
following such notification, the Parties shall confer to determine whether
either or both Parties shall control the prosecution or defense of such action
or proceeding and who shall bear the costs thereof.  If both Parties wish
to control the prosecution or defense of such action or proceeding and the
Parties are unable to reach agreement within [*]
of the notification referred to above, then [*]
shall have the exclusive right to bring such action or defend such proceeding,
in its own name and entirely under its own direction, and at [*] request, [*] shall participate in such action or proceeding at [*].  No settlement of any action or
defense that restricts the scope or affects the enforceability of Joint
Roche-PDL Patents may be entered into by either PDL or Roche without the prior
consent of the other Party hereto, which consent shall not be unreasonably
withheld.  In any event, the Acting Party pursuant to this Section 12.9
shall solicit, and seriously consider in good faith the other Party’s input
with respect to all material aspects of such action, including without
limitation, the development of the litigation strategy and the execution
thereof.  In furtherance and not in limitation of the foregoing, the
Acting Party shall keep the other Party promptly and fully informed of the
status of any such action, and the


 


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other Party shall have the
right to review and comment on the Acting Party’s activities related thereto.


 


12.10      Distribution of Proceeds.  In
the event either Party exercises the rights conferred in Section 12.8 or 12.9
hereof, and recovers any damages or other sums in such action, suit or
proceeding or in settlement thereof, such damages or other sums recovered shall
first be applied to reimburse the Parties for all costs and expenses incurred
in connection therewith, including reasonable attorneys’ fees necessarily
involved in the prosecution and/or defense of any suit or proceeding and, if
after such reimbursement any funds shall remain from such damages or other sums
recovered, said remaining recovery shall be allocated as follows:


 


(a)           With
respect to actions or proceedings commenced hereunder in the U.S. Territory
prior to the end of the Co-Promotion Term regarding one or more Sole PDL
Patents or Sole Roche Patents, the Parties shall [*] share such remaining recovery;


 


(b)           With
respect to actions or proceedings commenced hereunder in the U.S. Territory
after the end of the Co-Promotion Term regarding one or more Sole PDL Patents
or Sole Roche Patents, [*] shall
retain such remaining recovery in its entirety;


 


(c)           With
respect to actions or proceedings commenced hereunder in the ROW Territory
regarding one or more Sole PDL Patents or Sole Roche Patents, [*] shall retain such remaining recovery in
its entirety, provided that if [*]
is the acting Party, then such remaining recovery shall be deemed [*] and [*]
shall pay [*] a royalty based
thereon in accordance with the terms set forth in Section [*];


 


(d)           With
respect to actions or proceedings commenced by PDL hereunder with respect to a
Joint Roche-PDL Patent, such remaining recovery shall be divided between the
Parties [*]; and


 


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(e)           With
respect to actions or proceedings commenced by Roche hereunder with respect to
a Joint Roche-PDL Patent, such remaining recovery shall be divided [*] between the Parties.


 


12.11      Defense of Infringement Actions.


 


(a)           If
Roche and/or PDL are named as defendant(s) in a patent infringement suit filed
by a Third Party concerning the development, manufacture, production, use,
importation, offer for sale, or sale of Licensed Products in the Asthma Field
in the ROW Territory, then Roche shall defend such suit at its own cost and
shall indemnify and hold PDL
harmless against any such patent or other infringement suits, and any claims,
losses, damages, liabilities, expenses, including reasonable attorneys’ fees
and cost, that may be incurred by PDL therein or in settlement thereof. 
Any and all settlements that restrict the scope or enforceability of PDL
Know-How or PDL Patents must be approved by PDL, in its sole and absolute
discretion, before execution by Roche.  Any and all settlements that
restrict the scope or enforceability of Joint Roche-PDL Patents or Sole Roche
Patents (other than those Sole Roche Patents co-owned by a Third Party) must be
approved by PDL before execution by Roche, such approval not to be unreasonably
withheld.  PDL shall not be required to
approve any settlement that does not include as a condition thereof the
granting to PDL of a full and unconditional release of claims.


 


(b)           If
Roche and/or PDL are named as defendant(s) in a patent infringement suit filed
by a Third Party concerning the methods or products used by or on behalf of PDL
during the manufacture of Licensed Products for sale in the Asthma Field in the
U.S. Territory, and PDL had not previously disclosed to Roche that it was using
such methods or products during such manufacture, then PDL shall defend such
suit at its own cost and hold Roche harmless against any such patent or other
infringement suits, and any claims, losses, damages, liabilities, expenses,
including reasonable attorneys’ fees and costs, that may be incurred by either
Party therein or in settlement thereof.  Any and all settlements must be
approved by both Parties, such


 


70





















 


approval not to be unreasonably
withheld.  Roche shall not be required to
approve any settlement that does not include as a condition thereof the
granting to Roche of a full and unconditional release of claims.


 


(c)           If
Roche and/or PDL are named as defendant(s) in a patent infringement suit not
covered by Section 12.11(b) that is filed by a Third Party concerning the
development, manufacture, production, use, importation, offer for sale, or sale
of Licensed Products in the Asthma Field in the U.S. Territory prior to the end
of the Co-Promotion Term, then the Parties shall share [*] all costs associated with such suit
including all claims, losses, damages, liabilities, expenses, including
reasonable attorneys’ fees and costs, that may be incurred by either Party
therein or in settlement thereof.  Any and all settlements must be
approved by both Parties, such approval not to be unreasonably withheld.  Neither Party shall not be required to
approve any settlement that does not include as a condition thereof the
granting to such Party of a full and unconditional release of claims.


 


(d)           During
the term of this Agreement, each Party shall bring to the attention of the
other Party all information regarding potential infringement of Third Party
intellectual property rights via the development, manufacture, production, use,
importation, offer for sale, or sale of Licensed Products in the Asthma Field
in the ROW Territory or the U.S. Territory. 
The Parties shall discuss such information and decide how to handle such
matter.


 


(e)           This
Section 12.11 shall not be interpreted as placing on either Party a duty of
inquiry regarding Third Party intellectual property rights.


 


12.12      Right to Counsel.  Each Party
to this Agreement shall always have the right to be represented by counsel of
its own selection and its own expense in any suit or other action instituted by
the other for infringement, under the terms of this Agreement.


 


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12.13      Conflicts.  If the terms set forth in this Article 12
conflict with or are inconsistent with any terms set forth in the Worldwide
Daclizumab Agreement, then the terms set forth in this Article 12 shall prevail
to the extent necessary to overcome such conflict or inconsistency.


 


ARTICLE 13



TRADEMARKS


 


13.1        Selection
and Procurement of Trademarks.  The
JSC shall select a single trademark to be used to market the Licensed Product
in the Asthma Field throughout the Territory. 
If the JSC selects the Zenapax Trademark as the single trademark to be
used to market the Licensed Product in the Asthma Field and the Zenapax
Trademark has not been previously assigned to PDL pursuant to the Worldwide
Daclizumab Agreement, Roche shall be responsible for maintenance of trademark
registrations for the Zenapax Trademark in the ROW Territory.  Those expenses incurred by Roche with respect
to Zenapax Trademark in the U.S. Territory shall be included in Operating
Expenses.  If the JSC selects a trademark
other than the Zenapax Trademark as the single trademark to be used to market
the Licensed Product in the Asthma Field or the Zenapax Trademark has been
previously assigned to PDL pursuant to the Worldwide Daclizumab Agreement, then
the selected trademark shall be deemed a PDL Trademark and shall be owned by
PDL.  PDL shall be responsible for
procurement and maintenance of trademark registrations for the PDL Trademarks
in the Territory, except that PDL may cease trademark registration procurement
activities for any PDL Trademark in any country in the ROW Territory provided
it first offers Roche the opportunity to assume such activities at its own
expense.  Those expenses incurred by PDL
with respect to PDL Trademarks in the U.S. Territory shall be included in
Operating Expenses.


 


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13.2        Use of the
Trademarks.  Roche and its Affiliates
and sublicensees shall use the PDL Trademarks only in connection with the
development, use, marketing, promotion, detailing, sale, and offer for sale of
Licensed Product in the Territory in accordance with the licenses granted in
Sections 2.1(a)(iii) and 2.1(b)(ii).  It
is understood and agreed by PDL that, in the ROW Territory, Roche shall have
the right to use the corporate names of Roche and its Affiliates, and
associated logos and designs, in conjunction with the PDL Trademarks, and shall
identify PDL on all packaging and labeling as the manufacture and co-developer
of the Licensed Product.  It is also
understood and agreed that, during the Co-Promotion Term in the U.S. Territory,
the Parties shall have the right to use the corporate names of the Parties and
their Affiliates, and all associated logos and designs, in conjunction with the
PDL Trademarks.


 


13.3        PDL House
Marks.  Roche acknowledges the
goodwill and reputation associated with the PDL House Marks and shall use the PDL
House Marks in a manner that maintains and promotes such goodwill and
reputation.  Roche shall take all
reasonable precautions and actions to protect the goodwill and reputation that
has inured to the PDL House Marks, shall refrain from doing any act that is
reasonably likely to impair the reputation of the PDL House Marks, and shall
cooperate fully to protect the PDL House Marks.


 


13.4        Quality
Control.  Roche’s use of the PDL
Trademarks and the PDL House Marks must comply with PDL’s style and branding guidelines,
and Roche shall provide all materials (including without limitation advertising
or promotional materials) that incorporate the PDL Trademarks or PDL House
Marks to the JDC for prior review and approval.


 


13.5        Acknowledgement
of Ownership Rights.  Roche
undertakes to conduct its activities in such a way so as not to jeopardize or
compromise in any way the PDL Trademarks or rights therein.  Roche shall not use the PDL Trademarks or PDL
House Marks, as the case may be, as all or part of any corporate name, trade
name, trademark, service mark, certification mark, collective membership mark,
domain name,


 


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or any other designation
confusingly similar to the PDL Trademarks or PDL House Marks in any way that
damages the PDL Trademarks or PDL House Marks. 
If Roche or its Affiliates challenge or, directly or indirectly, assert
any right, title or interest in or to the PDL Trademarks, PDL House Marks, or
any registrations or applications for registration thereof, or seek to register
the PDL Trademarks or PDL House Marks in any country for any goods and
services, then PDL shall have the right to give written notice to Roche of such
conduct and Roche shall immediately cease such conduct.


 


13.6        Use of
Trademark Designations.  The TM
designation may be used in conjunction with each PDL Trademark within the
Territory.  Once registrations issue, the
® designation may be used in connection with the PDL Trademarks.  An appropriate statutory notice of trademark
ownership shall be affixed to or imprinted on any material wherever the PDL
House Marks or PDL Trademarks are used. 
PDL’s ownership of such marks shall be identified on all materials on
which they appear.  The exact language
for identification of ownership shall be in accordance with branding and
implementation guidelines to be agreed on by the Parties.


 


13.7        Infringement
of Trademarks.


 


(a)           Procedure.  In the event that either Party becomes aware
of (i) actual infringement of a PDL Trademark
in the ROW Territory; (ii) a mark or name confusingly similar to a
PDL Trademark in the ROW Territory; or (iii) any unfair trade practices, trade
dress imitation, passing off, or like offenses, in the ROW Territory that
relate to the [*] Trademarks, such
Party shall promptly so notify the other Party in writing.  PDL shall have the right, but not the
obligation, at its sole cost and expense, to initiate, prosecute, and control
an infringement action or file any other appropriate action or claim related to
such infringement of the PDL Trademark against any Third Party.  If [*]
fails to bring any such infringement action within a period of ninety (90) days
after delivery of the notice set forth above, then [*] shall have the right, but not the obligation, at its sole [*], to initiate, prosecute, and control an
infringement action or file any other appropriate action or claim related to
such infringement of the PDL Trademark against


 


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any Third Party.  In either event, the Party not bringing any
such action (i) shall have the right (at its own expense) to participate in
such action and to be represented by counsel of its own choice, and (ii)
agrees, at the request [*] of the
Party bringing such action, to be joined as a Party to the suit and to provide
reasonable assistance in any such action. 
The Party controlling such action shall take all reasonable and
appropriate steps to protect, defend, and maintain the PDL Trademarks for use
by the Parties and shall have the right to control settlement of such action;
provided, however, that no settlement shall be entered into without the written
consent of the other Party, not to be unreasonably withheld.


 


(b)           Costs.  Any damages or monetary award recovered shall
be applied first to reimburse the reasonable costs and expenses of the Party
bringing such action in connection with such litigation, with the balance being
allocated to the Parties [*].


 


13.8        Third Party
Trademark Claims.


 


(a)           Claims
Based on Use of the PDL Trademarks. 
If a claim is brought by a Third Party that the Parties’ use of the PDL
Trademarks or Zenapax Trademark infringes such Third Party’s trademarks, the
Party against which (or against whose Affiliate, as the case may be) the action
is brought will give prompt written notice to the other Party of such
claim.  If the JSC or Executive Officers
selected such trademark for the Licensed Product by consensus, then (i) [*] shall defend any such claim and any
resulting suit brought in the ROW Territory [*]
and shall indemnify [*] and its
Affiliates against any resulting final judgments and settlements, provided that
[*] shall not settle any claim or
suit in a manner that would adversely affect [*]
without obtaining [*] prior
written consent, which shall not be unreasonably withheld, and (ii) [*] shall defend any such claim and any
resulting suit brought in the U.S. Territory with respect to use of the
trademark during the Co-Promotion Term, provided that the costs associated with
such defense shall be [*] and [*] shall not settle any claim or suit in a
manner that would adversely affect [*]
without obtaining [*] prior
written consent, which


 


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shall not be unreasonably
withheld.  If the JSC and Executive
Officers did not reach consensus regarding the selection of a trademark for use
on the License Product and [*]
selected such trademark pursuant to Section 3.5(b), then [*] shall defend such claim and any
resulting suit [*] and shall
indemnify [*] and its Affiliates
against any resulting final judgments and settlements, provided that [*] shall not settle any claim or suit in a
manner that would adversely affect [*]
without obtaining [*] prior
written consent, which shall not be unreasonably withheld.


 


(b)           Claims
Based on Use of the PDL House Marks.    If a
claim is brought by a Third Party that the use of the PDL House Marks by Roche
or its Affiliates in the ROW Territory infringes such Third Party’s trademarks,
Roche shall give prompt written notice to PDL of such claim.  [*]
shall defend such claim and any resulting suit [*] and shall indemnify [*]
and its Affiliates against any resulting final judgments and settlements,
provided that [*] shall not settle
any claim or suit in a manner that would adversely affect [*] without obtaining [*] prior written consent, which shall not
be unreasonably withheld.


 


ARTICLE 14



REPRESENTATIONS, WARRANTIES, AND COVENANTS


 


14.1        Mutual
Representations and Warranties.  Each
Party hereby represents and warrants to the other Party:


 


(a)           Such
Party is a corporation or entity duly organized and validly existing under the
laws of the state or other jurisdiction of its incorporation or formation;


 


(b)           The
execution, delivery and performance of this Agreement by such Party has been
duly authorized by all requisite corporate action;


 


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(c)           Such
Party has the power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and such performance does not conflict with
or constitute a breach of any agreement of such Party with a Third Party; and


 


(d)           To
the best of its knowledge, such Party has the right to grant the rights and
licenses described in this Agreement.


 


14.2        Intellectual
Property Representations and Warranties.


 


(a)           Roche
hereby represents and warrants to PDL that


 


(i)            Roche
has received no [*] arising out
of, and [*], the development,
manufacture, use, sale, offer for sale or import of Daclizumab by Roche
(collectively, [*]”), except for
(1) claims of infringement that [*]
or (2) [*] disclosed in Schedule
14.2(a); and


 


(ii)           Except
as set forth in Schedule 14.2(a), to Roche’s knowledge, neither Roche nor any
of its Affiliates has any [*] to [*] covering the manufacture, use,
importation, offer for sale, or sale of Daclizumab.


 


(b)           PDL
hereby represents and warrants to Roche that (i) Schedule 14.2(b) sets forth
all [*] prior to the Effective
Date concerning any [*] arising
out of, and all [*] prior to the
Effective Date to take a license to any Third Party intellectual property
relating to the development, manufacture, use, sale, offer for sale or import
of Licensed Products; and (ii) it has previously disclosed to Roche all [*] that the [*] are aware of as of the Effective Date as [*] contemplated to be performed by or on
behalf of either Party pursuant to this Agreement.


 


14.3        Disclaimer.  EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS
14.1 AND 14.2, THE TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS PROVIDED BY EACH
PARTY ARE PROVIDED “AS IS” AND EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL
WARRANTIES OF ANY KIND, EXPRESS


 


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OR IMPLIED, INCLUDING WITHOUT
LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES, ARISING FROM A COURSE OR DEALING, USAGE OR TRADE PRACTICES, IN ALL
CASES WITH RESPECT THERETO.


 


14.4        Limitation
of Liability.  NEITHER PARTY SHALL BE
ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL
OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT, EACH PARTY’S PERFORMANCE
OR LACK OF PERFORMANCE HEREUNDER, OR ANY LICENSE GRANTED HEREUNDER, EXCEPT FOR
DAMAGES ARISING FROM A BREACH OF SECTION 2.3 OR 15.1.  THE FOREGOING SHALL NOT LIMIT EITHER PARTY’S
INDEMNIFICATION OBLIGATIONS HEREUNDER.


 


ARTICLE 15


 


CONFIDENTIALITY


 


15.1        Nondisclosure
of Confidential Information.  All
Information disclosed by one Party to the other Party under this Agreement
shall be subject to the nondisclosure and nonuse provisions set forth in
Article XIV of the Worldwide Daclizumab Agreement (as amended by this
Agreement).  The Parties hereby amend
Section 14.1(a) of the Worldwide Daclizumab Agreement to permit, in addition to
any rights already granted under the Worldwide Daclizumab Agreement, (a) the
use by a Party of any trade secrets or proprietary information disclosed to
such Party by the other Party (“Confidential Information”)
for those purposes permitted by this Agreement; and (b) the further disclosure
by such Party of such trade secrets or proprietary information disclosed to
such Party by the other Party to those of its Affiliates, sublicensees,
prospective sublicensees, employees, consultants, agents or


 


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subcontractors as necessary in
connection with such Party’s performance under this Agreement.


 


The
Parties acknowledge that the terms of this Agreement shall be treated as
Confidential Information of both Parties. 
Such terms may be disclosed by a Party to investment bankers, investors,
and potential investors, each of whom prior to disclosure must be bound by
similar obligations of confidentiality and non-use at least equivalent in scope
to those set forth in this Article 15. 
In addition, a copy of this Agreement may be filed by PDL with the
Securities and Exchange Commission.  In
connection with any such filing, PDL shall endeavor to obtain confidential
treatment of economic and trade secret information.


 


In any event, the Parties agree
to take all reasonable action to avoid disclosure of Confidential Information
except as permitted hereunder.


 


15.2        Publicity.  The Parties agree that the public
announcement of the execution of this Agreement shall be substantially in the
form of the press release attached as Exhibit F.  Any other publication, news release or other
public announcement relating to this Agreement or to the performance hereunder,
shall first be reviewed and approved by both Parties; provided, however, that
any disclosure which is required by law as advised by the disclosing Party’s
counsel may be made without the prior consent of the other Party, although the
other Party shall be given prompt notice of any such legally required
disclosure and to the extent practicable shall provide the other Party an
opportunity to comment on the proposed disclosure.


 


15.3        Publications.  The Parties shall comply with the terms set
forth in Section 14.3 of the Worldwide Daclizumab Agreement with respect to
publications of results generated pursuant to this Agreement.


 


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ARTICLE 16


 


INDEMNIFICATION


 


16.1        Indemnification by PDL.  Unless otherwise provided herein, PDL agrees
to indemnify, hold harmless and defend Roche and its directors, officers,
employees and agents (the “Roche Indemnitees”)
from and against any and all Third Party suits, claims, actions, demands,
liabilities, expenses and/or losses (including without limitation attorneys’
fees, court costs, witness fees, damages, judgments, fines and amounts paid in
settlement) (“Losses”) to the extent that such
Losses arise out of (a) a breach of a representation or warranty or covenant by
PDL under Article 14 or (b) the use, testing, promotion, marketing or sale of a
Licensed Product by or on behalf of PDL, its Affiliates or sublicensees (except
for Roche), but only to the extent the Losses described in “(b)” result from
(i) any violation of applicable law by PDL with respect to co-promotion
activity in the Asthma Field in the U.S. Territory under Article 6, or (ii) the
negligence or misconduct or failure to act of PDL, its agents or sublicensees
in connection with PDL’s obligations under this Agreement.  Notwithstanding the foregoing, PDL shall not
have any obligation to indemnify the Roche Indemnitees with respect to any
Losses arising out of the negligence or misconduct or failure to act of Roche,
its Affiliates, or sublicensees (except for PDL).


 


16.2        Indemnification by Roche.  Unless otherwise provided herein, Roche shall
indemnify, hold harmless and defend PDL and its directors, officers, employees
and agents (the “PDL Indemnitees”) from and
against any and all Losses, to the extent that such Losses arise out of
(a) a breach of a representation or warranty by Roche under Article 14 or
(b) the distribution, use, testing, promotion, marketing, or sale of a Licensed
Product by or on behalf of Roche, its Affiliates or sublicensees (except for
PDL), but only to the extent that the Losses described in “(b)” result from (i)
any violation of applicable law by Roche with respect to co-promotion activity
in the Asthma Field in the U.S. Territory under Article 6, (ii) any ROW
Commercialization Activities, or (iii) the negligence or misconduct or failure
to act of Roche, its agents or sublicensees in


 


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connection with Roche’s obligations under
this Agreement.  Notwithstanding the
foregoing, Roche shall not have any obligation to indemnify the PDL Indemnitees
with respect to any Losses arising out of the negligence or misconduct or
failure to act of PDL, its Affiliates, or sublicensees (except for Roche).


 


16.3        Procedure. 
In the event of a claim by a Third Party against a Party entitled to
indemnification under this Agreement (“Indemnified Party”),
the Indemnified Party shall promptly notify the other Party (“Indemnifying Party”) in writing of the claim and the
Indemnifying Party shall undertake and solely manage and control, at its sole
expense, the defense of the claim and its settlement.  The Indemnified Party shall cooperate with
the Indemnifying Party, including, as requested by the Indemnifying Party
entering into a joint defense agreement.  
The Indemnified Party may, at its option and expense, be represented in
any such action or proceeding by counsel of its choice.  The Indemnifying Party shall not be liable
for any litigation costs or expenses incurred by the Indemnified Party without
the Indemnifying Party’s written consent. 
The Indemnifying Party shall not settle any such claim unless such
settlement fully and unconditionally releases the Indemnified Party from all
liability relating thereto, unless the Indemnified Party otherwise agrees in
writing.


 


16.4        Certain Losses.  Any Losses
resulting from Third Party suits, claims, or actions in the U.S. with respect
to which neither Party owes an indemnification obligation under this Article 16
shall be [*].  In addition, notwithstanding anything to the
contrary, all Losses arising from latent defects in the Licensed Products shall
[*] and [*] shall have any indemnification obligations with respect
thereto.


 


16.5        Insurance.


 


(a)           PDL, at its own expense, shall maintain
product liability insurance in an amount consistent with industry standards for
a company of similar standing during the term of this Agreement.  PDL shall provide [*] prior written notice to any cancellation of its insurance
program.  PDL shall designate Roche as an
additional insured under its applicable insurance policies.


 


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(b)           The Parties acknowledge that Roche, as of
the Effective Date, self-insures.  If
during the term of this Agreement Roche [*],
Roche shall [*] under its [*] and shall provide PDL with [*] prior written notice of any [*].


 


16.6        Relationship to Worldwide Daclizumab Agreement.  Solely to the extent that either Party
has a Loss recoverable under this Article 16, the Parties’ rights and
obligations under this Article 16 shall supersede any rights or obligations of
the Parties granted under Section 17.6 of the Worldwide Daclizumab Agreement.


 


ARTICLE 17


 


TERM AND TERMINATION


 


17.1        Term. 
The term of this Agreement shall begin on the Effective Date and, unless
earlier terminated in accordance with the terms of this Article 17, will expire
on the date on which neither Party has nor will have any additional payment
obligations to the other Party under this Agreement.  Upon expiration of the Agreement, provided
that there has been [*] in at
least [*], Roche shall have a
fully paid-up license with respect to the licenses granted under Section
2.1(b).


 


17.2        Termination for Breach.


 


(a)           A Party (“non-breaching
Party”) shall have the right, in addition to any other rights and
remedies, to terminate this Agreement in the event the other Party (“breaching Party”) is in breach of any of its material
obligations under this Agreement, provided that any such termination shall only
be effective with respect to the particular Region(s) to which such breach
amounted to a material breach, except that a breach of a material obligation
related to the Development Plan shall be deemed a breach of the Agreement in
its entirety and shall be subject to the terms of Section 17.2(e).  The non-breaching Party shall provide written
notice to the breaching Party, which notice shall identify the breach and the
Region(s) with respect to which the non-


 


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breaching Party intends to have this
Agreement terminate.  With respect to
breaches of any payment provision hereunder, the breaching Party shall have a
period of [*] after such written
notice is provided to cure such breach; provided, however, if there is a
dispute as to whether a development event or commercialization event referenced
in Sections 9.2 or 10.6, respectively, has occurred (thereby triggering a
payment obligation under such sections), Roche shall not be obliged to make such
payment until such dispute is resolved in accordance with Article 18.  With respect to all other breaches, the
breaching Party shall have a period of [*]
after such written notice is provided to cure such breach.  If such breach is not cured within the applicable
period set forth above, this Agreement shall terminate immediately with respect
to the applicable Region, upon written notice provided by the non-breaching
Party of such termination.  The waiver by
either Party of any breach of any term or condition of this Agreement shall not
be deemed a waiver as to any subsequent or similar breach.  Termination for a breach occurring in one or
more Regions in the ROW Territory shall not affect any rights or obligation
hereunder relating to the U.S. Territory, and vice versa,
except as otherwise provided above.


 


(b)           For clarity and without limiting the
generality of the foregoing, any breach of a material obligation relating to
co-promotion of Licensed Product under this Agreement shall be treated as a
breach with respect to the U.S. Territory and may therefore give rise to a
right, pursuant to Section 17.2(a), to terminate this Agreement solely as to
the U.S. Territory.


 


(c)           Consequences of Termination for Roche’s Breach.


 


(i)            If Roche breaches the Agreement with respect
to a Region in the ROW Territory and PDL terminates the Agreement, pursuant to
the procedure outlined in Section 17.2(a), with respect to such Region, then
the following shall apply:


 


(1)           Roche shall, at PDL’s written request,
promptly (and in any event within [*]
after Roche’s receipt of such request) assign and transfer to PDL, all of Roche’s
right, title, and interest in and to all regulatory filings (such as INDs and


 


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drug master files), Regulatory Approvals,
clinical trial agreements (to the extent assignable and not cancelled), and
data, including clinical data, materials, and information, in each case to the
extent in Roche’s control and to the extent related the Licensed Products in
the affected Region.  The costs of such
transfers shall be borne [*];


 


(2)           Roche shall grant to PDL an exclusive,
perpetual, irrevocable, fully paid license, under the Roche Technology,
Collaboration Inventions and patents claiming Collaboration Inventions, to make,
have made, use, offer for sale, sell and import Licensed Products in the Asthma
Field in the affected Region;


 


(3)           All licenses granted to Roche under
Section 2.1(b) shall terminate with respect to the affected Region; and


 


(4)           The Parties’ respective co-development
and co-promotion rights and obligations in the U.S. Territory, and the Parties’
rights and obligations in any other Region in the ROW Territory shall not be
affected by any termination of this Agreement with respect to a Region in the
ROW Territory.


 


(ii)           If Roche breaches the Agreement with
respect to the U.S. Territory and PDL terminates the Agreement, pursuant to the
procedure outlined in Section 17.2(a), with respect to the U.S. Territory, then
the following shall apply:


 


(1)           The Co-Promotion Term, if started, shall
end and, if not yet started, shall not commence;


 


(2)           All licenses granted to PDL in Sections
2.2(a), 2.2(b) and 2.2(c) shall become exclusive, perpetual, irrevocable, and
fully paid;


 


(3)           All licenses granted to Roche under Section
2.1(a) shall terminate, and Roche shall cease to have any right or obligation
to Develop or co-promote Licensed Products in the Asthma Field in the U.S.
Territory or to participate in any other commercialization- or
development-related activities (including sharing of


 


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Operating Expenses) with respect to Licensed
Products in the Asthma Field in the U.S. Territory; and


 


(4)           The Parties’ respective rights and
obligations with respect to the ROW Territory (and all Regions therein) shall
not be affected by any termination of this Agreement with respect to the U.S.
Territory.


 


(iii)         Notwithstanding the foregoing Sections
17.2(c)(i) and (ii), in the event that Roche breaches the Agreement with
respect to the [*] then PDL shall
have the right to terminate this Agreement in its entirety and such termination
shall have the consequences set forth in Section 17.2(e)(ii).


 


(d)           Consequences of PDL’s Breach.


 


(i)            If PDL breaches the Agreement with
respect to a Region in the ROW Territory and Roche terminates the Agreement,
pursuant to the procedure outlined in Section 17.2(a), with respect to such
Region, then the following shall apply:


 


(1)           Roche shall, at PDL’s written request,
promptly (and in any event within [*]
after Roche’s receipt of such request) assign and transfer to PDL, all of Roche’s
right, title, and interest in and to all regulatory filings (such as INDs and
drug master files), Regulatory Approvals, clinical trial agreements (to the
extent assignable and not cancelled), and data, including clinical data,
materials, and information, in each case to the extent in Roche’s control and
to the extent related the Licensed Products in the affected Region.  The costs of such transfers shall be borne [*];


 


(2)           Roche shall grant to PDL an exclusive,
perpetual, irrevocable, fully paid license, under the Roche Technology,
Collaboration Inventions and patents claiming Collaboration Inventions, to
make, have made, use, offer for sale, sell and import Licensed Products in the
Asthma Field in the affected Region;


 


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(3)           All licenses granted to Roche under
Section 2.1(b) shall terminate with respect to such affected Region; and


 


(4)           The Parties’ respective co-development
and co-promotion rights and obligations in the U.S. Territory, and the Parties’
rights and obligations in any other Region in the ROW Territory shall not be
affected by any termination of this Agreement with respect to a Region in the
ROW Territory.


 


(ii)           If PDL breaches the Agreement with
respect to a Region in the ROW Territory and Roche has the right to terminate
the Agreement in such Region as a result, Roche may elect the following as an
alternative remedy to termination:


 


(1)           The Parties’ respective rights and obligations with respect to the ROW
Territory shall remain unchanged, except that Roche shall be relieved of any
diligence obligations with respect to the affected Region for so long as PDL’s
breach in such affected Region prevents Roche from satisfying such diligence
obligations; and


 


(2)           The Parties’ respective co-development
and co-promotion rights and obligations in the U.S. Territory, and the Parties’ rights and obligations in all
other Regions in the ROW Territory shall not be affected.


 


(iii)         If PDL breaches the Agreement with
respect to the U.S. Territory and Roche terminates the Agreement, pursuant to
the procedure outlined in Section 17.2(a), with respect to the U.S. Territory,
then the following shall apply:


 


(1)           The Co-Promotion Term shall end;


 


(2)           All licenses granted PDL in Sections
2.2(a) and 2.2(c) shall be suspended until [*];


 


(3)           PDL shall grant to Roche, under the PDL
Technology, an exclusive license to use, import, offer for sale and sell
Licensed Products in the Asthma Field in the U.S. Territory until [*], provided that if PDL or its Third
Party


 


86





















 


licensee has filed for regulatory approval in
an indication outside of the Asthma Field in the U.S. Territory for Licensed
Product having the same formulation and mode of administration as Licensed
Product being developed or commercialized for the Asthma Field, then the
Parties shall discuss in good faith the feasibility of two parties
simultaneously booking sales of Licensed Product;


 


(4)           PDL shall cease to have any right or
obligation to Develop or co-promote Licensed Products in the Asthma Field in
the U.S. Territory or to actively participate in any other commercialization-
or development-related activities with respect to Licensed Products in the
Asthma Field in the U.S. Territory until [*],
provided that PDL shall retain the right of access to information, meetings and
planning reasonably required to ensure effective transition, manufacturing
support and return to PDL following [*];


 


(5)           the Parties shall share [*] Operating Expenses, Roche’s Sales Force
Expenses and Gross Margin until [*],
provided that any payments [*] may
be offset by the amount of [*], as
set forth in a final non-appealable judgment or award granted in accordance with
the dispute resolution procedures of Article 18;


 


(6)           On [*],
the licenses to Roche set forth in Sections 2.1(a), 2.1(b) and 17.2(d)(iii)(3)
shall terminate, the licenses set forth in Sections 2.2(a) and 2.2(c) shall
come back into force and become exclusive, and PDL shall have sole
responsibility and decision-making authority for the Detailing, marketing,
Promotion, sale and distribution of Licensed Product in the Asthma Field in the
U.S. Territory.  Except as explicitly
provided in Section 10.2, PDL shall owe Roche no consideration in respect to
sales of Licensed Product in the Asthma Field in the U.S. Territory after [*], except for the [*] provided for hereinabove.  In particular, PDL shall not have any
obligation to make the payments specified in Section 7.2(c) of the Worldwide
Daclizumab Agreement on account of any sales of Licensed Product for use in the
Asthma Field in the U.S. Territory after such anniversary; and


 


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(7)           The Parties’ respective rights and
obligations with respect to the ROW Territory (including all Regions therein)
shall not be affected by any termination of this Agreement with respect to the
U.S. Territory.


 


(e)           Consequences of Material Breach of Development Plan.    Notwithstanding
the applicability of Sections 17.2(c) or 17.2(d), if a Party breaches a
material obligation related to the Development Plan, the non-breaching Party
shall have the following alternatives;


 


(i)            Continue the Agreement in effect and
pursue any and all remedies available in law or at equity, including the right
to seek specific performance of the Parties’ respective performance and payment
obligations under the Development Plan as well as the right to seek appropriate
damages; or


 


(ii)           Terminate the Agreement in its entirety,
pursuant to the procedure outlined in Section 17.2(a), in which case the
following shall apply:


 


(1)           Roche shall, at PDL’s written request,
promptly (and in any event within [*]
after Roche’s receipt of such request) assign and transfer to PDL, all of Roche’s
right, title, and interest in and to all regulatory filings (such as INDs and
drug master files), Regulatory Approvals, clinical trial agreements (to the
extent assignable and not cancelled), and data, including clinical data, materials,
and information, in each case to the extent in Roche’s control and to the
extent related the Licensed Products in the Territory.  The costs of such transfers shall be borne [*];


 


(2)           Roche shall grant to PDL an exclusive,
perpetual, irrevocable, fully paid license, under Roche Technology,
Collaboration Inventions and patents claiming Collaboration Inventions, to
make, have made, use, offer for sale, sell and import Licensed Products in the
Asthma Field in the Territory; and


 


(3)           All licenses granted to Roche under
Sections 2.1(a) and 2.1(b) shall terminate and Roche shall cease to have any
rights with respect to the Licensed Products in the Asthma Field in the
Territory.


 


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17.3        Termination for Material Delay.  If the JSC
adopts a revised Development Plan that sets forth an anticipated commercial
launch date for the Licensed Product in the Asthma Field in the U.S. Territory
that is [*] the anticipated
commercial launch date set forth in the Development Plan attached to this
Agreement on the Effective Date as Exhibit D, then [*] shall have the right to terminate this
Agreement with respect to both the ROW Territory and the U.S. Territory by
providing written notice of such intent to PDL [*].  Such termination
would become effective [*] after
PDL’s receipt of such notice, and would have the following effect:


 


(a)           Roche shall,
at PDL’s written request, promptly (and in any event within [*] after Roche’s receipt of such request)
assign and transfer to PDL, all of Roche’s right, title, and interest in and to
all regulatory filings (such as INDs and drug master files), Regulatory
Approvals, clinical trial agreements (to the extent assignable and not
cancelled), and data, including clinical data, materials, and information, in
each case to the extent in Roche’s control and to the extent related the
Licensed Products in the Territory.  The
costs of such transfers shall be borne [*];


 


(b)           Roche shall grant to PDL an exclusive,
perpetual, irrevocable, fully paid license, under Roche Technology,
Collaboration Inventions and patents claiming Collaboration Inventions, to
make, have made, use, offer for sale, sell and import Licensed Products in the
Asthma Field in the Territory;


 


(c)           All licenses granted to Roche under Sections
2.1(a) and 2.1(b) shall terminate and Roche shall cease to have any rights with
respect to the Licensed Products in the Asthma Field in the Territory; and


 


(d)           During an additional [*] period following the effective date of
such termination, Roche shall continue to pay its share any non-cancelable
Development Expenses and any other non-cancelable costs that are required to be
shared under this Agreement, in each case solely with respect to the ROW
Territory and subject to PDL’s obligation to use reasonable efforts to mitigate
such non-cancelable expenses and costs. 
In addition, Roche shall provide, [*]
transition services to ensure effective


 


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transition to PDL or a Third Party designated
by PDL for a period not to exceed [*]
following the effective date of such termination, all on terms to be agreed
upon by the Parties.


 


17.4        Termination at Will.  Commencing
on [*], Roche shall have the right
to terminate this Agreement without cause as follows:


 


(a)           During Development.  Prior to the receipt of Regulatory Approval
in the U.S. Territory or the European Union, such termination shall pertain to
both the ROW Territory and the U.S. Territory and such termination shall become
effective [*] after PDL’s receipt
of Roche’s written termination notice. 
During the period between Roche’s termination notice and the effective
date of such termination (the “Termination Notice Period”),
the Parties shall continue to perform all of their obligations under this
Agreement, including sharing Development Expenses and other costs required to
be shared under this Agreement; provided, however, that no payments shall
become due or payable for any development or commercialization events first
achieved during the Termination Notice Period. 
Termination of this Agreement pursuant to this Section 17.4(a) shall
have the following effects:


 


(i)            Roche shall, at PDL’s written request,
promptly (and in any event within [*]
after Roche’s receipt of such request) assign and transfer to PDL, all of Roche’s
right, title, and interest in and to all regulatory filings (such as INDs and
drug master files), Regulatory Approvals, clinical trial agreements (to the
extent assignable and not cancelled), and data, including clinical data,
materials, and information, in each case to the extent in Roche’s control and
to the extent related the Licensed Products in the Territory.  The costs of such transfers shall be borne [*];


 


(ii)           Roche shall grant to PDL an exclusive,
perpetual, irrevocable, fully paid license, under Roche Technology,
Collaboration Inventions and patents claiming Collaboration Inventions, to
make, have made, use, offer for sale, sell and import Licensed Products in the
Asthma Field in the Territory;


 


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(iii)         All licenses granted to Roche under
Sections 2.1(a) and 2.1(b) shall terminate and Roche shall cease to have any
rights with respect to the Licensed Products in the Asthma Field in the
Territory; and


 


(iv)          During an additional [*] period following the effective date of
such termination, Roche shall continue to pay its share any non-cancelable
Development Expenses and any other non-cancelable costs that are required to be
shared under this Agreement, in each case solely with respect to the ROW
Territory and subject to PDL’s obligation to use reasonable efforts to mitigate
such non-cancelable expenses and costs. 
In addition, Roche shall provide[*]
transition services to ensure effective transition to PDL or a Third Party
designated by PDL for a period not to exceed [*]
following the effective date of such termination, all on terms to be agreed
upon by the Parties.


 


(b)           After Regulatory
Approval.  After the receipt
of Regulatory Approval in the U.S. Territory or the European Union, such termination
shall be on a Region-by-Region basis in the ROW Territory and shall become
effective [*] after PDL’s receipt
of Roche’s written termination notice. 
During the period between Roche’s termination notice and the effective
date of such termination (the “Termination Notice Period”),
the Parties shall continue to perform all of their obligations under this
Agreement, including sharing costs required to be shared under this Agreement;
provided, however, that no payments shall become due or payable for any
development or commercialization events first achieved during the Termination
Notice Period that apply solely to terminated Regions.  Termination of this Agreement pursuant to
this Section 17.4(b) shall have the following effects:


 


(i)            Roche shall, at PDL’s written request,
promptly (and in any event within [*]
after Roche’s receipt of such request) assign and transfer to PDL, all of Roche’s
right, title, and interest in and to all regulatory filings (such as INDs and
drug master files), Regulatory Approvals, clinical trial agreements (to the
extent assignable and not cancelled), and data, including clinical data,
materials, and information, in each


 


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case to the extent in Roche’s control and to
the extent related the Licensed Products in the terminated countries.  The costs of such transfers shall be borne [*];


 


(ii)           Roche shall grant to PDL an exclusive,
perpetual, irrevocable, fully paid license, under Roche Technology,
Collaboration Inventions and patents claiming Collaboration Inventions, to
make, have made, use, offer for sale, sell and import Licensed Products in the
Asthma Field in the terminated countries;


 


(iii)         All licenses granted to Roche under
Section 2.1(b) (and Section 2.1(a) if the U.S. Territory is terminated) shall
terminate with respect to the terminated Region; and


 


(iv)          The Parties’ respective co-promotion
rights and obligations in the U.S. Territory shall not be affected by any
termination of this Agreement pursuant to this Section 17.4(b) with respect to
only to Regions that are part of the ROW Territory.


 


17.5        Termination of Co-Promotion Term by Roche.  In the event that, any anytime after [*] but before [*], [*] falls
below [*], Roche shall have the
right, within [*] after the end of
such [*], to provide written
notice to PDL of Roche’s intent to terminate the Co-Promotion Term, which
termination shall be effective at the end of such [*] period.  In the
event that Roche terminates the Co-Promotion Term pursuant to this Section
17.5, then the following shall apply:


 


(a)           All licenses granted to Roche under
Section 2.1(a) shall terminate, and Roche shall cease to have any right or
obligation to co-promote Licensed Products in the Asthma Field in the U.S.
Territory or to participate in any other commercialization- or
development-related activities (including sharing of Operating Expenses) with
respect to Licensed Products in the Asthma Field in the U.S. Territory;


 


(b)           Until [*],
PDL shall pay royalties to Roche at the rate of [*] of PDL Net Sales. 
PDL will not have any obligation to pay royalties to Roche pursuant to
Section 10.2.  The Parties acknowledge
and agree that the royalty payment set forth in


 


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this Section 17.5(b) is in lieu of, rather
than in addition to, any payments that would otherwise have been due to Roche
pursuant to Section 7.2(c) of the Worldwide Daclizumab Agreement on account of
the PDL Net Sales described in this Section 17.5(b); and


 


(c)           The Parties’ respective rights and
obligations with respect to the ROW Territory shall not be affected by any
termination of the Co-Promotion Term pursuant to this Section 17.5.


 


17.6        Change of Control
Termination.  In the event
of a Change of Control of a Party (the “Acquired
Party”) in which the Acquired Party is acquired by or becomes an
Affiliate of a Major Pharmaceutical Company (the “Acquiror”), the other Party (the “Non-Acquired Party”) shall have the following rights:


 


(a)           if the Acquiror does not have a product
that has received regulatory approval for [*]
in the U.S. or the European Union, or the Acquired Party and the Acquiror have
agreed to divest any such product, then the Non-Acquired Party shall have the
right to request in writing to and thereafter discuss face-to-face with the
Executive Officer of the Acquired Party the future plans of the Acquired Party
for the development and commercialization of Licensed Product in the Asthma
Field (“Status Request”).  Such right shall commence on the date of a
public announcement (the “Announcement Date”)
by the Acquired Party of its intention to undergo such a Change of Control (“Transaction”) and expire [*] after the close of the Transaction.


 


If, following a Status
Request, the Non-Acquired Party believes in good faith the Acquired Party is
either (i) failing to progress the development and/or commercialization of the
Licensed Product in the Asthma Field in either the U.S. or European Union
because of the Transaction or (ii) not expeditiously proceeding with the
divestiture, then the Non-Acquired Party may give the Acquired Party written
notice of such alleged failure, identifying the issues and specific reasons for
such allegation.  The Acquired Party
shall have [*] to provide the
Non-Acquired Party a written response specifying details of (1) why the
Transaction has not negatively impacted the development and/or


 


93





















 


commercialization of the Licensed Product in
the Asthma Field or (2) how it is expeditiously proceeding with the divestiture.


 


If the Acquired Party
fails to timely provide such written response, or has failed within the [*] period to remedy such allegations, then
the Non-Acquired Party shall have the right to terminate this Agreement in its
entirety in accordance with Section 17.6(c).


 


(b)           If the Acquiror has a product that has
received regulatory approval for [*] in the U.S.
or the European Union that will not be divested, the Non-Acquired Party may,
upon prior written notice delivered within [*]
following the Announcement Date, either (i) elect to proceed with the Agreement
under the terms of Section 17.6(a), or (ii) terminate this Agreement effective [*] after the consummation of the closing
of the Transaction.  If no election is
made under this Section 17.6(b), then the Non-Acquired Party shall be deemed to
have elected to proceed with the Agreement under the terms of Section 17.6(a).


 


(c)           In the event of any termination of this
Agreement pursuant to this Section 17.6, then the following shall apply:


 


(i)            Roche shall, at PDL’s written request,
promptly (and in any event within [*]
after Roche’s receipt of such request) assign and transfer to PDL, all of Roche’s
right, title, and interest in and to all regulatory filings (such as INDs and
drug master files), Regulatory Approvals, clinical trial agreements (to the
extent assignable and not cancelled), and data, including clinical data,
materials, and information, in each case to the extent in Roche’s control and
to the extent related the Licensed Products in the Territory.  The costs of such transfers shall be borne [*]


 


(ii)           Roche shall grant to PDL an exclusive,
perpetual, irrevocable, fully paid license, under Roche Technology,
Collaboration Inventions and patents claiming Collaboration Inventions, to
make, have made, use, offer for sale, sell and import Licensed Products in the
Asthma Field in the Territory; and


 


94





















 


(iii)         All licenses granted to Roche under
Sections 2.1(a) and 2.1(b) shall terminate and Roche shall cease to have any
rights with respect to the Licensed Products in the Asthma Field in the
Territory.


 


17.7        Survival; Accrued Rights.  The rights and obligations of the Parties
under the following provisions of this Agreement shall survive expiration or
any termination of this Agreement:  Sections 2.2, 7.7, 8.7, 11.5, 11.9, 12.1,
12.2, 12.3, 12.6, 12.9, 12.10 (solely with respect to Joint Roche-PDL Patents),
12.13, 14.4, 15.1, 15.3, 16.1, 16.2, 16.3, 16.6, 17.1, 17.2(c), 17.2(d)(i),
17.2(d)(iii), 17.2(e)(ii), 17.3, 17.4, 17.6(c), 17.7, and 19.4 and Article
18.  In any event, expiration or
termination of this Agreement shall not relieve the Parties of any liability
which accrued hereunder prior to the effective date of such expiration or
termination nor preclude either Party from pursuing all rights and remedies it
may have hereunder or at law or in equity with respect to any breach of this
Agreement, nor prejudice either Party’s right to obtain performance of any
obligation.


 


ARTICLE 18


 


DISPUTE RESOLUTIONS; GOVERNING LAW


 


18.1        Disputes. 
Unless otherwise set forth in this Agreement, in the event of any
dispute arising under this Agreement between the Parties (including without
limitation any dispute under Article 17), the Parties shall refer such dispute
to the respective Executive Officers, and such Executive Officers shall attempt
in good faith to resolve such dispute.


 


18.2        Arbitration. 
If the Parties are unable resolve a given dispute pursuant to Section
18.1 within sixty (60) days of referring such dispute to the Executive
Officers, either Party may have the given dispute settled by binding
arbitration in the manner described below:


 


95





















 


(a)           Arbitration Request.  If a Party intends to begin an arbitration to
resolve a dispute arising under this Agreement, such Party shall provide
written notice (the “Arbitration Request”)
to the other Party of such intention and the issues for resolution.  From the date of the Arbitration Request and
until such time as the dispute has become finally settled, the running of the
time periods as to which Party must cure a breach of this Agreement becomes
suspended as to the subject matter of the dispute.


 


(b)           Additional Issues.  Within ten (10) business days after the
receipt of the Arbitration Request, the other Party may, by written notice, add
additional issues for resolution.


 


(c)           No Arbitration of Patent Issues.  Unless otherwise agreed by the Parties,
disputes relating to patents shall not be subject to arbitration, and shall be
submitted to a court of competent jurisdiction.


 


(d)           Arbitration Procedure.  Except as expressly provided herein, the sole
mechanism for resolution of any claim, dispute or controversy arising out of or
in connection with or relating to this Agreement or the breach or alleged
breach thereof shall be arbitration by the American Arbitration Association (“AAA”) in [*],
under the commercial rules then in effect for the AAA except as provided
herein.  All proceedings shall be held in
English and a transcribed record prepared in English.  The Parties shall choose, by mutual
agreement, one arbitrator within thirty (30) days of receipt of notice of the
intent to arbitrate.  If no arbitrator is
appointed within the times herein provided or any extension of time that is
mutually agreed on, the AAA shall make such appointment within thirty (30) days
of such failure.  The award rendered by
the arbitrator shall include costs of arbitration, reasonable attorneys’ fees
and reasonable costs for expert and other witnesses, and judgment on such award
may be entered in any court having jurisdiction thereof.  The Parties shall be entitled to discovery as
provided in Sections 1283.05 and 1283.1 of the Code of Civil Procedure of the
State of California, whether or not the California Arbitration Act is deemed to
apply to said arbitration.  Nothing in
this Agreement shall be deemed as preventing either Party from seeking
injunctive relief (or


 


96





















 


any other provisional remedy) from any court
having jurisdiction over the Parties and the subject matter of the dispute as
necessary to protect either Party’s name, proprietary information, trade
secrets, know-how or any other proprietary right.  If the issues in dispute involve scientific
or technical matters, any arbitrator chosen hereunder shall have educational
training and/or experience sufficient to demonstrate a reasonable level of
knowledge in the field of biotechnology. 
Judgment on the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof.


 


18.3        Choice of Law. 
The validity, performance, construction, and effect of this Agreement
shall be governed by the laws of the [*],
without regard to conflicts of law principles that would provide for
application of the law of a jurisdiction outside [*] and excluding the United Nations Convention on Contracts
for the International Sales of Goods.


 


ARTICLE 19


 


MISCELLANEOUS


 


19.1        Assignment. 
Either Party may assign this Agreement and the licenses herein granted
(a) to any Affiliate of such Party without the prior written consent of the
other Party, provided that such Party remains fully liable for the performance
of such Party’s obligations hereunder by such Affiliate, or (b) without the
prior written consent of the other Party, to any Third Party purchaser of all
or substantially all of the business unit to which this Agreement relates,
which in the case of PDL, shall mean PDL’s therapeutic antibody business, and
in the case of Roche, shall mean Roche’s therapeutic antibody business.  Any other assignment of this Agreement by a
Party requires the prior written consent of the other Party.   Any assignment in violation of this Section
19.1 shall be null and void.  This
Agreement shall be binding on and shall inure to the benefit of the permitted
successors and assigns of the Parties hereto.


 


97





















 


19.2        Force Majeure. 
If either Party shall be delayed, interrupted in or prevented from the
performance of any obligation hereunder by reason of force majeure including an
act of God, fire, flood, earthquake, war (declared or undeclared), public
disaster, act of terrorism, strike or labor differences, governmental
enactment, rule or regulation, or any other cause beyond such Party’s control,
such Party shall not be liable to the other therefor; and the time for
performance of such obligation shall be extended for a period equal to the
duration of the force majeure which occasioned the delay, interruption or
prevention.  The Party invoking such
force majeure rights of this Section 19.2 must notify the other Party by
courier or overnight dispatch (e.g., Federal Express) within a period of
fifteen (15) days of both the first and last day of the force majeure unless
the force majeure renders such notification impossible in which case
notification will be made as soon as possible. 
If the delay resulting from the force majeure exceeds six (6) months,
both Parties shall consult together to find an appropriate solution.


 


19.3        Entire Agreement.  This Agreement constitutes the entire
agreement between the Parties hereto with respect to the subject matter herein
and, effective as of the Effective Date, supersedes all previous agreements,
whether written or oral.  Notwithstanding
the foregoing, the terms of the Worldwide Daclizumab Agreement shall remain in
force and effect (including but not limited to Section 19.3 thereof), except to
the extent this Agreement indicates otherwise by specific reference in Sections
6.2(e), 7.7, 10.1, 10.2(b), 10.3(c), 10.5, 15.1, 16.6, 17.2(d)(iii)(6), and
17.5(b) and Article 12 herein.  This
Agreement shall not be changed or modified orally, but only by an instrument in
writing signed by both Parties.


 


19.4        Severability. 
If a Party receives notification of any investigation, inquiry or
proceeding regarding the legality, validity or enforceability of any provision
under this Agreement, the Parties shall promptly meet to discuss the provision
in question and discuss in good faith the appropriate actions, if any, to be
taken in response to such notification. If any provision of this Agreement is
declared illegal, invalid or unenforceable by an arbitrator pursuant to Article
18 or by a court of last resort or by


 


98





















 


any court or other governmental body from the
decision of which an appeal is not taken within the time provided by law, then
and in such event, this Agreement will be deemed to have been terminated only
as to the portion thereof that relates to the provision invalidated by that
decision and only in the relevant jurisdiction, but this Agreement, in all
other respects and all other jurisdictions, will remain in force; provided,
however, that the Parties shall negotiate in good faith to amend the terms
hereof as nearly as practical to carry out the original intent of the Parties,
and, failing such amendment, either Party may submit the matter to arbitration
for resolution pursuant to Article 18.


 


19.5        Notices. 
Any notice or report required or permitted to be given under this
Agreement shall be in writing and shall be mailed by certified or registered
mail, or telexed or telecopied and confirmed by mailing, as follows and shall
be effective five (5) days after such mailing:


 


	
   

  	
  If
  to PDL:

  	
   

  	
  Protein
  Design Labs, Inc.

  
	
   

  	
   

  	
   

  	
  34801
  Campus Drive

  
	
   

  	
   

  	
   

  	
  Fremont,
  California 94555

  
	
   

  	
   

  	
   

  	
  U.S.A.

  
	
   

  	
   

  	
   

  	
  Attention:
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  and

  	
   

  	
  Protein
  Design Labs, Inc.

  
	
   

  	
   

  	
   

  	
  34801
  Campus Drive

  
	
   

  	
   

  	
   

  	
  Fremont,
  California 94555

  
	
   

  	
   

  	
   

  	
  U.S.A.

  
	
   

  	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If
  to Roche:

  	
   

  	
  Hoffmann-La
  Roche Inc.

  
	
   

  	
   

  	
   

  	
  340
  Kingsland Street

  
	
   

  	
   

  	
   

  	
  Nutley,
  New Jersey 07110

  
	
   

  	
   

  	
   

  	
  Attention:
  Corporate Secretary

  



 


99





















 


	
   

  	
  and

  	
   

  	
  F.
  Hoffmann-La Roche Ltd

  
	
   

  	
   

  	
   

  	
  Grenzacherstrasse
  124

  
	
   

  	
   

  	
   

  	
  CH-4002
  Basel, Switzerland

  
	
   

  	
   

  	
   

  	
  Attention:
  Law Department

  



 


19.6        Further Assurances.  The Parties agree to reasonably cooperate
with each other in connection with any actions required to be taken as part of
their respective obligations under this Agreement, and shall (a) furnish to
each other such further information; (b) execute and deliver to each other such
other documents; and (c) do such other acts and things (including working
collaboratively to correct any clerical, typographical, or other similar errors
in this Agreement), all as the other Party may reasonably request for the
purpose of carrying out the intent of this Agreement.


 


19.7        Agency. 
Neither Party is, nor will be deemed to be, an employee, agent or
representative of the other Party for any purpose.  Each Party is an independent contractor, not
an employee or partner of the other Party. 
Neither Party shall have the authority to speak for, represent or
obligate the other Party in any way without prior written authority from the
other Party.


 


19.8        Bankruptcy. 
All rights and licenses granted under or pursuant to this Agreement by
Roche or PDL are, and will otherwise be deemed to be, for purposes of Section
365(n) of the U.S. Bankruptcy Code, licenses of right to “intellectual property”
as defined under Section 101 of the U.S. Bankruptcy Code.  The Parties agree that the Parties, as
licensees of such rights under this Agreement, will retain and may fully
exercise all of their rights and elections under the U.S. Bankruptcy Code.  The Parties further agree that, in the event
of the commencement of a bankruptcy proceeding by or against either Party under
the U.S. Bankruptcy Code, the Party hereto that is not a party to such
proceeding will be entitled to a complete duplicate of (or complete access to,
as appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in their possession, will be
promptly delivered to them (a) upon any such commencement of a bankruptcy
proceeding upon their written


 


100





















 


request therefor, unless the Party subject to
such proceeding elects to continue to perform all of its obligations under this
Agreement, or (b) if not delivered under (a) above, following the rejection of
this Agreement by or on behalf of the Party subject to such proceeding upon
written request therefor by the non-subject Party.


 


19.9        No Waiver. 
Any omission or delay by either Party at any time to enforce any right
or remedy reserved to it, or to require performance of any of the terms, covenants
or provisions hereof, by the other Party, shall not constitute a waiver of such
Party’s rights to the future enforcement of its rights under this
Agreement.  Any waiver by a Party of a
particular breach or default by the other Party shall not operate or be
construed as a waiver of any subsequent breach or default by the other Party.


 


19.10      No Strict Construction.  This Agreement has been prepared jointly by
the Parties and shall not be strictly construed against either Party.


 


19.11      Headings. 
The captions used herein are inserted for convenience of reference only
and shall not be construed to create obligations, benefits, or limitations.


 


19.12      Counterparts. 
This Agreement may be executed in counterparts, all of which taken
together shall be regarded as one and the same instrument.


 


101





















 


IN WITNESS WHEREOF, the
Parties have executed this Co-Development and Commercialization Agreement
through their duly authorized representatives to be effective as of the
Effective Date.


 


	
  PROTEIN DESIGN LABS, INC.

  	
   

  	
  HOFFMANN-LA ROCHE INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title: 

  	
  Chief Executive Officer

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  F. HOFFMANN-LA ROCHE LTD

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
														



 


SIGNATURE
PAGE


 


102





















 


EXHIBIT A


 


FINANCIAL APPENDIX


 


This
Financial Appendix is a supplement to the definitions and procedures provided
in Articles 1 and 11 and Sections 4.6 and 6.3 of this Agreement.  References to Articles and Sections are
references to the articles and sections of the Agreement.  This Appendix sets forth the principles for
capturing, reporting and consolidating Operating Expenses, Development
Expenses, royalties and gross margin profit sharing.  Further, it describes the accounting (i.e.
the frequency of reporting, currency, taxes, methods of determining payments
between the Parties, auditing of accounts, etc.) and the definitions of Sales
Force Expenses, Development Expenses and Operating Expenses.


 


REPORTING AND
CONSOLIDATION


 


During
the applicable period in which such revised budgets are required under the
Agreement, preparation of revised annual budgets associated with the
Development Plan or the Commercialization Plan (as the case may be) will be
initiated in each [*] during such
period and a preliminary budget should be presented for review by the JSC
before end of each [*] during such
period.  The completed annual budget
should be endorsed by the JSC between the Parties by the end of each [*] during such period.  Reporting by each Party will be performed as
follows (with copies provided to the JSC and to the other Party):


 


	
  Reporting Event (calendar basis)

  	
   

  	
  Frequency

  	
   

  	
  Submission

  Deadline

  
	
   

  	
   

  
	
  [*] actuals

  	
   

  	
  end of quarter

  	
   

  	
  [*] after end of quarter

  
	
  [*]

  	
   

  	
  end of quarter

  	
   

  	
  [*] after end of quarter

  
	
  Accruals

  	
   

  	
  end of quarter

  	
   

  	
  [*] of last month of the quarter

  
	
  Preliminary annual budget

  	
   

  	
  annually

  	
   

  	
  [*]

  
	
  Final annual budget

  	
   

  	
  annually

  	
   

  	
  [*]

  
	
  Forecasts (rolling [*]), except [*]

  	
   

  	
  quarterly

  	
   

  	
  end of [*] of the quarter

  



 


A-1





















 


Responsibility
for approving the annual budgets associated with the Development Plan and the
Commercialization Plan will rest with the JSC.


 


The
JFC shall be responsible for the preparation of consolidated reporting
(actuals, budgets and forecasts) for the Operating Expenses and Development
Expenses as well as determination of the cash settlement.  The JFC shall provide the JSC (and the Party
not preparing the consolidated reporting on behalf of the JFC) within
forty-five working days after the submission date shown above, a statement
showing the consolidated results, forecasts and cash settlements required in a
format agreed to by the Parties.


 


The
JFC will be responsible for monitoring and agreeing upon appropriate controls
to ensure reasonable and consistent calculation and allocation of Sales Force
Expenses, Operating Expenses and Development Expenses under the Agreement.  More specifically, the JFC shall review the
projected versus actual FTE’s per quarter and the process by which third
parties are retained to provide services in the performance by the Parties
under the Agreement.  In any event, the
JFC shall review use of FTE resources on a quarterly basis.  The Parties shall also use commercially
reasonable efforts to provide access to available discounts and discount
programs available from existing vendors for the benefit of the Parties under
the Agreement.


 


Reports
of actual results compared to budget will be made by the JFC.  The Parties will work together to keep actual
spending within the approved budget. The Parties shall discuss in good faith
the adoption of additional control measures to address deviations from the
approved budget on an aggregate annual basis above [*] In any event, if a Party contemplates that an expenditure
will increase the annual budget in excess of [*],
the Parties shall review the expenditure with the JFC prior to commitment to
that expenditure.  The JFC will meet as
appropriate to review and approve the reporting events (actuals, accruals,
budgets and forecasts).


 


A-2





















 


Each
Party will use its applicable project cost system with the goal of tracking and
reporting costs on a project/product indication/work package basis consistent
with its other projects/products in development.


 


ACCOUNTING


 


1.             Audits. Each
Party (the “Audited Party”) agrees to keep
full, clear and accurate records for a period of at least three (3) years after
the relevant report is made pursuant to Section 4.6(c), 6.3(b) or 11 setting
forth its Development Expenses, Operating Expenses, Sales Force Expenses or Net
Sales, as applicable, incurred in sufficient detail to enable royalties and
compensation payable to the other Party (the “Auditing
Party”) hereunder to be determined. 
Each Audited Party further agrees to permit its books and records to be
examined by an independent accounting firm selected by the Auditing Party to
verify reports made pursuant to Section 4.6(c) or 6.3(b), as applicable.  Unless the Auditing Party obtains the prior
written consent of the Audited Party, such accounting firms must be selected
from among the four largest global accounting firms.  Such audit shall not be performed more
frequently that [*] per calendar
year nor more frequently than [*]
with respect to records covering any specific period of time.  Such examination is to be made at the expense
of the Auditing Party, except in the event that the results of the audit reveal
a discrepancy in favor of the Audited Party of [*] or more over the period being audited, in which case
reasonable audit fees for such examination shall be paid by the Audited Party.


 


2.             Methods of Payments.  All payments due to either PDL or Roche under
this Agreement shall be paid in Dollars by wire transfer to a bank in the U.S.
designated in writing by the Party to which the payment is due.


 


3.             Taxes.  If provision is made in law or regulation of
any country of the Territory for withholding of taxes of any type, levies or
other charges with respect to any amounts payable hereunder to a Party, the
other Party (“Withholding Party”) shall
promptly pay such tax, levy or charge for and on behalf of the Party to the
proper governmental authority, and shall promptly furnish the Party with
receipt of such payment.  The


 


A-3





















 


Withholding Party
shall have the right to deduct any such tax, levy or charge actually paid from
payment due the Party or be promptly reimbursed by the Party if no further
payments are due the Party.  Each
Withholding Party agrees to assist the other Party in claiming exemption from
such deductions or withholdings under double taxation or similar agreement or
treaty from time to time in force and in minimizing the amount required to be
so withheld or deducted.


 


4.             Currency.  All payments under this Agreement shall be in
Dollars. Whenever payments require conversion from a foreign currency, then
this shall be converted using the average daily exchange rate for the period to
be reported based on Roche Swiss Franc Sales Statistics, which shall be based
on exchange rate information obtained from the Reuters system.


 


5.             Late Payments.  Any amount owed by one
Party to the other Party under this Agreement that is not paid within the
applicable time period set forth herein shall accrue interest at the [*] as reported by Datastream (or a
successor or similar organization).


 


6.             General. 
As a general matter, the Parties do not intend that
expenses paid for or credited under this Agreement will be charged or credited
more than once.


 


DEFINITIONS


 


A.            SALES
FORCE EXPENSES


 


Sales Force Expenses shall mean costs directly
associated with the efforts of field sales representatives with respect to
Licensed Products, including costs associated with field sales forces, field
sales offices, and home offices staffs directly involved in the management of
and the performance of the selling functions.


 


B.            DEVELOPMENT EXPENSES


 


Development Expenses shall mean the expenses
incurred by a Party or for its


 


A-4





















 


account that are consistent with the
Development Plan and specifically are attributable to the Development of a
Licensed Product.  Development Expenses
shall include amounts paid by a Party to Third Parties involved in the
Development of Licensed Products, and all internal costs incurred by a Party in
connection with the Development of Licensed Products.  Notwithstanding anything to the contrary herein,
Development Expenses shall not include any Incremental Development
Expenses.  Development Expenses for
manufacturing of clinical supplies shall be as set forth in Article 8.


 


Development Expenses shall include but are not limited
to the cost of the development of research plans and programs, screening, lead
optimization, in vitro and in vivo testing, studies on the toxicological,
pharmacokinetic, metabolic or clinical aspects of such Product conducted
internally or by individual investigators, or consultants necessary for the
purpose of obtaining and/or maintaining approval of such Product by a
government organization in a country, and costs for preparing, submitting,
reviewing or developing data or information for the purpose of a submission to
a governmental authority to obtain and/or maintain approval of Product in a
country as well as costs of process development and scale-up costs and recovery
(including plant costs). Development Expenses shall further include costs of
Phase IV Trials and Post-Launch Product R&D Expenses. Development Expenses
shall not include patent costs, pre-Registration marketing costs (e.g.
trademark costs, advertising agency selection costs, pre-marketing studies),
post-Registration clinical studies which are not enabling for Registration of
the Product and post-Registration marketing studies.


 


Development Expenses constitute of two main accounting
elements, variable costs and fixed costs.


 


Variable costs are external costs invoiced from third
parties.


 


Fixed costs include the amounts expended for
personnel, relocation, travel, entertainment and training incurred by the
functions directly operating the program. The work scope of these functions
include activities within the areas of development operations, clinical quality
insurance, medical science, genetics integrated medicine,


 


A-5





















 


drug regulatory and technical development. To
these primary fixed costs should be added the secondary fixed costs which are
attributable to a Party’s costs for IT software and hardware, IT external
costs, depreciation, occupancy costs, corporate bonus (to the extent not
charged directly), and its payroll, information systems, human relations or
purchasing functions. These secondary fixed costs are allocated to company
departments based on space occupied or headcount or other activity-based
method.  The secondary fixed costs
further includes costs attributable to general corporate activities for
executive management, investor relations, business development, legal affairs
and finance. In determining all these fixed costs, the Parties have agreed on
an FTE-rate that will be charged for the resources allocated to the programs
from the functions directly operating the programs on a fractional FTE-basis.
The Parties have agreed on a FTE rate which will be used for calculating FTE’s
in the performance of Development activities under the Agreement.  The Parties contemplate that this rate
captures total actual personnel and fixed costs attributable to the performance
of the Joint Development Plan under this Agreement.


 


All FTE expenditures shall be included in
Development Expenses based on a rate of [*]
per FTE.  Each [*] beginning [*],
the FTE rate will be [*] compared
to previous calendar year.


 


Time-recording will be used by all people within these
functions to record actual time spent on the activities under the programs. For
clarity, FTE time recording should be made on a fractional basis. Each Party
will also use its applicable project cost system with the purpose of tracking
and reporting costs on a project/product indication/work package level.


 


C.            POST-LAUNCH PRODUCT R&D EXPENSES


 


Post-Launch
Product R&D Expenses shall include certain research and development costs
incurred by a Party in relation to a Licensed Product after the first
commercial launch and shall exclude administrative expenses and costs that are


 


A-6





















 


included within Costs of Goods Sold.  Such post-launch research and development
costs shall include, to the extent relating to a Licensed Product:


 


•                    Phase
IV Trials.


 


•                    Ongoing
medical affairs (PDL) and the counterpart for Roche.


 


•                    Preclinical
research.


 


•                    Contract
R&D costs performed by others for a particular project that have no
alternative future uses in other R&D projects or otherwise.


 


•                    Fees
and expenses of outside counsel in respect of regulatory affairs unrelated to
obtaining Regulatory Approval.


 


D.            OPERATING EXPENSES


 


Operating Expenses means those expenses incurred by a
Party which are generally consistent with the Commercialization Plan (and
associated budget) and are specifically attributable to Licensed Products in
the U.S. Territory, and shall consist of (i) Marketing Expenses, (ii)
Distribution Expenses, (iii) Third Party License Expenses, (iv) Allocated
Administration Expenses, and (v) Patent and Legal Expenses.  Operating Expenses shall exclude Development
Expenses and Sales Force Expenses. 
Notwithstanding the foregoing, Patent and Legal Expenses need not be
consistent with the Commercialization Plan (and associated budget) as long as
they have been approved by the JSC.


 


1.             MARKETING
EXPENSES


 


Marketing Expenses means
the costs incurred by a Party, excluding Allocated Administration Expenses and
Sales Force Expenses, which are generally consistent with the Commercialization
Plan (and associated budget) and are specifically attributable to the sale,
promotion, and/or marketing of a Licensed Product in the U.S. Territory.  Marketing Expenses shall be the sum of
Marketing Management, Market and


 


A-7





















 


Consumer Research, Advertising, Trade
Promotion, Consumer Promotion, and Education Expenses (each of which is
specified below), and the cost of performing Non-Registrational Trials (as
defined in Section 1.44).


 


1.1          “Marketing Management” shall include
product management and sales promotion management compensation and departmental
expenses.  This shall include costs
associated with developing overall sales and marketing strategies and planning
for Licensed Products.  In addition, payments
to Third Parties in connection with trademark selection, filing, prosecution
and enforcement shall be included in this category.


 


1.2          “Market and Consumer Research” shall
include compensation and departmental expenses for market and consumer research
personnel and payments to Third Parties related to conducting and monitoring
professional and consumer appraisals of existing, new or proposed Licensed
Products such as market share services (e.g., IMS data), special research
testing, and focus groups.  Costs
incurred pursuant to Section 7.6 shall not be included in Market and Consumer
Research, but shall be shared in accordance with the terms set forth in Section
7.6.


 


1.3          “Advertising” shall include all media
costs associated with Licensed Product advertising as follows:  production expense/artwork including set up;
design and art work for an advertisement; the cost of securing print space, air
time, etc. in newspapers, magazines, trade journals, television, radio, billboards,
etc.


 


1.4          “Trade Promotion” shall include the
allowances given to retailers, brokers, distributors, hospital buying groups,
etc. for purchasing, promoting, and distribution of Licensed Products.  This shall include purchasing, advertising,
new distribution, and display allowances as well as free goods, wholesale
allowances and reasonable field sales samples. 
To the extent multiple products are involved and some of such products
are not Licensed Products, then such allowances shall be allocated on a pro rata basis based upon net sales of each respective
product by such operating unit during the most recent quarter.


 


A-8





















 


1.5          “Consumer Promotion” shall include the
expenses associated with programs to promote Licensed Products directly to the
end user.  This category shall include
expenses associated with promoting products directly to the professional
community such as professional samples, professional literature, promotional
material costs, patient aids and detailing aids.  To the extent multiple products are involved
and some of such products are not Licensed Products, then such allowances shall
be allocated on a pro rata basis based upon net
sales of each respective product by such operating unit during the most recent
quarter.


 


1.6          “Education” shall include expenses
associated with professional education with respect to Licensed Products
through any means not covered above, including articles appearing in journals,
newspapers, magazines or other media; seminars, scientific exhibits, and conventions;
and symposia, advisory boards and opinion leader development activities.


 


2.             DISTRIBUTION
EXPENSES


 


Distribution
Expenses shall be the sum of Stock and Shipping expenses and Transportation
expenses, each as specified below.


 


2.1          “Stock and Shipping” shall include the
portion of distribution costs for the warehousing of Licensed Product finished
goods from the point of completion of production to the time the goods are
turned over to a carrier for delivery as follows:  order filling/assembly functions; reasonable
order billing and customer service functions; reasonable portion of company
owned/leased facilities relating to warehousing of finished products; storage
of products at public warehouses.


 


2.2          “Transportation” shall include the portion
of distribution costs relating to moving Licensed Product goods from a
warehouse to the customer as follows: outbound transportation costs; costs of
moving goods from a manufacturing point to a warehouse at another location from
which it is ultimately to be distributed to a customer;


 


A-9





















 


the costs of the traffic department where there is a
separate department that has responsibility for administration of freight
costs.


 


3.             THIRD
PARTY LICENSE EXPENSES


 


Third Party License Expenses means all
payments by a Party under Third Party Licenses that are allocable to the use,
development, sale, manufacture, or import of Licensed Product in the U.S.
Territory, including without limitation all payments by a Party under Third
Party Licenses (a) calculated based on sales of Licensed Product in the U.S.
Territory; (b) made on account of achievement of particular events relating to
development or commercialization of Licensed Product in the U.S. Territory; and
(c) as consideration for a grant of a license or other rights in the U.S.
Territory.


 


4.             ALLOCATED
ADMINISTRATION EXPENSES


 


Allocated Administration
Expenses means the administration expenses incurred by a Party or any of its
operating units that are actually directly engaged in the commercialization of
Licensed Products in the U.S. Territory pursuant to the Commercialization Plan,
to be calculated in the manner set forth below. 
In view of the manner in which Allocated Administration Expenses are
calculated, administration expenses shall be excluded from the definition of
each of the other elements which make up Operating Expenses.


 


The
costs recoverable as Allocated Administration Expenses are the costs of
finance, management information services, human resources, legal, and employees
engaged in general management functions for the operating units in
question.  Cost categories included
within Allocated Administration Expenses shall not be included in any other
cost recoverable under this Agreement.


 


Recoverable
administration expenses shall include the direct costs of employees performing
such functions, the costs of supporting such individuals in the performance of
their job (e.g., occupancy costs, travel, computers, and telephones), and
outside services (e.g., consulting and audit services).  Such costs shall be calculated in


 


A-10





















 


accordance with the customary accounting
methodology of the Party incurring such expenses, consistently applied
throughout such organization. Such costs shall be allocated based on a
percentage determined by sales of Licensed Product supported by such operating
unit(s) divided by the total product sales supported by such operating unit(s)
during the relevant quarter.  Total
Allocated Administrative Expenses of a Party shall not exceed [*] of the Operating Expenses incurred by
such Party (less Allocated Administrative Expense), on an annualized basis.


 


5.             PATENT
AND LEGAL EXPENSES


 


Patent and Legal Expenses means (a) the fees
and expenses of outside counsel and payments to Third Parties incurred after
the Effective Date in connection with the preparation, filing, prosecution and
maintenance of PDL Trademarks and those patent fees and expense set forth in
Section 12.7, (b) all expenses associated with Third Party claims in the U.S.
Territory for which neither Party has an indemnification obligation pursuant to
Article 16, and (c) all expenses associated with latent defects in the Licensed
Product in the U.S. Territory for which neither Party has an indemnification
obligation pursuant to Article 16.  For
clarity, no internal legal costs shall be included in Patent and Legal
Expenses.


 


A-11





















 


EXHIBIT B


 


GMP AUDIT


 


Following
the Effective Date, the Parties shall form an advisory group, consisting of
qualification experts from both PDL and Roche. 
This group will advise PDL on the qualification and validation
activities (including a discussion of the PDL process evaluation and process
validation plan for Daclizumab) required to license PDL’s manufacturing
facility.  They will also coordinate an
initial, informal audit by Roche of the PDL manufacturing facility
project.  This audit should be performed
following mechanical completion [*],
and include a review of the Impact Assessment, the System Boundary Drawings,
the Commissioning Documents, and sample IQ, OQ, and PQ Documents; which is
consistent with the ISPE Baseline Guide for Commissioning and Qualification
Activities (the qualification approach currently being applied by PDL).  This initial audit is advisory only, and as
such, will not trigger any development event payment.


 


Roche
will perform a formal GMP Audit after the completion of PQ by PDL.  This audit will include a review of PDL’s PQ
Plans and Reports, and their overall Quality Management System, using the
standards set forth in ICH Q7A and the US and EMEA Regulations.  For clarity, PQ, Process Qualification, is
the documented verification that premises and equipment perform effectively,
reliably, and meeting predetermined acceptance criteria.  The PQ of process support and utility systems
involves the operation, sampling, and monitoring of the system under specified
conditions over a relevant period of time. 
Therefore, PQ is mandatory for the critical process support and utility
systems, as determined in the PDL Impact Assessment.


 


PDL
should keep Roche directly informed as to their progress toward completion of
the PQ, informing Roche of any significant issues that arise.  When nearing the completion of PQ, PDL should
supply Roche with advance copies of their PQ procedures, plans, and other
related documents, and determine, with Roche, an appropriate timeline for the
GMP Audit, which allows both parties to prepare properly.


 


B-1





















 


The
GMP Audit will be successful if (a) the PQ Plans, PQ Reports, and Quality
Management System are in compliance with cGMP guidelines and (b) there are no
observations which (i) will lead to a significant delay of Phase III clinical
development or the anticipated launch of the product, (ii) present a
significant risk of non-acceptance of the site by regulatory authorities for
clinical and/or commercial supplies, or (iii) may place clinical material or
commercial supplies “at risk”.


 


Following
the completion of a [*], but prior
to [*], the payment described in
9.2(c) will be due.


 


B-2





















 


EXHIBIT C


 


THIRD PARTY LICENSES


 


7.             [*]


 


To the extent that one or
more additional agreements entered into by a Party prior to the Effective Date
are necessary for the use, manufacture, sale, offering for sale, or importation
of Licensed Products in the Asthma Field in the Territory (or to the extent
that one or more of the agreements listed on this Exhibit C as of the Effective
Date are not necessary therefor), the Parties agree to discuss in good faith
the amendment of this Exhibit C to include (or to remove, as appropriate) any
such agreements that a Party may reasonably suggest to the other Party in writing
during the thirty (30) days immediately following the Effective Date.


 


C-1





















 


EXHIBIT D


 


DEVELOPMENT PLAN


 


The attached Development Plan currently identifies the
timeline and budget agreed upon by the Parties effective as of [*]. 
The budget does not include [*],
which the Parties have agreed will be reviewed by the JDC for inclusion or
exclusion as part of the Development Plan. 
The Development Plan consists of the following documents:


 


1.               Development
Plan Summary


 


2.               Development
Plan Gantt Chart


 


3.               Clinical
Model Roche Rate


 


4.               Daclizumab
IPP


 


5.               Detailed
Activity breakdown


 


6.               Development
Timeline Allocation of Responsibilities


 


7.               Clinical
Development Information


 


The Parties acknowledge that the Phase III clinical
studies in the Development Plan will not be initiated without available
clinical supply manufactured in the facility expected to produce the commercial
supply.


 


The Parties currently agree that the available safety
database at BLA filing shall contain [*]
(currently contemplated to be approximately [*].  If the Parties identify that, due to factors
such as drop-out rate, changes in the Development Plan, or other factors, the
number of treated patients in the safety database at filing will be less than [*], then the JDC will propose amendments
to the Development Plan to ensure that the safety database contains [*].


 


[*]


 


D-1





















 


EXHIBIT E


 


[*] TESTING PLAN


 


Roche
and PDL recognize that the ideal assessment of Daclizumab [*] would accurately determine clinically
relevant [*] responses to
Daclizumab for the proposed asthma indication within this particular patient
population.  Clinically relevant
responses reflect issues related to [*].


 


The
[*] plan should be discussed on a
regular basis with regulatory authorities especially at the end of phase II
meeting.


 


I.
Assay outline:


 


Samples
from clinical study subjects in the asthma development program will be tested
for [*] The primary [*] assessment methods will comprise:


 


[*]


 


II. [*]
definition:


 


For
the purposes of identifying [*]
response, a [*] is defined as one
of the following:


 


[*]


 


III.
[*] and Patient testing:


 


Throughout
the development of the compound, [*]
will be done.


 


[*]


 


E-1





















 


IV.
Deliverables:


 


End
of Phase 1:


 


[*]


 


Interim
analysis of [*]


 


[*]


 


The
JDC will assess the possibility and desirability of developing [*] for testing [*].


 


[*]


 


V.
Development Events:


 


For
the purposes of this Agreement, the rate of [*]
as determined by step 3 [*] will
be used for certain development payments and project decisions.


 


Phase 1 Development Event:


 


(1)
Not more than [*] and (2) an
acceptable [*]


 


Phase 2 Development Event:


 


Not
more than [*]


 


E-2





















 


EXHIBIT F


 


PRESS RELEASE


 


	
  

  	
   

  	
  

  
	
  Media Release

   

   

   

   

  Basel, Switzerland and
  Fremont, CA 16 September, 2004

  	
   

  
	
   

  	
   

  	
   

  
	
  Roche and Protein Design Labs to jointly develop
  Zenapax for Asthma

  
	
   

  	
   

  	
   

  



 


Roche and
Protein Design Labs (PDL) (NASDAQ: PDLI) today announced a worldwide agreement
to co-develop and commercialize Zenapax® (Daclizumab) for asthma and
related respiratory diseases, based on recent positive phase II data in
patients with moderate to severe asthma. 



 


Mark McDade,
Chief Executive Officer, PDL, said, “The continued development of daclizumab in
asthma is among PDL’s highest clinical development priorities.  With Roche as our ongoing partner in this
indication, we believe daclizumab will obtain the resources needed to develop
the full potential of this humanized antibody in asthma.”  


 


“This new
agreement will strengthen our pipeline in asthma, where we are currently in
phase II development of a novel oral treatment,” said William Burns, Head of
Roche’s Pharmaceuticals Division. “We believe that daclizumab will offer
patients a significant improvement over today’s current therapy.  Our long-standing relationship with PDL
continues to grow as we develop daclizumab further.”


 


Under terms
of the agreement, PDL will receive a $17.5 million upfront payment as well as
up to $187.5 million in development and commercialization milestones for
successful further development of


 


F-1





















 


daclizumab.  Roche and PDL will globally co-develop
daclizumab in asthma, share development expenses and co-promote the product in
the US.  Outside the US, PDL will receive
royalties on net sales of the product in asthma.  


 


About the Roche - PDL partnership


In 1989, Roche acquired the worldwide rights to
daclizumab, a product that has
since gained an important position within Roche’s transplantation portfolio. In October 2003, Roche resold to PDL all
rights to daclizumab, except in transplantation, until 2007 when PDL
will have the option to re-acquire the transplantation rights as well.  In 2004, PDL approached Roche with compelling
phase II data for daclizumab in
asthma, leading to today’s announcement for the continued co-development of daclizumab in respiratory disorders by
Roche and PDL.


 


About Asthma


Asthma is
among the most common chronic medical conditions in the United States and
worldwide, affecting more than 20 million people in the United States,
according to the American Lung Association (ALA) and the American Academy of
Allergy, Asthma & Immunology (AAAAI). 
According to a recent report on the global burden of asthma published by
the NIH, WHO and the Global Initiative for Asthma, asthma is one of the most
common chronic diseases in the world and it is estimated that around 300
million people in the world currently have asthma. The rate of asthma continues
to increase and it is estimated that there may be an additional 100 million
persons suffering from asthma by 2025. Asthma accounts for 1 in every 250
deaths worldwide.


 


About Protein Design Labs


In October
2003, PDL acquired all rights to Zenapax®, excluding transplantation
indications but with the option to gain such indication rights by 2007.  PDL retains this right in accordance with the
terms of the October 2003 agreement.


Protein
Design Labs is a leader in the development of humanized antibodies to prevent
or treat various disease conditions.  PDL
currently has antibodies under development for autoimmune and inflammatory


 


F-2





















 


conditions,
asthma and cancer.  PDL holds fundamental
patents for its antibody humanization technology.  Further information on PDL is available at www.pdl.com.


 


About Roche


Headquartered in
Basel, Switzerland, Roche is one of the world’s leading innovation-driven
healthcare groups. Its core businesses are pharmaceuticals and diagnostics. As
a supplier of products and services for the prevention, diagnosis and treatment
of disease, the Group contributes on a broad range of fronts to improving
people’s health and quality of life. Roche is number one in the global
diagnostics market, a leading supplier of pharmaceuticals for cancer and
transplantation and a market leader in virology. In 2003 prescription drug sales by the Pharmaceuticals Division
totalled 19.8 billion Swiss francs, while the Diagnostics Division posted sales
of 7.4 billion Swiss francs. Roche employs
roughly 65,000 people in 150 countries and has alliances and R&D agreements
with numerous partners, including
majority ownership interests in Genentech and Chugai. 


 


Webcast scheduled for 8:30 a.m.
Eastern time on September XXX.  


PDL will host a webcast beginning at 8:30
a.m. Eastern time on September XX, 2004, to discuss the joint development and
commercialization agreement.


 


The live webcast will be available through
the PDL website: www.pdl.com. Please connect to this website at least 15
minutes prior to the live webcast to allow time for any software download that
may be needed to hear the webcast. A replay will be available at www.pdl.com
starting approximately one hour after completion of the webcast. 


 


An audio replay will also be available by
telephone from approximately 10:30 a.m. Eastern time on September XX, 2004
through 10:30 a.m. Eastern time on September XX, 2004. To access the
replay, dial 800-633-8284 from inside the United States and 402-977-9140
from outside the United States; enter conference ID number 21207310.


 


Conditions


 


The foregoing contains
forward-looking statements involving risks and uncertainties and PDL’s actual
results may differ materially from those in the forward-looking
statements.  Factors that may cause such
differences are discussed in PDL’s Annual Report on Form 10-K for the year
ended December 31, 2003, in its Quarterly Report on Form 10-Q for the three
months ended June 30, 2004, and in other filings made with the Securities and
Exchange Commission.  In particular,
results obtained in the Phase II study may not be predictive of results to be
obtained in the additional evaluations that would be necessary to demonstrate
the antibody to be safe and effective in the treatment of asthma, nor can there
be assurance that PDL will initiate subsequent clinical trials in asthma.


 


Protein Design Labs and Humanizing Science are registered
U.S. trademarks and the PDL logo is considered a trademark of Protein Design
Labs, Inc.  Zenapax is a registered
trademark of Roche


 


F-3





















 


 


	
  Contacts:  

  Roche- Europe

  Sabrina Oei

  Pharma Partnering Communications

  Tel: +41 61 688 9358

  3300

  sabrina.oei@roche.com  

  	
   

  	
  

  

  Maria Payne

  DeFacto

  Tel: +44 (0) 207 496

  	
   

  	
  PDL

  James
  R. Goff

  Senior
  Director, Corporate Communications

  Tel:
  (510) 574-1421

  jgoff@pdl.com  

  	
   

  



 


ENDS


 


F-4





















 


EXHIBIT
G


 


REGIONS


 


1)  United States of
America


 


2)  Canada


 


3)  Japan


 


4)  Western Europe


The
15 pre May 1, 2004 EU member states


Switzerland


Turkey


Norway


Iceland


 


5)  Central and Eastern
Europe


Albania


Belarus


Bosnia-Herzegovina


Bulgaria


Croatia


Czech
Republic


Estonia


Hungary


Latvia


Lithuania


Macedonia


Moldavia


Poland


Romania


Russia


Serbia
& Montenegro


Slovakia


Slovenia


Ukraine


 


6)  Latin America


34
countries from Mexico to Argentina including:


Argentina


Brazil


Chile


 


G-1





















 


Colombia


Costa
Rica


Ecuador


Mexico


Peru


Uruguay


Venezuela


 


7)  Asia/Pacific


Bangladesh


Cambodia


China
(including Hong Kong)


India


Indonesia


Korea


Malaysia


Pakistan


Philippines


Singapore


Sri
Lanka


Taiwan


Thailand


Vietnam


Australia


New
Zealand


 


8)  Pharma International


All
countries not listed above


 


G-2





















 


SCHEDULE 14.2(A)


 


[*]


 


1





















 


SCHEDULE 14.2(B)


 


[*]


 


1