Exhibit 10.16


 


CONFIDENTIAL PROVISIONS REDACTED


 


LICENSE
AGREEMENT


 


BY AND
BETWEEN


 


PROTEIN
DESIGN LABS, INC.


 


AND


 


HUMAN GENOME
SCIENCES, INC.


 


December 15,
2005


 


 


CONFIDENTIAL
TREATMENT REQUESTED


 





















 


LICENSE
AGREEMENT


 


This
License Agreement (“Agreement”) is
entered into as of December 15, 2005 (the “Effective Date”) by and between PROTEIN DESIGN LABS, INC.,
having its principal offices at 34801 Campus Drive, Fremont, CA 94555 USA (“PDL”), and HUMAN GENOME SCIENCES, INC.,
having its principal offices at 14200 Shady Grove Road, Rockville, MD 20850 USA
(“HGS”). PDL and HGS are each
individually referred to as a “Party,”
and collectively as the “Parties.”


 


RECITALS


 


WHEREAS, HGS owns certain intellectual
property rights in inventions related to the receptor to the Tumor necrosis
factor-like weak inducer of apoptosis (“Tweak-R”);


 


WHEREAS, PDL desires to obtain, and HGS
wishes to grant to PDL, a license under such intellectual property rights to
practice such inventions for the purposes of research, development and
commercialization of products, all on the terms set forth below in this
Agreement;


 


WHEREAS, PDL owns or controls certain
patents and patent applications concerning humanized antibodies and antibody
humanization technology including certain patents and patent applications that
are sometimes referred to as the “Queen
Patents”;


 


WHEREAS, HGS desires to generate humanized
antibodies directed against up to [****]* HGS Antigens and to conduct research,
development and commercial activities on these humanized antibodies that would
be claimed in, or would involve the use of certain antibody humanization
technologies claimed in the Queen Patents; and


 


WHEREAS, PDL is interested in granting to
HGS a non-exclusive license under the Queen Patents for the purpose of
conducting research, development and commercial activities on humanized
antibodies directed against up to [****]* HGS Antigens.


 


NOW, THEREFORE, in consideration of the
foregoing premises and the covenants and promises contained in this Agreement,
the Parties agree as follows:


 


Article 1.  DEFINITIONS


 


As
used herein, the following initially capitalized terms shall have the following
meanings:


 


1.1                               “Affiliate” shall mean any
individual, corporation, association or other business entity which directly or
indirectly controls, is controlled by or is under common control with the Party
in question. As used in this definition of “Affiliate,” the term “control”
means the direct or indirect ownership of more than fifty percent (50%) of the
stock having the right to vote for directors thereof or the ability to
otherwise control the management of the corporation or other business entity
whether through the ownership of voting securities, by contract, resolution,
regulation or otherwise; provided, however,
that the term “Affiliate” shall not include subsidiaries or other entities in
which a Party or its Affiliates owns a majority of the ordinary voting power necessary to elect a majority of
the board of directors or other governing body, but is restricted from electing
such majority by contract or otherwise until the time such restrictions are no
longer in effect.


 










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


 


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1.2                               “Antibody”  shall mean a molecule comprising or
containing one or more immunoglobulin variable domains or parts of such
domains, fragments, variants, modifications or derivatives thereof.


 


1.3                               “Bulk
Product” means Royalty Product or Developed Drug Product, as the case may
be, supplied in a form other than Finished Product which can be converted into
Finished Product.


 


1.4                               “Commercially Reasonable and Diligent Efforts”
shall mean efforts and resources commonly used in the research-based
pharmaceutical industry for a product at a similar stage in its product life of
similar market potential taking into account efficacy, the competitiveness of
alternative products in the marketplace, the patent and other proprietary
position of the product, the likelihood of regulatory approval given the
regulatory structure involved, the profitability of the product including the
royalties payable to licensors of patent rights, alternative products and other
relevant factors. Commercially Reasonable Efforts shall be determined on a
market-by-market basis for a particular product, and it is anticipated that the
level of effort will change over time, reflecting changes in the status of the
product and the market involved.


 


1.5                               “Confidential Information” is defined in Section 9.1.


 


1.6                               “Controlled”
shall mean with respect to any know-how, patent, other intellectual
property right, data, or regulatory filing, the possession of the right,
whether directly or indirectly, and whether by ownership, license or otherwise,
to assign, or grant a license, sublicense or other right to or under, such
know-how, patent, other intellectual property right, data, or regulatory filing
as provided for herein without violating the terms of any agreement or other
arrangements with any Third Party.


 


1.7                               “Developed
Drug Product” shall mean any therapeutic product that is not a Licensed
Biologic Product, that was discovered through the use of a drug screening
method, which screening method or material employed in such method would, but
for the license granted herein, infringe a Valid Royalty Claim of the Licensed
Intellectual Property.


 


1.8                               “Diagnostic
Field” shall mean any use for the diagnosis, prognosis, or monitoring of a
human disease or disorder.


 


1.9                               “Finished
Product(s)” means any and all Royalty Products or Developed Drug Products,
as the case may be, in a form for use by an end user and not intended for
further chemical or genetic manipulation or transformation.


 


1.10                        “HGS
Antigens” shall mean an antigen selected by HGS and approved by PDL for the
grant by PDL to HGS of a license to its PDL Antibody Humanization Patent Rights
as provided by Section 2.7 of this Agreement up to a limit of [****]*
antigens. HGS shall identify each such HGS Antigen after the Effective Date,
but no later than the [****]* date for each associated Licensed Queen Product.


 


1.11                        “Licensed
Biologic Product(s)” shall mean any product that contains (a) an
Antibody, or (b) a protein or peptide, the manufacture, use, sale, offer
for sale or import of which, but for the licenses granted herein, would
infringe a Valid Royalty Claim.


 










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


 


3





















 


1.12                        “Licensed
Diagnostic Product(s)” shall mean any product used solely for the
diagnosis, prognosis, or monitoring of a human disease, but not to treat or
prevent a human disease, the manufacture, use, sale, offer for sale or import
of which, but for the license from HGS, would infringe a Valid Royalty Claim.


 


1.13                        “Licensed
Drug Product(s)” shall mean any product other than a Licensed Biologic
Product, Licensed Diagnostic Product, or Developed Drug Product, the
manufacture, use, sale, offer for sale or import of which, but for the license
from HGS, would infringe a Valid Royalty Claim.


 


1.14                        “Licensed
Queen Product(s)” shall mean any Antibody that binds to an HGS Antigen
whose development, manufacture, import, export, use, offer for sale or sale
would infringe a Valid Queen Claim absent a license to one or more of the Queen
Patents.


 


1.15                        “Licensed
Intellectual Property” shall mean (a) all patents and patent
applications listed in Exhibit A and any future patent applications that
claim the manufacture, use, or composition of matter of a product with respect
to Tweak-R; (b) all patent applications anywhere in the world claiming
priority to such filings; (c) all provisionals, converted provisionals,
divisionals, continuations and continuations-in-part (but solely to the extent
not containing new matter) of any of the foregoing in the United States; (d) any
non-United States counterparts of the applications listed in (a), (b) and (c) above;
and (e) all patents issuing on any of the foregoing patent applications
listed in (a)-(d) and all reissues, re-examinations, and extensions in the
United States (and their equivalents in the other countries of the world) of
any such patents; collectively, all of the above subparagraphs, solely to the
extent that they claim the manufacture, use, or composition of matter of a
product with respect to Tweak-R.


 


1.16                        “Major
European Country” shall mean any one of [****]*.


 


1.17                        “Net Sales” shall mean, with respect to a particular
time period, the gross amount invoiced by PDL, its sublicensees and Affiliates
for sales, transfer or disposition to independent, unrelated third parties of
Royalty Products or Developed Drug Products (such Royalty Products or Developed
Drug Products being in the final form intended for use by the end user), during
such time period (including the fair market value of all other consideration
received for the sale, transfer or other disposition of Royalty Products or
Developed Drug Products by PDL, its sublicensees and Affiliates, whether such
consideration is in cash, payments in kind, exchange or other forms), less an
allowance of [****]* to cover factors such as (a) credits
or allowances, if any, actually granted on account of price adjustments,
recalls, rejection or return of items previously sold, (b) excise and
sales taxes, duties or other taxes imposed on and paid with respect to such
sales (excluding income or franchise taxes of any kind) and (c) outer
packing, freight and freight insurance costs. 
The provisions of (a) through (c) above shall be adjusted
periodically as necessary to reflect amounts actually incurred. Notwithstanding
anything to the contrary, in all cases Net Sales shall be determined in
accordance with United  States
GAAP. In the event that a Royalty Product or Developed Drug Products is sold in
combination with other active components, (“Combination Royalty Product”), Net
Sales for purposes of royalty payments on the Combination Royalty Products
shall be calculated by multiplying the Net Sales of the Combination Royalty
Product by the fraction A/(A+B), where A is the gross selling price of the
Royalty Product sold separately (i.e. without the other active components) and
B is the gross selling price of the other active components. In the event that
no such separate sales are made, Net Sales for royalty payments shall be
calculated by multiplying Net Sales of the Combination Royalty Product by C/
(C+D) where C is the fully allocated cost of the Royalty Product


 










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


 


4





















 


(not including the other active components) and D is
the fully allocated cost of such other active components, such costs being
determined using United States GAAP consistently applied.


 


Net Sales for Bulk Products shall be calculated by multiplying the
units of Finished Product to which such Bulk Product is reasonably anticipated
to be converted by the established market price of the Finished Product on the
date of sale of the Bulk Product. By way of example and without limitation,
units of Finished Product may be measured in grams or doses, as appropriate.


 


The method of calculating Net Sales of
materials in forms other than Finished Product or Bulk Product that can be
converted into Finished Product shall be established by good faith discussion
between PDL and HGS prior to the first sale or transfer of any such material by
PDL to a non-Affiliate.


 


1.18                        “PDL Antibody
Humanization Patent Rights” shall mean those patent and patent applications
related to the humanization of Antibodies consisting of the patents identified
in Exhibit B  and any
foreign counterparts thereto, and any, continuations, continuations-in-part,
reissues, extensions or patent term extension of any such patent, divisions of
such patents or patent applications or any substitute applications therefor,
and any supplementary protection certificate, confirmation patent or
registration patent or patent of addition based on any such patent owned by PDL
as of the Effective Date or at any time during the term of this Agreement
otherwise referred to herein as the “Queen
Patents”.


 


1.19                        “PDL License Agreement” shall mean the agreement in the form
attached hereto as Exhibit C.


 


1.20                        “Phase II Clinical Trial”
shall mean the
first controlled and lawful study of the safety, dose ranging and efficacy of a
specific Royalty Product or Developed Drug Product by administration of such
Royalty Product or Developed Drug Product to human beings where the principal
purpose of such trial is to generate sufficient data (if successful) to
commence a Phase III Clinical Trial for such Royalty Product or Developed Drug
Product or the first trial that would otherwise satisfy the requirements of 21
C.F.R. Section 312.21(a).


 


1.21                        “Phase III Clinical
Trial” shall mean
the first controlled and lawful pivotal study of the efficacy of a specific
Royalty Product or Developed Drug Product by administration of such Royalty
Product or Developed Drug Product to human beings where the principal purpose
of such trial is to provide statistically significant efficacy data primarily
to support an application for Regulatory Approval of a Royalty Product or
Developed Drug Product for the  indication
being investigated by the trial or the first trial that would otherwise satisfy
the requirements of 21 C.F.R. Section 312.21(c).


 


1.22                        “Regulatory Application”
shall mean an application
filed to obtain Regulatory Approval, including, without limitation, a Biologics
License Application (“BLA”) or New
Drug Application (“NDA”) and their
foreign equivalents.


 


1.23                        “Regulatory Approval” shall mean the final government approval
required to market a Royalty Product in a given country, including, but not
limited to, product registration(s) and price and marketing approval(s),
as applicable, in such country.


 


1.24                        “Royalty Product” shall mean a Licensed Biologic Product, a
Licensed Diagnostic Product, or a Licensed Drug Product.


 


1.25                        “Royalty Term” is defined in Section 5.1.


 


1.26                        “Term” is defined in Section 5.1.


 


5





















 


1.27                        “Therapeutic Field” shall mean any human and/or animal use.


 


1.28                        “Tweak-R” shall mean the receptor to the tumor
necrosis factor like weak inducer of apoptosis, which is the molecule
designated [****]* by HGS.


 


1.29                        “Valid Milestone Claim” shall mean (i) a claim in an
unexpired, issued patent within the Licensed Intellectual Property that has not
been found to be unpatentable, invalid or unenforceable by a decision of a
court or other governmental body of competent jurisdiction in the country of
the patent, which decision is unappealable or unappealed within the time allowed
for appeal, that has not been rendered unenforceable through disclaimer or
otherwise, and that has not been lost though an interference proceeding, or (ii) for
the time period ending on the [****]*
anniversary of the
Effective Date, a claim in a pending patent application within the Licensed
Intellectual Property. For purposes of clarity, no claim of any patent
application shall be considered a Valid Milestone Claim at any time following
the [****]* anniversary of the Effective Date.


 


1.30                        “Valid Queen Claim” shall mean a claim in an unexpired,
issued patent within the PDL Antibody Humanization Patent Rights that has not
been found to be unpatentable, invalid or unenforceable by a decision of a
court or other governmental body of competent jurisdiction in the country of
the patent, which decision is unappealable or unappealed within the time
allowed for appeal, that has not been rendered unenforceable through disclaimer
or otherwise, and that has not been lost though an interference proceeding.


 


1.31                        “Valid Royalty Claim” shall mean a claim in an unexpired,
issued patent within the Licensed Intellectual Property that has not been found
to be unpatentable, invalid or unenforceable by a decision of a court or other
governmental body of competent jurisdiction in the country of the patent, which
decision is unappealable or unappealed within the time allowed for appeal, that
has not been rendered unenforceable through disclaimer or otherwise, and that
has not been lost though an interference proceeding.


 


Article 2.  LICENSES


 


2.1                               License Grant to PDL for
Licensed Biologic Products. HGS hereby grants to PDL an exclusive, sub-licensable
(without restriction), worldwide license to PDL to research, develop, use,
make, have made, sell, offer for sale, import or export any Licensed Biologic
Product(s) in the Therapeutic Field.


 


2.2                               License Grant to PDL for
Licensed Drug Products. HGS hereby grants to PDL an exclusive, sub-licensable (with restriction
as set forth in Section 2.5 below), worldwide license to research, develop,
use, make, have made, sell, offer for sale, import or export any Licensed Drug
Product(s) in the Therapeutic Field. Notwithstanding the foregoing, PDL
may sublicense a Licensed Drug Product, provided that PDL has at least [****]* covering
such product.


 


2.3                               License Grant to PDL for
Developed Drug Products. HGS hereby grants to PDL a non-exclusive, sub-licensable (with
restriction as set forth in Section 2.5 below), worldwide license to
research, develop, use, make, have made, sell, offer for sale, import or export
any Developed Drug Products in the Therapeutic Field. Notwithstanding the
foregoing, PDL may sublicense a Developed Drug Product, provided that PDL has
at least [****]* covering such product.


 










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


 


6





















 


2.4                               License Grant to PDL for
Licensed Diagnostic Products. HGS hereby grants to PDL a non-exclusive,
sub-licensable (with restriction), worldwide license to research, develop, use,
make, have made, sell, offer for sale, import or export any Licensed Diagnostic
Product in the Diagnostic Field. PDL’s right to sublicense a Licensed
Diagnostic Product will be limited to applications reasonably determined to be
necessary for successful commercialization of the Licensed Biologic Product or
Licensed Drug Product and subject to HGS approval, which will not be
unreasonably withheld.


 


2.5                               Sublicensing. Each sublicense granted hereunder shall
include a grant that is consistent with the terms herein and PDL shall be
responsible for payments and royalties under such sublicense due to HGS as if
such were made by PDL directly and pursuant to the terms and conditions of this
Agreement. PDL shall provide HGS with written notice of any sublicense granted
hereunder within [****]* of granting such sublicense.


 


2.6                               License Grant to HGS. PDL hereby grants to HGS, and HGS hereby
accepts, a non-exclusive, non-sublicensable, royalty-free sublicense under the
exclusive rights granted to PDL pursuant to Section 2.1 herein to
research, develop, make and use (but not to, have made, sell, or offer for
sale) Licensed Biologic Products for HGS internal research only.


 


2.7                               Licenses to HGS Under the Queen
Patents


 


2.7.1                     Election. Subject to the terms and conditions of this
Agreement, PDL hereby grants to HGS through the [****]*
anniversary of the
Effective Date (or until such earlier time as HGS has exercised its rights
under this Section 2.7 with respect to the HGS Antigens), the right, upon
written notice to PDL, to receive licenses under the PDL Antibody Humanization
Patent Rights for the HGS Antigens. HGS shall identify each HGS Antigen prior
to [****]* for the associated Licensed Queen Product. Each
license shall be a nonexclusive, worldwide (except as provided in Section 2.7.2),
transferable (to an Affiliate of HGS or to a successor in interest to the
CoGenesys division of HGS), license under the PDL Antibody Humanization Patent
Rights to make, have made, use, import, offer for sale and sell or otherwise
dispose of Licensed Queen Product pursuant to a PDL License Agreement to be
executed by the Parties after such written notice. The rights of HGS under such
PDL License Agreement shall include the right to grant sublicenses for Licensed
Queen Product in accordance with the terms of the applicable PDL License
Agreement. Each license elected by HGS hereunder shall be pursuant to a
separate PDL License Agreement and effective as of the date when the election
for such license by HGS becomes irrevocable, which license agreement will
include such terms that are standard and customary for PDL in other
non-exclusive license agreements under the Queen Patents substantially in the
form as attached hereto as Exhibit C to this Agreement.


 


2.7.2                     Procedure for Exercise of License Rights. Prior to [****]*, HGS shall provide PDL with written
notice identifying the HGS Antigen for which HGS desires to enter into a PDL
license agreement pursuant to the provisions of Section 2.7.1. A separate
notice shall be provided with respect to each antigen for which a license is
requested. PDL shall promptly review and respond in writing to the request by
HGS for a license within [****]* of receipt of the written request. PDL
may refuse to grant HGS a license only if PDL [****]*. In the event that PDL validly refuses
to grant HGS a license under the PDL Antibody Humanization Patent Rights, [****]*. If PDL
affirms HGS’s request or has not responded by notice in writing within [****]* of
receipt of HGS’s request under this Section 2.7.2, then HGS’s election
shall be deemed irrevocable and HGS and PDL shall enter into a PDL License
Agreement with respect to that HGS Antigen for the territory designated.


 










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


 


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2.7.3                     Humanization
Technical Support.  [****]*.


 


Article 3.  PAYMENTS AND ROYALTIES


 


3.1                               License Fee. Within [****]* after the Effective Date, PDL shall pay
HGS a non-refundable initial licensing fee of [****]*.


 


3.2                               Milestone Payments.


 


3.2.1                     PDL shall pay HGS the following
non-refundable amounts for the first achievement of the following milestone
events by PDL, its Affiliates or sublicensees for the first of each type of
Royalty Product covered by a Valid Milestone Claim (subject to Section 3.2.4):


 


	
   

  	
   

  	
  Licensed Biologic

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Product or

  	
   

  	
  Licensed

  	
   

  
	
   

  	
   

  	
  Licensed Drug

  	
   

  	
  Diagnostic

  	
   

  
	
  Milestone Event

  	
   

  	
  Product

  	
   

  	
  Product

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 










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


 


8





















 


	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


3.2.2                     Solely for the sake of clarification, and
only with respect to this Section 3.2, a Royalty Product shall include a
product covered by a Valid Milestone Claim or a Valid Royalty Claim. Such
non-refundable amounts shall be payable within [****]* after the day on which the relevant
milestone event is achieved.


 


3.2.3                     [****]*.


 


3.2.4                     In the event that a payment to HGS upon
achievement of a milestone event pursuant to Section 3.2.1 herein with
respect to a Royalty Product is due from PDL, and PDL has not paid one or more
previous milestone payments (if any) with respect to such Royalty Product, then
at such time PDL shall pay all such previously unpaid milestone payments (if
any) with respect to such Royalty Product. If, at the time of the first
commercial sale of a Royalty Product by PDL, its Affiliates or sublicensee, PDL
has not paid all milestone payments (if any) pursuant to Section 3.2.1
herein with respect to such Royalty Product, then at such time PDL shall pay
all such previously unpaid milestone payments (if any) with respect to such
Royalty Product.


 


3.2.5                     Each of the milestone payments payable
pursuant to Section 3.2.1 above shall be payable only one time for the first
achievement of such milestone by a Developed Drug Product, provided further
that PDL shall pay to HGS [****]* of each milestone payment that would be
applicable to a Licensed Drug Product referenced in Section 3.2.1 above
for each Developed Drug Product that achieves such milestone.


 


3.2.6                     Milestones Achieved by
Sublicensees. [****]*.


 


3.3                               Non-creditable Payments.
Milestone
payments payable pursuant to Section 3.2 are not creditable against the
earned royalties set forth in Section 3.5.


 


3.4                               Entire Consideration. The initial license fee payable pursuant
to Section 3.1, the milestone payments payable pursuant to Section 3.2,
if any, and the right granted to the Queen Patents in Section 2.7 of this
Agreement shall be the entire consideration for the licenses granted to PDL
hereunder for any use or purpose other than the sale of Royalty Products or
Developed Drug Products.


 


3.5                               Royalties.


 


3.5.1                     PDL shall pay HGS earned royalties on
annual Net Sales of Royalty Products by PDL, its Affiliates or sublicensees,
covered by a Valid Royalty Claim at the following rates:


 










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


 


9


















 


	
  Annual Net Sales

  	
   

  	
  Royalty Rate

  	
   

  
	
  The portion of annual Net Sales worldwide of
  Licensed Biologic Products or Licensed Drug Products less than U.S. $[****]*

  	
   

  	
  [****]*

  	
   

  
	
  The portion of annual Net Sales worldwide of
  Licensed Biologic Products or Licensed Drug Products equal to U.S. $[****]* but
  less than U.S. $[****]*

  	
   

  	
  [****]*

  	
   

  
	
  The portion of annual Net Sales worldwide of
  Licensed Biologic Products or Licensed Drug Products equal to U.S. $[****]* but
  less than U.S. $[****]*

  	
   

  	
  [****]*

  	
   

  
	
  The portion of annual Net Sales worldwide of
  Licensed Biologic Products or Licensed Drug Products equal to U.S. $[****]*and
  greater

  	
   

  	
  [****]*

  	
   

  
	
  Net Sales worldwide of Licensed Diagnostic Products

  	
   

  	
  [****]*

  	
   

  



 


PDL’s obligation to pay royalties under this Section 3.5.1 will
accrue or become due or payable on a country-by-country basis solely with
respect to Royalty Product(s) that are covered by a Valid Royalty Claim at
the time of sale by PDL or its sublicensees. Where a Royalty Product is covered
by more than one Valid Royalty Claim, only a single royalty payment shall be
payable and there will be no multiple royalties due with respect to each
separate Royalty Product under this Section 3.5.1.


 


3.5.2                     Developed Drug Products.
For a Developed
Drug Product, PDL shall pay HGS an earned royalty on annual Net Sales of
Developed Drug Products by PDL its Affiliates or sublicensees at a rate of [****]* of
those required for Royalty Products. In the event that a Licensed Drug Product
is also a Developed Drug Product, PDL’s sole royalty payment obligations
hereunder shall be set forth in Section 3.5.1 above, and the royalty
obligations set forth in this Section 3.5.2 shall not apply.


 


3.6                               Net Sales Reports. Beginning with the calendar quarter of
the first commercial sale of a Royalty Product or Developed Drug Product,
within [****]* after the end of each calendar quarter in which there
are Net Sales, PDL shall submit a written report to HGS stating the amount of
Net Sales in such calendar quarter and the amount of royalty due hereunder with respect to
such Net Sales. Such written report shall describe for each calendar quarter: (a) the
total worldwide Net Sales; (b) the Net Sales on a country by country
basis; (c) the exchange rate used to convert Net Sales from local currency
to U.S. dollars; and (d) the total royalty due.


 


3.7                               Payment. Concurrently with the making of each
written report as set forth in Section 3.7, PDL shall pay to HGS any
royalties due hereunder with respect to Net Sales in the calendar quarter
covered by the report. If PDL does not make any royalty or other payments due
hereunder at the times that they are due, PDL shall pay to HGS interest on each
late payment, to the extent permitted by applicable law, at a rate of [****]* the
annual prime rate of interest, as published in the Federal Reserve Bulletin
H.15 or successor thereto, for the date on which such payment becomes
delinquent, calculated


 






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


 


10

















 


daily on the basis of a three hundred sixty-five (365)
day year. Royalties payable on sales in countries other than the United States
shall be calculated by multiplying the appropriate royalty rate times the sales
in each currency in which they are made and converting the resulting amounts
into U.S. Dollars, at the average rate of exchange for the currency of the
country, from which the royalties are payable, as reported by Reuters Ltd for each calendar quarter for
which a payment is due. Such payments shall be without deduction of exchange,
collection, or other charges. All payments to HGS hereunder shall be made in
U.S. Dollars by wire transfer to an HGS account identified by HGS prior to the
date such payment is due. PDL shall send HGS a facsimile transmission or an
email message confirming the details of each such transfer promptly after
making such transfer.


 


3.8                               Accounting and Records. PDL shall keep complete, true and
accurate records of the Net Sales of all Royalty Products or Developed Drug
Products by PDL and its sublicensees for not less than [****]*
following the end of the [****]* in which such sales were made. PDL shall
make such records available to an independent certified public accountant
representing HGS, who will not be unreasonably rejected by PDL, provided that
such representative has entered into a confidentiality agreement with PDL
limiting the use of such records to verification of the accuracy of payments
due hereunder and prohibiting the disclosure of information in such records to
HGS or to any third party for any purpose. Audits of such records shall be
conducted no more frequently than annually and upon at least [****]* prior
written notice during reasonable business hours, for the sole purpose of
conducting an audit to verify the accuracy of PDL’s royalty statements and any
other payments made or owed to HGS. Such accountant shall provide PDL with a
copy of any written report prepared or given to HGS in connection with such
audits. Any claims of underpayment or overpayment will be submitted to PDL
within [****]* of the final written report. All such audits shall be
conducted at HGS’s cost and expense; provided, however, that if the audit
reveals an underpayment to HGS of more than [****]*, PDL shall pay for the cost and expense
of the audit.


 


3.9                               Taxes. HGS shall be responsible for any and all
taxes levied on account of amounts it receives under this Agreement. If PDL is
required by law, rule or regulation to withhold taxes from the types of
payments due HGS hereunder, PDL shall (a) deduct those taxes from the
amount otherwise remittable to HGS hereunder, (b) pay such taxes to the
proper taxing authority and (c) send evidence of the obligation together
with proof of payment to HGS within [****]* following that payment.


 


3.10                        HGS Payments for the PDL Antibody
Humanization Patent Licenses.


 


3.10.1              Milestones. For each license granted pursuant to HGS’ exercise
of its right under Section 2.7 of this Agreement, HGS shall pay to PDL [****]*.


 


3.10.2              Royalties. HGS shall pay PDL an earned royalty of [****]* on
annual Net Sales, as defined in the applicable PDL License Agreement, by HGS, a
successor in interest to the CoGenesys division of HGS, their sublicensees, or
Affiliates for any Licensed Queen Product [****]*.


 


Article 4.  INTELLECTUAL PROPERTY


 


4.1                               Prosecution
of Licensed Intellectual Property.


 


4.1.1                     Licensed Biologic
Products and Licensed Drug Products. Outside counsel mutually acceptable to PDL and HGS
shall have the responsibility to file, prosecute and maintain Licensed
Intellectual Property relating to Licensed Biologic Products and Licensed Drug
Products, and


 






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portions.


 


11

















 


methods of making and using the same, and HGS shall
transfer responsibility therefor to such outside counsel promptly after the
Effective Date. Such outside counsel shall respond to both Parties’ reasonable
requests for information about the course of patent prosecution or other
proceedings relating thereto and shall provide both Parties with copies of all
communications relating thereto with a patent office. The outside counsel shall
perform its duties in the filing, prosecution and maintenance of such Licensed
Intellectual Property hereunder in the best interests of both parties hereto.
The expenses for such outside counsel and all filing, issue, maintenance and
other fees and other costs of filing, prosecution and maintenance of such
Licensed Intellectual Property shall be borne by PDL.  PDL shall be responsible for providing
instructions to such outside counsel and shall reasonably consider comments
thereon by HGS. The Parties shall cooperate reasonably in the prosecution
thereof and shall share all material information relating thereto promptly
after receipt of such information. If PDL elects not to participate in the filing,
prosecution or maintenance, or otherwise abandons, any such Licensed
Intellectual Property in a country for which the Parties had agreed to so file
and prosecute such Licensed Intellectual Property, it shall promptly notify HGS
in a timely manner to allow HGS to preserve any and all rights in such
intellectual property. Thereafter, HGS shall have the right to pursue, at its
sole expense and sole discretion, prosecution or maintenance of such Licensed
Intellectual Property in the relevant country and PDL shall have no further
rights to such Licensed Intellectual Property.


 


4.1.2                     Licensed Diagnostic
Products. Outside
counsel mutually acceptable to PDL and HGS shall have the responsibility to
file, prosecute and maintain Licensed Intellectual Property relating to
Licensed Diagnostic Products, and methods of making and using the same, and HGS
shall transfer responsibility therefor to such outside counsel promptly after
the Effective Date. Such outside counsel shall respond to both Parties’
reasonable requests for information about the course of patent prosecution or
other proceedings relating thereto and shall provide both Parties with
copies of all communications relating thereto with a patent office. The outside
counsel shall perform its duties in the filing, prosecution and maintenance of
such Licensed Intellectual Property hereunder in the best interests of both
parties hereto. PDL shall be responsible for providing instructions to such
outside counsel and shall reasonably consider comments thereon by HGS. The
Parties shall cooperate reasonably in the prosecution thereof and shall share
all material information relating thereto promptly after receipt of such
information. The expenses for such outside counsel and all filing, issue,
maintenance and other fees and other costs of filing, prosecution and
maintenance of such Licensed Intellectual Property shall be borne by PDL. In
the event that HGS licenses any rights to Licensed Diagnostic Products to a
third party, HGS shall notify PDL of such license in writing (the “Notice”)
within [****]* of the effective date
thereof. The Notice shall indicate that such a license has been granted, but
need not identify to PDL the licensee or the terms of such license. After the
effective date of such license, HGS and PDL will share equally the expenses for
outside counsel and all filing, issue, maintenance and other fees and other
costs of filing, prosecution and maintenance of such Licensed Intellectual
Property relating to Licensed Diagnostic Products. In the event HGS licenses
rights to a third party, HGS shall be responsible for providing instruction to
such outside counsel on behalf of all parties and shall reasonably consider
comments thereon by PDL and the third party. If PDL elects not to participate
in the filing, prosecution or maintenance, or to otherwise abandon, any such
Licensed Intellectual Property in a country for which the Parties had agreed to
so file and prosecute such Licensed Intellectual Property, it shall promptly
notify HGS. Thereafter, HGS shall have the right to pursue, at its sole expense
and sole discretion, prosecution or maintenance of such Licensed Intellectual
Property in the relevant country and PDL shall have no further rights to such
Licensed Intellectual Property.


 






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4.2                               Enforcement of Licensed
Intellectual Property for any Licensed Biologic Product or Licensed Drug
Product.


 


4.2.1                     If either Party learns of any alleged
infringement of any Licensed Intellectual Property relating to Licensed
Biologic Product or Licensed Drug Product, that Party shall promptly provide
written notice to the other Party of such alleged infringement. The Parties
shall consult as to potential strategies to terminate such alleged infringement
without litigation. PDL, at its sole discretion, may take reasonable actions to
terminate such alleged infringement without litigation.


 


4.2.2                     If the efforts of PDL are not successful
in terminating the alleged infringement, PDL shall have the first right, at its
sole discretion and expense using counsel of its choice, to take action to
enforce such Licensed Intellectual Property (an “Infringement Action”) against
such alleged infringer. To the extent PDL takes such Infringement Action, PDL
shall control any such Infringement Action undertaken by PDL against such an
alleged infringer, and PDL may enter into settlements, stipulated judgments or
other arrangements respecting such infringement, at its own expense; provided,
however, that if such proposed settlements, judgments or arrangements would
result in reduction or elimination of payments to HGS under this agreement,
they shall be subject to HGS’s consent.


 


4.2.3                     If PDL commences such Infringement
Action, HGS agrees to execute all papers and to perform such other acts as may
be reasonably required (including consent to be joined as nominal party
plaintiffs in such Infringement Action). PDL shall reimburse HGS for its
out-of-pocket expenses relating to such Infringement Action, and HGS may, at
its option and expense, be represented by counsel of its choice. If PDL
commences such Infringement Action, PDL shall indemnify, defend and hold HGS
harmless from any costs, expenses or liability arising out of PDL’s negligent
conduct or as a consequence of HGS conduct that was requested or required by
PDL for Infringement Actions undertaken by PDL. Any damages or other recovery
from an Infringement Action undertaken by PDL pursuant to this section shall be
retained by PDL, subject to payments and royalties due under this Agreement
including any royalties that might have been due on sales lost as a result of
the infringement.


 


4.2.4                     In the event that PDL does not initiate
reasonable actions to terminate such alleged infringement without litigation
within [****]* of the date of notice from HGS pursuant to Section 4.2.1
or does not initiate an Infringement Action thereafter in accordance with Section 4.2.2,
then HGS may at its option and sole expense initiate and control an
Infringement Action against such third party infringer. PDL shall reasonably
cooperate with HGS in preparing and presenting such Infringement Action at HGS’s
expense. Any recovery or damages derived from such Infringement Action shall
first be applied to reimburse both Parties expenses incurred in preparing and
presenting such Infringement Action. Any remaining balance of such recovery and
damages shall be retained by HGS.


 


4.3                               Enforcement of Licensed
Intellectual Property for any Licensed Diagnostic Product. If either Party learns of any alleged
infringement of any Licensed Intellectual Property relating to a Licensed
Diagnostic Product, that Party shall promptly inform the other Party of such
alleged infringement. The Parties shall consult as to potential strategies to
terminate such alleged infringement.


 


4.4                               Infringement of Third
Party Rights. In
the event that the practice of any invention claimed by any Licensed Intellectual
Property or the making, using, offering for sale, selling or importing of any
Royalty Products hereunder becomes the subject of a third party claim of patent
infringement against PDL and/or HGS, the Party first having notice of the claim
shall promptly give the other Party


 






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13

















 


written notice of such infringement claim, setting
forth the facts of such claim in reasonable detail. As between the Parties to
this Agreement, PDL, in its sole discretion, shall have the first and primary
right, at its own expense, to defend and control the defense of any such claim,
by counsel of its own choice and PDL shall indemnify HGS in accordance with Section 7
herein. If HGS is named a defendant in any lawsuit relating to any such third
party claim, PDL shall not settle any such action without HGS’s written
consent, such consent not to be unreasonably withheld. Upon PDL’s reasonable
request, HGS shall cooperate with PDL in the defense of any such action at PDL’s
cost and expense. In HGS’s sole discretion, HGS shall be entitled to
participate through counsel of its own choice in any legal action naming HGS as
a defendant that involves the validity of Licensed Intellectual Property at HGS’s
cost and expense (subject to any applicable indemnification obligations
pursuant to Sections 7.1 through 7.3).


 


4.5                               PDL Rights. As between the Parties, PDL and its
sublicensees hereunder shall own all inventions, whether patentable or not,
know-how and other intellectual property developed, conceived or reduced to
practice by or on behalf of PDL or its sublicensees, as the case may be, as a
result of activities under this Agreement.


 


Article 5.  TERM AND TERMINATION


 


5.1                               Term. The term of this Agreement shall commence
upon the Effective Date and shall continue while PDL has an obligation to pay
royalties to HGS hereunder (“Term”).
Unless this Agreement is terminated pursuant to this Article 5, PDL’s
obligation to pay royalties (“Royalty
Term”) shall continue on a country-by-country basis until the
expiration of the last to expire Valid Royalty Claim covering a Royalty Product
in such country or in the case of a Developed Drug Product, in accordance with Section 3.5.2.
Upon expiration of the Royalty Term in a given country, the licenses granted to
PDL hereunder with respect to such country shall become fully paid, subject to Section 5.2
below.


 


5.2                               Termination for Material Breach.


 


(a)                                  Prior
to the receipt of Regulatory Approval to market a Royalty Product or Developed
Drug Product hereunder, either Party may terminate this Agreement in its
entirety for breach by the other Party by providing written notice to the
breaching Party as set forth in Section 5.2(c) and otherwise
complying with Section 5.2 (c) below.


 


(b)                                 After
the receipt of any Regulatory Approval to market a Royalty Product or Developed
Drug Product hereunder, either Party may terminate this Agreement for breach by
the other Party, but only with respect to the specific Royalty Product or
Developed Drug Product that is the subject of the breach in question, by
providing written notice to the breaching Party as set forth in Section 5.2(c) and
otherwise complying with Section 5.2 (c) below.


 


(c)                                  Either
Party may exercise the right to terminate for the breach as set forth in
Sections 5.2(a) and/or Section 5.2(b) hereunder, upon the breach
by the breaching Party of such Party’s obligations to pay any amounts owing
hereunder, if such breach is not cured within [****]* after receipt of written
notice from the non-breaching Party or (b) upon any material breach of
this Agreement by the non-breaching Party, if such breach is not cured within [****]*
after the breaching Party receives written notice of such breach from the
non-breaching Party; provided, however, if such breach is not capable of being
cured within such [****]* period, the cure period shall be extended for such amount
of time as may


 






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be reasonably
necessary to cure such breach, so long as the breaching Party is making
diligent efforts to do so. Such termination shall be effective upon expiration
of such cure period. Any dispute as to whether a notice of termination pursuant
to this Section 5.2 is proper, or a breach has been cured, shall be
resolved as provided pursuant to Article 10. Upon termination of this
Agreement under this Section 5.2 as a result of a material breach by PDL,
all rights granted to PDL by HGS hereunder to research, develop, make (and have
made), use, sell, offer for sale and import such particular Royalty Product or
Developed Drug Product shall terminate.


 


5.3                               PDL Elective
Termination. PDL
shall have the right to terminate this Agreement, in its sole discretion, upon [****]* written
notice to HGS. With respect to a Royalty Product, if at the time of such
termination the manufacture, use, sale, offer for sale, or import of such
Royalty Product would, but for the licenses granted herein, infringe a Valid
Royalty Claim within Licensed Intellectual Property, then PDL shall grant to
HGS a license on commercially reasonable terms (provided such terms shall be
memorialized in a mutually acceptable definitive license agreement executed
within [****]* following such termination under this Section 5.3)
under any granted patents or patent applications owned and obtained by PDL in
the course of, in furtherance of, and as a direct result of activities under
this Agreement, that are necessary to make, use and sell such Royalty
Product(s). PDL shall have no obligation to grant such license to HGS under any
patent if such grant under such patent would constitute a breach of an
obligation owed by PDL under an agreement between PDL and a third party. HGS
will be solely responsible for the payment of any third party payment
obligations or other relevant obligations in connection with the license
granted to HGS to Royalty Products in accordance with this Section. The grant
of such license to Royalty Products and the negotiation of terms thereto shall
be subject to the provisions of Article 10, which provisions shall survive
termination of this Agreement; provided, however, the arbitrators chosen in
accordance with the terms of Section 10.2 shall render their decision
within [****]* from their receipt of
written evidence with such evidence being provided by the parties hereto within
[****]* of the appointment of the
arbitrators. No oral testimony shall be permitted. At any time during the
negotiation period, HGS may notify PDL in writing that it is terminating the
negotiations and its right to secure the license to Royalty Product under this
Section.


 


With respect to a Developed Drug Product, if the Valid
Royalty Claim that was infringed by the screening and discovery of the
Developed Drug Product is issued and valid at the time PDL terminates this
Agreement pursuant to the first sentence of this Section 5.3, PDL shall
grant to HGS a license on commercially reasonable terms (provided such terms
shall be memorialized in a mutually acceptable definitive license agreement
executed within [****]*
following such termination under this Section 5.3) under any granted
patents or patent applications owned and obtained by PDL in the course of, in
furtherance of, and as a direct result of activities under this Agreement, that
are necessary to make, use and sell such Developed Drug Product. PDL shall have
no obligation to grant such license to HGS under any patent if such grant under
such patent would constitute a breach of an obligation owed by PDL under an
agreement between PDL and a third party. HGS will be solely responsible for the
payment of any third party payment obligations or other relevant obligations in
connection with the license granted to HGS to Developed Drug Product in
accordance with this Section. The grant of such license to Developed Drug
Product and the negotiation of terms thereto shall be subject to the provisions
of Article 10, which provisions shall survive termination of this
Agreement; provided, however, the arbitrators chosen in accordance with the
terms of Section 10.2 shall render their decision within [****]* from their receipt of written
evidence with such evidence being provided by the parties hereto within [****]* of the appointment of the
arbitrators. No oral testimony shall be permitted. At any time during the
negotiation period, HGS may notify PDL in writing that it is terminating the
negotiations and its right to secure 


 






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portions.


 


15

















 


licenses to Developed Drug Product under this Section.


 


The
right of HGS to obtain licenses to Royalty Product under this Section 5.3,
and PDL’s obligations related thereto, shall terminate upon the expiration of
the last to expire Valid Royalty claim. The right of HGS to obtain licenses to
Developed Drug Product under this Section 5.3 and PDL’s obligations
related thereto shall terminate upon the earlier of June 25, 2019, or upon
the expiration of issued Valid Claims within Licensed Technology that were
infringed by methods of drug screening or material utilized in the discovery of
the Developed Drug Product.


 


5.4                               Insolvency or
Bankruptcy. In
the event that a Party becomes insolvent, files a petition in bankruptcy, has
such a petition filed against it, determines to file a petition in bankruptcy,
or receives notice of a third party’s intention to file an involuntary petition
in bankruptcy, such Party shall immediately notify the other Party in writing.
Furthermore, such other Party shall have the right to immediately terminate
this Agreement, in whole or in part as the terminating Party may determine,
upon learning of any of the foregoing events.


 


5.5                               Payment of Royalties
Due. No
termination or expiration of this Agreement shall relieve PDL of its obligation
to pay any royalty or other payments which obligation accrued prior to such
termination or expiration.


 


5.6                               Treatment of Inventory
at Termination. In
the event a Party for any reason terminates this Agreement, PDL shall have the
right to sell or otherwise dispose of the stock of Royalty Products or
Developed Drug Products then on hand until [****]* after the effective date of such
termination, subject to Article 3 (Payments and Royalties) and the other
applicable terms of this Agreement.


 


5.7                               Effects of Termination. Termination of this Agreement shall not
affect the rights and obligations of the Parties that accrued prior to the
effective date of such termination.


 


5.8                               Survival. The provisions of [****]*, shall
survive termination or expiration of this Agreement in perpetuity, unless
otherwise explicitly stated in this or the applicable section.


 


Article 6.  PUBLICITY


 


6.1                               PDL Publicity. Subject to Section 6.3 below, PDL
shall not identify HGS or use the name of HGS, or any contraction thereof, in
any manner in connection with the exercise of this Agreement, or use the name
of any agent or employee of HGS, or any trademark, service mark, trade name, or
symbol of HGS without HGS’s prior written consent.


 


6.2                               HGS Publicity. Subject to Section 6.3 below, HGS
shall not identify PDL or use the name of PDL, or any contraction thereof, in
any manner in connection with the exercise of this Agreement, or use the name
of any agent or employee of PDL, or any trademark, service mark, trade name, or
symbol of PDL without PDL’s prior written consent.


 


6.3                               Public Announcements. Except as may otherwise be required by
law or regulation, neither Party shall disclose any terms of this Agreement to
any third party or make any public announcement concerning this Agreement or
the subject matter hereof, without the prior written consent of the other
Party. Each Party shall provide the other with a copy of any proposed press
release in advance of distribution and shall in good faith consider any
comments from such other Party. Both Parties must


 






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portions.


 


16

















 


agree to the content of such press release prior to
disclosure to any third party. Thereafter, press releases and like public
announcements concerning this Agreement or the activities hereunder that
contain information not previously disclosed to the public shall be made only
when, and in the form, approved by the Parties; provided, however, if a press
release or like public announcement is required by law, regulation  or court or administrative order, the
Parties shall, as is reasonably practicable under the circumstances, consult
with one another in connection with such disclosure to allow the other Party an
opportunity to comment thereon.


 


Article 7.  INDEMNIFICATION


 


7.1                               Indemnification by PDL. PDL shall indemnify, defend and hold
harmless HGS, its Affiliates, directors, officers, employees, agents, and
contractors (“HGS Indemnitees”)
from any costs, fees, damage, loss, liability, expense or judgment (including
attorneys’ fees and expenses of litigation if assessed against the indemnified
Party by a court of competent jurisdiction) (collectively “Losses”) incurred by or imposed upon the
HGS Indemnitees in connection with any third party claims, suits, actions or
demands (collectively, “Claims”)
arising out of PDL’s (a) exercise of the rights granted to PDL under the
Licensed Intellectual Property pursuant to this Agreement or (b) testing,
labeling, manufacture, use, offer for sale or sale of Royalty Products or
Developed Drug Products; (c) the material violation of any applicable
federal, state or local law or regulation by PDL, its Affiliates, directors,
officers, employees, agents and contractors; or (d) a breach by PDL of its
representations and warranties hereunder, except to the extent that such Losses
are due to the negligence or willful misconduct of any HGS Indemnitee, or by
the violation of any applicable federal, state or local law or regulation by
any HGS Indemnitee.


 


7.2                               Indemnification by HGS. HGS shall indemnify, defend and hold
harmless PDL, its Affiliates, directors, officers, employees, agents and
contractors (“PDL Indemnitees”)
from any Losses incurred by or imposed upon the PDL Indemnitees in connection
with any Claims arising out of (a) the negligence or willful misconduct of
any HGS Indemnitee, (b) the material violation of any applicable federal,
state or local law or regulation by any HGS Indemnitee, or (c) a breach by
HGS of its representations and warranties hereunder.


 


7.3                               Procedures. The indemnified Party shall promptly, but
in no event more than [****]* after receiving notice of any Claim,
notify the indemnifying Party of any Claim and shall cooperate with the
indemnifying Party in the defense of the Claim. The indemnifying Party shall
have the right to control such defense (including the right to settle the claim
solely for monetary consideration). The indemnifying Party agrees, at its own
expense, to provide attorneys reasonably acceptable to the indemnified Party to
defend against any Claim with respect to which the indemnifying Party has
agreed to provide indemnification hereunder. The indemnified Party shall not
settle or compromise the claim without the express, prior written consent of
the indemnifying Party, and the indemnifying Party’s obligations under this Article 7
shall not apply to amounts paid by the indemnified Party in settlement of any
Claim if such settlement is made without the consent of the indemnifying Party,
which consent shall not be unreasonably withheld.


 


Article 8.  WARRANTIES


 


8.1                               Binding Agreement. Each Party hereby represents and warrants
to the other Party as follows:


 






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(a)                                  it
is validly organized under the laws of its jurisdiction of incorporation;


 


(b)                                 this
Agreement has been duly authorized by all requisite corporate action and is a
legal and valid obligation binding upon the representing and warranting Party
and enforceable in accordance with its terms; and


 


(c)                                  the
execution, delivery and performance of this Agreement by it does not conflict
with any agreement, instrument or understanding, oral or written, to which it
is a party or by which it may be bound, nor violate any material law or
regulation of any court, governmental body or administrative or other agency
having jurisdiction over it.


 


8.2                               HGS Warranty. HGS represents and warrants to PDL that (i) it
owns or Controls the Licensed Intellectual Property, (ii) it has all
right, power and authority necessary to grant the licenses set forth in
Sections 2.1-2.4 to PDL, (iii) as of the Effective Date, such license
grants represent all intellectual property rights to Tweak-R owned or
Controlled by HGS, and (iv) that it has not, and shall not during the
Term, grant any right or interest in the Licensed Intellectual Property to any
third party that would conflict with the rights granted to PDL hereunder.


 


8.3                               PDL Warranty. PDL represents and warrants to HGS that,
as of the Effective Date, it has not initiated any of the in vivo studies necessary to support an
IND filing for any Tweak-R-related therapeutic.


 


8.4                               Disclaimer of
Warranties; Limitation of Liability. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A
WARRANTY THAT ANY PATENT OR PATENT APPLICATION INCLUDED WITHIN THE LICENSED
INTELLECTUAL PROPERTY IS VALID OR ENFORCEABLE OR THAT THE EXERCISE OF ANY
RIGHTS GRANTED HEREUNDER WILL NOT INFRINGE ANY PATENTS OF THIRD PARTIES. EXCEPT
AS EXPLICITLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY WARRANTIES,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
THE CONDITION OF ANY INVENTION(S) OR PRODUCT(S), THAT ARE THE SUBJECT OF
THIS AGREEMENT; OR THE MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF
ANY SUCH INVENTION OR PRODUCT. EXCEPT FOR ANY BREACH UNDER ARTICLE 9, NEITHER
PARTY SHALL BE LIABLE TO THE OTHER PARTY OR TO ANY OF THE OTHER PARTY’S
AFFILIATES FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE
DAMAGES SUFFERED BY THE OTHER PARTY OR ITS AFFILIATES IN RELATION TO ANY
SUBJECT MATTER OF THIS AGREEMENT (INCLUDING LOST PROFITS) UNDER ANY CONTRACT,
NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY, EVEN IF SUCH
PARTY OR ITS AFFILIATES HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS,
DAMAGE, OR COST, EXCEPT TO THE EXTENT IT MAY BE REQUIRED TO INDEMNIFY THE
OTHER PARTY.


 


Article 9.  CONFIDENTIALITY


 


9.1                               Confidential
Information. As
used in this Agreement, “Confidential
Information” means nonpublic information disclosed by one Party to
the other in connection with this Agreement, provided that such information
is clearly marked as confidential. PDL’s Confidential Information shall
include, without limitation, reports submitted by PDL to HGS pursuant to Section 3.7.
Information disclosed other than in written or other tangible form will be
deemed Confidential Information only if the


 


18

















 


disclosing Party provides
the receiving Party with a written statement within [****]* of the initial
disclosure that identifies which portion of such information is to be deemed
Confidential Information.


 


9.2                               Confidentiality. Each Party agrees (a) to hold the
other Party’s Confidential Information in confidence; (b) to use such
Confidential Information solely in accordance with this Agreement; and (c) except
as otherwise expressly permitted herein, to not disclose such Confidential
Information to any third party without prior written permission. The foregoing
confidentiality obligations do not pertain to any information that a receiving
Party establishes: (i) was known to the receiving Party prior to receipt
from the disclosing Party; (ii) is now or becomes public knowledge, other
than through acts or omissions of the receiving Party in breach of this
Agreement; (iii) is disclosed at any time to the receiving Party by a
third party with a lawful right to disclose such information; or (iv) was
independently developed by or on behalf of the receiving Party without use of
the Confidential Information of the disclosing Party. Notwithstanding the
above, the receiving Party may disclose Confidential Information to comply with
any applicable law, court order or governmental regulation, provided that if a
Party is required by law or regulation to make any such disclosure of the other
Party’s Confidential Information it will, except where impracticable for
necessary disclosures, give reasonable notice to the other Party of such
disclosure requirement and will use its reasonable efforts to secure a
protective order or confidential treatment of such confidential information to
be disclosed.


 


9.3                               Survival. The confidentiality provisions of this Article 9
will continue with respect to given Confidential Information for a period of [****]* after
the date of disclosure thereof.


 


Article 10.  DISPUTE RESOLUTION


 


10.1                        Internal Resolution. The Parties shall discuss in good faith
for a period of no less than [****]* any disputes arising between the Parties
in connection with this Agreement. In the event such a dispute between the
Parties is not settled within [****]*, the issue shall be referred to an
officer of HGS, or his/her designee, and an officer of PDL, or his/her
designee, for discussions in good faith for a period of no less than [****]*. If the
executives do not reach agreement within such additional [****]* period,
then either Party may initiate dispute resolution procedures pursuant to Section 10.2
or 10.3, as applicable.


 


10.2                        Arbitration. Subject to Section 12.4 and except
as otherwise expressly provided herein, the Parties agree that any dispute not
resolved internally by the Parties pursuant to Section 10.1, shall be
resolved through binding arbitration utilizing “Baseball Arbitration.” The
parties shall agree upon one arbitrator. If the Parties cannot agree on the
person to be named as arbitrator within [****]*, the President of the International
Chamber of Commerce shall make the necessary appointment for arbitrator. Within
[****]* of the conclusion of the arbitration, the arbitration
decision shall be rendered in writing and must specify the basis on which the
decision was made. Unless otherwise mutually agreed upon by the Parties, the
arbitration proceedings shall be conducted in English, in New York, NY, USA.
Such decision shall be final, binding upon the Parties and enforceable through
application to any court of competent jurisdiction. The Parties agree that they
shall share equally the cost of the arbitration filing and hearing fees, and
the cost of the arbitrator. Each Party must bear its own attorneys’ fees and
associated costs and expenses.


 


10.3                        Patent Validity. Notwithstanding the other provisions of
this Article 10, any dispute that involves the validity of a patent (a) that
is issued in the United States shall be subject to actions before the United
States Patent and Trademark Office and/or submitted exclusively to the federal
courts, and (b) that


 






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


 


19

















 


is issued in any other country shall be brought before
an appropriate regulatory or administrative body or court in that country, and
the Parties hereby consent to the jurisdiction and venue of such courts and
bodies.


 


Article 11.  DILIGENCE


 


11.1                        Diligence. During the Term of this Agreement, PDL
shall use Commercially Reasonable and Diligent Efforts to research, develop and
commercialize at least one Royalty Product.


 


11.2                        Progress Reports. Within [****]* following each anniversary of the
Effective Date of this Agreement, PDL shall provide a written summary to HGS on
(i) the development progress of Royalty Products or Developed Drug
Products and (ii) submissions for Regulatory Approval, if any. Such
written summaries shall contain reasonably sufficient information as is
necessary for HGS to assess the progress of PDL in its research, development,
clinical testing (if any) and Regulatory Approval (if any).


 


Article 12.  MISCELLANEOUS


 


12.1                        Force Majeure. Neither Party shall be liable for any
failure to perform as required by this Agreement, if the failure to perform is
caused by circumstances beyond such Party’s reasonable control, such as labor
disturbances or labor disputes of any kind, accidents, civil disorders or
commotions, acts of aggression, acts of God, energy or other conservation
measures, explosions, failure of utilities, disease, thefts or other such
occurrences; provided, however, that such Party shall use reasonable efforts to
prevent and overcome such circumstances.


 


12.2                        Assignment. Neither Party may assign this Agreement
without the prior written consent of the other Party, such consent not to be
unreasonably withheld; provided, however,  that
either Party may assign this Agreement in connection with a merger or similar
reorganization, consolidation, or sale of all or substantially all of such
Party’s assets to which this Agreement relates; Notwithstanding the foregoing,
HGS may assign this Agreement in its entirety to a successor in interest to the
CoGenesys division of HGS without the prior written consent of PDL. Any
purported assignment in violation of this Section 12.2 shall be null and
void. Subject to the foregoing, this Agreement shall be binding upon the
Parties, their legal representatives, successors and permitted assigns.


 


12.3                        Notices. Any notices given under this Agreement
shall be in writing and deemed delivered upon receipt by first class mail
(registered or certified), by private express courier, by hand, or by facsimile
(confirmed by registered or certified first class mail) addressed to the
Parties as set forth below. Either Party may change its address for purposes
hereof by written notice to the other in accordance with the provisions of this
Section.


 


If to PDL:


 


Protein Design Labs, Inc. 34801


Campus Drive Fremont, Ca 94555


Attention: General Counsel


 






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


 


20

















 


If to HGS:


 


Human Genome Sciences, Inc.


14200 Shady Grove Road


Rockville, MD 20850


Telephone: (301) 309-8504


Facsimile: (301) 309-8512


Attention: General Counsel


Copy to: Vice President, Business Development


 


12.4                        Legal and Equitable
Remedies. Because
a material breach of this Agreement may result in a harm to either Party which
could not be remedied by monetary damages, both Parties shall have the right to
seek enforcement of this Agreement and any of its provisions by injunction,
specific performance or other equitable relief without prejudice to any other
rights and remedies that a Party may have for a breach of this Agreement.


 


12.5                        Severability. If any provision of this Agreement
becomes or is declared illegal, invalid, or unenforceable, such provision shall
be deemed severed from this Agreement and the remaining provisions shall
continue in full force and effect. If such severance substantially alters the
basis of this Agreement, the Parties shall negotiate in good faith to amend the
provisions of this Agreement to give effect to the original intent of the
Parties.


 


12.6                        Independent Contractors.
HGS and PDL are
independent contractors under this Agreement. Nothing contained in this
Agreement is intended, nor is to be construed so as to constitute a joint
venture, partnership, agency, distributorship, employer-employee, or fiduciary
relationship between the Parties with respect to this Agreement. Neither Party
shall have any  express or implied
right or authority to assume or create any obligations on behalf of or in the
name of the other Party or to bind the other Party to any other contract,
agreement or undertaking with any third party.


 


12.7                        Entire Agreement. This Agreement represents the entire
agreement and understanding between the Parties with respect to its subject
matter and supersedes any prior and/or contemporaneous discussions,
representations or agreements, whether written or oral, of the Parties
regarding the subject matter hereof.


 


12.8                        Waiver. The failure of either Party to assert a
right hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition by the other Party.
None of the terms, covenants and conditions of this Agreement can be waived
except by the written consent of the Party waiving compliance.


 


12.9                        Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York and the United States without
regard to the conflicts of laws provisions thereof.


 


12.10                 Amendments. Amendments or changes to this Agreement
shall be valid and binding only if in writing and signed by duly authorized
representatives of the Parties. No provision of this Agreement can be waived
except by the express written consent of the Party waiving compliance.


 


12.11                 Construction. The Parties mutually acknowledge that
they and their attorneys have participated in the negotiation and preparation
of this Agreement. Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
drafted the Agreement or authorized the ambiguous provision.


 


21

















 


12.12                 Captions. Titles, headings and other captions are
for convenience only and are not to be used for interpreting this Agreement.


 


12.13                 Bankruptcy. All rights and licenses granted under or
pursuant to this Agreement are and shall be deemed to be, for purposes of Section 365(n) of
the U.S. Bankruptcy Code, licenses of rights to “intellectual property” as
defined under Section 101 of the U.S. Bankruptcy Code. The Parties shall
retain and may fully exercise all of its rights and elections under the U.S.
Bankruptcy Code; provided that nothing herein shall be deemed to constitute a
present exercise of such rights and elections.


 


12.14                 Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. For purposes hereof, a
facsimile copy of this Agreement, including the signature pages hereto
will be deemed to be an original. Notwithstanding the foregoing, the Parties
will deliver original execution copies of this Agreement to one another as soon
as practicable following execution thereof.


 


[Signature
Page Follows]


 


22

















 


IN
WITNESS WHEREOF, these duly authorized representatives of the
Parties hereby execute this Agreement.


 


	
  PROTEIN DESIGN LABS, INC.

  	
  HUMAN GENOME SCIENCES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Mark McDade

  	
   

  	
  By: 

  	
  /s/ Barry A. Labinger

  
	
  Name:   Mark
  McDade

  	
  Name:   Barry
  A. Labinger

  
	
  Title:     Chief
  Executive Officer

  	
  Title:     Executive
  Vice President

  
	
   

  	
   

  
	
  Date:  December
  15, 2005

  	
  Date:  December
  15, 2005

  
					



 


23

















 


EXHIBIT A


 


	
  Country

  	
   

  	
  Application/Patent No.

  	
   

  	
  Filing/Issue Date

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  



 






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


 


24

















 


EXHIBIT B


 


PDL Antibody
Humanization Patent Rights


 


The following are patents
and patent applications issued and filed in certain countries in the world and
licensed as part of the PDL Antibody Humanization Patent Rights under this
Agreement. (As of: October 6, 2005)


 


	
  Application Number

  	
   

  	
  Filing Date

  	
   

  	
  Patent Number

  	
   

  	
  Issue Date

  	
   

  	
  Country

  	
   

  	
  Status

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
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  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
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  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
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  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 






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


 


25

















 


	
  Application Number

  	
   

  	
  Filing Date

  	
   

  	
  Patent Number

  	
   

  	
  Issue Date

  	
   

  	
  Country

  	
   

  	
  Status

  	
   

  
	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  	
  c

  	
   

  	
  [****]*

  	
   

  
	
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* PCT International Publication Number and
International Publication Date


 


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


 


26

















 


EXHIBIT C


 


PATENT
LICENSE AGREEMENT


 


between


 


PROTEIN
DESIGN LABS, INC.


 


and


 


HUMAN
GENOME SCIENCES, INC.


 


[****]*


 






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


 


27