Exhibit 10.19


 


CONFIDENTIAL
PROVISIONS REDACTED


 


COLLABORATION AGREEMENT


 


BY AND BETWEEN


 


PDL BIOPHARMA, INC.


 


AND


 


BRISTOL-MYERS SQUIBB COMPANY


 


AUGUST 18, 2008


 


EXECUTION COPY


 


CONFIDENTIAL
TREATMENT REQUESTED


 


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COLLABORATION
AGREEMENT


 


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


 


RECITALS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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1.                                      DEFINITIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 










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omitted portions.


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


For clarity, [****]*.


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


1.48        “Oncology” means [****]*.


 


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


 


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


 






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treatment has been requested with respect to the omitted portions.


 


11

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


12














 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






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treatment has been requested with respect to the omitted portions.


 


14

















 


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


 


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


 


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


 


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


 


1.77                        “Territory” means the world.


 


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


 


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


 


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


 


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


 






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15

















 


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


 


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


 


Additional Definitions


 


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


 


	
  Definition

  	
   

  	
  Location (Section)

  
	
  Alliance
  Manager

  	
   

  	
  2.6(a)

  
	
  Annual
  Development Plan

  	
   

  	
  3.2(a)

  
	
  Bankrupt
  Party

  	
   

  	
  14.14(a)

  
	
  BMS
  Decisions

  	
   

  	
  2.4(c)(iv)

  
	
  BMS
  Option

  	
   

  	
  3.7

  
	
  BMS
  Prosecuted Patent

  	
   

  	
  9.3(b)

  
	
  Competing
  Product

  	
   

  	
  7.6(b)(i)

  
	
  Competing
  Program

  	
   

  	
  7.6(a)

  
	
  Competition
  Testing

  	
   

  	
  1.14

  
	
  Confidential
  Information

  	
   

  	
  10.1

  
	
  Cost-Terminated
  Patent Right

  	
   

  	
  9.3(f)(iii)

  
	
  EDI

  	
   

  	
  14.19

  
	
  Effective
  Date

  	
   

  	
  12.6

  
	
  Exclusivity
  Term

  	
   

  	
  7.6(a)

  
	
  Existing
  License Agreement

  	
   

  	
  7.1(f)

  
	
  First
  Product

  	
   

  	
  7.6(b)(i)

  
	
  Global
  Development Plan

  	
   

  	
  3.1(a)

  
	
  ICH

  	
   

  	
  4.3(f)

  
	
  Indemnitee

  	
   

  	
  13.4

  
	
  JAMS

  	
   

  	
  14.2

  
	
  JAMS
  Rules

  	
   

  	
  14.2

  
	
  Joint
  Invention Patent

  	
   

  	
  9.1(b)

  
	
  Joint
  Patent

  	
   

  	
  9.3(f)

  
	
  Losses

  	
   

  	
  13.1

  
	
  Non-Compete
  Period

  	
   

  	
  7.6(c)

  
	
  Opt-Out
  Notice

  	
   

  	
  3.6(b)(ii)

  
	
  Other
  Joint Patent

  	
   

  	
  9.4(b)(i)

  
	
  Party
  Implementation Matter

  	
   

  	
  2.4(c)(ii)

  



 






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16

















 


	
  Party
  Vote

  	
   

  	
  2.4(c)(i)

  
	
  PDL
  Holding Company

  	
   

  	
  1.74

  
	
  PDL
  Operating Company

  	
   

  	
  1.74

  
	
  PDL
  Prosecuted Patent

  	
   

  	
  9.3(a)(i)

  
	
  PDL-241
  Pre-Clinical Testing

  	
   

  	
  3.7(a)

  
	
  Pharmacovigilance
  Agreement

  	
   

  	
  4.7

  
	
  Prior
  CDA

  	
   

  	
  10.4

  
	
  Regulatory
  Lead Party

  	
   

  	
  4.1

  
	
  Royalty
  Term

  	
   

  	
  8.9

  
	
  Sales
  Threshold

  	
   

  	
  8.4(c)

  
	
  Sole
  Invention Patent

  	
   

  	
  9.1(b)

  
	
  Target

  	
   

  	
  Recitals

  
	
  Term

  	
   

  	
  11.1

  
	
  Title
  11

  	
   

  	
  14.14(a)

  
	
  U.S.
  Commercialization Plan

  	
   

  	
  5.2(a)

  
	
  Working
  Group

  	
   

  	
  2.4(e)

  



 


2.                                      MANAGEMENT OF COLLABORATION


 


2.1                               General.


 


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


 


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


 


17

















 


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


 


2.2                               Joint
Development and Regulatory Committee.


 


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


 


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


 


(i)                                    monitor Development activities;


 


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


 


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


 


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


 


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


 


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


 


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


 






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18

















 


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


 


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


 


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


 


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


 


2.4                               General
Committee Membership and Procedures.


 


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


 


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


 






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19

















 


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


 


(c)                                  Decision-Making.


 


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


 


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


 


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


 






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20

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






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21

















 


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


 


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


 


2.6                               Alliance
Managers.


 


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


 


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


 


2.7                               Collaboration
Guidelines.


 


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


 


22














 


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


 


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


 


2.8                               Overview
of Accounting.


 


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


 


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


 


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


 


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


 


23

















 


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


 


3.                                      DEVELOPMENT OF PRODUCTS


 


3.1                               Global Development Plans.


 


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


 


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


 


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


 


3.2                               Annual Development Plans.


 


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


 






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24

















 


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


 


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


 


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


 


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


 


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


 


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


 






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25

















 


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


 


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


 


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


 


3.6                               Development Costs.


 


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


 


(b)                                  Terminating Co-Development.


 


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


 






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26

















 


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


 


(ii)                                Subsequent
to Commencement of Development.


 


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


 


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


 


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


 






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27

















 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


(ii)                                the
BMS Option shall terminate.


 


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


 






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


 


29

















 


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


 


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


 


3.10                        Competition
Testing.


 


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


 


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


 


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


 






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separately with the SEC. Confidential treatment has been requested with respect
to the omitted portions.


 


30

















 


4.                                      REGULATORY


 


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


 


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


 


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


 


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


 


31

















 


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


 


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


 


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


 


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


 






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to the omitted portions.


 


32














 


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


 


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


 


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


 


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


 


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


 


33

















 


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


 


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


 


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


 


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


 


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


 






* Certain information on
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treatment has been requested with respect to the omitted portions.


 


34

















 


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


 


5.                                      COMMERCIALIZATION


 


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


 


5.2          Commercialization Plans.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






* Certain information on
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treatment has been requested with respect to the omitted portions.


 


35

















 


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


 


6.                                      MANUFACTURING


 


6.1          Clinical and Commercial Supply.


 


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


 


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


 


36

















 


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


 


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


 


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


 


6.2          Transfer of Manufacturing Right.


 


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


 


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


 


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


 


7.                                      LICENSES; EXCLUSIVITY


 


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


 


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


 






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37

















 


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


 


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


 


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


 


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


 


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


 


38

















 


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


 


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


 


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


 


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


 


7.2          Licenses to PDL.


 


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


 


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


 


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


 


7.3          Mutual Covenants.


 


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


 


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


 






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


 


39

















 


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


 


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


 


7.6          Exclusivity.


 


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


 


(b)           Commercial
Launch of Competing Product.


 


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


 


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


 






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


 


40

















 


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


 


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


 


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


 


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


 


	
   

  	
  Calendar
  year Net Sales  of HuLuc63 Products

  in the U.S.

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


	
   

  	
  Calendar
  year Net Sales of Other Products 

  in the U.S.

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


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


 






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


 


41

















 


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


 


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


 


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


 


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


 


	
   

  	
  Calendar
  year Net Sales of HuLuc63 

  Products in the U.S.

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


	
   

  	
  Calendar
  year Net Sales of Other Products

  in the U.S. 

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 






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


 


42














 


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


 


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


 


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


 


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


 


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


 


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


 


8.                                      COMPENSATION


 


8.1          Upfront
Payment and Option Exercise Fee.


 


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


 


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


 






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


 


43

















 


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


 


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


 


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


 


8.3          Calculation and Payment of Profit or
Loss Share.


 


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


 


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


 


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


 


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


 






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


 


44

















 


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


 


8.4          Milestone Payments to PDL.


 


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


 


[****]*


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


45

















 


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


 


8.5          Royalty Payments to PDL.


 


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


 


	
   

  	
  Calendar
  year Net Sales of HuLuc63

  Products in Royalty Territory

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Calendar
  year Net Sales of Other Products

  in Royalty Territory

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


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


 


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


 


	
   

  	
  Calendar
  year Net Sales of HuLuc63

  Products in the U.S.

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Calendar
  year Net Sales of Other Products

  in the U.S.

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


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


 






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


 


46

















 


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


 


	
   

  	
  Calendar
  year Net Sales of HuLuc63

  Products in the U.S.

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


	
   

  	
  Calendar
  year Net Sales of Other Products

  in the U.S.

  	
   

  	
  Royalty
  Rate

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [****]*

  	
   

  	
  [****]*

  	
   

  



 


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


 


8.6          Third Party Royalties


 


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


 


(b)           [****]*.


 


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


 






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


 


47

















 


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


 


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


 


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


 


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


 


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


 


[****]*.


 


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


 


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


 






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


 


48

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


49

















 


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


 


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


 


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


 


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


 


9.                                      INTELLECTUAL PROPERTY


 


9.1          Ownership.


 


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


 


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


 






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


 


50

















 


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


 


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


 


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


 


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


 


9.3          Patent Prosecution and Maintenance;
Abandonment.


 


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


 


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


 


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


 






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


 


51

















 


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


 


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


 


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


 






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


 


52














 


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


 


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


 


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


 


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


 


(f)                                    Non-payment of Expenses.


 


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


 


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


 


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


 






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


 


53

















 


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


 


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


 


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


 


9.4                               Enforcement
of Patent Rights.


 


(a)                                  Enforcement of PDL Licensed
Patents.


 


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


 


54

















 


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


 


(b)                                  Enforcement of Joint Patents.


 


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


 


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


 






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


 


55

















 


conditioned).


 


(c)                                  General Provisions Relating to
Enforcement of Patents.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


56

















 


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


 


Bristol-Myers
Squibb Company


P.O. Box
4000


Route
206 & Province Line Road


Princeton,
New Jersey 08543-4000


Attention:
Vice President and Chief Intellectual Property Counsel


Telephone:
609-252-4825


Facsimile: 609-252-7884


 


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


 


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


 


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


 


10.                               CONFIDENTIALITY


 


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


 






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


 


57

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


58

















 


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


 


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


 


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


 


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


 


10.6                        Publications.


 


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


 


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


 






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


 


59





















 


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


 


11.                               TERM
AND TERMINATION


 


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


 


11.2                        BMS’ Right to Terminate.


 


(a)                                  With
respect to each Product arising from the Collaboration pursuant to the terms of
this Agreement, BMS shall have the right to terminate this Agreement on a
Product by Product and Region by Region basis (a) prior to Regulatory Approval
of a Product, upon four (4) months prior written notice to PDL, and (b)
subsequent to Regulatory Approval of a Product, upon six (6) months prior
written notice to PDL. [****]*.  If PDL
notifies BMS, within [****]* of BMS’ notice pursuant to this Section 11.2, that PDL does not intend to further Develop or
Commercialize such Product in the applicable Region (either directly or through
a new licensee), then (X) the Parties shall wind down all Development and
Commercialization activities with respect to such Product in the applicable Region,
and each Party shall pay its applicable share of the Development Costs and
Allowable Expenses, if any, arising from such wind-down, effective as of the
earliest notice from a Party pursuant to Section 3.6(b)
or this Section 11.2(a), as applicable; and (Y)
[****]*.


 


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


 


11.3                        Termination for Material Breach.


 


(a)                                  If either Party believes that the other Party
is in material breach of this Agreement (including any material breach of a
representation or warranty made in this Agreement), then the non-breaching
Party may deliver written notice of such breach to the other Party. In such
notice the non-breaching Party shall identify the actions or conduct that such
Party would consider to be an acceptable cure of such breach. For all breaches
other than a failure to make a payment set forth in Article 8
or Section 7.6, the allegedly
breaching Party shall have ninety (90) days to cure such breach. Subject to Section 11.3(b), for any breach arising from a failure
to make a payment set forth in Article 8 or Section 7.6, the allegedly breaching Party shall have ten
(10) business days to cure such breach.


 


(b)                                  Subject
to Section 11.3(c), if the Party
receiving notice of breach fails to cure such breach within the 90-day period
or 10-day period (as applicable, and subject to the remainder of this Section 11.3(b)), or the Party providing the notice
reasonably determines that the proposed corrective plan or the actions being
taken to carry it out are not commercially practicable, the Party originally
delivering the notice may terminate this Agreement upon thirty (30) days
advance written notice; provided, that if the breach applies only to a given
Product or to a given Region, the non-breaching


 






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


 


60

















 


Party may only terminate the breaching Party’s rights
with respect to such Product or such Region; and provided further, that the
failure of PDL to cure, within thirty (30) days of BMS’ notice pursuant to Section 11.3(a), a material breach by PDL of its
obligations to pay Development Costs under Section 3.6,
or Operating Losses under Section 8.3
with respect to a Product, shall not give BMS any right to terminate this
Agreement, but shall give BMS the right, upon thirty (30) days advance written
notice to PDL, to terminate PDL’s right to Co-Develop such Product (in the
manner set forth in Section 3.6(b))  and to convert PDL’s profit-sharing rights in such Product
to rights to receive royalties under Section 8.5(b)(ii).
In the event BMS converts PDL’s profit-sharing rights to rights to receive
royalties pursuant to the foregoing, the terms of Section 11.6(e) shall
apply with respect to such Product as though PDL were the terminating Party.


 


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


 


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


 


11.5                        Survival; Effect of Termination.


 


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


 






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


 


61

















 


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


 


11.6                        Licenses and Payments on
Termination.


 


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


 


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


 






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


 


62

















 


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


 


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


 


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


 


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


 






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


 


63

















 


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


 


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


 


12.                               REPRESENTATIONS
AND WARRANTIES AND COVENANTS


 


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


 


12.2                        Rights in Technology.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


13.                               INDEMNIFICATION AND LIMITATION OF
LIABILITY


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


14.                               MISCELLANEOUS


 


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


 


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


 






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


 


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


 


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


 


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


 


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


 


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


 






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


 


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


 


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


 


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


 


14.9        Disputes Relating to Patents and
Trademarks and Equitable Relief.


 


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


 


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


 


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


 






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separately with the SEC. Confidential treatment has been requested with respect
to the omitted portions.


 


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


 


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


 


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


 


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


 


14.14      Bankruptcy.


 


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


 


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


 


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


 


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


 


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


 






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to the omitted portions.


 


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


 


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


 


	
   

  	
  For PDL:

  	
   

  	
  PDL BioPharma, Inc.

  
	
   

  	
   

  	
   

  	
  1400 Seaport Blvd.

  
	
   

  	
   

  	
   

  	
  Redwood City, CA  94063

  
	
   

  	
   

  	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
   

  	
   

  	
  Phone: 650-454-2999

  
	
   

  	
   

  	
   

  	
  Fax: 650-454-1438

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  	
  PDL BioPharma, Inc.

  
	
   

  	
   

  	
   

  	
  1400 Seaport Blvd.

  
	
   

  	
   

  	
   

  	
  Redwood City, CA  94063

  
	
   

  	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
   

  	
  Phone: 650-454-2569

  
	
   

  	
   

  	
   

  	
  Fax: 650-399-8569

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  For BMS:

  	
   

  	
  Bristol-Myers Squibb Company

  
	
   

  	
   

  	
   

  	
  P.O. Box 4000

  
	
   

  	
   

  	
   

  	
  Route 206 and Province Line Road

  
	
   

  	
   

  	
   

  	
  Princeton, NJ 08543-4000

  
	
   

  	
   

  	
   

  	
  Attention: Vice President, Business Development

  
	
   

  	
   

  	
   

  	
  Phone: 609-252-4418

  
	
   

  	
   

  	
   

  	
  Fax: 609-252-6880

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
   

  	
  Bristol-Myers Squibb Company

  
	
   

  	
   

  	
   

  	
  P.O. Box 4000

  
	
   

  	
   

  	
   

  	
  Route 206 and Province Line Road

  
	
   

  	
   

  	
   

  	
  Princeton, NJ 08543-4000

  
	
   

  	
   

  	
   

  	
  Attention: Vice President and Senior Counsel, Business Development

  
	
   

  	
   

  	
   

  	
  Phone: 609-252-5328

  
	
   

  	
   

  	
   

  	
  Fax: 609-252-4232

  



 


73

















 


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


 


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


 


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


 


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


 


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


 


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


 






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


 


74

















 


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


 


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


 


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


 


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


 


Signature page follows.


 


75

















 


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


 


	
  BRISTOL-MYERS
  SQUIBB COMPANY

  	
   

  	
  PDL BIOPHARMA, INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jeremy Levin
  

  	
   

  	
  By: 

  	
  /s/ Andrew
  Guggenhime 

  
	
  Name: Jeremy
  Levin 

  	
   

  	
  Name: Andrew
  Guggenhime 

  
	
  Title: Sr. VP,
  Strategic Transactions Group 

  	
   

  	
  Title: Chief
  Financial Officer 

  
	
  Date:
  August 18, 2008

  	
   

  	
  Date:
  August 18, 2008

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: 

  	
  /s/ Mark McCamish
  

  
	
   

  	
   

  	
  Name: Mark A.
  McCamish 

  
	
   

  	
   

  	
  Title: Sr.
  VP & Chief Medical Officer 

  
	
   

  	
   

  	
  Date:
  August 18, 2008

  
					



 


76














 


Schedule
10.5


 


Press
Release


 


Bristol-Myers Squibb and PDL BioPharma Enter Global Alliance to Develop
Novel Treatment for Multiple Myeloma


 


Elotuzumab Antibody Designed to Target
Highly Expressed Cell Surface Protein and Selectively Kill Multiple Myeloma Cells


 


PRINCETON,
New Jersey, and REDWOOD CITY, California — August XX,
2008 — Bristol-Myers Squibb Company (NYSE: BMY) and PDL BioPharma, Inc.
(NASDAQ: PDLI) today announced an agreement for the global
development and commercialization of PDL BioPharma’s anti-CS1 antibody,
elotuzumab, previously known as HuLuc63, currently in Phase I development for
multiple myeloma.


 


Elotuzumab
provides a novel approach to treating multiple myeloma because it is an
antibody that binds to the CS1 glycoprotein, allowing the immune system to
selectively kill myeloma cells with minimal effects on other cell types. CS1 is
a cell surface glycoprotein that is widely expressed on multiple myeloma cells
but is minimally expressed on normal cells. Elotuzumab is currently being investigated
in Phase I studies as a monotherapy and in combination with other
therapies.  There are currently no
approved monoclonal antibodies on the market to treat multiple myeloma.


 


Under the terms of the collaboration, BMS would pay PDL BioPharma an upfront
cash payment of $30 million for the development and marketing rights to
elotuzumab and for an option to expand the collaboration to include PDL241,
another anti-CS1 antibody, upon completion of pre-agreed preclinical studies.  PDL BioPharma could receive additional
payments of up to $480 million based on pre-defined development and regulatory
milestones and up to $200 million based on pre-defined sales-based milestones
for elotuzumab in multiple myeloma and other potential oncology indications.


 


The companies will share development costs, with
Bristol-Myers Squibb providing 80 percent of the funding and PDL BioPharma
providing 20 percent. Bristol-Myers Squibb will lead global development activities, and PDL
BioPharma will complete the ongoing Phase I program and provide support for
Phase II studies.  The companies would
share profits on sales of elozutumab in the U.S.  PDL BioPharma would receive royalties on net
sales of elotuzumab outside the U.S.


 


If Bristol-Myers Squibb exercises its option to expand the collaboration to
include PDL241, PDL BioPharma would receive an additional cash payment of $15
million and could receive additional payments of up to $230 million based on
pre-defined development and regulatory milestones and up to $200 million based on
pre-defined sales-based milestones.  The
same division of development costs and profit sharing that apply to elotuzumab
would apply to PDL241.


 


77

















 


The closing of the transaction is subject to antitrust clearance under the Hart-Scott-Rodino Act
and other customary regulatory approvals.


 


“Elotuzumab provides us with the opportunity to develop and market an
innovative therapy that has the potential to meaningfully address the
significant unmet medical need in multiple myeloma,” said Francis Cuss, MD,
senior vice president, Discovery and Exploratory Clinical Research,
Bristol-Myers Squibb. “Consistent with our company’s strategy to integrate
external innovation and
to expand our capabilities, this collaboration will further strengthen our
pipeline of agents targeting hematologic malignancies, which includes Sprycel and tanespimycin, an Hsp90 inhibitor from our recent
acquisition of Kosan Biosciences.”


 


“We are delighted to enter this global alliance with Bristol-Myers Squibb,
which we believe will maximize the potential benefit of elotuzumab to patients,
and highlight the value of our scientific discoveries and antibody technologies
to the field,” said Mark McCamish, MD, PhD, PDL’s senior vice president
and chief medical officer.  “In addition,
Bristol-Myers Squibb brings extensive oncology development experience and
resources and we look forward to collaborating with them to increase the scope
of the elotuzumab development program moving forward.”


 


About
Bristol-Myers Squibb


 


Bristol-Myers
Squibb is a global biopharmaceutical company whose mission is to extend and
enhance human life. For more information visit www.bms.com


 


About PDL
BioPharma


 


PDL BioPharma, Inc.
is a biotechnology company focused on the discovery and development of novel
antibodies in oncology and immunologic diseases. For more information, please
visit www.pdl.com.


 


Bristol-Myers Squibb Forward-Looking Statements


 


This
press release contains “forward-looking statements” as that term is defined in
the Private Securities Litigation Reform Act of 1995, regarding the research,
development and commercialization of pharmaceutical products.  Such forward-looking statements are based on
current expectations and involve inherent risks and uncertainties, including
factors that could delay, divert or change any of them, and could cause actual
outcomes and results to differ materially from current expectations.  No forward-looking statement can be
guaranteed.  Among other risks, there can
be no guarantee that the clinical trials will begin on the timeframe described
in this release, that the clinical studies described in this release will
support a regulatory filing or that the product will receive regulatory
approval.  There can be no assurance that
if approved, the product described in this release will be commercially
successful.  Nor is there any assurance that
the transaction described in this release will receive the necessary regulatory
approvals to close. Forward-looking statements in the press release
should be evaluated together with the many uncertainties that affect
Bristol-Myers Squibb’s business, particularly those identified in the
cautionary factors discussion in Bristol-Myers Squibb’s Annual Report on Form 10-K
for the year ended December 31, 2007, its Quarterly Reports on Form 10-Q,
and Current Reports on Form 8-K. 
Bristol-Myers Squibb undertakes no obligation 


 


78

















 


to
publicly update any forward-looking statement, whether as a result of new information,
future events, or otherwise.


 


PDL
BioPharma Forward-Looking Statements


 


This
press release contains forward-looking statements regarding the entry into and
potential for success of a development and commercialization collaboration
between PDL BioPharma and BMS, including whether antitrust approval will be
obtained to permit the effectiveness of the agreement; the ability of BMS or
PDL BioPharma to achieve any or all of the milestone payments for products
covered by the collaboration; the scope of the collaboration, including the
option exercise and milestones payments related to the exercise of the PDL241
product option by BMS;  the ability of
PDL BioPharma to maintain the collaboration in effect; the ability of the
parties to achieve regulatory approval; and if approved, the commercial
potential of any products developed pursuant to the collaboration. Other
factors that may cause PDL’s actual results to differ materially from those
expressed or implied in the forward-looking statements in this press release
are discussed in the Current Report on Form 8-K filed by PDL BioPharma
with the Securities and Exchange Commission (SEC) in connection with this press
release and PDL BioPharma’s periodic filings with the SEC, including the “Risk
Factors” sections of its annual and quarterly reports filed with the SEC.
Copies of PDL’s filings with the SEC may be obtained at the “Investors” section
of PDL’s website at www.pdl.com. PDL expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in PDL’s expectations with
regard thereto or any change in events, conditions or circumstances on which
any such statements are based for any reason, except as required by law, even
as new information becomes available or other events occur in the future. All
forward-looking statements in this press release are qualified in their
entirety by this cautionary statement.


 


	
  Bristol-Myers
  Squibb Company

  	
  PDL BioPharma

  	
   

  
	
  Media

  	
  Media

  	
   

  
	
  Jennifer Fron Mauer,
  609-252-6579

  	
  Kathleen Rinehart,  

  	
  650-454-2543

  
	
  jennifer.mauer@bms.com

  	
  kathleen.rinehart@pdl.com

  	
   

  
	
  or

  	
  or

  	
   

  
	
  Investors

  	
  Investors

  	
   

  
	
  John Elicker, 212-546-3775

  	
  Jean Suzuki, 650-454-2648

  	
   

  
	
  john.elicker@bms.com

  	
  jean.suzuki@pdl.com

  	
   

  



 


79