Exhibit 10.1


 


Separation and Distribution Agreement


 


between


 


PDL
BioPharma, Inc.,  


a Delaware
corporation


 


and


 


Facet
Biotech Corporation,


a Delaware
corporation


 


Dated as of December
17, 2008


 

















 


Table of Contents


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  Article I Definitions 

  	
  1

  
	
  Article II The Separation

  	
  11

  
	
  2.1

  	
  General

  	
  11

  
	
  2.2

  	
  Transfer of Facet Assets and Assumption of Facet
  Liabilities

  	
  11

  
	
  2.3

  	
  Governmental Approvals; Consents

  	
  12

  
	
  2.4

  	
  Deferred Transfers/Assumptions

  	
  12

  
	
  2.5

  	
  Calculation, Adjustment and Payment of Selected
  Liabilities

  	
  13

  
	
  2.6

  	
  Termination of Agreements

  	
  14

  
	
  2.7

  	
  Disclaimer of Representations and Warranties

  	
  14

  
	
  Article III The Distribution 

  	
  15

  
	
  3.1

  	
  The Distribution

  	
  15

  
	
  3.2

  	
  Actions in Connection with the Distribution

  	
  16

  
	
  3.3

  	
  Conditions to Distribution

  	
  17

  
	
  3.4

  	
  Fractional Shares

  	
  18

  
	
  Article IV Insurance 

  	
  18

  
	
  4.1

  	
  Policies and Rights Included Within the Facet Assets

  	
  18

  
	
  4.2

  	
  Post-Effective Time Claims

  	
  18

  
	
  4.3

  	
  PDL Policies

  	
  19

  
	
  Article V Releases And Indemnification

  	
  19

  
	
  5.1

  	
  Release of Pre-Distribution Claims

  	
  19

  
	
  5.2

  	
  Indemnification by Facet

  	
  21

  
	
  5.3

  	
  Indemnification by PDL

  	
  21

  
	
  5.4

  	
  Reduction for Insurance Proceeds and Other
  Recoveries

  	
  22

  
	
  5.5

  	
  Procedures For Indemnification of Third-Party Claims

  	
  22

  
	
  5.6

  	
  Additional Matters

  	
  24

  
	
  5.7

  	
  Survival of Indemnities

  	
  24

  
	
  Article VI Certain Covenants And Other
  Agreements Of The Parties

  	
  25

  
	
  6.1

  	
  Restriction on Employee Solicitation and Hiring

  	
  25

  
	
  6.2

  	
  Legal Names

  	
  25

  
	
  6.3

  	
  Preparation of Opening Facet Balance Sheet

  	
  25

  
	
  6.4

  	
  Amendment of Patent Licensing Master Agreements

  	
  25

  
	
  6.5

  	
  Payment of Accrued Merit Bonuses

  	
  26

  
	
  Article VII Confidentiality

  	
  26

  
	
  7.1

  	
  Confidentiality

  	
  26

  
	
  7.2

  	
  Protective Arrangements

  	
  27

  
	
  Article VIII Access To Information And Services

  	
  27

  
	
  8.1

  	
  Provision of Books and Records

  	
  27

  
	
  8.2

  	
  Access to Information

  	
  28

  
	
  8.3

  	
  Production of Witnesses

  	
  28

  
	
  8.4

  	
  Privileged Matters

  	
  28

  
	
  Article IX Dispute Resolution

  	
  30

  
	
  9.1

  	
  Disputes and Negotiation

  	
  30

  
	
  9.2

  	
  Dispute Resolution and Arbitration

  	
  30

  
	
  Article X Further Assurances

  	
  31

  
	
  10.1

  	
  Further Assurances

  	
  31

  



 


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  Article XI Termination

  	
  32

  
	
  11.1

  	
  Termination

  	
  32

  
	
  Article XII Miscellaneous

  	
  32

  
	
  12.1

  	
  Governing Law; Jurisdiction

  	
  32

  
	
  12.2

  	
  Assignability

  	
  32

  
	
  12.3

  	
  Third Party Beneficiaries

  	
  33

  
	
  12.4

  	
  Notices

  	
  33

  
	
  12.5

  	
  Severability

  	
  34

  
	
  12.6

  	
  Expenses

  	
  34

  
	
  12.7

  	
  Survival of Covenants

  	
  34

  
	
  12.8

  	
  Waivers of Default

  	
  34

  
	
  12.9

  	
  Specific Performance

  	
  34

  
	
  12.10

  	
  Amendments

  	
  34

  
	
  12.11

  	
  Schedules

  	
  35

  
	
  12.12

  	
  Construction

  	
  35

  
	
  12.13

  	
  Counterparts

  	
  35

  



 


ii

















 


Separation and Distribution Agreement


 


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


 


Recitals


 


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


 


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


 


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


 


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


 


Article I


 


Definitions


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


1.17                           “Exchange”
shall mean the NASDAQ Global Market.


 


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


 


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


 


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


 


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


 


1.22                           “Facet
Assets” shall mean:


 


(a)                                  All
categories of assets that are reflected as assets of Facet in the unaudited pro
forma condensed combined balance sheet of Facet, dated September 30, 2008,
included in the Form 10, with the value of such asset as reflected in the
Opening Facet Balance Sheet.


 


3

















 


(b)                                 All
of PDL’s rights, title and interest in and to the patents and patent
applications listed in Attachment 1.22(b), and any patents of addition,
re-examinations, reissues, extensions, granted supplementary protection
certifications, substitutions, confirmations, registrations, revalidations,
revisions, additions and the like, of or to said patents and any and all
divisionals, continuations and continuations-in-part, and any patents issuing
therefrom, as well as any patent applications related thereto and all Actions
against past, present, and future infringement, misappropriation, or other
violation of the foregoing.


 


(c)                                  All
of PDL’s rights, title and interest in and to the Trademarks listed on Attachment
1.22(c), together with (i) all common law rights to such Trademarks, (ii) the
goodwill of the Facet Business symbolized by such Trademarks, (iii) all
Actions for, or arising from any infringement, dilution, unfair competition, or
other violation, including past infringement, dilution, unfair competition, or
other violation, of such Trademarks, and (iii) all rights corresponding
thereto throughout the world.


 


(d)                                 All
of PDL’s rights, title and interest in and to the domain names listed in Attachment
1.22(d) and all Actions against past, present, and future
infringement, misappropriation, or other violation of the foregoing.


 


(e)                                  All
U.S. and foreign copyrights and copyrightable subject matter related to the
Facet Business, whether registered or unregistered, published or unpublished,
statutory or common law, including all related registrations, applications and
common law rights, in any labels, product marketing materials or other
copyrighted works related to the Facet Business and all Actions against past,
present, and future infringement, misappropriation, or other violation of the
foregoing (“Facet Copyrights”).


 


(f)                                    All
of PDL’s rights, title and interest in and to all Intellectual Property,
including trade secrets, not hereto forth described in the definition of Facet
Assets that are reasonably likely to be used in the Facet Business, but
excluding the Excluded Intellectual Property.


 


(g)                                 With
respect to the Products, all (i) regulatory filings and approvals,
registrations and governmental authorizations, (ii) each NDA, (iii) each
IND or equivalent, (iv) all compliance notices, licenses and permits, (v) all
applications to the FDA or the comparable foreign law or bodies in effect or
pending at the Effective Time, and (vi) all materials and Information
relating to the FDA and other Governmental Approvals for the Facet Business,
all as set forth on Attachment 1.22(g), and all information contained
therein (collectively, the “Registrations”).


 


(h)                                 All
Facet Books and Records.  “Facet Books
and Records” shall mean books and records which relate to Facet, the Facet
Assets, the Facet Liabilities or the conduct of the Facet Business.


 


(i)                                     All
pre-clinical and clinical data related to the Facet Business and which is
contained in PDL’s databases or otherwise in PDL’s possession or control.


 


4

















 


(j)                                     All
fixed assets of PDL as of the Effective Time except for the PDL Fixed Assets.


 


(k)                                  All
rights and benefits of PDL in existence as of the Effective Time or arising
after the Effective Time under the Contracts listed in Attachment 1.22(k) (the
“Assumed Contracts”), including any rights to Intellectual Property or
Facet Copyrights contained therein.  The
Assumed Contracts shall be deemed to include all purchase, work and change
orders related thereto.


 


(l)                                     All
of PDL’s rights, title and interest in and to the Clinical Trial Materials.


 


(m)                               All
of PDL’s rights, title and interest in and to the Clinical Trial Study Reports.


 


(n)                                 Cash
and cash equivalents in the amount of Four Hundred Five Million U.S. Dollars
($405,000,000) in the aggregate plus the amount of the Post-Closing Cash, as
determined in accordance with Section 2.5.


 


(o)                                 All
of PDL’s rights under the Leases, including the right to possess, use and occupy
the Premises and the Subleased Premises (as defined in the Leases), and all of
PDL’s rights, title and interest in and to the Lessee Improvements and the Sublessee
Improvements (as those terms are defined in the Leases) constructed at 1400 and
1500 Seaport Boulevard.


 


(p)                                 Any
and all interest in the Facet Subsidiaries, including Thirty Seven Thousand
(37,000) shares in PDL BioPharma France S.A.S. (One Euro per share), One
Thousand (1000) shares in Fremont Management, Inc. (par value $.01 per
share) and all of the membership interests in Fremont Holdings, LLC.


 


(q)                                 Any
and all interest in Ophthotech Corporation, including 1,835,000 shares of Series A-1
Preferred Stock ($0.001 par value per share).


 


(r)                                    Facet
Policies.


 


(s)                                  All
of PDL’s rights, title and interest in and to any and all other assets that are
expressly contemplated by this Agreement or any Ancillary Agreement (or the
Attachments and Schedules hereto or thereto) to be transferred to Facet.


 


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


 


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


 


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


 


5

















 


1.25                           “Facet
Liabilities” shall mean:


 


(a)                                  All
categories of Liabilities that are reflected as liabilities of Facet in the
unaudited pro forma condensed combined balance sheet of Facet, dated September 30,
2008, included in the Form 10 with the value of such liabilities as
reflected in the Opening Facet Balance Sheet.


 


(b)                                 All
Liabilities under the Assumed Contracts.


 


(c)                                  All
Liabilities under the Leases.


 


(d)                                 All
Liabilities under the Registrations arising after the Effective Time.


 


(e)                                  All
other Liabilities (other than Excluded Liabilities) arising out of the conduct
of PDL’s business prior to the Effective Time, other than liabilities solely
related to the PDL Business, including Liabilities arising out of the conduct
of the Facet Business or arising out of or related to the Facet Assets.


 


(f)                                    Any
and all Environmental Liabilities.


 


(g)                                 Any
and all Liabilities expressly set forth on Attachment 1.25(g).


 


(h)                                 The
Selected Liabilities, as described in Section 2.5.


 


(i)                                     Any
and all other Liabilities of Facet relating to, arising out of or resulting
from Facet’s performance or obligations under any Ancillary Agreement or this
Agreement.


 


(j)                                     any
and all other Liabilities that are expressly contemplated by this Agreement or
any Ancillary Agreement (or the Attachments and Schedules hereto or thereto) to
be transferred to and assumed by Facet.


 


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


 


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


 


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


 


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


 


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


 


6

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7
















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


8

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


9

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


10

















 


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


 


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


 


Article II


 


The Separation


 


2.1           General.  Subject to the terms and conditions of this
Agreement, the Parties shall use, and shall cause any respective Subsidiaries
to use, their respective reasonable best efforts to consummate the transactions
contemplated hereby.


 


2.2           Transfer
of Facet Assets and Assumption of Facet Liabilities.  Subject to Sections 2.3, 2.4
and 2.5:


 


(a)           At the Effective Time, PDL shall, and
hereby does, transfer, contribute, assign, and convey, or cause to be
transferred, contributed, assigned, and conveyed, to Facet all of PDL’s right,
title and interest in and to the Facet Assets (the “Transfer”).


 


(b)           At the Effective Time, Facet shall,
and hereby does, accept the Transfer from PDL.


 


(c)           On or before the Distribution Date,
PDL shall transfer the Facet Employees to Facet.


 


(d)           Except as otherwise specifically set
forth in this Agreement or any Ancillary Agreement, at the Effective Time Facet
shall, and hereby does, accept, assume or, as applicable, retain all the Facet
Liabilities and shall after the Effective Time perform, discharge and fulfill,
in accordance with their respective terms, all the Facet Liabilities, in each
case, unless specified otherwise in the definition of Facet Liabilities,
regardless of (i) when or where such Liabilities arose or arise, (ii) where
or against whom such Liabilities are asserted or determined, (iii) which
entity is named in any action associated with any Liability, and (iv) whether
the facts on which they are based occurred prior to, on or after the Effective
Time (the “Assumption”). 
Notwithstanding the foregoing, Facet shall not assume any Liability
attributable to the failure of PDL or its officers, directors, employees,
agents or Affiliates to materially perform PDL’s obligations to Facet pursuant
to this Agreement or the Ancillary Agreements.


 


(e)           If at any time, after the Effective
Time, the Parties agree that PDL or its Subsidiaries possess any assets or
liabilities related to the Facet Business, PDL shall as promptly as practicable
transfer or cause to be transferred, at Facet’s expense, and Facet shall accept
such transfer and/or assume, for no additional consideration, such Facet Asset
and/or Liability, including any and all economic benefits generated from such
Facet Asset and/or Liabilities after the Effective Time, to Facet.  Each such 


 


11

















 


transferred asset or liability shall be
deemed a Facet Asset or a Facet Liability, respectively, and shall be subject
to the terms and conditions of this Agreement applicable thereto.


 


(f)            If at any time, after the Effective
Time, the Parties agree that Facet or its Subsidiaries possess any assets or
liabilities solely related to the PDL Business, Facet shall as promptly as
practicable transfer or cause to be transferred, at PDL’s expense, and PDL
shall accept such transfer and/or assume, for no consideration, such PDL Asset
and/or Liability, including any and all economic benefits generated from such
PDL Asset and/or Liabilities after the Effective Time, to PDL.  Each such transferred asset or liability
shall be deemed a PDL Asset or a PDL Liability, respectively, and shall be
subject to the terms and conditions of this Agreement applicable thereto.


 


(g)           In furtherance of the Transfer and
the assumption of the Facet Liabilities by Facet as set forth above, and
simultaneously with the execution and delivery of this Agreement (i) PDL
shall execute and deliver such bills of sale, stock powers, certificates of
title, assignments of contracts and other instruments of transfer, conveyance
and assignment as and to the extent necessary to evidence the Transfer, and (ii) Facet
shall execute and deliver to PDL such bills of sale, stock powers, certificates
of title, assumptions of contracts, indemnity agreements and other instruments
of assumption as and to the extent necessary to evidence the valid and
effective Assumption.


 


2.3          Governmental Approvals; Consents.


 


(a)           To the extent that the Transfer or
the Assumption requires any Governmental Approvals, the Parties shall use
reasonable best efforts to obtain any such Governmental Approvals.  If and to the extent that the Transfer or the
Assumption would be a violation of applicable laws or require any Governmental
Approval in connection with the Separation or the Distribution, then, unless
PDL shall otherwise determine, the Transfer to or Assumption by Facet of such
Facet Assets or Facet Liabilities, as the case may be, shall be automatically
deemed deferred and any such purported Transfer or the Assumption shall be null
and void until such time as all legal impediments are removed and/or each of
such Governmental Approval has been obtained.


 


(b)           The Parties shall use reasonable best
efforts to obtain any Consents required in connection with the transactions
contemplated by this Agreement. 
Notwithstanding the foregoing, no Party shall be obligated to pay any
consideration therefor to any Third Party from whom any such Consent,
substitution or amendment is requested (unless such Party is fully reimbursed
by the requesting Party).


 


2.4          Deferred Transfers/Assumptions.


 


(a)           If the Transfer of any Facet Asset or
Assumption intended to be Transferred and assumed hereunder is not consummated
prior to or at the Effective Time, whether as a result of the provisions of Section 2.3
or for any other reason, then PDL shall thereafter hold such Facet Asset for
the use and benefit of Facet if permitted by Law.


 


12

















 


(b)           If and when the Consents and/or
Governmental Approvals, or any other impediments to Transfer or Assumption, the
absence of which caused the deferral of Transfer of any Facet Asset or
Assumption pursuant to Section 2.3 or otherwise, are obtained or
removed (as appropriate), the Transfer of the applicable Facet Asset or
Assumption shall be effected in accordance with the terms of this Agreement
and/or the applicable Ancillary Agreement.


 


(c)           With respect to any Facet Asset
retained by PDL due to the deferral of the Transfer of such Facet Asset, PDL
shall take such actions with respect to such Facet Asset as may be reasonably
requested by Facet.


 


(d)           If the Parties are unable to obtain,
or to cause to be obtained, any such required Governmental Approvals, Consents,
release, substitution or amendment pursuant to Section 2.3 or
otherwise, PDL shall (i) continue to be bound by such Contract, license or
other obligation, which shall not constitute a Liability of PDL (unless not
permitted by Law or the terms thereof), (ii) as agent or subcontractor for
Facet, pay, perform and discharge fully all the obligations or other Facet
Liabilities thereunder after the Effective Time, and (iii) deliver to Facet any
payments, benefits or other consideration received by PDL under such Contract,
license or other obligation; provided, however, that PDL shall
not be obligated to extend, renew or otherwise cause such Contract, license or other
obligation to remain in effect beyond the term in effect as of the Effective
Time.  Facet shall have the right to
direct PDL to exercise PDL’s rights under such Contract, license or other
obligation for the benefit of Facet.  Facet
shall fully indemnify PDL and its Affiliates, officers, directors, employees,
agents and hold each of them harmless against any and all obligations or Facet
Liabilities arising in connection therewith and also for any actions requested
by Facet pursuant to Section 2.4(c), provided, however, that
Facet shall have no obligation to indemnify PDL with respect to any matter to
the extent that PDL has engaged in any violation of Law or fraud in connection
therewith.  PDL shall, without further
consideration, promptly pay and remit, or cause to be promptly paid or
remitted, to Facet, all money, rights and other consideration received by it or
any of its Subsidiaries in respect of such performance on behalf of Facet
(unless any such consideration is an Excluded Asset of PDL pursuant to this
Agreement).  If and when any such
Governmental Approval, Consent, release, substitution or amendment shall be
obtained or such agreement, lease, license or other rights or obligations shall
otherwise become assignable or capable of novation, PDL shall promptly assign,
or cause to be assigned, all rights, obligations and other Facet Liabilities
thereunder of PDL’s to Facet without payment of any further consideration and
Facet, without the payment of any further consideration, shall assume such
rights and obligations and other Facet Liabilities.


 


2.5          Calculation, Adjustment and Payment
of Selected Liabilities.


 


(a)           “PDL Consolidated Balance Sheet”
shall mean the unaudited consolidated balance sheet of PDL, dated as of the day
immediately preceding the Distribution Date, prepared on a basis consistent
with the basis on which the unaudited consolidated balance sheet included in
PDL’s Quarterly Report on Form 10-Q for the quarterly period ended September 30,
2008 and filed with the Securities and Exchange Commission on November 12,
2008 was prepared.  As soon as reasonably
practicable after the Effective Time, the Parties shall coordinate in the
preparation of the PDL Consolidated Balance Sheet.


 


13

















 


(b)           “Selected Liabilities” shall
mean certain current liabilities that are both recorded on the PDL Consolidated
Balance Sheet in accordance with U.S. generally accepted accounting principals
(“GAAP”) and unpaid as of the Effective Time, in the following categories:
accrued vacation, accrued preclinical and clinical trial expenses,
personnel-related restructuring accruals and accrued post-employment
benefits.  For clarity, the Selected
Liabilities shall be recorded on the Opening Facet Balance Sheet.


 


(c)           Payment of Current Liabilities.  PDL shall under the terms of each respective
Contract remit payment to vendors for all current liabilities that are both
recorded on the PDL Consolidated Balance Sheet in accordance with GAAP and
unpaid as of the Effective Time, with the exception of (i) the Selected
Liabilities and (ii) any deferred revenue and debt accounts that are
recorded on the Opening Facet Balance Sheet. 
Facet shall remit payment for the Selected Liabilities to the payees
identified by PDL under the terms of each respective Contract.


 


(d)           Initial Selected Liabilities
Statement and Post-Closing Cash. 
Facet shall provide PDL in writing with its estimate for the amount of
the Selected Liabilities within fifteen (15) business days after
the Effective Time (the “Selected Liabilities Statement”).  PDL shall have ten (10) business
days following the receipt of the Selected Liabilities Statement to review
and analyze Facet’s calculation of the amount set forth in the
Selected Liabilities Statement (the “Post-Closing Cash”) and PDL shall
then pay to Facet any undisputed part of the Post-Closing
Cash.  If PDL does not agree with Facet’s calculation
of the Post-Closing Cash, the parties shall work in good faith to
resolve the disagreement.  After resolution of such disagreement, any
payments owing either to Facet as a result of such adjustment shall be made
within five (5) business days after the agreement of the parties.


 


2.6           Termination
of Agreements.  Except with respect
to this Agreement and the Ancillary Agreements (and agreements expressly
contemplated herein or therein to survive by their terms), the Parties hereby
terminate any and all written or oral agreements, arrangements, commitments or
understandings, between or among them, effective as of the Effective Time; and
each Party shall, at the reasonable request of the other Party, take, or cause
to be taken, such other actions as may be necessary to effect the foregoing.


 


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


 


14

















 


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


 


Article III


 


The Distribution


 


3.1          The Distribution.


 


(a)           Subject to Section 3.3,
on or prior to the Distribution Date, for the benefit of and distribution to
the holders of PDL Common Stock on the Record Date, PDL will deliver stock
certificates, endorsed by PDL in blank, to the distribution agent, BNY Mellon
Shareowner Services (the “Agent”), representing all of the outstanding
and issued shares of Facet Common Stock then owned by PDL.  PDL shall instruct the Agent to
electronically distribute on the Distribution Date the appropriate number of
such shares of Facet Common Stock to each such holder or designated transferee
or transferees of such holder.


 


(b)           Subject to Section 3.4,
each holder of PDL Common Stock on the Record Date (or such holder’s designated
transferee or transferees) will be entitled to receive in the Distribution one (1) share
of Facet Common Stock for every five (5) shares of PDL Common Stock.  No investment decision or action by any such
stockholder shall be necessary for such stockholder (or such stockholder’s
designated transferee or transferees) to receive the applicable number of
shares of Facet Common Stock.


 


(c)           Facet and PDL, as the case may be,
will provide to the Agent any and all information required in order to complete
the Distribution.


 


15

















 


3.2          Actions in Connection with the
Distribution.


 


(a)           Facet shall prepare and, in
accordance with applicable Law, file with the SEC and cause to become effective
the Form 10, including amendments, supplements, exhibits and any such
other documentation which is necessary or desirable to effectuate the
Separation and the Distribution, and PDL and Facet shall each use reasonable
best efforts to obtain all necessary approvals from the SEC with respect
thereto as soon as practicable.


 


(b)           In connection with the Distribution,
PDL and Facet shall prepare and mail to the holders of PDL Common Stock such
information concerning Facet, the Facet Business, the Facet Assets, the Facet
Liabilities, operations and management, the Distribution, the Separation and
such other matters as PDL shall reasonably determine and as may be required by
Law.


 


(c)           Facet shall also prepare, file with
the SEC and cause to become effective any registration statements or amendments
thereto required to effect the establishment of, or amendments to, any employee
benefit and other plans necessary or appropriate in connection with the
transactions contemplated by this Agreement, or any of the Ancillary
Agreements.


 


(d)           PDL and Facet shall take all such
action as may be necessary or appropriate under the securities or blue sky laws
of the states or other political subdivisions of the United States or of other
foreign jurisdictions in connection with the Distribution.


 


(e)           PDL and Facet shall take all
reasonable steps necessary and appropriate to cause the conditions set forth in
Section 3.3 to be satisfied and to effect the Distribution on the
Distribution Date.


 


(f)            Facet shall prepare and file, and
shall use reasonable best efforts to have approved and made effective, an
application for the original listing on the Exchange of the Facet Common Stock
to be distributed in the Distribution, subject to official notice of
distribution.


 


(g)           PDL shall give the Exchange not less
than ten (10) days’ advance notice of the Record Date in compliance with Rule 10b-17
under the Exchange Act.


 


(h)           PDL and Facet shall take all actions
necessary to cause, immediately prior to the Distribution, the number of shares
of Facet Common Stock issued and outstanding to be increased to equal the
number of shares of Facet Common Stock to be distributed to holders of PDL
Common Stock in accordance with this Agreement.


 


(i)            PDL and Facet shall cooperate to
change the name, effective on or prior to the Distribution Date, of any entity
that is part of (i) Facet and any of its Affiliates so that the words “PDL,”
or derivations thereof are not included in any such name, and (ii) PDL and
its Affiliates so that the word “Facet” or derivations thereof are not
included in any such name.  Notwithstanding the foregoing, Facet may
continue to operate PDL BioPharma France S.A.S. under that name during the
period in which Facet 


 


16

















 


winds down the activities of PDL BioPharma France S.A.S., such period
not to exceed twelve (12) months after the Effective Time.


 


3.3           Conditions
to Distribution.  Subject to Section 3.2,
the following are conditions to the consummation of Distribution.  The conditions are for the sole benefit of
PDL and shall not give rise to or create any duty on the part of PDL or the
Board of Directors of PDL to waive or not waive any such condition:


 


(a)           The Form 10 shall have been
declared effective by the SEC, with no stop order in effect with respect
thereto;


 


(b)           All permits, registrations and
consents required under the securities or blue sky laws of the states or other
political subdivisions of the United States or of other foreign jurisdictions
in connection with the Separation and the Distribution shall have been obtained
and be in full force and effect;


 


(c)           All material Government Approvals and
other consents necessary to consummate the Separation and the Distribution
shall have been obtained and be in full force and effect;


 


(d)           No order, injunction or decree issued
by any court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Separation and the Distribution
shall be in effect and no other event outside the control of PDL shall have
occurred or failed to occur that prevents the consummation of the Distribution;


 


(e)           The Board of Directors of PDL shall
have authorized and approved the Distribution and not withdrawn such
authorization and approval;


 


(f)            The Board of Directors of PDL shall
have approved the basis of the determination of the Selected Liabilities and
categories of assets and liabilities included in both the Opening Facet Balance
Sheet and the PDL Consolidated Balance Sheet.


 


(g)           The Facet Common Stock to be
delivered in the Distribution shall have been approved for listing on the
Exchange;


 


(h)           PDL shall have completed the Transfer
of Facet Assets and transfer of Facet Employees to Facet, and the Assumption of
all the Facet Liabilities by Facet shall be completed;


 


(i)            All Ancillary Agreements shall have
been entered into by the Parties and all other Parties thereto, as applicable,
and shall remain in full force and effect; and


 


(j)            No other events or developments
shall have occurred that, in the sole discretion of the Board of Directors of
PDL, would result in the Distribution having a material adverse effect on PDL
or on the stockholders of PDL or not being in the best interest of PDL and its
stockholders.


 


17
















 


3.4                                 Fractional Shares.  The Agent and PDL shall, as soon as
practicable after the Distribution Date (a) determine the number of whole
shares and fractional shares of Facet Common Stock allocable to each holder of
record or beneficial owner of PDL Common Stock as of close of business on the
Record Date, (b) aggregate all such fractional shares into whole shares
and sell the whole shares obtained thereby in open market transactions at
then-prevailing trading prices on behalf of holders who would otherwise be
entitled to fractional share interests, and (c) distribute to each such
holder, or for the benefit of each such beneficial owner, such holder’s or
owner’s ratable share of the net proceeds of such sale, based upon the average
gross selling price per share of Facet Common Stock after making appropriate
deductions for any amount required to be withheld for United States federal
income tax purposes.  The Agent, in its
sole discretion, will determine the timing and method of selling such
fractional shares, the selling price of such fractional shares and the
broker-dealer to which such fractional shares will be sold, provided that the
designated broker-dealer is not an Affiliate of PDL or Facet.  Neither PDL nor Facet will pay any interest
on the proceeds from the sale of fractional shares.


 


Article IV


 


Insurance


 


4.1                                 Policies and Rights
Included Within the Facet Assets. 
Without limiting the generality of the definition of the Facet Assets,
the Facet Assets shall include (a) the Facet Policies and (b) any and
all rights of an insured Party or its Affiliates under each of the PDL
Pre-Distribution Policies, to the extent allowable under such Policies,
including rights of indemnity and the right to be defended by or at the expense
of the insurer, with respect to all injuries, losses, Liabilities, damages and
expenses incurred or claimed to have been incurred prior to the Effective Time
by any Party or any of its Affiliates in connection with the Facet Business
(provided PDL shall have equal rights with respect to indemnity and the right
to be defended to the extent practical and appropriate) and which injuries,
losses, liabilities, damages and expenses may arise out of insured or insurable
occurrences or events under one or more of the PDL Pre-Distribution Policies; provided,
however, that nothing in this Section 4.1 shall be deemed to
constitute (or to reflect) the assignment of the PDL Pre-Distribution Policies,
or any of them, to Facet.


 


4.2                                 Post-Effective Time
Claims.


 


(a)                                  If,
subsequent to the Effective Time, any Person shall assert a claim against Facet
or its Affiliates with respect to any injury, loss, Liability, damage or
expense incurred or claimed to have been incurred prior to the Effective Time,
including claims related to the Facet Business, or in connection with the
Distribution, and such injury, loss, Liability, damage or expense may have or
has arisen out of insured or insurable occurrences, claims or events under one
or more of the PDL Pre-Distribution Policies, PDL shall at the time such claim
is asserted (except to the extent inconsistent with Section 4.1 and
to the extent allowable under the PDL Pre-Distribution Policies) be deemed to
assign, without need of further documentation, to Facet or its Affiliates, any
and all rights of an insured party under the applicable PDL Pre-Distribution
Policy with respect to such asserted claim, including rights of indemnity and
the right to be defended 


 


18

















 


by or at the expense of the insurer; provided,
however, that nothing in this Section 4.2 shall be deemed to
constitute (or to reflect) the assignment of the PDL Pre-Distribution Policies,
or any of them, to Facet.


 


(b)                                 In
the event that any PDL Pre-Distribution Policy does not allow such assignment
of a claim to Facet or its Affiliates, at Facet’s sole option, cost and
expense, claims for coverage of insured Facet Liabilities shall be tendered by
PDL as necessary to invoke the benefit of the PDL Pre-Distribution
Policies.  If such insurers do not
promptly acknowledge insurance coverage in connection with such insured Facet
Liabilities, then, with respect to such insured Facet Liabilities, Facet, on an
as-incurred basis (i) shall advance all amounts expended by PDL, incurred
at the request of Facet, for or with respect to such insured Facet Liabilities,
including all costs and expenses in connection with the defense and settlement
and in satisfaction of any judgment incurred, and amounts sufficient to cover
any Liabilities required to be paid by PDL or its Subsidiaries, and (ii) shall
pay all costs incurred in connection with pursuing and recovering Insurance
Proceeds with respect to the insured Facet Liabilities, but only to the extent
so requested by Facet, which shall be entitled to direct such recovery efforts.  Any payments made to PDL or its Subsidiaries
by Facet or the Facet Subsidiaries on account of such insured Facet Liabilities
shall be deemed to be advances pursuant to this Section 4.2.  Facet and the Facet Subsidiaries shall have
the right to recover any advances made pursuant to Section 4.3 from
PDL and its Subsidiaries, and PDL and its Subsidiaries shall have the
obligation promptly to reimburse Facet and the Facet Subsidiaries for such
advances, solely from the Insurance Proceeds of the PDL Pre-Distribution
Policies that cover such insured Facet Liabilities and that are received by PDL
or its Subsidiaries.  PDL and its
Subsidiaries (i) shall, at all times until paid to Facet, hold Insurance
Proceeds received for or with respect to insured Facet Liabilities in trust for
the benefit of Facet; and (ii) shall promptly remit such Insurance
Proceeds to Facet.


 


4.3                                 PDL Policies.  PDL shall, to the extent that the PDL
Policies cover the Facet Liabilities, after discussion with Facet, either (a) maintain
the PDL Policies, (b) buy replacement insurance, or (c) purchase an
extended reporting period endorsement for the PDL Policies.  In each of (a), (b) and (c), such
coverage shall be at the expense of Facet and be of a type and with a limit and
terms and conditions similar to those in force under the PDL Policies as of the
Effective Time and shall be maintained for a minimum of six (6) years
after the Effective Time.


 


Article V


 


Releases And Indemnification


 


5.1                                 Release of
Pre-Distribution Claims.


 


(a)                                  Except
as otherwise provided in this Agreement or any Ancillary Agreement, Facet,
together with its Subsidiaries, executors, administrators, successors and
assigns, does hereby, effective as of the Effective Time, remise, release and
forever discharge PDL, its respective Affiliates and all Persons who at any
time prior to the Effective Time were stockholders, directors, officers, agents
or employees of PDL or any 


 


19

















 


of its Affiliates (in each case, in their
respective capacities as such), in each case, together with their respective
heirs, executors, administrators, successors and assigns, from all
Liabilities existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Effective Time.


 


(b)                                 Except
as otherwise provided in this Agreement or any Ancillary Agreement, PDL,
together with its respective Subsidiaries, executors, administrators,
successors and assigns, does hereby, effective as of the Effective Time,
remise, release and forever discharge Facet, its respective Affiliates and all
Persons who at any time prior to the Effective Time were stockholders,
directors, officers, agents or employees of Facet or any of its Affiliates (in
each case, in their respective capacities as such), in each case, together with
their respective heirs, executors, administrators, successors and assigns, from all
Liabilities existing or arising from any acts or events occurring or failing to
occur or alleged to have occurred or to have failed to occur or any conditions
existing or alleged to have existed on or before the Effective Time.


 


(c)                                  Nothing
contained in Section 5.1(a) and Section 5.1(b) shall
impair or otherwise affect any right of any Party to enforce this Agreement or
any Ancillary Agreement.  In addition,
nothing contained in Section 5.1(a) and Section 5.1(b) shall
release any Party from:


 


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


 


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


 


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


 


(d)                                 Each
Party shall not, and shall not permit any of its Subsidiaries to, make any
claim or demand, or commence any Action asserting any claim or demand,
including any claim of contribution or indemnification, against the other Party
or any member of the other Party’s Affiliates, or any other Person released
pursuant to Section 5.1(a) and Section 5.1(b),
with respect to any and all Liabilities released pursuant to Section 5.1(a) and
Section 5.1(b).  If a Party
breaches this Section 5.1(d), such breaching Party shall be liable
for all related expenses, including court costs, attorneys’ fees, and all other
legal expenses of the other Party.


 


20

















 


(e)                                  It
is the intent of each Party, by virtue of the provisions of this Section 5.1,
to provide for a full and complete release and discharge of all Liabilities
existing or arising from all acts and events occurring or failing to occur or
alleged to have occurred or to have failed to occur and all conditions existing
or alleged to have existed on or before the Effective Time, whether known or
unknown, between one Party (and/or any Affiliate of such Party) and the other
Party (and/or a member of such other Party) (including any contractual
agreements or arrangements existing or alleged to exist between or among any
such members on or before the Effective Time), except as otherwise set forth in
this Section 5.1.


 


(f)                                    If
any Person associated with a Party (including any director, officer or employee
of a Party) initiates an Action with respect to claims released by this Section 5.1,
the Party with which such Person is associated shall indemnify the other Party
against such Action in accordance with the provisions set forth in this Article V.


 


(g)                                 At
any time, at the request of a Party, each Party shall, and to the extent
practicable, cause each other Person on whose behalf it released Liabilities
pursuant to this Section 5.1, to execute and deliver releases
reflecting the provisions hereof.


 


5.2                                 Indemnification by
Facet.  Except as otherwise provided
in this Agreement or any Ancillary Agreement, following the Effective Time,
Facet shall indemnify, defend and hold harmless PDL and its Affiliates and all
Persons who at any time prior to the Effective Time were directors, officers, agents
or employees of PDL or any of its Affiliates (in each case, in their respective
capacities as such), in each case, together with their respective heirs,
executors, administrators, successors and assigns (collectively, the “PDL
Indemnitees”), from and against any and all Liabilities and related losses
of the PDL Indemnitees relating to, arising out of or resulting from any of the
following:


 


(a)                                  The
failure of Facet, and its Affiliates or any other Person to pay, perform or
otherwise promptly discharge after the Effective Time any Facet Liabilities in
accordance with their respective terms;


 


(b)                                 The
Facet Liabilities (including any subsequently identified Facet Liabilities
under Section 2.2(e));


 


(c)                                  Any
untrue statement, alleged untrue statement, omission or alleged omission of a
material fact in the Form 10, resulting in a misleading statement, with
respect to all information contained in the Form 10; and


 


(d)                                 Any
breach by Facet of this Agreement or any of the Ancillary Agreements.


 


5.3                                 Indemnification by
PDL.  Except as otherwise provided in
this Agreement or any Ancillary Agreement, following the Effective Time, PDL
shall indemnify, defend and hold harmless Facet, and its Affiliates and all
Persons who are directors, officers, agents or employees of Facet or any of its
Affiliates (in each case, in their respective 


 


21

















 


capacities as such), in each case, together
with their respective heirs, executors, administrators, successors and assigns
(collectively, the “Facet Indemnitees”), from and against any and all
Liabilities and related losses of the Facet Indemnitees relating to, arising
out of or resulting from any of the following items:


 


(a)                                  The
failure of PDL, its Affiliates or any other Person to pay, perform or otherwise
promptly discharge after the Effective Time any Excluded Liabilities;


 


(b)                                 The
Excluded Liabilities; and


 


(c)                                  Any
breach by PDL of this Agreement or any of the Ancillary Agreements.


 


5.4                                 Reduction for
Insurance Proceeds and Other Recoveries.


 


(a)                                  The
amount that any Party is required to provide indemnification (the “Indemnifying
Party”) to or on behalf of the Party entitled to such indemnification (the “Indemnitee”)
pursuant to this Article V, shall be reduced (retroactively or
prospectively) by Insurance Proceeds or other amounts actually recovered from
Third Parties on behalf of such Indemnitee in respect of the Liability or
related loss.  If an Indemnitee receives
a payment as required by this Agreement from an Indemnifying Party in respect
of any Liability or related loss (an “Indemnity Payment”) and
subsequently receives Insurance Proceeds in respect of such Liability or
related loss, then such Indemnitee shall hold such Insurance Proceeds in trust
for the benefit of the Indemnifying Party (or Indemnifying Parties) and shall
pay to the Indemnifying Party, as promptly as practicable after receipt, a sum
equal to the amount of such Insurance Proceeds received, up to the aggregate
amount of any payments received from the Indemnifying Party pursuant to this
Agreement in respect of such indemnifiable loss of such Insurance Proceeds.


 


(b)                                 An
insurer who would otherwise be obligated to pay any claim shall not be relieved
of the responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, have any subrogation rights with respect thereto, it being
expressly understood and agreed that no insurer or any other Third Party shall
be entitled to a “windfall” (i.e., a benefit they would not be entitled to
receive in the absence of the indemnification provisions) by virtue of the
indemnification provisions hereof. 
Notwithstanding the foregoing, each Party shall be required to use
reasonable best efforts to collect or recover any available Insurance Proceeds.


 


5.5                                 Procedures For
Indemnification of Third-Party Claims.


 


(a)                                  If
an Indemnitee shall receive notice or otherwise learn of the assertion by a
Third Party (including any Governmental entity) of any claim or of the
commencement by any such Person of any Action (collectively, a “Third-Party
Claim”) with respect to which an Indemnifying Party may be obligated to
provide indemnification to such Indemnitee, such Indemnitee shall give such
Indemnifying Party and each Party to this Agreement, written notice thereof as
soon as reasonably practicable, but no later 


 


22

















 


than thirty (30) days after becoming
aware of such Third-Party Claim.  Any
such notice shall describe the Third-Party Claim in reasonable detail.  If any Party shall receive notice or
otherwise learn of the assertion of a Third-Party Claim which may reasonably be
determined to be a Liability of the Parties, such Party shall give the other
Party to this Agreement written notice thereof within thirty (30) days after
becoming aware of such Third-Party Claim. 
Any such notice shall describe the Third-Party Claim in reasonable
detail.  Notwithstanding the foregoing,
the failure of any Indemnitee or other Party to give notice as provided in this
Section 5.5(a) shall not relieve the related Indemnifying
Party of its obligations under this Article V, except to the extent
that such Indemnifying Party is actually prejudiced by such failure to give
notice.


 


(b)                                 An
Indemnifying Party shall be entitled to participate in the defense of any
Third-Party Claim, at such Indemnifying Party’s own expense and by such
Indemnifying Party’s own counsel; provided that if the defendants in any
such claim include both the Indemnifying Party and one or more Indemnitees and
in such Indemnitees’ reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of such claim, such
Indemnitees shall have the right to employ separate counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than
one separate counsel reasonably satisfactory to the Indemnifying Party) shall
be paid by such Indemnifying Party. 
Within thirty (30) days after the receipt of notice from an Indemnitee
in accordance with Section 5.5(a) (or sooner, if the nature of
such Third-Party Claim so requires), the Indemnifying Party shall notify the
Indemnitee of its election whether the Indemnifying Party will assume
responsibility for defending such Third-Party Claim.  After notice from an Indemnifying Party to an
Indemnitee of its election to assume the defense of a Third-Party Claim, such
Indemnitee shall have the right to employ separate counsel and to participate
in (but not control) the defense, compromise, or settlement thereof, but the fees
and expenses of such counsel shall be the expense of such Indemnitee.


 


(c)                                  With
respect to any Third-Party Claim, the Indemnifying Party and Indemnitees agree,
and shall cause their respective counsel (if applicable), to cooperate fully
(in a manner that will preserve all attorney-client privilege or other
privileges) to mitigate any such claim and minimize the defense costs
associated therewith.


 


(d)                                 If
an Indemnifying Party fails to assume the defense of a Third-Party Claim within
thirty (30) days after receipt of written notice of such claim, the
Indemnitee will, upon delivering notice to such effect to the Indemnifying
Party, have the right to undertake the defense, compromise or settlement of
such Third-Party Claim on behalf of and for the account of the Indemnifying
Party subject to the limitations as set forth in this Section 5.5; provided,
however, that such Third-Party Claim shall not be compromised or settled
without the written consent of the Indemnifying Party, which consent shall not
be unreasonably withheld, delayed or conditioned.  If the Indemnitee assumes the defense of any
Third-Party Claim, it shall keep the Indemnifying Party reasonably informed of
the progress of any such defense, compromise or settlement.  The Indemnifying Party shall reimburse all
such costs and expenses of the Indemnitee in the event it is ultimately
determined that the Indemnifying Party is obligated to indemnify the Indemnitee
with respect to such Third-Party Claim. 
In no event shall an Indemnifying 


 


23

















 


Party be liable for any settlement effected
without its consent, which consent will not be unreasonably withheld, delayed
or conditioned.


 


5.6                                 Additional Matters.


 


(a)                                  Any
claim on account of a Liability which does not result from a Third-Party Claim
shall be asserted by written notice given by the Indemnitee to the related
Indemnifying Party.  Such Indemnifying
Party shall have a period of thirty (30) days after the receipt of such
notice within which to respond thereto. 
If such Indemnifying Party does not respond within such sixty
(60) day period, such Indemnifying Party shall be deemed to have accepted
responsibility to make payment.  If such
Indemnifying Party rejects such claim in whole or in part, such Indemnitee shall
be free to pursue such remedies as may be available to such party as
contemplated by this Agreement and the Ancillary Agreements.


 


(b)                                 In
the event of payment by or on behalf of any Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to
any events or circumstances in respect of which such Indemnitee may have any
right, defense or claim relating to such Third-Party Claim against any claimant
or plaintiff asserting such Third-Party Claim or against any other person.  Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense
(including allocated costs of in-house counsel and other in-house personnel) of
such Indemnifying Party, in prosecuting any subrogated right, defense or claim.


 


(c)                                  In
the event of an Action in which the Indemnifying Party is not a named
defendant, if the Indemnifying Party shall so request, the Parties shall endeavor
to substitute the Indemnifying Party for the named defendant, and add the
Indemnifying Party as a named defendant if at all practicable.  If such substitution or addition cannot be
achieved for any reason or is not requested, the named defendant shall allow
the Indemnifying Party to manage the Action as set forth in this section and
subject to Section 5.5 with respect to Liabilities, the
Indemnifying Party shall fully indemnify the named defendant against all costs
of defending the Action (including court costs, sanctions imposed by a court,
attorneys’ fees, experts’ fees and all other external expenses, and the
allocated costs of in- house counsel and other in-house personnel), the costs
of any judgment or settlement, and the cost of any interest or penalties
relating to any judgment or settlement.


 


5.7                                 Survival of
Indemnities.  The rights and
obligations of each Party and their respective Indemnitees under this Article V
shall survive the sale or other transfer by any Party or its Affiliates of any
assets or businesses or the assignment by it of any and all Liabilities.


 


24

















 


Article VI


 


Certain Covenants And Other Agreements Of The Parties


 


6.1                                 Restriction on
Employee Solicitation and Hiring. 
Following the transfer of the Facet Employees from PDL to Facet pursuant
to this Agreement, none of PDL or Facet or their respective Subsidiaries from
the Distribution Date through and including the one (1) year anniversary
of the Distribution Date, without prior written consent of the applicable
Party, may solicit, aid, encourage or induce any employee to terminate or
breach an employment, contractual or other relationship with the other Party
(or its Affiliates), hire or otherwise employ any employee of the other Party; provided,
however, that nothing in this Section 6.1 shall be deemed to
prohibit any hiring resulting from a general solicitation for employment
through advertisements and search firms not specifically directed at employees
of such other applicable Party; provided, further, that the
applicable Party has not encouraged or advised such firm to approach any such
employee.


 


6.2                                 Legal Names.  As soon as reasonably practicable and in any
event within one hundred eighty (180) days after the Distribution Date, each
Party shall (i) cease to make any use of the other Party’s respective name
and any Trademarks related thereto or containing or comprising the foregoing,
including any name or mark confusingly similar thereto or dilutive thereof (the
“Marks”), (ii) take all steps necessary, and fully cooperate with
the other Party and its Affiliates, to remove the Marks from any corporate,
trade, and assumed names and cancel any recordation of such names with any
Governmental entity, and change any corporate, trade, and assumed name that
uses the Marks to a name that does not include the Marks or any variation,
derivation, or colorable imitation thereof, and (iii) remove, strike over
or otherwise obliterate all Marks from (or otherwise not use) in all materials
owned by each Party and its Affiliates, including without limitation, any
business cards, stationary, packaging materials, displays, signs, promotional
and advertising materials, and other materials or media including any internet
usage or domain names that include the Marks.


 


6.3                                 Preparation of
Opening Facet Balance Sheet.  As soon
as practicable after the Distribution Date, the Parties shall cooperate in the
preparation of the Opening Facet Balance Sheet, prepared on the same basis as
the unaudited pro forma condensed combined balance sheet of Facet, dated as of September 30,
2008, included in the Form 10.


 


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


 


(a)                                  amend
and restate the Patent Licensing Master Agreement between PDL and Genentech, Inc.
(“Genentech”), dated September 25, 1998, as amended (the “Genentech
PLMA”), and cause Facet to become a party to an agreement with Genentech
that will allow Facet to obtain licenses to the GNE Licensed Patents (as that
term is defined in the Genentech PLMA) on the same terms and conditions
provided to PDL under the Genentech PLMA; and


 


25

















 


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


 


6.5       
Payment of Accrued Merit Bonuses.  Facet shall recommend the
amount, if any, of the merit bonus with respect to 2008 service to PDL prior to
the Effective Time (a “2008 Merit Bonus”) earned by each Facet Employee
and each PDL employee whose employment PDL terminated after July 1, 2008 but
before the Effective Time because PDL eliminated such employee’s employment
position in connection with a reduction in force (each such terminated
employee, a “Terminated Transition Employee”), which recommendation
shall be made in a manner consistent with the terms of PDL's 2008 Bonus Program
and PDL's past practices.  On or before January 31, 2009, Facet shall
deliver to PDL the list of Facet Employees and Terminated Transition Employees
who have earned a 2008 Merit Bonus, along with any supporting documentation
requested by PDL, which list shall set forth opposite each such person's name
the amount of the 2008 Merit Bonus recommended for each such Facet Employee or
Terminated Transition Employee (the “Merit Bonus List”).  PDL will
review the Merit Bonus List promptly, consider the recommendations of Facet and
prior to February 15, 2009, PDL shall pay to each Facet Employee and each
Terminated Transition Employee listed on the Merit Bonus List such 2008 Merit
Bonus as PDL deems appropriate; provided, however, that the
aggregate amount of such 2008 Merit Bonuses which PDL shall pay to all Facet
Employees and Terminated Transition Employees shall be Six Million Six Hundred Seventy-Five
Thousand Eight Hundred Twenty-Eight Dollars ($6,675,828).


 


Article VII


 


Confidentiality


 


7.1                                 Confidentiality.


 


(a)                                  Notwithstanding
any termination of this Agreement and subject to Section 7.2, for a
period of seven (7) years after the Distribution Date, each Party agrees
to hold, and to cause its respective Subsidiaries, directors, officers,
employees, agents, accountants, counsel and other advisors and representatives
to hold, in strict confidence, and undertake all reasonable precautions to
safeguard and protect the confidentiality of, all Information concerning the
other Party that is in its possession after the Distribution Date or furnished
by the other Party or its respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives at any time
pursuant to this Agreement, any Ancillary Agreement or otherwise, and shall not
use any such Information other than for such purposes as shall be expressly
permitted hereunder or thereunder, except, in each case, to the extent that
such Information has been (i) in the public domain through no fault of
such Party, their respective directors, officers, employees, agents,
accountants, counsel and other advisors and representatives, (ii) lawfully
acquired from other sources, which are not bound by a confidentiality
obligation, by such Party or their respective Subsidiaries, or (iii) independently
generated without reference to any proprietary or confidential Information of
the other Party.


 


(b)                                 Each
Party agrees not to release or disclose, or permit to be released or disclosed,
any such Information to any other Person, except its directors, officers,
employees, agents, accountants, counsel and other advisors and representatives 


 


26

















 


who need to know such Information and who are
informed and advised that the Information is confidential and subject to the
obligations hereunder, except in compliance with Section 7.2.  Without limiting the foregoing, when any
Information is no longer needed for the purposes contemplated by this Agreement
or any Ancillary Agreement, each Party will promptly after request of the other
Party either (i) destroy all copies of the Information in such Party’s
possession, custody or control (including any that may be stored in any
computer, word processor, or similar device, to the extent not commercially
impractical to destroy such copies) including any copies, summaries, analyses,
compilations, reports, extracts or other reproductions, in whole or in part, of
such written, electronic or other tangible material or any other materials in
written, electronic or other tangible format based on, reflecting or containing
Information prepared by such Party, and/or (ii) return to the requesting
Party, at the expense of the requesting Party, all copies of the Information
furnished to such Party by or on behalf of the requesting Party.  Notwithstanding the foregoing, each Party may
maintain the confidential Information of the other Party that is contained in
such Party’s electronic back-up files that are created in the normal course of
business pursuant to such Party’s standard protocol for preserving its
electronic records.


 


7.2                                 Protective
Arrangements.  In the event that
either Party or their respective Affiliates, either (i) determines after
consultation with counsel, in the opinion of such counsel that it is required
by law to disclose any Information, or (ii) receives any demand under
lawful process or from any Governmental entity to disclose or provide
Information of the other Party or their respective Subsidiaries that is subject
to the confidentiality provisions hereof, such Party shall notify the other
Party prior to disclosing or providing such Information and shall cooperate at
the expense of the requesting party (and to the extent legally permissible) in
seeking any reasonable protective arrangements requested by such other Party.  Subject to the foregoing, the Party that
received such request may thereafter (i) furnish only that portion of the
Confidential Information that is legally required, (ii) give notice to the
other Party of the Information to be disclosed as far in advance as is
practical, and (iii) exercise reasonable best efforts to obtain reliable
assurance that the confidential nature of such Information shall be maintained.


 


Article VIII


 


Access To Information And Services


 


8.1                                 Provision of Books
and Records.


 


(a)                                  Except
as otherwise provided in any Ancillary Agreement, as soon as practicable after
the Distribution Date, PDL and Facet shall cooperate to provide that originals
of Facet Books and Records (including all documents and electronically stored
information except e-mails or other electronic correspondence not readily
available in hard copy) which solely relate to Facet or the conduct of the
Facet Business, as the case may be, up to the Effective Time, are in the
possession or control of Facet or a Facet Subsidiary.


 


27

















 


(b)                                 With
respect to Facet Books and Records (including e-mails and other electronic
correspondence not readily available in hard copy) that relate to both the
Facet Business and the PDL Business (the “Combined Books and Records”), (i) the
Parties shall use good faith efforts to divide as soon as practicable but no
later than six (6) months following the Distribution Date such Combined
Books and Records into the books and records which solely relate to PDL or
the conduct of the PDL Business and those that relate solely to Facet and the
Facet Business, as the case may be, up to the Effective Time, as appropriate,
and (ii) to the extent such Combined Books and Records are not so divided,
each Party shall keep and maintain copies of such Combined Books and Records as
reasonably appropriate under the circumstances, subject to applicable
confidentiality provisions hereof and of any Ancillary Agreement.


 


8.2                                 Access to
Information.  Except as otherwise
provided in any Ancillary Agreement, after the Distribution Date, each Party
shall provide the other Party and such other Party’s authorized accountants,
counsel and other designated representatives reasonable access and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and Information relating to
pre-Distribution operations of the Facet Business or PDL Business, as
applicable, or within such Party’s possession or control or such other
Information reasonably necessary for the preparation, review or auditing for
spin-out financials for such other Party (including using reasonable best
efforts to give access to Persons or firms possessing Information) insofar as
such access is reasonably required by such other Party for the conduct of the
Facet Business or PDL Business, as applicable, subject to appropriate
restrictions for classified or privileged information.


 


8.3                                 Production of
Witnesses.  At all times after the
Effective Time, each of Facet and PDL shall use reasonable best efforts to make
available to the other, upon prior written request, its and its Subsidiaries’
officers, directors, employees and agents as witnesses to the extent that such
Persons may reasonably be required in connection with any Action.


 


8.4                                 Privileged Matters.  To allocate the interests of each Party with
respect to privileged information, the Parties agree as follows:


 


(a)                                  PDL
shall be entitled, in perpetuity, to control the assertion or waiver of all
privileges in connection with privileged information which relates solely to
the PDL Business, whether or not the privileged information is in the
possession of or under the control of PDL or Facet.  PDL shall also be entitled, in perpetuity, to
control the assertion or waiver of all privileges in connection with privileged
information that relates solely to the subject matter of any claims
constituting Liabilities of PDL and its Affiliates and all Persons who at any
time prior to or as of the Effective Time were directors, officers, agents or
employees of PDL or any of its Affiliates (in each case, in their respective
capacities as such), in each case, together with their respective heirs,
executors, administrators, successors and assigns, now pending or which may be
asserted in the future, in any lawsuits or other Actions initiated against or
by PDL, whether or not the privileged information is in the possession of or
under the control of PDL or Facet.


 


28
















 


(b)           Facet
shall be entitled, in perpetuity, to control the assertion or waiver of all
privileges in connection with privileged information which relates solely to
the Facet Business, whether or not the privileged information is in the
possession of or under the control of PDL or Facet.  Facet shall also be entitled, in perpetuity,
to control the assertion or waiver of all privileges in connection with
privileged information which relates solely to the subject matter of any claims
constituting Facet Liabilities, now pending or which may be asserted in the
future, in any lawsuits or other Actions initiated against or by Facet, whether
or not the privileged information is in the possession of Facet or under the
control of PDL or Facet.


 


(c)           PDL
and Facet agree that they shall have a shared privilege, with equal right to
assert or waive, subject to the restrictions of this Section 8.4,
with respect to all privileges not allocated pursuant to the terms of Sections 8.4(a) and
(b).  All privileges relating to
any claims, proceedings, litigation, disputes or other matters which involve
both PDL and Facet in respect of which PDL and Facet retain any responsibility
or liability under this Agreement shall be subject to a shared privilege.


 


(d)           No
Party may waive any privilege which could be asserted under any applicable law,
if the other Party has a shared privilege, without the consent of the other
Party, except to the extent reasonably required in connection with any
litigation with Third Parties or as provided in Section 8.4(e).  Such consent shall be in writing, or shall be
deemed to be granted unless written objection is made within twenty
(20) days after notice upon the other Party requesting such consent.


 


(e)           In
the event of any litigation or dispute between the Parties and any of its
Affiliates, either Party may waive a privilege in which the other Party has a
shared privilege, without obtaining the consent of the other Party, provided
that such waiver of a shared privilege shall be effective only as to the use of
Information with respect to the litigation or dispute between the Parties and
any of its Affiliates, and shall not operate as a waiver of the shared
privilege with respect to Third Parties.


 


(f)            If
a dispute arises between the Parties regarding whether a privilege should be
waived to protect or advance the interest of either Party, each Party agrees
that it shall negotiate in good faith, shall endeavor to minimize any prejudice
to the rights of the other Party, and shall not unreasonably withhold consent to
any request for waiver by the other Party. 
Each Party specifically agrees that it will not withhold consent to
waiver for any purpose except to protect its own legitimate interests.


 


(g)           Upon
receipt by any Party of any subpoena, discovery or other request which arguably
calls for the production or disclosure of Information subject to a shared
privilege or as to which the other Party has the sole right hereunder to assert
a privilege, or if any Party obtains knowledge that any of its current or
former directors, officers, agents or employees has received any subpoena,
discovery or other request which arguably calls for the production or
disclosure of such privileged information, such Party shall promptly notify the
other Party of the existence of the request and shall provide the other Party a
reasonable opportunity to review the Information and to assert 


 


29

















 


any rights it may have under this Section 8.4 or otherwise
to prevent the production or disclosure of such privileged information.


 


(h)           The
transfer of all Information pursuant to this Agreement is made in reliance on
the agreement of PDL and Facet, as set forth in this Section 8.4
and elsewhere in this Agreement, to maintain the confidentiality of privileged
information and to assert and maintain applicable privileges.  The access to Information being granted
pursuant to Sections 8.1 and 8.2, the agreement to provide
witnesses and individuals pursuant to Section 8.3 and the transfer
of privileged information between the Parties pursuant to this Agreement shall
not be deemed a waiver of any privilege that has been or may be asserted under
this Agreement or otherwise.


 


Article IX


 


Dispute Resolution


 


9.1           Disputes
and Negotiation.  PDL and Facet
recognize that disputes as to certain matters may from time to time arise
during the effectiveness of this Agreement and the Ancillary Agreements which
relate to either Party’s rights and obligations hereunder or thereunder.  It is the objective of the Parties to
establish procedures to facilitate the resolution of disputes arising under
this Agreement and the Ancillary Agreements in an expedient manner by mutual
cooperation and without resort to litigation. 
To accomplish this objective, the Parties agree to follow the procedures
set forth in this Article IX if and when a dispute arises under
this Agreement or the Ancillary Agreements. 
In the event of a dispute between the Parties, a designated
representative of each of PDL and Facet will meet as reasonably requested by
either Party to review any such dispute. 
If the disagreement is not resolved by the designated representatives by
mutual agreement within thirty (30) days after a meeting to discuss the
disagreement, either Party may at any time thereafter provide the other Party
written notice specifying the terms of such disagreement in reasonable
detail.  Upon receipt of such notice, the
chief executive officers of PDL and Facet shall meet at a mutually agreed upon
time and location for the purpose of resolving such disagreement.  The chief executive officers of PDL and Facet
will discuss such disagreement and/or negotiate for a period of up to sixty
(60) days in an effort to resolve such disagreement or negotiate an acceptable
interpretation or revision of the applicable portion of this Agreement or the
Ancillary Agreements mutually agreeable to both Parties, without the necessity
of formal procedures relating thereto. 
During the course of such negotiations, the Parties will reasonably
cooperate and provide information that is not materially confidential in order
that each of the Parties may be fully informed with respect to the issues in
dispute.  The institution of a formal
proceeding, including arbitration under Section 9.2, to resolve the
disagreement may occur by written notice to the other Party only after the
earlier of: (i) the chief executive officers of PDL and Facet mutually
agreeing that resolution of the disagreement through continued negotiation is
not likely to occur; or (ii) the expiration of the sixty (60) day
negotiation period.


 


9.2           Dispute
Resolution and Arbitration.  Except
as provided in the Non-Exclusive Cross-License Agreement for any disputes
concerning Intellectual Property, 


 


30

















 


disputes arising out of, relating to or in connection with this
Agreement or the Ancillary Agreements, or in relations between the parties with
respect to the subject matter hereof, for any reason or under any
circumstances, will be finally settled by a single arbitrator in a binding
arbitration in accordance with the Judicial Arbitration and Mediation Services
(“JAMS”) Comprehensive Arbitration Rules and Procedures (the “JAMS
Rules”).  Upon receipt of written
notice by one Party to the other of the existence of a dispute, the Parties
shall, within thirty (30) days conduct a meeting of one or more senior
executives of each Party, with full settlement authority, in an attempt to
resolve the dispute.  Each Party shall
make available appropriate personnel to meet and confer with the other Party
reasonably within the thirty-day period. 
Upon the expiration of the thirty-day period, or upon the termination of
discussions between the senior executives, either Party may elect arbitration
of any dispute by written notice to the other (the “Arbitration Notice”).  The arbitration shall be held in San
Francisco, California before one (1) arbitrator from JAMS having
substantial experience as a jurist and mediator with significant disputes in
the biotechnology and/or pharmaceuticals industry selected by the mutual
agreement of the Facet and the PDL; provided, however, that if
such parties cannot agree on an arbitrator within thirty (30) days of the
Arbitration Notice, either Party may request JAMS select the arbitrator, and
JAMS shall select an arbitrator pursuant to the procedure set out by the JAMS
rules; provided, however, that the arbitrator selected by JAMS
shall be a former judge with at least fifteen (15) years experience addressing
as a jurist and/or mediator significant disputes in the biotechnology and/or
pharmaceutical industry.  The arbitration
shall be administered by JAMS pursuant to its AAA Rules.  Judgment on the arbitration award may be
entered in any court having jurisdiction. 
The arbitrator may, in the arbitration award, allocate for payment by
the non-prevailing party all or part of the costs of the arbitration, including
fees of the arbitrator and the reasonable attorneys’ fees and costs incurred by
the prevailing party.  This Section shall
not preclude the parties from seeking provisional remedies in aid of
arbitration from a court of appropriate jurisdiction.  In respect of any actions for injunctive or
other equitable relief hereunder, any action or proceeding may be brought
against any Party in the state and federal courts located in the county of San
Mateo, California and each of the parties consents to the jurisdiction of such
courts in any such action or proceeding and waives any objection to venue laid
therein.


 


Article X


 


Further Assurances


 


10.1         Further
Assurances.


 


(a)           In
addition to and without limiting the actions specifically provided in this
Agreement, each of the Parties shall use its reasonable best efforts, prior to,
on and after the Distribution Date, to take, or cause to be taken, all actions,
and to do, or cause to be done, all things, reasonably necessary, proper or
advisable under applicable laws, regulations and agreements to consummate and
make effective the transactions contemplated by this Agreement and the
Ancillary Agreements.


 


31

















 


(b)           Without
limiting the foregoing, prior to, on and after the Distribution Date, each
Party shall cooperate with the other Party, and without any further
consideration, but at the expense of the requesting Party, to execute and
deliver, or use its reasonable best efforts to cause to be executed and
delivered, all instruments, including instruments of conveyance, assignment and
transfer, and to make all filings with, and to obtain all consents, approvals
or authorizations of, any Governmental entity or any other Person under any
permit, license, agreement, indenture or other instrument (including any
Consents or Governmental Approvals), and to take all such other actions as such
Party may reasonably be requested to take by the other Party from time to time,
consistent with the terms of this Agreement and the Ancillary Agreements, in
order to effectuate the provisions and purposes of this Agreement and the
Ancillary Agreements and the transfers of the Facet Assets and the assignment
and assumption of the Facet Liabilities and the other transactions contemplated
hereby and thereby.


 


Article XI


 


Termination


 


11.1         Termination.  Notwithstanding anything to the contrary
herein, this Agreement (including Article V (Indemnification)) may
be terminated and the Separation and Distribution may be amended, modified or
abandoned at any time prior to the Distribution by and in the sole discretion
of PDL without the approval of Facet or the stockholders of PDL.    In the event of such termination, no Party
shall have any Liability to the other Party or any other Person.  After the Distribution, this Agreement may
not be terminated except by an agreement in writing signed by each Party.


 


Article XII


 


Miscellaneous


 


12.1         Governing
Law; Jurisdiction.  This Agreement
shall be deemed to have been made in the State of Delaware and its form,
execution, validity, construction and effect shall be determined in accordance
with the laws of the State of Delaware, without giving effect to the principles
of conflicts of law thereof.


 


12.2         Assignability.  The provisions of this Agreement, each
Ancillary Agreement and the obligations and rights hereunder shall be binding
upon, inure to the benefit of and be enforceable by (and against) the Parties
and their respective successors and permitted transferees and assigns.  Notwithstanding the foregoing, this Agreement
shall not be assignable, in whole or in part, by any Party without the prior
written consent of the other Party, and any attempt to assign any rights or
obligations arising under this Agreement without such consent shall be null and
void; provided, however, that a Party may assign this Agreement to an
Affiliate controlled by such Party or in connection with a merger transaction
in which such Party is not the surviving entity or in connection with the sale
or other transfer by such Party of all or substantially all of its assets, and
upon the effectiveness of such assignment, the assigning Party shall be
released from all of its obligations under this Agreement if the surviving
entity of such merger or the transferee 


 


32

















 


of such assets shall agree in writing, in form and substance reasonably
satisfactory to the other Party, to be bound by all terms of this Agreement as
if named as a “Party” hereto.


 


12.3         Third
Party Beneficiaries.  Except for the
indemnification rights under this Agreement of any PDL Indemnitee or Facet
Indemnitee in their respective capacities as such, (a) the provisions of
this Agreement and each Ancillary Agreement are solely for the benefit of the
Parties and are not intended to confer upon any Person except the Parties any
rights or remedies hereunder, and (b) there are no Third Party
beneficiaries of this Agreement or any Ancillary Agreement and neither this
Agreement nor any Ancillary Agreement shall provide any Third Party with any
remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement or any Ancillary
Agreement.


 


12.4         Notices.  All notices and other communications given or
made pursuant to this Agreement shall be in writing and shall be deemed
effectively given:  (a) upon
personal delivery to the Party to be notified, (b) when sent by confirmed
facsimile, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid or (c) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt.  All communications shall be sent to the
respective parties at the addresses set forth below (or at such other addresses
as shall be specified by notice given in accordance with this Section):


 


	
  If to PDL, to:

  	
   

  	
  PDL
  BioPharma, Inc.

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
  932 Southwood Boulevard

  
	
   

  	
   

  	
  Incline Village, NV
  89451

  
	
   

  	
   

  	
  Facsimile: 775-832-8501

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Shearman &
  Sterling LLP

  
	
  (not to constitute
  notice)

  	
   

  	
  Attention: Peter Lyons

  
	
   

  	
   

  	
  599 Lexington Avenue

  
	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
  Facsimile: 212-848-7179

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Facet, to:

  	
   

  	
  Facet Biotech
  Corporation

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
  1400 Seaport Boulevard

  
	
   

  	
   

  	
  Redwood City, CA  94063

  
	
   

  	
   

  	
  Facsimile: 650-454-1468

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  DLA Piper LLP (US)

  
	
  (not to constitute
  notice)

  	
   

  	
  Attention: Howard
  Clowes

  
	
   

  	
   

  	
  153 Townsend Street,
  Suite 800

  
	
   

  	
   

  	
  San Francisco, CA
  94107-1957

  
	
   

  	
   

  	
  Facsimile: 415-
  659-7410

  



 


33

















 


12.5         Severability.  If any provision of this Agreement or any
Ancillary Agreement or the application thereof to any Person or circumstance is
determined by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions hereof or thereof, or the application
of such provision to Persons or circumstances or in jurisdictions other than
those as to which it has been held invalid or unenforceable, shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
thereby, so long as the economic or legal substance of the transactions
contemplated hereby or thereby, as the case may be, is not affected in any
manner adverse to any Party.  Upon such
determination, the Parties shall negotiate in good faith in an effort to agree
upon such a suitable and equitable provision to affect the original intent of
the Parties.


 


12.6         Expenses.  Except as expressly set forth in this
Agreement or in any Ancillary Agreement, whether or not the Separation or the
Distribution is consummated, all Third Party fees, costs and expenses paid or
incurred in connection with the Separation and Distribution shall be paid by
PDL but only to the extent such fees arise or were paid or incurred prior to
the Effective Time.


 


12.7         Survival
of Covenants.  Except as expressly
set forth in any Ancillary Agreement, all covenants, representations and
warranties contained in this Agreement and each Ancillary Agreement, and
liability for the breach of any obligations contained herein, shall survive the
Effective Time and remain in full force and effect in accordance with their applicable
terms.


 


12.8         Waivers
of Default.  The failure of either
Party to require strict performance by the other Party of any provision in this
Agreement or any Ancillary Agreement will not waive or diminish such Party’s
right to demand strict performance thereafter of that or any other provision
hereof.


 


12.9         Specific
Performance.  The Parties agree that
irreparable damage would occur in the event that the provisions of this
Agreement were not performed in accordance with their specific terms.  Accordingly, it is hereby agreed that the
Parties shall be entitled to (a) an injunction or injunctions to enforce
specifically the terms and provisions hereof in any arbitration in accordance
with Article IX, (b) provisional or temporary injunctive
relief in accordance therewith in the District of Delaware, and (iii) enforcement
of any such award of an arbitral tribunal in any court of the United States, or
any other any court or tribunal sitting in any state of the United States or in
any foreign country that has jurisdiction, this being in addition to any other
remedy or relief to which they may be entitled.


 


12.10       Amendments.  This Agreement may not be modified or amended
except by an agreement in writing signed by each of the Parties.


 


34

















 


12.11       Schedules.  All schedules attached hereto are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein.  Capitalized terms used in the
schedules hereto but not otherwise defined therein will have the respective
meanings assigned to such terms in this Agreement.


 


12.12       Construction.


 


(a)           This
Agreement has been prepared jointly and shall not be strictly construed against
either Party.


 


(b)           For
purposes of this Agreement, whenever the context requires:  the singular number shall include the plural,
and vice versa; the masculine gender shall include the feminine and neuter
genders; the feminine gender shall include the masculine and neuter genders;
and the neuter gender shall include the masculine and feminine genders.


 


(c)           Except
as otherwise indicated, all references in this Agreement to “Articles,” “Sections,”
“Exhibits” and “Attachments” are intended to refer to Articles and Sections of
, and Exhibits and Attachments, to this Agreement.


 


(d)           The
words “include” and “including,” shall not be deemed to be terms of limitation,
but rather shall be deemed to be followed by the words “without limitation.”


 


(e)           The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.


 


12.13       Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which together
shall constitute one and the same instrument. 
Any executed counterpart delivered by facsimile or other means of
electronic transmission shall be deemed an original for all purposes.


 


[SIGNATURE PAGE
FOLLOWS]


 


35

















 


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


 


 


	
   

  	
   

  	
  PDL BioPharma, Inc.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John P. McLaughlin

  
	
   

  	
   

  	
  Name:

  	
  John P. McLaughlin

  
	
   

  	
   

  	
  Title:

  	
  Senior Advisor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Andrew Guggenhime

  
	
   

  	
   

  	
  Name:

  	
  Andrew Guggenhime

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President and

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Facet Biotech Corporation,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Faheem Hasnain

  
	
   

  	
   

  	
  Name:

  	
  Faheem Hasnain

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive Officer

  
					



 


SEPARATION AND DISTRIBUTION
AGREEMENT


SIGNATURE PAGE