Document:

Exhibit 10.12

 

SUBLEASE

 

THIS SUBLEASE is dated for references purposes only
as of July 6, 2006, and is entered by and between OPENWAVE SYSTEMS INC., a
Delaware corporation (“Sublessor”), and PDL BIOPHARMA, INC., a Delaware
corporation (“Sublessee”). Sublessor and Sublessee hereby agree as follows:

 

1. Recitals: This Sublease is made with
reference to the fact that Pacific Shores Development, LLC,
predecessor-in-interest to Pacific Shores Investors, LLC, a Delaware limited
liability company (“Master Lessor”), as Lessor, and Sublessor, under its
previous name of Phone.Com, Inc., as Lessee, are parties to that certain
Triple Net Building Lease, dated as of February 4, 2000 (“Master Lease”),
with respect to certain premises (the “Premises”) comprising that certain
building commonly known as Building 9, Pacific Shores Center, with an address
at 1400 Seaport Boulevard, Redwood City, California 94063 (“Building”). The
Building is located within Pacific Shores Center, Redwood City, California
(“Project”). A copy of the Master Lease is attached hereto as Exhibit A.

 

2. Premises and Common Areas:

 

A. Premises. Sublessor hereby subleases to
Sublessee, and Sublessee hereby subleases from Sublessor, the entire Premises
(“Subleased Premises”). The Subleased Premises, the Building and the Project
are more particularly described in the Master Lease.

 

B. Common Areas. During the Term, Sublessee
shall have the non-exclusive right to use the Common Area described in, and
pursuant to, the provisions of Section 2.02 of the Master Lease. Sublessee
shall use the Common Area in accordance with such reasonable rules and
regulations as are established by Master Lessor. Said use of the Common Area
(including without limitation amenities/athletic facility/baseball and soccer
fields) shall be provided at no additional cost or charge to Sublessee and its
employees for user fees or otherwise, except as expressly provided in the
Master Lease for reimbursement of repair, replacement and maintenance costs and
such other costs charged by Master Lessor with respect thereto as part of
Master Lease Additional Rent (as defined in Section 4.B. below), and
except for any governmental or public authority charges, fees or impositions of
any nature imposed against the Sublease or the Sublessee’s use of the Common
Areas during the Term.

 

3. Term:

 

A. Term. Subject to (i) Sublessor’s
having obtained Master Lessor’s Consent to this Sublease as described in
Paragraph 25 below, and (ii) execution and delivery of the Future Lease by
Sublessee and Master Lessor as described in Paragraph 3.B below, the term of
this Sublease (“Term”) shall be for that period commencing on the earlier of (a) January 1,
2007, and (b) the date that is ninety (90) days after Sublessee’s
completion of the Sublessee Improvements (as defined in Section 14.B.
below) (“Commencement Date”), and ending on April 29, 2013 (“Expiration
Date”), unless this Sublease is sooner terminated pursuant to its terms, or the
Master Lease is sooner terminated pursuant to its terms. Sublessor shall
deliver the Subleased Premises to Sublessee in the condition required by this
Sublease on November 1, 2006 (“Premises Delivery Date”). If Sublessor is
unable to deliver possession of the Subleased Premises to Sublessee by the
Premises Delivery Date for any reason whatsoever, Sublessor shall not be
subject to any liability therefor, nor shall such failure affect the validity
of this Sublease or the obligations of Sublessee hereunder, or extend the

 

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Expiration
Date, but in such case Sublessee shall not be obligated to perform any
obligation of Sublessee hereunder with respect to the Premises until Sublessor
delivers possession of the Subleased Premises to Sublessee in the required
condition, and the Commencement Date shall be extended for a reasonable period
of time to the extent that Sublessor’s delay causes any delay in completion of
the Sublessee Improvements. Sublessor and Sublessee promptly shall execute a
Commencement Date memorandum establishing the Commencement and Expiration Dates
promptly after the Commencement Date has been determined. Sublessee’s failure
to execute the Commencement Date memorandum shall not affect the validity of
this Sublease or the dates set forth therein.

 

Notwithstanding the foregoing, in the event that
Sublessor fails, as a result of occurrences other than a Sublessee default
hereunder or Force Majeure Delay (as defined in Section 17.21 of the
Master Lease), to deliver to Sublessee the Master Lessor’s Consent, the
provisions of Paragraph 25 below shall control. Also notwithstanding the
foregoing, in the event that (i) Sublessee and Master Lessor fail to
execute and deliver the Future Lease within fifteen (15) days after the
date of full execution of this Sublease (the “Execution Date”) by Sublessor and
Sublessee (“Future Lease Outside Termination Date”), and/or (ii) Sublessor
fails, as a result of occurrences other than a Sublessee default hereunder or
Force Majeure Delay (as defined in Section 17.21 of the Master Lease), to
deliver to Sublessee the Subleased Premises on or before the date that is
thirty (30) days after the Premises Delivery Date (the “Premises Delivery
Outside Termination Date”), then Sublessee and Sublessor shall have the right,
but not the obligation, to terminate this Sublease. Such termination shall be
accomplished by providing written notice thereof to the other party within ten (10) days
after the Future Lease Outside Termination Date or the Premises Delivery
Outside Termination Date, as applicable, in which case this Sublease shall
terminate on the day following the last day of the applicable ten (10)- day
notice period (unless Sublessee and Master Lessor execute and deliver the
Future Lease, and/or Sublessor delivers the Subleased Premises to Sublessee, as
applicable, during such ten (10)- day period, in which case this Sublease shall
remain in full force and effect), neither party shall have any further rights
or obligations hereunder, and Sublessor shall return to Sublessee all sums
(including the Letter of Credit [as defined below], if any) paid by Sublessee
to Sublessor in connection with Sublessee’s execution hereof. The return of all
sums paid by Sublessee to Sublessor shall be Sublessee’s sole and exclusive
remedy in the event of a termination pursuant to this Paragraph. However,
Sublessor agrees to use commercially reasonable diligent, good faith efforts to
deliver the Subleased Premises to Sublessee on the Premises Delivery Date, and
Sublessee agrees to use commercially reasonable diligent good faith efforts to obtain
the execution and delivery by Sublessee and Master Lessor of the Future Lease
as soon as possible.

 

B. No Option to Extend; Future Lease. The
parties acknowledge that Sublessee has no option to extend the Term of this
Sublease. However, concurrently with the execution of this Sublease, Sublessee
and Master Lessor have executed and delivered, or plan to execute and deliver,
a lease agreement whereby Sublessee shall continue in occupancy of the
Subleased Premises following the Expiration Date as a direct tenant for the
Subleased Premises (the “Future Lease”). Sublessee shall attempt in good faith
to obtain the execution and delivery of the Future Lease by Sublessee and
Master Lessor as soon as possible, but not later than fifteen (15) days
after the Execution Date. No costs or expenses associated with the execution
and delivery of the Future Lease shall be borne by Sublessor. If the execution
and delivery of the Future Lease by Sublessee and Master Lessor is not obtained
within fifteen (15) days after the Execution Date, the provisions of Section 3.A.
above shall control.

 

C. Early Entry. For the period commencing on
the Premises Delivery Date and continuing until the Commencement Date (“Early
Entry Period”), Sublessee shall have the right to enter the Subleased Premises
for purposes of constructing the Sublessee Improvements and installing its
trade fixtures, furniture, equipment, cabling and wiring. Such early entry
shall be subject to all of the terms and conditions of this Sublease
(including, without limitation, obligations relating to Sublessee’s insurance)
except for the

 

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obligation
to pay Rent; provided, however that during the period of Sublessee’s
construction work in the Subleased Premises, Sublessee shall be obligated to
pay all utilities costs for the Subleased Premises. Notwithstanding anything to
the contrary contained in this Sublease, Sublessee shall not have the right to
commence demolition in preparation for or construction of the Sublessee
Improvements during the Early Entry Period in any portion of the Subleased
Premises unless and until both Sublessor and Master Lessor have approved
Sublessee’s plans for the Sublessee Improvements pursuant to the provisions of Section 14.B.
below. Further, prior to the Premises Delivery Date, Sublessee shall have no
right of possession or occupancy of the Subleased Premises, and Sublessor
reserves the right to make any use of the Subleased Premises that is not
inconsistent with Sublessor’s obligation to deliver the Subleased Premises to
Sublessee as of the Premises Delivery Date.

 

4. Rent:

 

A. Monthly Base Rent. Commencing on the
Commencement Date and continuing throughout the Term, Sublessee shall pay to
Sublessor monthly base rent (“Monthly Base Rent”) for the Subleased Premises in
equal monthly installments as set forth below:

 

	
  Months

  	
   

  	
  Base Rent

  	
   

  
	
  1 - 24

  	
   

  	
  $223,581.85 per month

  	
   

  
	
  25 – Expiration Date

  	
   

  	
  $268,864.25 per month

  	
   

  

 

As used herein, “month” shall mean a period
beginning on the first (1st) day of a calendar month and ending on the
last day of that month. Monthly Base Rent shall be paid on or before the first
(1st) day of each month. Rent (as defined below) for any period during the
Term hereof which is for less than one month of the Term shall be a prorata
portion of the monthly installment based on the number of days in such month.
Rent shall be payable without notice or demand and without any deduction,
offset or abatement, in lawful money of the United States of America. Rent
shall be paid directly to Sublessor at Openwave Systems Inc., 2100 Seaport
Boulevard, Redwood City, California 94063, Attn: Real Estate Department, or
such other address as may be designated in writing by Sublessor.

 

This Sublease is an “Absolute Triple Net” Sublease.
Except as expressly provided in this Sublease (i) Sublessor shall receive
the Monthly Base Rent free and clear of any and all expenses, costs,
impositions, taxes, assessments, liens or charges of any nature whatsoever
payable by Sublessee pursuant to this Sublease, and (ii) Sublessee shall
not be entitled to any abatement of or reduction in Rent payable under this
Sublease.

 

B. Additional Rent. In addition to Monthly
Base Rent, commencing on the Commencement Date and continuing each month
thereafter throughout the remainder of the Term, Sublessee shall pay to
Sublessor as additional rent under this Sublease (“Sublease Additional Rent”),
at the time that Sublessee pays Monthly Base Rent or, if so notified by
Sublessor in writing, within twenty (20) days after receipt of Sublessor’s
invoice therefor, one hundred percent (100%) (“Sublessee’s Share”) of all
“Additional Rent” (as defined in Section 4.05(a) of the Master Lease,
and hereinafter referred to as “Master Lease Additional Rent”) with respect to
the Subleased Premises during the Term, including, without limitation, all
taxes, assessments, fees and other impositions payable in accordance with the
provisions of Article XI of the Master Lease, insurance in accordance with
the provisions of Article VII of the Master Lease, operating charges and
Common Area facility use privilege charges with respect to the
amenities/athletic facility (in lieu of any separate use charge to employees
who use said facility, the baseball and soccer fields), as well as maintenance,
repair and replacement costs and expenses, utility charges and other costs and
charges allocable to the Common Area and the Common Area facilities and the
Outside Areas of the Subleased Premises, all in

 

3

 

accordance
with the provisions of Article VI of the Master Lease, and any other
charges, costs and expenses (including appropriate reserves therefor) which are
contemplated or may arise under any provision of the Master Lease during the
Term, plus the Management Fee described in Section 4.05 (a) of the
Master Lease, payable by Sublessor under the Master Lease during the Term.

 

Pursuant to Section 4.05(b) of the Master
Lease, Master Lessor is required to provide a “Lessor’s Statement” of the
actual expenses for the Premises as compared to the estimated payments made
throughout the applicable calendar period. Following Sublessor’s receipt of
such Lessor’s Statement from Master Lessor, Sublessor shall promptly forward a
copy to Sublessee, and there shall be an adjustment between Sublessor and
Sublessee for any over- or under- payment of such Master Lease Additional Rent
items for the preceding calendar period, with payment to Sublessor or credit to
Sublessee against the next installment of Sublease Additional Rent (or refund
following the expiration of the Sublease Term), as the case may require, within
thirty (30) days after Sublessor’s delivery of such reconciliation to
Sublessee. Attached hereto as Exhibit E is a true and correct copy
of the most recent reconciliation for the Subleased Premises received by
Sublessor from Master Lessor.

 

Pursuant to Section 4.07 of the Master Lease,
Sublessor has a right to review supporting data for any Lessor’s Statement. If,
within ten (10) days after receipt of the Lessor’s Statement from
Sublessor, Sublessee notifies Sublessor that Sublessee desires to review the
supporting data and identifies for Sublessor those items it wishes to
challenge, Sublessor shall forward to Master Lessor Sublessee’s statement prior
to the end of the thirty (30)- day period identified in Section 4.07(1),
and Sublessee may exercise the rights set forth in Section 4.07 in strict
accordance therewith. If Sublessee does not timely meet the requirements of Section 4.07,
or if Master Lessor does not comply with the provisions of Section 4.07,
Sublessor shall have no liability to Sublessee with respect thereto other than
the obligation set forth in Paragraph 24.A.(iv) below, and Sublessee shall
indemnify Sublessor for any liability Sublessor incurs as a result of
Sublessee’s failure to comply with the provisions of Section 4.07 of the
Master Lease.

 

Except as otherwise provided in this Sublease,
Sublessee also shall be responsible for payment of all other monetary
obligations of Sublessor to Master Lessor under the terms of the Master Lease,
including, without limitation, pursuant to Section 17.04, applicable to
the Subleased Premises for the Term, except to the extent such Master Lease
Additional Rent is incurred as a result of Sublessor’s default under the Master
Lease or this Sublease. Sublessee also shall pay Sublessee’s own telephone,
telecommunications, internet and data communications charges.

 

All monies required to be paid by Sublessee under
this Sublease (except for Monthly Base Rent, as defined in Paragraph 4.A.)
shall be deemed Sublease Additional Rent, and Sublessor shall have all rights
and remedies for the non-payment of same as it would have for non-payment of
Monthly Base Rent. Monthly Base Rent and Sublease Additional Rent hereinafter
collectively shall be referred to as “Rent.”

 

Notwithstanding anything to the contrary contained
in this Sublease, if Sublessee elects to occupy the Subleased Premises for
purposes of conducting business thereon prior to the Commencement Date, from
and after such date Sublessee shall pay to Sublessor the Master Lease
Additional Rent applicable to the Subleased Premises.

 

C. Payment of First Month’s Rent. Upon
execution of this Sublease by Sublessee, Sublessee shall pay to Sublessor the
sum of $223,581.85, which sum shall constitute Monthly Base Rent for the first
month of the Term.

 

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5. Security Deposit: Subject to the
provisions of Paragraph 34 below, upon the execution of this Sublease by
Sublessee, Sublessee shall deposit with Sublessor, in cash, the sum of
$268,864.25 as security for the performance by Sublessee of the terms and
conditions of this Sublease (“Security Deposit”). If Sublessee fails to pay
Rent or other charges due hereunder or otherwise defaults with respect to any
provision of this Sublease, then Sublessor may, but shall not be required to,
draw upon, use, apply or retain all or any portion of the Security Deposit for
the payment of any Rent or other charge in default, for the payment of any
other sum which Sublessor has become obligated to pay by reason of Sublessee’s
default, or to compensate Sublessor for any loss or damage which Sublessor has
suffered thereby. The Security Deposit is not an advance payment of Rent or a
measure or limit of Sublessor’s damages upon Sublessee’s default under this
Sublease, and Sublessor shall not be required to keep the Security Deposit
separate from Sublessor’s general funds or to pay interest thereon. Sublessor
shall not be deemed a trustee of the Security Deposit. Sublessee hereby waives
any restriction on the use or application of the Security Deposit by Sublessor
as may be set in any applicable law, including, without limitation, Section 1950.7
of the California Civil Code, as it may be amended. The use, application or
retention of the Security Deposit, or any portion thereof, by Sublessor shall
not prevent Sublessor from exercising any other right or remedy provided by
this Sublease or at law or in equity, it being intended that Sublessor shall
not first be required to proceed against the Security Deposit, and the Security
Deposit shall not operate as a limitation on any recovery to which Sublessor
otherwise may be entitled. If Sublessor so uses or applies all or any portion
of the Security Deposit, then Sublessee shall, within five (5) days after
demand therefor, deposit cash with Sublessor in the amount required to restore
the Security Deposit to the full amount stated above. Failure to make such
deposit when due shall be a material default under this Sublease, without any
requirement for prior written notice thereof from Sublessor. Within thirty
(30) days after the later of the expiration or earlier termination date of
this Sublease, if Sublessee is not then in default hereunder, Sublessor shall
return to Sublessee (without interest) so much of the Security Deposit as has
not been applied by Sublessor pursuant to this Paragraph, or which is not
otherwise required to cure Sublessee’s defaults.

 

6. Parking: During the Term, Sublessee shall
have the right to use the parking spaces for the Subleased Premises described
in, and pursuant to, the provisions of Section 2.03 of the Master Lease.
Sublessee shall use the parking area in accordance with such reasonable rules and
regulations as are established by Master Lessor. Said parking shall be provided
at no additional cost or charge, except as expressly provided in the Master
Lease for reimbursement of repair, replacement and maintenance costs and such
other costs charged by Master Lessor with respect thereto as part of Master Lease
Additional Rent, and except for any governmental or public authority charges,
fees or impositions of any nature imposed against the Sublease or the
Sublessee’s use of the parking spaces during the Term.

 

7. Condition of Premises: Sublessor
represents and warrants for the benefit of Sublessee, to the knowledge of
Sublessor that, as of the Premises Delivery Date, the following two
representations and warranties shall be true and correct. Whenever a
representation or warranty is being made to Sublessor’s knowledge in this
Sublease, such qualification indicates that the warranty is being made to the
current actual knowledge of Thomas Masles, Sublessor’s Vice President, Global
Real Estate and Facilities, without any implied, imputed or constructive knowledge
and without any independent investigation having been made or any implied duty
to investigate.

 

A. Compliance with Laws. The Subleased
Premises, including the tenant improvements installed by Sublessor, are in
compliance with all applicable laws, regulations, building codes and ordinances
(collectively, “Applicable Laws”), including, without limitation, the Americans
with Disabilities Act of 1990 (“ADA”). If at any time during the period
commencing with the date of Sublessee’s receipt of comments from the City of
Redwood City (“City”) to Sublessee’s plans for the Sublessee Improvements and
continuing until the earlier of (i) ninety (90) days thereafter and (ii) the
date that Sublessee commences demolition in

 

5

 

preparation for and/or construction of the Sublessee Improvements,
Sublessee discovers that the foregoing sentence was not true as of the Premises
Delivery Date, Sublessee shall notify Sublessor of the need for correction or
repair, and Sublessor shall cause the correction or repair to be completed at
no cost to Sublessee. Notwithstanding anything to the contrary contained in the
foregoing, if the need for correction or repair was caused by the act or
omission of Sublessee, its agents, employees or contractors on the Subleased
Premises, Sublessee, and not Sublessor, shall be responsible for the correction
or repair.

 

B. No Defects. The Subleased Premises
(including without limitation the window systems, roof, roof membrane and
structural elements), tenant improvements installed by Sublessor, and all
systems located within or serving the Subleased Premises (including without
limitation the plumbing, lighting, gas, electrical, HVAC distribution and fire
safety (each individually referred to as a “Building Systems)), are water-tight
and in good working condition and repair. If at any time during the ninety
(90) day period immediately following Sublessee’s receipt of comments from
the City to Sublessee’s plans for the Sublessee Improvements (the “Warranty
Period”), Sublessee discovers that the roof membrane, roof structure, window
systems or the electrical, gas, plumbing, lighting or HVAC distribution systems
serving the Subleased Premises are not in the condition required by the
foregoing sentence, Sublessee shall notify Sublessor of the need for correction
or repair, and Sublessor shall cause the correction or repair to be completed
at no cost to Sublessee; provided, however, if during the Warranty Period
Sublessee (i) commences demolition in preparation for and/or construction
that modifies a particular Building System, then the Warranty Period with
regard to that Building System shall cease as of the date that Sublessee
commences such demolition and/or construction, or (ii) makes a roof
penetration at the Sublease Premises, then the Warranty Period with regard to
the roof and roof membrane shall cease as of the date of such penetration. If
during the first ninety (90) days after Sublessee occupies the Subleased
Premises for purposes of conducting business Sublessee discovers that the
generator, plumbing (or other) fixtures or HVAC units are not in the condition
required by this Paragraph, Sublessee shall notify Sublessor of the need for
correction or repair, and Sublessor shall cause the correction or repair to be
completed at no cost to Sublessee. If Sublessor delivers to Sublessee the
elevators and the maintenance and certification documentation required with
respect thereto, and prior to the date that Sublessee commences demolition in
preparation for and/or construction of the Sublessee Improvements, Sublessee
discovers that the elevators are not in the condition required by this
Paragraph, Sublessee shall notify Sublessor of the need for correction or
repair, and Sublessor shall cause the correction or repair to be completed at
no cost to Sublessee. Notwithstanding anything to the contrary contained in the
foregoing, if the need for correction or repair was caused by the act or
omission of Sublessee, its agents, employees or contractors on the Subleased
Premises, including, without limitation, modifications to or penetration of the
roof membrane, Sublessee, and not Sublessor, shall be responsible for the
correction or repair.

 

Other than as provided in Paragraphs 7.A and B above
and Paragraph 35 below, Sublessor shall deliver the Subleased Premises to
Sublessee broom clean and with all personal effects removed, but otherwise in
its “as-is, with all faults” condition, and Sublessor shall have no obligation
whatsoever to make or pay the cost of any alterations, improvements or repairs
to the Subleased Premises, including, without limitation, any improvement or
repair required to comply with any Applicable Laws. Sublessee shall not look to
Sublessor for performance of any repairs required to be performed by Master Lessor
under the terms of the Master Lease, provided, however, that any cost that
might otherwise be “passed through” to Sublessee pursuant to Section 6.01(b) or
6.02 of the Master Lease with respect only to the matters warranted in
Paragraphs 7.A. and 7.B. above as a result of such repairs shall be borne by
Sublessor rather than Sublessee, except to the extent the need for repair was
caused by the act of omission of Sublessee, its agents, employees or
contractors on the Subleased Premises.

 

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Other than as provided in Paragraphs 7.A and B
above, from and after the Premises Delivery Date, Sublessee shall, at
Sublessee’s cost and expense, comply promptly with all Applicable Laws relating
to the Subleased Premises and Sublessee’s use and occupancy of the same in
effect during any part of the Term, whether such requirements are presently
foreseeable or not, and without regard to the cost or expense of compliance.

 

8. Indemnification.

 

A. Indemnification of Master Lessor. Pursuant
to this Sublease, for the benefit of Master Lessor, Sublessee assumes all of
Sublessor’s indemnification obligations as “Lessee” under the Master Lease,
including, without limitation, Sections 7.07 and 17.22(d), arising from and
after the Delivery Date or related to the actions or omissions of Sublessee or
its agents, employees, licensees, invitees, contractors, vendors, guests,
visitors, sublessees or assigns (collectively, “Agents”), subject to and in
accordance with the terms, conditions, exceptions and defenses set forth in the
Master Lease, and except for any liability, damage or injury arising because of
the negligence or willful misconduct of Sublessor or its Agents.

 

B. Indemnification of Sublessor. Except to
the extent caused by the active negligence or willful misconduct of Sublessor
or its Agents, Sublessee shall indemnify and hold harmless Sublessor from any
and all liability, claims, loss, damages, causes of action (whether in tort or
contract, law or equity, or otherwise), expenses, charges, assessments, fines
and penalties of any kind, including, without limitation, reasonable attorney
fees, expert witness fees and costs, arising by reason of (i) the death or
injury of any person, including any person who is an employee, agent, invitee,
licensee, permittee, visitor, guest or contractor of Sublessee, or by reason of
damage to or destruction of any property, including property owned by Sublessee
or any person who is an employee, agent, invitee, licensee, permittee, visitor,
guest or contractor of Sublessee, caused or allegedly caused (1) while
that person or property is in or about the Subleased Premises; (2) by some
condition of the Subleased Premises; (3) by some act or omission by
Sublessee or its Agents, or any person in, adjacent, on, or about the Subleased
Premises with the permission, consent or sufferance of Sublessee; (4) by
any matter connected to or arising out of Sublessee’s occupation and use of the
Subleased Premises (ii) the negligence or willful misconduct of Sublessee
or its Agents; or (iii) a breach of Sublessee’s obligations,
representations or warranties under this Sublease; or (iv) a breach of
Sublessee’s obligations under the Master Lease to the extent incorporated
herein pursuant to Paragraph 24. In addition, Sublessee shall indemnify and
hold Sublessor harmless from any liabilities, losses, claims, damages,
penalties, fines, attorney fees, expert fees, court costs, remediation costs,
investigation costs, or other expenses resulting from or arising out of the use,
storage, treatment, transportation, release, presence, generation or disposal
of Hazardous Materials (defined in Section 17.22 of the Master Lease) on,
from or about the Subleased Premises, and/or the subsurface or ground water,
after the Premises Delivery Date from an act or omission of Sublessee or any of
Sublessee’s Agents. If by reason of an act or omission of Sublessee or any of
its employees, agents, invitees, licensees, visitors, guests or contractors,
Sublessor is made a party defendant or a cross-defendant to any action
involving the Subleased Premises or this Sublease, Sublessee shall hold
harmless and indemnify Sublessor from all liability or claims of liability,
including all damages, attorney fees and costs of suit.

 

C. Indemnification of Sublessee. Sublessor
shall indemnify and hold harmless Sublessee from any liabilities, losses,
claims, damages, penalties, fines, attorney fees, expert fees, court costs,
remediation costs, investigation costs, or other expenses resulting from or
arising out of the use, storage, treatment, transportation, release, presence,
generation or disposal of Hazardous Materials on, from or about the Subleased
Premises, and/or the subsurface or ground water, prior to the Premises Delivery
Date, from an act or omission of Sublessor or its agents or employees. To the
extent that Sublessor is indemnified by Master Lessor pursuant to Section 17.22(d) of
the Master Lease, Sublessee shall have no liability with respect to such
matters.

 

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D. Consequential Damages. Notwithstanding any
other provision of this Sublease, in no event shall Sublessor or Sublessee be
liable to the other (i) for lost profits or any special, indirect,
incidental, punitive or consequential damages arising from any cause (except,
in the case of an indemnity obligation, to the extent the indemnified party is
obligated to pay such damages to Master Lessor under the Master Lease as a
result of a default by the indemnifying party under this Sublease or the Master
Lease), or (ii) for any damage which is or could be covered by the
insurance required to be carried under this Sublease.

 

E. Survival. The foregoing indemnifications
and those contained in the Master Lease incorporated by reference herein shall
survive the expiration or earlier termination of this Sublease.

 

9. Right to Cure Defaults:

 

A. Sublessee’s Defaults. If Sublessee fails
to pay any sum of money due to Sublessor within two (2) business days’
following written notice to Sublessee, or fails to perform any other act on its
part to be performed hereunder within five (5) business days’ following
written notice to Sublessee, then Sublessor may, but shall not be obligated to,
make such payment or perform such act. All such sums paid, and all costs and
expenses of performing any such act, shall be deemed Sublease Additional Rent
payable by Sublessee to Sublessor upon demand, together with interest thereon
at the Agreed Rate as described in Section 17.02 of the Master Lease, from
the date of the expenditure until repaid.

 

B. Sublessee’s Authorization to Direct Sublease
Payments. In addition to Sublessee’s rights pursuant to Paragraph 41 below,
Sublessee shall have the right to pay all Rent owing by Sublessee to Sublessor
under this Sublease for those items which also are owed by Sublessor to Master
Lessor under the Master Lease directly to Master Lessor on the following terms
and conditions:

 

(i) Either (i) Sublessee reasonably
believes that Sublessor has failed to make any payment required to be made by
Sublessor to Master Lessor under the Master Lease and Sublessor fails to
provide adequate proof of payment within two (2) business days after
Sublessee’s written demand requesting such proof; or (ii) Sublessee
reasonably believes that Sublessor shall fail to make any payment required to
be made by Sublessor to Master Lessor under the Master Lease and Sublessor
fails to provide assurance of future performance in form reasonably
satisfactory to Sublessee within two (2) business days after Sublessee’s
written demand requesting such assurance; or (iii) Sublessee has received
a Master Lessor Base Rent Demand as defined in Section 41.A.(2) below.

 

(ii) Sublessee shall not prepay any amounts
owing by Sublessee without the consent of Sublessor.

 

(iii) Sublessee shall provide to Sublessor
concurrently with any payment to Master Lessor reasonable evidence of such
payment.

 

(iv) Notwithstanding section (i) above, if
Sublessor notifies Sublessee that it disputes any amount demanded by Master
Lessor, Sublessee shall not make any such payment to Master Lessor unless
Master Lessor has provided a three-day notice to pay such amount or forfeit the
Master Lease or Master Lessor has provided a Master Lessor Base Rent Demand.

 

8

 

Any
sums paid directly by Sublessee to Master Lessor in accordance with this
Paragraph 9 (rather than pursuant to the provisions of Paragraph 41 below)
shall be credited toward the amounts payable by Sublessee to Sublessor under
this Sublease, and Sublessee agrees that upon the credit by Sublessor of such
amounts against the amounts payable by Sublessee to Sublessor pursuant to this
Sublease, Sublessor shall be forever released from all obligations and
liabilities under this Sublease relating to Sublessor’s obligation to pay such
particular amounts due under the Master Lease.

 

10. Assignment and Subletting:

 

A. In General. Sublessee shall not
voluntarily or by operation of law assign, transfer, mortgage, sublet, license
or otherwise transfer or encumber all or any part of Sublessee’s interest in
this Sublease or the Subleased Premises or any part thereof (“Transfer”)
without the prior written consent of Sublessor, which shall not be unreasonably
withheld or delayed, and of Master Lessor to any proposed Transfer, and any
such Transfer shall be made in accordance with the provisions of Article 11
of the Master Lease or Paragraph 10.C. below. A consent to one Transfer shall
not be deemed to be a consent to any subsequent Transfer. Any Transfer without
the consents required by this Paragraph shall be void and shall constitute a
breach of this Sublease. Sublessor’s consent to any assignment or subletting
shall be ineffective unless set forth in writing, and Sublessee shall not be
relieved from any of its obligations under this Sublease, unless the consent
expressly so provides.

 

B. Excess Rent. In the event Sublessor shall
consent to a Transfer, and after any excess rent has been paid to Master Lessor
pursuant to Section 11.04 of the Master Lease, Sublessee shall pay to
Sublessor with its regularly scheduled Monthly Base Rent payments, fifty
percent (50%) of all sums and the fair market value of all consideration
collected or received by Sublessee from a sub-sublessee or assignee which are
in excess of the Monthly Base Rent and Sublease Additional Rent due and payable
with respect to the subleased or assigned Subleased Premises for the time
period encompassed by the Transfer term, after first deducting: (i) leasing
commissions, and (ii) the unamortized cost (based on a straight-line
amortization over the entire Sublease Term) of Sublessee Improvements paid for
by Sublessee and allocable to such subleased or assigned Subleased Premises
(based on the rentable square footage of the space assigned or sublet compared
to the Subleased Premises).

 

C. Sublessee Affiliates. Sublessee may assign
this Sublease, or sublet up to forty percent (40%) of the Sublease
Premises, without the need for Sublessor’s consent (but with written notice to
Sublessor prior to such transfer, unless such notification is restricted by the
regulations or requirements of the Securities and Exchange Commission, in which
event such notification shall be made promptly following the date of such
transfer), to any corporation, limited liability company or partnership which
controls, is controlled by, or is under common control with Sublessee, or to
any corporation, limited liability company or partnership resulting from the
merger or consolidation with Sublessee, or to any person or entity which
acquires all of Sublessee’s stock or all, or substantially all of the assets of
Sublessee as a going concern of the business that is being conducted on the
Sublease Premises (collectively, an “Affiliate”), provided that said assignee
or sublessee (i) in the event of an assignment of this Sublease to an
Affiliate only, has a net worth at least equal to the net worth of Sublessee as
of the date of this Sublease, and (ii) assumes, in full, the obligations
of Sublessee under this Sublease (or, in the case of a sublease, the portion of
the Sublease Premises subject to the sublease) and provided further that the
use to which the Sublease Premises will be put does not materially change. Any
such assignment shall not, in any way, affect or limit the liability of
Sublessee under the terms of this Sublease. The terms of Paragraph 10.B. above
shall not be applicable to any assignment or sublease pursuant to this
Paragraph. The foregoing shall not be deemed to relieve Sublessee’s obligation
to obtain Master Lessor’s consent to an assignment or sublease to an Affiliate
under the Master Lease, to the extent Master Lessor’s consent is required.

 

9

 

11. Use: Sublessee shall use the Subleased
Premises only for office, research and development and such ancillary uses
which do not cause excessive wear of the Subleased Premises or increase the
potential liability of Sublessor, and, except as otherwise expressly permitted
in this Sublease, in accordance with the provisions of Section 5.01 of the
Master Lease. Notwithstanding the foregoing sentence, at Sublessee’s option
(written notice of which election shall be given to Sublessor at least sixty
(60) days prior to commencement of such use), and subject to the terms of
the Master Lessor’s Consent (which shall include Master Lessor’s consent to the
following), the Subleased Premises also may be used and occupied for
laboratory, biopharmaceutical research (including without limitation, vivarium
and animal colony facilities for rodents only, small scale pilot fermentation
and other pilot plant facilities) and other related legal uses (collectively,
“Lab Uses”). Sublessee shall use the Subleased Premises for no uses other than
those set forth in the foregoing two sentences without Sublessor’s prior
written consent, which shall not be unreasonably withheld, conditioned or
delayed so long as such use is lawful and does not conflict with any other
provision of this Sublease, and the prior written consent of Master Lessor.
Upon demand, Sublessee shall pay to Sublessor all taxes or charges imposed by
applicable governmental authorities against the Subleased Premises or
Sublessor, so long as such tax or assessment is directly related to Sublessor’s
interest in the Subleased Premises (including, without limitation, assessments
imposed as a consequence of the occurrence, storage, use or disposal of
Hazardous Materials [as defined in Section 17.22(a) of the Master
Lease] by Sublessee or Sublessee’s Agents in or about the Subleased Premises).
Sublessee shall not do or permit anything to be done in or about the Subleased
Premises which would (i) injure the Subleased Premises, or (ii) vibrate,
shake, overload, or impair the efficient operation of the Subleased Premises or
the sprinkler systems, heating ventilating or air conditioning equipment, or
utilities systems located therein. Sublessee shall not store any materials,
supplies, finished or unfinished products, or articles of any nature outside of
the Subleased Premises, except with the prior written consent of Master Lessor.
Sublessee shall comply with all reasonable rules and regulations
promulgated from time to time by Master Lessor.

 

12. Effect of Conveyance by Sublessor: As
used in this Sublease, the term “Sublessor” means the holder of the lessee’s
interest under the Master Lease, together with any of such lessee’s successors
and assigns. In the event of any transfer of said lessee’s interest, Sublessor
shall not be relieved of any covenants or obligations of the Sublessor
hereunder. From and after the effective date of the transfer, it shall be
deemed and construed, without further agreement between the parties, that the
transferee has assumed and shall be jointly and severally liable with the
original lessee for the performance of all of covenants and obligations to be
performed by Sublessor hereunder. However, if Sublessor shall transfer and
deliver any security of Sublessee to the transferee of said lessee’s interest
in the Master Lease, and thereupon the Sublessor shall be discharged from any
further liability with respect thereto. Notwithstanding anything to the
contrary contained in this Paragraph, no transfer of Sublessor’s interest in
the Subleased Premises shall affect the terms and conditions of this Sublease.

 

13. Acceptance: The parties acknowledge and
agree that Sublessee is subleasing the Subleased Premises on an “as is, with
all faults” basis and Sublessor has made no representations or warranties with
respect to the condition of the Subleased Premises except as set forth in
Paragraph 7 above. Sublessee hereby represents to Sublessor and Master Lessor
that (i) Sublessee has fully inspected the Subleased Premises and the
physical condition thereof, including, without limitation, accessibility and
location of utilities and improvements, zoning and earthquake preparedness,
which in Sublessee’s judgment affect or influence Sublessee’s use of the
Subleased Premises and Sublessee’s willingness to enter into this Sublease, (ii) Sublessee
is relying on its inspection in subleasing the Subleased Premises, and (iii) Sublessee
has received no representations or warranties from Sublessor, other than with
respect to the condition of the Premises (as set forth in Paragraph 7 above),
or from Master Lessor on which Sublessee has relied in entering into this
Sublease.

 

10

 

14. Improvements:

 

A. Alterations and Improvements. No
alterations or improvements shall be made to the Subleased Premises except in
strict accordance with this Sublease and Sections 6.03 and 6.04 of the Master
Lease, and only with the prior written consent of both Master Lessor and
Sublessor, which consent of Sublessor shall not be unreasonably withheld,
conditioned or delayed; provided, however, that for any “de minimis”
alterations that do not require Master Lessor’s consent under Section 6.03
of the Master Lease, Sublessee shall not be required to obtain the consent of
either Master Lessor or Sublessor.

 

B. Sublessee Improvements. Sublessee may, at
its option and in strict accordance with the provisions of the Master Lease,
including, without limitation, Sections 6.03 and 6.04 thereof, and this
Sublease, complete certain sublessee improvements to prepare the Subleased
Premises for Sublessee’s occupancy thereof, consisting, conceptually, of the
following: modifications to the existing data center, demolition of certain
network labs, possible modifications to the existing executive suites and
modifications to the shipping and receiving area (the “Sublessee
Improvements”). The Sublessee Improvements shall be constructed at Sublessee’s
sole cost and expense, without any contribution or improvement allowance from
Sublessor. Sublessee shall not make or permit anyone to make any Sublessee
Improvements without the prior written consent of Sublessor, which shall not be
unreasonably withheld, conditioned or delayed, and of Master Lessor in
accordance with the Master Lease. In connection with the foregoing, Sublessee
shall submit to Sublessor, for prior written approval by Sublessor, which shall
not be unreasonably withheld, conditioned or delayed, and Master Lessor, any
and all space plans, preliminary plans, design development drawings and
construction documents required by Master Lessor to be provided in connection
with the Sublessee Improvements. Any and all costs and expenses associated with
the acquisition of cabling, equipment, furniture, security systems or other
personal property for Sublessee or the Subleased Premises or the installation
or placement of any of the foregoing within the Subleased Premises or with the
project management for the performance of the Sublessee Improvements
(collectively, “Sublessee’s Personal Property and Services”), also shall be
paid for by and be the sole responsibility of Sublessee, except to the extent
included as part of the Personal Property described in Paragraph 35 below.

 

C. Removal of Improvements. Upon the
expiration or earlier termination of this Sublease, or at such later time if so
permitted by the Future Lease, Sublessee, at its sole cost and expense, shall
be responsible for removing any and all alterations or improvements (including,
without limitation, the Sublessee Improvements) installed in the Subleased
Premises by Sublessee and restoring the Subleased Premises to its condition
immediately prior to the alteration or improvement, but only if and to the
extent required by Master Lessor. If this Sublease is terminated as a result of
a default, beyond applicable notice and cure periods, by Sublessee under this
Sublease or under the Master Lease (to the extent incorporated herein),
Sublessee shall be required to remove the alterations or improvements
(including, without limitation, the Sublessee Improvements) and restore the
Subleased Premises if and to the extent required by Master Lessor.

 

11

 

15. Insurance; Waiver of Subrogation and Release:

 

A. Insurance. All insurance policies required
to be carried by “Lessee” under Article VII of the Master Lease shall be
maintained by Sublessee pursuant to the terms of Article VII, commencing
on the Premises Delivery Date and continuing until the expiration or earlier
termination of the Term. Such policies shall name Sublessor and Master Lessor
(and such lenders as are designated by Sublessor or Master Lessor) as
additional insureds. All policies shall be written as primary policies with
respect to the interests of Master Lessor and Sublessor and such other
additional insureds, and shall be primary to and not contributory with any
similar insurance carried by Master Lessor, which insurance shall be considered
excess insurance. All policies shall also contain “cross liability” or
“severability of interest” provisions and shall insure the performance of the
indemnity obligations set forth in this Sublease. Sublessee shall provide
Master Lessor and Sublessor with certificates of all policies, including in
each instance an endorsement providing that such insurance shall not be
cancelled or amended except after thirty (30) days prior written notice to
Master Lessor and Sublessor. Sublessor shall not be obligated to deliver the
Subleased Premises to Sublessee until Sublessee has provided to Sublessor the
certificates of insurance required by Section 7.05 of the Master Lease.
The limits of said insurance required by this Sublease as carried by Sublessee
shall not limit the liability of Sublessee nor relieve Sublessee of any
obligation hereunder.

 

B. Master Lessor’s Insurance. Sublessee shall
pay, as Sublease Additional Rent, any deductible for insurance carried by
Master Lessor pursuant to, and subject to the conditions stated in, Article VII
of the Master Lease.

 

C. Mutual Waiver of Subrogation. Sublessor
and Sublessee hereby release and relieve the other, and waive their entire
claim of recovery for loss or damage to property arising out of or incident to
fire, lightning, and the other perils included in a standard “all risk”
insurance policy of a type described in Sections 7.01 and 7.02 of the Master
Lease that is carried by the waiving party (or that would have been if the
waiving party had carried the insurance required hereunder), when such property
constitutes the Subleased Premises or the Project, or is in, on or about the
Subleased Premises, whether or not such loss or damage is due to the negligence
of Sublessor or Sublessee, or their respective agents, employees, guests,
licensees, invitees, or contractors. Sublessee and Sublessor waive all rights
of subrogation against each other on behalf of, and shall obtain a waiver of
all subrogation rights from, all property and casualty insurers referenced
above.

 

D. Releases. Except as expressly set forth in
this Sublease, Sublessor shall not be liable to Sublessee, nor shall Sublessee
be entitled to terminate this Sublease or to abate Rent, for any reason,
including, without limitation: (i) failure or interruption of any utility
system or service; or (ii) failure of Master Lessor to maintain the
Subleased Premises as may be required under the Master Lease, subject to
Paragraph 16.C below. Sublessee hereby waives all claims against Sublessor for
damages to good, wares and merchandise and all other personal property in, on
or about the Subleased Premises and for injury or death to persons in, on or
about the Subleased Premises from any cause arising at any time to the fullest
extent permitted by law. Sublessor and Sublessee are corporations or other
business entities, and the obligations of Sublessor and Sublessee shall not
constitute the personal obligations of the officers, directors, trustees,
partners, joint venturers, members, owners, stockholders or other principals or
representatives of such corporation or business entity.

 

12

 

16. Damage and Destruction; Condemnation.

 

A. Rights of Termination. To the that the
Master Lease gives Sublessor any rights following the occurrence of any damage,
destruction or condemnation to terminate the Master Lease, to obtain and
utilize insurance or condemnation proceeds to repair or restore the Sublease
Premises, or any similar rights, such rights shall be reserved to and
exercisable solely by Sublessee, and not by Sublessor; provided, however, that
Sublessee shall be entitled to exercise such rights only with the prior written
consent of Sublessor, which consent shall not be unreasonably withheld,
conditioned or delayed.

 

B. Waiver of Statutory Rights. Except as expressly
set forth herein, Sublessee shall have no right to terminate this Sublease as a
result of any casualty or condemnation, and Sublessee hereby waives any
provision of law that provides for such right of termination.

 

C. Rent Abatement. Notwithstanding anything
in this Sublease to the contrary, to the extent that Rent is abated for
Sublessor with respect to the Subleased Premises pursuant to the terms of the
Master Lease, Sublessee’s Rent obligations with respect to the Subleased
Premises also shall be abated.

 

17. Default and Remedies.

 

A. Default: Sublessee’s performance of each
of its obligations under this Sublease constitutes a condition as well as a
covenant, and Sublessee’s right to continue in possession of the Subleased
Premises is conditioned upon such performance. In addition, Sublessee shall be
in material default of its obligations under this Sublease if Sublessee
commits, or is responsible for the occurrence of, any of the events of default
set forth in Section 12.01 of the Master Lease.

 

B. Remedies: In the event of any default by
Sublessee under this Sublease (including, without limitation, a default
pursuant to Section 12.01 of the Master Lease), Sublessor shall have all
remedies provided by applicable law and in equity, including, without
limitation, all rights pursuant to Article 12 of the Master Lease.
Sublessor may resort to its remedies cumulatively or in the alternative.

 

18. Surrender:

 

A. In General. Unless otherwise provided
pursuant to the Future Lease, on or before the Expiration Date or earlier
termination of this Sublease, Sublessee shall remove all of its trade fixtures
and all alterations and improvements, including, without limitation the
Sublessee Improvements if removal is required by Master Lessor, and shall
surrender the Subleased Premises to Sublessor in the condition required by Section 17.09(a) of
the Master Lease, free of Hazardous Materials stored, used or disposed of by
Sublessee. If the Subleased Premises are not surrendered if and as required
hereby, then Sublessee shall be liable to Sublessor for all costs incurred by
Sublessor in returning the Subleased Premises to the required condition, plus
interest thereon at the Agreed Rate. Sublessee shall indemnify, defend, protect
and hold harmless Sublessor and Master Lessor against any and all claims,
liabilities, judgments, causes of action, damages, costs, and expenses
(including attorneys’, consultants’ and experts’ fees) resulting from
Sublessee’s delay in surrendering the Subleased Premises, including, without
limitation, any claim made by any succeeding tenant founded on or resulting
from such failure to surrender. The indemnification set forth in this Paragraph
shall survive the expiration or earlier termination of this Sublease. In no
event shall Sublessee be required to remove any alterations or improvements
which were not installed by or on behalf of Sublessee.

 

13

 

B. Change in Use of Subleased Premises. If
Sublessee elects to use the Subleased Premises for one or more of the Lab Uses,
Sublessee shall comply with the provisions of this Section 18.B.;
provided, however, that if Sublessee continues to occupy the Subleased Premises
pursuant to the Future Lease following the expiration or earlier termination of
this Sublease, then the provisions of this Section 18.B. shall not apply.

 

(i) Governmental Clearances. At the
expiration or earlier termination of this Sublease, Sublessee shall vacate,
deliver up and surrender to Sublessor possession of the Subleased Premises and
all improvements thereon, subject to the terms of this Sublease concerning
Hazardous Materials brought upon, kept, used, stored, handled, treated,
generated in, or released or disposed of from the Subleased Premises by
Sublessee or any of Sublessee’s agents, employees or contractors (collectively,
“Sublessee HazMat Operations”), and released of all clearances required by any
governmental authorities with respect to Sublessee HazMat Operations.

 

(ii) Closure Requirements. At least
three (3) months prior to the surrender of the Subleased Premises,
Sublessee shall deliver to Sublessor a narrative description of the actions
proposed (or required by any governmental authority) to be taken by Sublessee
in order to surrender the Subleased Premises (including any Alterations
permitted by Master Lessor to remain in the Subleased Premises) at the
expiration or earlier termination of the Sublease Term, in accordance with the
requirements of any Environmental Laws or relevant governmental authority or,
in the absence thereof, the commercially reasonable requirements of Master
Lessor’s lender or any commercially reasonable requirements of Sublessor’s
environmental consultant (collectively, “HazMat Requirements”) with respect to
the Sublessee HazMat Operations and otherwise released for unrestricted use and
occupancy (the “Surrender Plan”). Such Surrender Plan shall be accompanied by a
current listing of (i) all Hazardous Materials licenses and permits held
by or on behalf of Sublessee or any of its agents, employees or contractors
(collectively, the “Sublessee Parties”) with respect to the Subleased Premises,
and (ii) all Hazardous Materials used, stored, handled, treated,
generated, released or disposed of from the Subleased Premises, and shall be
subject to the review and approval of Sublessor’s environmental consultant. In
connection with the review and approval of the Surrender Plan, upon the request
of Sublessor, Sublessee shall deliver to Sublessor or its consultant such
additional non-proprietary information concerning Sublessee HazMat Operations
as Sublessor shall request. On or before such surrender, Sublessee shall
deliver to Sublessor evidence that the approved Surrender Plan shall have been
satisfactorily completed and all HazMat Requirements have been met, and Sublessor
shall have the right, subject to reimbursement at Sublessee’s expenses as set
forth below, to cause Sublessor’s environmental consultant to inspect the
Subleased Premises and perform such additional procedures as may be deemed
reasonably necessary to confirm that the Subleased Premises are, as of the
effective date of such surrender or early termination of this Sublease, in
accordance with applicable HazMat Requirements. Sublessee shall reimburse
Sublessor, as Sublease Additional Rent, for the actual, out-of-pocket expense
incurred by Sublessor for Sublessor’s environmental consultant to review and
approve the Surrender Plan and to visit the Subleased Premises and verify
satisfactory completion of the same. Sublessor shall have the unrestricted right
to deliver such Surrender Plan and any report by Sublessor’s environmental
consultant with respect to the surrender of the Subleased Premises to third
parties. If Sublessee shall fail to prepare or submit a Surrender Plan approved
by Sublessor, or if Sublessee shall fail to complete the approved Surrender
Plan, or if such Surrender Plan, whether or not approved by Sublessor, shall
fail to adequately address any residual effect of Sublessee HazMat Operations
in, on or about the Subleased Premises in violation of HazMat Requirements,
Sublessor shall have the right to take such actions as Sublessor may deem
reasonable or appropriate to assure that the Subleased Premises and the Project
are surrendered free from any residual impact from Sublessee HazMat Operations,
the cost of which actions shall be reimbursed by Sublessee as Sublease
Additional Rent. Sublessee’s obligations pursuant to this Paragraph 18.B. shall
survive the expiration or earlier termination of this Sublease.

 

14

 

19. Brokers: Sublessor and Sublessee each
represent to the other that they have dealt with no real estate brokers,
finders, agents or salesmen in connection with this transaction, except Cresa
Partners, representing Sublessor, and Cornish & Carey Commercial, Inc.,
representing Sublessee (“Brokers”). Each party agrees to hold the other party
harmless from and against all claims for brokerage commissions, finder’s fees,
or other compensation made by any other agent, broker, salesman or finder as a
consequence of said party’s actions or dealings with such agent, broker,
salesman, or finder. Sublessor shall be responsible for payment of any
brokerage commission due to the Brokers in connection with this Sublease
pursuant to the terms of a separate agreement between Sublessor and Cresa
Partners.

 

20. Notices:

 

A. Notice Requirements. Unless five (5) days’
prior written notice is given in the manner set forth in this Paragraph, the
addresses of Sublessor and Sublessee for all purposes connected with this
Sublease shall be the addresses set forth below their respective signatures.
All notices, demands, or communications in connection with this Sublease shall
be considered received when (i) personally delivered, or (ii) if
properly addressed and either sent by nationally recognized overnight courier
or deposited in the mail (registered or certified, return receipt requested,
and postage prepaid), on the date shown on the return receipt or other
documentation for acceptance or rejection. All notices given to the Master
Lessor under the Master Lease shall be considered received only when delivered
in accordance with Section 17.06 of the Master Lease and when sent to
Master Lessor at the following address: Pacific Shores Investors, LLC, c/o Jay
Paul Company, 350 California Street, Suite 1905, San Francisco, California
94111.

 

B. Notices from or to Master Lessor. Each
party shall provide to the other party a copy of any notice or demand received
from or delivered to Master Lessor within three (3) business days of
receiving or delivering such notice or demand, where such notice or demand
materially relates to or affects the rights and/or obligations of the parties
under this Sublease.

 

21. Severability: If any term of this
Sublease is held to be invalid or unenforceable by any court of competent
jurisdiction, then the remainder of this Sublease shall remain in full force
and effect to the fullest extent possible under the law, and shall not be
affected or impaired.

 

22. Amendment: This Sublease may not be amended
except by the written agreement of all parties hereto.

 

23. Attorneys’ Fees: If either Sublessor or
Sublessee shall bring any action or legal proceeding to enforce, protect or
establish any term or covenant of this Sublease, the prevailing party shall be
entitled to recover its reasonable attorneys’ fees, consultants’ costs, court
costs and experts’ fees as may be fixed by the court. “Prevailing party” as
used in this Sublease includes a party who dismisses an action for recovery
hereunder in exchange for sums allegedly due, performance of covenants
allegedly breached or consideration substantially equal to the relief sought in
the action.

 

24. Other Sublease Terms:

 

A. Incorporation By Reference. Except as
otherwise provided in or contradicted by this Sublease, the terms and
conditions of this Sublease shall include the specific Sections of the Master
Lease listed in Paragraph 24.B, which are incorporated into this Sublease as if
fully set forth, except that: (i) each reference in such incorporated
Sections to “Lease” shall be deemed a reference to “Sublease”; (ii) each
reference to the “Premises” shall be deemed a reference to the “Subleased
Premises”; (iii) each reference to

 

15

 

“Lessor”
and “Lessee” shall be deemed a reference to “Sublessor” and “Sublessee”,
respectively, except as expressly set forth herein; (iv) with respect to
work, services, repairs, restoration, provision of insurance or the performance
of any other obligation of Master Lessor under the Master Lease, the sole
obligation of Sublessor shall be to request the same in writing from Master
Lessor as and when requested to do so by Sublessee, and to use Sublessor’s
commercially reasonable good faith efforts (without requiring Sublessor to spend
more than a nominal sum and otherwise at Sublessee’s sole cost and expense) to
obtain the Master Lessor’s performance; (v) with respect to any obligation
of Sublessee to be performed under this Sublease, wherever the Master Lease
grants to Sublessor a specified number of days to perform its obligations under
the Lease, Sublessee shall have two (2) fewer days to perform the
obligation, including, without limitation, curing any defaults (provided,
however, that if any cure period provides for three (3) days or fewer to
perform, Sublessee shall have two (2) business days to perform); (vi) Sublessor
shall have no liability to Sublessee with respect to (a) representations
and warranties made by Master Lessor under the Master Lease, (b) any
indemnification obligations of Master Lessor under the Master Lease, or other
obligations or liabilities of Master Lessor under the Master Lease with respect
to compliance with laws, condition of the Premises or Hazardous Materials, and (c) obligations
under the Master Lease to repair, maintain, restore, or insure all or any
portion of the Premises, regardless of whether the incorporation of one or more
provisions of the Master Lease might otherwise operate to make Sublessor liable
therefor; and (vii) with respect to any approval required to be obtained
from the “Lessor” under the Master Lease, such consent must be obtained from
both the Master Lessor and the Sublessor, but Sublessor’s consent shall not be
unreasonably withheld, conditioned or delayed (except that the approval of
Sublessor shall be conditioned upon receipt of the Master Lessor’s consent).  Notwithstanding the foregoing, references
to “Lessor” in the following provisions of the Master Lease shall mean Master
Lessor, not Sublessor: Section 2.02, the first sentence of Section 5.06,
Section 6.01(b), Section 6.02, the second, third, sixth and seventh
sentences of Section 6.03, Section 6.05, Section 7.01, Section 7.03,
Section 8.01, Article 13, Section 16.01, Section 17.13, Section 17.19,
the last sentence of Section 17.22(d) and Section 17.23.

 

B. Incorporated Provisions. The following
paragraphs of the Master Lease are hereby incorporated into this Sublease,
except to the extent expressly contradicted by the provisions of this Sublease:
Section 2.02; Section 2.03; Section 5.01; Section 5.02(c); Section 5.03,
except for the first sentence; Section 5.05, except as provided in Section 35(ii) of
this Sublease; Section 5.06, provided that Sublessee shall be bound by all
rules and regulations to the same extent that Sublessor is bound; Article 6;
Sections 7.01 through 7.05; Article 8; Article 9; Article 10; Section 11.01,
Section 11.03, Section 11.05; Article 12; Article 13;
Article 14 (excluding subsection (ii) thereof), except that in
exercising any right of entry, Sublessor shall comply with Sublessee’s
reasonable security measures and operating procedures and shall minimize any
disruption to Sublessee; Article 15; Article 16; Section 17.01; Section 17.02;
Section 17.03; Section 17.05, except that the reference to exhibits therein
shall mean and refer only to the exhibits to this Sublease; Section 17.06;
Section 17.07; Section 17.09(a), except that this Section shall
not apply if Sublessee continues in occupancy past the expiration of the Term
pursuant to the Future Lease; Section 17.10; Section 17.11; Section 17.12,
excluding the reference to Article 16; Section 17.13 (excluding the
last sentence); Section 17.16; Section 17.18; Section 17.19; Section 17.20;
Section 17.21; Section 17.22, except that in Section 17.22(c),
Sublessor shall not withhold approval of any Hazardous Materials use that is
approved by Master Lessor, and Sublessee shall not be required to remove
Hazardous Materials at the end of the Term if Sublessee continues in occupancy
pursuant to the Future Lease; Section 17.23; Section 17.26; and
Exhibits A, I, J, K, L and M.

 

C. Assumption of Obligations: This Sublease
is and at all times shall be subject and subordinate to the Master Lease and
the rights of Master Lessor thereunder, provided, however, that in the event of
a conflict between the provisions of this Sublease and the provisions of the
Master Lease, as between Sublessor and Sublessee, the provisions of this
Sublease shall control. Sublessee hereby expressly assumes and agrees: (i) to
comply with all provisions of the Master Lease with respect to the Subleased
Premises

 

16

 

during
the Term to the extent incorporated herein or as otherwise expressly provided
by this Sublease; (ii) to perform all the obligations on the part of the
“Lessee” to be performed under the terms of the Master Lease with respect to
the Subleased Premises during the Term to the extent incorporated herein or as
otherwise expressly provided by this Sublease; and (iii) not to act or
omit to act in any manner which would violate any provision of the Master
Lease.

 

D. Performance by Sublessor. Sublessor shall
not be required to furnish, supply or install anything required of Master
Lessor under any Article of the Master Lease. Sublessor shall have no
liability or responsibility whatsoever for Master Lessor’s failure or refusal
to perform under the Master Lease. Sublessor’s obligation to use its
commercially reasonable good faith efforts to cause Master Lessor to observe
and perform its obligations under the Master Lease shall not be a guarantee by
Sublessor of Master Lessor’s compliance with the provisions of the Master
Lease, and in no event shall Sublessor be required to initiate any litigation
proceedings or file suit against Master Lessor. Sublessor shall not act or omit
to act in any manner which would violate any provision of the Master Lease or
that would lead to the termination of the Master Lease by Master Lessor.

 

25. Master Lessor’s Consent: This Sublease
and Sublessor’s and Sublessee’s obligations hereunder are conditioned upon
obtaining the written consent of the Master Lessor to this Sublease upon such
terms and conditions as are reasonably acceptable to both Sublessor and
Sublessee (the “Master Lessor’s Consent”). The parties shall cooperate in good
faith to obtain the Master Lessor’s Consent as soon as possible, but not later
than fifteen (15) days after the Execution Date. Any and all costs and
expenses associated with the Master Lessor’s Consent shall be borne solely by
Sublessor. If the Master Lessor’s Consent is not obtained within fifteen
(15) days after the Execution Date, then either Sublessor or Sublessee may
terminate this Sublease by giving the other party ten (10) days’ prior
written notice, in which case this Sublease shall terminate on the day
following the last day of the ten (10)- day notice period (unless Master
Lessor’s Consent is obtained during such ten (10)- day period, in which case
this Sublease shall remain in full force and effect), neither party shall have
any further rights or obligations hereunder and Sublessor shall return to
Sublessee all sums (including the Letter of Credit, if applicable) paid by
Sublessee to Sublessor in connection with Sublessee’s execution hereof. The
return of all sums paid by Sublessee to Sublessor shall be Sublessee’s sole and
exclusive remedy in the event of a termination pursuant to this Paragraph,
including, without limitation, a termination resulting from Sublessor’s
reasonable determination that any term or condition proposed by Master Lessor
to be included in a consent is unacceptable.

 

26. Signage: Sublessee shall have the signage
rights, and the obligations with respect thereto, set forth in Section 17.15
of the Master Lease. Sublessor shall be responsible for the removal of Sublessor’s
existing signage prior to the Delivery Date. Unless otherwise provided in the
Future Lease, Sublessee shall be responsible for the removal of Sublessee’s
signage upon the expiration or earlier termination of this Sublease, and for
the cost to restore any damage caused by such removal.

 

27. No Offer. Submission of this Sublease for
examination or signature by Sublessee does not constitute a reservation of,
option for or option to sublease, and such submission is not effective as a
sublease or otherwise until execution and delivery by both Sublessor and
Sublessee, subject, however, to the provisions of Paragraph 25 above.

 

29. (Intentionally omitted.)

 

30. Fitness Center. A fitness center exists
within the Project and, to the extent it is open and operating, is available
for Sublessee’s use at no additional cost on the terms and conditions provided
herein. Sublessee’s use of the fitness center shall be subject to all the rules and
regulations of the Master Lessor.

 

17

 

Sublessor
does not represent or warrant to Sublessee that Master Lessor will continue to
open and operate the fitness center for the tenants of the Project. The
continued availability of the fitness center shall not be a condition precedent
to this Sublease, and the failure of the fitness center to be available to
Sublessee shall have no effect upon this Sublease or the rent payable by
Sublessee to Sublessor under this Sublease. Except to the extent caused by the
active negligence or willful misconduct of Sublessor, its agents, employees or
contractors, Sublessor shall not be liable to Sublessee, or its employees,
agents, contractors, sublessees, assignees or invitees, and Sublessee, as a
material part of the consideration to be rendered to Sublessor under this
Sublease, waives all such claims against Sublessor, for any damage to personal
property or injury to persons in or about the fitness center and/or the Project
from any cause whatsoever arising at any time, including, but not limited to, any
damage or injury to any Sublessee employee, agent, contractor, sublessee,
assignee or invitee using the fitness center or Project. Except to the extent
caused by the active negligence or willful misconduct of Sublessor (or Master
Lessor), its agents, employees or contractors, Sublessee shall indemnify,
protect, defend with counsel reasonably acceptable to Sublessor (or Master
Lessor) and hold harmless Sublessor) or Master Lessor) from and against any and
all claims, liabilities, judgments, causes of action, damages, costs and
expenses (including reasonable attorneys’, consultants’ and experts’ fees),
caused by or arising in connection with the use of the fitness center by
Sublessee, its agents, employees, contractors, sublessee, assignees or
invitees, including, without limitation, any claims asserted or caused by
Sublessee’s employees. The foregoing release and indemnity shall survive the
expiration or earlier termination of this Sublease.

 

31. Holding Over. Unless Sublessee continues
to occupy the Sublease Premises pursuant to the Future Lease, if Sublessee
holds over in the Subleased Premises after the expiration or sooner termination
of the Term of this Sublease, Sublessee shall be deemed a month-to-month
subtenant and the Monthly Base Rent during the holdover period shall be 200% of
the monthly base rent payable by Sublessor to Master Lessor during the last
month of the term of the Master Lease. Nothing in this Paragraph shall be
deemed to permit Sublessee to hold over beyond the expiration or earlier termination
of the Term of this Sublease (unless Sublessee continues to occupy the
Subleased Premises pursuant to the Master Lease), and Sublessee shall
indemnify, defend, protect and hold harmless Sublessor or Master Lessor from
and against any and all claims, liabilities, judgments, causes of action,
damages, costs and expenses (including reasonable attorneys’, consultants’ and
experts’ fees) resulting from the failure of Sublessee to surrender the
Subleased Premises in the condition required by this Sublease upon the
expiration or sooner termination of the Term of this Sublease. The foregoing
indemnification shall survive the expiration or earlier termination of this
Sublease.

 

32. Sublessor’s Estoppel. Sublessor
represents and warrants that to Sublessor’s knowledge, as of the date of this
Sublease, (i) the Master Lease is in full force and effect; (ii) neither
Sublessor nor Master Lessor is in material breach of the Master Lease; and (iii) the
Master Lease has not been modified, altered, amended or otherwise changed as
between Master Lessor and Sublessor, except as provided in that certain
Settlement Agreement between Sublessor’s and Sublessee’s respective
predecessors-in-interest dated November 15, 2001.

 

33. Access. Sublessee shall have access to
the Subleased Premises twenty-four (24) hours per day, seven (7) days
per week, subject to Master Lessor’s reasonable security measures.

 

34. Letter of Credit:

 

A. Terms of Letter of Credit. In lieu of the
cash Security Deposit required by Paragraph 5 above, as additional
consideration for value received and a further incentive to maintain
Sublessor’s willingness to enter this Sublease, and as additional collateral so
as to compensate Sublessor for future damages it may suffer by reason of
Sublessee’s defaults hereunder, Sublessee shall deliver to Sublessor, not

 

18

 

later
than five (5) days after the date of Sublessee’s execution of this
Sublease, an unconditional, clean, irrevocable letter of credit in the amount
of $268,864.25 (“LC Amount”), which letter of credit shall be issued by a
money-center bank (a bank which accepts deposits, maintains accounts, has a
local Silicon Valley office which will negotiate a letter of credit and whose
deposits are insured by the FDIC) reasonably acceptable to Sublessor, shall be
for a term continuing through the last day of the forty-five (45) - day period
following the Expiration Date (or shall contain an “evergreen” provision which
provides that it automatically is renewed on an annual basis unless the issuer
delivers forty-five (45) days’ prior written notice to Sublessor and
Sublessee), shall permit partial draws, shall provide that draws thereunder
will be honored upon receipt by issuer of the letter of credit and a written
statement signed by Sublessor or its authorized agent stating that Sublessor is
entitled to draw down on the letter of credit, shall be freely transferable and
shall be in a form and content reasonably acceptable to Sublessor. Such letter
of credit, together with any other renewal or replacement letters of credit
delivered or to be delivered by Sublessee hereunder shall be referred to
collectively herein as the “LC”. The LC shall provide for forty-five
(45) days’ prior written notice to Sublessor of cancellation or material
change thereof, and shall further provide that, in the event of any
non-extension of the LC, Sublessor shall be entitled to present its written
demand for payment of the entire face amount of the LC, and the proceeds
therefrom so obtained shall be held as provided below. Sublessee shall pay all
expenses, points and/or fees incurred by Sublessee in obtaining the LC.
Additionally, upon a proposed sale or other transfer of any interest in the
Premises, this Sublease or Sublessor (including consolidations, mergers or
other entity changes), Sublessee, at its sole cost and expense and upon ten (10) business
days’ notice, shall, concurrent with Sublessor’s delivery to Sublessee of the
then outstanding LC, deliver to any such transferee, successor or assign a
replacement LC on identical terms (except for the stated beneficiary) from the
same issuer or another bank acceptable to Sublessor, in Sublessor’s reasonable
discretion, naming the new sublessor as the beneficiary thereof. The LC shall
not be mortgaged, assigned or encumbered in any manner whatsoever by Sublessee
without Sublessor’s prior written consent, which may be withheld in Sublessor’s
sole discretion.

 

B. Application of LC. The LC shall be held by
Sublessor without liability for interest and as security for performance by
Sublessee of its obligations under this Sublease. The LC, and any proceeds
therefrom, is not an advance payment of Rent or a measure or limit of
Sublessor’s damages upon Sublessee’s default under this Sublease, and Sublessor
shall not be required to keep any proceeds from the LC separate from
Sublessor’s general funds or to pay interest thereon. If Sublessee defaults
(following any applicable grace periods, it being understood that no notice of
a default by Sublessee hereunder need be given by Sublessor to Sublessee if
Sublessee is the subject of a bankruptcy proceeding) with respect to any
provision of this Sublease, including, but not limited to, provisions relating
to the payment of Rent, Sublessor may, but shall not be required to, draw down
upon all or any portion of the LC for payment of any Rent or other sum in
default, and/or for the payment of any amount that Sublessor may spend or may
become obligated to spend by reason of Sublessee’s default or to compensate
Sublessor for any loss or damage which Sublessor has suffered thereby. The use,
application or retention of the LC, or any proceeds therefrom, by Sublessor
shall not prevent Sublessor from exercising any other right or remedy provided
by this Sublease or by law or in equity, it being intended that Sublessor shall
not first be required to proceed against the LC, and the LC and any proceeds
therefrom shall not operate as a limitation on any recovery to which Sublessor
otherwise may be entitled. Sublessee hereby waives any restriction on the use
or application of the Security Deposit by Sublessor as set forth in California
Civil Code Section 1950.7 or any successor statute. If all or any portion
of the LC is drawn upon, Sublessee, within five (5) days after written
notice from the issuer or Sublessor of the amount so applied, shall reinstate
the LC to the LC Amount required under this Sublease by providing either cash
(so that the full amount of cash and LC proceeds held by Sublessor equals the
LC Amount) or a replacement LC upon the identical terms and conditions set
forth in this Paragraph, and if all or any portion of the LC again is used or
applied, Sublessee shall, within five (5) days after written demand
therefor, again reinstate the LC to the LC Amount required under this Sublease
by providing either cash (so

 

19

 

that
the full amount of cash and LC proceeds held by Sublessor equals the LC Amount)
or a replacement LC upon the identical terms and conditions set forth in this
Paragraph. Sublessee’s failure to provide Sublessor with cash in the required
amount or to reinstate the LC as required hereunder shall be a material default
under this Sublease, without any obligation of Sublessor to provide any
additional notice of default, and Sublessor shall be permitted to draw down the
entire balance of the LC and apply it to any current or future obligations of
Sublessee in such event. Sublessee hereby grants to Sublessor a security
interest in the LC and any cash proceeds therefrom in accordance with the
applicable provisions of the California Uniform Commercial Code.

 

C. Return of LC. Within thirty (30) days
after the later of the expiration or earlier termination date of this Sublease,
and the date upon which the LC expires, if Sublessee is not then in default
hereunder, Sublessor shall return to Sublessee (without interest) the LC or so
much of the proceeds of the LC as have not been applied by Sublessor pursuant
to this Paragraph, or which are not otherwise required to cure Sublessee’s
defaults.

 

35. Personal Property: During the Term of
this Sublease, without obligation to pay additional Monthly Base Rent with
respect thereto, Sublessee shall have the right to use the following: (i) existing
furniture, (ii) security system, (iii) cabling, (iv) UPS, PDU,
and air handlers in all main data centers and MDF/IDF data closets, (v) existing
racks, and (vi) other personal property currently located in the Subleased
Premises. In addition, at no cost to Sublessee (a) prior to the Commencement
Date, Sublessor shall configure the existing furniture located in the Subleased
Premises to a condition reasonably appropriate for use by Sublessee’s
employees, and (b) within sixty (60) days following the Premises
Delivery Date, Sublessor shall provide to Sublessee and shall configure to
Sublessee’s reasonable requirements any additional furniture and personal
property requested by Sublessee from Sublessor’s inventory of such items
currently in storage. The items listed in the foregoing two sentences shall be
referred to as the “Personal Property”). Sublessee acknowledges that Sublessee
is taking possession of the Personal Property on an “as is, where is, with all
faults” basis, and that Sublessee is not relying on any representations or
warranties of any kind whatsoever, express or implied, including, without
limitation, any implied warranties as to merchantability or fitness for a
particular purpose; provided, however, that Sublessor represents for the
benefit of Sublessee that Sublessor owns the Personal Property free and clear
of all liens. Sublessor shall have no obligation to repair, maintain, replace
or insure the Personal Property, all of which shall be the obligation of
Sublessee. Upon the expiration of this Sublease (or upon early termination for
any reason other than a default of Sublessee under this Sublease), Sublessee
shall purchase the Personal Property from Sublessor pursuant to the bill of
sale in substantially the form attached hereto as Exhibit B and
incorporated by reference herein. Unless Sublessee continues to occupy the
Subleased Premises pursuant to the Future Lease, Sublessee shall be responsible
for removing the Personal Property from the Subleased Premises upon the
expiration or earlier termination (except for early termination resulting from
the default of Sublessee under this Sublease) of the Term.

 

36. Voluntary Termination: Sublessor shall
not voluntarily terminate the Master Lease during the Term unless and until
Master Lessor has agreed in writing to continue this Sublease in full force and
effect as a direct lease between Master Lessor and Sublessee upon and subject
to all of the terms, covenants and conditions of this Sublease for the balance
of the Term hereof, including without limitation the Monthly Base Rent payable hereunder.
If Master Lessor so consents, Sublessee shall attorn to Master Lessor in
connection with any such voluntary termination and shall execute an attornment
agreement in such form as reasonably may be requested by Master Lessor.

 

37. Environmental:

 

A. Sublessee’s Acknowledgment. Sublessee’s
execution of this Sublease shall be deemed Sublessee’s acknowledgment and
agreement that Sublessee has received, and, pursuant to Section

 

20

 

17.22(b) of
the Master Lease, reviewed same, a copy of each of those certain documents
entitled: (i) PHASE I, ENVIRONMENTAL SITE ASSESSMENT, PACIFIC SHORES
CENTER, REDWOOD CITY, CALIFORNIA, Prepared for: The Jay Paul Company, San
Francisco, California, Prepared by: IRIS ENVIRONMENTAL, Oakland, California, December 20,
1999, Job No. 99-122A; and (ii) PHASE II, ENVIRONMENTAL SITE
ASSESSMENT, PACIFIC SHORES CENTER, 1000 SEAPORT BOULEVARD, REDWOOD CITY,
CALIFORNIA, Prepared for: The Jay Paul Company, San Francisco, California,
Prepared by: IRIS ENVIRONMENTAL, Oakland, California, January 14, 2000,
Job No. 99-122-B.

 

B. Change in Use of Subleased Premises. If
Sublessee elects to use the Subleased Premises for one or more of the Lab Uses,
in addition to the provisions of Section 17.22 of the Master Lease
regarding Hazardous Materials (to the extent incorporated in this Sublease),
Sublessee also shall comply with the following provisions:

 

(i) Use of Hazardous Materials.
Sublessee shall not cause or permit any Hazardous Materials to be brought upon,
kept or used in, on or about the Project by Sublessee or Sublessee’s Parties
without Sublessor’s prior written consent, except that Sublessee may, without
the need for Sublessor’s prior written consent, bring on, keep at and use in,
on or about the Subleased Premises those Hazardous Materials described in Exhibit C
attached hereto and incorporated by reference herein or any similar Hazardous
Materials used for substantially the same purposes in substitution thereof in
compliance with applicable Environmental Laws, even if they are Hazardous
Materials. All such Hazardous Materials will be used, kept and stored by
Sublessee in a manner that complies with all applicable Environmental Laws.
Sublessee shall, at all times, use, keep, test, store, handle, transport, treat
or dispose all such Hazardous Materials in or about the Project in compliance
with all applicable HazMat Requirements. Unless Sublessee continues to occupy
the Subleased Premises pursuant to the Future Lease following the expiration or
earlier termination of this Sublease, Sublessee shall remove Hazardous
Materials used or brought onto the Project during the Sublease Term from the
Project prior to the expiration or earlier termination of this Sublease in
accordance with any applicable HazMat Requirements and the Surrender Plan
approved by Sublessor. For purposes of this Sublease, if Sublessee elects to
use the Subleased Premises for one or more of the Lab Uses, then this Paragraph
37.B.(i) of this Sublease shall supersede in their entirety the provisions
of Section 17.22(c) of the Master Lease.

 

(ii) Sublessee’s Obligation to Promptly
Remediate. If the presence of Hazardous Materials on the Subleased Premises
after the Premises Delivery Date results from an act or omission of Sublessee
(or Sublessee’s successors-in-interest), its agents, employees, invitees,
vendors, contractors, guests, or visitors results in contamination of the
Project or any water or soil beneath the Project in violation of applicable
HazMat Requirements, Sublessee shall promptly take all action necessary or
appropriate to test, investigate and remedy that contamination, at its sole
cost and expense, provided that Sublessor’s consent to such action shall first
be obtained, which consent shall not be unreasonably withheld, conditioned or
delayed.

 

(iii) Notification. Sublessor and
Sublessee each agree to promptly notify the other of any communication received
from any governmental entity concerning Hazardous Materials or the violation or
alleged violation of Environmental Laws that relate to the Project. In
addition, Sublessee shall promptly provide to Sublessor copies of any approvals
or disapprovals received from any relevant governmental agency in connection
with permits, licenses or periodic or episodic testing or remediation of the
Subleased Premises by Sublessee required by HazMat Requirements, including but
not limited to the plans, permits and licenses described in Exhibit D
attached hereto and incorporated by reference herein or any other such plans,
permits and licenses instead performed by Sublessee pursuant to HazMat
Requirements. Without limiting the foregoing, Sublessee shall deliver to
Sublessor any applications for decommissioning the Subleased Premises pursuant
to HazMat Requirements at the same time such application is delivered to the

 

21

 

relevant
governmental agency. Sublessor shall have the opportunity to participate in,
and comment on, any such decommission or surrender plan application, and the
final version of such plan shall be subject to Sublessor’s written approval.

 

(iv) Testing. Sublessor shall have the
right to conduct tests of the Subleased Premises at any time that Master Lessor
seeks to sell or refinance the Subleased Premises, or if Sublessor has
reasonable grounds to believe that Hazardous Materials may exist at the Subleased
Premises in violation of the terms of this Sublease. Such tests shall be
performed in order to determine whether any contamination of the Subleased
Premises or the Project has occurred as a result of Sublessee’s use. Sublessee
shall be required to pay the reasonable cost of such tests of the Subleased
Premises if they are performed due to Sublessor’s reasonable grounds to believe
that Hazardous Materials may exist at the Subleased Premises in violation of
the terms of this Sublease (Master Lessor shall pay the costs of such tests in
the event of a sale or refinancing); provided, however, that if Sublessee
conducts its own tests of the Subleased Premises using third party contractors
and test procedures acceptable to Sublessor which tests are certified to Sublessor,
Sublessor shall accept such tests in lieu of such tests to be paid for by
Sublessee. In connection with such testing, upon the request of Sublessor,
Sublessee shall deliver to Sublessor or its consultant such non-proprietary
information concerning the use of Hazardous Materials in or about the Subleased
Premises by Sublessee or any Sublessee Parties. If contamination has occurred
in violation or excess of the HazMat Requirements for which Sublessee is liable
under this Section 37.B.(iv), Sublessee shall pay all costs to conduct
such tests. If no such contamination is found, Sublessor shall pay the costs of
such tests. Sublessee shall, at its sole cost and expense, promptly and
satisfactorily remediate any environmental conditions identified by such
testing in accordance with HazMat Requirements. Sublessor’s receipt of or
satisfaction with any environmental assessment in no way waives any rights
which Sublessor may have against Sublessee. Notwithstanding anything herein to
the contrary, within thirty (30) days prior to the Expiration Date or any
earlier date on which this Sublease terminates, Sublessee shall, at Sublessee’s
sole expense, deliver to Sublessor a phase II environmental audit of the
Subleased Premises showing the environmental condition of the Subleased
Premises and the completion of Sublessee’s Surrender Plan for the Subleased
Premises; provided, however, that this sentence shall not apply if Sublessee
continues to occupy the Subleased Premises pursuant to the Future Lease
following the expiration or earlier termination of this Sublease.

 

(v) Dispute Resolution. Notwithstanding
anything herein to the contrary, if Sublessor requires Sublessee to perform any
testing, clean-up or remediation of Hazardous Materials, or if Sublessor
requires Sublessee to modify Sublessee’s use of Hazardous Materials at the
Subleased Premises in a manner or in amounts other than as is required by
Environmental Laws pursuant to either this Paragraph 37.B. or Section 18.B.
above, and Sublessee believes that Sublessor’s requirements are not
commercially reasonable, then if Sublessee provides Sublessor with written
notice thereof (the “Dispute Notice”) within fifteen (15) business days of
the date on which Sublessor first informs Sublessee in writing of such requirement,
then such dispute shall be remedied pursuant to the terms of this Paragraph
37.B.(v). If such a dispute exists, Sublessor and Sublessee shall meet within
ten (10) business days after the date of the Dispute Notice and attempt in
good faith to resolve the dispute. If, despite such meeting, the parties cannot
resolve the dispute, each of Sublessor and Sublessee shall separately designate
to the other in writing an environmental expert to determine if the requirement
in question is commercially reasonable. Each environmental expert designated
shall have at least ten (10) years’ experience in performing environmental
audits of real property in San Mateo County and shall be paid by the party
choosing such expert. The failure of either party to appoint an environmental
expert within the time allowed shall be deemed equivalent to appointing the
environmental expert appointed by the other party, who shall then determine
whether the requirement in question is commercially reasonable. The two (2) environmental
experts shall then each prepare a written proposal of what a commercially
reasonable environmental requirement for the activity in question. If the two (2) environmental
experts are unable to agree on whether the requirement in question is

 

22

 

commercially
reasonable, or, in lieu thereof, to come to agreement on a commercially
reasonable environmental requirement for the issue in question, within fifteen
(15) business days of their appointment, the two designated environmental
experts shall jointly designate a third similarly qualified environmental
expert. The third environmental expert shall within ten (10) business days
following its appointment, then determine which of the two environmental
experts’ determinations most closely reflects an appropriate, commercially
reasonable requirement with respect to the Hazardous Materials issue in
question. The third environmental expert shall have no rights to adjust, amend
or otherwise alter the determinations made by the environmental experts
selected by the parties, but must select one or the other of such experts’
submissions. The determination by such third environmental expert shall be
final and binding upon the parties. Said third environmental expert shall, upon
selecting the determination, concurrently notify both parties hereto. The
parties shall share the expenses of the third environmental expert equally.

 

(vi) Survival. Sublessee’s obligations
pursuant to this Paragraph 37.B. shall survive the expiration or earlier
termination of this Sublease.

 

38. Surrender if No Future Lease. If for any
reason Sublessee is not entitled to continue to occupy the Subleased Premises
pursuant to the Future Lease, upon the expiration or earlier termination of
this Sublease, Sublessee shall surrender the Subleased Premises to Sublessor in
the condition required by Section 17.09(a) of the Master Lease and
shall remove any alterations or improvements (including the Sublessee
Improvements) if required to do so pursuant to Paragraph 14.C. above.

 

39. Right to Make Building Repairs. Pursuant
to Section 6.01(b) of the Master Lease, Sublessor has a right to
perform repairs required to be made by Master Lessor if Master Lessor defaults
with respect to such obligations, and to be reimbursed, together with interest
thereon, for the cost of such repairs. Upon prior written notice to Sublessor,
Sublessee shall have the right to exercise the rights set forth in Section 6.01(b) in
strict accordance therewith. If Sublessee does not timely meet the requirements
of Section 6.01(b), or if Master Lessor does not comply with Section 6.01(b),
Sublessor shall have no liability to Sublessee with respect thereto other than
the obligation set forth in Paragraph 24.A.(iv) above.

 

40. Right to Contest Property Taxes. Pursuant
to Section 9.04 of the Master Lease, Sublessor has a right to seek a
reduction in the assessed valuation of the Subleased Premises or to contest any
real property taxes to be paid by Sublessor with respect to the Subleased
Premises. Upon prior written notice to Sublessor, Sublessee shall have the
right to exercise the rights set forth in Section 9.04 in strict
accordance therewith. If Sublessee does not timely meet the requirements of Section 9.04,
or if Master Lessor does not comply with Section 9.04, Sublessor shall
have no liability to Sublessee or with respect thereto other than the
obligation set forth in Paragraph 24.A.(iv) above, and Sublessee shall
indemnify Sublessor for any liability Sublessor incurs as a result of
Sublessee’s failure to comply with the provisions of Section 9.04 of the
Master Lease.

 

41. Security for Sublessor’s Performance.

 

A. Events Necessitating the Posting of a
Deficiency Letter of Credit. Sublessor shall deliver to Sublessee a letter
of credit, in the form described in Paragraph 41.B. below, in the amount of
Three Million and No/100 Dollars ($3,000,000.00) (“Deficiency Letter of
Credit”), upon the occurrence of either of the following:

 

(1) If at any time following the second
anniversary of the Commencement Date, Sublessor’s average cash on hand for any
six (6)- month period, as displayed in Sublessor’s 10-K and 10-Q, drops below
One Hundred Million and No/100 Dollars ($100,000,000.00) (a “Cash Deficiency
Event”), Sublessee shall provide Sublessor with written notice that a Cash
Deficiency Event has occurred. Within

 

23

 

thirty
(30) days after Sublessor receives any such notice from Sublessee (a “Cash
Deficiency Notice”), Sublessor shall deliver to Sublessee the Deficiency Letter
of Credit, provided that a Cash Deficiency Event has occurred, or

 

(2) If, at any time during the Term, Sublessor
fails to pay Base Rent under the Master Lease when due, Master Lessor has made
an unconditional demand (“Master Lessor Base Rent Demand”) upon either
Sublessor or Sublessee for payment of such Base Rent, and Sublessor fails to
pay the Base Rent at issue within five (5) business days after the date of
Master Lessor’s Base Rent Demand (“Event of Sublessor’s Default”), within thirty
(30) days following such Event of Sublessor’s Default Sublessor shall
deliver to Sublessee the Deficiency Letter of Credit.

 

B. Terms of the Deficiency Letter of Credit.
The Deficiency Letter of Credit shall be issued by a bank, selected by
Sublessor and reasonably acceptable to Sublessee, that accepts deposits,
maintains accounts, has an office in the San Francisco Bay Area, and that will
negotiate a letter of credit, the deposits of which must be insured by the
Federal Deposit Insurance Corporation (“Issuer”). Sublessor shall pay all
expenses, points or fees incurred to obtain and maintain the Deficiency Letter
of Credit, including, without limitation, all costs or fees charged by the
Issuer in connection with a draw against a Deficiency Letter of Credit. The
Deficiency Letter of Credit shall provide that, once per calendar month during
the term of the Letter of Credit, drafts will be honored, up to the amount of
the difference between the Monthly Base Rent payable by Sublessee under this
Sublease and the monthly Base Rent payable by Sublessor under the Master Lease,
together with any applicable late charges payable by Sublessor under the Master
Lease for such month (“Monthly Base Rent Differential”) (plus any costs imposed
by the Issuer in connection with the draw), on sight if accompanied by a
statement on Sublessee’s company letterhead signed by an officer of Sublessee
asserting that (i) under Section 12.01(b) of the Master Lease,
Sublessor has not paid the Base Rent due under the Master Lease when due and
such failure has continued for four (4) business days after written notice
thereof from Master Lessor, and that Master Lessor has made a Master Lessor
Base Rent Demand upon either Sublessor or Sublessee for the payment of such
Base Rent, and (ii) Sublessee is entitled to draw the amount requested
from the Deficiency Letter of Credit Issuer pursuant to Paragraph 41 of this
Sublease and that such requested amount does not exceed the Monthly Base Rent
Differential for such month (plus any costs imposed by Issuer in connection
with the draw). In addition, the Deficiency Letter of Credit shall provide that
the term of the Letter of Credit (“Letter of Credit Term”) will expire upon the
earlier to occur of (y) the date that is thirty (30) days after the
expiration or earlier termination of this Sublease, and (z) the date that
the Issuer receives a statement signed by an officer of Sublessor asserting
that a Permitted Termination Event (defined below) or a Restricted Assignment
(defined below) has occurred. During the Letter of Credit Term, any Deficiency
Letter of Credit shall be automatically renewable on an annual basis, and for
thirty (30) days following the expiration of the Letter of Credit Term.

 

Notwithstanding anything to the contrary contained
in this Paragraph 41.B., if Sublessor fails to renew or replace the Deficiency
Letter of Credit at least thirty (30) days prior to its expiration,
Sublessee may, without prejudice to any other remedy it has, upon five (5) business
days’ written notice to Sublessor, and provided Sublessor does not renew or
replace such Deficiency Letter of Credit during such period, draw on all of the
Deficiency Letter of Credit and such drawn amount shall be held by Sublessee
solely to pay the Monthly Base Rent Differential in the amounts and at the
times otherwise permitted by this Paragraph; provided, however, Sublessee must
certify to Sublessor each of the items described in subsections (i)-(ii) above
of this Paragraph 41.B. before Sublessee may, in any calendar month, disburse
any payments from such drawn amount, and all amounts so drawn from the
Deficiency Letter of Credit (less any amounts disbursed to Sublessee in
accordance with the provisions of this sentence) shall be immediately refunded
to Sublessor upon Sublessor’s replacement or renewal of such Deficiency Letter
of Credit. If there is a termination of the Master Lease for any reason other
than Sublessor’s uncured default under the Master Lease, such event shall

 

24

 

be
a “Permitted Termination Event” and shall terminate the Deficiency Letter of
Credit automatically. If the Sublease or Sublessee’s interest in the Subleased
Premises is assigned other than to a Sublessee Affiliate, or if Sublessee
attempts to transfer the Deficiency Letter of Credit other than to a Sublessee
Affiliate, either of such events shall be a “Restricted Assignment” and shall
terminate the Deficiency Letter of Credit automatically. Sublessee shall notify
Sublessor at least ten (10) days in advance of a transfer to a Sublessee
Affiliate, unless such notification is restricted by the regulations or
requirements of the Securities and Exchange Commission, in which event such
notification shall be made promptly following the date of such transfer.

 

C. Rights and Obligations of the Parties. If,
in any calendar month during the Letter of Credit Term, Sublessor has not paid
the Base Rent due under the Master Lease when due, Master Lessor has made a
Master Lessor Base Rent Demand upon either Sublessor or Sublessee for the
payment of such Base Rent, and Sublessor fails to pay the Base Rent at issue
within three (3) business days after the date of the Master Lessor Base
Rent Demand, then Sublessee, at its option, may draw from the Deficiency Letter
of Credit an amount of cash that in no event exceeds the Monthly Base Rent
Differential for the applicable calendar month (plus costs imposed by the
issuer in connection with the draw), and shall pay all such drawn amounts to
Master Lessor within five (5)- business days after any such draw. In the
alternative, within such five (5)- business day period, Sublessee may deliver
to Sublessor written evidence certified by an officer of Sublessee and
otherwise reasonably acceptable to Sublessor (“Payment Notice”) that Sublessee
has paid Sublessor’s full Monthly Base Rent Differential to Master Lessor for
such calendar month, together with a statement that Sublessee will retain the
Monthly Base Rent Differential (together with the issuer’s costs) as
reimbursement for that portion of Sublessee’s payment allocable to the Monthly
Base Rent Differential and costs. In the event Sublessee either fails to pay
any such amounts to Master Lessor within such period or to provide Sublessor
with the Payment Notice (a “Payment Default”), the Deficiency Letter of Credit
shall automatically terminate. Notwithstanding anything to the contrary
contained in this Sublease, in the event Sublessee draws on the Deficiency
Letter of Credit due to a Monthly Base Rent Differential for any calendar
month, Sublessee agrees that Sublessor shall be forever released from all
obligations and liabilities under this Sublease relating to Sublessor’s
obligation hereunder to pay the Base Rent due for such particular calendar
month under the Master Lease. Also notwithstanding anything in this Sublease to
the contrary, Sublessor shall have the right, from time to time during the
Letter of Credit Term, but not more than once each calendar year during the
Letter of Credit Term and upon no less than ten (10) days’ prior written
notice to Sublessee, to replace Deficiency Letter of Credit with a replacement
letter of credit meeting all of the terms and conditions set forth in this
Paragraph. Sublessee shall return the Deficiency Letter of Credit (or any
unapplied proceeds thereof) to Sublessor, or shall cause the Issuer to cancel
the Deficiency Letter of Credit, within thirty (30) days following the
expiration or termination of the Letter of Credit Term.

 

D. Termination of Master Lease. In the event
of a termination of the Master Lease due solely to a default, beyond applicable
notice and cure periods, by Sublessor thereunder, and not as a result of any
fault of Sublessee, Sublessee shall have the right at its option, and without
prejudice to any other remedy which Sublessee may have, to draw on all of the
Deficiency Letter of Credit and retain such proceeds.

 

[SIGNATURES APPEAR ON NEXT PAGE]

 

25

 

IN WITNESS WHEREOF, the parties have executed this
Sublease on the day and year first above written.

 

 

	
  SUBLESSEE:

  	
   

  	
  SUBLESSOR:

  
	
   

  	
   

  	
   

  
	
  PDL
  BIOPHARMA, INC.,

  	
   

  	
  OPENWAVE
  SYSTEMS INC.,

  
	
  a
  Delaware corporation

  	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Mark McDade

  	
   

  	
  By:

  	
  /s/
  Gregory Wrenn

  
	
   

  	
  Mark
  McDade

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief
  Executive Officer

  	
   

  	
  Title:

  	
  SVP &
  General Counsel

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  34801
  Campus Drive

  	
   

  	
  Address:

  	
  2100
  Seaport Boulevard

  
	
   

  	
  Fremont,
  CA 94555

  	
   

  	
   

  	
  Redwood
  City, CA 94063

  
	
   

  	
  Attn:
  Laurie Torres

  	
   

  	
   

  	
  Attn:
  Real Estate Department

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone:

  	
  (510)
  574-1400

  	
   

  	
  Telephone:

  	
  (650)
  480-8000

  

 

26

 

EXHIBIT “A”

MASTER LEASE

 

 

TRIPLE NET
BUILDING LEASE

 

Between

PACIFIC
SHORES CENTER LLC,

as

LESSOR

 

and

 

PHONE.COM,
INC.

a California corporation

as

LESSEE

 

for

 

PREMISES

At

Pacific Shores Center

Building 9

Redwood City, California

 

 

ARTICLE I

PARTIES

 

Section 1.01. Parties. This Lease, dated for
reference purposes, and effective as of February 4, 2000, is made by and
between PACIFIC SHORES CENTER LLC, or assignee (provided that such assignee is
an entity controlled or managed, directly by Jay Paul) (“Lessor”) and
PHONE.COM, INC., a California corporation (“Lessee”).

 

ARTICLE II

PREMISES

 

Section 2.01. Demise of Premises. Lessor hereby
leases to Lessee and Lessee leases from Lessor for the term, at the rental, and
upon all of the terms and conditions set forth herein, Premises consisting of
one building (“Building”) of ten free standing, office and research and
development buildings (“Buildings”) to be constructed by Lessor on real
property situated in Redwood City, County of San Mateo, State of California and
commonly known as Pacific Shores Center which Lessor is in the process of
acquiring (the “Property”). The Building will be five stories tall and will
consist of approximately two hundred seventy-nine thousand five hundred eighty-four
(279,584) rentable square feet, as more particularly described and
depicted herein in Exhibit “A.” The actual rentable square footage of the
Building (the “Rentable Area”) will be determined and certified by Lessor’s
architect by a method described as “dripline,” whereby the measurement
encompasses the outermost perimeter of the constructed building, including
every projection thereof and all area beneath each such projection, whether or
not enclosed, with no deduction for any inward deviation of structure and with
the measurement being made floor by floor, beginning from the top of the
Building provided that, Lessee shall have the right, to be exercised prior to
Commencement Date, to measure the “as-built” Building to confirm that the
aforesaid dripline methodology was accurately utilized by Lessor’s architect.
The Buildings and appurtenances described herein, the Property, and all other
improvements to be built on the Property are together designated as the
“Project.” The Building leased hereunder is commonly known as Building 9 -
Pacific Shores Center, Redwood City, California and its appurtenances described
herein are herein designated as the “Premises.”

 

Section 2.02. Common Area. During the Lease
Term, Lessee shall have the non-exclusive right to use the Common Area defined
herein. Lessor reserves the right to modify the Common Area, including reducing
the size or changing the use, configuration and elements thereof in its sole
discretion and to close or restrict access from time to time for repair, maintenance
or to prevent a dedication thereof, provided that Lessee nonetheless shall have
access to parking and the Premises during such activities and, provided
further, that Lessor will continue to maintain the baseball and soccer fields
and the amenities/athletic facility or replacement items of like kind for so
long as Lessor is legally able to do so during the Lease Term. Lessor further
reserves the right to establish, repeal and amend from time to time rules and
regulations for the use of the Common Area (provided that, to the extent that
any conflict between any new Rules and Regulations and this Lease
(including the Rules and Regulations attached hereto as Exhibit “L”)
would materially and adversely affect Lessee’s use of the Premises, this Lease
shall govern, and to grant reciprocal easements or other rights to use the
Common Area to owners of other property. “Common Area” includes, without
limitation,

 

2

 

landscaping,
sidewalks, walkways, driveways, curbs, parking lots (including striping),
sprinkler systems, lighting, surface water drainage systems and
amenities/athletic facility, as well as baseball and soccer fields, and, to the
extent required by government authorities having jurisdiction over Lessor’s
development of the Project, a waterfront park, perimeter walking/biking trail,
amphitheater, marine life resource center, retreat and conference center, child
care center and such further portions of the Project or additional or different
facilities as Lessor may from time to time designate or install or make
available for the use by Tenant in common with others.

 

Section 2.03. Parking. Lessor shall provide
Lessee with parking spaces within the Common Area in the ratio to space within
the Building as required by law which is three (3) spaces per one thousand
(1,000) square feet of interior space. In the event Lessor elects or is
required by any law to limit or control parking at the Premises, whether by
validation of parking tickets or any other method of assessment, Lessee agrees
to participate in such validation or assessment program under such reasonable rules and
regulations as are from time to time established by Lessor. Said parking shall
be provided at no additional cost except as expressly provided herein in Article VI
for reimbursement of repair, replacement and maintenance, and except for any
governmental or public authority charges, fees or impositions of any nature
hereafter imposed.

 

Section 2.04. Construction.

 

(a) Government Approvals. Lessor shall
diligently pursue obtaining governmental approval of a Site Plan and Buildings
design and elevations with respect to the development of the Premises, copies
of which are attached hereto as Exhibit “A.” The parties acknowledge and
agree that the final footprint and elevations of the Buildings may vary from
those attached as Exhibit “A” because the plans and specifications will
undergo a plancheck process with the City of Redwood City and Lessor will make
such revisions as are required or are otherwise deemed necessary or appropriate
by Lessor, provided however, that nothing herein shall be deemed to relieve
Lessor from the duty to develop the Building substantially in compliance with Exhibit “A,”
and further provided that all revisions to the plans and specifications which
may materially and adversely affect the use, accessibility, safety or design of
the Premises shall be subject to the review and (unless imposed by law or any
governmental agency) consent of Lessee, which shall not be unreasonably withheld,
conditioned or delayed, provided further that any delay to the construction
schedule caused by such review and giving or withholding of consent shall be
Lessee Delay.

 

(b) Construction of Shell Buildings. Lessor,
utilizing Rudolph & Sletten (or such alternate as Lessor in its sole
discretion may select) as general contractor (“General Contractor”), shall
construct the “Building Shell” (as defined in the attached Exhibit “D”) in
accordance with (i) plans and specifications to be attached as Exhibit “B”
and (ii) all existing applicable municipal, local, state and federal laws,
statutes, rules, regulations and ordinances. Lessor shall pay all costs of
constructing the Building Shell.

 

(c) Construction of Tenant Improvements. All
improvements not included within the scope of the Building Shell shall be
deemed “Tenant Improvements.” Lessor, using the General

 

3

 

Contractor,
shall construct the Tenant Improvements and shall contribute the Tenant
Improvement Allowance towards the payment of same and Lessee shall pay all
costs associated with same in excess of the Tenant Improvement Allowance.
Notwithstanding the foregoing, Lessee may select a general contractor other
than Lessor’s General Contractor to construct the Tenant Improvements by giving
written notice to Lessor on or before April 1, 2000, provided that (i) such
general contractor has sufficient financial strength and experience in
constructing first class quality improvements of the type to be constructed in
the Premises to reasonably satisfy Lessor and any lender whose loan is secured
by the Project or any part thereof and, (ii) Lessee agrees in such notice
that the Tenant Improvements identified on Exhibit N hereto as “Early
Construction Improvements” shall be constructed by Lessor’s General Contractor
to facilitate construction of the balance of the Tenant Improvements by the
Lessee selected general contractor (that the Early Construction Improvements
shall retain concurrent status as Tenant Improvements, the cost of which is to
be charged to the Tenant Improvement Allowance), and (iii) such general
contractor is ready, willing and able and agrees to construct the Tenant
Improvements in accordance with Lessor’s General Contractor’s construction
schedule, and (iv) any failure by such Lessee selected general contractor
to construct the Tenant Improvements in accordance with Lessor’s General
Contractor’s construction schedule shall be Lessee Delay. If Lessor’s General
Contractor constructs the Tenant Improvements, or if Lessee selects a general
contractor other than Lessor’s General Contractor, but Lessor’s General
Contractor nonetheless contracts with Lessor to construct the “Early
Construction Improvements,” in each case the contract shall be a guaranteed
maximum price contract based upon the successful bids of subcontractors and/or
negotiated prices as provided in Section 2.04(f). The total compensation
to the General Contractor under such contract shall be equal to a contractor’s
fee not to exceed an amount equal to 2.5% of the contract (provided that a
contractor’s fee shall not be payable for change orders required due to
coordination errors caused by the General Contractor or any of its
subcontractors) and an amount not to exceed an amount equal to 2 1/2% of the contract for general conditions plus
an amount equal to .75% of the contract for insurance.

 

(d) Tenant Improvement Plans and Cost Estimate.
Lessee shall work with Lessor’s architect to develop interior schematic
drawings and Lessee shall approve final interior schematic drawings for the
Tenant Improvements no later than June 6, 2000. Lessee shall work with
Lessor’s architect to develop working drawings outlining, among other things,
Lessee’s wall layout, detailed electrical and air conditioning requirements and
finishes (“Working Drawings”) and Lessee shall approve final Working Drawings
on or before July 15, 2000. The cost of the interior schematic drawings
and Working Drawings shall be a Tenant Improvement cost paid by Lessee. Based
on this information, Lessee shall cause the General Contractor to prepare and
deliver to Lessee a budget for the Tenant Improvements (“Budget”). Lessee shall
approve the Budget (or modify the same with Lessor’s consent), in writing,
within fourteen (14) days thereafter. The Working Drawings and Budget must
be approved by Lessor and Lessee (neither of whom shall unreasonably withhold
or delay such consent) in writing and must provide for Tenant Improvements of
quality equal to or greater than the Interior Specifications Standards set
forth in Exhibit “C” and must encompass the buildout of the entire
Premises. Once the Budget is approved, Lessor shall enter into a guaranteed
maximum price (“GMP”) contract with the General Contractor for the construction
of the Tenant Improvements, and any additional costs for Tenant Improvements in
excess of the GMP contract shall be Lessor’s responsibility except for Lessee
initiated change orders which shall be Lessee’s responsibility.

 

4

 

(e) Cost Responsibilities. Attached as Exhibit “C”
to this Lease is a Work Letter Agreement for Tenant Improvements, and Exhibit “D,”
Cost Responsibilities of Lessor and Lessee, which together with this Section 2.04,
describe the planning and payment responsibilities of the Lessor and Lessee
with respect to the construction of the Shell Building and Tenant Improvements
at the Premises. All approved Tenant Improvements shall be constructed in
accordance with a construction schedule approved by Lessor.

 

(f) Tenant Improvement Allowance. Lessor shall
provide to Lessee a semi-improved “cold” shell facility as described in Exhibit “D”
attached and a Tenant Improvement Allowance of $27.50 per square foot to be
used for the Tenant Improvements outlined in Exhibit “D,” all as outlined
in the Tenant Improvement Work Letter attached as Exhibit “C.”
Subcontracts for all Tenant Improvement Work shall be obtained by a sealed
competitive bid process (involving at least two qualified bidders) wherever
practical and as to work done without such process, Lessor or the General
Contractor shall provide reasonable assurance to Lessee that the cost and
expense of same is competitive in the industry for first-class workmanship and
materials.

 

(g) Payment for Tenant Improvements. Within
five (5) business days after the Budget is approved by Lessor and Lessee,
Lessee shall deposit Lessee’s share of the amount budgeted for the first three (3) months
of the construction schedule (together with the cost of any Tenant Improvements
already made), with Lessor’s construction lender to be held in an escrow
account. Until the Tenant Improvements are completed, Lessee shall deposit, on
the first day of the third calendar month of the construction schedule,
Lessee’s share of the amount budgeted for the following three (3) months
and on the first day of the sixth calendar month of the construction schedule
Lessee’s share of all remaining budgeted amounts. Lessee’s share is the portion
of the budgeted amount not paid from the Tenant Improvement Allowance as
described in the following sentence. Said construction lender shall issue
payments from said account pursuant to the construction contract for the Tenant
Improvements with a portion of each payment being taken from the Tenant
Improvement Allowance (in the same ratio as the Tenant Improvement Allowance
bears to the entire Budget total) and the balance being paid from Lessee’s
deposit, until the Tenant Improvement Allowance is exhausted, whereupon any
remaining payments shall be made 100% by Lessee. Lessor shall manage the
construction of the Tenant Improvements for a supervision fee of 4% of the
Budget (as the same may change by agreement of the parties) due and payable in
nine equal monthly installments beginning on the first day of the calendar month
following the calendar month in which the Budget is first approved.

 

(h) Lessee’s Fixturing Period. At least thirty
(30) days prior to such date that is estimated by Lessor to be forty-five
(45) days prior to the Commencement Date, Lessor shall notify Lessee of
the date that is estimated to be forty-five (45) days prior to the
Commencement Date. Lessor shall provide Lessee access to the Premises during
the forty-five (45) day period prior to the estimated Commencement Date
(“Lessee’s Fixturing Period”) for the purpose of installing furnishings and
equipment, e.g. security system, furniture system and phone and data system,
provided, that Lessee and Lessee’s employees and contractors shall at all times
avoid interfering with Lessor’s ongoing work to bring the Premises to a
substantially completed condition. Except for payment of Base Rent, all terms
and provisions of this Lease shall apply during Lessee’s Fixturing Period,
including, without limitation, Lessee’s indemnity and other obligations set
forth in Sections 7.07., 7.08. and 17.22. hereof.

 

5

 

(i) Construction of Offsite and Onsite
Improvements. In addition to the Building Shell and Tenant Improvements, and
concurrently with its construction schedule Lessor shall construct both offsite
and onsite improvements required as a condition to the Certificate of Occupancy
for the Building which are (i) (onsite) shoreline park, baseball field,
soccer field and an amenities/athletic facility, and (ii) (offsite) Seaport
Boulevard improvements and deep water slough restoration.

 

(j) Lessee Termination Rights. In the event
that either (i) Lessor is not the fee owner of the Property on or before April 1,
2000, or (ii) Lessor has not presented Lessee with reasonable evidence on
or before June 1, 2000, that it has closed a loan with one or more lenders
and obtained financing in an amount sufficient to purchase the Property, to
complete the construction of the Building Shell and all onsite and offsite
improvements described in subparagraph (i) above, and to fund the Tenant
Improvement Allowance, then Lessee shall have the right to terminate this Lease
upon written notice to Lessor within sixty (60) days after either April 1,
2000 or June 15, 2000, as applicable. If Lessee terminates this Lease in
accordance with this paragraph, neither party shall have any further rights or
obligations hereunder.

 

ARTICLE III

TERM

 

Section 3.01. Lease Term.

 

(a) Commencement Date. The term of this Lease
(“Lease Term”) shall be for twelve (12) years beginning on the earlier of (i) the
first date on which Lessee occupies or conducts business at the Premises or (ii) the
date on which a Certificate of Occupancy is issued affecting the Building and
the Seaport Boulevard improvements, the baseball and soccer fields and the
amenities/athletic facility have been substantially completed (the
“Commencement Date”) provided that, (A) for each day of delay by Lessee in
failing to approve the interior schematic drawings or the Working Drawings when
required under Section 2.04(d), or (B) for each day of delay by
Lessee in failing to approve the Budget, in writing, within fourteen
(14) days after delivery by the General Contractor as provided in Section 2.04(d),
or (C) for each day of delay caused by any changes to the approved Working
Drawings requested by Lessee, or (D) for each day that any other act or
omission by Lessee causes the construction schedule for Tenant Improvements to
be delayed provided that Lessor gives Lessee written notice of such Lessee Delay
within five (5) business days after its occurrence (collectively “Lessee
Delay”), the Commencement Date shall occur one (1) day in advance of the
date of the Certificate of Occupancy for each such day of delay. For example,
if seven (7) days of Lessee Delay causes the date of issuance of the
Certificate of Occupancy to occur on April 8, 2001 rather than April 1,
2001, the Commencement Date shall be April 1, 2001 for all purposes,
including payment of Base Rent and Additional Rent. The Lease Term shall expire,
unless sooner terminated or extended as provided herein, on the date which
completes twelve years after the Commencement Date occurs or is deemed to have
occurred, e.g. if the date on which the Certificate of Occupancy is issued or
deemed to be issued for the Building is April 1, 2001, the Lease Term
shall expire on

 

6

 

March 31,
2013 and if that date is April 3, 2001, the Lease Term shall expire on April 2,
2013 (“Expiration Date”). The parties shall execute a “Memorandum of
Commencement of Lease Term” when the Commencement Date becomes known, which
shall include a certification of the actual Rentable Area of the Building
determined by the methodology described in Section 2.01. and the actual
monthly installments of Base Rent to be paid pursuant to Section 4.01.,
and shall be substantially in the form attached hereto as Exhibit “E.”

 

(b) Scheduled Commencement Date. Lessor shall
use commercially reasonable efforts to cause the Certificate of Occupancy for
the Building to be issued no later than April 1, 2001 (“Scheduled
Commencement Date”). If a Certificate of Occupancy is not issued for the
Building on or before the Scheduled Commencement Date, this failure shall not
affect the validity of this Lease or the obligations of Lessee under it. If the
Commencement Date is adjusted for delay from any cause, the Expiration Date
shall be likewise adjusted for a like period.

 

(c) Termination in Event of Delay. If for any
reason Lessor is unable to cause the issuance of a Certificate of Occupancy for
the Building, on or before the date which is one hundred eighty (180) days
after the Scheduled Commencement Date (for a reason other than Lessee Delay or
delay excused under Section 20.01.), Lessee, at its sole election, may
terminate this Lease upon giving notice within ten (10) days thereafter.
Failure to give such notice within said time period constitutes an irrevocable
waiver of the foregoing right to terminate under this Section 3.01(c).

 

Section 3.02. Option to Extend.

 

(a) Exercise. Lessee is given two (2) options
to extend the Lease Term (“Option to Extend”), each for a five (5) year
period (“Extended Term”) following the date on which the initial Lease Term of
first Extended Term would otherwise expire, which option may be exercised only
by written notice (“Option Notice”) from Lessee to Lessor given not less than
twelve (12) months prior to the end of the initial Lease Term or the first
Extended Term, as the case may be, (“Option Exercise Date”); provided, however,
if Lessee is in material default under this Lease (beyond the expiration of any
applicable notice period) on the Option Exercise Date or on any day thereafter
on or before the last day of the initial Lease Term of the first Extended Term,
the Option Notice shall be totally ineffective, and this Lease shall expire on
the last day of the initial Lease Term or the first Extended Term, if not
sooner terminated. The right of Lessee to exercise an Option to Extend shall
not be affected by any sublease or assignment of this Lease previously entered
into by Lessee pursuant to the provisions of this Lease.

 

(b) Extended Term Rent. In the event Lessee
exercises its Option to Extend set forth herein, all the terms and conditions
of this Lease shall continue to apply except that the Base Rent payable by
Lessee during each Option Term shall be equal to one hundred percent
(100%) of Fair Market Rent (defined below), as determined under
subparagraph (c) below. “Fair Market Rent” shall mean the effective rate
being charged (including periodic adjustments thereto as applicable during the
period of the Extended Term), for comparable space in similar buildings in the
vicinity, i.e. of a similar age and quality considering any recent renovations
or modernization, and floor plate size or, if such comparable space is not
available, adjustments shall be made in the determination of Fair Market Rent
to reflect the age and quality of the Building and Premises

 

7

 

as
contrasted to other buildings used for comparison purposes, with similar
amenities, taking into consideration: size, location, floor level, leasehold
improvements or allowances provided or to be provided, term of the lease,
extent of services to be provided, the time that the particular rate under
consideration became or is to become effective, and any other relevant terms or
conditions applicable to both new and renewing tenants, but in no event less
than the monthly Base Rent prevailing during the last year of the initial Lease
Term or first Extended Term, as applicable.

 

(c) Determination of Fair Market Rent.

 

(i) Negotiation. If Lessee so exercises an
Option to Extend in a timely manner, the parties shall then meet in good faith
to negotiate the Base Rent for the Premises for the Extended Term, during the
first thirty (30) days after the date of the delivery by Lessee of the
Option Notice (the “Negotiation Period”). If, during the Negotiation Period,
the parties agree on the Base Rent applicable to the Premises for the Extended
Term, then such agreed amount shall be the Base Rent payable by Lessee during
the Extended Term.

 

(ii) Arbitration. In the event that the parties
are unable to agree on the Base Rent for the Premises within the Negotiation
Period, then within ten (10) days after the expiration of the Negotiation
Period, each party shall separately designate to the other in writing an
appraiser to make this determination. Each appraiser designated shall be a
member of MAI and shall have at least ten (10) years experience in
appraising commercial real property, of similar quality and use as the
Premises, in San Mateo County. The failure of either party to appoint an
appraiser within the time allowed shall be deemed equivalent to appointing the
appraiser appointed by the other party, who shall then determine the Fair
Market Rent for the Premises for the Extended Term. Within five (5) business
days of their appointment, the two designated appraisers shall jointly
designate a third similarly qualified appraiser. Within thirty (30) days
after their appointment, each of the two appointed appraisers shall submit to
the third appraiser a sealed envelope containing such appointed appraiser’s
good faith determination of the Fair Market Rent for the Premises for the
Extended Term; concurrently with such delivery, each such appraiser shall
deliver a copy of his or her determination to the other appraiser. The third
appraiser shall within ten (10) days following receipt of such
submissions, then determine which of the two appraisers’ determinations most
closely reflects Fair Market Rent as defined above. The determination most
closely reflecting the third appraiser’s determination shall be deemed to be
the Fair Market Rent for the Premises during the Extended Term; the third
appraiser shall have no rights to adjust, amend or otherwise alter the
determinations made by the appraiser selected by the parties, but must select
one or the other of such appraisers’ submissions. The determination by such
third appraiser shall be final and binding upon the parties. Said third
appraiser shall, upon selecting the determination which most closely resembles
Fair Market Rent, concurrently notify both parties hereto. The Base Rent for
the Extended Term in question shall be the determination so selected. The
parties shall share the appraisal expenses equally. If the Extended Term begins
prior to the determination of Fair Market Rent, Lessee shall pay monthly
installments of Base Rent equal to one hundred ten percent (110%) of the
monthly installment of Base Rent in effect for the last year of the initial
Lease Term or the first Extended Term, as applicable, (in lieu of “holdover
rent” payable under Section 17.09(b)). Once a determination is made, any
over payment or under payment shall be reimbursed as a credit against, or paid
by adding to, the monthly installment of Base Rent next falling due.

 

8

 

ARTICLE IV

RENT: TRIPLE NET LEASE

 

Section 4.01. Base Rent. Lessee shall pay to
Lessor as Base Rent an initial monthly installment of Three Dollars and
twenty-five Cents ($3.25) per square foot of Rentable Area as determined under Section 2.01.,
in advance, on the first day of each calendar month of the Lease Term,
commencing on the Commencement Date. Base Rent for any period during the Lease
Term which is for less than one month shall be a pro rata portion of the
monthly installment (based on the actual days in that month).

 

Section 4.02. Rent Adjustment. The Base Rent
set forth in Section 4.01. above shall be adjusted upward by an annual
compounded increase of three and five tenths percent (3.5%), as of the first
day of the thirteenth (13th) full calendar month following the
Commencement Date and as of the first day of every thirteenth
(13th) calendar month thereafter during the Lease Term, as shown on Exhibit “E”
attached hereto.

 

Section 4.03. First Payment of Base Rent. If
the Commencement Date is other than the first day of a calendar month, the
first installment of Base Rent shall be paid on the first day of the calendar
month immediately succeeding the Commencement Date and shall include pro rata
payment for the calendar month in which the Commencement Date occurs.

 

Section 4.04. Absolute Triple Net Lease. This
Lease is what is commonly called a “Absolute Triple Net Lease,” it being
understood that Lessor shall receive the Base Rent set forth in Section 4.01.
free and clear of any and all expenses, costs, impositions, taxes, assessments,
liens or charges of any nature whatsoever. Lessee shall pay all rent in lawful money
of the United States of America to Lessor at the notice address stated herein
or to such other persons or at such other places as Lessor may designate in
writing on or before the due date specified for same without prior demand,
set-off or deduction of any nature whatsoever. It is the intention of the
parties hereto that this Lease shall not be terminable for any reason by
Lessee, and that except as herein expressly provided in Articles III, VIII and
XIII, concerning delay, destruction and condemnation, Lessee shall in no event
be entitled to any abatement of or reduction in rent payable under this Lease.
Any present or future law to the contrary shall not alter this agreement of the
parties.

 

Section 4.05. Additional Rent.

 

(a) Defined. In addition to the Base Rent
reserved by Section 4.01., Lessee shall pay, as Additional Rent, all
taxes, assessments, fees and other impositions in accordance with the
provisions of Article IX, insurance premiums in accordance with the
provisions of Article VII, operating charges, and Common Area facility use
privilege charges with respect to the amenities/athletic facility (in lieu of
any separate use charge to Lessee’s employees who use said facility the
baseball and soccer fields) as well as, maintenance, repair and replacement
costs and expenses, utility charges, and other costs and charges allocable to
the Common Area and the Common Area facilities and the Outside Areas of the
Premises, all in accordance with the provisions of Article VI and any
other charges, costs and expenses (including appropriate

 

9

 

reserves
therefor) which are contemplated or which may arise under any provision of this
Lease during the Lease Term, plus a Management Fee to Lessor equal to 4% of the
Base Rent. The Management Fee is due and payable, in advance, with each
installment of Base Rent. All of such charges, costs, expenses, Management Fee
and all other amounts payable by Lessee hereunder, shall constitute Additional
Rent, and upon the failure of Lessee to pay any of such charges, costs or
expenses, Lessor shall have the same rights and remedies as otherwise provided
in this Lease for the failure of Lessee to pay Base Rent. To the extent any of
the aforesaid amounts are fairly allocable to the Common Area or to other
portions of the Project, Lessee’s obligation is to pay only its proportionate
share as determined by Lessor based upon the ratio of the Rentable Area of the
Premises to the Rentable Area of other office and research and development
buildings at the Project that have been approved for development which share is
presently determined to be seventeen percent (17%).

 

(b) Payment. To the extent not paid pursuant to
other provisions of this Lease, and at Lessor’s sole election, Lessor may submit
invoices and Lessee shall pay Lessee’s share of Additional Rent in monthly
installments on the first day of each month in advance in an amount to be
estimated by Lessor, based on Lessor’s experience in managing office/research
and development projects. Within ninety (90) days following the end of the
period used by Lessor in estimating Additional Rent, Lessor shall furnish to
Lessee a statement (hereinafter referred to as “Lessor’s Statement”) of the
actual amount of Lessee’s proportionate share of such Additional Rent for such
period. Within fifteen (15) days thereafter, Lessee shall pay to Lessor,
as Additional Rent, or Lessor shall remit or credit to Lessee, as the case may
be, the difference between the estimated amounts paid by Lessee and the actual
amount of Lessee’s Additional Rent for such period as shown by such statement.
Monthly installments for the ensuing year shall be adjusted upward or downward
as set forth in Lessor’s Statement.

 

Section 4.06. Security Deposit. Within two (2) business
days after the first date when Lessor is both the fee owner of the Property and
has obtained financing in an amount sufficient both to purchase the Property
and to complete the construction of the Building Shell, the offsite and offsite
improvements described in subsection 2.04(j) and to fund the Tenant
Improvement Allowance, Lessee shall deposit with Lessor a Security Deposit
equal to eighteen (18) month’s of Base Rent in the amount of Sixteen
Million, Five Hundred Forty Five Thousand Dollars and no Cents ($16,545,000) in
the form of cash or an unconditional, irrevocable letter of credit without
documents, i.e. no obligation on Lessor’s part to present anything but a sight
draft, with Lessor as beneficiary and providing for payment in San Francisco on
presentation of Lessee’s drafts on sight and drawable in whole or in part San
Francisco and otherwise from a bank and in a form acceptable to Lessor (the
“Security Deposit”). The Security Deposit shall be held by Lessor as security
for the faithful performance by Lessee of all of the terms, covenants, and
conditions of this Lease applicable to Lessee. If Lessee defaults with respect
to any provision of this Lease, including but not limited to the provisions
relating to the condition of the Premises upon Lease Termination, Lessor may
(but shall not be required to) use, apply or retain all or any part of the
Security Deposit for the payment of any amount which Lessor may spend by reason
of Lessee’s default or to compensate Lessor for any loss or damage which Lessor
may suffer by reason of Lessee’s default. If any portion of the Security
Deposit is so used or applied, Lessee shall, within ten days after written
demand therefor, deposit cash (or a replacement Letter of Credit in form and
substance subject to the same requirements as the original Letter of Credit)

 

10

 

with
Lessor in an amount sufficient to restore the Security Deposit to its original
amount. Lessee’s failure to do so shall be a Default by Lessee. The rights of
Lessor pursuant to this Section 4.06. are in addition to any rights which
Lessor may have pursuant to Article 12 below. If Lessee fully and
faithfully performs every provision of this Lease to be performed by it, the
Security Deposit or any balance thereof shall be returned (without interest) to
Lessee (or, at Lessor’s option, to the last assignee of Lessee’s interests
hereunder) at Lease expiration or termination and after Lessee has vacated the
Premises. Lessor shall not be required to keep the Security Deposit separate
from Lessor’s general funds or be deemed a trustee of same. If the Security
Deposit is in whole or in part in the form of a Letter of Credit, failure of
Lessee to deliver a replacement Letter of Credit to Lessor at least forty-five
(45) business days prior to the expiration date of any current Letter of
Credit shall constitute a separate default entitling Lessor to draw down
immediately and entirely on the current Letter of Credit and the proceeds shall
constitute a cash Security Deposit.

 

Section 4.07. Lessee’s Right to Review
Supporting Data.

 

(1) Exercise of Right by Lessee. Provided that
Lessee is not in default under this Lease and provided further that Lessee
strictly complies with the provisions of this Paragraph, Lessee shall have the
right to reasonably review supporting data for any portion of a Lessor’s
statement that Lessee claims is incorrect. In order for Lessee to exercise its
right under this Paragraph, Lessee shall, within thirty (30) days after
any such Lessor’s statement is sent, deliver a written notice to Lessor
specifying the portions of the Lessor’s statement that are claimed to be
incorrect, and Lessee shall simultaneously pay to Lessor all amounts due from
Lessee to Lessor as specified in the Lessor’s statement. Except as expressly
set forth in subparagraph 3 below, in no event shall Lessee be entitled to
withhold, deduct, or offset any monetary obligation of Lessee to Lessor under
the Lease including, without limitation, Lessee’s obligation to make all Base
Rent payments and all payments for Additional Rent pending the completion of,
and regardless of the results of, any review under this Paragraph. The right to
review granted to Lessee under this Paragraph may only be exercised once for
any Lessor’s statement, and if Lessee fails to meet any of the above conditions
as a prerequisite to the exercise of such right, the right of Lessee under this
Paragraph for a particular Lessor’s statement shall be deemed waived.

 

(2) Procedures for Review. Lessee acknowledges
that Lessor maintains its records for the Building and Project at its offices
in San Francisco, and Lessee therefore agrees that any review of supporting
data under this Paragraph shall occur at such location. Any review to be
conducted under this Paragraph shall be at the sole expense of Lessee and shall
be conducted by an independent firm of certified public accountants of national
standing. Lessee acknowledges and agrees that any supporting data reviewed
under this Paragraph constitute confidential information of Lessor, which shall
not be disclosed to anyone other than the accountants performing the review and
the principals of Lessee who receive the results of the review. The disclosure
of such information to any other person, whether or not caused by the conduct
of Lessee, shall constitute a material breach of this Lease.

 

(3) Finding of Error. Any errors disclosed by
the review of supporting data under this Paragraph shall be promptly corrected,
provided that Lessor shall have the right to cause another review of the
supporting data to be made by an independent firm of certified public

 

11

 

accountants
of national standing. In the event of a disagreement between the two accounting
firms, the review that discloses the least amount of deviation from the
Lessor’s statement shall be deemed to be correct and its review shall be final
and binding on both Lessor and Lessee. If the results of the review of
supporting data taking into account, if applicable, the results of any
additional review caused by Lessor reveal that Lessee has overpaid obligations
for a preceding period, the amount of such overpayment shall be credit against
Lessee’s subsequent installment obligations to pay its share of Additional
Rent. In the event that such results show that Lessee has underpaid its
obligations for a preceding period, the amount of such underpayment shall be
paid by Lessee to Lessor with the next succeeding installment obligation of
Additional Rent or, if the Lease has terminated, in cash within thirty
(30) days after the determination of underpayment is delivered to Lessee.
Each party shall pay the cost and expense of its chosen accounting firm.

 

(4) Effect of Lessee’s Default. In the event
that Lessee becomes in default of its obligations under this Lease at any time
during the pendency of a review of records under this Paragraph, said right to
review shall immediately cease and the matters originally set forth in the
Lessor’s statement shall be deemed to be correct.

 

ARTICLE V

USE

 

Section 5.01. Permitted Use and Limitations on
Use. The Premises shall be used and occupied only for office, research and
development, together with such ancillary uses which do not cause excessive
wear of the Premises or increase the potential liability of Lessor, and for no
other use, without Lessor’s prior written consent. Lessee shall not use, suffer
or permit the use of the Premises in any manner that will tend to create waste,
nuisance or unlawful acts. In no event shall it be unreasonable for Lessor to
withhold its consent as to uses which it determines would tend to increase
materially the wear of the Premises or any part thereof or increase the
potential liability of Lessor or decrease the marketability, financability,
leasability or value of the Premises. Lessee shall not do anything in or about
the Premises which will (i) cause structural injury to the Building or
Premises, or (ii) cause damage to any part of the Building except to the
extent reasonably necessary for the installation of Lessee’s trade fixtures and
Lessee’s Alterations, and then only in a manner which has been first approved
by Lessor in writing. Lessee shall not operate any equipment within the
Building or Premises which will (i) materially damage the Building or the
Common Area, (ii) overload existing electrical systems or other mechanical
equipment servicing the Building, (iii) impair the efficient operation of
the sprinkler system or the heating, ventilating or air conditioning (“HVAC”)
equipment within or servicing the Building, or (iv) damage, overload or
corrode the sanitary sewer system. Lessee shall not attach, hang or suspend
anything from the ceiling, roof, walls or columns of the Building or set any
load on the floor in excess of the load limits for which such items are designed
nor operate hard wheel forklifts within the Premises. Any dust, fumes, or waste
products generated by Lessee’s use of the Premises shall be contained and
disposed so that they do not (i) create an unreasonable fire or health
hazard, (ii) damage the Premises, or (iii) result in the violation of
any law. Except as approved by Lessor, Lessee shall not change the exterior of
the Building, or install any equipment or fixtures on or make any penetrations
of the exterior or roof of the Building, provided that Lessee may install
rooftop antennae or other communication devices on the roof of the Building
with Lessor’s prior written consent which shall not be unreasonably

 

12

 

withheld
or delayed. Lessee shall not conduct on any portion of the Premises any sale of
any kind, including any public or private auction, fire sale,
going-out-of-business sale, distress sale or other liquidation sale. No
materials, supplies, tanks or containers, equipment, finished products or
semifinished products, raw materials, inoperable vehicles or articles of any
nature shall be stored upon or permitted to remain within the outside areas of
the Premises except in fully fenced and screened areas outside the Building
which have been designed for such purpose and have been approved in writing by
Lessor for such use by Lessee.

 

Section 5.02. Compliance with Law.

 

(a) Lessor shall deliver the Premises to Lessee
on the Commencement Date, for office use, free of violations of any covenants or
restrictions of record, or any applicable law, building code, regulation or
ordinance in effect on such Commencement Date, including without limitation,
the Americans with Disability Act, and free of Year Two Thousand computer
programming defects.

 

(b) Except as provided in paragraph 5.02.(a),
Lessee shall, at Lessee’s cost and expense, comply promptly with all statutes,
ordinances, codes, rules, regulations, orders, covenants and restrictions of
record, and requirements applicable to the Premises and Lessee’s use and
occupancy of same in effect during any part of the Lease Term, whether the same
are presently foreseeable or not, and without regard to the cost or expense of
compliance.

 

(c) By executing this Lease, Lessee
acknowledges that it has reviewed and satisfied itself as to its compliance, or
intended compliance with the applicable zoning and permit laws, hazardous
materials and waste requirements, and all other statutes, laws, or ordinances
relevant to the uses stated in Section 5.01., above, provided that Lessor
represents that the Premises, when certified for occupancy, may legally be used
for general office purposes.

 

Section 5.03. Condition of Premises at
Commencement Date. Subject to all of the terms of this Lease for the
construction of Tenant Improvements. Lessor shall deliver the Building to
Lessee on the Commencement Date with the Building plumbing, lighting, heating,
ventilating, air conditioning, gas, electrical, and sprinkler systems and
loading doors as set forth in Exhibit “D” in proper operating condition
and built substantially in accordance with the approved plans therefor, and in
a workmanlike manner. Except as otherwise provided in this Lease, Lessee hereby
accepts the Premises in their condition existing as of the Commencement Date,
subject to all applicable zoning, municipal, county and state laws, ordinances
and regulations governing and regulating the use and condition of the Premises,
and any covenants or restrictions, liens, encumbrances and title exceptions of
record, and accepts this Lease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Lessee acknowledges that neither
Lessor nor any agent of Lessor has made any representation or warranty as to
the present or future suitability of the Premises for the conduct of Lessee’s
business.

 

Section 5.04. Defective Condition at
Commencement Date. In the event -that it is determined, and Lessee notifies
Lessor in writing within one year after the Commencement Date, that any of the
obligations of Lessor set forth in Section 5.02.(a) or Section 5.03.(a) were
not performed, then it shall be the obligation of Lessor, and the sole right
and remedy of Lessee,

 

13

 

after
receipt of written notice from Lessee setting forth with specificity the nature
of the failed performance, to promptly, within a reasonable time and at
Lessor’s sole cost, correct same. Except as to defects which remain Lessor’s
responsibility under Section 6.01(b), Lessee’s failure to give such
written notice to Lessor within one year after the Commencement Date shall
constitute a conclusive presumption that Lessor has complied with all of
Lessor’s obligations under the foregoing sections 5.02. and 5.03., and any
required correction after that date shall be performed by Lessee, at its sole
cost and expense. At the end of the first year of the Lease Term, Lessor shall
promptly assign to Lessee all of Lessor’s contractor’s, and/or manufacturer’s
guarantees, warranties, and causes of action which do not relate to Lessor’s
obligations under Section 6.01(b).

 

Section 5.05. Building Security. Lessee
acknowledges and agrees that it assumes sole responsibility for security at the
Premises for its agents, employees, invitees, licensees, contractors, guests
and visitors and will provide such systems and personnel for same including,
without limitation, that portion of the Common Area located on the legal parcel
which the Building is located as it deems necessary or appropriate and at its
sole cost and expense. Lessee acknowledges and agrees that Lessor does not
intend to provide any security system or security personnel at the Premises or
Project, including, without limitation, at the Common Areas provided, however,
that nothing herein shall be deemed to prevent Lessor from providing such
system or personnel in the future, the cost of which will be included in those
items for which Lessee pays Additional Rent.

 

Section 5.06. Rules and Regulations.
Lessor may from time to time promulgate reasonable and nondiscriminatory rules and
regulations applicable for the care and orderly management of the Premises.
Such rules and regulations shall be binding upon Lessor upon delivery of a
copy thereof to Lessor, and Lessor agrees to abide by such rules and
regulations. A copy of the initial Rules and Regulations is attached
hereto as Exhibit “L.” If there is a conflict between the rules and
regulations and any of the provisions of this Lease, the provisions of this
Lease shall prevail. Lessor shall not be responsible for the violation of any
such rules and regulations by any person, including, without limitation,
Lessee or its employees, agents, invitees, licensees, guests, visitors or
contractors.

 

ARTICLE VI

MAINTENANCE, REPAIRS AND ALTERATIONS

 

Section 6.01. Maintenance of Premises.

 

(a) Throughout the Lease Term, Lessee, at its
sole cost and expense, shall keep, maintain, repair and replace the Premises
(except as provided in 6.01.(b)) and all improvements and appurtenances in or
serving the Premises, including, without limitation, all interior and exterior
walls, all doors and windows, the roof membrane, all elevators and stairways,
all wall surfaces and floor coverings, all Tenant Improvements and alterations,
additions and improvements installed during the Lease Term, all sewer,
plumbing, electrical, lighting, heating, ventilation and cooling systems, fire
sprinklers, fire safety and security systems, fixture and appliances and all
wiring and glazing, in the same good order, condition and repair as they are in
on the Commencement Date, or may be put in during the Lease Term, reasonable
wear excepted, provided that wear which could be prevented by first class
maintenance shall not be deemed reasonable.

 

14

 

(b) Lessor, at its sole cost and expense, shall
repair defects in the Building Shell, including, exterior walls (including all
exterior glass which is damaged by structural defects in such exterior walls),
floors installed as part of the Building Shell, supporting pillars, structural
walls, roof structure and foundations of the Building and sewer and plumbing
systems outside the Building as well as any defects in the offsite and onsite
improvements listed in Section 2.04(i), provided that the need for repair
is not caused by Lessee, in which event Lessor shall repair same, at Lessee’s
sole cost and expense (to the extent not insured) and Lessee shall reimburse
Lessor for same upon demand. Lessor shall replace the roof membrane of the
Building, the parking lot surface, landscaping, drainage, irrigation, sprinkler
and sewer and plumbing systems outside the Building systems when the useful
life of each has expired, and Lessee shall pay that portion of the cost of each
replacement, together with annual interest at the Agreed Rate which shall be
amortized over the useful life of each such replacement applicable to the
balance of the Lease Term, in equal monthly installments due and payable with
installments of Base Rent provided that as to repairs and replacements within
the Common Area, Lessee shall pay its proportionate share. Lessee shall give
Lessor written notice of any need of repairs which are the obligation of Lessor
hereunder and Lessor shall have a reasonable time to perform same. Should
Lessor default as provided in Section 12.03 with respect to its obligation
to make any of the repairs assumed by it hereunder with respect to the
Building, Lessee shall have the right to perform such repairs and Lessor agrees
that within thirty (30) days after written demand accompanied by detailed
invoice(s), it shall pay to Lessee the cost of any such repairs together with
accrued interest from the date of Lessee’s payment at the Agreed Rate. Lessor
shall not be liable to Lessee, its employees, invitees, or licensees for any
damage to person or property, and Lessee’s sole right and remedy shall be the
performance of said repairs by Lessee with right of reimbursement from Lessor
of the reasonable fair market cost of said repairs, not exceeding the sum
actually expended by Lessee, together with accrued interest from the date of
Lessee’s payment at the Agreed Rate, provided that nothing herein shall be
deemed to create a right of setoff or withholding by Lessee of Base Rent or
Additional Rent or any other amounts due herein. Lessee hereby expressly waives
all rights under and benefits of Sections 1941 and 1942 of the California Civil
Code or under any similar law, statute or ordinance now or hereafter in effect
to make repairs and offset the cost of same against rent or to withhold or
delay any payment of rent or any other of its obligations hereunder as a result
of any default by Lessor under this Section 6.01.(b).

 

(c) Lessee agrees to keep the Premises, both
inside and out, clean and in sanitary condition as required by the health,
sanitary and police ordinances and regulations of any political subdivision
having jurisdiction and to remove all trash and debris which may be found in or
around the Premises. Lessee further agrees to keep the interior surfaces of the
Premises, including, without limitation, windows, floors, walls, doors,
showcases and fixtures clean and neat in appearance.

 

(d) If Lessee refuses or neglects to commence
such repairs and/or maintenance for which Lessee is responsible under this Article VI
(including with respect to that portion of the Common Area located on the legal
parcel on which the Building is located) within a thirty (30) day period

 

15

 

(or
as soon as practical and in no event later than five (5) days, if the
failure to initiate the repair threatens to cause further damage to the
Premises) after written notice from Lessor and thereafter diligently prosecute
the same to completion, then Lessor may (i) enter the Premises (except in
an emergency, upon at least 24 hours advanced written notice) during Lessor’s
business hours and cause such repairs and/or maintenance to be made and shall
not be responsible to Lessee for any loss or damage occasioned thereby and
Lessee agrees that upon demand, it shall pay to Lessor the reasonable cost of
any such repairs, not exceeding the sum actually expended by Lessor, together
with accrued interest from the date of Lessor’s payment at the Agreed Rate and (ii) elect
to enter into a maintenance contract at a market rate for first-rate
maintenance with a third party for the performance of all or a part of Lessee’s
maintenance obligations, whereupon, Lessee shall be relieved from its
obligations to perform only those maintenance obligations covered by such
maintenance contract, and Lessee shall bear the entire cost of such maintenance
contract which shall be paid in advance, as Additional Rent, on a monthly basis
with Lessee’s Base Rent payments.

 

Section 6.02. Maintenance of Common
Areas and Outside Areas. Subject to 6.01.(c) and subject to Lessee paying
Lessee’s share of the cost and expense for same pursuant to Section 4.05,
Lessor shall maintain, repair and replace all landscape, hardscape and other
improvements within the Common Areas and shall operate and manage the
amenities/athletic facility and other Common Area features and facilities described
in Section 2.02 and Lessor shall also maintain, repair and replace all
landscape, hardscape and other improvements within the Outside Areas of the
Premises (“Outside Areas”), including without limitation, walkways, driveways,
parking areas and lighting and sprinkler systems.

 

Section 6.03. Alterations, Additions and
Improvements. No alterations, additions, or improvements (“Alterations”) shall
be made to the Premises by Lessee without the prior written consent of Lessor
which Lessor will not unreasonably withhold, provided, however, that Lessee may
make Alterations which do not affect the Building systems, exterior appearance,
structural components or structural integrity and which do not exceed
collectively Seventy-five Thousand Dollars ($75,000) in cost within any twelve
(12) month period, without Lessor’s prior written consent. As a condition
to Lessor’s obligation to consider any request for consent hereunder, Lessee
shall pay Lessor upon demand for the reasonable costs and expenses of third
party consultants, engineers, architects and others for reviewing plans and
specifications and for monitoring the construction of any proposed Alterations.
Lessor may require Lessee to remove any such Alterations at the expiration or
termination of the Lease Term and to restore the Premises to their prior
condition by written notice given on or before the earlier of (i) the expiration
of the Lease Term or (ii) thirty (30) days after termination of the
Lease or (iii) thirty (30) days after a written request from Lessee
for such notice from Lessor provided, that, if Lessee requests same from
Lessor, Lessor will notify Lessee within five (5) business days after
receipt of Lessee’s request and a copy of all plans and specifications for the
proposed Alteration whether it will require removal. All Alterations to be made
to the Premises shall be made under the supervision of a competent, California
licensed architect and/or competent California licensed structural engineer
(each of whom has been approved by Lessor) and shall be made in accordance with
plans and specifications which have been furnished to and approved by Lessor in
writing prior to commencement of work. All Alterations shall be designed,
constructed and installed at the sole cost and expense of Lessee by California
licensed architects, engineers, and

 

16

 

contractors
approved by Lessor, in compliance with all applicable law, and in good and
workmanlike manner. Any Alteration except furniture and trade fixtures, shall
become the property of Lessor at the expiration, or sooner termination of the
Lease, unless Lessor directs otherwise, provided that Lessee shall retain title
to all furniture and trade fixtures placed on the Premises. All heating,
lighting, electrical, air conditioning, full height partitioning (but not
moveable, free standing cubicle-type partitions which do not extend to the
ceiling or connect to Building walls), drapery and carpeting installations made
by Lessee together with all property that has become an integral part of the
Premises, shall be and become the property of Lessor upon the expiration, or
sooner termination of the Lease, and shall not be deemed trade fixtures. Within
thirty (30) days after completion of any Alteration, Lessee, Lessee shall
provide Lessor with a complete set of “as built” plans for same.

 

Section 6.04. Covenant Against Liens.
Lessee shall not allow any liens arising from any act or omission of Lessee to
exist, attach to, be placed on, or encumber Lessor’s or Lessee’s interest in
the Premises or Project, or any portion of either, by operation of law or
otherwise. Lessee shall not suffer or permit any lien of mechanics, material
suppliers, or others to be placed against the Premises or Project, or any
portion of either, with respect to work or services performed or claimed to
have been performed for Lessee or materials furnished or claimed to have been
furnished to Lessee or the Premises. Lessor has the right at all times to post
and keep posted on the Premises any notice that it considers necessary for
protection from such liens. At least seven (7) days before beginning
construction of any Alteration, Lessee shall give Lessor written notice of the
expected commencement date of that construction to permit Lessor to post and
record a notice of nonresponsibility. If any such lien attaches or Lessee
received notice of any such lien, Lessee shall cause the lien to be immediately
released and removed of record. Despite any other provision of this Lease, if
the lien is not released and removed within twenty (20) days after Lessor
delivers notice of the lien to Lessee, Lessor may immediately take all action
necessary to release and remove the lien, without any duty to investigate the
validity of it. All expenses (including reasonable attorney fees and the
cost of any bond) incurred by Lessor in connection with a lien incurred by
Lessee or its removal shall be considered Additional Rent under this Lease and
be immediately due and payable by Lessee.

 

Section 6.05 Reimbursable Capital Expenditures.
Except for items of capital expenditures, which are to be made at Lessor’s sole
cost and expense pursuant to the first sentence of Section 6.01(b) above,
capital expenditures, together with interest thereon at the Agreed Rate, for
any replacement item at the Premises made by Lessor in excess of Ten Thousand
Dollars ($10,000.00) during the Lease Term shall be amortized over the
remaining Lease Term for the useful life of such replacement item within the
numerator being the number of months remaining in the Lease Term and the
denominator being the number of months of the “useful life” of the
improvements. Lessee shall be obligated for such amortized portion of any such
expenditure in equal monthly installments due and payable with each installment
of Base Rent.

 

17

 

ARTICLE VII

INSURANCE

 

Section 7.01. Property/Rental Insurance for
Premises: At all times during the Lease Term, Lessor shall keep the Premises
insured against loss or damage by fire and those risks normally included in the
term “all risk,” including, without limitation, coverage for (i) earthquake
and earthquake sprinkler leakage, (ii) flood, (iii) loss of rents and
extra expense for eighteen (18) months, including scheduled rent
increases, (iv) boiler and machinery, (v) Tenant Improvements and (vi) fire
damage legal liability form, including waiver of subrogation. Any deductibles
shall be paid by Lessee. The amount of such insurance shall not be less than
100% of replacement cost. Insurance shall include a Building Ordinance and
Increased Cost of Construction Endorsement insuring the increased cost of reconstructing
the Premises incurred due to the need to comply with applicable statutes,
ordinances and requirements of all municipal, state and federal authorities now
in force, which or may be in force hereafter. Any recovery received from said
insurance policy shall be paid to Lessor and thereafter applied by Lessor to
the reconstruction of the Premises in accordance with the provisions of Article VIII
below. Lessee, in addition to the rent and other charges provided herein, shall
reimburse Lessor for the cost of the premiums for all such insurance covering
the Premises in accordance with Article IV. Such reimbursement and shall
be made within (15) days of Lessee’s receipt of a copy of Lessor’s
statement therefor. Lessee shall pay to Lessor any deductible (subject to the
above conditions) owing within fifteen (15) days after receipt of notice
from Lessor of the amount owing. To the extent commercially available, Lessor’s
insurance shall have a deductible not greater than fifteen percent
(15%) for earthquake and ten percent (10%) for the basic “all risk”
coverage.

 

Section 7.02. Property Insurance for Fixtures
and Inventory. At all times during the Lease Term, Lessee shall, at its sole
expense, maintain insurance with “all risk” coverage on any fixtures, furnishings,
merchandise equipment or personal property in or on the Premises, whether in
place as of the date hereof or installed hereafter. The amount of such
insurance shall not be less than one hundred percent (100%) of the
replacement cost thereof, and Lessor shall not have any responsibility nor pay
any cost for maintaining any types of such insurance. Lessee shall pay all
deductibles.

 

Section 7.03. Lessor’s Liability Insurance.
During the Lease Term, Lessor shall maintain a policy or policies of comprehensive
general liability insurance naming Lessor (and such others as designated by
Lessor) against liability for bodily injury, property damage on our about the
Project, with combined single limit coverage of not less than Thirty Million
Dollars ($30,000,000.00). Lessee, in addition to the rent and other charges
provided herein, agrees to pay to Lessor Lessee’s proportionate share of the
premium(s) for all such insurance pursuant to Section 4.05. The
insurance premiums shall be paid in accordance with Article IV, within
(15) days of Lessee’s receipt of a copy of Lessor’s statement therefore.

 

Section 7.04. Liability Insurance Carried by
Lessee. At all times during the Lease Term (and any holdover period) Lessee
shall obtain and keep in force a commercial general liability policy of
insurance protecting Lessee, Lessor and any Lender(s) whose names are
provided to Lessee as Additional Insureds against claims from bodily injury,
personal injury and property

 

18

 

damage
based upon involving or arising out of ownership, use, occupancy or maintenance
of the Premises and all areas appurtenant thereto. Such insurance shall be on
an occurrence basis providing a single limit coverage in amount of not less
than Ten Million Dollars ($10,000,000) per occurrence with an Additional
Lessors or Premises Endorsements and containing an “Amendment of the Pollution
Exclusion Endorsement” for damage caused by heat, smoke, fumes from a hostile
fire. The limits of said insurance required by this Lease as carried by Lessee
shall not, however limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. All insurance to be carried by the Lessee shall be
primary to and not contributory with, any similar insurance carried by Lessor
whose insurance shall be considered excess insurance only.

 

Section 7.05. Lessee to Furnish Proof of
Insurance. Lessee shall furnish to Lessor prior to the Commencement Date, and
at least thirty (30) days prior to the expiration date of any policy, certificates
indicating that the property insurance and liability insurance required to be
maintained by Lessee is in full force and effect for the twelve (12) month
period following such expiration date; that Lessor has been named as an
additional insured to the extent of contractual liability assumed in Section 7.07.
“Indemnification” and Section 7.08. “Lessor as Party Defendant”; and that
all such policies will not be canceled unless thirty (30) days’ prior
written notice of the proposed cancellation has been given to Lessor. The
insurance shall be with insurers approved by Lessor, provided, however, that
such approval shall not be unreasonably withheld so long as Lessee’s insurance
carrier has a Best’s Insurance Guide rating not less than A+ VIII. Within ten (10) business
days after Lessee’s written request for same, Lessor shall furnish once during
any calendar year, certificates indicating that the property insurance and
liability insurance required to be kept by Lessor is in full force and effect.

 

Section 7.06. Mutual Waiver of Claims and
Subrogation Rights. Lessor and Lessee hereby release and relieve the other, and
waive their entire claim of recovery for loss or damage to property arising out
of or incident to fire, lightning, and the other perils included in a standard “all
risk” insurance policy of a type described in Sections 7.01 and 7.02 above,
when such property constitutes the Premises, or is in, on or about the
Premises, whether or not such loss or damage is due to the negligence of Lessor
or Lessee, or their respective agents, employees, guests, licensees, invitees,
or contractors. Lessee and Lessor waive all rights of subrogation against each
other on behalf of, and shall obtain a waiver of all subrogation rights from,
all property and casualty insurers referenced above.

 

Section 7.07. Indemnification and Exculpation.

 

(a) Except as otherwise provided in Section 7.07.(b),
Lessee shall indemnify and hold Lessor free and harmless from any and all
liability, claims, loss, damages, causes of action (whether in tort or
contract, law or equity, or otherwise), expenses, charges, assessments, fines,
and penalties of any kind, including without limitation, reasonable attorney
fees, expert witness fees and costs, arising by reason of the death or injury of
any person, including any person who is an employee, agent, invitee, licensee,
permittee, visitor, guest or contractor of Lessee, or by reason of damage to or
destruction of any property, including property owned by Lessee or any person
who is an employee, agent, invitee, permitee, visitor, or contractor of Lessee,
caused or allegedly caused (1) while that person or property is in or
about the Premises; (2) by some condition of the Premises; (3) by
some act or omission by Lessee or its agent, employee,

 

19

 

licensee,
invitee, guest, visitor or contractor or any person in, adjacent, on, or about
the Premises with the permission, consent or sufferance of Lessee; (4) by
any matter connected to or arising out of Lessee’s occupation and use of the
Premises, or any breach or default in timely observance or performance of any
obligation on Lessee’s part to be observed or performed under this Lease.

 

(b) Notwithstanding the provisions of Section 7.07.(a) of
this Lease, Lessee’s duty to indemnify and hold Lessor harmless shall not apply
to any liability, claims, loss or damages arising because of the active
negligence or willful acts of misconduct of Lessor or its agents, employees or
contractors or which is or could be covered by the insurance Lessor is required
to carry under this Lease. Lessor hereby waives all claims against Lessee for
any damage which is or could be covered by the insurance Lessee is required to
carry under this Lease.

 

(c) Lessee hereby waives all claims against
Lessor for damages to goods, wares and merchandise and all other personal
property in, on or about the Premises and for injury or death to persons in, on
or about the Premises from any cause arising at any time to the fullest extent
permitted by law and in no event shall Lessor be liable for lost profits or
other consequential damages arising from any cause or for any damage which is
or could be covered by the insurance Lessee is required to carry under this
Lease.

 

Section 7.08. Lessor as Party Defendant. If by
reason of an act or omission of Lessee or any of its employees, agents,
invitees, licensee, visitors, guests or contractors, Lessor is made a party
defendant or a cross- defendant to any action involving the Premises or this
Lease, Lessee shall hold harmless and indemnify Lessor from all liability or
claims of liability, including all damages, attorney fees and costs of suit.

 

ARTICLE VIII

DAMAGE OR DESTRUCTION

 

Section 8.01. Destruction of the Premises.

 

(a) In the event of a partial destruction of
the Premises during the Lease Term from any cause, Lessor, upon receipt of, and
to the extent of, insurance proceeds paid in connection with such casualty,
shall forthwith repair the same, provided the repairs can be made within a
reasonable time under state, federal, county and municipal applicable law, but
such partial destruction shall in no way annul or void this Lease, (except as
provided in Section 8.01.(b) below) provided that Lessee shall be
entitled to a proportionate credit for rent equal to the payment of Rental
Income Insurance received by Lessor. Lessor shall use diligence in making such
repairs within a reasonable time period, acts of God, strikes and delays beyond
Lessor’s control excepted, in which instance the time period shall be extended
accordingly, and this Lease shall remain in full force and effect, with the
rent to be proportionately reduced as provided in this Section. If the Premises
are damaged by any peril within twelve (12) months prior to the last day
of the Lease Term and, in the reasonable opinion of the Lessor’s architect or
construction consultant, the restoration of the Premises cannot be
substantially completed within ninety (90) days after the date of such
damage and such damage renders unusable more than thirty percent (30%) of
the Premises, Lessor may terminate this Lease on sixty (60) days written
notice to Lessee.

 

20

 

(b) If the Building is damaged from any cause,
Lessor shall promptly furnish Lessee with the written opinion of Lessor’s
architect of when the restoration work to repair the damage may be complete.
Lessee shall have the option to terminate this Lease if the time estimated to
substantially complete the restoration exceeds fifteen (15) months from
the date Lessor’s architect’s opinion is delivered to Lessee, which shall be (i) exercised
by written notice to Lessor delivered within thirty (30) days after
delivery to Lessee of Lessor’s architect’s opinion or (ii) irrevocably and
automatically waived if not so timely exercised. In the event of termination,
Lessee shall pay to Lessor all insurance proceeds, if any, received by Lessee
as a result of the damage or destruction except to the extent allocable to the
unamortized (over the Lease Term) cost of (i) Tenant Improvements paid for
by Lessee over and above the Tenant Improvement Allowance and (ii) or
other Alterations installed therein at Lessee’s sole cost and expense.

 

Section 8.02. Waiver of Civil Code Remedies.
Lessee hereby expressly waives any rights to terminate this Lease upon damage
or destruction to the Premises, including without limitation any rights
pursuant to the provisions of Section 1932, Subdivisions 1 and 2 and Section 1933,
Subdivision 4, of the California Civil Code, as amended from time-to-time, and
the provisions of any similar law hereinafter enacted.

 

Section 8.03. No Abatement of Rentals. The
Rentals and other charges due under this Lease shall not be reduced or abated
by reason of any damage or destruction to the Premises (except to the extent of
proceeds received by Lessor from the Rental Loss Insurance), and Lessor shall
be entitled to all proceeds of the insurance maintained pursuant to Section 7.01.
above during the period of rebuilding pursuant to Section 8.01.(a) above,
or if the Lease is terminated pursuant to Section 8.01.(a) above.
Lessee shall have no claim against Lessor, including, without limitation, for
compensation for inconvenience or loss of business, profits or goodwill during
any period of repair or reconstruction.

 

Section 8.04. Liability for Personal Property.
In no event shall Lessor have any liability for, nor shall it be required to
repair or restore, any injury or damage to Lessee’s personal property or to any
other personal property or to Alterations (except to the extent Lessor receives
insurance proceeds to repair damage to same) in or upon the Premises by Lessee.

 

ARTICLE IX

REAL PROPERTY TAXES

 

Section 9.01. Payment of Taxes. Lessee shall
pay all real property taxes, including any escaped or supplemental tax and any
form of real estate tax or assessment, general, special, ordinary or
extraordinary, and any license, fee, charge, excise or imposition (“real
property taxes”), imposed, assessed or levied on or with respect to the
Premises (and Lessee shall pay its proportionate share of real property taxes
imposed, assessed or levied on or with respect to the Common Area) by any
Federal, State, County, City or other political subdivision or public authority
having the direct or indirect power to tax, including, without limitation, any
improvement district or any community facilities district, as against any legal
or equitable

 

21

 

interest
of Lessor in the Premises or against the Premises or any part thereof applicable
to the Premises for a period of time included within the Lease Term as well as
any government or private cost sharing agreement assessments made for the
purpose of augmenting or improving the quality of services and amenities
normally provided by government agencies. All such payments shall be made at
least ten (10) days prior to the delinquency date for such payment or ten (10) days
after Lessee’s receipt of the tax bill, whichever is later. Notwithstanding the
foregoing, Lessee shall not be required to pay any net income taxes, franchise
taxes, or any succession or inheritance taxes of Lessor. If any anytime during
the Lease Term, the State of California or any political subdivision of the
state, including any county, city, city and county, public corporation,
district, or any other political entity or public corporation of this state,
levies or assesses against Lessor a tax, fee, charge or imposition, excise on
rents under the Lease, the square footage of the Premises, the act of entering
into this Lease, or the occupancy of Lessee, or levies or assesses against
Lessor any other tax, fee, or excise, however described, including, without
limitation, a so-called value added, business license, transit, commuter,
environmental or energy tax fee, charge or excise or imposition related to the
Premises as a direct substitution in whole or in part for, or in addition to,
any real property taxes on the Premises, Lessee shall pay ten (10) days
before delinquency or ten (10) days after receipt of the tax bill,
whichever is later, that tax, fee, charge, excise or imposition. A good faith
estimate of anticipated real property taxes is attached hereto as Exhibit M.

 

Section 9.02. Pro Ration for Partial Years. If
any such taxes paid by Lessee shall cover any period prior to the Commencement
Date or after the Expiration Date of the Lease Term, Lessee’s share of such
taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year during which this Lease shall be in effect, and Lessor shall
reimburse Lessee to any extent required. If Lessee shall fail to pay any such
taxes, Lessor shall have the right to pay the same in which case Lessee shall
repay such amount to Lessor within ten (10) days after written demand,
together with interest at the Agreed Rate.

 

Section 9.03. Personal Property Taxes.

 

(a) Lessee shall pay prior to delinquency all
taxes imposed, assessed against and levied upon trade fixtures, furnishings,
equipment and all other personal property of Lessee contained in the Premises
or elsewhere. When possible, Lessee shall cause said trade fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Lessor.

 

(b) If any of Lessee’s said personal property
shall be assessed with Lessor’s real property, Lessee shall pay Lessor the
taxes attributable to Lessee within ten (10) days after receipt of a
written statement setting forth the taxes applicable to Lessee’s property.

 

(c) If Lessee shall fail to pay any such taxes,
Lessor shall have the right to pay the same, in which case Lessee shall repay
such amount to Lessor with Lessee’s next rent installment together with
interest at the Agreed Rate.

 

Section 9.04. Lessee’s Right to Contest Real
Property Taxes. Lessee at its sole cost and expense shall have the right, at
any time, to seek a reduction in the assessed valuation of the

 

22

 

Premises
or to contest any real property taxes that are to be paid by Lessee with
respect to the Premises. If Lessee seeks a reduction or contests any such real
property taxes, the failure on Lessee’s part to pay such real property taxes
shall not constitute a default as long as Lessee complies with the provisions
of this Section. Lessor shall not be required to join in any proceeding or
contest brought by Lessee unless the provisions of any law require that the
proceeding or contest be brought by or in the name of Lessor or any owner of
the Premises. In that case Lessor shall join in the proceeding or contest or
permit it to be brought in Lessor’s name as long as Lessor is not required to
bear any cost or expense. Lessor, on final determination of the proceeding or
contest, shall immediately pay or discharge any decision or judgment rendered,
together with all costs, fees, charges, interest, penalties and all other
amounts incidental to the decision or judgment. If Lessor does not pay the real
property taxes when due and Lessor seeks a reduction or contests them as
provided in this Section, before the commencement of such proceeding or contest
Lessee shall furnish to Lessor a surety bond issued by an insurance company
qualified to do business in California provided that said bond and company are
both reasonably satisfactory to Lessor. The amount of the bond shall equal one
hundred thirty three percent (133%) of the total amount of real property
taxes in dispute. The bond shall hold Lessor and the Premises harmless from any
damage arising out of the proceeding or contest and shall insure the payment of
any judgment that may be rendered.

 

ARTICLE X

UTILITIES

 

Section 10.01. Lessee to Pay. Lessee shall pay
prior to delinquency and throughout the Lease Term, all charges for water, gas,
heating, cooling, sewer, telephone, electricity, garbage, air conditioning and
ventilation, janitorial service, landscaping and all other materials and
utilities supplied to the Premises. The disruption, failure, lack or shortage
of any service or utility due to any cause whatsoever shall not affect any
obligation of Lessee hereunder, and Lessor shall faithfully keep and observe
all the terms, conditions and covenants of this Lease and pay all rent due
hereunder, all without diminution, credit or deduction, provided that, Lessor
shall credit Lessee to the extent of any rental interruption proceeds Lessor
receives as a result of such disruption, failure, lack or shortage of services
or utility.

 

ARTICLE XI

ASSIGNMENT AND SUBLETTING

 

Section 11.01. Lessor’s Consent Required.
Except as provided in Section 11.02, Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, license or otherwise
transfer or encumber all or any part of Lessee’s interest in this Lease or in
the Premises or any part thereof, without Lessor’s prior written consent which
Lessor shall not unreasonably withhold or delay. Lessor shall respond in
writing to Lessee’s request for consent hereunder in a timely manner and any
attempted assignment, transfer, mortgage, encumbrance, subletting or licensing
without such consent shall be void, and shall constitute a breach of this
Lease. By way of example, but not limitation, reasonable grounds for denying
consent include: (i) poor credit history or insufficient financial
strength of transferee (but not necessarily financial strength as great as that
of Lessee), (ii) transferee’s intended use of the Premises is inconsistent
with the permitted use or will materially and adversely affect Lessor’s
interest. Lessee shall 

 

23

 

reimburse
Lessor upon demand for Lessor’s reasonable costs and expenses (including
attorneys’ fees, architect fees and engineering fees) involved in renewing any
request for consent whether or not consent is granted.

 

Section 11.02. Lessee Affiliates. Lessee may
assign or sublet the Premises, or any portion thereof, to any corporation which
controls, is controlled by, or is under common control with Lessee, or to any
corporation resulting from the merger or consolidation with Lessee, or to any
person or entity which acquires all, or substantially all of the assets of
Lessee as a going concern of the business that is being conducted on the
Premises (“Affiliate”), provided that said assignee or sublessee assumes, in
full, the obligations of Lessee under this Lease and provided further that the
use to which the Premises will be put does not materially change. Any such
assignment shall not, in any way, affect or limit the liability of Lessee under
the terms of this Lease.

 

Section 11.03. No Release of Lessee. Regardless
of Lessor’s consent, no subletting or assignment shall release Lessee of Lessee’s
obligation or alter the primary liability of Lessee to pay the rent and to
perform all other obligations to be performed by Lessee hereunder. The
acceptance of rent by Lessor from any other person shall not be deemed consent
to any subsequent assignment or subletting. In the event of default by any
assignee of Lessee or any successor of Lessee, in the performance of any of the
terms hereof, Lessor may proceed directly against Lessee without the necessity
of exhausting remedies against said assignee.

 

Section 11.04. Excess Rent. In the event Lessor
shall consent to a sublease or an assignment, Lessee shall pay to Lessor with
its regularly scheduled Base Rent payments, fifty percent (50%) of all sums
and the fair market value of all consideration collected or received by Lessee
from a sublessee or assignee which are in excess of the Base Rent and
Additional Rent due and payable with respect to the subject space pursuant to Article IV
for the time period encompassed by the sublease or assignment term, after first
deducting reasonable leasing commissions and the cost of any Tenant
Improvements paid by Lessee with respect to such sublease or assignment.

 

Section 11.05. No Impairment of Security.
Lessee’s written request to Lessor for consent to an assignment or subletting
or other form of transfer shall be accompanied by (a) the name and legal
composition of the proposed transferee; (b) the nature of the proposed
transferee’s business to be carried on in the Premises; (c) the terms and
provisions of the proposed transfer agreement; and (d) such financial and
other reasonable information as Lessor may request concerning the proposed
transferee.

 

Section 11.06. Lessor’s Recapture Rights.

 

(a) Lessor’s Recapture Rights. Notwithstanding
any other provision of this Article 11, in the event that Lessee proposes
to sublease or assign or otherwise transfer (to anyone other than an Affiliate)
any interest in this Lease or the Premises or any part thereof affecting
(collectively with all other such subleases, assignments, or transfers then in
effect) more than fifty percent (50%) of the square footage of the
Rentable Area of the Building (“Recapture Space”) for the major portion of the
then remaining Lease Term, then Lessor shall have the option to recapture the
Recapture Space by written notice to Lessee (“Recapture Notice”) given within
ten (10)

 

24

 

business
days after Lessor receives any notice of such proposed assignment or sublease
or other transfer (“Transfer Notice”). A timely Recapture Notice terminates
this Lease for the Recapture Space, effective as of the date specified in the
Transfer Notice. If Lessor declines or fails timely to deliver a Recapture
Notice, Lessor shall have no further right under this Section 11.06 to the
Recapture Space unless it becomes available again after transfer by Lessee.

 

(b) Consequences of Recapture. To determine the
new Base Rent under this Lease if Lessor recaptures the Recapture Space, the
then current Base Rent (immediately before Lessor’s recapture) under the Lease
shall be multiplied by a fraction, numerator of which is the square feet of the
Rentable Area retained by Lessee after Lessor’s recapture and the denominator
of which is the total square feet of the Rentable Area before Lessor’s
recapture. The Additional Rent, to the extent that it is calculated on the
basis of the square feet within the Building, shall be reduced to reflect
Lessee’s proportionate share based on the square feet of the Building retained
by Lessee after Lessor’s recapture. This Lease as so amended shall continue
thereafter in full force and effect. Either party may require written
confirmation of the amendments to this Lease necessitated by Lessor’s recapture
of the Recapture Space. If Lessor recaptures the Recapture Space, Lessor shall,
at Lessor’s sole expense, construct, paint, and furnish any partitions required
to segregate the Recapture Space from the remaining Premises retained by
Lessee.

 

ARTICLE XII

DEFAULTS; REMEDIES

 

Section 12.01. Defaults. The occurrence of any
one or more of the following events shall constitute a material default and
breach of this Lease by Lessee:

 

(a) The vacation of the Premises by Lessee for
a period of time which would thereafter terminate Lessor’s insurance coverage
at the Premises or cause an increase of Lessor’s insurance coverage at the
Project or which for a period of more than six consecutive calendar months
(other than vacation caused by damage or destruction and during the repair of
same) or the commission of waste at the Premises or the making of an assignment
or subletting in violation of Article XI;

 

(b) The failure by Lessee to make any payment
of rent or any other payment required to be made by Lessee hereunder, as and
when due, if such failure continues for a period of five (5) business days
after written notice thereof from Lessor to Lessee. In the event that Lessor
serves Lessee with a Notice to Pay Rent or Quit in the form required by
applicable Unlawful Detainer statutes such Notice shall constitute the notice
required by this paragraph, provided that the cure period stated in the Notice
shall be five (5) business days rather than the statutory three (3) days;

 

(c) Lessee’s failure to provide (i) any
instrument or assurance as required by Section 7.05 or (ii) estoppel
certificate as required by Section 15.01 or (iii) any document
subordinating this Lease to a Lender’s deed of trust if such failure continues
for five (5) business days after written notice of the failure. In the
event Lessor serves Lessee with a Notice to Perform Covenant or Quit in the
form required by applicable Unlawful Detainer Statutes, such Notice shall
constitute the notice required by this paragraph, provided that the cure period
stated in the Notice shall be five (5) business days rather than the
statutory three (3) days;

 

25

 

(d) The failure by Lessee to observe or perform
any of the covenants, conditions or provisions of this Lease to be observed or
performed by Lessee, other than described in paragraph (a) (b) or (c) above,
if such failure continues for a period of ten (10) days after written
notice thereof from Lessor to Lessee; provided, however, that if the nature of
Lessee’s default is such that more than ten (10) days are reasonably
required for its cure, then Lessee shall not be deemed to be in default if
Lessee commences such cure within said ten (10) day period and thereafter
diligently prosecutes such cure to completion;

 

(e) (i) The making by Lessee of any
general arrangement or assignment for the benefit of creditors; (ii) the
filing by Lessee of a voluntary petition in bankruptcy under Title 11 U.S.C. or
the filing of an involuntary petition against Lessee which remains uncontested
for a period of sixty days; (iii) the appointment of a trustee or receiver
to take possession of substantially all of Lessee’s assets located at the
Premises or of Lessee’s interest in this Lease; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee’s assets
located at the Premises or of Lessee’s interest in this Lease, provided,
however, in the event that any provisions of this Section 12.01(e) is
contrary to any applicable law, such provision shall be of no force or effect;

 

(f) The discovery by Lessor that any financial
statement given to Lessor by Lessee, or any guarantor of Lessee’s obligations
hereunder, was materially false.

 

Section 12.02. Remedies. In the event of any
such material default and breach by Lessee, Lessor may at any time thereafter,
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such default and breach:

 

(a) Terminate Lessee’s right to possession of
the Premises by any lawful means including by way of unlawful detainer (and
without any further notice if a notice in compliance with the unlawful detainer
statutes and in compliance with paragraphs (b), (c) and (d) of Section 12.01
above has already been given), in which case this Lease shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In
such event Lessor shall be entitled to recover from Lessee all damages incurred
by Lessor by reason of Lessee’s default including, but not limited to, (i) the
cost of recovering possession of the Premises including reasonable attorney’s
fees related thereto; (ii) the worth at the time of the award of any
unpaid rent that had been earned at the time of the termination, to be computed
by allowing interest at the Agreed Rate but in no case greater than the maximum
amount of interest permitted by law, (iii) the worth at the time at the
time of the award of the amount by which the unpaid rent that would have been
earned between the time of the termination and the time of the award exceeds
the amount of unpaid rent that Lessee proves could reasonably have been
avoided, to be computed by allowing interest at the Agreed Rate but in no case
greater than the maximum amount of interest permitted by law, (iv) the
worth at the time of the award of the amount by which the unpaid rent for the
balance of the Lease Term after the time of the award exceeds the amount of
unpaid rent that Lessee proves could reasonably have been avoided, to be
computed by discounting that amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award plus one per cent (1%), (v) any
other amount necessary to compensate Lessor for all the detriment proximately
caused by Lessee’s failure to perform obligations under

 

26

 

this
Lease, including brokerage commissions and advertising expenses, expenses of
remodeling the Premises for a new tenant (whether for the same or a different
use), and any special concessions made to obtain a new tenant, and (vi) any
other amounts, in addition to or in lieu of those listed above, that may be
permitted by applicable law.

 

(b) Maintain Lessee’s right to possession as
provided in Civil Code Section 1951.4 in which case this Lease shall
continue in effect whether or not Lessee shall have abandoned the Premises. In
such event Lessor shall be entitled to enforce all of Lessor’s rights and
remedies under this Lease, including the right to recover the rent as it
becomes due hereunder.

 

(c) Pursue any other remedy now or hereafter
available to Lessor under the laws or judicial decisions of the state of
California. Unpaid amounts of rent and other unpaid monetary obligations of
Lessee under the terms of this Lease shall bear interest from the date due at
the Agreed Rate.

 

Section 12.03. Default by Lessor. Lessor shall
not be in default under this Lease unless Lessor fails to perform obligations
required of Lessor within a reasonable time, but in no event later than thirty
(30) days after written notice by Lessee to Lessor and to the holder of
any first mortgage or deed of trust covering the Premises whose name and
address shall have theretofore been furnished to Lessee in writing, specifying
that Lessor has failed to perform such obligation; provided, however, that if
the nature of Lessor’s obligation is such that more than thirty (30) days
are required for performance then Lessor shall not be in default if Lessor
commences performance within such thirty day period and thereafter diligently
prosecutes the same to completion. In the event Lessor does not commence
performance within the thirty (30) day period provided herein, Lessee may
perform such obligation and will be reimbursed for its expenses by Lessor
together with interest thereon at the Agreed Rate. Lessee waives any right to
terminate this Lease or to vacate the Premises on Lessor’s default under this
Lease. Lessee’s sole remedy on Lessor’s default is an action for damages or
injunctive or declaratory relief. Notwithstanding the foregoing, nothing herein
shall be deemed applicable in the event of Lessor’s delay in delivery of the
Premises. In that situation, all rights and remedies shall be determined under Section 3.01
above.

 

Section 12.04. Late Charges. Lessee hereby
acknowledges that late payment by Lessee to Lessor of rent and other sums due
hereunder will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed on Lessor by the terms of any mortgage or trust
deed covering the Premises. Accordingly, if any installment of rent or any
other sum due from Lessee shall not be received by Lessor or Lessor’s
designated agent by the later of two (2) days after written notice of such
failure is given or five (5) days after such amount is due and owing,
Lessee shall pay to Lessor a late charge equal to ten percent (10%) of
such overdue amount. The parties hereby agree that such late charge represents
a fair and reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee’s default with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of rent, then rent shall
automatically become due and payable quarterly in advance, rather than monthly,
notwithstanding Section 4.01 or any other provision of this Lease to the
contrary.

 

27

 

Section 12.05. Impounds. In the event that a
late charge is payable hereunder, whether or not collected, for three (3) installments
of rent or any other monetary obligation of Lessee under the terms of this
Lease within a twelve (12) month period, Lessee shall pay to Lessor, if
Lessor shall so request in writing, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as
the monthly rent, as estimated by Lessor, for real property tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. Such fund shall be established to insure payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to
Lessor, upon Lessor’s demand, such additional sums necessary to pay such
obligations. All moneys paid to Lessor under this paragraph may be intermingled
with other moneys of Lessor and shall not bear interest. In the event of a
default in the obligations of Lessee to perform under this Lease, then any
balance remaining from funds paid to Lessor under the provisions of this
paragraph may, at the option of Lessor, be applied to the payment of any
monetary default of Lessee in lieu of being applied to the payment of real
property tax and insurance premiums.

 

ARTICLE XIII

CONDEMNATION OF PREMISES.

 

Section 13.01. Total Condemnation. If the
entire Premises, whether by exercise of governmental power or the sale or
transfer by Lessor to any condemnor under threat of condemnation or while
proceedings for condemnation are pending, at any time during the Lease Term,
shall be taken by condemnation such that there does not remain a portion
suitable for occupation, this Lease shall then terminate as of the date
transfer of possession is required. Upon such condemnation, all rent shall be
paid up to the date transfer of possession is required, and Lessee shall have
no claim against Lessor or the award for the value of the unexpired portion of
this Lease Term.

 

Section 13.02. Partial Condemnation. If any
portion of the Premises is taken by condemnation during the Lease Term, whether
by exercise of governmental power or the sale for transfer by Lessor to an
condemnor under threat of condemnation or while proceedings for condemnation
are pending, this Lease shall remain in full force and effect except that in
the event a partial taking leaves the Premises unfit for the conduct of the
business of Lessee, then Lessee shall have the right to terminate this Lease
effective upon the date transfer of possession is required. Moreover, Lessor
shall have the right to terminate this Lease effective on the date transfer of
possession is required if more than thirty-three percent (33%) of the
total square footage of the Premises is taken by condemnation. Lessee and
Lessor may elect to exercise their respective rights to terminate this Lease
pursuant to this Section by serving written notice to the other within
thirty (30) days after receipt of notice of condemnation. All rent shall
be paid up to the date of termination, and Lessee shall have no claim against
Lessor for the value of any unexpired portion of the Lease Term. If this Lease
shall not be canceled, the rent after such

 

28

 

partial
taking shall be that percentage of the adjusted base rent specified herein,
equal to the percentage which the square footage of the untaken part of the
Premises, immediately after the taking, bears to the square footage of the
entire Premises immediately before the taking. If Lessee’s continued use of the
Premises requires alterations and repair by reason of a partial taking, all
such alterations and repair shall be made by Lessee at Lessee’s expense. Lessee
waives all rights it may have under California Code of Civil Procedure Section 1265.130
or otherwise, to terminate this Lease based on partial condemnation.

 

Section 13.03. Award to Lessee. In the event of
any condemnation, whether total or partial, Lessee shall have the right to
claim and recover from the condemning authority such compensation as may be
separately awarded or recoverable by Lessee for loss of its business fixtures,
or equipment belonging to Lessee immediately prior to the condemnation. The
balance of any condemnation award shall belong to Lessor (including, without
limitation, any amount attributable to any excess of the market value of the
Premises for the remainder of the Lease Term over the then present value of the
rent payable for the remainder of the Lease Term) and Lessee shall have no
further right to recover from Lessor or the condemning authority for any claims
arising out of such taking, provided that Lessee shall have the right to make a
separate claim in the condemnation proceeding, as long as the award payable to
Lessor is not reduced thereby, for (i) the taking of the unamortized or
undepreciated value of any leasehold improvements owned by Lessee that Lessee
has the right to remove at the end of the Lease Term and that Lessee elects not
to remove, (ii) reasonable removal and relocation costs for any leasehold
improvements that Lessee has the right to remove and elects to remove (if
condemnor approves of the removal), and (iii) relocation costs under
Government Code section 7262, the claim for which Lessee may pursue by separate
action independent of this Lease.

 

ARTICLE XIV

ENTRY BY LESSOR

 

Section 14.01. Entry by Lessor Permitted.
Lessee shall permit Lessor and its employees, agents and contractors to enter
the Premises and all parts thereof (i) upon twenty-four (24) hours
notice (or without notice in an emergency), including without limitation, the
Building and all parts thereof at all reasonable times for any of the following
purposes: to inspect the Premises; to maintain the Premises; to make such
repairs to the Premises as Lessor is obligated or may elect to make pursuant to
Section 6.01(d); to make repairs, alterations or additions to any other
portion of the Project and (ii) upon twenty-four (24) hours notice to
show the Premises and post “To Lease” signs for the purposes of reletting
during the last twelve (12) months of the Lease Term (provided that Lessee
has failed to exercise its option to extend) or extended

 

Lease Term to
show the Premises as part of a prospective sale by Lessor or to post notices of
nonresponsibility. Lessor shall have such right of entry without any rebate of
rent to Lessee for any loss of occupancy or quiet enjoyment of the Premises
hereby occasioned. Lessee shall have the right to accompany Lessor on any
entry, provided that Lessor shall not be required to give Lessee any notice of
an emergency entry and shall not be required to delay any noticed entry to accommodate
Lessee’s exercise of its right to so accompany.

 

29

 

ARTICLE XV

ESTOPPEL CERTIFICATE

 

Section 15.01. Estoppel Certificate.

 

(a) Either party shall at any time upon not
less than fifteen (15) days’ prior written request from the other party
execute, acknowledge and deliver to the other party a statement in writing (i) certifying,
if true, that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification and certifying, if true, that
this Lease, as so modified, is in full force and effect) and the date to which
the rent and other charges are paid in advance, if any, and (ii) acknowledging,
if true, that there are not, to such party’s knowledge, any uncured defaults on
the part of the other party hereunder, or specifying such defaults if any are
claimed and (iii) certifying or acknowledging such other matters as are
requested by any prospective lender or buyer which are reasonably related to
the loan or sale transaction. Any such statement may be conclusively relied
upon by any prospective purchaser or encumbrancer of the Premises.

 

(b) Either party’s failure to deliver such
statement within such time shall be conclusive upon the other party (i) that
this Lease is in full force and effect, without modification except as may be
represented by the requesting party in the statement, (ii) that there are
no uncured defaults in requesting party’s performance, and (iii) that not
more than one month’s rent has been paid in advance.

 

ARTICLE XVI

LESSOR’S LIABILITY

 

Section 16.01. Limitations on Lessor’s
Liability. The term “Lessor” as used herein shall mean only the owner or owners
at the time in question of the fee title of the Premises. In the event of any
transfer of such title or interest, Lessor herein named (and in case of any
subsequent transfers then the grantor) shall be relieved from and after the
date of such transfer of all liability as respects Lessor’s obligations
thereafter to be performed, provided that any funds in the hands of Lessor or
the then grantor at the time of such transfer, in which Lessee has an interest,
shall be delivered to the grantee. The obligations contained in this Lease to
be performed by Lessor shall, subject as aforesaid, be binding on Lessor’s
successors and assigns, only during their respective periods of ownership. For
any breach of this Lease by Lessor, the liability of Lessor (including all
persons and entities that comprise Lessor, and any successor Lessor) and any
recourse by Lessee against Lessor shall be limited to (i) the interest of
Lessor, and Lessor’s successors in interest, in and to the Premises including
any sales proceeds or condemnation awards received by Lessor from the sale or
condemnation of the Premises after said breach and (ii) any insurance
coverage pertaining to such breach provided by policies caused pursuant to this
Lease. On behalf of itself and all persons claiming by, through, or under
Lessee, Lessee expressly waives and releases Lessor and each member, agent and
employee of Lessor from any personal liability for breach of this Lease.

 

30

 

ARTICLE XVII

GENERAL PROVISIONS

 

Section 17.01. Severability. The invalidity of
any provision of this Lease as determined by a court of competent jurisdiction,
shall in no way affect the validity of any other provision hereof.

 

Section 17.02. Agreed Rate Interest on Past-Due
Obligations. Except as expressly herein provided, any amount due to either
party not paid when due shall bear interest at the Bank of America prime rate
plus one percent (1%) (“Agreed Rate”). Payment of such interest shall not
excuse or cure any default by Lessee under this Lease. Despite any other
provision of this Lease, the total liability for interest payments shall not
exceed the limits, if any, imposed by the usury laws of the State of
California. Any interest paid in excess of those limits shall be refunded to
the payor by application of the amount of excess interest paid against any sums
outstanding in any order that payee requires. If the amount of excess interest
paid exceeds the sums outstanding, the portion exceeding those sums shall be
refunded in cash to the payor by the payee. To ascertain whether any interest
payable exceeds the limits imposed, any nonprincipal payment (including late
charges) shall be considered to the extent permitted by law to be an expense or
a fee, premium, or penalty rather than interest.

 

Section 17.03. Time of Essence. Time is of the
essence in the performance of all obligations under this Lease.

 

Section 17.04. Additional Rent. Any monetary
obligations of Lessee to Lessor under the terms of this Lease shall be deemed
to be Additional Rent and Lessor shall have all the rights and remedies for the
nonpayment of same as it would have for nonpayment of Base Rent, except that
the one year requirement of Code of Civil Procedure Section 1161(2) shall
apply only to scheduled installments of Base Rent and not to any Additional
Rent. All references to “rent” (except specific references to either Base Rent
or Additional Rent) shall mean Base Rent and Additional Rent.

 

Section 17.05. Incorporation of Prior
Agreements, Amendments and Exhibits. This Lease (including Exhibits A, B, C, D,
E, F, G, H, I, J, K and L) contains all agreements of the parties with respect
to any matter mentioned herein. No prior agreement or understanding pertaining
to any such matter shall be effective. This Lease may be modified in writing
only, signed by the parties in interest at the time of the modification. Except
as otherwise stated in this Lease, Lessee hereby acknowledges that neither the
Lessor nor any employees or agents of the Lessor has made any oral or written
warranties or representations to Lessee relative to the condition or use by
Lessee of said Premises and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable
laws and regulations in effect during the Lease Term except as otherwise
specifically stated in this Lease. Neither party has been induced to enter into
this Lease by, and neither party is relying on, any representation or warranty
outside those expressly set forth in this Lease.

 

31

 

Section 17.06. Notices. -

 

(a) Written Notice. Any notice required or
permitted to be given hereunder shall be in writing and shall be given by a
method described in paragraph (b) below and shall be addressed to Lessee
or to Lessor at the addresses noted below, next to the signature of the
respective parties, as the case may be. Either party may by notice to the other
specify a different address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee, but delay or failure of delivery to
such person shall not affect the validity of the delivery to Lessor or Lessee.

 

(b) Methods of Delivery:

 

(i) When personally delivered to the recipient,
notice is effective on delivery. Delivery to the person apparently designated
to receive deliveries at the subject address is personally delivered if made
during business hours (e.g. receptionist).

 

(ii) When mailed by certified mail with return
receipt requested, notice is effective on receipt if delivery is confirmed by a
return receipt.

 

(iii) When delivery by overnight delivery
Federal Express/Airborne/United Parcel Service/DHL WorldWide Express with
charges prepaid or charged to the sender’s account, notice is effective on
delivery if delivery is confirmed by the delivery service.

 

(c) Refused, Unclaimed or Undeliverable
Notices. Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be notified shall
be considered to be effective as of the first date that the notice was refused,
unclaimed, or considered undeliverable by the postal authorities, messenger, or
overnight delivery service.

 

Section 17.07. Waivers. No waiver of any
provision hereof shall be deemed a waiver of any other provision hereof or of
any subsequent breach of the same or any other provisions. Any consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
consent to or approval of any subsequent act. The acceptance of rent hereunder
by Lessor shall not be a waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent
so accepted, regardless of Lessor’s knowledge of such preceding breach at the
time of acceptance of such rent.

 

Section 17.08. Recording. Either Lessor or
Lessee shall, upon request of the other, execute, acknowledge and deliver to
the other a “short form” memorandum of this Lease for recording purposes, provided
that Lessee shall also simultaneously execute in recordable form and delivering
to Lessor a Quit Claim Deed as to its leasehold and any other interest in the
Premises and hereby authorizes Lessor to date and record the same only upon the
expiration or sooner termination of this Lease.

 

32

 

Section 17.09. Surrender of Possession; Holding
Over. -

 

(a) At the expiration of the Lease, Lessee
agrees to deliver up and surrender to Lessor possession of the Premises and all
improvements thereon broom clean and, in as good order and condition as when
possession was taken by Lessee, excepting only ordinary wear and tear (wear and
tear which could have been avoided by first class maintenance practices and in
accordance with industry standards shall not be deemed “ordinary”). Upon
expiration or sooner termination of this Lease, Lessor may reenter the Premises
and remove all persons and property therefrom. If Lessee shall fail to remove
any personal property which it is entitled or obligated to remove from the
Premises upon the expiration or sooner termination of this Lease, for any cause
whatsoever, Lessor, at its option, may remove the same and store or dispose of
them, and Lessee agrees to pay to Lessor on demand any and all expenses
incurred in such removal and in making the Premises free from all dirt, litter,
debris and obstruction, including all storage and insurance charges. If the
Premises are not surrendered at the end of the Lease Term, Lessee shall
indemnify Lessor against loss or liability resulting from delay by Lessee in so
surrendering the Premises, including, without limitation, actual damages for
lost rent and with respect to any claims of a successor occupant.

 

(b) If Lessee, with Lessor’s prior written consent,
remains in possession of the Premises after expiration of the Lease Term and if
Lessor and Lessee have not executed an express written agreement as to such
holding over, then such occupancy shall be a tenancy from month to month at a
monthly Base Rent equivalent to one hundred fifty percent (150%) of the
monthly rental in effect immediately prior to such expiration, such payments to
be made as herein provided for Base Rent. In the event of such holding over,
all of the terms of this Lease, including the payment of Additional Rent all
charges owing hereunder other than rent shall remain in force and effect on
said month to month basis.

 

Section 17.10. Cumulative Remedies. No remedy
or election hereunder by -Lessor shall be deemed exclusive but shall, wherever
possible, be cumulative with all other remedies at law or in equity, provided
that notice and cure periods set forth in Article XII are intended to
extend and modify statutory notice provisions to the extent expressly stated in
Section 12.01.

 

Section 17.11. Covenants and Conditions. Each
provision of this Lease to be observed or performed by Lessee shall be deemed
both a covenant and a condition.

 

Section 17.12. Binding Effect; Choice of Law.
Subject to any provisions hereof restricting assignment or subletting by Lessee
and subject to the provisions of Article XVI, this Lease shall bind the
parties, their personal representatives, successors and assigns. This Lease
shall be governed by the laws of the State of California and any legal or
equitable action or proceeding brought with respect to the Lease or the
Premises shall be brought in Santa Clara County, California.

 

Section 17.13. Lease to be Subordinate. Lessee
agrees that this Lease is and shall be, at all times, subject and subordinate
to the lien of any mortgage or other encumbrances which Lessor may create
against the Premises including all renewals, replacements and extensions
thereof provided, however, that regardless of any default under any such
mortgage or

 

33

 

encumbrance
or any sale of the Premises under such mortgage, so long as Lessee timely
performs all covenants and conditions of this Lease and continues to make all
timely payments hereunder, this Lease and Lessee’s possession and rights
hereunder shall not be disturbed by the mortgagee or anyone claiming under or
through such mortgagee. Lessee shall execute any documents subordinating this
Lease within ten (10) days after delivery of same by Lessor so long as the
Lender agrees therein that this Lease will not be terminated if Lessee is not
in default following a foreclosure, including, without limitation, any
Subordination Non-Distribution and Attornment Agreement (“SNDA”) which is
substantially in the form attached hereto as Exhibit “F.”

 

Section 17.14. Attorneys’ Fees. If either party
herein brings an action to enforce the terms hereof or to declare rights
hereunder, the prevailing party in any such action, on trial or appeal, shall
be entitled to recover its reasonable attorney’s fees, expert witness fees and
costs as fixed by the Court.

 

Section 17.15. Signs. Lessee shall not place
any sign upon the exterior of the Building without Lessor’s prior written
consent, which consent shall not be unreasonably withheld and which consent is
hereby given to the signage described in Exhibit “G” hereto. Lessee, at
its sole cost and expense, after obtaining Lessor’s prior written consent,
shall install, maintain and remove prior to expiration of this Lease (or within
ten (10) days after any earlier termination of this Lease) all signage in
full compliance with (i) all applicable law, statutes, ordinances and
regulations and (ii) all provisions of this Lease concerning alterations.

 

Section 17.16. Merger. The voluntary or other
surrender of this Lease by Lessee, or a mutual cancellation thereof, or a
termination by Lessor, shall not work a merger, and shall, at the option of
Lessor, terminate all or any existing subtenancies or may, at the option of
Lessor, operate as an assignment to Lessor of any or all of such subtenancies.

 

Section 17.17. Guarantor. [Intentionally
Omitted]

 

Section 17.18. Quiet Possession. Upon Lessee
timely paying the rent for the Premises and timely observing and performing all
of the covenants, conditions and provisions on Lessee’s part to be observed and
performed hereunder, Lessee shall have quiet possession of the Premises for the
entire Lease Term, subject to all of the provisions of this Lease.

 

Section 17.19. Easements. Lessor reserves to
itself the right, from time to time, to grant such easements, rights and
dedications that Lessor deems necessary or desirable, and to cause the
recordation of Parcel Maps and conditions, covenants and restrictions, so long
as such easements, rights, dedications, Maps and conditions, covenants and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee shall sign any of the aforementioned or other documents, and
take such other actions, which are reasonably necessary or appropriate to
accomplish such granting recordation and subordination of the Lease to same,
upon request of Lessor, and failure to do so within ten (10) business days
of a written request to do so shall constitute a material breach of this Lease.

 

34

 

Section 17.20. Authority. Each individual
executing this Lease on behalf of a corporation, limited liability company or
partnership represents and warrants that he or she is duly authorized to
execute and deliver this Lease on behalf of such entity in accordance with a
duly adopted resolution of the governing group of the entity empowered to grant
such authority, and that this Lease is binding upon said entity in accordance
with its terms. Each party shall provide the other with a certified copy of its
resolution within ten (10) days after execution hereof, but failure to do
so shall in no manner (i) be evidence of the absence of authority or (ii) affect
the representation or warranty.

 

Section 17.21. Force Majeure Delays. In any
case where either party hereto is required to do any act (other than the
payment of money), delays caused by or resulting from Acts of God or Nature,
war, civil commotion, fire, flood or other casualty, labor difficulties,
shortages of labor or materials or equipment, government regulations, delay by
government or regulatory agencies with respect to approval or permit process,
unusually severe weather, or other causes beyond such party’s reasonable
control the time during which act shall be completed, shall be deemed to be extended
by the period of such delay, whether such time be designated by a fixed date, a
fixed time or “a reasonable time.”

 

Section 17.22. Hazardous Materials.

 

(a) Definition of Hazardous Materials and
Environmental Laws. “Hazardous Materials” means any (a) substance,
product, waste or other material of any nature whatsoever which is or becomes
listed regulated or addressed pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. sections 9601, et seq.
(“CERCLA”); the Hazardous Materials Transportation Act (“HMTA”) 49 U.S.C.
section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
section 6901, et seq. (“RCRA”); the Toxic Substances Control Act, 15 U.S.C.
sections 2601, et seq. (“TSCA”); the Clean Water Act, 33 U.S.C. sections 1251,
et seq.; the California Hazardous Waste Control Act, Health and Safety Code
sections 25100, et seq.; the California Hazardous Substances Account Act,
Health and Safety Code sections 26300, et seq.; the California Safe Drinking
Water and Toxic Enforcement Act, Health and Safety Code sections 25249.5, et
seq.; California Health and Safety Code sections 25280, et seq.; (Underground
Storage of Hazardous Substances); the California Hazardous Waste Management
Act, Health and Safety Code sections 25170.1, et seq.; California Health and
Safety Code sections 25501. et seq. (Hazardous Materials Response Plans and
Inventory); or the Porter-Cologne Water Quality Control Act, California Water
Code sections 13000, et seq., all as amended, or any other federal, state or
local statute, law, ordinance, resolution, code, rule, regulation, order or
decree regulating, relating to or imposing liability (including, but not
limited to, response, removal and remediation costs) or standards of conduct or
performance concerning any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter may be in effect (collectively,
“Environmental Laws”); (b) any substance, product, waste or other material
of any nature whatsoever whose presence in and of itself may give rise to
liability under any of the above statutes or under any statutory or common law
theory based on negligence, trespass, intentional tort, nuisance, strict or
absolute liability or under any reported decisions of a state or federal court,
(c) petroleum or crude oil, including but not limited to petroleum and
petroleum products contained within regularly operated motor vehicles and (d) asbestos.

 

35

 

(b) Lessor’s Representations and Disclosures.
Lessor represents that it has provided Lessee with a description of the
Hazardous Materials on or beneath the Property as of the date hereof, attached
hereto as Exhibit I and incorporated herein by reference. Lessee
acknowledges that in providing the attached Exhibit I, Lessor has
satisfied its obligations of disclosure pursuant to California Health &
Safety Code Section 25359.7 which requires:

 

“Any owner of nonresidential real property who
knows, or has reasonable cause to believe, that any release of hazardous
substances has come to be located on or beneath that real property shall, prior
to the sale, lease or rental of the real property by that owner, give written
notice of that condition to the buyer, lessee or renter of the real property.”

 

(c) Use of Hazardous Materials. Lessee shall
not cause or permit any Hazardous Materials to be brought upon, kept or used
in, on or about the Project by Lessee, its agents, employees, contractors,
licensees, guests, visitors or invitees without the prior written consent of
Lessor. Lessor shall not unreasonably withhold such consent so long as Lessee
demonstrates to Lessor’s reasonable satisfaction that such Hazardous Materials
are necessary or useful to Lessee’s business and will be used, kept and stored
in a manner that complies with all applicable Environmental Laws. Lessee shall,
at all times, use, keep, store, handle, transport, treat or dispose all such
Hazardous Materials in or about the Property in compliance with all applicable
Environmental Laws. Prior to the expiration or earlier termination of the
Lease, Lessee shall remove from the Project all Hazardous Materials used or
brought onto the Premises during the Lease Term by anyone other than Lessor,
its agents, employees or contractors.

 

(d) Lessee’s and Lessor’s Environmental
Indemnities. Lessee agrees to indemnify and hold Lessor harmless from any
liabilities, losses, claims, damages, penalties, fines, attorney fees, expert
fees, court costs, remediation costs, investigation costs, or other expenses
resulting from or arising out of the use, storage, treatment, transportation,
release, presence, generation, or disposal of Hazardous Materials on, from or
about the Project, and/or subsurface or ground water, after the Commencement
Date from an act or omission of Lessee (or Lessee’s successor), its agents,
employees, invitees, vendors, contractors, guests or visitors. Lessor agrees to
indemnify and hold Lessee harmless from any liabilities, losses, claims,
damages, penalties, fines, attorney fees, expert fees, court costs, remediation
costs, investigation costs, or other expenses resulting from or arising out of
the use, storage, treatment, transportation, release, presence, generation, or
disposal of Hazardous Materials on, from or about the Premises, and/or
subsurface or ground water, after the Commencement Date from an act or omission
of Lessor (or Lessor’s successor), its agents or employees.

 

(e) Lessee’s Obligation to Promptly Remediate.
If the presence of Hazardous Materials on the Premises after the Commencement
Date results from an act or omission of Lessee (or Lessee’s successors), its
agents, employees, invitees, vendors, contractors, guests, or visitors results
in contamination or deterioration of the Premises or Project or any water or
soil beneath the Premises or Project, Lessee shall promptly take all action
necessary or appropriate to investigate and remedy that contamination, at its
sole cost and expense, provided that Lessor’s consent to such action shall
first be obtained. Lessor’s consent shall not be unreasonably withheld.

 

36

 

(f) Notification. Lessor and Lessee each agree
to promptly notify the other of any communication received from any
governmental entity concerning Hazardous Materials or the violation of
Environmental Laws that relate to the Premises.

 

Section 17.23. Modifications Required by
Lessor’s Lender. If any lender of Lessor requires a modification of this Lease
that will not increase Lessee’s cost or expense or materially and adversely
change Lessee’s rights and obligations, this Lease shall be so modified and
Lessee shall execute whatever documents are required by such lender and deliver
them to Lessor within ten (10) days after the request.

 

Section 17.24. Brokers. Lessor and Lessee each
represents to the other that it has had no dealings with any real estate broker
or agent in connection with the negotiation of this Lease, except for the real
estate brokers or agents identified on the signature page hereof (“Brokers”)
and that they know of no other real estate broker or agent who is entitled to a
commission or finder’s fee in connection with this Lease. Each party shall
indemnify, protect, defend, and hold harmless the other party against all
claims, demands, losses, liabilities, lawsuits, judgments, and costs and
expenses (including reasonable attorney fees) for any leasing commission,
finder’s fee, or equivalent compensation alleged to be owning on account of the
indemnifying party’s dealings with any real estate broker or agent other than
the Brokers. The terms of this Section 17.24 shall survive the expiration
or earlier termination of the Lease Term.

 

Section 17.25. Right of First Offer to Lease
Building 10.

 

(a) During the Lease Term, Lessee shall have a
right of first offer (“Right of First Offer”) to lease the adjacent Building 10
as shown on Exhibit A (“Building 10”) subject to Paragraphs (b) through
(g).

 

(b) At the time Lessee exercises the Right of
First Offer: (i) The Lease must be in full force and effect; (ii) Lessee
shall not be in Default under the Lease; nor shall Lessee be in Default under
the Lease at the Commencement Date (defined in paragraph g(1)) for the Offer
Building, (defined in Paragraph c); and (iii) Lessee’s then current
financial condition, as revealed by its most recent financial statements (which
shall include quarterly and annual financial statements, including income
statements, balance sheets, and cash flow statements), must demonstrate that
either: (1) Lessee’s net worth is at least equal to its net worth at the
time this Lease was signed; or (2) Lessee meets the financial criteria
reasonably acceptable to Lessor.

 

(c) Lessor shall not lease Building10 to
another lessee unless and until Lessor has first offered Building 10 to Lessee
in writing (the “Offer Notice”) and Lessee either rejects such offer or a
period of ten (10) business days has elapsed from the date that Lessor has
delivered the Offer Notice without Lessee having notified Lessor in writing of
its acceptance of such Offer Notice and supplied Lessor with current financial
statements pursuant to Paragraph b(3), which ever event occurs first. The Offer
Notice shall contain the following information: (i) The date on which the
Lessor expects Building 10 to become available; (ii) The Base Rent; (iv) The
pro rata share of Additional Rent; and (v) Such other terms and conditions
upon which Lessor wishes to lease Building 10.

 

37

 

(d) If Lessee timely delivers to Lessor, in
accordance with the conditions of this Section, written notice of Lessee’s
exercise of the Right of First Offer (along with Lessee’s financial statements
pursuant to Paragraph b(3)) and Lessor determines that Lessee meets all of the
conditions provided in this Section, then Building 10 shall be deemed added to
the Premises and subject to the then applicable terms and conditions in the
Lease, as modified by the terms and conditions set forth in the Offer Notice.

 

(e) If Lessee declines or fails to duly and
timely exercise its Right of First Offer or fails to meet all of the conditions
provided in this Section, Lessor shall thereafter be free to lease the Building
10 in portions or in its entirety to any third-party tenant at any time without
regard to the restrictions in this Section 17.25 and on whatever terms and
conditions Lessor may decide in its sole discretion, without again complying
with all the provisions of this Section 17.25.

 

(f) Within ten (10) business days after
the Commencement Date for the Offer Building, Lessor and Lessee shall confirm
the foregoing in a written amendment to the Lease.

 

(g) This Right of First Offer is personal to
the Lessee and shall become null and void upon the occurrence of an assignment
of the Lease or a sublet of all or a major part of the Premises.

 

Section 17.26. Acknowledgment of Notices.
Lessor has provided and Lessee hereby acknowledges receipt of the Notices
attached as Exhibits J and K hereto, concerning the presence of certain uses
and operations of neighboring parcels of land.

 

Section 17.27. List of Exhibits.

 

	
   

  	
   

  	
  Ref. Page

  
	
  EXHIBIT
  A: Real Property Legal Description, Site Plan, and Building Elevations

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  B: Plans and Specifications for Shell Building

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  C: Work Letter Agreement for Tenant Improvements and Interior Specification
  Standards

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  D: Cost Responsibilities of Lessor and Lessee

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  E: Memorandum of Commencement of Lease Term and Schedule of Base Rent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  F: SNDA

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  G: Signage Exhibit

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT
  H: Guaranty of Lease [Intentionally Omitted]

  	
   

  	
   

  

 

38

 

	
  EXHIBIT
  I: Hazardous Materials Disclosure

  
	
   

  
	
  EXHIBIT
  J: Notice to Tenants

  
	
   

  
	
  EXHIBIT
  K: Notice to Tenants

  
	
   

  
	
  EXHIBIT
  L: Rules and Regulations

  
	
   

  
	
  EXHIBIT
  M: Estimate of Real Property Taxes

  

 

39

 

LESSOR
AND LESSEE EACH HAS CAREFULLY READ AND HAS REVIEWED THIS LEASE AND BEEN ADVISED
BY LEGAL COUNSEL OF ITS OWN CHOOSING AS TO EACH TERM AND PROVISION CONTAINED
HEREIN AND, BY EXECUTION OF THIS LEASE, SHOWS ITS INFORMED AND VOLUNTARY
CONSENT THERETO. EACH PARTY HEREBY AGREE THAT, AT THE TIME THIS LEASE IS
EXECUTED, THE TERMS AND CONDITIONS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

 

Executed at San Jose, California, as of the
reference date.

 

 

	
  LESSOR:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Jay Paul

  	
   

  	
  c/o
  Jay Paul Company

  
	
   

  	
  Jay
  Paul, President

  	
   

  	
  353
  Sacramento Street, Suite 1740

  
	
   

  	
   

  	
  San
  Francisco, California 94111

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Thomas
  G. Perkins, Esq.

  
	
   

  	
   

  	
  99
  Almaden Blvd., 8th Floor

  
	
   

  	
   

  	
  San
  Jose, CA 95113

  
	
   

  	
   

  	
  Telephone:
  408-993-9911

  
	
   

  	
   

  	
  Facsimile:
  408-286-3312

  
	
   

  	
   

  	
   

  
	
  LESSEE:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
  Phone.Com, Inc.

  	
   

  	
   

  
	
  a
  California corporation

  	
   

  	
   

  
	
   

  	
   

  	
  (Before
  Commencement Date)

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Alain Rossmann

  	
   

  	
  Pacific
  Shores Center

  
	
   

  	
  (Type
  or print name)

  	
   

  	
  Building
  9

  
	
  Its:

  	
   

  	
   

  	
  Redwood
  City, CA

  
	
   

  	
   

  	
   

  	
  (After
  Commencement Date)

  

 

40

 

LESSOR
AND LESSEE EACH HAS CAREFULLY READ AND HAS REVIEWED THIS LEASE AND BEEN ADVISED
BY LEGAL COUNSEL OF ITS OWN CHOOSING AS TO EACH TERM AND PROVISION CONTAINED
HEREIN AND, BY EXECUTION OF THIS LEASE, SHOWS ITS INFORMED AND VOLUNTARY
CONSENT THERETO. EACH PARTY HEREBY AGREE THAT, AT THE TIME THIS LEASE IS
EXECUTED, THE TERMS AND CONDITIONS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

 

Executed at San Jose, California, as of the
reference date.

 

 

	
  LESSOR:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jay Paul

  	
   

  	
  c/o Jay Paul
  Company

  
	
   

  	
  Jay Paul,
  President

  	
   

  	
  353
  Sacramento Street, Suite 1740

  
	
   

  	
   

  	
  San
  Francisco, California 94111

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy
  to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Thomas G.
  Perkins, Esq.

  
	
   

  	
   

  	
  99 Almaden
  Blvd., 8th Floor

  
	
   

  	
   

  	
  San Jose, CA
  95113

  
	
   

  	
   

  	
  Telephone:
  408-993-9911

  
	
   

  	
   

  	
  Facsimile:
  408-286-3312

  
	
   

  	
   

  	
   

  
	
  LESSEE:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
  Phone.Com, Inc.

  	
   

  	
   

  
	
  a California
  corporation

  	
   

  	
   

  
	
   

  	
   

  	
  (Before
  Commencement Date)

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Alain Rossmann

  	
   

  	
  Pacific
  Shores Center

  
	
   

  	
  (Type or print name)

  	
   

  	
  Building 9

  
	
  Its:

  	
   

  	
   

  	
  Redwood City,
  CA

  
	
   

  	
   

  	
   

  	
  (After
  Commencement Date)

  

 

BROKER EXECUTION

 

By signing below, the indicated real estate broker
or agent is not being made a party hereto, but is signifying its agreement with
the provisions hereof concerning brokerage.

 

 

	
  LESSOR’S
  BROKER:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
  Cornish & Carey
  Commercial

  	
   

  	
  2804 Mission College
  Boulevard

  
	
   

  	
   

  	
   

  	
  Suite 120

  
	
  By:

  	
   

  	
   

  	
  Santa Clara, California
  95054

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Type or print name)

  	
   

  	
   

  
	
  Its:

  	
  Executive Vice President

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LESSEE’S
  BROKER:

  	
   

  	
  ADDRESS:

  
	
   

  	
   

  	
   

  
	
  Wayne Mascia

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Type or print name)

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  	
   

  

 

41

 

EXHIBIT A

TO

PACIFIC
SHORES CENTER LLC

LEASE

TO

PHONE.COM,
INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

REAL
PROPERTY LEGAL DESCRIPTION,

SITE PLAN
AND BUILDING ELEVATIONS

 

(See Attached)

 

[MAP Page 1]

 

[MAP Page 2]

 

 

EXHIBIT B

TO

PACIFIC
SHORES CENTER LLC

LEASE

TO

PHONE.COM,
INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

SHELL
BUILDING PLANS AND SPECIFICATIONS

 

(To be provided)

 

NOTE:
Shell Building Plans and Specifications shall be consistent with DES Development
Progress Plans dated February 7, 2000 for (a) exterior skin and (b) structural
steel.

 

 

EXHIBIT C

TO

PACIFIC
SHORES CENTER LLC

LEASE

TO

PHONE.COM,
INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

WORK LETTER
AGREEMENT FOR TENANT IMPROVEMENTS

AND
INTERIOR SPECIFICATION STANDARDS

 

This
agreement supplements the above referenced Lease executed concurrently herewith
and is as follows:

 

1. Lessee shall devote such time and may be
necessary to enable Lessor to complete and obtain by the respective dates
specified in Section 2.04(d) of the Lease Lessee’s written approval,
and approval by appropriate government authorities, of the final Working
Drawings. The Working Drawings, as they may be modified or provided herein,
shall be prepared by Lessor in accordance with the design specified by Lessee
and reasonably approved by Lessor. Lessee shall be responsible for the
suitability, for Lessee’s needs and business, of the design and function of all
Tenant Improvements. All improvements to be constructed by Lessor as shown on
the Working Drawings, standard or special, shall be defined as “Tenant
Improvements.” All Tenant Improvements materials shall be of a quality equal to
or greater than the quality of materials described on the Interior Specification
Standards attached hereto as Schedule One.

 

2. Lessor shall cause General Contractor to complete
the construction of the Tenant Improvements in a good and workmanlike manner
and in substantial accordance with the Working Drawings. Lessor shall not, however,
be responsible for procuring or installing in the Premises any trade fixtures,
equipment, furniture, furnishings, telephone equipment or other personal
property (“Personal Property”) to be used in the Premises by Lessee, and the
cost of such Personal Property shall be paid by Lessee. Lessee shall conform to
all Project standards in installing any Personal Property and shall be subject
to any and all rules of the site during construction.

 

3. Payment for the Tenant Improvements shall be
pursuant to Section 2.04(g) of the Lease.

 

4. Lessee shall, by signing the Working
Drawings within the time set forth in Section 2.04(d) of the Lease,
give Lessor authorization to complete the Tenant Improvements in accordance
with such Working Drawings. If Lessee shall request any change, addition or
alteration in the approved Working Drawings, Lessor shall promptly give Lessee
a written estimate of the cost of engineering and design services to prepare a
change order (the “Change Order”) in accordance with such request and the time
delay expected because of such request. If

 

1

 

Lessee,
in writing, approves such written estimate, Lessor shall have the Change Order
prepared and Lessee shall concurrently reimburse Lessor for the cost thereof.
Promptly upon the completion of such Change Order, Lessor shall notify Lessee
in writing of the cost and delay which will be chargeable to Lessee by reason
of such change, addition or deletion. Lessee shall within three (3) business
days notify Lessor in writing whether it desires to proceed with such change,
addition or deletion, and in the absence of such written authorization, the
Change Order will be deemed canceled and Lessee shall be chargeable with any
delay in the completion of the Premises resulting from the processing of such
Change Order, including the three (3) business day approval period.

 

5. If the completion of the Tenant Improvements in
the Premises is delayed (i) at the request of Lessee, (ii) by Lessee’s
failure to comply with the foregoing provisions, (iii) by changes in the
work ordered by Lessee or by extra work ordered by Lessee, or (iv) because
Lessee chooses to have additional work performed by Lessor, then Lessee shall
be responsible for all costs and any expenses occasioned by such delay
including, without limitation, any costs and expenses attributable to increases
in labor or materials; and there shall be no delay in the commencement of
Lessee’s obligation to pay Rent because of Lessor’s failure to complete the Tenant
Improvements on time and any such delay in completion shall constitute Lessee
Delay for purposes of Section 3.01(a) of the Lease.

 

Each person executing this Work Letter Agreement
certifies that he or she is authorized to do so on behalf of and as the act of
the entity indicated.

 

Executed as of
            , at
Mountain View (Santa Clara County), California..

 

 

	
  PACIFIC
  SHORES CENTER LLC

  	
  PHONE.COM, Inc.

  	
   

  
	
   

  	
  a
  California corporation

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Jay Paul

  	
  By:

  	
  /s/
  Alain Rossmann

  
	
   

  	
  Jay
  Paul

  	
   

  	
  (Type
  or print name)

  
	
   

  	
   

  	
   

  	
   

  
	
  Its:

  	
  Manager

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  (Type
  or print name)

  
	
   

  	
   

  	
  Its:

  	
   

  
					

 

2

 

SCHEDULE
ONE

TO

EXHIBIT C

TO

PACIFIC
SHORES CENTER LLC

LEASE

TO

PHONE.COM,
INC.

FOR

Pacific
Shores Center

Building 9

Redwood City,
California

 

INTERIOR
SPECIFICATION STANDARDS

 

ABBREVIATED
BUILDING STANDARDS

 

For Pacific
Shores

 

GENERAL OFFICE

 

CUSTOM CABINETRY

 

SCOPE: All materials and
labor for the construction and installation of Cabinetry and all related
accessories per WIC Standards.

 

A.
Trade Standards: Woodworking Institute of California (WIC) latest edition Section 15
and 16 for plastic laminated casework and plastic laminated countertops. Color
of plastic laminate to be selected by Architect.

 

B.
All cabinetry to be constructed to “Custom-Grade” Specifications. Cabinetry to
be flush overlay construction.

 

C.
Plastic Laminate: High Pressure thermoset laminated plastic surfacing material
to equal or surpass NEMA LD3, Nevamar, WilsonArt or approved equal.

 

1. Countertops, shelf-tops,
splashes, and edges: Grade GP 50, 0.050 inches thick.

 

2. All other exposed
vertical surfaces: Grade GP 28, 0.028 inches thick

 

3. Semi-exposed backing
sheet: Grade CI, 20, 0.020 inches thick

 

4. Concealed backing sheet:
Grade BK 20, 0.020 inches thick D. Adhesives: Bond surfaces to Type 11 as
recommended by Plastic Laminate Manufacturer.

 

1

 

E.
Hinges: Heavy-duty concealed self-closing hinges. Amount of hinges per Door per
WIC. Stanley or approved equal

 

F.
Door and Drawer Pulls: Wire-pull with 4-inch centers; Dull chrome finish;
Stanley 4483 or approved equal.

 

G.
Drawer slides: Heavy-duty grade with ball-bearings. Stanley, Klein or approved
equal

 

H.
Door Catches: Heavy-duty commercial friction type.

 

I.
Recessed Adjustable Shelf Standards: Aluminum or zinc-plated recessed type;
Knape & Vogt with clips or approved equal. J. Base and Wall Cabinets
including doors: 3/4-inch thick medium-density particleboard;

 

1. Conceal all fastenings.

 

2. Provide clear spaces as required for mechanical
and electrical fittings

 

3. Plastic laminate and self-edge all shelves.

 

4. Provide 3/4-inch thick doors and drawer faces.

 

5. Unless indicated otherwise, all shelving to be
adjustable.

 

6. Provide back and ends on all cabinets.

 

7. All exposed cabinet faces to be plastic
laminated.

 

K.
Countertops and Shelving: 3/4-inch thick medium density particleboard.
Backsplash to be 3/4 inches thick, glued and screwed into top with scribed
edges. Joints in countertop to be not closer that 24 inches from sinks. Joints
shall be shop fitted, spined, glued and mechanically fastened.

 

L.
Installation of Cabinetry shall be per WIC instructions, Custom Grade.

 

WOOD DOORS

 

SCOPE:
All materials and labor necessary for the installation of Wood Doors, required
accessories and preparations for hardware.

 

A.
Non-rated Wood Doors: 1 3/4 inch thick, flush, solid core, plain sliced
Birch veneer with Birch edge. Cores may be either of the following: Glued block
Hardwood Core per NWMA or Particleboard Core per NWMA. Manufacturer: Algoma,
Weyerhaeuser, or approved equal.

 

B.
Fire-rated Wood Doors: 1 3/4 inch thick, flush, solid core, plain sliced
Birch face veneer with Birch Edge with mineral core per rating. Manufacturer:
Algoma, Weyerhaeuser, or approved equal. Doors shall have a permanent UL label.

 

C.
Vision Panels (where applies): Fire rated vision panel where required. Set in
square metal stop to match metal doorstops as provided by doorframe
manufacturer.

 

D.
Doors shall be 8’-0” x 3’-0” leafs typical.

 

ALUMINUM DOOR AND WINDOW FRAMES

 

SCOPE:
All materials and labor necessary for the installation of Aluminum Door Frames.

 

A.
Frame Manufacturers: Raco, or Ragland Manufacturing Company, Inc.

 

2

 

B.
Door Frames: Non-rated and 20-minute label, Raco “Trimstyle” frame with Trim
700 (3/8 inch by 1 1/2 inch) with no exposed fasteners.

 

C.
Finish, Door and Window Frame Extrusions, Wall Trim:

 

1. Painted and oven-cured with “Duralaq” finish.

 

2. Color: Clear.

 

3. Finish shall meet or exceed requirements of AAMA
Specifications 603.

 

4. Coat inside of frame profile with bituminous
coating to a thickness of 1/16 inch where in contact with dissimilar materials.

 

DOOR HARDWARE

 

SCOPE:
All materials and labor for the installation of all Door Hardware, locksets,
closers, hinges, miscellaneous door hardware.

 

A.
Swinging Door Lockset and Cylinder: Schlage “L” series with lever handle with 6
pin cylinder.

 

B.
Keyway: Furnish blank keyways to match existing master-key system. Match
existing keyways.

 

C.
Finishes: Satin Chrome, 626 finish. Paint closers to match.

 

D.
Kickplates: 16 gauge stainless steel; 10 inches high: width to equal door width
less 2 inches.

 

HARDWARE SCHEDULE

 

	
  Hardware
  Group A (Typical, rated, single door)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9050PD

  
	
  1 1/2

  	
   

  	
  pair Butt Hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  700
  Series

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
  1

  	
   

  	
  Smoke
  Seal

  	
   

  	
  Pemko

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardware
  Group B (Typical, rated, closet/service door)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9080PD

  
	
  1 1/2

  	
   

  	
  pair
  Butt hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  700
  Series w/ hold-open

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
  1

  	
   

  	
  Smoke
  Seal

  	
   

  	
  Pemko

  	
   

  	
   

  

 

3

 

	
  Hardware
  Group C (Typical, non-rated door)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9050PD

  
	
  1 1/2

  	
   

  	
  pair Butt hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardware Group D (Typical, non-rated, closet/service door)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9080PD

  
	
  1 1/2

  	
   

  	
  pair
  Butt hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardware
  Group E (Card-access door)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Electric Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9080PDGU

  
	
  1 1/2

  	
   

  	
  pair
  Butt hinges

  	
   

  	
  Hager

  	
   

  	
  BB1279
  - NRP (2 pr @ 8’ door)

  
	
  1

  	
   

  	
  Electric
  Butt

  	
   

  	
  Hager

  	
   

  	
   

  
	
  1

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  700
  Series w/ hold-open

  
	
  1

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hardware
  Group F (typical, double door)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  Electric
  Lockset

  	
   

  	
  Schlage

  	
   

  	
  L9050PD

  
	
  3

  	
   

  	
  pair
  Butt hinges

  	
   

  	
  Hager

  	
   

  	
  BB1270

  
	
  1

  	
   

  	
  Auto
  Flush Bolt

  	
   

  	
  Glyn Johnson

  	
   

  	
  FB-8

  
	
  1

  	
   

  	
  Dustproof Strike

  	
   

  	
  Glyn
  Johnson

  	
   

  	
  DP2

  
	
  2

  	
   

  	
  Closer

  	
   

  	
  Norton

  	
   

  	
  700
  Series

  
	
  2

  	
   

  	
  Stop

  	
   

  	
  Quality

  	
   

  	
  (332
  @ carpet)

  
	
  1

  	
   

  	
  Astragal

  	
   

  	
  Pemko

  	
   

  	
   

  
	
  1

  	
   

  	
  Coordinator

  	
   

  	
  Glyn
  Johnson

  	
   

  	
   

  
	
  1

  	
   

  	
  Smoke
  Seal

  	
   

  	
  Pemko

  	
   

  	
   

  

 

GLAZING

 

SCOPE:
All materials and labor for the installation of Glass.

 

A.
Manufacturers: PPG Industries, or Viracom, Inc. See glazing schedule
below.

 

B.
Shop prepares all glazing. Edges to have no chips or fissures.

 

C.
Glazing Materials:

 

1. Safety Glass: ASTM C1048,
fully tempered with horizontal tempering. Condition A uncoated, Type 1
transparent flat, Class 1 clear, Quality q3 glazing select, conforming to
ANSI Z97.1

 

2. Mirror Glass: Clear float
type with copper and silver coating, organic overcoating, square polished
edges, 1/4-inch thick.

 

3. Wire Glass: Clear,
polished both sides, square wire mesh of woven stainless steel wire 1/2 inch x
1/2 inch grid: 1/4 inch thick.

 

4

 

4. Tempered Glass: 1/4 inch thick, no tong marks. UL
rated for 1-hour rating.

 

5. Spacers: Neoprene.

 

6. Tape to be poly-iso-butylene.

 

D.
Schedule:

 

1. Type A: 1/4-inch thick mirror, annealed, heat
strengthened, or full tempered as required.

 

2. Type B: 1/4 inch thick clear float glass,
annealed, heat strengthened, or full tempered as required.

 

3. Type C: 1/4-inch thick wire glass plate, square
pattern “Baroque”

 

LIGHT GAUGE METAL FRAMING

 

SCOPE:
All materials and labor necessary for the installation of metal framing and
related accessories.

 

A.
Structural Studs: 14 gauge punched channel studs with knurled screw-type
flanges, prime-coated steel. Manufacturer: United States Gypsum SJ or approved
equal: Submit cut-sheet of material.

 

B.
Partition Studs: 20 gauge studs with key-hole shaped punch-outs at 24 inches on
center. Manufacturer: United States Gypsum ST or approved equal.

 

C.
Fasteners for Structural Studs: Metal screws as recommended by metal system
manufacturer. Weld at all structural connection points.

 

D.
Reinforce framed door and window openings with double studs at each jamb
(flange-to-flange and weld) and fasten to runners with screws and weld.
Reinforce head with 14 gauge double stud same width as wall. Screw and weld.

 

E.
Provide all accessories as required to fasten metal-framing per manufacturers
recommendations.

 

F.
Provide and install flat-strapping at all structural walls (walls with concrete
footings beneath the walls). Minimum bracing shall be 25% of structural walls
shall be braced with flat-strapping per Manufacturer’s recommendations. Weld at
all strap ends and at all intermediate studs.

 

G.
Provide foundation clips at 4’-0” on center at structural walls. Anchor with
1/2 inch diameter by 10 inch long anchor bolts.

 

5

 

H.
Non-structural interior partitions shall be anchored with power-driven
fasteners at 4’-0” on center at the concrete slab.

 

ACOUSTIC CEILING SYSTEM

 

SCOPE:
All materials and labor for the installation of the Acoustic Ceiling System
including T-bar system, Acoustic Ceiling Panels, Suspension wiring and
fastening devices and Glued-down Ceiling Panels.

 

A.
Manufacturer: Armstrong, or approved equal. Exposed T-bar system; factory
painted; steel construction; rated for the intermediate duty.

 

D.
Acoustical Tile: “Second Look”, conforming to the following:

 

1. Size: 24 x 48 inches.

 

2. Thickness: 3/4 inches.

 

3. Composition: Mineral.

 

4. NRC Range: .55 to .60.

 

5. STC Range: 35 to 39.

 

6. Flame Spread: ASTME84,0-25, UL Label, 25 or
under.

 

7. Edge: Tegular, Lay-in.

 

8. Surface Color: White.

 

9. Surface Finish: Factory-applied washable vinyl
latex paint.

 

G.
Installation to be per ASTM C636 structural testing. Lateral support for each
96 square feet of ceiling flared at 45 degrees in 4 directions.

 

H.
Provide clips for panel uplift restraints at all panels, 2 per panel.

 

GYPSUM WALLBOARD

 

SCOPE:
Provide all materials and labor for the installation of Gypsum Wallboard
including all accessories and finishes.

 

A.
Standard Gypsum Wallboard: ASTM C36; Ends square cut, tapered edges.

 

B.
Fire Restraint Gypsum Wallboard: ASTM C36, 5/8 inches thick Type X. Ends square
cut, tapered edges. See Drawings for locations.

 

C.
Moisture-resistant gypsum wallboard: ASTM C630-90.

 

D.
Joint-reinforcing Tape and Joint Compound: ASTM C475, as manufactured by or
recommended by wallboard manufacturer. Minimum 3 coat application for a smooth
finish.

 

E.
Corner Bead: Provide at all exposed outside corners;

 

F.
L-shaped edge trim: Provide at all exposed intersections with different
materials.

 

6

 

G.
All work shall be done in accordance with the USG recommended method of
installation.

 

1. Finish: smooth.

 

PAINTING

 

A.
Paint Manufacturers: ICI, Dunn-Edwards Corporation, Kelly Moore.

 

B.
Paint colors shall be selected by the Architect.

 

C.
Painting Schedule: Provide for 4 different color applications

 

1. P-1: “Field”. Color to be selected.

 

2. P-2: “Accent”. Color to be selected.

 

3. P-3: “Accent”. Color to be selected.

 

4. P-4: “Accent”. Color to be selected.

 

D.
Interior Gypsum Wallboard:

 

1. Primer: Vinyl Wall Primer/Sealer.

 

2. 1 stand 2nd Coat: Eggshell Acrylic Latex.

 

E.
Metal Framing:

 

1. Primer: Red Oxide, shop-primed (for
non-galvanized) if exposed.

 

F.
Wood Work, Wood Doors:

 

1. Two coats of transparent finish. Sand lightly
between coats with steel wool.

 

INSULATION

 

A.
R-15 in exterior walls.

 

B.
R-25 on Roof.

 

C.
Sound batts in conference, restroom and lobby walls.

 

ROOF EQUIPMENT

 

A.
Stainless steel mechanical platform and associated access stairs and guard rail
system

 

7

 

B.
EIFS roof screen to match detail of exterior GFRC Panel.

 

FULL HEIGHT GLAZED PARTITION

 

A.
1/4” glazed partition, in building standard aluminum frame

 

FINISHES

 

A.
Vinyl Composite Tile: Armstrong stonetex, 12” x 12”

 

B.
Resilient Base: Burke rubber wall base, 4” top set or cove, as appropriate for
VCT or carpet.

 

C.
Window Coverings: Miniblinds, Levelor, color: TBD D. Carpet:

 

Option 1: Designweave,
Windswept Classic 30 oz. (Direct glue installation) or equal

 

Option2: (cut pile)
Designweave, Tempest Classic 32 oz. (Direct glue Upgrade installation) or
equal.

 

Option 3: (cut pile)
Designweave, Sabre Classic, 38 oz. (Direct glue Upgrade installation) or equal.

 

KITCHEN FIXTURES

 

A.
Sink: Ekkay stainless steel, GECR-2521-L&R, 20 gauge, 25”w x 211/4”D x 53/8” D, ADA compliant.

 

B.
Kitchen Faucet: American Standard, Silhouette Single control, #4205 series,
spout 93/4”.

 

KITCHEN APPLIANCES

 

A.
Dishwasher

 

Option 1: GE GSD463DZWW, 24”
W x 243/4” D x
34-35” H, 9 gallons/wash

 

Option 2: Bosch, SHU5300
series, 5.4 gallons/wash-with water heater

 

B.
Refrigerator:

 

Full Size: GE, “S” series
top-mount, TBX16SYZ, 16.4 cubic feet, recessed, recessed handles, 28” W x 29
1/8” D x 66 3/4” H, white, optional factory installed ice-maker.

 

Under-counter:

 

Option 1: U-Line, #29R, 3.5
cubic feet, white

 

Option 2: U-Line, Combo
29FF, Frost Free with factory installed icemaker, 2.1 cubic feet, white

 

8

 

C.
Microwave: GE, Spacemaker II JEM25WY, Midsize, 9 cubic feet, 800 watts, 2313/16” W x 1113/16” D x 125/16” H

 

Option 1: Under counter
Mounting Kit, #4AD19-4

 

Option 2: Accessory Trim Kit
# JXB37WN, 261/8”
W X 181/4” H

 

                    (built-in
application)

 

D.
Garbage Disposal: ISE #77, 3/4” horsepower

 

E.
Water Heater: To be selected by DES.

 

PUBLIC SPACES

 

FRONT BUILDING LOBBY

 

Walk off Matts: Design
Materials, Sisel, Calcetta #68, Natural, 100% coir

 

Floor Tile: 3/8” x 18” x 18”
Stone or Marble set in mortar bed in recessed slab as approved by Owner

 

Transition Strips: 5/16” x 11/2” x random
length strips, cherry wood flooring

 

Corridor Carpeting: Carpet
over pad, Atlas, New Vista or as approved by Owner

 

Lobby Ceiling: Suspended
gypsum board ceiling, Painted

 

Building Lobby: Akari shades
hanging #J1-93/4”
x 5’-2” or equal as Pendant Fixture approved by owner.

 

Stairs & P &
P Railing, Modesto with custom cherry guard rail Mezzanine Railing: Rep: Oliver
Capp (805) 241-8810. Hand and guard railing P & P Railings,
Modesto stainless steel railing with horizontal spirals and custom cherry guard
rail cap by others, fittings dark gray metallic or equal as approved by Owner.

 

BACK BUILDING LOBBY & EMERGENCY STAIRS

 

Walk
off Matts: Design Materials, Sisal, Calcutta #68, Natural, 100% coir.

 

Treads &
Landings: Carpet covered concrete, as approved by Owner

 

Stringers,
Risers Painted steel stringer, eggshell & Handrails finish enamel.

 

Ceiling:
Suspended gypsum board ceiling.

 

9

 

ELEVATORS

 

Cars:
(1) 2800 lb, (1) 3500 lb 150 ft/min by Otis

 

Elevator
Doors: Stainless Steel

 

Elevator
Interior Paneling: Cherry veneer with stainless steel reveals and railing

 

Elevator
Floor: Slate 3/8” x 18” x 18” tile as approved by Owner.

 

RESTROOMS

 

Counter
tops: Stone/marble or equal as approved by Owner

 

Walls
at Lavatories: Eggshell finish, latex paint, Benjamin Moore

 

Floor
at Toilets: 2” x 2” matte porcelain ceramic floor tiles, thin set, Dal-tile.

 

Walls
at Toilets: 2” x 2” matte porcelain ceramic floor tiles, thin set, Dal-tile.

 

Ceiling:
Suspended gypsum board ceiling.

 

Toilet
compartments:

 

A. Manufactured
floor-anchored metal toilet compartments and wall- hung urinal screens.

 

B. Approved Manufacturer,
Global Steel Products Corp, or approved equal.

 

C Toilet Partitions:
Stainless Steel finish.

 

D. Hardware: Hinges:
Manufacturer’s standard self-closing type that can be adjusted to hold door
open at any angle up to 90 degrees. Latch and Keeper: Surface-mounted latch
unit, designed for emergency access, with combination rubber-faced door strike
and keeper. Coat Hook: Combination hook and rubber-tipped bumper. Door Pull:
Manufacturer’s standard.

 

Ceramic Tile

 

A. Manufacturer: Dal-Tile or
approved equal.

 

B. Size: 41/4” x 41/4” for walls, 8 x
8 for floors, 3/4” liner strip as accent.

 

C. Glaze: Satin glaze for
walls, unglazed tile for floors.

 

D. Color: As selected by
Architect.

 

10

 

E. Accessories: Base,
corners, coved cap and glazed to match

 

F. Wall and floor
installation: per applicable TCA

 

G. Waterproof Membrane:
Chloraloy or approved equal:

 

H. Tile Backer Board: 1/2
inch thick wonderboard

 

I. Grout: Commercial
Portland Cement Grout; Custom Building Products or approved equal

 

J. Mortar: Latex-Portland
cement mortar; Custom Building Products or approved equal.

 

RESTROOM:

 

Toilet: Kohler/American
Standard, commercial quality.

 

Urinal: Kohler/American
Standard, commercial quality.

 

Lavatory: Kohler/American
Standard, undercounter.

 

Lavatory Faucet: Kroin
handicap lavatory faucet #HV1LH, polished chrome.

 

Soap Dispenser Bobrick,
8226, Lavatory mounted for soaps, 34 fl oz.

 

Counter:

 

Toilet
accessories:

 

A. Manufacturer: Bobrick
Washroom Equipment, or approved equal.

 

B. Schedule: Model numbers
used in this schedule are Bobrick (134) unless otherwise noted.

 

C. Combination Paper Towel
Dispenser/Waste Receptacle: Recessed Model B-3944, one per restroom #7151 and
7152, and two per restroom #7050 and 7061.

 

D. Feminine Napkin Vendor:
Recessed, combination napkin/tampon vendor, Model B-3500 with 25 cent
operation, one per each women’s toilet room.

 

E. Soap Dispenser: Lavatory
mounted dispenser, Model B-822, one per each lavatory.

 

F. Toilet Paper Dispenser:
Surface-mounted, Model JRT, JR Escort, “In-Sight” by Scott Paper Company, one
per stall.

 

G. Toilet Seat Cover
Dispenser: Recessed, wall-mounted, Model B-301, one per stall.

 

H. Sanitary Napkin Disposal:
Recessed, wall-mounted, Model B-353, one per each women’s handicapped and odd
stall.

 

I. Sanitary Napkin Disposal:
Partition-mounted, Model B-354 (serves two stalls).

 

J. Grab Bars: Horizontal 36”
B6206-36: 42”, B62-6-42: one per each handicapped stall.

 

K. Mop/Broom Holders:
B223-24 (one per janitor closet).

 

L. Paper Towel Dispensers:
Recessed mounted, Model B-359, one at side wall adjacent to sink.

 

TENANT CORRIDORS

 

Walls: Eggshell finish,
latex paint, Benjamin Moore.

 

11

 

Floors: Level loop carpet over pad with 4” resilient
base as approved by Owner.

 

Ceiling 4” x 24” x 3/4” thick fine fissures type
mineral fiber, Armstrong Circus acoustical tile (beveled regular edge) in a 24”
x 24” Donn Fineline suspended grid, white finish.

 

Water Fountain: Haws Model #1114 Stainless Steel #4.

 

Cross Corridor 3’-6” x full height, 20 minute rated,
pocket assembly, Smoke Detector: on magnetic hold opens.

 

Corridor Carpyen “Berta” 35 cm x 33 cm, engraved
curved opaque Wall Sconce glass, 2 x 7-9W, #G-23 or equal as approved by owner

 

ELECTRICAL

 

A. 50 foot candles at
working surface.

 

B. 3 Bulb 2x4 parbolic
fixtures

 

C. 1/2 20 Amp circuit for
each hard wall office

 

D. Electrical Devices:
Recessed wall mounted devices with plastic cover plate. Color: white,
multi-gang plate 80400 Series duplex wall outlets.

 

E. Telephone/Data
Outlets: Recessed wall mounted, Standard 2x4 wall box with 3/4” EMT conduit
from box to sub out above ceiling walls pull string, cabling, terminations and
cover-plates, color: white, provided by tenants vendor. Tenant shall furnish
telephone backboard.

 

F. Light Switches: Dual
level rocker type, mounted at standard locations, with plastic cover plate,
5325-W cover plate single switch B0401-W, double switch B0409-W. Decors by
Leviton, colors: white, and will comply with Title 24 Energy Codes. Decors by
Leviton.

 

MECHANICAL

 

A. VAV Reheat system -
design/build. Each floor to have a minimum of thirty zones. Provide reheat
boxes on all zones on top floor and at all exterior zones on lower floor.
System shall meet T-24 for ventilation. Design shall be for 73 deg. Ambient
interior temperature and 2 1/2 watts per sq. ft. min.

 

FIRE
SPRINKLER SYSTEM

 

As required by NFPA &
factory mutual standard hazard, seismically braced.

 

12

 

EXHIBIT D

TO

PACIFIC SHORES CENTER LLC

LEASE TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

COST RESPONSIBILITIES OF LESSOR AND
LESSEE

 

FOR SHELL TENANT IMPROVEMENTS

 

(See Attached)

 

 

Exhibit D.

 

COST RESPONSIBILITIES OF LESSOR AND
LESSEE

 

A. Lessor is responsible
for the construction of the building shell improvements which shall include the
following items.

 

Soils Engineer

 

Civil Engineer

 

Architectural and
Structural Engineer

 

Landscaping

 

Empty Electrical Conduits will be provided from the
street to the future electrical room for a 2500 Amp. Service 277/480 volt
service capability for each building. The electrical conduits will be stubbed
up above the floor level

 

Lessor to provide two
vertical risers for fire sprinklers.

 

Testing and Inspection
for the shell.

Building Permits for the
Shell and exterior Premises. Utility Connection Fee (Fire Protection).

Area Fees

Construction Insurance

Construction Interest

Construction Taxes

Land Interest (if any)

Temporary Facilities

 

All site work to include:

 

Site clearing and grading

Excavating/Fill

Soil compaction

Site drainage

Site utilities

Paving

Curbs and gutters

Sidewalks

Parking lot lights

Curb painting and parking lot striping and markings as
required by the City.

 

Fences, to include
special enclosures for trash

Irrigation System

Lawns and planting

 

Building Shells to
include:

 

Concrete Formwork

 

2

 

Concrete Reinforcement (if used)

Case in pace concrete (if used)

Metal decking (if used)

Metal framing (if used)

Rough carpentry as related to the Shell Millworks as
related to Shell

Glue-Lam structure (if used)

Building roof installation

Roofing tiles

Flashing

Drainage Systems for Roof

Roof Pitch Pans

Caulking/Sealants

Exterior Metal Door/Frames related to the Shell Wood
or Glass Doors as designated as related to the Shell Exterior Shell

Overhead Doors

Anodized Aluminum Windows

Finish Hardware as related to the Shell Doors

Glass Glazing as specific on plans Storefront if
desired

Gutters over front and rear entrances Exterior Loading
Docks as specific on plans Water Supply stubbed to the ground floor (first
floor of each Building only)

Roof drainage

Gas piping to face of building at First Floor
Telephone and computer conduits between Buildings All Government fees applying
to the exterior premises and shell.

 

B. The following shall be
considered interior improvements costs and shall be the responsibility of the
Lessee subject to the tenant improvement allowance as provided in the Lease:

 

Interior Building Permits

Gypsum drywall

Ceramic File or elate Tile in Lobbies

Quarry Tile as specified

Flag Pole

Metal door framing

All interior Wood doors and Hardware

Custom Woodwork

Specialized Security Construction

Interior Glass doors 2nd windows

 

3

 

Acoustical Treatment (suspended ceiling)

Resilient flooring

Any special flooring

Carpeting

Sprayed fire proofing if required by the code on
structural

Steel and metal deck surfaces

Lift and Lift Operator

Interior Painting

Wall Coverings including Ceramic Tiles

Grease Interceptor if required

Drapery, Blinds or Shades

Pedestal floors

Toilet Compartments

Demountable partitions

Firefighting devices (Extinguishers)

Toilet and bath accessories

Lift (dock levelers)

Plumbing fixtures, trims and vertical piping

Interior electrical distribution Lighting

Electrical controls

Electrical Power Equipment

Built in Audio-Visual facilities

Built in Projection screens

Water Treatment Discharge

Sinks in Coffee Rooms

Lunch Room plumbing for vending machines

Specialized security systems

Specialized Halon fire Extinguishing systems

Fire sprinkler head drops and horizontal distribution

Piping off owner-installed vertical risers Specialized
caging

Special piping for Tank Farm (If installed)

Hot water heating system

Cool water system

HVAC units

Ducting controls

Air Tempering Systems

Elevators and elevator pits (Otis Elevator Lessor
Specs)

Mechanical platforms, screens and associated roof
accessories

Stairs

Electrical service (Lessor to provide exterior
conduits)

 

4

 

EXHIBIT E

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

MEMORANDUM

OF

COMMENCEMENT OF LEASE TERM

 

Pursuant to Article III,
Section 3.01, paragraph (a) of the above- referenced Lease, the
parties to said Lease agree to the following:

 

1. The Commencement Date
of the Lease is , 2001 and the Lease Term commenced on said date. The
Expiration Date for the initial Lease Term is , 2013.

 

2. The date for
commencement of rent for the Building is , 2001.

 

3. Attached hereto as a
part hereof is a true and correct schedule of Base Rent.

 

4. The total Rentable
Area of the Building is ( ) rentable square feet.

 

Each person executing
this memorandum certifies that he or she is authorized to do so on behalf of
and as the act of the entity indicated.

 

	
   

  	
   

  
	
   

  	
  Executed as of
              ,
  2000 at Redwood City (San Mateo County), California.

  
	
   

  	
   

  
	
      

  	
  PACIFIC SHORES CENTER LLC  PHONE.COM, Inc.

  
	
   

  	
    a California corporation

  

 

 

	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Jay
  Paul

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:   Manager

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  
											

 

 

EXHIBIT E

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

SNDA

 

(See Construction And Permanent SNDA Samples Attached)

 

 

RECORDING
REQUESTED AND WHEN

RECORDED
RETURN TO:

 

KEYBANK
NATIONAL ASSOCIATION

Real Estate Division

Mailcode WA-31-10-5285

700 Fifth Avenue, 52nd
Floor

Seattle, WA 98104-5099

Attn:

Loan
No.

 

SUBORDINATION, ACKNOWLEDGEMENT OF
LEASE ASSIGNMENT,

NONDISTURBANCE AND ATTORNMENT
AGREEMENT

AND ESTOPPEL CERTIFICATE

(Lease to Deed of Trust)

 

NOTICE:
THIS SUBORDINATION AGREEMENT RESULTS IN YOUR LEASE BECOMING SUBJECT TO AND OF
LOWER PRIORITY THAN THE LIEN OF THE DEED OF TRUST (DEFINED BELOW).

 

THIS AGREEMENT AND
CERTIFICATE is made this      day of                     ,
1990, between KEYBANK NATIONAL ASSOCIATION, a national banking association
(“Lender”) and                                 ,
a                                         
(“Tenant”).

 

Recitals

 

A.                                     
(“Landlord”), is the owner of real property (“Property”) located in                     
County, California, and legally described on Exhibit A.

 

B.
Tenant is a tenant of a portion of the Property (“Premises”) under a lease
(“Lease”) with Landlord dated                     .

 

C.
Lender has agreed to make a loan (“Loan”) to Landlord. In connection therewith,
Landlord has executed or proposes to execute, a Construction Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing (“Deed of
Trust”) encumbering the Property and securing, among other things, a promissory
note (“Note”) in the principal sum of                     
DOLLARS ($                    ),
of even date herewith, in favor of Lender, which Note is payable with interest
and upon the terms described therein. The Deed of Trust is to be recorded
concurrently herewith.

 

D. The
Deed of Trust constitutes a present assignment to Lender of all rights, title,
and interest of Landlord under the Lease.

 

2

 

E.
Lender’s agreement to make the Loan is conditioned on Tenant’s specific and
unconditional subordination of the Lease to the lien of the Deed of Trust such
that the Deed of Trust at all times remains a lien on the Property, prior and
superior to all the rights of Lessee under the Lease, and Tenant’s agreement to
attorn to Lender if Lender obtains possession of the Property by foreclosure or
deed in lieu of foreclosure. Tenant is willing to do so in consideration of the
benefits to Tenant from the Loan and the Lease and Lender’s agreement not to
disturb Tenant’s possession of the Premises under the Lease.

 

NOW, THEREFORE, Lender
and Tenant agree as provided below.

 

1. Subordination. Tenant
hereby intentionally and unconditionally subordinates the Lease and all of
Lessee’s right, title and interest thereunder an in an to the Property to the
lien of the Deed of Trust and all of Lender’s rights thereunder, including any
and all renewals, modifications and extensions thereof and agrees that the Deed
of Trust and any and all renewals, modifications and extensions thereof shall
unconditionally be an at all times remain a lien on the Property prior and
superior to the Lease. Without limiting the generality of the foregoing, such
subordination shall include all rights of Tenant in connection with any
insurance or condemnation proceeds with respect to the Premises or Property.

 

2. Acknowledgment. Tenant
understands that Lender would not make the Loan without this Agreement and the
subordination of the Lease to the lien of the Deed of Trust as set forth herein
and that in reliance upon, and in consideration of, this subordination,
specific loans and advances are being and will be made by Lender and, as part
and parcel thereof, specific monetary other obligations are being and will be
entered into which would not be made or entered into but for reliance upon this
subordination. This Agreement is and shall be the sole and only agreement with
regard to the subordination of the Lease to the lien of the Deed of Trust and
shall supersede and cancel, but only insofar as would affect the priority
between the Deed of Trust and the Lease, any prior agreement as to such
subordination, including, without limitation, those provisions, if any,
contained in the Lease which provide for the subordination of the Lease to a
deed or deeds of trust or to a mortgage or mortgages.

 

3. Use of Proceeds.
Lender, in making disbursement pursuant to the Note, the Deed of Trust or any
loan agreement with respect to the Property, is under no obligation or duty to,
nor has Lender represented that it will, see to the application of such
proceeds by the person or persons to whom Lender disburses such proceeds, and
any application or use of such proceeds for purposes other than those provided
for in such agreement or agreements shall not defeat this agreement to
subordinate in whole or in part.

 

4. Nondisturbance. Lender
agrees that Tenant’s possession of the Premises shall not be disturbed by
Lender during the term of the Lease, and Lender shall not join Tenant in any
action or proceeding for the purposes of terminating the Lease, except upon the
occurrence of a default by Tenant under the Lease and the continuance of such
default beyond any cure period given to Tenant under the Lease.

 

5. Attornment. If Lender
obtains possession of the Property by foreclosure or deed in lieu of
foreclosure, Tenant shall attorn to Lender, be bound to Lender in accordance
with all of the

 

3

 

provisions of the Lease
for the balance of the term thereof, and recognize Lender as the landlord under
the Lease for the unexpired term of the Lease. Such attornment shall be
effective without Lender being (i) subject to any offsets or defenses or
otherwise liable, for any prior act or omission of Landlord, (ii) bound by
any amendment, modification, or waiver of any of the provisions of the Lease,
or by any separate agreement between Landlord and Tenant relating to the
Premises or Property, unless any such action was taken with the prior written
consent of Lender, (iii) liable for the return of any security or other
deposit unless the deposit has been paid to Lender, (iv) bound by any
payment of rent or other monthly payment under the Lease made by tenant more
then one (1) month in advance of the due date, or (v) bound by any
option, right of first refusal, or similar right of Tenant to Lease any portion
of the Property (other than the Premise) or to purchase all or any portion of
the Property. Lender’s obligations as landlord under the Lease after obtaining
possession of the Property by foreclosure or deed in lieu of foreclosure shall
terminate upon Lender’s subsequent transfer of its interest in the Property.

 

6. Termination of Lease.
Notwithstanding any other provision of this Agreement, in the event Lender
obtains ownership of the Property by foreclosure of deed in lieu of foreclosure
and the Lease requires the landlord to construct any improvements on the
Premises or Property, the Lease shall terminate unless (i) Lender delivers
written notice to Tenant expressly assuming such obligation with ten (10) days
after the foreclosure sale or acceptance of the deed in lieu of foreclosure, or
(ii) Tenant waives such obligation by delivery of written notice to Lender
within ten (10) days after receiving notice of foreclosure or deed in lieu
of foreclosure.

 

7. Covenants of Tenant.
Tenant covenants and agrees with Lender as follows:

 

(a) Tenant
shall pay to Lender all rent and other payments otherwise payable to Landlord
under the Lease upon written demand form Lender. the consent and approval of
Landlord to this Agreement shall constitute an express authorization for Tenant
to make such payments to Lender and a release and discharge of all liability of
Tenant to Landlord for any such payments made to Lender.

 

(b) Tenant
shall enter into no material amendment or modification of any of the provisions
of the Lease without Lender’s prior written consent.

 

(c) Tenant
shall not subordinate its rights under the Lease to any other mortgage deed of
trust, or security instrument without the prior written consent of Lender.

 

(d) In
the event the Lease is rejected or deemed rejected in any bankrupt proceeding
with respect to Landlord, Tenant shall not exercise it option to treat the
Lease as terminated under 11 U.S.C. (S) 365(h), as amended.

 

(e) Tenant
shall not accept any waiver or release of Tenant’s obligations under the Lease
by Landlord, or any termination of the lease by Landlord, without Lender’s
prior written consent.

 

(f) Tenant
shall promptly deliver written notice to Lender of any default by Landlord
under the Lease. Lender shall have the right to cure such default within thirty
(30) days after the receipt of such notice. Tenant further agrees not to
invoke any of its remedies under the Lease

 

4

 

until the thirty
(30) days have elapsed, or during any period that Lender is proceeding to
cure the default with due diligence, or is attempting to obtain the right to
enter the Premises and cure the default

 

8. Effect of Assignment.
Notwithstanding that Landlord has made a present assignment of all of its
rights under the Lease to Lender, Lender shall not be liable for any of the
obligations of Landlord to Tenant under the Lease until Landlord has obtained
possession of the Property by foreclosure or deed in lieu of foreclosure, and
then only to the extent provided in paragraph 3 above.

 

9. Estoppel
Certifications. Tenant hereby certifies and represents to Lender as provided
below.

 

(a) The
Lease constitutes the entire agreement between Landlord and Tenant relating to
the Premises and the Property.

 

(b) The
Lease is in full force and effect, and has not been amended, modified, or
assigned by Tenant, either orally or in writing.

 

(c) No
Payments to become due under the Lease have been paid more than one (1) month
in advance of the due date.

 

(d) Tenant
has no present claim, offset or defense under the Lease, and Tenant has no
knowledge of any uncured breach or default by Landlord or Tenant under the
Lease or of any event or condition which, with the giving of notice or the
passage of time or both, could constitute a breach or default under the lease.

 

(e) Tenant
has no knowledge of any prior sale, transfer, assignment, hypothecation or
pledge of Landlord’s interest under the Lease or of the rents due under the
Lease.

 

(f) Except
as otherwise provided in the Lease, Tenant has made no agreements with Landlord
concerning free rent, partial rent, rebate or rental payments, setoff, or any
other type of rental concession.

 

10. Costs and Attorney’s
Fees. In the event of any claim or dispute arising out of this Agreement, the
party that substantially prevails shall be awarded , in addition to all other
relief, all attorneys’ fees and other costs and expenses incurred in connection
with such claim or dispute; including without limitation those fees, costs, and
expenses incurred before or after suit, and in any arbitration, and any appeal,
any proceedings under any present or future bankruptcy act or state
receivership, and any post-judgement proceedings.

 

11. Notices. All notices
to be given under this Agreement shall be in writing and personally delivered
or mailed, postage prepaid, certified or registered mail, return receipt
requested, to Lender at the address indicated on the first page of this
Agreement, and to Tenant at its address indicated below. All notices which are
mailed shall be deemed given three (3) days after the postmark thereof.
Either party may change their address by delivery of written notice to the
other party.

 

5

 

12. Miscellaneous. This
agreement may not be modified except in writing and executed by the parties
hereto or their successors in interest. This agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
assigns. As used herein, “Landlord” shall include Landlord’s predecessors and
successors in interest under the Lease, and “Lender” shall include any
purchaser of the Property at any foreclosure sale. All rights of Lender herein
to collect rents on behalf of Landlord under the Lease are cumulative and shall
be in addition to any and all other rights and remedies provided by law and by
other agreements between Lender and Landlord or others. If any provision of
this Agreement is determined to be invalid, illegal or unenforceable, such
provision shall be considered severed from the rest of this Agreement and the
remaining provisions shall continue in full force and effect as if such
provision had not been included. This Agreement shall be governed by the laws
of the State of California. This Agreement may be executed in one or more
counterparts, all of which together shall constitute one and the same original.

 

DATED this     
day of                     ,
1999

 

NOTICE:
THIS SUBORDINATION AGREEMENT RESULTS IN YOUR LEASE BECOMING SUBJECT TO AND OF
LOWER PRIORITY THAN THE LIEN OF THE DEED OF TRUST (DEFINED ABOVE).

 

IT IS RECOMMENDED THAT,
PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES CONSULT WITH THEIR
ATTORNEYS WITH RESPECT HERETO.

 

	
   

  	
   

  	
   

  
	
   

  	
  “LENDER”

  	
   

  
	
   

  	
  KEYBANK
  NATIONAL 

  ASSOCIATION,  

  a National banking
  association

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its

  	
   

  
				

 

6

 

	
   

  	
   

  	
  “TENANT”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  a

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

	
  CONSENTED
  AND AGREED TO:

  	
   

  	
   

  
	
  “LANDLORD”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  a

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Its

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

ALL SIGNATURES MUST BE ACKNOWLEDGED

 

7

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  	
   

  	
   

  
	
   

  	
  )

  	
  ss.

  	
   

  	
   

  
	
  COUNTY OF)

  	
  )

  	
   

  	
   

  	
   

  

 

On                                     ,
1999, before me,                                         
the undersigned, a notary public in and for said state, personally appeared                                         ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized
capacity, and that by his/her signature on the instrument the person, or the
entity upon behalf of which the person acted, executed the instrument.

 

WITNESS my hand and
official seal.

 

Notary Public

 

8

 

EXHIBIT A

TO

SUBORDINATION, NONDISTURBANCE AND

ATTORNMENT AGREEMENT AND ESTOPPEL
CERTIFICATE

 

Legal Description

 

The Property is located
in
                                
County, California and is legally described as follows:

 

9

 

SCHEDULE TWO

TO

EXHIBIT F

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

SNDA

 

(See Construction and Permanent SNDA Samples Attached)

 

These samples are subject
to negotiation by Tenant.

 

 

SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

 

THIS SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this “Agreement”) made as of the
[    ] day of [                    ],
1997, by and among Nomura Asset Capital Corporation (“Leader”),                         
(“Tenant”) and                                 
(“Landlord”).

 

WITNESSETH:

 

WHEREAS,
Lender has agreed to make a loan (the “Loan”) of up to [                    ]
to Landlord;

 

WHEREAS,
the Loan will be evidenced by a deed of trust note (the “Note”) of even date
herewith made by Landlord to order of Lender and will be secured by, among
other things, a deed of trust, assignment of leases and rents and security
agreement (the “Deed of Trust”) of even date herewith made by Landlord to
Lender covering the land (the “Land”) described on Exhibit A attached
hereto and all improvements (the “Improvements”) now or hereafter located on
the land (the Land and the Improvements hereinafter collectively referred to as
the “Property”); and

 

WHEREAS,
by a lease dated as of [                    ]
(which lease, as the same may have been amended and supplemented, is
hereinafter called the “Lease”), Landlord leased to Tenant approximately [                    ]
square feet of space located in the Improvements (the “Premises”); and

 

WHEREAS,
the parties hereto desire to make the Lease subject and subordinate to the Deed
of Trust.

 

NOW,
THEREFORE, the parties hereto, in consideration of the covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, hereby agree as follows:

 

1. The Lease, as the same
may hereafter be modified, amended or extended, and all of Tenant’s right,
title and interest in and to the Premises and all rights, remedies and options
of Tenant under the Lease, are and shall be unconditionally subject and
subordinate to 

the Deed of Trust and the
lien thereof, to all the terms, conditions and provisions of the Deed of Trust,
to each and every advance made or hereafter made under the Deed of Trust, and
to all renewals, modifications, consolidations, replacements, substitutions and
extensions of the Deed of Trust, so that at all times the Deed of Trust shall
be and remain a lien on the Property prior and superior to the Lease for all
purposes; provided, however, and Lender agrees, that so long as (A) no
event has occurred and no condition exists, which would entitle Landlord to
terminate the Lease or would cause, without further action of Landlord, the
termination of the Lease or would entitle Landlord to dispossess Tenant from
the Premises, (B) the term of the Lease has commenced and

 

 

Tenant is in possession
of the Premises, (C) the Lease shall be in full force and effect and shall
not have been otherwise modified or supplemented in any way without Lender’s
prior written consent, (D) Tenant shall duly confirm its attornment to
Lender or its successor or assign by written instrument as set forth in
Paragraph 3 hereof, (E) neither Lender nor its successors or assigns shall
be liable under any warranty of construction contained in the Lease or may
implied warranty of construction, and (F) all representations and
warranties made herein by Tenant shall be true and correct as of the date of
such attornment; then, and in such event Tenant’s leasehold estate under the
Lease shall not be terminated, Tenant’s possession of the Premises shall not be
disturbed by Lender and Lender will accept the attornment of Tenant.

 

2. Notwithstanding
anything to the contrary contained in the Lease, Tenant hereby agrees that in
the event of any act, omission or default by Landlord or Landlord’s agents,
employees, contractors, licensees or invitees which would give Tenant the
right, either immediately or after the lapse of a period of time, to terminate
the Lease, or to claim a partial or total eviction, or to reduce the rent
payable thereunder or credit or offset any amounts against future rents payable
thereunder, Tenant will not exercise any such right (i) until it has given
written notice of such act, omission or default to Lender by delivering notice
of such act, omission or default, in accordance with Paragraph 8 hereof, and (ii) until
a period of not less than sixty (60) days for remedying such act, omission
or default shall have elapsed following the giving of such notice.
Notwithstanding the foregoing, in the case of any default of Landlord which
cannot be cared within such sixty (60) day period, if Lender shall within
such period proceed promptly to cure the same (including such time as may be
necessary to acquire possession of the Premises if possession is necessary to
effect such cure) and thereafter shall prosecute the curing of such default
with diligence, then the time within which such default may be cured by Lender
shall be extended for such period as may be necessary to complete the curing of
the same with diligence. Lender’s cure of Landlord’s default shall not be
considered an assumption by Lender of Landlord’s other obligations under the
Lease. Unless Lender otherwise agrees in writing, Landlord shall remain solely
liable to perform Landlord’s obligations under the Lease (but only to the
extent required by and subject to the limitation included with the Lease), both
before and after Lender’s exercise of any right or remedy under this Agreement.
If Lender or any successor or assign becomes obligated to perform as Landlord
under the Lease, such person or entity will be released from those obligations
when such person or entity assigns, sells or otherwise transfers its interest
in the Premises or the Property.

 

3. Without limitation of
any of the provisions of the Lease, in the event that Lender succeeds to the
interest of Landlord or any successor to Landlord, then subject to the
provisions of this Agreement including, without limitation, Paragraph 1 above,
the Lease shall nevertheless continue in full force and effect and Tenant shall
and does hereby agree to attorn to and accept Lender and to recognize Lender as
its Landlord under the Lease for the then remaining balance of the term
thereof, and upon request of Lender, Tenant shall execute and deliver to Lender
an agreement of attornment reasonably satisfactory to Lender.

 

4. If Lender succeeds to
the interest of Landlord or any successor to Landlord, in no event shall Lender
have any liability for any act or omission of any prior landlord under the
Lease which occurs prior to the date Lender succeeds to the rights of Landlord
under the Lease, nor any liability for claims, offsets or defenses which Tenant
might have had against Landlord. In no

 

2

 

event shall Lender have
any personal liability as successor to Landlord and Tenant shall look only to
the estate and property of Lender in the Land and the Improvements for the
satisfaction of Tenant’s remedies for the collection of a judgment (or other
judicial process) requiring payment of money in the event of any default by
Lender as Landlord under the Lease, and no other property assets of Lender
shall be subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant’s remedies under or with respect to the Lease.

 

5. Tenant agrees that no
prepayment of rent or additional rent due under the Lease of more than one
month in advance, and no amendment, modification, surrender or cancellation of
the Lease, and no waiver or consent by Landlord under the terms of the Lease,
shall be binding upon or as against Lender, as holder of the Deed of Trust, and
as Landlord under the Lease if it succeeds to that portion, unless consented to
in writing by Lender. In addition, and notwithstanding anything to the contrary
set forth in this Agreement, Tenant agrees that Lender, as holder of the Deed
of Trust, and as Landlord under the Lease if it succeeds to that position,
shall in no event have any liability for the performance or completion of any
initial work or installations or for any loan or contribution or rent
concession towards initial work, which are required to be made by Landlord (A) under
the Lease or under any related Lease documents or (B) for any space which
may hereafter become part of said Premises, and any such requirement shall be
inoperative in the event Lender succeeds to the position of Landlord prior to
the completion or performance thereof. Tenant further agrees with Lender that
Tenant will not voluntarily subordinate the Lease to any lien or encumbrance
without Lender’s prior written consent.

 

6. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which together shall constitute and be construed as one and the same
instrument.

 

7. All remedies which
Lender may have against Landlord provided herein, if any, are cumulative and
shall be in addition to any and all other rights and remedies provided by law
and by other agreements between Lender and Landlord or others. If any party
consists of multiple individuals or entities, each of same shall be jointly and
severally liable for the obligations of such party hereunder.

 

8. All notices to be
given under this Agreement shall be in writing and shall be deemed served upon
receipt by the addressee if served personally or, if mailed, upon the first to
occur of receipt or the refusal of delivery as shown on a return receipt, after
deposit in the United States Postal Service certified mail, postage prepaid,
addressed to the address of Landlord, Tenant or Lender appearing below, or, if
sent by telegram, when delivered by or refused upon attempted delivery by the
telegraph office. Such addresses may be changed by notice given in the same
manner. If any party consists of multiple individuals or entities, then notice
to any one of same shall be deemed notice to such party.

 

3

 

Lender’s
Address:

 

Nomura
Asset Capital Corporation

Two
World Financial Center, Building B

New
York, New York 10281-1198

Attention:
Ms. Sheryl McAfee

 

Tenant’s
Address:

 

 

Attention:

 

 

Landlord’s
Address:

 

 

Attention:

 

9. This Agreement shall
be interpreted and construed in accordance with and governed by the laws of the
State of California.

 

10. This Agreement shall
apply to, bind and inure to the benefit of the parties hereto and their
respective successors and assigns. As used herein “Lender” shall include any
subsequent holder of the Deed of Trust.

 

11. Tenant acknowledges
that Landlord has assigned to Lender its right, title and interest in the Lease
and to the rents, issues and profits of the Property and the Property pursuant
to the Deed of Trust, and that Landlord has been granted the license to collect
such rents provided no Event of Default has occurred under, and as defined in,
the Deed of Trust. Tenant agrees to pay all rents and other amounts due under
the Lease directly to Lender upon receipt of written demand by Lender, and
Landlord hereby consents thereto. The assignment of the Lessee to Lender, or
the collection of rents by Lender pursuant to such assignment, shall not
obligate Lender to perform Landlord’s obligations under the Lease.

 

[NO FURTHER TEXT ON THIS PAGE]

 

4

 

IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the
day and year first above written.

 

	
   

  	
   

  
	
   

  	
  NOMURA
  ASSET CAPITAL 

  CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [LANDLORD]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  [TENANT]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  

 

5

 

	
  STATE OF CALIFORNIA

  	
  )

  	
   

  
	
   

  	
  )

  	
  ss.

  
	
  COUNTY OF

  	
  )

  	
   

  

 

On                             ,
before me, a Notary Public in and for said state, personally appeared                                         
    , personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity
upon behalf of which the person(s) acted, executed the instrument.

 

WITNESS my hand and
official seal.

 

	
   

  	
   

  
	
  (SEAL)

  

 

6

 

EXHIBIT G

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

SIGNAGE EXHIBIT

 

(To be provided)

 

 

EXHIBIT H

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

Guaranty of Lease

 

(Intentionally Omitted)

 

 

EXHIBIT I

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

HAZARDOUS MATERIALS DISCLOSURE

 

Lessor
has provided Lessee, and Lessee acknowledges that it has received and pursuant
to Section 17.22(b) of the Lease, reviewed same, a copy of each of
those certain documents entitled: (i) PHASE I, ENVIRONMENTAL SITE
ASSESSMENT PACIFIC SHORES CENTER, REDWOOD CITY, CALIFORNIA, Prepared for: The
Jay Paul Company, San Francisco, California, Prepared by: IRIS ENVIRONMENTAL,
Oakland, California, December 20, 1999, Job No. 99-122A; and (ii) PHASE
II, ENVIRONMENTAL SITE ASSESSMENT, PACIFIC SHORES CENTER, 1000 SEAPORT
BOULEVARD, REDWOOD CITY, CALIFORNIA, Prepared for: The Jay Paul Company, San
Francisco, California, Prepared by: IRIS ENVIRONMENTAL, Oakland, California, January 14,
1999, Job No. 99-122-B

 

 

	
   

  	
  LESSEE

  
	
   

  	
   

  
	
   

  	
  Phone.com, Inc.  

  a California
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Type or print name)

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

 

EXHIBIT J

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

NOTICE TO TENANTS AND TRANSFEREES OF

CURRENT OR FUTURE USES OF ADJACENT
PORT PROPERTY

 

Notice
is hereby given to all lessees, tenants and transferees of land or interests in
land located within Pacific Shores Center of the presence or potential future
presence of Port related industrial activities on Port property adjacent to and
west of Pacific Shores Center. All recipients of this notice should be aware of
the following facts:

 

1. The parcel of Port
property adjacent to Pacific Shores Center to the northwest shown on the Exhibit         
attached hereto (the “Port Parcel”) is now or may be developed for Port related
maritime and industrial uses similar to those occupying other properties along
the west side of Seaport Boulevard and to the west of Pacific Shores Center.

 

2. Such Port related
maritime and industrial activities are those which are permitted by the general
industrial zoning of the City of Redwood City and may include heavy industrial
land uses, including uses which involve the receipt, transport, storage or
management of hazardous wastes, aggregates, cement, gravel and similar
materials, including the outdoor storage and handling of such materials.

 

3. Pacific Shores Center
Limited Partnership, on behalf of itself, its successors and assigns, has
recognized, accepted and approved such uses of the Port Parcel subject to the
utilization of Best Available Management Practices in the development and use
of the Port Parcel. Best Available Management Practices are defined on Exhibit         
attached hereto.

 

4. Despite the use of
Best Available Management Practices on the Port Parcel by the Port and its
lessees and licensees and despite Pacific Shores Center Limited Partnership’s
efforts to ensure compatibility between such uses and those in Pacific Shores
Center, it is possible that such uses will cause emissions into the air of dust
or other particulate matter, or noise or odorous substances which may be
offensive to or be perceived as a nuisance by occupants of Pacific Shores
Center.

 

 

5. Pursuant to covenants
made by Pacific Shores Center Limited Partnership on behalf of its successors
and assigns, tenants and lessees, the tenants, lessees and transferees of
Pacific Shores Center Limited Partnership have approved and accepted such
neighboring uses subject to their utilization of Best Available Management
Practices.

 

6. Any actions to enjoin
the continuation of such uses or to recover any damages to persons or property
related to their operations are subject to a requirement for prior notice found
in recorded covenants by Pacific Shores Center Limited Partnership. The
following language is excerpted from such covenants:

 

“In the event that either party hereto believes that
the other has failed to perform any covenant made herein in favor of the other,
at least ten (10) days prior to the commencement of any action to enforce
the covenants hereunder or to recover damages for the breach thereof, that
party who believes that a failure to perform has occurred (the “Complaining
Party”) shall give written notice (the “Notice”) to the party alleged not to
have performed the covenant (the “Non-Complaining Party”) of the specific
nature of the alleged failure and of the intent of the complaining Party to
take action to remedy the breach by the Non-Complaining Party. In the event
that the nature of the alleged failure to perform is such that the same cannot
reasonably be cured within ten (10) days after receipt of the Notice (the “Notice
Period”), the Non-Complaining Party shall not be deemed to be in violation of
its covenants and no action shall be commenced by the Complaining Party if,
within the Notice Period, the Non-Complaining Party commences such cure and
thereafter diligently and continuously prosecutes the same to completion within
a reasonable time. Provided, however, that the Complaining Party shall not be
precluded from recovering any actual damages suffered by reason of the alleged
failure to perform prior to or after delivery of the Notice, whether or not
such failure is thereafter cured.”

 

2

 

EXHIBIT K

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

NOTICE TO PACIFIC SHORES TENANTS,
LESSEES,

SUCCESSORS, ASSIGNS AND TRANSFEREES
REGARDING

CURRENT OR FUTURE USES OF ADJACENT
RMC LONESTAR

AND PORT PROPERTY

 

Notice is hereby given to
all tenants, lessees, successors, assigns and transferees of land or interest
in land located within the Pacific Shores Center of the presence or potential
future presence of maritime and industrial activities on RMC Lonestar and Port
of Redwood City property west and adjacent to Pacific Shores Center. Recipients
of this notice should be aware of the following:

 

1. The RMC Lonestar
property and parcels of port property adjacent to and west of Pacific Shores
Center are shown on the map attached to this notice. The RMC Lonestar and Port
properties are now devoted to, or will be developed for, maritime and
industrial uses.

 

2. These maritime and
industrial uses are those which are permitted by the “Heavy Industry” General
Plan designation and general industrial zoning of the City of Redwood City.
These uses include, by way of example and not limitation, uses involving the
receipt, transport, storage, handling, processing or management of aggregates,
cement, concrete, asphalt, soil or other landscaping materials, recyclable
metals and plastics, recyclable concrete and asphalt, chemicals, petroleum
products, hazardous wastes, and similar materials, including indoor storage,
mixing and handling of these materials.

 

3. These uses may cause,
on either a regular or intermittent basis, air emissions, including without
limitation, dust and other particles, odors, vibrations, loud noises, and heavy
truck, rail or marine vessel traffic. These uses may have a visual, aesthetic
or other aspects that may be offensive or perceived as a nuisance by occupants
of Pacific Shores Center.

 

 

EXHIBIT L

TO

PACIFIC SHORES CENTER LLC

LEASE

TO

PHONE.COM, INC.

FOR

Pacific Shores Center

Building 9

Redwood City, California

 

RULES AND REGULATIONS

 

1. Lessee and Lessee’s
employees shall not in any way obstruct the sidewalks, entry passages,
pedestrian passageways, driveways, entrances and exits to the Project or the
Building, and they shall use the same only as passageways to and from their
respective work areas.

 

2. Any sash doors,
sashes, windows, glass doors, lights and skylights that reflect or admit light
into the Common Area of the Project shall not be covered or obstructed by the
Lessee. Water closets, urinals and wash basins shall not be used for any
purpose other than those for which they were constructed, and no rubbish,
newspapers, food or other substance of any kind shall be thrown into them.
Lessee shall not mark, drive nails, screw or drill into, paint or in any way
deface the exterior walls, roof, foundations, bearing walls or pillars without
the prior written consent of Lessor, which consent may be withheld in Lessor’s
sole discretion. The expense of repairing any breakage, stoppage or damage
resulting from a violation of this rule shall be borne by Lessee.

 

3. No awning or shade
shall be affixed or installed over or in the windows or the exterior of the
Premises except with the consent of Lessor, which may be withheld in Lessor’s
discretion.

 

4. No boring or cutting
for wires shall be allowed, except with the consent of Lessor, which consent
may be withheld in Lessor’s discretion.

 

5. Lessee shall not do
anything in the Premises, or bring or keep anything therein, which will in any
way increase or tend to increase the risk of fire or the rate of fire insurance
or which shall conflict with the regulations of the fire department or the law
or with any insurance policy on the Premises or any part thereof, or with any rules or
regulations established by any administrative body or official having
jurisdiction, and it shall not use any machinery therein, even though its
installations may have been permitted, which may cause any unreasonable noise,
jar, or tremor to the floors or walls, or which by its weight might injure the
floors of the Premises.

 

6. Lessor may reasonably
limit weight, size and position of all safes, fixtures and other equipment used
in the Premises. If Lessee shall require extra heavy equipment, Lessee shall
notify Lessor of such fact and shall pay the cost of structural bracing to
accommodate it. All damage done to the Premises or Project by installing,
removing or maintaining extra heavy equipment shall be repaired at the expense
of the Lessee.

 

 

7. Lessee and Lessee’s
officers, agents and employees shall not make nor permit any loud, unusual or
improper noises nor interfere in any way with other Lessees or those having
business with them, nor bring into or keep within the Project any animal or
bird or any bicycle or other vehicle, except such vehicle as Lessor may from
time to time permit.

 

8. No machinery of any
kind will be allowed in the Premises without the written consent of Lessor.
This shall not apply, however, to customary office equipment or trade fixtures
or package handling equipment.

 

9. All freights must be
moved into, within and out of the Project only during such hours and according
to such reasonable regulations as may be posted from time to time by Lessor.

 

10. No aerial or
satellite dish or similar device shall be erected on the roof or exterior walls
of the Premises, or on the grounds, without in each instance, the written
consent of Lessor. Any aerial installed without such written consent shall be
subject to removal without notice at any time. Lessor may withhold consent in
its sole discretion.

 

11. All garbage,
including wet garbage, refuse or trash shall be placed by the Lessee in the
receptacles appropriate for that purpose and only at locations prescribed by
the Lessor.

 

12. Lessee shall not burn
any trash or garbage at any time in or about the Premises or any area of the
Project.

 

13. Lessee shall observe
all security regulations issued by the Lessor and comply with instructions
and/or directions of the duly authorized security personnel for the protection
of the Project and all tenants therein.

 

14. Any requirements of
the Lessee will be considered only upon written application to Lessor at Lessor’s
address set forth in the Lease.

 

15. No waiver of any rule or
regulation by Lessor shall be effective unless expressed in writing and signed
by Lessor or its authorized agent.

 

16. Lessor reserves the
right to exclude or expel from the Project any person who, in the judgment of
the Lessor, is intoxicated or under the influence of liquor or drugs, or who
shall in any manner do any act in violation of the law or the rules and
regulations of the Project.

 

17. Lessor reserves the
right at any time to change or rescind any one or more of these rules and
regulations or make such other and further reasonable rules and
regulations as in Lessor’s judgment may from time to time be necessary for the
operation, management, safety, care, and cleanliness of the Project and the Premises,
and for the preservation of good order therein, as well as for the convenience
of other occupants and tenants of the Project. Lessor shall not be

 

2

 

responsible to Lessee or
the any other person for the non-observance or violation of the rules and
regulations by any other tenant or person. Lessee shall be deemed to have read
these rules and have agreed to abide by them as a condition to its
occupancy of the Premises.

 

18. Lessee shall abide by
any additional rules or regulations which are ordered or requested by any
governmental or military authority.

 

19. In the event of any
conflict between these rules and regulations, or any further or modified rules and
regulations from time to time issued by Lessor, and the Lease provisions, the
Lease provisions shall govern and control.

 

20. Lessor specifically
reserves to itself or to any person or firm it selects, (i) the right to
place in and upon the Project, coin-operated machines for the sale of
cigarettes, candy and other merchandise or service, and (ii) the revenue
resulting therefrom.

 

3

 

EXHIBIT M

 

ESTIMATED TAX ASSESSMENT FOR PACIFIC
SHORES

 

$12,000,000 @ 6% with
15-year amortization divided by 1,641,534 SF = $0.06 (1)

 

For
Phone.com:

 

279,584 x $0.06 = $16,775
per month

 

(1)   Interest rate subject to change.

 

 

EXHIBIT N

 

EARLY CONSTRUCTION ITEMS

 

·             Shell Fire Protection 

 

·             Perimeter Stairs 

 

·             Fireproofing of Steel 

 

·             Elevator Pits 

 

·             Elevator Penthouse Structure 

 

Openwave Sublease

 

 

EXHIBIT “B”

 

FORM OF BILL OF SALE

 

For
the sum of One Dollar ($1.00) and other good and valuable consideration, the
receipt of which is hereby acknowledged, Openwave Systems Inc., a Delaware
corporation (“Seller”), does hereby sell, transfer, and convey to PDL BioPharma, Inc.,
a Delaware corporation (“Buyer”), the personal property and furniture, fixtures
and equipment owned by Seller and located within that certain premises commonly
known as 1400 Seaport Boulevard, Redwood City, California 94062 as more
particularly described on Schedule 1 attached hereto and made a part
hereof (“Personal Property”).

 

Buyer
acknowledges that Seller is selling and Buyer is buying the Personal Property
on an “as is, where is, with all faults” basis, and that Buyer is not relying
on any representations or warranties of any kind whatsoever, express or
implied, except as expressly set forth below, including, without limitation,
any implied warranties as to merchantability or fitness for a particular
purpose.

 

Seller
represents and warrants to Buyer, however, that Seller is conveying title to
the Personal Property to Buyer free and clear of any liens or encumbrances.
Buyer shall take delivery of the Personal Property in its “as-is, where-is,
with all faults” condition. Seller shall have no obligation to repair or
replace any item of Personal Property.

 

This
Bill of Sale shall be governed by and construed in accordance with the laws of
the State of California. Any waiver by either party of any breach of any term
or condition of this Bill of Sale shall not operate as a waiver of any other
breach of such term or condition or of any other term or condition, nor shall
any failure to enforce such provision hereof operate as a waiver of such
provision or of any other provision hereof, nor constitute nor be deemed as a
waiver or release of any other party for anything arising out of, connected
with or based upon this Bill of Sale. In the event of any litigation involving
the parties arising out of this Bill of Sale, the prevailing party shall be
entitled to recover from the other party such reasonable attorneys’ fees and
costs as may reasonably be incurred, as awarded by the court hearing the
matter.

 

This
Bill of Sale may be executed in one or more counterparts, each of which shall
be deemed an original but all of which taken together shall constitute one and
the same instrument.

 

[Signatures appear on next page.]

 

Openwave Sublease

 

 

Dated this     
day of             ,
20    .

 

 

	
  SELLER:

  	
  OPENWAVE SYSTEMS INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  BUYER:

  	
  PDL BIOPHARMA, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

Openwave Sublease

 

 

EXHIBIT “C”

 

PERMITTED HAZARDOUS MATERIALS

 

(See attached)

 

Openwave Sublease

 

 

EXHIBIT “D”

 

PDL BIOPHARMA, INC. LIST OF PLANS, LICENSES AND PERMITS

 

	
   

  	
   

  	
  Inspecting Authority

  	
   

  	
  Frequency

  
	
  Plans

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Injury Illness
  Prevention Plan

  	
   

  	
  Cal OSHA

  	
   

  	
  Anytime

  
	
  Biosafety Plan

  	
   

  	
  ”

  	
   

  	
  ”

  
	
  Radiation Safety Plan

  	
   

  	
  ”

  	
   

  	
  ”

  
	
  Chemical Hygiene Plan

  	
   

  	
  ”

  	
   

  	
  ”

  
	
  Hazard Communication
  Plan

  	
   

  	
  ”

  	
   

  	
  ”

  
	
  Emergency Action Plan

  	
   

  	
  ”

  	
   

  	
  ”

  
	
  Hazardous Materials
  Business Plan

  	
   

  	
  Fremont Fire

  	
   

  	
  Annual

  
	
  AAALAC Accreditation
  program

  	
   

  	
  AAALAC

  	
   

  	
  Complaint

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Licenses

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CA – Business License

  	
   

  	
   

  	
   

  	
   

  
	
  DHS - Radiation Use
  License

  	
   

  	
  DHS

  	
   

  	
  Anytime

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Permits

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fremont City -
  Hazardous Materials Permits A/B/D

  	
   

  	
  Fremont Fire

  	
   

  	
  Annual

  
	
  Alameda County -
  Medical waste Permits A/B/D

  	
   

  	
  Ala. County

  	
   

  	
  Annual

  
	
  BAAQMD – Emergency
  Generator Permits A/B/D

  	
   

  	
  AQMD

  	
   

  	
  Complaint

  
	
  DEA – Controlled
  Substances

  	
   

  	
  DEA

  	
   

  	
  Violation

  

 

Openwave Sublease

 

 

EXHIBIT “E”

MOST RECENT RECONCILIATION

 

[to be attached]

 

Openwave SubleaseEXHIBIT 10.13

 

Execution
Version

 

 

CONFIDENTIAL
PROVISIONS REDACTED

 

COLLABORATION
AGREEMENT

 

THIS COLLABORATION AGREEMENT
(the “Agreement”) is entered into as of September 12,
2005 (the “Effective Date”) by and between
Protein Design Labs, Inc., a Delaware corporation having its offices at
34801 Campus Drive, Fremont, California 94555 (“PDL”),
and Biogen Idec MA Inc., a Massachusetts corporation having offices at 14
Cambridge Center, Cambridge, Massachusetts 02142 (“Biogen Idec”).
PDL and Biogen Idec may each be referred to in this Agreement individually as a
“Party” and collectively as the “Parties.”

 

RECITALS

 

WHEREAS, PDL
possesses worldwide rights to develop, manufacture, market, and sell certain
proprietary antibodies directed at certain antigens (such antigens defined
below as “Collaboration Targets”) and;

 

WHEREAS, PDL has
research and development programs for such antibodies as well and for certain
compounds relating to the Collaboration Targets; and

 

WHEREAS, Biogen Idec
and PDL wish to collaborate in the research, development, manufacturing and
commercialization of products for the Collaboration Targets, including such
antibodies and compounds, under the terms and conditions set forth below.

 

NOW THEREFORE, in
consideration of the foregoing premises and the mutual covenants contained
herein, the Parties, intending to be legally bound, agree as follows:

 

ARTICLE 1

DEFINITIONS

 

The following capitalized terms, whether used in the
singular or the plural, shall have the following meanings as used in this
Agreement unless otherwise specifically indicated:

 

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

 

 

	
   

  	
  1.1

  	
  “5

  	
  1” means [****].

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  “5

  	
  1 Target Field” means the diagnosis, treatment or
  prevention of human diseases.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
  “5

  	
  1 Target Future Product” means [****].

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.4

  	
  “5

  	
  1 Target Product” means [****].

  

 

1.5                               “Affiliate”
means any corporation or other business entity controlled by, controlling,
or under common control with another entity, with “control” meaning: (a) direct
or indirect beneficial ownership of at least fifty percent (50%) of the voting
stock of, or at least fifty percent (50%) interest in the income of, such
corporation or other business entity, or (b) the possession, directly or
indirectly, of the power to direct the management or policies of a legal
entity, whether through the ownership of voting securities or by contract
relating to voting rights or corporate governance. For purposes of clarity,
Affiliates of Biogen Idec shall include Biogen Dompé SRL and Biogen Dompé AG.

 

1.6                               “Annual
Workplan/Budget” means, as to a Collaboration Product the detailed schedule of
Development activities and budgets prepared pursuant to Section 3.3.

 

1.7                               “Antibody”
means a molecule comprising or containing: (a) one or more immunoglobulin
variable domains; (b) fragments, variants, modifications or derivatives of
molecules described in the foregoing clause (a); and (c) the nucleic acid
consisting of a sequence of nucleotides encoding (or complementary to a nucleic
acid encoding) an antibody. Antibody shall include any antibody monospecific
and bispecific antibodies; less than full-length antibody forms such as Fv, Fab,
and F(ab’)2; and  any antibody
or fragment that is conjugated or fused to any other composition, including for
example, a toxin, radionuclide, small molecule, polypeptide or polypeptide
fragment. The term Antibody includes any human, humanized, primatized, chimeric
or other antibody.

 

1.8                               “Antibody
Product” means any pharmaceutical product having an Antibody as an active
ingredient.

 

1.9                               “Approved
Budget” means the then-current JSC approved aggregate annual budget for the
current calendar year for the Development and/or Commercialization of all
Collaboration Products.

 

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

 

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

 

2

 

1.11                        “Biogen
Idec Indemnitees” shall have the meaning set forth in Section 15.1.

 

1.12                        “Biogen
Idec Inventions” means all Inventions that (a) relate to or are useful
with any Antibody Product or Non-Antibody Product that are directed against or
incorporate a Collaboration Target, (b) are made during the Term by one or
more employees of Biogen Idec or its Affiliates or persons contractually
required to assign or license patent rights covering such inventions to Biogen
Idec or its Affiliates, in the course of performing Biogen Idec’s obligations,
or exercising Biogen Idec’s rights, under this Agreement, and (c) are not Joint
Inventions.

 

1.13                        “Biogen
Idec Know-How” means all Know-How that is (a) Controlled by Biogen
Idec or its Affiliates at any time during the Term; (b) used by or on
behalf of Biogen Idec or its Affiliates in the development or commercialization
of a Collaboration Product and (c) reasonably necessary or useful for PDL
to (i) perform its obligations under this Agreement or (ii) develop
or commercialize a Collaboration Product or Royalty Product in the Field;
provided that Biogen Idec Know-How shall not include methods of manufacturing,
production and test methods, procedures and batch records, manufacturing and
testing summary data, process and assay validation information, designing,
developing or preparing Antibodies including methods of humanizing Antibodies,
methods of reducing the immunogenicity of Antibodies, methods of modifying
effector function, and methods of increasing the affinity or half-lives of
Antibodies, unless necessary for PDL to perform its Development  or Commercialization obligations hereunder.

 

1.14                        “Biogen
Idec Patent Rights” means Patent Rights that claim  Technology Controlled by Biogen Idec or its
Affiliates at any time during the Term and that relate in whole or in part to
the Collaboration Targets or the manufacture, use or sale of Products. Biogen
Idec Patent Rights shall not include Joint Patents but shall include Biogen
Idec Target Patent Rights. As of the Effective Date, to Biogen Idec’s
knowledge, there are no Biogen Idec Patent Rights.

 

1.15                        “Biogen
Idec Target Patent Rights” means Patent Rights that claim  Technology Controlled by Biogen Idec or its
Affiliates at any time during the Term and that relate in substantial part to
the Collaboration Targets or in substantial part to the manufacture, use or
sale of Products.

 

1.16                        “Biogen
Idec Technology” means Biogen Idec Patent Rights and Biogen Idec Know-How.

 

1.17                        “Calendar
Quarter” means the respective periods of three consecutive calendar months
ending on March 31, June 30, September 30 or December 31,
for so long as this Agreement is in effect.

 

1.18                        “Change of
Control” means with respect to a Party: (i) the sale of all or
substantially all of such Party’s assets or business relating to this
Agreement; (ii) a merger, reorganization or consolidation involving such
Party in which the voting

 

3

 

securities of such Party
outstanding immediately prior thereto cease to represent at least fifty percent
(50%) of the combined voting power of the surviving entity immediately after
such merger, reorganization or consolidation; or (iii) a person or entity,
or group of persons or entities, acting in concert acquire more than fifty
percent (50%) of the voting equity securities or management control of such
Party.

 

1.19                        “Clinical
Supplies” shall mean supplies of Collaboration Product or Royalty Products,
as the case may be, in suitable form, whether Manufactured by PDL or by Biogen
Idec, as specified under this Agreement or under any Manufacturing agreement
between the Parties, Manufactured in compliance with GMP, if required given the
intended use, and ready to be used for the conduct of pre-clinical and/or human
clinical trials of such Product in the Field by the Parties pursuant to the
Development Plan and Annual Workplan/Budget.

 

1.20                        “Collaboration”
means the Parties’ program of collaborative Development, and
Commercialization of Products contemplated by this Agreement.

 

1.21                        “Collaboration
Committee” or “Committee”
means any of the JSC, JDCs, JCCs, JPC or JFC, or any other committee formed with
the approval of such other committees.

 

1.22                        “Collaboration
Invention” means a Joint Invention, Biogen Idec Invention or PDL Invention.

 

1.23                        “Collaboration
Product” means a Product being jointly Developed and Commercialized by the
Parties under this Agreement pursuant to a Development Plan or a
Commercialization Plan. For the avoidance of doubt, a Collaboration Product
shall not be a Royalty Product.

 

1.24                        “Collaboration  Product Profit”
means the profits or losses resulting from the Commercialization of Collaboration
Products in the Profit Sharing Territory and shall be equal to [****].

 

1.25                        “Collaboration
Target” means [****].

 

1.26                        “Combination
Product” shall have the meaning set forth in Exhibit C.

 

1.27                        “Combination
Product Amount” shall have the meaning set forth in Exhibit C.

 

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treatment has been requested with respect to the omitted portions.

 

4

 

1.28                        “Commercial
Supplies” shall mean supplies of Collaboration Product or Royalty Product,
as the case may be, in suitable final packaged form, as specified under a
Commercial Supply Agreement, Manufactured in compliance with GMP, and ready to
be offered for commercial sale for use in the Field in the Territory by Biogen
Idec and/or PDL, and/or their Affiliates, or permitted licensees or
sublicensees.

 

1.29                        “Commercial
Supply Agreement” shall have the meaning set forth in Section 8.3(a).

 

1.30                        “Commercialization”
means all activities undertaken relating to the manufacture, marketing,
distribution, offer for sale and sale of a Product in the Field, including
pre-marketing, advertising, education, planning, marketing, promotion,
distribution, market and product support, post-Regulatory Approval product
support and related medical affairs.

 

1.31                        “Commercialization
Plan” shall have the meaning set forth in Section 6.1(a).

 

1.32                        “Confidential
Information” means all Know-How, information (whether in written, oral,
electronic, visual, tangible, or other form) and materials, including
biological and other tangible materials, that are disclosed by one Party to the
other Party prior to the Effective Date or during the Term and are either
identified as confidential at the time of disclosure or should reasonably be
believed to be of the type of information that would be considered confidential
under the circumstances.

 

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

 

1.34                        “Controlling
Party” shall have the meaning set forth in Section 12.5(b)(vi).

 

1.35                        “Co-Promoting
Party” shall have the meaning set forth in Section 7.1(c).

 

1.36                        “Co-Promotion Option” shall have the meaning set forth in Section 7.1(a).

 

1.37                        “Co-Promote
Product” shall have the meaning set forth in Section 7.4.

 

1.38                        “Cost of
Clinical Supplies” shall have the meaning set forth in Exhibit C.

 

1.39                        “Cost of
Goods Manufactured for Sale” or “COGM” shall
have the meaning set forth in Exhibit C.

 

1.40                        “Cost of
Sales” shall have the meaning set forth in Exhibit C.

 

5

 

1.41                        “Daclizumab
Product” means [****].

 

1.42                        “Detail”
or “Detailing” means a face-to-face presentation by a Party’s sales
representative, to one or several medical professional(s) having prescribing
authority in the applicable territory in the Field, as well as to other
mutually agreed individuals or entities that have significant impact or
influence on prescribing decisions in the applicable territory in the Field,
where the principal objective of such presentation is to emphasize the features
and function of such Collaboration Product in the Field in a balanced manner. A
Detail does not include a reminder or sample drop.

 

1.43                        “Development”
means all research and pre-Regulatory Approval development and regulatory
activities in the Field regarding a Product. This includes (i) research,
preclinical testing, toxicology, formulation, manufacturing-related technology
development, and clinical studies of Products; and (ii) preparation,
submission, review, and development of data or information for the purpose of
submission to a governmental authority to obtain Regulatory Approval of
Products, and outside counsel regulatory legal services related thereto. Development
shall include development and regulatory activities for additional Indications
for a Product after Regulatory Approval of such Product but shall not include
Post-Approval Clinical Trials or Phase 4 Trials with respect to an approved
Indication.

 

1.44                        “Development
Expenses” shall have the meaning set forth in Exhibit C.

 

1.45                        “Development
Plan” shall have the meaning set forth in Section 3.3(a).

 

1.46                        “Development
Program” means any of the following: (a) the program of Development
contemplated by this Agreement for [****], (b) the program of Development
contemplated by this Agreement for [****], and (c) the program of
Development contemplated by this Agreement for [****], in each case as such
programs may be revised or amended from time to time.

 

1.47                        “Diligent
Efforts” means reasonable and good faith efforts by a Party to accomplish
such objective as that Party would normally use to accomplish a similar
objective under similar circumstances, it being understood and agreed that,
with respect to the Development or Commercialization of a Collaboration Product
or Royalty Product, as the case may be, such efforts shall be similar to those
efforts and resources commonly used by a Party for a similar pharmaceutical
product owned by it or to which it has rights, which product is at a similar
stage in its development or product life and is of similar market potential in
the applicable market taking into account efficacy, safety, approved labeling,
the competitiveness of all products in the applicable market, the

 

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6

 

patent and other
proprietary position of the product, the likelihood of regulatory approval
given the regulatory structure involved, the profitability of the product
including the royalties payable to licensors of patent or other intellectual
property rights, alternative products and other relevant factors. Diligent
Efforts shall be determined on a market-by-market and Indication-by-Indication
basis for a particular Product, and it is anticipated that the level of effort
shall be different for different markets, and shall change over time,
reflecting changes in the status of the Product and the market(s) involved.

 

1.48                        “Drug
Approval Application” means a Biologics License Application or an
equivalent application for Regulatory Approval required before commercial sale
or use of a pharmaceutical product in a field in a regulatory jurisdiction.

 

1.49                        “EU
Territory” means all countries that are officially recognized as member
states of the European Union. There are twenty-five (25) such member states as
of the Effective Date, namely:  Austria,
Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the
Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and United
Kingdom.

 

1.50                        “Executive”
means the Chief Executive Officer of a Party or such other executive
officer designated by such person. If the Chief Executive Officer position for
either Party is vacant or does not exist, then the person having the most
nearly equivalent position at such Party (or such individual’s designee) shall
be deemed to be the Executive of such Party.

 

1.51                        “Existing Product” means any one or more of the Daclizumab
Product, the Fontolizumab Product or the Volociximab Product.

 

1.52                        “Field”
means: [****].

 

1.53                        “First
Commercial Sale” means, for each Collaboration Product or Royalty Product,
as the case may be, in each country, the first sale for end use or consumption
to a Third Party of such Product in the country by a Party, its Affiliate, or
its sublicensee, after the granting of Regulatory Approval in the relevant
Field for the Collaboration Product or Royalty Product, as the case may be, by
the relevant governing authorities. First Commercial Sale excludes any sale or
other distribution for use in a clinical trial or other Development activity.

 

1.54                        “Fontolizumab
Product” means [****].

 

1.55                        “FTE Rate”
shall have the meaning set forth in Exhibit C.

 

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

 

7

 

1.56                        “Future Product” means [****].

 

1.57                        “GMP”
means current Good Manufacturing Practices, as defined under the rules and
regulations of the United States Food and Drug Administration, as the same may
be amended from time to time.

 

1.58                        “Gross
Sales” shall have the meaning set forth in Exhibit C.

 

1.59                        “IFN-”
means [****].

 

1.60                        “IFN- Target Field” means the diagnosis,
treatment or prevention of human diseases.

 

1.61                        “IFN- Target Future Product” means [****].

 

1.62                        “IFN- Target Product” means [****].

 

1.63                        “[****]
Product” means the [****].

 

1.64                        “IL-2R” means
(a) the protein commonly known as the IL-2 receptor alpha subunit “p55” “TAC
antigen”, “CD25 antigen “T-Cell Growth factor receptor”,  “TCGFR” and (b) fragments of the
foregoing.

 

1.65                        “IL-2R Target
Field” means the diagnosis, treatment or prevention of human diseases, but [****].

 

1.66                        “IL-2R
Target Future Product” means [****].

 

1.67                        “IL-2R
Target Product” means [****].

 

1.68                        “Independent
Indication” means, with respect to a particular Collaboration Product, any
Indication for which a Party has exercised its opt-out right pursuant to Section 4.1
and shall include all Opt Out Indications, provided that such Party has not
exercised its opt-in right for such Indication pursuant to Section 4.4
(after which such Indication shall cease to be an Independent Indication).

 

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

 

8

 

1.69                        “Independent
Product” means a former Collaboration Product for which a Party terminated
its participation in such Product pursuant to Section 4.1, and as to which
no Indication is (i) being developed under the Collaboration, or (ii) is
the subject of a proposal made in writing to the JSC under Section 3.10(a) as
to which the JSC has not made a decision.

 

1.70                        “Indication”
means an illness or sickness; or any interruption, cessation or disorder of
a particular bodily function, system or organ; in any case regardless of the
severity, frequency or route of any treatment.

 

1.71                        “Initial
Development Program Budget” means the budget attached hereto as part of the
initial draft Development Plan attached as Exhibit 3.3.

 

1.72                        “Invention”
means any process, method, composition of matter, article of manufacture,
discovery or finding that is conceived and/or reduced to practice (whether or
not patentable).

 

1.73                        “Joint
Commercialization Committee” or “JCC” shall have the meaning set forth in Section 2.4(a).

 

1.74                        “Joint
Development Committee” or “JDC” shall have the meaning set forth in Section 2.3(a).

 

1.75                        “Joint
Finance Committee” or “JFC” shall have the meaning set forth in Section 2.5(a).

 

1.76                        “Joint
Inventions” means all Inventions that are jointly made during the Term by
at least one (1) PDL employee or person contractually required to assign
or license patent rights covering such inventions to PDL and at least one (1) Biogen
Idec employee or person contractually required to assign or license patent
rights covering such inventions to Biogen Idec.

 

1.77                        “Joint
Patent Committee” or “JPC” shall have the meaning set forth in Section 2.6(a).

 

1.78                        “Joint
Patent Rights” means all Patent Rights that claim or cover Joint Inventions.

 

1.79                        “Joint
Steering Committee” or “JSC” shall have the meaning set forth in Section 2.2(a).

 

1.80                        “Know-How”
means Inventions, discoveries, trade secrets, information, experience, data,
formulas, procedures, technology and results (whether or not patentable), which
at the time of use constitute Confidential Information, including discoveries,
formulae, materials including biological materials, practices, methods,
knowledge, know-how, processes, experience and test data (including physical,
chemical, biological, toxicological, pharmacological, clinical, and veterinary
data), dosage regimens, control assays, product specifications, analytical and
quality control

 

9

 

data, marketing, pricing,
distribution cost and sales data or descriptions.

 

1.81                        “Losses”
shall have the meaning set forth in Section 15.1.

 

1.82                        “Manufacturing”
means any activities related to the manufacturing of a Collaboration Product or
Royalty Product, as the case may be, or any ingredient thereof, including
manufacturing process development, technology transfer, and scale-up,
establishment of manufacturing capacity, evaluation, qualification and
validation of manufacturing processes and facilities, manufacturing active
ingredients or supplies of such Product for Development, manufacturing such
Product for commercial sale, packaging, in-process and finished product
testing, release of product or any component or ingredient thereof, and quality
assurance activities related to manufacturing, ongoing stability tests and
regulatory activities related to any of the foregoing.

 

1.83                        “Manufacturing
Party” shall have the meaning set forth in Section 8.1.

 

1.84                        “Milestone
Indication” means  any Indication
as to which a separate Drug Approval Application is required for approval in a
jurisdiction. By way of example, (i) for ophthalmology Indications,
macular degeneration and diabetic retinopathy are two separate Milestone
Indications, (ii) with respect to autoimmune disease indications, Crohn’s
disease and ulcerative colitis are two separate Milestone Indications and (iii) with
respect to cancer Indications, “Milestone Indication” means a cancer of a
particular organ or any metastatic progression thereof, including as distinct
Milestone Indications, breast cancer, prostate cancer, colon cancer, rectal
cancer, ovarian cancer, uterine cancer, gastric cancer, bladder cancer, brain
cancer, bile duct cancer, pancreatic cancer, kidney cancer, stomach cancer,
head-and-neck cancer, esophageal cancer, liver cancer, and lung cancer.

 

1.85                        “MS” means
multiple sclerosis.

 

1.86                        “Net Sales”
shall have the meaning set forth in Exhibit C.

 

1.87                        “Non-Antibody
Product” means any pharmaceutical product having as an active ingredient
any synthetic molecule or biologic molecule other than an Antibody, including a
compound that has a molecular weight that is less than or equal to 1000
daltons, fusion protein (other than an Antibody), antisense molecule, siRNA,
nucleic acid, peptide, polypeptide (other than an Antibody) or fragment
thereof.

 

1.88                        “Non-Developing
Party” shall have the meaning set forth in Section 4.1(a).

 

1.89                        “North
American Territory” means the United States (including its possessions and
territories) and Canada.

 

1.90                        “Ongoing
Development Expense” shall have the meaning set forth in Exhibit C.

 

10

 

1.91                        “Operating
Expenses” shall have the meaning set forth in Exhibit C.

 

1.92                        “Opt Out
Indications” shall have the meaning set forth in Section 4.1(b)(iii).

 

1.93                        “Other
Out-of-Pocket Costs” shall have the meaning set forth in Exhibit C.

 

1.94                        “Patent
Expenses” means the sum of all out-of-pocket expenses reasonably incurred
by a Party to prepare, file, prosecute and maintain PDL Target Patent Rights,
Biogen Idec Target Patent Rights and Joint Patent Rights, including the costs
of interferences/oppositions proceedings with respect to such Patent Rights,
provided in each case such expenses have been incurred in accordance with
Sections 12.4 and 12.5 and subject to Section 12.7 (b)(vii) below. In
addition, Patent Expenses shall include the costs of freedom to operate
searches and analyses with respect to Collaboration Products, to the extent
such searches or analyses have been authorized by the JPC and approved by the
JSC.

 

1.95                        “Patent Rights” means (a) all patents and patent
applications in any country or supranational jurisdiction, and (b) any
substitutions, divisions, continuations, continuations-in-part, reissues,
renewals, registrations, confirmations, re-examinations, extensions,
supplementary protection certificates and the like, and any provisional
applications, of any such patents or patent applications.

 

1.96                        “PDL
Inventions” means all Inventions that (a) relate to or are useful with
any Antibody Product or Non-Antibody Product that are directed against or
incorporate a  Collaboration Target, (b) are
made during the Term by one or more employees of PDL or its Affiliates or
persons contractually required to assign or license patent rights covering such
inventions to PDL or its Affiliates, in the course of performing PDL’s
obligations, or exercising PDL’s rights, under this Agreement, and (c) are
not Joint Inventions.

 

1.97                        “PDL
Know-How” means all Know-How that is (a) Controlled by PDL or its
Affiliates at any time during the Term and (b) reasonably necessary or
useful for Biogen Idec to (i) perform its obligations under this
Agreement; or (ii) develop or commercialize a Collaboration Product or a
Royalty Product in the Field; provided that PDL Know-How shall not include methods
of manufacturing, production and test methods, procedures and batch records,
manufacturing and testing summary data, process and assay validation
information, designing, developing or preparing Antibodies including methods of
humanizing Antibodies, methods of reducing the immunogenicity of Antibodies,
methods of modifying effector function, and methods of increasing the affinity
or half-lives of Antibodies unless necessary for Biogen Idec to perform its
Development or Commercialization obligations or to exercise its rights
hereunder.

 

1.98                        “PDL
Patent Rights” means Patent Rights that claim  Technology Controlled by PDL or its
Affiliates at any time during the Term and that relate in whole or in part to
the Collaboration Targets or the manufacture, use or sale of Products. PDL

 

11

 

Patent Rights shall not
include Joint Patents but shall include the Queen Patents and PDL Target Patent
Rights. As of the Effective Date, to PDL’s knowledge, all PDL Patent Rights are
listed on Exhibit A hereto.

 

1.99                        “PDL
Target Patent Rights” means Patent Rights that claim Technology Controlled
by PDL or its Affiliates at any time during the Term and that relate in
substantial part to the Collaboration Targets or the manufacture, use or sale
of Products. PDL Target Patent rights shall not include the Queen Patents.

 

1.100                 “PDL Technology”
means PDL Patent Rights and PDL Know-How.

 

1.101                 “Phase 1 Trial” means,
as to a specific pharmaceutical product, a well conducted and lawful study in
humans of the safety of such product, which is prospectively designed to
generate sufficient data (if successful) to commence a Phase 2 Trial (or
foreign equivalent) of such product, as further defined in Federal Regulation
21 C.F.R. 312.21(a), as amended from time to time, or the corresponding
regulation in jurisdictions other than the United States. A Phase 1 Trial shall
be deemed initiated upon the enrollment of the first patient.

 

1.102                 “Phase 2 Trial” means,
as to a specific pharmaceutical product, a well conducted and lawful study,
conducted anywhere in the world in diseased humans, of the feasibility, safety,
dose ranging and efficacy of such product, that is prospectively designed to
generate sufficient data (if successful) to commence a Phase 3 Trial (or
foreign equivalent) of such product, as further defined in 21 C.F.R. 312.21(b),
as amended from time to time, or the corresponding regulation in jurisdictions
other than the United States. For the avoidance of doubt, a Phase 2 Trial
requires enrollment of patients with the applicable disease or condition and is
aimed to provide a measure of efficacy in addition to short-term tolerability. A
Phase 2 Trial shall be deemed initiated upon the enrollment of the first
patient.

 

1.103                 “Phase 3 Trial” means,
as to a specific pharmaceutical product, a well conducted and lawful study in
humans performed to gain evidence of the efficacy of such product in a target
population, and to obtain expanded evidence of safety for such product that is
needed to evaluate the overall benefit-risk relationship of such product and
provide an adequate basis for physician labeling, as described in 21 C.F.R.
312.21(c), as amended from time to time, or the corresponding regulation in
jurisdictions other than the United States. A Phase 3 Trial shall be deemed
initiated upon the enrollment of the first patient.

 

1.104                 “Phase 4 Trial” means
any clinical trial in an Indication to be conducted after a Regulatory Approval
which was mandated by the applicable Regulatory Authority as a condition of
such Regulatory Approval.

 

1.105                 “Physician Group”
means a category of physicians and other medical professionals to whom one
or more Products is being Promoted, or will be Promoted if then-current
Development activities are successful. For purposes of this definition,
all  oncologists (without regard to
whether they treat a particular type or stage of cancer)

 

12

 

shall be a single
Physician Group.

 

1.106                 “Post-Approval
Clinical Trial” shall have the meaning set forth in Exhibit C.

 

1.107                 “Product”
means [****].

 

1.108                 “Profit Sharing
Territory” means, with respect to a particular Product, those countries or
territories outside the Royalty Territory, if any, for such Product.

 

1.109                 “Promotion” or “Promote”
means the marketing and advertising of a Collaboration Product in the
relevant Field in the applicable territory in accordance with the relevant
Commercialization Plan, including medical education, information and
communication, market development and medical liaison activities, but not
including Detailing.

 

1.110                 “Queen Patents” means
those issued patents and patent applications Controlled by PDL that claim
priority under 35 USC §120 to U.S. Patent Application Serial No. [****].

 

1.111                 “Recipient” shall
have the meaning set forth in Section 14.2.

 

1.112                 “Regulatory
Approval” means, with respect to a particular regulatory jurisdiction, all
approvals (including pricing and reimbursement approvals), product and/or
establishment licenses, registrations or authorizations of any regional,
federal, state or local regulatory agency, department, bureau or other
governmental entity, necessary for the commercial sale of Products in such
regulatory jurisdiction.

 

1.113                 “Regulatory
Filings” means all applications, filings, dossiers and the like submitted
to a regulatory authority for the purpose of obtaining Regulatory Approval from
that regulatory authority. Regulatory Filings shall include all Drug Approval
Applications.

 

1.114                 “[****]” means
the [****] except to the extent such rights are later included within the scope
of this Agreement pursuant to Section 3.8.

 

1.115                 “Responsible
Commercialization Party” means the Party having the responsibilities set
forth in Article 6 for the execution and implementation of the
JSC-approved Commercialization Plan for the Commercialization of a particular
Collaboration Product, but excluding regulatory activities specifically
assigned to the Responsible Regulatory Party hereunder.

 

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1.116                 “Responsible
Development Party” means the Party having the responsibilities set forth in
Article 3 for the execution and implementation of the JSC-approved
Development Plan for the Development of a particular Collaboration Product, but
excluding any regulatory or Manufacturing activities.

 

1.117                 “Responsible
Regulatory Party” means the Party having the responsibilities set forth in Article 5
for the execution and implementation of the regulatory activities set forth in
the JSC-approved Development Plan for a particular Collaboration Product.

 

1.118                 “[****]” means
[****].

 

1.119                 “[****]
Agreements” means (a) [****], and (b) [****].

 

1.120                 “ROW Territory” means
all parts of the Territory not included in the North American Territory or EU
Territory.

 

1.121                 “Royalty Product”
means (a) an Independent Product; (b) a Collaboration Product with
respect solely to any Independent Indication; or (c) with respect solely
to the ROW Territory, a Collaboration Product, an Independent Product or
Independent Indication.

 

1.122                 “Royalty
Territory” means, with respect to a particular Product, those countries or
territories in which such Product is a Royalty Product.

 

1.123                 “Sales Costs” shall
have the meaning set forth in Exhibit C.

 

1.124                 “Sales Returns &
Allowances” shall have the meaning set forth in Exhibit C.

 

1.125                 “Strategic Plan”
means, on a Collaboration Product-by-Collaboration Product basis, a written
document establishing, for such Collaboration Product, a specific multi-year
global strategic plan and budget.

 

1.126                 “Sublicensing
Revenues” means [****] approved pursuant to Section 3.7(c) [****].

 

1.127                 “Technology”
means any technical and other information, discoveries, inventions,
modifications, improvements, data, results, designs, formulae, ideas, analyses,
methods, techniques, assays, research plans, procedures, tests, processes
(including manufacturing processes, specifications and techniques), laboratory
records,

 

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14

 

chemical,
pharmacological, toxicological, clinical, analytical and quality control data,
reports, summaries, and information contained in submissions to, and
information from, regulatory authorities (in each case whether patentable or
not).

 

1.128                 “Term” shall
have the meaning set forth in Section 16.1.

 

1.129                 “Territory”
means all the countries of the world, and their territories and possessions.

 

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

 

1.131                 “Third Party
License” means (a) any of the license agreements set forth on Exhibit B
and (b) any license agreement entered into by a Party with a Third Party
after the Effective Date that the Parties (or the JSC, to the extent
authorized) agree in writing is necessary for the Development, Manufacture or
Commercialization of one or more Products in the applicable territory under
this Agreement.

 

1.132                 “Third Party
License Fees” shall mean license fees, royalties and other amounts incurred
by a Party under a Third Party License or in-license after the Effective Date.

 

1.133                 “Transplant Field”
means all indications that involve the suppression of rejection of
transplanted organs, bone marrow or other tissue, including, solid organ
transplantation (including tolerance induction and xenotransplantation), bone
marrow transplantation, graft versus host disease and cell transplantation.

 

1.134                 “Valid Claim”
means a claim in any (a) [****]; or (b) [****].

 

1.135                 “Volociximab
Product” means [****].

 

Any reference in this Agreement to an Article,
Section, subsection, paragraph, clause, Schedule or Exhibit shall be
deemed to be a reference to an Article, Section, subsection, paragraph, clause,
Schedule or Exhibit, of or to, as the case may be, this Agreement, unless
otherwise indicated. Unless the context of this Agreement otherwise requires, (a) words
of any gender include each other gender, (b) words such as “herein”, “hereof”,
and “hereunder” refer to this Agreement as a whole and not merely to the
particular provision in which such words appear, (c) words using the
singular shall include the plural, and vice versa, and (d) the words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “but not
limited to”, “without limitation”, “inter alia” or words of similar import.

 

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15

 

ARTICLE 2

GOVERNANCE OF THE COLLABORATION

 

2.1                               Scope
of the Agreement. Pursuant and subject to the terms of this Agreement,
within the Field and the Territory, the Parties agree to engage in Development activities
with the goal of obtaining Regulatory Approval for Collaboration Products, as
soon as reasonably practicable. Each Party agrees, during the Term, to Develop
Collaboration Products only under the terms of this Agreement except as
contemplated under the terms of the [****] Agreements. The Parties’ intent is
to Develop Collaboration Products as expeditiously as reasonably practicable
with the resources and responsibilities allocated between the Parties on the
basis of each Party’s respective capabilities and availability of adequate
capacities. Unless otherwise specified in this Agreement, the guiding
principles to be followed by the Parties are attached hereto as Exhibit 2.1.

 

2.2                               Joint
Steering Committee.

 

(a)                                  Formation
and Purpose. As of the Effective Date, the Parties shall create a Joint
Steering Committee (the “JSC”) to
oversee the overall strategy of the Development and Commercialization of
Collaboration Products and carry out the functions described in this Section 2.2.
The purposes of the JSC shall be to provide overall strategic decision-making
and oversight of the Development and Commercialization of Collaboration
Products, including the development of a Strategic Plan, a [****] high-level
budget forecast and Approved Budget (consistent with the Development Plans to
be prepared pursuant to Section 3.3), oversight of the activities of the
Collaboration Committees, review of recommendations from the Collaboration
Committees regarding strategic and aggregate budget issues, allocation of
financial and other resources among collaboration projects, and resolution of
any matters not resolved by any other Collaboration Committee. The JSC shall
operate by the procedures set forth in this Section 2.2 and in Section 2.7.
The members of the JSC appointed by a party shall collectively exercise one
vote as to any matter upon which a vote is taken

 

(b)                                  Membership
of the JSC. Each Party shall designate representatives who are employees of
such Party or an Affiliate of such Party (not to exceed [****] for each Party)
with appropriate expertise to serve as members of the JSC. Each representative
may serve on more than one Committee as appropriate in view of the individual’s
expertise and may be substituted by another person with notice

 

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

 

16

 

to the other Party. Each
party may replace any or all of its representatives at any time upon prior
written notice to the other Party.

 

(c)                                  Specific
Responsibilities of the JSC. In addition to its general responsibilities
set forth in Section 2.2(a), the JSC shall, in particular:

 

(i)                                    prepare
and approve a Strategic Plan for the Collaboration and all Collaboration
Products, a [****] high-level budget forecast and an Approved Budget for the
Collaboration, and within such Approved Budget, make high-level budget
allocations among particular Development Programs. Such Strategic Plan will
guide the management of the Collaboration, and strategic decision-making
regarding Collaboration Products. The Strategic Plan shall be in a form to be
determined by the JSC (it being understood that the Parties will endeavor to
approve such Strategic Plan, [****] high-level budget forecast, and Approved
Budget within [****] following the Effective Date);

 

(ii)                                review
and approve the Development Plan and Commercialization Plan for each
Collaboration Product, and the Annual Workplans/Budget including any amendments
and revisions thereto, submitted to it by the JDC and JCC, respectively, as
soon as reasonably practicable after receipt thereof, but in no event later
than the dates specified in Section 3.3(c);

 

(iii)                            review
and approve decisions to terminate Collaborative efforts on Collaboration
Products, including with respect to specific Indications;

 

(iv)                               review
and approve decisions to proceed with the Development of any Future Products as
part of a Development Plan therefor;

 

(v)                                   establish
subcommittees pursuant to Section 2.7(c), oversee the activities of all
subcommittees so established, and address disputes or disagreements arising in
all such subcommittees;

 

(vi)                               attempt
to resolve disputes or disagreements arising in any other Collaboration
Committee or pursuant to Section 5.2(a);

 

(vii)                           review
and approve any changes in the Responsible Regulatory Party, the Responsible
Development Party, the Responsible Commercialization Party or the Manufacturing
Party, when and as necessary;

 

(viii)                       [****];
and

 

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

 

17

 

(ix)                              perform
such other functions as the Parties may agree in writing or as otherwise
assigned by this Agreement.

 

(d)                                  Meetings
of the JSC. The JSC shall meet at least twice every calendar  year, on such dates and at such times as agreed to by PDL
and Biogen Idec, with all scheduled in-person meetings to alternate between
Fremont, California and a Biogen Idec site to be designated by Biogen Idec
prior to such meeting, or at other locations as determined by the JSC. In
addition, either Party may convene a special meeting of the JSC by no less than
ten (10) business days’ prior written notice. Meetings may be held by
audio or video conference with the consent of each Party, provided that at
least one (1) meeting per calendar year shall be held in person.
Additional representatives or consultants may from time to time, by mutual
consent of the Parties, be invited to attend JSC meetings, subject to such
representative’s or consultant’s written agreement to comply with the
requirements of this Agreement. Each Party shall be responsible for its own
expenses for participating in the JSC. Meetings of the JSC shall be effective
only if at least three (3) representatives of each Party are present or
participating.

 

2.3                               Joint
Development Committees.

 

(a)                                  Formation
and Purpose. Within thirty (30) days after the Effective Date, the Parties
shall create a Joint Development Committee (the “JDC”)
for each Development Program to oversee the Development of the Existing
Products in such program. In addition, within thirty (30) days after a decision
by the JSC to Develop a Future Product, the JSC shall decide whether to create
a JDC to oversee the Development of such Future Product hereunder or include
such Development within the scope of an existing JDC. The purposes of each JDC
shall be to (i) review and recommend to the JSC Development Plans and
Annual Workplan/Budgets prepared by the Responsible Development Party for its
particular Collaboration Products and (ii) monitor and facilitate, as
necessary, the implementation of the Development Plans by the Parties. Each JDC
shall operate by the procedures set forth in this Section 2.3 and in Section 2.7.

 

(b)                                  Membership
of the JDC. Each Party shall designate representatives who are employees of
such Party or an Affiliate of such Party (not to exceed six (6) for each
Party) with appropriate expertise to serve as members of each JDC. Each Party
shall include representatives from the functions for which it is the
Responsible Party. Each representative may serve on more than one Committee as
appropriate in view of the individual’s expertise and may be substituted by
another person with notice to the other Party. Each party may replace any or
all of its representatives at any time upon prior written notice to the other
Party.

 

(c)                                  Specific
Responsibilities of the JDC. In addition to its general responsibilities
set forth in Section 2.3(a), the JDC shall, in particular:

 

(i)                                    consult
with the Responsible Development Party on its preparation of a Development Plan
and the Annual Workplans/Budget for each

 

18

 

Collaboration Product,
including with respect to budgets, clinical trial strategy, Regulatory Approval
requirements and clinical supply requirements;

 

(ii)                                review
and recommend to the JSC for approval each Development Plan as soon as
reasonably practicable after receipt thereof, but in no event later than the
dates specified in Section 3.3(c);

 

(iii)                            review
and recommend to the JSC for approval the Annual Workplan/Budget proposed by
the Responsible Development Party as soon as reasonably practicable after
receipt thereof, but in no event later than the dates specified in Section 3.3(c);

 

(iv)                               review
changes to the Development Plan proposed by the Responsible Development Party
and recommend to the JSC for approval as soon as reasonably practicable after
receipt thereof, but in no event later than the dates specified in Section 3.3(c);

 

(v)                                   establish
subcommittees pursuant to Section 2.7(c), oversee the activities of all
subcommittees so established, and address disputes or disagreements arising in
all such subcommittees;

 

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

 

(vii)                           perform
such other functions as the Parties may agree in writing or as otherwise
assigned by this Agreement.

 

(d)                                  Meetings
of the JDC. The JDC shall meet as frequently as members of the JDC
determine is required (but in no event, less frequently than once every month
during the first six (6) months following the Effective Date and once
every Calendar Quarter thereafter), on such dates and at such times as agreed
to by PDL and Biogen Idec, with all scheduled in-person meetings to alternate
between a PDL site and a Biogen Idec site as designated by the respective Party
prior to such meeting prior to such meeting, or at other locations as
determined by the JDC. Meetings may be held by audio or video conference with
the consent of each Party, provided that at least two (2) meetings per
calendar year shall be held in person. Additional consultant’s or
representatives may from time to time, by mutual consent of the Parties, be
invited to attend JDC meetings, subject to such consultant’s or representative’s
written agreement to comply with the requirements of this Agreement. Each Party
shall be responsible for its own expenses for participating in each JDC. Meetings
of the JDC shall be effective only if more than one-half of the representatives
of each Party are present or participating.

 

2.4                               Joint
Commercialization Committees.

 

(a)                                  Formation
and Purpose. The Parties shall form a Joint Commercialization Committee
(the “JCC”) for such Collaboration Product to
oversee the Commercialization thereof not later than the date that is six (6) months
prior to the

 

19

 

anticipated commencement
of the first Phase 3 Trial with respect to a Collaboration Product or such
earlier date as the JSC may determine. The purpose of each JCC shall be to (i) review
and recommend to the JSC Commercialization Plans prepared by the Responsible
Commercialization Party for its particular Collaboration Products and (ii) monitor
and facilitate, as necessary, the implementation of such Commercialization
Plans by the Parties. Each JCC shall operate by the procedures set forth in
this Section 2.4 and in Section 2.7.

 

(b)                                  Membership
of the JCC. Each Party shall designate representatives who are employees of
such Party or an Affiliate of such Party (not to exceed three (3) for each
Party) with appropriate expertise to serve as members of each JCC. Each Party
may replace any or all of its representatives at any time upon prior written
notice to the other Party. Each representative may serve on more than one
Committee as appropriate in view of the individual’s expertise and may be
substituted by another person with notice to the other Party.

 

(c)                                  Specific
Responsibilities of the JCC. In addition to its general responsibilities
set forth in Section 2.4(a), the JCC shall, in particular:

 

(i)                                    promptly
following the formation of each JCC, develop and recommend to the JSC a
Strategic Plan for the Commercialization of the applicable Collaboration
Product prior to the submission by the Responsible Commercialization Party of a
Commercialization Plan for such Product;

 

(ii)                                consult
with the Responsible Commercialization Party on its preparation of a
Commercialization Plan for each Collaboration Product, including budgets to be
included therein;

 

(iii)                            review
and recommend to the JSC for approval each annual Commercialization Plan as
soon as reasonably practicable after receipt thereof, but in no event later
than the dates specified in Section 3.3(c);

 

(iv)                               review
changes to the Commercialization Plan proposed by the Responsible
Commercialization Party and recommend to the JSC for approval as soon as
reasonably practicable after receipt thereof, but in no event later than the
dates specified in Section 3.3(c);

 

(v)                                   review
initial Collaboration Product launch concepts for such Collaboration Product
Promotional material prior to the creation and use thereof;

 

(vi)                               serve
as a forum for discussion of issues presented by a Party with respect to the
Commercialization of Collaboration Products;

 

(vii)                           establish
subcommittees pursuant to Section 2.7(c), oversee the activities of all
subcommittees so established, and address disputes or disagreements arising in
all such subcommittees;

 

(viii)                       present
disputes not resolvable by the JCC to the JSC for

 

20

 

resolution; and

 

(ix)                              perform
such other functions as the Parties may agree in writing or as otherwise
assigned by this Agreement.

 

(d)                                  Meetings
of the JCC. The JCC shall meet as frequently as members of the JCC
determine is required (but in no event, less frequently than once every
Calendar Quarter), on such dates and at such times as agreed to by PDL and
Biogen Idec, with all scheduled in-person meetings to alternate between a PDL
site and a Biogen Idec site as designated by the respective Party prior to such
meeting, or at other locations as determined by the JCC. Meetings may be held
by audio or video conference with the consent of each Party, provided that at
least two (2) meetings per calendar year shall be held in person.
Additional representatives or consultants may from time to time, by mutual
consent of the Parties, be invited to attend JCC meetings, subject to such
representative’s or consultant’s written agreement to comply with the
requirements of this Agreement. Each Party shall be responsible for its own
expenses for participating in each JCC. Meetings of each JCC shall be effective
only if more than one-half of the representatives of each Party are present or
participating.

 

2.5                               Joint
Finance Committee.

 

(a)                                  Formation
and Purpose. Within thirty (30) days after the Effective Date, the Parties
shall create a single Joint Finance Committee (the “JFC”)
for the Collaboration. The JFC shall operate under the direction of the JSC to
provide services to and consult with the JDC and the JCC in order to address
the financial, budgetary and accounting issues that arise in connection with
the Development Plans and updates thereto as described in Exhibit C, as
well as Commercialization Plans and updates thereto. Additionally, the JFC will
lead the economic analysis to help drive decisions on future Collaboration
investments, and lead the reporting and reconciliation processes outlined in Exhibit C.
The JFC shall operate by the procedures set forth in this Section 2.5 and
in Section 2.7.

 

(b)                                  Membership
of the JFC. Each Party shall designate two (2) employees of such Party
or an Affiliate of such Party. Each Party may replace any or all of its
representatives at any time upon prior written notice to the other Party. Such
representatives will include individuals with expertise and responsibilities in
the areas of accounting, cost allocation, budgeting and financial reporting. Each
representative may serve on more than one Committee as appropriate in view of
the individual’s expertise.

 

(c)                                  Meetings
of the JFC. The JFC shall meet as frequently as members of the JSC
determine is required (but in no event, less frequently than twice every
calendar year), on such dates and at such times as agreed to by PDL and Biogen
Idec, with all scheduled in-person meetings to alternate between a PDL site and
a Biogen Idec site as designated by the respective Party prior to such meeting,
or at other locations as determined by the JFC. All meetings shall be held in
person or by audio or videoconference. Additional representatives or
consultants may from time to time, by mutual consent of the Parties, be invited
to attend JFC meetings, subject to such

 

21

 

representative’s or
consultant’s written agreement to comply with the requirements of this
Agreement. Each Party shall be responsible for its own expenses for
participating in the JFC. Meetings of the JFC shall be effective only if all
representatives of each Party are present or participating.

 

2.6                               Joint
Patent Committee.

 

(a)                                  Formation
and Purpose. Within thirty (30) days after the Effective Date, the Parties
shall create a single Joint Patent Committee (the “JPC”)
for the Collaboration. The purposes of the JPC shall be to prepare, file and
prosecute the PDL Patent Rights, the Biogen Idec Patent Rights and the Joint
Patent Rights, as described in and subject to the terms of Article 12. The
JPC shall operate by the procedures set forth in this Section 2.6 and in Section 2.7.

 

(b)                                  Membership
of the JPC. Each Party shall designate an employee of such Party or an
Affiliate of such Party with appropriate expertise to serve as members of the
JPC. Each Party may replace any or all of its representatives at any time upon
prior written notice to the other Party. Each representative may serve on more
than one Committee as appropriate in view of the individual’s expertise.

 

(c)                                  Specific
Responsibilities of the JPC. In addition to its general responsibilities
set forth in Section 2.6(a), the JPC shall, in particular be responsible
for:

 

(i)                                    Managing
continued prosecution of the PDL Patent Rights, the Biogen Idec Patent Rights
and the Joint Patent Rights as described and in accordance with the terms of Article 12;

 

(ii)                                Reviewing
invention disclosures and publications in accordance with the terms of Article 12
and Section 14.3;

 

(iii)                            Reviewing
and managing licensing, enforcement activities and conflicts involving
intellectual property rights to the extent provided in Article 12;

 

(iv)                               Providing
advice, periodic updates and reports to the JSC regarding intellectual property
matters;

 

(v)                                   Using
reasonable efforts to provide a freedom to operate analysis relating to
Collaboration Products prior to the Phase 2 Trial completion;

 

(vi)                               Using
good faith efforts to keep the Parties informed as to material developments
with respect to the prosecution of, and any adversarial proceedings involving
intellectual property rights, to the extent a Party’s representative on the JPC
concludes that such prosecution or proceeding directly affects a Collaboration
Product; and

 

(vii)                           Performing
such other functions as the Parties may agree in writing or as otherwise assigned
by this Agreement.

 

22

 

(d)                                  Meetings
of the JPC. The JPC shall communicate on such dates and at such times as
agreed upon by its members but in no event, less frequently than once every
other Calendar Quarter. Meetings may be held by audio or video conference with
the consent of each Party, provided that at least two (2) meetings per
calendar year shall be held in person with all scheduled in-person meetings to
alternate between a PDL site and a Biogen Idec site as designated by the
respective Party prior to such meeting, or at other locations as determined by
the JPC. Each Party may permit visitors to attend meetings of the JPC. Each
Party shall be responsible for its own expenses for participating in the JPC. Meetings
of the JPC shall be effective only if the representative of each Party is
present or participating.

 

(e)                                  Decisions;
Actions Without Meetings. Subject to Article 12 below, any approval,
determination or other action of the JPC shall require unanimous agreement of
both members of the JPC. In the event that a decision can not be reached by the
JPC, then the matter shall be referred to the respective senior management of
the in-house legal department of each Party. In the event such senior management
is unable to resolve the matter, then the matter will be resolved pursuant to Section 2.8
(b) and (c) and Article 17. Unless otherwise agreed by the
Parties, decisions of the JPC shall be determined in a manner designed to
ensure a reasonable scope of protection for the PDL Patent Rights, the Biogen
Idec Patent Rights and the Joint Patent Rights, to obtain broad patent
protection for Collaboration Products and to strengthen the Parties’ ability to
broadly protect and enforce such Patent Rights against infringers within the
scope of Collaboration Products.

 

2.7                               General
Committee Procedures.

 

(a)                                  Chairperson.
Each Collaboration Committee will be led by a representative of one of the
Parties (the “Chairperson”), appointed as
follows:  [****] shall select from its
representatives a Chairperson for each of the Committees for the period
commencing on the Effective Date and ending on [****] and [****] shall select
from its representatives a Chairperson for each of the Committees for the
period commencing on [****] and ending on [****]. Thereafter, selection of the
Chairperson for each of the Committees will [****].

 

(b)                                  Responsibilities.
The Chairperson shall have only those responsibilities set forth in this Section 2.7(b).
The Chairperson of each Collaboration Committee shall be responsible for
calling meetings, preparing and circulating an agenda in advance of each
meeting of such Collaboration Committee, provided, that a Chairperson shall
call a meeting of the applicable Collaboration Committee promptly upon the
written request of either Party to convene such a meeting. In addition, each

 

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

 

23

 

Chairperson shall bear
the responsibility for preparing written draft minutes of that Collaboration
Committee’s meetings in reasonable detail and for distributing such draft
minutes to all members of that Collaboration Committee for comment and review
within [****] after the relevant meeting. The members of the Collaboration
Committee shall have [****] to provide comments. Each Chairperson shall
incorporate timely received comments and distribute revised minutes to all
members of that Collaboration Committee for their final review and approval
within [****] after the relevant meeting.

 

(c)                                  Subcommittees.
From time to time, each Committee may establish and delegate duties to
other committees or sub-committees on an “as-needed” basis to oversee
particular projects or activities. Each such subcommittee shall be constituted
and shall operate as the JSC, JDC, JCC, JFC or JPC, as the case may be,
determines; provided, that each Party shall have the right to equal
representation on any such subcommittee. Subcommittees may be established on an
ad hoc basis for purposes of a specific project for the life of a Collaboration
Product, or on such other basis as the applicable Committee may determine. Each
subcommittee and its activities shall be subject to the oversight, review and
approval of, and shall report to, the Committee that established such
subcommittee. In no event shall the authority of the subcommittee exceed that
specified for the relevant Committee in this Article 2.

 

(d)                                  Limitations
of Committee Powers. Each Committee shall have only such powers as are
specifically delegated to it hereunder and shall not be a substitute for the
rights of the Parties. Without limiting the generality of the foregoing, no
Committee shall have any power to amend this Agreement. Any amendment to the
terms and conditions of this Agreement shall be implemented pursuant to Section 18.3
below.

 

(e)                                  Authority.
The Parties agree that, in voting on matters as described in this Article 2,
it shall be conclusively presumed that each voting member of the JSC or other
Committee has the authority and approval of such member’s respective senior
management in casting his or her vote.

 

2.8                               Committee
Decision-Making.

 

(a)                                  Consensus;
Good Faith; Action Without Meeting. Subject to the terms of this Section 2.8,
each Committee will take action by [****], assuming a quorum for such Committee
is present. Consistent with Exhibit 2.1, the members of each Committee
shall act in good faith to cooperate with one another to reach agreement with
respect to issues to be decided by the Committee. Action that may be taken at a
meeting of a Committee also may be taken without a meeting if a written

 

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

 

24

 

consent setting forth the
action so taken is signed by all of the Committee representatives of each
Party.

 

(b)                                  Failure
to Reach Consensus by a Collaboration Committee. If a Collaboration
Committee is unable to reach [****] within [****] of its initial consideration
of any matter over which such Committee has authority and responsibility, then
the Committee shall escalate the matter to the JSC for decision; provided, that
such Committee may escalate the matter to the JSC prior to the expiration of
such [****] with the consent of both Parties.

 

(c)                                  [****]:

 

(i)                                    With
respect to any [****] shall [****] with respect to all matters, except as
described below in clause (ii) and (iv) and provided that [****];

 

(ii)                                Each
Party shall possess final decision-making authority with respect to
Manufacturing processes during the time that such Party is the Manufacturing
Party under this Agreement, but for avoidance of doubt in each case, such
authority does not include the ability to terminate Manufacturing of a Product
in contravention of the terms of any Clinical Supply arrangement or a
Commercial Supply Agreement or to unilaterally alter the terms of any Clinical
Supply arrangement or Commercial Supply Agreement including quantities or
forecasts.

 

(iii)                            [****].

 

(iv)                               [****].

 

2.9                               Compliance
with [****] Agreements. PDL shall have no obligation to act in any way that
would breach its obligations under the [****] Agreements.

 

2.10                        [****].

 

ARTICLE 3

DEVELOPMENT OF COLLABORATION PRODUCTS

 

3.1                               Overview.
The Collaboration between the Parties is divided into three Development
Programs, one for each Collaboration Target. This Article 3 describes the
rights and obligations of the Parties with respect to the Development of
Collaboration Products within the various Development Programs, including both
Existing Products and Future Products.

 

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

 

25

 

3.2                               Responsible
Development Party. Subject to the roles of the various Collaboration
Committees described in Article 2, the allocation of primary
responsibility for the creation of Development Plans and the implementation of
Development activities of Collaboration Products described in such Development
Plans shall be given to the Responsible Development Party. The allocation of
such responsibilities shall be as follows: 

 

	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  North
  American Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  EU
  Territory and ROW Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

3.3                               Development
Plan.

 

(a)                                  Scope.
All  Development of Collaboration Products
shall be conducted pursuant to a Collaboration Product specific, multi-year,
global development plan and budget (in each case, a “Development
Plan”), which shall set forth all anticipated Development activities
and timelines, allocate responsibility for carrying out such activities between
PDL and Biogen Idec and include an associated [***] development budget with
respect to each such Collaboration Product, plus a forecast of the total,
multi-year costs of any clinical trials included within such plan. Primary
responsibility for developing and implementing each such Development Plan shall
reside with the Responsible Development Party for its respective Collaboration
Product. The non-Responsible Development Party will have the right to consent
to any Development activities assigned to such Party under the terms of a
Development Plan. The initial draft Development Plans, including the Initial
Development Program Budget, for the Existing Products are attached hereto as Exhibit 3.3.
The Parties intend that the draft Development Plans attached in Exhibit 3.3
will serve as the Development Plans until first Development Plans are prepared
and approved pursuant to Section 3.3(b).

 

(b)                                  Development
Plan and First Annual Workplan/Budget. The Responsible Development Party
shall in consultation with the relevant JDC pursuant to Section 2.3(c)(i) prepare
a Development Plan for each Existing Product as soon as practicable following
the Effective Date, and each such Development Plan, when

 

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

 

26

 

approved, shall supersede
the applicable draft Development Plan attached as Exhibit 3.3. The
Responsible Development Party will also prepare a draft of an Annual
Workplan/Budget for [****] after consultation with the relevant JDC, specifying
in detail the Development activities to be performed during the year,
designation of which Party is responsible for each task, staffing levels (which
levels shall be reasonably necessary for the attainment of the Development
goals, as applicable), any approved use of Third Party contractors required to
carry out such activities, a budget setting forth the estimated expenditures
required to carry out such activities and a timeline for completion of such
activities. Such draft will be prepared as soon as practicable following the
Effective Date.

 

(c)                                  Yearly
Updates and Subsequent Annual Workplan/Budget. The Responsible Development
Party shall, on an annual basis, update the Development Plan to reflect any
changes necessary given the progress and the results of the Development work as
of such date or any change in strategy, timelines, or long range plans going
forward. In addition, prior to the start of each year, the Responsible
Development Party shall prepare an Annual Workplan/Budget which shall specify
in detail the Development activities to be performed during such year,
designation of which Party is responsible for each task, staffing levels (which
levels shall be reasonably necessary for the attainment of the Development
goals, as applicable), any approved use of Third Party contractors required to
carry out such activities, a budget setting forth the estimated expenditures
required to carry out such activities, a timeline for completion of such
activities and annual production requirements, as specified in Section 8.2.
Each update to the Development Plan and adoption of each Annual
Work-plan/Budget under this paragraph and any modifications and updates under paragraph
(d) below shall automatically be deemed to constitute an amendment to the
Development Plans upon JSC approval and ratification of the meeting minutes
related thereto, and shall not constitute an obligation of either Party until
such approval and ratification. The schedule for yearly updates to the
Development Plan and the drafting and approval of each Annual Workplan/Budget
commencing with the calendar year [****], shall occur no later than the dates
set forth below:

 

	
  EVENT

  	
   

  	
  TIMING

  
	
  [****]

  	
   

  	
  [****]

  
	
  [****]

  	
   

  	
  [****]

  
	
  [****]

  	
   

  	
  [****]

  
	
  [****]

  	
   

  	
  [****]

  

 

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

 

27

 

(d)                                  Interim
and Annual Workplan/Budget Modifications and Updates. The Responsible
Development Party shall review each Annual Workplan/Budget on a [****] during
the course of each year to review actual activities and expenditures compared
to plan and to determine if any changes are necessary given the progress and
the results of the Development work as of such date. Other interim
modifications to each Annual Workplan/Budget during the course of the year may
also be adopted by the Responsible Development Party, as necessary, but shall
be subject to the approval of the JSC if material. All changes to any Annual
Work-plan/Budget shall be subject to review and approval of the JSC where such
modifications exceed the authority delegated to the Responsible Development
Party by the JSC or under this Agreement.

 

3.4                               Standards
of Conduct; Diligence.

 

(a)                                  Each
Party shall perform the Development activities for which it is responsible
under the Development Plan in good scientific manner and in compliance with
applicable laws, rules and regulations. Each Party will keep the other
Party fully informed regarding the progress and results of such Party’s
Development activities with respect to the Collaboration Products through the
Collaboration Committee meetings.

 

(b)                                  Each
Party shall use Diligent Efforts to execute and carry out the activities
assigned to it in the Development Plan within each Annual Workplan/Budget; [****].

 

(c)                                  The
Parties shall cooperate in good faith to establish appropriate and consistent
medical information support relating to Collaboration Products.

 

3.5                               Shared
Development Expenses.

 

(a)                                  Payment
of Development Expenses. Subject to a Party’s right to opt out as set forth
in Article 4, all Development Expenses or Other Out of Pocket Costs shall
be shared between Biogen Idec and PDL as provided below and in accordance with Exhibit C,
so that Biogen Idec bears fifty percent (50%) of such costs and PDL bears fifty
percent (50%) of such costs, provided that such costs were part of an Annual
Workplan/Budget, or were incurred pursuant to the draft Development Plans
attached as Exhibit 3.3 prior to approval of a Development Plan under Section 3.3(b),
or were otherwise approved by the JSC. There shall be a Reconciliation
Statement, prepared by the Responsible Development Party as set forth in Section A.2.2
of Exhibit C, of such costs which are to be shared and which are incurred
during a reporting period by each Party, in accordance with Section A.2.2
of Exhibit C, with a payment by one Party to the other, pursuant to Section A.5
of Exhibit C, to the extent necessary so that each Party bears its
appropriate percentage of such shared Development Costs. [****].  

 

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(b)                                  Development
Cost Accounts. Subject to the limitations set forth in Section 3.6,
each Party shall charge all Development Expenses or Other Out-of –Pocket Costs
so incurred by it or its Affiliates on its books and records to enable the
tracking of expenses incurred in connection with each Development Plan and each
Annual Workplan/Budget (each, a “Development Cost Project
Account”). Within [****] after the end of each Calendar Quarter,
each Party shall submit to the other Party a written summary of all expenses
charged to its Development Cost Project Account during such Calendar Quarter,
which summary shall be accompanied by reasonable supporting documentation for
such expenses. Each Party shall provide the other Party with interim [****]
reports of [****] estimates of current Calendar Quarter charges within [****]
after the end of [****] in a Calendar Quarter (other than the [****], for which
only a quarterly report will be due).

 

3.6                               Excluded
Development Expenses. Notwithstanding the terms of Section 3.5, [****]
will bear any [****], incurred by the Parties primarily in connection with the
Development of any and all Royalty Products for approval and sale in the ROW
Territory.

 

3.7                               Third
Parties.

 

(a)                                  Contractors.
Any Third Party retained by a Party to perform Development activities must
be approved in advance in writing by the other Party, unless such Third Party
is specifically named in a Development Plan. Each Party shall remain liable for
the performance of its obligations hereunder which it delegates to such Third
Parties. Any Third Parties performing Development activities hereunder shall be
subject to confidentiality and non-use obligations at least as stringent as
those set forth in Article 14 and must comply with the terms of Article 12.

 

(b)                                  Intellectual
Property. The Parties intend not to knowingly introduce to any
Collaboration Product any Technology that is not Controlled by a Party, except
with the prior approval of the JPC and the JSC. If the JSC in consultation with
the JPC determines that a license to certain Third Party technology is
reasonably necessary to advance the successful Development of a Collaboration
Product, then the JSC shall [****]. Upon approval of the terms of such Third
Party license, the [****] may execute such Third Party license and any payments
that become due pursuant to a Third Party License agreement executed pursuant
to this Section 3.7(b) will, during the course of Development of the
applicable Collaboration Products, be treated as [****].

 

(c)                                  Sublicensing.
The JSC may elect to license the further Development or Commercialization
of a Collaboration Product to a Third Party in one or more Indications and/or
territories. In such event, the JSC shall designate a Party to negotiate the
terms on which such a Third Party license would be granted and to serve

 

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29

 

as the primary point of
contact with the applicable Third Party sublicensee following the execution of
the license agreement, provided that the JSC may condition approval of such
sublicense upon submission of the final agreement with the Third Party to the
JSC for final approval. The parties acknowledge that any grant of rights to a
distributor shall not constitute a license of Development or Commercialization
rights hereunder.

 

3.8                               [****].
If, after the Effective Date,  [****]. If the
Parties fail to agree on the payment and other terms under which such [****]
would be included within this Agreement prior to the termination of the
Negotiation Period, then such [****] shall not be included within the scope of
this Agreement and [****] shall have no further obligation to [****] in respect
of such rights except as set forth in this Section 3.8. If the Parties
were unable to execute an agreement prior to the termination or expiration of
the Negotiation Period, [****] will not, for a period of [****] from the
termination or expiration of the Negotiation Period, enter into a license or
other agreement with a Third Party providing for the development or
commercialization of such [****] on terms which are in the aggregate less
favorable to [****] than the last bona fide offer made in writing by [****] to [****]
without first offering to [****] for a period of [****] the right to include
the [****] within the scope of this Agreement upon such alternative terms.

 

3.9                               Development
of Products in the ROW Territory.

 

(a)                                  Responsibility.
Biogen Idec shall be solely responsible, at its sole cost and expense and at
its sole discretion, for the Development of any Royalty Product in the ROW
Territory. Biogen Idec shall use Diligent Efforts in proceeding with the
development and registration of Royalty Products in Japan.

 

(b)                                  Updates.
Biogen Idec will inform PDL of the status of Biogen Idec’s Development and
Commercialization of Royalty Products in the ROW Territory through [****]
progress reports submitted in writing to PDL. In addition, upon reasonable
notice to Biogen Idec, it will provide PDL with copies of any information or
data reasonably requested by PDL and reasonably necessary for the development
or commercialization of Royalty Products. Through the JSC, Biogen Idec shall
advise and consult with PDL with respect to any significant issues or questions
raised by any regulatory authorities in the ROW Territory with respect to a
Royalty Product that Biogen Idec believes would have an adverse impact on the
corresponding Collaboration  Product in
the Profit Sharing Territory.

 

(c)                                  Regulatory
Cross-Referencing. Biogen Idec will allow the Responsible Regulatory Party
in a Territory to cross-reference, in furtherance of JSC-approved activities
under this Agreement, Biogen Idec regulatory filings and clinical data

 

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30

 

with respect to any
Royalty Product developed or commercialized by Biogen Idec in the ROW Territory
and will grant PDL reasonable access during normal business hours to such
regulatory filings and clinical data.

 

3.10                        Consideration
of Future Products and Additional Indications or New Formulations of
Collaboration Products; Scope and Exclusivity

 

(a)                                  Future
Products Brought to Joint Steering Committee

 

(i)                                    From
time to time during the Term, the JSC shall consider proposals that the Parties
jointly Develop and Commercialize any (A) new Product as a Future Product
in accordance with the terms of this Agreement; (B) additional Indication
for an existing Collaboration Product; or (C) new formulation of an
existing Collaboration Product.

 

(ii)                                Either
Party may initiate the foregoing proposal at any time during the Term. In
addition, the Parties must initiate a proposal with respect to a Product under
the circumstances discussed below. A Party initiating a proposal under this Section 3.10
shall be deemed a “Proposing Party.”

 

(1)                                 A
Party must bring a proposal to the JSC that the Parties Collaborate on [****]
at the following times:

 

(a)                                  With
respect to a [****], prior to negotiation of such license; or

 

(b)                                  With
respect to all other Products that are [****], after the Proposing Party has
performed Development on such Product, [****];

 

(2)                                 PDL
must [****] at the following times:

 

(a)                                  With
respect to a [****]; or

 

(b)                                  With
respect to all other Products that are [****], after PDL has performed
Development on such Product, [****];

 

(b)                                  Consequences
of JSC Consideration of Future Products and Additional Indications or New Formulations
of Collaboration Products

 

(i)                                    Full
Approval. If the JSC approves the addition of a new Product as a Future
Product or an additional Indication for an existing Collaboration Product or a
new formulation of an existing Collaboration Product, then such Product

 

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31

 

shall be a Collaboration
Product and the JSC shall appoint a Responsible Development Party that shall
create a new Development Plan for such Collaboration Product or update the
applicable Development Plan to include the Development activities to be
performed by the Parties in the case of an additional Indication for or new
formulation of an existing Collaboration Product. The JSC will take into
consideration a Party’s current abilities, expertise and infrastructure when
appointing new Responsible Development Parties and will make such appointments
accordingly. The Responsible Development Party for each such Collaboration
Product shall implement such Development activities as contemplated by this Article 3.
Any such Development Plan or update shall be prepared and approved in
accordance with the provisions of Articles 2 and 3.

 

(ii)                                Partial
Approval. If, after a proposal is made under Section 3.10(a), the JSC
does not approve the addition of a new Product as a Future Product or an
additional Indication for an existing Collaboration Product or a new
formulation of an existing Collaboration Product, but determines that such
Product or additional Indication or formulation should be subject to further
evaluation then such Product or additional Indication or formulation shall be subject
to this Section 3.10(b)(ii). At the request of the Proposing Party, the
JSC shall develop a proposed work plan, which shall include specific goals
(such as a clinical trial, with primary endpoints) for such Product or
additional Indication or formulation and the Proposing Party shall provide all
information reasonably requested by the JSC that would be material to making a
determination as to whether such proposed work plan should be approved and to
the appropriateness of the proposed goals. If the JSC agrees that if the
specific goals set forth in work plan are met, the Indication, formulation or
new Product would become a Collaboration Product, then the following shall
apply:

 

(1)                                 The
Proposing Party shall have the right to undertake the work specified in the
work plan at its own expense;

 

(2)                                 If
the Proposing Party carries out the work plan and meets all of the JSC-approved
specific goals, then

 

(a)                                  the
other Party shall reimburse the Proposing Party an amount equal to [****] of
the Development Expenses related to such trial that such Party would have
otherwise been responsible for if the JSC had approved such trial as part of
the Development Plan,  and

 

(b)                                  the
formulation, Indication or new Product shall be developed jointly by the
Parties and the JSC shall take the actions described in Section 3.10(b) in
respect of such new Collaboration Product or additional Indication or new
formulation of an existing Collaboration Product.

 

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(3)                                 If
the JSC-approved specific goals are not met, the Proposing Party shall be
solely responsible for all related costs without the right of reimbursement
from the other Party and neither Party will be allowed to continue development
except in the following circumstances:

 

(a)                                  If
[****] is the Proposing Party, it may [****];

 

(b)                                  If
[****] is the Proposing Party [****] it may [****].

 

For purposes of clarity,
the Parties agree that if the JSC is unable to agree on the specific goals for
the foregoing work plan or is unable to agree that if the work plan meets its
goals the Parties would jointly Develop the new product as a Future Product or
an additional clinical indication for an existing Collaboration Product or a
new formulation of an existing Collaboration Product, such disagreement shall
not be subject to dispute resolution hereunder and shall be considered final.

 

(iii)                            No
Approval. If, after a proposal is made under Section 3.10(a), the JSC
does not approve the addition of a new Product as a Future Product or an
additional Indication for an existing Collaboration Product or a new
formulation of an existing Collaboration Product, and does not determine that
such Product or additional Indication or formulation should be subject to
further evaluation, [****] except in the following circumstances, and provided
that the Proposing Party did not block the approval of any such proposal:

 

(1)                                 If
[****] is the Proposing Party, it may [****];

 

(2)                                 If
[****] is the Proposing Party [****], it may [****].

 

Any such Product which is permitted to be pursued
outside the Collaboration shall not be subject to the terms, obligations,
rights and responsibilities in this Agreement.

 

(c)                                  Lapse
of Obligations [****]. The obligations to propose [****] under this Section 3.10
shall lapse as to any [****].

 

3.11                        Transfer
of Materials. During the Term, the Parties anticipate that each Party will
transfer certain of its proprietary tangible research materials to the other
Party. Each Party agrees during the Term that it will use such materials of the
other Party only for the purposes set forth in this Agreement, and will not
transfer such materials to any Third Party, except in compliance with Section 14.1
and Section 14.2 of this Agreement. Each Party shall have the right to use
proprietary tangible research materials provided

 

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33

 

to it by the other Party
during the Term and in furtherance of the purposes set forth in this Agreement,
solely for the purposes hereunder. Such proprietary materials received from the
other Party which are directly related to Collaboration Products may be
transferred to Third Parties only with consent of the JDC and JPC, subject to the
form of material transfer agreements or collaboration agreements, as
applicable, covering such materials, such form agreements to be drafted and
agreed upon by the JPC.

 

ARTICLE 4

OPT OUT RIGHTS; ROYALTY  PRODUCTS

 

4.1                               Opt
Out Rights for Collaboration Products or Indications

 

(a)                                  Opt
Out Right. Each Party will have the option to terminate its participation
in the Development and Commercialization of one or more Collaboration Products
as set forth in this Section 4.1 (the Party exercising such right referred
to as the “Non-Developing Party”). A
Non-Developing Party may terminate its participation with respect to: (i) [****];
(ii) [****]; (iii) [****]; or (iv) [****], everywhere in the
world; provided, however, that (A) [****] and (B) [****].

 

(b)                                  Limitations.
The rights of each party to terminate its participation pursuant to this Section 4.1
shall be subject to the following limitations:

 

(i)                                    [****]
may not exercise its opt out rights described in this Section 4.1 with
respect to [****].

 

(ii)                                [****]
can opt out of Development or Commercialization except at one of the points
shown at Exhibit 4.1(b)(ii) with respect to the Existing Products and
at such other points as determined by the Parties with respect to other
Collaboration Products or as provided in Section 4.1(b)(iv). The Parties
agree that they will include such opt out points in the Development Plans for
other Collaboration Products at the time of preparation thereof.

 

(iii)                            If
a Party elects to opt out of an Indication for a Collaboration Product, it
shall automatically be deemed to have opted out of all other Indications for
which that Collaboration Product would be marketed to the same Physician Group
(collectively the “Opt Out Indications”)
and if a Party opts out of an oncology Indication it shall be deemed to have
opted out of all oncology Indications.

 

(iv)                               If
a Party elects to opt out of Commercialization, the election shall not be
effective until [****] after written notice of such election (or such earlier
date

 

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34

 

as specified in writing
by the Independent Development Party (as defined in Section 4.1(d) below))
and may not be made until [****] following the [****]. A party may not opt out
of Commercialization of a Collaboration Product if the opt out would result in
a higher profit to the Party electing to opt-out, based on a comparison of the
royalty payments and Collaboration Product Profit payments that such Party
would have received in the four full calendar quarters prior to the election.

 

(v)                                   Neither
Party can elect to opt out of Development or Commercialization with respect to
a Product if such Party has received notice pursuant to Section 16.2 that
it is in material breach of this Agreement with respect to such Product and it
has not cured such breach or resolved in its favor any dispute regarding
whether there was a breach or whether such breach was cured.

 

(c)                                  Timing.
Subject to the limitations in Section 4.1(b) a Party may exercise its
opt out right with respect to Development of a particular Collaboration Product
or an Opt Out Indication(s) of a particular Collaboration Product at the
decision points described in Section 4.1(b). The Non-Developing Party
shall provide written notice to the other Party of its decision to exercise
such right (the “Opt Out Notice”) during the time
period described in each opt out point.

 

(d)                                  Effects
of Exercise. Effective upon timely delivery of an Opt Out Notice, (i) the
Party that is not the Non-Developing Party will be deemed the “Independent Development Party” with respect to the
applicable Independent Product or Independent Indication, (ii) the
Non-Developing Party will be deemed the “Non-Developing Party”
with respect to the applicable Independent Product or Independent Indication
and responsibility shall be as set forth in Section 4.3, (iii) if
such exercise was made with respect to [****], such Collaboration Product will
become an Independent Product in [****], and (iv) if such exercise was
made with respect to [****]. In any event, the further Development of such [****]
by the Independent Development Party will be subject to the terms set forth in
Sections 4.2 and 4.3. For purposes of the following Section 4.2, [****] is
not [****] with respect to the [****].

 

4.2                               Development
of Independent Products and Independent Indications.

 

(a)                                  Generally.
For each Independent Product and Independent Indication, the Independent
Development Party will have the right, at its own option and expense, to plan
and conduct the Development of and to Commercialize such Independent Product or
Independent Indication, as the case may be, in accordance with the terms of
Sections 4.2, 4.3 and 4.5.

 

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(b)                                  Transition
of Development Activities. Upon a Party giving the Opt Out Notice with
respect to a Collaboration Product or one or more Indications of a
Collaboration Product, the applicable Development Plan or Commercialization
Plan, as the case may be, for such Collaboration Product or Indication, as the
case may be, shall automatically be amended to provide that the Parties shall
carry out and share the costs with respect to only those particular Development
or Commercialization activities under the applicable Development Plan or
Commercialization Plan, respectively, that have commenced on or before the date
of such Opt Out Notice. By way of example, an activity for purposes of this Section would
include a clinical trial that has commenced. Notwithstanding the foregoing, the
Non-Developing Party shall transfer responsibility for such ongoing activities
to the Independent Development Party as of the date of such Opt Out Notice or
as soon as reasonably practicable after such date.

 

4.3                               Rights
and Obligations Upon Opt-Out.

 

(a)                                  Prior
to the Opt-In Trigger. Prior to the date of the Opt-In Trigger,  the Independent Development Party shall be obligated to
Develop the Independent Indication, at its sole cost (subject to Section 4.2(b)),
and shall use Diligent Efforts in such development. The Independent Development
Party shall keep the JSC reasonably informed regarding matters that would
adversely affect Development or Commercialization of the Collaboration Product
in other Indications then being Developed or Commercialized by the Parties
jointly.

 

(b)                                  Following
the  Opt-In Trigger and As to Independent Products.
The Independent Development Party will assume unilateral control over the
Development and Commercialization of (i) an Independent Product after opt
out has occurred as to such Product, and (ii) as to an Independent
Indication from and after the date of the Opt-in Trigger if such option is not
exercised by the other Party, except that:

 

(1)                                 The
Independent Development Party shall give the JSC annual updates regarding the
status and results of any development and commercialization activities
conducted regarding an Independent Indication.

 

(2)                                 If
PDL is the Independent Development Party, then PDL shall use Diligent Efforts
to Develop and Commercialize  such
Independent Product or Independent Indication.

 

(3)                                 If
Biogen Idec is the Independent Development Party, then Biogen Idec shall use
Diligent Efforts to Develop and Commercialize such Independent Product or
Independent Indication.

 

(4)                                 If
[****] is the Independent Development Party and [****] PDL, at its option, may [****].

 

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(c)                                  Manufacturing.
If the Non-Developing Party as to a Product is responsible for Manufacturing
the applicable Collaboration Product pursuant to Article 8, then such
Non-Developing Party will continue to supply the Independent Development Party
with clinical and/or commercial supply of the applicable Collaboration Product
until such time as the Parties have effected a technology transfer of the
applicable Manufacturing process, at the Independent Development Party’s
request, and the Independent Development Party has validated such process in
its or its CMO’s designated facility and has all necessary regulatory approvals
to Manufacture and such Manufacture has commenced. The Non-Developing Party
shall use commercially reasonable efforts to effect a technology transfer of
the applicable Manufacturing process to the Independent Development Party or
its designated CMO as soon as practicable, but in no event more than [****]
after the Opt Out Notice is delivered The Non-Developing Party shall supply
such Product to the Independent Development Party during the [****] at a cost
of [****]  Between [****] and [****], the
Non-Developing Party shall supply such Product to the Independent Development
Party at a cost of [****]. Between [****] and [****], the Non-Developing Party
shall supply such Product to the Independent Development Party at a cost of [****].

 

(d)                                  Remaining
Program Obligations. The portion of the applicable Development Program with
respect to which the Non-Developing Party has not exercised its option to opt
out will continue unaffected by such opt out.

 

(e)                                  Data
Transfer. Commencing at the time of delivery of the Opt Out Notice, the
Non-Developing Party promptly shall provide, at the sole cost of the Non-Developing
Party, the Independent Development Party with copies of all data and
information, and samples of all tangible items, comprising Know-how and other
Technology of the Non-Developing Party relating to such Independent Product or
Independent Indication, as the case may be.

 

(f)                                    Assignment
of Regulatory Filings. The Non-Developing Party promptly shall, as
applicable, assign or make available by cross-reference to the Independent
Development Party, at the Non-Developing Party’s sole cost, all registrations
for such Independent Product (at the time of exercising its opt out rights) or
Independent Indication (an assignment shall only occur after the expiration of
the Non-Developing Party’s  right to opt
in; a cross reference right shall be available from the time of exercise of the
Non-Developing Party’s opt out rights until the expiration of such party’s opt
in rights or longer, as appropriate), as the case may be, and shall notify the
appropriate Regulatory Authorities and take any other action reasonably
necessary to effect such transfer of ownership or access to regulatory filings;
provided, however, that a Non-Developing Party shall not have any obligation to
assign to the Independent

 

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Development Party the
Drug Master File for any Independent Product if and for so long as the Non-Developing
Party is engaged in the Manufacture of such Independent Product on behalf of
the Independent Development Party or with respect to Indications or territories
for which such Non-Developing Party has retained rights.

 

(g)                                 Obligations
with Respect to Third Party Contracts. Each Party shall include provisions
in its contracts with Third Parties entered into after [****] and specifically
related to Development or Commercialization of a Collaboration Product or an
Indication of a Collaboration Product that would permit (i) [****] or (ii) [****].
Except as otherwise set forth in this Article 4, the Non-Developing Party
shall use Diligent Efforts to effect assignment (and full release of the
Non-Developing Party) or the granting of a sublicense or equivalent right of
access (and partial release of the Non-Developing Party) to the Independent
Development Party, whether through novation or sublicensing of such contracts
or otherwise, of any and all rights under any contract between the
Non-Developing Party and any Third Party that are necessary for Independent
Development Party to continue with Development or Commercialization of such
Collaboration Product or Indication, as the case may be, and the Independent
Development Party shall reasonably cooperate in connection therewith. If such
assignment, novation or sublicense is not permissible, the Parties shall
discuss in good faith potential alternatives that would enable the Independent
Development Party to exercise the rights and obligations of the Non-Developing
Party under such contracts with respect to such Independent Product while
minimizing the continuing obligations of the Non-Developing Party.

 

(h)                                 Technical
Assistance. During the period commencing with delivery of an Opt Out Notice
and ending [****] following the effective date of such Opt Out Notice, the
Non-Developing Party shall provide reasonable technical assistance as requested
by the Independent Development Party to effectuate an orderly transition of the
Development and Commercialization of such Independent Product or Independent
Indication, as the case may be, to the Independent Development Party. Such
assistance shall be at the expense of the Non-Developing Party until the
effective date of the Opt Out Notice and thereafter shall be at the expense of
the Independent Development Party.

 

(i)                                    Termination
of License Rights. Unless and until the Non-Developing Party decides to
Opt-in pursuant to the Opt In Trigger described herein, it shall have no
further rights under the licenses provided to it under Article 11 with
respect to such Independent Product or Independent Indication.

 

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(j)                                    Transfer of Trademarks. If the
Non-Developing Party owns the Product Trademarks (as defined in Section 12.13(a))
relating to the Independent Product (or Independent Indication, if there are
Product Trademarks that relate specifically to such Indication), ownership of
such Product Trademarks shall be transferred to the Independent Development
Party in the Territories as to which the opt out occurs.

 

4.4                               Rights
to Opt In to Independent Indication During Development.

 

(a)                                  General.
Subject to the terms of this Section 4.4, a Non-Developing Party will have
the option to opt-in to the independent development of an Independent
Indication on a one-time basis, exercisable by providing a notice in writing to
the Independent Development Party within (i) the [****] (the “Opt In Trigger”)  [****]
or (ii) the [****]. Within [****] of receipt of such written notice, the
Independent Development Party shall provide to the Non-Developing Party a
package of data and other information concerning the Independent Indication
reasonably necessary to permit the Non-Developing Party to make an informed
decision on its desire to opt in to Development and Commercialization in the
manner set forth in this Agreement (the “Data Package”).
Following receipt of the Data Package, the Non-Developing Party shall have [****]
within which to elect to opt-in. Any such election shall become effective upon
receipt by the Independent Development Party of a final written determination
by the Non-Developing Party stating its decision to opt-in. Failure to deliver
timely notice of an intent to opt-in shall be conclusively deemed to be a
waiver of such rights.

 

(b)                                  Limitations.
A Non-Developing Party shall not have the right to opt in to the Commercialization
of a Collaboration Product in the event that it delivers an Opt Out Notice for
such Product at any time following final regulatory approval for the marketing
of such Collaboration Product anywhere in the Territory.

 

(c)                                  Expense
Reimbursement. Upon exercise of an opt in right as described in this Section 4.4,
the Non-Developing Party shall reimburse the Independent Development Party for [****]
of that portion of the Development Expenses that would have been incurred by
the Non-Developing Party, had such Party not opted out, during the period in
which such Party had opted out.

 

(d)                                  Effects
of Opt In. Upon exercise of an opt in right and payment of all amounts due
under subsection (c) above, the Independent Indication shall cease
being an Independent Indication and will automatically return to the scope of
the Collaboration. Thereafter, the Parties shall continue Development and
Commercialization of such Indication jointly as described in this Agreement;
provided, that for the [****] following the exercise of an opt in right, the
Party that had been the

 

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39

 

Independent Development
Party shall be the Responsible Development Party, notwithstanding the
provisions of Section 3.2 and the Parties shall agree on the allocation of
responsibilities thereafter.

 

4.5                               Royalty
Products.

 

(a)                                  Effective
upon the exercise of a Party’s opt-out right with respect to a Collaboration
Product, either on a Product or Indication basis, the applicable Product will
be a Royalty Product. The Independent Development Party will pay the Opt-Out
Party the royalty payments described in Section 9.5 for such Royalty
Product.

 

(b)                                  With
respect to Collaboration Products developed by [****], [****] is the
Independent Development Party and [****] is the Non-Developing Party, such
Products are Royalty Products with respect to the [****] and the [****] is
within the Royalty Territory for such Products. [****] will pay to [****] the
royalty payments described in Section 9.5 for all such Royalty Products
Commercialized in the [****].

 

ARTICLE 5

REGULATORY

 

5.1                               Responsible
Regulatory Party. Subject to the roles of the various Committees described
in Article 2, the allocation of Responsible Regulatory Party for
Collaboration Products under this Agreement is as follows:

 

(a)                                  [****]
will be the Responsible Regulatory Party in the [****] and the [****] for all
Collaboration Products; and

 

(b)                                  [****]
will be the Responsible Regulatory Party in the [****] for all Collaboration
Products during the Development of such Collaboration Product. At the time of
receipt of first Regulatory Approval for the [****].

 

5.2                               Regulatory
Filings for Collaboration Products.

 

(a)                                  The
Responsible Regulatory Party identified in Section 5.1 above shall
primarily be responsible for preparing and filing all Regulatory Filings and
seeking all Regulatory Approvals in the relevant territory, including preparing
all reports necessary as part of a Drug Approval Application. All Regulatory
Filings for all Collaboration Products shall be filed in the name of the
Responsible Regulatory Party for a particular Territory. The Parties anticipate
that Regulatory Filings for the EU and North America Territories will be based
on a common set of technical documents. Such

 

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40

 

common set of technical
documents shall be prepared by the Responsible Development Party (or
collectively by both of the Responsible Development Parties where there are two
for a Collaboration Product). The Responsible Regulatory Party and the
Responsible Commercialization Party (to the extent they are different Parties)
shall jointly prepare all Regulatory Filings. All reasonable comments of the
Responsible Commercialization Party for an applicable Collaboration Product
shall be incorporated into such Regulatory Filing for any Collaboration Product.
The Responsible Regulatory Party shall, at all times, consult with the
Responsible Commercialization Party on all communications and other dealings
with the regulatory agencies relating to such Collaboration Product in the
applicable territory. However, the Manufacturing Party shall be solely
responsible for all communications and other dealings with the regulatory
agencies throughout the world pertaining to the Manufacture of such
Collaboration Products. The Responsible Regulatory Party and the Responsible
Commercialization Party shall jointly develop and implement procedures for
drafting and review of Regulatory Filings for the relevant Collaboration
Products in the applicable territory, which procedures shall provide for
sufficient time for the Responsible Commercialization Party to provide comments
to such Regulatory Filings. If the Parties are unable to resolve any disputes
related to such Regulatory Filings content or strategy, such disputes shall be
resolved as set forth in Article 2 hereof. In addition to the right to
cross-reference set forth in Section 3.9(c), the other Party shall have
the right of cross-reference to all such Regulatory Filings or Regulatory
Approvals obtained hereunder for purposes of Collaboration Products.

 

(b)                                  The
Responsible Regulatory Party shall promptly provide the other Party with a copy
(which may be wholly or partly in electronic form) of all Regulatory Filings
with respect to such Collaboration Products that it makes hereunder. The
Responsible Regulatory Party will provide the other Party with reasonable
advance notice of any meeting with any regulatory agency relating to
Development, Commercialization and/or any Drug Approval Application in the
relevant territory, and the other Party shall have the right to observe and, if
the Parties mutually agree in advance or if such Party is the Responsible
Commercialization Party, participate in any such meeting. The Responsible
Regulatory Party also shall promptly furnish the other Party with copies of all
material correspondence or minutes of material meetings with any regulatory
agency relating to Development, Regulatory Filings and/or a Drug Approval
Application in the relevant territory. As between the Parties, the Responsible
Regulatory Party shall be the initial legal and beneficial owner of all
Regulatory Filings and related approvals in the relevant territory for such
Collaboration Product. The Responsible Regulatory Party shall assign all
Regulatory Filings in the North American Territory to the Responsible
Commercialization Party promptly following filing of the NDA (or its foreign
equivalent). No such assignment shall take place in the ROW Territory.

 

(c)                                  The
Manufacturing Party shall provide the Responsible Commercialization Party (if a
different Party) with reasonable advance notice of any scheduled regulatory
inspection of the Manufacturing Party’s Manufacturing facilities for a Product.
The Manufacturing Party shall control all interactions with regulatory

 

41

 

authorities with respect
to such inspection. The  other Party if
applicable, shall have the right to be present, but not participate, during
such inspection.

 

5.3                               Safety
Data. [****] will ensure that [****] has complete access to any and all
safety data regarding the [****] or any [****] thereof. [****] will ensure that
[****] have complete access to any and all safety data regarding the [****] or
any [****]. If and to the extent that a single global safety database is
required for the [****],  [****] will be
the recognized holder of the global safety database for such Product, which
will be searched to provide answers to safety queries, for signal evaluation,
for the preparation of analyses of similar events and for the preparation of
periodic safety update reports.

 

5.4                               Adverse
Event Reporting. Each Party shall notify the other of all information
coming into its possession concerning any and all side effects, injury,
toxicity, pregnancy or sensitivity event associated with commercial or clinical
uses, studies, investigations or tests with any of the Collaboration Products
or Royalty Products, throughout the world, whether or not determined to be
attributable to such Products (“Adverse Event Reports”). 
The Parties shall each identify a person to coordinate the exchange of Adverse
Event Reports (“Report Coordinators”) so as to
enable timely reporting of such Adverse Event Reports to appropriate
governmental and regulatory authorities consistent with all laws, rules and
regulations. Within a reasonable time after  the Effective
Date, the Parties shall agree in writing on formal procedures for such exchange
in a separate pharmacovigilance agreement. Provided that [****] is under a
similar obligation under the [****] Agreements, the Parties agree to engage in
good faith negotiations regarding a three-party pharmacovigilance agreement. The
Parties acknowledge and agree that such procedures, as well as the Parties’
exchange of Adverse Event Reports in general, must not be in contravention with
the [****] Agreements relating to safety issues involving the [****] that is a
Collaboration Product, or a Royalty Product.

 

5.5                               Copies
of Responses. Within a reasonable time frame prior to submission of
responses to any regulatory authority on product safety issues regarding a
Collaboration Product, a copy of a near final draft response will be provided
to the other Party for review.  Final copies of responses submitted to any
regulatory authority will be provided to the other Party within [****] of
document finalization. [****] acknowledges that such responses may need to be
coordinated under the [****] Agreements with respect to the [****] and agrees
to use commercially reasonable efforts to facilitate such coordination.

 

5.6                               Regulatory
Actions. The Party responsible for interacting with regulators on a
specific safety issue regarding a Collaboration Product or Royalty Product shall
communicate material action requested by regulators to the other Party without
delay.

 

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42

 

Such actions may include,
for example, change in label, Dear Doctor letter, trial on hold for clinical
safety reasons and the like.

 

5.7                               Other
Safety Issues. Either Party may request that specific safety issues be
discussed, and the parties will establish a Safety Committee (the “SC”) consisting of an equal number of representatives from
each Party, for such purpose. The role of the SC shall be to advise each Party
concerning the collection and evaluation of safety data, and to respond to any
significant safety issues raised, or requests made, by regulatory authorities.

 

ARTICLE 6

COMMERCIALIZATION

 

6.1                               Overview.
Subject to the roles of the various Committees described in Article 2,
the allocation of primary responsibility for the creation of Commercialization
Plans and the implementation of Commercialization activities of Collaboration
Products described in such Commercialization Plans shall be given to the
Responsible Commercialization Party. The allocation of such responsibilities
with respect to the Existing Products shall be as follows: 

 

	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  North
  American Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  EU
  Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  ROW
  Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

(a)                                  Commercialization
Plans. All Commercialization of Collaboration Products shall be conducted
pursuant to a Collaboration Product specific, multi-year, global
commercialization plan and budget (in each case, a “Commercialization
Plan”), which shall set forth the anticipated activities (including
market studies, launch plans, Detailing and Promotion) and timelines, and shall
allocate responsibility for carrying out such activities between PDL and Biogen
Idec. Each Commercialization Plan shall include the plan for: (i) Detailing
and Promotion activities for the applicable Collaboration Product in the
applicable Indication for the next [****] (as to the initial Commercialization
Plan, the [****] following launch) and timelines for performing such activities,
(ii) target audience, (iii) anticipated expenses other than
personnel,

 

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43

 

(iv) assumptions
regarding product profile, (v) sales force size, and (vi) Promotional
efforts. Any Commercialization Plan, together with any updates thereto, shall
be prepared and approved as follows:

 

(i)                                    The
Responsible Commercialization Party with strategic guidance from the JSC shall
prepare the initial Commercialization Plan for a Collaboration Product and
submit such plan to the JCC for recommendation for approval and, following such
recommendation, to the JSC for its review and approval; provided that the JCC
must recommend and the JSC must approve the Commercialization Plan if it is
consistent with the then-current Strategic Plan and Approved Budget for that
year. The Parties agree and acknowledge that any such Commercialization Plan
will reasonably allocate between the Parties the performance of any
Post-Approval Clinical Trials for Collaboration Products in the North American
Territory, giving equal consideration to each Party’s abilities when making such
allocation.

 

(ii)                                The
Responsible Commercialization Party will, from time to time, prepare and submit
an update to each Commercialization Plan for its territory for a Collaboration
Product as necessary to reflect changes in the progress, strategy, or costs of
Commercialization of such Collaboration Product, but in no event more
frequently than quarterly.

 

(iii)                            the
Responsible Commercialization Party for a Collaboration Product will prepare
and submit an update to the applicable Commercialization Plan for its territory
on an annual basis thereafter until the Parties cease Commercializing the
applicable Collaboration Product.

 

(iv)                               the
Responsible Commercialization Party will lead the implementation of the
Commercialization Plan in accordance with the allocation of responsibilities
set forth therein.

 

Once approved by the JSC,
a Commercialization Plan shall become effective and supersede any previous
Commercialization Plan, if any, as of the date of such approval. Unless the
Parties otherwise agree, in the event that a Commercialization Plan is
inconsistent with or contradicts the terms of this Agreement, the terms of this
Agreement shall prevail.

 

(b)                                  Commercialization
Plans for Additional Collaboration Products. Promptly following the JSC’s
request for a Commercialization Plan for a particular Collaboration Product,
the Responsible Commercialization Party shall create an initial
Commercialization Plan for such Collaboration Product. Such Commercialization
Plan shall be approved as described in this Section 6.1.

 

6.2                               Commercialization
Reports. The Responsible Commercialization Party will keep the JCC fully
informed regarding the progress and results of its Commercialization activities
under this Agreement.

 

44

 

6.3                               Standards
of Conduct.

 

(a)                                  Each
Party shall perform, or shall ensure that its Affiliates and permitted
sublicensees and Third Party contractors perform, all Commercialization
activities assigned to it in a good scientific and ethical business manner and
in compliance with applicable laws, rules and regulations.

 

(b)                                  The
Parties shall use Diligent Efforts in Commercializing Collaboration Products.

 

(c)                                  Each
Party shall use Diligent Efforts to execute and carry out the activities
assigned to it in the Commercialization Plan within the associated annual
budget; provided that if a Party exceeds the associated annual budget by
greater than [****] without the prior approval of the JSC, any amount in excess
of such number shall not be considered expenses reimbursable hereunder and such
Party shall be solely responsible for payment of such excess.

 

6.4                               Sales
Force Training. The Responsible Commercialization Party shall develop and
conduct training programs for its sales representatives and for the other Party’s
sales representatives in the event such Party has exercised its Co-Promotion
Option hereunder, specifically relating to the Collaboration Products to be
Commercialized by such Party. Each Party agrees to utilize such training
programs on an ongoing basis to assure a consistent, focused promotional
strategy.

 

6.5                               Branding.
Each Product Commercialized under this Agreement shall be Commercialized
under and in connection with the trademarks and trade dress selected in
accordance with Section 12.13. To the extent that a Party is granted
rights under this Agreement to Commercialize a Product, it shall Commercialize
such Product solely under and in connection with the trademarks and trade dress
selected and approved pursuant to the terms of Section 12.13 (except for a
Party’s use of its house marks, which do not require such approval).

 

6.6                               Pricing.
[****].

 

6.7                               Booking
of Sales.

 

(a)                                  [****]
will be solely responsible for the invoicing and booking of sales of [****]
that are Collaboration Products in the [****] and the supply and distribution
of product in respect to such sales. [****] shall also be responsible for
handling inventory, receivables, managing relationships with the trade,
returns, reimbursements, and charge-backs, trade-customer complaints and
inquiries regarding [****] that are Collaboration Products in the [****].

 

(b)                                  The
JSC will jointly determine which Party will book sales in

 

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45

 

accordance with U.S.
GAAP, including handling inventory, receivables, managing relationships with
the trade, returns, reimbursements, and charge-backs, trade-customer complaints
and inquiries with respect to all other Collaboration Products.

 

(c)                                  For
clarity, each Party’s expenses in connection with the activities described in
this Section 6.7 will be included as Marketing Costs or Distribution
Costs, as appropriate.

 

6.8                               Special
Provisions Relating to Sales Tracking for [****].

 

(a)                                  The
Parties recognize that [****] marketed by [****] or its licensees for
indications in the [****] may nonetheless be sold in the [****], and [****]
marketed by [****] and [****] for indications in the [****] may nonetheless be
sold in the [****]  (collectively, “Cross-Field Sales”). In order to detect and limit these
Cross-Field Sales of such Collaboration Products, the Parties agree as follows:

 

(i)                                    If,
at any time following the receipt of Regulatory Approval in the [****] for an [****]
that is a Collaboration Product or Royalty Product (Collectively, “Collaborative Field Products”), a Party believes that either
(i) sales of such Collaborative Field Products are occurring or will occur
for uses both inside and outside the [****], or (ii) that sales by [****]
of a [****] licensed to it in the [****] by [****] (a “Non-Collaborative
Field Product”) are occurring in any Indication in which a
Collaboration Product or Royalty Product is marketed, then such Party may
provide notice to the other Party of its desire to track sales of the
Collaborative Field Products and the Non-Collaborative Field Products for the
relevant Indications in the relevant territory.

 

(ii)                                Upon
receipt of notice under Section 6.8(a)(i) [****] and [****] shall
meet and agree upon a method of tracking sales of each such product (“Sales Tracking Methodology”) for use in the relevant
Indications including (A) the acquisition of one or more prescription data
products or services (including, by way of example, IMS Xponent or DDD data) or
other relevant pharmaceutical sales tracking research services (including, for
example, use of random sampling, use of data regarding distribution channels as
a proxy for indication-specific sales and development of mathematical models
for approximating indication-specific sales) generally recognized in the
pharmaceutical industry as having a high degree of accuracy and reliability in
the tracking of sales of pharmaceutical products that have a similar nature as
and are prescribed by similar physicians as the relevant [****] in the [****]
and, if applicable, outside the [****] (the “Data Services”),
and (B) the methodology for applying any such resulting data and
information provided by such Data Services to determine the extent to which
sales of the relevant [****] are Cross-Field Sales in the relevant territory. At
the request of either Party, any meeting held under this Section 6.8(a) shall
include licensees of [****] to whom [****] has granted rights in the [****],
provided such licensee

 

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46

 

agrees to be bound to
confidentiality provisions similar to those contained in this Agreement.

 

(b)                                  If
[****] (as applicable) are unable to agree on a Sales Tracking Methodology
pursuant to Section 6.8(a), then the following default methodologies shall
apply:

 

(i)                                    With
respect to each of the U.S., United Kingdom, France, Germany, Italy, or Spain
(each a “Major Regulatory Jurisdiction”) in
which a Collaborative Field Product and a Non-Collaborative Field Product have
received Regulatory Approval and in which Data Services are available at a
reasonable cost (evaluated in light of the anticipated accuracy of such data
and anticipated magnitude of Cross-Field Sales in such country), sales in the
Field in such country and sales outside the Field in such country shall be
calculated for each Collaborative Field Product and each Non-Collaborative
Field Product based on the sales levels reported by the Data Services for such
country. For clarity, the sum of sales of a product in the Field and sales of
such product outside the Field (both as calculated for such country in
accordance with the preceding sentence) shall always be equal to the total
sales for such product in the relevant country.

 

(ii)                                With
respect to each country in which a Collaborative Field Product and a
Non-Collaborative Field Product have received Regulatory Approval and to which Section 6.8(b)(i) is
inapplicable, the percentage of sales of each Collaborative Field Product
attributable to use outside the Field and the percentage of sales of each
Non-Collaborative Field Product attributable to use in the Field shall be
calculated from total sales of such products based on the assumption that the
ratio of Cross-Field Sales to total sales in such country is equal to the ratio
of Cross-Field Sales to total sales calculated across all Major Regulatory
Jurisdictions in which Cross-Field Sales are evaluated pursuant to Section 6.8(b)(i).
If there are no Major Regulatory Jurisdictions in which Cross-Field Sales are
evaluated pursuant to Section 6.8(b)(i), then no Sales Tracking
Methodology shall apply unless and until the Parties agree on a Sales Tracking
Methodology pursuant to Section 6.8(a).

 

(c)                                  All
costs associated with the acquisition and application of such Data Services and
Sales Tracking Methodology shall be shared equally by the Parties and any
licensee of PDL participating in the negotiations contemplated by Section 6.8(a).
All such costs that are attributable to PDL and Biogen Idec shall be included
in the Operating Expenses for the applicable [****]. In addition, the Parties
shall also meet and confer with respect to: (A) how to account for
prescriptions to patients with multiple afflictions, both within and outside
the [****]; (B) the right for each Party to audit, on a periodic basis,
the application of the Data Services and Sales Tracking

 

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47

 

Methodology; and (C) a
mechanism for addressing prescriptions that are tracked back to sole source
purchasing agreements.

 

(d)                                  If
in the course of applying the foregoing Sales Tracking Methodology of the
Collaborative Field Product and Non-Collaborative Field Product pursuant to
this Section 6.8, or in the course of performing an audit of such
application by the other Party, a Party determines that Cross-Field Sales are
occurring at more than [****] or such [****] as may be agreed under the [****]
Agreements [****] (with written notice of such amount to be provided to [****]),
the Parties shall confer, together with the [****], regarding an appropriate
method either to curtail such Cross-Field Sales and to compensate any affected
Party (or affected [****]) for the economic effects thereof. [****] will ensure
that [****] is reimbursed for any such Cross-Field Sales as if such Cross-Field
Sales were included in Collaboration Product Profit. The Parties shall also negotiate
with each other and with such licensee in good faith (provided that such
licensee is bound by a substantially similar obligation) to reach an agreement
implementing a Sales Tracking Methodology that is as accurate as reasonably
possible given the then-available information and the costs associated
therewith.

 

(e)                                  In
the event of any unresolved issues, dispute or disagreement under this Section 6.8
the Parties will submit such dispute, issue or disagreement for resolution
pursuant to Article 17.

 

6.9                               Other
Cross Field Sales. If either Party is marketing a Product for an
Independent Indication and cross field sales may be occurring with the same
Product that is a Collaboration Product, the Parties shall meet and negotiate
in good faith provisions similar to or designed to have the same economic
effect as Section 6.8.

 

6.10                        Product
Recalls. Decisions with respect to recalls, withdrawals or other corrective
actions (“Recall”) with respect to any
Collaboration Product related to manufacturing or product quality issues shall
be handled in accordance with the Commercial Supply Agreement. Decisions with
respect to any other Recall  related to
any Collaboration Product in the Profit Sharing Territory or Royalty Product in
its applicable territory shall be made only upon mutual agreement of the
Parties; provided, however, that nothing herein shall prohibit either Party
from initiating or conducting any Recall (i) mandated by a regulatory
authority or applicable law, (ii) which in its reasonable judgment is, or
such Party reasonably believes will result in, a Class I or Class II
recall (under U.S. Food and Drug Administration regulations or its equivalent
outside of the U.S.) or (iii) if a Party is the Independent Development
Party in its sole discretion. The Parties shall cooperate with respect to any
actions taken or public statements made in connection with any such Recall.
Except as otherwise provided in this Section 6.10, the Parties will share
all costs of a Recall with respect to any Collaboration Product in the Profit
Sharing Territory as a Shared Promotion Expense.

 

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An Independent
Development Party shall bear all costs of a Recall with respect to any Royalty
Product in the Royalty Territory. Notwithstanding the foregoing, a Party shall
bear any and all costs of a recall, market withdrawal or other corrective
action with respect to a Collaboration Product in the Territory, including the
COGM for the Collaboration Product in question, to the extent the Recall is
attributable to the fault of such Party and results from (a) a grossly
negligent or reckless act or omission or intentional misconduct of such Party
(or its Affiliate, agent or sublicensee), (b) the failure of the
Manufacturing Party to perform its responsibilities and Manufacture the
Collaboration Product in compliance with specifications or with applicable
laws, including applicable Good Manufacturing Practices, or (c) a breach
of any laws or the terms of this Agreement.

 

6.11                        [****]. [****]
hereby covenants that it shall not, nor shall it cause any Affiliate or
sublicensee to, [****] that are Collaboration Products or Independent Products
for any use outside the [****]. Except as permitted pursuant to Section 3.8,
[****] hereby covenants that it shall only [****] in the [****] pursuant to the
[****] Agreements.

 

ARTICLE 7

CO-PROMOTION OF COLLABORATION PRODUCTS

 

7.1                               Option
to Co-Promote.

 

(a)                                  Subject
to this Section 7.1, PDL and Biogen Idec shall each have the right, to the
extent it is not the Responsible Commercialization Party (the “Co-Promotion Option”) to elect at specified times to
Commercialize a particular Indication of a Collaboration Product in either or
both of the North American Territory or the EU Territory jointly with the
Responsible Commercialization Party for such Collaboration Product.

 

(b)                                  [****]
may exercise its Co-Promotion Option in respect of a particular Territory only
if it has and only with respect [****] shall reasonably be expected to be in
place at the time of Co-Promotion. [****] may exercise its Co-Promotion Option
in respect of a particular Territory only with respect [****] which shall
reasonably be expected to be in place at the time of Co-Promotion.

 

(c)                                  A
Party may exercise its Co-Promotion Option with respect to a particular
Indication of a Collaboration Product in a particular territory by providing
written notice of such exercise to the Responsible Commercialization Party and
the JCC. Such exercise must be provided for a particular territory no later
than the date

 

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49

 

[****] prior to the
anticipated filing date for Regulatory Approval in such territory for such
Indication for the Collaboration Product and will be effective [****] following
receipt of such notice by the Responsible Commercialization Party. Thereafter,
the Party exercising the Co-Promotion Option shall be deemed a co-promoting
Party (the “Co-Promoting Party”) of such
Indication for such Collaboration Product in such territory.

 

(d)                                  If
a Co-Promotion Option is exercised, then responsibility for Detailing will be
shared on a basis to be determined by the JCC taking into account the resources
and capabilities of each Party as well as each Party’s prior efforts under
Co-Promotion Options previously exercised and the nature of the market and
Indication for which the Co-Promotion Option has been exercised. The Parties
agree and acknowledge that, in allocating such Detailing activities between the
Parties, the JCC shall apply the following principle in the event that both
Parties have resources and capabilities in respect of a specific sales force
(or neither Party has such resources and capabilities):  the JCC shall give first consideration to
using [****] and first consideration to using [****].

 

7.2                               Co-Promotion
Period. The “Co-Promotion Period” will commence
upon the Co-Promoting Party’s exercise of the Co-Promotion Option and will
expire upon the earlier of: (a) termination of the Parties’
Commercialization of the applicable Collaboration Product for the applicable
Indication in the relevant portion of the Profit Sharing Territory, and (b) [****]  following the date that the Co-Promoting Party provides
written notice to the Responsible Commercialization Party terminating the
Co-Promoting Party’s Co-Promotion activities hereunder (or such lesser period
of time as the Responsible Commercialization Party is able to satisfactorily
fill the sales force commitments previously filled by the Co-Promoting Party) .

 

7.3                               Co-Promotion
in Commercialization Plan. The Parties’ co-promotion activities for any
Collaboration Product in the relevant territory shall be governed by the
Commercialization Plan for such Collaboration Product prepared by the  Responsible Commercialization Party. Each
Commercialization Plan for a Co-Promote Product shall set forth the allocation
between the Parties of the co-promotion activities for the Collaboration
Product in the applicable territory determined pursuant to Section 7.1(d),
the sales and marketing strategy determined by the JSC and the means by which
to maximize the overall gross profit from sales of such Collaboration Product.

 

7.4                               Scope.
The Co-Promotion by the Co-Promoting Party of any Collaboration Products under
this Agreement shall be subject to the terms and conditions set forth in this Article 7.
For purposes of this Article 7, a Collaboration Product subject to
co-promotion under this Agreement shall be referred to as a “Co-Promote Product.”

 

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7.5                               Advertising
and Promotional Materials.

 

(a)                                  The
Responsible Commercialization Party shall be responsible for designing and
supplying all advertising and promotional materials for each Co-Promote Product.
The Responsible Commercialization Party shall provide samples of such
advertising and promotional materials to the JCC for its information.

 

(b)                                  Each
Party agrees that:

 

(i)                                    it
will instruct its sales representatives to use only promotional materials,
Co-Promote Product samples, and literature approved for use under this Section 7.5
for the Promotion of the Co-Promote Product; and

 

(ii)                                all
written, electronic and visual communications provided by a Party to its sales
representatives regarding the positioning, selling messages or product strategy
of the applicable Co-Promote Product will be subject to prior review and
approval by the Responsible Commercialization Party; provided, that a
communication, once approved, need not be re-submitted for approval again prior
to its re-use unless the Co-Promote Product labeling applicable to such
communication has been changed since such prior approval date.

 

7.6                               Training.

 

(a)                                  The
Responsible Commercialization Party will develop and implement training
programs for the Co-Promoting Party’s sales representatives as to matters
relating specifically to the Co-Promote Product in a manner as set forth in the
applicable Commercialization Plan. Training shall be carried out at a time that
is mutually acceptable to the Parties, and that is prior to but reasonably near
the commencement of the co-promoting Party’s co-promotion of the Co-Promote
Product. All costs associated with such product-specific training shall be
shared equally by the Parties, except that the Co-Promoting Party shall pay all
travel costs for its sales representatives to attend such training.

 

(b)                                  The
Responsible Commercialization Party shall provide continuing education
regarding each Co-Promote Product for sales representatives of the Co-Promoting
Party on substantially the same schedule as it provides continuing
education for its own sales representatives for such Co-Promote Product.

 

7.7                               Sales
and Distribution of Co-Promote Product.

 

(a)                                  For
each Co-Promote Product, other than [****], the Responsible Commercialization
Party shall be solely responsible for handling all returns, recalls,

 

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51

 

order processing,
invoicing and collection, distribution, and inventory and receivables. With
respect to [****], [****] shall solely be responsible for such activities.  The Co-Promoting Party may not accept orders for Co-Promote
Product or make sales for its own account or for the Responsible
Commercialization Party’s account. If the Co-Promoting Party receives any order
for a Co-Promote Product, it shall refer such orders to the Responsible
Commercialization Party for acceptance or rejection.

 

(b)                                  The
Responsible Commercialization Party shall have the right and responsibility for
establishing and modifying the terms and conditions with respect to the sale of
the Co-Promote Product, other than [****], including any terms and conditions
relating to or affecting the price at which the Co-Promote Product will be
sold, discounts available to managed care providers, any discount attributable
to payments on receivables, distribution of the Co-Promote Product, and
credits, price adjustments, or other discounts and allowances to be granted or
refused. With respect to [****], [****] shall solely be responsible for such
activities.

 

ARTICLE 8

 

MANUFACTURE AND SUPPLY

 

8.1                               Overview.
The Party primarily responsible for the Manufacturing Clinical Supplies or
Commercial Supplies of Collaboration Products (the “Manufacturing
Party”) will be determined by the JSC (except for the Existing
Products, with respect to which such responsibility is allocated by the table
below) and shall be subject to the terms of this Article 8 and any
Clinical Supply arrangement or Commercial Supply Agreement entered into by the
Parties after the Effective Date. Unless determined otherwise by the JSC, the
Manufacturing Party for the Existing Products will be as follows:

 

	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

8.2                               Clinical
Manufacturing.

 

(a)                                  Clinical
Supply. Each Manufacturing Party shall Manufacture a clinical supply of
bulk or finished Collaboration Products pursuant to a plan and on terms set by
the Manufacturing Party, as approved by the JSC (a “Supply Plan”).
Notwithstanding the aforementioned, [****] shall ensure a supply of [****]
necessary to complete dosing in the [****] as of the Effective Date, provided
that such supply shall be not less than [****].

 

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52

 

(b)                                  Supply
Plan. The Supply Plan shall be in accordance with the supply schedule dictated
by the applicable Development Plan for each Collaboration Product and shall set
forth, among other things, the quantities of and specifications for such
Collaboration Products to be supplied by the Manufacturing Party for
Development purposes and an approximate delivery schedule therefor.

 

(c)                                  Cost
of Clinical Supply. The Manufacturing Party will notify the JDC of the COGM
for such Collaboration Products under the applicable Development Program for quantities
of Collaboration Products supplied for clinical use.

 

8.3                               Commercial
Manufacturing.

 

(a)                                  Commercial
Supply Agreement. No later than [****] prior to the anticipated First
Commercial Sale of a Collaboration Product as specified in the Commercialization
Plan for such Collaboration Product, PDL and Biogen Idec shall negotiate in
good faith one or more definitive supply agreements (each, a “Commercial Supply Agreement”). Each such agreement will set
forth the specific terms and conditions governing the supply of bulk and/or
finished Collaboration Products by the Parties for commercial use. Any
Commercial Supply Agreement shall include terms substantially similar to those
set forth in Exhibit 8.3 as well as additional reasonable and customary
terms relating to commercial supply.

 

(b)                                  Cost
of Commercial Supply. Each  Commercial
Supply Agreement will provide for a transfer price from the Manufacturing Party
to the Collaboration based on the total quantity of finished Collaboration
Product ordered per calendar year (including material for Collaboration Product
samples) calculated as follows:  Transfer
Price = [****].

 

8.4                               Exclusivity.
Each Responsible Commercialization Party, its Affiliates and sublicensees,
shall purchase all of their respective requirements for the supply of
Collaboration Products from the Manufacturing Party, unless otherwise agreed in
writing by the Parties. The Manufacturing Party may not supply Collaboration
Product for use in any field to any party other than the Responsible
Commercialization Party, its Affiliates and sublicensees, except that [****]
may provide material manufactured by [****] to [****] to support [****].

 

8.5                               Good
Manufacturing Practice. Each Collaboration Product, regardless of the form
or formulation delivered by the Manufacturing Party, shall be Manufactured by
the Manufacturing Party in accordance with GMP and the specifications for such
Collaboration Product.

 

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ARTICLE 9

FINANCIAL TERMS

 

9.1                               Licensing
Fee. As partial payment for the rights and licenses granted by PDL pursuant
to this Agreement, Biogen Idec shall pay to PDL, within five (5) days
following the Effective Date, the following non-refundable and non-creditable
license fees with respect to each Collaboration Product, as follows:

 

(a)                                  With
respect to the [****], total license fees of twenty-five million dollars
($25,000,000); and

 

(b)                                  With
respect to the [****], total license fees of fifteen million dollars
($15,000,000).

 

9.2                               Milestone
Payments. Biogen Idec shall make the following non-creditable and
non-refundable milestone payments to PDL within [****] after the achievement by
Biogen Idec of each of the following milestones (or, in the event that any such
milestone is achieved by PDL, after PDL shall have given Biogen Idec sufficient
written documentation evidencing the achievement of such milestone). For the
avoidance of doubt, the milestone payments to be paid under this Section 9.2
shall be paid even following the delivery of an Opt Out Notice by PDL under Article 4
provided that Biogen Idec continues Development of the product. However, such
milestone payments shall not be paid following the delivery of an Opt Out
Notice by Biogen Idec under Article 4.

 

(a)                                  Milestone
Payments for [****] and [****] that are Collaboration Products or [****]. The
following milestone payments shall be paid by Biogen Idec to PDL upon the [****]
of each of the designated milestone events for any [****] that are
Collaboration Products or [****] for which [****]:

 

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54

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  [****]

  	
   

  	
  Milestone Payment

  [****]

  	
   

  	
  Milestone Payment

  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  n/a

  	
   

  	
  n/a

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

*  [****],
Biogen Idec shall pay an additional [****] to PDL.

 

For the avoidance of doubt, the foregoing milestone
payments will only be made a maximum of [****] per milestone event, regardless
of the number of Collaboration Products, applicable Independent Products or
Indications Developed.

 

(b)                                  Milestone
Payments for [****] that are Collaboration Products or Independent Products. The
following milestone payments shall be paid by Biogen Idec to PDL upon the [****]
occurrence of each of the designated milestone events: (i) for an [****]
that is an Antibody Product and a Collaboration Product or Independent Product,
and (ii) for an [****] that is a Non-Antibody Product and a Collaboration
Product or Independent Product. For clarity, each milestone below will be
payable a maximum of [****], [****] for a Product in category (i) and [****]
for a Product in category (ii), irrespective of the number of such [****] that
may trigger the milestone events.

 

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55

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  

 

9.3                               R&D
Funding. Biogen Idec shall make a [****] non-creditable, non-refundable
R&D funding payment to PDL within [****] after approval by the JSC of a [****]
to the JSC following the Effective Date.

 

9.4                               Profit
Sharing. PDL and Biogen Idec shall share equally in the Collaboration
Product Profit for each Collaboration Product as set forth Exhibit C. The
Parties shall share Collaboration Product Profit hereunder with respect to each
Collaboration Product in the Profit Sharing Territory until each such
Collaboration Product is permanently withdrawn from and is no longer being sold
anywhere in the Profit Sharing Territory or otherwise ceases to be a
Collaboration Product.

 

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56

 

9.5                               Royalties.

 

(a)                                  Royalties.

 

(i)                                    For
the term specified below, the Independent Development Party shall pay to the
Non-Developing Party incremental royalties on Net Sales of the relevant Royalty
Product in the Royalty Territory, at a royalty rate as determined in accordance
with the schedules set forth in Exhibit D, as applicable. The term of the
Independent Development Party’s obligation to pay a royalty under this Section 9.5(a)(i) for
a particular Royalty Product (collectively, the “Royalty Term”)
shall expire on a country-by-country and Royalty Product-by-Royalty Product
basis, upon the later of:

 

(1)                                 In
the event that Biogen Idec is the Independent Development Party for [****] that is an Antibody Product, (i) [****],
and (ii) [****];

 

(2)                                 In
the event that Biogen Idec is the Independent Development Party for any
Products other than an [****] that is
an Antibody Product (i) [****], and (ii) [****]; or

 

(3)                                 In
the event that PDL is the Independent Development Party, (i) [****], and (ii) [****].

 

(ii)                                For
purposes of calculating Net Sales under this Section 9.5, the Independent
Development Party may make the additional deductions described herein.

 

(1)                                 In
the event that pursuant to a Third Party License, the Independent Development
Party must pay such Third Party royalties on sales of the Royalty Product in a
particular country in the Royalty Territory, then the Independent Development
Party may deduct [****] of such royalties paid to such Third Party from Net
Sales of the applicable Royalty Product in such country.

 

(2)                                 Following
the expiration in a particular country in the Royalty Territory of the last to
expire Valid Claim of a relevant Patent Right claiming the Manufacture, use or
sale of a particular Royalty Product, the royalty rates set forth in Exhibit D
with respect to such Royalty Product will be decreased [****] until expiration
of the Royalty Term.

 

(3)                                 If,
during the Royalty Term, a Third Party receives regulatory approval for and
commences commercial sale of a Generic Product in a country of the Royalty
Territory, then the Independent Development Party shall have the right to
reduce any royalties due under Section 9.5(a)(i) on account of the
sale of such

 

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57

 

Royalty Products for such
Indication by [****] during such time as such Third Party continues sales of
such Generic Product in such country. As used in this Section, “Generic Product” means a Third Party product (a) [****];
and (b) [****]. Notwithstanding the foregoing, Generic Products do not
include Royalty Products sold by either Party’s sublicensees or distributors
pursuant to this Agreement. For the avoidance of doubt, the reduction in
royalties pursuant to Section 9.5(a)(ii)(3) for generic competition
or Section 9.5(a)(ii)(2) for patent expiration, shall not, in the
aggregate, [****].

 

(b)                                  Special
Provision Relating to ROW Territory. With respect to any definitive
sublicense agreement under which Biogen Idec grants a Third Party a license to
develop or commercialize one or more Royalty Products in the ROW Territory
which is entered into prior to the [****], Biogen Idec will pay to PDL [****]
of any Sublicensing Revenues received by Biogen Idec in connection with such
sublicense agreement(s). As used in this Section 9.5(b) ONLY, “Sublicensing Revenues” means any [****], but excluding: (1) [****];
and (2) [****].

 

(c)                                  Reporting
and Payment.

 

(i)                                    Until
the expiration of the Independent Development Party’s royalty obligations under
Section 9.5, the Independent Development Party agrees, within [****] after
the end of each Calendar Quarter, to make payments and written reports to the
Non-Developing Party based upon Net Sales of the Royalty Products (substituting
“Royalty Products” for “Collaboration Products” in the Net Sales definition) in
the relevant Field in the Royalty Territory by the Independent Development
Party, its Affiliates or sublicensees during such Calendar Quarter and provide
written reports to the Non-Developing Party detailing for the period in
question Net Sales by Product, royalty rate and royalty due.

 

(ii)                                The
information contained in each report under Section 9.5(c)(i) shall be
considered Confidential Information of the Independent Development Party. Concurrent
with the delivery of each quarterly report, the Independent Development Party
shall make the payment due the Non-Developing Party hereunder for the Calendar
Quarter covered by such report.

 

(iii)                            It
is understood that only one royalty payment under Section 9.5 shall be
payable on a given unit of Royalty Product disposed of under this Agreement. In
the case of transfers or sales of any Royalty Product between the Independent
Development Party and an Affiliate or sublicensee of the Independent
Development Party, such royalty shall be payable with respect to the sale of
such Royalty Product to (i) an independent Third Party not an Affiliate of
the seller or (ii) if the end user is an Affiliate of the seller, then
such end user.

 

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58

 

9.6                               Provisions
Regarding [****]. After the Effective Date, PDL will use Diligent Efforts
to renegotiate the terms of that certain License Agreement between [****] to
extend the diligence deadline for [****] (as defined in the [****]) to  [****]. If, as a result of such renegotiations, the royalty rate
payable by PDL on sales of licensed antibody products [****] (and provided the
calculation of such royalty remains subject to the same offset provisions as
included in the form of the [****] as of the Effective Date, then PDL may not
charge as Third Party License Fees hereunder any royalty amount paid under the [****]
in [****].

 

ARTICLE 10

PAYMENT TERMS

 

10.1                        Accounting.

 

(a)                                  Product
Sales Records. Each Party (a “Selling Party”)
agrees to keep complete and accurate records for a period of at least [****]
after the relevant payment is owed pursuant to this Agreement, setting forth
the sales and other disposition of Collaboration Products or Royalty Products
sold or otherwise disposed of pursuant to this Agreement in sufficient detail
to enable compensation payable to either Party hereunder to be determined. The
Selling Party further agrees to permit its books and records to be examined by
an independent accounting firm selected by the other Party to verify reports
provided for in Section 9.5. Unless the other Party obtains the prior
written consent of the Selling Party, such accounting firms must be selected
from among the four largest U.S. accounting firms. Such audit shall not be
performed more frequently that [****] nor more frequently than
once with respect to records covering any specific period of time. Such
examination is to be made at the expense of auditing Party, except in the event
that the results of the audit reveal a discrepancy in favor of the Selling
Party of [****] or more over the period being audited, in which
case reasonable audit fees for such examination shall be paid by the Selling
Party.

 

(b)                                  Expense
Records. Each Party (an “Expense Incurring Party”)
agrees to keep full, clear and accurate records for a period of at least [****]
after the relevant report is made pursuant to Section 9.5(c) setting
forth its incurred Development Expenses, Operating Expenses, Ongoing
Development Expenses, Other Out-of-Pocket Costs in sufficient detail to enable
compensation payable to the other Party (an “Expense
Reimbursing Party”) hereunder to be determined. Each Expense
Incurring Party further agrees to permit its books and records to be examined
by an independent accounting firm selected by the Expense Reimbursing Party to
verify reports made

 

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59

 

pursuant to Section 9.5(c).
Unless the Expense Reimbursing Party obtains the prior written consent of the
Expense Incurring Party, such accounting firms must be selected from among the
four largest U.S. accounting firms. Such audit shall not be performed more
frequently that [****]. Such examination is to be made at the expense of the
Expense Reimbursing Party, except in the event that the results of the audit
reveal a discrepancy in favor of the Expense Incurring Party of [****] or more
over the period being audited, in which case reasonable audit fees for such
examination shall be paid by the Expense Incurring Party.

 

10.2                        Methods of
Payments. All payments due to either PDL or Biogen Idec under this
Agreement shall be paid in Dollars by wire transfer to a bank in the U.S.
designated in writing by the Party to which the payment is due. Payments due on
Collaboration Products or Royalty Products distributed in countries or
jurisdictions outside of the U.S. shall be made in U.S. Dollars after being
converted at the rate of exchange for such country’s or jurisdiction’s currency
in U.S. Dollars as listed in the Wall Street Journal, Eastern Edition on the
last business day of the Calendar Quarter in which such sales were made.

 

10.3                        Taxes. If
provision is made in law or regulation of any country for withholding of taxes
of any type, levies or other charges with respect to the any amounts payable
hereunder to a Party, the other Party (a “Withholding Party”)
shall promptly pay such tax, levy or charge for and on behalf of the Party to
the proper governmental authority, and shall promptly furnish the Party with
receipt of such payment. The Withholding Party shall have the right to deduct
any such tax, levy or charge actually paid from payment due the Party or be
promptly reimbursed by the Party if no further payments are due the Party. Each
Withholding Party agrees to assist the other Party in claiming exemption from
such deductions or withholdings under double taxation or similar agreement or
treaty from time to time in force and in minimizing the amount required to be
so withheld or deducted.

 

ARTICLE 11

LICENSES

 

11.1                        Licenses
to Biogen Idec.

 

(a)                                  Subject
to the terms and conditions of this Agreement, PDL and its Affiliates hereby
grant to Biogen Idec:

 

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60

 

(i)                                    a
worldwide license, under the PDL Technology and Joint Inventions, to conduct
Development of the Collaboration Products in the applicable Field in accordance
with the Development Plans (which shall not include any Independent Indications
for such Products);

 

(ii)                                a
license, under the PDL Technology and Joint Inventions, to use, import, offer
for sale and sell Collaboration Products in the applicable Field and in the
North American Territory and EU Territory (i.e., the Profit Sharing Territory)
in accordance with the Commercialization Plans (which shall not include any
Independent Indications for such Products);

 

(iii)                            a
worldwide license, under the PDL Technology and Joint Inventions, to make and
have made Collaboration Products for which Biogen Idec is the Manufacturing
Party, provided that such manufacture is solely for use in the applicable
Field;

 

(iv)                               a
worldwide license, under the PDL Technology and Joint Inventions, to develop,
make, have made, use, have used, import, offer for sale and sell, in the
applicable Field, Independent Products for which Biogen Idec is the Independent
Development Party;

 

(v)                                   a
worldwide license, under the PDL Technology and Joint Inventions, to develop,
use, have used, import, offer for sale and sell, in the applicable Field and in
the Independent Indications, those Royalty Products for which Biogen Idec is
the Independent Development Party with respect to such Indications; and

 

(vi)                               a
license, under the PDL Technology and Joint Inventions, to use, have used,
import, offer for sale and sell, in the applicable Field and in the ROW
Territory (i.e., the Royalty Territory), Royalty Products.

 

(b)                                  The
licenses set forth in Sections 11.1(a)(i), (ii) and (iii) shall be
exclusive in the Field (except as to PDL) for all PDL Know-How, for all PDL
Patent Rights other than the Queen Patents, and with respect to PDL’s interest
in the Joint Inventions. The licenses set forth in Section 11.1(a)(iv)-(vi) shall
be exclusive (even as to PDL) for all PDL Know-How, for all PDL Patent Rights
other than the Queen Patents, and with respect to PDL’s interest in the Joint
Inventions. Subject to all of the restrictions of Section 11.1(a) and
this Section 11.1(b), all licenses set forth in Section 11.1(a) are
non-exclusive with respect to the Queen Patents.

 

(c)                                  The
licenses set forth in Section 11.1(a) may only be sublicensed to
Biogen Idec Affiliates and permitted Third Parties.

 

11.2                        Licenses
to PDL.

 

(a)                                  Subject
to the terms and conditions of this Agreement, Biogen Idec and its Affiliates
hereby grant to PDL:

 

(i)                                    a
worldwide license, under the Biogen Idec Technology and

 

61

 

Joint Inventions, to
conduct Development of the Collaboration Products in the applicable Field in
accordance with the Development Plans (which shall not include any Independent
Indications for such Products);

 

(ii)                                a
license, under the Biogen Idec Technology and Joint Inventions, to use, import,
offer for sale and sell Collaboration Products in the applicable Field and in
the North American Territory and EU Territory 
in accordance with the Commercialization Plans (which shall not include
any Independent Indications for such Products);

 

(iii)                            a
worldwide license, under the Biogen Idec Technology and Joint Inventions, to
make and have made Collaboration Products for which PDL is the Manufacturing
Party, provided that such manufacture is solely for use in the applicable
Field;

 

(iv)                               a
worldwide license, under the Biogen Idec Technology and Joint Inventions, to
develop, make, have made, use, have used, import, offer for sale and sell, in
the applicable Field, Independent Products for which PDL is the Independent
Development Party;

 

(v)                                   a
worldwide license, under the Biogen Idec Technology and Joint Inventions, to
develop, use, have used, import, offer for sale and sell, in the applicable
Field and in the Independent Indications, those Collaboration Products for
which PDL is the Independent Development Party with respect to such Indications;
and

 

(vi)                               a
license, under the Biogen Idec Technology and Joint Inventions, to use, have
used, import, offer for sale and sell, in the applicable Field and in the ROW
Territory  Royalty Products, if the right
to Develop and Commercialize any Royalty Product in the ROW Territory revert to
PDL.

 

(b)                                  The
licenses set forth in Sections 11.2(a)(i), (ii) and (iii) shall be
exclusive in the Field (except as to Biogen Idec) for all Biogen Idec
Technology and with respect to Biogen Idec’s interest in the Joint Inventions. The
licenses set forth in Section 11.2(a)(iv)-(vi) shall be exclusive
(even as to Biogen Idec) for all Biogen Idec Technology and with respect to
Biogen Idec’s interest in the Joint Inventions.

 

(c)                                  The
licenses set forth in Section 11.2(b) may only be sublicensed to PDL
Affiliates and permitted Third Parties.

 

11.3                        No Implied
Licenses. Except as expressly provided in this Agreement, neither Party
grants to the other Party any right or license in any intellectual property
right, whether by implication, estoppel or otherwise. No implied licenses are
granted under this Agreement. Each Party hereby covenants and agrees not to use
or

 

62

 

sublicense any of its
rights under the licenses set forth in this Article 11 except as expressly
permitted in this Agreement. In particular, for the avoidance of doubt, PDL has
no right to, and is not hereby granting any license to, [****].

 

11.4                        Affiliates.
The licenses granted pursuant to this Article 11 include the right of
each licensee to use its Affiliates in exercising such rights and carrying out
its obligations under this Agreement; provided that in the event any such
Affiliate ceases to meet the definition of an Affiliate (whether due to the
transfer or sale of all or substantially all of the assets or stock of such
Affiliate or otherwise) then such right with respect to such Affiliate shall
terminate

 

11.5                        Third
Party Licenses.

 

(a)                                  Certain
license rights granted by one Party to the other Party under this Article 11
may include a sublicense of Patent Rights and/or Know-How of Third Parties
under Third Party Licenses. Notwithstanding anything to the contrary in this
Agreement, the licenses granted under the provisions of this Article 11 (i) are
subject to the applicable terms and conditions of such Third Party Licenses,
and (ii) the Party receiving a sublicense under such Third Party License
shall, in exercising such sublicense rights, comply with the applicable
provisions of such Third Party Licenses. The Parties agree and acknowledge that
the licenses granted to Biogen Idec under this Article 11 shall be subject
to the following Third Party License provisions (as such Third Party Licenses
and specific provisions may be amended from time to time upon notice to and consent
of the JPC) and such provisions shall supersede anything to the contrary
contained in this Agreement:  (i) [****];
(ii) [****]; (iii) [****]; (iv)  [****]; (v) [****];  (vi) [****]; (vii) [****]; (viii) [****];
and (ix) [****]. The Parties agree and acknowledge that the provisions of [****]
are incorporated by reference herein solely for the benefit of [****]. The
Parties agree and acknowledge that a copy of Paragraphs [****] is attached
hereto as Exhibit 11.5 and shall be binding on Biogen Idec as if it were a
party to the [****].

 

(b)                                  PDL
represents and warrants to Biogen Idec that, as of the Effective Date, (i) [****];
(ii) [****]; (iii) [****]. [****].

 

(c)                                  With
respect to each Third Party License to which a Party is a party, such Party (i) shall
use Diligent Efforts to maintain such Third Party License in full force and
effect, including without limitation seeking amendments or modifications of
such agreements if necessary or useful as agreed by the Parties to continue
Development or Commercialization of a Product, (ii) shall not amend,
modify or permit to be amended or modified such Third Party License to reduce
or impair the right sublicensed hereunder or to increase the obligations or
burdens on the other Party hereunder without the other Party’s consent, not to
be unreasonably withheld, except as

 

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63

 

to the [****] as
specifically provided herein, (iii) shall provide the other Party with a
copy of each notice received by such Party under such Third Party License
Agreement material to the rights granted to the other Party under this
Agreement and derivative of rights granted under such Third Party License
Agreement, and (iv) shall use Diligent Efforts to cause such Third Party
License, as to rights licensed hereunder, to convert to a direct license to the
other Party hereunder upon the termination of such Third Party License
(provided that the other Party agrees to be bound by the terms and conditions
of such Third Party License) and subject to the terms of such Third Party
Licenses, including the following provisions (as such Third Party Licenses and
specific provisions may be amended from time to time upon notice to and consent
of the JPC):  (a)  [****]; (b) [****];
(c) [****]; (d) [****]; and (e) [****].

 

ARTICLE 12

INTELLECTUAL PROPERTY OWNERSHIP AND PATENT RIGHTS

 

12.1                        Ownership
of Intellectual Property.

 

(a)                                  Generally.
[****].

 

(b)                                  Joint
Ownership. All Joint Inventions will be owned jointly by PDL and Biogen
Idec.

 

(c)                                  Inventorship
Procedure. The JPC shall, within a reasonable time after the Effective
Date, establish and oversee a mutually agreeable procedure for (i) identifying
Collaboration Inventions, and (ii) determining inventorship of Inventions
made by a Party in connection with the Collaboration, provided that such
determination shall be made in accordance with the applicable patent laws
relating to inventorship in the country where each patent application is to be
filed in instances where U.S. law regarding determinations of inventorship may
be at variance with the laws of the said country. All such determinations shall
be documented to ensure that any divisional or continuation patent application
reflect appropriate inventorship and that inventions and patent rights are
assigned to the appropriate assignee.

 

12.2                        Disclosure
of Patentable Inventions. Each Party shall provide to the other Party any
invention disclosure submitted in the normal course of its business which
discloses a Collaboration Invention within [****] after the Party determines
that an Invention has been made.

 

12.3                        Patent Due
Diligence. Each Party agrees to use good faith efforts to bring to the
attention of the JPC in a timely manner any Third Party Patent Right it

 

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discovers, or has
discovered, and which the disclosing Party reasonably believes relates to, the
Development or Commercialization of a Collaboration Product.

 

12.4                        Prosecution
of Patents

 

(a)                                  PDL
Patent Rights

 

(i)                                    PDL
Target Patent Rights. Decisions regarding the preparation, filing,
prosecution and maintenance of PDL Target Patent Rights shall be made by the
JPC. PDL shall be responsible, using in-house counsel or outside patent counsel
selected by PDL and reasonably acceptable to Biogen Idec to implement the
decisions of the JPC regarding the preparation, filing, prosecution and
maintenance of such PDL Target Patent Rights. PDL shall provide the JPC with a
copy of each patent application within such PDL Target Patent Rights as filed,
together with its filing date and serial number. PDL shall keep the JPC advised
of the status of all communications, actual and prospective filings or
submissions regarding the PDL Target Patent Rights, and shall give the JPC an
opportunity to review and comment on any such communications, filings and
submissions proposed to be sent to any patent office. PDL shall consult with,
and obtain the approval of, the JPC before deciding that it is no longer
interested in maintaining or prosecuting the PDL Target Patent Rights
contemplated by Section 12.10, provided, however, that if the JPC cannot
reach agreement as to whether or not to maintain or prosecute such PDL Target
Patent Rights, then PDL shall continue to maintain and prosecute such PDL
Target Patent Rights. [****].

 

(ii)                                Queen
Patents.             Decisions regarding the
preparation, filing, prosecution and maintenance of the Queen Patents shall be
made solely by PDL. Notwithstanding the foregoing, [****]. PDL shall
provide the JPC with a copy of each patent application within the Queen Patents
that contains claims
that specifically relate to a Collaboration Target or Collaboration Product,
as filed, together with its filing date and serial number. PDL shall keep the
JPC advised of the status of all communications, actual and prospective filings
or submissions regarding the [****] and shall give the JPC an opportunity to
review and comment on any such communications, filings and submissions proposed
to be sent to any patent office. Subject to Section 12.12, PDL shall
consult with, and obtain the approval of, the JPC before deciding that [****] or Collaboration Product,
provided, however, that if the JPC cannot reach agreement as to whether or not [****].

 

(iii)                            Other
PDL Patent Rights. Decisions regarding the preparation, filing, prosecution
and maintenance of the PDL Patent Rights, to the extent not addressed in Section 12.4(a)(i) or
Section 12.4(a)(ii), shall be made solely by PDL.

 

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(b)                                  Biogen
Idec Patent Rights.

 

(i)                                    Biogen
Idec Target Patent Rights. Decisions regarding the preparation, filing,
prosecution and maintenance of Biogen Idec Target Patent Rights shall be made
by the JPC. Biogen Idec shall be responsible, using in-house counsel or outside
patent counsel  selected by Biogen Idec
and reasonably acceptable to PDL, to implement the decisions of the JPC
regarding the preparation, filing, prosecution and maintenance of such Biogen
Idec Target Patent Rights. Biogen Idec shall provide the JPC with a copy of
each patent application within such Biogen Idec Target Patent Rights as filed,
together with its filing date and serial number. Biogen Idec shall keep the JPC
advised of the status of all communications, actual and prospective filings or
submissions regarding the Biogen Idec Target Patent Rights, and shall give the
JPC an opportunity to review and comment on any such communications, filings
and submissions proposed to be sent to any patent office. [****].

 

(ii)                                Other
Biogen Idec Patent Rights. Decisions regarding the preparation, filing,
prosecution and maintenance of Biogen Idec Patent Rights that are not Biogen
Idec Target Patent Rights shall be made solely by Biogen Idec.

 

(c)                                  Prosecution
of Joint Inventions.

 

(i)                                    Decisions
regarding the preparation, filing and prosecution and maintenance of Joint
Patents shall be made by the JPC. Upon the identification of a Joint Invention,
the JPC shall (1) promptly discuss such Joint Invention, (2) promptly
discuss the desirability of filing a United States patent application covering
such Joint Invention, as well as foreign counterparts, and (3) designate
the Party (the “Implementing Party”) to be responsible for the preparation,
filing, prosecution and maintenance of such Joint Patent Rights. The
Implementing Party shall be responsible, using in-house or outside counsel
reasonably selected by the JPC to implement the decisions of the JPC regarding
the preparation, filing, prosecution and maintenance of such Joint Patent
Rights.   The Implementing Party
shall provide the JPC an opportunity to review and comment upon the text of the
applications relating to such Joint Patent Rights before filing. The
Implementing Party shall provide the JPC with a copy of each patent application
within such Joint Patent Rights as filed, together with notice of its filing
dates and serial number. The Implementing Party shall keep the JPC advised of
the status of all communications, actual and prospective filings or submissions
regarding such Joint Patent Rights, shall provide the JPC an opportunity to
review and comment on such communications, filings and submissions proposed to
be sent to any patent office. The Implementing Party shall also notify the JPC
of the grant of any such Joint Patent Rights. The Implementing Party shall not
cease the prosecution and/or

 

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maintenance, or modify
the claims, of any such Joint Patent Rights in any country or elect not to file
a patent application within such Joint Patent Rights, unless approved by the
JPC (which approval shall not be unreasonably withheld).

 

(d)                                  Patent
Term Extensions. PDL shall be responsible to implement the decisions of the
JPC regarding patent term extensions, including supplementary protection
certificates and any other extensions that are now or become available in the
future, wherever applicable to PDL Target Patent Rights or Queen Patents that
contain claims that
specifically relate to a Collaboration Target or a Collaboration Product,
in each case to the extent claiming a Collaboration Product. Biogen Idec shall
be responsible to implement the decisions of the JPC regarding patent term
extensions, including supplementary protection certificates and any other
extensions that are now or become available in the future, wherever applicable
to such Biogen Idec Target Patent Rights to the extent claiming a Collaboration
Product. The Implementing Party shall be responsible to implement the decisions
of the JPC regarding patent term extensions, including, without limitation,
supplementary protection certificates and any other extensions that are now or
become available in the future, wherever applicable to Joint Patent Rights to
the extent claiming such Royalty Product. Each Party shall reasonably
cooperate, as requested by the other Party, to implement such decisions of the
JPC. In each instance of patent term extension contemplated by this section,
the Parties agree to take all actions necessary to comply with the then-current
laws and regulations relating to patent term extensions.

 

12.5                        Patent
Interferences/Oppositions

 

(a)                                  Interferences/Oppositions Between the Parties.
If an interference is declared by the U.S. Patent and Trademark
Office, or its foreign equivalent, or an opposition exists between one or more
PDL Target Patent Rights, Biogen Idec Target Patent Rights or Joint Patent
Rights and such declared interference or opposition involves any claims
specifically directed to a Collaboration Product, then the Parties shall in
good faith establish a mutually agreeable process to resolve such interference
or oppositions in a reasonable manner in conformance with all applicable legal
standards, but which prejudices neither Party nor diminishes the value of such
PDL Target Patent Rights, Biogen Idec Target Patent Rights, or Joint Patent
Rights at issue.

 

(b)                                  Oppositions/Interferences
With Third Parties.

 

(i)                                    PDL
Target Patent Rights. Other than as set forth in Section 12.5(a), all
decisions relating to interferences or oppositions lodged against PDL Target
Patent Rights, including whether to initiate such interferences, appropriate
settlement strategy, along with other strategic decisions relating to the PDL
Target Patent Rights, shall be made by PDL, subject to the advice and counsel
of the JPC. Subject to the provisions of this subsection (i), PDL shall
control the conduct of any such interference or opposition. Biogen Idec shall
reasonably cooperate, as requested by PDL, with respect to such opposition or
interference. PDL shall keep the JPC informed of the progress of any opposition
or interference action or proceeding relating to the PDL Target Patent Rights.
PDL shall keep the JPC advised of all communications, actual and prospective
filings or submissions regarding such PDL 

 

67

 

Target Patent Rights, and
shall provide the JPC an opportunity to review and comment on any such
communications, filing and submissions. Notwithstanding the foregoing, [****].

 

(ii)                                Queen
Patents.             All decisions
relating to interferences or oppositions lodged against the Queen Patents,
including whether to initiate such interferences, appropriate settlement
strategy, along with other strategic decisions relating to the Queen Patents,
shall be made solely by PDL. Notwithstanding [****]. Subject to the provisions
of this subsection (ii), PDL shall control the conduct of any such
interference or opposition. Biogen Idec shall reasonably cooperate, as
requested by PDL, with respect to such opposition or interference. PDL shall
keep the JPC informed of the progress of any opposition or interference action
or proceeding relating to such Queen Patents that contain claims that specifically
relate to a Collaboration Target or a Collaboration Product. PDL shall keep the
JPC advised of all communications, actual and prospective filings or
submissions regarding such claims in such Queen Patents, and shall provide the
JPC an opportunity to review and comment on any such communications, filing and
submissions. Notwithstanding the foregoing, [****].

 

(iii)                            Other
PDL Patent Rights. Decisions relating to interferences or oppositions
lodged against Queen Patents or PDL Patent Rights, including whether to
initiate such interferences, appropriate settlement strategy, and other
strategic decisions relating to the Queen Patents or PDL Patent Rights, to the
extent not addressed in Section 12.5(b)(i) or Section 12.5(b)(ii),
shall be made by PDL.

 

(iv)                               Biogen
Idec Target Patent Rights. Other than as set forth in Section 12.5(a),
all decisions relating to interferences or oppositions lodged against Biogen
Idec Target Patent Rights, including whether to initiate such interferences,
appropriate settlement strategy, along with other strategic decisions relating
to the Biogen Idec Target Patent Rights, shall be made by Biogen Idec, subject
to the advice and counsel of the JPC. Subject to the provisions of this subsection (i),
Biogen Idec shall control the conduct of any such interference or opposition. PDL
shall reasonably cooperate, as requested by Biogen Idec, with respect to such
opposition or interference. Biogen Idec shall keep the JPC informed of the
progress of any opposition or interference action or proceeding relating to the
Biogen Idec Target Patent Rights. Biogen Idec shall keep the JPC advised of all
communications, actual and prospective filings or submissions regarding such
Biogen Idec Target  Patent Rights,
and shall provide the JPC an opportunity to review and comment on any such
communications, filings and submissions. Notwithstanding the foregoing, [****].

 

(v)                                   Other
Biogen Idec Patent Rights. Other than as set forth in Section 12.5(a) and
Section 12.5(b)(iv), all decisions relating to interferences or

 

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oppositions lodged
against Biogen Idec Patent Rights that are not Biogen Idec Target Patent
Rights, including, without limitation, whether to initiate such interferences,
appropriate settlement strategy, along with other strategic decisions relating
to such Biogen Idec Patent Rights, shall be made by Biogen Idec.

 

(vi)                               Joint
Patent Rights and Third Party Patent Rights. Other than as set forth in Section 12.5(a),
all decisions relating to interferences or oppositions lodged against Joint
Patent Rights, including, without limitation, whether to initiate such
interferences, whether to file oppositions against Third Party Patent Rights
relevant to a Collaboration Product, appropriate settlement strategy, along
with other strategic decisions relating thereto, with respect to the Joint
Patent Rights and Third Party Patent Rights shall be made by the JPC. Upon the
identification of a potential opposition or interference directly involving the
Joint Patent Rights or to the extent such opposition or interference is
specifically directed to a Collaboration Product or Third Party Patent Rights
(each, an “Adversarial Prosecution Action”), the JPC shall (i) promptly
discuss such Adversarial Prosecution Action, including the strategy for
conducting such Adversarial Prosecution Action, and (ii) designate the a
Party (the “Controlling Party”) to be responsible for controlling such
Adversarial Prosecution Action, and determine a reasonable allocation between
the Parties of the cost of such Adversarial Prosecution Action. The Controlling
Party shall be responsible, using outside counsel reasonably selected by the
Controlling Party, to implement the decisions of the JPC regarding such
Adversarial Prosecution Action. The Party that is not the Controlling Party
shall reasonably cooperate, as requested by the Controlling Party, in such
Adversarial Prosecution Action. The Controlling Party shall keep the JPC
informed of the progress of any such Adversarial Prosecution Action. The
Controlling Party shall keep the JPC advised of all communications, actual and
prospective filings or submissions regarding such Adversarial Prosecution
Action, and shall provide the JPC an opportunity to review and comment on any
such communications, filings and submissions. The Controlling Party shall not
settle or consent to an adverse judgment in any such Adversarial Prosecution
Action with respect to the Joint Patent Rights or Third Party Patent Rights,
unless approved by the JPC (which approval shall not be unreasonably withheld).

 

12.6                        Initial
Filings if Made Outside of the United States.  The Parties agree to
use reasonable efforts to ensure that any Patent Right within the PDL Target
Patent Rights, Biogen Idec Target Patent Rights or Joint Patent Rights that is
filed outside of the United States prior to a United States filing will be in a
form sufficient to establish the date of original filing as a priority date for
the purposes of a subsequent United States filing.

 

12.7                        Enforcement of Patent Rights.

 

(a)                                  Notification.
If either Party learns of any substantial and continuing infringement of PDL
Target Patent Rights, Biogen Idec Target Patent Rights or Joint Patent Rights
by a Third Party making, using, offering for sale, selling or importing a
product in or outside of the applicable Field, such Party shall promptly notify
the other Party and shall provide such other Party with available evidence of
such infringement.

 

69

 

(b)                                  Enforcement
of Patent Rights.

 

(i)                                    PDL
Target Patent Rights. Subject to the further provisions of this subsection (b),
decisions regarding the enforcement of PDL Target Patent Rights in an action
against an infringement by a Third Party of claims licensed to Biogen Idec
under Section 11.1, including the defense of a declaratory judgment action
with respect to such potential infringement (each, an “Enforcement
Action”) shall be made by PDL. PDL shall have the first right to
implement at its sole expense any Enforcement Actions relating to the PDL
Target Patent Rights. Biogen Idec shall reasonably cooperate, as requested by
PDL, with respect to such Enforcement Action. PDL shall keep the JPC informed
of the progress of any action or proceeding to enforce the PDL Target Patent
Rights. PDL shall keep the JPC advised of all communications, actual and prospective
filings or submissions regarding such PDL Target Patent Rights, and shall
provide the JPC an opportunity to review and comment on any such
communications, filing and submissions. PDL shall not settle or consent to an
adverse judgment in any action or proceeding to enforce such PDL Target Patent
Rights that admits the invalidity or unenforceability of such PDL Target Patent
Rights unless approved by the Joint Steering Committee (which approval shall
not be unreasonably withheld). If PDL fails to institute such a suit or take
such action within [****] after a request by Biogen Idec to do so, then Biogen
Idec shall have the right at its sole discretion to bring and control such
Enforcement Action in the name of either or both Parties, subject to Section 12.10.
Such prosecution or defense shall be at Biogen Idec’s sole expense unless PDL
opts, at its discretion, to reimburse Biogen Idec for a portion ([****]) of all
costs or expenses incurred by Biogen Idec with respect to such prosecution or
defense.

 

(ii)                                Queen
Patents.             Decisions regarding
Enforcement Actions with respect to Queen Patents shall be made solely by PDL. [****]
shall be carried out in accordance with subsection (i) above and Section 12.10.
For clarity, an Enforcement Action that involves [****] and carried out in
accordance subsection (i), Section 12.9, and Section 12.12.

 

(iii)                            Additional
PDL Patent Right Enforcement. Decisions regarding Enforcement Actions as
well as actions for infringement outside the applicable Field and declaratory
judgment suits regarding potential infringement outside the applicable Field,
with respect to PDL Patent Rights and Queen Patents, to the extent and so long
as such Enforcement Actions are not addressed in 12.7(b)(i) or (b)(ii),
shall be made by PDL. PDL shall have the right, using outside counsel selected
by PDL, to bring and control such Enforcement Actions at its sole expense. Biogen
Idec shall reasonably cooperate, as requested by PDL, with respect to such
Enforcement Action. PDL shall keep the Joint Patent Committee informed of the
progress of any such Enforcement Action with respect to the PDL Patent Rights
that are not PDL Target 

 

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Patent Rights or Queen Patents. Notwithstanding the terms of Section 12.7(b)(vii),
[****].

 

(iv)                               Biogen
Idec Target Patent Rights. Subject to the further provisions of this subsection (b),
decisions regarding the enforcement of Biogen Idec Target Patent Rights in an
action against an infringement by a Third Party, including the defense of a
declaratory judgment action with respect to such potential infringement shall
be made by Biogen Idec. Biogen Idec shall have the first right to implement at
its sole expense any Enforcement Actions relating to the Biogen Idec Target
Patent Rights. PDL shall reasonably cooperate, as requested by Biogen Idec,
with respect to such Enforcement Action. Biogen Idec shall keep the JPC
informed of the progress of any action or proceeding to enforce the Biogen Idec
Target Patent Rights. Biogen Idec shall keep the JPC advised of all
communications, actual and prospective filings or submissions regarding such
Biogen Idec Target Patent Rights, and shall provide the JPC an opportunity to
review and comment on any such communications, filing and submissions. Biogen
Idec shall not settle or consent to an adverse judgment in any action or proceeding
to enforce such Biogen Idec Target Patent Rights that admits the invalidity or
unenforceability of such Biogen Idec Target Patent Rights unless approved by
the Joint Steering Committee (which approval shall not be unreasonably
withheld). If Biogen Idec fails to institute such a suit or take such action
within [****] after a request by PDL to do so, then PDL shall have the right at
its sole discretion to bring and control such Enforcement Action in the name of
either or both Parties, except to the extent that such prosecution or defense
would conflict with rights granted by Biogen Idec to a Third Party. Such
prosecution or defense shall be at PDL’s sole expense unless Biogen Idec opts,
at its discretion, to reimburse PDL for a portion ([****]) of all costs or
expenses incurred by Biogen Idec with respect to such prosecution or defense.

 

(v)                                   Additional
Biogen Idec Patent Right Enforcement. Decisions regarding Enforcement
Actions with respect to Biogen Idec Patent Rights that are not Biogen Idec
Target Patent Rights shall be made by Biogen Idec. Biogen Idec shall have the
right, using outside counsel selected by Biogen Idec, to bring and control such
Enforcement Actions at its sole expense. PDL shall reasonably cooperate, as
requested by Biogen Idec, with respect to such Enforcement Action. Biogen Idec
shall keep the Joint Patent Committee informed of the progress of any such
Enforcement Action with respect to the Biogen Idec Patent Rights that are not
Biogen Idec Target Patent Rights. Notwithstanding the terms of Section 12.7(b)(vii),
Biogen Idec shall retain all Recoveries received from a Third Party in
connection with such Enforcement Action.

 

(vi)                               Joint
Patent Rights. Decisions regarding Enforcement Actions with respect to the
Joint Patent Rights shall be made by the JPC, upon

 

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consultation with the
Joint Steering Committee. Upon the identification of an infringement of Joint
Patent Rights with respect to a Collaboration Product, the JPC shall (i) promptly
discuss such infringement, (ii) promptly discuss the strategy for enforcing
such Joint Patent Rights, and (iii) designate the Controlling Party to be
responsible for controlling an Enforcement Action with respect to such Joint
Patent Rights, and determine a reasonable allocation between the Parties of the
costs of such Enforcement Action. The Controlling Party shall be responsible,
using outside counsel mutually acceptable to both Parties, to implement the
decisions of the JPC regarding such Enforcement Action. The non-Controlling
Party shall reasonably cooperate, as requested by the Controlling Party, in
such Enforcement Action. The Controlling Party shall keep the Joint Steering
Committee and the JPC informed of the progress of any action or proceeding to
enforce the Joint Patent Rights. The Controlling Party shall keep the JPC
advised of all communications, actual and prospective filings or submissions
regarding such Joint Patent Rights, and shall provide the JPC an opportunity to
review and comment on any such communications, filing and submissions. The
Controlling Party shall not settle or consent to an adverse judgment in any
such Enforcement Action with respect to the Joint Patent Rights, unless
approved by the Joint Steering Committee (which approval shall not be
unreasonably withheld).

 

(vii)                           Allocation
of Recoveries. All cash amounts (plus the fair market value of all non-cash
consideration) received by a Party or its Affiliates from a Third Party in
connection with the final judgment, award or (to the extent a sublicense to
such Third Party would require the consent of the other Party under this
Agreement) settlement of such Enforcement Action (“Recoveries”) shall
first be applied to reimbursement of the unreimbursed legal fees and expenses
of the Parties in connection with such Enforcement Action, and then the
remainder shall be divided equally between the Parties, except that [****], [****],
such remainder shall be shared [****] to the [****], and [****] to the [****]; provided
that the [****] shall receive such share only to the extent the
Recoveries were obtained with respect to Patents of such Party (e.g., [****]).

 

(viii)                       Representation
by Counsel. Each Party shall always have the right to be represented by
counsel of its own selection and its own expense in any suit or other action
instituted by the other Party pursuant to this Section 12.7 for
infringement in a Field. The amounts borne by such Party pursuant to this Section 12.7(b)(viii) shall
not count towards the determination of the allocation between the Parties of
any remaining recovery pursuant to Section 12.7(b)(vii).

 

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12.8                        Defense of Infringement
Actions.

 

(a)                                  If
PDL and/or Biogen Idec are defendant(s) named in a patent infringement suit
filed by a Third Party concerning the development, manufacture, production,
use, importation, offer for sale, or sale of Collaboration Products in the Field
(a “Defensive Action”) decisions regarding such Defensive Actions shall be made
by the JPC, upon consultation with the Joint Steering Committee. Upon the
identification of a Defensive Action with respect to a Collaboration Product,
the JPC shall (i) promptly discuss such Defensive Action, (ii) promptly
discuss the strategy for defending such suit, and (iii) designate the
Controlling Party to be responsible for controlling said Defensive Action, and
determine a reasonable allocation between the Parties of the costs of such
Defensive Action. The Controlling Party shall be responsible, using outside
counsel mutually acceptable to both Parties, to implement the decisions of the
JPC regarding such Defensive Action. The non-Controlling Party shall reasonably
cooperate, as requested by the Controlling Party, in such Defensive Action. The
Controlling Party shall keep the Joint Steering Committee and the JPC informed
of the progress of any action or proceeding in the Defensive Action. The
Controlling Party shall keep the JPC advised of all communications, actual and
prospective filings or submissions regarding such Defensive Action, and shall
provide the JPC an opportunity to review and comment on any such
communications, filing and submissions. The Controlling Party shall not settle
or consent to an adverse judgment in any such Defensive Action, unless approved
by the Joint Steering Committee (which approval shall not be unreasonably
withheld).

 

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

 

12.9                        Third
Party Intellectual Property.

 

(a)                                  In
the event that PDL or Biogen Idec (the “Acquiring Party”) proposes to
apply to a Collaboration Product Technology that the Acquiring Party obtained
from a Third Party that is not included automatically within the definition of
Biogen Idec Technology or PDL Technology prior to the Effective Date (and hence
included in the licenses granted by the Acquiring Party pursuant to Article 11)
or otherwise acquired by the Acquiring Party, the Acquiring Party shall
disclose the same to the Joint Steering Committee, including any royalty or
other payment obligations determined in accordance with United States GAAP that
would apply to the Collaboration Product as a result of the Development or
Commercialization of such

 

73

 

Collaboration Products
hereunder. The Joint Steering Committee shall determine, [****] whether or not
the Joint Steering Committee agrees that the intellectual property so acquired
should be applied to the Collaboration Products, and if the Joint Steering
Committee so determines, the agreement under which the Acquiring Party acquires
such intellectual property shall be a Third Party License for purposes of this
Agreement. To the extent the agreement is not so included within the Third
Party Licenses hereunder, the subject matter of such agreement shall not be
within the definition of PDL Technology or Biogen Idec Technology hereunder
(and therefore the licenses granted by the Acquiring Party pursuant to Article 11
shall not include such subject matter).

 

(b)                                  Manufacturing
Technology.

 

(i)                                    PDL-Lead
Manufacturer. Notwithstanding the foregoing, with respect to Collaboration
Products or Royalty Products for which PDL is the Manufacturing Party under Article 8
above, PDL shall have the right to decide which Third Party Technology will be
used in such Manufacturing, and any agreement pursuant to which PDL acquired or
acquires such technology shall be deemed a Third Party License.

 

(ii)                                Biogen
Idec-Lead Manufacturer. Notwithstanding the foregoing, with respect to
Collaboration Products or Royalty Products for which Biogen Idec is the
Manufacturing Party under Article 8 above, Biogen Idec shall have the
right to decide which Third Party Technology will be used in such
Manufacturing, and any agreement pursuant to which Biogen Idec acquired or
acquires such technology shall be deemed a Third Party License.

 

(c)                                  Third
Party Licenses. Notwithstanding the provisions of this Article 12, the
rights and obligations of the Parties under this Article 12, with respect
to Patents licensed pursuant to a Third Party License, shall be subject to the
rights of the applicable Third Party licensor/licensee pursuant to such Third
Party License and the applicable Parties’ obligations to such Third Party
pursuant to such Third Party License. Without limiting the foregoing, the
Parties agree and acknowledge that the provisions set forth in this Article 12
shall be subject to the following Third Party License provisions (as such Third
Party Licenses and specific provisions may be amended from time to time upon
notice to and consent of the other Party, if required, pursuant to Section 11.5(c)(ii))
and such provisions shall supersede anything to the contrary contained in this
Agreement:  (i) [****]; (ii) [****];
(iii) Article 5 of the UCSD License Agreement;  (iv) [****]; (v) [****]; (vi) [****];
(vii) [****]; (viii) [****]; and (ix) [****]. The Parties further
agree and acknowledge that PDL does not have any rights to prosecute or enforce
the Patent

 

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Rights licensed to it
pursuant to the following Third Party Licenses and therefore no portion of Article 12
shall be interpreted as granting Biogen Idec or the JPC or JSC rights to file,
prosecute (including interferences and oppositions), maintain, enforce or
defend such Patents or receive information or provide input with respect to
such Patent Rights:  [****]; [****]; [****]; [****];
and [****].

 

12.10                 Rights pursuant
to the [****] Agreements.

 

(a)                                  The
Parties acknowledge that, pursuant to the [****] Agreements, [****] has certain
rights to file, prosecute (including interferences and oppositions), maintain,
enforce and defend certain PDL Patent Rights that are licensed by or to PDL
pursuant to the [****] Agreements. Notwithstanding anything to the contrary,
Biogen Idec’s, JPC’s and JSC’s rights pursuant to this Article 12 with
respect to such PDL Patent Rights are subject to such [****] rights to file,
prosecute, maintain, enforce and defend the certain PDL Patent Rights that are
licensed by or to PDL pursuant to [****] Agreement. For clarity, PDL shall not
be required pursuant to this Article 12 to provide Biogen Idec or the JPC
or JSC with any patent filing, prosecution (including interferences and
oppositions), maintenance, enforcement or defense associated-rights that
conflict with [****] rights under the [****] Agreements or that would
constitute a breach of PDL’s obligations to [****] under the [****] Agreements,
provided however, no additional rights shall accrue to Biogen Idec unless and
until Biogen Idec obtains a license pursuant to Section 3.8. The Parties
acknowledge that certain of Biogen Idec’s, JPC’s and JSC’s rights under this Article 12
that relate to PDL Patent Rights that are licensed by or to PDL pursuant to the
[****] Agreements. The Parties further acknowledge that such rights of Biogen
Idec, JPC or JSC derive solely from those rights retained by PDL under the [****]
Agreements.

 

(b)                                  PDL
hereby agrees and acknowledges that, notwithstanding any other provisions of
this Agreement, Biogen Idec will not be obligated to pay any royalties due to [****]
pursuant to the [****] Agreements for sales of Collaboration or Royalty
Products, except as expressly stated in this Agreement.

 

12.11                 Patent Marking.
Each Party agrees to comply with the patent marking statutes in each country in
which Collaboration Products or Royalty Products are sold by such Party, its
Affiliates and/or sublicensees. Notwithstanding the foregoing, prior to the
launch of each Product, the JPC will formulate a marking strategy for such
Product in cooperation with qualified outside counsel and in cooperation with
the guidelines of the appropriate governmental agencies regulating the
Manufacture or sale of Products, including determining the appropriate patent
marking, if any, to be used with such Product.

 

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12.12                 Limited Rights to
Humanization Technology Claims in Queen Patents. Nothing in this Article 12
shall be interpreted as granting Biogen Idec, the JPC or the JSC any rights
with respect to the filing, prosecution (including interferences and oppositions),
maintenance, enforcement or defense of primarily those claims in the Queen
Patents that are directed toward the humanization of antibodies or humanized
antibodies in general (as opposed to particular humanized antibodies or
humanized antibodies directed at a particular target). For example and without
limiting the foregoing, PDL shall not have any obligation to: (a) keep
Biogen Idec or the JPC advised of the status of communications, actual and
prospective filings or submissions primarily regarding such claims; (b) consult
with Biogen Idec or the JPC on matters that primarily relate to such claims; (c) give
Biogen Idec or the JPC access to or an opportunity to review and comment on any
portion of patent office or patent litigation communications, filings or
proposed submissions that pertain primarily to such claims; or (d) obtain
JSC approval of a settlement or consent to an adverse judgment with respect to
any admission of invalidity or unenforceability primarily of such claims.

 

12.13                 Trademark
Selection and Ownership.

 

(a)                                  Ownership
of Trademarks. The Responsible Commercialization Party for the North
American Territory, as the “Responsible Trademark Party,” shall own, throughout
the world, all trademarks and trade dress, and all registrations therefor, selected
under Section 12.13(b) and used or intended to be used on or in
connection with a Product under this Agreement (the “Product Trademarks”). Accordingly,
with respect to the Existing Products, [****] shall be the Responsible
Trademark Party for [****], and [****] shall be the Responsible Trademark Party
for [****] and [****]. All goodwill attributable to a Product Trademark
generated by the Commercialization of a Product under this Agreement bearing a
Product Trademark shall inure to the benefit of the Responsible Trademark
Party.

 

(b)                                  Selection
and Procurement of Trademarks. The Responsible Trademark Party for a
Product to be Commercialized under this Agreement shall select, subject to
approval by the Joint Commercialization Committee, a minimum of [****]
trademarks in each of the North American Territory and EU Territory and
appropriate corresponding trade dress for such Product (whether as a
Collaboration Product or Royalty Product). Any determination regarding the
selection of such trademarks and trade dress shall take into account the
objectives of the Parties, both within and outside the Collaboration, when
making any determinations and exercising any rights it may have with respect to
selecting the trademark and trade dress for a Product. All uses of trademarks
and trade dress to identify and/or in connection with the Commercialization of
a Product under this Agreement shall comply with all applicable laws
(including,

 

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76

 

without limitation, those
laws and regulations particularly applying to the proper use and designation of
trademarks in the applicable countries).

 

(c)                                  Prosecution
and Enforcement; Expenses. The Responsible Trademark Party shall be
responsible for procurement and maintenance of trademark registrations for the
Product Trademarks throughout the Territory, except that the Responsible
Trademark Party may cease trademark registration procurement activities for any
Product Trademark in any country in the Royalty Territory provided it first
offers the other Party the opportunity to assume such activities at its own
expense. All expenses incurred by the Responsible Trademark Party with respect
to the preparation, filing, prosecution, maintenance and enforcement of the
Product Trademarks for the Profit Sharing Territory shall be included in Other
Out-of-Pocket Costs and solely for the Royalty Territory shall be borne at the
Independent Development  Party’s sole
expense.

 

(d)                                  Use
of the Product Trademarks. To effectuate the purposes of this Agreement,
the Responsible Trademark Party shall grant to the other Party, a non-exclusive,
non-royalty bearing license (with the right to grant sublicenses) pursuant to a
separate agreement, to use each Product Trademark solely in connection with the
Commercialization of Products under this Agreement. The Party that is not the
Responsible Trademark Party, its Affiliates and its sublicensees will comply
with the Responsible Trademark Party’s then-current trademark and trade dress
guidelines for trademarks and trade dress and shall have the right to monitor
the quality of the Products on which a Product Trademark appears or which
incorporates a Product Trademark in the form of trade dress in accordance with
reasonable procedures to be agreed by the Parties. The Party that is not the
Responsible Trademark Party, its Affiliates and sublicensees shall use the
Product Trademarks only in connection with the Commercialization of Products
under this Agreement in the Territory in accordance with the licenses to be
granted herein. The Responsible Trademark Party, or the Party commercializing
an Independent Product or Royalty Product as the case may be, shall provide all
materials (including without limitation advertising or promotional materials)
that incorporate the Product Trademarks or a Party’s house marks to the
Responsible Trademark Party for prior review and approval, not to be
unreasonably withheld.

 

(e)                                  House
Marks. In the event that the Parties mutually agree to permit a Party to
use the house marks of the other Party in connection with the Commercialization
and/or Co-Promotion of Products under this Agreement, the Parties will
establish mutually acceptable terms for the usage of such house marks.

 

(f)                                    Acknowledgement
of Ownership Rights. Each Party acknowledges the sole ownership by the
other Party and validity of all trademarks, trade dress, logos and slogans
owned by the other Party and used or intended to be used on or in connection
with the Commercialization of a Product under this Agreement. Each Party agrees
that it will not at any time during or after the Term assert or claim any interest
in or do anything which may adversely affect the validity or enforceability of
any trademark, trade dress, logo or slogan owned by the other Party and used or
intended to be used on or in connection with Commercialization of a Product
under this Agreement. Neither Party will register, seek to register or cause to
be registered any

 

77

 

trademarks, trade dress,
logos or slogans owned by the other Party and used or intended to be used on or
in connection with the Commercialization of a Product under this Agreement or
any variation thereof, under any law providing for registration of trademarks,
service marks, trade names, fictitious names or similar laws, as an Internet
domain name, or in the name of a corporation, partnership, limited liability
company or other entity, without the other Party’s prior written consent.

 

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

 

(h)                                 Infringement
of Product Trademarks.

 

(i)                                    Procedure.
In the event that either Party becomes aware of (i) actual
infringement of a Product Trademark  in the
Territory; (ii) a mark or name confusingly similar to a Product Trademark
in the Territory; or (iii) any unfair trade practices, trade dress
imitation, passing off, or like offenses, in the Territory that relate to the
Product Trademarks, such Party shall promptly so notify the other Party in
writing. The Responsible Trademark Party shall have the right, but not the
obligation, at its sole cost and expense, to initiate, prosecute, and control
an infringement action or file any other appropriate action or claim related to
such infringement of the Product Trademark against any Third Party. If the
Responsible Trademark Party fails to bring any such infringement action within
a period of [****] after delivery of the notice set forth above, then the other
Party shall have the right, but not the obligation, at its sole cost and
expense, to initiate, prosecute, and control an infringement action or file any
other appropriate action or claim related to such infringement of the Product
Trademark against any Third Party. In either event, the Party not bringing any
such action (i) shall have the right (at its own expense) to participate
in such action and to be represented by counsel of its own choice, and (ii) agrees,
at the request and expense of the Party bringing such action, to be joined as a
Party to the suit and to provide reasonable assistance in any such action. The
Party controlling such action shall take all reasonable and appropriate steps
to protect, defend, and maintain the Product Trademarks for use by the Parties
and shall have the right to control settlement of such action; provided,
however, that no settlement shall be entered into without the written consent
of the other Party, not to be unreasonably withheld.

 

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(ii)                                Costs.
The costs associated with such defense for the Profit Sharing Territory
shall be included in [****] as set forth in Exhibit C and the costs
associated solely with the Royalty Territory shall be borne by the Independent
Development Party. Any damages or monetary award recovered shall be allocated
as follows:  All cash amounts (plus the
fair market value of all non-cash consideration) received by a Party or its
Affiliates from a Third Party in connection with the final judgment, award or
settlement of such action (“Recoveries”) shall first be applied to
reimbursement of the unreimbursed legal fees and expenses of the Parties in
connection with such action, and then the remainder shall be [****].

 

12.14                 Third Party
Trademark Claims Based on Use of the Trademarks.

 

If a
claim is brought by a Third Party that a Party’s use of the Product Trademarks
infringes such Third Party’s trademarks, the Party against which (or against
whose Affiliate, as the case may be) the action is brought will give prompt
written notice to the other Party of such claim. The Responsible Trademark
Party shall defend any such claim and any resulting suit brought in the Territory
with respect to the use of the Product Trademark, provided the costs associated
with such defense for the Profit Share Territory shall be included in [****] as
set forth in Exhibit C and the costs associated solely with the Royalty
Territory shall be borne by the [****]. Any damages or monetary award recovered
shall be allocated as follows:  All cash
amounts (plus the fair market value of all non-cash consideration) received by
a Party or its Affiliates from a Third Party in connection with the final
judgment, award or settlement of such defense (“Recoveries”) shall first
be applied to reimbursement of the unreimbursed legal fees and expenses of the
Parties in connection with such defense, and then the remainder shall be [****],
except that [****]. The Responsible Trademark Party shall not settle any claim
or suit in a manner that would adversely affect the other Party without
obtaining the other Party’s prior written consent, which shall not be
unreasonably withheld.

 

ARTICLE 13

REPRESENTATIONS AND WARRANTIES

 

13.1                        Mutual
Representations and Warranties. Each Party hereby represents and warrants
to the other Party as of August 2, 2005:

 

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

 

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

 

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

 

(d)                                  Subject
to Section 11.5(b)(iii) such Party has the right to grant the rights
and licenses described in Article 11; and

 

(e)                                  Such
Party has and shall maintain the resources and capability to perform its
obligations hereunder either alone or together with one or more of its
Affiliates whose performance it can cause to be made available to perform
obligations hereunder.

 

13.2                        Representations
by PDL. PDL hereby represents and warrants to Biogen Idec as of August 2,
2005:

 

(a)                                  Prior
to August 2, 2005, it has provided a complete copy of the [****]
Agreements and of all Third Party Licenses in effect as of the Effective Date;

 

(b)                                  [****];

 

(c)                                  it
has not previously assigned, transferred, conveyed or otherwise encumbered its
right, title and interest in PDL Technology in the Field;

 

(d)                                  [****];

 

(e)                                  [****];

 

(f)                                    [****];

 

(g)                                 [****];

 

(h)                                 [****];
and

 

(i)                                    [****].

 

As used and except as otherwise set forth
herein, “PDL’s knowledge” means the actual knowledge, after reasonable inquiry,
as of the Effective Date, of any executive officer of PDL with operational
responsibility for the subject matter of the applicable representation or
warranty.

 

Without limiting the foregoing, the Parties
agree and acknowledge that the representations made by PDL in this Section 13.2
shall not be deemed to be representations made by or on behalf of [****].

 

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13.3                        Disclaimer.
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTION 13.1 AND 13.2, EACH
PARTY MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AND
EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL OTHER REPRESENTATIONS AND WARRANTIES
OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF DESIGN, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, ARISING FROM A COURSE OR DEALING, USAGE OR
TRADE PRACTICES, OR ANY WARRANTY AS TO THE VALIDITY OR ANY PATENTS OR THE
NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTIES, IN
ALL CASES WITH RESPECT THERETO.

 

13.4                        Limitation
of Liability. NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER
PARTY ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
CONNECTION WITH THIS AGREEMENT, EACH PARTY’S PERFORMANCE OR LACK OF PERFORMANCE
HEREUNDER, OR ANY LICENSE GRANTED HEREUNDER, HOWEVER CAUSED, ON ANY THEORY OF
LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. THE FOREGOING LIMITATION SHALL NOT LIMIT EITHER PARTY’S
OBLIGATION TO THE OTHER PARTY UNDER ARTICLES 14 AND 15.

 

13.5                        Essential
Basis. The Parties acknowledge and agree that the disclaimers, exclusions
and limitations of liability set forth in this Article 13 form an
essential basis of this Agreement, and that, absent any of such disclaimers,
exclusions or limitations of liability, the terms of this Agreement, including
the economic terms, would be substantially different.

 

ARTICLE 14

CONFIDENTIALITY

 

14.1                        Generally.
During and for five (5) years after the Term of this Agreement, each
Party (i) shall maintain in confidence all Confidential Information of the
other Party; (ii) shall not use such Confidential Information for any
purpose except as permitted by this Agreement; and (iii) shall not
disclose such Confidential Information to anyone other than those of its
Affiliates, sublicensees, prospective sublicensees, employees, consultants,
agents or subcontractors who are bound by written obligations of nondisclosure
and non-use no less stringent than those set forth in this Article 14 and
to whom such disclosure is necessary in connection with such Party’s activities
as contemplated in this Agreement. Each Party shall ensure that such Party’s
Affiliates, sublicensees, prospective sublicensees, employees, consultants,
agents and subcontractors comply with these obligations. Each Party shall
notify the other promptly on discovery of any unauthorized use or disclosure of
the other’s trade secrets or proprietary information.

 

14.2                        Exceptions.
The obligations of confidentiality, non-disclosure, and non-use set forth in Section 14.1
shall not apply to the extent the receiving Party (the

 

81

 

“Recipient”)
can demonstrate that the disclosed information (i) was in the public
domain at the time of disclosure to the Recipient by the other Party, or
thereafter entered the public domain, in each case other than as a result of
actions of the Recipient, its Affiliates, employees, licensees, agents or
subcontractors, in breach of this Agreement; (ii) was rightfully known by
the Recipient or its Affiliates (as shown by its written records) prior to the
date of disclosure to the Recipient by the other Party; or (iii) was
received by the Recipient or its Affiliates on an unrestricted basis from a
Third Party rightfully in possession of such information and not under a duty
of confidentiality to the other Party. Notwithstanding any other provision of
this Agreement, Recipient’s disclosure of Confidential Information shall not be
prohibited if such disclosure:  (a) is
in response to a valid order of a court or other governmental body, provided
that Recipient provides the other Party with prior written notice of such
disclosure in order to permit the other Party to seek a protective order or
other confidential treatment of such Confidential Information; or (b) is
otherwise required by applicable law or regulation, or rules of a
nationally recognized securities exchange.

 

14.3                        Publications.

 

(a)                                  Prior
to public disclosure or submission for publication of a proposed academic,
scientific or other publication or presentation that contains or references the
results of any scientific or clinical activity relating to any Development
Program or Collaboration Product, or any Patents or Know-How related thereto,
the Party disclosing or submitting such proposed publication (“Submitting Party”) shall send the other party (“Responding Party”) by expedited delivery a copy of the
proposed publication to be submitted and shall allow the Responding Party a
reasonable time period (but no less than forty-five (45) days from the date of
confirmed receipt) in which to determine whether the proposed publication
contains subject matter for which patent protection should be sought (prior to
publication of such proposed publication) for the purpose of protecting an
invention and/or whether the proposed publication contains the Confidential
Information of the Responding Party. Following the expiration of the forty-five
(45) day review period, the Submitting Party shall be free to submit such proposed
publication for publication and publish or otherwise disclose to the public
such scientific or clinical results, subject to the procedures set forth in Section 14.3(b).

 

(b)                                  If
the Responding Party believes that the subject matter of the proposed publication
contains Confidential Information or a patentable invention of the Responding
Party, then prior to the expiration of the applicable time period for review,
the Responding Party shall notify the Submitting Party in writing of its
determination that such proposed publication contains such information or
subject matter for which patent protection should be sought. On receipt of such
written notice from the Responding Party, the Submitting Party shall delay
public disclosure of such information or submission of the proposed publication
for an additional period of ninety (90) days to permit preparation and filing
of a patent application on the disclosed subject matter. The Submitting Party
shall thereafter be free to publish or disclose such information, except that
the Submitting Party may not disclose any Confidential Information of the
Responding Party in violation of Sections 14.1 and 14.2 hereof.

 

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14.4                        Publicity.
The Parties agree that the public announcement of the execution of this
Agreement shall be substantially in the form of a mutually agreed press release.
Any other publication, news release or other public announcement relating to
this Agreement or to the performance hereunder, shall first be reviewed and
approved by both Parties unless such publication, news release or other public
announcement contains information previously approved by the other Party for
release hereunder; provided, however, that any disclosure which is required by
law, or by the rules of a nationally recognized securities exchange, as
advised by the disclosing Party’s counsel may be made without the prior consent
of the other Party, although the other Party shall be given prompt notice of
any such legally required disclosure and to the extent practicable shall
provide the other Party an opportunity to comment on the proposed disclosure.

 

ARTICLE 15

INDEMNIFICATION

 

15.1                        Indemnification
by PDL.

 

(a)                                  PDL
agrees to indemnify, hold harmless and defend Biogen Idec and its Affiliates,
directors, officers, employees and agents (the “Biogen Idec
Indemnitees”) from and against any and all Third Party suits,
claims, actions, demands, liabilities, expenses and/or losses (including
attorneys’ fees, court costs, witness fees, damages, judgments, fines and
amounts paid in settlement) (“Losses”) [****],
but [****].

 

(b)                                  PDL
agrees to indemnify, hold harmless and defend the Biogen Idec Indemnitees from
and against any and all Losses [****] (i) [****], or (ii) [****],
except [****].

 

15.2                        Indemnification
by Biogen Idec.

 

(a)                                  Biogen
Idec shall indemnify, hold harmless and defend PDL and its Affiliates
directors, officers, employees and agents (the “PDL
Indemnitees”) from and against any and all Losses, [****], but [****],
but not [****]. [****].

 

(b)                                  Biogen
Idec agrees to indemnify, hold harmless and defend the PDL Indemnitees from and
against any and all Losses [****], except [****].

 

15.3                        Procedure.
In the event of a claim by a Third Party against a Party entitled to
indemnification under this Agreement (“Indemnified Party”),
the Indemnified

 

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

 

15.4                        Insurance.
Each Party, at its own expense, shall maintain product liability insurance in
an amount consistent with industry standards for a company of similar standing
during the Term. Each Party shall provide [****] prior written notice of any
cancellation of its insurance program. Each Party shall provide the other Party
with a certificate of insurance evidencing product liability coverage.

 

ARTICLE 16

TERM AND TERMINATION; EFFECTS OF TERMINATION

 

16.1                        Term. The
term of this Agreement shall begin on the Effective Date and, unless earlier
terminated in accordance with the terms of this Article 16, will expire on
the date on which neither Party has nor will have any additional payment
obligations to the other Party under this Agreement (the “Term”).

 

16.2                        Termination
for Breach.

 

(a)                                  Breach.
If a Party materially breaches its obligations under this Agreement with
respect to a Collaboration Product or Royalty Product, which breach is not
cured within [****] after written notice thereof from the non-breaching Party
(or if such breach is not capable of cure within such period, which breach the breaching
Party is not making diligent good faith efforts to cure), then upon further
express written notice from the non-breaching Party, the breaching Party
automatically (and without further action on its part) shall be deemed to have [****]
(a “Breaching Party”); provided however that the breaching Party shall be
entitled to receive no more than [****] of the royalties due to a
Non-Developing Party hereunder. This preceding sentence shall not, however,
limit in any manner the non-breaching Party’s other remedies for breach. The
Parties acknowledge and agree that failure to exercise any right or option with
respect

 

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to any Collaboration
Product or to take any action expressly within the discretion of a Party shall
not be deemed to be material breach hereunder.

 

(b)                                  Breaching
Party Obligations. A Breaching Party shall, with respect to the
Collaboration Product or Royalty Product as to which it is the Breaching Party (i) notwithstanding
the provisions of this Agreement to the contrary, the Breaching Party shall be [****],
(ii) in addition to the obligations specified in [****] the Breaching  Party shall [****], and (iii) the
Breaching Party shall [****].

 

16.3                        Bankruptcy.
All rights and licenses granted under this Agreement by one Party to the other
Party are, and shall otherwise be deemed to be, for purposes of Section 365(n)
of the United States Bankruptcy Code (the “Bankruptcy Code”),
licenses of rights to “intellectual property” as defined under Section 101(35A)
of the Bankruptcy Code. The Parties agree that a Party shall retain and may
fully exercise all of its rights and elections under the Bankruptcy Code in the
event of a bankruptcy by the other Party. The Parties further agree that in the
event of the commencement of a bankruptcy proceeding by or against one Party
under the Bankruptcy Code, the other Party shall be entitled to complete access
to any such intellectual property pertaining to the rights granted in the
licenses hereunder of the Party by or against whom a bankruptcy proceeding has
been commenced and all embodiments of such intellectual property.

 

16.4                        Change of
Control.

 

(a)                                  In
the event a Party undergoes a Change of Control (the “Acquired Party”), the
other Party (the “Non-Acquired Party”) shall have the right, at any time within
[****] following the closing of such Change of Control, and at its sole
discretion, to elect none, some or all of the following. This Agreement shall
otherwise remain in full force and effect.

 

(i)                                    The
provisions of this Agreement permitting the Acquired Party to vote in any
Committee decision [****].

 

(ii)                                The
Non-Acquired Party shall have the option [****].

 

(iii)                            The
Non-Acquired Party shall have [****].

 

(iv)                               Upon
[****] prior written notice, the Non-Acquired Party may [****]; and

 

(v)                                   The
Non-Acquired Party shall have the [****] to (A) [****] and (B) [****].
The purposes of such procedures shall be to strictly limit such disclosures to

 

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only those personnel
having a need-to-know Sensitive Information in order for the Acquired Party to
perform its remaining obligations under this Agreement and to prohibit the use
of Sensitive Information for competitive reasons against the Non-Acquired Party
and its Affiliates, including without limitation, the use of Sensitive
Information for the development or commercialization of competing products.

 

(b)                                  An
Acquired Party shall have the one-time right, at any time within [****]
following the election by the Non Acquired Party to exercise any of the rights
specified in Section 16.4(a)  to [****]. Upon written notice of the
Acquired Party’s intent to [****], the Acquired Party shall:

 

(i)                                    Continue
to participate in the equal funding of the Development and Commercialization of
each Collaboration Product in the Profit Sharing Territory until the next
applicable opt-out point specified in Exhibit 4.1(b)(iii) for such
Collaboration Product.

 

(ii)                                Promptly
comply with the provisions of Sections 4.3(c), 4.3(e), 4.3(f),  4.3(g) and 4.3 (h) with respect to
each Collaboration Product as if it were a Non-Developing Party thereunder.

 

(iii)                            Following
the termination of the Acquired Party’s funding obligation as set forth in Section 16.4(b)(i) above,
the Acquired Party shall thereafter be eligible to receive from the
Non-Acquired Party, for the term specified below, incremental royalties on Net
Sales of the relevant Collaboration Product at a royalty rate which is equal to
the sum of (A) [****] (B) [****], as applicable. The term of the
Non-Acquired Party’s obligation to pay a royalty under this Section 16.4(b) shall
expire on a country-by-country and Collaboration Product-by-Collaboration
Product basis, at the dates specified in Section 9.5. Each Collaboration
Product shall thereafter be deemed to be an Independent Product and all the
applicable provisions of the Agreement shall remain in full force and effect.

 

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

 

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

 

86

 

ARTICLE 17

DISPUTE RESOLUTION; GOVERNING LAW

 

17.1                        Disputes.
Unless otherwise set forth in this Agreement, in the event of any dispute
arising under this Agreement between the Parties, the Parties shall refer such
dispute to the respective Executives, and such Executives shall attempt in good
faith to resolve such dispute.

 

17.2                        Arbitration.
Subject to the provisions of Section 2.8(c), if the Parties are unable
resolve a given dispute pursuant to Section 17.1 within [****] of
referring such dispute to the Executives, either Party may have the given
dispute settled by binding arbitration in the manner described below:

 

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

 

(b)                                  Additional
Issues. Within [****] after the receipt of the Arbitration Request, the
other Party may, by written notice, add additional issues for resolution.

 

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

 

(d)                                  Arbitration
Procedure. Except as expressly provided herein, the sole mechanism for
resolution of any claim, dispute or controversy arising out of or in connection
with or relating to this Agreement or the breach or alleged breach thereof
shall be arbitration by the American Arbitration Association (“AAA”) in Los Angeles, California, or in such other venue as
the Parties agree, under the commercial rules then in effect for the AAA
except as provided herein. All proceedings shall be held in English and a
transcribed record prepared in English. The Parties shall choose, by mutual
agreement, one arbitrator within [****] of receipt of notice of the intent to
arbitrate. If no arbitrator is appointed within the times herein provided or
any extension of time that is mutually agreed on, the AAA shall make such
appointment within [****] of such failure. The award rendered by the arbitrator
shall not include costs of arbitration, attorneys’ fees or costs for expert and
other witnesses. Within [****] of initiation of arbitration, the Parties shall
reach agreement upon and thereafter follow procedures assuring that the
arbitration will be concluded and the award rendered within no more than [****]
from

 

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

 

87

 

selection of the
arbitrator. Failing such agreement, the AAA will design and the Parties will
follow procedures that meet such a time schedule. The arbitrator (i) shall
not have any power or authority to add to, alter, amend or modify the terms of
this Agreement but shall specify rules sufficient to allow reasonable
discovery by the Parties; (ii) shall establish and enforce appropriate rules to
ensure that the proceedings, including the decision, be kept confidential and
that all Confidential Information of the Parties be kept confidential and be
used for no purpose other than the arbitration; (iii) shall have the power
to enforce specifically this Agreement and the terms and conditions hereof in
addition to any other remedies at law or in equity; and (iv) shall issue
all decisions in writing. Nothing in this Agreement shall be deemed as
preventing either Party from seeking injunctive relief (or any other
provisional remedy) from any court having jurisdiction over the Parties and the
subject matter of the dispute as necessary to protect either Party’s name,
proprietary information, trade secrets, know-how or any other proprietary right.
If the issues in dispute involve scientific or technical matters, any
arbitrator chosen hereunder shall have educational training and/or experience
sufficient to demonstrate a reasonable level of knowledge in the field of
biotechnology. Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof.

 

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

 

ARTICLE 18

MISCELLANEOUS

 

18.1                        Assignment.
Each Party, without the consent of the other Party, may assign this
Agreement and its rights and obligations hereunder (i) [****], or (ii) [****].
Any permitted assignee shall assume all assigned obligations of its assignor
under this Agreement. The assigning Party shall promptly notify the other Party
of any such Change of Control and any such assignment and shall use all
reasonable efforts to provide such notification at least [****] before the
completion of the Change of Control and before the assignment. Except as
specifically provided in this Section 18 or in Section 3.7, this
Agreement may not be assigned or otherwise transferred, nor may any right or
obligation hereunder be assigned or transferred, by either Party without the
consent of the other Party. Any attempted assignment not in accordance with
this Section shall be void.

 

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88

 

18.2                        Force
Majeure. If either Party shall be delayed, interrupted in or prevented from
the performance of any obligation hereunder by reason of force majeure
including an act of God, fire, flood, earthquake, war (declared or undeclared),
public disaster, act of terrorism, strike or labor differences, governmental
enactment, rule or regulation, or any other cause beyond such Party’s
control, such Party shall not be liable to the other therefor; and the time for
performance of such obligation shall be extended for a period equal to the
duration of the force majeure which occasioned the delay, interruption or
prevention. The Party invoking such force majeure rights of this Section 18.2
must notify the other Party by courier or overnight dispatch (e.g., Federal
Express) within a period of fifteen (15) days of both the first and last day of
the force majeure unless the force majeure renders such notification impossible
in which case notification will be made as soon as possible. If the delay
resulting from the force majeure exceeds six (6) months, both Parties
shall consult together to find an appropriate solution.

 

18.3                        Entire
Agreement; Amendment. This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter herein and, effective on
the Effective Date, supersedes all previous agreements between the Parties with
respect to the subject matter herein, whether written or oral, including the
existing confidentiality agreement between PDL and Biogen Idec. This Agreement
shall not be changed or modified orally, but only by an instrument in writing
signed by both Parties.

 

18.4                        Severability.
If any provision of this Agreement is declared invalid by a court of last
resort or by any court or other governmental body from the decision of which an
appeal is not taken within the time provided by law, then and in such event,
this Agreement will be deemed to have been terminated only as to the portion
thereof that relates to the provision invalidated by that decision and only in
the relevant jurisdiction, but this Agreement, in all other respects and all
other jurisdictions, will remain in force; provided, however, that if the
provision so invalidated is essential to the Agreement as a whole, then the
Parties shall negotiate in good faith to amend the terms hereof as nearly as
practical to carry out the original intent of the Parties, and, failing such
amendment, either Party may submit the matter for resolution pursuant to Article 16.

 

18.5                        Notices. Any
notice or report required or permitted to be given under this Agreement shall
be in writing and shall be mailed by nationally recognized overnight courier,
or faxed and confirmed by mailing, as follows and shall be effective one (1) day
after such mailing:

 

	
  If to PDL:

  	
  Protein Design Labs, Inc.

  
	
   

  	
  34801 Campus Drive

  
	
   

  	
  Fremont, California U.S.A. 94555

  
	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
  and

  	
  Protein Design Labs, Inc.

  
	
   

  	
  34801 Campus Drive

  

 

89

 

	
   

  	
  Fremont, California U.S.A. 94555

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
  If to Biogen Idec:

  	
  Biogen Idec Inc.

  
	
   

  	
  14 Cambridge Center

  
	
   

  	
  Cambridge, Massachusetts U.S.A 02142

  
	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
  and

  	
  Biogen Idec Inc.

  
	
   

  	
  14 Cambridge Center

  
	
   

  	
  Cambridge, Massachusetts U.S.A 02142

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Facsimile:

  

 

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

 

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

 

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

 

18.9                        No Strict
Construction. Each Party has had the opportunity to consult with counsel in
connection with the review, drafting and negotiation of this Agreement. Accordingly,
the rule of construction that any ambiguity in this Agreement shall be
construed against the drafting Party shall not apply.

 

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

 

90

 

18.11                 Cumulative
Remedies. No remedy referred to in this Agreement is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to in this Agreement or otherwise available under law.

 

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

 

 

[Signature Page to Follow]

 

91

 

IN WITNESS WHEREOF,
the Parties have executed this Collaboration Agreement through their duly
authorized representatives to be effective as of the Effective Date.

 

 

	
  PROTEIN DESIGN LABS, INC.

  	
  BIOGEN IDEC MA INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Mark McDade

  	
   

  	
  By:

  	
  /s/ James Mullen

  	
   

  
	
   

  
	
  Title:

  	
   President and CEO

  	
   

  	
  Title:

  	
      President

  	
   

  
	
   

  
	
  Date:

  	
  September 12, 2005

  	
   

  	
  Date

  	
    September 12, 2005

  	
   

  
										

 

 

EXHIBIT A

PDL PATENT RIGHTS

 

I.                                         Queen
Patents

 

[****]

 

II.                                     [****]
Patent Rights

 

[****]

 

III.                                 [****]
Patent Rights

 

[****]

 

IV.                                 [****]
Patent Rights

 

[****]

 

 

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

 

 

EXHIBIT B

 

THIRD
PARTY LICENSES

 

[****]

 

 

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

 

94

 

EXHIBIT C

 

FINANCIAL
PLANNING, ACCOUNTING AND REPORTING PROCEDURES

FOR COLLABORATION AGREEMENT

 

This Exhibit C
to the Collaboration Agreement (the “Agreement”)
dated as of the Effective Date, between Protein Design Labs, Inc. (“PDL”) and Biogen Idec MA, Inc. (“Biogen Idec”)
covers financial planning, accounting policies and procedures to be followed in
determining Development Expenses, Ongoing Development Expenses, Other
Out-of-Pocket Costs and Reimbursable Commercial Costs pursuant to the
Agreement.

 

For such
purpose, this Exhibit C sets forth the principles for reporting
actual results and budgeted plans in the Territory, the frequency of reporting,
the use of a single “Functional Currency”
(as defined in A.3) and the methods of determining payments to the Parties,
auditing of accounts and other matters.

 

This Exhibit C
also provides agreed upon definitions of financial terms applicable to the
Parties for purposes of the Agreement. All capitalized terms used herein without
definition shall have the meanings ascribed thereto in the Agreement and, where
applicable, the further definitions contained herein. References in this Exhibit C
to a “Party” or “Parties”
shall be construed to mean Biogen Idec or PDL, as the case may be, and in every
case shall be deemed to include a Party’s Affiliates or sublicensees
under the Agreement.

 

The contents
of this Exhibit C are hereby incorporated into the Agreement and
are governed by the terms and conditions of the Agreement, including the
confidentiality provisions set forth therein. Notwithstanding anything in the
Agreement to the contrary, no cost, expense, amount or sum allocable or
chargeable to the Parties’ activities under the Agreement shall be
allocated or charged more than once. Unless otherwise specifically authorized
by the Parties or the Agreement, all costs, expenses, amounts or sums to be
charged or allocated by one Party to the other Party under the Agreement shall
not be so chargeable or allocable unless they are both directly related to the
Agreement and the activities to be performed under the Agreement and are
reasonable and customary with respect to the global biopharmaceutical industry
considering the respective size and activities of the two Parties as collaborators
under the Agreement.

 

A.                                    Definitions,
Reporting and Reconciliation

 

A.1.                          Definitions

 

A.1.1                   “Combination
Product” shall mean a product containing both the Collaboration Product and
one or more other active ingredients in addition to the Collaboration Product
where the other active ingredients have independent prophylactic or therapeutic
effect when used alone to treat the disease or indication for which the
Combination Product is labeled, whether the Collaboration Product and the other
active

 

 

ingredients are together in a physical mixture or
packaged and priced together as a single product.

 

A.1.2                   “Combination
Product Amount” shall mean the following: in the event a Collaboration
Product is sold in the form of a Combination Product, and provided that the
JSC  has approved the sale and marketing
of such a Combination Product in a Commercialization Plan , Net Sales for such
Combination Product for purposes of this Agreement will be determined by [****].
If, on a country-by-country basis, the other active component or components in
the combination are not sold separately in such country, Net Sales shall be
calculated by [****]. If, on a country-by-country basis, the Collaboration
Product component of the Combination Product is not sold separately in such country,
but the other active component or components are sold separately, Net Sales
shall be calculated by [****]. If, on a country-by-country basis, neither the
Collaboration Product nor the other active component or components of the
Combination Product is sold separately in such country, [****].

 

A.1.3  “Cost of
Clinical Supplies”  shall mean a
Party’s costs to produce [****], to the extent that such costs would ordinarily
be included [****] for a similar product, including without limitation labor
and material cost, allocable depreciation and amortization, product quality
assurance/control costs, allocable facilities costs (e.g., sewer, water,
property taxes), Third Party Royalties, insurance, and other costs borne by the
party for transport, customs and duty clearance and storage of Clinical
Supplies of Collaboration Product. [****].

 

A.1.4                   “Cost of Goods
Manufactured for Sale” or “COGM” shall mean a Party’s costs to produce [****]
and/or [****] to the extent that such costs would ordinarily be included [****]
for a similar product, including without limitation labor and material cost,
allocable depreciation and amortization, product quality assurance/control
costs, allocable facilities costs (e.g., sewer, water, property taxes), Third
Party Royalties, insurance, and other costs borne by the party for transport,
customs and duty clearance and storage of Commercial Supplies of Collaboration
Product. [****].

 

A.1.5                   “Cost of Sales”
shall mean a Collaboration Product’s Cost of Goods Manufactured for Sale [****],
Third Party Royalties (i.e., any allocable intellectual property acquisition
and licensing costs not included in COGM) and transport, customs and duty
clearance on sales if borne by the seller.

 

A.1.6                   “Development Expenses”  shall mean the
costs and expenses associated with Development activities actually for each
Collaboration Product incurred by Biogen Idec or PDL or their Affiliates from August 2,
2005, provided that the provisions of Section 3.5(a)(ii) are complied
with, and otherwise, from the Effective Date through the later of (a) [****],
or (b) [****]. The costs and expenses associated with

 

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96

 

Development
activities shall include those costs required to obtain, maintain and/or expand
the authorization and/or ability to manufacture, formulate, fill, ship and/or
sell Collaboration Product in commercial quantities to Third Parties in the
Territory, including the costs of the Parties associated with the transfer of,
and implementation of manufacturing technology necessary to qualify a
manufacturing facility. Development Expenses shall also include, but are not
limited to, costs of research or Development, including costs of studies on the
toxicological, pharmacological, metabolical or clinical aspects of a
Collaboration Product conducted internally or by individual investigators or
consultants and necessary for the purpose of obtaining, maintaining and/or
expanding marketing approval of a Collaboration Product, process development,
process improvement and scale-up costs, validation costs, including
qualification lots, the manufacture of Clinical Supplies of Collaboration
Product, and costs for preparing, submitting, reviewing or developing data or
information for the purpose of submission to a governmental authority to
obtain, maintain and/or expand manufacturing and/or marketing approval of a
Collaboration Product and costs of marketing studies related to Collaboration
Product. Development Expenses shall include the previously incurred cost of any
inventory of Collaboration Products held by PDL at the Effective Date, provided
that the date at which the cost of any such inventory shall be deemed to be
incurred by PDL as a Development Expense shall be the date such product is
shipped for use in Clinical Trials for a Collaboration Product. Development
Expenses shall also include expenses for data management, statistical designs
and studies, document preparation, and other administration expenses associated
with the clinical testing program. In determining Development Expenses
chargeable under this Agreement, each Party will use its respective project
accounting systems, and will review its respective project accounting systems
and methodologies with the other Party. The Parties shall agree upon and
consistently apply methodologies for calculating and allocating Development
Expenses based on their respective internal accounting systems. The Parties
hereby agree that efforts of the employees of a Party or its Affiliates in
performing its activities hereunder shall be charged as Development Expenses at
the applicable FTE Rate. Notwithstanding anything in this Section to the
contrary, only those Development Expenses that are contemplated by the
Development Plan and an Annual Workplan/Budget or were otherwise approved by
the JSC shall be chargeable by a Party as Development Expenses with any cost
overruns treated in the manner set forth in Section A.2.2 of this Exhibit C.
All payments made by a Party to a Third Party in connection with the
performance of its activities under the Development Plan and an Annual
Workplan/Budget shall be charged as Development Expenses at such Party’s actual
out-of-pocket cost. The Cost of Clinical Supplies of Collaboration Product
shall be charged as a Development Expense. Except to the extent included in
Cost of Clinical Supplies of Collaboration Product, expenses incurred by each
Party for equipment, materials and supplies utilized in performing its
activities under the Development Plan and an Annual Workplan/Budget shall not
be separately charged as Development Expenses, except for those expenses
incurred by a Party, with the prior written consent of the JSC as set forth in
the Development Plan and Annual Workplan/Budget, in the purchase or making of
equipment, materials or supplies (other than common laboratory supplies, e.g., pipettes, test tubes, petri dishes, reagents, and the
like) that are to be used exclusively in connection with the performance of
such

 

97

 

Party’s
activities under a Development Plan and an Annual Workplan/Budget (e.g., laboratory animals, placebo supplies, etc.), which
expenses shall be charged as Development Expenses at such Party’s actual
out-of-pocket expense incurred in purchasing or making such equipment,
materials or supplies. Special purchases of capital equipment not related to
Manufacturing that are used solely for purposes of the Collaboration shall be
approved in advance by the JSC.

 

A.1.7                   “Distribution Costs”  shall mean the
FTE costs and other costs specifically identifiable or allocable to the
distribution of Collaboration Product by a Party and described in an Annual
Commercialization Plan/Budget including warehousing, transportation, order
entry, billing, shipping, credit and collection and other such activities as
approved by the JSC. For purposes of this definition, FTE costs shall be
charged at the applicable FTE Rate.

 

A.1.8                   “FTE Rate” shall
mean as defined in Section A.6 of this Exhibit C.

 

A.1.9                   “Gross Sales” shall mean the gross amount invoiced by a Party
or its Affiliates or sublicensees for sales of a Collaboration Product to Third
Parties in the Territory, including sales to distributors. For clarity, Gross
Sales will include a Party’s revenue from distributors, and not revenue of the
distributors themselves. A sale or transfer of a Collaboration Product by a
Party to one of its Affiliates shall not be considered a sale to a Third Party
for the purpose of this provision but the resale of such Collaboration Product
by such Affiliate to a Third Party shall be a sale for such purposes. In the
event the Collaboration Product is sold in the form of a Combination Product,
Gross Sales will be the Combination Product Amount. Each Party shall
communicate to the other Party any mandatory discounts to Gross Sales levied by
any Third Party.

 

A.1.10            “Marketing Costs”
shall mean the FTE costs and other direct costs of marketing, promotion and
advertising, including, without limitation, costs for preparing and reproducing
detailing aids, Collaboration Product promotional Materials and other
promotional materials,  costs of professional education,  product related public relations, relationships with
opinion leaders and professional societies, market research (before and after
product approval), healthcare economics studies, Post-Approval Clinical Trials,
and other similar activities directly related to the Collaboration Products, in
each case as approved by the JSC as part of the Commercialization Plan and an
Annual Commercialization Plan/Budget. Such costs may also include actual
out-of-pocket costs for outside services and expenses (e.g., consultants,
agency fees, meeting costs, etc.). “Marketing Costs” shall also include
activities related to obtaining reimbursement from payers, costs of sales and
marketing data, and costs not previously included as Sales Costs. For purposes
of this definition, FTE costs shall be charged at the applicable FTE Rate, as
set forth in Section A.1.16 of this Exhibit C.

 

A.1.11  “Net Sales” shall
mean Gross Sales of a Collaboration Product less applicable Sales Returns and
Allowances.

 

A.1.12  “Ongoing Development Expense” shall mean FTE costs and

 

98

 

other costs
and expenses borne by either Party or its Affiliates with respect to Phase IV
Clinical Trials approved by the JSC and other expenses approved by the JSC
associated with market positioning of a Collaboration Product to the extent not
otherwise included within Development Expenses or Marketing Costs or Sales
Costs under any other written agreement between the Parties or their Affiliates
relating to Collaboration Product. For purposes of this definition, FTE costs
shall be charged at the applicable FTE Rate.

 

A.1.13  “Operating Expenses” shall mean Cost of Sales,  Marketing Costs,  Sales Costs, Ongoing Development
Expenses,  Other Out-of-Pocket Costs and
Distribution Costs

 

A.1.14  “Other Out-of-Pocket Costs” shall mean other operating
expenses paid by the Parties or their Affiliates to Third Parties which are not
part of Development Expenses, but are considered and approved by the JSC as
expenses for purposes of the cost sharing arrangements under the Agreement. Other
Out-of-Pocket Costs shall be limited to the following:

 

•                       Third Party
License Fees (other than those related to the manufacture of Collaboration
Product to the extent covered under any other written agreement between the
Parties or their Affiliates related to Collaboration Product)

 

•                       Patent
Costs and trademark costs (as limited by Article 12 of the Agreement)

 

•                       product
liability insurance to the extent the Parties obtain a joint policy

 

•                       costs
pursuant to joint ownership of intellectual property as outlined in Article 12
of this Agreement

 

•                       costs
incurred in the defense of infringement suits pursuant to Section 12.8 of
the Agreement

 

•                       other
expenses approved by the JSC

 

A.1.15  “Post-Approval Clinical Trial” shall mean any clinical trial
in an indication, other than a Phase 3 Clinical Trial or Phase 4 Clinical
Trial, to be conducted after a Regulatory Approval for such indication.

 

A.1.16            “Sales Costs” shall
mean FTE costs and other direct costs approved by the JCC as part of the
Commercialization Plan and an Annual Commercialization Plan/Budget and
specifically identifiable to sales of Collaboration Products in the Territory. Sales
Costs shall include costs associated with Sales Representatives and training of
the Sales Representatives, sales meetings, details, sales call reporting, work
on managed care accounts, costs related to customer service and other sales and
customer service-related expenses. Sales Costs will not include start-up costs
associated with either Party’s sales force, including recruiting, relocation

 

99

 

and other similar costs. The annual FTE cost shall be determined based
on the actual FTE cost from the prior budget year for the respective Sales,
Marketing, Customer Service, Managed Markets, Decision Support and Medical
Affairs functions of each Party, with one collaboration FTE rate established
each year for all sales and marketing functions.

 

A.1.17  “Sales Returns & Allowances” shall
mean the sum of (a) and (b), where: (a) [****]; and (b) [****].

 

It is the
intention of the Parties that the interpretation of these definitions in this Exhibit C
will be in accordance with U.S. GAAP consistently applied in accordance with
Biogen Idec then current practices. A Party will promptly make the appropriate
adjustments to the financial information it supplies under the Agreement to
reflect changes to the provisions, including reasonable detail underlying the
adjustment, in reporting results of operation.

 

A.2.1. Reporting.
Each Party shall report to the other Party forecasts, budgets and actual
results of operations related to the following:

 

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

 

*Certain information on
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100

 

Reporting by
each Party will be performed as follows:

 

	
  Reporting Event

  	
   

  	
  Frequency

  	
   

  	
  Timing of Submission

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

The financial
representatives from the Parties will review financial information [****] and
meet as appropriate but shall in any event meet in person at least quarterly to
review and approve the following:

 

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

 

Costs included
in Cost of Clinical Supplies are not subject to JSC approval as long as they
are consistent with the definitions and within the JSC approved budget.

 

A.2.2  Reconciliation Statements.
Within [****] following the end of a Calendar Quarter, each Party shall submit
to the other Party its report of actual results as outlined above (including a
summary of charges and credits allocated to its Development Expense Project
Account). Expenses charged by either Party as Ongoing Development Expenses,
Other Out-of-Pocket Costs and Development Expenses shall not exceed [****] of
the amount included for the total expenditure in the then current Development
Plan or Annual Workplan/Budget, as the case may be, unless the JFC recommends,
and the JSC approves such excess expense. If actual costs of any expense line
item in implementing an Annual Work Plan/Budget or the Development Plan is
expected to vary by more than [****], then the Party incurring the variance(s)
has

 

101

 

the obligation
to inform the other Party of such variance(s) in a timely manner and to discuss
with such Party the causes of the variance(s). Any such discussion as to the
cause of the variances shall occur at the JFC. If the actual costs of
implementing an Annual Work Plan/Budget or the Development Plan are expected to
vary by more than [****] from the amounts budgeted for expenditure during the
calendar year, the Responsible Development Party will promptly revise, as
applicable, the Annual Workplan/Budget or Development Plan and submit it in
writing, with an explanation of the variance and the reasons therefore, for
approval to the JSC. If the JSC does not approve the variance, the amount by
which the actual costs exceed [****] of the budgeted costs shall be borne by
the Party that incurred the costs.

 

The financial
representatives from each Party on the JFC shall be responsible for, within [****]
days following the end of a Calendar Quarter, preparing a statement (“Reconciliation Statement”) in a format agreed to by the
Parties showing each Party’s results, the calculations of Ongoing Development
Expenses, Other Out-of-Pocket Costs, Cost of Clinical Supplies, COGM and Development
Expenses sharing under Section 3.6 of the Agreement and any cash
settlement required. The Reconciliation Statement and reports of actual results
compared to budget will be sent to the JFC, within [****] following the end of
a Calendar Quarter for approval. After approval by the JFC, the JFC will
forward the Reconciliation Statement to the JSC for its information or approval
in the case of a dispute. The Reconciliation Statement shall be provided to the
JSC [****] prior to the date upon which the JSC shall meet to approve the
Reconciliation Statement, if approval is being sought. Reconciliation
Statements shall be made by PDL or Biogen Idec in the manner set forth in Section A.5
of this Exhibit C.

 

A.3  Foreign Exchange. The
“Functional Currency” for accounting for
Ongoing Development Expenses, Other Out-of-Pocket Costs and Development
Expenses will be U.S. dollars. Except as the Parties otherwise mutually agree,
for billing and reporting, the statement of operations will be translated into
U.S. dollars using the [****] listed in The Wall Street Journal
for the [****]. If, due to restrictions or prohibitions imposed by national or
international authority, payments cannot be made as provided in this Section,
the Parties shall consult with each other with a view towards finding a prompt
and acceptable solution, and the paying Party will transfer funds as the other
Party may lawfully direct at no additional out-of-pocket expense to the paying
Party.

 

A.4  Audits and Interim Reviews.
Either Party shall have the right to request that a nationally recognized,
independent accounting firm to be mutually agreed upon by the Parties and that
is not either Party’s independent accounting firm perform an audit
or interim review of the other Party’s books and records as they relate to

 

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

 

102

 

activities
under this Agreement in order to express an opinion regarding such Party’s
accounting for revenues, costs and expenses under this Agreement. Such audits
or review will be conducted at the expense of the requesting Party. Either
Party shall have the right to request that a nationally recognized, independent
accounting firm to be mutually agreed upon by the Parties and that is not
either Party’s independent accounting firm perform an audit of the other Party’s
books of accounts for the sole purpose of verifying compliance with the
Agreement and the Transaction Agreements. Upon [****] prior written notice from
a Party (the “Auditing Party”), the other Party
(the “Audited Party”) shall permit the
mutually agreed upon independent accounting firm to examine the relevant books
and records of the Audited Party and its Affiliates as may be reasonably
necessary to verify the reports and information submitted by the Audited Party
and the accuracy of any Reconciliation Statement. An examination by a Party
under this Section shall occur not more than [****] and shall be limited
to the pertinent books and records for any calendar year ending not more than [****]
before the date of the request. The accounting firm shall be provided access to
such books and records at the Audited Party’s facility(ies) and/or the
facilities of its Affiliates or sublicensees where such books and records are
normally kept and such examination shall be conducted during the Audited Party’s
normal business hours. The Audited Party may require the accounting firm to
sign a standard non-disclosure agreement with terms that are not inconsistent
with the terms of the Agreement before providing the accounting firm access to
the Audited Party’s facilities or records. Upon completion of the audit, the accounting
firm shall provide both Biogen Idec and PDL a written report disclosing whether
the reports submitted by the Audited Party are correct or incorrect and the
specific details and supporting analysis for any discrepancies. No other
information shall be provided to the Auditing Party. If the accounting firm
determines that, based on errors in the reports so submitted, any report
prepared in accordance with the Agreement is incorrect, the Parties shall
promptly revise the report and the associated Reconciliation Statement and any
additional amount owed by one Party to the other shall be paid within [****]
after receipt of the accountant’s report, along with interest at the lesser of (i) the
[****] or (ii) the highest rate permitted by applicable law from the date
that such additional amount should have first been paid; provided,
however, that no such interest shall be
payable if the errors leading to the Reconciliation Statement being incorrect
were in the reports provided by the Party to receive such additional amount. Additionally,
if the accountant determines that the reports submitted by the Audited Party
overstate the Audited Party’s share by more than [****], the Audited Party
shall reimburse the Auditing Party for the expenses incurred by the Auditing
Party in conducting the audit. Notwithstanding anything to the contrary herein,
the Parties shall coordinate with their Affiliates such that not more than [****]
audit of a Party and its Affiliates as a whole, shall be performed in any given
calendar year with respect to the

 

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

 

103

 

development,
manufacturing, commercialization or other use of the Collaboration Product
under any written agreement between the Parties and/or their Affiliates
relating to the Collaboration Product. In the event of any sublicense or
transfer of rights with respect to Collaboration Products by a Party under this
Agreement, the sublicensor or transferor shall provide for audit rights by the
other Party to this Agreement in accordance with this Section A.4 of this Exhibit C.

 

A.5 
Payments Between the Parties. Based upon the
Reconciliation Statement, as approved by the JFC or the JSC, as applicable,
there shall be a cash settlement between the Parties no later than [****]
after the end of each Calendar Quarter. In the event any payment is made after
the date specified in the preceding sentence and provided that such payment is
not otherwise subject to good faith dispute, the paying Party shall increase
the amount otherwise due and payable by adding interest at the lesser of (i) [****]
or (ii) the highest rate permitted by applicable law from the date that
such additional amount should have first been paid. Except where the actual
expenses for the Daclizumab development exceeds the annualized budget/plan by
more than [****], and such variances were approved by the JSC, then the Parties
shall get a payment deferral of [****] for cash settlement of the amount in
excess of [****] of the annualized budget/plan. If a Party elects to defer
payments during this time, interest will accrue [****] and through settlement.

 

Any other amount owed by one Party to the
other Party under this Agreement, except for amounts pursuant to Reconciliation
Statements, that is not paid within the applicable time period set forth herein
shall bear simple interest [****], as reported in the Wall Street Journal,
Eastern Edition, on the due date (or, if the due date is not a business day, on
the last business day prior to such due date).

 

A.6                             FTE
Methodology

 

A.6.1                   Accounting for
Development Expenses. All Development Expenses, Ongoing Development Expenses
and Other Out-of-Pocket Costs will be based on the appropriate costs definition
stated in the Agreement or Section A.1 of this Exhibit C.

 

Each Party shall report Development Expenses
and Ongoing Development Expenses based on its project cost system (which shall
in any event track FTEs by functional area and by month) or using such other
system as such Party applies with respect to its internal programs and which
system has been reviewed with the JFC. In general, these project cost systems
shall report actual and/or allocable time spent on specific projects, apply the
FTE Rates, determined in the manner specified below, capture actual and/or
allocable costs of specific projects and allocate other expenses to

 

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

 

104

 

projects. For
Other Out-of-Pocket Costs the Parties will allocate costs based on spending in
the relevant departments or applying such other allocation methodology as such
Party uses with respect to all other products taken as a whole, and which shall
be approved by the JSC.

 

A.6.2                   Research and
Development FTE Rate. For the [****], the FTE rate will be set at [****]
per year. FTE Rates will increase annually to reflect the change over the
preceding [****] for which data is then available in the [****], All Items (as
published by the [****]).  FTE Rates
shall be set in a manner, which fairly reflects the direct costs of each Party
for the direct functional groups specified below:

 

Direct
Functional Groups.       Research &
Development shall include the following: Research, Project Management,
Preclinical, Product Development/QA, Medical Research/Medical
Operations/Clinical, Biometry (biostatistics and data management), Medical
Writing,  Regulatory Affairs/Drug Safety,
Manufacturing (not including production of Clinical Supplies and commercial supplies,
which will be stated in the Clinical Supply Plan for Clinical Supplies and in
the Commercial Supply Agreement for Commercial Supplies).

 

Total budgeted
expenses incorporated in the FTE Rate shall include and be limited to: [****].

 

A.7                             Principles
of Reporting

 

The results of operations of the Collaboration will be presented in the
following format (on a per Collaboration Product basis), with the categories as
defined in Section A.1 below:

 

A.7.1                   Income
Statement

 

Gross Sales

Less: Sales
Returns and Allowances

= Net Sales

Less: Cost of
Sales

= Gross
Profits

Less:
Marketing Costs

Less: Sales
Costs

Less: Ongoing
Development Expenses

Less: Other
Out-of-Pocket Costs

= Contribution

Less:
Distribution Costs

=
Collaboration Product Profit (Loss)

 

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

 

105

 

Separately
reported will also be:

 

Other Development Costs

 

Development Expenses

 

Cost of Clinical Supplies

 

Ongoing Development Expense

 

It is the intention of the Parties that the
interpretation of these definitions will be in accordance with U.S. GAAP
consistently applied consistent with a Party’s report in its financial statements
filed in accordance with the Securities Exchange Act of 1934, as amended.

 

A.7.2                   Subcomponent
Reporting

 

For reporting purposes only, expenses will be
identified for the budget, forecast, and quarterly actual amounts within this Section A.7.
by the following detail sub-components within the aggregate Income Statement
expense components specified under Section A.7.1.

 

•                  Cost
of Sales – cost of goods manufactured for sale, third party royalties, freight &
other

•                  Marketing
– marketing promotion, market research, marketing headcount

•                  Sales
– sales headcount, sales promotion & sales operations

•                  Development
– by indication label-enabling activities & trials, by indication post
marketing activities & trials, cost of goods manufactured for clinical
supply, medical education.

 

A.8                             Budget
and Long Range Plan

 

Responsibility for the Budget and Long Range Plan with regard to
Collaboration Products, prior to the First New Product FDA Approval, will be as
specified in Articles 2 and 3 of the Agreement

 

Budgets will be prepared annually for the following full calendar year
containing monthly details/numbers.

 

Budgets will be supplemented with high level business plans and costs
for clinical trials, registration applications, and plans for product
introduction, sales efforts and promotion.

 

106

 

EXHIBIT D
:  OPT OUT ROYALTIES AND ROW ROYALTIES

 

I. OPT-OUT ROYALTIES FOR
COLLABORATION PRODUCTS

 

	
   

  	
   

  	
  Existing Products

  	
   

  	
  Existing Products

  	
   

  	
  Future Products

  	
   

  
	
   

  	
   

  	
  Payable to Biogen

  Idec

  	
   

  	
  Payable to PDL

  	
   

  	
  Payable to Biogen

  Idec/ PDL

  	
   

  
	
  Preclinical

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  Phase I

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  Phase II

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  Phase III

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  After
  Approval

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

*Royalties in %

 

II. ROW ROYALTIES OWED FOR ROYALTY
PRODUCTS

 

	
   

  	
   

  	
  ROW Royalty

  payable to PDL

  	
   

  	
  Royalty on

  Termination**

  payable to

  Biogen Idec

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

	
  *Royalties
  in %

  

 

**Note:  The royalty in table
applies provided that diligent efforts were underway in the territory, and that
such termination was Phase III or later in the US and EU territories. In the
event that this is not the case, Phase II royalties should apply for Biogen
Idec in the ROW territory:

 

[****]

[****]

[****]

 

 

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

 

 

Exhibit 1.41

 

Daclizumab PRODUCT

 

[****]

 

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

 

 

EXHIBIT 1.54

 

Fontolizumab PRODUCT

 

[****]

 

 

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

 

 

EXHIBIT 1.135

 

Volociximab
PRODUCT

 

[****]

 

 

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

 

 

Exhibit 2.1

 

Joint Operating Principles

 

The following Principles are intended as guidelines for the operation
of the Committees and Collaboration, but the specific terms of the Agreement
shall be controlling in the case of any conflict between a provision of the
Agreement and these guidelines.

 

 Guiding Principles

 

•                  Engage in
development activities with the goal of obtaining regulatory approval for each
collaborative product as soon as reasonably practicable in major market
countries where it makes commercial sense to do so given the economic profile
and the safety and efficacy profile of such collaborative product

•                  Utilize the
then-prevailing infrastructure, expertise and experience of each party with
respect to specific development activities for collaborative products in
specific indications

•                  Create
reasonable flexibility to allow each party to build infrastructure for
development and commercialization activities if it reasonably elects, provided
that the cost associated with building such infrastructure are not charged to
the reimbursable activities under this agreement

•                  Avoid
unnecessary duplication of resources

•                  Maximize
information flow between parties

•                  Allow each party
to have input into the content and scope of Registrations for collaborative
products and, through their Joint Steering Committee representatives, the right
to approve substantive portions of any registrations

•                  Allow each party
to participate in substantive interactions with Regulatory Authorities related
to collaborative products

 

1.                                      Development:  Joint Development Plan

 

Each joint development plan shall be in the form agreed upon by the
Joint Strategy Committee, but shall address, at a minimum, the following:

•                  Goals for the
development of the collaborative products

•                  Critical
decision points criterion

•                  Scope of
research and clinical work, including regulatory strategy

•                  Timeline for
performing research and clinical work

•                  Anticipated
indications, including the desired product profile and formulation

•                  Competitive
market issues

•                  High level cost
and other financial estimates

•                  Manufacturing,
product supply and cell-line development activities

•                  General
commercialization framework

 

 

•                  Operational
responsibilities for each party

•                  Key technical
and commercial assumptions

 

2.                                      Development:  Annual Work Plan

 

•                  A reasonable
detailed description of the development activities to be performed during the
next full calendar year or to the next key decision point 

•                  The estimated
budget for such activities for at least the next full calendar year 

•                  A designation of
which party is responsible for each task 

•                  Estimated
staffing levels 

•                  Any expected use
of Third Party contractors required to carry out the applicable development
activities and the party that shall manage such third party contractor 

•                  Estimated
timelines for completion of such activities 

•                  Estimated
product requirements for each activity

 

 

Exhibit 3.3

 

Initial Development Plans And Initial
Development Program Budget For Existing Products

 

Neither Party shall be obligated to incur costs for any activities,
except for those set forth herein, unless and until (a) such
study/activity is approved by the JSC, or (b) is included in a Development
Plan approved by the JSC pursuant to Section 3.3(b) of the Agreement.

 

All costs submitted for reimbursement by the Parties must be
demonstrably related to the activities specified in this draft Development
Plan.

 

I. Development Plan for Daclizumab in [****]

 

2.1                               A.
Daclizumab in [****]:  Clinical Program
Rationale and Strategy 

 

[****].

 

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

 

 

B. Daclizumab in [****]:  Clinical Development Studies 

 

	
  Study

  	
   

  	
  N

  [Active;

  Placebo]

  (Inv.

  Centers)

  	
   

  	
  Purpose

  	
   

  	
  First

  Patient

  Dosed

  	
   

  	
  Last

  Patient

  Visit

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost ****

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  

 

Notes:* – Pivotal studies; ** TBD – to be determined; *** dac –
Daclizumab; **** [****].

 

C. Daclizumab
in [****]:  Timetable of Development
Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

II. Development Plan for Volociximab in [****]

 

A. Volociximab in [****]:  Clinical Program Rationale and Strategy 

 

[****]

 

B.
Volociximab in [****]:  Clinical
Development Studies

 

	
  Study

  	
   

  	
  Est. # Pts

  (# of

  Centers)

  	
   

  	
  Purpose of

  study

  	
   

  	
  Est. Start

  Date

  	
   

  	
  Est. Last

  Patient visit

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost*

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* [****].

 

C. Volociximab in [****]:  Major Project Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

III. Development Plan for Volociximab in [****]

 

A. Volociximab in [****]:  Clinical Development Rationale and Strategy

 

[****]

 

B.
Volociximab in [****]:  Clinical
Development Studies

 

	
  Study

  	
   

  	
  Est. # Pts (#

  of Centers)

  	
   

  	
  Purpose of

  study

  	
   

  	
  Est. Start

  Date

  	
   

  	
  Est. Last

  Patient

  visit

  (safety)

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost*

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* [****].

 

C. Volociximab in [****]:  Major Project Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

IV. Development Plan for Fontolizumab in [****]

 

A. Fontolizumab in [****]:  Clinical Development Rationale and Strategy

 

[****]

 

B.
Fontolizumab in [****]:  Clinical
Development Studies

 

	
  Study

  	
   

  	
  Est. # Pts

  (# of

  Centers)

  	
   

  	
  Purpose of

  study

  	
   

  	
  Est. Start

  Date

  	
   

  	
  Est. Last

  Patient

  visit

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost*

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* [****].

 

C. Fontolizumab in [****]:  Major Project Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

V. Initial
Program Budget for Existing Products

 

2005 FTE and External Cost  ($ in thousands)

 

	
  Function

  	
   

  	
  Type

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  Program

  Totals

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
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  [****]

  	
   

  
	
   

  	
   

  	
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  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
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  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
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  [****]

  	
   

  	
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  [****]

  	
   

  
	
   

  	
   

  	
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  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* An additional [****]
in [****] expense will be incurred if the [****] trial enrolls on plan.

 

 

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

 

 

EXHIBIT 4.1(b)(ii)

OPT OUT POINTS FOR EXISTING
COLLABORATION PRODUCTS

 

2.1                               Daclizumab

 

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

 

2.2                               Fontolizumab

 

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

 

 

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

 

 

2.3                               Volociximab

 

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

 

 

Opt out points for New Collaboration Products or Indications shall be
decided by the JSC.

 

 

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

 

 

Exhibit 8.3

 

A Commercial Supply Agreement between the Parties for
Collaboration Products or Royalty Products shall contain, in addition to
customary manufacturing terms and conditions, the following obligations:

 

a.               The Responsible Commercialization Party
shall purchase [****] of its, its Affiliates and its sublicensees’ commercial
requirements of Collaboration Product from the Manufacturing Party.

 

b.              The Parties will agree to reasonable
forecasting mechanisms in the Commercial Supply Agreement. The Manufacturing
Party will provide the other Party with notice not less than [****] in advance
of any anticipated change in annual production that would impact such party’s
ability to meet forecasted demand.

 

c.               Collaboration Product shall be Manufactured
in accordance with all requirements of applicable laws and regulations and all
GMP, as prescribed from time to time by the FDA and other applicable worldwide
regulatory authorities, using the product specifications, manufacturing methods
and formulae as agreed upon by the Parties.

 

d.              If either Party believes that any
Regulatory Approval, GMP, or other applicable law, or any other notice from a
regulatory authority, shall require a change to the particular product specifications,
the Parties shall consult prior to the implementation of such change in order
to mutually determine whether such change is, in fact, required by such
Regulatory Approval, GMP, other applicable law or notice. Any such change in
product specifications will be effected upon mutual agreement of the Parties.

 

e.               In the event either Party is unable to obtain
Regulatory Approval for a Collaboration Product and such lack of approval is
related to the CMC Section, then the other Party shall have the right to become,
and assume all of the responsibilities of, the Manufacturing Party for such
product.

 

 

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

 

 

f.                 The non-Manufacturing Party shall have the
right to conduct (upon reasonable notice during reasonable business hours)
reasonable quality assurance audits with respect to all facilities, operations
and laboratories (and any records related thereto) of the Manufacturing Party
or, if applicable, the Third Party contract manufacturer used by such Party,
where applicable Manufacturing activities are conducted, as is reasonably
necessary to verify the compliance with GMP and other regulatory requirements.
The results of any such audit shall be provided to the other Party.

 

g.              The Manufacturing Party may
not utilize a Third Party contract manufacturer without the consent of the
non-Manufacturing Party.

 

h.              The Manufacturing Party shall
be responsible for release of product from its and its Third Party CMO’s
facilities. The non Manufacturing Party shall have access to, and the right to
review, all release documentation for any evidence of product nonconformance.

 

i.                  If the Manufacturing Party
desires to use a Third Party to perform any part of the Manufacture and supply
or if the Manufacturing Party plans to undertake capacity expansion,
significant facility improvements, or the purchase of capital equipment for the
Manufacture of Collaboration Product, the JSC shall first consider whether the
other Party has the ability, capability, and desire to perform such Manufacture
and supply and, if so, the Parties shall amend the Commercial Manufacturing
Agreement to cover the part of the Manufacture and supply to be performed by
such other Party.

 

j.                  In the event that the non Manufacturing
Party consents to use of a Third Party contract manufacturer, the Manufacturing
Party shall enter into a supply agreement and quality agreement and shall
ensure that the non Manufacturing Party shall either be a party to such
agreements (in addition to the Responsible Manufacturing Party), or a third
party beneficiary of such agreements. To the extent the non Manufacturing Party
is not a party to such agreements, it shall be a permitted assignee or
sublicensee under such agreement.

 

k.               The non Manufacturing Party shall have the
right to review and comment upon the Third Party supply agreement and quality
agreement.

 

l.                  If the Manufacturing Party utilizes a Third
Party contract manufacturer, such supply agreement shall require the Third
Party supplier to transfer sufficient information (including information
contained in the CMC section of any applicable Regulatory Filings, the
results of any stability studies performed on Product and copies of any direct
communications between the Third Party supplier and regulatory authorities in
relation to Product) to

 

 

Biogen Idec or PDL (as appropriate), in each case as is required to
implement the then-most current versions of such Manufacturing process, upon
termination of such agreement or otherwise upon request.

 

m.            If the Manufacturing Party is unwilling or unable to meet [****]
of the Responsible Commercialization Party’s requirements for Collaboration
Product on the timelines set forth in the Commercialization Plan for such
Collaboration Product or if the Collaboration Product Manufactured consistently
does not meet the requisite Product specifications and other quality
requirements set forth herein, then the Manufacturing Party shall, at the election of the other
party, conduct a transfer of the necessary Manufacturing
Technology to the non Manufacturing Party so as to enable it to Manufacture or
have Manufactured such Product by a Third Party contract manufacturer of its
choice. The non Manufacturing Party, upon such transfer, shall become the
Manufacturing Party for purposes of the Collaboration Product.

 

n.              The Parties shall enter into a Technology
Transfer Agreement containing the FTE Plans and costs related to CMC/filing
activities for the Collaboration Products. In addition, the Parties shall enter
into a Quality Agreement related to the Manufacture of the Collaboration
Products. Such Quality Agreement shall specify the designated Qualified Person
for release of finished Collaboration Products.

 

 

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

 

 

Exhibit 11.5

 

Required Attachment of Certain Provisions of the [****]

 

[****]

 

 

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00146-of-00352.parquet"}]]