Document:

exv10w12

Exhibit 10.12

SECOND AMENDMENT TO OFFICE LEASE AGREEMENT

     THIS SECOND AMENDMENT TO OFFICE LEASE AGREEMENT (this “Second Amendment”) is made and entered
into as of the 2nd day of December, 2008, by and between WASHINGTON TELEVISION CENTER LLC, a
District of Columbia limited liability company (“Landlord”) and BLACKBOARD INC., a Delaware
corporation (“Tenant”).

RECITALS

     A. Pursuant to that certain Office Lease Agreement dated as of December 15, 2006 (the
“Original Lease”), as modified by that certain First Amendment to Office Lease Agreement dated as
of June 5, 2007 (as modified, the “Lease”), Landlord has leased to Tenant certain space consisting
of approximately One Hundred Eleven Thousand Eight Hundred Ninety-Five (111,895) square feet of
rentable area on the first (1st), sixth (6th), seventh (7th) and
eighth (8th) floors in the office building located at 650 Massachusetts Avenue, NW,
Washington, D.C. 20001, as more particularly described in the Lease (the “Premises”).

     B. Landlord and Tenant desire to further amend the Lease as set forth in this Second Amendment
to expand the Premises to include the Fifth Floor Expansion Space (as defined below), pursuant to
the terms and conditions set forth herein.

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

     1. Defined Terms.  All defined terms herein shall have the meaning given to such term
in the Lease, unless specifically defined herein.

     2. Incorporation of Recitals.  The foregoing recitals are incorporated by reference
into this Second Amendment as if set forth in this Section 2 in full.

     3. Fifth Floor Expansion Space.  Tenant hereby leases from Landlord, and Landlord
hereby leases to Tenant, approximately Seventeen Thousand One Hundred Seventy- Three (17,173)
rentable square feet on the fifth (5th) floor of the Building as further identified on
Exhibit A attached hereto (the “Fifth Floor Expansion Space”) for the Fifth Floor Expansion
Space Lease Term (as defined below).

     4. Fifth Floor Expansion Space Lease Term. The lease term of the Fifth Floor
Expansion Space shall commence on the earlier of (a) the date Tenant commences conducting business
operations in any material portion of the Fifth Floor Expansion Space, or (b) October 1, 2009 (the
earlier of (a) or (b), the “Fifth Floor Expansion Space Commencement Date”), and shall be
coterminous with Lease Term, including any renewal or extension periods contemplated thereunder
(the “Fifth Floor Expansion Space Lease Term”).

 

 

     5. Fifth Floor Expansion Space Base Rent. Annual Base Rent for the Fifth Floor
Expansion Space shall be equal to the product of (a) the Fifth Floor Expansion Space Base Rent Per
Rentable Square Foot (as shown in the chart below) in effect during the applicable Fifth Floor
Expansion Space Lease Year (defined below), and (b) the number of square feet in the Fifth Floor
Expansion Space. With respect to the Fifth Floor Expansion Space, the term “Fifth Floor Expansion
Space Lease Year” means, as applicable, a period of twelve (12) consecutive months commencing on
the Fifth Floor Expansion Space Commencement Date, and each successive twelve (12) month period
thereafter; provided, however, that if the Fifth Floor Expansion Space Commencement Date is not the
first day of a month, then the second Fifth Floor Expansion Space Lease Year shall commence on the
first day of the month after the month in which the Fifth Floor Expansion Space Lease Commencement
Date occurs, and the Base Rent for any partial additional month during either the first or last
Fifth Floor Expansion Space Lease Year will be the Monthly Base Rent in effect for the first or
last, as applicable, Fifth Floor Expansion Space Lease Year prorated based on the actual number of
days in such month. Landlord and Tenant acknowledge that the Fifth Floor Expansion Space Lease
Years do not coincide with the “Lease Years” under the Original Lease.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Fifth Floor	 	 	 	 	 	 
	Expansion	 	Fifth Floor Expansion	 	Annual Fifth	 	Monthly Fifth Floor
	   Space	 	Space Base Rent Per	 	Floor Expansion	 	Expansion Space
	Lease Year	 	Rentable Square Foot	 	Space Base Rent	 	Base Rent
	1
	 	$	47.00	 	 	$	807,131.00	 	 	$	67,260.92	 
	2
	 	$	47.94	 	 	$	823,274.00	 	 	$	68,606.14	 
	3
	 	$	48.90	 	 	$	839,760.00	 	 	$	69,979.98	 
	4
	 	$	49.88	 	 	$	856,589.00	 	 	$	71,382.44	 
	5
	 	$	51.38	 	 	$	882,349.00	 	 	$	73,529.06	 
	6
	 	$	52.41	 	 	$	900,037.00	 	 	$	75,003.08	 
	7
	 	$	53.46	 	 	$	918,069.00	 	 	$	76,505.72	 
	8
	 	$	54.53	 	 	$	936,444.00	 	 	$	78,036.97	 
	9
	 	$	55.62	 	 	$	955,162.00	 	 	$	79,596.86	 
	10
	 	$	56.73	 	 	 	N/A	 	 	$	81,185.36	 

The term “Base Rent” includes the Annual Fifth Floor Expansion Space Base Rent, and with respect to
the third sentence of Section 4.1(a) of the Original Lease, the term “Monthly Base Rent”
includes the Monthly Fifth Floor Expansion Space Base Rent, and the term “Lease Year” includes the
term Fifth Floor Expansion Space Lease Year. Landlord and Tenant agree that the number of rentable
square feet in the Fifth Floor Expansion Space is Seventeen Thousand One Hundred Seventy-Three
(17,173) and not subject to remeasurement. Landlord and Tenant agree that the abatement of Monthly
Base Rent set forth in the first (1st) sentence of Section 4.1(b) of the Lease
is not applicable to the Fifth Floor Expansion Space Base Rent payable under the terms of this
Second Amendment.

     6. Fifth Floor Expansion Space Security Deposit and Prepaid Rent.

          (a) Within thirty (30) days after the date of execution of this Second Amendment by Landlord
and Tenant, Tenant shall deliver to Landlord a security deposit in the

2

 

amount of Four Hundred Three Thousand Five Hundred Sixty-Five Dollars and Fifty Cents
($403,565.50) (the “Fifth Floor Expansion Space Security Deposit”) pursuant to the terms of
Article VI of the Lease and as a condition to Landlord’s obligation to pay amounts to
Tenant in accordance with Section 9 of this Second Amendment. Tenant shall be permitted to
provide such security deposit in the form of a letter of credit pursuant to the terms of
Article VI of the Lease, or in the alternative, Tenant may replace the letter of credit
currently held by Landlord with a new letter of credit which includes the Fifth Floor Expansion
Space Security Deposit. Provided Landlord has received such replacement letter of credit, Landlord
agrees to return such initial letter of credit to Tenant promptly upon Tenant’s request. For the
purpose of the Lease, the Fifth Floor Expansion Space Security Deposit shall be deemed to be part
of and included within the term “Security Deposit” and shall be subject to the provisions of
Article VI of the Lease, including, but not limited to, the provisions of Section 6.1
(c) thereof regarding Tenant’s right to reduce the Security Deposit; provided, however, with
respect to any burn down of the Fifth Floor Expansion Space Security Deposit in accordance with the
terms of Section 6.1(c), the term “Lease Year” therein shall mean the Fifth Floor Expansion Space
Base Year and the term “Security Deposit” therein shall mean the Fifth Floor Expansion Space
Security Deposit (i.e., the burn down of the Fifth Floor Expansion Space Security Deposit shall
commence on the first day of the second Fifth Floor Expansion Space Lease Year).

          (b) Notwithstanding anything to the contrary, in no event will the Security Deposit (whether
pursuant to Section 6.1(c) of the Lease or otherwise) be reduced below the amount of Twenty-Five
Thousand Dollars ($25,000.00) until the Staircase Restoration Obligation (defined below) is
satisfied. Nothing in this Section 6(b) will be deemed or construed to limit the cost of the
Staircase Restoration Obligation to the sum of Twenty-Five Thousand Dollars ($25,000.00).

          (c) Within five (5) business days after the date of execution of this Second Amendment by
Landlord and Tenant, Tenant shall deliver to Landlord an amount equal to the first two (2) monthly
installments of Fifth Floor Expansion Space Base Rent (i.e., $134,521.84), which amount shall be
applicable toward and applied against Tenant’s Fifth Floor Expansion Space Base Rent obligations
first due under this Second Amendment.

     7. Operating Expenses and Real Estate Taxes. Commencing on the first (1st)
day of the second Fifth Floor Expansion Space Lease Year, Tenant shall pay (in accordance with the
process generally set forth in Section 5.1(e) of the Lease), as additional rent for the
Fifth Floor Expansion Space, (i) Tenant’s proportionate share (with respect to the Fifth Floor
Expansion Space only) of the amount by which Operating Expenses incurred by Landlord for each
calendar year falling entirely or partly within the Fifth Floor Expansion Space Lease Term exceed
the Fifth Floor Expansion Space Base Year Operating Expenses (hereinafter defined) incurred by
Landlord during the twelve (12) month period commencing January 1, 2009, and ending December 31,
2009 (the “Fifth Floor Expansion Space Base Year”), and (ii) Tenant’s proportionate share (with
respect to the Fifth Floor Expansion Space only) of the amount by which Real Estate Taxes for each
calendar year falling entirely or partly within the Fifth Floor Expansion Space Lease Term exceed
the Fifth Floor Expansion Space Base Year Real Estate Taxes (hereinafter defined) incurred by
Landlord during the Fifth Floor Expansion Space Base Year. For the purpose of this Second
Amendment, the term “Fifth Floor Expansion Space Base Year Operating Expenses” means the Operating
expenses incurred by Landlord during

3

 

the Fifth Floor Expansion Space Base Year and the term “Fifth Floor Expansion Space Base Year
Real Estate Taxes” means the Real Estate Taxes incurred by Landlord during the Fifth Floor
Expansion Space Base Year. Landlord and Tenant acknowledge that the “Base Year” for the “Premises”
under the Original Lease is different than the “Base Year” for the Fifth Floor Expansion space. To
the extent that the aggregate of the Operating Expenses and Real Estate Taxes (for the Fifth Floor
Expansion Space only) for any calendar year are less than the aggregate of the Fifth Floor
Expansion Space Base Year Operating Expenses and Fifth Floor Expansion Space Base Year Real Estate
Taxes, then Tenant shall only be responsible for the net increase over the aggregate of the Fifth
Floor Expansion Space Base Year Operating Expenses and the Fifth Floor Expansion Space Base Year
Real Estate Taxes after deducting the amount of such reduction from the Fifth Floor Expansion Space
Base Year Operating Expenses and/or Fifth Floor Expansion Space Base Year Real Estate Taxes (as
applicable); provided, however, in no event will the netting-out of increase in taxes and expenses
pursuant to this sentence result in a credit or reimbursement to Tenant.

     8. Condition of Fifth Floor Expansion Space. Tenant agrees to lease the Fifth Floor
Expansion Space in its “as-is” condition; provided, that Landlord shall be responsible for
demising the Fifth Floor Expansion Space at Landlord’s sole cost and expense. Notwithstanding the
foregoing terms of this Section 8, Landlord shall, prior to May 1, 2009, complete the
following: (i) replace all missing ceiling tiles and carpet tiles in the Fifth Floor Expansion
Space, which replacement tiles may come from Landlord’s storage, provided that such replacement
tiles are reasonably clean and consistent in appearance with the ceiling tiles and carpet tiles
existing in the Fifth Floor Expansion Space, (ii) replace all window blinds with the type and style
of meccho shades currently located in Tenant’s Premises on the sixth (6th), seventh
(7th) and eighth (8th) floors of the Building, (iii) refurbish the perimeter
heat pump units applicable to the Fifth Floor Expansion Space, (iv) perform a general cleaning of
the Fifth Floor Expansion Space, (v) with respect to the Fifth Floor Expansion Space, ensure that
the light fixtures, thermofusers and thermostats are in working order including replacement of
ballasts as needed, and (vi) perform HVAC balancing of the Fifth Floor Expansion Space.

     9. Tenant Improvements.

          (a) Tenant Work; Improvement Allowance. Tenant shall, in accordance with the
applicable terms of the Lease (including, without limitation, the applicable terms of Exhibit
B thereof), perform, and/or cause to be performed, the design and construction of the initial
tenant-improvements in Fifth Floor Expansion Space (the “Fifth Floor Expansion Space Tenant Work”),
at Tenant’s cost and expense. Notwithstanding the foregoing terms of this Section 9(a),
provided no Event of Default exists on the part of Tenant under the Lease, Landlord shall grant
Tenant an allowance (the “Fifth Floor Expansion Space Improvements Allowance”) in the amount of
Four Hundred Sixty Thousand Eight Hundred Eight and 82/100ths Dollars ($460,808.82), to be applied
to the cost of the Fifth Floor Expansion Space Tenant Work; provided, however, that Tenant must
apply the Fifth Floor Expansion Space Improvements Allowance towards “hard” costs. Landlord and
Tenant agree that (i) all references to Demolition in the Lease and (ii) the following Sections of
Exhibit B of the Lease do not apply to this Second Amendment: 3, 6(a), 6(b), 6(d), 8, 15
(except as provided in subsection (b) below) and Schedule II. For purposes of this Second
Amendment, all references to the “Improvements Allowance” in

4

 

Exhibit B of the Lease will be deemed to refer to the Fifth Floor Expansion Space
Improvements Allowance. Landlord hereby approves Coakley-Williams for the role of Leasehold
Contractor with respect to the Fifth Floor Expansion Space Tenant Work in addition to the general
contractors approved by Landlord in Section 7(a) of Exhibit B of the Lease. Any
portion of the Fifth Floor Expansion Space Improvements Allowance that remains unapplied after
application as set forth in this Second Amendment and as otherwise provided in Exhibit B to
the Lease by the fifth (5th) anniversary of the Fifth Floor Expansion Space Lease
Commencement Date (the “Fifth Floor Expansion Space Tenant Improvement Deadline”) (but not in
excess of Seventy-Two Thousand Nine Hundred Eighty-Five and 25/100ths Dollars ($72,985.25)) shall
be applied against the annual base rent next due and owing following for the Fifth Floor Expansion
Space Lease Commencement Date. Any unapplied portion of the Fifth Floor Expansion Space
Improvements Allowance in excess of Seventy-Two Thousand Nine Hundred Eighty-Five and 25/100ths
Dollars ($72,985.25) shall be deemed waived and forfeited if not utilized by the Fifth Floor
Expansion Space Tenant Improvement Deadline. Except for application of the Fifth Floor Expansion
Space Improvements Allowance toward annual base rent as provided herein, Landlord shall not be
obligated to disburse any of the Fifth Floor Expansion Space Improvements Allowance after the Fifth
Floor Expansion Space Tenant Improvement Deadline.

          (b) Landlord Oversight Construction Management Fee. Tenant shall be responsible for
the timely payment to Landlord of an oversight construction management fee equal to the amount of
one percent (1%) of Tenant’s total “hard” construction costs for the Fifth Floor Expansion Space
Tenant Work. Such management fee shall be paid in accordance with the second (2nd)
sentence of Section 15 of Exhibit B of the Lease. From time to time, upon
Landlord’s request, Tenant shall provide Landlord with documentation reasonably acceptable to
Landlord to allow Landlord to verify the “hard” construction costs expended by Tenant.

     10. Signage.

          (a) Landlord shall, at Landlord’s cost, provide Building standard suite entry signage
identifying Tenant in a location designated by Landlord and in such place, number, size, color and
style as are approved by Landlord in Landlord’s sole discretion, and Landlord also shall, at
Tenant’s option, list Tenant’s name in the Building lobby directory with respect to the Fifth Floor
Expansion Space pursuant to the terms of the Lease.

          (b) Subject to the terms of Article XI of the Lease and provided Tenant has entered
into an amendment(s) to the Lease whereby Tenant has leased either (x) all of the rentable square
footage located on the fifth (5th) floor of the Building or (y) any additional rentable
square footage in the Building, the total amount of which equals or exceeds the amount of the
remaining rentable square footage on the fifth (5th) floor of the Building (i.e., all of
the rentable square footage located on the fifth (5th) floor less the Fifth Floor
Expansion Space), then Tenant, at Tenant’s sole cost and expense, shall, subject to Landlord’s
approval which will not be unreasonably withheld, conditioned or delayed, be permitted to install
one (1) exterior identification sign (identifying Tenant’s name and/or logo) in a reasonably
prominent location on the Seventh Street, NW side of the Building (Landlord hereby approving the
conceptual size, design and location of the sign shown on Exhibit B), which exterior sign
may be illuminated in accordance with the terms of Article XI of the Lease. The foregoing
sentence relating to Tenant’s 7th Street signage rights shall supersede and replace the
applicable provisions of the

5

 

first (1st) sentence of Section 11.1 of the Lease relating to such Seventh
Street, NW signage rights (provided that Tenant’s obligation to remove any such signage if Tenant’s
Premises drops below the applicable amount in accordance with the terms of the Lease shall remain
effective).

          (c) Tenant, at Tenant’s sole cost and expense, shall, subject to Landlord’s approval
(including without limitation approval of the location, size and design) which will not be
unreasonably withheld, conditioned or delayed, be permitted to install one (1) sign in the elevator
lobby area of the Building and one (1) sign beside the doorway leading from the Building lobby to
Tenant’s reception desk on the Seventh Street, NW side of the Building.

     11. Landlord Renovation and Cleaning Obligations. Prior to May 1, 2009, Landlord
shall complete the following at Landlord’s sole cost and expense:

          (a) Common Areas. Landlord shall install Building standard floor and wall coverings
in the common areas of the fifth (5th) floor of the Building.

          (b) Restrooms. Landlord shall complete a cosmetic renovation of the restrooms on the
fifth (5th) floor of the Building, which renovation shall be at least comparable to the
renovation currently being performed by Landlord on the other set of restrooms located on the fifth
(5th) floor of the Building.

          (c) Window Washing. Landlord shall perform interior washing of all windows located
within the Fifth Floor Expansion Space.

     12. Internal Staircase. If Tenant constructs an internal staircase between the fifth
(5th) and sixth (6th) floors of the Building (the “Staircase”), Tenant shall,
prior to the end of the Lease Term or within forty-five (45) days after earlier termination of the
Lease, remove the Staircase, repair any damage caused by such removal and restore the affected
portion of the Premises and the Building to their condition immediately prior to commencement of
the Fifth Floor Expansion Space Lease Term. If Tenant fails to prosecute and timely complete such
removal and restoration, Landlord may, at Landlord’s option, complete such removal and restoration
and Tenant shall reimburse Landlord for all costs and expenses incurred in connection therewith, in
accordance with Section 9.1 of the Lease. Notwithstanding the foregoing and any provisions
to the contrary in the Lease, Tenant’s obligation to remove any interior stairwells constructed by
Tenant (including the Staircase) (the “Staircase Restoration Obligation”) may be deferred by Tenant
until Landlord has relet the applicable portion of the Premises and determined the scope of
required demolition of such stairwell(s) required for the succeeding tenant(s). Upon such
determination by Landlord, Landlord shall provide Tenant written notice of such determination,
whereupon Tenant shall have seven (7) business days to notify Landlord in writing of whether Tenant
elects to perform the Staircase Restoration Obligation (or portion thereof determined necessary by
Landlord). If Tenant notifies Landlord of its election not to perform the Staircase Restoration
Obligation or fails to notify Landlord of its election with respect to performing the Staircase
Restoration Obligation within such seven (7) business day period, then Landlord may at Landlord’s
sole option (i) elect to perform the Staircase Restoration Obligation (as compared to Tenant
performing such obligation), in which case Tenant shall reimburse Landlord for the reasonable costs
of removing such interior stairwell(s) within twenty (20) days after written request, or (ii) elect
for Tenant to perform the Staircase Restoration Obligation, in which case Tenant shall perform (and
complete) such work in accordance with the applicable terms of the

6

 

Lease within forty-five (45) days after Landlord’s written request. Landlord shall provide
reasonable substantiation of its costs and invoices to Tenant. The foregoing rights and
obligations of Landlord and Tenant shall survive the termination or earlier expiration of this
Lease. Nothing in this Section 12 shall be deemed or construed to evidence Landlord’s
consent to the construction of the Staircase, any such construction to be separately requested by
Tenant in accordance with the terms of the Lease.

     13. Landlord Reimbursement Obligation. Within ten (10) business days of execution of
this Second Amendment by both Landlord and Tenant, Landlord shall pay Tenant the amount of Twenty
Two Thousand Two Hundred One Dollars and Sixteen Cents ($22,201.16) as reimbursement for the work
performed by Tenant in the restrooms located on the sixth (6th) floor of the Premises,
which amount equals the product of the actual amount spent by Landlord per restroom in renovating
the second (2nd) floor restrooms (including all “hard” and “soft” costs), multiplied by
four (4).

     14. [Intentionally Omitted]

     15. Qualified High Technology Company Benefits. Landlord hereby agrees to reasonably
cooperate in Tenant’s application to the District of Columbia for certain credits, exemptions and
other benefits relating to Tenant’s classification as a “Qualified High Technology Company” at no
cost or liability to Landlord. The following sentences shall be added to the end of Section 5.1(a)
of the Lease:

“If and to the extent Tenant applies for and qualifies as a “Qualified High
Technology Company” and Landlord actually receives a real estate tax credit or
abatement (the “Credit”) as the result of such qualification, and if, and only if,
the Credit actually reduces Real Estate Taxes in the Base Year (whether by reducing
Real Estate Taxes actually due and owing in the Base Year or by a retroactive tax
credit or abatement effectively reducing the Real Estate Taxes paid in the Base
Year), then only for the purpose of calculating the Base Year Real Estate Taxes for
this Section 5.1, the Credit will be ignored and the Base Year Real Estate Taxes
will be the amount of Real Estate Taxes incurred in the Base Year prior to taking
the Credit into account (such grossing-up shall be referred to herein as the “Base
Year Adjustment”). By way of example of the preceding sentence only, if the Real
Estate Taxes in the Base Year were Five Hundred Thousand Dollars ($500,000) and in
the calendar year after the Base Year Landlord received the Credit in the amount of
Fifty Thousand Dollars ($50,000) that was retroactive to the Base Year, then for the
purpose of calculating the Base Year Real Estate Taxes for this Section 5.1, the
Base Year Real Estate Taxes would remain Five Hundred Thousand Dollars ($500,000).
Neither the Base Year Adjustment nor the Credit shall be taken into account for
purposes of the netting-out of the increase or decrease in Real Estate Taxes and
Operating Expenses described above in this Section 5.1(a), which netting-out shall
be calculated based on Real Estate Taxes actually incurred each year prior to taking
the Credit into account. Notwithstanding anything to the contrary, in no event
shall the Credit result in (i) Tenant’s payment of increases in Real Estate Taxes
being less than zero, (ii) reimbursement to Tenant of any Real Estate Taxes paid by
Tenant to

7

 

Landlord or (iii) a payment by Landlord to Tenant for or approximating the value of
the Credit.”

     16. Counterparts; Facsimile. This Second Amendment may be executed in multiple
counterparts, each of which shall be deemed an original and all of which together constitute one
and the same document. Faxed signatures will have the same binding effect as original signatures.

     17. Ratification. Except as expressly modified by the terms of this Second Amendment,
the Lease shall remain unchanged and continue in full force and effect. All terms, covenants and
conditions of the Lease applicable to the Premises, as amended hereby (including, but not limited
to, Tenant’s renewal, expansion and termination rights, all as expressly set forth in the Lease),
are confirmed and ratified, remain in full force and effect, and constitute valid and binding
obligations of Landlord and Tenant, enforceable according to the terms thereof.

     18. Authority. Landlord, Tenant and the persons executing and delivering this Second
Amendment on their respective behalves each represents and warrants that such person is duly
authorized to so act, and has the power and authority to enter into this Second Amendment, and that
all action required to authorize Landlord, Tenant and such person to enter into this Second
Amendment has been duly taken.

     19. Binding Effect. This Second Amendment shall not be effective and binding unless
and until fully executed and delivered by each of the parties hereto. All of the covenants
contained in this Second Amendment, including, but not limited to, all covenants of the Lease as
modified hereby, shall be binding upon and inure to the benefit of the parties hereto, their
respective heirs, legal representatives, and permitted successors and assigns. In the event of a
conflict between the terms of the Lease and the terms of this Second Amendment, the terms of this
Second Amendment will control. This Second Amendment will be effective between Landlord and Tenant
when executed and delivered by Landlord and Tenant without regard to execution by escrow agent.

     20. References. The terms of this Second Amendment shall be deemed to modify and
supplement the terms of the Lease, and all future references to the Lease (unless otherwise
provided) shall be deemed to be to the Lease as amended by this Second Amendment. All references
to the Premises in the Lease shall be deemed to include the Fifth Floor Expansion Space, except to
the extent that inclusion of the Fifth Floor Expansion Space into the definition of the Premises
renders the terms of the Lease inconsistent with the terms of this Second Amendment.

[Signature Page Follows]

8

 

IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed as of
the date first above written.

	 	 	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	LANDLORD:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	WASHINGTON TELEVISION
CENTER LLC, 
a District of Columbia limited liability company	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	WTC Realty, Inc., a Delaware corporation, 

its Managing Member	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	/s/ Bruce Maher      [SEAL]	 	 
	 

	 	 	 	 	 	 
	 	 
	 

	 	 	 	Name:
	 	Bruce Maher
	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

	 	 	 	 	 	 	 
	WITNESS/ATTEST:	 	TENANT:	 	 
	 
	 	 	 	 	 	 
	 	 	BLACKBOARD INC.,	 	 
	 

	 	a Delaware corporation
	 		 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael Beach       [SEAL]	 	 
	 
	 	Name:
	 	Michael Beach
	 	 
	 

	 	Title:
	 	CFO	 	 

9exv10w25

Exhibit
10.25

CO-DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

BETWEEN

HUMAN GENOME SCIENCES, INC.

AND

GLAXO GROUP LIMITED

 

 

     THIS CO-DEVELOPMENT AND COMMERCIALIZATION AGREEMENT is made effective as of the 1st day of
August, 2006 (“Effective Date”) by and between Human Genome Sciences, Inc., a Delaware corporation
having its principal place of business at 14200 Shady Grove Road, Rockville, Maryland 20850 (“HGS”)
and Glaxo Group Limited, a company organized under the laws of England and Wales with its principal
place of business at GlaxoWellcome House, Berkeley Avenue, Greenford, Middlesex, UB6 0NN, United
Kingdom (“GSK”). HGS and GSK shall be referred to herein collectively as “Parties” and
individually as a “Party.”

RECITALS

WHEREAS, pursuant to the SB/HGS License Agreement entered into on June 28, 1996 by and among HGS,
SmithKline Beecham Corporation (“SB Corp.”) and SmithKline Beecham p.l.c. (“SB PLC”), SB Corp. and
SB PLC retained an option to co-develop and commercialize certain HGS products.

WHEREAS, SB Corp. and SB PLC have assigned its rights related to such option under the SB/HGS
License Agreement to GSK.

WHEREAS, HGS has developed a compound know as belimumab, a human monoclonal antibody that
neutralizes BLyS, B-lymphocyte stimulator.

WHEREAS, pursuant to the rights under the June 28, 1996 SB/HGS License Agreement which were
assigned to GSK, GSK has exercised its option to co-develop and co-promote belimumab.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises, terms and
conditions hereafter set forth, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, HGS and GSK hereby agree to be legally bound as
follows:

ARTICLE 1

DEFINITIONS

2

 

The following terms shall have the following meanings as used in this Agreement:

1.1 “Active Period” shall mean the period commencing upon the First Commercial Sale of a
Collaboration Product and expiring on the later to occur of (i) the expiration of the last Valid
Claim of HGS Existing Patent Rights claiming Collaboration Product sold in the Territory or (ii)
ten (10) years after the First Commercial Sale of the Collaboration Product by HGS or GSK in the
Territory.

1.2 “Additional Indications” shall mean any indication except the Lead Indication and Minor
Indications.

1.3 “Adverse Event” shall mean any untoward medical occurrence in a patient or clinical
investigation subject administered Collaboration Product which does not necessarily have to have a
causal relationship with this administration. An Adverse Event can therefore be any unfavorable
and unintended sign (including an abnormal laboratory finding), symptom or disease temporally
associated with the use of Collaboration Product, whether or not considered related to
Collaboration Product. Notwithstanding the above, all spontaneously reported Adverse Events
involving Collaboration Product sold as a marketed product should be considered Adverse Drug
Reactions (implied causal relationship) for regulatory reporting purposes.

1.4 “Affiliate” shall mean any corporation, firm, partnership or other legal entity, which directly
or indirectly controls, is controlled by or is under common control with a party to this Agreement.
A party shall be deemed to “control” another entity if it (a) owns at least fifty percent (50%) of
the equity (or such lesser percentage which is the maximum allowed to be owned by a foreign
corporation in a particular jurisdiction) of such other entity or (b) has the power by contract or
otherwise to vote on or direct the management and policies of the entity.

1.5 “All Other Countries” shall mean all countries of the world other than the United States, Japan
and those countries in the European Union.

3

 

1.6 “Alliance Manager” shall have the meaning set forth in Section 3.7.

1.7 “belimumab” shall mean the human monoclonal antibody that neutralizes BLyS with the sequence
listed in Appendix E.

1.8 “BLyS” shall mean B-lymphocyte stimulator.

1.9 “Calendar Quarter” shall mean each of the four successive three calendar month periods in a
Calendar Year.

1.10 “Calendar Year” shall mean each successive period of twelve (12) months commencing on January
1 and ending on December 31, for so long as this Agreement is in effect.

1.11 “Call” shall mean a personal visit by a Sales Representative to a member of the Target
Audience legally permitted to prescribe prescription drugs during which such Sales Representative
Details a Collaboration Product. The Parties may, by mutual agreement, designate additional types
of Calls.

1.12 “Claims” shall have the meaning set forth in Section 14.1.

1.13 “Clinical Studies” shall mean Phase I Clinical Studies, Phase II Clinical Studies, and/or
Phase III Clinical Studies.

1.14 “Clinical Supplies” shall mean supplies of Collaboration Product for pre-clinical and/or
Clinical Studies for the Territory.

1.15 “Collaboration Product” shall mean any product incorporating belimumab, or a derivative,
fragment, or modification thereof which retains neutralizing activity against BLyS, for any
indication, in all dosage forms, delivery systems, formulations, presentations, line extensions and
package configurations thereof. “Collaboration Product” shall include combination products
incorporating belimumab as the therapeutically active ingredient.

4

 

1.16 “Collaboration Technology” shall mean HGS Existing Patent Rights, HGS Existing Know-How, GSK
Arising Patent Rights, GSK Arising Know-How, HGS Arising Patent Rights, HGS Arising Know-How, Joint
Arising Patent Rights and Joint Arising Know-How.

1.17 “Commercial Supplies” shall mean supplies of Collaboration Product for commercial sale in the
Territory.

1.18 “Commercialization” shall mean all activities regarding the sale, distribution, Co-Promotion
and Detailing of a Collaboration Product, and any pre-marketing or post-marketing studies (other
than Phase I, Phase II or Phase III Clinical Studies) conducted to obtain or maintain all
Regulatory Approvals, including market research and pharmaco-economic research. When used as a
verb, “Commercialize” shall mean to make, have made, use, sell, offer to sell or import
Collaboration Product.

1.19 “Committee” shall mean any of the JSC, JDC, GJMC, RJMC or JMC.

1.20 “Confidential Information” shall mean all technical and scientific know-how and information,
pre-clinical and Clinical Studies results, computer programs, knowledge, technology, means,
methods, processes, practices, formulas, techniques, procedures, technical assistance, designs,
drawings, apparatus, written and oral representations of data, specifications, assembly procedures,
schematics and other valuable information of whatever nature and all other scientific, clinical,
regulatory, marketing, financial and commercial information or data, whether communicated in
writing, verbally or electronically, which is provided by one party to the other party in
connection with this Agreement.

1.21 “Control” shall mean possession of the ability to grant licenses or sublicenses to
intellectual property as contemplated by this Agreement without violating the terms of any
agreement or other arrangement with any Third Party.

5

 

1.22 “Co-Promotion” shall mean those marketing and promotional activities, other than Detailing,
undertaken by GSK or HGS to implement the Marketing Plans and strategies with respect to a
Collaboration Product under a single Product Trademark, where permitted, wherein only one Party
sells the Collaboration Product. When used as a verb, “Co-Promote” shall mean to engage in such
activities.

1.23 “Cost of Goods” or “CoGs” shall mean the fully allocated cost of Manufacturing Commercial
Supplies of Collaboration Product, as such costs are specifically allocated to such Collaboration
Product and as computed in accordance with U.S. generally accepted accounting principles (“GAAP”),
including, without limitation, the following:

     (a) Materials cost, which means the price paid for raw material, intermediates, components and
finished goods which are purchased from outside vendors as well as any freight and duty where
applicable;

     (b) Direct labor costs, which means the allocable employment cost of all personnel engaged in
the Manufacture of the Collaboration Product including, without limitation, salary and employee
benefits within the relevant manufacturing operating unit wherein allocable employment costs shall
mean only those direct labor costs applied to the actual Manufacture of the Collaboration Product;

     (c) Direct costs and factory overhead costs, which means the cost of specific activities that
are provided by support functions either on or off-site, provided they are directly related to the
Manufacture or packaging of Collaboration Product and not a general overhead allocation or charge.
Overhead costs include, but are not limited to, expenses associated with quality assurance testing,
quality compliance, stability testing, batch review, equipment maintenance costs, manufacturing
utilities, waste removal, storage, transportation, insurance for the factory, its contents or other
directly related items, factory management and factory administrative expenses, factory facilities
costs which shall include lease payments made by HGS, environmental engineering and property taxes.
These expenses shall be reasonably allocated to the Manufacture of Collaboration Product on a pro
rata basis based on the allocation methodology appropriate at the Manufacturing site. Such
expenses shall exclude costs relating to available capacity which is not used in or reserved for
the Manufacture of the Collaboration Product.

6

 

     (d) Depreciation costs, which represent the annual amortization of original purchase costs
reasonably allocated to the Manufacture of Collaboration Product on a pro rata basis based on the
allocation methodology appropriate at the Manufacturing site over the useful life of the asset, and

     (e) the out-of-pocket costs of freight and tariffs and other expenses associated with
transporting Collaboration Product from the source of manufacture to a distribution center,
inclusive of any interim points of delivery, but excluding (i) any such costs which are separately
invoiced to a customer, and (ii) FTEs involved in the management of supply chain logistics.

     For the sake of clarity, if a cost is an addition to the COGs calculation herein, such cost
shall not also be accounted for as a deduction in the Net Sales calculation and vice versa.
Notwithstanding the foregoing, HGS shall not be entitled to include as COGS those overhead and
depreciation costs referenced in (c) and (d) above that were incurred prior to the Effective Date
and that are solely attributable to reserved capacity. After the Effective Date, HGS shall use
reasonable efforts to mitigate costs attributable to reserved capacity by utilizing such reserved
capacity until such time as it is needed.

1.24 “Costs” shall have the meaning set forth in Section 14.1.

1.25 “CTA” shall mean a clinical trial application filed in accordance with ICH guidelines.

1.26 “Current Good Manufacturing Practices” or “cGMPs” shall mean all applicable standards relating
to manufacturing practices for fine chemicals, intermediates, bulk products or finished
pharmaceutical products. For purposes of this Agreement, cGMPs shall mean the principles (i)
detailed in the U.S. Current Good Manufacturing Practices, 21 CFR Parts 210 and The Rules Governing
Medicinal Products in the European Community, Volume IV Good Manufacturing Practice for Medicinal
Products as each may be amended from time to time or (ii) promulgated by any Governmental Authority
having jurisdiction over the manufacture of the Collaboration Product, in the form of Laws, (iii)
promulgated by any Governmental Authority having jurisdiction over the manufacture of the
Collaboration Product, in the form of guidance documents (including but not limited to advisory
opinions, compliance policy guides and guidelines) which guidance documents are being implemented
within the pharmaceutical

7

 

manufacturing industry for such products and subject to any arrangements, additions or
clarifications agreed to from time to time by the Parties in the Quality Agreement to be negotiated
pursuant to Article 9.

1.27 “Detail” or “Detailing” shall mean, a Primary Detail or a Secondary Detail. When used as a
verb, Detail shall mean to engage in the activities set forth herein. For the avoidance of doubt,
discussions at conventions shall not constitute “Details” or “Detailing”.

1.28 “Detail Requirements” shall have the meaning set forth in Section 5.5.2.

1.29 “Development” shall mean all activities relating to the research and development of a
Collaboration Product as approved by the JDC, including, but not limited to, the conduct of all
pre-clinical and Clinical Studies and the submission of all Regulatory Applications for all
Regulatory Approvals necessary for the manufacture, sale, marketing, and distribution of a
Collaboration Product. When used as a verb, “Develop” shall mean to engage in such activities.

1.30 “Development Expenses” shall mean, the FTE costs and direct out-of-pocket cash costs recorded
as an expense in accordance with GAAP by or on behalf of a Party or any of its Affiliates after
June 30, 2006, related to the Development of the Lead Indication, Minor Indications and Additional
Indications that are specifically identifiable or reasonably allocable to the Development of a
Collaboration Product, which Development activities are set forth in the approved Development Plan
or otherwise approved in advance by the Joint Development Committee or Joint Steering Committee in
accordance with Section 3.2.5. Subject to the foregoing, Development Expenses shall include such
costs in connection with the following activities:

     (a) pre-clinical activity costs such as toxicology and formulation development, test method
development, stability testing, quality assurance, quality control development and statistical
analysis;

     (b) clinical costs, except for costs associated with Phase IV Clinical Studies;

     (c) regulatory expenses relating to the conduct of Clinical Studies, wherever performed, for a
Collaboration Product;

8

 

     (d) Manufacturing Clinical Supplies of Collaboration Product for use in Clinical Studies and
any pre-clinical activities in support thereof;

     (e) The Manufacture, purchase or packaging of comparators or placebo for use in Clinical
Studies (with the Manufacturing costs for comparators or placebo to be determined in the same
manner as Manufacturing costs are determined for Clinical Supplies of any Collaboration Product);

     (f) Direct costs and expenses of disposal of Clinical Supplies of Collaboration Product and
other supplies used in such Clinical Studies and pre-clinical activities, and

     (g) Development of the Manufacturing process for Commercial Supplies of a Collaboration
Product, scale-up, Manufacturing process validation, Manufacturing improvements and qualification
and validation of Third Party contract manufacturers..

1.31 “Development Plan” shall mean the plan for the Collaboration Product designed to achieve the
Development for such Collaboration Product for the Lead Indication as well as Minor Indications and
Additional Indications, including, without limitation, the budget and nature, number and schedule
of Development activities.

1.32 “Diligent Efforts” shall mean, with respect to the research, development, manufacture or
commercialization of a Collaboration Product, efforts and resources that would be used by a Party
consistent with its normal business practices for a similar product, which in no event shall be
less than the level of efforts and resources standard in the pharmaceutical industries for a
company similar in size and scope to that Party with respect to such activity, subject always to
the requirement to take into account, without limitation, matters such as efficacy and safety
profile of any such product, the development stage of the product, the commercial potential of the
product, the degree of technical complexity and the scientific characteristics of the product, the
competitiveness of alternative products that are in the marketplace or under development, and the
patent and other intellectual property and proprietary position of any product. Diligent Efforts
requires that: (i) each Party promptly assigns responsibility for such obligations to specific
employees who are held accountable for progress and monitor such progress on an on-going basis,
(ii) each Party sets and consistently seeks to achieve the objectives assigned to such party as set
forth in the Development Plan, and (iii) each Party consistently makes and

9

 

implements decisions and allocates resources designed to meet such objectives. For avoidance of
doubt, Diligent Efforts as applied through this Agreement is to be applied to a Party with respect
to how that Party would progress a similar product in that Party’s own pipeline.

1.33 “Dispute Detailing Audit Data” shall mean the absolute number of Details performed by a
Party’s Sales Representatives for a given Calendar Year, as reflected in the Personal Selling Audit
and Hospital Personal Selling Audit of Scott-Levin Associated or IMS America. In the event the
Personal Selling Audit or Hospital Personal Selling Audit for any given period or periods does not
report details for the physician specialties which correspond to the Target Audience, the Parties
shall mutually agree upon an alternative methodology to verify the internal Detailing records of a
Party.

1.34 “Distribution Costs” shall mean the supply price paid by GSK to HGS for supplies of
Collaboration Product to be distributed by GSK as set forth in Article 9 herein and the supply and
distribution agreement and quality agreement to be negotiated pursuant to Article 9, as well as all
costs associated with order entry, billing, credit, collection, handling, storage, importation and
distribution of the Collaboration Product in the Territory while in GSK’s possession (such costs to
be calculated as a percentage of Net Sales, such percentage to be agreed by the GJMC pursuant to
Section 3.3.1(ii) and to be reconciled and adjusted periodically thereafter), whether Collaboration
Product is owned by GSK or HGS, including without limitation costs of the vials necessary for
quality control testing, brokerage costs, and transportation costs.

1.35 “FDA” means the United States Food and Drug Administration or any successor agency thereto.

1.36 “Field” shall mean all human therapeutic, diagnostic, palliative and prophylactic indications.

1.37 “First Commercial Sale” shall mean the date on which Collaboration Product is first shipped to
wholesalers and retailers by GSK in commercial quantities from its distribution centers for
commercial sale to a Third Party in any country after receipt of Marketing

10

 

Authorization Approval for such Collaboration Product in such country. Sales for test marketing,
sampling and promotional uses or Clinical Studies or research purposes or compassionate uses will
not be considered a First Commercial Sale.

1.38 “FTE” shall mean full-time equivalent employment.

1.39 “FTE Cost” shall mean, unless otherwise agreed to by the Parties, the specific dollar amount
agreed upon by the Parties hereto for each FTE, where the number of and rate for the FTEs shall be
determined by the appropriate Committee.

1.40 “GJMC” shall mean the Global Joint Marketing Committee, as further defined in Section 3.3.1.

1.41 “Governmental Authority” shall mean any court, tribunal, arbitrator, agency, commission,
official or other instrumentality of any government or of any federal, state, county, city or other
political subdivision, domestic or foreign, including Regulatory Authorities.

1.42 “GSK Arising Know-How” shall mean any inventions, discoveries, information, data and know-how,
whether or not patentable, pertaining to improvements, modifications, and adaptations to any part
of the Collaboration Technology which is developed during the term of and pursuant to this
Agreement by or on behalf of GSK.

1.43 “GSK Arising Patent Rights” shall mean rights under any patents or patent applications which
are owned or Controlled by GSK, and any and all substitutions, continuations, divisionals,
continuations-in-part, reissues, renewals, registrations, confirmations, reexaminations, extensions
including supplementary protection certificates, foreign equivalents or counterparts, and other
filings thereof, containing claims that specifically cover patentable GSK Arising Know-How.

1.44 “GSK Indemnitee” shall have the meaning set forth in Section 14.2.

11

 

1.45 “HGS Arising Know-How” shall mean any inventions, discoveries, information, data or know-how,
whether or not patentable, pertaining to improvements, modifications, and adaptations to any part
of the Collaboration Technology which is developed during the term of this Agreement by or on
behalf of HGS pursuant to this Agreement.

1.46 “HGS Arising Patent Rights” shall mean rights under any patent or patent applications owned or
Controlled by HGS, and any and all substitutions, continuations, divisions, continuations-in-part,
reissues, renewals, registrations, confirmations, reexaminations, extensions including
supplementary protection certificates, foreign equivalents or counterparts, and other filings
thereof, containing claims that specifically cover patentable HGS Arising Know-How.

1.47 “HGS Existing Know-How” shall mean any inventions, discoveries, information, data or know-how,
whether or not patentable, specifically relating to the research, development, registration,
marketing, use, sale or Commercialization of Collaboration Product, which were developed by or on
behalf of HGS or were in HGS’ possession or Control through a license or otherwise prior to the
Effective Date.

1.48 “HGS Existing Patent Rights” shall mean rights under any patents or patent applications
specifically related to belimumab or Collaboration Product which are owned or Controlled by HGS as
of the Effective Date and which are listed in Appendix A attached hereto and incorporated herein by
reference. Collaboration Patent Rights shall also include all United States and foreign patents
with claims entitled to the priorities of any of the patent applications and patents listed in
Appendix A, including any continuation, continuation-in-part or divisional applications thereof.

1.49 “HGS Indemnitee” shall have the meaning set forth in Section 14.1.

1.50 “Housemarks” shall mean the names of a Party or its Affiliate, or variations of the names, and
all related logotypes and symbols used by a Party in connection with its products.

12

 

1.51 “Internal Detailing Report” shall have the meaning set forth in Section 5.5.3.

1.52 “JDC” shall mean the Joint Development Committee, as further defined in Section 3.2.

1.53 “JMC” shall mean the Joint Manufacturing Committee, as further defined in Section 3.4.

1.54 “JSC” shall mean the Joint Steering Committee, as further defined in Section 3.1.

1.55 “Joint Arising Know-How” shall mean any inventions, discoveries, information, data and
know-how, whether or not patentable, pertaining to improvements, modifications, and adaptations to
any part of the Collaboration Technology which is developed during the term of this Agreement by or
on behalf of HGS and GSK jointly.

1.56 “Joint Arising Patent Rights” shall mean rights under any patents or patent applications owned
or Controlled jointly by the Parties, and any and all substitutions, continuations, divisionals,
continuations-in-part, reissues, renewals, registrations, confirmations, reexaminations, extensions
including supplementary protection certificates, foreign equivalents or counterparts, and other
filings thereof, containing claims that specifically cover patentable Joint Arising Know-How.

1.57 “Laws” shall mean all laws, statutes, rules, regulations, ordinance, guidances and other
pronouncements having the effect of law of any government or Governmental Authority.

1.58 “Lead Indication” shall mean the indication of SLE.

1.59 “Losses” shall mean any and all damages, fines, fees, penalties, judgments, deficiencies,
losses and expenses (including without limitation interest, court costs, reasonable fees of
attorneys, accountants and other experts or other expenses of litigation or other proceedings or of
any claim, default or assessment).

13

 

1.60 “Manufacture” or “Manufacturing” shall mean all activities directly related to the manufacture
of Clinical Supplies and Commercial Supplies of the Collaboration Product, including, without
limitation, the planning, purchasing, manufacture, transportation, processing, compounding, quality
assurance testing, quality control, regulatory compliance, storage and maintenance of cell banks,
manufacture and testing of future cell banks, waste disposal, sample retention, formulation,
stability testing, storage, filling, packaging, labeling, leafleting, release and dispatch and such
other matters in each case as specifically applicable to the relevant Collaboration Product.

1.61 “Marketing Approval Application” or “MAA” shall mean, with respect to any country outside the
United States, any application submitted to the relevant Regulatory Authorities seeking
authorization to market a Collaboration Product in the Territory.

1.62 “Marketing Expenses” shall mean, excluding any Development Expenses, all external costs and
expenses incurred (i.e., paid or accrued) by a Party, whether incurred by HGS or its Affiliates, or
GSK or its Affiliates, to the extent provided for in an approved Marketing Plan or otherwise
approved in advance by the RJMC or the Joint Steering Committee, and solely to the extent related
to Collaboration Products, for Commercialization in connection with: marketing, advertising,
sampling and promoting a Collaboration Product, including without limitation costs associated with
Phase IV Clinical Studies, development of training plans, educational expenses, programs in any
format that are related to patient education, physician education and disease management, including
speakers’ programs and symposia, and joint marketing and sales meetings; primary and secondary
market research; and Promotional Materials; and Samples. For clarity, Marketing Expenses shall
include sales force FTE Costs. For the sake of clarity, internal marketing personnel expenses
shall not be included in this definition.

1.63 “Marketing Plan” shall mean for the Collaboration Product a plan and budget for the promotion
and marketing of the Collaboration Products as developed by the RJMC and approved by the GJMC.

14

 

1.64 “Minor Indications” shall mean those minor indications [***] that are agreed by the JDC to be
supportive of and/or incremental to the Development and Commercialization of the Lead Indication,
[***].

1.65 “NDA” shall mean, with respect to the United States, a New Drug Application or Biologics
License Application (or their equivalent) filed with the United States Food and Drug Administration
seeking authorization to market a Collaboration Product in the United States.

1.66 “Net Profit” shall mean Net Sales in a given country or region minus the Cost of Goods
(except for Cost of Goods for which GSK reimburses HGS pursuant to Section 9.2.2) and Distribution
Costs of Collaboration Product in such country minus any Third Party royalties paid by
either HGS or GSK on such Net Sales in such country.

1.67 “Net Sales” shall mean the gross amount invoiced by a Party, its Affiliates, or sublicensees
for sales, transfer or disposition to independent, unrelated Third Parties of a Collaboration
Product (such Collaboration Product being in the final form intended for use by the end user),
during such time period (including the fair market value of all other consideration received for
the sale, transfer or other disposition of a Collaboration Product by a Party, its Affiliates, or
sublicensees, whether such consideration is in cash, payments in kind, exchange or other forms),
exclusive of (i) inter-company transfers or sales to or from its Affiliates or sublicensees, (ii)
transfers of samples of the Collaboration Product such as for physician samples and indigent
patient and similar programs (including registration samples), and (iii) transfers of the
Collaboration Product for use in post-launch Clinical Studies, less the Permitted Deductions. The
Permitted Deductions shall include only the following, to the extent each is actually incurred and
is not otherwise recovered by or reimbursed to GSK or HGS, its Affiliates, or sublicensees (which
are to be determined under generally accepted accounting principles (“GAAP”) in the United States)
and does not exceed the reasonable and customary amount for such item in the market in which the
sale occurred:

     (a) trade, cash and quantity discounts or rebates on any Collaboration Products;

     (b) credits, allowances, rebates or chargebacks given or made to a customer for retroactive
price reductions (including rebates similar to Medicaid);

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

15

 

     (c) sales taxes, excise taxes and duties or other governmental charges levied on or measured
by the billing amount, as adjusted for rebates or refunds, imposed upon the importation, use or
sale of a Collaboration Product;

     (d) charges for freight and insurance directly related to the distribution of the
Collaboration Products (to the extent not paid by the Third Party customer); and

     (e) The lesser of (i) [***] of the aggregate gross amount billed or invoiced on sales of
Collaboration Product in the relevant country or (ii) the actual amount of any write-offs for bad
debt relating to such sales.

The provisions of (a) through (e) above shall be adjusted periodically as necessary to reflect
amounts actually incurred.

1.68 “PDMA” shall mean the U.S. Federal Food, Drug and Cosmetics Act of 1938, as amended, and the
Prescription Drug Marketing Act of 1987, as amended.

1.69 “Phase I Clinical Study” shall mean a human clinical study in any country conducted in
accordance with good clinical practices (“GCPs”) in a small number of healthy volunteers or
patients designed or intended to establish an initial safety profile, pharmacodynamics or
pharmacokinetics of product, or that would otherwise satisfy the requirements of 21 CFR §312.21(a)
or any successor regulation thereto or foreign equivalents.

1.70 “Phase II Clinical Study” shall mean a human clinical study in any country that is conducted
in accordance with GCPs and is intended to initially evaluate the effectiveness of a product for a
particular indication or indications in patients with the disease or indication under study, or
that would otherwise satisfy the requirements of 21 CFR §312.21(b) or any successor regulation
thereto or foreign equivalents.

1.71 “Phase III Clinical Study” shall mean a human clinical study in any country that is conducted
in accordance with GCPs and the results of which could be used as pivotal to establish safety and
efficacy of a product as a basis for a marketing approval application submitted to the FDA or the
appropriate regulatory authority of such other country, or that would otherwise

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

16

 

satisfy the requirements of 21 CFR §312.21(c), or any successor regulation thereto or foreign
equivalents.

1.72 “Phase IV Clinical Study” shall mean human clinical studies that are supportive of post-launch
activities, including Commercialization and Co-Promotion of Collaboration Product.

1.73 “Primary Detail” shall mean a face-to-face presentation by a Sales Representative with the
Target Audience in which Collaboration Product is either the only pharmaceutical product which is
presented or is given a majority of the emphasis during the presentation in which other
pharmaceutical products are also discussed.

1.74 “Product Labeling” shall mean all labels and other written, printed, or graphic matter upon
(a) any container or wrapper utilized with Collaboration Product during the Active Period and Tail
Period in the Territory or (b) any written material accompanying any container or wrapper utilized
with the Collaboration Product during the Active Period and Tail Period, including, package
inserts.

1.75 “Product Trademarks” shall mean all trademarks, other than Housemarks, used or intended for
use on or in connection with a Collaboration Product in the Territory.

1.76 “Promotional Materials” shall mean all written, printed, video or graphic advertising,
promotional, educational and communication materials (other than Collaboration Product Labeling)
for marketing, advertising and promotion of the Collaboration Products for use by (a) a Sales
Representative or (b) advertisements or direct mail pieces, in accordance with the terms of the
applicable Marketing Plan.

1.77 “RJMC” shall mean the Regional Joint Marketing Committee as further defined in Section 3.3.2.

1.78 “Region” means any of the United States, the European Union, Japan or All Other Countries.

17

 

1.79 “Regulatory Application” shall mean any application or request necessary for the development,
manufacture, distribution, marketing, promotion, offer for sale, use, import, export, sale,
reimbursement or pricing of a Collaboration Product, including but not limited to any applications
or requests for (i) approval of Collaboration Product, including NDAs and MAAs, abbreviated new
drug applications or supplemental new drug applications or any supplements or amendments thereto
(as defined in 21 C.F.R. § 314.50 et. seq.) submitted to the FDA or foreign equivalent; (ii) pre-
and post-approval marketing applications for prerequisite manufacturing approval or authorization
related thereto); (iii) labeling approval; (iv) technical, medical and scientific licenses; and (v)
registrations or authorizations from any national, regional, state or local regulatory agency,
department, bureau, commission, council or other governmental entity necessary for the development,
manufacture, distribution, marketing, promotion, offer for sale, use, import, export or sale of
Collaboration Product.

1.80 “Regulatory Approval” shall mean all official approvals by a Regulatory Authority in a country
or region which are required for the use and/or sale of a Collaboration Product in that country or
region including applicable development, manufacture, distribution, marketing, promotion, offer for
sale, use, importation, exportation, sale, pricing and reimbursement approvals.

1.81 “Regulatory Authority” shall mean any applicable government regulatory authority involved in
granting Regulatory Approvals for the development, manufacture, distribution, marketing, promotion,
offer for sale, use, import, export, sale, reimbursement or pricing of any Collaboration Product,
including, in the United States, the FDA.

1.82 “SLE” shall mean Systemic Lupus Erythematosus.

1.83 “Sales Representative” shall mean a professional pharmaceutical sales representative engaged
or employed by either Party to conduct, among other sales responsibilities, Detailing and other
promotional efforts with respect to the Collaboration Products and who has been trained by either
Party in accordance with a training protocol to be agreed upon by the GJMC.

18

 

1.84 “Samples” shall mean Collaboration Product packaged and distributed to members of the Target
Audience as a complimentary trial for use with patients.

1.85 “Secondary Detail” shall mean a face-to-face presentation by a Sales Representative with the
Target Audience in which Collaboration Product is not presented as a Primary Detail but is given an
important emphasis during the presentation, but not less than that given to other pharmaceutical
products discussed during the presentation; provided, however, that a Detail during a sales call in
which greater emphasis is placed upon two or more other products than the emphasis placed upon
Collaboration Product shall not be considered a Secondary Detail.

1.86 “Senior Officers” shall have the meaning set forth in Section 3.1.3.

1.87 “Tail Period” shall mean the period commencing on the expiration date of the Active Period and
continuing for three (3) years thereafter.

1.88 “Target Audience” shall mean the physician specialties with authority to prescribe a
pharmaceutical product or issue hospital orders for a pharmaceutical product, as may be amended
from time to time by the RJMC.

1.89 “Target Product Profile” shall mean the description of the commercially relevant range of
acceptable product performance of a compound against key characteristics used to shape the
progressions and development decisions and attached hereto as Appendix C and hereby incorporated by
reference.

1.90 “Term” shall have the meaning set forth in Section 12.1.

1.91 “Territory” shall mean all of the countries and territories of the world.

1.92 “Third Party” shall mean any person or entity other than HGS, GSK, their respective
Affiliates, or their employees.

19

 

1.93 “United States” shall mean the fifty states and District of Columbia that comprise the United
States of America.

1.94 “Valid Claim” shall mean a claim of an issued, unexpired patent owned or Controlled by HGS,
which claim has not lapsed, been abandoned, been revoked or been held to be invalid or
unenforceable by a final judgment of a court or other governmental agency or competent jurisdiction
from which no appeal can be or is taken within the time allowed for appeal and which has not been
admitted to be invalid or unenforceable through reissue, re-examination, disclaimer or otherwise.

ARTICLE 2

LICENSES

2.1 License Grants to HGS Existing Patent Rights and HGS Existing Know-How.

          2.1.1 Co-Development License. Subject to the terms of this Agreement, HGS hereby
grants to GSK an exclusive (except as to HGS and its Affiliates and permitted sublicensees),
sublicensable (only in accordance with Section 2.3) license under the HGS Existing Patent Rights
and HGS Existing Know-How to Develop Collaboration Products for Commercialization in the Territory
during the Active Period, pursuant to the terms of this Agreement.

          2.1.2 Commercialization License. HGS hereby grants to GSK an exclusive (except as to
HGS and its Affiliates and permitted sublicensees), sublicensable (only in accordance with Section
2.3) license under the HGS Existing Patent Rights and HGS Existing Know-How to Commercialize
Collaboration Products with HGS in the Territory during the Active Period, pursuant to the terms of
this Agreement and further subject to HGS’ right to Manufacture Collaboration Product in Article 9
herein, provided, however, that if HGS does not Manufacture Collaboration Product as contemplated
in Article 9, GSK’s license under this Section 2.1.2 shall remain unchanged during the Active
Period.

20

 

2.2 License Grants for Arising Patent Rights and Arising Know-How. 

          2.2.1 Subject to the terms of this Agreement, GSK hereby grants to HGS, an exclusive (except
as to GSK and its Affiliates and permitted sublicensees), sublicensable (only in accordance with
Section 2.3) license under the GSK Arising Patent Rights, GSK Arising Know-How and GSK’s rights in
the Joint Arising Patent Rights and Joint Arising Know-How to Develop and Commercialize
Collaboration Products in the Territory, pursuant to the terms of this Agreement.

          2.2.2 Subject to the terms of this Agreement, HGS hereby grants to GSK, an exclusive (except
as to HGS and its Affiliates and permitted sublicensees), sublicensable (only in accordance with
Section 2.3) license under the HGS Arising Patent Rights, HGS Arising Know-How and HGS’ rights in
the Joint Arising Patent Rights and Joint Arising Know-How to Develop and Commercialize
Collaboration Products in the Territory during the Active Period, pursuant to the terms of this
Agreement.

2.3 Sublicensing.

          2.3.1 GSK Sublicensing or Subcontracting to Affiliates and Contract Research
Organizations. GSK may sublicense or subcontract its rights to use the Collaboration Technology
or Product Trademarks to Develop or Commercialize Collaboration Products in whole or in part to one
or more of its Affiliates or a contract research organization performing work for GSK under this
Agreement on a fee-for-service basis, provided that the rights sublicensed or subcontracted to any
Affiliate shall automatically terminate upon a change of control of such Affiliate in connection
with which such Affiliate ceases to be an Affiliate of GSK.

          2.3.2 GSK Sublicensing or Subcontracting to Third Parties. GSK shall have the right
to sublicense or subcontract its rights to use the Collaboration Technology and Product Trademarks
to Commercialize Collaboration Products to any Third Party, provided GSK obtains

21

 

the prior written consent of HGS, such consent not to be unreasonably withheld. Upon
notification by GSK of its desire to sublicense its rights hereunder, HGS shall have [***] to
review such proposal. If HGS fails to notify GSK in writing of its decision within such [***]
period, HGS shall be deemed to have consented to such sublicense.

          2.3.3 HGS Sublicensing or Subcontracting to Affiliates and Contract Research
Organizations. HGS shall have the right to sublicense or subcontract its rights to use the
Collaboration Technology to Develop and Commercialize Collaboration Products in whole or in part to
one or more of its Affiliates or to a contract research organization performing work for HGS under
this Agreement on a fee-for-service basis, provided that the rights sublicensed or subcontracted to
any Affiliate shall automatically terminate upon a change of control of such Affiliate in
connection with which such Affiliate ceases to be an Affiliate of HGS.

          2.3.4 HGS Sublicensing or Subcontracting to Third Parties. HGS shall have the right to
sublicense or subcontract its rights to use the Collaboration Technology to Commercialize
Collaboration Products to any Third Party, provided HGS obtains the prior written consent of GSK,
such consent not to be unreasonably withheld. Upon notification by HGS of its desire to sublicense
its rights hereunder, GSK shall have [***] to review such proposal. If GSK fails to notify HGS in
writing of its decision within such [***] period, GSK shall be deemed to have consented to such
sublicense.

          2.3.5 Liability for Affiliates, Sublicensees and Subcontractors. Each Party shall
ensure that each of its Affiliates and sublicensees or subcontractors accepts and complies with all
of the terms and conditions of this Agreement as if such Affiliates or sublicensees or
subcontractors were a party to this Agreement and each Party shall be primarily liable for its
Affiliates’ and sublicensees’ or subcontractors’ performance under this Agreement.

2.4 Product Trademarks for Collaboration Products. The Parties shall agree on the Product
Trademarks to be used for the Collaboration Product through the GJMC, as set forth in Section
3.3.1. Unless otherwise agreed by the Parties, HGS shall exclusively own all Product Trademarks
approved by the GJMC. Subject to the terms of this Agreement, HGS hereby grants

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

22

 

to GSK, an exclusive (except as to HGS and its Affiliates and permitted sublicensees),
sublicensable (in accordance with Section 2.3) license under the Product Trademarks to
Commercialize Collaboration Products in the Territory, pursuant to the terms of this Agreement.
Upon the Parties agreement on the Product Trademarks to be used for the Collaboration Product and
prior to using such Product Trademarks in the Commercialization of the Collaboration Product, the
Parties shall enter into a formal trademark license agreement which shall set forth the license
grant in this Section 2.4 and quality control provisions. Such formal trademark license agreement
shall be used for recordation purposes of such trademark licenses in countries in the Territory
where such recordation is required. Such separate formal trademark license agreement shall also
include a license to use each Party’s Housemarks in Commercializing Collaboration Products.

2.5 In the event of any bankruptcy or insolvency of a Party hereto, or in the event of any default
or material breach by a Party of the terms of any agreement granting rights to the other Party
under the HGS Existing Know-How, HGS Existing Patent Rights, HGS Arising Know-How, HGS Arising
Patent Rights, GSK Arising Know-How or GSK Arising Patent Rights, and in order to preserve the
non-defaulting Party’s rights to practice the licenses granted to such Party under this Article 2,
the defaulting Party hereby agrees to provide reasonable assistance in the event that the
non-defaulting party and/or its Affiliate desires to obtain contractual privity directly with any
Third Party licensor to establish the non-defaulting Party and/or its Affiliate as a stand-in
licensee under any agreement granting the defaulting Party rights under the HGS Existing Patent
Rights, HGS Existing Know-How, HGS Arising Patent Rights, HGS Arising Know-How, GSK Arising
Know-How or GSK Arising Patent Rights, such that the non-defaulting Party and/or its Affiliate may
continue to practice as a licensee under the HGS Existing Patent Rights, HGS Existing Know-How, HGS
Arising Patent Rights, HGS Arising Know-How, GSK Arising Know-How or GSK Arising Patent Rights.

2.6 HGS and GSK hereby hold each other harmless and covenant not to sue for any use of intellectual
property by the other Party during the term of this Agreement and in furtherance of this Agreement,
whether or not such use is specifically included in this Agreement.

23

 

ARTICLE 3

GOVERNANCE OF DEVELOPMENT AND COMMERCIALIZATION OF

COLLABORATION PRODUCTS

3.1 Joint Steering Committee.

          3.1.1 Members. As soon as reasonably practicable following the Effective Date, HGS
and GSK will establish a joint steering committee (the “JSC”) made up of six (6) representatives
(three (3) representatives to be appointed by GSK and three (3) representatives to be appointed by
HGS). HGS and GSK will co-chair the JSC and the chairpersons shall be members of the JSC. HGS’
representatives on the JSC will include HGS’ [***] and GSK’s representatives on the JSC will
include GSK’s [***]. Representatives from both Parties must be at the vice president level or
above, unless otherwise mutually agreed by the Parties. Each of GSK and HGS may replace any or all
of its representatives on the JSC at any time upon written notice to the other Party, provided such
new representatives are at the vice president level or above and further provided that such
representatives have the requisite experience and expertise in pharmaceutical drug development and
commercialization.

          3.1.2 Responsibilities. The JSC shall perform the following functions: (a) review and
resolve any issues presented to it by the JDC, the GJMC, the RJMCs or the JMC; (b) establish the
GJMC at a time deemed appropriate by the JSC; (c) resolve disputes, disagreements and deadlocks
unresolved by the JDC, the GJMC, or the JMC; (d) review and approve, when necessary or appropriate,
the Development Plans and Marketing Plans for Collaboration Products and any material amendments to
the Development Plans and Marketing Plans; and (e) have such other responsibilities as may be
assigned to the Joint Steering Committee pursuant to this Agreement or as may be mutually agreed
upon by the Parties from time to time.

               (i) Meetings. The Joint Steering Committee shall meet in person at least one (1) time
during every Calendar Year and at least two (2) times in person or by telephone or videoconference
during every Calendar Year, and more frequently as GSK and HGS deem appropriate or as required to
resolve disputes, disagreements or deadlocks in the other committees, on such dates, and at such
places and times, as such Parties shall agree;

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

24

 

provided that the Parties shall endeavor to have the first meeting of the Joint Steering
Committee within thirty (30) days after the establishment of the Joint Steering Committee. Meetings
of the Joint Steering Committee that are held in person shall alternate between offices of GSK and
HGS, or such other place as such Parties may agree. The members of the Joint Steering Committee
also may convene or be polled or consulted from time to time by means of telecommunications, video
conferences, electronic mail or correspondence, as deemed necessary or appropriate. Meetings of
the JSC may be held in person or by teleconference, as may be determined by the JSC.

          3.1.3 Decision Making. All decisions of the JSC shall be made by unanimous vote, with
each Party having one vote. Reasonable efforts will be made to come to a consensus decision. With
respect to any issue, if the Joint Steering Committee cannot reach consensus within [***] after
the matter has been brought to the Joint Steering Committee’s attention, then all Development
issues shall be referred to the Chief Executive Officer of HGS and the Chairman , Research &
Development of GSK for resolution and all Commercialization issues shall be referred to the Chief
Executive Officer of HGS and the President of Pharmaceutical Operations of GSK for resolution (in
each case, the “Senior Officers”).

3.2 Joint Development Committee. 

          3.2.1 Members. Within thirty (30) days after the Effective Date, the Parties shall
establish a joint development committee (the “JDC”), and GSK and HGS shall designate
representatives, up to a maximum total of eight (8) members on such Joint Development Committee.
HGS and GSK will co-chair the JDC. The chairpersons shall be members of the JDC. The
representation of the Parties on the JDC shall be determined by the Parties. Functional areas
required to participate at JDC meetings will be determined by the Parties based on topics and
agendas scheduled for such meeting. Each of GSK and HGS may replace any or all of its
representatives on the Joint Development Committee at any time upon written notice to the other
Party. Such functional-area representatives shall include individuals who have experience in
Clinical Studies, clinical operations, regulatory activities, Commercialization, and expertise in
pharmaceutical drug development. GSK and HGS each may, on advance written

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

25

 

notice to the other Party, invite non-voting, ad hoc representatives of such Party to attend
meetings of the Joint Development Committee.

          3.2.2 Responsibilities. The JDC will perform the following functions: (i) evaluate
the scientific and commercial feasibility for, and direct, any Development of Collaboration Product
for all indications being jointly Developed by the Parties pursuant to Section 4.2 below and/or
additional dosage forms in the Territory, and recommend and approve the budget for the Development
Expenses for related Development of the Lead Indication, Minor Indications and Additional
Indications; (ii) manage and oversee the preparation and implementation of Development Plans
including agreeing to any future Development work required, including but not limited to clinical
protocol design and endpoint measures for Phase III Clinical Studies and Phase IV Clinical Studies
on the Collaboration Product for the Lead Indication in the Territory (including all post-approval
studies and activities required to obtain desired Collaboration Product Labeling), and recommend
the budget for any such Phase III Clinical Studies and Phase IV Clinical Studies for Minor
Indications and Additional Indications; (iii) approve the Target Product Profile for the
Collaboration Product, which will include clinical and commercial attributes, for the Lead
Indication and each Additional Indication approved by the JDC in accordance with Section 3.2.5;
(iv) each year beginning with the first full Calendar Year after the Effective Date, update and
amend the initial Development Plans for the following Calendar Year; (v) determine whether the
Collaboration Product achieved the mutually agreed Target Product Profile for the relevant
indication; (vi) make any material amendments or modifications to the Development Plans; (vii)
coordinate and monitor regulatory strategy and activities for the Collaboration Products in
accordance with Article 8; (viii) at each meeting of the Joint Development Committee, review a
comparison of actual Development Expenses for the Lead Indication as well as Development Expenses
for Minor Indications and Additional Indications to the budgeted Development Expenses for such
indications for the United States in the Development Plan for the year-to-date, as current as
practicable to a date immediately prior to the date of the meeting; (ix) review and approve
decisions to either move forward or abandon the Development of Collaboration Products; (x)
establish FTE rates for tracking and reimbursement of internal costs that form part of the
Development Expenses for the Lead Indication, Minor Indications and Additional Indications; and
(xi) have such other responsibilities as may be assigned to the Joint

26

 

Development Committee pursuant to this Agreement or as may be mutually agreed upon by the
Parties from time to time.

          3.2.3 Meetings. The Joint Development Committee shall meet in person at least once
during every Calendar Quarter, and more frequently as GSK and HGS deem appropriate or as reasonably
requested by either such Party, on such dates, and at such places and times, as such Parties shall
agree; provided that the Parties shall endeavor to have the first meeting of the Joint Development
Committee within thirty (30) days after the establishment of the Joint Development Committee.
Meetings of the Joint Development Committee shall alternate between the offices of GSK and HGS, or
such other place as the Parties may agree. The members of the Joint Development Committee also may
convene or be polled or consulted from time to time by means of telecommunications, video
conferences, electronic mail or correspondence, as deemed necessary or appropriate.

          3.2.4 Development Budget. The Joint Development Committee shall review on a quarterly
basis the actual Development Expenses against the budget for such expenses in the applicable
Calendar Year. If in the course of its quarterly review of Development Expenses, the Joint
Development Committee should determine that for any study or activity the actual amounts incurred
are likely to be higher than budgeted, the Joint Development Committee shall review the reasons for
such potential overrun and determine whether such overrun is appropriate. If the Joint Development
Committee determines that such overrun is appropriate, the Joint Development Committee will assess
whether such overrun is likely to result in an overrun of the budget for Development Expenses and
if required, will agree on a revised budget for such Development Expenses for subsequent approval
by the Joint Steering Committee.

          3.2.5 Decision Making. All decisions of the JDC shall be made by unanimous vote, with
each Party having one vote. Reasonable efforts will be made to come to a consensus decision, but
any matters that cannot be resolved by the JDC will be presented to the JSC for resolution, in
accordance with Section 3.1 above.

3.3  Global and Regional Joint Marketing Committees.

27

 

          3.3.1 Global Joint Marketing Committee.

               (i) Members. At a time agreed upon by the JSC, the Parties shall form a global joint
marketing committee (“GJMC”). The Parties shall each designate up to eight (8) representatives for
membership on the GJMC. Membership shall include representation from among each Party’s commercial
development and finance departments. The GJMC shall be co-chaired by GSK and HGS and each
chairperson shall be a member of the GJMC. Each Party shall have one (1) vote on each matter
brought before the GJMC, regardless of the number of representatives present from each Party. At
least two (2) representatives from each Party shall be present to represent a quorum for voting
purposes. In addition, the GJMC may from time to time include additional non-voting ad-hoc
representatives from either Party on specific issues as the need arises.

               (ii) Responsibilities. The purpose of the initial meeting shall be to review the
current status of the Commercialization of Collaboration Product in the Territory, prepare the
Marketing Plan, and agree on an operational charter that shall set forth the principles and
guidelines for the governance of the GJMC. Furthermore, the GJMC shall (a) determine and
establish, and as required from time to time to modify, the Marketing Plan for Collaboration
Product for each Region, including the establishment of the Regional Joint Marketing Committees
(“RJMCs”) for each Region in the Territory; (b) approve the budget for the Marketing Expenses for
Commercialization of the Collaboration Product; (c) oversee the Commercialization of Collaboration
Product, as managed and implemented by the applicable Regional Joint Marketing Committee, including
approving the pricing in all markets and Third Party commercial partners in all countries in the
Territory; (d) approve the Product Trademarks for the Collaboration Product (e) establish sales
force FTE rates for tracking and reimbursement of costs that form part of the Marketing Expenses,
including sales force FTE Costs, (f) upon determining the price for the Collaboration Product,
agree on Distribution Costs as percentage of Net Sales, to be reconciled and adjusted periodically
thereafter, and (g) unless as otherwise set forth in this Agreement, settle unresolved
disputes or disagreements of a RJMC.

28

 

               (iii) Meetings. The first meeting of the GJMC shall occur within thirty (30) days
after the formation of the GJMC. Thereafter, meetings shall be held once each Calendar Quarter.
The location of such meetings shall alternate between sites selected by GSK and HGS, unless
otherwise agreed upon between the Parties. GJMC meetings need not necessarily be face-to-face
meetings but, upon the agreement of both Parties, can be via other methods of communication such as
teleconferences and/or videoconference.

               (iv) Decision Making. All decisions of the GJMC shall be made by unanimous vote of
the Parties, with each Party getting one (1) vote. All such decisions shall be final and binding
upon both Parties; provided that if a dispute cannot be settled by the GJMC after good faith
attempts, then such matter shall be presented to the JSC for resolution in accordance with Section
3.1 above.

          3.3.2 Regional Joint Marketing Committees.

               (i) Members. At a time agreed on by the GJMC, the Parties shall form teams of
appropriate personnel from both GSK and HGS to manage and implement the Marketing Plan for
Collaboration Product in each Region. The RJMCs shall each consist of representatives from GSK and
HGS. HGS and GSK will co-chair the RJMC for the United States and GSK shall chair the RJMCs for
the remaining Regions. The timing of the first meeting of each RJMC shall be determined by the
GJMC.

               (ii) Responsibilities. The RJMCs shall oversee aspects of the Co-Promotion and
Commercialization of a Collaboration Product for the relevant Region, including but not limited to:
(a) determining the budget for Marketing Expenses and reviewing and approving the strategy and
tactics for Co-Promoting Collaboration Product in the respective Regions; (b) developing the
regional Marketing Plan for approval by the GJMC, (c) recommending to the GJMC in which countries
in the respective Regions the Collaboration Product will be Co-Promoted and sold; (d) recommending
to the GJMC pricing for the Collaboration Product; (e) determining the respective number of Sales
Representatives from each Party that will Co-Promote the Collaboration Product to deliver the
agreed number of Details for

29

 

the desired coverage, and (f) creating, reviewing and approving the content of Promotional
Materials, and level of promotional spend, based on market potential and best commercial judgment,
all in conformance with applicable Laws.

               (iii) Meetings. Meetings of each RJMC shall be held on a quarterly basis. The
location of each RJMC’s meetings shall alternate between sites selected by GSK and HGS, unless
otherwise agreed upon between the Parties, with the first meeting to be held at GSK’s offices.
RJMC meetings need not necessarily be face-to-face meetings, but upon the agreement of both Parties
can be via other methods of communication such as teleconferences and/or videoconferences.

               (iv) Decision Making. All decisions of the RJMC shall be made by unanimous vote of
the Parties, with each Party getting one (1) vote. All such decisions shall be final and binding
upon both Parties, provided that, if any dispute cannot be settled by a RJMC after good faith
attempts, then such decision shall be presented to the head of each Party’s pharmaceutical division
for such country, or their designee. If the dispute remains unresolved after [***] following such
presentation, then such dispute shall be referred to the GJMC for resolution in accordance with
Section 3.3.1(iv) above.

          3.3.3 Marketing Budget. The Global Joint Marketing Committee shall review each
Calendar Quarter the actual Marketing Expenses against the budgeted Marketing Expenses as developed
by the RJMC in the applicable Calendar Year. If in the course of its quarterly review of Marketing
Expenses, the GJMC should determine for any Collaboration Product that for any study or activity
the actual amounts incurred are likely to be higher than those budgeted, the GJMC shall review the
reasons for such potential overrun and determine whether such overrun is appropriate. If the GJMC
determines that such overrun is appropriate, the GJMC will assess whether such overrun is likely to
result in an overrun of the budget for Marketing Expenses for such Collaboration Product on an
annual basis and if required, will agree on a revised budget for such Marketing Expenses for such
Collaboration Product for subsequent approval by the GJMC. If the GJMC determines that such overrun
is not appropriate, the GJMC will take such actions as required to remedy the situation.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

30

 

3.4 Joint Manufacturing Committee. As soon as reasonably practicable after the execution
by the Parties of a separate manufacture, supply and quality agreement in accordance with Article 9
herein, the Parties shall form a joint manufacturing committee (“JMC”). The separate manufacture,
supply and quality agreement entered into by the Parties in accordance with Article 9 shall govern
the structure of the JMC, including the JMC’s membership, responsibilities, and decision-making
authority, provided that the JMC shall be responsible, at a minimum, for reviewing and approving
the Development Expenses that are associated with the Manufacture of Clinical Supplies of
Collaboration Product and Cost of Goods and further provided that all unresolved disputes shall be
referred to the JSC for resolution.

3.5 Minutes of Committee Meetings. Definitive minutes of all Committee meetings shall be
finalized no later than thirty (30) days after the meeting to which the minutes pertain as follows:

          3.5.1 Distribution of Minutes. Within ten (10) days after a Committee meeting, the
secretary of such Committee shall prepare and distribute to all members of such Committee draft
minutes of the meeting. Such minutes shall provide a list of any issues yet to be resolved, either
within such Committee or through the relevant resolution process.

          3.5.2 Review of Minutes. The members of each Committee shall have ten (10) days after
receiving such draft minutes to collect comments thereon and provide them to the secretary of such
Committee.

          3.5.3 Discussion of Comments. Upon the expiration of such second ten (10) day period,
the Parties shall have an additional ten (10) days to discuss each other’s comments and finalize
the minutes.

          3.5.4 The secretary from each RJMC shall provide the GJMC with a copy of the minutes no later
than thirty (30) days after they have been approved by the RJMC.

31

 

3.6 Expenses. Each Party shall be responsible for all travel and related costs and expenses
for its members and other representatives to attend meetings of, and otherwise participate on, a
Committee. All travel and related costs and expenses to attend Committee meetings shall not be
considered part of the Development Expenses or the Promotional Expenses.

3.7 Alliance Managers. Promptly after the Effective Date, each Party shall appoint an
individual(s) to act as the alliance manager for such Party (“Alliance Manager”) during the term of
this Agreement. Each Alliance Manager shall thereafter be permitted to attend any Committee
meeting as a non-voting observer. The Alliance Managers shall be the primary point of contact for
the Parties regarding activities contemplated by this Agreement and shall facilitate all such
activities hereunder, including, but not limited to, the exchange of information between the
Parties. The Alliance Managers shall be responsible for assisting the Committees in performing
their oversight responsibilities. The name and contact information for such Alliance Managers, as
well as any replacements chosen by HGS or GSK, in their sole discretion, from time to time, shall
be promptly provided to the other Party in accordance with Section 16.3 of this Agreement.

ARTICLE 4

DEVELOPMENT OF COLLABORATION PRODUCTS

4.1 Responsibilities of the Parties. Subject to the general oversight of the JDC, and
subject in all instances to the specific provisions relating to regulatory matters referred to in
Article 8, the Parties shall use Diligent Efforts to Develop the Collaboration Products for
Commercialization. Each Party shall perform the Development activities assigned to it pursuant to
the Development Plan, all in accordance with the Development Plan for a Collaboration Product.
Additionally, GSK shall provide three (3) expert clinical operations personnel to assist HGS with
the enrollment and monitoring of the Phase III Clinical Studies, particularly outside the United
States and western European countries.

4.2 Development Expenses. The Parties agree that all JDC-approved Development Expenses for
the Lead Indication arising after June 30, 2006 and all Development Expenses for Minor

32

 

Indications will be shared equally by GSK and HGS, through reimbursement of such Development
Expenses as set forth in Section 6.6.1 below, if necessary.

4.3 Development Expenses for Additional Indications. At any time after the Effective Date,
either Party may make a written proposal to the Joint Development Committee regarding the
Development of a Collaboration Product in an Additional Indication. Such proposal shall include (i)
any data and other information in its possession which may be relevant to the use of the
Collaboration Product in the proposed Additional Indication, (ii) a reasonably detailed outline of
the major Development activities required to obtain Regulatory Approval for the Collaboration
Product for such proposed Additional Indication in the Territory, including a timeline for
performing such activities, (iii) an estimated budget for the expected Development Expenses to be
incurred in Developing the Collaboration Product for such proposed Additional Indication, (iv) an
appropriate market analysis of the for the Collaboration Product for the proposed Additional
Indication (including market size and competitive analysis), and (v) preliminary sales forecasts
for the sale of the Collaboration Product for the proposed Additional Indication. Thereafter, the
JDC shall meet in order to review such proposal.

          4.3.1 Co-Development of Additional Indication. With respect to a proposal pursuant to
Section 4.3, if the JDC unanimously accepts, or if the JDC cannot agree and the JSC unanimously
accepts, such proposal, the Joint Development Committee shall prepare a Development Plan for
Development of the Collaboration Product for such Additional Indication and all JDC-approved
Development Expenses for the Development of the Collaboration Product for the Additional Indication
shall be shared equally by the Parties.

          4.3.2 Independent Development and Commercialization of Additional Indications. If the
JDC or the JSC, as applicable, cannot agree to jointly Develop the Collaboration Product in an
Additional Indication pursuant to the procedure set forth in Sections 4.3 and 4.3.1 above due to a
Party deciding in good faith, using its normal decision making practices for a similar product,
that such Party does not wish to pursue such Additional Indication, and if one Party still desires
to Develop and Commercialize the Collaboration Product for such Additional Indication (“Developing
Party”), the Developing Party may do so on its own,

33

 

at its sole cost and expense and without the oversight of the JDC, provided that: (i) the
Development or Commercialization of such Additional Indication does not adversely impact the
Development and Commercialization of the Collaboration Product in the Lead Indication; and (ii) the
Developing Party takes into account the goal of optimizing the best overall commercial potential of
the Collaboration Products in the Lead Indication. The other Party (“Non-Developing Party”)
retains the right to opt-in to further Develop and Commercialize the Collaboration Product for the
Additional Indication in concert with the Developing Party [***]. In the event the Non-Developing
Party exercises its right to opt in to the Development of the Collaboration Product for the
Additional Indication, the Parties shall thereafter share equally in the Development Expenses for
such Additional Indication, subject to Section 4.3.3 below, and all terms and conditions of this
Agreement shall apply to the further Development of the Collaboration Product for such Additional
Indication. Furthermore, upon opting in to the Development of the Collaboration Product for such
Additional Indication, the Non-Developing Party shall reimburse the Developing Party [***] of all
Development Expenses actually incurred prior to the exercise by the Non-Developing Party of its
right to opt-in to the Development of the Collaboration Product for such Additional Indication,
provided all such Development Expenses to be reimbursed will be reviewed and approved prior to such
payment by the JDC. If the Non-Developing Party elects not to exercise its opt-in right [***], the
Non-Developing Party shall have no further rights or obligations with respect to the Development
and Commercialization of the Collaboration Product for such Additional Indication. For clarity,
the Developing Party shall not enter into any agreement with any Third Party which would in any way
limit the rights of the Non-Developing Party to opt-in to the Development of the Additional
Indication.

          4.3.3 Right to Reduce Level of Funding of Development of Collaboration Product for
Additional Indications Only. On an Additional Indication-by-Additional Indication basis, each
Party shall have the right to bear less than fifty percent (50%) of the Development Expenses for
Phase III Clinical Studies incurred in the Development of the Collaboration Product for an
Additional Indication, and thereby receive [***]. In order for a Party to receive any share of the
Net Profits on the sale of the Collaboration Product for a specific indication, a Party must bear
at least [***] of the Development Expenses for Phase III Clinical Trials incurred in the
Development of the Collaboration Product for such indication.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

34

 

               (i) In the event a Party bears at least [***] of such Development Expenses, that Party shall
have the right to actively participate in the Development and Commercialization of the
Collaboration Product for such Additional Indication, through either conducting Development
activities pursuant to the Development Plan or through its participation on the JDC and receive
[***].

               (ii) In the event one Party elects not to bear at least [***] of the Development Expenses for
Phase III Clinical Studies incurred in the Development of the Collaboration Product for a specific
Additional Indication, then the other Party has the right to control all Development and
Commercialization activities associated with the Collaboration Product for such Additional
Indication and shall assume one hundred percent (100%) of the Development Expenses and Marketing
Expenses incurred in the Development and Commercialization of the Collaboration Product for such
Additional Indication and thereby receive one hundred percent (100%) of the Net Profits on the sale
of such Collaboration Product for such Additional Indication.

               (iii) If a Party’s election to bear less than fifty percent (50%) of all Development Expenses
incurred in the Development of the Collaboration Product for an Additional Indication in any
country will affect that Party’s level of effort and personnel involved in the Development of the
Collaboration Product in such country, the Parties will work together, through the appropriate
Committee, to amend the Development Plan to properly reflect each Party’s responsibilities for
Development of the Collaboration Product for such Additional Indication in such country.

4.4 Costs Incurred Prior to July 1, 2006. HGS will be solely responsible for all costs
associated with the Collaboration Product and incurred prior to July 1, 2006.

4.5 Capital Expenditures. Any capital expenditures incurred by either Party after the
Effective Date of the Agreement which a Party seeks to include as Development Expenses must be
approved in advance by the JDC. The JDC will determine the percentage of such capital expenditures
that

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

35

 

were incurred in order to enable the Development of the Collaboration Product for the Lead
Indication and Additional Indications that are being Developed by both Parties and such percentage
will [***].

4.6 Payment of Expenses; Development Expense Account. Subject to each Party’s [***] to
fund Development Expenses for Additional Indications as set forth in Section 4.3 above and
Reconciliation as provided in Article 6, each Party shall be responsible to pay for all Development
Expenses incurred in performing its obligations in connection with any Development activities under
a Development Plan. Each Party shall charge all such Development Expenses so incurred to a separate
account created by it on its books and records solely for the purpose of tracking Development
Expenses, and identifying all Development Expenses by Collaboration Product and indication being
Developed on an indication-by-indication basis.

4.7 Other Development Expenses. Neither Party shall have the right to obligate the other
Party to finance any Development Expenses or conduct any Development activities to which it has not
agreed, through the JDC.

4.8 Development Plans. The Development Plan for the Collaboration Product for the Lead
Indication, which the Parties hereby approve, is attached to this Agreement as Appendix B. Prior
to the end of each Calendar Year beginning with the first full Calendar Year after the Effective
Date, the Joint Development Committee shall review and approve any proposed Development Plan for
the Development of the Lead Indication and for Minor Indications and Additional Indications and,
prior to the end of each Calendar Year, the Joint Development Committee shall update and amend any
Development Plan in order to prepare for the Development of the Collaboration Product for such
indication for the following Calendar Year.

          4.8.1 Criteria for Development Plans. The Development Plan shall contain at a minimum
a list and description of preclinical and clinical activities, timelines for the performance of
studies in support of the Development activities for such Collaboration Product and a budget for
the Development Expenses to complete such Development activities.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

36

 

          4.8.2 Implementation of Development Plans. Each Party will inform the Joint
Development Committee of ongoing implementation of the Development Plan and consider timely
recommendations for improving Development activities assigned to such Party under the Development
Plan. In connection with the preparation and implementation of the Development Plan, HGS and GSK
will make available to the Joint Development Committee any information then in their possession
pertaining to the Collaboration Products useful for such Development activities.

          4.8.3 Budget for Development Expenses. The budget for proposed Development Expenses
for the Lead Indication and for Additional Indications of the Collaboration Product to be Developed
and Commercialized shall be set forth in the Development Plan. Such budget shall be sufficient to
fund all necessary Clinical Studies and related activities necessary to obtain Regulatory Approval
for such Collaboration Product in the relevant indication and generate data otherwise necessary for
Commercialization as agreed by the JSC.

ARTICLE 5

CO-PROMOTION, DETAILING AND COMMERCIALIZATION

5.1 Co-Promotion. 

          5.1.1 The Parties shall Commercialize and Co-Promote Collaboration Products in each country in
the Territory in which the Parties, through the GJMC, mutually agree that Commercialization and
Co-Promotion is desirable. The Parties shall attempt to coordinate their Co-Promotion efforts in
the Territory to the extent legally permissible.

          5.1.2 The Parties agree that all JDC-approved Marketing Expenses incurred for Phase IV
Clinical Studies for the Lead Indication for the Collaboration Product shall be shared equally by
the Parties, through reimbursement of such Marketing Expenses as set forth in Section 6.6.1 below.
With respect to all other Marketing Expenses, [***]. Each Party shall charge all such Marketing
Expenses so incurred to a separate account created by it on its books

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

37

 

and records solely for the purpose of tracking Marketing Expenses, and identifying all
Marketing Expenses by Collaboration Product being Commercialized on an indication-by-indication
basis.

          5.1.3 During the Active Period, each Party shall Detail and Co-Promote Collaboration Product
in the Territory in accordance with the Marketing Plan, as amended from time to time and maximize
sales and market share of Collaboration Product in the Territory. HGS shall Develop and
Commercialize Collaboration Product in the Territory during the Tail Period. During the Active
Period, each Party shall provide the number of Details in the Territory as set forth in the
Marketing Plan.

5.2 Marketing Plans. The RJMC shall be responsible for preparing and implementing a
Marketing Plan for the each Region for each Collaboration Product, subject to the approval of the
Marketing Plan by the GJMC. Each Marketing Plan shall define the goals and objectives for
Commercializing the Collaboration Products in the pertinent Calendar Year consistent with the
applicable Development Plan and the Laws of the respective Regions.

          5.2.1 Updating Marketing Plan. Each year beginning with the first full Calendar Year
after the establishment of the GJMC, each RJMC shall review and propose any amendments to the
Marketing Plan for submission of such proposed amendments to the Global Joint Steering Committee no
later than October 1 of such year for review and approval. The Parties shall obtain final
corporate approval for the final budgets for the amendments to the Marketing Plan prior to the end
of each Calendar Year.

          5.2.2 Contents of Each Marketing Plan. Each Marketing Plan shall encompass
Commercialization activities for one (1) Calendar Year, or as otherwise agreed by the Parties. The
Marketing Plan shall contain at a minimum: (a) minimum Detail Requirements for each Party,
including a firm indication of the number of Sales Representatives and Details to be provided by
each party in such period; (b) the rate for sales force FTE Costs for each Party; (c) market
research and strategy, including market size, dynamics, growth, customer segmentation, competitive
analysis and Collaboration Product positioning; (d) annual sales forecasts; (e) advertising and
promotion programs and strategies, including sales literature, promotional

38

 

premiums, media plans, symposia and speaker programs; (f) sales plans and activity, including
sales force training, and for each Party, development of appropriate sales training materials, and
strategy and budget for Samples, and (g) the budgeted Marketing Expenses for the Collaboration
Product for each indication.

          5.2.3 Budget for Marketing Expenses. Each Marketing Plan shall set forth the total
budget for Marketing Expenses for such Collaboration Product. Such Marketing Expense budget shall
be sufficient to fund all necessary pre-launch, launch and related activities necessary to optimize
Commercialization of each Collaboration Product for each indication approved by the JDC or JSC, as
applicable, including sales force FTE Costs for each Party. In the event that Marketing Expenses
incurred by a Party exceed the budgeted Marketing Expenses, the Party incurring such excess
Marketing Expenses shall be solely responsible for such expenses unless otherwise mutually agreed
in writing by the Parties through the GJMC.

5.3 Funding of Marketing Expenses for Commercialization Activities. Except as otherwise
provided in Section 5.3.1 below, each Party will bear fifty percent (50%) of the Marketing
Expenses, through reimbursement of the other Party’s Marketing Expenses as set forth in Section
6.6.1 below, if necessary, for the Commercialization of Collaboration Product in the Territory.

          5.3.1 Party’s Right to Reduce Level of Funding of Commercialization of Collaboration
Product. On a country-by-country and indication-by-indication basis, either Party shall have
the right to bear less than fifty percent (50%) of the Marketing Expenses incurred for the
Commercialization of Collaboration Product for the Lead Indication or Additional Indications, and
thereby receive [***]. In order for a Party to receive any share of the Net Profits on the sale
of the Collaboration Product for such indication in a country, a Party must bear at least [***] of
the Marketing Expenses incurred in the Commercialization, including Co-Promotion, of the
Collaboration Product for such indication. A Party shall have the right to elect to bear less than
fifty percent (50%) of the Marketing Expenses incurred for the Commercialization of Collaboration
Product [***] prior written notice; provided, however, that during such [***], the Party electing
such right shall continue to use Diligent Efforts to perform its obligations under the Agreement
and shall not unreasonably withhold consent on issues

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

39

 

related to Commercialization of the Collaboration Product for such indication, such as
spending. For clarity, if a Party elects to bear less than fifty percent (50%) of the Marketing
Expenses incurred for the Commercialization of Collaboration Product for an indication, that Party
shall not have the right to thereafter increase its share of the Marketing Expenses in order to
receive a greater share of the Net Profits.

               (i) In the event a Party bears at least [***] of such Marketing Expenses involved in
Commercializing the Collaboration Product for such indication in a country, that Party shall have
the right to actively participate in the promotional activities associated with the Collaboration
Product for such indication in such country, including the right to Commercialize and Co-Promote
the Collaboration Product for such indication in such country, and receive [***].

               (ii) In the event one Party elects not to bear at least [***] of the Marketing Expenses
incurred in the Commercialization of the Collaboration Product for a specific indication in a
country, then the other Party has the right to control all Commercialization activities associated
with the Collaboration Product for such indication in such country and shall assume one hundred
percent (100%) of the Marketing Expenses incurred in the Commercialization of the Collaboration
Product for such indication and thereby receive a greater percentage of the Net Profits on the sale
of such Collaboration Product in such country.

               (iii) Notwithstanding anything to the contrary contained in this Article 5, in the event that
GSK elects to bear less than [***] of all Marketing Expenses incurred in the Commercialization of
the Collaboration Product in any country in the European Union, GSK will continue to own all
Regulatory Approvals applicable to Collaboration Product in such country and GSK will have no
obligation to assign and/or surrender such Regulatory Approvals and Regulatory Applications to HGS;
however, GSK will promptly designate HGS or HGS’ designee as GSK’s local representative in such
country with respect to the Development and Commercialization of Collaboration Product and GSK will
take all actions reasonably necessary to effectuate such designation, including, without
limitation, by making such filings as may be

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

40

 

required with Regulatory Authorities and other Governmental Authorities in such country that
may be necessary to record such designation.

               (iv) If a Party’s election to bear less than fifty percent (50%) of all Marketing Expenses
incurred in the Commercialization of the Collaboration Product for an indication in any country
will affect that Party’s level of effort and personnel involved in the Commercialization of the
Collaboration Product in such country, the Parties will work together, through the appropriate
Committee, to amend the Marketing Plan to properly reflect each Party’s responsibilities for
Commercialization of the Collaboration Product in such country.

          5.3.2 Neither Party shall have the right to obligate the other Party to finance any
Commercialization activities or pay any Marketing Expenses to which it has not agreed, through the
GJMC or the RJMC, as applicable.

5.4 Commercialization Responsibilities. 

          5.4.1 HGS Responsibilities. HGS shall have the sole right and responsibility to record
all payments for sales of Collaboration Products throughout the United States and GSK shall have
the sole right and responsibility to [***]. HGS shall use Diligent Efforts to employ an
appropriate management infrastructure to supervise the Sales Representatives required to oversee
HGS obligations to perform Detail Requirements and marketing staff of sufficient size to establish,
maintain and implement the Marketing Plan for the Collaboration Products; and HGS shall also be
responsible for all medical inquiries in the Territory as set forth in Section 8.2.4 and Regional
medical scientists relating to Collaboration Product, unless otherwise agreed upon by the Parties.

          5.4.2 GSK Responsibilities. GSK shall have the sole right and responsibility to
[***]. With respect to sales of Collaboration Product in the United States, GSK shall [***], in
accordance with Section 5.4.1 above. Furthermore, GSK shall be solely responsible for the
distribution of Collaboration Product in the Territory during the term of the Agreement in
accordance with Article 9.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

41

 

5.5 Detailing Efforts. 

          5.5.1 Any Co-Promotion and Detailing activities conducted by the Parties shall be conducted in
accordance with the terms of this Agreement and the Marketing Plan and as directed by the GJMC and
the applicable RJMC. The Parties shall only use Promotional Materials approved by the applicable
RJMC. No Party shall be required to undertake any activity under this Agreement which it believes,
in good faith, would violate any Laws. In the event of a conflict between the policies of each
Party with respect to Promotional Materials or Co-Promotion and Detailing activities, the GJMC or
the relevant RJMC shall determine which policy will be followed.

          5.5.2 Detailing and Marketing Requirements. The RJMC shall determine the targeted
number of total Details, Primary Details and Secondary Details to be performed by each Party during
each Calendar Year and the Target Audience for such Details (the “Detail Requirements”). Such
Detailing Requirements shall be set forth in the Marketing Plan.

          5.5.3 Detailing Reports. Within thirty (30) days following the end of each Calendar
Quarter, each Party shall provide the RJMC with a report setting forth, in such detail and form as
the RJMC shall require, an internal detailing report, which shall be based upon each Party’s
internal Call reporting and Detailing auditing system and which shall include the total number of
Details, including Primary Details and Secondary Details, actually performed by such Party,
segmented by health care professional specialty of the Target Audience during the immediately
preceding Calendar Quarter (“Internal Detailing Report”).

          5.5.4 Records and Audits Pertaining to Details. At any time during the Term of this
Agreement, but not more than twice every Calendar Quarter, each Party agrees to make available to
the other Party, upon reasonable advance notice, such books and records necessary to verify the
accuracy of such Internal Detailing Report with respect to any Calendar Quarter ending not more
than twelve (12) Calendar Quarters prior to the date of such request. Unless the auditing Party
has notified the other party of an issue relating to verifying an Internal Detailing

42

 

Report for a particular Calendar Quarter, such other Party shall be released from any
liability or accountability to the auditing Party for Detailing in any Calendar Quarter ending more
than twelve (12) Calendar Quarters prior to the initiation of such verification process by the
auditing Party. In the event of an unresolved dispute regarding the number of Details actually
performed by a Party based on such Party’s internal Call reporting and Detail auditing system, the
Parties hereby agree that such Party’s internal Call reporting and Detail auditing system may be
correlated (on a trend basis only) with the Dispute Detailing Audit Data. Such correlation may be
used by the auditing Party in any arbitration proceeding with respect to any dispute regarding
Detailing under this Agreement.

5.6 Training. 

          5.6.1 Training Plans. The RJMC shall develop training plans for Sales Representatives
of each Party responsible for Co-Promoting Collaboration Product and shall determine which Party
shall own such training plans. Such training plans shall be incorporated into the Marketing Plan
for the Collaboration Product. The Party that owns such training plans shall grant the other Party
the right to use such training plans for use with Commercializing the Collaboration Product, and
GSK and HGS shall, each at each Party’s own expense, comply with the training plan contained in any
Marketing Plan which is otherwise consistent with provisions of this Agreement. Each Party will be
responsible for supervising, training and maintaining its Sales Representatives as may be required
to Detail the Collaboration Products as provided herein or in the applicable Marketing Plan, such
training to include a reasonable proficiency examination relevant to the Collaboration Products for
all Sales Representatives who will be engaged in Detailing on an as-needed basis as determined by
the GJMC, at such Party’s own cost and expense. HGS shall have the right to participate in the
training programs of GSK, and GSK shall have the right to participate in the training programs of
HGS, for the purpose of ensuring overall consistency in the training programs for the Collaboration
Products. All costs and expenses incurred by each Party for supervising, training and maintaining
its Sales Representatives pursuant to the Marketing Plan shall not be considered Marketing Expenses
or sales force FTE Costs and shall not be reimbursable under Article 6.

43

 

          5.6.2 Assistance. During the Active Period, each Party shall make available to the
other for use in connection with Co-Promoting the Collaboration Products, to the extent reasonable,
assistance and services relating to such Co-Promotion, including, but not limited to, providing the
other Party, free of charge and in a timely manner, with a master copy of such training materials
relating to Collaboration Products as such Party has used and/or intends to use in connection with
the training of its Sales Representatives, including but not limited to learning units and any
other printed, audio and video training materials. To the extent the other Party wishes to use such
training materials in the training of its own Sales Representatives, it will be responsible for
obtaining all necessary licenses and for reproducing such training materials, at its own cost and
expense.

          5.6.3 Training of Sales Representatives. All Sales Representatives of a Party have
received, or will receive in a timely manner, appropriate training on proper marketing and sales
techniques to be used in promoting pharmaceutical products in accordance with applicable Laws.

          5.6.4 Joint Marketing and Sales Meetings. The Parties shall plan and implement
periodic joint sales and marketing meeting, including a national launch meeting, for the
Collaboration Product in each country in the Territory where the Collaboration Product will be
Co-Promoted. Each Party shall be solely responsible for the travel costs and expenses incurred by
its own Sales Representatives for attending such meetings.

5.7 Compliance.

          5.7.1 Each Party shall cause its Sales Representatives responsible for Detailing and
Co-Promoting the Collaboration Product in the Territory to comply with all Laws and industry
standards applicable to the Commercialization of Collaboration Product, including, without
limitation, with respect to the U.S., the PDMA.

          5.7.2 Each Party warrants and represents that its Sales Representatives responsible for
Co-Promoting Collaboration Product in the Territory under this Agreement shall:

44

 

               (i) limit claims of efficacy and safety for Collaboration Product in the relevant country of
the Territory to those that are (A) consistent with the approved promotional claims in the
Marketing Plan and (B) consistent with the FDA-approved (or relevant regulatory authority-approved,
whichever is applicable) prescribing information for Collaboration Product in such country;

               (ii) not add, delete or modify claims of efficacy and safety in the promotion of Collaboration
Product under this Agreement from those claims of efficacy and safety that are contained in the
Marketing Plan and that are consistent with the FDA-approved (or relevant regulatory
authority-approved, whichever is applicable) prescribing information and with applicable Law;

               (iii) use only, and not make any changes in Promotional Materials and literature approved by
the RJMC;

               (iv) not make any statement, representation or warranty, oral or written, to any Third Party
concerning the use of the Collaboration Product that is inconsistent with, or contrary to, the
Product Labeling or Promotional Material, and

               (v) Detail Collaboration Product under this Agreement in adherence to the Marketing Plan and
to applicable legal requirements, as well as the American Medical Association Gifts to Physicians
From Industry Guidelines.

          5.7.3 Samples.

               (i) Sample Records. Each Party shall cause, and shall maintain written procedures to
ensure that all of its Sales Representatives comply with all applicable Laws relating to the
storage and distribution of, and accountability for, Samples of Collaboration Product. Each Party
shall notify the other within forty-eight (48) hours of learning of any instances of theft or
significant loss, or upon such Party having reason to believe there has been a

45

 

diversion or falsification of a Sample record, or other instances of non-compliance with any
Laws regarding Samples of Collaboration Product. Any and all records, reports or other
documentation with respect to Samples of Collaboration Product for distribution in the Territory
shall be maintained by each Party for as long as required by the PDMA, but in no event less than
three (3) years. Each Party shall fully cooperate with the other in production and delivery of any
such documentation as may be requested or required by any other Governmental Authority.

               (ii) Reports. At the end of each month during the Active Period that the Parties are
Co-Promoting Collaboration Product, each Party shall provide the other Party with a report, on a
country-by-country basis, which summarizes the manner in which Collaboration Product Samples were
distributed by its Sales Representatives during such month, which report shall include, without
limitation, data on the health care professionals and entities to whom or which Collaboration
Product Samples were distributed and the quantity and type of Collaboration Product Samples
distributed to such health care professionals and entities.

               (iii) Auditing. Upon reasonable (but not less than five (5) business days) advance
written notice, a Party shall be entitled, at such Party’s sole expense, to conduct an inspection
and audit of the other Party’s compliance with this Section 5.7.3 at any of the other Party’s owned
or controlled facilities where Samples of Collaboration Product are stored. The purpose of such
inspection and audit shall be solely to ensure reasonable compliance by such Party with respect to
the applicable provisions of the PDMA as the same apply to each Party’s duties and obligations
under this Agreement, as well as to copy records relating to Collaboration Product Sample receipt,
storage and distribution. The auditing Party shall bear the costs of such audit.

          5.7.4 Compliance with Industry Standards. Each Party shall cause its Sales
Representatives to act in accordance with the highest standards of the industry and in a
professional, ethical and lawful manner and consistent with the same diligence used with regard to
other products marketed by either Party.

          5.7.5 Details.

46

 

               (i) Recording of Details. Each Party shall keep complete and accurate records of all
Details performed by its Sales Representatives in Co-Promoting in each applicable country of the
Territory during the Active Period. Such records shall include, without limitation, actual health
care professional data, the number of Details, the date or week in which the Detail was performed
and, if available, the location of the Detail. Records of such Details performed pursuant to this
Agreement, whether generated by the Party or by a Third Party, shall be provided, on a
country-by-country basis, by each Party to the other Party no later than forty (40) days after the
end of each Calendar Quarter during the Active Period.

               (ii) Auditing of Detail Records. Not more than once per Calendar Year during the
Active Period, each Party or its authorized independent public accountant shall have the right to
engage the other Party’s independent public accountant, at reasonable times and upon providing
reasonable notice, to audit the Detail records of the other Party relating to Co-Promotion of
Collaboration Product pursuant to this Agreement. The Party requesting the audit shall bear the
cost of such audit, unless such audit indicates an overestimate of the number of Details by the
other Party in any country in the Territory by [***]or more, in which event the other Party shall
bear the costs of such audit. The auditing Party shall make the results of any such examination
available to the other Party.

     5.8 Product Trademarks.

     5.8.1 Procurement and Maintenance of Product Trademarks. GSK shall be responsible for
procurement and maintenance of trademark registrations for such Product Trademarks and for
obtaining acceptance of the Product Trademarks by the appropriate Regulatory Authority. All costs
associated with procuring and maintaining the trademark registrations for Product Trademarks during
the Term of the Agreement shall be considered part of the Marketing Expenses.

     5.8.2 Use of Product Trademarks. All Collaboration Products Developed and
Commercialized by both HGS and GSK in a country in the Territory shall be sold in such

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

47

 

country under the Product Trademarks. The Parties shall not use the Product Trademarks, except in
connection with Detailing and Co-Promoting in the Territory, as provided under this Agreement.

ARTICLE 6

PAYMENTS AND REPORTS

6.1 Initial Payment. In partial consideration for the rights granted to GSK hereunder, GSK
shall pay to HGS Twenty-Four Million U.S. Dollars (US $24,000,000) within fifteen (15) days
(exclusive of bank holidays) of receipt by GSK of an invoice therefor, such invoice to be sent by
HGS on or after the Effective Date of this Agreement.

6.2 Calculation of Each Party’s Portion of Net Profits.

          6.2.1 When Parties Share Equally in Commercialization of Collaboration Product.

               (i) Active Period Payments. In countries where the Parties have invested equally
(50/50) in the Marketing Expenses associated with the Commercialization of the Collaboration
Product for an indication, GSK and HGS will share equally (50/50) in the Net Profits from sales of
Collaboration Product for such indication in that country during the Active Period.

               (ii) Tail Period Payments.

                         (1) In countries where the Parties have invested equally (50/50) in the Marketing Expenses
associated with the Commercialization of the Collaboration Product for an indication, HGS shall pay
to GSK [***].

                         (2) In countries where the Parties have invested equally (50/50) in the Marketing Expenses
associated with the Commercialization of Collaboration Product for an indication, HGS shall pay to
GSK [***].

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

48

 

                         (3) In countries where the Parties have invested equally (50/50) in the Marketing Expenses
associated with the Commercialization of Collaboration Product for an indication, HGS shall pay to
GSK [***].

          6.2.2 When Parties Do Not Share Equally in Marketing Expenses. In countries where the
Parties have not invested equally in the Marketing Expenses associated with the Commercialization
of the Collaboration Product for an indication, as permitted pursuant to Sections 4.3 and 5.3,
including the limitations included in Section 5.3.1, each Party shall receive a share of the Net
Profits on the sale of the Collaboration Product in such country [***].

6.3 Mechanism to Track Sales. Prior to commercial launch of the Product for the first
Additional Indication, the Parties shall work together to determine a methodology for tracking and
separating sales of the Collaboration Product for the different indications. Such mechanism shall
be reviewed and approved by the GJMC.

6.4 No Other Payments. Notwithstanding anything to the contrary contained in this
Agreement, neither Party shall have any obligation to make any milestone payments, license
fees/payments, or any other type of payments or fees which are not expressly stated hereunder to
the other Party under this Agreement. In addition, neither Party shall have any obligation to pay
royalties to the other Party on Net Sales of any Collaboration Product.

6.5 Reports.

          6.5.1 GSK Report. Within sixty (60) days after the end of each Calendar Quarter, GSK
shall submit to HGS a written report (each, a “GSK Report”) setting forth in reasonable detail the
following items during such Calendar Quarter:

               (i) All JDC-approved Development Expenses incurred by GSK;

               (ii) All GJMC-approved Marketing Expenses (including sales force FTE Costs) incurred by GSK;

               (iii) Distribution Costs for Collaboration Product;

               (iv) Royalties, if any, paid by GSK to Third Parties, and

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

49

 

               (v) Net Sales of Collaboration Products.

          6.5.2 HGS Report. Within sixty (60) days after the end of each Calendar Quarter, HGS
shall submit to GSK a written report (each, an “HGS Report”) setting forth in reasonable detail the
following items during such Calendar Quarter:

               (i) All JDC-approved Development Expenses incurred by HGS;

               (ii) All GJMC-approved Marketing Expenses (including sales force FTE Costs) incurred by HGS;

               (iii) Cost of Goods for the Collaboration Product (except for any Cost of Goods separately
reimbursed under a supply and distribution agreement between the Parties or Section 9.2.2 of this
Agreement);

               (iv) Royalties, if any, paid by HGS to Third Parties, and

               (v) Net Sales of Collaboration Product.

          6.5.3 Estimated Marketing Expenses. After commercial launch of the Collaboration
Product, the Parties will work together to refine the estimated Marketing Expenses in order to
enable the Parties to use the estimated Marketing Expenses in preparing the GSK Report and HGS
Report to facilitate the reconciliation process outlined in Section 6.6 below.

6.6 Financial Reconciliation.

          6.6.1 Development Expenses and Marketing Expenses. Within twenty (20) days after the
receipt of each Party’s Report in accordance with Section 6.5 above, commencing with first Calendar
Quarter during which the Effective Date occurs, HGS shall, using the GSK Report and the HGS Report,
prepare a reconciliation report for the Collaboration Product (the “Reconciliation Report”) which
shall show the Development Expenses and/or Marketing Expenses either Party may owe the other and
the resulting net amount owed by HGS to GSK or by GSK to HGS, as the case may be. Such
Reconciliation Report will be provided to the JDC or GJMC, as applicable, for approval. The JDC or
GJMC shall approve or disapprove the Reconciliation Report with ten (10) business days of receipt.
Within thirty (30) days after approval of the Reconciliation Report by the appropriate Committee,
GSK or HGS, as the case

50

 

may be, shall pay the net amount shown therein to the other Party. If the Reconciliation
Report is disapproved by the JDC or GJMC, HGS shall have ten (10) days to revise such report and
resubmit to the JDC or GJMC. If the report is subsequently disapproved by the JDC or GJMC again,
the matter will be submitted to the JSC, in accordance with Section 3.1.3.

          6.6.2 Net Profits. In addition to that set forth in Section 6.6.1 above, within
twenty (20) days after the receipt of each Party’s Report in accordance with Section 6.5 above,
beginning with the first Calendar Quarter in which the First Commercial Sale occurs, HGS shall
include in the Reconciliation Report the Net Profits either Party may be entitled to receive. Such
Reconciliation Report will be provided to the JDC or GJMC, as applicable, for approval. The JDC or
GJMC shall approve or disapprove the Reconciliation Report within seven (7) days of receipt.
Within forty-five (45) days of approval of the Reconciliation Report by the appropriate Committee,
GSK or HGS, as the case may be, shall pay the net amount of Net Profits due to the other Party, as
shown in such Reconciliation Report. If the Reconciliation Report is disapproved by the JDC or
GJMC, HGS shall have ten (10) days to revise such report and resubmit to the JDC or GJMC.

6.7 Late Payments. If a party does not make any payments due hereunder at the times that
they are due, then the non-paying party shall pay interest on each late payment, to the extent
permitted by applicable law, at a rate of [***] over the annual prime rate of interest, as
published in the Federal Reserve Bulletin H.15 or successor thereto, for the date on which such
payment becomes delinquent, calculated daily on the basis of a three hundred sixty (360) day year.

6.8 Currency. All payments due under Section 6.1. Section 6.2 and Section 6.6 shall be
made in U.S. dollars. The method of currency conversion from the local currency into U.S. dollars
upon the calculation of Net Profits shall be consistent with GSK’ consolidated group reporting
systems. The currency conversion effected through the use of such consolidated reporting systems
shall be calculated using the average exchange rate calculation used by GSK in its group reporting
system and in the preparation of its public accounts.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

51

 

6.9 Records. Each Party shall keep complete, true and accurate records of the Net Sales
and Development Expenses and Marketing Expenses for not less than three (3) years following the end
of the Calendar Quarter in which such sales were made. A Party (“Non-Auditing Party”) shall make
such records available to an independent certified public accountant representing the Party
requesting the audit (“Auditing Party”), who will not be unreasonably rejected by the Non-Auditing
Party, provided that such representative has entered into a confidentiality agreement with the
Auditing Party limiting the use of such records to verification of the accuracy of payments due
hereunder and prohibiting the disclosure of information in such records to the Auditing Party or to
any Third Party for any purpose. Audits of such records shall be conducted no more frequently than
annually and upon at least thirty (30) days prior written notice during reasonable business hours.
Audits shall be limited to results in the twelve (12) Calendar Quarters prior to audit
notification. In the event that a Non-Auditing Party makes a change that impacts the Development
Expenses, Marketing Expenses or Net Profits or discovers any errors that result in any change in
the Development Expenses, Marketing Expenses or Net Profits for any period(s) within the previous
twelve (12) Calendar Quarters, then the Auditing Party reserves that right to re-audit the affected
time period(s) solely with respect to verifying the effect, if any, such change or error has on
Development Expenses, Marketing Expenses, or Net Profits with respect to such period(s). In the
event that a Non-Auditing Party or the auditors discover during one audit period a material
discrepancy that they reasonably believe would also exist in prior periods and would materially
adversely (with respect to the Auditing Party) affect the Development Expenses, Marketing Expenses
or Net Profits in such prior periods, then the Auditing Party reserves the right to re-audit
records from such prior periods solely with respect to verifying whether or not such same
discrepancy exists and has a material effect on Development Expenses, Marketing Expenses or Net
Profits with respect to such prior periods provided such time period(s) fall within the twelve (12)
Calendar Quarters preceding the audit period in which the material discrepancy was first
discovered. Such accountant shall provide the Non-Auditing Party with a copy of any written
report prepared or given to the Auditing Party in connection with such audits. Any claims of
underpayment or overpayment will be submitted to the Non-Auditing Party within thirty (30) days of
the final written report. All such audits shall be conducted at the Auditing Party’s cost and
expenses; provided, however, that if the audit

52

 

reveals an underpayment to the Auditing Party of more than [***], the Non-Auditing Party shall pay
for the cost and expense of the audit.

6.10 Taxes. Each Party shall be responsible for any and all taxes levied on account of
amounts it receives under this Agreement. No part of any amount payable to a Party under this
Agreement may be reduced due to any counterclaim, set-off, adjustment or other right which the
other Party might have against such Party, any other Party or otherwise, except as expressly
permitted hereunder. Any tax paid or required to be withheld by the payor for the benefit of the
receiving Party under this Agreement shall be deducted from the amount of those payments otherwise
due. The payor shall secure and send to the receiving Party proof of any such taxes withheld and
paid by the payor for the benefit of the receiving Party, and shall, at the receiving Party’s
request, provide reasonable assistance to the receiving Party in recovering such taxes.

ARTICLE 7

DILIGENCE

7.1 The Parties acknowledge that failure to use their respective Diligent Efforts in Development
and/or Commercialization of a Collaboration Product will diminish the value of this Agreement to
both HGS and GSK. Accordingly, HGS and GSK shall each use its respective Diligent Efforts to
perform the obligations assigned to each Party under the Agreement.

7.2 Each Party shall perform, or cause to be performed, any and all of its obligations as set forth
in this Agreement, including, without limitation, those obligations identified in this Article 7,
in good scientific manner and in compliance in all material respects with all applicable laws.

7.3 The Parties will work together, through either the JDC, the RJMC, the GMJC or the JMC, as
applicable, to reduce costs associated with the Development, Manufacturing, and Commercialization
of a Collaboration Product, where possible, consistent with the terms of this Agreement and
applicable Law, in order to maximize Net Profits.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

53

 

7.4 Should a Party materially fail to apply its respective Diligent Efforts as required under this
Section 7, then such failure to use Diligent Efforts shall be considered a material breach of this
Agreement and the non-breaching Party shall have the right to terminate the rights granted to the
breaching Party under Article 2 in accordance with Article 12.

7.5 In addition to other diligence requirements in this Article 7, a Party shall use Diligent
Efforts to Commercialize the Collaboration Product in [***] to the extent the Collaboration Product
is being Commercialized by both Parties in such country. Should a Party not exercise its
obligations under this Section 7.5 with respect to [***], the other Party shall have the right to
terminate the other Party’s rights with respect to the Collaboration Product under this Agreement
in that respective country or in the case of the country in the European Union, that Region, in
accordance with Section 12.3.

ARTICLE 8

REGULATORY MATTERS

8.1 Regulatory Applications/Activities.

          8.1.1 Regulatory Applications/Approvals in the United States. Unless otherwise agreed
upon by the Parties or required by applicable Law, HGS shall be responsible for obtaining,
registering and maintaining all Regulatory Applications and Regulatory Approvals necessary to
Develop, register and Commercialize a Collaboration Product in the United States, including,
without limitation, NDAs. HGS shall obtain, register and maintain such Regulatory Applications and
Regulatory Approvals in accordance with the Development Plan and as directed by the JDC, using
Diligent Efforts.

               (i) HGS shall provide GSK with reasonable prior written notice of all material meetings and
teleconferences between representatives of HGS and Regulatory Authorities regarding any
Collaboration Product. Consistent with all applicable Laws, GSK shall have the right to have one
(1) or more representatives attend material meetings and

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

54

 

conferences and participate in material telephone discussions with any Regulatory Authority
concerning Collaboration Product.

               (ii) HGS shall promptly provide to GSK copies of any material documents or other
correspondence received from the FDA or other Regulatory Authorities (including without limitation
any minutes of material meetings or teleconferences) pertaining to the Development or
Commercialization of Collaboration Product being Co-Promoted by the Parties in the United States.

               (iii) HGS shall promptly provide GSK’s representatives to the JDC with copies of all proposed
material correspondence between HGS and a Regulatory Authority regarding Collaboration Product
being Co-Promoted by the Parties in the United States at least ten (10) days before the submission
of such correspondence. HGS shall seriously consider all reasonable material suggestions and
recommendations of GSK concerning such correspondence, to the extent feasible.

               (iv) If GSK reasonably concludes that GSK must communicate with a Regulatory Authority
regarding GSK’s activities in the United States under this Agreement, then GSK shall promptly
advise HGS. If HGS reasonably disagrees with GSK’s conclusion, the matter will be provided to the
JDC for determination. If the JDC determined that GSK may communicate with a Regulatory Authority
hereunder, GSK shall do so as follows:

                    (1) GSK shall provide HGS with reasonable prior notice of all material meetings and
teleconferences between representatives of GSK and the Regulatory Authority regarding any
Collaboration Product. Consistent with all applicable Laws, HGS shall have the right to have one
(1) or more representatives attend material meetings and conferences and participate in material
telephone discussions with any Regulatory Authority concerning the Development or Commercialization
of Collaboration Product in the United States;

55

 

                    (2) GSK shall promptly provide to HGS copies of any material documents or other correspondence
received from the Regulatory Authorities (including without limitation any minutes of material
meetings or teleconferences) pertaining to the Development or Commercialization of Collaboration
Product being Co-Promoted by the Parties in the United States;

                    (3) GSK shall promptly provide HGS’ representatives to the JDC with copies of all proposed
material correspondence between GSK and a Regulatory Authority concerning the Collaboration Product
being Co-Promoted by the Parties in the United States at least ten (10) days before the submission
of such correspondence. GSK shall seriously consider all reasonable material suggestions and
recommendations of HGS concerning such correspondence, to the extent feasible.

          8.1.2 CTAs in the European Union, Japan and All Other Countries. Unless otherwise
agreed upon by the Parties or required by applicable Law, HGS or an Affiliate of HGS shall be
responsible for obtaining and maintaining all CTAs necessary to Develop a Collaboration Product in
European Union, Japan and All Other Countries. HGS or its Affiliate shall obtain and maintain such
CTAs in accordance with the Development Plan and as directed by the JDC, using Diligent Efforts.

               (i) HGS or its Affiliate shall provide GSK with reasonable prior written notice of all
material meetings and teleconferences between representatives of HGS and Regulatory Authorities
regarding any CTAs for the Collaboration Product. Consistent with all applicable Laws, GSK shall
have the right to have one (1) or more representatives attend material meetings and conferences and
participate in material telephone discussions with any Regulatory Authority concerning the CTA for
the Collaboration Product.

               (ii) HGS or its Affiliate shall promptly provide to GSK copies of any material documents or
other correspondence received from the Regulatory Authorities (including without limitation any
minutes of material meetings or teleconferences) pertaining to the CTA

56

 

for the Collaboration Product being Co-Promoted by the Parties in the European Union, Japan
and All Other Countries.

               (iii) HGS or its Affiliate shall promptly provide GSK’s representatives to the JDC with copies
of all proposed material correspondence between HGS or its Affiliate and a Regulatory Authority
regarding the CTA for the Collaboration Product being Developed by the Parties in the European
Union, Japan and All Other Countries at least ten (10) days before the submission of such
correspondence. HGS or its Affiliate shall seriously consider all reasonable material suggestions
and recommendations of GSK concerning such correspondence, to the extent feasible.

               (iv) If GSK reasonably concludes that GSK must communicate with a Regulatory Authority
regarding the CTA for the Collaboration Product in the European Union, Japan and All Other
Countries under this Agreement, then GSK shall promptly advise HGS. If HGS reasonably disagrees
with GSK’s conclusion, the matter will be provided to the JDC for determination. If the JDC
determined that GSK may communicate with a Regulatory Authority hereunder, GSK shall do so as
follows:

                         (1) GSK shall provide HGS or its Affiliate with reasonable prior notice of all material
meetings and teleconferences between representatives of GSK and the Regulatory Authority regarding
the CTA for any Collaboration Product. Consistent with all applicable Laws, HGS or its Affiliate
shall have the right to have one (1) or more representatives attend material meetings and
conferences and participate in material telephone discussions with any Regulatory Authority
concerning the Development of Collaboration Product in the European Union, Japan or All Other
Countries;

                         (2) GSK shall promptly provide to HGS or its Affiliate copies of any material documents or
other correspondence received from the Regulatory Authorities (including without limitation any
minutes of material meetings or teleconferences) pertaining to the CTA for the Collaboration
Product being Developed by the Parties in the European Union, Japan or All Other Countries, and any
Development issues related thereto;

57

 

                         (3) GSK shall promptly provide HGS’ representatives to the JDC with copies of all proposed
material correspondence between GSK and a Regulatory Authority concerning the CTA for the
Collaboration Product being Developed by the Parties in the European Union, Japan and All Other
Countries at least ten (10) days before the submission of such correspondence. GSK shall seriously
consider all reasonable material suggestions and recommendations of HGS concerning such
correspondence, to the extent feasible.

          8.1.3 MAAs and Regulatory Approvals in the European Union, Japan and All Other
Countries. Unless otherwise agreed upon by the Parties or required by applicable Law, GSK or
an Affiliate of GSK shall be responsible for obtaining, registering and maintaining all MAAs and
Regulatory Approvals necessary to register and Commercialize a Collaboration Product in the
European Union, Japan and All Other Countries. GSK or its Affiliate shall obtain, register and
maintain such MAAs and Regulatory Approvals in accordance with the Development Plan and/or
Marketing Plan and as directed by the JDC or GJMC using Diligent Efforts.

               (i) GSK or its Affiliate shall provide HGS with reasonable prior written notice of all
material meetings and teleconferences between representatives of GSK and Regulatory Authorities
regarding any MAA or Regulatory Approval for Collaboration Product. Consistent with all applicable
Laws, HGS shall have the right to have one (1) or more representatives attend material meetings and
conferences and participate in material telephone discussions with any Regulatory Authority
concerning the MAA or Regulatory Approval for the Collaboration Product.

               (ii) GSK or its Affiliate shall promptly provide to HGS copies of any material documents or
other correspondence received from the Regulatory Authorities (including without limitation any
minutes of material meetings or teleconferences) pertaining to the MAA or Regulatory Approval for
Collaboration Product being Co-Promoted by the Parties in the European Union, Japan and All Other
Countries.

58

 

               (iii) GSK or its Affiliate shall promptly provide HGS’ representatives to the JDC with copies
of all proposed material correspondence between GSK or its Affiliate and a Regulatory Authority
regarding the MAA or Regulatory Approval for such Collaboration Product being Co-Promoted by the
Parties in the European Union, Japan and All Other Countries at least ten (10) days before the
submission of such correspondence. GSK or its Affiliate shall seriously consider all reasonable
material suggestions and recommendations of HGS concerning such correspondence, to the extent
feasible.

               (iv) If HGS reasonably concludes that HGS must communicate with a Regulatory Authority
regarding the MAA or Regulatory Approval for the Collaboration Product in the European Union, Japan
and All Other Countries under this Agreement, then HGS shall promptly advise GSK. If GSK
reasonably disagrees with HGS’ conclusion, the matter will be provided to the JDC for
determination. If the JDC determined that HGS may communicate with a Regulatory Authority
hereunder, HGS shall do so as follows:

                         (1) HGS shall provide GSK or its Affiliate with reasonable prior notice of all material
meetings and teleconferences between representatives of HGS and the Regulatory Authority regarding
any MAA or Regulatory Approval for the Collaboration Product. Consistent with all applicable Laws,
GSK or its Affiliate shall have the right to have one (1) or more representatives attend material
meetings and conferences and participate in material telephone discussions with any Regulatory
Authority concerning the Development or Commercialization of Collaboration Product in the European
Union, Japan or All Other Countries;

                         (2) HGS shall promptly provide to GSK or its Affiliate copies of any material documents or
other correspondence received from the Regulatory Authorities (including without limitation any
minutes of material meetings or teleconferences) pertaining to the MAA or Regulatory Approval for
Collaboration Product being Co-Promoted by the Parties in the European Union, Japan or All Other
Countries, and any Development or Commercialization issues related thereto;

59

 

                         (3) HGS shall promptly provide GSK’s representatives to the JDC with copies of all proposed
material correspondence between HGS and a Regulatory Authority concerning the MAA or Regulatory
Approval for Collaboration Product being Co-Promoted by the Parties in the European Union, Japan
and All Other Countries at least ten (10) days before the submission of such correspondence. HGS
shall seriously consider all reasonable material suggestions and recommendations of GSK concerning
such correspondence, to the extent feasible.

8.2 HGS Responsibilities. HGS shall fulfill and discharge all obligations under applicable
Law, as well as procedures ensuring timely compliance with all Laws as are reasonable in accordance
with accepted business practices and legal requirements to maintain the authorization and/or
ability to Manufacture Collaboration Product in the Territory, and to Commercialize Collaboration
Product in the Territory, including, without limitation, the following:

          8.2.1 The maintenance of all Regulatory Approvals necessary for the Manufacture of
Collaboration Product in the Territory in accordance with cGMP, and for the use and
Commercialization of Collaboration Product for all approved indications in the United States,
including, without limitation, maintaining such records and filing such reports as may be required
under the provisions of the U.S. Federal Food, Drug and Cosmetic Act, as well as all other Laws,
including, without limitation, all advertising and promotional literature and labeling in the
United States relating to Collaboration Product.

          8.2.2 Timely filing with appropriate Regulatory Authorities of all Adverse Event reports
related to Collaboration Product in the United States. The procedures for sharing and reporting of
Adverse Events encountered by each Party for Collaboration Product in the Territory shall be as set
forth in a Safety Data Exchange Agreement, which shall be entered into by the Parties in accordance
with the terms of Section 8.4 below.

          8.2.3 Creation of a master safety database which shall cross-reference any Adverse Events
relating to Collaboration Product in the United States, in accordance with the

60

 

Safety Data Exchange Agreement to be entered into by the Parties pursuant to Section 8.4.2
below.

          8.2.4 Medical Inquiries. Responsibility for responding to all medical inquiries in
the Territory relating to Collaboration Product, including inquiries from the medical profession
and inquiries for medical information relating to the Collaboration product, including, without
limitation, prescription, sampling, and safety information, in accordance with procedures set forth
in the Safety Data Exchange Agreement. GSK shall promptly communicate to HGS all comments,
requests and inquiries of the medical profession or any other Third Parties for information
relating to Collaboration Product of which it becomes aware. All responses to the medical
profession or such other Third Parties shall be handled by HGS and all such responses made shall be
communicated to the GJMC, except as otherwise mutually agreed. GSK shall provide reasonable
cooperation to HGS to the extent deemed necessary by HGS to fully respond to such communications.

8.3 GSK Responsibilities. GSK shall fulfill and discharge all obligations under applicable
Law, as well as procedures ensuring timely compliance with all Laws as are reasonable in accordance
with accepted business practices and legal requirements to maintain the authorization and/or
ability to Commercialize to Commercialize Collaboration Product in the Territory, including,
without limitation, the following:

          8.3.1 The maintenance of all Regulatory Approvals either by GSK or its Affiliate(s) necessary
for the use and Commercialization of Collaboration Product for all approved indications in the
European Union, Japan and All Other Countries, including, without limitation, maintaining such
records and filing such reports as may be required under the provisions of the U.S. Federal Food,
Drug and Cosmetic Act, as well as all other Laws, including, without limitation, all advertising
and promotional literature and labeling in the European Union, Japan and All Other Countries
relating to Collaboration Product.

          8.3.2 Timely filing with appropriate Regulatory Authorities of all Adverse Event reports
related to Collaboration Product in the European Union, Japan and All Other

61

 

Countries. The procedures for sharing and reporting of Adverse Events encountered by each
Party for Collaboration Product in the Territory shall be as set forth in the Safety Data Exchange
Agreement to be entered into by the Parties in accordance with Section 8.4.2 below.

          8.3.3 Creation of a master safety database which shall cross-reference any Adverse Events
relating to Collaboration Product in the European Union, Japan and All Other Countries, in
accordance with procedures set forth in the Safety Data Exchange Agreement to be entered into by
the Parties in accordance with Section 8.4 below.

8.4 Exchange of Safety Data. 

          8.4.1 Clinical Studies Safety Data. During the conduct of clinical studies for the
Collaboration Product, the Parties shall form a Product Safety Committee which shall manage the
clinical studies safety data in ongoing clinical studies. All available blinded safety data and
other safety issues will be reviewed by the Product Safety Committee every four (4) months, or more
or less frequently, as determined and agreed by the members of the Product Safety Committee. The
Product Safety Committee will consist of members from both GSK and HGS in accordance with HGS’
charter governing the formation and conduct of such committees. The Product Safety Committee will
also have responsibility for (i) maintaining the benefit risk management plan for the Collaboration
Product; and (ii) communication of safety issues with the JDC and JSC.

               (i) Resolution of Disputes. All decisions of the Product Safety Committee shall be
made by unanimous vote, with each Party having one (1) vote. In the event the Parties are unable
to reach agreement on a safety issue through the Product Safety Committee, for disputes concerning
non-emergent safety issues, such disputes shall be elected to the Joint Development Committee and,
if necessary, the Joint Steering Committee, for resolution. In the event the JDC and JSC are
unable to resolve such issue, the matter will be submitted for resolution by arbitration, pursuant
to Article 15. Notwithstanding the above, Section 3.1 or Article 15 below, in the event the
Product Safety Committee cannot reach agreement on a particular issue, and such dispute relates to
a safety issue where a rapid decision

62

 

must be reached, the dispute shall be raised to the senior safety physician for each Party for
immediate resolution.

          8.4.2 Safety Data Exchange Agreement. At least [***] before the submission of the
first MAA in the Territory, the Parties will agree to the terms of a Safety Data Exchange Agreement
to facilitate the management of safety for the product in accordance with the standards which are
no less stringent than in the ICH Guidelines. The agreed terms of such Safety Data Exchange
Agreement will ensure that:

               (i) The Parties will be able to comply with regulatory requirements for the reporting of
safety data in accordance with standards stipulated in the ICH Guidelines, and all applicable Laws
regarding the management of safety data, and

               (ii) The Parties will exchange relevant safety data within appropriate timeframes and in an
appropriate format to enable them to meet both expedited and periodic regulatory reporting
requirements.

     Furthermore, HGS will commit to establishment of mutually acceptable pharmacovigilance systems
to the satisfaction of GSK in advance of safety data exchange commencing under this Agreement, and
shall demonstrate those systems comprehensively to GSK prior to safety data exchange commencing.

8.5 Managed Care Contracts and Relationships. During the Term of the Agreement, GSK shall
be responsible for all dealings related to Collaboration Product in the Territory with Managed Care
Customers (as defined below), and shall manage the relationships with such customers with respect
to the Collaboration Product. “Managed Care Customers” in this context shall mean health insurers,
health maintenance organizations, pharmacy benefit management companies, any other organization,
public or private, that pays or insures health or medical expenses on behalf of beneficiaries or
recipients, retail pharmacies, hospitals, hospitals GPOs, long term care institutions or
pharmacies, nursing homes, and other non-wholesaler purchase of Collaboration Product that are
typically called on by GSK as potential contracted customers.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

63

 

GSK shall develop a strategic plan for approaching and dealing with Managed Care Customer accounts
in order to enable GSK to carry out its obligations under this Section 8.5 in a manner which is
consistent with both Parties’ objectives for the Product, which plan shall be reviewed and approved
by the GJMC. [***]. To the extent possible and subject to GSK’s own requirements of
confidentiality in relation to the same, GSK shall use Diligent Efforts to (i) identify Managed
Care Customers, (ii) maximize geographic coverage in the Territory with such customers, (iii)
enhance penetration of the managed care market and (iv) maximize Product sales to such customers,
provided however, that, in no event will GSK be required to administer the Collaboration Product
using systems, policies and procedures that are different from those systems, policies or
procedures which GSK uses for other products in the GSK portfolio. [***].

8.6 Recalls, Market Withdrawals and Corrective Actions.

          8.6.1 United States. Prior to making a decision to implement any recall, market
withdrawal or corrective action in the United States, the Parties will work together through the
GJMC to determine the appropriate course of action. HGS shall have the responsibility for
implementing any recall, market withdrawals or any other corrective action related to the
Collaboration Product in the United States. At HGS’ request, GSK shall provide reasonable
assistance to HGS in conducting such recall, market withdrawal or other corrective action in the
United States, including handling recall communications, health hazard evaluations and recall
classifications. The amount of any expenses incurred by either Party with respect to the conduct
of any such recall, market withdrawal or other corrective action in the United States shall [***].
GSK shall notify HGS as soon as practicable of any recall information received by it with respect
to the Collaboration Product in the United States to allow HGS to comply with any and all Laws
imposed upon it in the United States. The Parties shall be jointly responsible for the expenses of
recall, unless such recall is due to GSK’s [***] in which case GSK shall indemnify and hold HGS
harmless for the cost of Collaboration Product recalled in accordance with Section 14.1. For the
purposes of this Section 8.6.1, the expenses of recall shall be limited to the expenses of
notification, initial shipment of the recalled Collaboration Product incurred by HGS to its
customers, and destruction or return of the recalled Collaboration Product, the costs of

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

64

 

Collaboration Product or any costs directly associated with the Manufacture of replacement
Collaboration Product.

          8.6.2 European Union, Japan and All Other Countries. Prior to making a decision to
implement any recall, market withdrawal or corrective action in the European Union, Japan or All
Other Countries, the Parties will work together through the GJMC to determine the appropriate
course of action. GSK shall have the responsibility for implementing any recall, market
withdrawals or any other corrective action in the European Union, Japan and All Other Countries.
Prior to making a decision to implement any such recall, market withdrawal or corrective action,
GSK will consult with HGS as to same. At GSK’s request, HGS shall provide reasonable assistance to
GSK in conducting such recall, market withdrawal or other corrective action in the European Union,
Japan and All Other Countries, including handling recall communications, health hazard evaluations
and recall classifications. The amount of any expenses incurred by either Party with respect to
the conduct of any such recall, market withdrawal or other corrective action in the European Union,
Japan and All Other Countries shall [***]. HGS shall notify GSK as soon as practicable of any
recall information received by it with respect to the Collaboration Product in the European Union,
Japan and All Other Countries to allow GSK to comply with any and all Laws imposed upon it in the
European Union, Japan and All Other Countries. The Parties shall jointly be responsible for the
expenses of recall, unless [***] in which case HGS shall indemnify and hold GSK harmless for the
cost of Collaboration Product recalled in accordance with Section 14.2, including reasonable,
documented out-of-pocket expenses related to implementation of a recall of any batch of
Collaboration Product supplied by HGS due to breach of the warranties set forth in Sections 13.2.4
and 13.2.5 hereof. For the purposes of this Section 8.6.2, the expenses of recall shall be limited
to the expenses of notification, initial shipment of the recalled Collaboration Product incurred by
GSK to its customers, and destruction or return of the recalled Collaboration Product, the costs of
Collaboration Product or any costs directly associated with the Manufacture of replacement
Collaboration Product.

          8.6.3 Records. Each Party shall maintain complete and accurate records for such
periods, but in no event for less than three (3) years for the Collaboration Product, including

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

65

 

to the extent available to such Party distribution data related to sales of the Collaboration
Product to end users by lot number.

          8.6.4 Mutual Cooperation. During the Term of the Agreement, the Parties shall notify
each other as soon as practicable of any circumstances of which they are aware which arise whereby
the integrity and reputation of the Collaboration Product or of the Parties are threatened by the
unlawful activity of any Third Party in relation to the Collaboration Product, which circumstances
shall include, by way of illustration, deliberate tampering with or contamination of Collaboration
Product by any Third Party as a means of extorting payment from the Parties or another Third Party.
In any such circumstances, the Parties shall, to a reasonable extent, cooperate fully to limit any
Loss to the Parties.

8.7 Reasonable Assistance. GSK shall provide reasonable assistance to HGS with respect to
communications from Governmental Authorities (as requested by HGS) in the Territory. Except as
otherwise set forth in Section 8.1, all communications with Governmental Authorities in the United
States concerning Collaboration Product shall be the sole responsibility of HGS and all
communications with Governmental Authorities in the European Union, Japan and All Other Countries
concerning Collaboration Product shall be the sole responsibility of GSK. Each Party shall provide
reasonable cooperation to the other Party to the extent deemed necessary to fully respond to such
communications.

8.8 Clinical Studies in the Territory.

          8.8.1 Unless otherwise agreed by the Parties or required by applicable Law, HGS shall own all
data and reports related to Clinical Studies for Collaboration Product in the Territory. All data,
database information and safety reports from such Clinical Studies for Collaboration Product in the
Territory shall be centralized and held by HGS with copies of such data, information or reports
provided to GSK.

          8.8.2 Clinical Trial Registry. Both Parties shall be permitted to publish on its
Clinical Studies register summaries of results of all Clinical Studies conducted by either Party

66

 

with respect to the Collaboration Product after the Effective Date of this Agreement without
being required to obtain the other Party’s approval. Each Party shall inform the other Party in
writing prior to publishing such Clinical Studies summaries of results on its Clinical Studies
register.

8.9 Product Labeling. Upon direction of the GJMC, each Party shall include the other
Party’s Housemark(s) on the labeling of the Collaboration Product and on all Promotional Materials,
to the extent permissible by applicable Law, provided such does not create logistical, importation,
quality, regulatory, tax or similar issues. Each Party’s Housemark(s) shall be included with equal
prominence to the other Party’s Housemark(s), except to the extent prohibited by Law. Each Party
shall conform to the guidelines provided by the other Party with respect to the manner of use of
such Party’s Housemark(s) on Product Labeling.

8.10 Regulatory Affairs and Safety Monitoring Audit Right.

          8.10.1 During the Term of the Agreement, GSK shall have the right to audit compliance with the
procedures set forth in this Article 8, including compliance with the Safety Data Exchange
Agreement, at the offices of HGS on reasonable notice and no more than [***]. HGS’ drug safety and
quality assurance personnel will be informed about the audit process in advance. Adequate time
will be given for the preparation, conduct and evaluation of the audit process essential to gain
reliable results. The results of such audit may be raised by GSK for discussion at the JDC and an
appropriate plan for addressing any deficiency, or deficiencies, drawn up and it is hereby
contemplated that such plan may involve GSK more actively assisting HGS in the fulfillment and
discharge of its regulatory and safety reporting responsibilities as the Regulatory Approval holder
for Collaboration Product in the European Union beyond that GSK assistance and activity already
contemplated under this Agreement and assuming from HGS certain responsibilities itself in respect
of such activities, as the Parties deem appropriate.

          8.10.2 During the Term of the Agreement, HGS shall have the right to audit compliance with the
procedures with the procedures set forth in this Article 8, including compliance with the Safety
Data Exchange Agreement, at the offices of GSK or the appropriate

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

67

 

Affiliate on reasonable notice and no more than [***]. GSK’s (or its Affiliate’s) drug safety
and quality personnel will be informed about the audit process in advance. Adequate time will be
given for the preparation, conduct and evaluation of the audit process essential to gain reliable
results. The results of such audit may be raised by HGS for discussion in the applicable Committee
and an appropriate plan for addressing any deficiency, or deficiencies, drawn up and it is hereby
contemplated that such plan may involve HGS more actively assisting GSK in the fulfillment and
discharge of its regulatory and safety reporting responsibilities as the Regulatory Application and
Regulatory Approval holder for Collaboration Product in the United States and Regulatory
Application holder of the Collaboration Product the European Union beyond that HGS assistance and
activity already contemplated under this Agreement and assuming from GSK certain responsibilities
itself in respect of such activities, as the Parties deem appropriate.

ARTICLE 9

SUPPLY; MANUFACTURE AND DISTRIBUTION OF COLLABORATION PRODUCT

9.1 Supply of Collaboration Product for Commercialization in the United States. 

          9.1.1 Subject to the terms and conditions of this Agreement, HGS shall supply, or obtain
supply, for requirements of Collaboration Product in the United States to enable the Parties to
fulfill their obligations to Commercialize Collaboration Products in the United States under this
Agreement.

          9.1.2 With respect to Commercial Supplies of Collaboration Product supplied by HGS to GSK in
the United States, HGS shall:

               (i) Supply to GSK on a consignment basis Collaboration Product in finished form ready for
sale;

               (ii) Retain title and risk of loss to the Collaboration Product until such time as GSK ships
Collaboration Product to a Third Party on HGS’ behalf, and

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

68

 

               (iii) Assume responsibility for all shipping, insurance and other related expenses, provided
that such expenses shall be allocated among the Parties.

9.2 Supply of Collaboration Product for Commercialization in the European Union, Japan and All
Other Countries.

          9.2.1 Subject to the terms and conditions of this Agreement, HGS shall supply or obtains
supply, of Collaboration Product in the European Union, Japan and All Other Countries to enable the
Parties to fulfill their obligations to Commercialize Collaboration Product in the European Union,
Japan and All Other Countries under this Agreement.

          9.2.2 With respect to Commercial Supplies of Collaboration Product supplied by HGS to GSK in
the European Union, Japan and All Other Countries:

               (i) HGS shall supply Commercial Supplies of Collaboration Product to GSK [***] and GSK shall
purchase its requirements of Commercial Supplies of Collaboration Product from HGS; and

               (ii) GSK shall be responsible for shipping, insurance and other related expenses, provided
such expenses shall be allocated between the Parties.

9.3 Shelf Life. All Commercial Supplies of Collaboration Product shipped to GSK shall have
expiration dating of no less than [***] of the shelf life of the Collaboration Product.

9.4 Safety Stock. HGS and GSK shall agree and implement an acceptable level of safety
stock of Collaboration Product to be set forth in the Supply Agreement, which level shall be based
on a formula that takes into account the average demand for Collaboration Product, the lead time
necessary to Manufacture Collaboration Product and certain safety factors as determined by the JMC.
The JMC may review and update the safety stock levels from time to time.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

69

 

9.5 Clinical and Commercial Supplies of Collaboration Product. With respect to all
Clinical Supplies and Commercial Supplies of Collaboration Product provided by HGS, HGS will use
reasonable efforts to ensure compliance with the relevant specifications and all Regulatory
Approvals. All Clinical Supplies and Commercial Supplies of Collaboration Product will be fit for
purpose and will have been Manufactured in compliance with applicable Laws, including cGMP.

9.6 Right to Review and Inspect. HGS shall grant GSK the right to review and inspect HGS’
Manufacturing and supply operations (including those of any subcontractor being used by HGS in the
Manufacture and testing of Collaboration Product) to the extent that such operations relate to or
may impact the Manufacture and supply of Collaboration Product. Such rights will be granted [***],
upon reasonable prior notice, or at any time for cause. HGS will notify GSK of any regulatory
inspection in relation to the Manufacture and sale of Collaboration Product, and provide copies of
inspection findings (e.g., Form 483) and their responses. HGS shall consult with GSK before
providing any such responses to any Regulatory Authority. GSK may attend such inspections to the
extent that they relate to or may affect the Manufacture and supply of Collaboration Product.

9.7 Changes to Collaboration Product. HGS will consult with GSK, through the JMC and
pursuant to the procedures outlined in Section 9.10, prior to making any change which may impact
the characteristics, quality or performance of Collaboration Product.

9.8 Legal and Regulatory Responsibilities of HGS and GSK. HGS will provide GSK with all
such information relating to the supplies of Collaboration Product as GSK may require in order to
fulfill legal or regulatory responsibilities, and to fulfill its obligations under this Agreement.

9.9 Shortage of Supply; Failure to Supply. In the event of any supply shortage of
Collaboration Product resulting in a conflict in any country or countries in the Territory, the
Parties shall allocate priority for supply of Collaboration Product consistent with the respective
sales and/or volume of Collaboration Product in each country affected. In the event that a
material issue arises while HGS is Manufacturing supplies of Collaboration Product which

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

70

 

would significantly impact HGS’ ability to deliver the mutually agreed amount of Collaboration
Product to the mutually agreed quality specifications, including but not limited to issues relating
to capacity, safety or quality, then the JMC must meet to consider and determine what reasonable
Manufacturing alternatives are available to the Parties, including but not limited to: (i) granting
GSK the right to step in and manage the existing supply chain; (ii) in the event of an extended
supply interruption, granting GSK or a mutually acceptable Third Party the right to Manufacture the
Collaboration Product; and (iii) providing technical transfer or such other assistance as necessary
to effect the grant of rights in items (i) or (ii) above; provided, however, that the right of GSK
to step in and manage the existing supply chain in such event shall be subject to review and
approval by the JSC; and further provided, that in the event that the JSC cannot reach consensus on
this issue, the Parties shall submit the issue for resolution in accordance with Article 15.

9.10 Supply and Distribution Agreement; Quality Agreement. The manufacture and supply of
Collaboration Product to be provided by HGS hereunder shall be subject to a separate supply and
distribution agreement and a quality agreement to be negotiated between the Parties hereto within
[***] after the Effective Date, or such later date as shall be mutually agreed upon by the Parties,
but in no event later than [***] prior to the Commercialization of Collaboration Product. For the
avoidance of doubt, no Commercial Supplies of Collaboration Product shall be distributed unless and
until the Parties enter the supply and distribution agreement and quality agreement. Such supply
and distribution agreement and quality agreement shall reflect the terms and conditions agreed to
herein and shall include any and all standard and customary terms addressing all aspects of the
manufacturing process for the Collaboration Product and the responsibilities of each Party with
respect thereto including without limitation:

          9.10.1 the establishment of a Joint Manufacturing Committee;

          9.10.2 full visibility of costs to supply Collaboration Product, Distribution Costs and agreed
yields;

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

71

 

          9.10.3 the establishment of an acceptable maximum number of failed Collaboration Product
batches, which maximum number shall be determined by the Joint Manufacturing Committee based on a
number of factors, including, but not limited to, the following: final specifications, a number of
batches in a certain time frame (not in excess of a twelve (12) month period), process capability,
and which actual acceptable number shall be included in the Cost of Goods calculation;

          9.10.4 the establishment of process yields based on a statistical assessment; and

          9.10.5 continuous improvement commitments designed to drive down the Cost of Goods for the
mutual benefit of both Parties.

9.11 Forecasts. A forecast for Development and Commercialization of the Collaboration
Products shall be prepared and periodically updated by the JMC and coordinated with the applicable
Development and Marketing Plans for Collaboration Products through the appropriate Committee for
Commercialization.

ARTICLE 10

PATENTS AND TRADEMARKS

10.1 Ownership. Subject to the license grants in Article 2 herein, HGS owns or controls
the HGS Existing Know-How and HGS Existing Patent Rights and all HGS Arising Patent Rights and HGS
Arising Know-How as well as all Product Trademarks and GSK owns or controls the GSK Arising Patent
Rights and GSK Arising Know-How. Joint Arising Know-How and Joint Arising Patent Rights shall be
jointly owned by HGS and GSK.

10.2 Filing, Prosecution and Maintenance of Patents. 

          10.2.1 GSK will prepare, file, prosecute and maintain, GSK Arising Patent Rights. In the
event that GSK intends to abandon or decline responsibility for any or all of GSK Arising Patent
Rights, GSK shall provide reasonable prior written notice to HGS of such

72

 

intention to abandon or decline responsibility, and HGS shall have the right to file,
prosecute and maintain such GSK Arising Patent Rights
        .

          10.2.2 HGS will prepare, file, prosecute and maintain all HGS Existing Patent Rights, Joint
Arising Patent Rights and HGS Arising Patent Rights. HGS shall keep GSK advised on a quarterly
basis, through the JDC, on the status of pending patent applications, including without limitation,
the grant of any HGS Existing Patent Rights, Joint Arising Patent Rights and HGS Arising Patent
Rights. HGS shall at all times during its filing, prosecution, and maintenance of the HGS Existing
Patent Rights, Joint Arising Patent Rights and HGS Arising Patent Rights, use Diligent Efforts to
protect the commercial value of and maintain the HGS Existing Patent Rights, Joint Arising Patent
Rights and the HGS Arising Patent Rights.

          10.2.3 The Parties hereto shall share equally all costs and expenses relating to the
preparation, filing, prosecution and maintenance of the HGS Existing Patent Rights, the Joint
Arising Patent Rights, the GSK Arising Patent Rights and the HGS Arising Patent Rights relating to
Collaboration Product.

10.3 Filing and Maintenance of Product Trademarks. Unless otherwise agreed by the Parties
through the GJMC, GSK will prepare, file, register and maintain all Product Trademarks which are
approved by the GJMC. GSK shall keep HGS advised on a quarterly basis, through the GJMC, on the
status of pending Product Trademarks. GSK shall at all times during its filing, registration and
maintenance of the Product Trademarks use Diligent Efforts to protect the commercial value and
maintain the Product Trademarks.

10.4 Enforcement of Patents. 

          10.4.1 In the event that either GSK or HGS becomes aware of any infringement of any issued
patent with the Collaboration Technology which infringement involves the Collaboration Product, it
will notify the other Party in writing to that effect within thirty (30) days. Any such notice
shall include evidence to support an allegation of infringement by such Third Party.

73

 

          10.4.2 HGS shall have the first right (but not the obligation), using counsel approved by both
Parties, to bring suit to abate any infringement or misappropriation of the HGS Existing Patent
Rights, Joint Arising Patent Rights and HGS Arising Patent Rights. HGS and GSK shall work together
to determine strategies with regard to any such suit and HGS shall provide to GSK copies of all
draft filings and take into account GSK’s comments on such filings. Both Parties will share the
costs and expenses of any suit initiated by HGS pursuant to this Section 10.4.2 [***]. Any
recovery or damages derived from such an action or suit shall be deemed Net Profits and will be
shared by the Parties in accordance with Section 6.2.

          10.4.3 If HGS does not initiate a suit to abate any infringement or misappropriation in
accordance with Section 10.4.2 within [***] after receiving notice thereof, GSK shall have the
right, but not the obligation, using counsel of its choice, to bring suit to abate any infringement
or misappropriation of the HGS Existing Patent Rights, the Joint Arising Patent Rights or the HGS
Arising Patent Rights. The Parties will share the costs and expenses of any suit initiated by GSK
pursuant to this Section 10.4.3 [***]. Any recovery or damages derived from such an action or suit
shall be deemed Net Profits and shall be shared by the Parties in accordance with Section 6.2.

          10.4.4 GSK shall have the right (but not the obligation) to bring suit to abate any
infringement or misappropriation of the GSK Arising Patent Rights. HGS will reasonably cooperate
with GSK in preparing and presenting any such action or suit. Both parties will share the costs
and expenses of any suit brought by GSK pursuant to this Section 10.4.4 [***]. Any recovery or
damages derived from such an action or suit shall be deemed Net Profits and will be shared by the
Parties in accordance with Section 6.2.

          10.4.5 If GSK does not initiate a suit to abate any infringement in accordance with Section
10.4.4 above within [***] after receiving notice thereof, HGS shall have the right, but not the
obligation, using counsel of its choice, to bring suit to abate any infringement or
misappropriation of the GSK Arising Patent Rights. GSK will reasonably cooperate with HGS in
preparing and presenting any such suit or action. The Parties will share the costs and expenses

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

74

 

of any suit initiated by HGS pursuant to this Section 10.4.5 [***]. Any recovery or damages
derived from such an action or suit shall be deemed Net Profits and will be shared by the Parties
in accordance with Section 6.2.

          10.4.6 Neither Party may enter into any settlement without the prior consent of the other
Party, which shall not be unreasonably withheld, and may not make any statement, which admits that
any of the Collaboration Technology licensed hereunder is invalid or unenforceable.

10.5 Enforcement of Product Trademarks. 

          10.5.1 In the event that either GSK or HGS becomes aware of any infringement of any issued
Product Trademark, it will notify the other Party in writing to that effect within thirty (30)
days. Any such notice shall include evidence to support an allegation of infringement of such
Product Trademark.

          10.5.2 GSK shall have the obligation, using counsel of its choice, to bring suit to abate any
infringement or misappropriation of the Product Trademark. HGS will reasonably cooperate with GSK
in preparing and presenting any such suit or action. Both Parties will share the costs and
expenses of any suit or initiated by GSK pursuant to this Section 10.5.2 [***]. Any recovery of
damages derived from such an action or suit shall be deemed Net Profits and will be shared by the
Parties in accordance with Section 6.2.

10.6 Defense of Patents. In the event of the institution of any suit, opposition,
revocation, nullity or interference proceeding by a Third Party against HGS or GSK related to the
Patent Rights or Product Trademarks, the Party being sued shall promptly notify the other Party in
writing within fifteen (15) business days. The Parties shall work together and cooperate with each
other to determine strategies for defending , settling, and/or responding to, such suit, and the
Parties shall choose counsel acceptable to both Parties. Neither Party may enter into any
settlement without the prior consent of the other Party. Such consent shall not be unreasonably

 

[***] INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

75

 

withheld. The Party being sued may seek partial indemnification from the other Party pursuant to
Section 14.3.

ARTICLE 11

CONFIDENTIALITY

11.1 During the Term of this Agreement and for a period of [***] following the expiration or
earlier termination hereof, each Party shall maintain in confidence the Confidential Information of
the other Party, and shall not disclose, use or grant the use of the Confidential Information of
the other Party except on a need-to-know basis to such Party’s Affiliates, directors, officers and
employees, and such Party’s professional consultants and collaborators, to the extent such
disclosure is reasonably necessary in connection with such Party’s activities as expressly
authorized by this Agreement. To the extent that disclosure to any person is authorized by this
Agreement, prior to disclosure, a Party shall obtain written agreement of such person to hold in
confidence and not disclose, use or grant the use of the Confidential Information of the other
Party except as expressly permitted under this Agreement. Each Party shall notify the other Party
promptly upon discovery of any unauthorized use or disclosure of the other Party’s Confidential
Information. Upon the expiration or earlier termination of this Agreement, each Party shall return
to the other Party all tangible items regarding the Confidential Information of the other Party and
all copies thereof; provided, however, that each Party shall have the right to retain one (1) copy
for its legal files for the sole purpose of determining its obligations hereunder.

11.2 No public announcement or scientific publication relating to this Agreement and/or the
Development, Manufacture or Commercialization of Collaboration Products, shall be made, either
directly or indirectly, by any Party to this Agreement without first obtaining the approval of the
other Party and agreement upon the nature and text of such announcement, such agreement and/or
approval not to be unreasonably withheld. The Party desiring to make any such public announcement
shall inform the other Party of the proposed announcement or disclosure at least ten (10) business
days prior to public release, and shall provide the other Party with a written

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

76

 

copy thereof, in order to allow such other Party to comment upon such announcement or disclosure,
subject to the provisions of the previous sentence.

11.3 Notwithstanding the foregoing, the confidentiality obligations of Section 11.1 shall not
include any information that: (a) is or hereafter becomes part of the public domain by public use,
publication, general knowledge or the like through no wrongful act, fault or negligence on the part
of receiving party; (b) can be demonstrated by documentation or other competent proof to have been
in the receiving party’s possession prior to disclosure by the disclosing party; (c) is
subsequently received by the receiving party from a Third Party who is not bound by any obligation
of confidentiality with respect to said information; (d) is generally made available to Third
Parties by disclosing party without restriction on disclosure; or (e) is independently developed by
or for the receiving party without reference to the disclosing party’s Confidential Information.

11.4 The confidentiality obligations under this Article 11 shall not apply to the extent that a
Party is required to disclose information by applicable law, regulation or order of a governmental
agency or a court of competent jurisdiction, including, but not limited to, disclosures required
under rules promulgated by the United States Securities and Exchange Commission; provided, however,
that to the extent practicable, such Party (a) shall provide advance written notice thereof to the
other Party and consult with the other Party prior to such disclosure with respect thereto, and
(b) shall provide the other Party with reasonable assistance, as requested by the other Party, to
object to any such disclosure or to request confidential treatment thereof, and (c) shall take
reasonable action to avoid and/or minimize the extent of such disclosure.

11.5 Neither Party shall mention or otherwise use the name, Housemark, Trademark or trade name of
the other party (or any abbreviation or adaptation thereof) in any publication, press release,
promotional material or other form of publicity without the prior written approval of such other
party in each instance. The restrictions imposed by this Section 11.5 shall not prohibit either
Party from making any disclosure identifying the other Party that is required by applicable law or
from making any disclosure where the information being disclosed has already been made publicly
available.

77

 

ARTICLE 12

TERM AND TERMINATION

12.1 Term. This Agreement will begin as of the Effective Date and will remain in effect
until the expiration of the Tail Period (“Term”), unless earlier terminated in accordance with this
Article 12.

12.2 GSK Right to Terminate. GSK may terminate this Agreement and all of GSK’s obligations
with respect to Collaboration Product under this Agreement(s) in the event that GSK determines, in
good-faith, and upon the basis of competent scientific or medical evidence, safety data, or data
regarding commercial potential, that the Collaboration Product does not merit incurring further
Development Expenses or Marketing Expenses, applying standards that GSK would normally apply to
any of its own pipeline products having similar scientific characteristics, degree of technical
complexity and hurdles, therapeutic value and projected market potential. In such case, GSK may
terminate this Agreement upon [***] prior written notice. Furthermore, GSK may also terminate this
Agreement and all of its obligations with respect to such Collaboration Product if Collaboration
Product is not approved by FDA or EMEA for the Lead Indication upon [***] prior written notice. In
either case, GSK shall be responsible for its share of the financial costs and expenses actually
incurred and other noncancelable obligations during the relevant termination period, including
costs and expenses as may be required for the completion of any ongoing Clinical Study in humans
(in the event that no significant safety issue is presented by continuing such ongoing study),
provided such costs and expenses are actually incurred during the termination period. For the
avoidance of doubt, costs that are not pre-agreed, prior to the date of termination, by the Parties
will be excluded. Notwithstanding the foregoing, GSK will not be responsible for ongoing costs
incurred during the termination period if HGS executes an agreement with a new collaborator for the
Collaboration Product during the termination period. HGS agrees to use Diligent Efforts to speed
the transition of the project as quickly as possible.

12.3 Termination Upon Material Breach. 

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

78

 

          12.3.1 If either Party commits a material breach of this Agreement, the non-breaching Party
shall have the right to terminate this Agreement by giving written notice of termination to the
breaching Party in sufficient detail to ascertain and respond to the alleged breach. Termination
shall take effect [***] after receipt of such notice unless the breach is corrected within the same
time period, except as otherwise provided in Section 12.4.

          12.3.2 Notwithstanding the foregoing, if either Party fails to use Diligent Efforts with
respect to its obligations hereunder and such failure amounts to a material breach of the
Agreement, then the non-breaching Party shall have the right to give the breaching Party written
notice thereof stating in reasonable detail the particular diligence failure(s). In such event, the
breaching Party shall initiate a program to address the failure of diligence within [***] from the
breaching Party’s receipt of such notice, and the period for the breaching Party to cure the lack
of diligence shall not be longer than [***] from the breaching Party’s receipt of such notice,
unless extended by the mutual written agreement of the Parties.

12.4 Effects of Termination.

          12.4.1 If HGS terminates in accordance with Section 12.3, then (i) all rights and licenses
granted by HGS to GSK hereunder shall immediately terminate, and GSK shall have no right to any
continued use of HGS Existing Patent Rights, HGS Existing Know-How, HGS Arising Patent Rights or
HGS Arising Know-How, (ii) all rights and licenses granted by GSK to HGS hereunder shall
immediately terminate and HGS shall have no right to any continued use of the GSK Arising Patent
Rights and GSK Arising Know-How, and (iii) HGS shall not incur any additional costs, expenses or
liabilities of any kind to GSK under this Agreement except for those costs, expenses or liabilities
which have matured and accrued as of the effective date of termination.

          12.4.2 If GSK terminates this Agreement in accordance with Section 12.2, then all rights and
licenses granted by HGS to GSK hereunder shall immediately terminate, and GSK shall have no right
to any continued use of the HGS Existing Patent Rights, HGS Existing

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

79

 

Know-How, HGS Arising Patent Rights or HGS Arising Know-How. Furthermore, HGS shall have no
obligation to make any Active or Tail Period payments to GSK as provided above, unless such Active
or Tail Payments are accrued and due prior to or during the termination period.

          12.4.3 If GSK terminates this Agreement in accordance with Section 12.3, then, (i) all rights
and licenses granted by HGS to GSK hereunder shall immediately terminate, and GSK shall have no
right to any continued use of the HGS Existing Patent Rights, HGS Existing Know-How, HGS Arising
Patent Rights or HGS Arising Know-How, (ii) all rights and licenses granted by GSK to HGS hereunder
shall immediately terminate and HGS shall have no right to any continued use of the GSK Arising
Patent Rights and GSK Arising Know-How, and (iii) GSK shall not incur any additional costs,
expenses or liabilities of any kind to HGS under this Agreement except for those costs, expenses or
liabilities which have matured and accrued as of the effective date of termination. Furthermore,
HGS shall have no obligation to make any Active or Tail Period payments to GSK as provided above,
unless such Active or Tail Payments are accrued and due prior to or during the termination period.

12.5 Termination Upon Insolvency.

          12.5.1 Either Party may terminate this Agreement if, at any time, the other Party shall file
in any court or agency pursuant to any statute or regulation of any state, country or jurisdiction,
a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the
appointment of a receiver or trustee of that Party or of its assets, or if the other Party proposes
a written agreement of composition or extension of its debts, or if the other Party shall be served
with an involuntary petition against it, filed in any insolvency proceeding, and such petition
shall not be dismissed within [***] after the filing thereof, or if the other Party shall propose
or be a Party to any dissolution or liquidation, or if the other Party shall make an assignment for
the benefit of its creditors.

          12.5.2 All rights and licenses granted under or pursuant to this Agreement by GSK or HGS are,
and shall otherwise be deemed to be, for purposes of Section 365(n) of the

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

80

 

U.S. Bankruptcy Code, licenses of right to “intellectual property” as defined under Section
101 of the U.S. Bankruptcy Code. The Parties agree that the Parties, as licensees of such rights
under this Agreement, shall retain and may fully exercise all of their rights and elections under
the U.S. Bankruptcy Code. The Parties further agree that, in the event of the commencement of a
bankruptcy proceeding by or against either Party under the U.S. Bankruptcy Code, the Party hereto
that is not a Party to such proceeding shall be entitled to a complete duplicate of (or complete
access to, as appropriate) any such intellectual property and all embodiments of such intellectual
property, which, if not already in the non-subject Party’s possession, shall be promptly delivered
to it (a) upon any such commencement of a bankruptcy proceeding upon the non-subject Party’s
written request therefor, unless the Party subject to such proceeding elects to continue to perform
all of its obligations under this Agreement or (b) if not delivered under (a) above, following the
rejection of this Agreement by or on behalf of the Party subject to such proceeding upon written
request therefor by the non-subject Party.

12.6 The right of either Party to terminate this Agreement as herein above provided shall not be
affected in any way by its waiver of or failure to take action with respect to any previous
default. Any such termination shall be without prejudice to any further rights and remedies vested
in the Parties. The license rights granted herein shall survive the bankruptcy or reorganization of
either Party.

12.7 Survival. Expiration or termination of this Agreement for any reason, except as
otherwise stated under this Agreement, shall be without prejudice to:

          12.7.1 Articles 1 (for interpretation purposes only), 6, 11, 12, 14, 15, and 16; and Section
10.1 which shall survive termination or expiration of this Agreement in accordance with their
respective terms for the stated duration or indefinitely if no duration is stated; and

          12.7.2 either Party’s obligation to make any payments due pursuant to this Agreement which
accrue prior to termination, and at the time of termination, all such payments due shall be made in
full.

81

 

ARTICLE 13

REPRESENTATIONS & WARRANTIES, COVENANTS

13.1 Representations and Warranties of Each Party. Each Party hereby represents and
warrants to the other that:

          13.1.1 it is a corporation duly organized and validly existing under the law of the state of
its incorporation;

          13.1.2 it has the full legal right and authority to enter into and perform all of the duties
and obligations contemplated under this Agreement attributed to such Party, and to convey the
rights and licenses granted to the other Party herein;

          13.1.3 the execution, delivery and performance of this Agreement by it has been duly
authorized by all requisite corporate action, subject only to approval of its board of directors;
and

          13.1.4 it has not entered into as of the Effective Date, and shall not at any time thereafter
enter into any agreement, understanding, or other obligation or commitment which would prevent or
conflict or otherwise encumber or interfere with the performance of its obligations or contemplated
activities hereunder or the grant or exercise of any of the rights or licenses expressly granted to
the other Party hereunder.

13.2 HGS Representations and Warranties. HGS hereby represents and warrants to GSK that:

          13.2.1 it is the owner of or controls all right, title and interest in and to the HGS Existing
Patent Rights as defined herein and listed in Appendix A (as updated from time to time) and the HGS
Existing Know-How for any use of Collaboration Product;

          13.2.2 it has provided GSK with true and complete copies of all contracts, agreements,
understandings, arrangements and commitments with any Third Party pertaining to any part of the HGS
Existing Patent Rights and HGS Existing Know-How and the use, transfer, access to, disclosure of,
or grant of any right, title, interest or license in or to the same, solely as it relates to
Collaboration Product; and

82

 

          13.2.3 it has and will maintain insurance for products liability and general liability in
accordance with standard and prudent practices in the pharmaceutical industry for products such as
the Collaboration Products in amounts not less than [***] per incident and [***] annual aggregate,
provided that such amounts shall increase to [***] when the Collaboration Product enters Phase III
Clinical Studies and [***] at the time of First Commercial Sale of the Collaboration Product. Such
insurance shall provide (i) product liability coverage and (ii) broad form contractual liability
coverage for HGS’s indemnification under Section 14.2 of this Agreement.

          13.2.4 it has not used, in any capacity associated with or related to the Manufacture of
Collaboration Product, the services of any persons who have been, or are in the process of being,
debarred under 21 U.S.C. sec. 335 (a) or (b) or any comparable Law. Furthermore, neither HGS nor
any of its officers, employees, or consultants has been convicted of an offense under (i) either a
federal or state law that is cited in 21 U.S.C. sec. 335(a) as a ground for debarment, denial of
approval, or suspension, or (ii) any other Law cited as a ground for debarment, denial or approval
or suspension.

          13.2.5 the manufacture, generation, processing, distribution, transport, treatment, storage,
disposal and other handling of Collaboration Product by HGS shall (i) be in accordance with and
conform to the specifications agreed upon by the Parties, cGMPs, Laws and the Quality Agreement;
(ii) be in accordance with and conform to the applicable standards specified by the United States
Pharmacopeia and Pharmacopeial Forum and the European Pharmacopeia and Pharmacopeial Forum, and
(iii) otherwise conform to any provisions of the applicable Laws not reflected in cGMPs and the
Quality Agreement. The Collaboration Product will strictly comply with the specifications agreed
upon by the Parties, shall be free from defects in materials and workmanship and shall not be
adulterated or misbranded within the meaning of applicable Laws or the United States Federal Food,
Drug and Cosmetic Act.

          13.2.6 as of the Effective Date, and except as set forth in Appendix E, it is not aware of any
action, suit, inquiry, investigation or other proceeding threatened, pending or ongoing, brought by
HGS or any Third Party that challenges or threatens the validity or

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

83

 

enforceability of any of the HGS Existing Patent Rights or any other intellectual property
licensed to GSK hereunder or that alleges that the use of any such intellectual property for
Development and Commercialization of Collaboration Products as contemplated hereunder would
infringe or misappropriate the intellectual property rights of any Third Party. In the event that
HGS becomes aware of any such action or proceeding, it shall notify GSK in writing within fifteen
(15) days.

          13.2.7 HGS is not in material breach or default of any provision or obligation under any of
the Third Party license agreements.

          13.2.8 HGS is not aware of any valid patent, know-how or other intellectual property right
owned or Controlled by HGS as of the Effective Date which is not licensed to GSK under Article 2,
which HGS has reason to believe as of the Effective Date would be necessary or important for the
Parties to Develop and/or Commercialize the Collaboration Product as contemplated hereunder.

          13.2.9 HGS has filed and prosecuted HGS Existing Patent Rights in good faith and complied with
all duties of disclosure as required by the United States Patent and Trademark Office.

13.3 HGS Covenants. HGS hereby covenants that at no time during the Term of this Agreement
shall HGS assign, transfer, encumber or grant rights in or with respect to any rights licensed to
GSK hereunder or any portion or all of the HGS Existing Patent Rights, HGS Existing Know-How, HGS
Arising Patent Rights, HGS Arising Know-How or HGS’ interest in the Joint Arising Patent Rights or
Joint Arising Know-How that are inconsistent with the license grants and other rights reserved to
GSK under this Agreement, provided, however, this covenant shall not affect the absolute right of
HGS to transfer title to such HGS Existing Patent Rights, HGS Existing Know-How, HGS Arising
Know-How, HGS Arising Patent Rights or its interest in Joint Arising Know-How and Joint Arising
Patent Rights as well as its exclusively licensed rights to any successor to all or substantially
all of that portion of HGS’ business relating to belimumab.

84

 

13.4 GSK Representations and Warranties. GSK hereby represents and warrants to HGS that it
is self-insured for products liability and general liability, and that it has and will maintain
those coverages and other self-insured liability coverages in accordance with standard and prudent
practices in the pharmaceutical industry for products such as the Collaboration Products in amounts
not less than [***] per incident and [***] annual aggregate, provided that such amounts shall
increase to [***] when the Collaboration Product enters Phase III Clinical Studies and [***] at the
time of First Commercial Sale of the Collaboration Product. Such insurance shall provide (i)
product liability coverage and (ii) broad form contractual liability coverage for GSK’s
indemnification under Section 14.1 of this Agreement.

13.5 GSK Covenants. GSK covenants that at no time during the term of this Agreement shall
GSK assign, transfer, encumber or grant rights in or with respect to any rights licensed to GSK
hereunder or any portion or all of the GSK Arising Patent Rights, GSK Arising Know-How and GSK’s
interest in the Joint Arising Patent Rights and Joint Arising Know-How that are inconsistent with
the grants and other rights reserved to HGS under this Agreement; provided, however, this covenant
shall not affect the absolute right of GSK to transfer title to such GSK Arising Patent Rights and
GSK Arising Know-How or its interest in the Joint Arising Know-How and Joint Arising Patent Rights
as well as its exclusive licensed rights under this Agreement to any successor to all or
substantially all of that portion of GSK’s business relating to belimumab.

13.6 EXCEPT AS OTHERWISE PROVIDED IN THIS ARTICLE 13, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED
AS A WARRANTY THAT ANY PATENT RIGHTS INCLUDED WITHIN COLLABORATION TECHNOLOGY ARE VALID OR
ENFORCEABLE OR THAT EITHER PARTY’S EXERCISE OF COLLABORATION TECHNOLOGY DOES NOT INFRINGE ANY
PATENT RIGHTS OF THIRD PARTIES.

13.7 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS NOR
EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

85

 

OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT OR ANY OTHER WARRANTY,
EXPRESS OR IMPLIED.

ARTICLE 14

INDEMNIFICATION

14.1 Indemnification by GSK. GSK shall defend, indemnify and hold harmless HGS, its
Affiliates, and each of its or their respective directors, officers, shareholders, agents and
employees (collectively, the “HGS Indemnitees”), from and against any and all liability, loss,
damages, costs and expenses, including reasonable attorneys’ fees and expenses (“Costs”) resulting
from any lawsuit or other legal proceeding brought by a Third Party asserting any legal claim,
demand, or judgment (“Claims”) (i) arising out of the negligence or misconduct in the handling,
storage, testing, transportation, advertising, promotion, distribution, sale, use, treatment or
disposal of the Collaboration Product by, on behalf of or through GSK or any Third Party granted
rights by GSK hereunder; (ii) the violation of any applicable federal, state or local law or
regulation by any GSK Indemnitee, or (iii) a breach by GSK of any of its representations,
warranties or covenants hereunder, or (iv) failure by GSK to comply with the terms of any safety
data exchange agreement to be entered into by the Parties pursuant to Section 8.4.2; provided,
however, the indemnity provided hereunder shall not under any circumstances extend to any Cost or
Claim asserted against an HGS Indemnitee to the extent such Cost or Claim is attributable to the
gross negligence, willful misconduct or material breach of this Agreement of or by any such HGS
Indemnitee or to the extent subject to indemnity by HGS pursuant to Section 14.2 below. GSK shall
have the exclusive right to control the defense of any action which is to be indemnified by GSK
hereunder, including the right to select counsel reasonably acceptable to HGS to defend HGS
Indemnitees and to settle such action; provided that, without the written consent of HGS (which
shall not be unreasonably withheld or delayed), GSK shall not agree to settle any claim against an
HGS Indemnitee to the extent such claim has a material adverse effect on HGS or such settlement
consists of obligations other than the payment of money.

86

 

14.2 Indemnification by HGS. HGS shall defend, indemnify and hold harmless GSK, its
Affiliates and each of its or their respective directors, officers, shareholders, agents and
employees (“GSK Indemnitees”), from and against any and all Costs, resulting from any Claims (i)
arising out of the negligence or misconduct in the handling, storage, design, manufacture, testing,
transportation, advertising, promotion, distribution, sale, use, treatment or disposal of the
Collaboration Product by, on behalf of or through HGS or any Third Party granted rights by HGS;
(ii) the violation of any applicable federal, state or local law or regulation by any HGS
Indemnitee, (iii) a breach by HGS of any of its representations, warranties or covenants hereunder,
or (iv) failure by HGS to comply with the terms of any safety data exchange agreement entered into
by the Parties pursuant to Section 8.4.2; provided, however, that the indemnity provided hereunder
shall not under any circumstances extend to any Cost or Claim asserted against a GSK Indemnitee to
the extent such Cost or Claim is attributable to the gross negligence, willful misconduct or
material breach of this Agreement of or by any such GSK Indemnitee or to the extent subject to
indemnity by GSK under Section 14.1. HGS shall have the exclusive right to control the defense of
any action which is to be indemnified by HGS hereunder, including the right to select counsel
reasonably acceptable to GSK to defend GSK Indemnitees and to settle such action; provided that,
without the written consent of GSK (which shall not be unreasonably withheld or delayed), HGS shall
not agree to settle any claim against a GSK Indemnitee to the extent such claim has a material
adverse effect on GSK or such settlement consists of obligations other than the payment of money.

14.3 Each Party shall be responsible for a percentage of all Costs resulting from any Claims which
are not covered under Sections 14.1 or 14.2 above and which (i) arise out of the joint Development
(as described in Section 4.2, except for independent Development by one Party as outlined in
Section 4.3) or joint Commercialization (as described in Article 5, except as set forth in Section
5.3.1(ii)) of a Collaboration Product by the Parties pursuant to this Agreement or (ii) are brought
against either Party or its indemnities alleging infringement or misappropriation of the
intellectual property rights of any Third Party to the extent based upon or attributable to the
Collaboration Technology (subject to Section 14.3.1 below), or (iii) arise out of a claim of
inequitable conduct brought before the United States Patent and Trademark Office and any resulting
antitrust claims arising therefrom. [***].

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

87

 

          14.3.1 If a Claim is brought against either Party alleging infringement or misappropriation of
the intellectual property rights of a Third Party to the extent based upon or attributable to a
patent forming part of the Collaboration Technology which claims a method of use of the
Collaboration Product for a specific indication, then the [***].

14.4 A Party will promptly notify the indemnifying Party of receipt of notice of any such Claim and
shall cooperate fully with the indemnifying Party in the defense of all such Claims. Failure of an
indemnified Party to provide notice of a Claim to the indemnifying Party shall affect indemnified
Party’s right to indemnification only to the extent that such failure has a material adverse effect
on the indemnifying Party’s ability to defend or the nature or the amount of the liability. GSK
shall have the right to assume the defense of any Claim related to the liability set forth in
Section 14.1 above if it has assumed responsibility for the suit or claim in writing and HGS shall
have the right to assume the defense of any Claim related to the liability set forth in Section
14.2 above if it has assumed responsibility for the suit or claim in writing; however, if in the
reasonable judgment of the indemnified Party, such Claim involves an issue or matter which could
have a materially adverse effect on the business operations or assets of such indemnified Party,
the indemnified Party may waive its rights to indemnity under this Agreement and control the
defense or settlement thereof, but in no event shall any such waiver be construed as a waiver of
any indemnification rights the indemnified Party may have at law or in equity. If the indemnifying
Party defends the Claim, the indemnified Party may participate in (but not control) the defense
thereof at its sole cost and expense.

ARTICLE 15

DISPUTE RESOLUTION

15.1 All disputes between the Parties arising under this Agreement shall be in the first instance
referred to the JSC for resolution. The JSC will have [***] after submission of a dispute to work
together in good faith to reach a reasonable resolution of such dispute. If, after [***] and good
faith efforts, the JSC or its Senior Officers fail to reach consensus on the resolution of such
dispute as set forth in Section 3.1, then (i) disputes relating to Development of a Collaboration

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

88

 

Product shall be elevated to GSK’s [***] for resolution; (ii) disputes relating to Manufacturing of
Collaboration Product shall be elevated to [***] for resolution, and (iii) disputes relating to the
Commercialization of a Collaboration Product shall be elevated to [***] for resolution.

15.2 Arbitration. 

          15.2.1 If the dispute is not fully resolved pursuant to Section 15.1 to the mutual
satisfaction of the Parties, the dispute shall be resolved by binding arbitration administered by
the American Arbitration Association (“AAA”) under its Commercial Arbitration Rules then in effect,
except as otherwise provided for herein. The arbitration will be conducted in Washington, D.C.
Within [***] after initiation of the arbitration proceeding by a Party and notice to the other
Party, the Parties shall select, by mutual agreement, one arbitrator, with an expertise in the
subject matter of this Agreement. Should no arbitrator be chosen within such period, then each
Party shall select an arbitrator within [***] after the end of such period and the two arbitrators
will select a mutually agreeable third arbitrator within [***].

          15.2.2 The Parties agree that the arbitrator(s) shall use [***] for resolving the dispute, as
set forth in the AAA guidelines. The arbitrator shall set the date, time, and place of the
hearing, to be scheduled to take place within [***] of confirmation of the arbitrator’s
appointment. In advance of the hearing, each Party shall submit to the arbitrator(s), and exchange
with each other, [***]. After the hearing the arbitrator(s) shall be limited to awarding [***].

          15.2.3 Within [***] after the hearing, the arbitrator(s) shall decide the matter by [***].

          15.2.4 Unless otherwise agreed to by the Parties, the arbitrator(s)shall make such decisions
based on the following factors in descending order of importance: (a) consistency with the
provisions of this Agreement; (b) consistency with the intent of the Parties as reflected in this
Agreement; and (c) customary and reasonable provisions included in comparable agreements.

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

89

 

          15.2.5 The decision of the arbitrator(s) will be binding upon the Parties without the right of
appeal, and judgment upon the decision may be entered in any court having jurisdiction thereof. The
Parties shall be responsible for their own legal fees and expenses incurred in the arbitration.
The arbitrator(s)’ fees travel and other expenses, as well as AAA administrative fees, shall be
borne equally by the Parties.

ARTICLE 16

MISCELLANEOUS

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

16.2 Both Parties shall be excused from the performance of their obligations under this Agreement
to the extent that such performance is prevented by force majeure and the nonperforming Party
promptly provides notice of the prevention to the other Party. Such excuse shall be continued so
long as the condition constituting force majeure continues and the nonperforming Party takes
reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall
include conditions beyond the control of the Parties, including without limitation, an act of God,
voluntary or involuntary compliance with any regulation, law or order of any government, war, civil
commotion, labor strike or lock-out, epidemic, failure or default of public utilities or common
carriers, destruction of production facilities or materials by fire, earthquake, storm or like
catastrophe; provided, however, the payment of invoices due and owing prior to such force majeure
event shall not be delayed by the payor because such a force majeure event affecting the payor;
provided, further, that in the event the suspension of performance continues for [***] after the
date of the occurrence, and such failure to perform

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

90

 

would constitute a material breach of this Agreement in the absence of such force majeure, the
non-breaching Party may terminate this Agreement pursuant to Section 12.3 by written notice to the
other Party.

16.3 Any notice required or permitted to be given under this Agreement shall be in writing, shall
specifically refer to this Agreement and shall be deemed to have been sufficiently given for all
purposes upon the date of receipt if mailed by first class certified or registered mail, postage
prepaid, express delivery service or personally delivered or upon the date of a confirmed facsimile
transfer. Unless otherwise specified in writing, the mailing addresses of the Parties shall be as
described below.

For HGS:

Human Genome Sciences, Inc.

14200 Shady Grove Road

Rockville, MD 20850

Attn: Chief Commercial Officer

With a Copy to: General Counsel

For GSK:

Alliance Management

WW Business Development

GlaxoSmithKline

Medicines Research Centre

Gunnels Wood Road

Stevenage SG1 2NY

UK

Fax: +44 1438 763276

Attention: Alliance Manager

With a copy to:

GlaxoSmithKline

91

 

2301 Renaissance Boulevard

Mail Code: RN0220

King of Prussia, PA 19406

Fax: 610-787-7084

Attention: General Counsel

16.4 Whenever provision is made in this Agreement for either Party to secure the consent or
approval of the other, that consent or approval shall not unreasonably be withheld or delayed, and
whenever in this Agreement provisions are made for one Party to object to or disapprove a matter,
such objection or disapproval shall not unreasonably be exercised.

16.5 Neither Party may assign or transfer this Agreement or any rights or obligations hereunder
without the prior written consent of the other Party, except that either Party may make such an
assignment without the other Party’s consent to Affiliates or to a successor to substantially all
of the pharmaceutical business of the assigning Party relating to the subject matter of this
Agreement, whether in a merger, sale of stock, sale of assets or other transaction. Any permitted
successor or assignee of rights and/or obligations hereunder shall, in writing to the non-assigning
or non-transferring Party, expressly assume performance of such rights and/or obligations. This
Agreement and the provisions hereof shall be binding upon and inure to the benefit of the
successors, heirs, administrators and permitted assignees of the respective Parties. Any assignment
or attempted assignment by either Party in violation of the tenets of this Section 16.5 shall be
null and void and of no legal effect.

16.6 Each of HGS and GSK acknowledges that obligations under this Agreement may be performed by
Affiliates of HGS and GSK. Each of HGS and GSK guarantee performance of this Agreement by its
Affiliates.

16.7 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 one and the same instrument.

92

 

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

16.9 If any one or more of the provisions of this Agreement is held to be invalid or unenforceable,
the provision shall be considered severed from this Agreement and shall not serve to invalidate any
remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or
unenforceable provision with a valid and enforceable one such that the objectives contemplated by
the Parties when entering this Agreement may be realized.

16.10 This Agreement shall be governed by and construed in accordance with the laws of Delaware, as
if executed and fully performed within Delaware, excluding any conflicts or choice of law rule or
principle that might otherwise refer construction or interpretation of this agreement to the
substantive law of another jurisdiction. Any disputes under this Agreement shall be subject to the
exclusive jurisdiction and venue of the Delaware state courts and the Federal courts located in
Delaware, and the parties hereby consent to the personal and exclusive jurisdiction and venue of
these courts.

16.11 Any delay in enforcing a Party’s rights under this Agreement or any waiver as to a particular
default or other matter shall not constitute a waiver of such Party’s rights to the future
enforcement of its rights under this Agreement, excepting only as to an express written and signed
waiver as to a particular matter for a particular period of time.

[SIGNATURE PAGES TO FOLLOW]

93

 

     IN WITNESS WHEREOF, the Parties, through their authorized officers, have executed this
Co-Development and Commercialization Agreement as of the Effective Date.

	 	 	 	 	 	 	 
	HUMAN GENOME SCIENCES, INC.	 	GLAXO GROUP LIMITED
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 

	 	H. Thomas Watkins	 	 	 	 
	 

	 	Chief Executive Officer	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	(Printed Name)
	 
	 	 	 	 	 	 
	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	(Title)

94

 

Appendix A

[***]

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

95

 

Appendix B

[***]

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

96

 

Appendix C

[***]

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

97

 

Appendix D

[***]

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

98

 

Appendix E

[***]

 

	 	 	 
	[***]	 	INDICATES MATERIAL THAT HAS BEEN OMITTED AND FOR WHICH CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED. ALL SUCH OMITTED MATERIAL HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24b-2 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

99

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00153-of-00352.parquet"}]]