Document:

Exhibit
10.28

 

LEASE PACKAGE:

 

RESPECTING LEASE BY
AND BETWEEN

 

PEARSON FUND III,
L.P., a Texas limited partnership (“LANDLORD”),

 

And 

 

SONUS NETWORKS, INC,
a Delaware corporation (“TENANT”)

 

RESPECTING LEASE OF
PREMISES SITUATED AT 1130 EAST 

ARAPAHO ROAD, RICHARDSON, TEXAS 75081:

 

1.                                       BASIC LEASE
INFORMATION

 

2.                                       STANDARD LEASE,
INCLUDING EXHIBITS THERETO AS FOLLOWS:

 

	
  Exhibit A-l

  	
  -

  	
   

  	
  Legal Description of the Land

  
	
  Exhibit A-2

  	
  -

  	
   

  	
  General Depiction of the Premises – 1st
  Floor

  
	
  Exhibit A-3

  	
  -

  	
   

  	
  General Depiction of the Premises – 2nd
  Floor

  
	
  Exhibit B

  	
  -

  	
   

  	
  Building Rules and Regulations

  
	
  Exhibit C

  	
  -

  	
   

  	
  Operating Expense Escalator

  
	
  Exhibit D

  	
  -

  	
   

  	
  Special Provisions

  
	
  Exhibit D-l

  	
  -

  	
   

  	
  ADA Compliance Matters

  
	
  Exhibit E

  	
  -

  	
   

  	
  Parking

  
	
  Exhibit F

  	
  -

  	
   

  	
  Intentionally Deleted

  
	
  Exhibit G

  	
  -

  	
   

  	
  Subordination Non-Disturbance and Attornment
  Agreement

  
	
  Exhibit H

  	
  -

  	
   

  	
  Intentionally Deleted

  
	
  Exhibit I

  	
  -

  	
   

  	
  Janitorial Specifications

  

 

 

BASIC LEASE INFORMATION

 

	
  Lease
  Date/Effective Date:

  	
   

  	
  Effective,
  but not necessarily signed, July 19, 2005.

  
	
   

  	
   

  	
   

  
	
  Commencement
  Date:

  	
   

  	
  The
  earlier of (a) November 15, 2005 (provided that Landlord delivers
  possession of the Premises to Tenant on the Lease Date; otherwise, such date
  shall be extended one day for each day of delay in delivering possession of
  the Premises to Tenant) or (b) the date on which Tenant occupies any
  portion of the Premises and begins conducting business therein, as may be
  adjusted to the date set forth in that certain letter agreement between
  Landlord and Tenant described in Section 3 of this Lease.

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
   

  
	
   

  	
   

  	
  Sonus
  Networks, Inc., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
  Tenant’s
  Address:

  	
   

  	
  Sonus
  Networks, Inc.

  1130 East Arapaho Road

  Suite 200

  Richardson, Texas 75081

  Attention: Mike Eastep

  Telephone: 972.301.4930

  Facsimile: 972.680.6329

  	
   

  	
  with
  a copy to:

  Sonus
  Networks, Inc.

  250 Apollo Drive

  Chelmsford, MA 01824

  Attention: General Counsel

  Telephone: 978.614.8505

  Facsimile: 978.614.8651

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
  Pearson
  Fund III, L.P., a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
  Landlord’s
  Address:

  	
   

  	
  Pearson
  Fund III, L.P.

  9000 Mountbatten Circle

  Austin, TX 78730

  Attention: Craig Nemec, President

  Telephone: 512.342.1700

  Facsimile: 512.233.5280 

  	
   

  	
  with
  a copy to:

  Pearson
  Group, Inc.

  1130 East Arapaho Road

  Suite 190

  Attention: Craig Nemec, Pres.
 Richardson, Texas 75081

  Telephone: 972.234.3743

  Facsimile:
  972.664.1084

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Premises:

  	
   

  	
  Suite 200,
  containing approximately 26,537
  rentable square feet, as outlined on the floor plans attached hereto as Exhibits
  A-2 and A-3 (“Premises”),
  comprising a portion of the 1st and 2nd floors of the six-story
  office building (the “Building”)
  located on that certain real property commonly known as Two Richardson
  Center, Richardson, Dallas County, Texas, with a street address of 1130 East
  Arapaho Road, Richardson, Texas 75081 (Dallas County, Texas), comprised of a
  stipulated 119,169 rentable square feet, as
  more particularly described on Exhibit A-l (the “Land”), together with the non-exclusive use of the
  Common Area of the first floor
  of the Building, including, without limitation, the loading dock area and the
  front lobby (collectively the “First Floor Common
  Area”). The Premises and the First and Second Floor Common
  Areas are generally depicted and shown on Exhibits A-2 and A-3; said
  exhibits being attached for identification purposes only, and such depictions
  are expressly made WITHOUT WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND. The
  First and Second Floor Common Areas do not include the elevator closets and
  mechanical rooms on the first and second floors of the Building as depicted
  and shown on Exhibit A-2 and A-3.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Measurement
  and calculation of rentable area has been performed in accordance with

  
							

 

 

	
   

  	
   

  	
  the
  Building Owners and Managers Association (“BOMA”)
  guidelines using no more than a 15.0% load factor with respect to each
  multi-tenant floor of the Building and a 8.0% load factor with respect to
  each single tenant floor of the Building (i.e., the 2nd floor); it
  being agreed that, at no time during the Term, shall such load factors exceed
  such percentages. Landlord and Tenant hereby stipulate that notwithstanding
  anything herein to the contrary, the Premises shall be deemed to consist of 19,478 rentable square feet on the 2nd Floor
  and 7,059  rentable square feet on the 1st
  Floor, and that no shortage or overage in the rentable square feet of the Premises
  purported by either party shall be the basis for changing the number of
  rentable square feet herein stipulated, other than in the event of Tenant’s
  exercise of its Expansion Option, if any, as provided in the Lease.

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  60
  full calendar months, plus any partial month from the Commencement Date to
  the end of the month in which the Commencement Date occurs, beginning on the
  Commencement Date and ending at 5:00 p.m. local time on the last day of
  the 60th full calendar month following the Commencement Date,
  subject to adjustment and earlier termination as provided in the Lease.

  

 

	
  Basic
  Rental:

  	
   

  	
  LEASE MONTHS:

  	
   

  	
  ANNUAL BASIC

  RENTAL PER

  RENTABLE

  SQUARE FOOT:

  	
   

  	
  MONTHLY BASIC RENTAL:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1-3*

  	
   

  	
  $

  	
  0.00

  	
   

  	
  $

  	
  0.00

  	
   

  
	
   

  	
   

  	
  4-12

  	
   

  	
  $

  	
  10.00

  	
   

  	
  $

  	
  22,114.17

  	
   

  
	
   

  	
   

  	
  13-60

  	
   

  	
  $

  	
  18.50

  	
   

  	
  $

  	
  40,911.21

  	
   

  

 

	
   

  	
   

  	
  As
  used herein, the term “Lease Month”
  means each calendar month during Term (and if the Commencement Date does not
  occur on the first day of the calendar month, the period from the
  Commencement Date to the first day of the next calendar month shall be
  included in the first Lease Month for purposes of determining the duration of
  the Term and the monthly Basic Rental applicable for such partial month.

  
	
   

  	
   

  	
   

  

	
   

  	
   

  	
  *Notwistanding
  the foregoing, the Basic Rent shall be $0.00 with respect to the first 92
  days of the Term and any remaining portion of the calendar month after such
  initial 92-day period expires shall be prorated based on the number of days
  remaining in such month, the total number of days in such month and a monthly
  Basic Rental of $22,114.17.

  
	
   

  	
   

  	
   

  
	
  Security
  Deposit

  	
   

  	
   $30,000.00.

  
	
   

  	
   

  	
   

  
	
  Rent:

  	
   

  	
  Basic
  Rental, Electricity Costs, Excess (as defined in Exhibit C), and
  all other sums that Tenant may owe to Landlord under the Lease.

  
	
   

  	
   

  	
   

  
	
  Permitted
  Use:

  	
   

  	
  General
  business and professional offices, research and development, training,
  demonstration and sales and service of telephony equipment.

  
	
   

  	
   

  	
   

  
	
  Expense
  Stop:

  	
   

  	
  Basic
  Cost (as defined in Exhibit C)
  per rentable square foot in the Building for calendar year 2006 (the “Base
  Stop Year”) as more fully set forth on Exhibit C.

  
	
   

  	
   

  	
   

  
	
  Initial
  Liability Insurance

  	
   

  	
  $1,000,000.00
  per occurrence, and $2,000,000.00 in the aggregate.

  

 

 

	
  Amount:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tenant’s Pro Rata Share

  	
   

  	
  22.27%, being the percentage obtained by dividing (a) the
  number of rentable square feet in the Premises as stated above by (b) the
  119,169 rentable square feet in the Building.

  

 

 

SIGNATURES ON FOLLOWING PAGE

 

 

The foregoing
Basic Lease Information is incorporated into and made a part of the Lease
identified above.  If any conflict exists
between any Basic Lease Information (as set forth herein) and the Lease, then
the Basic Lease Information shall control.

 

 

	
   

  	
  LANDLORD:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PEARSON FUND III, L.P.

  
	
   

  	
  a Texas limited
  partnership

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Pearson Group
  Capital Management III, Inc.

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Craig Nemec

  	
   

  
	
   

  	
   

  	
  Name:
  Craig Nemec

  
	
   

  	
   

  	
  Title:
  President

  
	
   

  	
  Signed
  the 31st day of July 2005

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  TENANT:

  	
   

  
	
   

  	
   

  
	
   

  	
  SONUS
  NETWORK INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Ellen B. Richstone

  	
   

  
	
   

  	
  Name:

  	
    Ellen
  B. Richstone

  	
   

  
	
   

  	
  Title:

  	
  CFO

  	
   

  
	
   

  	
  Signed
  the 29th day of July, 2005

  
												

 

 

STANDARD LEASE PROVISIONS

 

	
   

  	
   

  	
  THIS LEASE (this “Lease”)
  is entered into effective, but not necessarily signed July 19, 2005, by
  and between Pearson Fund III, L.P., a Texas limited partnership (“Landlord”), and Sonus Networks, Inc., a Delaware
  corporation (“Tenant”).

  
	
   

  	
   

  	
   

  
	
  DEFINITIONS AND

  BASIC PROVISIONS

  	
   

  	
  1.   The definitions and basic
  provisions set forth in the Basic Lease information (the “Basic
  Lease Information”) executed by Landlord and Tenant
  contemporaneously herewith are incorporated herein by reference for all
  purposes.

  
	
   

  	
   

  	
   

  
	
  LEASE GRANT

  	
   

  	
  2.   Subject to the terms of
  this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, the
  Premises.  Except as may be expressly provided elsewhere in this
  Lease, Tenant hereby accepts the Premises in their “AS-IS”
  condition.  Landlord shall have no obligation to perform any work
  therein (including demolition of any improvements existing therein or
  construction of any tenant finish-work or other improvements therein), and
  shall not, except as provided in Exhibit D, be obligated to
  reimburse Tenant or provide an allowance for any costs related to the
  demolition or construction of improvements therein.  Landlord shall
  deliver possession and permit early occupancy immediately upon complete
  execution hereof and receipt of proof of Tenant’s insurance as required in
  this Lease. Occupancy of the Premises by Tenant prior to the Commencement
  Date shall be subject to all provisions of this Lease excepting only those
  requiring the payment of Basic Rent.  Notwithstanding
  anything to the contrary contained in this Lease, if Landlord does not
  deliver possession of the Premises to Tenant on or before the later of the
  date this Lease is executed by Tenant or August 1, 2005, Tenant may
  terminate this Lease by delivering to Landlord written notice thereof.

  
	
   

  	
   

  	
   

  
	
  TERM

  	
   

  	
  3.   The Term of the Lease
  shall commence as of the Commencement Date.  By occupying the
  Premises, Tenant shall be deemed to have accepted the Premises in their
  condition as of the date of such occupancy, subject to the performance of
  punch-list items that remain to be performed by Landlord pursuant to the
  express provisions hereof, if any. Tenant shall execute and deliver to
  Landlord, within ten days after Landlord has requested same, a letter
  confirming (i) that Tenant has accepted the Premises, and (ii) that
  Landlord has performed all of its obligations with respect to the Premises.

  
	
   

  	
   

  	
   

  
	
  RENT

  	
   

  	
  4.   (a)  Payment.  Tenant shall
  timely pay to Landlord the Basic Rental without demand and all additional
  sums to be paid by Tenant to Landlord under this Lease, including the amounts
  set forth in Section 4(b) below (Tenant’s Share of Electricity
  Costs) and in Exhibit C (Operating Expense Escalator) after
  receipt of a monthly invoice therefor, without further demand, deduction or
  set off, at Landlord’s Address (or such other address within the continental
  United States as Landlord may from time to time designate in writing to
  Tenant). Basic Rental, adjusted as herein provided, shall be payable monthly
  in advance.  The first monthly installment of Basic Rental shall be
  payable contemporaneously with the Commencement Date of this Lease, which
  installment shall be prorated if such date does not fall on the first day of
  the month, and thereafter, monthly installments of Basic Rental shall be due
  on the first day of the first calendar month immediately following the
  Commencement Date.  Monthly installments shall continue on the
  first day of each succeeding calendar month during the Term.  Basic
  Rental for any fractional month at the beginning of the Term shall be
  prorated based on 1/365 of the current annual Basic Rental for each day of
  the partial month from the Commencement Date to the first day of the first calendar
  month immediately following the Commencement Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Electricity Costs.
  In addition to Basic Rental and any other amounts to be paid by Tenant to
  Landlord under this Lease, Tenant will pay to Landlord, concurrently with
  each monthly installment of Basic Rental, Tenant’s Share (as hereinafter
  defined) of all electricity (including the cost of electricity for Landlord
  to provide HVAC) used by the Building (“Electricity Costs”)
  the prior month.  The term “Tenant’s Share”
  shall mean Tenant’s ProRata Share adjusted as reasonably determined by
  Landlord to (aa) compensate for the first and final months of the Lease term
  and or (bb) reflect any disproportionate utility requirements of any occupant
  or tenant of the Building; provided, however, that in the event the Premises
  are ever separately metered, Tenant shall directly pay for Electricity Costs
  as so metered for the

  

 

1

 

	
   

  	
   

  	
  Premises and shall have no further obligation to pay
  any other Electricity Costs, other than Tenant’s Share of Electricity Costs
  attributable to the Common Area as reasonably determined by Landlord.
  Landlord shall use commercially reasonable efforts to cause any tenants of
  the Building whose equipment consumes a disproportionate amount of
  electricity (relative to other tenants in the Building) to pay their fair
  share of Electrical Costs.

  
	
   

  	
   

  	
   

  
	
  DELINQUENT

  PAYMENT; HANDLING

  CHARGES

  	
   

  	
  5.   All payments required of
  Tenant hereunder shall bear interest from seven (7) days after the date
  due until paid at the lower of the Prime Rate (as defined in Section 18(a))
  or the maximum lawful rate. Alternatively, Landlord may charge Tenant a fee
  equal to 5% of any delinquent payment (“Late
  Fee”) to reimburse Landlord for its cost and inconvenience incurred
  as a consequence of Tenant’s delinquency if any payment is not made by Tenant
  within seven (7) days of the date due; provided however, such interest
  or Late Fee shall not be charged with respect to the first two (2) of
  such occasions hereunder during the Term, but not otherwise. In no event
  shall the charges permitted under this Section 5 or elsewhere in this
  Lease, to the extent the same are considered to be interest under applicable
  law, exceed the maximum lawful rate of interest.

  
	
   

  	
   

  	
   

  
	
  SECURITY DEPOSIT

  	
   

  	
  6.  Within ten (10) business
  days of the Effective Date of this Lease, Tenant shall pay to Landlord, in
  immediately available funds, the Security Deposit, which shall be held by
  Landlord without liability for interest and as security for the performance
  by Tenant of its obligations under this Lease. The Security Deposit is not an
  advance payment of Rent or a measure or limit of Landlord’s damages upon an
  Event of Default (defined below). Landlord may, from time to time and without
  prejudice to any other remedy, use all or a part of the Security Deposit to
  perform any obligation which Tenant was obligated, but failed, to perform
  hereunder. Following any such application of the Security Deposit, Tenant
  shall pay to Landlord on demand the amount so applied in order to restore the
  Security Deposit to its original amount. Within sixty (60) days after the
  Term ends, provided Tenant has performed all of its obligations hereunder,
  Landlord shall return to Tenant the balance of the Security Deposit not
  applied to satisfy Tenant’s obligations.  If Landlord transfers its
  interest in the Premises, then Landlord may assign the Security Deposit to
  the transferee and Landlord thereafter shall have no further liability for
  the return of the Security Deposit.

  
	
   

  	
   

  	
   

  
	
  LANDLORD’S

  OBLIGATIONS

  	
   

  	
  7.

  
	
   

  	
   

  	
  (a)  Services.
  Subject to the provisions of Section 4(b) (Tenant’s Share of
  Electricity Costs) and the Rules and Regulations hereinafter referred
  to, and while Tenant is occupying the Premises, Landlord shall furnish to
  Tenant:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)  water (hot and cold) at those points
  of supply provided for general use of tenants of the Building;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)  heated and refrigerated air
  conditioning in season during Building Hours (as set forth in Exhibit B
  hereto, the Rules and Regulations) throughout the year other than
  holidays, at such temperatures and in such amounts as are standard for
  comparable buildings in the vicinity of the Building; provided that Tenant
  acknowledges that such service and temperature may be subject to change by local,
  county, state or federal regulation; and whenever atypical business use,
  machines or equipment that generate abnormal heat are used in the Premises
  (excluding the server room on the first floor of the Premises) which affect
  the temperature otherwise maintained by the air conditioning system, Landlord
  shall have the right to install supplemental air conditioning in the Premises
  (excluding the server room on the first floor of the Premises), and the
  reasonable cost thereof, including the cost of installation, operation, use
  and maintenance, shall be paid by Tenant to Landlord as additional rental
  upon demand;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)  janitorial service and maintenance,
  as set forth in the attached Exhibit I (Janitorial
  Specifications) respecting the Building and Parking Facilities (as
  hereinafter defined) on weekdays other than holidays for Building-standard
  installations (Landlord reserves the right to bill Tenant separately for

  

 

2

 

	
   

  	
   

  	
  extra
  janitorial service required for non-standard installations) and such window
  washing as may from time to time in Landlord’s judgment may be reasonably
  required (which shall not be less than two times per calendar year);

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)  elevators
  for access to the Premises in common with other tenants, if applicable,
  provided that Landlord may reasonably limit the number of elevators to be in
  operation at times other than during customary business hours and on
  holidays,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (v)  replacement
  of Building-standard light bulbs and fluorescent tubes; provided that
  Landlord’s standard charge for such bulbs and tubes shall be paid by Tenant;
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (vi)  electrical
  current to the Building during all hours for equipment that requires not more
  than 110 volts, and whose electrical energy consumption does not exceed
  normal office usage.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Landlord
  shall maintain the Common Area of the Building in reasonably good order and
  condition. If Tenant desires any of the services specified in this Section 7
  (ii) at any time other than (A) between 7:00 a.m.
  and 7:00 p.m. on weekdays and (B) between 8:00 a.m. and 1:00 p.m. on Saturday, such
  services shall be supplied to Tenant upon the written request of Tenant
  delivered to Landlord before 3:00 p.m. on the business day preceding
  such extra usage, and Tenant shall pay to Landlord the lesser of (i) the
  cost of such services or (ii) $50.00 within 10 days after Landlord has
  delivered to Tenant an invoice therefor.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Landlord
  shall provide the services referred to in Section 7(a)(i) through
  7{a) (v) and shall maintain the Common Area, the Building’s HVAC,
  life-safety, plumbing, electrical and mechanical systems at a level
  substantially similar to the level of service and maintenance that is typical
  in other similar class office buildings located in the submarket in the city
  in which the Building is located.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Landlord
  shall, at its sole cost and expense, install a separate meter, or separate
  sub-meter, for electricity consumption attributable to the server room
  located at the first floor of the Premises and Tenant shall pay the
  electrical costs attributable to the server room directly to the utility
  provider, or to Landlord with the next due Monthly Basic Rental following
  receipt of a statement there for, as may be applicable.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Discontinuance.
  [INTENTIONALLY OMITTED].

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Restoration of Services;
  Abatement.  Landlord shall use reasonable efforts to
  restore any service that becomes unavailable; provided however, such
  unavailability, irrespective of the cause thereof, shall not render Landlord
  liable for any damages caused thereby, be a constructive eviction of or
  disturbance of Tenant, constitute a breach of any implied warranty, or,
  except as provided in the next sentence, entitle Tenant to any abatement of
  Tenant’s obligations hereunder.  However, if Tenant is prevented
  from making reasonable use of the Premises for more than seven (7) consecutive
  days because of the unavailability of any such service, irrespective of the
  cause thereof, Tenant shall, as its exclusive remedy therefor, be entitled to
  a per diem abatement of Basic Rental for each consecutive day (after such 7-day
  period) that Tenant is so prevented from making reasonable use of the
  Premises, provided such unavailability is not caused in whole or in part by
  Tenant, in which case Tenant shall not be entitled to such abatement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Landlord’s Obligations.  Landlord
  shall commence making necessary repairs and cure of damage to the Building
  corridors, lobby, structural members of the Building and equipment used to
  provide the services referred to in sub-section 7(a) hereof within
  twenty (20) days of discovering such damage, and shall thereafter diligently
  prosecute such repairs at Landlord’s cost (subject to reimbursement to
  Landlord by the Building’s tenants, including Tenant, pursuant to a provision
  similar to Exhibit C hereto); unless any such damage is caused by
  the gross neglidence of Tenant, or Tenant’s agents, employees or invitees, in
  which event Tenant shall bear the cost of such repairs.  Tenant
  shall promptly give Landlord notice of any damage in the Premises requiring
  repair by Landlord, as aforesaid.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)  Access  Tenant
  will be provided access to the Premises 24 hours per day, seven days per

  

 

3

 

	
   

  	
   

  	
  week. If such access is unavailable due to force
  majeure or any other reason beyond Landlord’s control (including construction
  performed by parties other than Landlord which prohibits such access),
  Landlord shall not be in default under this Section 7(e).  If
  reasonable access to the Premises is unavailable preventing Tenant from making
  reasonable use of any substantial portion of the Premises for its intended
  purpose for more than seven (7) consecutive days following written
  notice from Tenant to Landlord and such unavailability was not caused in
  whole or in part by Tenant, then Tenant shall, as its exclusive remedy
  therefor, be entitled to a reasonable abatement of Rent for each consecutive
  day (immediately following such 7-day period,) that Tenant is so prevented from
  making reasonable use of such portion of the Premises based on the area
  thereof.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)  Self-Help.  If
  at any time following the Commencement Date Landlord fails to deliver
  electrical service, elevator service, HVAC service, sewer service or water
  service to the Premises (the “Critical Services”)
  for ten (10) consecutive days after Tenant advises Landlord in writing that
  the Critical Services are not being provided to the Premises, and Landlord
  has not commenced to cure such cessation of Critical Services within five (5) days
  thereafter, has failed to prosecute such cure with reasonable diligence or
  has failed to cure same within one hundred fifty (150) days thereafter,
  Tenant shall be entitled to restore such service in a commercially reasonable
  manner.  Landlord shall reimburse Tenant for its actual and
  reasonable, out-of-pocket costs therefor within 30 days after delivery to
  Landlord of a reasonably detailed invoice, failing which default interest
  shall accrue thereon from the date due until the date paid at the lesser of
  the Prime Rate or the maximum lawful rate. If the unavailability of such
  Critical Services is caused by a Taking (defined below) or a Casualty
  (defined below), then the provisions of this Section shall not be
  applicable thereto; rather, the provisions of Section 14 and 15 (as the case may be) shall
  apply.

  
	
   

  	
   

  	
   

  
	
  IMPROVEMENTS;

  ALTERATIONS;

  REPAIRS;

  MAINTENANCE

  	
   

  	
  8.  (a)(l)  Improvements; Alterations.  Improvements
  to the Premises (including any signage, antennas, or risers respecting the
  Building) may be installed at the expense of Tenant only in accordance with
  plans and specifications submitted to and approved in writing by Landlord,
  prior to the commencement of any improvements. No alterations or physical
  additions in or to the Premises may be made without Landlord’s prior written
  consent, which shall not be unreasonably withheld, conditioned or delayed.
  Notwithstanding the foregoing, Tenant shall not be required to obtain
  Landlord’s consent for repainting, recarpeting, or other cosmetic
  alterations, tenant improvements, alterations or physical additions to the
  Premises which are cosmetic in nature totaling less than $25,000 in any
  single instance or series of related cosmetic alterations performed within a
  six-month period (provided that Tenant shall not perform any such cosmetic
  improvements, alterations or additions to the Premises in stages as a means
  to subvert or circumvent this provision).  Tenant may, subject to
  applicable law and Landlord’s prior written approval, not to be unreasonably
  withheld, conditioned or delayed, and management, install signage at the
  Premises, only as provided herein.  All alterations, additions, or
  improvements (whether temporary or permanent in character, and including
  without limitation all air-conditioning and all other equipment that is in
  any manner connected to the Building’s plumbing system) made in or upon the
  Premises, either by Landlord or Tenant, shall be Landlord’s property at the
  end of the Term and shall remain on the Premises without compensation to
  Tenant.  Approval by Landlord of any of Tenant’s drawings and plans
  and specifications prepared in connection with any improvements in the
  Premises shall not constitute a representation or warranty of Landlord as to
  the adequacy or sufficiency of such drawings, plans and specifications, or
  the improvements to which they relate, for any use, purpose, or condition,
  but such approval shall merely be the consent of Landlord as required
  hereunder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (2)  HVAC.  Tenant
  shall be permitted to use the three existing HVAC units in the server room
  located on the first floor of the Premises and, at its sole election, shall
  be permitted to install additional HVAC units therein. If Tenant elects to
  use the existing HVAC units or to install additional units, Tenant shall, at
  its sole cost and expense, maintain the same and any other units installed by
  Tenant in the server room; provided, however, Tenant shall have no obligation
  to use such units or to replace any HVAC units in the Premises.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Other than as expressly provided in Exhibit D-l
  of this Lease, entitled Landlord’s Remedial ADA Compliance Matters,
  which Landlord shall effectuate as provided in said Exhibit, Tenant shall be
  solely

  

 

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  responsible for the cost of all work required to
  comply with the retrofit requirements of the Americans with Disabilities Act
  of 1990 (“ADA”), and the Texas
  Elimination of Architectural Barriers Act or other applicable laws pertaining
  to accessibility of the Premises (but not including the Common Areas or the
  Parking Facilities for which Landlord shall be responsible) by disabled
  or handicapped persons, and all rules, regulations, and guidelines
  promulgated thereunder, as the same may be amended from time to time, necessitated by any installations, additions, or alterations made in
  or to the Premises at the request of or by Tenant or by Tenant’s use of the
  Premises (other than retrofit work to the Building that is outside
  the Premises whose cost has been particularly identified as being payable by
  Landlord in an instrument signed by Landlord and Tenant), regardless of
  whether, such cost is incurred in connection with retrofit work required in
  the Premises.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Repairs;
  Maintenance.  Tenant shall maintain the Premises in
  a clean, safe, operable, attractive condition, and shall not permit or allow
  to remain any waste or damage to any portion of the Premises.  Landlord shall, at its own expense, maintain
  the structure and foundation of the Building and Landlord shall, subject to
  reimbursement by Tenant as provided in Exhibit C, reasonably
  maintain the roof and structure of the Building and the electrical,
  mechanical, plumbing, elevators, and HVAC systems of the Building, unless
  such damage is caused in whole or in part by the gross negligence of Tenant,
  or Tenant’s agents, employees or invitees, in which event Tenant shall bear
  the costs of such repairs. Tenant shall repair or replace, subject to
  Landlord’s direction and supervision, any damage to the Building caused by
  Tenant or Tenant’s agents, contractors, or invitees. If Tenant fails to
  commence to make any repairs or replacements required of Tenant hereunder
  within twenty (20) days after written demand therefor or thereafter fails to
  diligently pursue completion thereof, then Landlord may make the same at
  Tenant’s cost. The reasonable cost of any repair or replacement work
  performed by Landlord under this Section 8 shall be paid by Tenant to
  Landlord within ten days after Landlord has delivered to Tenant an invoice
  therefor.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  This Section 8(b) shall not apply in the
  case of damage or destruction by fire or other casualty which is covered by
  insurance maintained by Landlord on the Building (as to which Section 15
  hereof shall apply), or damage resulting from an eminent domain taking (as to
  which Section 14 hereof shall apply).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Performance
  of Work.  All work described in this Section 8
  shall he performed only by Tenant or by contractors and subcontractors
  approved in writing by Landlord, which approval shall not be unreasonably
  withheld or delayed. Tenant shall cause all contractors and subcontractors to
  procure and maintain insurance coverage against such risks, in such amounts,
  and with such companies as Landlord may reasonably require, and to procure
  payment and performance bonds reasonably satisfactory to Landlord covering
  the cost of the work. All such work shall be performed in accordance with all
  legal requirements and in a good and workmanlike manner so as not to damage
  the Premises, the primary structure or structural qualities of the Building,
  or plumbing, electrical lines, or other utility transmission facility. All
  such work which may affect the HVAC, electrical system, or plumbing must be
  approved by the Landlord’s engineer, which shall not be unreasonably
  withheld, conditioned or delayed.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Mechanic’s
  Liens.  Tenant shall not permit any mechanic’s liens
  to be filed against the Premises, Building or any portion thereof for any
  work performed, materials furnished, or obligation incurred by or at the
  request of Tenant. If such a lien is filed, then Tenant shall, within ten (10) days
  after Landlord has delivered notice of the filing to Tenant, either pay the
  amount of the lien or diligently contest such lien and deliver to Landlord a
  bond or other security reasonably satisfactory to Landlord. If Tenant fails
  to timely take either such action, then Landlord may pay the lien claim
  without inquiry as to the validity thereof, and any amounts so paid,
  including expenses and interest, shall be paid by Tenant to Landlord within
  ten (10) days after Landlord has delivered to Tenant an invoice
  therefor.

  
	
   

  	
   

  	
   

  
	
  USE; SIGNAGE

  	
   

  	
  9.  Tenant shall continuously occupy and
  use the Premises only for the Permitted Use and shall comply with all laws,
  orders, rules, and regulations relating to the Permitted Use, condition, and
  occupancy of the Premises.  The Premises shall not be used for any
  use which is disreputable or creates extraordinary fire hazards or results in
  an increased rate of insurance on the Building or its contents or the storage
  of any hazardous materials or substances. If, because of Tenant’s acts, the
  rate of insurance on the

  

 

5

 

	
   

  	
   

  	
  Building
  or its contents increases, then Tenant shall pay to Landlord the amount of
  such increase on demand, and acceptance of such payment shall not constitute
  a waiver of any of Landlord’s other rights. Tenant shall conduct its business
  and control its agents, employees, and invitees in such a manner as not to
  create any nuisance or interfere with other tenants or Landlord in its
  management of the Building. Tenant, at Tenant’s own expense, (a) shall
  not commit or permit waste in the Premises or the Building, and (b) shall
  not paint, erect or display any sign, advertisement, placard or lettering
  which is visible in the corridors or lobby of the Building or from the
  exterior of the Building without Landlord’s prior written approval, which
  shall not be unreasonably withheld, conditioned or delayed.

  
	
   

  	
   

  	
   

  
	
  ASSIGNMENT
  AND

  SUBLETTING

  	
   

  	
  10.  (a)  Transfers.  Except as
  provided in Section 10(h) (Permitted Transfers), Tenant shall not,
  without the prior written consent of Landlord, (1) assign, transfer, or
  encumber this Lease or any estate or interest herein, whether directly or by
  operation of law, (2) permit any other entity to become Tenant hereunder
  by merger, consolidation, or other reorganization, (3) if Tenant is an
  entity other than a corporation whose stock is publicly traded, permit the
  transfer of an ownership interest in Tenant so as to result in a change in
  the current control of Tenant, (4) sublet any portion of the Premises, (5) grant any license,
  concession, or other right of occupancy of any portion of the Premises, or (6) permit
  the use of the Premises by any parties other than Tenant (any of the events
  listed in Sections 10(a)(1) through 10(a)(6) being a “Transfer”), and any attempt to do any of the
  foregoing without the prior express written permission of Landlord shall be
  void and of no effect.  In the event of any such attempted
  assignment or attempted sublease, or should Tenant, in any other nature of
  transaction, permit or attempt to permit anyone to occupy the Premises (or
  any portion thereof) without the prior express written permission of
  Landlord, and provided Tenant fails to affirmatively and effectively rescind
  or revoke such attempted assignment, sublease or other transfer ab initio within thirty (30) days of
  receipt of written notice from Landlord, then Landlord shall thereupon have
  the right and option to cancel and terminate this Lease effective upon ten (10) days(1) notice
  to Tenant given by Landlord at any time thereafter as to only the portion
  thereof which Tenant shall have attempted to assign or sublease or otherwise
  permitted some other party’s occupancy without Landlord’s prior express
  written permission, and if Landlord elects to cancel and terminate this Lease
  as to the aforesaid portion of the Premises, then the rental and other
  charges payable hereunder shall thereafter be proportionately reduced. Except
  as provided in Section 10(b) (Permitted Transfers), this
  prohibition against assignment or subletting shall be construed to include a
  prohibition against any assignment or subletting by operation of law.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Consent Standards.  Landlord
  shall not unreasonably withhold its consent to any assignment or subletting
  of the Premises, provided that the proposed transferee (1) is
  creditworthy, (2) will use the Premises for the Permitted Use and will
  not use the Premises in any manner that would conflict with any exclusive use
  agreement or other similar agreement entered into by Landlord with any other
  tenant of the Building, (3) will not use any portion of the Premises or
  the Building in a manner that would materially increase the pedestrian or
  vehicular traffic to the Premises or the Building, (4) is not a
  governmental entity, or subdivision or agency thereof, (5) is not
  another occupant of the Building, (6) is in compliance with the
  regulations of the Office of Foreign Asset Control (“OFAC”)
  of the Department of the Treasury (including those named on OFAC’s Specially
  Designated and Blocked Persons List) and any statute; executive order
  (including the September 24, 2001, Executive Order Blocking Property and
  Prohibiting Transactions with Persons Who Commit, Threaten to Commit or
  Support Terrorism), or other governmental action relating thereto; and (7) is
  not a person or entity with whom Landlord is then, or has been within the
  six-month period prior to the time Tenant seeks to enter into such assignment
  or subletting, negotiating to lease space in the Building or any Affiliate of
  any such person or entity; otherwise, Landlord may withhold its consent in
  its sole discretion. Additionally, Landlord may withhold its consent in its
  sole discretion to any proposed Transfer if any Event of Default by Tenant
  then exists.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Request for Consent.  If
  Tenant requests Landlord’s consent to a Transfer, then, at least fifteen (15)
  business days prior to the effective date of the proposed Transfer, Tenant shall
  provide Landlord with a written description of all material terms and
  conditions of the proposed Transfer, copies of the proposed transfer
  documentation, and the following information about the proposed transferee:
  name and address of the proposed transferee and any entities and persons who
  own, control or direct the proposed transferee; reasonably satisfactory
  information about its business and business history; its

  

 

6

 

	
   

  	
   

  	
  proposed use of the Premises; banking, financial,
  and other credit information; and general references sufficient to enable
  Landlord to determine the proposed transferee’s creditworthiness and
  character. Concurrently with Tenant’s notice of any request for consent to a
  Transfer, Tenant shall pay to Landlord a reasonable allocation of the
  expenses incurred by Landlord in reviewing such request (such allocation not
  exceed $500.00), and Tenant shall also
  reimburse Landlord immediately upon request for its reasonable attorneys’ fees
  incurred in connection with considering any request for consent to a
  Transfer.  No fees shall be payable with regard to a Permitted
  Transfer pursuant to Section 10(h).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If Landlord fails to notify Tenant that it approves
  or disapproves the requested Transfer within ten (10) business days
  after submission to Landlord of all of the items required under this Section 10,
  together with a Deemed Approval Notice (defined below), then Landlord shall
  be deemed to have approved such
  Transfer.  A “Deemed
  Approval Notice” means a written notice from Tenant to
  Landlord that conspicuously
  states in bold, uppercase typeface that the requested transfer shall be
  deemed to be approved by Landlord unless Landlord expressly disapproves of
  such in a written instrument sent to Tenant within ten (10) business
  days of Landlord’s receipt of the requested Transfer.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Conditions
  to Consent.  If Landlord consents to a proposed
  Transfer, then the proposed transferee shall deliver to Landlord a written
  agreement whereby it expressly assumes Tenant’s obligations hereunder;
  however, any transferee of less than all of the space in the Premises shall
  be liable only for obligations under this Lease that are properly allocable
  to the space subject to the Transfer for the period of the Transfer.  No Transfer shall release Tenant from its
  obligations under this Lease, but rather Tenant and its transferee shall be
  jointly and severally liable therefor. Landlord’s consent to any Transfer
  shall not waive Landlord’s rights as to any subsequent Transfers.  If
  an Event of Default occurs while the Premises or any part thereof are subject
  to a Transfer, then Landlord, in addition to its other remedies, may collect
  directly from such transferee all rents becoming due to Tenant and apply such
  rents against Rent. Tenant authorizes its transferees to make payments of
  rent directly to Landlord upon receipt of notice from Landlord to do so
  during the continuance of an Event of Default hereunder. Tenant shall pay for
  the cost of any demising walls or other improvements necessitated by a
  proposed subletting or assignment.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)  Attornment
  by Subtenants.  Each sublease by Tenant hereunder
  shall be subject and subordinate to this Lease and to the matters to which
  this Lease is or shall be subordinate, and each subtenant by entering into a
  sublease is deemed to have agreed that in the event of termination, re-entry
  or dispossession by Landlord under this Lease, Landlord may, at its option,
  take over all of the right, title and interest of Tenant, as sublandlord,
  under such sublease, and such subtenant shall, at Landlord’s option, attorn
  to Landlord pursuant to the then executory provisions of such sublease,
  except that Landlord shall not be (1) liable for any previous act or
  omission of Tenant under such sublease, (2) subject to any counterclaim,
  offset or defense that such subtenant might have against Tenant, (3) bound
  by any previous modification of such sublease not approved by Landlord in
  writing or by any rent or additional rent or advance rent which such
  subtenant might have paid for more than the current month to Tenant, and all
  such rent shall remain due and owing, notwithstanding such advance payment, (4) bound
  by any security or advance rental deposit made by such subtenant which is not
  delivered or paid over to Landlord and with respect to which such subtenant
  shall look solely to Tenant for refund or reimbursement, or (5) obligated
  to perform any work in the subleased space or to prepare it for occupancy,
  and in connection with such attornment, the subtenant shall execute and
  deliver to Landlord any instruments Landlord may reasonably request to
  evidence and confirm such attornment. Each subtenant or licensee of Tenant
  shall be deemed, automatically upon and as a condition of its occupying or
  using the Premises or any part thereof, to have agreed to be bound by the
  terms and conditions set forth in this Section 10(e).  The
  provisions of this Section 10(e) shall be self-operative, and no
  further instrument shall be required to give effect to this provision.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)  Cancellation.  Landlord
  may, within twenty (20) days after submission of Tenant’s written request for
  Landlord’s consent to an assignment or subletting, cancel this Lease as to
  the portion of the Premises proposed to be sublet or assigned as of the date
  the proposed Transfer is to be effective. If Landlord cancels this Lease as
  to any portion of the Premises, then this Lease shall cease for such portion
  of the Premises and Tenant shall pay to Landlord all Rent accrued through the
  cancellation date relating to

  

 

7

 

	
   

  	
   

  	
  the
  portion of the Premises covered by the proposed Transfer.  Thereafter,
  Landlord may lease such portion of the Premises to the prospective transferee
  (or to any other person) without liability to Tenant.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding
  the foregoing, if Landlord provides written notification to Tenant of its
  election to cancel this Lease as to any portion of the Premises as provided
  above, Tenant may rescind its proposed assignment or subletting of all or any
  portion of the Premises by notifying Landlord in writing within ten (10) business
  days following Landlord’s written cancellation notice.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (g)  Additional
  Compensation.  Tenant shall pay to Landlord,
  immediately upon receipt thereof, fifty percent (50%)
  of the excess of (1) all compensation received by Tenant for a Transfer
  less the actual out-of-pocket
  costs reasonably incurred by Tenant with unaffiliated third parties (i.e.,
  brokerage commissions and tenant finish work) in connection with such
  Transfer (such costs shall be amortized on a straight-line basis over the
  term of the Transfer in question) over (2) the Rent allocable to the
  portion of the Premises covered thereby.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (h)  Permitted
  Transfers.  Notwithstanding Section 10(a),
  Tenant may Transfer all or part of its interest in this Lease or all or part of the Premises (a “Permitted Transfer”) to the following types of
  entities (a “Permitted Transferee”)
  without the written consent of Landlord:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)  an
  Affiliate of Tenant;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)  any
  corporation, limited partnership, limited liability partnership, limited
  liability company or other business entity in which or with which Tenant, or
  its corporate successors or assigns, is merged or consolidated, in accordance
  with applicable statutory provisions governing merger and consolidation of
  business entities, so long as (A) Tenant’s obligations hereunder are
  assumed by the entity surviving such merger or created by such consolidation;
  and (B) the Tangible Net Worth of the surviving or created entity is not
  less than the Tangible Net Worth of Tenant as of the date hereof; or

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)  any
  corporation, limited partnership, limited liability partnership, limited
  liability company or other business entity acquiring all or substantially all
  of Tenant’s assets if such entity’s Tangible Net Worth after such acquisition
  is not less than the Tangible Net Worth of Tenant as of the date hereof.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tenant
  shall promptly notify Landlord of any such Permitted Transfer.  Tenant shall remain liable for the
  performance of all of the obligations of Tenant hereunder, or if Tenant no
  longer exists because of a merger, consolidation, or acquisition, the
  surviving or acquiring entity shall expressly assume in writing the
  obligations of Tenant hereunder. Additionally, the Permitted Transferee shall
  comply with all of the terms and conditions of this Lease, including the
  Permitted Use, and the use of the Premises by the Permitted Transferee may
  not violate any other agreements affecting the Premises, the Building,
  Landlord or other tenants of the Building. No later than forty-five (45) days
  after the effective date of any Permitted Transfer, Tenant agrees to furnish
  Landlord with (A) copies of the instrument effecting any of the
  foregoing Transfers, (B) documentation establishing Tenant’s
  satisfaction of the requirements set forth above applicable to any such
  Transfer, (C) evidence of insurance as required under this Lease with
  respect to the Permitted Transferee, and (D) evidence of compliance with
  the regulations of OFAC and any statute, executive order (including the September 24,
  2001, Executive Order Blocking Property and Prohibiting Transactions with
  Persons Who Commit, Threaten to Commit, or Support Terrorism), or other
  governmental action relating thereto, including the name and address of the
  Permitted Transferee and any entities and persons who own, control or direct
  the Permitted Transferee. The occurrence of a Permitted Transfer shall not
  waive Landlord’s rights as to any subsequent Transfers.  “Tangible Net Worth”
  means the excess of total assets over total liabilities, in each case as
  determined in accordance with generally accepted accounting principles consistently
  applied (“GAAP”) excluding, however,
  from the determination of total assets all assets which would be classified
  as intangible assets under GAAP including goodwill, licenses, patents,
  trademarks, trade names, copyrights, and franchises.  Any
  subsequent Transfer by a Permitted Transferee shall be subject to the terms
  of this Section 10.

  

 

8

 

	
  INSURANCE;

  WAIVERS;

  SUBROGATION;

  INDEMNITY

  	
   

  	
  11.  (a)  Insurance. Effective as of the
  earlier of (1) the date Tenant enters or occupies the Premises, or (2) the
  Commencement Date, and continuing throughout the Term, Tenant shall maintain
  the following insurance policies: (i) commercial general liability
  insurance in amounts of $1,000,000 per occurrence, and $2,000,000 in the
  aggregate or, following the expiration of the initial Term, such other
  amounts as Landlord may from time to time reasonably require (and, if the use
  and occupancy of the Premises include any activity or matter that is or may
  be excluded from coverage under a commercial general liability policy [e.g.,
  the sale, service or consumption of alcoholic beverages], Tenant shall obtain
  such endorsements to the commercial general liability policy or otherwise
  obtain insurance to insure all liability arising from such activity or matter
  [including liquor liability, if applicable] in such amounts as Landlord may
  reasonably require), insuring Tenant, Landlord, Landlord’s property
  management company, Landlord’s asset management company and, if requested in
  writing by Landlord, Landlord’s Mortgagee, against all liability for injury
  to or death of a person or persons or damage to property arising from the use
  and occupancy of the Premises and (without implying any consent by Landlord
  to the installation thereof) the installation, operation, maintenance, repair
  or removal of Tenant’s Off-Premises Equipment, (ii) insurance covering
  the full value of all alterations and improvements and betterments in the
  Premises, naming Landlord and Landlord’s Mortgagee as additional loss payees
  as their interests may appear, (iii) insurance covering the full value
  of all furniture, trade fixtures and personal property (including property of
  Tenant or others) in the Premises or otherwise placed in the Building by or
  on behalf of Tenant (including Tenant’s Off-Premises Equipment), (iv) contractual
  liability insurance sufficient to cover Tenant’s indemnity obligations
  hereunder (but only if such contractual liability insurance is not already
  included in Tenant’s commercial general liability insurance policy), and (v) worker’s
  compensation insurance. Any insurance required to be maintained by Tenant may
  be taken out under a blanket insurance policy or policies covering other
  premises, property or insured in addition to the Premises and Tenant,
  provided such policy or policies otherwise comply with this Section 1l(a).
  Tenant’s insurance shall provide primary coverage to Landlord when any policy
  issued to Landlord provides duplicate or similar coverage, and in such
  circumstance Landlord’s policy will be excess over Tenant’s policy. Tenant
  shall furnish to Landlord certificates of such insurance and, if requested by
  Landlord, copies of the actual insurance policies at least ten days prior to the
  earlier of the Commencement Date or the date Tenant enters or occupies the
  Premises, and at least 15 days prior to each renewal of said insurance, and
  Tenant shall obtain a written obligation on the part of each insurance
  company to notify Landlord at least 15 days before cancellation or a material
  change of any such insurance policies.  All such insurance policies
  shall be in form, and issued by companies with a Best’s rating of A+:VII or
  better, reasonably satisfactory to Landlord. If Tenant fails to comply with
  the foregoing insurance requirements or to deliver to Landlord the
  certificates or evidence of coverage required herein, Landlord, in addition
  to any other remedy available pursuant to this Lease or otherwise, may, but
  shall not be obligated to, obtain such insurance and Tenant shall pay to
  Landlord on demand the premium costs thereof, plus an administrative fee of 15% of such cost. As used hereunder,
  the term “Tenant’s Off-Premises Equipment”
  means any of Tenant’s equipment or other property that may be located on or
  about the Building (other than inside the Premises). As used hereunder, the
  term “Tenant Party” means any of
  the following persons: Tenant; any assignees claiming by, through, or under
  Tenant; any subtenants claiming by, through, or under Tenant; and any of
  their respective agents, contractors, employees and licensees.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Landlord’s Insurance.  Throughout
  the Term of this Lease, Landlord shall maintain, as a minimum, the following
  insurance policies: (1) property insurance for the Building’s
  replacement value (excluding property required to be insured by Tenant), and (2) commercial
  general liability insurance in an amount of not less than $1,000,000 per
  occurrence, $2,000,000 in the aggregate.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Waiver of Negligence
  Claims; No Subrogation.  Landlord and Tenant each
  waives any claim it might have against the other for any damage to or theft,
  destruction, loss, or loss of use of any property, to the extent the same is
  insured against under any insurance policy of Landlord or Tenant that covers
  the Building, the Premises, Landlord’s or Tenant’s fixtures, personal
  property, leasehold improvements, or business, or is required to be insured against under
  the terms hereof, REGARDLESS OF WHETHER
  THE NEGLIGENCE OF THE OTHER PARTY CAUSED SUCH LOSS (DEFINED BELOW).
   Additionally, Tenant waives any claim
  it may have against Landlord for any Loss to the extent such Loss is caused
  by a terrorist act. Each party shall cause its insurance carrier to endorse

  

 

9

 

	
   

  	
   

  	
  all applicable policies waiving the carrier’s rights
  of recovery under subrogation or otherwise against the other party.
  Notwithstanding any provision in this Lease to the contrary, Landlord, its
  agents, employees and contractors shall not be liable to Tenant or to any
  party claiming by, through or under Tenant for (and Tenant hereby releases
  Landlord and its servants, agents, contractors, employees and invitees from
  any claim or responsibility for) any damage to or destruction, loss, or loss
  of use, or theft of any property of any Tenant Party located in or about the
  Building, caused by casualty, theft, fire, third parties or any other matter
  or cause, REGARDLESS OF WHETHER THE NEGLIGENCE OF ANY
  PARTY CAUSED SUCH LOSS IN WHOLE OR IN PART.  Tenant acknowledges that Landlord shall not
  carry insurance on, and shall not be responsible for damage to, any property
  of any Tenant Party located in or about the Building.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Indemnity.  Subject
  to Section 1l(c), Tenant shall defend, indemnify, and hold harmless
  Landlord and its representatives and agents from and against all claims,
  demands, liabilities, causes of action, suits, judgments, damages, and
  expenses (including reasonable attorneys’ fees) arising from any injury to or
  death of any person or the damage to or theft, destruction, loss, or loss of
  use of, any property or inconvenience (a “Loss”)
  (1) occurring in or on the Building (other than within the Premises) to
  the extent caused by the negligence or willful misconduct of any Tenant
  Party, (2) occurring in the Premises, or (3) arising out of the
  installation, operation, maintenance, repair or removal of any property of
  any Tenant Party located in or about the Building, including Tenant’s
  Off-Premises Equipment.  IT BEING AGREED THAT CLAUSES (2) AND (3) OF THIS INDEMNITY
  ARE INTENDED TO INDEMNIFY LANDLORD AND ITS AGENTS AGAINST THE CONSEQUENCES OF
  THEIR OWN NEGLIGENCE OR FAULT, EVEN WHEN LANDLORD OR ITS AGENTS ARE JOINTLY, COMPARATIVELY,
  CONTRIBUTIVELY, OR CONCURRENTLY NEGLIGENT WITH TENANT, AND EVEN THOUGH ANY
  SUCH CLAIM, CAUSE OF ACTION OR SUIT IS BASED UPON OR ALLEGED TO BE BASED UPON
  THE STRICT LIABILITY OF LANDLORD OR ITS AGENTS; HOWEVER, SUCH INDEMNITY SHALL
  NOT APPLY TO THE SOLE OR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LANDLORD
  AND ITS AGENTS.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Subject to Section 11(c), Landlord shall
  defend, indemnify, and hold harmless Tenant and its agents from and against
  all claims, demands, liabilities, causes of action, suits, judgments, damages
  and expenses (including reasonable attorneys’ fees) for any Loss arising from
  any occurrence in or on the
  Common Areas to the extent caused by the negligence or willful misconduct of
  Landlord or its agents.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The indemnities set forth in this Lease shall
  survive termination or expiration of this Lease and shall not terminate or be
  waived, diminished or affected in any manner by any abatement or apportionment
  of Rent under any provision of this Lease. If any proceeding is filed for
  which indemnity is required hereunder, the indemnifying party agrees, upon
  request therefor, to defend the indemnified party in such proceeding at its
  sole cost utilizing counsel satisfactory to the indemnified party.

  
	
   

  	
   

  	
   

  
	
  SUBORDINATION

  ATTORNMENT; NOTICE

  TO LANDLORD’S

  MORTGAGEE

  	
   

  	
  12.  (a)  Subordination.  This
  Lease shall be, and is hereby made subordinate to, and Tenant accepts this
  Lease subject and subordinate to any deed of trust, mortgage, or other
  security instrument (a “Mortgage”),
  or any ground lease, master lease, or primary lease (a “Primary
  Lease”) that may presently or hereafter covers all or any part
  of the Premises (the mortgagee under any Mortgage or the lessor under any
  Primary Lease is referred to herein as “Landlord’s Mortgagee”).
  The provisions of this Section 12(a) shall be self-operative
  without the necessity of any further instrument of subordination to be
  executed by Tenant, provided however, that Tenant covenants and agrees to
  execute and deliver to Landlord a subordination non-disturbance and
  attornment agreement (“SNDA”)
  substantially in the form of Exhibit G or such other form of SNDA
  as may be from time to time reasonably requested by a Landlord’s Mortgagee
  within ten (10) days after requested.  In the event that
  Tenant shall fail to execute any such instrument within ten (10) days
  after requested, then Tenant hereby irrevocably consents and agrees that
  Landlord may file of record in the Real Property Records of the county in
  which the Premises is situated an affidavit attaching true and correct copies
  of this Section 12(a), together with the signature pages hereto and
  a copy of Exhibit G hereto completed in favor of Landlord’s
  Mortgagee.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Attornment.  Tenant
  shall attorn to any party succeeding to Landlord’s interest in the

  

 

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  Premises, whether by purchase, foreclosure, deed in
  lieu of foreclosure, power of sale, termination of lease, or otherwise, upon
  such party’s request, and shall execute such agreements confirming such
  attornment as such parry may reasonably request.  The current
  Landlord’s Mortagee is Bank of Texas, N.A., whose address is set forth on Exhibit G
  hereto.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Notice
  to Landlord’s Mortgagee.  Tenant shall not seek to
  enforce any remedy it may have for any default on the part of the Landlord
  without first giving written notice by certified mail, return receipt
  requested, specifying the default in reasonable detail, to any Landlord’s
  Mortgagee whose address has been given to Tenant, and affording such Landlord’s
  Mortgagee a reasonable opportunity to perform Landlord’s obligations
  hereunder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Subordination,
  Non-Disturbance and Attornment Agreement. Landlord shall
  obtain a subordination, non-disturbance and attornment agreement from the
  current Landlord’s Mortgagee in the form of Exhibit G hereto or
  as otherwise reasonably agreed to by Landlord’s Mortgagee, and shall deliver
  same to Tenant contemporaneously with Landlord’s execution of this Lease, and
  Landlord shall seek to obtain a similar subordination, non-disturbance and
  attornment agreement from any future Landlord’s Mortgagee or other
  institutional lenders.  The subordination of Tenant’s rights
  hereunder to any future Landlord’s Mortgagee under Section 12(a) shall
  be conditioned upon such future Landlord’s Mortgagee’s execution and delivery
  of a subordination, non-disturbance and attornment agreement in the form of Exhibit G
  hereto or another form reasonably acceptable to Tenant and such Landlord’s
  Mortgagee or other institutional lenders.

  
	
   

  	
   

  	
   

  
	
  RULES
  AND

  REGULATIONS

  	
   

  	
  13.  Tenant shall comply with the rules and
  regulations of the Building which are attached hereto as Exhibit B.
  Landlord may, from time to time, change such rules and regulations for
  the safety, care, or cleanliness of the Building and related facilities,
  provided that such changes are applicable to all tenants of the Building and
  will not unreasonably interfere with Tenant’s use of the Premises.  Tenant
  shall be responsible for the compliance with such rules and regulations
  by its employees, agents, and invitees.

  
	
   

  	
   

  	
   

  
	
  CONDEMNATION

  	
   

  	
  14.  (a)  Taking -
  Termination.  If the entire Building or Premises are
  taken by right of eminent domain or conveyed in lieu thereof (a “Taking”), this Lease shall terminate as of the
  date of the Taking.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Partial
  Taking - Tenant’s Rights.  If any part of the
  Premises or material portion of the Building becomes subject to a Taking and
  such Taking will prevent Tenant from conducting on a permanent basis its
  business in the Premises in a manner reasonably comparable to that conducted
  immediately before such Taking, then Tenant may terminate this Lease as of
  the date of such Taking by giving written notice to Landlord within thirty
  (30) days after the Taking, and Rent shall be apportioned as of the date of
  such Taking.  If Tenant does not terminate this Lease, then Rent
  shall be abated on a reasonable basis as to that portion of the Premises that
  Tenant is prevented from conducting its business in a manner comparable to
  that conducted immediately before such taking.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Partial
  Taking - Landlord’s Rights.  If any material
  portion, but less than all, of the Building becomes subject to a Taking, or
  if Landlord is required to pay any of the proceeds arising from a Taking to a
  Landlord’s Mortgagee, then Landlord may terminate this Lease by delivering
  written notice thereof to Tenant within thirty (30) days after such Taking,
  and Rent shall be apportioned as of the date of such Taking. If Landlord does
  not so terminate this Lease, then this Lease will continue, but if any
  portion of the Premises has been taken, Rent shall abate as provided in the
  last sentence of Section 14(b).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Temporary Taking.  If all
  or any portion of the Premises becomes subject to a Taking for a limited
  period of time, this Lease shall remain in full force and effect and Tenant
  shall continue to perform all of the terms, conditions and covenants of this
  Lease, including the payment of Basic Rental and all other amounts required
  hereunder. If any such temporary Taking terminates prior to the expiration of
  the Term, Tenant shall restore the Premises as nearly as possible to the
  condition prior to such temporary Taking, at Tenant’s sole cost and expense.
  Landlord shall be entitled to receive the entire award for any such temporary
  Taking, except that Tenant shall be entitled to receive the portion of such
  award which (1) compensates Tenant for its loss of use of the Premises
  within the Term and (2) reimburses Tenant for

  

 

11

 

	
   

  	
   

  	
  the reasonable out-of-pocket costs actually incurred
  by Tenant to restore the Premises as required by this Section 14(d).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)  Award. If
  any Taking occurs, then Landlord shall receive the entire award or other
  compensation for the Land, the Building, and other improvements taken;
  however, Tenant may separately pursue a claim (to the extent it will not
  reduce Landlord’s award) against the condemnor for the value of Tenant’s
  personal property which Tenant is entitled to remove under this Lease, moving
  costs, loss of business, and other claims it may have.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)  Restoration.  In
  the event of any Taking of less than the whole of the Premises which does not
  result in a termination of this Lease, (1) Landlord, at its expense,
  shall proceed with reasonable diligence to repair, alter and restore the
  remaining parts of the affected Building and the Premises therein to the
  extent practicable, and (2) if requested by either party, Landlord and
  Tenant shall promptly execute an amendment to this Lease confirming the
  deletion from the Premises of the space subject to the Taking.

  
	
   

  	
   

  	
   

  
	
  FIRE OR OTHER

  CASUALTY

  	
   

  	
  15.  (a)  Repair
  Estimate.  If the Premises or the Building are damaged by fire or other
  casualty (a “Casualty”), Landlord
  shall, within sixty (60) days after such Casualty, deliver to Tenant a good
  faith estimate (the “Damage Notice”
  ) of the time needed to repair the damage caused by such Casualty.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Tenant’s
  Rights:  If a material portion of the Premises
  is damaged by Casualty such that Tenant is prevented from conducting its
  business in the Premises in a manner reasonably comparable to that conducted
  immediately before such Casualty and Landlord estimates that the damage
  caused thereby cannot be repaired within two hundred ten (210) days after the
  commencement of repairs (the “Repair Period”),
  then Tenant may terminate this Lease by delivering written notice to Landlord
  of its election to terminate within thirty (30) days after the Damage Notice
  has been delivered to Tenant.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Landlord’s
  Rights.  If a Casualty damages the Premises or a
  material portion of the Building and (1) Landlord estimates that the
  damage to the Premises cannot be repaired within the Repair Period, (2) the
  damage to the Premises exceeds 50% of the replacement cost thereof (excluding
  foundations and footings), as estimated by Landlord, and such damage occurs
  during the last two years of the Term, and Tenant does not exercise its next
  unexercised renewal option (if any) by written notice to Landlord within
  fifteen (15) days after the Damage Notice has been delivered to Tenant, (3) regardless
  of the extent of damage to the Premises, the damage is not fully covered by
  Landlord’s insurance policies or Landlord makes a good faith determination
  that restoring the Building would be uneconomical, or (4) Landlord is
  required to pay any insurance proceeds arising out of the Casualty to a
  Landlord’s Mortgagee, then Landlord may terminate this Lease (provided
  Landlord also terminates all leases for space in the Building that is
  similarly impacted by such Casualty) by giving written notice of its election
  to terminate within thirty (30) days after the Damage Notice has been
  delivered to Tenant.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Repair
  Obligation.  If neither party elects to terminate this Lease following a Casualty, then Landlord shall,
  within a reasonable time after such Casualty, begin to repair the Premises
  and shall proceed with reasonable diligence to restore the Premises to
  substantially the same condition as they existed immediately before such
  Casualty; however, Landlord shall not be required to repair or replace any
  alterations or betterments within the Premises (which shall be promptly and
  with due diligence repaired and restored by Tenant at Tenant’s sole cost and
  expense) or any furniture, equipment, trade fixtures or personal property of
  Tenant or others in the Premises or the Building and Landlord’s obligation to
  repair or restore the Premises shall be limited to the extent of the
  insurance proceeds actually received by Landlord for the Casualty in question
  or proceeds that would have been received had Landlord maintained the
  insurance required of Landlord under this Lease, and regardless of the cause
  of such Casualty, together with any deductible amounts. If this Lease is
  terminated under the provisions of this Section 15, Landlord shall be
  entitled to the full proceeds of the insurance policies providing coverage
  for all alterations, improvements and betterments in the Premises (and, if
  Tenant has failed to maintain insurance on such items as required by this
  Lease, Tenant shall pay Landlord an amount equal to the proceeds Landlord
  would have received had Tenant maintained insurance on such items as required
  by this Lease).  If Landlord does not complete the restoration of
  the Premises within ninety (90) days after the time period

  

 

12

 

	
   

  	
   

  	
  estimated
  by Landlord to repair the damage caused by such Casualty as specified in the
  Damage Notice, as the same may be extended by force majeure, Tenant may
  terminate this Lease by delivering written notice to Landlord and Landlord’s
  Mortgagee within ten days following the expiration of such ninety (90)-day
  period (as the same may be extended as set forth above) and prior to the date
  upon which Landlord substantially completes such restoration. Such
  termination shall be effective as of the date specified in Tenant’s
  termination notice (but not earlier than 30 days nor later than 90 days after
  the date of such notice) as if such date were the date fixed for the
  expiration of the Term.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)  Abatement of Rent.  If
  the Premises are damaged by Casualty, Rent for the portion of the Premises
  that Tenant is prevented from conducting its business in a manner comparable
  to that conducted immediately before such Casualty shall be abated on a
  reasonable basis from the date of damage until the completion of Landlord’s
  repairs (or until the date of termination of this Lease by Landlord or Tenant
  as provided above, as the case may be).

  
	
   

  	
   

  	
   

  
	
  TAXES

  	
   

  	
  16.  Tenant
  shall be liable for all taxes levied or assessed against personal property,
  furniture, or fixtures placed by Tenant in the Premises. If any taxes for
  which Tenant is liable are levied or assessed against Landlord or Landlord’s
  property and Landlord elects to pay the same, or if the assessed value of
  Landlord’s property is increased by inclusion of such personal property,
  furniture or fixtures and Landlord elects to pay the taxes based on such
  increase, then Tenant shall pay to Landlord, upon demand, that part of such
  taxes for which Tenant is primarily liable hereunder. Tenant has no right to
  protest the real estate tax rate assessed against the Building or Land and/or
  the appraised value of the Building or Land determined by any appraisal
  review board or other taxing entity with authority to determine tax rates
  and/or appraised values (each a “Taxing Authority”).  Tenant hereby knowingly, voluntarily and
  intentionally waives and releases any right, whether created by law or
  otherwise, to (a) file or otherwise protest before any Taxing Authority
  any such rate or value determination even though Landlord may elect not to
  file any such protest; (b) receive, or otherwise require Landlord to deliver,
  a copy of any reappraisal notice received by Landlord from any Taxing
  Authority; and (c) appeal any order of a Taxing Authority which
  determines any such protest. The foregoing waiver and release covers and
  includes any and all rights, remedies and recourse of Tenant, now or at any
  time hereafter, under Section 41.413 and Section 42.015 of the
  Texas Tax Code (as currently enacted or hereafter modified) together with any
  other or further laws, rules or regulations covering the subject matter
  thereof. Tenant acknowledges and agrees that the foregoing waiver and release
  was bargained for by Landlord and Landlord would not have agreed to enter
  into this Lease in the absence of this waiver and release.

  
	
   

  	
   

  	
   

  
	
  EVENTS OF

  DEFAULT

  	
   

  	
  17.  Each
  of the following occurrences shall constitute an “Event
  of Default”:

  
	
   

  	
   

  	
  (a)  Tenant’s failure to pay Rent when due and the
  continuance of such failure for a period of ten (10) days after Landlord
  has delivered written notice to Tenant that the same is past due;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Tenant’s failure to perform, comply with, or observe
  any other agreement or obligation of Tenant under this Lease and the
  continuance of such failure for a period of thirty (30) days after the date
  Landlord delivers to Tenant written notice thereof; however, if such failure
  cannot be cured with such 30-day period and Tenant commences to cure such
  failure within such 30-day period and thereafter diligently pursues such cure
  to completion, then such failure shall not be an Event of Default, unless it
  is not fully cured within a reasonable time but in no event later than 150
  days following receipt of written notice from Landlord of such failure;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  the filing of a petition by or against Tenant (the term
  “Tenant” shall include, for the purpose of this Section 17(c), any
  guarantor of the Tenant’s obligations hereunder) (1) in any bankruptcy
  or other insolvency proceeding; (2) seeking any relief under any state
  or federal debtor relief law; or (3) for the appointment of a liquidator
  or receiver for all or substantially all of Tenant’s property or for Tenant’s
  interest in this Lease; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  [Intentionally Omitted];

  

 

13

 

	
   

  	
   

  	
  (e)  the admission in writing by
  Tenant that it cannot meet its obligations as they become due or the making
  by Tenant of an assignment for the benefit of its creditors.

  
	
   

  	
   

  	
   

  
	
  REMEDIES

  	
   

  	
  18.  Upon any Event of Default, Landlord
  may, in addition to all other rights and remedies afforded Landlord hereunder
  or by law or equity, take any of the following actions:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)  Landlord may terminate this
  Lease by giving Tenant written notice thereof in which event, Tenant shall
  pay to Landlord the sum of (i) all Rent accrued hereunder through the
  date of termination, (ii) all amounts due under Section 19(a), and (iii) an
  amount equal to (A) the total Rent that Tenant would have been required
  to pay for the remainder of the Term discounted to present
  value at a per annum rate equal to the “Prime Rate” as published on the date
  this Lease is terminated by The Wall Street Journal, Southwest Edition, in
  its listing of “Money Rates” minus three percent, minus (B) the then
  present fair rental value of the Premises for such period, similarly
  discounted; or

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Landlord may terminate Tenant’s
  right to possession of the Premises without terminating this Lease by giving
  written notice thereof to Tenant, in which event Tenant shall pay to Landlord
  (i) all Rent and other amounts accrued hereunder to the date of
  termination of possession, (ii) all amounts due from time to time under Section 19(a),
  and (iii) all Rent and other sums required hereunder to be paid by
  Tenant during the remainder of the Term, diminished by any net sums
  thereafter received by Landlord through reletting the Premises during such period.
  Landlord shall use reasonable efforts to relet the Premises on such terms and
  conditions as Landlord in its sole discretion may determine (including a term
  different from the Term, rental concessions, and alterations to, and
  improvement of, the Premises); however, Landlord shall not be obligated to
  relet the Premises before leasing other portions of the Building.  Landlord
  shall not be liable for, nor shall Tenant’s obligations hereunder be
  diminished because of, Landlord’s failure to relet the Premises or to collect
  rent due for such reletting. Tenant shall not be entitled to the excess of
  any consideration obtained by reletting over the Rent due hereunder. Reentry
  by Landlord in the Premises shall not affect Tenant’s obligations hereunder
  for the unexpired Term; rather, Landlord may, from time to time, bring action
  against Tenant to collect amounts due by Tenant, without the necessity of
  Landlord’s waiting until the expiration of the Term.  Unless Landlord delivers written notice to
  Tenant expressly stating that it has elected to terminate this Lease, all
  actions taken by Landlord to exclude or dispossess Tenant of the Premises
  shall be deemed to he taken under this Section 18(b). If Landlord elects
  to proceed under this Section 18(b), it may at any time elect to
  terminate this Lease under Section 18(a).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ADDITIONALLY, TO THE EXTENT PERMITTED BY
  APPLICABLE LAW, LANDLORD MAY ALTER LOCKS OR OTHER SECURITY DEVICES AT
  THE PREMISES TO DEPRIVE TENANT OF ACCESS THERETO; AND EXCEPT AS OTHERWISE PROVIDED
  BY APPLICABLE LAW, LANDLORD SHALL NOT BE REQUIRED TO PROVIDE A NEW KEY OR
  RIGHT OF ACCESS TO TENANT UNLESS AND UNTIL THE EVENT OF DEFAULT HAS BEEN
  CURED.

  
	
   

  	
   

  	
   

  
	
  PAYMENT BY TENANT;

  NON-WAIVER

  	
   

  	
  19.  (a)  Payment
  by Tenant.  Upon any Event of Default, Tenant shall
  pay to Landlord all reasonable costs incurred by Landlord (including court
  costs and reasonable attorneys’ fees and expenses) in (i) obtaining
  possession of the Premises, (ii) removing and storing Tenant’s or any
  other occupant’s property, (iii) repairing, restoring, altering,
  remodeling, or otherwise putting the Premises into the condition required by
  market conditions then prevailing so as to be reasonably acceptable to a new
  tenant, (iv) if Tenant is dispossessed of the Premises and this Lease is
  not terminated, reletting all or any part of the Premises (including
  brokerage commissions, cost of tenant finish work, and other costs incidental
  to such reletting), (v) performing Tenant’s obligations which Tenant
  failed to perform, and (vi) enforcing, or advising Landlord of, its
  rights, remedies, and recourses arising out of the Event of Default. Tenant’s
  obligations under this Section 19 shall survive the expiration of the
  Term or earlier termination of this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  No Waiver.  Landlord’s
  acceptance of Rent following an Event of Default shall not waive Landlord’s
  rights regarding such Event of Default. No waiver by Landlord of any
  violation or breach of

  

 

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  any of the terms contained herein shall waive
  Landlord’s rights regarding any future violation of such term or violation of
  any other term.

  
	
   

  	
   

  	
   

  
	
  COMMON AREA

  	
   

  	
  20.  ”Common Area”  as
  used herein stall refer to that part of the Building and other improvements now or hereafter placed,
  constructed or erected on the Land designated by
  Landlord from time to time for the common use of all tenants, including among
  other facilities, sidewalks, service corridors, curbs, truckways, loading
  areas, private streets and alleys, lighting facilities, mechanical and
  electrical rooms, janitors’ closets, halls, lobbies, delivery passages, elevators,
  drinking fountains, meeting rooms, public toilets, parking areas and garages,
  decks and other parking facilities, landscaping and other common rooms and
  common facilities. The Common Area shall be subject to Landlord’s sole
  management and control and shall be operated and
  maintained in a manner consistent with similar buildings in the market in
  which the Building is located.  Landlord reserves the right to
  change from time to time the dimensions and location of the Common Area, to
  construct additional stories on the Building and to place, construct or erect
  new structures or other improvements on any part of the Land without the consent
  of Tenant.  Tenant, and Tenant’s employees
  and invitees shall have the nonexclusive right to use the Common Area as
  constituted from time to time, such use to be in common with Landlord, other
  tenants of the Building and other persons entitled to use the same, and
  subject to such reasonable rules and regulations governing use as
  Landlord may from time to time prescribe. Tenant shall not solicit business
  or display merchandise within the Common Area, or distribute handbills
  therein, or take any action which would interfere with the rights of other
  persons to use the Common Area. Landlord may temporarily close any part of
  the Common Area for such periods of time as may be reasonably necessary to
  prevent the public from obtaining prescriptive rights or to make repairs or
  alterations, provided Tenant retains reasonable access to the Premises.

  
	
   

  	
   

  	
   

  
	
  SURRENDER OF

  PREMISES

  	
   

  	
  21.  No act by Landlord shall be deemed an
  acceptance of a surrender of the Premises, and no agreement to accept a
  surrender of the Premises shall be valid unless the same is made in writing
  and signed by Landlord. At the expiration or termination of this Lease,
  Tenant shall deliver to Landlord the Premises with all improvements located
  thereon in good repair and condition, reasonable wear and tear (and
  condemnation and fire or other casualty damage) excepted, and shall deliver
  to Landlord all keys to the Premises.  Tenant may remove all
  unattached trade fixtures, furniture owned by it, equipment and personal
  property placed in the Premises by Tenant (but Tenant shall not remove any
  such item which was paid for, in whole or in part, by Landlord, as part of
  the Finish Work Allowance or otherwise).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Subject to Section 8(a)(2) of this Lease,
  all alterations, additions or improvements made in or upon the Premises
  shall, at Landlord’s option, (to be exercised pursuant to following
  sentence), either be removed by Tenant prior to the end of the Term (and
  Tenant shall repair all damage caused thereby), or shall remain in the
  Premises at the end of the Term without compensation to Tenant. In connection
  with Landlord’s review and approval of any of Tenant’s proposed alterations,
  additions or improvements to the Premises, Landlord may notify Tenant in
  writing, contemporaneously with Landlord’s notice of approval to Tenant with
  respect to the improvements in question, that Landlord will require Tenant to
  remove such alterations prior to the expiration of the Term; however, if
  Tenant submits plans and specifications to Landlord for proposed alterations,
  additions or improvements to the Premises and delivers a Removal Notice
  (defined below) to Landlord contemporaneously with such submission by Tenant,
  and Landlord fails to notify Tenant that Tenant will be required to remove
  such alterations, additions or improvements to the Premises at the expiration
  of the Term, Landlord may not request such removal at the expiration of the
  Term. A “Removal Notice” means a
  written notice from Tenant to Landlord that conspicuously states in bold,
  uppercase typeface that Tenant will not be required to remove the alterations,
  additions or improvements in question at the end of the Term unless,
  contemporaneously with Landlord’s notice of approval to Tenant with respect
  to the improvements in question, Landlord notifies Tenant in writing that
  Landlord will require Tenant to remove such alterations prior to the
  expiration of the Term.  Notwithstanding the foregoing, if Tenant
  does not obtain Landlord’s prior written consent for any alterations,
  additions or improvements to the Premises (whether such approval is required
  hereunder or otherwise), Tenant shall, at Landlord’s written request, remove
  all such alterations, additions, improvements, trade fixtures, equipment,
  wiring, and furniture as Landlord may request; however, Tenant shall not be
  required to remove any addition or improvement to the Premises if Landlord
  has specifically agreed in writing that the

  

 

15

 

	
   

  	
   

  	
  improvement or addition in question need not be
  removed.  Tenant shall repair all damage caused by such removal.  All
  of the office furniture and equipment and all other items not so removed
  shall be deemed to have been abandoned by Tenant and may be appropriated,
  sold, stored, destroyed, or otherwise disposed of by Landlord without notice
  to Tenant and without any obligation to account for such items.  Notwithstanding
  the foregoing, Landlord acknowledges that Landlord will not require the
  removal of the initial tenant improvement work performed by Tenant (as
  described in Section 3 of Exhibit D hereto) at the
  expiration of the Term.  The provisions of this Section 21
  shall survive the end of the Term or the earlier termination of this Lease.

  
	
   

  	
   

  	
   

  
	
  HOLDING OVER

  	
   

  	
  22.  If Tenant fails to vacate me Premises
  at the end of the Term or upon the earlier termination of this Lease, then
  Tenant shall be a month-to-month tenant and Tenant shall pay, in addition to
  the other Rent, a daily Basic Rental equal to 150% of the daily Basic Rental
  payable during the last month of the Term.  The provisions of this Section 22
  shall survive the end of the Term or the earlier termination of this Lease.

  
	
   

  	
   

  	
   

  
	
  CERTAIN RIGHTS RESERVED BY LANDLORD

  	
   

  	
  23.  Provided that the exercise of such
  rights does not unreasonably interfere with Tenant’s permitted use and
  occupancy of the Premises, Landlord, its agents, employees, and contractors
  shall have the following rights:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)  to decorate or to make inspections,
  repairs, alterations, additions, changes, or improvements, whether structural
  or otherwise, in and about the Building, or any part thereof as Landlord may
  deem necessary or desirable; for such purposes, to enter upon the Premises
  (after 24 hours’ advance written notice to Tenant thereof) and, during the
  continuance of any such work, to temporarily close doors, entryways, public
  space, and corridors in the Building; to interrupt or temporarily suspend
  Building services and facilities; and to change the arrangement and location
  of entrances or passageways, doors, and doorways, corridors, elevators,
  stairs, restrooms, or other public parts of the Building;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ii)  to take such reasonable measures as
  Landlord deems advisable for the security of the Building and its occupants,
  including without limitation searching all persons entering or leaving the
  Building and requiring that persons entering or leaving the Building, whether
  or not during normal business hours, identify themselves to a security
  officer by registration or otherwise and that such persons establish their
  right to enter or leave the Building; evacuating the Building for cause,
  suspected cause, or for drill purposes; temporarily denying access to the
  Building;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iii)  to change the name by which the
  Building is designated, provided that Landlord reimburses Tenant the actual
  costs of changing Tenant’s stationery (including letterhead, business cards,
  envelopes and the like) on hand at the time of such name change; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (iv)  to enter the Premises (other than
  the raised floor area in the server room or the first floor of the Premises)
  at all reasonable hours, upon 24 hours advance written notice, to show the
  Premises to prospective purchasers or lenders, or, during the last 12 months
  of the Term, to prospective tenants; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (v)  to have access to and the right to
  enter upon any and all parts of the Premises with 24 hours advance written
  notice (except in cases of emergency, defined to be any situation in which
  Landlord perceives imminent danger of injury to person and/or damage to or
  loss of property, in which case Landlord may enter upon any and all parts of
  the Premises at any time) to examine the condition thereof, to clean, to make
  any repairs, alterations or additions required to be made by Landlord hereunder,
  and for any other purpose deemed reasonably by Landlord, and Tenant shall not
  be entitled to any abatement or reduction of rental by reason thereof.

  
	
   

  	
   

  	
   

  
	
  LANDLORD’S LIEN

  	
   

  	
  24.  Waiver of Landlord’s
  Lien.  Landlord waives all contractual, statutory and
  constitutional liens held by Landlord on Tenant’s personal property, goods,
  equipment, inventory, furnishings, chattels, accounts and assets to secure
  the obligations of Tenant under this Lease.

  
	
   

  	
   

  	
   

  
	
  HAZARDOUS

  	
   

  	
  25.  (a)  Hazardous
  Substances.  The term “Hazardous
  Substances,” as used in this Lease, shall include, without
  limitation, flammables, explosives, radioactive materials, asbestos,
  polychlorinated

  

 

16

 

	
  SUBSTANCES

  	
   

  	
  biphenyls (PCB’s),
  chemicals known to cause cancer or reproductive toxicity, pollutants,
  contaminants, hazardous wastes, toxic substances or related materials,
  petroleum and petroleum products, and substances declared to be hazardous or
  toxic under any law or regulation now or hereafter enacted or promulgated by
  any governmental authority. To the best of Landlord’s knowledge, the Building
  does not contain any Hazardous Substances, other than as may have been
  previously disclosed to Tenant in writing.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Tenant’s Restrictions.  Tenant
  shall not cause to occur (i) any violation of any federal, state, or
  local law, ordinance, or regulation now or hereafter enacted, without
  limitation, related to environmental conditions on, under, or about the
  Premises, or arising from Tenant’s release of Hazardous Substances,
  including, but not limited to, soil and ground water conditions; or (ii) the
  use, generation, release, manufacture, refining, production, processing,
  storage, or disposal of any Hazardous Substance on, under, or about the
  Premises, or the transportation to or from the Premises of any Hazardous
  Substance, except for normal cleaning and office supplies in reasonable
  quantities.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Environmental Clean-up.  Tenant
  shall, at Tenant’s own expense, comply with all laws regulating the use,
  generation, storage, transportation, or disposal of Hazardous Substances (the
  “Laws”) by Tenant and or its
  agents, employees or contractors within or respecting the Premises. Except as
  expressly provided in the immediately preceding sentence, Landlord shall make
  all submissions to, provide all information required by, and comply with, all
  requirements of all governmental authorities (the “Authorities”)
  under the Laws relating to the Premises.  Should any authority or
  any third party demand that a clean-up plan be prepared and that a clean-up
  be undertaken because of any deposit, spill, discharge, or other release of
  Hazardous Substances by Tenant or its employees that occurs during the Term,
  at or from the Premises, then Tenant shall, at Tenant’s own expense, prepare
  and submit the required plans and all related bonds and other financial
  assurances, and Tenant shall carry out such clean-up plan; otherwise,
  Landlord shall be responsible for any clean-up within the Building.  Tenant
  shall promptly provide all information regarding the use, generation,
  storage, transportation, or disposal by Tenant of Hazardous Substances that
  is requested by Landlord.  If Tenant fails to fulfill any duty
  imposed under this Section 25 within a reasonable time, Landlord may do
  so; and in such case, Tenant shall cooperate with Landlord in order to
  prepare all documents Landlord deems necessary or appropriate to determine
  the applicability of the Laws to the Premises and Tenant’s use thereof, and
  for compliance therewith, and Tenant shall execute all documents upon
  Landlord’s request.  No such action by Landlord and no attempt made
  by Landlord to mitigate damages under any Law shall constitute a waiver of
  any of Tenant’s obligations under this Section 25. The obligations and
  liabilities under this Section 25 shall survive the expiration of the
  Term or earlier termination of this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Tenant’s Indemnity.  Tenant
  shall indemnify, defend, and save and hold harmless Landlord, the manager of
  the Building, and their respective officers, directors, beneficiaries,
  shareholders, partners, agents and employees from all fines, suits,
  procedures, claims, and actions of every kind, and all costs associated
  therewith (including attorneys’ fees and expenses and consulting fees and
  expenses) arising out of or in any way connected with any deposit, spill,
  discharge, or other release of Hazardous Substances by Tenant or its
  employees or contractors that occurs during the Term, at or from the
  Premises, or which arises at any time during the Term from Tenant’s use or
  occupancy of the Premises.  Tenant’s obligations and liabilities
  under this Section 25 shall survive the expiration of the Term or
  earlier termination of this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ESA.  Landlord
  has previously delivered and Tenant hereby acknowledges receipt of the
  Property Site Assessment for the Building and the Land dated May 28,
  2004 (File Number E2472) and prepared for Landlord by Pinnacle Environmental.  Landlord
  represents and warrants, to its knowledge, there are no Hazardous Substances
  in, on or affecting the Building or the Premises, other than as may be
  reflected therein, if any.  Landlord shall indemnify, defend, and
  save and hold harmless Tenant and its officers, directors, beneficiaries,
  shareholders, partners, agents and employees from all fines, suits,
  procedures, claims, and actions of every kind, and all costs associated
  therewith (including attorneys’ fees and expenses and consulting fees and
  expenses) arising out of or in any way connected with Landlord’s breach of
  its representation set forth in the preceding sentence.

  

 

17

 

	
  PARKING

  	
   

  	
  26.  Tenant shall have the right to use
  parking spaces as provided in Exhibit E.

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  	
  27.  (a)  Landlord
  Transfer.  Landlord may transfer, in whole or in
  part, the Building and any of its rights under this Lease.  If
  Landlord assigns its rights under this Lease, then, upon the transferee’s
  written assumption of Landlord’s obligations under this Lease, Landlord shall
  thereby be released from any further obligations hereunder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)  Landlord’s Liability.   The liability of Landlord (and its
  partners, shareholders or members) to Tenant (or any person or entity
  claiming by, through or under Tenant) for any default by Landlord under the
  terms of this Lease or any matter relating to or arising out of the occupancy
  or use of the Premises and/or other areas of the Building shall be limited to
  Tenant’s actual direct, but not consequential, damages therefor and shall be
  recoverable only from the interest of Landlord in the Building, net proceeds
  derived from the sale thereof, and to the extent actually received by
  Landlord (thus excluding amounts paid to Landlord’s Mortgagees) insurance
  proceeds and condemnation awards, and Landlord (and its partners,
  shareholders or members) shall not be personally liable for any deficiency.  The
  provisions of this Section shall survive any expiration or termination
  of this Lease.  Additionally, Tenant hereby waives its statutory
  lien under Section 91.004 of the Texas Property Code.  Notwithstanding
  the foregoing, this section shall not be deemed to limit any remedies
  which Tenant may have in the event of default by Landlord of its indemnity
  obligations hereunder.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)  Tenant’s Liability.  The liability
  of Tenant to Landlord for any monetary damages arising from any default by
  Tenant under the terms of this Lease shall be limited to Landlord’s actual
  direct, but not consequential damages therefor.  Nothing in this Section 27(c) shall
  affect or limit Landlord’s rights to file legal actions to recover possession
  of the Premises; or for injunctive relief against Tenant, or any other
  non-monetary relief as provided in Sections 18 or 19 of this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)  Force Majeure.  Other
  than for Tenant’s monetary obligations under this Lease and obligations which
  can be cured by the payment of money (e.g., maintaining insurance), whenever
  a period of time is herein prescribed for action to be taken by either party
  hereto, such party shall not be liable or responsible for, and there shall be
  excluded from the computation for any such period of time, any delays due to
  strikes, riots, acts of God, shortages of labor or materials, war,
  governmental laws, regulations, or restrictions, or any other causes of any
  kind whatsoever which are beyond the control of such party.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (e)  Brokerage.  Landlord
  and Tenant each warrant to the other that it has not dealt with any broker or
  agent in connection with the negotiation or execution of this Lease, other than
  Stream Realty Partners, L.P. and Cushman & Wakefield of Texas, Inc.,
  (collectively “Broker”) whose
  commissions shall be paid by Landlord pursuant to separate written
  agreements.  Tenant and Landlord shall each defend, indemnify, hold
  the other harmless against all costs, expenses, attorneys’ fees, and other
  Liability for commissions or other compensation claimed by any broker or
  agent, other than Broker, claiming the same by, through, or under the
  indemnifying party.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (f)  Estoppel Certificates.  From
  time to time, either party shall furnish to any party designated by the
  non-requesting parry within ten (10) days after the requesting party has
  made a request therefor, a certificate signed by the non-requesting party
  confirming and containing such factual certifications and representations as
  to this Lease as the requesting party may reasonably request, including, but
  not necessarily limited to (i) that the Lease is unmodified and in full
  force and effect (or, if there have been modifications, that the same is in
  full force and effect as so modified), (ii) the dates to which rental
  and other charges payable under this Lease have been paid, and (iii) that
  the requesting party is not in default hereunder (or, if the requesting party
  is in default, specifying the nature of such default).  Tenant
  further agrees that Tenant shall from time to time upon request by Landlord
  execute and deliver to Landlord an instrument in recordable form
  acknowledging Tenant’s receipt of any notice of assignment of this Lease by
  Landlord

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (g)  Notices.  All
  notices and other communications given pursuant to this Lease shall be in
  writing and shall be (i) mailed by first class, United States Mail,
  postage prepaid, certified, with return

  

 

18

 

	
   

  	
   

  	
  receipt
  requested, and addressed to the parties hereto at the address specified in
  the Basic Lease Information, (ii) sent by a nationally recognized
  overnight courier service, or (iii) sent by facsimile transmission followed
  by a confirmatory letter sent in another method permitted hereunder.  All
  notices shall be effective upon delivery to the address of the addressee. The
  parties hereto may change their addresses by giving notice thereof to the
  other in conformity with this provision.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (h)  Separability.  If any
  clause or provision of this Lease is illegal, invalid, or unenforceable under
  present or future laws, then the remainder of this Lease shall not be
  affected thereby and in lieu of such clause or provision, there shall be added
  as a part of this Lease a clause or provision as similar in terms to such
  illegal, invalid, or unenforceable clause or provision as may be possible and
  be legal, valid, and enforceable.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (i)  Amendments; and Binding Effect.  This
  Lease may not be amended except by instrument in writing signed by Landlord
  and Tenant. No provision of this Lease shall be deemed to have been waived by
  either party unless such waiver is in writing signed by such party, and no
  custom or practice which may evolve between the parties in the administration
  of the terms hereof shall waive or diminish the right of either party to
  insist upon the performance by the other party in strict accordance with the
  terms hereof. The terms and conditions contained in this Lease shall inure to
  the benefit of and be binding upon the parties hereto, and upon their
  respective successors in interest and legal representatives, except as
  otherwise herein expressly provided.  This Lease is for the sole
  benefit of Landlord and Tenant, and, other than Landlord’s Mortgagee, no
  third party shall be deemed a third party beneficiary hereof.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (j)  Quiet Enjoyment.  Provided
  no Event of Default exists, Tenant shall peaceably and quietly hold and
  enjoy the Premises for the
  Term, without hindrance from Landlord or any party claiming by, through, or
  under Landlord, subject to the terms and conditions of this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (k)  Joint and Several Liability.  If
  there is more than one Tenant, then the obligations hereunder imposed upon
  Tenant shall be joint and several.  If there is a guarantor of
  Tenant’s obligations hereunder, then the obligations hereunder imposed upon
  Tenant shall be the joint and several obligations of Tenant and such
  guarantor, and Landlord need not first proceed against Tenant before
  proceeding against such guarantor nor shall any such guarantor be released
  from its guaranty for any reason whatsoever.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (l)  Captions.  The captions
  contained in this Lease are for convenience of reference only, and do not
  limit or enlarge the terms and conditions of this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (m)  No Merger.  There shall
  be no merger of the leasehold estate hereby created with the fee estate in
  the Premises or any part thereof if the same person acquires or holds,
  directly or indirectly, this Lease or any interest in this Lease and the fee
  estate in the leasehold Premises or any interest in such fee estate.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (n)  No Offer.  The
  submission of this Lease to Tenant shall not be construed as an offer, nor shall
  Tenant have any rights under this Lease unless and until Landlord executes a
  copy of this Lease and delivers it to Tenant.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (o)  Exhibits.  All exhibits
  and attachments attached hereto are incorporated herein by this reference.

  

 

	
  Exhibit A-1

  	
   

  	
  -

  	
   

  	
  Legal
  Description of the Land

  
	
  Exhibit A-2

  	
   

  	
  -

  	
   

  	
  General
  Depiction of the Premises – 1st Floor

  
	
  Exhibit A-3

  	
   

  	
  -

  	
   

  	
  General
  Depiction of the Premises – 2nd Floor

  
	
  Exhibit B

  	
   

  	
  -

  	
   

  	
  Building
  Rules and Regulations

  
	
  Exhibit C

  	
   

  	
  -

  	
   

  	
  Operating
  Expense Escalator

  
	
  Exhibit D

  	
   

  	
  -

  	
   

  	
  Special
  Provisions

  
	
  Exhibit D-1

  	
   

  	
  -

  	
   

  	
  ADA
  Compliance Matters

  

 

19

 

	
  Exhibit E

  	
   

  	
  -

  	
   

  	
  Parking

  
	
  Exhibit F

  	
   

  	
  -

  	
   

  	
  Intentionally Deleted

  
	
  Exhibit G

  	
   

  	
  -

  	
   

  	
  Subordination Non-Disturbance and Attornment
  Agreement

  
	
  Exhibit H

  	
   

  	
  -

  	
   

  	
  Intentionally Deleted

  
	
  Exhibit I

  	
   

  	
  -

  	
   

  	
  Janitorial Specifications

  

 

	
   

  	
   

  	
  (p)  Entire Agreement.  This
  Lease constitutes the entire agreement between Landlord and Tenant regarding
  the subject matter hereof and supersedes all oral statements and prior
  writings relating thereto.  Except for those set forth in this
  Lease, no representations, warranties, or agreements have been made by
  Landlord or Tenant to the other with respect to this Lease or the obligations
  of Landlord or Tenant in connection therewith.

  
	
   

  	
   

  	
   

  
	
  ADDITIONAL

  PROVISIONS:

  	
   

  	
  28.  DISCLAIMER.  LANDLORD AND TENANT EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES
  ARE SUITABLE FOR TENANT’S INTENDED COMMERCIAL PURPOSE.  TENANT’S
  OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE
  PREMISES OR THE PERFORMANCE BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND, EXCEPT
  AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TENANT SHALL CONTINUE TO PAY THE
  RENT, WITHOUT ABATEMENT, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY BREACH BY
  LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.  NOTHING
  IN THIS PARAGRAPH SHALL BE CONSTRUED TO DIMINISH THE OBLIGATIONS OF LANDLORD
  THAT ARE EXPRESSLY SET FORTH ELSEWHERE IN THIS LEASE.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  29.  Authority.  Tenant
  (if a corporation, partnership or other business entity) hereby represents
  and warrants to Landlord that Tenant is a duly formed and existing entity
  qualified to do business in the state in which the Premises are located, that
  Tenant has full right and authority to execute and deliver this Lease, and
  that each person signing on behalf of Tenant is authorized to do so. Landlord
  hereby represents and warrants to Tenant that Landlord is a duly formed and
  existing entity qualified to do business in the state in which the Premises
  are located, that Landlord has full right and authority to execute and
  deliver this Lease, and that each person signing on behalf of Landlord is
  authorized to do so.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  30.  Telecommunications.
  Tenant and its telecommunications companies, including local exchange
  telecommunications companies and alternative access vendor services
  companies, shall have no right of access to and within the Building, for the
  installation and operation of telecommunications systems, including voice,
  video, data, Internet, and any other services provided over wire, fiber optic,
  microwave, wireless, and any other transmission systems (“Telecommunications
  Services”), for part or all of Tenant’s telecommunications
  within the Building and from the Building to any other location without
  Landlord’s prior written consent, which shall not be unreasonably withheld,
  conditioned or delayed. All providers of Telecommunications Services shall be
  required to comply with the rules and regulations of the Building,
  applicable Laws and Landlord’s policies and practices for the Building. Tenant
  acknowledges that Landlord shall not be required to provide or arrange for
  any Telecommunications Services and that Landlord shall have no liability to
  any Tenant Party in connection with the installation, operation or
  maintenance of Telecommunications Services or any equipment or facilities
  relating thereto.  Tenant, at its cost and for its own account,
  shall be solely responsible for obtaining all Telecommunications Services.  However,
  nothing in this Section 29 shall prohibit Tenant’s employees from accessing
  areas solely within the Premises that do not contain any equipment serving
  other tenants of the Building.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  31.  Confidentiality.  Both
  Landlord and Tenant acknowledge that the terms and conditions of this Lease
  are to remain confidential for both parties’ benefit, and may not be
  disclosed by either party to anyone, by any manner or means, directly or
  indirectly, without the other party’s prior written consent; however, either
  party may disclose the terms and conditions of this Lease if required by Law
  or court order, to its attorneys, accountants, employees and existing or
  prospective financial partners provided same are advised by Landlord or
  Tenant (as the case may be) of the confidential nature of such terms and

  

 

20

 

	
   

  	
   

  	
  conditions
  and agree to maintain the confidentiality thereof (in each case, prior to
  disclosure). The disclosing party shall be liable for any disclosures made in
  violation of this Section by the disclosing party or by any entity or
  individual to whom the terms and conditions of this Lease were disclosed or
  made available by the disclosing party. The consent by either party to any
  disclosures shall not be deemed to be a waiver on the part of such party of
  any prohibition against any future disclosure.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  32.  Water Mold Notification.  To
  the extent Tenant or its agents or employees discover any water leakage,
  water damage or mold in or about the Premises or Building, Tenant shall
  promptly notify Landlord thereof in writing.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  33.  No Recording.  Tenant
  shall not record this Lease or any
  memorandum of this Lease without the prior written consent of Landlord, which
  consent may be withheld or denied in the sole and absolute discretion of
  Landlord, and any recordation by Tenant stall be a material
  breach of this Lease. Tenant grants to Landlord a power of attorney to
  execute and record a release instrument releasing any such recorded
  instrument of record that was recorded without the prior written consent of
  Landlord.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  34.  WAIVER OF JURY TRIAL.  TO THE MAXIMUM
  EXTENT PERMITTED BY LAW, LANDLORD AND TENANT WAIVE ANY RIGHT TO TRIAL BY JURY
  IN ANY LITIGATION OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE
  ARISING OUT OF OR WITH RESPECT TO THIS LEASE OR ANY OTHER INSTRUMENT,
  DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
  TRANSACTIONS RELATED HERETO.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  35.  No Electronic Transactions.  The
  parties hereby acknowledge and agree this Agreement shall not be executed,
  entered into, altered, amended or modified by electronic means. Additionally,
  the parties hereby acknowledge and agree the transactions contemplated by
  this Agreement shall not be conducted by electronic means.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  36.  Prohibited Persons and Transactions.  Landlord
  and Tenant each represent and warrant to the other, that it is currently in
  compliance with and shall at all times during the Term (including any
  extension thereof) remain in compliance with the regulations of the OFAC of
  the Department of the Treasury (including those named on OFAC’s Specially
  Designated and Blocked Persons List) and any statute, executive order
  (including the September 24, 2001, Executive Order Blocking Property and
  Prohibiting Transactions with Persons Who Commit, Threaten to Commit or
  Support Terrorism), or other governmental action relating thereto.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  37.  No Representations or Warranties.  Tenant
  acknowledges that except for any express warranties and representations
  contained in this Lease, Tenant is not relying on any written, oral, implied
  or other representations, statements or warranties by Landlord or any agent
  of Landlord or any real estate broker or salesman. All previous written,
  oral, implied or other statements, representations, warranties or agreements,
  if any, are merged in this Lease. Except as expressly set forth herein,
  Landlord shall have no liability to Tenant, and Tenant hereby RELEASES Landlord from any liability (including
  contractual and/or statutory actions for contribution or indemnity), for,
  concerning or regarding (1) the nature and condition of the Premises,
  including the suitability thereof for any activity or use; (2) any
  improvements or substances located thereon; or (3) the compliance of the
  Premises with any laws, rules, ordinances or regulations of any government or
  other body.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE
  FOREGOING INCLUDES A RELEASE OF LANDLORD FROM CLAIMS BASED ON LANDLORD’S
  NEGLIGENCE IN WHOLE OR IN PART AND CLAIMS BASED ON STRICT LIABILITY. LANDLORD HAS NOT MADE, DOES NOT MAKE AND
  EXPRESSLY DISCLAIMS, ANY WARRANTIES, REPRESENTATIONS, COVENANTS OR
  GUARANTEES, EXPRESSED OR IMPLIED, OR ARISING BY OPERATION OF LAW, AS TO THE
  MERCHANTABILITY, HABITABILITY, QUANTITY, QUALITY OR ENVIRONMENTAL CONDITION
  OF THE PREMISES OR ITS SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR
  USE; OTHER THAN

  

 

21

 

	
   

  	
   

  	
  AS
  EXPRESSLY PROVIDED IN THIS LEASE.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TENANT
  AFFIRMS THAT TENANT SHALL HAS (i) INVESTIGATED AND INSPECTED THE
  PREMISES TO ITS SATISFACTION AND BECOME FAMILIAR AND SATISFIED WITH THE
  CONDITION OF THE PREMISES, AND (ii) MADE ITS OWN DETERMINATION AS TO (a) THE
  MERCHANTABILITY, QUANTITY, QUALITY AND CONDITION OF THE PREMISES, INCLUDING THE
  POSSIBLE PRESENCE OF TOXIC OR HAZARDOUS SUBSTANCES, MATERIALS OR WASTES OR OTHER
  ACTUAL OR POTENTIAL ENVIRONMENTAL CONTAMINATES, AND (b)  THE PREMISES’ SUITABILITY
  OR FITNESS FOR ANY PARTICULAR PURPOSE OR USE. TENANT HEREBY ACCEPTS THE
  PREMISES IN ITS PRESENT CONDITION ON AN “AS IS”, “WHERE IS” AND “WITH ALL
  FAULTS”, INCLUDING ENVIRONMENTAL MATTERS AND ACKNOWLEDGES THAT WITHOUT THIS
  ACCEPTANCE, THIS LEASE WOULD NOT BE MADE.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  38.  WAIVER OF CONSUMER RIGHTS.  THE
  UNDERSIGNED TENANT HEREBY ACKNOWLEDGES THAT IT IS NOT IN A SIGNIFICANTLY
  DISPARATE BARGAINING POSITION; AND HAS BEEN REPRESENTED BY COUNSEL IN SEEKING
  OR ACQUIRING THE LEASEHOLD THAT IS THE SUBJECT OF THIS LEASE. TENANT HEREBY
  WAIVES ANY AND ALL RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES—CONSUMER
  PROTECTION ACT, SECTION 17.41 ET SEQ, BUSINESS & COMMERCE CODE,
  A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AFTER CONSULTATION
  WITH AN ATTORNEY OF ITS OWN SELECTION. TENANT VOLUNTARILY CONSENTS TO THIS
  WAIVER.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  39.
  Each party hereto may restrain or enjoin any breach of any covenant, duty or
  obligation of the other party herein contained without the necessity of
  proving the inadequacy of any legal remedy or irreparable harm. The remedies
  of either party hereunder shall be deemed cumulative, and no remedy of such
  party, whether exercised by such party or not, shall be deemed to be in
  exclusion of any other. Except as may be otherwise herein expressly provided,
  in all circumstances under this Lease where prior consent or permission of
  one (1) party (“first party”)
  is required before the other party (“second party”)
  is authorized to take any particular type of action, the matter of whether to
  grant such consent or permission shall be within the sole and exclusive
  judgment and discretion of the first party; and it shall not constitute any
  nature of breach by the first party hereunder or any defense to the
  performance of any covenant, duty or obligation of the second party hereunder
  that the first party delayed or withheld the granting of such consent or
  permission, whether or not the delay or withholding of such consent or
  permission was prudent or reasonable or based on good cause.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  40.
  In all instances where either party is required to pay any sum or do any act
  at a particular indicated time or within an indicated period, it is
  understood that time is of the essence.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  41.
  The obligation of Tenant to pay all rental and other sums hereunder provided
  to be paid by Tenant and the obligation of Tenant to perform Tenant’s other
  covenants and duties hereunder constitute independent, unconditional
  obligations to be performed at all times provided for hereunder, save and
  except only when an abatement thereof or reduction therein is hereinabove
  expressly provided for and not otherwise. Tenant waives and relinquishes all
  rights which Tenant might have to claim any nature of lien against or withhold,
  or deduct from or offset against any rental and other sums provided hereunder
  to be paid Landlord by Tenant. Tenant waives and relinquishes any right to
  assert, either as a claim or as a defense, that Landlord is bound to perform
  or is liable for the nonperformance of any implied covenant or implied duty
  of Landlord not expressly herein set forth.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  42.
  [Intentionally Omitted].

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  43.
  All monetary obligations of Landlord and Tenant (including, without
  limitation, any monetary obligation of Landlord or Tenant for damages for any
  breach of the respective covenants, duties or obligations of Landlord or
  Tenant hereunder) are performable exclusively in the county in which the

  

 

22

 

	
   

  	
   

  	
  Building
  is located.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  44.
  The laws of the State in which the Building is located shall govern the
  interpretation, validity, performance and enforcement of this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  45.
  Words of any gender used in this Lease shall be held and construed to include
  any other gender, and words in the singular number shall be held to include
  the plural, unless the context otherwise requires.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  46.
  Nothing herein contained shall be deemed or construed by the parties hereto,
  nor by any third party, as creating the relationship of principal and agent,
  or of partnership or of joint venture between the parties hereto, it being
  understood and agreed that neither the method of the computation of rental,
  nor any other provision contained herein, nor any acts of the parties hereto,
  shall be deemed to create any relationship between the parties hereto other
  than the relationship of landlord and tenant

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  47.
  Tenant further acknowledges that no rights, easements or licenses are
  acquired by Tenant by implication or otherwise, except as herein expressly
  set forth

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  48.
  Tenant warrants that Tenant is, and shall remain throughout the Term of this
  Lease, authorized to do business and in good standing in the State in which
  the Building is located. Tenant agrees, upon request by Landlord, to furnish
  Landlord satisfactory evidence of Tenant’s authority for entering into this
  Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  49.
  [Intentionally Omitted.]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  50.
  In the event Tenant requests from Landlord the written consent of Landlord to
  any proposed action for which this Lease requires such consent, Landlord may
  require (in addition to the payment of reasonable attorneys’ fees) the
  payment by Tenant of a fee representing the administrative cost incurred by
  Landlord in processing such request, regardless of whether such consent is granted.
  Such fee shall be payable by Tenant at the time such request is made by
  Tenant. However, if Landlord reasonably believes that the out-of-pocket costs
  payable to third parties to be incurred by Landlord in reviewing the proposed
  action or consent will exceed $1,000, Landlord will first notify Tenant of
  such cost estimate before proceeding with such third-party expenses. The time
  period for Landlord’s consent to the proposed action shall be tolled until
  such time as Tenant consents to such additional costs and expenses. If Tenant
  fails to consent to such additional costs and expenses within five business
  days after Landlord’s written notification to Tenant thereof, Tenant shall be
  deemed to have rescinded its request for such action or consent.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  51.
  Landlord shall have the right at any time to change the name or street
  address of the Building and to install and maintain a sign or signs on the
  interior or exterior of the Building.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  52.
  The parties acknowledge that the parties and their counsel have reviewed and
  revised this Lease and that the normal rule of construction to the
  effect that any ambiguities are to be resolved against the drafting party
  shall not be employed in the interpretation of this Lease or any exhibits or
  amendments hereto.

  
	
   

  	
   

  	
   

  
	
  RELOCATION

  	
   

  	
  53.
  [Intentionally Omitted].

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  54.  Compliance with Laws.  Landlord
  represents and warrants to Tenant that, to the current, actual knowledge of
  Landlord, the Building is in compliance with all applicable laws (including
  any restrictive covenants affecting the Building) in existence as of the date
  of this Lease. If at any time during the Term, the Building fails to comply
  with any law (including any restrictive covenants affecting the Building) and
  (including any restrictive covenants affecting the Building), Landlord shall
  (subject to the reimbursement of such costs on the terms and subject to the
  limitations contained in this Lease) take such action in connection therewith
  as may be (and within the time frame) required by law (including any
  restrictive

  

 

23

 

	
   

  	
   

  	
  covenants
  affecting the Building) and thereafter diligently pursue such action until
  completion.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  55.  Internal Statute of Limitations.  Notwithstanding
  anything to the contrary in this Lease, any charges due to be paid by either
  Landlord or Tenant to the other party hereto, other than Basic Rental and any
  charges or other sums pertaining to the indemnity and insurance obligations
  of either party under this Lease, shall be deemed waived by the other party
  hereto unless invoiced to the party owing such amount prior to the expiration
  of twelve (12) months following the date such charges are due.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  56.  Attorneys’ Fees.  If
  there is any legal or arbitration action or proceeding between Landlord and
  Tenant to enforce any provision of this Lease or to protect or establish any
  right or remedy of either Landlord or Tenant hereunder, the unsuccessful
  party to such action or proceeding will pay to the prevailing party all reasonable,
  actual out-of-pocket costs and expenses paid or payable to third parties,
  including reasonable attorneys’ fees incurred by such prevailing party in
  such action or proceeding and in any appeal in connection therewith, and if
  such prevailing party recovers a judgment in any such action, proceeding or
  appeal, such costs, expenses and attorneys’ fees will be determined by the
  court or arbitration panel handling the proceeding and will be included in
  and as a part of such judgment.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  57.  Landlord’s Default.  Landlord
  shall be in default under this Lease only if Landlord fails to perform any of
  its obligations within the time period provided for under this Lease, and
  such failure continues for 30 days after Tenant delivers to Landlord written
  notice specifying such failure; provided however, Landlord shall use
  reasonable efforts to commence such cure as soon as reasonably practicable
  following Tenant’s written notification and if such failure cannot reasonably
  be cured within such 30-day period, but Landlord commences to cure such
  failure within such 30-day period and thereafter diligently pursues the
  curing thereof to completion, then Landlord shall not be in default hereunder
  or liable for damages therefor; unless it is not fully cured within a reasonable
  time but in no event later than 150 days following receipt of written notice
  from Tenant of such failure Unless Landlord fails to so cure such default
  after such notice, Tenant shall not have any remedy or cause of action by
  reason thereof. If following the Commencement Date Landlord fails to perform
  its obligations within the time periods provided for in the previous
  sentences of this Section 57, then Tenant may reasonably and in a good
  and workmanlike manner perform such obligations and Landlord shall reimburse
  Tenant all reasonable and actual third-party, out-of-pocket costs reasonably
  and actually incurred by Tenant in connection with performing such
  obligations (other than those which would constitute a Basic Cost had
  Landlord performed such work, in which case, Landlord shall not be obligated
  to reimburse Tenant for the pro rata cost thereof) within 30 days after
  Tenant delivers to Landlord written demand therefor, accompanied by invoices
  substantiating Tenant’s claim. Nothing herein contained shall give or allow
  Tenant any right of offset or credit to or towards its monetary obligations
  under this Lease.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  THE REMAINDER OF THIS PAGE
  INTENTIONALLY LEFT BLANK.

  

 

24

 

Effective as of the date first written above.

 

 

	
   

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pearson Fund
  III, L.P., 

  a Texas limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Pearson Group Capital Management III, Inc. 

  A Texas corporation 

  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Craig Nemec

  	
   

  
	
   

  	
   

  	
  Name: Craig Nemec

  
	
   

  	
   

  	
  Title: President

  
	
   

  	
   

  	
  Signed the 31st day of July, 2005

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sonas Networks, Inc.

  
	
   

  	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ellen B. Richstone

  
	
   

  	
   

  	
  Name:

  	
  Ellen B. Richstone

  
	
   

  	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
  Signed the 29th day of July, 2005

  
										

 

25

 

EXHIBIT A-1

 

LEGAL DESCRIPTION OF LAND

 

BEING
a 4.214 acre tract of land situated in the Baurch Cantrell Survey, Abstract No. 625,
City of Richardson, Texas, Dallas County, Texas, and being all of LOT 2, BLOCK
1, of a Replat of Richardson Industrial Park East, according to the Map or Plat
recorded in Volume 67089, Page 3521, Map Records of Dallas County,
Texas.

 

 

EXHIBIT A-2 – 1st Floor

 

DEPICTION OF PREMISES AND
FIRST FLOOR COMMON AREA

 

(Being attached for identification purposes
only.

Such depictions are expressly made WITHOUT WARRANTY, EXPRESS OR IMPLIED, OF ANY
KIND)

 

 

 

EXHIBIT A-3 – 2nd Floor

 

DEPICTION OF PREMISES

 

(Being attached for identification purposes
only. 

Such depictions are expressly made WITHOUT WARRANTY, EXPRESS OR IMPLIED, OF ANY
KIND)

 

 

 

EXHIBIT B

 

BUILDING RULES AND REGULATIONS

 

The following rules and regulations shall apply to the Premises,
the Building, the Parking Facilities associated therewith, the Land and the
appurtenances thereto:

 

1.                                       Sidewalks, doorways, vestibules, halls,
stairways, and other similar areas shall not be obstructed by tenants or used
by any tenant for any purpose other than ingress and egress to and from their
respective leased premises and for going from one to another part of the Building.

 

2.                                       Plumbing, fixtures and appliances shall be used
only for the purposes far which designed, and no
sweepings, rubbish, rags or other unsuitable material shall be thrown or
deposited therein.  Damage resulting to
any such fixtures or appliances from
misuse by a tenant or its agents, employees or invitees, shall be paid by such
tenant.

 

3.                                       No signs, advertisements or notices shall be
painted or affixed on or to any windows or doors or other part of the Building
without the prior written consent of Landlord. No curtains or other window
treatments shall be placed between the glass and the Building standard window
treatments.

 

4.                                       Landlord shall provide and maintain an
alphabetical directory for all tenants in the main lobby of the Building and
Tenant shall be listed in the Building Directory on or before the Commencement
Date.

 

5.                                       Landlord shall provide all door locks in each
tenant’s leased premises, at Landlord’s cost, and no tenant shall place any
additional door locks in its leased premises without Landlord’s prior written
consent. Landlord shall furnish to each tenant a reasonable number of keys to
such tenant’s leased premises, at such tenant’s cost, and no tenant shall make
a duplicate thereof.

 

6.                                       Movement in or out of the Building of furniture
or office equipment, or dispatch or receipt by tenants of any bulky material,
merchandise or materials which require use of elevators or stairways, or
movement through the Building entrances or lobby shall be conducted under
Landlord’s supervision at such times and in such a manner as Landlord may
reasonably require.  Each tenant assumes
all risks of and shall be liable for all damage to articles moved and injury to
any property and or to any persons or public engaged or not engaged in such
movement, including equipment, property and personnel of Landlord if damaged or
injured as a result of acts in connection with carrying out this service for
such tenant.

 

7.                                       Landlord may prescribe weight limitations and
determine the locations for safes and other heavy equipment or items, which
shall in all cases be placed in the Building so as to distribute weight in a
manner acceptable to Landlord, which may include the use of such supporting
devices as Landlord may require.   All
damages to the Building caused by the installation or removal of any property
of a tenant, or done by a tenant’s property while in the Building, shall be
repaired at the expense of such tenant.

 

8.                                       Corridor doors, when not in use, shall be kept
closed. Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds or animals shall be brought into or kept in, on
or about any tenant’s leased premises other than those animals specially
trained to assist the disabled. No portion of any tenant’s leased premises
shall at any time be used or occupied as sleeping or lodging quarters.

 

9.                                       Tenant shall cooperate with Landlord’s
employees in keeping its leased premises neat and clean. Tenants shall not
employ any person for the purpose of such cleaning other than the Building’s
cleaning and maintenance personnel.

 

 

10.                                 To ensure orderly operation of the Building,
notice, mineral or other water, towels, etc. shall be delivered to any leased
area except by persons approved by Landlord, in its reasonable discretion.

 

11.                                 Tenant shall not make or permit any improper,
objectionable or unpleasant noises or odors in the Building or otherwise
interfere in any way with other tenants or persons having business with them.

 

12.                                 No machinery of any kind (other than normal
office equipment, four Precision air-conditioning units, and Uninterrupted
Power Supply equipment and other related equipment typical in large data
centers) shall be operated by any tenant in its leased area without Landlord’s
prior written consent, nor shall any tenant use or keep in the Building any
flammable or explosive fluid or substance.

 

13.                                 Landlord will not be responsible for lost or
stolen personal property, money or jewelry from tenant’s leased premises or
public or common areas regardless of whether such loss occurs when the area is
locked against entry or not.

 

14.                                 No vending or dispensing machines of any kind
may be maintained in any leased premises without the prior written permission
of Landlord.

 

15.                                 All mail chutes located in the Building shall
be available for use by Landlord and all tenants of the Building according to the
rules of the United States Postal Service.

 

16.                                 Building Hours:   Shall be 7:00 a.m. to 6:00 p.m.
Monday through Friday, and 8:00 a.m. to noon on Saturdays.

 

 

EXHIBIT C

 

OPERATING EXPENSE ESCALATOR

 

1.                                       Tenant shall pay an amount (per each rentable
square foot in the Premises) equal to the excess (“Excess”)
from time to time of the actual Basic Cost per rentable square foot in the
Building over the actual Basic Cost per rentable square foot in the building
for the Base Stop Year (the “Expense Stop”).   Landlord may collect such amount in a lump
sum, to be due within 30 days after Landlord furnishes to Tenant the annual
cost statement, that is, a statement of Landlord’s actual costs, to be
furnished to Tenant by Landlord by April 1 of each calendar year or as soon
thereafter as practicable (“Annual Cost Statement”).
Alternatively, Landlord may make a good
faith estimate of the Excess to be due by Tenant for any calendar year or part
thereof during the Term, and, unless Landlord delivers to Tenant a revision of
the estimated Excess, Tenant shall pay to Landlord, on the Commencement Date
and on the first day of each calendar month thereafter, an amount equal to the
estimated Excess for such calendar year or part thereof divided by the number
of months in such calendar year during the Term. From time to time (but not more
than twice in any calendar year), Landlord may estimate and re-estimate the
Excess to be due by Tenant and deliver a copy of the estimate or re-estimate to
Tenant. Thereafter, the monthly installments of Excess payable by Tenant shall
be appropriately adjusted in accordance with the estimations so that, by the
end of the calendar year in question, Tenant shall have paid all of the Excess
as estimated by Landlord. Any amounts paid based on such an estimate shall be
subject to adjustment pursuant to Section 3 of this Exhibit when
actual Basic Cost is available for each calendar year.

 

2.                                       For the purposes of this Exhibit, the term “Basic Cost” shall mean all expenses and
disbursements of every kind (subject to the limitations set forth below) which
Landlord incurs, pays or becomes obligated to pay in connection with the
ownership, operation, and maintenance of the Building (including the associated
Parking Facilities), determined in accordance with generally accepted or
federal income tax basis accounting principles consistently applied, including
but not limited to the following:

 

(a)                                  Reasonable wages and salaries and management fees,
in each case, at market rates of all employees engaged in the operation,
repair, replacement, maintenance, and security of the Building, including
taxes, insurance and benefits relating thereto (all of the foregoing not to
exceed in the aggregate 5% of gross rents);

 

(b)                                 All supplies and materials used in the
operation, maintenance, repair, replacement, and security of the Building;

 

(c)                                  Cost of all actual capital improvements made to
the Building which although capital in nature can reasonably and demonstrably
be expected to reduce the normal operating costs of the Building, to the extent
of such reduction, as well as all capital improvements made in order to comply
with any law hereafter promulgated by any governmental authority, as amortized
over the period over which such improvements may be amortized for federal income
tax purposes;

 

(d)                                 Cost of all utilities, other than the cost of
utilities actually reimbursed to Landlord by the Building’s tenants;

 

(e)                                  Cost of any insurance or insurance related expense
applicable to the Building and Landlord’s personal property used in connection
therewith;

 

(f)                                    All taxes and assessments and governmental
charges whether federal, state, county or municipal, and whether they be by
taxing or management districts or authorities presently taxing or by others,
subsequently created or otherwise, and any other taxes and assessments
attributable to the Building (or its operation), and the grounds, parking
areas, driveways, and alleys around the Building, excluding, however, federal
and state taxes on income (collectively, “Taxes”); if
the present method of taxation changes so that in lieu of the whole or any part
of any Taxes levied on the Land or Building, there is levied on Landlord a
capital tax directly on the rents received

 

 

therefrom
or a franchise tax, assessment, or charge based, in whole or in part, upon such
rents for the Building, then all such taxes, assessments, or charges, or the
part thereof so based, shall be deemed to be included within the term “Taxes”
for the purposes hereof; and

 

(g)                                 Cost of repairs, replacements, and general
maintenance of the Building; and

 

(h)                                 Cost of service or maintenance contracts with
independent contractors for the operation, maintenance, repair, replacement, or
security of the Building (including, without limitation, alarm service, window
cleaning, and elevator maintenance).

 

(i)                                     There are specifically excluded from the
definition of the term “Basic Cost” costs and expenses.

 

(1)                                  for capital improvements made to the Building,
other than capital improvements described in Subsection 2(e) of this Exhibit and
except for items which, though capital for accounting purposes, are properly considered
maintenance and repair items, such as painting of common areas, replacement of
carpet in elevator lobbies, and the like;

 

(2)                                  for repair, replacements and general
maintenance paid by proceeds of insurance or by Tenant or other third parties,
and alterations attributable solely to tenants of the Building other than
Tenant;

 

(3)                                  for interest, amortization or other payments on
loans to Landlord, as maker;

 

(4)                                  for legal expenses, other than those incurred
for the general benefit of the Building’s tenants (e.g., tax disputes);

 

(5)                                  for renovating or otherwise improving space for
occupants of the Building or vacant space in the Building;

 

(6)                                  for overtime or other expenses of Landlord in
curing defaults or performing work expressly provided in this Lease to be home
at Landlord’s expense;

 

(7)                                  for federal income taxes imposed on or measured
by the income of Landlord from the operation of the Building;

 

(8)                                  for repair or replacement or other work
occasioned by exercise of the right of eminent domain (to the extent of the
costs and expenses for which Landlord actually receives a cash award);

 

(9)                                  for leasing commissions, advertising and other
promotional costs and expenses, attorneys’ fees, costs and disbursements and
other expenses incurred in negotiating or executing leases or in resolving
disputes with other tenants, other occupants, or other prospective tenants or
occupants of the Building, collecting rents or otherwise enforcing leases of
other tenants of the Building;

 

(10)                            for special services rendered to particular
tenants of the Building or that exclusively benefit another tenant or tenants
of the Building, including, without limitation, costs of tenant installations,
decorating expenses, redecorating expenses, or constructing improvements or
alterations to any tenant space, the costs of any janitorial cleaning service
or security services provided to other tenants which exceed the standard of
that provided to Tenant and costs in connection with services (including
electricity), items or other benefits of a type which are not standard for the
Building and which are not available to Tenant without specific charge
therefor, but which are provided to another tenant or occupant of the Building,
whether or not such other tenant or occupant is actually charged therefor by
Landlord;

 

 

(11)                            for depreciation of the Building, the systems
related thereto (e.g., HVAC, elevators, electrical, plumbing, etc.) or the
equipment or tools used in connection therewith;

 

(12)                            incurred by Landlord for which Landlord is
actually reimbursed by parties other than tenants of the Building, including,
without limitation, insurance proceeds;

 

(13)                            for the initial construction of the Building,
including the correction of any structural construction defects;

 

(14)                            except for the management fee, of any overhead
or profit;

 

(15)                            of any amounts paid to any subsidiary or
affiliate of Landlord for services on or to the Building, parking garage or
related facilities and/or the Land on which the Building is situated, to the
extent of any portion of the cost of such services exceeds the reasonable costs
for such services rendered by persons or entities of similar skill, competence
and experience other than a subsidiary or affiliate of Landlord;

 

(16)                            of rental under any ground or underlying lease
or leases for the Land;

 

(17)                            except for the management fee, of Landlord’s
general overhead;

 

(18)                            of any compensation paid to clerks, attendants
or other persons in commercial concessions operated by Landlord, other than
with respect to the parking garage;

 

(19)                            for items and services for which Tenant
directly reimburses Landlord or pays to third persons with Landlord’s consent,
to the extent of such reimbursement or payment;

 

(20)                            of fines, penalties, and legal fees incurred
due to violations by Landlord, its employees, agents, contractors or assigns,
or any other tenant or occupant of the Building, of building codes, any other
governmental rule or requirement or the terms and conditions of any lease
pertaining to the Building;

 

(21)                            of management fees to the extent of any portion
of such fees which are unreasonable;

 

(22)                            of acquiring sculptures, paintings, wall
hangings or other objects of art;

 

(23)                            of wages, salaries, or other compensation paid
to any executive employees of Landlord above the level of property manager;
provided, further, if any employee of Landlord works on several buildings within
the area, including the Building, the costs and expenses connected with such
employee shall be allocated among such buildings by Landlord in accordance with
reasonable and consistent criteria;

 

(24)                            incurred in leasing air-conditioning systems,
elevators, or other equipment ordinarily considered to be of a capital nature
(other than on a temporary basis);

 

(25)                            associated with the removal or encapsulation of
asbestos or other hazardous or toxic substances;

 

(26)                            for repairs or maintenance which are covered by
warranties and service contracts, to the extent such maintenance and repairs
are made at no cost to Landlord;

 

(27)                            representing any amount paid for services and
materials to an affiliate of Landlord (i.e., persons or entities controlled by,
under common control with, or which control, Landlord) to the extent such
amount exceeds the amount that would reasonably be paid for such services or
materials were they rendered by an unaffiliated person, firm or corporation;

 

 

(28)                            for amounts payable by Landlord by way of
indemnity or for damages or which constitutes a fine or penalty, including
interest or penalties for any late payment;

 

(29)                            for repairs necessitated by violations of law
in effect as of the date of the Lease;

 

(30)                            for property taxes and assessments which are
not properly allocable to the Building; without limiting the generality of the
foregoing, property taxes and assessments which are properly allocable to
undeveloped land shall be excluded from Basic Cost;

 

(31)                            of interest and penalties due to the late
payment of taxes, utility bills or other such costs except any interest or
penalties arising from late payments beyond Landlord’s control; and

 

(32)                            bad debt expenses and
charitable contributions and donations; and

 

(33)                            costs incurred as a result of the gross
negligence of Landlord.

 

3.                                       The Annual Cost Statement shall include a
statement of Landlord’s actual Basic Cost for the previous year adjusted as
provided in Section 4 of this Exhibit. If the Annual Cost Statement
reveals that Tenant paid more for Basic Cost than the actual Excess in the year
for which such statement was prepared, then Landlord shall credit or reimburse
Tenant for such excess within 30 days after delivery of the Annual Cost
Statement; likewise, if Tenant paid less than the actual Excess, then Tenant
shall pay Landlord such deficiency within 30 days after delivery of the Annual
Cost Statement.

 

4.                                       With respect to any calendar year or partial
calendar year in which the Building is not
occupied to the extent of 95% of the rentable area thereof, including calendar
year 2006 (if applicable), the Basic Cost for such period shall, for the
purposes hereof, be increased to the amount which would have been incurred had
the Building been occupied to the extent of 95% of the rentable area thereof.
The foregoing adjustment shall be applied only to those items of Basic Cost
which vary with the level of occupancy of the Building, and in particular,
shall not be applied to taxes described in Subsection 2(f) of this Exhibit C.  In no event shall Landlord be entitled to
recover more than one hundred percent (100%) of actual Basic Costs pursuant to
this Section.

 

5.                                       For purposes of calculating Excess under this Exhibit C, the Controllable Basic
Costs (defined below) for each calendar year after 2006
shall not increase by more than 106% over the Controllable Operating Costs for
the previous calendar year.   “Controllable Basic Costs” shall
mean all items of Basic Costs which are within the reasonable control of
Landlord; thus, excluding taxes, insurance, utilities, snow removal costs,
costs incurred to comply with governmental requirements, and other costs beyond
the reasonable control of Landlord.

 

 

EXHIBIT D

 

SPECIAL
PROVISIONS

 

The following Special Provisions are hereby made a
part of the Lease Agreement, in all respects, and shall be read in context of
the Standard Lease Provisions as set forth and contained therein. In the event
of any express conflict between these Special Provisions and the Standard Lease
Provisions, then these Special Provisions shall control:

 

	
  1.               Right of First
  Refusal.

  	
   

  	
  If during the term of this Lease, Landlord receives
  a bona fide offer from a third party (the “Third
  Party Offer”) to execute a new lease for the lease of (a) the
  remaining portion of the first floor of the Building not included in the
  Premises or (b) any portion of the third floor of the Building
  (collectively, the “Refusal Space”)
  and Landlord is willing to accept the terms of such Third Party Offer,
  Landlord shall, provided that (a) no Event of Default then exists, and (b) Tenant
  occupies the Premises, offer to lease to Tenant the Refusal Space on the same
  terms and conditions as the Third Party Offer; such offer shall be in
  writing, specify the rent to be paid for the Refusal Space, contain the basic
  terms and conditions of the Third Party Offer and the date on which the
  Refusal Space shall be included in the Premises (the “Offer Notice”). Tenant
  shall notify Landlord in writing whether Tenant elects to lease the entire
  portion of the Refusal Space subject to the Third Party Offer on the same
  terms and conditions as the Third Party Offer in the Offer Notice within
  seven (7) business days after Landlord delivers to Tenant the Offer
  Notice. If Tenant timely elects to lease the Refusal Space within such seven (7) -
  business day period by written notice to Landlord, then Landlord and Tenant
  shall execute an amendment to this Lease effective as of the date the Refusal
  Space is to be included in the Premises, on the same terms as this Lease
  except (a) the Basic Rental shall be the amount specified in the Offer
  Notice (b) the term for the Refusal Space shall be that specified in the
  Offer Notice, (c) Tenant shall receive any tenant improvement allowance
  referenced in the Offer Notice with respect to the Refusal Space, and (d) other
  terms set forth in this Lease which are inconsistent with the terms of the
  Offer Notice shall be modified accordingly respecting the Refusal Space only.
  If Tenant fails to timely elect to Lease the Refusal Space or fails to
  execute the Amendment to the Lease consistent herewith within seven (7) business
  days of receipt of such from Landlord, then this right shall automatically
  terminate as to the portion of the Refusal Space covered by the applicable
  Third Party Offer only.

  
	
   

  	
   

  	
   

  
	
  2.               Monument Signage

  	
   

  	
  So long as (i) no Event of Default then exists,
  and (ii) Tenant occupies at the Premises, effective as of the
  Commencement Date signage shall be made available for Tenant on both sides of
  the existing monument in front of the Building in a manner consistent with
  the signage currently in place. Any such signage shall be at Tenant’s sole
  cost and subject to applicable governmental approvals and permits, and
  Landlord’s prior written approval, which shall not be unreasonably withheld,
  conditioned or delayed. Notwithstanding the foregoing.  Landlord shall have the right, at Landlord’s
  sole cost and expense, from time to time during the Term, as the same may be
  extended, to relocate and/or replace said signage with similar signage of
  equal or greater size and of equivalent or better location and visibility.
  Tenant’s sign panel or display shall be at least as large as any other panel
  or display of any other Tenant. In the event that the pertinent laws, rules,
  regulations or governmental authorities limit the number of designations that
  may be placed on the monument sign to one, then only the Building name shall
  be displayed thereon. In the event that the pertinent laws, rules,
  regulations and governmental authorities limit the

  

 

 

	
   

  	
   

  	
  number of designations to be placed on the
  monument sign to two, then only the designation of the Building and the
  Tenant then occupying the greatest RSF in the Building shall be on the
  monument sign. Subject to the foregoing, Landlord shall use reasonable
  efforts to ensure that Tenant will have its name on the monument sign
  throughout the Lease Term.

  
	
   

  	
   

  	
   

  
	
  3.     Spandrel Signage

  	
   

  	
  So long as (i) no Event of Default then
  exists, and (ii) Tenant occupies at the Premises, effective as of the
  Commencement Date, and subject to regulatory approvals and Landlord’s prior
  written approval, which shall not be unreasonably conditioned, withheld or
  delayed, Tenant may install building signage above the 6th floor
  spandrel on the northwest side of the building facing Arapaho Road. Any such
  signage shall be at Tenant’s sole cost.

  
	
   

  	
   

  	
   

  
	
  4.     Finish Work
  Allowance

  	
   

  	
  The space will be provided in its “as-is”
  condition. Landlord shall provide Tenant with an allowance for the costs (“Finish Work Allowance Costs”) of
  hereafter constructing any tenant improvements in the Premises (including,
  without limitation, third party architectural and engineering fees with
  respect thereto) in an amount not to exceed $864,840.83
  (i.e., the product of (x)$32.59 per rentable
  square foot and (y) 26,537
  rentable square feet of the Premises) (the “Finish
  Work Allowance”). All construction and design costs for the
  Premises in excess of the Finish Work Allowance shall be paid for entirely by
  Tenant, and Landlord shall not provide any reimbursement therefor. The Finish
  Work Allowance, less 10% retainage, shall be disbursed as requisitioned by
  Tenant, but not more frequently than monthly, within thirty (30) days after
  Tenant’s submission of the requisition package. For each disbursement, Tenant
  shall submit a requisition package to Landlord with an itemization of the
  costs being requisitioned, a certificate by an officer of Tenant that all
  such costs are Finish Work Allowance Costs and have been incurred by Tenant,
  and appropriate back-up documentation including, without limitation, partial
  or full lien waivers (in a form reasonably approved by Landlord), invoices
  and bills (together with evidence of Tenant’s payment of such amounts, if
  Tenant does not request such
  invoices to be paid by joint check pursuant to the next sentence), and, upon
  completion of the work, such certificates of completion, final lien waivers,
  certificates of occupancy, and as-built plans as Landlord may reasonably
  require in light of the nature and scope of the work Notwithstanding the foregoing,
  at Tenant’s request, Landlord shall make disbursements of the Finish Work
  Allowance by check jointly payable to Tenant and Tenant’s general contractor
  with respect to the portion of the work then completed; provided however,
  that Landlord shall have no responsibility or Liability to Tenant or such
  contractor with respect to such work, including without limitation, the
  quality or completeness of such work or any warranties associated therewith.
  If the reasonably estimated cost of the work exceeds the Finish Work
  Allowance, Landlord reserves the right to make pro-rata disbursements of the
  Finish Work Allowance in the proportion that the Finish Work Allowance bears
  to the estimated cost of the work, subject to a final reconciliation upon
  completion of the work. Subject to the foregoing, Landlord shall disburse the
  retainage amount upon receipt of a final back-up documentation, within
  forty-five (45) days of completion of all the work. Landlord shall have no
  obligation to pay the Finish Work Allowance at any time (a) when Tenant
  is in default under the Lease (as amended hereby) beyond the expiration of
  any applicable notice or cure period or (b) with respect to any
  requisition submitted after the last day of the Sixth (6th) Lease
  Month. After the final completion of the work and the reconciliation of the
  Finish Work Allowance and the Finish Work Allowance Costs, Tenant may use any
  excess Finish Work Allowance for the payment of Rent hereunder or towards the
  cost of Tenant’s bona fide move-related expenses, furniture, and cabling
  costs respecting the Premises, and third party construction management
  services by

  

 

 

	
   

  	
   

  	
  making written request for such final
  disbursement before the last day of the Sixth (6th) Lease Month,
  together with all appropriate back up documentation, and Landlord shall
  reimburse Tenant for the cost of the same within thirty (30) days of Tenant’s
  request therefor. Thereafter Landlord shall have no obligation for any unused
  portion of the Finish Work Allowance.

  
	
   

  	
   

  	
   

  
	
  5.     Early Termination:

  	
   

  	
  Provided no monetary Event of Default by Tenant
  then exists at the time of the exercise of the option that is the subject of
  this special provision, Tenant shall have the irrevocable right to terminate
  the Lease effective on the last day of the 36th Lease Month by
  delivering to Landlord written notice thereof (“Termination
  Notice”) no later than the last day of the 28th
  Lease Month accompanied by a Termination Fee (herein so called) in cash or
  its equivalent in an amount equal to the balance of as the effective date of
  such Termination of all unamortized Landlord’s Finish Work Allowance,
  brokerage commissions and costs for the purchase and installation of the
  Generator associated with the Lease, such costs to be amortized at a rate of
  nine percent (9%) over the initial Term of this Lease. Failing the timely
  delivery of the Termination Notice and or the Termination Fee, then the right
  herein provided shall automatically cease and expire.

  
	
   

  	
   

  	
   

  
	
  6.     Single Renewal
  Option:

  	
   

  	
  Tenant may renew this Lease for one additional
  period of five (5) years, provided there is not then an Event of Default
  by Tenant under the Lease, by delivering written notice of the exercise
  thereof to Landlord not later than six months before the expiration of the
  Term. The Basic Rental payable for each month during such extended Term shall
  be the prevailing rental rate (the
  “Prevailing Rental Rate”), at the
  commencement of such extended Term, for renewals of space in buildings
  comparable to the Building in the submarket in which the Premises are located
  of equivalent quality, size, utility and location, with the length of the
  extended Term and the credit standing of Tenant to be taken into account.
  Within 30 days after receipt of Tenant’s notice to renew, Landlord shall
  deliver to Tenant written notice of the Prevailing Rental Rate and shall
  advise Tenant of the required adjustment to Basic Rental, if any, and the
  other terms and conditions offered. Tenant shall, within twenty (20) days
  after receipt of Landlord’s notice, notify Landlord in writing whether Tenant
  accepts or rejects Landlord’s determination of the Prevailing Rental Rate. If
  Tenant timely notifies Landlord that Tenant accepts Landlord’s determination
  of the Prevailing Rental Rate, then, on or before the commencement date of
  the extended Term, Landlord and Tenant shall execute an amendment to this
  Lease extending the Term on the same terms provided in this Lease, except as
  follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (a)           Basic Rental shall
  be adjusted to the Prevailing Rental Rate;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)           Tenant shall have
  no further renewal option unless expressly granted by Landlord in writing;

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)           Landlord shall
  lease to Tenant the Premises in their then-current condition, and Landlord
  shall not provide to Tenant any allowances (e.g., moving allowance,
  construction allowance, and the like) or other tenant inducements; provided,
  if such allowances have been taken into account in determining the Prevailing
  Rental Rate, then Landlord shall provide such allowances to Tenant; and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (d)           The Expense Stop
  shall be adjusted to be the calendar year in which the extended Term
  commences (provided such adjustment is taken into account in

  

 

 

	
   

  	
   

  	
  determining the
  Prevailing Rental Rate).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If Tenant rejects
  Landlord’s determination of the Prevailing Rental Rate and timely notifies
  Landlord thereof, Tenant may, in its notice to Landlord, require that the
  determination of the Prevailing Rental Rate be made by brokers. In such
  event, within 10 days thereafter, each party shall select a qualified
  commercial real estate broker with at least ten years experience in Leasing
  property and buildings in the city or submarket in which the Premises are
  located. The two brokers shall give their opinion of prevailing rental rates
  within 20 days after their retention. In the event the opinions of the two
  brokers differ and, after good faith efforts over the succeeding 20-day
  period, they cannot mutually agree, the brokers shall immediately and jointly
  appoint a third broker with the qualifications specified above. This third
  broker shall immediately (within five days) choose either the determination
  of Landlord’s broker or Tenant’s broker and such choice of this third broker
  shall be final and binding on Landlord and Tenant. Each party shall pay its
  own costs for its real estate broker. Following the determination of the
  Prevailing Rental Rate by the brokers, the parties shall equally share the
  costs of any third broker,

  
	
   

  	
   

  	
   

  
	
  7.     Satellite Dish/Riser:

  	
   

  	
  Subject to the terms set
  forth below, Landlord hereby grants Tenant a license to use a portion of the
  roof of the Building for the installation of up to two (2) communications
  antennae or satellite dish or other communications equipment for Tenant’s
  uses ancillary to the Permitted Use in the Premises (the “Satellite Dish”). The size,
  location, manner of placement, screening, installation specifications, and
  other particulars of the Satellite Dish shall be subject to the prior review
  and reasonable approval of Landlord. Tenant shall be responsible for
  obtaining all necessary permits, approvals, and operating licenses for such
  installation and shall pay all costs arising from the installation,
  maintenance, repair, and subsequent removal of the Satellite Dish, and repair
  and replacement of any disturbed roofing materials associated therewith. Similarly,
  subject to the terms set forth below, Landlord hereby grants Tenant a license
  to use a portion of the riser space situated at the Building for the
  installation of certain equipment for Tenant’s uses ancillary to the
  Permitted Use in the Premises. The size, location, manner of placement,
  screening, installation specifications, and other particulars of such
  equipment shall be subject to the prior review and reasonable approval of
  Landlord. Tenant shall be responsible for such installation and shall pay all
  costs arising from the installation, maintenance and repair of such equipment.

  
	
   

  	
   

  	
   

  
	
  8.     Generator

  	
   

  	
  Landlord, at its sole
  cost and expense, shall purchase, install and maintain in good working order
  throughout the Term, an approximate 500 Kva generator with a 2-hour fuel “day
  tank”, pursuant to written specifications as provided by Tenant, and subject
  to Landlord’s review and approval, for use by Tenant during the Term;
  provided however that Landlord shall also have the right to use such for its
  benefit and the benefit of the Building for essential building systems. Such
  installation shall include the generator pad, screening and conduit to the
  Premises. Conduit shall be adequate in size to accommodate wiring from a
  second generator if installed by Tenant, at its sole cost and expense, with
  the prior written approval of Landlord, if any. The location of the generator
  shall be mutually acceptable to Landlord and Tenant.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Upon installation of the
  generator or contemporaneously therewith, Tenant may, at its sole cost and
  expense, perform the electrical testing of the generator and related systems,
  to its reasonable satisfaction. Landlord shall be responsible for, and shall
  timely perform, all other testing associated with the generator.

  

 

 

	
   

  	
   

  	
  Landlord and Tenant shall
  use their best efforts in the installation and any testing of the generator,
  so that the generator will be installed and ready for use on or before
  November 1, 2005.

  
	
   

  	
   

  	
   

  
	
  9.     Furniture

  	
   

  	
  In addition to the Finish
  Work Allowance, Landlord shall provide Tenant with an allowance for the costs
  (“Furniture Allowance Costs”) of
  hereafter purchasing thirty (30) new Kimball “Reasons” cubicles and thirty
  (30) new “CUSP” task chairs, or, in each case, furniture of comparable
  quality, and otherwise furnishing up to three (3) conferences rooms with one
  (1) new or used conference table and up to twelve (12) new or used
  conference chairs for each of the three conference rooms within the Premises in
  an amount not to exceed $100,000.00
  (the “Furniture Allowance”). Prior
  to the acquisition of such furniture Tenant shall provide copies of the bids
  or other pricing for such furniture, and the type and cost of such shall be
  subject to Landlord’s review and approval, which approval shall not be
  unreasonably withheld, conditioned or delayed; and in the event Landlord does
  not approve or disapprove of any such bids within five (5) business days
  of Tenant’s submission thereof, then Landlord shall be deemed to have approved of such bid. Provided
  Landlord, has approved (or is deemed to have approved) the proposed furniture
  to be purchased, as provided in the foregoing, the Furniture Allowance shall
  be disbursed as requisitioned by Tenant, but not more frequently than
  monthly, within thirty (30) days after Tenant’s submission of the requisition
  package. For each disbursement, Tenant shall submit a requisition package to
  Landlord with an itemization of the costs being requisitioned, a certificate
  by an officer of Tenant that all such costs are Furniture Allowance Costs and
  have been incurred by Tenant, and appropriate back-up documentation
  including, without limitation, invoices and bills (together with evidence of
  Tenant’s payment of such amounts, if Tenant does not request such invoices to
  be paid by joint check pursuant to the next sentence). Notwithstanding the
  foregoing, at Tenant’s request, Landlord shall make disbursements of the
  Furniture Allowance by check jointly payable to Tenant and the furniture
  supplier with respect to the portion of the furniture then acquired. Landlord
  shall have no obligation to pay the Furniture Allowance at any time
  (a) when Tenant is in default under the Lease (as amended hereby) beyond
  the expiration of any applicable notice or cure period or (b) with
  respect to any requisition submitted after the last day of the Sixth (6th)
  Lease Month. Thereafter Landlord shall have no obligation for any unused
  portion of the Furniture Allowance. All furnishings purchased with the
  Furniture Allowance shall be and remain the property of Landlord, provided
  however, that during the Term, Tenant shall lease and have the right to use
  such furniture, in partial consideration of the Basic Rental provided for
  herein, and provided that Tenant during the Term of the Lease shall be
  responsible for any and all business personal property taxes assessed
  respecting such furniture.

  
	
   

  	
   

  	
   

  
	
  10.   Security System

  	
   

  	
  Landlord will make its
  card-key access system available to Tenant so that Tenant may secure the
  Premises via the card-key access system and access the exterior security
  cameras (to the extent such cameras are operational).

  
	
   

  	
   

  	
   

  
	
  11.   Tenant Audit of Excess

  	
   

  	
  Tenant, at its expense,
  shall have the right upon fifteen (15) business days advance written notice,
  to inspect Landlord’s books and records relating to the Lease and the Building
  for any year in which Excess charges are due, any such inspection to be
  conducted at Landlord’s building manager’s office, during normal business
  hours; provided, however Landlord agrees to reimburse Tenant for the costs of
  any such inspection conducted by or for it in the event the inspection
  reflect that the Excess charged to Tenant by Landlord hereunder for the
  period of time covered by such

  

 

 

	
   

  	
   

  	
  inspection shall have been overstated by seven
  (7%) or more. If such audit or inspection reveals that an error was made in
  the Excess previously charged to Tenant, Landlord shall refund to Tenant any
  overpayment of any such costs within 30 days of notification thereof. Any
  such inspection must cover a period within twenty-four (24) months prior to
  the then current calendar year, any objections to charges prior thereto being
  conclusively presumed to have been waived.

  
	
   

  	
   

  	
   

  
	
  12.   Permitted
  Equipment

  	
   

  	
  Any provision of Section 12 of the Building
  Rules and Regulations to the contrary notwithstanding. Tenant may use and
  operate in the Premises four (4) Precision air-conditioning units, and
  Uninterrupted Power Supply equipment and other related equipment typical in
  large data centers, subject to the other terms and provisions as provided in
  this Lease.

  
	
   

  	
   

  	
   

  
	
  13.   Building Hours

  	
   

  	
  Any provision of Section 16 of the Building
  Rules and Regulations to the contrary notwithstanding, the Building
  Hours, for purposes of this Lease shall be 7:00 a.m. to

  7:30 p.m. Monday through Friday, and 8:00 a.m. to 1:00 p.m. on
  Saturdays.

  
	
   

  	
   

  	
   

  
	
  14.   Landlord’s
  Remedial ADA Compliance

  	
   

  	
  Landlord covenants and agrees to commence within
  45 days of the Effective Date to commence and diligently pursue to completion
  the installation, remediation or repair of the ADA compliance matters set
  forth on Exhibit D-1 hereto.

  

 

 

Exhibit D-1

ADA Compliance Matters

 

Women’s Restroom

 

1.             Accessible signage
on front door to be relocated to strike side of door at 60” a.f.f. 

2.             Entrance door to
restroom is not accessible on the pull side. 

3.             ADA/TAS stall door
to be 4” max. from side stall wall (it is currently at 7”). 

4.             Coat book on women’s
ADA/TAS stall is mounted at 53” a.f.f. Needs to be mounted at 48” a.f.f. 

5.             Women’s ADA/TAS
water closet is not at an accessible height or distance from closest side wall.
Relocate to 1’-6” from side wall and at 17” – 19” a.f.f. to top of rim. 

6.             Provide new women’s
rear grab bar (to be 36” minimum, is at 30” currently). 

7.             Lavatory apron is
26-1/2” a.f.f. and needs to be 29” a.f.f.
minimum for required ADA/TAS knee clearance. 

8.             Kneespace under
lavatory is not clear 8” deep X 27” high required ADA/TAS clearance because of
existing angled panel. 

9.             Paper towel
dispenser / trash receptacle is mounted too high. Relocate so that paper towel
dispenser height is at 48” a.f.f.

 

Men’s Restroom

 

1.             Accessible signage
on front door to be relocated to strike side of door at 60” a.f.f. 

2.             Entrance door is not
accessible on the pull side. 

3.             Men’s ADA/TAS water
closet is not at an accessible distance from closest side wall. Relocate water
closet to 1’-6” from side wall. 

4.             Existing urinal does
not meet the 14” deep TAS requirement. Provide new urinal and mount per ADA/TAS
requirements. 

5.             Cut privacy panel
between urinals back to 24” deep maximum (or width will have to increase to 32”
wide. Stall is currently at 30-1/2” wide). 

6.             Paper towel
dispenser projects 4-1/4” from wall and is mounted 50” to paper towel
dispenser. Provide new paper towel dispenser which projects 4” max. from wall
and mount at 48” a.f.f. to paper towel dispenser. 

7.             Lavatory apron is
26-1/2” a.f.f. and needs to be at 29” a.f.f. minimum for required ADA/TAS knee
clearance. 

8.             Kneespace under
lavatory is not have 8” deep X 27” high required ADA/TAS clearance because of
existing angled panel.

 

Breakroom
millwork

 

1. Front vertical apron at accessible sink
meets ADA/TAS knee clearance height, however, horizontal and sloped panel
beyond is impeding on the 8”
deep X 27” high required knee space.

 

 

EXHIBIT E

 

PARKING

 

Parking Spaces.

 

Landlord hereby grants to Tenant and persons
designated by Tenant a license for the duration of the Term to use up to one hundred and four (104)
unreserved surface
parking spaces and twenty (20) reserved
covered vehicle parking space (as Landlord shall determine) in that certain
surface parking lot facility (the “Parking Facilities”) owned by
Landlord adjacent to the Building, for the initial Term of the Lease, subject
to its early termination as provided in this Lease, and subject to such terms,
conditions and regulations as are from time to time applicable to patrons of
the Parking Facilities.

 

During such initial Term, there shall be a
charge of $0.00 (plus tax) per month per unreserved parking space and a
charge of $0.00 (plus tax) per month per reserved parking space, for the
parking spaces designated above, whether or not Tenant utilizes such parking
spaces. No deductions from the monthly charge will be made for days on which
the Parking Facilities or any particular parking space is not used by Tenant.

 

After the initial Term, Tenant may continue
such license, subject to the payment of the then prevailing fees generally
charged by Landlord for such parking spaces, and subject to such terms,
conditions and regulations as are from time to time applicable to patrons of
the Parking Facilities.

 

Tenant may not assign its licenses without
the prior written approval of Landlord, which shall not be unreasonably
withheld, conditioned or delayed.

 

Control of Parking.

 

Tenant shall at all times comply with all
applicable ordinances, rules, regulations, codes, laws, statutes and
requirements of all federal, state, county and municipal governmental bodies or
their subdivisions respecting the use of the Parking Facilities. Landlord
reserves the right from time to time to adopt, modify and enforce reasonable rules governing
the use of the Parking Facilities, including any key-card, sticker or other
identification or entrance system, and hours of operation. Landlord may refuse
to permit any person who violates such rules to park in the Parking
Facilities, and any violation of the rules will subject the car to removal
from same.

 

Liability.

 

The unreserved parking spaces hereunder will
be provided on an unreserved “first-come, first-served” basis. Tenant
acknowledges that Landlord has or may arrange for the Parking Facilities to be
operated by an independent contractor, not affiliated with Landlord. Tenant
agrees to look first to its insurance carrier and to require that Tenant’s
employees look first to their respective insurance carriers for payment of any losses
sustained in connection with any use of the Parking Facilities. Tenant hereby
waives on behalf of Tenants insurance carriers all rights of subrogation
against Landlord or Landlord’s agents. Landlord reserves the right to assign
specific spaces, and to reserve spaces for visitors, small cars, handicapped
persons and for other tenants, guests of tenants or other parties, and Tenant
and persons designated by Tenant hereunder will not park in any such assigned
or reserved spaces. Landlord also reserves the right to close all or any
portion of the Parking Facilities on a temporary basis (as necessary) in order
to make repairs or perform maintenance services, or to alter, modify, restripe
or renovate the Parking Facilities, or if required by casualty, strike,
condemnation, act of God, governmental law or requirement or other reason
beyond Landlord’s reasonable control. If, for any other reason, Tenant or
persons properly designated by Tenant, are denied access to the Parking
Facilities and Tenant or such persons will have complied with this Exhibit E. Landlord’s liability will be limited to parking charges (excluding
tickets for parking violations) incurred

 

 

by Tenant or such persons in utilizing
alternative parking, which amount Landlord will pay upon presentation of
documentation supporting Tenant’s claims in connection therewith.

 

Landlord shall use
reasonable efforts to monitor the use of reserved parking spaces by the
licenses entitle to use of such, but shall have no liability whatsoever in this
regard.

 

Default Remedies.

 

If Tenant defaults under this Exhibit E, Landlord will have the right to remove from the Parking Facilities any
vehicles hereunder which are involved or are owned or driven by parties involved
in causing such default, without liability there for whatsoever. In addition,
if Tenant defaults under this Exhibit E, then, Landlord will have
the right to cancel Tenant’s reserved parking spaces after ten (10) days’
written notice, provided Tenant does not cure such within that time period; such
cancellation to continue in any event until such matter has been cured. If
Tenant defaults with respect to the same term or condition under this Exhibit E,
more than three (3) times during any twelve (12) month period, the next
default of such term or condition, will, at Landlord’s election, constitute a
default of the parking arrangements and the person or persons causing such
default shall no longer have access to any of the Parking Facilities.

 

 

EXHIBIT F

 

INTENTIONALLY DELETED

 

 

EXHIBIT G

 

SUBORDINATION,
NON-DISTURBANCE AND ATTORNMENT AGREEMENT

 

THIS
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the “Agreement”) is
made as of the
              
day of
                     ,
200   , by and between BANK OF TEXAS, N.A. having an address at 5956 Sherry Lane, Suite 1100, Dallas, Texas 75225 (“Lender”)
and SONUS NETWORKS, INC., a Delaware corporation, having an address at 1130 East
Arapaho Road, Suite          ,
Richardson, Texas 75081 (“Tenant”).

 

RECITALS:

 

A.            Tenant is the holder
of a leasehold estate in a portion of the property described on Exhibit “A”
(the “Property”) under and pursuant to the provisions of a certain lease dated
the
              
day of          , 2005 between
PEARSON FUND III, L.P., a Texas limited partnership, as landlord, and Tenant,
as tenant (the “Lease”);

 

B.            PEARSON FUND III,
L.P., a Texas limited
partnership (“Landlord”) is the current holder of the “Landlord’s” interest in
the Lease;

 

C.            The Property is or
is to be encumbered by one or more mortgages, deeds of trust, deeds to secure debt
or similar security agreements (collectively, the “Security Instrument”) in
favor of or to be assigned to Lender; and

 

D.            Tenant has agreed to
subordinate the Lease to the Security Instrument and to the lien thereof and Lender
has agreed to grant non-disturbance to Tenant under the Lease on the terms and
conditions hereinafter set forth.

 

AGREEMENT:

 

NOW, THEREFORE, the parties hereto mutually
agree as follows:

 

1.             Subordination. The
Lease shall be subject and subordinate in all respects to the lien and terms of
the Security Instrument, to any and all advances to be made there under and to
all renewals, modifications, consolidations, replacements and extensions
thereof.

 

2.            Non-disturbance. So
long as Tenant pays all rents and other charges as specified in the Lease and
is not otherwise in default (beyond applicable notice and cure periods) of any
of its obligations and covenants pursuant to the Lease, Lender agrees for
itself and its successors in interest and for any purchaser of the Property
upon a foreclosure of the Security Instrument, that Tenant’s possession of the
premises as described in the Lease will not be disturbed during the term of the
Lease, as said term may be extended pursuant to the terms of the Lease or as
said premises may be expanded as specified in the Lease, by reason of a
foreclosure. For purposes of this agreement, a “foreclosure” shall include (but
not be limited to) a sheriff’s or trustee’s sale under the power of sale
contained in the Security Instrument, the termination of any superior lease of
the Property and any other transfer of the Landlord’s interest in the Property
under peril of foreclosure, including, without limitation to the generality of
the foregoing, an assignment or sale in lieu of foreclosure.

 

3.             Attornment. Tenant
agrees to attorn to, accept and recognize any person or entity which acquires the
Property through a foreclosure (an “Acquiring Party”) as the landlord under the
Lease for the then remaining balance of the term of the Lease, and any
extensions thereof as made pursuant to the Lease. The foregoing provision shall
be self-operative and shall not require the execution of any further instrument
or agreement by Tenant as a condition to its effectiveness. Tenant agrees,
however, to execute and deliver, at any time and from time to time, upon the
request of the Lender or any Acquiring Party any reasonable instrument which
may be necessary or appropriate to
evidence
such attornment.

 

 

4.             No Liability.
Notwithstanding anything to the contrary contained herein or in the Lease, it
is specifically understood and agreed that neither the Lender, any receiver or
any Acquiring Party shall be:

(a)   liable for any act,
omission, negligence or default of any prior landlord (other than to cure
defaults of a continuing nature with respect to the maintenance or repair of
the demised premises or the Property); provided, however, that any Acquiring
Party shall be liable and responsible for the performance of all covenants and
obligations of landlord under the Lease accruing from and after the date that
it takes title to the Property; or

(b)   except as set forth
in (a), above, liable for any failure of any prior landlord to construct any
improvements;

(c)   subject to any offsets, credits, claims or
defenses which Tenant might have against any prior landlord; or

(d)   bound by any rent or additional rent which is
payable on a monthly basis and which Tenant might have paid for more than one (1) month
in advance to any prior landlord;

(e)   bound by any cancellation, surrender,
amendment or modification of the Lease or release of liability thereunder not
expressly consented to in writing by Lender or otherwise permitted by the
Security Instrument in each instance, except, for those cancellations,
surrenders, amendments or modifications contemplated in the Lease or permitted
to be made without Lender’s consent pursuant to the terms of the loan documents
between Lender and Landlord, or

(f)    be liable to Tenant hereunder or under the
terms of the Lease beyond its interest in the Property.

 

Notwithstanding the
foregoing, Tenant reserves its rights to any and all claims or causes of action
against such prior landlord for prior losses or damages and against the
successor landlord for all losses or damages arising from and after the date
that such successor landlord takes title to the Property.

 

5.            Rent. Tenant has
notice that the Lease and the rents and all other sums due thereunder have been
assigned in writing to Lender as security for the loan secured by the Security
Instrument. In the event Lender notifies Tenant of the occurrence of a default
under the Security Instrument and demands that Tenant pay its rents and all
other sums due or to become due under the Lease directly to Lender, Tenant
shall honor such demand and pay its rent and all other sums due under the Lease
directly to Lender or as otherwise authorized in writing by Lender. Landlord
hereby irrevocably authorizes Tenant to make the foregoing payments to Lender
upon such notice and demand.

 

6.            Lender to Receive
Notices. Tenant shall notify Lender of any default by Landlord under the Lease which
would entitle Tenant to cancel the Lease, and agrees that, notwithstanding any
provisions of the Lease to the contrary, no notice of cancellation thereof
shall be effective unless Lender shall have received notice of default giving
rise to such cancellation and shall have failed within thirty (30) days after
receipt of such notice to cure such default, or if such default cannot be cured
within thirty (30) days, shall have failed within thirty (30) days after receipt
of such notice to commence and thereafter diligently pursue any action
necessary to cure such default.

 

7.            NOTICES. All notices
or other written communications hereunder shall be deemed to have been properly
given (i) upon delivery, if delivered in person with receipt acknowledged
by the recipient thereof, (ii) one (1) Business Day (hereinafter
defined) after having been deposited for overnight delivery with any reputable overnight
courier service, or (iii) three (3) Business Days after having been
deposited in any post office or mail depository regularly maintained by the
U.S. Postal Service and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed to the receiving party at its address set forth
above, and:

 

if to Tenant:

 

Sonus Networks, Inc.

1130 East Arapaho Road, Suite 200

Richardson, Texas 75081

Attn:

Telephone:

Fax:

 

 

with a copy to:

 

Sonus Networks, Inc. 

250 Apollo Drive 

Chelmsford, MA 01824

Attn:

Telephone:

Fax:

 

if to Lender:

 

Bank of Texas, NA

5956 Sherry Lane, Suite 1100

Dallas, Texas 75225

Attn: Kimberly (Kim) W. Kittle, Vice
President

kkittle@mail.bokf.com

Telephone: 214.987.8842 direct

Fax:

 

or addressed as such party may from time to
time designate by written notice to the other parties. Either party by notice
to the other may designate additional or different addresses for subsequent
notices or communications. For purposes of this Section 7, the term “Business
Day” shall mean any day other than Saturday, Sunday or any other day on which
banks are required or authorized to close in Dallas County, Texas. Either party
by notice to the other may designate additional or different addresses for
subsequent notices or communications.

 

8.             Successors. The
obligations and rights of the parties pursuant to this Agreement shall bind and
inure to the benefit of the successors, assigns, heirs and legal
representatives of the respective parties.

 

9.             Duplicate Originals;
Counterparts. This Agreement may be executed in any number of duplicate originals
and each duplicate original shall be deemed to be an original. This Agreement
may be executed in several counterparts, each of which counterparts shall be
deemed an original instrument and all of which together shall constitute a
single agreement.

 

10.           Transfer of
Loan/Servicing. Lender may sell, transfer and deliver the Note and assign the
Security Instrument, this Agreement and the other documents executed in
connection therewith to one or more Investors (as defined in the Security
Instrument) in the secondary mortgage market or otherwise. Lender may also
retain or assign responsibility for servicing the loan evidenced by the Note,
or may delegate some or all of such responsibility and/or obligations to a
servicer including, but not limited to, any subservicer or master servicer, on
behalf of the Investors. All references to Lender herein shall refer to and
include any such servicer to the extent applicable. Lender may disclose the
terms of this Agreement, the identity of Tenant or any principal of Tenant, or
any financial information regarding Tenant or any principal of Tenant, to any
Investor or potential Investor.

 

IN WITNESS WHEREOF,
Lender, Landlord and Tenant have duly executed this Agreement as of the date
first above written.

 

	
  LENDER:

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  
	
  Its:

  	
   

  
			

 

 

	
  STATE OF

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF

  	
  )

  

 

On the          day
of               ,
in the year 200    , before me, the undersigned, a Notary
Public in  and for said State, personally appeared                       ,
personally known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to me
that said person executed the same in said person’s capacity as                                    
of                      ,
and that by said person’s signature on the instrument, said corporation
executed the instrument.

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  

 

 

	
  TENANT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  

 

	
  STATE OF TEXAS

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF

  	
  )

  

 

The foregoing
instrument was acknowledged before me this               day
of
                 ,
2005, by
                   
the
                   
of
                                          ,
a
                                 ,
on behalf of the
                         .

 

 

	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  
	
   

  	
   

  	
   

  
	
  My Commission Expires:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					

 

 

The undersigned accepts and agrees to

the provisions of Section 5 hereof:

 

	
  LANDLORD:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
				

 

	
  STATE OF TEXAS

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF

  	
  )

  

 

This instrument was
acknowledged before me  this         day
of                                   ,
2005, by                            
..

 

	
  My commission expires:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Seal)

  	
   

  	
   

  	
   

  

 

 

EXHIBIT A

to SNDA

 

LEGAL DESCRIPTION

 

 

EXHIBIT H

INTENTIONALLY DELETED

 

 

EXHIBIT I

JANITORIAL SPECIFICATIONS

 

CLEANING SPECIFICATIONS

 

Cleaning services are to be provided five (5) days
a week unless otherwise specified. Cleaning hours are Sunday through Thursday
between 6:00 p.m. and before 7:00 a.m. The cleaning specifications
are as follows:

 

I.              OFFICE
AREAS

 

A.        Daily

 

1.     Dust and wipe clean
all furniture, fixtures, shelving, and cabinets. Note: Desks with loose papers
on the top will not be cleaned.

2.     Spot clean all
vertical desk surfaces.

3.     Office wastepaper
will be emptied. Liners will be replaced as required.

4.     Vacuum carpet in
offices as needed; moving light furniture other than desks, file cabinets, etc.
Remove any spot on carpet, when possible.

5.     Dust and spot mop
all resilient tile floor areas. All floor edges will be damp mopped.

6.     All telephones will
be cleaned and sanitized, if possible.

7.     Spot clean all
surfaces and columns. All glass partitions will be spot cleaned.

8.     Wipe metal door
knobs, light switch plates, mirrors, kick plates, door saddles and directional signs.

9.     Vacuum all traffic
areas daily.

 

B.         Weekly

 

1.     Dust and clean all
paneling, door frame, ornamental work, grilles, ventilating louvers, baseboards
and entire doors.

2.     Dust all mini-blinds

 

C.         Monthly

 

1.     Complete all high
dusting.

2.     Dust and wipe clean all air diffusers and ceiling ventilators.

3.     Resilient tile
floors will be buffed.

 

II.            RESTROOMS

 

A.        Daily

 

1.     Restroom floors are
to be swept and washed with disinfectant.

2.     Basins, toilets
bowls and urinals are to be washed and disinfected.

3.     Clean and disinfect
both sides of every toilet seat.

4.     Mirrors, shelves,
plumbing work, bright work, and enamel surfaces will be wiped down.

5.     Remove spots,
stains, splashes from all wall areas, doors, door frames, light switches, etc.

6.     Waste receptacles
will be emptied and cleaned. Soap, toilet, paper, toilet seat cover, towel, and
sanitary napkin/tampon dispensers will he filled.

7.     Tile walls and
dividing partitions will be spot cleaned.

8.     Dust top of all
toilet partitions.

 

B.         Weekly

 

1.     Tile walls and dividing
partitions will be washed and disinfected thoroughly.

 

 

2.         Resilient tile
floors will be buffed twice per month.

 

C.         Monthly

 

1.         Thoroughly scrub
floors. Pay special attention to corners and edges, base of walls and grouting.

 

III.           COMMON
AREAS, KITCHEN AREA, BREAK AREA

 

A.        Daily

 

1.     All hard surface
floors are to be swept and/or dust mopped with dust control treated mops or
other effective tools, and left clean and free of dust (includes cove base
and/or carpet caps).

2.     Carpets are to be
vacuumed and spot cleaned.

3.     Main lobby floors
are to be wiped and washed.

4.     Spot clean all walls
where possible, dust floor to ceiling as needed.

5.     Clean entrance
glass. Clean entrance doors. Polish thresh plates.

6.     Clean directory
board.

7.     Waste receptacles are
to be emptied.

8.     All water fountains
are to be sanitized and polished.

9.     Lobby furniture is
to be dusted and vacuumed.

10.   Stairwell is to be
swept and mopped.

11.   All interior glass
is to be spot cleaned.

12.   All table tops,
counters and sinks in kitchen and break area will be cleaned. Vending machines
and ice makers will be wiped clean with a damp cloth.

 

B.         Weekly

 

1.     Dust and clean all
paneling, ornamental work, grilles, ventilating louvers, baseboards and entire
doors.

2.     Resilient tile
floors will be buffed twice per month.

 

C.         Monthly

 

1.     Complete all high
dusting.

2.     Dust and wipe clean
all air diffusers and ceiling ventilators.

 

D.         Quarterly

 

1.     Scrub and refinish
all resilient tile floor areas.

 

E.         Semi-Annually

 

1.     Strip and refinish
all resilient floor areas.

 

 

C:\99 My Documents\Nemic200412\1130E Arapaho Leases\SanusLease\Drafts\20050720a
Landlord\Lease Agreement (v4 from Randy Marx) 20050720 pm 4.DOC

 

###EXHIBIT 10.1

 

Execution
Version

 

 

CONFIDENTIAL
PROVISIONS REDACTED

 

COLLABORATION
AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

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

 

ARTICLE 1

DEFINITIONS

 

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

 

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

 

 

1.1                               “51”
means [****].

 

1.2                               “51
Target Field” means the diagnosis, treatment or prevention of human
diseases.

 

1.3                               “51
Target Future Product” means [****].

 

1.4                               “51
Target Product” means [****].

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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treatment has been requested with respect to the omitted portions.

 

4

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

1.85                        “MS” means
multiple sclerosis.

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

shall be a single
Physician Group.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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14

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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ARTICLE 2

GOVERNANCE OF THE COLLABORATION

 

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

 

2.2                               Joint
Steering Committee.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(viii)                       [****];
and

 

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

 

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

 

2.3                               Joint
Development Committees.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2.4                               Joint
Commercialization Committees.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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resolution; and

 

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

 

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

 

2.5                               Joint
Finance Committee.

 

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

 

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

 

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

 

21

 

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

 

2.6                               Joint
Patent Committee.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

2.7                               General
Committee Procedures.

 

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

 

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

 

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respect to the omitted portions.

 

23

 

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

 

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

 

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

 

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

 

2.8                               Committee
Decision-Making.

 

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

 

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24

 

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

 

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

 

(c)                                  [****]:

 

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

 

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

 

(iii)                            [****].

 

(iv)                               [****].

 

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

 

2.10                        [****].

 

ARTICLE 3

DEVELOPMENT OF COLLABORATION PRODUCTS

 

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

 

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

 

	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  North
  American Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  EU
  Territory and ROW Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

3.3                               Development
Plan.

 

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

 

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

 

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respect to the omitted portions.

 

26

 

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

 

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

 

	
  EVENT

  	
   

  	
  TIMING

  
	
  [****]

  	
   

  	
  [****]

  
	
  [****]

  	
   

  	
  [****]

  
	
  [****]

  	
   

  	
  [****]

  
	
  [****]

  	
   

  	
  [****]

  

 

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27

 

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

 

3.4                               Standards
of Conduct; Diligence.

 

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

 

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

 

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

 

3.5                               Shared
Development Expenses.

 

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

 

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

 

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

 

3.7                               Third
Parties.

 

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

 

(b)                                  Intellectual
Property. The Parties intend not to knowingly introduce to any
Collaboration Product any Technology that is not Controlled by a Party, except
with the prior approval of the JPC and the JSC. If the JSC in consultation with
the JPC determines that a license to certain Third Party technology is
reasonably necessary to advance the successful Development of a Collaboration
Product, then the JSC shall [****]. Upon approval of the terms of such Third
Party license, the [****] may execute such Third Party license and any payments
that become due pursuant to a Third Party License agreement executed pursuant
to this Section 3.7(b) will, during the course of Development of the
applicable Collaboration Products, be treated as [****].

 

(c)                                  Sublicensing.
The JSC may elect to license the further Development or Commercialization
of a Collaboration Product to a Third Party in one or more Indications and/or
territories. In such event, the JSC shall designate a Party to negotiate the
terms on which such a Third Party license would be granted and to serve

 

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29

 

as the primary point of
contact with the applicable Third Party sublicensee following the execution of
the license agreement, provided that the JSC may condition approval of such
sublicense upon submission of the final agreement with the Third Party to the
JSC for final approval. The parties acknowledge that any grant of rights to a
distributor shall not constitute a license of Development or Commercialization
rights hereunder.

 

3.8                               [****].
If, after the Effective Date, [****]. If the
Parties fail to agree on the payment and other terms under which such [****]
would be included within this Agreement prior to the termination of the
Negotiation Period, then such [****] shall not be included within the scope of
this Agreement and [****] shall have no further obligation to [****] in respect
of such rights except as set forth in this Section 3.8. If the Parties
were unable to execute an agreement prior to the termination or expiration of
the Negotiation Period, [****] will not, for a period of [****] from the
termination or expiration of the Negotiation Period, enter into a license or
other agreement with a Third Party providing for the development or
commercialization of such [****] on terms which are in the aggregate less
favorable to [****] than the last bona fide offer made in writing by [****] to [****]
without first offering to [****] for a period of [****] the right to include
the [****] within the scope of this Agreement upon such alternative terms.

 

3.9                               Development
of Products in the ROW Territory.

 

(a)                                  Responsibility.
Biogen Idec shall be solely responsible, at its sole cost and expense and at
its sole discretion, for the Development of any Royalty Product in the ROW
Territory. Biogen Idec shall use Diligent Efforts in proceeding with the
development and registration of Royalty Products in Japan.

 

(b)                                  Updates.
Biogen Idec will inform PDL of the status of Biogen Idec’s Development and
Commercialization of Royalty Products in the ROW Territory through [****]
progress reports submitted in writing to PDL. In addition, upon reasonable
notice to Biogen Idec, it will provide PDL with copies of any information or
data reasonably requested by PDL and reasonably necessary for the development
or commercialization of Royalty Products. Through the JSC, Biogen Idec shall
advise and consult with PDL with respect to any significant issues or questions
raised by any regulatory authorities in the ROW Territory with respect to a
Royalty Product that Biogen Idec believes would have an adverse impact on the
corresponding Collaboration  Product in
the Profit Sharing Territory.

 

(c)                                  Regulatory
Cross-Referencing. Biogen Idec will allow the Responsible Regulatory Party
in a Territory to cross-reference, in furtherance of JSC-approved activities
under this Agreement, Biogen Idec regulatory filings and clinical data

 

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30

 

with respect to any
Royalty Product developed or commercialized by Biogen Idec in the ROW Territory
and will grant PDL reasonable access during normal business hours to such
regulatory filings and clinical data.

 

3.10                        Consideration
of Future Products and Additional Indications or New Formulations of
Collaboration Products; Scope and Exclusivity

 

(a)                                  Future
Products Brought to Joint Steering Committee

 

(i)                                    From
time to time during the Term, the JSC shall consider proposals that the Parties
jointly Develop and Commercialize any (A) new Product as a Future Product
in accordance with the terms of this Agreement; (B) additional Indication
for an existing Collaboration Product; or (C) new formulation of an
existing Collaboration Product.

 

(ii)                                Either
Party may initiate the foregoing proposal at any time during the Term. In
addition, the Parties must initiate a proposal with respect to a Product under
the circumstances discussed below. A Party initiating a proposal under this Section 3.10
shall be deemed a “Proposing Party.”

 

(1)                                 A
Party must bring a proposal to the JSC that the Parties Collaborate on [****]
at the following times:

 

(a)                                  With
respect to a [****], prior to negotiation of such license; or

 

(b)                                  With
respect to all other Products that are [****], after the Proposing Party has
performed Development on such Product, [****];

 

(2)                                 PDL
must [****] at the following times:

 

(a)                                  With
respect to a [****]; or

 

(b)                                  With
respect to all other Products that are [****], after PDL has performed
Development on such Product, [****];

 

(b)                                  Consequences
of JSC Consideration of Future Products and Additional Indications or New Formulations
of Collaboration Products

 

(i)                                    Full
Approval. If the JSC approves the addition of a new Product as a Future
Product or an additional Indication for an existing Collaboration Product or a
new formulation of an existing Collaboration Product, then such Product

 

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31

 

shall be a Collaboration
Product and the JSC shall appoint a Responsible Development Party that shall
create a new Development Plan for such Collaboration Product or update the
applicable Development Plan to include the Development activities to be
performed by the Parties in the case of an additional Indication for or new
formulation of an existing Collaboration Product. The JSC will take into
consideration a Party’s current abilities, expertise and infrastructure when
appointing new Responsible Development Parties and will make such appointments
accordingly. The Responsible Development Party for each such Collaboration
Product shall implement such Development activities as contemplated by this Article 3.
Any such Development Plan or update shall be prepared and approved in
accordance with the provisions of Articles 2 and 3.

 

(ii)                                Partial
Approval. If, after a proposal is made under Section 3.10(a), the JSC
does not approve the addition of a new Product as a Future Product or an
additional Indication for an existing Collaboration Product or a new
formulation of an existing Collaboration Product, but determines that such
Product or additional Indication or formulation should be subject to further
evaluation then such Product or additional Indication or formulation shall be subject
to this Section 3.10(b)(ii). At the request of the Proposing Party, the
JSC shall develop a proposed work plan, which shall include specific goals
(such as a clinical trial, with primary endpoints) for such Product or
additional Indication or formulation and the Proposing Party shall provide all
information reasonably requested by the JSC that would be material to making a
determination as to whether such proposed work plan should be approved and to
the appropriateness of the proposed goals. If the JSC agrees that if the
specific goals set forth in work plan are met, the Indication, formulation or
new Product would become a Collaboration Product, then the following shall
apply:

 

(1)                                 The
Proposing Party shall have the right to undertake the work specified in the
work plan at its own expense;

 

(2)                                 If
the Proposing Party carries out the work plan and meets all of the JSC-approved
specific goals, then

 

(a)                                  the
other Party shall reimburse the Proposing Party an amount equal to [****] of
the Development Expenses related to such trial that such Party would have
otherwise been responsible for if the JSC had approved such trial as part of
the Development Plan,  and

 

(b)                                  the
formulation, Indication or new Product shall be developed jointly by the
Parties and the JSC shall take the actions described in Section 3.10(b) in
respect of such new Collaboration Product or additional Indication or new
formulation of an existing Collaboration Product.

 

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(3)                                 If
the JSC-approved specific goals are not met, the Proposing Party shall be
solely responsible for all related costs without the right of reimbursement
from the other Party and neither Party will be allowed to continue development
except in the following circumstances:

 

(a)                                  If
[****] is the Proposing Party, it may [****];

 

(b)                                  If
[****] is the Proposing Party [****] it may [****].

 

For purposes of clarity,
the Parties agree that if the JSC is unable to agree on the specific goals for
the foregoing work plan or is unable to agree that if the work plan meets its
goals the Parties would jointly Develop the new product as a Future Product or
an additional clinical indication for an existing Collaboration Product or a
new formulation of an existing Collaboration Product, such disagreement shall
not be subject to dispute resolution hereunder and shall be considered final.

 

(iii)                            No
Approval. If, after a proposal is made under Section 3.10(a), the JSC
does not approve the addition of a new Product as a Future Product or an
additional Indication for an existing Collaboration Product or a new
formulation of an existing Collaboration Product, and does not determine that
such Product or additional Indication or formulation should be subject to
further evaluation, [****] except in the following circumstances, and provided
that the Proposing Party did not block the approval of any such proposal:

 

(1)                                 If
[****] is the Proposing Party, it may [****];

 

(2)                                 If
[****] is the Proposing Party [****], it may [****].

 

Any such Product which is permitted to be pursued
outside the Collaboration shall not be subject to the terms, obligations,
rights and responsibilities in this Agreement.

 

(c)                                  Lapse
of Obligations [****]. The obligations to propose [****] under this Section 3.10
shall lapse as to any [****].

 

3.11                        Transfer
of Materials. During the Term, the Parties anticipate that each Party will
transfer certain of its proprietary tangible research materials to the other
Party. Each Party agrees during the Term that it will use such materials of the
other Party only for the purposes set forth in this Agreement, and will not
transfer such materials to any Third Party, except in compliance with Section 14.1
and Section 14.2 of this Agreement. Each Party shall have the right to use
proprietary tangible research materials provided

 

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33

 

to it by the other Party
during the Term and in furtherance of the purposes set forth in this Agreement,
solely for the purposes hereunder. Such proprietary materials received from the
other Party which are directly related to Collaboration Products may be
transferred to Third Parties only with consent of the JDC and JPC, subject to the
form of material transfer agreements or collaboration agreements, as
applicable, covering such materials, such form agreements to be drafted and
agreed upon by the JPC.

 

ARTICLE 4

OPT OUT RIGHTS; ROYALTY  PRODUCTS

 

4.1                               Opt
Out Rights for Collaboration Products or Indications

 

(a)                                  Opt
Out Right. Each Party will have the option to terminate its participation
in the Development and Commercialization of one or more Collaboration Products
as set forth in this Section 4.1 (the Party exercising such right referred
to as the “Non-Developing Party”). A
Non-Developing Party may terminate its participation with respect to: (i) [****];
(ii) [****]; (iii) [****]; or (iv) [****], everywhere in the
world; provided, however, that (A) [****] and (B) [****].

 

(b)                                  Limitations.
The rights of each party to terminate its participation pursuant to this Section 4.1
shall be subject to the following limitations:

 

(i)                                    [****]
may not exercise its opt out rights described in this Section 4.1 with
respect to [****].

 

(ii)                                [****]
can opt out of Development or Commercialization except at one of the points
shown at Exhibit 4.1(b)(ii) with respect to the Existing Products and
at such other points as determined by the Parties with respect to other
Collaboration Products or as provided in Section 4.1(b)(iv). The Parties
agree that they will include such opt out points in the Development Plans for
other Collaboration Products at the time of preparation thereof.

 

(iii)                            If
a Party elects to opt out of an Indication for a Collaboration Product, it
shall automatically be deemed to have opted out of all other Indications for
which that Collaboration Product would be marketed to the same Physician Group
(collectively the “Opt Out Indications”)
and if a Party opts out of an oncology Indication it shall be deemed to have
opted out of all oncology Indications.

 

(iv)                               If
a Party elects to opt out of Commercialization, the election shall not be
effective until [****] after written notice of such election (or such earlier
date

 

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34

 

as specified in writing
by the Independent Development Party (as defined in Section 4.1(d) below))
and may not be made until [****] following the [****]. A party may not opt out
of Commercialization of a Collaboration Product if the opt out would result in
a higher profit to the Party electing to opt-out, based on a comparison of the
royalty payments and Collaboration Product Profit payments that such Party
would have received in the four full calendar quarters prior to the election.

 

(v)                                   Neither
Party can elect to opt out of Development or Commercialization with respect to
a Product if such Party has received notice pursuant to Section 16.2 that
it is in material breach of this Agreement with respect to such Product and it
has not cured such breach or resolved in its favor any dispute regarding
whether there was a breach or whether such breach was cured.

 

(c)                                  Timing.
Subject to the limitations in Section 4.1(b) a Party may exercise its
opt out right with respect to Development of a particular Collaboration Product
or an Opt Out Indication(s) of a particular Collaboration Product at the
decision points described in Section 4.1(b). The Non-Developing Party
shall provide written notice to the other Party of its decision to exercise
such right (the “Opt Out Notice”) during the time
period described in each opt out point.

 

(d)                                  Effects
of Exercise. Effective upon timely delivery of an Opt Out Notice, (i) the
Party that is not the Non-Developing Party will be deemed the “Independent Development Party” with respect to the
applicable Independent Product or Independent Indication, (ii) the
Non-Developing Party will be deemed the “Non-Developing Party”
with respect to the applicable Independent Product or Independent Indication
and responsibility shall be as set forth in Section 4.3, (iii) if
such exercise was made with respect to [****], such Collaboration Product will
become an Independent Product in [****], and (iv) if such exercise was
made with respect to [****]. In any event, the further Development of such [****]
by the Independent Development Party will be subject to the terms set forth in
Sections 4.2 and 4.3. For purposes of the following Section 4.2, [****] is
not [****] with respect to the [****].

 

4.2                               Development
of Independent Products and Independent Indications.

 

(a)                                  Generally.
For each Independent Product and Independent Indication, the Independent
Development Party will have the right, at its own option and expense, to plan
and conduct the Development of and to Commercialize such Independent Product or
Independent Indication, as the case may be, in accordance with the terms of
Sections 4.2, 4.3 and 4.5.

 

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(b)                                  Transition
of Development Activities. Upon a Party giving the Opt Out Notice with
respect to a Collaboration Product or one or more Indications of a
Collaboration Product, the applicable Development Plan or Commercialization
Plan, as the case may be, for such Collaboration Product or Indication, as the
case may be, shall automatically be amended to provide that the Parties shall
carry out and share the costs with respect to only those particular Development
or Commercialization activities under the applicable Development Plan or
Commercialization Plan, respectively, that have commenced on or before the date
of such Opt Out Notice. By way of example, an activity for purposes of this Section would
include a clinical trial that has commenced. Notwithstanding the foregoing, the
Non-Developing Party shall transfer responsibility for such ongoing activities
to the Independent Development Party as of the date of such Opt Out Notice or
as soon as reasonably practicable after such date.

 

4.3                               Rights
and Obligations Upon Opt-Out.

 

(a)                                  Prior
to the Opt-In Trigger. Prior to the date of the Opt-In Trigger, the Independent Development Party shall be obligated to
Develop the Independent Indication, at its sole cost (subject to Section 4.2(b)),
and shall use Diligent Efforts in such development. The Independent Development
Party shall keep the JSC reasonably informed regarding matters that would
adversely affect Development or Commercialization of the Collaboration Product
in other Indications then being Developed or Commercialized by the Parties
jointly.

 

(b)                                  Following
the  Opt-In Trigger and As to Independent Products.
The Independent Development Party will assume unilateral control over the
Development and Commercialization of (i) an Independent Product after opt
out has occurred as to such Product, and (ii) as to an Independent
Indication from and after the date of the Opt-in Trigger if such option is not
exercised by the other Party, except that:

 

(1)                                 The
Independent Development Party shall give the JSC annual updates regarding the
status and results of any development and commercialization activities
conducted regarding an Independent Indication.

 

(2)                                 If
PDL is the Independent Development Party, then PDL shall use Diligent Efforts
to Develop and Commercialize  such
Independent Product or Independent Indication.

 

(3)                                 If
Biogen Idec is the Independent Development Party, then Biogen Idec shall use
Diligent Efforts to Develop and Commercialize such Independent Product or
Independent Indication.

 

(4)                                 If
[****] is the Independent Development Party and [****] PDL, at its option, may [****].

 

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(c)                                  Manufacturing.
If the Non-Developing Party as to a Product is responsible for Manufacturing
the applicable Collaboration Product pursuant to Article 8, then such
Non-Developing Party will continue to supply the Independent Development Party
with clinical and/or commercial supply of the applicable Collaboration Product
until such time as the Parties have effected a technology transfer of the
applicable Manufacturing process, at the Independent Development Party’s
request, and the Independent Development Party has validated such process in
its or its CMO’s designated facility and has all necessary regulatory approvals
to Manufacture and such Manufacture has commenced. The Non-Developing Party
shall use commercially reasonable efforts to effect a technology transfer of
the applicable Manufacturing process to the Independent Development Party or
its designated CMO as soon as practicable, but in no event more than [****]
after the Opt Out Notice is delivered The Non-Developing Party shall supply
such Product to the Independent Development Party during the [****] at a cost
of [****]  Between [****] and [****], the
Non-Developing Party shall supply such Product to the Independent Development
Party at a cost of [****]. Between [****] and [****], the Non-Developing Party
shall supply such Product to the Independent Development Party at a cost of [****].

 

(d)                                  Remaining
Program Obligations. The portion of the applicable Development Program with
respect to which the Non-Developing Party has not exercised its option to opt
out will continue unaffected by such opt out.

 

(e)                                  Data
Transfer. Commencing at the time of delivery of the Opt Out Notice, the
Non-Developing Party promptly shall provide, at the sole cost of the Non-Developing
Party, the Independent Development Party with copies of all data and
information, and samples of all tangible items, comprising Know-how and other
Technology of the Non-Developing Party relating to such Independent Product or
Independent Indication, as the case may be.

 

(f)                                    Assignment
of Regulatory Filings. The Non-Developing Party promptly shall, as
applicable, assign or make available by cross-reference to the Independent
Development Party, at the Non-Developing Party’s sole cost, all registrations
for such Independent Product (at the time of exercising its opt out rights) or
Independent Indication (an assignment shall only occur after the expiration of
the Non-Developing Party’s  right to opt
in; a cross reference right shall be available from the time of exercise of the
Non-Developing Party’s opt out rights until the expiration of such party’s opt
in rights or longer, as appropriate), as the case may be, and shall notify the
appropriate Regulatory Authorities and take any other action reasonably
necessary to effect such transfer of ownership or access to regulatory filings;
provided, however, that a Non-Developing Party shall not have any obligation to
assign to the Independent

 

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Development Party the
Drug Master File for any Independent Product if and for so long as the Non-Developing
Party is engaged in the Manufacture of such Independent Product on behalf of
the Independent Development Party or with respect to Indications or territories
for which such Non-Developing Party has retained rights.

 

(g)                                 Obligations
with Respect to Third Party Contracts. Each Party shall include provisions
in its contracts with Third Parties entered into after [****] and specifically
related to Development or Commercialization of a Collaboration Product or an
Indication of a Collaboration Product that would permit (i) [****] or (ii) [****].
Except as otherwise set forth in this Article 4, the Non-Developing Party
shall use Diligent Efforts to effect assignment (and full release of the
Non-Developing Party) or the granting of a sublicense or equivalent right of
access (and partial release of the Non-Developing Party) to the Independent
Development Party, whether through novation or sublicensing of such contracts
or otherwise, of any and all rights under any contract between the
Non-Developing Party and any Third Party that are necessary for Independent
Development Party to continue with Development or Commercialization of such
Collaboration Product or Indication, as the case may be, and the Independent
Development Party shall reasonably cooperate in connection therewith. If such
assignment, novation or sublicense is not permissible, the Parties shall
discuss in good faith potential alternatives that would enable the Independent
Development Party to exercise the rights and obligations of the Non-Developing
Party under such contracts with respect to such Independent Product while
minimizing the continuing obligations of the Non-Developing Party.

 

(h)                                 Technical
Assistance. During the period commencing with delivery of an Opt Out Notice
and ending [****] following the effective date of such Opt Out Notice, the
Non-Developing Party shall provide reasonable technical assistance as requested
by the Independent Development Party to effectuate an orderly transition of the
Development and Commercialization of such Independent Product or Independent
Indication, as the case may be, to the Independent Development Party. Such
assistance shall be at the expense of the Non-Developing Party until the
effective date of the Opt Out Notice and thereafter shall be at the expense of
the Independent Development Party.

 

(i)                                    Termination
of License Rights. Unless and until the Non-Developing Party decides to
Opt-in pursuant to the Opt In Trigger described herein, it shall have no
further rights under the licenses provided to it under Article 11 with
respect to such Independent Product or Independent Indication.

 

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(j)                                    Transfer of Trademarks. If the
Non-Developing Party owns the Product Trademarks (as defined in Section 12.13(a))
relating to the Independent Product (or Independent Indication, if there are
Product Trademarks that relate specifically to such Indication), ownership of
such Product Trademarks shall be transferred to the Independent Development
Party in the Territories as to which the opt out occurs.

 

4.4                               Rights
to Opt In to Independent Indication During Development.

 

(a)                                  General.
Subject to the terms of this Section 4.4, a Non-Developing Party will have
the option to opt-in to the independent development of an Independent
Indication on a one-time basis, exercisable by providing a notice in writing to
the Independent Development Party within (i) the [****] (the “Opt In Trigger”)  [****]
or (ii) the [****]. Within [****] of receipt of such written notice, the
Independent Development Party shall provide to the Non-Developing Party a
package of data and other information concerning the Independent Indication
reasonably necessary to permit the Non-Developing Party to make an informed
decision on its desire to opt in to Development and Commercialization in the
manner set forth in this Agreement (the “Data Package”).
Following receipt of the Data Package, the Non-Developing Party shall have [****]
within which to elect to opt-in. Any such election shall become effective upon
receipt by the Independent Development Party of a final written determination
by the Non-Developing Party stating its decision to opt-in. Failure to deliver
timely notice of an intent to opt-in shall be conclusively deemed to be a
waiver of such rights.

 

(b)                                  Limitations.
A Non-Developing Party shall not have the right to opt in to the Commercialization
of a Collaboration Product in the event that it delivers an Opt Out Notice for
such Product at any time following final regulatory approval for the marketing
of such Collaboration Product anywhere in the Territory.

 

(c)                                  Expense
Reimbursement. Upon exercise of an opt in right as described in this Section 4.4,
the Non-Developing Party shall reimburse the Independent Development Party for [****]
of that portion of the Development Expenses that would have been incurred by
the Non-Developing Party, had such Party not opted out, during the period in
which such Party had opted out.

 

(d)                                  Effects
of Opt In. Upon exercise of an opt in right and payment of all amounts due
under subsection (c) above, the Independent Indication shall cease
being an Independent Indication and will automatically return to the scope of
the Collaboration. Thereafter, the Parties shall continue Development and
Commercialization of such Indication jointly as described in this Agreement;
provided, that for the [****] following the exercise of an opt in right, the
Party that had been the

 

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39

 

Independent Development
Party shall be the Responsible Development Party, notwithstanding the
provisions of Section 3.2 and the Parties shall agree on the allocation of
responsibilities thereafter.

 

4.5                               Royalty
Products.

 

(a)                                  Effective
upon the exercise of a Party’s opt-out right with respect to a Collaboration
Product, either on a Product or Indication basis, the applicable Product will
be a Royalty Product. The Independent Development Party will pay the Opt-Out
Party the royalty payments described in Section 9.5 for such Royalty
Product.

 

(b)                                  With
respect to Collaboration Products developed by [****], [****] is the
Independent Development Party and [****] is the Non-Developing Party, such
Products are Royalty Products with respect to the [****] and the [****] is
within the Royalty Territory for such Products. [****] will pay to [****] the
royalty payments described in Section 9.5 for all such Royalty Products
Commercialized in the [****].

 

ARTICLE 5

REGULATORY

 

5.1                               Responsible
Regulatory Party. Subject to the roles of the various Committees described
in Article 2, the allocation of Responsible Regulatory Party for
Collaboration Products under this Agreement is as follows:

 

(a)                                  [****]
will be the Responsible Regulatory Party in the [****] and the [****] for all
Collaboration Products; and

 

(b)                                  [****]
will be the Responsible Regulatory Party in the [****] for all Collaboration
Products during the Development of such Collaboration Product. At the time of
receipt of first Regulatory Approval for the [****].

 

5.2                               Regulatory
Filings for Collaboration Products.

 

(a)                                  The
Responsible Regulatory Party identified in Section 5.1 above shall
primarily be responsible for preparing and filing all Regulatory Filings and
seeking all Regulatory Approvals in the relevant territory, including preparing
all reports necessary as part of a Drug Approval Application. All Regulatory
Filings for all Collaboration Products shall be filed in the name of the
Responsible Regulatory Party for a particular Territory. The Parties anticipate
that Regulatory Filings for the EU and North America Territories will be based
on a common set of technical documents. Such

 

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40

 

common set of technical
documents shall be prepared by the Responsible Development Party (or
collectively by both of the Responsible Development Parties where there are two
for a Collaboration Product). The Responsible Regulatory Party and the
Responsible Commercialization Party (to the extent they are different Parties)
shall jointly prepare all Regulatory Filings. All reasonable comments of the
Responsible Commercialization Party for an applicable Collaboration Product
shall be incorporated into such Regulatory Filing for any Collaboration Product.
The Responsible Regulatory Party shall, at all times, consult with the
Responsible Commercialization Party on all communications and other dealings
with the regulatory agencies relating to such Collaboration Product in the
applicable territory. However, the Manufacturing Party shall be solely
responsible for all communications and other dealings with the regulatory
agencies throughout the world pertaining to the Manufacture of such
Collaboration Products. The Responsible Regulatory Party and the Responsible
Commercialization Party shall jointly develop and implement procedures for
drafting and review of Regulatory Filings for the relevant Collaboration
Products in the applicable territory, which procedures shall provide for
sufficient time for the Responsible Commercialization Party to provide comments
to such Regulatory Filings. If the Parties are unable to resolve any disputes
related to such Regulatory Filings content or strategy, such disputes shall be
resolved as set forth in Article 2 hereof. In addition to the right to
cross-reference set forth in Section 3.9(c), the other Party shall have
the right of cross-reference to all such Regulatory Filings or Regulatory
Approvals obtained hereunder for purposes of Collaboration Products.

 

(b)                                  The
Responsible Regulatory Party shall promptly provide the other Party with a copy
(which may be wholly or partly in electronic form) of all Regulatory Filings
with respect to such Collaboration Products that it makes hereunder. The
Responsible Regulatory Party will provide the other Party with reasonable
advance notice of any meeting with any regulatory agency relating to
Development, Commercialization and/or any Drug Approval Application in the
relevant territory, and the other Party shall have the right to observe and, if
the Parties mutually agree in advance or if such Party is the Responsible
Commercialization Party, participate in any such meeting. The Responsible
Regulatory Party also shall promptly furnish the other Party with copies of all
material correspondence or minutes of material meetings with any regulatory
agency relating to Development, Regulatory Filings and/or a Drug Approval
Application in the relevant territory. As between the Parties, the Responsible
Regulatory Party shall be the initial legal and beneficial owner of all
Regulatory Filings and related approvals in the relevant territory for such
Collaboration Product. The Responsible Regulatory Party shall assign all
Regulatory Filings in the North American Territory to the Responsible
Commercialization Party promptly following filing of the NDA (or its foreign
equivalent). No such assignment shall take place in the ROW Territory.

 

(c)                                  The
Manufacturing Party shall provide the Responsible Commercialization Party (if a
different Party) with reasonable advance notice of any scheduled regulatory
inspection of the Manufacturing Party’s Manufacturing facilities for a Product.
The Manufacturing Party shall control all interactions with regulatory

 

41

 

authorities with respect
to such inspection. The  other Party if
applicable, shall have the right to be present, but not participate, during
such inspection.

 

5.3                               Safety
Data. [****] will ensure that [****] has complete access to any and all
safety data regarding the [****] or any [****] thereof. [****] will ensure that
[****] have complete access to any and all safety data regarding the [****] or
any [****]. If and to the extent that a single global safety database is
required for the [****],  [****] will be
the recognized holder of the global safety database for such Product, which
will be searched to provide answers to safety queries, for signal evaluation,
for the preparation of analyses of similar events and for the preparation of
periodic safety update reports.

 

5.4                               Adverse
Event Reporting. Each Party shall notify the other of all information
coming into its possession concerning any and all side effects, injury,
toxicity, pregnancy or sensitivity event associated with commercial or clinical
uses, studies, investigations or tests with any of the Collaboration Products
or Royalty Products, throughout the world, whether or not determined to be
attributable to such Products (“Adverse Event Reports”). 
The Parties shall each identify a person to coordinate the exchange of Adverse
Event Reports (“Report Coordinators”) so as to
enable timely reporting of such Adverse Event Reports to appropriate
governmental and regulatory authorities consistent with all laws, rules and
regulations. Within a reasonable time after the Effective
Date, the Parties shall agree in writing on formal procedures for such exchange
in a separate pharmacovigilance agreement. Provided that [****] is under a
similar obligation under the [****] Agreements, the Parties agree to engage in
good faith negotiations regarding a three-party pharmacovigilance agreement. The
Parties acknowledge and agree that such procedures, as well as the Parties’
exchange of Adverse Event Reports in general, must not be in contravention with
the [****] Agreements relating to safety issues involving the [****] that is a
Collaboration Product, or a Royalty Product.

 

5.5                               Copies
of Responses. Within a reasonable time frame prior to submission of
responses to any regulatory authority on product safety issues regarding a
Collaboration Product, a copy of a near final draft response will be provided
to the other Party for review.  Final copies of responses submitted to any
regulatory authority will be provided to the other Party within [****] of
document finalization. [****] acknowledges that such responses may need to be
coordinated under the [****] Agreements with respect to the [****] and agrees
to use commercially reasonable efforts to facilitate such coordination.

 

5.6                               Regulatory
Actions. The Party responsible for interacting with regulators on a
specific safety issue regarding a Collaboration Product or Royalty Product shall
communicate material action requested by regulators to the other Party without
delay.

 

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42

 

Such actions may include,
for example, change in label, Dear Doctor letter, trial on hold for clinical
safety reasons and the like.

 

5.7                               Other
Safety Issues. Either Party may request that specific safety issues be
discussed, and the parties will establish a Safety Committee (the “SC”) consisting of an equal number of representatives from
each Party, for such purpose. The role of the SC shall be to advise each Party
concerning the collection and evaluation of safety data, and to respond to any
significant safety issues raised, or requests made, by regulatory authorities.

 

ARTICLE 6

COMMERCIALIZATION

 

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

 

	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  North
  American Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  EU
  Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  ROW
  Territory

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

(a)                                  Commercialization
Plans. All Commercialization of Collaboration Products shall be conducted
pursuant to a Collaboration Product specific, multi-year, global
commercialization plan and budget (in each case, a “Commercialization
Plan”), which shall set forth the anticipated activities (including
market studies, launch plans, Detailing and Promotion) and timelines, and shall
allocate responsibility for carrying out such activities between PDL and Biogen
Idec. Each Commercialization Plan shall include the plan for: (i) Detailing
and Promotion activities for the applicable Collaboration Product in the
applicable Indication for the next [****] (as to the initial Commercialization
Plan, the [****] following launch) and timelines for performing such activities,
(ii) target audience, (iii) anticipated expenses other than
personnel,

 

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43

 

(iv) assumptions
regarding product profile, (v) sales force size, and (vi) Promotional
efforts. Any Commercialization Plan, together with any updates thereto, shall
be prepared and approved as follows:

 

(i)                                    The
Responsible Commercialization Party with strategic guidance from the JSC shall
prepare the initial Commercialization Plan for a Collaboration Product and
submit such plan to the JCC for recommendation for approval and, following such
recommendation, to the JSC for its review and approval; provided that the JCC
must recommend and the JSC must approve the Commercialization Plan if it is
consistent with the then-current Strategic Plan and Approved Budget for that
year. The Parties agree and acknowledge that any such Commercialization Plan
will reasonably allocate between the Parties the performance of any
Post-Approval Clinical Trials for Collaboration Products in the North American
Territory, giving equal consideration to each Party’s abilities when making such
allocation.

 

(ii)                                The
Responsible Commercialization Party will, from time to time, prepare and submit
an update to each Commercialization Plan for its territory for a Collaboration
Product as necessary to reflect changes in the progress, strategy, or costs of
Commercialization of such Collaboration Product, but in no event more
frequently than quarterly.

 

(iii)                            the
Responsible Commercialization Party for a Collaboration Product will prepare
and submit an update to the applicable Commercialization Plan for its territory
on an annual basis thereafter until the Parties cease Commercializing the
applicable Collaboration Product.

 

(iv)                               the
Responsible Commercialization Party will lead the implementation of the
Commercialization Plan in accordance with the allocation of responsibilities
set forth therein.

 

Once approved by the JSC,
a Commercialization Plan shall become effective and supersede any previous
Commercialization Plan, if any, as of the date of such approval. Unless the
Parties otherwise agree, in the event that a Commercialization Plan is
inconsistent with or contradicts the terms of this Agreement, the terms of this
Agreement shall prevail.

 

(b)                                  Commercialization
Plans for Additional Collaboration Products. Promptly following the JSC’s
request for a Commercialization Plan for a particular Collaboration Product,
the Responsible Commercialization Party shall create an initial
Commercialization Plan for such Collaboration Product. Such Commercialization
Plan shall be approved as described in this Section 6.1.

 

6.2                               Commercialization
Reports. The Responsible Commercialization Party will keep the JCC fully
informed regarding the progress and results of its Commercialization activities
under this Agreement.

 

44

 

6.3                               Standards
of Conduct.

 

(a)                                  Each
Party shall perform, or shall ensure that its Affiliates and permitted
sublicensees and Third Party contractors perform, all Commercialization
activities assigned to it in a good scientific and ethical business manner and
in compliance with applicable laws, rules and regulations.

 

(b)                                  The
Parties shall use Diligent Efforts in Commercializing Collaboration Products.

 

(c)                                  Each
Party shall use Diligent Efforts to execute and carry out the activities
assigned to it in the Commercialization Plan within the associated annual
budget; provided that if a Party exceeds the associated annual budget by
greater than [****] without the prior approval of the JSC, any amount in excess
of such number shall not be considered expenses reimbursable hereunder and such
Party shall be solely responsible for payment of such excess.

 

6.4                               Sales
Force Training. The Responsible Commercialization Party shall develop and
conduct training programs for its sales representatives and for the other Party’s
sales representatives in the event such Party has exercised its Co-Promotion
Option hereunder, specifically relating to the Collaboration Products to be
Commercialized by such Party. Each Party agrees to utilize such training
programs on an ongoing basis to assure a consistent, focused promotional
strategy.

 

6.5                               Branding.
Each Product Commercialized under this Agreement shall be Commercialized
under and in connection with the trademarks and trade dress selected in
accordance with Section 12.13. To the extent that a Party is granted
rights under this Agreement to Commercialize a Product, it shall Commercialize
such Product solely under and in connection with the trademarks and trade dress
selected and approved pursuant to the terms of Section 12.13 (except for a
Party’s use of its house marks, which do not require such approval).

 

6.6                               Pricing.
[****].

 

6.7                               Booking
of Sales.

 

(a)                                  [****]
will be solely responsible for the invoicing and booking of sales of [****]
that are Collaboration Products in the [****] and the supply and distribution
of product in respect to such sales. [****] shall also be responsible for
handling inventory, receivables, managing relationships with the trade,
returns, reimbursements, and charge-backs, trade-customer complaints and
inquiries regarding [****] that are Collaboration Products in the [****].

 

(b)                                  The
JSC will jointly determine which Party will book sales in

 

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45

 

accordance with U.S.
GAAP, including handling inventory, receivables, managing relationships with
the trade, returns, reimbursements, and charge-backs, trade-customer complaints
and inquiries with respect to all other Collaboration Products.

 

(c)                                  For
clarity, each Party’s expenses in connection with the activities described in
this Section 6.7 will be included as Marketing Costs or Distribution
Costs, as appropriate.

 

6.8                               Special
Provisions Relating to Sales Tracking for [****].

 

(a)                                  The
Parties recognize that [****] marketed by [****] or its licensees for
indications in the [****] may nonetheless be sold in the [****], and [****]
marketed by [****] and [****] for indications in the [****] may nonetheless be
sold in the [****]  (collectively, “Cross-Field Sales”). In order to detect and limit these
Cross-Field Sales of such Collaboration Products, the Parties agree as follows:

 

(i)                                    If,
at any time following the receipt of Regulatory Approval in the [****] for an [****]
that is a Collaboration Product or Royalty Product (Collectively, “Collaborative Field Products”), a Party believes that either
(i) sales of such Collaborative Field Products are occurring or will occur
for uses both inside and outside the [****], or (ii) that sales by [****]
of a [****] licensed to it in the [****] by [****] (a “Non-Collaborative
Field Product”) are occurring in any Indication in which a
Collaboration Product or Royalty Product is marketed, then such Party may
provide notice to the other Party of its desire to track sales of the
Collaborative Field Products and the Non-Collaborative Field Products for the
relevant Indications in the relevant territory.

 

(ii)                                Upon
receipt of notice under Section 6.8(a)(i) [****] and [****] shall
meet and agree upon a method of tracking sales of each such product (“Sales Tracking Methodology”) for use in the relevant
Indications including (A) the acquisition of one or more prescription data
products or services (including, by way of example, IMS Xponent or DDD data) or
other relevant pharmaceutical sales tracking research services (including, for
example, use of random sampling, use of data regarding distribution channels as
a proxy for indication-specific sales and development of mathematical models
for approximating indication-specific sales) generally recognized in the
pharmaceutical industry as having a high degree of accuracy and reliability in
the tracking of sales of pharmaceutical products that have a similar nature as
and are prescribed by similar physicians as the relevant [****] in the [****]
and, if applicable, outside the [****] (the “Data Services”),
and (B) the methodology for applying any such resulting data and
information provided by such Data Services to determine the extent to which
sales of the relevant [****] are Cross-Field Sales in the relevant territory. At
the request of either Party, any meeting held under this Section 6.8(a) shall
include licensees of [****] to whom [****] has granted rights in the [****],
provided such licensee

 

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46

 

agrees to be bound to
confidentiality provisions similar to those contained in this Agreement.

 

(b)                                  If
[****] (as applicable) are unable to agree on a Sales Tracking Methodology
pursuant to Section 6.8(a), then the following default methodologies shall
apply:

 

(i)                                    With
respect to each of the U.S., United Kingdom, France, Germany, Italy, or Spain
(each a “Major Regulatory Jurisdiction”) in
which a Collaborative Field Product and a Non-Collaborative Field Product have
received Regulatory Approval and in which Data Services are available at a
reasonable cost (evaluated in light of the anticipated accuracy of such data
and anticipated magnitude of Cross-Field Sales in such country), sales in the
Field in such country and sales outside the Field in such country shall be
calculated for each Collaborative Field Product and each Non-Collaborative
Field Product based on the sales levels reported by the Data Services for such
country. For clarity, the sum of sales of a product in the Field and sales of
such product outside the Field (both as calculated for such country in
accordance with the preceding sentence) shall always be equal to the total
sales for such product in the relevant country.

 

(ii)                                With
respect to each country in which a Collaborative Field Product and a
Non-Collaborative Field Product have received Regulatory Approval and to which Section 6.8(b)(i) is
inapplicable, the percentage of sales of each Collaborative Field Product
attributable to use outside the Field and the percentage of sales of each
Non-Collaborative Field Product attributable to use in the Field shall be
calculated from total sales of such products based on the assumption that the
ratio of Cross-Field Sales to total sales in such country is equal to the ratio
of Cross-Field Sales to total sales calculated across all Major Regulatory
Jurisdictions in which Cross-Field Sales are evaluated pursuant to Section 6.8(b)(i).
If there are no Major Regulatory Jurisdictions in which Cross-Field Sales are
evaluated pursuant to Section 6.8(b)(i), then no Sales Tracking
Methodology shall apply unless and until the Parties agree on a Sales Tracking
Methodology pursuant to Section 6.8(a).

 

(c)                                  All
costs associated with the acquisition and application of such Data Services and
Sales Tracking Methodology shall be shared equally by the Parties and any
licensee of PDL participating in the negotiations contemplated by Section 6.8(a).
All such costs that are attributable to PDL and Biogen Idec shall be included
in the Operating Expenses for the applicable [****]. In addition, the Parties
shall also meet and confer with respect to: (A) how to account for
prescriptions to patients with multiple afflictions, both within and outside
the [****]; (B) the right for each Party to audit, on a periodic basis,
the application of the Data Services and Sales Tracking

 

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47

 

Methodology; and (C) a
mechanism for addressing prescriptions that are tracked back to sole source
purchasing agreements.

 

(d)                                  If
in the course of applying the foregoing Sales Tracking Methodology of the
Collaborative Field Product and Non-Collaborative Field Product pursuant to
this Section 6.8, or in the course of performing an audit of such
application by the other Party, a Party determines that Cross-Field Sales are
occurring at more than [****] or such [****] as may be agreed under the [****]
Agreements [****] (with written notice of such amount to be provided to [****]),
the Parties shall confer, together with the [****], regarding an appropriate
method either to curtail such Cross-Field Sales and to compensate any affected
Party (or affected [****]) for the economic effects thereof. [****] will ensure
that [****] is reimbursed for any such Cross-Field Sales as if such Cross-Field
Sales were included in Collaboration Product Profit. The Parties shall also negotiate
with each other and with such licensee in good faith (provided that such
licensee is bound by a substantially similar obligation) to reach an agreement
implementing a Sales Tracking Methodology that is as accurate as reasonably
possible given the then-available information and the costs associated
therewith.

 

(e)                                  In
the event of any unresolved issues, dispute or disagreement under this Section 6.8
the Parties will submit such dispute, issue or disagreement for resolution
pursuant to Article 17.

 

6.9                               Other
Cross Field Sales. If either Party is marketing a Product for an
Independent Indication and cross field sales may be occurring with the same
Product that is a Collaboration Product, the Parties shall meet and negotiate
in good faith provisions similar to or designed to have the same economic
effect as Section 6.8.

 

6.10                        Product
Recalls. Decisions with respect to recalls, withdrawals or other corrective
actions (“Recall”) with respect to any
Collaboration Product related to manufacturing or product quality issues shall
be handled in accordance with the Commercial Supply Agreement. Decisions with
respect to any other Recall  related to
any Collaboration Product in the Profit Sharing Territory or Royalty Product in
its applicable territory shall be made only upon mutual agreement of the
Parties; provided, however, that nothing herein shall prohibit either Party
from initiating or conducting any Recall (i) mandated by a regulatory
authority or applicable law, (ii) which in its reasonable judgment is, or
such Party reasonably believes will result in, a Class I or Class II
recall (under U.S. Food and Drug Administration regulations or its equivalent
outside of the U.S.) or (iii) if a Party is the Independent Development
Party in its sole discretion. The Parties shall cooperate with respect to any
actions taken or public statements made in connection with any such Recall.
Except as otherwise provided in this Section 6.10, the Parties will share
all costs of a Recall with respect to any Collaboration Product in the Profit
Sharing Territory as a Shared Promotion Expense.

 

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An Independent
Development Party shall bear all costs of a Recall with respect to any Royalty
Product in the Royalty Territory. Notwithstanding the foregoing, a Party shall
bear any and all costs of a recall, market withdrawal or other corrective
action with respect to a Collaboration Product in the Territory, including the
COGM for the Collaboration Product in question, to the extent the Recall is
attributable to the fault of such Party and results from (a) a grossly
negligent or reckless act or omission or intentional misconduct of such Party
(or its Affiliate, agent or sublicensee), (b) the failure of the
Manufacturing Party to perform its responsibilities and Manufacture the
Collaboration Product in compliance with specifications or with applicable
laws, including applicable Good Manufacturing Practices, or (c) a breach
of any laws or the terms of this Agreement.

 

6.11                        [****]. [****]
hereby covenants that it shall not, nor shall it cause any Affiliate or
sublicensee to, [****] that are Collaboration Products or Independent Products
for any use outside the [****]. Except as permitted pursuant to Section 3.8,
[****] hereby covenants that it shall only [****] in the [****] pursuant to the
[****] Agreements.

 

ARTICLE 7

CO-PROMOTION OF COLLABORATION PRODUCTS

 

7.1                               Option
to Co-Promote.

 

(a)                                  Subject
to this Section 7.1, PDL and Biogen Idec shall each have the right, to the
extent it is not the Responsible Commercialization Party (the “Co-Promotion Option”) to elect at specified times to
Commercialize a particular Indication of a Collaboration Product in either or
both of the North American Territory or the EU Territory jointly with the
Responsible Commercialization Party for such Collaboration Product.

 

(b)                                  [****]
may exercise its Co-Promotion Option in respect of a particular Territory only
if it has and only with respect [****] shall reasonably be expected to be in
place at the time of Co-Promotion. [****] may exercise its Co-Promotion Option
in respect of a particular Territory only with respect [****] which shall
reasonably be expected to be in place at the time of Co-Promotion.

 

(c)                                  A
Party may exercise its Co-Promotion Option with respect to a particular
Indication of a Collaboration Product in a particular territory by providing
written notice of such exercise to the Responsible Commercialization Party and
the JCC. Such exercise must be provided for a particular territory no later
than the date

 

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49

 

[****] prior to the
anticipated filing date for Regulatory Approval in such territory for such
Indication for the Collaboration Product and will be effective [****] following
receipt of such notice by the Responsible Commercialization Party. Thereafter,
the Party exercising the Co-Promotion Option shall be deemed a co-promoting
Party (the “Co-Promoting Party”) of such
Indication for such Collaboration Product in such territory.

 

(d)                                  If
a Co-Promotion Option is exercised, then responsibility for Detailing will be
shared on a basis to be determined by the JCC taking into account the resources
and capabilities of each Party as well as each Party’s prior efforts under
Co-Promotion Options previously exercised and the nature of the market and
Indication for which the Co-Promotion Option has been exercised. The Parties
agree and acknowledge that, in allocating such Detailing activities between the
Parties, the JCC shall apply the following principle in the event that both
Parties have resources and capabilities in respect of a specific sales force
(or neither Party has such resources and capabilities):  the JCC shall give first consideration to
using [****] and first consideration to using [****].

 

7.2                               Co-Promotion
Period. The “Co-Promotion Period” will commence
upon the Co-Promoting Party’s exercise of the Co-Promotion Option and will
expire upon the earlier of: (a) termination of the Parties’
Commercialization of the applicable Collaboration Product for the applicable
Indication in the relevant portion of the Profit Sharing Territory, and (b) [****] following the date that the Co-Promoting Party provides
written notice to the Responsible Commercialization Party terminating the
Co-Promoting Party’s Co-Promotion activities hereunder (or such lesser period
of time as the Responsible Commercialization Party is able to satisfactorily
fill the sales force commitments previously filled by the Co-Promoting Party) .

 

7.3                               Co-Promotion
in Commercialization Plan. The Parties’ co-promotion activities for any
Collaboration Product in the relevant territory shall be governed by the
Commercialization Plan for such Collaboration Product prepared by the  Responsible Commercialization Party. Each
Commercialization Plan for a Co-Promote Product shall set forth the allocation
between the Parties of the co-promotion activities for the Collaboration
Product in the applicable territory determined pursuant to Section 7.1(d),
the sales and marketing strategy determined by the JSC and the means by which
to maximize the overall gross profit from sales of such Collaboration Product.

 

7.4                               Scope.
The Co-Promotion by the Co-Promoting Party of any Collaboration Products under
this Agreement shall be subject to the terms and conditions set forth in this Article 7.
For purposes of this Article 7, a Collaboration Product subject to
co-promotion under this Agreement shall be referred to as a “Co-Promote Product.”

 

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7.5                               Advertising
and Promotional Materials.

 

(a)                                  The
Responsible Commercialization Party shall be responsible for designing and
supplying all advertising and promotional materials for each Co-Promote Product.
The Responsible Commercialization Party shall provide samples of such
advertising and promotional materials to the JCC for its information.

 

(b)                                  Each
Party agrees that:

 

(i)                                    it
will instruct its sales representatives to use only promotional materials,
Co-Promote Product samples, and literature approved for use under this Section 7.5
for the Promotion of the Co-Promote Product; and

 

(ii)                                all
written, electronic and visual communications provided by a Party to its sales
representatives regarding the positioning, selling messages or product strategy
of the applicable Co-Promote Product will be subject to prior review and
approval by the Responsible Commercialization Party; provided, that a
communication, once approved, need not be re-submitted for approval again prior
to its re-use unless the Co-Promote Product labeling applicable to such
communication has been changed since such prior approval date.

 

7.6                               Training.

 

(a)                                  The
Responsible Commercialization Party will develop and implement training
programs for the Co-Promoting Party’s sales representatives as to matters
relating specifically to the Co-Promote Product in a manner as set forth in the
applicable Commercialization Plan. Training shall be carried out at a time that
is mutually acceptable to the Parties, and that is prior to but reasonably near
the commencement of the co-promoting Party’s co-promotion of the Co-Promote
Product. All costs associated with such product-specific training shall be
shared equally by the Parties, except that the Co-Promoting Party shall pay all
travel costs for its sales representatives to attend such training.

 

(b)                                  The
Responsible Commercialization Party shall provide continuing education
regarding each Co-Promote Product for sales representatives of the Co-Promoting
Party on substantially the same schedule as it provides continuing
education for its own sales representatives for such Co-Promote Product.

 

7.7                               Sales
and Distribution of Co-Promote Product.

 

(a)                                  For
each Co-Promote Product, other than [****], the Responsible Commercialization
Party shall be solely responsible for handling all returns, recalls,

 

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51

 

order processing,
invoicing and collection, distribution, and inventory and receivables. With
respect to [****], [****] shall solely be responsible for such activities. The Co-Promoting Party may not accept orders for Co-Promote
Product or make sales for its own account or for the Responsible
Commercialization Party’s account. If the Co-Promoting Party receives any order
for a Co-Promote Product, it shall refer such orders to the Responsible
Commercialization Party for acceptance or rejection.

 

(b)                                  The
Responsible Commercialization Party shall have the right and responsibility for
establishing and modifying the terms and conditions with respect to the sale of
the Co-Promote Product, other than [****], including any terms and conditions
relating to or affecting the price at which the Co-Promote Product will be
sold, discounts available to managed care providers, any discount attributable
to payments on receivables, distribution of the Co-Promote Product, and
credits, price adjustments, or other discounts and allowances to be granted or
refused. With respect to [****], [****] shall solely be responsible for such
activities.

 

ARTICLE 8

 

MANUFACTURE AND SUPPLY

 

8.1                               Overview.
The Party primarily responsible for the Manufacturing Clinical Supplies or
Commercial Supplies of Collaboration Products (the “Manufacturing
Party”) will be determined by the JSC (except for the Existing
Products, with respect to which such responsibility is allocated by the table
below) and shall be subject to the terms of this Article 8 and any
Clinical Supply arrangement or Commercial Supply Agreement entered into by the
Parties after the Effective Date. Unless determined otherwise by the JSC, the
Manufacturing Party for the Existing Products will be as follows:

 

	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

8.2                               Clinical
Manufacturing.

 

(a)                                  Clinical
Supply. Each Manufacturing Party shall Manufacture a clinical supply of
bulk or finished Collaboration Products pursuant to a plan and on terms set by
the Manufacturing Party, as approved by the JSC (a “Supply Plan”).
Notwithstanding the aforementioned, [****] shall ensure a supply of [****]
necessary to complete dosing in the [****] as of the Effective Date, provided
that such supply shall be not less than [****].

 

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52

 

(b)                                  Supply
Plan. The Supply Plan shall be in accordance with the supply schedule dictated
by the applicable Development Plan for each Collaboration Product and shall set
forth, among other things, the quantities of and specifications for such
Collaboration Products to be supplied by the Manufacturing Party for
Development purposes and an approximate delivery schedule therefor.

 

(c)                                  Cost
of Clinical Supply. The Manufacturing Party will notify the JDC of the COGM
for such Collaboration Products under the applicable Development Program for quantities
of Collaboration Products supplied for clinical use.

 

8.3                               Commercial
Manufacturing.

 

(a)                                  Commercial
Supply Agreement. No later than [****] prior to the anticipated First
Commercial Sale of a Collaboration Product as specified in the Commercialization
Plan for such Collaboration Product, PDL and Biogen Idec shall negotiate in
good faith one or more definitive supply agreements (each, a “Commercial Supply Agreement”). Each such agreement will set
forth the specific terms and conditions governing the supply of bulk and/or
finished Collaboration Products by the Parties for commercial use. Any
Commercial Supply Agreement shall include terms substantially similar to those
set forth in Exhibit 8.3 as well as additional reasonable and customary
terms relating to commercial supply.

 

(b)                                  Cost
of Commercial Supply. Each Commercial
Supply Agreement will provide for a transfer price from the Manufacturing Party
to the Collaboration based on the total quantity of finished Collaboration
Product ordered per calendar year (including material for Collaboration Product
samples) calculated as follows:  Transfer
Price = [****].

 

8.4                               Exclusivity.
Each Responsible Commercialization Party, its Affiliates and sublicensees,
shall purchase all of their respective requirements for the supply of
Collaboration Products from the Manufacturing Party, unless otherwise agreed in
writing by the Parties. The Manufacturing Party may not supply Collaboration
Product for use in any field to any party other than the Responsible
Commercialization Party, its Affiliates and sublicensees, except that [****]
may provide material manufactured by [****] to [****] to support [****].

 

8.5                               Good
Manufacturing Practice. Each Collaboration Product, regardless of the form
or formulation delivered by the Manufacturing Party, shall be Manufactured by
the Manufacturing Party in accordance with GMP and the specifications for such
Collaboration Product.

 

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53

 

ARTICLE 9

FINANCIAL TERMS

 

9.1                               Licensing
Fee. As partial payment for the rights and licenses granted by PDL pursuant
to this Agreement, Biogen Idec shall pay to PDL, within five (5) days
following the Effective Date, the following non-refundable and non-creditable
license fees with respect to each Collaboration Product, as follows:

 

(a)                                  With
respect to the [****], total license fees of twenty-five million dollars
($25,000,000); and

 

(b)                                  With
respect to the [****], total license fees of fifteen million dollars
($15,000,000).

 

9.2                               Milestone
Payments. Biogen Idec shall make the following non-creditable and
non-refundable milestone payments to PDL within [****] after the achievement by
Biogen Idec of each of the following milestones (or, in the event that any such
milestone is achieved by PDL, after PDL shall have given Biogen Idec sufficient
written documentation evidencing the achievement of such milestone). For the
avoidance of doubt, the milestone payments to be paid under this Section 9.2
shall be paid even following the delivery of an Opt Out Notice by PDL under Article 4
provided that Biogen Idec continues Development of the product. However, such
milestone payments shall not be paid following the delivery of an Opt Out
Notice by Biogen Idec under Article 4.

 

(a)                                  Milestone
Payments for [****] and [****] that are Collaboration Products or [****]. The
following milestone payments shall be paid by Biogen Idec to PDL upon the [****]
of each of the designated milestone events for any [****] that are
Collaboration Products or [****] for which [****]:

 

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54

 

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  [****]

  	
   

  	
  Milestone Payment

  [****]

  	
   

  	
  Milestone Payment

  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  n/a

  	
   

  	
  n/a

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

*  [****],
Biogen Idec shall pay an additional [****] to PDL.

 

For the avoidance of doubt, the foregoing milestone
payments will only be made a maximum of [****] per milestone event, regardless
of the number of Collaboration Products, applicable Independent Products or
Indications Developed.

 

(b)                                  Milestone
Payments for [****] that are Collaboration Products or Independent Products. The
following milestone payments shall be paid by Biogen Idec to PDL upon the [****]
occurrence of each of the designated milestone events: (i) for an [****]
that is an Antibody Product and a Collaboration Product or Independent Product,
and (ii) for an [****] that is a Non-Antibody Product and a Collaboration
Product or Independent Product. For clarity, each milestone below will be
payable a maximum of [****], [****] for a Product in category (i) and [****]
for a Product in category (ii), irrespective of the number of such [****] that
may trigger the milestone events.

 

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55

 

	
  Milestone Event

  	
   

  	
  Milestone Payment

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  

 

9.3                               R&D
Funding. Biogen Idec shall make a [****] non-creditable, non-refundable
R&D funding payment to PDL within [****] after approval by the JSC of a [****]
to the JSC following the Effective Date.

 

9.4                               Profit
Sharing. PDL and Biogen Idec shall share equally in the Collaboration
Product Profit for each Collaboration Product as set forth Exhibit C. The
Parties shall share Collaboration Product Profit hereunder with respect to each
Collaboration Product in the Profit Sharing Territory until each such
Collaboration Product is permanently withdrawn from and is no longer being sold
anywhere in the Profit Sharing Territory or otherwise ceases to be a
Collaboration Product.

 

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56

 

9.5                               Royalties.

 

(a)                                  Royalties.

 

(i)                                    For
the term specified below, the Independent Development Party shall pay to the
Non-Developing Party incremental royalties on Net Sales of the relevant Royalty
Product in the Royalty Territory, at a royalty rate as determined in accordance
with the schedules set forth in Exhibit D, as applicable. The term of the
Independent Development Party’s obligation to pay a royalty under this Section 9.5(a)(i) for
a particular Royalty Product (collectively, the “Royalty Term”)
shall expire on a country-by-country and Royalty Product-by-Royalty Product
basis, upon the later of:

 

(1)                                 In
the event that Biogen Idec is the Independent Development Party for [****] that is an Antibody Product, (i) [****],
and (ii) [****];

 

(2)                                 In
the event that Biogen Idec is the Independent Development Party for any
Products other than an [****] that is
an Antibody Product (i) [****], and (ii) [****]; or

 

(3)                                 In
the event that PDL is the Independent Development Party, (i) [****], and (ii) [****].

 

(ii)                                For
purposes of calculating Net Sales under this Section 9.5, the Independent
Development Party may make the additional deductions described herein.

 

(1)                                 In
the event that pursuant to a Third Party License, the Independent Development
Party must pay such Third Party royalties on sales of the Royalty Product in a
particular country in the Royalty Territory, then the Independent Development
Party may deduct [****] of such royalties paid to such Third Party from Net
Sales of the applicable Royalty Product in such country.

 

(2)                                 Following
the expiration in a particular country in the Royalty Territory of the last to
expire Valid Claim of a relevant Patent Right claiming the Manufacture, use or
sale of a particular Royalty Product, the royalty rates set forth in Exhibit D
with respect to such Royalty Product will be decreased [****] until expiration
of the Royalty Term.

 

(3)                                 If,
during the Royalty Term, a Third Party receives regulatory approval for and
commences commercial sale of a Generic Product in a country of the Royalty
Territory, then the Independent Development Party shall have the right to
reduce any royalties due under Section 9.5(a)(i) on account of the
sale of such

 

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57

 

Royalty Products for such
Indication by [****] during such time as such Third Party continues sales of
such Generic Product in such country. As used in this Section, “Generic Product” means a Third Party product (a) [****];
and (b) [****]. Notwithstanding the foregoing, Generic Products do not
include Royalty Products sold by either Party’s sublicensees or distributors
pursuant to this Agreement. For the avoidance of doubt, the reduction in
royalties pursuant to Section 9.5(a)(ii)(3) for generic competition
or Section 9.5(a)(ii)(2) for patent expiration, shall not, in the
aggregate, [****].

 

(b)                                  Special
Provision Relating to ROW Territory. With respect to any definitive
sublicense agreement under which Biogen Idec grants a Third Party a license to
develop or commercialize one or more Royalty Products in the ROW Territory
which is entered into prior to the [****], Biogen Idec will pay to PDL [****]
of any Sublicensing Revenues received by Biogen Idec in connection with such
sublicense agreement(s). As used in this Section 9.5(b) ONLY, “Sublicensing Revenues” means any [****], but excluding: (1) [****];
and (2) [****].

 

(c)                                  Reporting
and Payment.

 

(i)                                    Until
the expiration of the Independent Development Party’s royalty obligations under
Section 9.5, the Independent Development Party agrees, within [****] after
the end of each Calendar Quarter, to make payments and written reports to the
Non-Developing Party based upon Net Sales of the Royalty Products (substituting
“Royalty Products” for “Collaboration Products” in the Net Sales definition) in
the relevant Field in the Royalty Territory by the Independent Development
Party, its Affiliates or sublicensees during such Calendar Quarter and provide
written reports to the Non-Developing Party detailing for the period in
question Net Sales by Product, royalty rate and royalty due.

 

(ii)                                The
information contained in each report under Section 9.5(c)(i) shall be
considered Confidential Information of the Independent Development Party. Concurrent
with the delivery of each quarterly report, the Independent Development Party
shall make the payment due the Non-Developing Party hereunder for the Calendar
Quarter covered by such report.

 

(iii)                            It
is understood that only one royalty payment under Section 9.5 shall be
payable on a given unit of Royalty Product disposed of under this Agreement. In
the case of transfers or sales of any Royalty Product between the Independent
Development Party and an Affiliate or sublicensee of the Independent
Development Party, such royalty shall be payable with respect to the sale of
such Royalty Product to (i) an independent Third Party not an Affiliate of
the seller or (ii) if the end user is an Affiliate of the seller, then
such end user.

 

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58

 

9.6                               Provisions
Regarding [****]. After the Effective Date, PDL will use Diligent Efforts
to renegotiate the terms of that certain License Agreement between [****] to
extend the diligence deadline for [****] (as defined in the [****]) to [****]. If, as a result of such renegotiations, the royalty rate
payable by PDL on sales of licensed antibody products [****] (and provided the
calculation of such royalty remains subject to the same offset provisions as
included in the form of the [****] as of the Effective Date, then PDL may not
charge as Third Party License Fees hereunder any royalty amount paid under the [****]
in [****].

 

ARTICLE 10

PAYMENT TERMS

 

10.1                        Accounting.

 

(a)                                  Product
Sales Records. Each Party (a “Selling Party”)
agrees to keep complete and accurate records for a period of at least [****]
after the relevant payment is owed pursuant to this Agreement, setting forth
the sales and other disposition of Collaboration Products or Royalty Products
sold or otherwise disposed of pursuant to this Agreement in sufficient detail
to enable compensation payable to either Party hereunder to be determined. The
Selling Party further agrees to permit its books and records to be examined by
an independent accounting firm selected by the other Party to verify reports
provided for in Section 9.5. Unless the other Party obtains the prior
written consent of the Selling Party, such accounting firms must be selected
from among the four largest U.S. accounting firms. Such audit shall not be
performed more frequently that [****] nor more frequently than
once with respect to records covering any specific period of time. Such
examination is to be made at the expense of auditing Party, except in the event
that the results of the audit reveal a discrepancy in favor of the Selling
Party of [****] or more over the period being audited, in which
case reasonable audit fees for such examination shall be paid by the Selling
Party.

 

(b)                                  Expense
Records. Each Party (an “Expense Incurring Party”)
agrees to keep full, clear and accurate records for a period of at least [****]
after the relevant report is made pursuant to Section 9.5(c) setting
forth its incurred Development Expenses, Operating Expenses, Ongoing
Development Expenses, Other Out-of-Pocket Costs in sufficient detail to enable
compensation payable to the other Party (an “Expense
Reimbursing Party”) hereunder to be determined. Each Expense
Incurring Party further agrees to permit its books and records to be examined
by an independent accounting firm selected by the Expense Reimbursing Party to
verify reports made

 

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59

 

pursuant to Section 9.5(c).
Unless the Expense Reimbursing Party obtains the prior written consent of the
Expense Incurring Party, such accounting firms must be selected from among the
four largest U.S. accounting firms. Such audit shall not be performed more
frequently that [****]. Such examination is to be made at the expense of the
Expense Reimbursing Party, except in the event that the results of the audit
reveal a discrepancy in favor of the Expense Incurring Party of [****] or more
over the period being audited, in which case reasonable audit fees for such
examination shall be paid by the Expense Incurring Party.

 

10.2                        Methods of
Payments. All payments due to either PDL or Biogen Idec under this
Agreement shall be paid in Dollars by wire transfer to a bank in the U.S.
designated in writing by the Party to which the payment is due. Payments due on
Collaboration Products or Royalty Products distributed in countries or
jurisdictions outside of the U.S. shall be made in U.S. Dollars after being
converted at the rate of exchange for such country’s or jurisdiction’s currency
in U.S. Dollars as listed in the Wall Street Journal, Eastern Edition on the
last business day of the Calendar Quarter in which such sales were made.

 

10.3                        Taxes. If
provision is made in law or regulation of any country for withholding of taxes
of any type, levies or other charges with respect to the any amounts payable
hereunder to a Party, the other Party (a “Withholding Party”)
shall promptly pay such tax, levy or charge for and on behalf of the Party to
the proper governmental authority, and shall promptly furnish the Party with
receipt of such payment. The Withholding Party shall have the right to deduct
any such tax, levy or charge actually paid from payment due the Party or be
promptly reimbursed by the Party if no further payments are due the Party. Each
Withholding Party agrees to assist the other Party in claiming exemption from
such deductions or withholdings under double taxation or similar agreement or
treaty from time to time in force and in minimizing the amount required to be
so withheld or deducted.

 

ARTICLE 11

LICENSES

 

11.1                        Licenses
to Biogen Idec.

 

(a)                                  Subject
to the terms and conditions of this Agreement, PDL and its Affiliates hereby
grant to Biogen Idec:

 

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60

 

(i)                                    a
worldwide license, under the PDL Technology and Joint Inventions, to conduct
Development of the Collaboration Products in the applicable Field in accordance
with the Development Plans (which shall not include any Independent Indications
for such Products);

 

(ii)                                a
license, under the PDL Technology and Joint Inventions, to use, import, offer
for sale and sell Collaboration Products in the applicable Field and in the
North American Territory and EU Territory (i.e., the Profit Sharing Territory)
in accordance with the Commercialization Plans (which shall not include any
Independent Indications for such Products);

 

(iii)                            a
worldwide license, under the PDL Technology and Joint Inventions, to make and
have made Collaboration Products for which Biogen Idec is the Manufacturing
Party, provided that such manufacture is solely for use in the applicable
Field;

 

(iv)                               a
worldwide license, under the PDL Technology and Joint Inventions, to develop,
make, have made, use, have used, import, offer for sale and sell, in the
applicable Field, Independent Products for which Biogen Idec is the Independent
Development Party;

 

(v)                                   a
worldwide license, under the PDL Technology and Joint Inventions, to develop,
use, have used, import, offer for sale and sell, in the applicable Field and in
the Independent Indications, those Royalty Products for which Biogen Idec is
the Independent Development Party with respect to such Indications; and

 

(vi)                               a
license, under the PDL Technology and Joint Inventions, to use, have used,
import, offer for sale and sell, in the applicable Field and in the ROW
Territory (i.e., the Royalty Territory), Royalty Products.

 

(b)                                  The
licenses set forth in Sections 11.1(a)(i), (ii) and (iii) shall be
exclusive in the Field (except as to PDL) for all PDL Know-How, for all PDL
Patent Rights other than the Queen Patents, and with respect to PDL’s interest
in the Joint Inventions. The licenses set forth in Section 11.1(a)(iv)-(vi) shall
be exclusive (even as to PDL) for all PDL Know-How, for all PDL Patent Rights
other than the Queen Patents, and with respect to PDL’s interest in the Joint
Inventions. Subject to all of the restrictions of Section 11.1(a) and
this Section 11.1(b), all licenses set forth in Section 11.1(a) are
non-exclusive with respect to the Queen Patents.

 

(c)                                  The
licenses set forth in Section 11.1(a) may only be sublicensed to
Biogen Idec Affiliates and permitted Third Parties.

 

11.2                        Licenses
to PDL.

 

(a)                                  Subject
to the terms and conditions of this Agreement, Biogen Idec and its Affiliates
hereby grant to PDL:

 

(i)                                    a
worldwide license, under the Biogen Idec Technology and

 

61

 

Joint Inventions, to
conduct Development of the Collaboration Products in the applicable Field in
accordance with the Development Plans (which shall not include any Independent
Indications for such Products);

 

(ii)                                a
license, under the Biogen Idec Technology and Joint Inventions, to use, import,
offer for sale and sell Collaboration Products in the applicable Field and in
the North American Territory and EU Territory 
in accordance with the Commercialization Plans (which shall not include
any Independent Indications for such Products);

 

(iii)                            a
worldwide license, under the Biogen Idec Technology and Joint Inventions, to
make and have made Collaboration Products for which PDL is the Manufacturing
Party, provided that such manufacture is solely for use in the applicable
Field;

 

(iv)                               a
worldwide license, under the Biogen Idec Technology and Joint Inventions, to
develop, make, have made, use, have used, import, offer for sale and sell, in
the applicable Field, Independent Products for which PDL is the Independent
Development Party;

 

(v)                                   a
worldwide license, under the Biogen Idec Technology and Joint Inventions, to
develop, use, have used, import, offer for sale and sell, in the applicable
Field and in the Independent Indications, those Collaboration Products for
which PDL is the Independent Development Party with respect to such Indications;
and

 

(vi)                               a
license, under the Biogen Idec Technology and Joint Inventions, to use, have
used, import, offer for sale and sell, in the applicable Field and in the ROW
Territory  Royalty Products, if the right
to Develop and Commercialize any Royalty Product in the ROW Territory revert to
PDL.

 

(b)                                  The
licenses set forth in Sections 11.2(a)(i), (ii) and (iii) shall be
exclusive in the Field (except as to Biogen Idec) for all Biogen Idec
Technology and with respect to Biogen Idec’s interest in the Joint Inventions. The
licenses set forth in Section 11.2(a)(iv)-(vi) shall be exclusive
(even as to Biogen Idec) for all Biogen Idec Technology and with respect to
Biogen Idec’s interest in the Joint Inventions.

 

(c)                                  The
licenses set forth in Section 11.2(b) may only be sublicensed to PDL
Affiliates and permitted Third Parties.

 

11.3                        No Implied
Licenses. Except as expressly provided in this Agreement, neither Party
grants to the other Party any right or license in any intellectual property
right, whether by implication, estoppel or otherwise. No implied licenses are
granted under this Agreement. Each Party hereby covenants and agrees not to use
or

 

62

 

sublicense any of its
rights under the licenses set forth in this Article 11 except as expressly
permitted in this Agreement. In particular, for the avoidance of doubt, PDL has
no right to, and is not hereby granting any license to, [****].

 

11.4                        Affiliates.
The licenses granted pursuant to this Article 11 include the right of
each licensee to use its Affiliates in exercising such rights and carrying out
its obligations under this Agreement; provided that in the event any such
Affiliate ceases to meet the definition of an Affiliate (whether due to the
transfer or sale of all or substantially all of the assets or stock of such
Affiliate or otherwise) then such right with respect to such Affiliate shall
terminate

 

11.5                        Third
Party Licenses.

 

(a)                                  Certain
license rights granted by one Party to the other Party under this Article 11
may include a sublicense of Patent Rights and/or Know-How of Third Parties
under Third Party Licenses. Notwithstanding anything to the contrary in this
Agreement, the licenses granted under the provisions of this Article 11 (i) are
subject to the applicable terms and conditions of such Third Party Licenses,
and (ii) the Party receiving a sublicense under such Third Party License
shall, in exercising such sublicense rights, comply with the applicable
provisions of such Third Party Licenses. The Parties agree and acknowledge that
the licenses granted to Biogen Idec under this Article 11 shall be subject
to the following Third Party License provisions (as such Third Party Licenses
and specific provisions may be amended from time to time upon notice to and consent
of the JPC) and such provisions shall supersede anything to the contrary
contained in this Agreement:  (i) [****];
(ii) [****]; (iii) [****]; (iv)  [****]; (v) [****];  (vi) [****]; (vii) [****]; (viii) [****];
and (ix) [****]. The Parties agree and acknowledge that the provisions of [****]
are incorporated by reference herein solely for the benefit of [****]. The
Parties agree and acknowledge that a copy of Paragraphs [****] is attached
hereto as Exhibit 11.5 and shall be binding on Biogen Idec as if it were a
party to the [****].

 

(b)                                  PDL
represents and warrants to Biogen Idec that, as of the Effective Date, (i) [****];
(ii) [****]; (iii) [****]. [****].

 

(c)                                  With
respect to each Third Party License to which a Party is a party, such Party (i) shall
use Diligent Efforts to maintain such Third Party License in full force and
effect, including without limitation seeking amendments or modifications of
such agreements if necessary or useful as agreed by the Parties to continue
Development or Commercialization of a Product, (ii) shall not amend,
modify or permit to be amended or modified such Third Party License to reduce
or impair the right sublicensed hereunder or to increase the obligations or
burdens on the other Party hereunder without the other Party’s consent, not to
be unreasonably withheld, except as

 

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63

 

to the [****] as
specifically provided herein, (iii) shall provide the other Party with a
copy of each notice received by such Party under such Third Party License
Agreement material to the rights granted to the other Party under this
Agreement and derivative of rights granted under such Third Party License
Agreement, and (iv) shall use Diligent Efforts to cause such Third Party
License, as to rights licensed hereunder, to convert to a direct license to the
other Party hereunder upon the termination of such Third Party License
(provided that the other Party agrees to be bound by the terms and conditions
of such Third Party License) and subject to the terms of such Third Party
Licenses, including the following provisions (as such Third Party Licenses and
specific provisions may be amended from time to time upon notice to and consent
of the JPC):  (a)  [****]; (b) [****];
(c) [****]; (d) [****]; and (e) [****].

 

ARTICLE 12

INTELLECTUAL PROPERTY OWNERSHIP AND PATENT RIGHTS

 

12.1                        Ownership
of Intellectual Property.

 

(a)                                  Generally.
[****].

 

(b)                                  Joint
Ownership. All Joint Inventions will be owned jointly by PDL and Biogen
Idec.

 

(c)                                  Inventorship
Procedure. The JPC shall, within a reasonable time after the Effective
Date, establish and oversee a mutually agreeable procedure for (i) identifying
Collaboration Inventions, and (ii) determining inventorship of Inventions
made by a Party in connection with the Collaboration, provided that such
determination shall be made in accordance with the applicable patent laws
relating to inventorship in the country where each patent application is to be
filed in instances where U.S. law regarding determinations of inventorship may
be at variance with the laws of the said country. All such determinations shall
be documented to ensure that any divisional or continuation patent application
reflect appropriate inventorship and that inventions and patent rights are
assigned to the appropriate assignee.

 

12.2                        Disclosure
of Patentable Inventions. Each Party shall provide to the other Party any
invention disclosure submitted in the normal course of its business which
discloses a Collaboration Invention within [****] after the Party determines
that an Invention has been made.

 

12.3                        Patent Due
Diligence. Each Party agrees to use good faith efforts to bring to the
attention of the JPC in a timely manner any Third Party Patent Right it

 

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64

 

discovers, or has
discovered, and which the disclosing Party reasonably believes relates to, the
Development or Commercialization of a Collaboration Product.

 

12.4                        Prosecution
of Patents

 

(a)                                  PDL
Patent Rights

 

(i)                                    PDL
Target Patent Rights. Decisions regarding the preparation, filing,
prosecution and maintenance of PDL Target Patent Rights shall be made by the
JPC. PDL shall be responsible, using in-house counsel or outside patent counsel
selected by PDL and reasonably acceptable to Biogen Idec to implement the
decisions of the JPC regarding the preparation, filing, prosecution and
maintenance of such PDL Target Patent Rights. PDL shall provide the JPC with a
copy of each patent application within such PDL Target Patent Rights as filed,
together with its filing date and serial number. PDL shall keep the JPC advised
of the status of all communications, actual and prospective filings or
submissions regarding the PDL Target Patent Rights, and shall give the JPC an
opportunity to review and comment on any such communications, filings and
submissions proposed to be sent to any patent office. PDL shall consult with,
and obtain the approval of, the JPC before deciding that it is no longer
interested in maintaining or prosecuting the PDL Target Patent Rights
contemplated by Section 12.10, provided, however, that if the JPC cannot
reach agreement as to whether or not to maintain or prosecute such PDL Target
Patent Rights, then PDL shall continue to maintain and prosecute such PDL
Target Patent Rights. [****].

 

(ii)                                Queen
Patents.             Decisions regarding the
preparation, filing, prosecution and maintenance of the Queen Patents shall be
made solely by PDL. Notwithstanding the foregoing, [****]. PDL shall
provide the JPC with a copy of each patent application within the Queen Patents
that contains claims
that specifically relate to a Collaboration Target or Collaboration Product,
as filed, together with its filing date and serial number. PDL shall keep the
JPC advised of the status of all communications, actual and prospective filings
or submissions regarding the [****] and shall give the JPC an opportunity to
review and comment on any such communications, filings and submissions proposed
to be sent to any patent office. Subject to Section 12.12, PDL shall
consult with, and obtain the approval of, the JPC before deciding that [****] or Collaboration Product,
provided, however, that if the JPC cannot reach agreement as to whether or not [****].

 

(iii)                            Other
PDL Patent Rights. Decisions regarding the preparation, filing, prosecution
and maintenance of the PDL Patent Rights, to the extent not addressed in Section 12.4(a)(i) or
Section 12.4(a)(ii), shall be made solely by PDL.

 

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(b)                                  Biogen
Idec Patent Rights.

 

(i)                                    Biogen
Idec Target Patent Rights. Decisions regarding the preparation, filing,
prosecution and maintenance of Biogen Idec Target Patent Rights shall be made
by the JPC. Biogen Idec shall be responsible, using in-house counsel or outside
patent counsel  selected by Biogen Idec
and reasonably acceptable to PDL, to implement the decisions of the JPC
regarding the preparation, filing, prosecution and maintenance of such Biogen
Idec Target Patent Rights. Biogen Idec shall provide the JPC with a copy of
each patent application within such Biogen Idec Target Patent Rights as filed,
together with its filing date and serial number. Biogen Idec shall keep the JPC
advised of the status of all communications, actual and prospective filings or
submissions regarding the Biogen Idec Target Patent Rights, and shall give the
JPC an opportunity to review and comment on any such communications, filings
and submissions proposed to be sent to any patent office. [****].

 

(ii)                                Other
Biogen Idec Patent Rights. Decisions regarding the preparation, filing,
prosecution and maintenance of Biogen Idec Patent Rights that are not Biogen
Idec Target Patent Rights shall be made solely by Biogen Idec.

 

(c)                                  Prosecution
of Joint Inventions.

 

(i)                                    Decisions
regarding the preparation, filing and prosecution and maintenance of Joint
Patents shall be made by the JPC. Upon the identification of a Joint Invention,
the JPC shall (1) promptly discuss such Joint Invention, (2) promptly
discuss the desirability of filing a United States patent application covering
such Joint Invention, as well as foreign counterparts, and (3) designate
the Party (the “Implementing Party”) to be responsible for the preparation,
filing, prosecution and maintenance of such Joint Patent Rights. The
Implementing Party shall be responsible, using in-house or outside counsel
reasonably selected by the JPC to implement the decisions of the JPC regarding
the preparation, filing, prosecution and maintenance of such Joint Patent
Rights.   The Implementing Party
shall provide the JPC an opportunity to review and comment upon the text of the
applications relating to such Joint Patent Rights before filing. The
Implementing Party shall provide the JPC with a copy of each patent application
within such Joint Patent Rights as filed, together with notice of its filing
dates and serial number. The Implementing Party shall keep the JPC advised of
the status of all communications, actual and prospective filings or submissions
regarding such Joint Patent Rights, shall provide the JPC an opportunity to
review and comment on such communications, filings and submissions proposed to
be sent to any patent office. The Implementing Party shall also notify the JPC
of the grant of any such Joint Patent Rights. The Implementing Party shall not
cease the prosecution and/or

 

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maintenance, or modify the
claims, of any such Joint Patent Rights in any country or elect not to file a
patent application within such Joint Patent Rights, unless approved by the JPC
(which approval shall not be unreasonably withheld).

 

(d)                                  Patent
Term Extensions. PDL shall be responsible to implement the decisions of the
JPC regarding patent term extensions, including supplementary protection
certificates and any other extensions that are now or become available in the
future, wherever applicable to PDL Target Patent Rights or Queen Patents that
contain claims that
specifically relate to a Collaboration Target or a Collaboration Product,
in each case to the extent claiming a Collaboration Product. Biogen Idec shall
be responsible to implement the decisions of the JPC regarding patent term
extensions, including supplementary protection certificates and any other
extensions that are now or become available in the future, wherever applicable
to such Biogen Idec Target Patent Rights to the extent claiming a Collaboration
Product. The Implementing Party shall be responsible to implement the decisions
of the JPC regarding patent term extensions, including, without limitation,
supplementary protection certificates and any other extensions that are now or
become available in the future, wherever applicable to Joint Patent Rights to
the extent claiming such Royalty Product. Each Party shall reasonably
cooperate, as requested by the other Party, to implement such decisions of the
JPC. In each instance of patent term extension contemplated by this section,
the Parties agree to take all actions necessary to comply with the then-current
laws and regulations relating to patent term extensions.

 

12.5                        Patent
Interferences/Oppositions

 

(a)                                  Interferences/Oppositions Between the Parties.
If an interference is declared by the U.S. Patent and Trademark
Office, or its foreign equivalent, or an opposition exists between one or more
PDL Target Patent Rights, Biogen Idec Target Patent Rights or Joint Patent
Rights and such declared interference or opposition involves any claims
specifically directed to a Collaboration Product, then the Parties shall in
good faith establish a mutually agreeable process to resolve such interference
or oppositions in a reasonable manner in conformance with all applicable legal
standards, but which prejudices neither Party nor diminishes the value of such
PDL Target Patent Rights, Biogen Idec Target Patent Rights, or Joint Patent
Rights at issue.

 

(b)                                  Oppositions/Interferences
With Third Parties.

 

(i)                                    PDL
Target Patent Rights. Other than as set forth in Section 12.5(a), all
decisions relating to interferences or oppositions lodged against PDL Target
Patent Rights, including whether to initiate such interferences, appropriate
settlement strategy, along with other strategic decisions relating to the PDL
Target Patent Rights, shall be made by PDL, subject to the advice and counsel
of the JPC. Subject to the provisions of this subsection (i), PDL shall
control the conduct of any such interference or opposition. Biogen Idec shall
reasonably cooperate, as requested by PDL, with respect to such opposition or
interference. PDL shall keep the JPC informed of the progress of any opposition
or interference action or proceeding relating to the PDL Target Patent Rights.
PDL shall keep the JPC advised of all communications, actual and prospective
filings or submissions regarding such PDL 

 

67

 

Target Patent Rights, and
shall provide the JPC an opportunity to review and comment on any such
communications, filing and submissions. Notwithstanding the foregoing, [****].

 

(ii)                                Queen
Patents.             All decisions
relating to interferences or oppositions lodged against the Queen Patents,
including whether to initiate such interferences, appropriate settlement
strategy, along with other strategic decisions relating to the Queen Patents,
shall be made solely by PDL. Notwithstanding [****]. Subject to the provisions
of this subsection (ii), PDL shall control the conduct of any such
interference or opposition. Biogen Idec shall reasonably cooperate, as
requested by PDL, with respect to such opposition or interference. PDL shall
keep the JPC informed of the progress of any opposition or interference action
or proceeding relating to such Queen Patents that contain claims that
specifically relate to a Collaboration Target or a Collaboration Product. PDL
shall keep the JPC advised of all communications, actual and prospective
filings or submissions regarding such claims in such Queen Patents, and shall
provide the JPC an opportunity to review and comment on any such
communications, filing and submissions. Notwithstanding the foregoing, [****].

 

(iii)                            Other
PDL Patent Rights. Decisions relating to interferences or oppositions
lodged against Queen Patents or PDL Patent Rights, including whether to
initiate such interferences, appropriate settlement strategy, and other
strategic decisions relating to the Queen Patents or PDL Patent Rights, to the
extent not addressed in Section 12.5(b)(i) or Section 12.5(b)(ii),
shall be made by PDL.

 

(iv)                               Biogen
Idec Target Patent Rights. Other than as set forth in Section 12.5(a),
all decisions relating to interferences or oppositions lodged against Biogen
Idec Target Patent Rights, including whether to initiate such interferences,
appropriate settlement strategy, along with other strategic decisions relating
to the Biogen Idec Target Patent Rights, shall be made by Biogen Idec, subject
to the advice and counsel of the JPC. Subject to the provisions of this subsection (i),
Biogen Idec shall control the conduct of any such interference or opposition. PDL
shall reasonably cooperate, as requested by Biogen Idec, with respect to such
opposition or interference. Biogen Idec shall keep the JPC informed of the
progress of any opposition or interference action or proceeding relating to the
Biogen Idec Target Patent Rights. Biogen Idec shall keep the JPC advised of all
communications, actual and prospective filings or submissions regarding such
Biogen Idec Target Patent Rights,
and shall provide the JPC an opportunity to review and comment on any such
communications, filings and submissions. Notwithstanding the foregoing, [****].

 

(v)                                   Other
Biogen Idec Patent Rights. Other than as set forth in Section 12.5(a) and
Section 12.5(b)(iv), all decisions relating to interferences or

 

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oppositions lodged
against Biogen Idec Patent Rights that are not Biogen Idec Target Patent
Rights, including, without limitation, whether to initiate such interferences,
appropriate settlement strategy, along with other strategic decisions relating
to such Biogen Idec Patent Rights, shall be made by Biogen Idec.

 

(vi)                               Joint
Patent Rights and Third Party Patent Rights. Other than as set forth in Section 12.5(a),
all decisions relating to interferences or oppositions lodged against Joint
Patent Rights, including, without limitation, whether to initiate such
interferences, whether to file oppositions against Third Party Patent Rights
relevant to a Collaboration Product, appropriate settlement strategy, along
with other strategic decisions relating thereto, with respect to the Joint
Patent Rights and Third Party Patent Rights shall be made by the JPC. Upon the
identification of a potential opposition or interference directly involving the
Joint Patent Rights or to the extent such opposition or interference is
specifically directed to a Collaboration Product or Third Party Patent Rights
(each, an “Adversarial Prosecution Action”), the JPC shall (i) promptly
discuss such Adversarial Prosecution Action, including the strategy for
conducting such Adversarial Prosecution Action, and (ii) designate the a
Party (the “Controlling Party”) to be responsible for controlling such
Adversarial Prosecution Action, and determine a reasonable allocation between
the Parties of the cost of such Adversarial Prosecution Action. The Controlling
Party shall be responsible, using outside counsel reasonably selected by the
Controlling Party, to implement the decisions of the JPC regarding such
Adversarial Prosecution Action. The Party that is not the Controlling Party
shall reasonably cooperate, as requested by the Controlling Party, in such
Adversarial Prosecution Action. The Controlling Party shall keep the JPC
informed of the progress of any such Adversarial Prosecution Action. The
Controlling Party shall keep the JPC advised of all communications, actual and
prospective filings or submissions regarding such Adversarial Prosecution
Action, and shall provide the JPC an opportunity to review and comment on any
such communications, filings and submissions. The Controlling Party shall not
settle or consent to an adverse judgment in any such Adversarial Prosecution
Action with respect to the Joint Patent Rights or Third Party Patent Rights,
unless approved by the JPC (which approval shall not be unreasonably withheld).

 

12.6                        Initial
Filings if Made Outside of the United States.  The Parties agree to
use reasonable efforts to ensure that any Patent Right within the PDL Target
Patent Rights, Biogen Idec Target Patent Rights or Joint Patent Rights that is
filed outside of the United States prior to a United States filing will be in a
form sufficient to establish the date of original filing as a priority date for
the purposes of a subsequent United States filing.

 

12.7                        Enforcement of Patent Rights.

 

(a)                                  Notification.
If either Party learns of any substantial and continuing infringement of PDL
Target Patent Rights, Biogen Idec Target Patent Rights or Joint Patent Rights
by a Third Party making, using, offering for sale, selling or importing a
product in or outside of the applicable Field, such Party shall promptly notify
the other Party and shall provide such other Party with available evidence of
such infringement.

 

69

 

(b)                                  Enforcement
of Patent Rights.

 

(i)                                    PDL
Target Patent Rights. Subject to the further provisions of this subsection (b),
decisions regarding the enforcement of PDL Target Patent Rights in an action
against an infringement by a Third Party of claims licensed to Biogen Idec
under Section 11.1, including the defense of a declaratory judgment action
with respect to such potential infringement (each, an “Enforcement
Action”) shall be made by PDL. PDL shall have the first right to
implement at its sole expense any Enforcement Actions relating to the PDL
Target Patent Rights. Biogen Idec shall reasonably cooperate, as requested by
PDL, with respect to such Enforcement Action. PDL shall keep the JPC informed
of the progress of any action or proceeding to enforce the PDL Target Patent
Rights. PDL shall keep the JPC advised of all communications, actual and prospective
filings or submissions regarding such PDL Target Patent Rights, and shall
provide the JPC an opportunity to review and comment on any such
communications, filing and submissions. PDL shall not settle or consent to an
adverse judgment in any action or proceeding to enforce such PDL Target Patent
Rights that admits the invalidity or unenforceability of such PDL Target Patent
Rights unless approved by the Joint Steering Committee (which approval shall
not be unreasonably withheld). If PDL fails to institute such a suit or take
such action within [****] after a request by Biogen Idec to do so, then Biogen
Idec shall have the right at its sole discretion to bring and control such
Enforcement Action in the name of either or both Parties, subject to Section 12.10.
Such prosecution or defense shall be at Biogen Idec’s sole expense unless PDL
opts, at its discretion, to reimburse Biogen Idec for a portion ([****]) of all
costs or expenses incurred by Biogen Idec with respect to such prosecution or
defense.

 

(ii)                                Queen
Patents.             Decisions regarding
Enforcement Actions with respect to Queen Patents shall be made solely by PDL. [****]
shall be carried out in accordance with subsection (i) above and Section 12.10.
For clarity, an Enforcement Action that involves [****] and carried out in
accordance subsection (i), Section 12.9, and Section 12.12.

 

(iii)                            Additional
PDL Patent Right Enforcement. Decisions regarding Enforcement Actions as
well as actions for infringement outside the applicable Field and declaratory
judgment suits regarding potential infringement outside the applicable Field,
with respect to PDL Patent Rights and Queen Patents, to the extent and so long
as such Enforcement Actions are not addressed in 12.7(b)(i) or (b)(ii),
shall be made by PDL. PDL shall have the right, using outside counsel selected
by PDL, to bring and control such Enforcement Actions at its sole expense. Biogen
Idec shall reasonably cooperate, as requested by PDL, with respect to such
Enforcement Action. PDL shall keep the Joint Patent Committee informed of the
progress of any such Enforcement Action with respect to the PDL Patent Rights
that are not PDL Target 

 

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Patent Rights or Queen Patents. Notwithstanding the terms of Section 12.7(b)(vii),
[****].

 

(iv)                               Biogen
Idec Target Patent Rights. Subject to the further provisions of this subsection (b),
decisions regarding the enforcement of Biogen Idec Target Patent Rights in an
action against an infringement by a Third Party, including the defense of a
declaratory judgment action with respect to such potential infringement shall
be made by Biogen Idec. Biogen Idec shall have the first right to implement at
its sole expense any Enforcement Actions relating to the Biogen Idec Target
Patent Rights. PDL shall reasonably cooperate, as requested by Biogen Idec,
with respect to such Enforcement Action. Biogen Idec shall keep the JPC
informed of the progress of any action or proceeding to enforce the Biogen Idec
Target Patent Rights. Biogen Idec shall keep the JPC advised of all
communications, actual and prospective filings or submissions regarding such
Biogen Idec Target Patent Rights, and shall provide the JPC an opportunity to
review and comment on any such communications, filing and submissions. Biogen
Idec shall not settle or consent to an adverse judgment in any action or
proceeding to enforce such Biogen Idec Target Patent Rights that admits the
invalidity or unenforceability of such Biogen Idec Target Patent Rights unless
approved by the Joint Steering Committee (which approval shall not be
unreasonably withheld). If Biogen Idec fails to institute such a suit or take
such action within [****] after a request by PDL to do so, then PDL shall have
the right at its sole discretion to bring and control such Enforcement Action
in the name of either or both Parties, except to the extent that such
prosecution or defense would conflict with rights granted by Biogen Idec to a
Third Party. Such prosecution or defense shall be at PDL’s sole expense unless
Biogen Idec opts, at its discretion, to reimburse PDL for a portion ([****]) of
all costs or expenses incurred by Biogen Idec with respect to such prosecution
or defense.

 

(v)                                   Additional
Biogen Idec Patent Right Enforcement. Decisions regarding Enforcement
Actions with respect to Biogen Idec Patent Rights that are not Biogen Idec Target
Patent Rights shall be made by Biogen Idec. Biogen Idec shall have the right,
using outside counsel selected by Biogen Idec, to bring and control such
Enforcement Actions at its sole expense. PDL shall reasonably cooperate, as
requested by Biogen Idec, with respect to such Enforcement Action. Biogen Idec
shall keep the Joint Patent Committee informed of the progress of any such
Enforcement Action with respect to the Biogen Idec Patent Rights that are not
Biogen Idec Target Patent Rights. Notwithstanding the terms of Section 12.7(b)(vii),
Biogen Idec shall retain all Recoveries received from a Third Party in
connection with such Enforcement Action.

 

(vi)                               Joint
Patent Rights. Decisions regarding Enforcement Actions with respect to the
Joint Patent Rights shall be made by the JPC, upon

 

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consultation with the
Joint Steering Committee. Upon the identification of an infringement of Joint
Patent Rights with respect to a Collaboration Product, the JPC shall (i) promptly
discuss such infringement, (ii) promptly discuss the strategy for enforcing
such Joint Patent Rights, and (iii) designate the Controlling Party to be
responsible for controlling an Enforcement Action with respect to such Joint
Patent Rights, and determine a reasonable allocation between the Parties of the
costs of such Enforcement Action. The Controlling Party shall be responsible,
using outside counsel mutually acceptable to both Parties, to implement the
decisions of the JPC regarding such Enforcement Action. The non-Controlling
Party shall reasonably cooperate, as requested by the Controlling Party, in
such Enforcement Action. The Controlling Party shall keep the Joint Steering
Committee and the JPC informed of the progress of any action or proceeding to
enforce the Joint Patent Rights. The Controlling Party shall keep the JPC
advised of all communications, actual and prospective filings or submissions
regarding such Joint Patent Rights, and shall provide the JPC an opportunity to
review and comment on any such communications, filing and submissions. The
Controlling Party shall not settle or consent to an adverse judgment in any
such Enforcement Action with respect to the Joint Patent Rights, unless
approved by the Joint Steering Committee (which approval shall not be
unreasonably withheld).

 

(vii)                           Allocation
of Recoveries. All cash amounts (plus the fair market value of all non-cash
consideration) received by a Party or its Affiliates from a Third Party in
connection with the final judgment, award or (to the extent a sublicense to
such Third Party would require the consent of the other Party under this
Agreement) settlement of such Enforcement Action (“Recoveries”) shall
first be applied to reimbursement of the unreimbursed legal fees and expenses
of the Parties in connection with such Enforcement Action, and then the
remainder shall be divided equally between the Parties, except that [****], [****],
such remainder shall be shared [****] to the [****], and [****] to the [****]; provided
that the [****] shall receive such share only to the extent the
Recoveries were obtained with respect to Patents of such Party (e.g., [****]).

 

(viii)                       Representation
by Counsel. Each Party shall always have the right to be represented by
counsel of its own selection and its own expense in any suit or other action
instituted by the other Party pursuant to this Section 12.7 for
infringement in a Field. The amounts borne by such Party pursuant to this Section 12.7(b)(viii) shall
not count towards the determination of the allocation between the Parties of
any remaining recovery pursuant to Section 12.7(b)(vii).

 

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12.8                        Defense of Infringement
Actions.

 

(a)                                  If
PDL and/or Biogen Idec are defendant(s) named in a patent infringement suit
filed by a Third Party concerning the development, manufacture, production,
use, importation, offer for sale, or sale of Collaboration Products in the Field
(a “Defensive Action”) decisions regarding such Defensive Actions shall be made
by the JPC, upon consultation with the Joint Steering Committee. Upon the
identification of a Defensive Action with respect to a Collaboration Product,
the JPC shall (i) promptly discuss such Defensive Action, (ii) promptly
discuss the strategy for defending such suit, and (iii) designate the
Controlling Party to be responsible for controlling said Defensive Action, and
determine a reasonable allocation between the Parties of the costs of such
Defensive Action. The Controlling Party shall be responsible, using outside
counsel mutually acceptable to both Parties, to implement the decisions of the
JPC regarding such Defensive Action. The non-Controlling Party shall reasonably
cooperate, as requested by the Controlling Party, in such Defensive Action. The
Controlling Party shall keep the Joint Steering Committee and the JPC informed
of the progress of any action or proceeding in the Defensive Action. The
Controlling Party shall keep the JPC advised of all communications, actual and
prospective filings or submissions regarding such Defensive Action, and shall
provide the JPC an opportunity to review and comment on any such
communications, filing and submissions. The Controlling Party shall not settle
or consent to an adverse judgment in any such Defensive Action, unless approved
by the Joint Steering Committee (which approval shall not be unreasonably
withheld).

 

(b)                                  During
the term of this Agreement, each Party shall bring to the attention of the
other Party all information regarding potential infringement of Third Party
intellectual property rights via the development, manufacture, production, use,
importation, offer for sale, or sale of Collaboration Products in a Field
throughout the world. The Parties shall discuss such information and decide how
to handle such matter.

 

12.9                        Third
Party Intellectual Property.

 

(a)                                  In
the event that PDL or Biogen Idec (the “Acquiring Party”) proposes to
apply to a Collaboration Product Technology that the Acquiring Party obtained
from a Third Party that is not included automatically within the definition of
Biogen Idec Technology or PDL Technology prior to the Effective Date (and hence
included in the licenses granted by the Acquiring Party pursuant to Article 11)
or otherwise acquired by the Acquiring Party, the Acquiring Party shall
disclose the same to the Joint Steering Committee, including any royalty or
other payment obligations determined in accordance with United States GAAP that
would apply to the Collaboration Product as a result of the Development or
Commercialization of such

 

73

 

Collaboration Products
hereunder. The Joint Steering Committee shall determine, [****] whether or not
the Joint Steering Committee agrees that the intellectual property so acquired
should be applied to the Collaboration Products, and if the Joint Steering
Committee so determines, the agreement under which the Acquiring Party acquires
such intellectual property shall be a Third Party License for purposes of this
Agreement. To the extent the agreement is not so included within the Third
Party Licenses hereunder, the subject matter of such agreement shall not be
within the definition of PDL Technology or Biogen Idec Technology hereunder
(and therefore the licenses granted by the Acquiring Party pursuant to Article 11
shall not include such subject matter).

 

(b)                                  Manufacturing
Technology.

 

(i)                                    PDL-Lead
Manufacturer. Notwithstanding the foregoing, with respect to Collaboration
Products or Royalty Products for which PDL is the Manufacturing Party under Article 8
above, PDL shall have the right to decide which Third Party Technology will be
used in such Manufacturing, and any agreement pursuant to which PDL acquired or
acquires such technology shall be deemed a Third Party License.

 

(ii)                                Biogen
Idec-Lead Manufacturer. Notwithstanding the foregoing, with respect to
Collaboration Products or Royalty Products for which Biogen Idec is the
Manufacturing Party under Article 8 above, Biogen Idec shall have the
right to decide which Third Party Technology will be used in such
Manufacturing, and any agreement pursuant to which Biogen Idec acquired or
acquires such technology shall be deemed a Third Party License.

 

(c)                                  Third
Party Licenses. Notwithstanding the provisions of this Article 12, the
rights and obligations of the Parties under this Article 12, with respect
to Patents licensed pursuant to a Third Party License, shall be subject to the
rights of the applicable Third Party licensor/licensee pursuant to such Third
Party License and the applicable Parties’ obligations to such Third Party
pursuant to such Third Party License. Without limiting the foregoing, the
Parties agree and acknowledge that the provisions set forth in this Article 12
shall be subject to the following Third Party License provisions (as such Third
Party Licenses and specific provisions may be amended from time to time upon
notice to and consent of the other Party, if required, pursuant to Section 11.5(c)(ii))
and such provisions shall supersede anything to the contrary contained in this
Agreement:  (i) [****]; (ii) [****];
(iii) Article 5 of the UCSD License Agreement;  (iv) [****]; (v) [****]; (vi) [****];
(vii) [****]; (viii) [****]; and (ix) [****]. The Parties further
agree and acknowledge that PDL does not have any rights to prosecute or enforce
the Patent

 

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Rights licensed to it
pursuant to the following Third Party Licenses and therefore no portion of Article 12
shall be interpreted as granting Biogen Idec or the JPC or JSC rights to file, prosecute
(including interferences and oppositions), maintain, enforce or defend such
Patents or receive information or provide input with respect to such Patent
Rights:  [****];
[****]; [****]; [****]; and [****].

 

12.10                 Rights pursuant
to the [****] Agreements.

 

(a)                                  The
Parties acknowledge that, pursuant to the [****] Agreements, [****] has certain
rights to file, prosecute (including interferences and oppositions), maintain,
enforce and defend certain PDL Patent Rights that are licensed by or to PDL
pursuant to the [****] Agreements. Notwithstanding anything to the contrary,
Biogen Idec’s, JPC’s and JSC’s rights pursuant to this Article 12 with
respect to such PDL Patent Rights are subject to such [****] rights to file,
prosecute, maintain, enforce and defend the certain PDL Patent Rights that are
licensed by or to PDL pursuant to [****] Agreement. For clarity, PDL shall not
be required pursuant to this Article 12 to provide Biogen Idec or the JPC
or JSC with any patent filing, prosecution (including interferences and
oppositions), maintenance, enforcement or defense associated-rights that
conflict with [****] rights under the [****] Agreements or that would
constitute a breach of PDL’s obligations to [****] under the [****] Agreements,
provided however, no additional rights shall accrue to Biogen Idec unless and
until Biogen Idec obtains a license pursuant to Section 3.8. The Parties
acknowledge that certain of Biogen Idec’s, JPC’s and JSC’s rights under this Article 12
that relate to PDL Patent Rights that are licensed by or to PDL pursuant to the
[****] Agreements. The Parties further acknowledge that such rights of Biogen
Idec, JPC or JSC derive solely from those rights retained by PDL under the [****]
Agreements.

 

(b)                                  PDL
hereby agrees and acknowledges that, notwithstanding any other provisions of
this Agreement, Biogen Idec will not be obligated to pay any royalties due to [****]
pursuant to the [****] Agreements for sales of Collaboration or Royalty
Products, except as expressly stated in this Agreement.

 

12.11                 Patent Marking.
Each Party agrees to comply with the patent marking statutes in each country in
which Collaboration Products or Royalty Products are sold by such Party, its
Affiliates and/or sublicensees. Notwithstanding the foregoing, prior to the
launch of each Product, the JPC will formulate a marking strategy for such
Product in cooperation with qualified outside counsel and in cooperation with
the guidelines of the appropriate governmental agencies regulating the
Manufacture or sale of Products, including determining the appropriate patent
marking, if any, to be used with such Product.

 

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12.12                 Limited Rights to
Humanization Technology Claims in Queen Patents. Nothing in this Article 12
shall be interpreted as granting Biogen Idec, the JPC or the JSC any rights
with respect to the filing, prosecution (including interferences and oppositions),
maintenance, enforcement or defense of primarily those claims in the Queen
Patents that are directed toward the humanization of antibodies or humanized
antibodies in general (as opposed to particular humanized antibodies or
humanized antibodies directed at a particular target). For example and without
limiting the foregoing, PDL shall not have any obligation to: (a) keep
Biogen Idec or the JPC advised of the status of communications, actual and
prospective filings or submissions primarily regarding such claims; (b) consult
with Biogen Idec or the JPC on matters that primarily relate to such claims; (c) give
Biogen Idec or the JPC access to or an opportunity to review and comment on any
portion of patent office or patent litigation communications, filings or
proposed submissions that pertain primarily to such claims; or (d) obtain
JSC approval of a settlement or consent to an adverse judgment with respect to
any admission of invalidity or unenforceability primarily of such claims.

 

12.13                 Trademark
Selection and Ownership.

 

(a)                                  Ownership
of Trademarks. The Responsible Commercialization Party for the North
American Territory, as the “Responsible Trademark Party,” shall own, throughout
the world, all trademarks and trade dress, and all registrations therefor, selected
under Section 12.13(b) and used or intended to be used on or in
connection with a Product under this Agreement (the “Product Trademarks”). Accordingly,
with respect to the Existing Products, [****] shall be the Responsible
Trademark Party for [****], and [****] shall be the Responsible Trademark Party
for [****] and [****]. All goodwill attributable to a Product Trademark
generated by the Commercialization of a Product under this Agreement bearing a
Product Trademark shall inure to the benefit of the Responsible Trademark
Party.

 

(b)                                  Selection
and Procurement of Trademarks. The Responsible Trademark Party for a
Product to be Commercialized under this Agreement shall select, subject to
approval by the Joint Commercialization Committee, a minimum of [****]
trademarks in each of the North American Territory and EU Territory and
appropriate corresponding trade dress for such Product (whether as a
Collaboration Product or Royalty Product). Any determination regarding the
selection of such trademarks and trade dress shall take into account the
objectives of the Parties, both within and outside the Collaboration, when
making any determinations and exercising any rights it may have with respect to
selecting the trademark and trade dress for a Product. All uses of trademarks
and trade dress to identify and/or in connection with the Commercialization of
a Product under this Agreement shall comply with all applicable laws
(including,

 

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without limitation, those
laws and regulations particularly applying to the proper use and designation of
trademarks in the applicable countries).

 

(c)                                  Prosecution
and Enforcement; Expenses. The Responsible Trademark Party shall be
responsible for procurement and maintenance of trademark registrations for the
Product Trademarks throughout the Territory, except that the Responsible
Trademark Party may cease trademark registration procurement activities for any
Product Trademark in any country in the Royalty Territory provided it first
offers the other Party the opportunity to assume such activities at its own
expense. All expenses incurred by the Responsible Trademark Party with respect
to the preparation, filing, prosecution, maintenance and enforcement of the
Product Trademarks for the Profit Sharing Territory shall be included in Other
Out-of-Pocket Costs and solely for the Royalty Territory shall be borne at the
Independent Development  Party’s sole
expense.

 

(d)                                  Use
of the Product Trademarks. To effectuate the purposes of this Agreement,
the Responsible Trademark Party shall grant to the other Party, a non-exclusive,
non-royalty bearing license (with the right to grant sublicenses) pursuant to a
separate agreement, to use each Product Trademark solely in connection with the
Commercialization of Products under this Agreement. The Party that is not the
Responsible Trademark Party, its Affiliates and its sublicensees will comply
with the Responsible Trademark Party’s then-current trademark and trade dress
guidelines for trademarks and trade dress and shall have the right to monitor
the quality of the Products on which a Product Trademark appears or which
incorporates a Product Trademark in the form of trade dress in accordance with
reasonable procedures to be agreed by the Parties. The Party that is not the
Responsible Trademark Party, its Affiliates and sublicensees shall use the
Product Trademarks only in connection with the Commercialization of Products
under this Agreement in the Territory in accordance with the licenses to be
granted herein. The Responsible Trademark Party, or the Party commercializing
an Independent Product or Royalty Product as the case may be, shall provide all
materials (including without limitation advertising or promotional materials)
that incorporate the Product Trademarks or a Party’s house marks to the
Responsible Trademark Party for prior review and approval, not to be
unreasonably withheld.

 

(e)                                  House
Marks. In the event that the Parties mutually agree to permit a Party to
use the house marks of the other Party in connection with the Commercialization
and/or Co-Promotion of Products under this Agreement, the Parties will
establish mutually acceptable terms for the usage of such house marks.

 

(f)                                    Acknowledgement
of Ownership Rights. Each Party acknowledges the sole ownership by the
other Party and validity of all trademarks, trade dress, logos and slogans
owned by the other Party and used or intended to be used on or in connection
with the Commercialization of a Product under this Agreement. Each Party agrees
that it will not at any time during or after the Term assert or claim any interest
in or do anything which may adversely affect the validity or enforceability of
any trademark, trade dress, logo or slogan owned by the other Party and used or
intended to be used on or in connection with Commercialization of a Product
under this Agreement. Neither Party will register, seek to register or cause to
be registered any

 

77

 

trademarks, trade dress,
logos or slogans owned by the other Party and used or intended to be used on or
in connection with the Commercialization of a Product under this Agreement or
any variation thereof, under any law providing for registration of trademarks,
service marks, trade names, fictitious names or similar laws, as an Internet
domain name, or in the name of a corporation, partnership, limited liability
company or other entity, without the other Party’s prior written consent.

 

(g)                                 Use
of Trademark Designations. The TM designation may be used in conjunction
with each Product Trademark within the Territory. Once registrations issue, the
® designation may be used in connection with the Product Trademarks. An
appropriate statutory notice of trademark ownership shall be affixed to or
imprinted on any material wherever a Party’s house marks or Product Trademarks
are used. The Responsible Trademark Party’s ownership of the Product Trademarks
shall be identified on all materials on which they appear. The exact language
for identification of ownership shall be in accordance with branding and
implementation guidelines to be agreed on by the Parties.

 

(h)                                 Infringement
of Product Trademarks.

 

(i)                                    Procedure.
In the event that either Party becomes aware of (i) actual
infringement of a Product Trademark in the
Territory; (ii) a mark or name confusingly similar to a Product Trademark
in the Territory; or (iii) any unfair trade practices, trade dress
imitation, passing off, or like offenses, in the Territory that relate to the
Product Trademarks, such Party shall promptly so notify the other Party in
writing. The Responsible Trademark Party shall have the right, but not the
obligation, at its sole cost and expense, to initiate, prosecute, and control
an infringement action or file any other appropriate action or claim related to
such infringement of the Product Trademark against any Third Party. If the
Responsible Trademark Party fails to bring any such infringement action within
a period of [****] after delivery of the notice set forth above, then the other
Party shall have the right, but not the obligation, at its sole cost and
expense, to initiate, prosecute, and control an infringement action or file any
other appropriate action or claim related to such infringement of the Product
Trademark against any Third Party. In either event, the Party not bringing any
such action (i) shall have the right (at its own expense) to participate
in such action and to be represented by counsel of its own choice, and (ii) agrees,
at the request and expense of the Party bringing such action, to be joined as a
Party to the suit and to provide reasonable assistance in any such action. The
Party controlling such action shall take all reasonable and appropriate steps
to protect, defend, and maintain the Product Trademarks for use by the Parties
and shall have the right to control settlement of such action; provided,
however, that no settlement shall be entered into without the written consent
of the other Party, not to be unreasonably withheld.

 

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(ii)                                Costs.
The costs associated with such defense for the Profit Sharing Territory
shall be included in [****] as set forth in Exhibit C and the costs
associated solely with the Royalty Territory shall be borne by the Independent
Development Party. Any damages or monetary award recovered shall be allocated
as follows:  All cash amounts (plus the
fair market value of all non-cash consideration) received by a Party or its
Affiliates from a Third Party in connection with the final judgment, award or
settlement of such action (“Recoveries”) shall first be applied to
reimbursement of the unreimbursed legal fees and expenses of the Parties in
connection with such action, and then the remainder shall be [****].

 

12.14                 Third Party
Trademark Claims Based on Use of the Trademarks.

 

If a
claim is brought by a Third Party that a Party’s use of the Product Trademarks
infringes such Third Party’s trademarks, the Party against which (or against
whose Affiliate, as the case may be) the action is brought will give prompt
written notice to the other Party of such claim. The Responsible Trademark
Party shall defend any such claim and any resulting suit brought in the Territory
with respect to the use of the Product Trademark, provided the costs associated
with such defense for the Profit Share Territory shall be included in [****] as
set forth in Exhibit C and the costs associated solely with the Royalty
Territory shall be borne by the [****]. Any damages or monetary award recovered
shall be allocated as follows:  All cash
amounts (plus the fair market value of all non-cash consideration) received by
a Party or its Affiliates from a Third Party in connection with the final
judgment, award or settlement of such defense (“Recoveries”) shall first
be applied to reimbursement of the unreimbursed legal fees and expenses of the
Parties in connection with such defense, and then the remainder shall be [****],
except that [****]. The Responsible Trademark Party shall not settle any claim
or suit in a manner that would adversely affect the other Party without
obtaining the other Party’s prior written consent, which shall not be
unreasonably withheld.

 

ARTICLE 13

REPRESENTATIONS AND WARRANTIES

 

13.1                        Mutual
Representations and Warranties. Each Party hereby represents and warrants
to the other Party as of August 2, 2005:

 

(a)                                  Such
Party is a corporation or entity duly organized and validly existing under the
laws of the state or other jurisdiction of its incorporation or formation;

 

(b)                                  The
execution, delivery and performance of this Agreement by such Party has been
duly authorized by all requisite corporate action;

 

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(c)                                  Such
Party has the power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and such performance does not conflict with
or constitute a breach of any agreement of such Party with a Third Party;

 

(d)                                  Subject
to Section 11.5(b)(iii) such Party has the right to grant the rights
and licenses described in Article 11; and

 

(e)                                  Such
Party has and shall maintain the resources and capability to perform its
obligations hereunder either alone or together with one or more of its
Affiliates whose performance it can cause to be made available to perform
obligations hereunder.

 

13.2                        Representations
by PDL. PDL hereby represents and warrants to Biogen Idec as of August 2,
2005:

 

(a)                                  Prior
to August 2, 2005, it has provided a complete copy of the [****]
Agreements and of all Third Party Licenses in effect as of the Effective Date;

 

(b)                                  [****];

 

(c)                                  it
has not previously assigned, transferred, conveyed or otherwise encumbered its
right, title and interest in PDL Technology in the Field;

 

(d)                                  [****];

 

(e)                                  [****];

 

(f)                                    [****];

 

(g)                                 [****];

 

(h)                                 [****];
and

 

(i)                                    [****].

 

As used and except as otherwise set forth
herein, “PDL’s knowledge” means the actual knowledge, after reasonable inquiry,
as of the Effective Date, of any executive officer of PDL with operational
responsibility for the subject matter of the applicable representation or
warranty.

 

Without limiting the foregoing, the Parties
agree and acknowledge that the representations made by PDL in this Section 13.2
shall not be deemed to be representations made by or on behalf of [****].

 

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13.3                        Disclaimer.
EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN SECTION 13.1 AND 13.2, EACH
PARTY MAKES NO OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, AND
EACH PARTY EXPRESSLY DISCLAIMS ANY AND ALL OTHER REPRESENTATIONS AND WARRANTIES
OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING THE WARRANTIES OF DESIGN, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, ARISING FROM A COURSE OR DEALING, USAGE OR
TRADE PRACTICES, OR ANY WARRANTY AS TO THE VALIDITY OR ANY PATENTS OR THE
NON-INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTIES, IN
ALL CASES WITH RESPECT THERETO.

 

13.4                        Limitation
of Liability. NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER
PARTY ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN
CONNECTION WITH THIS AGREEMENT, EACH PARTY’S PERFORMANCE OR LACK OF PERFORMANCE
HEREUNDER, OR ANY LICENSE GRANTED HEREUNDER, HOWEVER CAUSED, ON ANY THEORY OF
LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. THE FOREGOING LIMITATION SHALL NOT LIMIT EITHER PARTY’S
OBLIGATION TO THE OTHER PARTY UNDER ARTICLES 14 AND 15.

 

13.5                        Essential
Basis. The Parties acknowledge and agree that the disclaimers, exclusions
and limitations of liability set forth in this Article 13 form an
essential basis of this Agreement, and that, absent any of such disclaimers,
exclusions or limitations of liability, the terms of this Agreement, including
the economic terms, would be substantially different.

 

ARTICLE 14

CONFIDENTIALITY

 

14.1                        Generally.
During and for five (5) years after the Term of this Agreement, each
Party (i) shall maintain in confidence all Confidential Information of the
other Party; (ii) shall not use such Confidential Information for any
purpose except as permitted by this Agreement; and (iii) shall not
disclose such Confidential Information to anyone other than those of its
Affiliates, sublicensees, prospective sublicensees, employees, consultants,
agents or subcontractors who are bound by written obligations of nondisclosure
and non-use no less stringent than those set forth in this Article 14 and
to whom such disclosure is necessary in connection with such Party’s activities
as contemplated in this Agreement. Each Party shall ensure that such Party’s
Affiliates, sublicensees, prospective sublicensees, employees, consultants,
agents and subcontractors comply with these obligations. Each Party shall
notify the other promptly on discovery of any unauthorized use or disclosure of
the other’s trade secrets or proprietary information.

 

14.2                        Exceptions.
The obligations of confidentiality, non-disclosure, and non-use set forth in Section 14.1
shall not apply to the extent the receiving Party (the

 

81

 

“Recipient”)
can demonstrate that the disclosed information (i) was in the public
domain at the time of disclosure to the Recipient by the other Party, or
thereafter entered the public domain, in each case other than as a result of
actions of the Recipient, its Affiliates, employees, licensees, agents or
subcontractors, in breach of this Agreement; (ii) was rightfully known by
the Recipient or its Affiliates (as shown by its written records) prior to the
date of disclosure to the Recipient by the other Party; or (iii) was
received by the Recipient or its Affiliates on an unrestricted basis from a
Third Party rightfully in possession of such information and not under a duty
of confidentiality to the other Party. Notwithstanding any other provision of
this Agreement, Recipient’s disclosure of Confidential Information shall not be
prohibited if such disclosure:  (a) is
in response to a valid order of a court or other governmental body, provided
that Recipient provides the other Party with prior written notice of such
disclosure in order to permit the other Party to seek a protective order or
other confidential treatment of such Confidential Information; or (b) is
otherwise required by applicable law or regulation, or rules of a
nationally recognized securities exchange.

 

14.3                        Publications.

 

(a)                                  Prior
to public disclosure or submission for publication of a proposed academic,
scientific or other publication or presentation that contains or references the
results of any scientific or clinical activity relating to any Development
Program or Collaboration Product, or any Patents or Know-How related thereto,
the Party disclosing or submitting such proposed publication (“Submitting Party”) shall send the other party (“Responding Party”) by expedited delivery a copy of the
proposed publication to be submitted and shall allow the Responding Party a
reasonable time period (but no less than forty-five (45) days from the date of
confirmed receipt) in which to determine whether the proposed publication
contains subject matter for which patent protection should be sought (prior to
publication of such proposed publication) for the purpose of protecting an
invention and/or whether the proposed publication contains the Confidential
Information of the Responding Party. Following the expiration of the forty-five
(45) day review period, the Submitting Party shall be free to submit such proposed
publication for publication and publish or otherwise disclose to the public
such scientific or clinical results, subject to the procedures set forth in Section 14.3(b).

 

(b)                                  If
the Responding Party believes that the subject matter of the proposed publication
contains Confidential Information or a patentable invention of the Responding
Party, then prior to the expiration of the applicable time period for review,
the Responding Party shall notify the Submitting Party in writing of its
determination that such proposed publication contains such information or
subject matter for which patent protection should be sought. On receipt of such
written notice from the Responding Party, the Submitting Party shall delay
public disclosure of such information or submission of the proposed publication
for an additional period of ninety (90) days to permit preparation and filing
of a patent application on the disclosed subject matter. The Submitting Party
shall thereafter be free to publish or disclose such information, except that
the Submitting Party may not disclose any Confidential Information of the
Responding Party in violation of Sections 14.1 and 14.2 hereof.

 

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14.4                        Publicity.
The Parties agree that the public announcement of the execution of this
Agreement shall be substantially in the form of a mutually agreed press release.
Any other publication, news release or other public announcement relating to
this Agreement or to the performance hereunder, shall first be reviewed and
approved by both Parties unless such publication, news release or other public
announcement contains information previously approved by the other Party for
release hereunder; provided, however, that any disclosure which is required by
law, or by the rules of a nationally recognized securities exchange, as
advised by the disclosing Party’s counsel may be made without the prior consent
of the other Party, although the other Party shall be given prompt notice of
any such legally required disclosure and to the extent practicable shall
provide the other Party an opportunity to comment on the proposed disclosure.

 

ARTICLE 15

INDEMNIFICATION

 

15.1                        Indemnification
by PDL.

 

(a)                                  PDL
agrees to indemnify, hold harmless and defend Biogen Idec and its Affiliates,
directors, officers, employees and agents (the “Biogen Idec
Indemnitees”) from and against any and all Third Party suits,
claims, actions, demands, liabilities, expenses and/or losses (including
attorneys’ fees, court costs, witness fees, damages, judgments, fines and
amounts paid in settlement) (“Losses”) [****],
but [****].

 

(b)                                  PDL
agrees to indemnify, hold harmless and defend the Biogen Idec Indemnitees from
and against any and all Losses [****] (i) [****], or (ii) [****],
except [****].

 

15.2                        Indemnification
by Biogen Idec.

 

(a)                                  Biogen
Idec shall indemnify, hold harmless and defend PDL and its Affiliates
directors, officers, employees and agents (the “PDL
Indemnitees”) from and against any and all Losses, [****], but [****],
but not [****]. [****].

 

(b)                                  Biogen
Idec agrees to indemnify, hold harmless and defend the PDL Indemnitees from and
against any and all Losses [****], except [****].

 

15.3                        Procedure.
In the event of a claim by a Third Party against a Party entitled to
indemnification under this Agreement (“Indemnified Party”),
the Indemnified

 

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Party shall promptly
notify the other Party (“Indemnifying Party”)
in writing of the claim and the Indemnifying Party shall undertake and solely
manage and control, at its sole expense, the defense of the claim and its
settlement. The Indemnified Party shall cooperate with the Indemnifying Party,
including, as requested by the Indemnifying Party entering into a joint defense
agreement. The Indemnified Party may, at its option and expense, be represented
in any such action or proceeding by counsel of its choice. The Indemnifying
Party shall not be liable for any litigation costs or expenses incurred by the
Indemnified Party without the Indemnifying Party’s written consent. The
Indemnifying Party shall not settle any such claim unless such settlement fully
and unconditionally releases the Indemnified Party from all liability relating
thereto, unless the Indemnified Party otherwise agrees in writing.

 

15.4                        Insurance.
Each Party, at its own expense, shall maintain product liability insurance in
an amount consistent with industry standards for a company of similar standing
during the Term. Each Party shall provide [****] prior written notice of any
cancellation of its insurance program. Each Party shall provide the other Party
with a certificate of insurance evidencing product liability coverage.

 

ARTICLE 16

TERM AND TERMINATION; EFFECTS OF TERMINATION

 

16.1                        Term. The
term of this Agreement shall begin on the Effective Date and, unless earlier
terminated in accordance with the terms of this Article 16, will expire on
the date on which neither Party has nor will have any additional payment
obligations to the other Party under this Agreement (the “Term”).

 

16.2                        Termination
for Breach.

 

(a)                                  Breach.
If a Party materially breaches its obligations under this Agreement with
respect to a Collaboration Product or Royalty Product, which breach is not
cured within [****] after written notice thereof from the non-breaching Party
(or if such breach is not capable of cure within such period, which breach the breaching
Party is not making diligent good faith efforts to cure), then upon further
express written notice from the non-breaching Party, the breaching Party
automatically (and without further action on its part) shall be deemed to have [****]
(a “Breaching Party”); provided however that the breaching Party shall be
entitled to receive no more than [****] of the royalties due to a
Non-Developing Party hereunder. This preceding sentence shall not, however,
limit in any manner the non-breaching Party’s other remedies for breach. The
Parties acknowledge and agree that failure to exercise any right or option with
respect

 

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to any Collaboration
Product or to take any action expressly within the discretion of a Party shall
not be deemed to be material breach hereunder.

 

(b)                                  Breaching
Party Obligations. A Breaching Party shall, with respect to the
Collaboration Product or Royalty Product as to which it is the Breaching Party (i) notwithstanding
the provisions of this Agreement to the contrary, the Breaching Party shall be [****],
(ii) in addition to the obligations specified in [****] the Breaching  Party shall [****], and (iii) the
Breaching Party shall [****].

 

16.3                        Bankruptcy.
All rights and licenses granted under this Agreement by one Party to the other
Party are, and shall otherwise be deemed to be, for purposes of Section 365(n)
of the United States Bankruptcy Code (the “Bankruptcy Code”),
licenses of rights to “intellectual property” as defined under Section 101(35A)
of the Bankruptcy Code. The Parties agree that a Party shall retain and may
fully exercise all of its rights and elections under the Bankruptcy Code in the
event of a bankruptcy by the other Party. The Parties further agree that in the
event of the commencement of a bankruptcy proceeding by or against one Party
under the Bankruptcy Code, the other Party shall be entitled to complete access
to any such intellectual property pertaining to the rights granted in the
licenses hereunder of the Party by or against whom a bankruptcy proceeding has
been commenced and all embodiments of such intellectual property.

 

16.4                        Change of
Control.

 

(a)                                  In
the event a Party undergoes a Change of Control (the “Acquired Party”), the
other Party (the “Non-Acquired Party”) shall have the right, at any time within
[****] following the closing of such Change of Control, and at its sole
discretion, to elect none, some or all of the following. This Agreement shall
otherwise remain in full force and effect.

 

(i)                                    The
provisions of this Agreement permitting the Acquired Party to vote in any
Committee decision [****].

 

(ii)                                The
Non-Acquired Party shall have the option [****].

 

(iii)                            The
Non-Acquired Party shall have [****].

 

(iv)                               Upon
[****] prior written notice, the Non-Acquired Party may [****]; and

 

(v)                                   The
Non-Acquired Party shall have the [****] to (A) [****] and (B) [****].
The purposes of such procedures shall be to strictly limit such disclosures to

 

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85

 

only those personnel
having a need-to-know Sensitive Information in order for the Acquired Party to
perform its remaining obligations under this Agreement and to prohibit the use
of Sensitive Information for competitive reasons against the Non-Acquired Party
and its Affiliates, including without limitation, the use of Sensitive
Information for the development or commercialization of competing products.

 

(b)                                  An
Acquired Party shall have the one-time right, at any time within [****]
following the election by the Non Acquired Party to exercise any of the rights
specified in Section 16.4(a)  to [****]. Upon written notice of the
Acquired Party’s intent to [****], the Acquired Party shall:

 

(i)                                    Continue
to participate in the equal funding of the Development and Commercialization of
each Collaboration Product in the Profit Sharing Territory until the next
applicable opt-out point specified in Exhibit 4.1(b)(iii) for such
Collaboration Product.

 

(ii)                                Promptly
comply with the provisions of Sections 4.3(c), 4.3(e), 4.3(f),  4.3(g) and 4.3 (h) with respect to
each Collaboration Product as if it were a Non-Developing Party thereunder.

 

(iii)                            Following
the termination of the Acquired Party’s funding obligation as set forth in Section 16.4(b)(i) above,
the Acquired Party shall thereafter be eligible to receive from the
Non-Acquired Party, for the term specified below, incremental royalties on Net
Sales of the relevant Collaboration Product at a royalty rate which is equal to
the sum of (A) [****] (B) [****], as applicable. The term of the
Non-Acquired Party’s obligation to pay a royalty under this Section 16.4(b) shall
expire on a country-by-country and Collaboration Product-by-Collaboration
Product basis, at the dates specified in Section 9.5. Each Collaboration
Product shall thereafter be deemed to be an Independent Product and all the
applicable provisions of the Agreement shall remain in full force and effect.

 

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

 

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

 

86

 

ARTICLE 17

DISPUTE RESOLUTION; GOVERNING LAW

 

17.1                        Disputes.
Unless otherwise set forth in this Agreement, in the event of any dispute
arising under this Agreement between the Parties, the Parties shall refer such
dispute to the respective Executives, and such Executives shall attempt in good
faith to resolve such dispute.

 

17.2                        Arbitration.
Subject to the provisions of Section 2.8(c), if the Parties are unable
resolve a given dispute pursuant to Section 17.1 within [****] of
referring such dispute to the Executives, either Party may have the given
dispute settled by binding arbitration in the manner described below:

 

(a)                                  Arbitration
Request. If a Party intends to begin an arbitration to resolve a dispute
arising under this Agreement, such Party shall provide written notice (the “Arbitration Request”) to the other Party of such intention
and the issues for resolution. From the date of the Arbitration Request and
until such time as the dispute has become finally settled, the running of the
time periods as to which Party must cure a breach of this Agreement becomes
suspended as to the subject matter of the dispute.

 

(b)                                  Additional
Issues. Within [****] after the receipt of the Arbitration Request, the
other Party may, by written notice, add additional issues for resolution.

 

(c)                                  No
Arbitration of Patent Issues. Unless otherwise agreed by the Parties,
disputes relating to patents shall not be subject to arbitration, and shall be
submitted to a court of competent jurisdiction.

 

(d)                                  Arbitration
Procedure. Except as expressly provided herein, the sole mechanism for
resolution of any claim, dispute or controversy arising out of or in connection
with or relating to this Agreement or the breach or alleged breach thereof
shall be arbitration by the American Arbitration Association (“AAA”) in Los Angeles, California, or in such other venue as
the Parties agree, under the commercial rules then in effect for the AAA
except as provided herein. All proceedings shall be held in English and a
transcribed record prepared in English. The Parties shall choose, by mutual
agreement, one arbitrator within [****] of receipt of notice of the intent to
arbitrate. If no arbitrator is appointed within the times herein provided or
any extension of time that is mutually agreed on, the AAA shall make such
appointment within [****] of such failure. The award rendered by the arbitrator
shall not include costs of arbitration, attorneys’ fees or costs for expert and
other witnesses. Within [****] of initiation of arbitration, the Parties shall
reach agreement upon and thereafter follow procedures assuring that the
arbitration will be concluded and the award rendered within no more than [****]
from

 

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

 

87

 

selection of the
arbitrator. Failing such agreement, the AAA will design and the Parties will
follow procedures that meet such a time schedule. The arbitrator (i) shall
not have any power or authority to add to, alter, amend or modify the terms of
this Agreement but shall specify rules sufficient to allow reasonable
discovery by the Parties; (ii) shall establish and enforce appropriate rules to
ensure that the proceedings, including the decision, be kept confidential and
that all Confidential Information of the Parties be kept confidential and be
used for no purpose other than the arbitration; (iii) shall have the power
to enforce specifically this Agreement and the terms and conditions hereof in
addition to any other remedies at law or in equity; and (iv) shall issue
all decisions in writing. Nothing in this Agreement shall be deemed as
preventing either Party from seeking injunctive relief (or any other
provisional remedy) from any court having jurisdiction over the Parties and the
subject matter of the dispute as necessary to protect either Party’s name,
proprietary information, trade secrets, know-how or any other proprietary right.
If the issues in dispute involve scientific or technical matters, any
arbitrator chosen hereunder shall have educational training and/or experience
sufficient to demonstrate a reasonable level of knowledge in the field of
biotechnology. Judgment on the award rendered by the arbitrator may be entered
in any court having jurisdiction thereof.

 

17.3                        Choice of
Law. The validity, performance, construction, and effect of this Agreement
shall be governed by the laws of the [****], U.S.A., without regard to
conflicts of law principles that would provide for application of the law of a
jurisdiction outside California and excluding the United Nations Convention on
Contracts for the International Sales of Goods.

 

ARTICLE 18

MISCELLANEOUS

 

18.1                        Assignment.
Each Party, without the consent of the other Party, may assign this
Agreement and its rights and obligations hereunder (i) [****], or (ii) [****].
Any permitted assignee shall assume all assigned obligations of its assignor
under this Agreement. The assigning Party shall promptly notify the other Party
of any such Change of Control and any such assignment and shall use all
reasonable efforts to provide such notification at least [****] before the
completion of the Change of Control and before the assignment. Except as
specifically provided in this Section 18 or in Section 3.7, this
Agreement may not be assigned or otherwise transferred, nor may any right or
obligation hereunder be assigned or transferred, by either Party without the
consent of the other Party. Any attempted assignment not in accordance with
this Section shall be void.

 

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

 

88

 

18.2                        Force
Majeure. If either Party shall be delayed, interrupted in or prevented from
the performance of any obligation hereunder by reason of force majeure
including an act of God, fire, flood, earthquake, war (declared or undeclared),
public disaster, act of terrorism, strike or labor differences, governmental
enactment, rule or regulation, or any other cause beyond such Party’s
control, such Party shall not be liable to the other therefor; and the time for
performance of such obligation shall be extended for a period equal to the
duration of the force majeure which occasioned the delay, interruption or
prevention. The Party invoking such force majeure rights of this Section 18.2
must notify the other Party by courier or overnight dispatch (e.g., Federal
Express) within a period of fifteen (15) days of both the first and last day of
the force majeure unless the force majeure renders such notification impossible
in which case notification will be made as soon as possible. If the delay
resulting from the force majeure exceeds six (6) months, both Parties
shall consult together to find an appropriate solution.

 

18.3                        Entire
Agreement; Amendment. This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter herein and, effective on
the Effective Date, supersedes all previous agreements between the Parties with
respect to the subject matter herein, whether written or oral, including the
existing confidentiality agreement between PDL and Biogen Idec. This Agreement
shall not be changed or modified orally, but only by an instrument in writing
signed by both Parties.

 

18.4                        Severability.
If any provision of this Agreement is declared invalid by a court of last
resort or by any court or other governmental body from the decision of which an
appeal is not taken within the time provided by law, then and in such event,
this Agreement will be deemed to have been terminated only as to the portion
thereof that relates to the provision invalidated by that decision and only in
the relevant jurisdiction, but this Agreement, in all other respects and all
other jurisdictions, will remain in force; provided, however, that if the
provision so invalidated is essential to the Agreement as a whole, then the
Parties shall negotiate in good faith to amend the terms hereof as nearly as
practical to carry out the original intent of the Parties, and, failing such
amendment, either Party may submit the matter for resolution pursuant to Article 16.

 

18.5                        Notices. Any
notice or report required or permitted to be given under this Agreement shall
be in writing and shall be mailed by nationally recognized overnight courier,
or faxed and confirmed by mailing, as follows and shall be effective one (1) day
after such mailing:

 

	
  If to PDL:

  	
  Protein Design Labs, Inc.

  
	
   

  	
  34801 Campus Drive

  
	
   

  	
  Fremont, California U.S.A. 94555

  
	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
  and

  	
  Protein Design Labs, Inc.

  
	
   

  	
  34801 Campus Drive

  

 

89

 

	
   

  	
  Fremont, California U.S.A. 94555

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
  If to Biogen Idec:

  	
  Biogen Idec Inc.

  
	
   

  	
  14 Cambridge Center

  
	
   

  	
  Cambridge, Massachusetts U.S.A 02142

  
	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
  Facsimile:

  
	
   

  	
   

  
	
  and

  	
  Biogen Idec Inc.

  
	
   

  	
  14 Cambridge Center

  
	
   

  	
  Cambridge, Massachusetts U.S.A 02142

  
	
   

  	
  Attention: General Counsel

  
	
   

  	
  Facsimile:

  

 

18.6                        Further
Assurances. The Parties agree to reasonably cooperate with each other in
connection with any actions required to be taken as part of their respective
obligations under this Agreement, and shall (a) furnish to each other such
further information; (b) execute and deliver to each other such other documents;
and (c) do such other acts and things (including working collaboratively
to correct any clerical, typographical, or other similar errors in this
Agreement), all as the other Party may reasonably request for the purpose of
carrying out the intent of this Agreement.

 

18.7                        Agency. Neither
Party is, nor will be deemed to be an employee, agent or representative of the
other Party for any purpose. Each Party is an independent contractor, not an
employee or partner of the other Party. Neither Party shall have the authority
to speak for, represent or obligate the other Party in any way without prior
written authority from the other Party.

 

18.8                        No Waiver.
Any omission or delay by either Party at any time to enforce any right or
remedy reserved to it, or to require performance of any of the terms, covenants
or provisions hereof, by the other Party, shall not constitute a waiver of such
Party’s rights to the future enforcement of its rights under this Agreement. Any
waiver by a Party of a particular breach or default by the other Party shall
not operate or be construed as a waiver of any subsequent breach or default by
the other Party.

 

18.9                        No Strict
Construction. Each Party has had the opportunity to consult with counsel in
connection with the review, drafting and negotiation of this Agreement. Accordingly,
the rule of construction that any ambiguity in this Agreement shall be
construed against the drafting Party shall not apply.

 

18.10                 Headings. The
captions used herein are inserted for convenience of reference only and shall
not be construed to create obligations, benefits, or limitations.

 

90

 

18.11                 Cumulative
Remedies. No remedy referred to in this Agreement is intended to be
exclusive, but each shall be cumulative and in addition to any other remedy
referred to in this Agreement or otherwise available under law.

 

18.12                 Counterparts. This
Agreement may be executed in counterparts, all of which taken together shall be
regarded as one and the same instrument.

 

 

[Signature Page to Follow]

 

91

 

IN WITNESS WHEREOF,
the Parties have executed this Collaboration Agreement through their duly
authorized representatives to be effective as of the Effective Date.

 

 

	
  PROTEIN DESIGN LABS, INC.

  	
  BIOGEN IDEC MA INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Mark McDade

  	
   

  	
  By:

  	
  /s/ James Mullen

  	
   

  
	
   

  
	
  Title:

  	
   President and CEO

  	
   

  	
  Title:

  	
      President

  	
   

  
	
   

  
	
  Date:

  	
  September 12, 2005

  	
   

  	
  Date

  	
    September 12, 2005

  	
   

  
										

 

 

 

EXHIBIT A

PDL PATENT RIGHTS

 

I.                                         Queen
Patents

 

[****]

 

II.                                     [****]
Patent Rights

 

[****]

 

III.                                 [****]
Patent Rights

 

[****]

 

IV.                                 [****]
Patent Rights

 

[****]

 

 

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

 

 

 

EXHIBIT B

 

THIRD
PARTY LICENSES

 

[****]

 

 

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

 

 

94

 

EXHIBIT C

 

FINANCIAL
PLANNING, ACCOUNTING AND REPORTING PROCEDURES

FOR COLLABORATION AGREEMENT

 

This Exhibit C
to the Collaboration Agreement (the “Agreement”)
dated as of the Effective Date, between Protein Design Labs, Inc. (“PDL”) and Biogen Idec MA, Inc. (“Biogen Idec”)
covers financial planning, accounting policies and procedures to be followed in
determining Development Expenses, Ongoing Development Expenses, Other
Out-of-Pocket Costs and Reimbursable Commercial Costs pursuant to the
Agreement.

 

For such
purpose, this Exhibit C sets forth the principles for reporting
actual results and budgeted plans in the Territory, the frequency of reporting,
the use of a single “Functional Currency”
(as defined in A.3) and the methods of determining payments to the Parties,
auditing of accounts and other matters.

 

This Exhibit C
also provides agreed upon definitions of financial terms applicable to the
Parties for purposes of the Agreement. All capitalized terms used herein
without definition shall have the meanings ascribed thereto in the Agreement
and, where applicable, the further definitions contained herein. References in
this Exhibit C to a “Party” or “Parties” shall be construed to mean Biogen Idec or PDL, as
the case may be, and in every case shall be deemed to include a Party’s
Affiliates or sublicensees under the Agreement.

 

The contents
of this Exhibit C are hereby incorporated into the Agreement and
are governed by the terms and conditions of the Agreement, including the
confidentiality provisions set forth therein. Notwithstanding anything in the
Agreement to the contrary, no cost, expense, amount or sum allocable or
chargeable to the Parties’ activities under the Agreement shall be
allocated or charged more than once. Unless otherwise specifically authorized
by the Parties or the Agreement, all costs, expenses, amounts or sums to be
charged or allocated by one Party to the other Party under the Agreement shall
not be so chargeable or allocable unless they are both directly related to the
Agreement and the activities to be performed under the Agreement and are
reasonable and customary with respect to the global biopharmaceutical industry
considering the respective size and activities of the two Parties as collaborators
under the Agreement.

 

A.                                    Definitions,
Reporting and Reconciliation

 

A.1.                          Definitions

 

A.1.1                   “Combination
Product” shall mean a product containing both the Collaboration Product and
one or more other active ingredients in addition to the Collaboration Product
where the other active ingredients have independent prophylactic or therapeutic
effect when used alone to treat the disease or indication for which the
Combination Product is labeled, whether the Collaboration Product and the other
active

 

 

ingredients are together in a physical mixture or
packaged and priced together as a single product.

 

A.1.2                   “Combination
Product Amount” shall mean the following: in the event a Collaboration
Product is sold in the form of a Combination Product, and provided that the
JSC  has approved the sale and marketing
of such a Combination Product in a Commercialization Plan , Net Sales for such
Combination Product for purposes of this Agreement will be determined by [****].
If, on a country-by-country basis, the other active component or components in
the combination are not sold separately in such country, Net Sales shall be
calculated by [****]. If, on a country-by-country basis, the Collaboration
Product component of the Combination Product is not sold separately in such
country, but the other active component or components are sold separately, Net
Sales shall be calculated by [****]. If, on a country-by-country basis, neither
the Collaboration Product nor the other active component or components of the
Combination Product is sold separately in such country, [****].

 

A.1.3  “Cost of
Clinical Supplies” shall mean a
Party’s costs to produce [****], to the extent that such costs would ordinarily
be included [****] for a similar product, including without limitation labor
and material cost, allocable depreciation and amortization, product quality
assurance/control costs, allocable facilities costs (e.g., sewer, water,
property taxes), Third Party Royalties, insurance, and other costs borne by the
party for transport, customs and duty clearance and storage of Clinical
Supplies of Collaboration Product. [****].

 

A.1.4                   “Cost of Goods
Manufactured for Sale” or “COGM” shall mean a Party’s costs to produce [****]
and/or [****] to the extent that such costs would ordinarily be included [****]
for a similar product, including without limitation labor and material cost,
allocable depreciation and amortization, product quality assurance/control
costs, allocable facilities costs (e.g., sewer, water, property taxes), Third
Party Royalties, insurance, and other costs borne by the party for transport,
customs and duty clearance and storage of Commercial Supplies of Collaboration
Product. [****].

 

A.1.5                   “Cost of Sales”
shall mean a Collaboration Product’s Cost of Goods Manufactured for Sale [****],
Third Party Royalties (i.e., any allocable intellectual property acquisition
and licensing costs not included in COGM) and transport, customs and duty
clearance on sales if borne by the seller.

 

A.1.6                   “Development Expenses” shall mean the
costs and expenses associated with Development activities actually for each
Collaboration Product incurred by Biogen Idec or PDL or their Affiliates from August 2,
2005, provided that the provisions of Section 3.5(a)(ii) are complied
with, and otherwise, from the Effective Date through the later of (a) [****],
or (b) [****]. The costs and expenses associated with

 

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

 

 

96

 

Development
activities shall include those costs required to obtain, maintain and/or expand
the authorization and/or ability to manufacture, formulate, fill, ship and/or
sell Collaboration Product in commercial quantities to Third Parties in the
Territory, including the costs of the Parties associated with the transfer of,
and implementation of manufacturing technology necessary to qualify a
manufacturing facility. Development Expenses shall also include, but are not
limited to, costs of research or Development, including costs of studies on the
toxicological, pharmacological, metabolical or clinical aspects of a
Collaboration Product conducted internally or by individual investigators or
consultants and necessary for the purpose of obtaining, maintaining and/or
expanding marketing approval of a Collaboration Product, process development,
process improvement and scale-up costs, validation costs, including
qualification lots, the manufacture of Clinical Supplies of Collaboration
Product, and costs for preparing, submitting, reviewing or developing data or
information for the purpose of submission to a governmental authority to
obtain, maintain and/or expand manufacturing and/or marketing approval of a
Collaboration Product and costs of marketing studies related to Collaboration
Product. Development Expenses shall include the previously incurred cost of any
inventory of Collaboration Products held by PDL at the Effective Date, provided
that the date at which the cost of any such inventory shall be deemed to be
incurred by PDL as a Development Expense shall be the date such product is
shipped for use in Clinical Trials for a Collaboration Product. Development
Expenses shall also include expenses for data management, statistical designs
and studies, document preparation, and other administration expenses associated
with the clinical testing program. In determining Development Expenses
chargeable under this Agreement, each Party will use its respective project
accounting systems, and will review its respective project accounting systems
and methodologies with the other Party. The Parties shall agree upon and
consistently apply methodologies for calculating and allocating Development
Expenses based on their respective internal accounting systems. The Parties
hereby agree that efforts of the employees of a Party or its Affiliates in
performing its activities hereunder shall be charged as Development Expenses at
the applicable FTE Rate. Notwithstanding anything in this Section to the
contrary, only those Development Expenses that are contemplated by the
Development Plan and an Annual Workplan/Budget or were otherwise approved by
the JSC shall be chargeable by a Party as Development Expenses with any cost
overruns treated in the manner set forth in Section A.2.2 of this Exhibit C.
All payments made by a Party to a Third Party in connection with the
performance of its activities under the Development Plan and an Annual
Workplan/Budget shall be charged as Development Expenses at such Party’s actual
out-of-pocket cost. The Cost of Clinical Supplies of Collaboration Product
shall be charged as a Development Expense. Except to the extent included in
Cost of Clinical Supplies of Collaboration Product, expenses incurred by each
Party for equipment, materials and supplies utilized in performing its
activities under the Development Plan and an Annual Workplan/Budget shall not
be separately charged as Development Expenses, except for those expenses
incurred by a Party, with the prior written consent of the JSC as set forth in
the Development Plan and Annual Workplan/Budget, in the purchase or making of
equipment, materials or supplies (other than common laboratory supplies, e.g., pipettes, test tubes, petri dishes, reagents, and the
like) that are to be used exclusively in connection with the performance of
such

 

97

 

Party’s
activities under a Development Plan and an Annual Workplan/Budget (e.g., laboratory animals, placebo supplies, etc.), which
expenses shall be charged as Development Expenses at such Party’s actual
out-of-pocket expense incurred in purchasing or making such equipment,
materials or supplies. Special purchases of capital equipment not related to
Manufacturing that are used solely for purposes of the Collaboration shall be
approved in advance by the JSC.

 

A.1.7                   “Distribution Costs” shall mean the
FTE costs and other costs specifically identifiable or allocable to the
distribution of Collaboration Product by a Party and described in an Annual
Commercialization Plan/Budget including warehousing, transportation, order
entry, billing, shipping, credit and collection and other such activities as
approved by the JSC. For purposes of this definition, FTE costs shall be
charged at the applicable FTE Rate.

 

A.1.8                   “FTE Rate” shall
mean as defined in Section A.6 of this Exhibit C.

 

A.1.9                   “Gross Sales” shall mean the gross amount invoiced by a Party
or its Affiliates or sublicensees for sales of a Collaboration Product to Third
Parties in the Territory, including sales to distributors. For clarity, Gross
Sales will include a Party’s revenue from distributors, and not revenue of the
distributors themselves. A sale or transfer of a Collaboration Product by a
Party to one of its Affiliates shall not be considered a sale to a Third Party
for the purpose of this provision but the resale of such Collaboration Product
by such Affiliate to a Third Party shall be a sale for such purposes. In the
event the Collaboration Product is sold in the form of a Combination Product,
Gross Sales will be the Combination Product Amount. Each Party shall
communicate to the other Party any mandatory discounts to Gross Sales levied by
any Third Party.

 

A.1.10            “Marketing Costs”
shall mean the FTE costs and other direct costs of marketing, promotion and
advertising, including, without limitation, costs for preparing and reproducing
detailing aids, Collaboration Product promotional Materials and other
promotional materials, costs of professional education, product related public relations, relationships with
opinion leaders and professional societies, market research (before and after
product approval), healthcare economics studies, Post-Approval Clinical Trials,
and other similar activities directly related to the Collaboration Products, in
each case as approved by the JSC as part of the Commercialization Plan and an
Annual Commercialization Plan/Budget. Such costs may also include actual
out-of-pocket costs for outside services and expenses (e.g., consultants,
agency fees, meeting costs, etc.). “Marketing Costs” shall also include
activities related to obtaining reimbursement from payers, costs of sales and
marketing data, and costs not previously included as Sales Costs. For purposes
of this definition, FTE costs shall be charged at the applicable FTE Rate, as
set forth in Section A.1.16 of this Exhibit C.

 

A.1.11  “Net Sales” shall
mean Gross Sales of a Collaboration Product less applicable Sales Returns and
Allowances.

 

A.1.12  “Ongoing Development Expense” shall mean FTE costs and

 

98

 

other costs
and expenses borne by either Party or its Affiliates with respect to Phase IV
Clinical Trials approved by the JSC and other expenses approved by the JSC associated
with market positioning of a Collaboration Product to the extent not otherwise
included within Development Expenses or Marketing Costs or Sales Costs under
any other written agreement between the Parties or their Affiliates relating to
Collaboration Product. For purposes of this definition, FTE costs shall be
charged at the applicable FTE Rate.

 

A.1.13  “Operating Expenses” shall mean Cost of Sales,  Marketing Costs,  Sales Costs, Ongoing Development
Expenses,  Other Out-of-Pocket Costs and
Distribution Costs

 

A.1.14  “Other Out-of-Pocket Costs” shall mean other operating
expenses paid by the Parties or their Affiliates to Third Parties which are not
part of Development Expenses, but are considered and approved by the JSC as
expenses for purposes of the cost sharing arrangements under the Agreement. Other
Out-of-Pocket Costs shall be limited to the following:

 

•                       Third Party
License Fees (other than those related to the manufacture of Collaboration
Product to the extent covered under any other written agreement between the
Parties or their Affiliates related to Collaboration Product)

 

•                       Patent
Costs and trademark costs (as limited by Article 12 of the Agreement)

 

•                       product
liability insurance to the extent the Parties obtain a joint policy

 

•                       costs pursuant
to joint ownership of intellectual property as outlined in Article 12 of
this Agreement

 

•                       costs
incurred in the defense of infringement suits pursuant to Section 12.8 of
the Agreement

 

•                       other
expenses approved by the JSC

 

A.1.15  “Post-Approval Clinical Trial” shall mean any clinical trial
in an indication, other than a Phase 3 Clinical Trial or Phase 4 Clinical
Trial, to be conducted after a Regulatory Approval for such indication.

 

A.1.16            “Sales Costs” shall
mean FTE costs and other direct costs approved by the JCC as part of the
Commercialization Plan and an Annual Commercialization Plan/Budget and
specifically identifiable to sales of Collaboration Products in the Territory. Sales
Costs shall include costs associated with Sales Representatives and training of
the Sales Representatives, sales meetings, details, sales call reporting, work
on managed care accounts, costs related to customer service and other sales and
customer service-related expenses. Sales Costs will not include start-up costs
associated with either Party’s sales force, including recruiting, relocation

 

99

 

and other similar costs. The annual FTE cost shall be determined based
on the actual FTE cost from the prior budget year for the respective Sales,
Marketing, Customer Service, Managed Markets, Decision Support and Medical
Affairs functions of each Party, with one collaboration FTE rate established
each year for all sales and marketing functions.

 

A.1.17  “Sales Returns & Allowances” shall
mean the sum of (a) and (b), where: (a) [****]; and (b) [****].

 

It is the
intention of the Parties that the interpretation of these definitions in this Exhibit C
will be in accordance with U.S. GAAP consistently applied in accordance with
Biogen Idec then current practices. A Party will promptly make the appropriate
adjustments to the financial information it supplies under the Agreement to
reflect changes to the provisions, including reasonable detail underlying the
adjustment, in reporting results of operation.

 

A.2.1. Reporting.
Each Party shall report to the other Party forecasts, budgets and actual
results of operations related to the following:

 

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

 

*Certain information on
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100

 

Reporting by
each Party will be performed as follows:

 

	
  Reporting Event

  	
   

  	
  Frequency

  	
   

  	
  Timing of Submission

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

The financial
representatives from the Parties will review financial information [****] and
meet as appropriate but shall in any event meet in person at least quarterly to
review and approve the following:

 

•                       [****]

•                       [****]

•                       [****]

•                       [****]

•                       [****]

 

Costs included
in Cost of Clinical Supplies are not subject to JSC approval as long as they
are consistent with the definitions and within the JSC approved budget.

 

A.2.2  Reconciliation Statements.
Within [****] following the end of a Calendar Quarter, each Party shall submit
to the other Party its report of actual results as outlined above (including a
summary of charges and credits allocated to its Development Expense Project
Account). Expenses charged by either Party as Ongoing Development Expenses,
Other Out-of-Pocket Costs and Development Expenses shall not exceed [****] of
the amount included for the total expenditure in the then current Development
Plan or Annual Workplan/Budget, as the case may be, unless the JFC recommends,
and the JSC approves such excess expense. If actual costs of any expense line
item in implementing an Annual Work Plan/Budget or the Development Plan is
expected to vary by more than [****], then the Party incurring the variance(s)
has

 

101

 

the obligation
to inform the other Party of such variance(s) in a timely manner and to discuss
with such Party the causes of the variance(s). Any such discussion as to the
cause of the variances shall occur at the JFC. If the actual costs of
implementing an Annual Work Plan/Budget or the Development Plan are expected to
vary by more than [****] from the amounts budgeted for expenditure during the
calendar year, the Responsible Development Party will promptly revise, as
applicable, the Annual Workplan/Budget or Development Plan and submit it in
writing, with an explanation of the variance and the reasons therefore, for
approval to the JSC. If the JSC does not approve the variance, the amount by
which the actual costs exceed [****] of the budgeted costs shall be borne by
the Party that incurred the costs.

 

The financial
representatives from each Party on the JFC shall be responsible for, within [****]
days following the end of a Calendar Quarter, preparing a statement (“Reconciliation Statement”) in a format agreed to by the
Parties showing each Party’s results, the calculations of Ongoing Development
Expenses, Other Out-of-Pocket Costs, Cost of Clinical Supplies, COGM and Development
Expenses sharing under Section 3.6 of the Agreement and any cash
settlement required. The Reconciliation Statement and reports of actual results
compared to budget will be sent to the JFC, within [****] following the end of
a Calendar Quarter for approval. After approval by the JFC, the JFC will
forward the Reconciliation Statement to the JSC for its information or approval
in the case of a dispute. The Reconciliation Statement shall be provided to the
JSC [****] prior to the date upon which the JSC shall meet to approve the
Reconciliation Statement, if approval is being sought. Reconciliation
Statements shall be made by PDL or Biogen Idec in the manner set forth in Section A.5
of this Exhibit C.

 

A.3  Foreign Exchange. The
“Functional Currency” for accounting for
Ongoing Development Expenses, Other Out-of-Pocket Costs and Development
Expenses will be U.S. dollars. Except as the Parties otherwise mutually agree,
for billing and reporting, the statement of operations will be translated into
U.S. dollars using the [****] listed in The Wall Street Journal
for the [****]. If, due to restrictions or prohibitions imposed by national or
international authority, payments cannot be made as provided in this Section,
the Parties shall consult with each other with a view towards finding a prompt
and acceptable solution, and the paying Party will transfer funds as the other
Party may lawfully direct at no additional out-of-pocket expense to the paying
Party.

 

A.4  Audits and Interim Reviews.
Either Party shall have the right to request that a nationally recognized,
independent accounting firm to be mutually agreed upon by the Parties and that
is not either Party’s independent accounting firm perform an audit
or interim review of the other Party’s books and records as they relate to

 

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

 

102

 

activities
under this Agreement in order to express an opinion regarding such Party’s
accounting for revenues, costs and expenses under this Agreement. Such audits
or review will be conducted at the expense of the requesting Party. Either
Party shall have the right to request that a nationally recognized, independent
accounting firm to be mutually agreed upon by the Parties and that is not
either Party’s independent accounting firm perform an audit of the other Party’s
books of accounts for the sole purpose of verifying compliance with the
Agreement and the Transaction Agreements. Upon [****] prior written notice from
a Party (the “Auditing Party”), the other Party
(the “Audited Party”) shall permit the
mutually agreed upon independent accounting firm to examine the relevant books
and records of the Audited Party and its Affiliates as may be reasonably
necessary to verify the reports and information submitted by the Audited Party
and the accuracy of any Reconciliation Statement. An examination by a Party
under this Section shall occur not more than [****] and shall be limited
to the pertinent books and records for any calendar year ending not more than [****]
before the date of the request. The accounting firm shall be provided access to
such books and records at the Audited Party’s facility(ies) and/or the
facilities of its Affiliates or sublicensees where such books and records are
normally kept and such examination shall be conducted during the Audited Party’s
normal business hours. The Audited Party may require the accounting firm to
sign a standard non-disclosure agreement with terms that are not inconsistent
with the terms of the Agreement before providing the accounting firm access to
the Audited Party’s facilities or records. Upon completion of the audit, the accounting
firm shall provide both Biogen Idec and PDL a written report disclosing whether
the reports submitted by the Audited Party are correct or incorrect and the
specific details and supporting analysis for any discrepancies. No other
information shall be provided to the Auditing Party. If the accounting firm
determines that, based on errors in the reports so submitted, any report
prepared in accordance with the Agreement is incorrect, the Parties shall
promptly revise the report and the associated Reconciliation Statement and any
additional amount owed by one Party to the other shall be paid within [****]
after receipt of the accountant’s report, along with interest at the lesser of (i) the
[****] or (ii) the highest rate permitted by applicable law from the date
that such additional amount should have first been paid; provided,
however, that no such interest shall be
payable if the errors leading to the Reconciliation Statement being incorrect
were in the reports provided by the Party to receive such additional amount. Additionally,
if the accountant determines that the reports submitted by the Audited Party
overstate the Audited Party’s share by more than [****], the Audited Party
shall reimburse the Auditing Party for the expenses incurred by the Auditing
Party in conducting the audit. Notwithstanding anything to the contrary herein,
the Parties shall coordinate with their Affiliates such that not more than [****]
audit of a Party and its Affiliates as a whole, shall be performed in any given
calendar year with respect to the

 

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

 

103

 

development,
manufacturing, commercialization or other use of the Collaboration Product
under any written agreement between the Parties and/or their Affiliates
relating to the Collaboration Product. In the event of any sublicense or
transfer of rights with respect to Collaboration Products by a Party under this
Agreement, the sublicensor or transferor shall provide for audit rights by the
other Party to this Agreement in accordance with this Section A.4 of this Exhibit C.

 

A.5 
Payments Between the Parties. Based upon the
Reconciliation Statement, as approved by the JFC or the JSC, as applicable,
there shall be a cash settlement between the Parties no later than [****]
after the end of each Calendar Quarter. In the event any payment is made after
the date specified in the preceding sentence and provided that such payment is
not otherwise subject to good faith dispute, the paying Party shall increase
the amount otherwise due and payable by adding interest at the lesser of (i) [****]
or (ii) the highest rate permitted by applicable law from the date that
such additional amount should have first been paid. Except where the actual
expenses for the Daclizumab development exceeds the annualized budget/plan by
more than [****], and such variances were approved by the JSC, then the Parties
shall get a payment deferral of [****] for cash settlement of the amount in
excess of [****] of the annualized budget/plan. If a Party elects to defer
payments during this time, interest will accrue [****] and through settlement.

 

Any other amount owed by one Party to the
other Party under this Agreement, except for amounts pursuant to Reconciliation
Statements, that is not paid within the applicable time period set forth herein
shall bear simple interest [****], as reported in the Wall Street Journal,
Eastern Edition, on the due date (or, if the due date is not a business day, on
the last business day prior to such due date).

 

A.6                             FTE
Methodology

 

A.6.1                   Accounting for
Development Expenses. All Development Expenses, Ongoing Development Expenses
and Other Out-of-Pocket Costs will be based on the appropriate costs definition
stated in the Agreement or Section A.1 of this Exhibit C.

 

Each Party shall report Development Expenses
and Ongoing Development Expenses based on its project cost system (which shall
in any event track FTEs by functional area and by month) or using such other
system as such Party applies with respect to its internal programs and which
system has been reviewed with the JFC. In general, these project cost systems
shall report actual and/or allocable time spent on specific projects, apply the
FTE Rates, determined in the manner specified below, capture actual and/or
allocable costs of specific projects and allocate other expenses to

 

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

 

104

 

projects. For
Other Out-of-Pocket Costs the Parties will allocate costs based on spending in
the relevant departments or applying such other allocation methodology as such
Party uses with respect to all other products taken as a whole, and which shall
be approved by the JSC.

 

A.6.2                   Research and
Development FTE Rate. For the [****], the FTE rate will be set at [****]
per year. FTE Rates will increase annually to reflect the change over the
preceding [****] for which data is then available in the [****], All Items (as
published by the [****]). FTE Rates
shall be set in a manner, which fairly reflects the direct costs of each Party
for the direct functional groups specified below:

 

Direct
Functional Groups.       Research &
Development shall include the following: Research, Project Management,
Preclinical, Product Development/QA, Medical Research/Medical
Operations/Clinical, Biometry (biostatistics and data management), Medical
Writing,  Regulatory Affairs/Drug Safety,
Manufacturing (not including production of Clinical Supplies and commercial supplies,
which will be stated in the Clinical Supply Plan for Clinical Supplies and in
the Commercial Supply Agreement for Commercial Supplies).

 

Total budgeted
expenses incorporated in the FTE Rate shall include and be limited to: [****].

 

A.7                             Principles
of Reporting

 

The results of operations of the Collaboration will be presented in the
following format (on a per Collaboration Product basis), with the categories as
defined in Section A.1 below:

 

A.7.1                   Income
Statement

 

Gross Sales

Less: Sales
Returns and Allowances

= Net Sales

Less: Cost of
Sales

= Gross
Profits

Less:
Marketing Costs

Less: Sales
Costs

Less: Ongoing
Development Expenses

Less: Other
Out-of-Pocket Costs

= Contribution

Less:
Distribution Costs

=
Collaboration Product Profit (Loss)

 

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

 

105

 

Separately
reported will also be:

 

Other Development Costs

 

Development Expenses

 

Cost of Clinical Supplies

 

Ongoing Development Expense

 

It is the intention of the Parties that the
interpretation of these definitions will be in accordance with U.S. GAAP
consistently applied consistent with a Party’s report in its financial statements
filed in accordance with the Securities Exchange Act of 1934, as amended.

 

A.7.2                   Subcomponent
Reporting

 

For reporting purposes only, expenses will be
identified for the budget, forecast, and quarterly actual amounts within this Section A.7.
by the following detail sub-components within the aggregate Income Statement
expense components specified under Section A.7.1.

 

•                  Cost
of Sales – cost of goods manufactured for sale, third party royalties, freight &
other

•                  Marketing
– marketing promotion, market research, marketing headcount

•                  Sales
– sales headcount, sales promotion & sales operations

•                  Development
– by indication label-enabling activities & trials, by indication post
marketing activities & trials, cost of goods manufactured for clinical
supply, medical education.

 

A.8                             Budget
and Long Range Plan

 

Responsibility for the Budget and Long Range Plan with regard to
Collaboration Products, prior to the First New Product FDA Approval, will be as
specified in Articles 2 and 3 of the Agreement

 

Budgets will be prepared annually for the following full calendar year
containing monthly details/numbers.

 

Budgets will be supplemented with high level business plans and costs
for clinical trials, registration applications, and plans for product
introduction, sales efforts and promotion.

 

106

 

EXHIBIT D
:  OPT OUT ROYALTIES AND ROW ROYALTIES

 

I. OPT-OUT ROYALTIES FOR
COLLABORATION PRODUCTS

 

	
   

  	
   

  	
  Existing Products

  	
   

  	
  Existing Products

  	
   

  	
  Future Products

  	
   

  
	
   

  	
   

  	
  Payable to Biogen

  Idec

  	
   

  	
  Payable to PDL

  	
   

  	
  Payable to Biogen

  Idec/ PDL

  	
   

  
	
  Preclinical

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  Phase I

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  Phase II

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  Phase III

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  After
  Approval

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

*Royalties in %

 

II. ROW ROYALTIES OWED FOR ROYALTY
PRODUCTS

 

	
   

  	
   

  	
  ROW Royalty

  payable to PDL

  	
   

  	
  Royalty on

  Termination**

  payable to

  Biogen Idec

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

	
  *Royalties
  in %

  

 

**Note:  The royalty in table
applies provided that diligent efforts were underway in the territory, and that
such termination was Phase III or later in the US and EU territories. In the
event that this is not the case, Phase II royalties should apply for Biogen
Idec in the ROW territory:

 

[****]

[****]

[****]

 

 

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

 

 

Exhibit 1.41

 

Daclizumab PRODUCT

 

[****]

 

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

 

 

 

EXHIBIT 1.54

 

Fontolizumab PRODUCT

 

[****]

 

 

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

 

 

 

EXHIBIT 1.135

 

Volociximab
PRODUCT

 

[****]

 

 

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

 

 

 

Exhibit 2.1

 

Joint Operating Principles

 

The following Principles are intended as guidelines for the operation
of the Committees and Collaboration, but the specific terms of the Agreement
shall be controlling in the case of any conflict between a provision of the
Agreement and these guidelines.

 

 Guiding Principles

 

•                  Engage in
development activities with the goal of obtaining regulatory approval for each
collaborative product as soon as reasonably practicable in major market
countries where it makes commercial sense to do so given the economic profile
and the safety and efficacy profile of such collaborative product

•                  Utilize the
then-prevailing infrastructure, expertise and experience of each party with
respect to specific development activities for collaborative products in
specific indications

•                  Create
reasonable flexibility to allow each party to build infrastructure for
development and commercialization activities if it reasonably elects, provided
that the cost associated with building such infrastructure are not charged to
the reimbursable activities under this agreement

•                  Avoid
unnecessary duplication of resources

•                  Maximize
information flow between parties

•                  Allow each party
to have input into the content and scope of Registrations for collaborative
products and, through their Joint Steering Committee representatives, the right
to approve substantive portions of any registrations

•                  Allow each party
to participate in substantive interactions with Regulatory Authorities related
to collaborative products

 

1.                                      Development:  Joint Development Plan

 

Each joint development plan shall be in the form agreed upon by the
Joint Strategy Committee, but shall address, at a minimum, the following:

•                  Goals for the
development of the collaborative products

•                  Critical decision
points criterion

•                  Scope of
research and clinical work, including regulatory strategy

•                  Timeline for
performing research and clinical work

•                  Anticipated
indications, including the desired product profile and formulation

•                  Competitive
market issues

•                  High level cost
and other financial estimates

•                  Manufacturing,
product supply and cell-line development activities

•                  General
commercialization framework

 

 

 

•                  Operational
responsibilities for each party

•                  Key technical
and commercial assumptions

 

2.                                      Development:  Annual Work Plan

 

•                  A reasonable
detailed description of the development activities to be performed during the
next full calendar year or to the next key decision point 

•                  The estimated
budget for such activities for at least the next full calendar year 

•                  A designation of
which party is responsible for each task 

•                  Estimated
staffing levels 

•                  Any expected use
of Third Party contractors required to carry out the applicable development
activities and the party that shall manage such third party contractor 

•                  Estimated
timelines for completion of such activities 

•                  Estimated
product requirements for each activity

 

 

 

Exhibit 3.3

 

Initial Development Plans And Initial
Development Program Budget For Existing Products

 

Neither Party shall be obligated to incur costs for any activities,
except for those set forth herein, unless and until (a) such
study/activity is approved by the JSC, or (b) is included in a Development
Plan approved by the JSC pursuant to Section 3.3(b) of the Agreement.

 

All costs submitted for reimbursement by the Parties must be
demonstrably related to the activities specified in this draft Development
Plan.

 

I. Development Plan for Daclizumab in [****]

 

2.1                               A.
Daclizumab in [****]:  Clinical Program
Rationale and Strategy 

 

[****].

 

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

 

 

 

B. Daclizumab in [****]:  Clinical Development Studies 

 

	
  Study

  	
   

  	
  N

  [Active;

  Placebo]

  (Inv.

  Centers)

  	
   

  	
  Purpose

  	
   

  	
  First

  Patient

  Dosed

  	
   

  	
  Last

  Patient

  Visit

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost ****

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  

 

Notes:* – Pivotal studies; ** TBD – to be determined; *** dac –
Daclizumab; **** [****].

 

C. Daclizumab
in [****]:  Timetable of Development
Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

 

II. Development Plan for Volociximab in [****]

 

A. Volociximab in [****]:  Clinical Program Rationale and Strategy 

 

[****]

 

B.
Volociximab in [****]:  Clinical
Development Studies

 

	
  Study

  	
   

  	
  Est. # Pts

  (# of

  Centers)

  	
   

  	
  Purpose of

  study

  	
   

  	
  Est. Start

  Date

  	
   

  	
  Est. Last

  Patient visit

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost*

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* [****].

 

C. Volociximab in [****]:  Major Project Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

III. Development Plan for Volociximab in [****]

 

A. Volociximab in [****]:  Clinical Development Rationale and Strategy

 

[****]

 

B.
Volociximab in [****]:  Clinical
Development Studies

 

	
  Study

  	
   

  	
  Est. # Pts (#

  of Centers)

  	
   

  	
  Purpose of

  study

  	
   

  	
  Est. Start

  Date

  	
   

  	
  Est. Last

  Patient

  visit

  (safety)

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost*

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* [****].

 

C. Volociximab in [****]:  Major Project Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

IV. Development Plan for Fontolizumab in [****]

 

A. Fontolizumab in [****]:  Clinical Development Rationale and Strategy

 

[****]

 

B.
Fontolizumab in [****]:  Clinical
Development Studies

 

	
  Study

  	
   

  	
  Est. # Pts

  (# of

  Centers)

  	
   

  	
  Purpose of

  study

  	
   

  	
  Est. Start

  Date

  	
   

  	
  Est. Last

  Patient

  visit

  	
   

  	
  Status

  	
   

  	
  Projected

  Cost*

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* [****].

 

C. Fontolizumab in [****]:  Major Project Milestones 

 

	
  Milestone

  	
   

  	
  Date

  	
   

  	
  Comments

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
   

  	
   

  

 

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

 

 

 

V. Initial
Program Budget for Existing Products

 

2005 FTE and External Cost  ($ in thousands)

 

	
  Function

  	
   

  	
  Type

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  Program

  Totals

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
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  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
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  [****]

  	
   

  
	
   

  	
   

  	
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  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
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  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
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  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  
	
  [****]

  	
   

  	
   

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  	
  [****]

  	
   

  

 

* An additional [****]
in [****] expense will be incurred if the [****] trial enrolls on plan.

 

 

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

 

 

EXHIBIT 4.1(b)(ii)

OPT OUT POINTS FOR EXISTING
COLLABORATION PRODUCTS

 

2.1                               Daclizumab

 

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

 

2.2                               Fontolizumab

 

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

 

 

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

 

 

 

2.3                               Volociximab

 

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

•                  [****]

 

 

Opt out points for New Collaboration Products or Indications shall be
decided by the JSC.

 

 

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

 

 

Exhibit 8.3

 

A Commercial Supply Agreement between the Parties for
Collaboration Products or Royalty Products shall contain, in addition to
customary manufacturing terms and conditions, the following obligations:

 

a.               The Responsible Commercialization Party
shall purchase [****] of its, its Affiliates and its sublicensees’ commercial
requirements of Collaboration Product from the Manufacturing Party.

 

b.              The Parties will agree to reasonable
forecasting mechanisms in the Commercial Supply Agreement. The Manufacturing
Party will provide the other Party with notice not less than [****] in advance
of any anticipated change in annual production that would impact such party’s
ability to meet forecasted demand.

 

c.               Collaboration Product shall be Manufactured
in accordance with all requirements of applicable laws and regulations and all
GMP, as prescribed from time to time by the FDA and other applicable worldwide
regulatory authorities, using the product specifications, manufacturing methods
and formulae as agreed upon by the Parties.

 

d.              If either Party believes that any
Regulatory Approval, GMP, or other applicable law, or any other notice from a
regulatory authority, shall require a change to the particular product specifications,
the Parties shall consult prior to the implementation of such change in order
to mutually determine whether such change is, in fact, required by such
Regulatory Approval, GMP, other applicable law or notice. Any such change in
product specifications will be effected upon mutual agreement of the Parties.

 

e.               In the event either Party is unable to obtain
Regulatory Approval for a Collaboration Product and such lack of approval is
related to the CMC Section, then the other Party shall have the right to
become, and assume all of the responsibilities of, the Manufacturing Party for
such product.

 

 

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

 

 

f.                 The non-Manufacturing Party shall have the
right to conduct (upon reasonable notice during reasonable business hours)
reasonable quality assurance audits with respect to all facilities, operations
and laboratories (and any records related thereto) of the Manufacturing Party
or, if applicable, the Third Party contract manufacturer used by such Party,
where applicable Manufacturing activities are conducted, as is reasonably
necessary to verify the compliance with GMP and other regulatory requirements.
The results of any such audit shall be provided to the other Party.

 

g.              The Manufacturing Party may
not utilize a Third Party contract manufacturer without the consent of the
non-Manufacturing Party.

 

h.              The Manufacturing Party shall
be responsible for release of product from its and its Third Party CMO’s
facilities. The non Manufacturing Party shall have access to, and the right to
review, all release documentation for any evidence of product nonconformance.

 

i.                  If the Manufacturing Party
desires to use a Third Party to perform any part of the Manufacture and supply
or if the Manufacturing Party plans to undertake capacity expansion,
significant facility improvements, or the purchase of capital equipment for the
Manufacture of Collaboration Product, the JSC shall first consider whether the
other Party has the ability, capability, and desire to perform such Manufacture
and supply and, if so, the Parties shall amend the Commercial Manufacturing
Agreement to cover the part of the Manufacture and supply to be performed by
such other Party.

 

j.                  In the event that the non Manufacturing
Party consents to use of a Third Party contract manufacturer, the Manufacturing
Party shall enter into a supply agreement and quality agreement and shall
ensure that the non Manufacturing Party shall either be a party to such
agreements (in addition to the Responsible Manufacturing Party), or a third
party beneficiary of such agreements. To the extent the non Manufacturing Party
is not a party to such agreements, it shall be a permitted assignee or
sublicensee under such agreement.

 

k.               The non Manufacturing Party shall have the
right to review and comment upon the Third Party supply agreement and quality
agreement.

 

l.                  If the Manufacturing Party utilizes a Third
Party contract manufacturer, such supply agreement shall require the Third
Party supplier to transfer sufficient information (including information
contained in the CMC section of any applicable Regulatory Filings, the
results of any stability studies performed on Product and copies of any direct
communications between the Third Party supplier and regulatory authorities in
relation to Product) to

 

 

Biogen Idec or PDL (as appropriate), in each case as is required to
implement the then-most current versions of such Manufacturing process, upon
termination of such agreement or otherwise upon request.

 

m.            If the Manufacturing Party is unwilling or unable to meet [****]
of the Responsible Commercialization Party’s requirements for Collaboration
Product on the timelines set forth in the Commercialization Plan for such
Collaboration Product or if the Collaboration Product Manufactured consistently
does not meet the requisite Product specifications and other quality
requirements set forth herein, then the Manufacturing Party shall, at the election of the other
party, conduct a transfer of the necessary Manufacturing
Technology to the non Manufacturing Party so as to enable it to Manufacture or
have Manufactured such Product by a Third Party contract manufacturer of its
choice. The non Manufacturing Party, upon such transfer, shall become the
Manufacturing Party for purposes of the Collaboration Product.

 

n.              The Parties shall enter into a Technology
Transfer Agreement containing the FTE Plans and costs related to CMC/filing activities
for the Collaboration Products. In addition, the Parties shall enter into a
Quality Agreement related to the Manufacture of the Collaboration Products. Such
Quality Agreement shall specify the designated Qualified Person for release of
finished Collaboration Products.

 

 

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

 

 

 

Exhibit 11.5

 

Required Attachment of Certain Provisions of the [****]

 

[****]

 

 

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00093-of-00352.parquet"}]]