[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

Exhibit 10.1

COLLABORATION AGREEMENT

THIS COLLABORATION AGREEMENT

(the "Agreement") is dated as of May 22, 2001 (the "Effective Date") by and
between Exelixis, Inc., a Delaware corporation having its principal place of
business at 170 Harbor Way, P.O. Box 511, South San Francisco, California
94083-0511 ("EXEL"), and Protein Design Labs, Inc., a Delaware corporation
having its principal place of business at 34801 Campus Drive, Fremont,
California 94555-3606 ("PDL"). EXEL and PDL are sometimes referred to herein
individually as a "Party" and collectively as the "Parties."

Recitals

A.

PDL has expertise and capability in developing antibodies, in particular
humanized antibodies, as pharmaceuticals.

B.

EXEL has expertise and proprietary technology relating to drug discovery focused
particularly on genetic model systems, genomics and computational biology and is
applying such technology to discover and validate targets and products for drug
discovery in a variety of disease areas.

C.

PDL and EXEL desire to establish a collaboration to utilize the technology and
expertise of PDL and EXEL to identify and characterize targets for the treatment
of cancer and precancerous conditions, controlling cell growth, apoptosis, and
proliferation, to generate antibodies directed against such targets, and to
develop and commercialize novel antibody products for diagnostic, prophylactic
and therapeutic uses.

Now, Therefore

, the Parties agree as follows:

Definitions

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

"Affiliate"

means, with respect to a particular Party, a person, corporation, partnership,
or other entity that controls, is controlled by, or is under common control with
such Party. For the purposes of the definition in this Section 1.1, the word
"control" (including, with correlative meaning, the terms "controlled by" or
"under the common control with") means the actual power, either directly or
indirectly through one or more intermediaries, to direct or cause the direction
of the management and policies of such entity, whether by the ownership of at
least fifty percent (50%) of the voting stock of such entity, or by contract or
otherwise.

"Antibody"

means a Humanized Antibody or Precursor Antibody.

"Antibody Inventions"

means an Invention directed to Antibodies, including without limitation,
composition of matter, methods of manufacture, methods of use, formulations,
dosing regimens, etc.

"Antibody Target"

means [ * ].

"Antibody Target Candidate"

means [ * ].

"BLA"

means a Biologics License Application as defined in the current Federal Food,
Drug and Cosmetic Act, and applicable regulations promulgated thereunder by the
FDA or the equivalent application to the equivalent agency of any other
regulatory jurisdiction, as amended from time to time during the term of this
Agreement.

"Co-Funded Product"

means a Product for which EXEL has made an effective election to co-fund
pursuant to Section 5.1 and which has not ceased to be a Co-Funded Product
pursuant to Section 5.9.

"Collaboration"

means all of the research activities performed by, or on behalf of, EXEL or PDL
during the Research Term pursuant to the Research Plan, through the stage of
evaluation of Precursor Antibodies.

"Combination Product"

means any product containing both (i) substantially all of at least one variable
region of an Antibody, and (ii) one or more other therapeutically active
ingredients.

"Commercialization Plan"

shall have the meaning set forth in Section 3.4(b).

"Controlled"

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

"Cost of Goods Sold"

means [ * ].

"Cost of Manufacture"

means [ * ].

"Development"

means those activities undertaken with respect to a Product that are directed
toward obtaining Regulatory Approval and the pre-marketing, marketing research,
marketing and sale of such Product, including without limitation, humanization,
cell line optimization, pre-clinical testing and toxicology studies, human
clinical trials, formulation, bulk production, fill/finish, manufacturing
process development, manufacturing scale-up costs and validation, qualification
and certification costs and preparation of regulatory filings.

"Development Plan"

means the plan describing the Development intended to be conducted for a given
Co-Funded Product, including an estimated schedule and budget, as such plan may
be amended by the relevant Joint Development Committee from time to time.

"Development Costs"

means [ * ].

"Diligent Efforts"

means the carrying out of obligations or tasks in a sustained manner consistent
with the efforts a Party devotes to a product or a research, development or
marketing project of similar market potential, profit potential or strategic
value resulting from its own research efforts, based on conditions then
prevailing and taking into account its relative risk profile, time to market,
and other factors considered in portfolio management. Diligent Efforts requires
that the Party: (i) promptly assign responsibility for such obligations to
specific employee(s) who monitor such progress on an on-going basis, (ii) set
and consistently seek to achieve specific and meaningful objectives for carrying
out such obligations, and (iii) allocate resources designed to advance progress
with respect to such objectives.

"Drug Approval Application"

means an application for Regulatory Approval required before commercial sale of
a Product as a pharmaceutical product in a regulatory jurisdiction.

"EXEL Diagnostic Product"

means [ * ].

"EXEL Know-How"

means all Information Controlled by EXEL during the term of the Agreement that
is necessary or reasonably useful for PDL (a) to fulfill its obligations under
the Research Plan, or (b) to research, develop, use, import, manufacture, market
or sell Antibodies or Products, but excluding the EXEL Patents.

"EXEL Patents"

means all (i) unexpired letters patent (including inventor's certificates) which
have not been held invalid or unenforceable by a court of competent jurisdiction
from which no appeal can be taken or has been taken within the required time
period, including without limitation any substitution, extension, registration,
confirmation, reissue, re-examination, renewal, patent of addition or any like
filing thereof and (ii) pending applications for letters patent, including
without limitation any continuation, division, or continuation-in-part thereof
and any provisional applications Controlled by EXEL related to Targets or
Antibodies, including the identification and generation of Antibody Target
Candidates and Antibody Targets for use in identifying and generating
Antibodies, including but not limited to issued patents and pending applications
that claim the composition of matter, manufacture, import or use of a Target,
Antibody Target Candidate, Antibody Target, Antibody or Product, which are filed
prior to or during the term of this Agreement in the United States or any
foreign jurisdiction. "EXEL Patents" shall not include Joint Patents or PDL
Patents or, after assignment to PDL, Antibody Patents.

"EXEL Products"

means those Products which previously were Co-Funded Products, but which EXEL
has assumed responsibility for Development and commercialization as described in
Section 5.9(c).

"First Commercial Sale"

means the first sale of the applicable Product to a Third Party following
Regulatory Approval of the Product in the country where sold.

"Humanized Antibody"

means [ * ] pursuant to this Agreement by [ * ]. The term "Humanized Antibody"
shall include, without limitation [ * ].

"Independent Research"

means [ * ].

"IND"

means an Investigational New Drug Application as defined in the current Federal
Food, Drug and Cosmetic Act and applicable regulations promulgated thereunder by
the FDA or the equivalent application to the equivalent agency in any other
regulatory jurisdiction, as amended from time to time during the term of this
Agreement, and any equivalent application or filing for diagnostics or medical
devices.

"Information"

means information, results and data of any type whatsoever, in any tangible or
intangible form whatsoever, including without limitation, databases, inventions,
practices, methods, techniques, specifications, formulations, formulae,
knowledge, know-how, skill, experience, test data including pharmacological,
biological, chemical, biochemical, toxicological and clinical test data,
analytical and quality control data, stability data, studies and procedures, and
patent and other legal information or descriptions.

"Inventions"

means any and all inventions, results, know-how and other Information, and all
intellectual property relating thereto, made, discovered or developed by one or
more Parties and their employees or agents (including, without limitation,
consultants or contractors who have assigned rights to inventions to a Party)
pursuant to work performed under the Collaboration or in the course of
developing a Pre-Opt-In Product or developing or marketing a Co-Funded Product.

"Joint Inventions"

means any and all Inventions (other than Antibody Inventions) made jointly by
employees or agents of both Parties (including, without limitation, consultants
or contractors who have assigned rights to inventions to a Party), as determined
in accordance with United States patent laws.

"Joint Patents"

means all (i) unexpired letters patent (including inventor's certificates) which
have not been held invalid or unenforceable by a court of competent jurisdiction
from which no appeal can be taken or has been taken within the required time
period, including without limitation any substitution, extension, registration,
confirmation, reissue, re-examination, renewal, patent of addition or any like
filing thereof, and (ii) pending applications for letters patent, including
without limitation any continuation, division, or continuation-in-part thereof
and any provisional applications claiming Joint Inventions, which are filed
during the term of this Agreement in the United States or any foreign
jurisdiction. "Joint Patents" shall not include EXEL Patents or PDL Patents or
Antibody Patents.

"Model System Targets"

means [ * ].

"Net Sales"

means [ * ].

In the case of Combination Products for which a Product and each of the other
therapeutically active ingredients contained in the Combination Product have
established market prices when sold separately, Net Sales shall be determined by
multiplying the Net Sales for each such Combination Product by a fraction, the
numerator of which shall be the established market price for the Product(s)
contained in the Combination Product, and the denominator of which shall be the
sum of the established market prices for the Product(s) plus the other active
ingredients contained in the Combination Product. When such separate market
prices are not established, then the Parties shall negotiate in good faith to
determine the method of calculating Net Sales for Combination Products.

If PDL, its Affiliates or sublicensees receive non-cash consideration for any
Product sold or otherwise transferred to a Third Party, the fair market value of
such non-cash consideration on the date of the transfer as known to PDL, or as
reasonably estimated by PDL if unknown, shall be included in the definition of
Net Sales. EXEL shall have a right to review the basis of such determination and
upon written notice, audit such estimates as provided in Section 9.16.

"Oncology Screens"

shall have the meaning [ * ].

"Opt-In Period"

shall have the meaning set forth in Section 5.1.

"Patents"

means EXEL Patents, PDL Patents and/or Joint Patents as the context requires.

"PDL Diagnostic Product"

means a product that is being or has been developed for [ * ] for use with a [ *
].

"PDL Know-How"

means all Information Controlled by PDL during the term of the Agreement that is
necessary or reasonably useful for EXEL to (a) fulfill its obligations under the
Research Plan, or (b) develop, import, use, manufacture, market or sell EXEL
Products, but excluding the PDL Patents and excluding all Information Controlled
by PDL that relates to antibodies other than EXEL Products (including, without
limitation, general methods for the humanization or manufacture of antibodies),
except to the extent the Parties agree pursuant to Section 5.9(c).

"PDL Patents"

means all (i) unexpired letters patent (including inventor's certificates) which
have not been held invalid or unenforceable by a court of competent jurisdiction
from which no appeal can be taken or has been taken within the required time
period, including without limitation any substitution, extension, registration,
confirmation, reissue, re-examination, renewal, patent of addition or any like
filing thereof and (ii) pending applications for letters patent, including
without limitation any continuation, division, or continuation-in-part thereof
and any provisional applications, Controlled by PDL related to the development
of Antibodies, including but not limited to applications that claim the
composition of matter, manufacture, or use of a Target, Antibody or Product,
which are issued or filed prior to or during the term of this Agreement in the
United States or any foreign jurisdiction. "PDL Patents" shall not include Joint
Patents or EXEL Patents or, until assigned to PDL, Antibody Patents.

"PDL Product"

means any Product developed under this Agreement which (a) [ * ], or (b) [ * ].

"Phase III Clinical Trial"

means a trial on sufficient numbers of patients that is designed to establish
that a pharmaceutical product is safe and efficacious for its intended use, and
to define warnings, precautions and adverse reactions that are associated with
the pharmaceutical product in the dosage range to be prescribed, and to support
Regulatory Approval of such pharmaceutical product or label expansion of such
pharmaceutical product.

"Precursor Antibody"

means [ * ] pursuant to this Agreement from [ * ]. The term "Precursor Antibody"
shall include, without limitation [ * ].

"Pre-Opt-In Product"

means a Product for which EXEL has not made a decision under Section 5.1 whether
to co-fund and for which the Opt-In Period has not expired.

"Product"

means any therapeutic or prophylactic product developed under this Agreement,
for [ * ], incorporating [ * ].

"Product Profit"

means the profit or loss for a particular Co-Funded Product for a particular
period calculated as described in Exhibit B.

"Regulatory Approval"

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

"Research Funding"

means the research funding and license payments made by PDL to EXEL as described
in Section 9.2.

"Research Plan"

means the research plan describing the goals and activities to be conducted
through the stage of Precursor Antibody evaluation during the Research Term,
including initially a detailed description of such goals and activities for the
first year of the Research Term and a general description of the goals and
intended activities for the remainder of the Research Term, as such plan is
amended from time to time during the Research Term in accordance with Section
3.1(b). The Research Plan, including any amended Research Plan, shall be
attached as Exhibit A.

"Research Term"

means the period commencing on [ * ] and ending on the termination [ * ].

"Sole Inventions"

means any and all Inventions (other than Antibody Inventions) made, discovered
or developed solely by one Party and its employees or agents (including, without
limitation, consultants or contractors who have assigned rights to inventions to
a Party).

"Target(s)"

means [ * ]. The term "Target(s)" shall include [ * ], but shall exclude [ * ].

"Target Pool"

means [ * ] whenever identified, [ * ].

"Third Party"

means any entity other than (i) EXEL, (ii) PDL or (iii) an Affiliate of either
of them.

"Third Party Royalty"

means any royalty paid by a Party or an Affiliate to a Third Party in respect of
the manufacture, importation, use or sale of a Product.

The Collaboration Relationship

Overview.

PDL and EXEL will collaborate to identify, develop, market and sell antibodies
for use in the diagnosis, prophylaxis and treatment of one or more [ * ]
cancerous conditions. EXEL will conduct activities under the Research Plan to
identify Targets and will present all such Targets to PDL [ * ]. Targets will be
analyzed [ * ]. [ * ] conduct preclinical testing in preparation for an IND and
develop a Development Plan for any Product for which PDL intends to file an IND.
If EXEL elects to co-fund one or more Products [ * ]

Management of the Collaboration

Joint Scientific Committee.

Membership.

[ * ] the Effective Date, the Parties shall establish a Joint Scientific
Committee (the "JSC") to oversee the research activities of EXEL and PDL under
the Research Plan. The JSC shall be composed of four representatives, two
members appointed by each of the Parties. One representative from each Party on
the JSC shall be the individual at the Party with primary responsibility for the
management of the Collaboration. Initial designees shall be Geoff Duyk and Greg
Plowman on behalf of EXEL and William Benjamin and Max Vasquez on behalf of PDL.
Each Party may replace its appointed JSC representatives at any time upon
written notice to the other Party. EXEL shall designate one of its
representatives as Chairperson of the JSC, and PDL shall designate one of its
representatives as Vice-Chairperson. The Chairperson shall be responsible for
scheduling meetings and preparing and circulating a draft agenda in advance of
each meeting. Any member may add topics to the agenda. The Vice-Chairperson
shall be responsible for preparing and issuing minutes of each meeting within
thirty (30) days thereafter.

Responsibilities.

During the [ * ], the JSC shall meet on a quarterly basis as provided in Section
3.5. Following the Research Term, the JSC shall meet on a quarterly basis for [
* ] for the purposes of winding down or completing work [ * ]. [ * ] may elect
to continue to work in the same manner as described in the Research Plan on [ *
] and [ * ] on a case-by-case basis. For those [ * ] for which [ * ] continues
to conduct such work and that complete the stage of in vitro and in vivo
validation as described in Section 2.7 of the Research Plan (to the extent
specified by the JSC), for each such resulting Product, the Opt-In Decision as
set forth in Section 5.1 (i.e., EXEL's right to co-fund) shall survive;
otherwise, such rights shall terminate. The JSC shall operate [ * ] and in
accordance with the principles set forth in this Article 3. The JSC shall: (i)
evaluate the data generated by the Parties in the course of the Collaboration,
(ii) decide what research activities the Parties shall perform on Targets or
Precursor Antibodies under the Collaboration, except as provided in Section 4.2,
and (iii) review and amend the Research Plan from time to time as appropriate,
including not less than an annual review to detail the activities and goals for
the upcoming year; provided that any amendment of the Research Plan that varies
any material terms of this Agreement shall be subject to Section 15.4, which
requires that any such amendment shall be reduced to writing and signed by an
authorized officer of each Party.

Joint Patent Committee.

Within [ * ] the Effective Date, a Joint Patent Committee (the "JPC") shall be
formed. The JPC, in consultation with the JSC, will devise a strategy for the
protection of intellectual property arising from the Collaboration, including
Antibody Target Candidates, Antibody Targets and Antibody Inventions, and will
supervise and direct the filing, prosecution and maintenance of all Patents
covering the Joint Inventions, as further described in Article 10. This
committee will consist of one member from each Party's management team or the
Party's designated alternate. The PDL representative will serve as the
Chairperson of the JPC. During the term of this Agreement, the JPC will meet at
[ * ], as provided in Section 3.5, and may hold additional meetings at the
request of either Party.

Joint Development Committee.

Membership.

[ * ] as EXEL exercises its option to co-fund a Product, as provided in Section
5.1, the Parties promptly shall establish a Joint Development Committee (a
"JDC") to oversee the development and commercialization of that Co-Funded
Product. The JDC shall be composed of four representatives, two members
appointed by each of the Parties. One JDC representative from PDL shall be the
individual at PDL with primary responsibility for the management of the
development of the Product. Each Party may replace its appointed JDC
representatives at any time upon written notice to the other Party. PDL shall
designate one of its representatives as Chairperson of the JDC, and EXEL shall
designate one of its representatives as Vice-Chairperson. The Chairperson shall
be responsible for scheduling meetings and preparing and circulating an agenda
in advance of each meeting. The Vice-Chairperson shall be responsible for
preparing and issuing minutes of each meeting within thirty (30) days
thereafter.

Responsibilities.

During the Development of a Co-Funded Product, the JDC for that Co-Funded
Product shall meet on a quarterly basis as provided in Section 3.5. Each JDC
shall operate [ * ] and in accordance with the principles set forth in this
Article 3. Each JDC shall: (i) oversee the progress of the Development conducted
by PDL for its Co-Funded Product, and (ii) review and approve any material
amendments to the Development Plan for its Co-Funded Product.

Joint Commercialization Committee.

Membership.

[ * ] for each Co-Funded Product, the Parties shall establish a Joint
Commercialization Committee ("JCC") for that Co-Funded Product. The JCC shall be
composed of four representatives, two members appointed by each of the Parties.
One representative from PDL on the JCC shall be the individual at PDL with
primary responsibility for the commercialization of the Product. Each Party may
replace its appointed JCC representatives at any time upon written notice to the
other Party. PDL shall designate one of its representatives as Chairperson of
the JDC, and EXEL shall designate one of its representatives as
Vice-Chairperson. The Chairperson shall be responsible for scheduling meetings
and preparing and circulating an agenda in advance of each meeting. The
Vice-Chairperson shall be responsible for preparing and issuing minutes of each
meeting within thirty (30) days thereafter.

Responsibilities.

Each JCC shall meet on a quarterly basis as provided in Section 3.5. Each JCC
shall operate [ * ] and in accordance with the principles set forth in this
Article 3. Each JCC shall: (i) prepare a basic commercialization plan, including
a launch and marketing plan and budget for the commercialization of its Co-
Funded Product (the "Commercialization Plan"), (ii) oversee the implementation
of the Commercialization Plan by PDL, and (iii) review and approve any material
amendments to the Commercialization Plan. In any event, the Commercialization
Plan shall not include detailed Information regarding PDL's implementation of
the Plan, including without limitation, sales force incentives, which shall be
in PDL's sole discretion. The Commercialization Plan shall be prepared taking
into consideration such factors as: (i) the use of Third Party collaborators to
develop, market and sell in particular countries or territories, (ii) market
conditions, (iii) regulatory factors, and (iv) competition. The
Commercialization Plan budget will include all projected additional Regulatory
Approvals, and sales and marketing expenses for the Co-Funded Product.

Meetings.

All meetings of the JSC, JPC, JDCs and JCCs shall be held at the headquarters of
either EXEL or PDL (or at any other mutually agreed upon location), on an
alternating basis. Either Party may bring additional representatives to attend
meetings of a particular committee as nonvoting observers. A meeting of a
committee may be held by audio or video teleconference with the consent of each
Party, provided that at least half of the minimum number of meetings for that
committee shall be held in person. Meetings of a committee shall be effective
only if at least one representative of each Party is present or participating.

Obligations of Parties.

EXEL and PDL shall provide the JSC, JPC, JDCs and JCCs and their authorized
representatives with reasonable access during regular business hours to all
records, documents, and Information relating to the Collaboration which any such
committee may reasonably require in order to perform its obligations hereunder;
provided, however, that if such documents are under a bona fide obligation of
confidentiality to a Third Party, then EXEL or PDL, as the case may be, may
withhold access thereto to the extent necessary to satisfy such obligation, such
access not to be unreasonably withheld. EXEL and PDL may also withhold documents
relating to any evaluations of the Collaboration, including documents relating
to evaluating the activities under this Agreement or relating to a decision
whether to continue a Collaboration project.

Collaboration Guidelines.

General.

In all matters related to the Collaboration and the development and marketing of
Co-Funded Products, the Parties shall be guided by standards of reasonableness
in economic terms and fairness to each of the Parties, striving to balance as
best they can the legitimate interests and concerns of the Parties to further
the goals of the Collaboration and to realize the economic potential of the
Products.

[ * ]; Deadlocks.

The JSC, JPC, JDCs and JCCs shall operate [ * ]. In the event of a deadlock
within the JSC, the JPC, a JDC or a JCC concerning any decision, such deadlock
shall be resolved as follows:

JSC Deadlocks.

If a deadlock arises between the members of the JSC, a non-JSC-member officer of
each party shall be advised of the deadlock in writing and shall attempt to
provide the JSC with a mutually agreed upon resolution within one (1) month. If
such resolution is not timely provided, the Chief Executive Officer ("CEO") of
each Party shall be advised of the deadlock in writing and the deadlock shall be
resolved by mutual agreement of the Parties' CEOs within one (1) month after
they have been so advised. If the CEOs do not agree on a resolution, [ * ]
regarding any deadlock concerning target selection (i.e., whether a Target meets
the Antibody Target Candidate or Antibody Target criteria) and all other
deadlocks shall be submitted to and resolved by binding arbitration pursuant to
the Commercial Arbitration Rules of the American Arbitration Association (the
"AAA Rules"). In any event, each Party shall submit a briefing document
detailing its position in the deadlock not to exceed 25 double-spaced 8.5"x11"
pages within 10 business days of the selection of the arbitrator, and the
arbitrator shall be instructed to make such determination within 30 days of
submission of both position papers, but in any event not later than 40 days
following submission of the matter to arbitration. The arbitration shall be held
in San Francisco, California and shall be conducted by one arbitrator who is
knowledgeable in the subject matter at issue and who is selected by mutual
agreement of the Parties or, failing such agreement, shall be selected according
to the AAA Rules. In conducting the arbitration, the arbitrator shall apply the
California Rules of Evidence, and shall be able to decree any and all relief of
an equitable nature, including without limitation such relief as a temporary
restraining order, a preliminary injunction, a permanent injunction, and
specific performance. Each Party shall bear its respective costs and expenses
and the fees of the arbitrator shall be shared equally.

JDC Deadlocks.

If a deadlock arises between the members of a JDC, the CEO of each Party shall
be advised of the deadlock in writing and shall attempt to provide the JDC with
a mutually agreed upon resolution within one (1) month. If such resolution is
not timely provided by the CEOs of the Parties, the deadlock shall be resolved
by mutual agreement of the Parties' CEOs within one (1) month after they have
been so advised. If the CEOs do not agree on a resolution, then [ * ].

JCC Deadlocks.

If a deadlock arises between the members of a JCC, the CEO of each Party shall
be advised of the deadlock in writing and shall attempt to provide the JCC with
a mutually agreed upon resolution within one (1) month. If such resolution is
not timely provided by the CEOs of the Parties, the deadlock shall be resolved
by [ * ].

Independence.

Subject to the terms of this Agreement, the activities and resources of each
Party shall be managed by such Party, acting independently and in its individual
capacity. The relationship between EXEL and PDL is that of independent
contractors and neither Party shall have the power to bind or obligate the other
Party in any manner, other than as is expressly set forth in this Agreement.

Collaboration; Humanization

Collaboration.

General.

[ * ], the Parties shall conduct collaborative research with the general goals
and objectives of: (a) applying EXEL technology to discover and characterize
Targets that may be useful as tools for the discovery and development of
therapeutic and diagnostic Antibodies for controlling cell growth, apoptosis and
proliferation in the diagnosis, prevention, treatment or cure of cancer or
pre-cancerous conditions, and (b) applying PDL technology [ * ]. Subject to [ *
], the obligations of EXEL described in [ * ] shall terminate [ * ]. The rights
and obligations of PDL in [ * ] shall terminate as provided for in [ * ]. The
obligations of PDL in [ * ] shall continue until the later of (i) the [ * ] or
(ii) the time [ * ]. The details of the Collaboration are set forth below and in
the Research Plan. In the event of any conflict between the provisions of this
Agreement and those of the Research Plan, the provisions of this Agreement shall
govern.

Presentation of Targets.

Promptly after the Effective Date, EXEL shall present to the JSC all Model
System Targets and Targets identified prior to the Research Term. During the
Research Term, EXEL will conduct activities as described in Sections 2.1 and 2.2
of the Research Plan to identify additional Model System Targets and Targets
and, promptly after identification, will present all such additional Model
System Targets and Targets to the JSC. [ * ].

Allocation of Targets to [ * ].

As described in Section 2.3 of the Research Plan, [ * ] shall conduct [ * ] for
each [ * ]. After presentation to the JSC of the [ * ] and results of such [ * ]
for a [ * ], the JSC shall determine whether the [ * ] is to be designated an [
* ] and pursued in accordance with the Research Plan. All [ * ] shall be
included in and shall constitute the "Work Pool." For each [ * ] determined not
to be designated an [ * ], then, promptly following such determination by the
JSC, and in no event later than the quarterly JSC meeting following the JSC
meeting at which such determination was made, [ * ] shall elect, by notifying
the JSC, whether such [ * ] shall be included in the [ * ] (in which case it
shall be a [ * ]) or the [ * ] (in which case it shall be an [ * ]).

[ * ]

[ * ] shall be reserved for possible future inclusion by the JSC in the Work
Pool. [ * ] shall have [ * ] license with respect to the [ * ] as set forth in [
* ]. [ * ] may designate a maximum number of [ * ] equal to [ * ]. [ * ] may at
any time, by notifying the JSC, elect to re-designate a [ * ] as an [ * ], in
which event it shall no longer count against the maximum number of [ * ]. The
JSC may designate a [ * ] for out-licensing, in which case it shall continue to
count as a [ * ] until such time as it is either out-licensed or re-designated
by [ * ] as an [ * ] or re-designated by the JSC to be included in the Work
Pool.

[ * ]

[ * ] shall be available for possible future inclusion by the JSC in the Work
Pool or by [ * ] in the [ * ] at [ * ], subject to the following limitation: If
[ * ] [ * ] in one or more model organisms, other than [ * ], either on its own
behalf or pursuant to an agreement with a Third Party Antibody Collaborator (as
defined below) and if [ * ] identifies through such [ * ] that is also a [ * ],
then [ * ] shall promptly notify the JSC in writing that such [ * ] was
identified in a screen outside the Collaboration. If such [ * ] is an [ * ], and
if there is a reasonable basis to believe such [ * ] may have potential in
cancer, then no later than the quarterly JSC meeting following the JSC meeting
at which such notice was provided, the JSC may elect to include such [ * ] in
the Work Pool or [ * ] may elect to include such [ * ]. If neither the JSC nor [
* ] so elects, then such [ * ] shall be remain in the [ * ] and shall be deemed
an [ * ] [ * ] shall have [ * ] license with respect to the [ * ] as set forth
in Section 8.1(b), except that it shall have [ * ] license with respect to any [
* ] in the [ * ] as set forth in Section 8.1(a). "Third Party Antibody
Collaborator" shall mean a Third Party providing average annual research funding
or other non-cash consideration (which shall be fair market value on the date of
transfer if known to [ * ] or, as reasonably estimated by [ * ] if unknown) of
not less than [ * ] in a designated therapeutic area.

[ * ]

Each [ * ] shall be available for selection by the JSC for inclusion in the Work
Pool until such time as [ * ] notifies [ * ] and the JSC in writing that either
[ * ] or the Third Party Antibody Collaborator has made a decision (as
documented by written records of [ * ]) to begin work to express and purify the
protein expressed by such [ * ] for purposes of developing a [ * ]. Upon receipt
of such notice, [ * ] shall have no further rights to that [ * ] and it shall
cease to be a [ * ].

Humanized Antibody Generation and Preclinical Testing.

[ * ] will determine which Precursor Antibodies should be humanized. If [ * ]
decides not to humanize a particular Precursor Antibody, then the provisions of
Section 7.1 shall apply to that Precursor Antibody and the provisions of Section
7.2, if applicable, shall apply to its Target. [ * ] will generate Humanized
Antibodies for each Precursor Antibody selected by [ * ] and will conduct
appropriate preclinical testing, as determined by [ * ], for preparation of the
IND. If [ * ] decides not to file an IND for any particular Humanized Antibody,
then the provisions of Section 7.3 shall apply to that Humanized Antibody.

Conduct of Research.

Each Party shall use Diligent Efforts to conduct: (i) their respective tasks, as
contemplated under the Research Plan and by the JSC (the "Research"), and (ii)
the Collaboration and the Research in good scientific manner, and in compliance
in all material respects with the requirements of applicable laws, rules and
regulations and all applicable good laboratory practices to attempt to achieve
their objectives efficiently and expeditiously.

Records.

Each Party shall maintain complete and accurate records of all work conducted by
it or on its behalf under the Collaboration or pursuant to the Research and all
Information generated in connection with its efforts under the Collaboration or
pursuant to the Research. Each Party shall maintain such records for a period of
[ * ] after the later to occur of (a) the end of the Research Term, or (b) the
termination of all efforts to develop, license, market or sell the Product to
which such records pertain. Such records shall fully and properly reflect all
work done and all Information generated in the performance of the Collaboration
or the Research in sufficient detail and in good scientific manner appropriate
for patent and regulatory purposes. Each Party shall have the right to review
and copy such records of the other Party at reasonable times to the extent
necessary for such Party to conduct its research, development or other
obligations under this Agreement.

Reports.

[ * ], each Party shall report to the JSC not less than [ * ] and will
periodically submit to the other Party and the JSC a written progress report
summarizing the Research.

Sharing of Biological Data.

PDL shall provide EXEL with copies of all Information that is Controlled by PDL
and that is generated by or on behalf of PDL in the course of the Collaboration.
EXEL may use such PDL Information for [ * ]. EXEL shall not [ * ]. EXEL shall
provide PDL with copies of all Information that is Controlled by EXEL and that
is generated by or on behalf of EXEL in the course of the Collaboration. PDL may
use such Information for [ * ].

Right to Engage Third Parties for Collaboration Efforts.

[ * ] shall have the right to grant licenses and sublicenses to Third Parties of
its rights with respect to the conduct of its portion of the Collaboration, as
it deems necessary or advisable, provided that [ * ].

Development and Marketing of Co- Funded Products; Exel Products

Development Decision.

At such time as PDL has substantially completed the IND and Development Plan for
a Product, PDL shall deliver to EXEL (i) such IND and Development Plan, and (ii)
documentation of historical Development Costs described in Section 5.2(a), and
the budget for such costs, if any, for that Product. EXEL shall have [ * ] from
the date of PDL's delivery of the IND and the Development Plan to review and
comment on the IND and Development Plan ("Opt-In Period") [ * ] and to determine
whether EXEL will elect to co-fund the development and commercialization of that
Product ("Opt-In Decision"). If EXEL decides to co-fund such Product, EXEL shall
provide written notice to PDL of its Opt-In Decision, accompanied by the
payments specified in Section 5.2(a) prior to the expiration of the Opt-In
Period. Effective as of the date of such notice, such Product shall become a
"Co-Funded Product" and the Development Plan provided to EXEL shall be deemed
agreed to by EXEL unless the Parties mutually agree in writing on a revised
Development Plan. The Parties then shall establish a Joint Development Committee
to oversee the Development of the Co-Funded Product, in accordance with Section
3.3. If EXEL does not so notify PDL and make such payments within the Opt-In
Period, then EXEL immediately shall return all copies of the IND and Development
Plan for that Product to PDL. Thereafter, that Product shall be deemed a PDL
Product, as provided in Section 6.1.

Payments for Co-Funded Products.

EXEL shall make the following payments for each Co-Funded Product:

Initial Payments.

[ * ] reimbursement of fifty percent (50%) of the Development Costs incurred by
PDL through the end of PDL's most recently ended fiscal quarter prior to PDL's
delivery to EXEL of the IND and Development Plan for that Product under Section
5.1.

Reimbursement of Development Costs.

Following the initial payments under Section 5.2(a), EXEL shall reimburse PDL [
* ] for fifty percent (50%) of the Development Costs incurred by PDL for each
Co-Funded Product. All such reimbursement payments shall be due within thirty
(30) days after invoicing by PDL.

Development Plan for Co-Funded Products.

[ * ] shall provide [ * ] for all Co-Funded Products. [ * ] shall [ * ] of each
Co-Funded Product as described in the [ * ]. [ * ] shall have the right to [ *
]. [ * ] shall have [ * ]. The JDC for each Co-Funded Product shall carry out
its responsibilities, as described in Section 3.3.

Commercialization Plan for Co- Funded Products.

The marketing and sale of each Co-Funded Product will be governed by its
Commercialization Plan, prepared as described in Section 3.4. PDL shall have the
authority and responsibility to implement each Commercialization Plan. The JCC
for each Co-Funded Product shall carry out its responsibilities, as described in
Section 3.4.

Right to Engage Third Parties for [ * ].

PDL may use Third Parties to perform portions of its obligations relating to [ *
]. In any material agreement with a Third Party relating to the Development of a
Product, the Party retaining such Third Party shall provide for terms that are
consistent with the terms of this Agreement and the Party shall remain liable
for the performance of any obligations hereunder which it delegates to Third
Parties. [ * ] shall have the right to grant licenses and sublicenses to Third
Parties of its rights with respect to Co- Funded Products as it deems necessary
or advisable for the Development and/or commercialization of Co-Funded Products.
[ * ] shall [ * ].

INDs and Drug Approval Applications.

[ * ] shall be responsible for the preparation and filing of, and shall own all
regulatory submissions relating to, [ * ] filed in any regulatory jurisdiction.
[ * ] shall keep the relevant JDC and JCC informed regarding the schedule and
process for the preparation of Drug Approval Applications for Co-Funded
Products. [ * ] shall provide a draft copy of the initial Drug Approval
Application for each Major Market (as defined in Section 9.3), and all
supplemental Drug Approval Applications for each Major Market (e.g., for a new
indication) for each Co-Funded Product to EXEL for review, to the extent
practical, prior to their submission to the appropriate regulatory authority,
provided, however, that [ * ] shall be required to promptly review such
submission and in any event shall have [ * ] to comment on such documents, [ *
].

Records.

Each Party shall maintain complete and accurate records of all research and
development work conducted by it or on its behalf related to Co-Funded Products
and Pre-Opt- In Products, and all Information generated and Development Costs
incurred by it or on its behalf in connection with Development under this
Agreement with respect to Co-Funded Products and Pre-Opt-In Products. Each Party
shall maintain such records for a period of [ * ] after the later to occur of
(a) the end of the Research Term, or (b) the termination of all efforts to
develop, license, market or sell the Product to which such records pertain. Such
records shall fully and properly reflect all work performed and all Information
generated in sufficient detail and in good scientific manner appropriate for
patent and regulatory purposes. Each Party shall have the right to review and
copy such records of the other Party at reasonable times to the extent necessary
for such Party to conduct its research, development or other obligations under
this Agreement.

Reports.

During the term of the Agreement, [ * ] will provide reports at the relevant JDC
and JCC meetings summarizing the recent Development and commercialization
activities relating to each Co-Funded Product. [ * ] will provide [ * ] with
summary reports for Pre-Opt-In Products through the JSC or, after the Research
Term, upon request by [ * ], but not more frequently than [ * ].

Termination of Co-Funding; Out- License of Co-Funded Products.

Voluntary Termination by [ * ].

[ * ] shall have the right to terminate its co-funding obligation for any
Co-Funded Product effective [ * ] after providing irrevocable, written notice to
[ * ] of such election to terminate. Upon the effective date of such
termination: (i) such Product shall be deemed a [ * ] Product, rather than a Co-
Funded Product, (ii) the JDC for such Product shall be disbanded, and (iii) [ *
] shall no longer have any rights pursuant to Section 9.9 to receive a share of
Product Profit with respect to such Product but instead shall receive
prospective milestones for events that occur after the effective date of such
termination and royalties on Net Sales of such Product pursuant to Article 9. [
* ]

Compulsory Termination by [ * ].

If [ * ] fails to make a payment under Section 5.2 and such payment is not
received within [ * ] after notice of failure to pay by [ * ], then at [ * ]
option, [ * ] shall be deemed to have terminated co-funding effective [ * ]
after the end of such [ * ] period. The effect of such termination shall be as
described in Section 5.9(a).

Voluntary Termination by [ * ]; [ * ] Products.

If [ * ] decides to terminate the development and/or commercialization of a
particular Co-Funded Product and not to attempt to out- license such Co-Funded
Product to a Third Party, [ * ] shall have the right to terminate its
obligations to develop and commercialize that Co-Funded Product effective [ * ]
after providing irrevocable, written notice to [ * ] of such election to
terminate. Within [ * ] after receipt of such notice, [ * ] shall notify [ * ]
in writing whether or not it elects to assume sole responsibility for, and all
costs and obligations of, the continued development and commercialization of
such Product. If [ * ] so elects, then upon the effective date of [ * ]
termination: (i) such Product shall be deemed an "[ * ]" rather than a Co-Funded
Product, (ii) the JDC for such Product shall be disbanded, and (iii) promptly
after [ * ] election, [ * ] and [ * ] shall work together to transfer and assign
all regulatory documents, contracts, materials and Information to [ * ] or its
designees to the extent necessary for [ * ] to assume such responsibility. [ *
].

Out-Licensing Decision for Products and Diagnostic Products.

[ * ] shall provide [ * ] with written notice of its intent to out-license some
or all of the rights for a particular Co-Funded Product and/or its related
Diagnostic Product to a Third Party (whether or not accompanied by a decision to
terminate the development and/or commercialization of a particular Co-Funded
Product and/or its Diagnostic Product). [ * ] shall have [ * ] from receipt of
such notice to notify [ * ] in writing that it wishes to exercise its right of
negotiation. If [ * ] exercises such right, the Parties shall negotiate for a
period of up to [ * ] to enter into a license agreement, the terms of which
shall include customary terms and conditions, including, without limitation,
appropriate signing and licensing fees, milestone payments and royalties. If [ *
] do not enter into a license agreement within such time, [ * ] thereafter shall
have the right to out-license such rights to a Third Party, subject to [ * ].
Upon [ * ] entering into such a license or sublicense with a Third Party, [ * ]
shall have [ * ] and [ * ] shall have [ * ]. All compensation received by the
Parties from such Third Party under such license or sublicense (including, but
not limited to, all license fees, milestone payments and royalty payments) shall
be shared as [ * ] by the Parties in accordance with [ * ], provided that all
such compensation shall be calculated after deductions for Development Costs
incurred by either Party under the agreement with the Third Party.

Development and Marketing of PDL Products

PDL Products.

If EXEL does not elect to co- fund a Product as provided in Article 5, such
Product shall be deemed a PDL Product. PDL shall have sole control and
responsibility for the development and commercialization of PDL Products, and
EXEL shall have no further rights with respect to such PDL Product except (a)
the right to receive milestone and royalty payments as described in Sections
9.3, 9.4 and 9.5, and (b) [ * ].

Reports.

Upon written request by EXEL to PDL during the term of the Agreement, but not
more frequently than once per calendar year, PDL will submit to EXEL a written
progress report summarizing the status of each PDL Product.

Right of Negotiation.

[ * ].

Commercialization of Targets and Early-Stage Products

Targets and Precursor Antibodies.

In the event that (a) any Targets result from the Collaboration for which
Antibodies are not generated for any reason, or (b) any Precursor Antibodies to
a given Antibody Target Candidate or Antibody Target result from the
Collaboration, but PDL determines not to select any Precursor Antibodies to that
Antibody Target Candidate or Antibody Target for humanization, then the JSC may
designate such Targets and/or Precursor Antibodies for out-licensing
("Out-Licensing Candidates"), [ * ] [ * ] shall have [ * ]. All consideration
received or to be received from any such license, including, without limitation,
all license fees, milestone payments and royalties shall be treated as [ * ].

[ * ] Reversion Targets.

Each Target identified by [ * ] during the [ * ] that (a) [ * ] or (b) [ * ],
shall revert to [ * ] ("Reversion Targets") and shall not be treated as
Out-Licensing Candidates pursuant to Section 7.1. Upon a Target becoming a
Reversion Target, [ * ] shall have no further rights to that Reversion Target,
it shall cease to be a Target and [ * ] licenses under this Agreement to that
Reversion Target shall terminate.

Humanized Antibodies Not Selected by [ * ] for IND.

In the event that [ * ] creates a Humanized Antibody, but decides not to proceed
with an IND filing for such Humanized Antibody, then such Humanized Antibody
shall be treated in the same manner as a [ * ] Product is treated under [ * ].

General Licensing.

Subject to Sections 5.9(d) and 6.3, [ * ] shall have the right to enter into a
license or sublicense with any Third Party for any or all rights to any Antibody
Target Candidates, Antibodies or Products [ * ], including without limitation
any Out-Licensing Candidates. All consideration received or to be received from
any such license, including, without limitation, all license fees, milestone
payments and royalties shall be treated as [ * ], except that any consideration
for [ * ] shall be allocated as provided in Sections 5.9 and 6.3. Upon [ * ] or
the Parties' entering into such a license or sublicense with a Third Party with
respect to any Target, Antibody or Pre-Opt-In Product, all rights under Article
5 shall terminate with respect to the applicable Product licensed to the Third
Party.

[ * ] Reversion.

Effective [ * ], all [ * ] shall revert to [ * ]. [ * ] shall have no further
rights with respect to such [ * ].

Licenses and Related Rights

Licenses to PDL.

Research.

Subject to the terms of this Agreement, EXEL hereby grants PDL a non-exclusive,
worldwide, non-transferable, royalty-free license for internal use under the
EXEL Patents, EXEL Know-How and EXEL's interest in the Joint Patents to the
extent necessary (i) to permit PDL to conduct its obligations under Article 4
and (ii) to use and characterize Targets, including, without limitation, the
Overlap Targets. The license set forth above includes the right to sublicense,
subject to Sections 4.7 and 5.5.

Pre-Opt-In Products and PDL Products.

Subject to the terms of this Agreement, EXEL hereby grants PDL a worldwide,
exclusive license, including the right to sublicense, under the EXEL Patents,
EXEL Know-How and EXEL's interest in the Joint Patents (i) to use the Targets [
* ] for the purpose of creating, developing and marketing antibodies for
commercial purposes, (ii) to use Antibody Target Candidates and Antibody Targets
to make, have made, use, develop and test Antibodies, and (iii) to make, have
made, use, develop, test, sell, offer to sell, have sold and import Pre-Opt-In
Products and PDL Products. Such license shall include all human prophylactic and
therapeutic indications for Pre-Opt-In Products and PDL Products and shall be
milestone and royalty-bearing as set forth in Article 9. The exclusivity of the
license set forth in 8.1(b) is subject to EXEL's retained rights under Sections
8.2 (a) and 8.5.

Co-Funded Products.

Subject to the terms of this Agreement, EXEL hereby grants PDL a worldwide, co-
exclusive license (with EXEL), including the right to sublicense, under the EXEL
Patents, EXEL Know-How and EXEL's interest in the Joint Patents to make, have
made, use, develop, test, sell, offer to sell, have sold and import Co-Funded
Products. Such license shall include all human prophylactic and therapeutic
indications and shall involve profit-sharing with respect to any such Product in
lieu of royalties and milestones as set forth in Article 9.

PDL Diagnostic Products.

Subject to the terms of this Agreement, EXEL hereby grants PDL a worldwide,
co-exclusive license, including the right to sublicense, under the EXEL Patents,
EXEL Know-How and EXEL's interest in the Joint Patents to make, have made, use,
develop, test, sell, offer to sell, have sold and import PDL Diagnostic
Products. At the time PDL identifies a Third Party manufacturer for any such PDL
Diagnostic Product, PDL may request the co-exclusive license be converted to an
exclusive license. [ * ].

Antibody Inventions.

Subject to the terms of this Agreement, EXEL hereby grants PDL a worldwide,
exclusive license, including the right to sublicense, under the Antibody Patents
that claim Antibody Inventions invented solely or jointly by PDL to practice
such Antibody Inventions for all purposes.

Licenses to EXEL.

Research.

Subject to the terms of this Agreement, PDL hereby grants EXEL a non-exclusive,
worldwide, non-transferable, royalty-free license (without the right to
sublicense) for internal use under the PDL Patents, PDL Know-How and PDL's
interest in the Joint Patents to the extent necessary (i) to permit EXEL to
conduct its obligations under the Research Plan, and (ii) [ * ].

EXEL Products.

Subject to the terms of this Agreement, effective upon a Product becoming an
EXEL Product pursuant to Sections 5.9(c) or 12.2(b), PDL hereby grants to EXEL,
a worldwide, license (with the right to sublicense) under the PDL Patents, PDL
Know-How and PDL's interest in the Joint Patents to develop, make, have made,
use, sell, offer to sell, have sold and import such EXEL Products. This license
shall be subject to any licenses or sublicenses granted by PDL in accordance
with Section 5.9 prior to the license under this Section 8.2(b) becoming
effective. Such license shall include all human prophylactic and therapeutic
indications and any Diagnostic Products developed for use in connection with
such prophylactic and therapeutic indications and shall be milestone and
royalty-bearing as set forth in Section 5.9(c). Such license shall be exclusive
to the extent of PDL's interest in an Antibody Patent covering the EXEL Product
and to the extent any PDL Patent or Joint Patent relates solely to such EXEL
Product; otherwise such license shall be non-exclusive.

EXEL Diagnostic Products.

Subject to the terms of this Agreement, effective upon a Product becoming an
EXEL Product pursuant to Section 5.9(c) or 12.2(b), and to the extent PDL then
has rights to a EXEL Diagnostic Product developed for use with such EXEL
Product, PDL hereby grants to EXEL, a worldwide license (with the right to
sublicense) under the PDL Patents, PDL Know-How and PDL's interest in the Joint
Patents to develop, make, have made, use, sell, offer to sell, have sold and
import such EXEL Diagnostic Product. This license shall be subject to any
licenses or sublicenses granted by PDL, in accordance with Section 5.9, prior to
the license under this Section 8.2(c) becoming effective. Such license shall
include all human diagnostic indications and shall be milestone and
royalty-bearing as set forth in Section 5.9(c). Such license shall be consistent
with the license granted pursuant to Section 8.2(b) with respect to the EXEL
Product for which the EXEL Diagnostic Product is intended to be used.

Negative Covenants.

Each Party hereby covenants that it will not practice any technology licensed to
it under this Agreement outside the scope of the licenses granted herein.
Specifically and without limitation, EXEL shall not, unless expressly permitted
elsewhere in this Agreement [ * ], provided that this covenant shall not be
interpreted to prevent EXEL from [ * ].

Exclusivity.

EXEL shall not research, develop or commercialize Products, except under the
terms of this Agreement. Specifically and without limitation, unless expressly
permitted elsewhere in this Agreement, neither EXEL nor its Affiliates shall:
(a) [ * ]; (b) make, have made, use, sell, offer to sell, have sold or import
such [ * ]; or (c) develop, make, have made, sell, offer to sell, have sold or
import, a [ * ] until the earlier of either (i) [ * ], or (ii) if at any time [
* ] following the selection of [ * ]. [ * ].

Independent Research.

The Parties acknowledge and agree that EXEL may use Information and materials
that EXEL generates in the course of performing its obligations under this
Agreement that constitutes general know-how relating to [ * ] for Independent
Research. For clarification, EXEL may use the following Information generated by
EXEL in the course of performing its obligations under this Agreement, for
Independent Research: [ * ] EXEL shall have no rights under this Agreement to
use PDL Information or materials, or to use or operate under any rights licensed
by PDL from Third Parties, for Independent Research or for development or
commercialization of any product or for any purpose other than as expressly
provided under this Agreement.

Compensation

Loan.

Concurrently with the execution of this Agreement, the Parties are entering into
a Note Purchase Agreement of even date herein pursuant to which PDL will loan
EXEL thirty million dollars ($30,000,000) pursuant to a Convertible Note. The
terms of such Convertible Note shall be governed exclusively by the Note
Purchase Agreement and related documents executed pursuant thereto.

Research Funding.

Subject to Sections 12.2 and 12.3, for the first two (2) years of this
Agreement, PDL shall make research funding and license payments totaling four
million dollars ($4,000,000) per year. This initial Research Term shall be
deemed to begin on [ * ]. Research Funding shall be payable in equal [ * ]
installments within [ * ] after the beginning of each [ * ] during the term of
the Research Funding. The annual Research Funding at the rate of four million
dollars ($4,000,000) per year shall be [ * ]. If the Research Term has been [ *
], then the research funding shall [ * ] at the rate of [ * ] for the following
[ * ]. The Research Term and Research Funding thereafter shall be [ * ] at the
rate of four million dollars ($4,000,000) per year for the [ * ].

Milestone Payments.

For each PDL Product, PDL shall pay EXEL the following amounts within thirty
(30) days after each PDL Product achieves the stated milestone:

[ * ] [ * ]

[ * ] [ * ]

Upon first filing of a BLA for the PDL Product [ * ]

Upon first Regulatory Approval of the PDL Product in a Major Indication in a
Major Market [ * ]

If the PDL Product has not achieved Milestone 9.3(d), upon such PDL Product
achieving sales resulting in cumulative royalty payments from PDL to EXEL under
this Agreement of at least [ * ] [ * ]

[ * ] as used in (b) above shall occur at such time as a draft final report for
the trial has been written [ * ].

Milestone payments shall be payable only once, which shall be the first time a
milestone is achieved. If a milestone for a PDL Product is skipped or avoided by
advancing to what would normally be expected to be a later development or
regulatory step, then the milestone that was expected to occur earlier shall be
deemed to have been achieved at the same time as such later milestone is
achieved, and the corresponding payment for both milestones shall be due. For
the purposes of milestone payments, all dosage forms, formulations and
constructs containing an Antibody against the same Antibody Target shall be
deemed a single Product.

"Major Indication" as used in (d) above means the following: cancers in any of
the following: [ * ]; provided, however, that the PDL Product is [ * ] in the
target cancer.

"Major Market" as used in (d) above means the United States, United Kingdom,
Germany, France, Italy or Japan.

Royalty Payments. For sales of each PDL Product for a prophylactic or
therapeutic indication by PDL, its Affiliates or sublicensees, PDL shall pay
EXEL royalties at the following rates:

Annual Net Sales of a given PDL Product

Royalty Rate

[ * ]

[ * ]

[ * ]

[ * ]

Except as set forth in Section 9.6, the foregoing royalty rates shall not be
subject to adjustment or reduction for any reason. For the purposes of royalty
payments, all dosage forms, formulations and constructs containing the same
Antibody shall be deemed a single Product. The measure of annual Net Sales set
forth in this Section 9.4 shall be the sum of Net Sales of a particular PDL
Product in all countries for each fiscal year of PDL.

By way of example, if in a particular fiscal year, PDL sells two PDL Products,
with one PDL Product having [ * ] in annual Net Sales and the other PDL Product
having [ * ] in annual Net Sales, then PDL shall make royalty payments to EXEL
during that year totaling [ * ] with respect to the first PDL Product and [ * ]
with respect to the second PDL Product for that fiscal year, assuming no
adjustments are required pursuant to Section 9.6.

Royalty Payment for PDL Product for a Diagnostic Indication.

For sales of each Diagnostic Product by PDL, its Affiliates or sublicensees, PDL
shall pay EXEL royalties at a rate equal to [ * ] of the rate that would
otherwise apply under Sections 6.3 or 9.4 after all adjustments under this
Agreement to such rates.

Royalty Credits and Adjustments.

The milestone payments set forth in Section 9.3(b) - (d) shall be [ * ]. In
addition, the amount of [ * ] shall be creditable against royalty payments
beginning in the quarter of the [ * ] as set forth in Section 9.4 and Section
9.5 as provided in Section 9.6(b).

[ * ]. Amounts paid by PDL to Third Parties for intellectual property applicable
to products in addition to PDL Products shall be reasonably allocated among the
products covered under the applicable licenses from Third Parties. In any event,
royalty credits shall not apply to license fees and other amounts paid under
Third Party licenses prior to the Effective Date. Royalty credits may be applied
against royalties due under Section 9.4 or Section 9.5 with respect to PDL
Products, provided that the royalty paid by PDL after the application of any
credit under this Section 9.6(b) shall not, as a result of such adjustment, be
less than [ * ] of the royalty rate which would otherwise apply under Section
9.4 or Section 9.5 to such Products.

[ * ].

In no event shall the royalty rate under Section 9.4 for a PDL Product be
reduced pursuant to this Section 9.6 to less than [ * ].

Term of Royalties.

EXEL's right to receive royalties under Section 9.4 and Section 9.5 shall expire
on a country-by-country basis upon the later of (i) [ * ] from the First
Commercial Sale of such PDL Product in such country, or (ii) the expiration of
the last to expire issued patent within the EXEL Patents or Joint Patents in
such country covering the PDL Product or the manufacture, use or sale of such
PDL Product.

Royalty Payment Reports.

All royalty payments under this Agreement shall be made to EXEL or its designee
quarterly within [ * ] following the end of each calendar quarter for which
royalties are due or, in the case of royalties from the sales of sublicensees,
within [ * ] following the end of the quarter in which PDL receives the royalty
report from the sublicensee. Each royalty payment shall be accompanied by a
statement stating the Net Sales, by country, of each PDL Product sold during the
relevant calendar quarter.

Profit Sharing For Co-Funded Products.

Share of Profits.

PDL shall be entitled to [ * ] of Product Profit from the sale of Co-Funded
Products and EXEL shall be entitled to [ * ] of such Product Profit until such
time as, and so long as, [ * ] of the cumulative Product Profit for all
Co-Funded Products equals [ * ] of the amount paid to EXEL under Section 9.2
(i.e., [ * ]). Whenever cumulative Product Profit exceeds such amount, each
Party shall be entitled to [ * ] of the subsequent Product Profit from the sale
of Co-Funded Products. The respective shares of Product Profit are referred to
below as the "PDL Share" and the "EXEL Share." The respective profit sharing
described in this Section 9.9(a) may be adjusted for particular Co-Funded
Products pursuant to Section 3.7(b).

Determination of Product Profit.

Within [ * ] after the end of each calendar quarter following the First
Commercial Sale of a Co-Funded Product, PDL shall provide EXEL with a statement
detailing (i) PDL's Net Sales and the Product Profit incurred or received, as
applicable, in the previous calendar quarter with respect to each Co-Funded
Product, (ii) the cumulative Product Profit for all Co-Funded Products and (iii)
the PDL Share and the EXEL Share for that quarter (the "Quarterly Report"). Such
statement shall be accompanied by appropriate supporting information.

Payments.

If the Product Profit for such calendar quarter was negative, then EXEL shall
pay the EXEL Share to PDL within [ * ] after receipt of the Quarterly Report. If
the Product Profit for such calendar quarter was positive, then PDL shall pay
the EXEL Share to EXEL within [ * ] after sending the Quarterly Report to EXEL.

Nonrefundable Payments.

Except as expressly provided in this Agreement, all payments made by a Party to
the other shall be non-refundable and non- creditable.

Payment Method.

All payments due under this Agreement to a Party shall be made by bank wire
transfer in immediately available funds to an account designated by the
receiving Party. All payments hereunder shall be made in United States dollars.

Taxes.

Each Party shall pay any and all taxes levied on account of all payments it
receives under this Agreement. If laws or regulations require that taxes be
withheld, the Party required to withhold will (i) deduct those taxes from the
remittable payment, (ii) pay the taxes to the proper taxing authority, and (iii)
send evidence of the obligation together with proof of tax payment to the other
Party within [ * ] following that tax payment.

Blocked Currency.

In each country where the local currency is blocked and cannot be removed from
the country, royalties or profit share payments accrued in that country shall be
paid to the receiving Party in the country in local currency by deposit in a
local bank designated by the receiving Party, unless the Parties otherwise
agree.

Sublicenses.

In the event PDL grants licenses or sublicenses to others to sell PDL Products
which are subject to royalties under Section 9.4, such licenses or sublicenses
shall include an obligation for the licensee or sublicensee to account for and
report its sales of Products on substantially the same basis as if such sales
were Net Sales by PDL, and PDL shall pay to EXEL, with respect to such sales,
royalties as if such sales of the licensee or sublicensee were Net Sales of PDL.
With respect to such sales of PDL Products by licensees or sublicensees, PDL
shall be required only to include information regarding Net Sales reflected in
reports received by PDL during the calendar quarter in question. PDL shall use
commercially reasonable efforts to cause its sublicensees to report sales of PDL
Products in a manner that will enable PDL to report such Net Sales by licensees
and sublicensees on a quarterly basis.

Foreign Exchange.

Conversion of sales recorded in local currencies to United States dollars will
be performed in a manner consistent with PDL's normal practices used to prepare
its audited financial statements for internal and external reporting purposes,
which uses a mutually agreed upon generally accepted source of published
exchange rates. It is agreed that the exchange rates published by Citibank or
the Wall Street Journal for the last banking day of the quarter shall be
acceptable exchange rates; provided that, in the case of sales by sublicensees,
the Parties will use the exchange rates provided in the agreements between PDL
and such sublicensees.

Records; Inspection.

Each Party shall keep complete and accurate books of account and records for PDL
Products, EXEL Products and Co-Funded Products, to be made under this Agreement.
Such books and records shall be kept for at least [ * ] following the end of the
calendar year to which they pertain. Such records will be open for inspection
during such three year period by independent accountants, solely for the purpose
of verifying payment statements hereunder. Such inspections shall be made no
more than once each calendar year, at reasonable times and on reasonable notice.
Inspections conducted under this Section 9.16 shall be conducted by an
independent Third Party reasonably acceptable to both Parties. The audit shall
be at the expense of the Party requesting the audit, except in the event that
the results of the audit reveal that the audited Party underpaid the Party
requesting the audit by [ * ] or more for any period covered by the audit, in
which case the audit fees, and any unpaid amounts (plus interest) that are
discovered will be paid promptly by the audited Party, and in any event no later
than [ * ] following delivery of the audit results to the audited Party.

Late Payments.

Any overdue payments under this Agreement shall bear interest at the rate of [ *
], or the highest rate allowed by law, whichever is less, commencing on the date
such payment is due until paid.

Intellectual Property

Ownership.

Except as otherwise described herein and subject to the licenses granted under
this Agreement, each Party shall own the entire right, title and interest in and
to any and all of its Sole Inventions, and Patents covering such Sole
Inventions, except that all Antibody Inventions initially shall be assigned to
EXEL. The Parties intend that during patent prosecution [ * ] (such patent
applications and any patents that issue with respect to such applications being
referred to as "Antibody Patents"). At the time PDL notifies EXEL pursuant to
Section 5.1 and thus commences the Opt-In Period for a particular Product
containing a particular Antibody, EXEL shall assign to PDL the Antibody Patents
that cover that Antibody. Following such assignment to PDL, the assigned
Antibody Patents shall be treated as PDL Patents under this Agreement.

Subject to Section 10.1(a) and the licenses granted under this Agreement, PDL
and EXEL shall each own an undivided one-half interest in and to any and all
Joint Inventions and Joint Patents. The Parties shall have the right to grant
licenses under such Joint Patents only to the extent provided in this Agreement.

Strategy; Disclosure.

During the Research Term, each Party shall submit a written report to the JPC
within [ * ] after the end of each quarter describing any Sole Invention or
Joint Invention or Antibody Inventions of which it became aware during the prior
quarter that it believes may be patentable. The JPC, in consultation with the
JSC, shall decide whether to file a patent application for each such Joint
Invention, as discussed in Section 10.3. The JPC shall establish the patent
strategy for all Joint Inventions, Antibody Inventions and Inventions pertaining
to Antibody Target Candidates and Antibody Targets arising from the
Collaboration, considering in good faith EXEL's obligations to PDL and Third
Parties relating to patent strategy for Targets.

Patent Prosecution and Maintenance; Abandonment.

Sole Inventions.

Each Party shall direct the filing, prosecution and maintenance of all Patents
covering its Sole Inventions, to the extent possible consistent with the
strategy established by the JPC for Joint Inventions and consistent with the
remaining provisions, as applicable, of this Section 10.3.

EXEL Product Patents.

EXEL shall prosecute and reasonably maintain all of the patents and applications
that qualify as EXEL Patents that claim or cover any Co-Funded Product or PDL
Product or the Antibody Target of any such Product ("EXEL Product Patents"). If
EXEL decides not to continue the prosecution or maintenance of an EXEL Product
Patent in any country, it shall promptly advise PDL thereof and, at the request
of PDL, EXEL and PDL shall negotiate in good faith to determine an appropriate
course of action in the interests of both Parties. If the Parties determine that
it would be [ * ] for PDL to assume responsibility for such prosecution or
maintenance, then PDL shall have the right but not the obligation to assume such
prosecution or maintenance. If the Parties do not determine that it would be [ *
] for PDL to assume responsibility for such prosecution or maintenance, then, at
PDL's request, EXEL shall continue such prosecution or maintenance, provided
that, [ * ].

PDL Product Patents.

PDL shall prosecute and reasonably maintain all of the patents and applications
that qualify as PDL Patents that claim or cover any Co-Funded Product or EXEL
Product or the Antibody Target of any such Product ("PDL Product Patents"). If
PDL decides not to continue the prosecution or maintenance of a PDL Product
Patent in any country, it promptly shall advise EXEL thereof and, at the request
of EXEL, PDL and EXEL shall negotiate in good faith to determine an appropriate
course of action in the interests of both Parties. If the Parties determine that
it would be [ * ] for EXEL to assume responsibility for such prosecution or
maintenance, then EXEL shall have the right but not the obligation to assume
such prosecution or maintenance. If the Parties do not determine that it would
be [ * ] for EXEL to assume responsibility for such prosecution or maintenance,
then, at EXEL's request, PDL shall continue such prosecution or maintenance,
provided that, [ * ].

Joint Inventions.

Each Party will use reasonable efforts to advise the other of a Joint Invention
as provided in Section 10.2 or promptly upon such Party becoming aware of such
Joint Invention. If the Invention is an Antibody Invention, it shall be assigned
as provided in Section 10.1(a) and shall be prosecuted as provided in Section
10.3(e). As soon as one of the Parties concludes that it wishes to file a patent
application covering a Joint Invention, it immediately shall inform the other
Party thereof, consult about the filing procedures concerning such patent
application, and file such patent applications for the Joint Inventions in such
countries as the JPC determines. For this purpose, such Party will provide the
other Party with the determination of inventors and scope of claims as early as
possible. If a Party is faced with possible loss of rights resulting from the
delay necessary for such communication, such communications may take place
promptly after filing a provisional or convention application. PDL will have the
first right of election to file patent applications for Joint Inventions in any
country in the world. If PDL declines to file any such application within [ * ]
after receipt of a written request to do so from EXEL, then EXEL may do so.
Regardless of which Party files a patent application, however, any claims
covered by such applications shall be considered as part of the Joint Patents.
If the Party who initially files a patent application covering a Joint Invention
decides not to continue the prosecution or maintenance of such patent
application or patent in general or in any particular country, it promptly shall
notify the other Party in writing in reasonably sufficient time for such other
Party to assume such prosecution and maintenance, and shall take the necessary
steps and execute the necessary documents to permit such other Party to assume
such prosecution or maintenance. The other Party shall have the right but not
the obligation to assume such prosecution or maintenance.

Antibody Inventions.

Antibody Inventions initially shall be assigned to EXEL as provided in Section
10.1(a). Unless the Parties agree otherwise, EXEL shall file patent applications
for the Antibody Inventions in such countries as the JPC determines. If EXEL
declines to file any such application within [ * ] after receipt of a written
request to do so from PDL, then PDL may do so. At the time that an application
constituting an Antibody Patent is filed, EXEL shall promptly notify PDL in
writing in reasonably sufficient time for PDL to assume the prosecution and
maintenance of that Antibody Patent, and shall take the necessary steps and
execute the necessary documents to permit PDL to assume such prosecution or
maintenance. If PDL subsequently decides not to continue the prosecution or
maintenance of an Antibody Patent directed to a Pre-Opt-In Product, in general
or in any particular country, it promptly shall notify EXEL in writing in
reasonably sufficient time for EXEL to assume such prosecution and maintenance,
and shall take the necessary steps and execute the necessary documents to permit
EXEL to assume such prosecution or maintenance. EXEL shall have the right but
not the obligation to assume such prosecution or maintenance.

Cooperation.

At the request of the Party performing the prosecution of any patent application
under this Section 10.3, the other Party will cooperate, in all reasonable ways,
in connection with the prosecution and maintenance of all such patent
applications. Each Party shall make available to the other Party or its
respective authorized attorneys, agents or representatives such of its employees
or consultants as the other Party in its reasonable judgment deems necessary in
order to assist such other Party with the prosecution and maintenance of such
patents. Each Party shall sign or use commercially reasonable efforts to have
signed at no charge to the other Party all legal documents necessary in
connection with such prosecution and maintenance.

Updates on Developments.

The Party performing the prosecution of any patent application under this
Section 10.3 shall advise the other Party of any substantial action or
development in the prosecution of such patent applications and patents, in
particular those involving the question of scope or the issuance, rejection, or
revocation, of an interference involving, or an opposition to any such patent
application or patent. In addition, the Party filing a patent application on a
Joint Invention shall provide the other Party with (a) a draft of such new
patent application prior to filing that application, allowing adequate time for
review and comment by the other Party if possible; provided, however, the filing
Party shall not be obligated to delay the filing of any patent application; and
(b) copies of material correspondence from patent offices concerning patent
applications covering such Joint Invention and a reasonable opportunity to
comment on any material responses, amendments or submissions to be made to such
patent offices. Notwithstanding the foregoing, PDL (with respect to PDL Patents
directed to PDL Products) and EXEL (with respect to EXEL Patents directed to
EXEL Products) shall have no obligation to advise or confer with the other Party
with respect to such Patents and shall prosecute, maintain or abandon such
Patents in their sole discretion.

Expenses.

For any Patents that relate solely to Co-Funded Products, all costs and expenses
for the filing, prosecution (including any interferences, reissue proceedings
and reexaminations) and maintenance of such Patents shall be [ * ]. For any
other Patents, all such costs and expenses shall be [ * ].

Enforcement of Patent Rights.

Enforcement of PDL Product Patents.

Enforcement by PDL.

In the event either Party becomes aware of a suspected infringement of a PDL
Product Patent or the institution by a Third Party of any proceedings for the
revocation of, or to invalidate or render unenforceable, any PDL Product Patent
due to the Third Party having an antibody product against the same target as a
Co-Funded Product or an EXEL Product, such Party shall notify the other Party
promptly, and following such notification, the Parties shall confer. PDL shall
have the right, but shall not be obligated, to bring an infringement action or
to defend such proceedings at its own expense, in its own name and entirely
under its own direction and control. EXEL will reasonably assist PDL in such
actions or proceedings if so requested, and will lend its name to such actions
or proceedings if requested by PDL or required by law [ * ]. EXEL shall have the
right to participate and be represented in any such suit by its own counsel at
its own expense. No settlement of any such action or defense which restricts the
scope or affects the enforceability of a PDL Product Patent that covers an EXEL
Product may be entered into by PDL without the prior consent of EXEL, which
consent shall not be unreasonably withheld.

Enforcement by EXEL.

If PDL elects not to bring any action for infringement or to defend any
proceeding described in Section 10.4(a)(i) and so notifies EXEL, then, subject
to the rights of any Third Party licensors of such Patent to PDL, EXEL may bring
such action or defend such proceeding at its own expense, in its own name and
entirely under its own direction and control. PDL will reasonably assist EXEL in
any action or proceeding being prosecuted or defended by EXEL, if so requested
by EXEL or required by law at [ * ]. PDL shall have the right to participate and
be represented in any such suit by its own counsel at its own expense. No
settlement of any such action or defense which restricts the scope or affects
the enforceability of PDL Patents may be entered into by EXEL without the prior
consent of PDL, which consent shall not be unreasonably withheld.

Enforcement of EXEL Product Patents.

Enforcement by EXEL.

In the event either Party becomes aware of a suspected infringement of an EXEL
Product Patent or the institution by a Third Party of any proceedings for the
revocation of, or to invalidate or render unenforceable, any EXEL Product Patent
due to the Third Party having an antibody product against the same target as a
Co-Funded Product or a PDL Product, such Party shall notify the other Party
promptly, and following such notification, the Parties shall confer. EXEL shall
have the right, but shall not be obligated, to bring an infringement action or
to defend such proceedings at its own expense, in its own name and entirely
under its own direction and control. PDL will reasonably assist EXEL in such
actions or proceedings if so requested, and will lend its name to such actions
or proceedings if requested by EXEL or required by law [ * ]. PDL shall have the
right to participate and be represented in any such suit by its own counsel at
its own expense. No settlement of any such action or defense which restricts the
scope or affects the enforceability of an EXEL Product Patent that covers a Co-
Funded Product or PDL Product may be entered into by EXEL without the prior
consent of PDL, which consent shall not be unreasonably withheld.

Enforcement by PDL.

If EXEL elects not to bring any action for infringement or to defend any
proceeding described in Section 10.4(b)(i) and so notifies PDL, then, subject to
the rights of any Third Party licensors of such Patent to EXEL, PDL may bring
such action or defend such proceeding at its own expense, in its own name and
entirely under its own direction and control. EXEL will reasonably assist PDL in
any action or proceeding being prosecuted or defended by PDL, if so requested by
PDL or required by law [ * ]. EXEL shall have the right to participate and be
represented in any such suit by its own counsel at its own expense. No
settlement of any such action or defense which restricts the scope or affects
the enforceability of EXEL Patents may be entered into by PDL without the prior
consent of EXEL, which consent shall not be unreasonably withheld.

Enforcement of Joint Patents.

Enforcement by PDL.

In the event either Party becomes aware of a suspected infringement of a Joint
Patent or the institution by a Third Party of any proceedings for the revocation
of, or to invalidate or render unenforceable, any Joint Patent, such Party shall
notify the other Party promptly, and following such notification, the Parties
shall confer. PDL shall have the right, but shall not be obligated, to prosecute
an infringement action or to defend such proceedings at its own expense, in its
own name and entirely under its own direction and control. EXEL will reasonably
assist PDL in such actions or proceedings if so requested, and will lend its
name to such actions or proceedings if requested by PDL or required by law [ *
]. EXEL shall have the right to participate and be represented in any such suit
by its own counsel at its own expense. No settlement of any such action or
defense which restricts the scope or affects the enforceability of a Joint
Patent that covers an EXEL Product may be entered into by PDL without the prior
consent of EXEL, which consent shall not be unreasonably withheld.

Enforcement by EXEL.

If PDL elects not to bring any action for infringement or to defend any
proceeding described in Section 10.4(c)(i) and so notifies EXEL, then EXEL may
bring such action or defend such proceeding at its own expense, in its own name
and entirely under its own direction and control. PDL will reasonably assist
EXEL in any action or proceeding being prosecuted or defended by EXEL, if so
requested by EXEL or required by law [ * ]. PDL shall have the right to
participate and be represented in any such suit by its own counsel at its own
expense. No settlement of any such action or defense which restricts the scope
or affects the enforceability of a Joint Patent that covers a Co-Funded Product
or PDL Product may be entered into by EXEL without the prior consent of PDL,
which consent shall not be unreasonably withheld.

General Provisions Relating to Enforcement of Patents.

Withdrawal.

If either Party brings such an action or defends such a proceeding under this
Section 10.4 and subsequently ceases to pursue or withdraws from such action or
proceeding, it shall promptly notify the other Party and the other Party may
substitute itself for the withdrawing Party under the terms of this Section 10.4
at its own expense.

Recoveries.

In the event either Party exercises the rights conferred in this Section 10.4
and recovers any damages or other sums in such action, suit or proceeding or in
settlement thereof, such damages or other sums recovered shall first be applied
to all out-of-pocket costs and expenses incurred by the Parties in connection
therewith, including attorneys fees. If such recovery is insufficient to cover
all such costs and expenses of both Parties, it shall be shared [ * ]. If after
such reimbursement any funds shall remain from such damages or other sums
recovered, such funds shall be [ * ].

Excluded Patents.

Certain patents as identified in Exhibits D-1 and D-2 relating to background
technologies of either EXEL or PDL, shall not be subject to the provisions of
Sections 10.3 and 10.4 (a-d).

Trademarks; Product Presentation.

Co-Funded Products.

PDL shall own all right title and interest in and to all trademarks, trade
names, service marks and trade dress specifically developed for and used on or
in connection with all Co- Funded Products. PDL shall be responsible for all
decisions regarding the trademarks, service marks and trade dress used on and in
connection with all Co- Funded Products. PDL and EXEL shall each retain sole and
exclusive ownership of their own respective and independently developed and
pre-existing trademarks, trade names, service marks and trade dress, regardless
of whether such trademarks, trade names, service marks and trade dress are used
on or in connection with any Co-Funded Product. The JCC shall approve all
trademarks and service marks used on or in connection with any Co-Funded
Products. Subject to applicable laws, rules and regulations, any written or
visual promotional or educational materials intended for use in conjunction with
Co-Funded Products shall refer to both Parties (where practical) with
substantially equal prominence, and all product labeling and promotional
material regarding the detailing and promoting of such Products shall display
the names and logos of PDL and EXEL (where practical) with substantially equal
prominence.

PDL Products.

PDL shall own all right title and interest in and to all trademarks, service
marks and trade dress specifically developed by PDL for and used on or in
connection with all PDL Products. PDL shall be responsible for all decisions
regarding the trademarks, service marks and trade dress used on or in connection
with all PDL Products.

EXEL Products.

EXEL shall own all right title and interest in and to all trademarks, service
marks and trade dress specifically developed by EXEL for and used on or in
connection with all EXEL Products. EXEL shall be responsible for all decisions
regarding the trademarks, service marks and trade dress used on or in connection
with all EXEL Products. PDL agrees to assign promptly any trademark rights for
an EXEL Product to EXEL.

Confidentiality

Nondisclosure of Confidential Information.

All written and oral Information disclosed by one Party to the other Party
pursuant to this Agreement and characterized as confidential to the receiving
Party shall be "Confidential Information." The Parties agree that during the
term of this Agreement, and for a period of [ * ] after this Agreement expires
or terminates, a Party receiving Confidential Information of the other Party
will (i) maintain in confidence such Confidential Information to the same extent
such Party maintains its own proprietary information of similar kind and value
(but at a minimum each Party shall use commercially reasonable efforts), (ii)
not disclose such Confidential Information to any Third Party without prior
written consent of the other Party, and (iii) not use such Confidential
Information for any purpose except those permitted by this Agreement.

Exceptions.

The obligations in Section 11.1 shall not apply with respect to any portion of
the Confidential Information that the receiving Party can show by competent
written proof:

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

Was known to the receiving Party, without obligation to keep it confidential,
prior to disclosure by the disclosing Party; or

Is subsequently disclosed to the receiving Party by a Third Party lawfully in
possession thereof and without obligation to keep it confidential; or

Has been published by a Third Party; or

Has been independently developed by the receiving Party without the aid,
application or use of Confidential Information.

Authorized Disclosure.

A Party may disclose the Confidential Information belonging to the other Party
to the extent such disclosure is reasonably necessary in any of the following
instances:

Filing or prosecuting Patents relating to Sole Inventions, Joint Inventions or
Products;

Regulatory filings relating to Products;

Prosecuting or defending litigation;

Complying with applicable governmental regulations; or

Disclosure, in connection with the performance of this Agreement, to Affiliates,
sublicensees, prospective licensees, research collaborators, employees,
consultants, or agents, each of whom prior to disclosure must be bound by
similar obligations of confidentiality and non-use at least equivalent in scope
to those set forth in this Article 11.

The Parties acknowledge that the terms of this Agreement shall be treated as
Confidential Information of both Parties. Such terms may be disclosed by a Party
to investment bankers, investors, prospective business partners (including
potential acquirers or acquisition targets) and potential investors, each of
whom prior to disclosure must be bound by similar obligations of confidentiality
and non-use at least equivalent in scope to those set forth in this Article 11.
In addition, if required, a copy of this Agreement may be filed by either Party
with the Securities and Exchange Commission. In connection with any such filing,
the filing Party shall endeavor to obtain confidential treatment of economic and
trade secret information and shall consult with the other Party prior to such
filing with respect to determining for which information confidential treatment
should be sought.

Publicity.

The Parties agree that the public announcement of the execution of this
Agreement shall be substantially in the form of the press release attached as
Exhibit C. Any other news release relating to this Agreement or to the
performance hereunder, shall first be reviewed and approved by both Parties;
provided, however, that any disclosure which is required by law 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.

Publications.

Neither Party shall publish or present the results of studies carried out under
this Agreement without the opportunity for prior review by the other Party.
Subject to Section 11.3, each Party agrees to provide the other Party the
opportunity to review any proposed abstracts, manuscripts or presentations
(including verbal presentations) which relate to any Target, Antibody or Product
(excluding any Product that has become a PDL Product) at least [ * ] prior to
its intended submission for publication and agrees, upon request, not to submit
any such abstract or manuscript for publication until the other Party is given a
reasonable period of time to secure patent protection for any material in such
publication which it believes to be patentable. Both Parties understand that a
reasonable commercial strategy may require delay of publication of information
for filing of patent applications. The Parties agree to review and consider
delay of publication and filing of patent applications under certain
circumstances. The JSC and JPC will review such requests and recommend
subsequent action. Neither Party shall have the right to publish or present
Confidential Information of the other Party that is subject to Section 11.1.
Nothing contained in this Section 11.5 shall prohibit the inclusion of
information necessary for a patent application, except for Confidential
Information of the nonfiling Party, provided the nonfiling Party is given a
reasonable opportunity to review the information to be included prior to
submission of such patent application. Any disputes between the Parties
regarding delaying a publication or presentation to permit the filing of a
patent application shall be referred to the JSC or, for a Co-Funded Product, the
relevant JDC.

Term and Termination

Term.

This Agreement shall become effective on the Effective Date and shall remain in
effect until the expiration of the last royalty or profit sharing payment
obligation with respect to any Product, as provided in this Agreement.

Termination for Material Breach.

Entire Agreement.

If either Party breaches any material agreement, condition or covenant of this
Agreement, the Note Purchase Agreement or the Note, or makes any materially
false report to the other Party, the Party not in breach may terminate this
Agreement at its option on [ * ] written notice, subject to the remaining
provisions of this Section 12.2; provided however, that any breach that relates
only to a particular Product(s) or only to the activities under the
Collaboration shall be governed by Section 12.2(b) instead of this Section
12.2(a).

Particular Products or Collaboration.

In the case of a breach that relates only to a particular Product(s) or only to
the activities under the Collaboration, the non-breaching Party, at its option
on [ * ] written notice and subject to the remaining provisions of this Section
12.2, may terminate this Agreement as to the particular Product(s) to which such
breach relates, (provided, however, that after such time as the breaching Party
has first filed for Regulatory Approval of a Product, the non-breaching Party
may terminate the breaching Party's rights to such Product only in those
countries to which such breach relates) or in the case of a breach relating only
to the activities under the Collaboration, the non-breaching Party may terminate
the Collaboration under this Agreement, but this Agreement shall continue in
full force and effect with respect to all Products. In the event of a breach by
PDL with respect to a particular Co-Funded Product, then EXEL, as an alternative
to terminating the Agreement as to such Product as provided above, may instead,
on providing [ * ] written notice to PDL, elect to terminate PDL's rights to
such Co-Funded Product on the same terms as if PDL had voluntarily terminated
its rights to such Co-Funded Product under Section 5.9(c).

Right to Cure.

In any notice of breach under this Section 12.2, the non-breaching Party shall
identify the actions or conduct that such Party considers to be a material
breach and specify conduct or actions that the notifying Party would consider to
be an acceptable cure of such breach. No termination of this Agreement or the
Collaboration or of rights relating to a particular Product or country pursuant
to Section 12.2(a) or (b) shall become effective unless such breach shall not
have been remedied, or steps initiated to remedy the same to the non-breaching
Party's reasonable satisfaction, within [ * ] after written notice thereof to
the breaching Party, or, in case the breach is a failure to make any payment
when due, within [ * ] after such notice.

Disputes.

If a Party gives notice of termination under this Section 12.2 and the other
Party disputes whether such notice was proper, then the issue of whether this
Agreement has been terminated shall be resolved in accordance with Section 15.1.
If, as a result of such dispute resolution process it is determined that the
notice of termination was proper, then such termination shall be deemed to have
been effective on the effective date of the notice of termination. If as a
result of such dispute resolution process it is determined that the notice of
termination was improper, then no termination shall have occurred and this
Agreement shall have remained in effect.

Termination or Expiration of Research Funding/Collaboration.

PDL and EXEL shall have their respective rights to terminate Research Funding as
described in Section 9.2, which shall have the effect of terminating the
Research Term. Upon such termination or upon expiration of the Research Term,
the Collaboration under this Agreement shall terminate, but all other rights and
obligations under this Agreement shall continue. If either Party terminates the
Collaboration pursuant to Section 12.2, any Research Funding paid by PDL for any
time period beyond the effective date of such termination shall be immediately
refunded by EXEL to PDL. The termination or expiration of the Collaboration
shall not affect any rights of PDL to any Targets, Antibodies or Products
resulting from the Collaboration prior to its termination or expiration.

Effect of Termination of Entire Agreement or Rights to Particular Product.

Upon termination of this Agreement in its entirety pursuant to Section 12.2(a),
all licenses granted to the breaching Party under this Agreement shall terminate
and the breaching Party shall return to the non-breaching Party all materials
and Information delivered under this Agreement by the non-breaching Party to the
breaching Party, except as provided in Section 12.5. Upon termination of this
Agreement pursuant to Section 12.2(b) with respect to a particular Product, all
licenses granted to the breaching Party under this Agreement with respect to
that Product (for the countries in which such rights are being terminated) shall
terminate and, if such termination is for all countries, the breaching Party
shall return to the non-breaching Party all materials and Information delivered
under this Agreement by the non-breaching Party to the breaching Party relating
to that Product, except as provided in Section 12.5.

Inventory.

Upon termination of this Agreement in its entirety or with respect to a
particular Product for which Regulatory Approval has been obtained, the
breaching Party shall have all rights necessary to sell within [ * ] of such
termination any such Product in its or its Affiliates' or sublicensee's
inventory on the date of such termination, which have not previously been sold
("Inventory"); provided, however that the breaching Party shall pay the
royalties due on such Inventory and provide related reports in the amounts and
manner provided for in Article 9.

Survival.

In the event of termination of this Agreement for any reason other than material
breach pursuant to Section 12.2, in addition to those Sections which by their
terms survive, the following provisions of this Agreement shall also survive:
Articles 1, 5, 6, 7, 8 10, 11, 12, and 15 and Sections 9.3 - 9.17, 14.1 and
14.2.

In the event of termination of this Agreement pursuant to Section 12.2, the
provisions of this Agreement referenced in Section 12.6(b) shall survive,
provided, however, that any licenses granted under this Agreement in favor of
the breaching Party shall terminate. In such case, the non-breaching Party shall
continue to hold the licenses granted hereunder, subject to the royalties set
forth herein.

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

Representations and Covenants

Mutual Authority.

EXEL and PDL each represents and warrants to the other that (a) it has the
authority and right to enter into and perform this Agreement and (b) its
execution, delivery and performance of this Agreement will not conflict in any
material fashion with the terms of any other agreement to which it is or becomes
a party or by which it is or becomes bound.

Representations by EXEL.

EXEL [ * ].

To its knowledge, EXEL, as of the Effective Date, owns or has a valid license to
use all technology it anticipates using in the Collaboration.

Rights in Technology.

During the term of this Agreement, each Party will use Diligent Efforts not to
diminish the rights under its Patents or Joint Patents granted to each other
herein, including without limitation by not committing or permitting any acts or
omissions which would cause the breach of any agreements between itself and
Third Parties which provide for intellectual property rights applicable to the
development, manufacture, use or sale of Products. Each Party agrees to provide
promptly the other Party with notice of any such alleged breach. As of the
Effective Date, each Party is in compliance in all material respects with any
aforementioned agreements with Third Parties.

Performance by Affiliates.

The Parties recognize that each may perform some or all of its obligations under
this Agreement through Affiliates, provided, however, that each Party shall
remain responsible and be guarantor of the performance by its Affiliates and
shall cause its Affiliates to comply with the provisions of this Agreement in
connection with such performance.

Indemnification and Limitation of Liability

Indemnification.

PDL Products.

PDL hereby agrees to defend and hold harmless EXEL and its agents and employees
from and against any and all suits, claims, actions, demands, liabilities,
expenses and/or loss, including reasonable legal expenses and reasonable
attorneys' fees ("Losses") resulting directly or indirectly from the
manufacture, use, testing, handling, storage, sale or other disposition of PDL
Products by PDL or its Affiliates, agents or sublicensees except to the extent
such Losses result from the negligence or wrongdoing of EXEL.

EXEL Products.

EXEL hereby agrees to defend and hold harmless PDL and its agents and employees
from and against any and all Losses resulting directly or indirectly from the
manufacture, use, testing, handling, storage, sale or other disposition of EXEL
Products by EXEL or its Affiliates, agents or sublicensees except to the extent
such Losses result from the negligence or wrongdoing of PDL.

General Indemnification Provisions.

In the event that a Party is seeking indemnification under this Section 14.1, it
shall inform the other Party of a claim as soon as reasonably practicable after
it receives notice of the claim, shall permit the other Party to assume
direction and control of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and shall cooperate as requested
by the other Party (at the expense of the other Party) in the defense of the
claim.

Co-Funded Products.

In the event of any Losses to either Party resulting directly or indirectly from
the manufacture, use, testing, handling, storage, sale or other disposition of
Co-Funded Products by either Party or their Affiliates, agents or sublicensees,
such [ * ] or if no Regulatory Approval has occurred for the Co-Funded Product,
then such [ * ] for that Co-Funded Product.

Limitation of Liability.

EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 14.1, IN NO EVENT SHALL EITHER PARTY,
ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR AFFILIATES BE LIABLE TO THE OTHER
PARTY FOR ANY INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES,
WHETHER BASED UPON A CLAIM OR ACTION OF CONTRACT, WARRANTY, NEGLIGENCE, STRICT
LIABILITY OR OTHER TORT, OR OTHERWISE, ARISING OUT OF THIS AGREEMENT. For
clarification, the foregoing sentence shall not be interpreted to limit or to
expand the express rights specifically granted in the sections of this
Agreement.

Product Liability Insurance.

Any Party developing a Product shall carry product liability insurance of not
less than [ * ]. Such product liability insurance shall be in effect not later
than the first administration of a Product in humans. Notwithstanding the
foregoing, a Party may self-insure for product liability claims if the Party
then has current assets of at least [ * ].

Miscellaneous

Dispute Resolution.

In the event of any controversy or claim arising out of, relating to or in
connection with any provision of this Agreement, other than a dispute addressed
in Sections 3.7 or 15.3, the Parties shall try to settle their differences
amicably between themselves first, by referring the disputed matter to an
appropriate Vice President (or higher level officer) of each Party and, if not
resolved by such officers, by referring the disputed matter to the respective
Chief Executive Officers of each Party. Either Party may initiate such informal
dispute resolution by sending written notice of the dispute to the other Party,
and, within twenty (20) days after such notice, such representatives of the
Parties shall meet for attempted resolution by good faith negotiations. If such
personnel are unable to resolve such dispute within thirty (30) days of their
first meeting of such negotiations, either Party may seek to have such dispute
resolved in any United States federal court of competent jurisdiction and
appropriate venue. The Parties hereby consent to jurisdiction in the United
States federal courts. If, notwithstanding such consent, United States federal
courts would not have proper jurisdiction over a dispute, then such dispute may
be submitted to any state court in the United States with proper jurisdiction
and venue. The Parties agree that, except as provided in Section 15.3, any
dispute under this Agreement shall be submitted exclusively to a state or
federal court in the United States.

Governing Law.

Resolution of all disputes arising out of or related to this Agreement or the
performance, enforcement, breach or termination of this Agreement and any
remedies relating thereto, shall be governed by and construed under the
substantive laws of the State of California, as applied to agreements executed
and performed entirely in the State of California by residents of the State of
California, without regard to conflicts of law rules.

Patents and Trademarks.

Any dispute, controversy or claim relating to the scope, validity,
enforceability or infringement of any Patent rights covering the manufacture,
use or sale of any Product or of any trademark rights related to any Product
shall be submitted to a court of competent jurisdiction in the territory in
which such Patent or trademark rights were granted or arose.

Entire Agreement; Amendment.

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

Export Control.

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

Bankruptcy.

All rights and licenses granted under or pursuant to this Agreement, including
amendments hereto, by each Party to the other Party are, for all purposes of
Section 365(n) of Title 11 of the United States Code ("Title 11"), licenses of
rights to intellectual property as defined in Title 11. Each Party agrees during
the term of this Agreement to create and maintain current copies or, if not
amenable to copying, detailed descriptions or other appropriate embodiments, to
the extent feasible, of all such intellectual property. If a case is commenced
by or against either Party (the "Bankrupt Party") under Title 11, then, unless
and until this Agreement is rejected as provided in Title 11, the Bankrupt Party
(in any capacity, including debtor-in- possession) and its successors and
assigns (including, without limitation, a Title 11 Trustee) shall, at the
election of the Bankrupt Party made within sixty (60) days after the
commencement of the case (or, if no such election is made, immediately upon the
request of the non-Bankrupt Party) either (i) perform all of the obligations
provided in this Agreement to be performed by the Bankrupt Party including,
where applicable and without limitation, providing to the non- Bankrupt Party
portions of such intellectual property (including embodiments thereof) held by
the Bankrupt Party and such successors and assigns or otherwise available to
them or (ii) provide to the non-Bankrupt Party all such intellectual property
(including all embodiments thereof) held by the Bankrupt Party and such
successors and assigns or otherwise available to them.

If a Title 11 case is commenced by or against the Bankrupt Party and this
Agreement is rejected as provided in Title 11 and the non-Bankrupt Party elects
to retain its rights hereunder as provided in Title 11, then the Bankrupt Party
(in any capacity, including debtor-in-possession) and its successors and assigns
(including, without limitations, a Title 11 Trustee) shall provide to the
non-Bankrupt Party all such intellectual property (including all embodiments
thereof) held by the Bankrupt Party and such successors and assigns or otherwise
available to them immediately upon the non- Bankrupt Party's written request
therefor. Whenever the Bankrupt Party or any of its successors or assigns
provides to the non-Bankrupt Party any of the intellectual property licensed
hereunder (or any embodiment thereof) pursuant to this Section 15.6, the
non-Bankrupt Party shall have the right to perform the obligations of the
Bankrupt Party hereunder with respect to such intellectual property, but neither
such provision nor such performance by the non-Bankrupt Party shall release the
Bankrupt Party from any such obligation or liability for failing to perform it.

All rights, powers and remedies of the non-Bankrupt Party provided herein are in
addition to and not in substitution for any and all other rights, powers and
remedies now or hereafter existing at law or in equity (including, without
limitation, Title 11) in the event of the commencement of a Title 11 case by or
against the Bankrupt Party. The non-Bankrupt Party, in addition to the rights,
power and remedies expressly provided herein, shall be entitled to exercise all
other such rights and powers and resort to all other such remedies as may now or
hereafter exist at law or in equity (including, without limitation, under Title
11) in such event. The Parties agree that they intend the foregoing non-Bankrupt
Party rights to extend to the maximum extent permitted by law and any provisions
of applicable contracts with Third Parties, including without limitation for
purposes of Title 11, (i) the right of access to any intellectual property
(including all embodiments thereof) of the Bankrupt Party or any Third Party
with whom the Bankrupt Party contracts to perform an obligation of the Bankrupt
Party under this Agreement, and, in the case of the Third Party, which is
necessary for the development, registration and manufacture of Products, and
(ii) the right to contract directly with any Third Party described in Section
15.6(c)(i) to complete the contracted work. Any intellectual property provided
pursuant to the provisions of this Section 15.6 shall be subject to the licenses
set forth in this Agreement and the payment obligations of this Agreement, which
shall be deemed to be royalties for purposes of Title 11.

Force Majeure.

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

Notices.

Any notice required or permitted to be given under this Agreement shall be in
writing, shall specifically refer to this Agreement and shall be deemed to have
been sufficiently given for all purposes if sent by express delivery service or
personally delivered, or by facsimile or electronic mail and confirmed by first
class mail. Unless otherwise specified in writing, the mailing addresses of the
Parties shall be as described below.

For EXEL:

Exelixis, Inc.

 

170 Harbor Way

 

P.O. Box 511

 

South San Francisco, CA 94083-0511

 

Attention: Chief Executive Officer

With a copy to:

Cooley Godward LLP

 

Five Palo Alto Square

 

3000 El Camino Real

 

Palo Alto, CA 94306-2155

 

Attention: Robert L. Jones, Esq.

For PDL:

Protein Design Labs, Inc.

 

34801 Campus Drive

 

Fremont, CA 94555-3606

 

Attention: Chief Executive Officer

With a copy to:

Protein Design Labs, Inc.

 

34801 Campus Drive

 

Fremont, CA 94555-3606

 

Attention: General Counsel

Consents Not Unreasonably Withheld or Delayed.

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

United States Dollars.

References in this Agreement to "Dollars" or "$" shall mean the legal tender of
the United States.

No Strict Construction.

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

Assignment.

Neither Party may assign or transfer this Agreement or any rights or obligations
hereunder without the prior written consent of the other, except a Party may
make such an assignment without the other Party's consent to an Affiliate or to
a successor to substantially all of the business of such Party, whether in a
merger, sale of stock, sale of assets or other transaction. Any permitted
successor or assignee of rights and/or obligations hereunder shall, in writing
to the other Party, expressly assume performance of such rights and/or
obligations. Any permitted assignment shall be binding on the successors of the
assigning Party. Any assignment or attempted assignment by either Party in
violation of the terms of this Section 15.12 shall be null and void and of no
legal effect.

Electronic Data Interchange.

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

Counterparts.

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

Further Actions.

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

Severability.

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

Ambiguities.

Ambiguities, if any, in this Agreement shall not be construed against any Party,
irrespective of which Party may be deemed to have authored the ambiguous
provision.

Headings.

The headings for each article and section in this Agreement have been inserted
for convenience of reference only and are not intended to limit or expand on the
meaning of the language contained in the particular article or section.

No Waiver.

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

In Witness Whereof

, the Parties have executed this Agreement in duplicate originals by their
proper officers as of the date and year first above written.

Protein Design Labs, Inc.

Exelixis, Inc.

By: /s/ Laurence Jay Korn

By: /s/ George Scangos

Laurence Jay Korn

George A. Scangos

Chairperson and Chief Executive Officer

Chief Executive Officer

 

 

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

 

 

 

 

List of Exhibits

Exhibit A

Research Plan

Exhibit B

Product Profit Calculation

Exhibit C

Form of Press Release

Exhibit D-1

EXEL Background Patents

Exhibit D-2

PDL Background Patents

 

 

Exhibit A

RESEARCH PLAN

[ * ]

 

Exhibit A1

Entrypoints for Genetic Screens -

Proposed or Initiated in Oncology Program

[ * ]

 

 

Exhibit B

Product Profit Calculation

[ * ]

 

 

EXHIBIT C

For Immediate Release

Contacts:

Robert L. Kirkman, M.D.

Glen Y. Sato

Vice President, Business Development

Chief Financial Officer

and Corporate Communications

Exelixis, Inc.

Protein Design Labs, Inc.

(650) 837-7565

(510) 574-1419, rkirkman@pdl.com

gsato@exelixis.com

 

PROTEIN DESIGN LABS AND EXELIXIS ANNOUNCE

ONCOLOGY ANTIBODY DRUG DISCOVERY COLLABORATION

FREMONT and SOUTH SAN FRANCISCO, CA - May 22, 2001 - Protein Design Labs, Inc.
(Nasdaq: PDLI) (PDL) and Exelixis, Inc. (Nasdaq: EXEL) (Exelixis) announced
today a collaboration to discover and develop humanized antibodies for the
diagnosis, prevention and treatment of cancer. The collaboration will utilize
Exelixis' model organism genetics technology for the identification of new
cancer drug targets, and PDL's antibody and clinical development expertise to
create and develop new antibody drug candidates. PDL will provide Exelixis with
$4.0 million in annual research funding for two or more years, and has purchased
a $30.0 million note convertible after the first year of the collaboration into
shares of Exelixis common stock.

George A. Scangos, Ph.D., President and Chief Executive Officer of Exelixis,
said, "We're pleased to be working with PDL, a leader in the development of
humanized antibodies, and are already in a position to deliver our first targets
under this collaboration. PDL is committed to a high- quality pipeline of
anti-cancer antibody products, and I am pleased that PDL has recognized the
value in our oncology target portfolio. The direct cash value to Exelixis is
substantial, and there is considerably more value in the co- development rights
that Exelixis has in this program, and in the resources that PDL will bring to
the collaboration. This relationship is consistent with Exelixis' strategy of
moving towards the market and capturing increasing value from the results of our
research, and is a strong complement to our internal efforts directed towards
finding small molecule therapeutics for cancer."

Laurence Jay Korn, Ph.D., Chief Executive Officer and Chairperson of Protein
Design Labs, said, "PDL has seven antibodies in clinical development, including
Zamyl™ (anti-CD33) and Remitogen™ (anti-HLA- DR) for potential cancer
indications, and Nuvion™ (anti-CD3) for the treatment of graft versus host
disease. This collaboration provides PDL with an opportunity to expand our
pipeline of oncology drugs with new antibodies that specifically block the
initiation or progression of cancer, using the model organism genetic approach
of Exelixis to identify novel targets. The Exelixis technology is designed to
provide information about the function of a target at an early stage, which mav
be quite valuable, as we believe antibodies for cancer are likely to work best
when they interfere with a function necessary for cell growth or proliferation,
or when they induce apoptosis."

Under the terms of the collaborative agreement, PDL will receive an exclusive,
worldwide license to develop antibodies against certain targets identified by
Exelixis that are involved in cell growth, apoptosis (cell death) and
proliferation. This approach may provide potential targets for developing novel
humanized antibodies for the treatment of cancer using PDL's proprietary SMART™
antibody technology. Exelixis will have the right to co-fund and co-develop
antibodies resulting from the collaboration. For antibody products developed by
PDL that Exelixis elects not to co-develop, Exelixis will be entitled to
specified milestone payments and royalty payments on any product sales.

Protein Design Labs, Inc. is a leader in the development of humanized antibodies
to prevent or treat various disease conditions. PDL currently has antibodies
under development for autoimmune and inflammatory conditions, asthma and cancer.
PDL holds fundamental patents in the U.S., Europe and Japan for its antibody
humanization technology. Further information is available at www.pdl.com.

Exelixis, Inc. is a leading life sciences biotechnology company focused on
product development through its expertise in comparative genomics and model
system genetics. These technologies provide a rapid, efficient and
cost-effective way to move from DNA sequence data to knowledge about the
function of genes and the proteins that they encode. Exelixis' technology is
broadly applicable to all life science industries including pharmaceutical,
diagnostic, agricultural biotechnology and animal health. Exelixis has
partnerships with Aventis, Bayer, Pharmacia, Bristol-Myers Squibb and Dow
AgroSciences and is building its internal development program in the area of
oncology. For more information, please visit Exelixis' web site at
www.exelixis.com.

This press release contains certain forward-looking statements that involve
risks and uncertainties that may affect our business, as more fully discussed in
the "Risk Factors" section of our filings with the U.S. Securities and Exchange
Commission. These risks and uncertainties include, but are not limited to, our
ability successfully to collaborate and identify novel targets and develop
potential products from the collaboration. Exelixis and PDL direct the reader to
our respective SEC filings, including our respective Annual Reports on Form 10-K
for the year ended December 31, 2000. The information in this press release is
current as of its release date. Neither party assumes responsibility to update
the information

.

Exelixis and the Exelixis logo are registered U.S. trademarks of Exelixis, Inc.

Protein Design Labs, the PDL logo and SMART are registered U.S. trademarks and
Zamyl, Remitogen and Nuvion are U.S. trademarks of Protein Design Labs, Inc.

 

 

Exhibit D-1

THIRD PARTY TECHNOLOGY

[ * ]

 

 

Exhibit D-2

PDL Excluded Patents

 

[ * ]

 

 

 

 

 

 

 

[ * ] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.

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