Q2 2001 10QA EXH10.1



[ * ] = 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. 


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


	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.
	
Exelixis, Inc.

	
By: /s/ Laurence Jay Korn
	
By: /s/ George Scangos

	
Laurence Jay Korn
	
George A. Scangos

	
Chairperson and Chief
	
Chief Executive Officer

	
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 and Corporate Communications
	
Chief Financial Officer

	 	
Protein Design Labs, Inc.
	
Exelixis, Inc.

	
 
	
(510) 574-1419, rkirkman@pdl.com
	
(650) 837-7565

	
 
	
 
	
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 ZamylTM (anti-CD33) and RemitogenTM (anti-HLA-
DR) for potential cancer indications, and NuvionTM (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 SMARTTM 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.