Document:

<PAGE>

                                                                    EXHIBIT 10.3
                        EXELIXIS PHARMACEUTICALS, INC.

                          1997 EQUITY INCENTIVE PLAN

                            Adopted September, 1997

1.   PURPOSES.

     (a)  The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) stock bonuses, and (iv) rights to purchase
restricted stock, all as defined below.

     (b)  The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

     (c)  The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.

2.   DEFINITIONS.

     (a)  "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.

     (b)  "Board" means the Board of Directors of the Company.

     (c)  "Code" means the Internal Revenue Code of 1986, as amended.

     (d)  "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

     (e)  "Company" means Exelixis Pharmaceuticals, Inc. a Delaware corporation.

     (f)  "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.

                                       1.
<PAGE>

     (g)  "Continuous Status as an Employee, Director or Consultant" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board may determine, in it's
sole discretion, whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave; or (ii) transfers between the Company, Affiliates or their
successors.

     (h)  "Director" means a member of the Board.

     (i)  "Employee" means any person, including officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

     (1)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     (k)  "Fair Market Value" means the value of the common stock as determined
in good faith by the Board and in a manner consistent with Section 260.140.50
of Title 10 of the California Code of Regulations.

     (I)  "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

     (m)  "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.

     (n)  "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.

     (o)  "Option" means a stock option granted pursuant to the Plan.

     (p)  "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (q)  "Optionee" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.

     (r)  "Plan" means this Exelixis Pharmaceuticals, Inc. 1997 Equity Incentive
Plan.

     (s)  "Securities Act" means the Securities Act of 1933, as amended.

                                       2.
<PAGE>

     (t)  "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.

     (u)  "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

3.   ADMINISTRATION.

     (a)  The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).

     (b)  The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

          (1),  To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to a Stock Award; and the number of
shares with respect to which a Stock Award shall be granted to each such person.

          (2)   To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

          (3)   To amend the Plan or a Stock Award as provided in Section 14.

          (4)   Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.

     (c)  The Board may delegate administration of the Plan to a committee of
the Board composed of one or more members (the "Committee"). If administration
is delegated to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or such a subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.

                                       3.
<PAGE>

4.   SHARES SUBJECT TO THE PLAN.

     (a)  Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate             (              ) shares of the
Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan.

     (b)  The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

5.   ELIGIBILITY.

     (a)  Incentive Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options may be granted only to Employees, Directors
or Consultants.

     (b)  No person shall be eligible for the grant of an Option or an award to
purchase restricted stock if, at the time of grant, such person owns (or is
deemed to own pursuant to Section 424(d) of the Code) stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any of its Affiliates unless (i) the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
such stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant, or (ii) for an award to
purchase restricted stock, the purchase price of restricted stock is at least
one hundred percent (100%) of the stock's Fair Market Value at the date of grant
of the award.

6.   OPTION PROVISIONS.

     Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

     (a)  Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.

     (b)  Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.

     (c)  Consideration. The purchase price of stock acquired pursuant to an
Option shall

                                       4.
<PAGE>

be paid, to the extent permitted by applicable statutes and regulations, either
(i) in cash at the time the Option is exercised, or (ii) at the discretion of
the Board or the Committee, at the time of the grant of the Option, (A) by
delivery to the Company of other common stock of the Company, (B) according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporate Law) shall not be made by
deferred payment, or other arrangement (which may include. without limiting the
generality of the foregoing, the use of other common stock of the Company) with
the person to whom the Option is granted or to whom the Option is transferred
pursuant to subsection 6(d), or (C) in any other form of legal consideration
that may be acceptable to the Board.

     In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

     (d)  Transferability. An Option shall not be transferable except by will or
by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person.

     (e)  Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary, but in each case will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option; provided, however, that an Option granted to an officer, director or
consultant (within the meaning of Section 260.140.41 of Title 10 of the
California Code of Regulations) may become fully exercisable, subject to
reasonable conditions such as continued employment, at any time or during any
period established by the Company or of any of its Affiliates. The provisions of
this subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

     (f)  Termination of Employment or Relationship as a Director or Consultant.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3) months following
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period, which shall not be less than three
(3) months (unless such termination is for cause, as specified in the Option
Agreement)), or (ii) the expiration of the term of the Option as set forth in
the Option Agreement. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall

                                       5.
<PAGE>

revert to and again become available for issuance under the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.

     (g)  Disability of Optionee. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period, which in no
event shall be less than six (6) months, specified in the Option Agreement), or
(ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

     (h)  Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
as of the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date twelve (12)
months following the date of death (or such longer or shorter period, which in
no event shall be less than six (6) months, specified in the Option Agreement),
or (ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the Plan.
If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.

     (i)  Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
Continuous Status as an Employee, Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Should the right of repurchase be assigned by the Company, the assignee
shall pay the Company cash equal to the difference between the original purchase
price and the stock's Fair Market Value if the

                                       6.
<PAGE>

original purchase price is less than the stock's Fair Market Value.

     (1)  Right of Repurchase. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares exercised pursuant to the
Option; provided, however, that (i) such repurchase right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant (or in the case of a
post-termination exercise of the Option, the ninety (90) period following such
exercise), or (B) such longer period as may be agreed to by the Company and the
Optionee (for example, for purposes of satisfying the requirements of Section
1202(c)(3) of the Code (regarding "qualified small business stock")), (ii) such
repurchase right shall be exercisable for less than all of the vested shares
only with the Optionee's consent, and (iii) such right shall be exercisable only
for cash or cancellation of purchase money indebtedness for the shares at a
repurchase price equal to the stock's Fair Market Value at the time of such
termination. Notwithstanding the foregoing, shares received on exercise of an
Option by an officer, director or consultant (within the meaning of Section 260.
140.41 of Title 10 of the California Code of Regulations) may be subject to
additional or greater restrictions specified in the Option Agreement.

     (2)  Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option. Such right of first refusal shall be exercised by the Company no more
than thirty (30) days following receipt of notice of the Optionee's intent to
transfer shares and must be exercised as to all the shares the Optionee intends
to transfer unless the Optionee consents to exercise for less than all the
shares offered. The purchase of the shares following exercise shall be completed
within thirty (30) days of the Company's receipt of notice of the Optionee's
intent to transfer shares, or such longer period of time as has been offered by
the person to whom the Optionee intends to transfer the shares, or as may be
agreed to by the Company and the Optionee (for example, for purposes of
satisfying the requirements of Section 1202(c)(3) of the Code (regarding
"qualified small business stock"). Except as expressly provided in this
Subsection (k), such right of first refusal shall otherwise comply with the
provisions of the Bylaws of the Company.

7.   TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

     Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:

     (a)  Purchase Price.  The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement, but in no event shall the
purchase price be less than eighty-five percent (85%) of the stock's Fair Market
Value on the date such award is made. Notwithstanding the foregoing, the Board
or the Committee may determine that eligible participants in the Plan may be
awarded stock pursuant to a stock

                                       7.
<PAGE>

bonus agreement in consideration for past services actually rendered to the
Company or for its benefit.

     (b)  Transferability. Rights under a stock bonus or restricted stock
purchase agreement shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the Option is granted only by such person.

     (c)  Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold,
except that payment of the common stock's "par value" (as defined in the
Delaware General Corporation Law) shall not be made by deferred payment; or
(iii) in any other form of legal consideration that' may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration. of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.

     (d)  Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee. The
applicable agreement shall provide (i) that the right to repurchase at the
original purchase price shall lapse at a minimum rate of twenty percent (20%)
per year over five (5) years from the date the Stock Award was granted (except
that a Stock Award granted to an officer, director or consultant (within the
meaning of Section 260140.41 of Title 10 of the California Code of Regulations)
may become fully vested, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company or of
any of its Affiliates), and (ii) such right shall be exercisable only (A) within
the ninety (90) day period following the termination of employment or the
relationship as a Director or Consultant, or (B) such longer period as may be
agreed to by the Company and the holder of the Stock Award (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares.

     (e)  Termination of Employment or Relationship as a Director or Consultant.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire,
subject to the limitations described in subsection 7(d), any or all of the
shares of stock held by that person which have not vested as of the date of
termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.

8.   CANCELLATION AND RE-GRANT OF OPTIONS.

     The Board or the Committee shall have the authority to effect, at any time
and from time to time, (i) the repricing of any outstanding Options under the
Plan and/or (ii) with the consent of the affected holders of Options, the
cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than eighty-five percent (85%) of the Fair Market Value (one hundred
percent (100%) of the Fair Market Value in the case of an Incentive Stock
Option) or, in the case of a 10% stockholder (as described in subsection

                                       8.
<PAGE>

5(1,)), not less than one hundred ten percent (110%) of the Fair Market Value)
per share of stock on the new grant date. Notwithstanding the foregoing, the
Board or the Committee may grant an Option with an exercise price lower than
that set forth above if such Option is granted as part of a transaction to which
section 424(a) of the Code applies.

9.   COVENANTS OF THE COMPANY.

     (a)  During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.

     (b)  The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.

10.  USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.

11.  MISCELLANEOUS.

     (a)  Subject to any applicable provisions of the California Corporate
Securities Law of 1968 and related regulations relied upon as a condition of
issuing securities pursuant to the Plan, the Board shall have the power to
accelerate the time at which a Stock Award may first be exercised or the time
during which a Stock Award or any part thereof will vest pursuant to subsection
6(e) or 7(d), notwithstanding the provisions in the Stock Award stating the time
at which it may first be exercised or the time during which it will vest.

     (b)  Neither an Employee, Director, or Consultant, nor any person to whom a
Stock Award is transferred under subsection 6(d) or 7(b) shall be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
shares subject to such Stock Award unless and until such person has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.

     (c)  Throughout the term of any Stock Award, the Company shall deliver to
the holder of such Stock Award, not later than one hundred twenty (120) days
after the close of each of the Company's fiscal years during the term of such
Stock Award, a balance sheet and an income statement. This subsection shall not
apply (i) after the Listing Date, or (ii) when issuance is limited to key
employees whose duties in connection with the Company assure them access to
equivalent information.

     (d) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto

                                       9.
<PAGE>

shall confer upon any Employee, Director, Consultant, or other holder of Stock
Awards any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, the right of the Company's Board of Directors and/or the
Company's stockholders to remove any Director as provided in the Company's
Bylaws and the provisions of the General Corporation Law of the State of
Delaware, or the right to terminate the relationship of any Consultant subject
to the terms of such Consultant's agreement with the Company or Affiliate.

     (e)  To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.

     (f)  The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d)
or 7(b), as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.

     (g)  To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.

12.  ADJUSTMENTS UPON CHANGES IN STOCK.

     (a)  Capitalization Adjustments. If any change is made in the Common
Stock subject to the Plan to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving
the receipt of consideration by the

                                      10.
<PAGE>

Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of securities subject to the Plan pursuant to subsection 4(a), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of securities and price per share of Common Stock subject to such
outstanding Stock Awards. The Board shall make such adjustments, and its
determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)

     (b)  Change in Control--Dissolution or Liquidation.  In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate  immediately prior to such event.

     (c)  Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse
merger in which the Company is the surviving corporation but the shares of
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards (including an award to acquire the same consideration
paid to the stockholders in the transaction described in this subsection 12(c)
for those outstanding under the Plan). In the event any surviving corporation
or acquiring corporation refuses to assume such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, then with respect
to Stock Awards held by Participants whose Continuous Status as an Employee,
Director or Consultant has not terminated, the vesting of such Stock Awards
and any shares of Common Stock acquired under such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.

     (d)  Change in Control--Securities Acquisition. In the event of an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing at least fifty
percent (50%) of the combined voting power entitled to vote in the election of
Directors and provided that such acquisition is not a result of, and does not
constitute a transaction described in, subsection 12(c) hereof, then with
respect to Stock Awards held by Participants whose Continuous Status as an
Employee, Director or Consultant has not terminated, the vesting of such Stock
Awards and any shares of Common Stock acquired under such Stock Awards (and,
if applicable, the time during which such Stock Awards may be exercised) shall
be accelerated in full.

     (e)  Change in Control--Termination of Continuous Status as an Employee,
Director or Consultant.

          (i)  In the event of a change in control as specified in subsection
12(c) or 12(d) (collectively, a "Change in Control") and Continuous Status as
Employee, Director or Consultant of a Participant is either involuntarily
terminated without Cause or is voluntarily terminated for Good Reason within
one (1) month before or thirteen (13) months after the Change in Control, then
the vesting of such Participant's Stock Award and any shares of Common Stock
acquired under such Stock Award (and, if applicable, the time during which
such Stock Award may be exercised) shall be accelerated by one (1) year.

          (ii)  The Company or an Affiliate may not terminate the Continuous
Status as an Employee, Director or Consultant of a Participant for Cause
unless and until there shall have been delivered to such person a copy of a
resolution duly adopted by the affirmative vote of at least a majority of the
Board at a meeting of the Board called and held for the purpose (after
reasonable notice to such person and an opportunity for such person, together
with such person's counsel, to be heard before the Board), finding that in the
good faith opinion of the Board, such person was guilty of the conduct
constituting "Cause" and specifying the particulars thereof in detail.

          (iii)  Any purported voluntarily termination of the Continuous
Status as an Employee, Director or Consultant of a Participant for Good Reason
shall be communicated by a notice of termination to the Company and shall
state the specific termination provisions relied upon and set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
such termination.

          (iv)   If any benefit received or to be received by such person
pursuant to the acceleration of the vesting and/or exercisability of Stock
Award would constitute an "excess parachute payment" subject to excise tax
under Section 4999 of the Code (the "Excise Tax"), the amount or benefit to be
received by such person shall be reduced if such reduction, taking into
account all applicable federal, state and local income and employment taxes
and the Excise Tax, results in a greater after-tax benefit for such person. The
determination by the Company's independent auditors of any required reduction
pursuant hereto shall be conclusive and binding upon such person.

     (f)  Definitions.

          (i)  "Good Reason" means, with respect to the voluntary termination
of the Continuous Status as an Employee, Director or Consultant of a
Participant in connection with a Change in Control, (i) reduction of such
person's rate of compensation as in effect immediately prior to the Change in
Control by greater than ten percent (10%), except to the extent the
compensation of other similarly situated persons are accordingly reduced, (ii)
failure to provide a package of welfare benefit plans that, taken as a whole,
provide substantially similar benefits to those in which such person is
entitled to participate immediately prior to the Change in Control (except
that such person's contributions may be raised to the extent of any cost
increases imposed by third parties) or any action by the Company that would
adversely affect such person's participation or reduce such person's benefits
under any of such plans, (iii) a change in such person's responsibilities,
authority, titles or offices resulting in diminution of position, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken
in bad faith that is remedied by the Company promptly after notice thereof is
given by such person, (iv) a request that such person relocate to a worksite
that is more than fifty (50) miles from such person's prior worksite, unless
such person accepts such relocation opportunity, (v) a material reduction in
duties, (vi) a failure or refusal of any successor company to assume the
obligations of the Company under an agreement with such person or (vii) a
material breach by the Company of any of the material provisions of an
agreement with such person. For purposes of this definition, "Company" shall
include an Affiliate of the Company and a successor to the Company.

          (ii)  "Cause" means, with respect to the involuntary termination of
the Continuous Status as an Employee, Director or Consultant of a Participant,
misconduct, including: (i) conviction of any felony or any crime involving
moral turpitude or dishonesty; (ii) participation in a fraud or act of
dishonesty against the Company or an Affiliate; (iii) conduct that, based upon
a good faith and reasonable factual investigation and determination by the
Company, demonstrates gross unfitness to serve; or (iv) intentional, material
violation of any agreement with the Company, or of any statutory duty to the
Company, that is not corrected within thirty (30) days after written notice
thereof. Physical or mental disability shall not constitute "Cause." For
purposes of this definition, "Company" shall include an Affiliate of the
Company and a successor to the Company.

     (g)  Modification of Incentive Stock Options. Notwithstanding the
foregoing, any adjustments made pursuant to Section 12 with respect to
Incentive Stock Options shall be made only after the Board, after consulting
with counsel for the Company, determines whether such adjustments would
constitute a "modifications" of such Incentive Stock Option (as that term is
defined in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holders of such Incentive Stock Options. If the Board
determines that such adjustments made with respect to Incentive Stock Options
would constitute a modification of such Incentive Stock Options, it may
refrain from making such adjustments, unless the holder of an Incentive Stock
Option specifically requests in writing that such adjustment be made and such
writing indicates that the holder has full knowledge of the consequences of such
"modification" on his or her income tax treatment with respect to the Incentive
Stock Option.

13.  AMENDMENT OF THE PLAN AND STOCK AWARDS.

     (a)  The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent such approval is necessary to satisfy the requirements
of Section 422 of the Code or any NASDAQ or securities exchange listing
requirements.

     (b)  To the extent required by applicable law, recipients of Stock Awards
shall be provided with financial statements at least annually.

     (c)  It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.

     (d)  Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.

     (e)  The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the

                                      11.
<PAGE>

Stock Award was granted and (ii) such person consents in writing.

14.  TERMINATION OR SUSPENSION OF THE PLAN.

     (a)  The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth anniversary of
the earlier of the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

     (b)  Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.

15.  EFFECTIVE DATE OF PLAN.

     The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall he within
twelve (12) months before or after the date the Plan is adopted by the Board.

                                      12.<PAGE>

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 406 of the Securities Act of 1933, as amended.

                                                                  Exhibit 10.7

                            COLLABORATION AGREEMENT

          This Collaboration Agreement (the "Agreement") is made and entered
into as of January 1, 2000 (the "Effective Date") by and among Exelixis
Pharmaceuticals, Inc., a Delaware corporation having its principal place of
business in South San Francisco, California ("Exelixis"), Bayer Corporation, an
Indiana corporation having its principal place of business in Pittsburgh,
Pennsylvania ("Bayer"), and GenOptera LLC, a Delaware limited liability company
having its principal place of business in South San Francisco, California (the
"LLC").  Each of Exelixis, Bayer and the LLC may be referred to herein
individually as a "Party" or collectively as the "Parties."

                                   Background

          A.  Exelixis has technology, materials, and expertise relating to the
identification of proteins and nucleic acids involved in intracellular pathways
or networks in insects and nematodes and to the development of high-throughput
assays that can identify compounds having potential utility in inhibiting or
enhancing the activity of such pathway proteins or nucleic acids.

          B.  Bayer has an extensive library of small molecules, and has
substantial experience in the research (including target research), development
(including assay development), and commercialization of pesticides for use in
the markets for crop and plant protection and non-human animal health (including
companion animal care).

          C.  Exelixis and Bayer A.G., an Affiliate of Bayer, have been working
together in the field of pesticide research under an existing Collaboration
Agreement (the "Original Agreement") entered into as of May 1, 1998 (the
"Original Agreement Date") and terminated as of the Effective Date by a separate
agreement between Exelixis and Bayer A.G.  Exelixis and Bayer have now decided
to organize the LLC to continue and expand the research performed under the
Original Agreement, and to make the collaboration between Exelixis and Bayer
exclusive within the field of insecticides and nematicides, as and to the extent
further defined herein.

          Now, Therefore, in consideration of the foregoing and the covenants
and promises contained in this Agreement, the Parties agree as follows:

1.   Definitions

     As used herein, the following capitalized terms shall have the following
meanings (with terms defined in the singular having the same meanings when used
in the plural):

     1.1     "A List Reserved Target" has the meaning set forth in Section 6.1.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       1
<PAGE>

  1.2     "Affiliate" means a Person who controls, is controlled by or is under
common control with (a) the referenced Party or (b) another Person.  For
purposes of this definition, (1) the word "control" (including, with correlative
meaning, the terms "controlled by" or "is under common control with") means the
power to direct or cause the direction of the management and policies of the
relevant Person, or the ownership of at least fifty percent (50%) of the voting
stock or voting power of such Person if it is a legal entity, and (2) Bayer and
Bayer AG are Affiliates of each other, the LLC shall not be considered an
Affiliate of either Bayer or Exelixis, and neither Bayer nor Exelixis shall be
considered an Affiliate of the LLC.

  1.3     "Annual FTE Rate" means the amount to be paid over a 12-month period
by the LLC to Exelixis to support one FTE for such period.  The Annual FTE Rate
will be [ * ] for the first Contract Year.  For each subsequent Contract Year,
this rate will be [ * ].

  1.4     "Approval Application" means the appropriate application(s), together
with all documents, data and information concerning a Product required to be
included with such application, that is necessary to obtain Regulatory Approval
to manufacture, use, import, distribute, market and/or sell a Product for use in
the Field of Use in a particular country.

  1.5     "B List Reserved Target" has the meaning set forth in Section 6.1.

  1.6     "Bayer Assay" means, with respect to a particular Target, an in vitro
or in vivo assay (other than an LLC Assay) developed by or on behalf of Bayer as
provided in Sections 2.11(b), 3.2, 4.3(b), 5.3 and 6.2(b) that can measure
whether a particular molecule or compound inhibits or antagonizes (or, if
appropriate, agonizes or enhances) the function of the Target.

  1.7     "Bayer Compounds" are compounds, excluding the Bayer Pesticides and
any and all compounds that Bayer and/or an Affiliate of Bayer was marketing or
developing on the Original Agreement Date, to which Bayer has access and which
it has the right to test and that Bayer A.G. tested under the Original Agreement
or that Bayer tests under this Agreement.

  1.8     "Bayer Know-How" means Information Controlled by Bayer or any
Affiliate of Bayer that is necessary or useful for conducting the LLC's
obligations under the Research Plan, or for the discovery, preparation or use of
Targets or LLC Assays, or for the development or use of the Sequence Library or
Sequence Database and that is disclosed to the LLC and/or Exelixis under this
Agreement and/or the Original Agreement.  Bayer Know-How excludes the Bayer
Patents.

  1.9     "Bayer Patents" means all Patents Controlled by Bayer or any Affiliate
of Bayer, covering inventions made prior to the end of the Research Term,
including those made prior to the Effective Date, that claim or cover a Bayer
Pesticide or its use, the discovery, manufacture or use of a Target or LLC
Assay, the development or use of the Sequence Library or Sequence Database, or
the discovery, manufacture or use of a Collaboration Compound or Product; and
include Joint Patents in which Bayer has an ownership interest.

  1.10    "Bayer Pesticide" means any compound Controlled by Bayer that has been
shown to have potential utility in pest control as an insecticide, arachnicide
and/or nematicide, but the target for such activity was not known as of the
Original Agreement Date.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       2
<PAGE>

  1.11    "Bayer Product" means a product that contains a Collaboration
Compound.

  1.12    "Candidate Target" means (a) a Target identified, mapped, cloned, and
validated in the course of the Target Identification Program or (b) a Sequence-
Based Target that is identical with a Target described in subsection (a) of this
Section 1.12.

  1.13    "Chemical Development Program" means a chemical research program
conducted to find a compound with commercial value when formulated into a
product.  For clarity, a Chemical Development Program includes, without
limitation, the synthesis of derivatives, modifications and analogues whether
made through medicinal chemistry, the study of structure-activity relationships,
combinatorial chemistry or a structure-based design program.

  1.14    "Chief Executive Officer" means the Chief Executive Officer of the
LLC.

  1.15    "Cognate Target" means any Candidate Target, (i) the function of which
a particular Bayer Pesticide agonizes, antagonizes, enhances or counteracts to
achieve the insecticide or nematicide (as applicable) effect, which function was
not known to Bayer, Exelixis or an Affiliate of either of them as of the
Original Agreement Date and was determined as a result of the investigation of
the mechanism of action of a Bayer Pesticide through work conducted by the LLC
or Exelixis, or (ii) [ * ].

  1.16    "Collaboration Compound" means

          (a) a compound (other than an Excluded Compound), having a molecular
weight below [ * ], that:

              (i)   agonizes, antagonizes, enhances or inhibits the function of
a Target, wherein such activity was discovered by or on behalf of Bayer or its
Affiliate or licensee by screening the compound in a Selected Assay for the
Target or in a Bayer Assay for the Target, within [ * ] after the first use of
such Selected Assay or Bayer Assay by Bayer or its Affiliate or licensee; or

              (ii)  agonizes, antagonizes, enhances or inhibits the function of
a Target, wherein such activity was discovered by a material use by or on behalf
of Bayer or its Affiliate or licensee of the Exelixis Know-How, Exelixis
Patents, LLC Know-How or LLC Patents (other than Selected Assays or Bayer
Assays), within [ * ] after the Effective Date or if later by [ * ]; or

              (iii) is a compound synthesized in connection with a Chemical
Development Program based on or arising from a compound (including, without
limitation, derivatives of an Excluded Compound) that meets the criteria in
Section 1.16(a)(i) or 1.16(a)(ii) and that is shown to agonize, antagonize,
enhance or inhibit the function of a Target; or

              (iv)  is identified by Bayer or its Affiliate or licensee (other
than the LLC) as provided in Section 2.4(c) within [ * ] after the first use by
Bayer or its Affiliate or licensee of an assay or Target described in Section
2.4(c); or

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       3
<PAGE>

          (b) is a [ * ] useful in the Field of Use and that is discovered by or
on behalf of Bayer or its Affiliate or licensee under this Agreement and/or was
discovered by or on behalf of Bayer AG or its licensee under the Original
Agreement.

The definition of "Collaboration Compound" does not include any compound
identified and developed without any use of a Selected Assay, Target or
Confidential Information of the LLC or Exelixis.  References in this Section
1.16 to a "licensee" of Bayer shall include sublicensees but shall exclude the
LLC in those cases where the compound satisfies the definition of an LLC
Compound.

  1.17    "Confidential Information" means with respect to a Party, Information
that is owned or Controlled by such Party, its Affiliates or sublicensees,
including information of Third Parties known to such Party by reason of any
collaboration with such Third Party or under any confidentiality agreement with
such Third Party, that is disclosed by such Party to the one or both of the
other Parties hereto pursuant to this Agreement, and that is identified by the
disclosing Party in writing, or is acknowledged by the receiving Party in
writing, to be confidential to the disclosing Party or to a Third Party at the
time of disclosure to the receiving Party if disclosed in tangible form, or is
confirmed by the disclosing Party to the receiving Party as confidential within
thirty (30) days after disclosure if initially disclosed orally by the
disclosing Party.  Confidential Information will not include any information
which:

     (a) Already Known Without Breach.  Was already known to the receiving
Party, without breach of any obligation of confidentiality by any Party, at the
time of disclosure by the disclosing Party;

     (b) Generally Available Or In Public Domain Without Breach.  Was generally
available to the public or otherwise part of the public domain at the time of
its disclosure to the receiving Party by the disclosing Party, or became
generally available to the public or otherwise part of the public domain after
its disclosure to the receiving Party by the disclosing Party, in each case
without breach of any obligation of confidentiality by the receiving Party or
subsequently becomes part of the public domain without breach of any obligation
of confidentiality by the receiving Party;

     (c) Freely Disclosed By Certain Third Parties.  Was disclosed to the
receiving Party, other than under an obligation of confidentiality, by a Third
Party who had no obligation to the disclosing Party not to disclose such
information to others;

     (d) Freely Disclosed By Disclosing Party To Others.  Is disclosed by the
disclosing Party to others without an obligation of confidentiality;

     (e) Required To Be Disclosed.  Is required to be disclosed pursuant to law,
subject, except for disclosure of financial information to the extent required
by securities laws to be disclosed, to the protective provisions set forth in
Section 18.6 of the Operating Agreement; or

     (f) Independently Developed.  The receiving Party can document was
subsequently and independently developed by employees or others on behalf of the
receiving

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       4
<PAGE>

Party without use of any Confidential Information disclosed to the receiving
Party or such others by the disclosing Party.

  1.18    "Contract Year" means a 12-month period of time commencing on the
Effective Date or any anniversary of the Effective Date, and designated by a
number one larger than the number of full 12-month periods since the Effective
Date at the commencement of such period of time.

  1.19    "Control" means, with respect to any compound, material, Information
or intellectual property right (including without limitation those relating to
an LLC Assay, Bayer Assay, Exelixis Assay, Bayer Pesticide, Bayer Compound,
Collaboration Compound, Exelixis Agrochemical Compound, Product or Target),
possession by a Party of the ability to grant access, a license, or a sublicense
to such 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.

  1.20    "Core Improvements" means any and all improvements to Exelixis Core
Technology made by FTEs, any entity other than Bayer or any individual other
than a Bayer employee under this Agreement after the Effective Date.  The JSC
will propose and the LLC will decide whether inventions made by FTEs, any entity
other than Bayer or any individual other than a Bayer employee are Core
Improvements or not.  In case of disagreement within the JSC, an external expert
appointed by the LLC shall make such proposal.

  1.21    "Dedicated FTE" means any FTE who, at the time in question, performs
work solely for the LLC.

  1.22    "Development" means conducting in vitro and/or in vivo investigations
and trials on a Collaboration Compound for use in the Field of Use, starting
with Bayer's decision to enter the F\\2\\-Phase as to such Collaboration
Compound.

  1.23    "Dollars" or "$" means United States dollars.

  1.24    "Excluded Compound" means any compound owned or Controlled by Bayer
that, prior to any use or screening of such compound in a Selected Assay or
Bayer Assay or in any material use under this Agreement or the Original
Agreement of Exelixis Know-How, Exelixis Patents, LLC Know-How or LLC Patents,
is known to Bayer, and has been shown by or on behalf of Bayer or its Affiliate
to have [ * ] activity, in testing such as microscreening or in actual data from
greenhouse or field experiments typically used by Bayer to determine whether a
compound has [ * ] activity.

  1.25    "Exelixis Agrochemical Compound" means a compound (including early
stage compounds such as hits and leads) having a molecular weight below [ * ]
that has activity in the Field of Use and that:

     (a) agonizes, antagonizes, enhances or inhibits the function of a Selected
Target identified in the Target Identification Project or present in the
Sequence Database,

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       5
<PAGE>

wherein such activity was discovered by or on behalf of Exelixis or its
Affiliate or collaborator by screening the compound in an LLC Assay for the
Target (if permitted by the LLC under Section 4.6(a)) within [ * ] after the
first use of such LLC Assay by Exelixis or its Affiliate or collaborator; or

     (b) agonizes, antagonizes, enhances or inhibits the function of an
Unselected Non-Cognate Target, wherein such activity was discovered by or on
behalf of Exelixis or its Affiliate or collaborator by screening the compound in
an Exelixis Assay for such Target (if permitted by the LLC under Section 4.3(a))
within [ * ] after the first use of such Exelixis Assay by Exelixis or its
Affiliate or collaborator; or

     (c) is a compound synthesized in connection with a Chemical Development
Program based on or arising from a compound that meets the criteria in Section
1.25(a) or (b) and that is shown to agonize, antagonize, enhance or inhibit the
function of a Selected Target identified in the Target Identification Project or
present in the Sequence Database or an Unselected Non-Cognate Target,
respectively.

The definition of "Exelixis Agrochemical Compound" does not include any compound
identified and developed without any use of an LLC Assay, Exelixis Assay,
Selected Target or Unselected Non-Cognate Target.

  1.26    "Exelixis Agrochemical Product" means a product that is commercialized
by Exelixis or by a licensee of Exelixis (other than Bayer) in the Field of Use
and that contains an Exelixis Agrochemical Compound.

  1.27    "Exelixis Assay" means, with respect to a particular Target, an in
vitro or in vivo assay developed by or on behalf of Exelixis that can measure
whether a particular molecule or compound inhibits or antagonizes (or, if
appropriate, agonizes or enhances) the function of the Target.

  1.28    "Exelixis Core Technology" means the [ * ] used by Exelixis (whether
owned by Exelixis or used by it under license from Third Parties) generally in
its business.  The JSC will consider in good faith and propose modifications of
this definition after the Effective Date and the LLC will decide whether to make
such modifications.  In case of disagreement within the JSC, an external expert
appointed by the LLC shall make such proposal.

  1.29    "Exelixis Human Health Compound" means a compound having a molecular
weight below [ * ] that has activity outside the Field of Use and that agonizes,
antagonizes, enhances or inhibits the function of a Candidate Target or a
Sequence-Based Target, wherein such activity was discovered by or on behalf of
Exelixis or its Affiliate or collaborator by screening the compound in an LLC
Assay or an Exelixis Assay for the Candidate Target or the Sequence-Based
Target, within [ * ] after first use of such assay by Exelixis or its Affiliate
or collaborator.

  1.30    "Exelixis Human Health Product" means any product commercialized by
Exelixis or a licensee of Exelixis (other than Bayer) outside the Field of Use
that contains an Exelixis Human Health Compound.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       6
<PAGE>

  1.31    "Exelixis Know-How" means Information Controlled by Exelixis or any
Affiliate of Exelixis that (a) is necessary or useful for performing an LLC
Assay or Bayer Assay or otherwise for discovering a Collaboration Compound and
is disclosed to the LLC and/or Bayer under this Agreement and/or the Original
Agreement, or (b) is derived from the FlyTag database.  Exelixis Know-How
excludes the Exelixis Patents.

  1.32    "Exelixis Patents" means all Patents Controlled by Exelixis or any
Affiliate of Exelixis, covering inventions made prior to the end of the Research
Term, including those made prior to the Effective Date, that (a) claim or cover
the manufacture or use of an LLC Assay or Target, or the discovery of a
Collaboration Compound, or (b) are derived from the FlyTag database; and include
Joint Patents in which Exelixis has an ownership interest.

  1.33    "Field of Use" means any use [ * ].

  1.34    "Force Majeure Event" means, as to a Party, an event or condition
having a material adverse effect upon such Party due to circumstances beyond
such Party's reasonable control and that by the exercise of commercially
reasonable due diligence it is unable to prevent.  Circumstances beyond the
reasonable control of a Party include, but are not limited to, fire, strikes,
insurrections, riots, embargoes, shortages, war-time rationing or preferences,
delays in transportation, inability to obtain supplies of raw materials or
requirements or regulations of any government or any other civil or military
authority in the relevant jurisdiction.

  1.35    "F\\2\\-Phase" means the stage of research and development of a
Collaboration Compound for use in the Field of Use where Bayer selects the
Collaboration Compound for formal development work to generate the data needed
for registration, such as toxicological, environmental and ecobiological data,
metabolism studies, and residue studies.

  1.36    "Full Time Employee" or "FTE" means the equivalent of one employee of
Exelixis, working full time for one work year.

  1.37    "Independent Research" means:

          (a) with respect to Exelixis, work performed by employees or
consultants of Exelixis other than Dedicated FTEs or persons while acting as
Shared FTEs that does not utilize Confidential Information of another Party
(other than that Confidential Information of the LLC permitted to be used in
Section 11.3(c)); or

          (b) with respect to Bayer, work performed by employees or consultants
of Bayer that does not utilize Confidential Information of another Party (other
than that Confidential Information of the LLC permitted to be used in Section
11.2(c)).

  1.38    "Information" means information, results and data of any type
whatsoever, in any tangible or intangible form whatsoever, including without
limitation 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.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       7
<PAGE>

  1.39    "Joint Invention" means all inventions, developments, results, know-
how and other Information, and all intellectual property relating thereto,
jointly conceived by employees of or consultants to two or more of the Parties
in the course of work performed pursuant to this Agreement after the Effective
Date and reduced to practice during the Research Term or within [ * ]
thereafter.

  1.40    "Joint Patent" means any Patent claiming a Joint Invention.

  1.41    "JSC" means the Joint Scientific Committee of the LLC, as further
defined in the Operating Agreement.

  1.42    "LLC Assay" means, with respect to a particular Selected Target, an in
vitro or in vivo assay developed by the LLC in the course of the Research or by
a Third Party subcontracted by the LLC pursuant to Section 3.3, including the
required reagents for performing such assay that are not otherwise readily
available, that is suitable for [ * ] and that can measure whether a particular
molecule or compound inhibits or antagonizes (or, if appropriate, agonizes or
enhances) the function of the Selected Target.

  1.43    "LLC Compound" means a  compound (including early stage compounds such
as hits and leads) having a molecular weight below [ * ] that:

          (a) agonizes, antagonizes, enhances or inhibits the function of a
Target, wherein such activity was discovered by or on behalf of the LLC or its
Affiliate or sublicensee by screening the compound in an LLC Assay for the
Target;

          (b) is a compound synthesized in connection with a Chemical
Development Program based on or arising from a compound that meets the criteria
in subsection (a) and that is shown to agonize, antagonize, enhance or inhibit
the function of a Target; or

          (c) is identified by the LLC or its Affiliate or licensee as provided
in Section 2.4(c) within [ * ] after the first use by the LLC or its Affiliate
or licensee of an assay or target described in Section 2.4(c).

The Parties understand and agree that the definition of "LLC Compound" does not
include any compound identified and developed without any use of an LLC Assay,
Selected Assay, Target or Confidential Information of Exelixis or Bayer.

  1.44    "LLC Know-How" means Information Controlled by the LLC or any
Affiliate of the LLC that (a) concerns a Target or is necessary or useful for
performing an LLC Assay, Exelixis Assay or Bayer Assay or otherwise for
discovering a Collaboration Compound, Exelixis Agrochemical Compound or Exelixis
Human Health Compound, or the manufacture, use or sale of a Product, and is
disclosed to Exelixis and/or Bayer under this Agreement, or (b) is derived from
the Sequence Library or Sequence Database.  LLC Know-How excludes the LLC
Patents.

  1.45    "LLC Patents" means all Patents Controlled by the LLC or any Affiliate
of the LLC, covering inventions made prior to the end of the Research Term, that
(a) claim or cover the discovery, manufacture or use of a Target, LLC Assay,
Exelixis Assay or Bayer Assay, or the

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       8
<PAGE>

discovery of a Collaboration Compound, Exelixis Agrochemical Compound or
Exelixis Human Health Compound, or the manufacture, use or sale of a Product, or
(b) are derived from the Sequence Library or Sequence Database; and include
Joint Patents in which the LLC has an ownership interest.

  1.46    "Management Committee" shall mean the Management Committee of the LLC,
as further defined in the Operating Agreement.

  1.47    "Net Sales" means the total amount invoiced or otherwise charged by
Bayer or Exelixis or their respective Affiliates or sublicensees, as applicable,
on account of the sale of a Product to a Third Party, less the following
deductions to the extent actually incurred and invoiced or charged to the
purchaser based upon the sale of such Product: (a) credits, allowances,
discounts and rebates to, and chargebacks from the account of, such Third Party
for spoiled, damaged, out-dated and returned Product; (b) actual freight and
insurance costs incurred in transporting such Product; (c) sales, value-added
and other direct taxes incurred; and (d) customs duties, surcharges and other
governmental charges incurred in connection with the exportation or importation
of such Product.  In calculating the Net Sales of a Product, any rebates,
discounts, commissions, costs, expenses or payments other than those expressly
provided above in this Section 1.47 shall not be deducted from the amount
invoiced or otherwise charged on account of sale of such Product.

  1.48    "Non-Cognate Target" means any Candidate Target or Sequence-Based
Target that is not a Cognate Target.

  1.49    "Operating Agreement" means the Operating Agreement of the LLC of even
date herewith.

  1.50    "Patent" means (a) all patent applications heretofore or hereafter
filed or having legal force in any country; (b) all unexpired patents that have
issued or in the future issue therefrom, including without limitation utility,
model and design patents and certificates of invention; and (c) all divisionals,
continuations, continuations-in-part, reissues, reexaminations, renewals,
extensions (including supplemental protection certificates), additions,
registrations or confirmations to or of any such patent applications and
patents.

  1.51    "Person" means a natural person, corporation, partnership (whether
general or limited), a limited liability company, or any trust, estate,
association, custodian, nominee or any other individual or entity in its own or
representative capacity, and in each case, as to a legal entity, whether formed
under the laws of the United States or of any state thereof or of any non-United
States jurisdiction.

  1.52    "Product" means a Bayer Product, Exelixis Agrochemical Product, or
Exelixis Human Health Product.

  1.53    "Putative Related Family Member" means an Unselected Non-Cognate
Target that is identified in accordance with Section 4.4(a).

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       9
<PAGE>

  1.54    "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 or sale of a Product in a regulatory jurisdiction.

  1.55    "Related Family Member" means, with respect to a particular Selected
Target, a Putative Related Family Member that the Parties determine, as set
forth in Section 4.4(b), to be [ * ].

  1.56    "Research" means the research efforts conducted by a Party or the
Parties pursuant to this Agreement during the Research Term, together with the
research efforts conducted by Exelixis and/or Bayer A.G. under the Original
Agreement during the term of the Original Agreement.  Research includes work
performed under the Target Identification Project and the Sequencing Project and
such other research activities as specified by the LLC.

  1.57    "Research Field" means research directed only towards the discovery
and testing of insecticides (including compounds acting against other
invertebrate animals) and nematicides for crop protection, [ * ].

  1.58    "Research Orthologue" means, with respect to a first gene or protein
that was discovered in the course of the Collaboration and naturally occurs in a
particular species, a second gene or protein that naturally occurs in a
different species, was identified by a Party in the course of work other than
Independent Research, and has sufficient sequence homology or evidence of
functional equivalence to be considered the counterpart of such first gene or
protein.

  1.59    "Research Plan" means a detailed plan for research under this
Agreement as recommended by the JSC and approved by the LLC from time to time
during the Research Term.

  1.60    "Research Term" means the period commencing on the Effective Date and
ending on the date specified in Section 2.1(b) unless earlier terminated
pursuant to Section 14.3.

  1.61    "Reserved Target" means any target designated as set forth in Section
6.1.

  1.62    "Selected Assay" means an LLC Assay for which Bayer commences
screening for Collaboration Compounds within the period set forth in Section
3.3.

  1.63    "Selected Cognate Target" means a Cognate Target that the LLC has
selected for LLC Assay development as provided in Section 3.1 or that Bayer has
selected for Bayer Assay development as provided in Section 3.2 or 5.3.

  1.64    "Selected Non-Cognate Target" means: (a) a Non-Cognate Target that the
LLC has selected for LLC Assay development as provided in Section 3.1 or 4.3(a)
or that Bayer has selected for Bayer Assay development as provided in Section
3.2 or 4.3(a), or (b) a Target that Bayer has selected for Bayer Assay or LLC
Assay development as provided in Section 2.11.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       10
<PAGE>

  1.65    "Selected Target" means a Selected Cognate Target, Selected Non-
Cognate Target or Selected A List Reserved Target.

  1.66    "Sequence-Based Target" means a Target contained in the Sequence
Database.

  1.67    "Sequence Database" means the compilation of the readable sequence
data from a Sequence Library.

  1.68    "Sequence Library" means an arrayed, normalized cDNA or genomic
library created from samples provided by Bayer from an arthropod or helminth
species selected by Bayer.

  1.69    "Sequencing Project" means the research project described in Section
2.4.

  1.70    "Shared FTE" means an FTE furnished by, and comprised of, the
collective services of persons who perform work for the LLC and also work on
other Exelixis projects, both internal and in collaboration with Third Parties.

  1.71    "Target" means (a) a gene or gene product or portion thereof that is
identified in the course of the Research, (b) a gene or gene product or portion
thereof Controlled by Exelixis that it licenses to the LLC for Research in the
Research Field, (c) a gene or gene product obtained by Bayer or the LLC using
sequence information provided by Exelixis pursuant to this Agreement or the
Original Agreement, or (d) a Research Orthologue of a gene, gene product or
portion thereof that meets the criteria set forth in Section 1.71(a), (b) or
(c).  For clarity, Section 1.71(a) includes Sequence-Based Targets, Candidate
Targets and A List Reserved Targets.  The Parties understand and agree that any
gene or gene product or portion thereof that is discovered through Independent
Research is not a Target.

  1.72    "Target Identification Project" means that research project described
in Section 2.3 and Articles 3, 4 and 5 regarding identification of Cognate
Targets and/or Non-Cognate Targets and development of LLC Assays.

  1.73    "Third Party" means any entity or individual other than the Parties
and other than the Affiliates of the Parties.

  1.74    "Unselected Assay" means an LLC Assay which Bayer fails to select or
for which Bayer fails to commence screening for Collaboration Compounds within
the period set forth in Section 3.3.

  1.75    "Unselected Cognate Target" means a Cognate Target that both the LLC
and Bayer failed to select as provided in Section 3.1, 3.2 or 5.3.

  1.76    "Unselected Non-Cognate Target" means a Non-Cognate Target that both
the LLC and Bayer failed to select as provided in Section 3.1, 3.2 or 4.3.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       11
<PAGE>

2.   Collaborative Research

     2.1     Overview of Research Projects.

             (a) Under the terms of the Original Agreement, Exelixis has already
performed Research on the Target Identification Project and the Sequencing
Project.  During the Research Term, the LLC shall undertake the Research, to be
conducted on a cooperative and collaborative basis with Exelixis and Bayer in
accordance with a new Research Plan agreed upon by the Parties.  To the extent
consistent with the resources of the LLC provided under this Agreement or
otherwise available to the LLC, the LLC may establish Research projects in
addition to the Target Identification Project and the Sequencing Project for the
Parties to conduct within the Research Field.

             (b) Unless terminated pursuant to Section 14.7, the Research Term
will initially last eight (8) years from the Effective Date, and it will
automatically be extended beyond the eighth anniversary of the Effective Date,
in one year increments, unless Exelixis or Bayer gives written notice, at least
[ * ] prior to the eighth or any subsequent anniversary of the Effective Date,
of its intent to terminate the Research Term.

     2.2     Research Plan. The Research shall be conducted in accordance with a
Research Plan approved by the LLC based on the recommendation of the JSC. The
initial Research Plan under this Agreement shall be recommended by the JSC at
its first meeting after the Effective Date, and shall include the continuation
of the Research underway as of the Effective Date with appropriate additions and
modifications arising from the increased level of Research effort arising from
this Agreement. Prior to the first meeting of the JSC, the Research Plan shall
be determined by the LLC. Any changes to the Research Plan will require the
recommendation of the JSC or, if a decision of the JSC cannot be reached, the
approval of such change by the LLC. If the revised Research Plan requires a
personnel change of [ * ] or more of the FTEs working in a particular
discipline, then such Research Plan shall provide for a reasonable time for
Exelixis to implement such change. If the revised Research Plan requires
Exelixis to purchase or lease more than [ * ] of equipment or to acquire
licenses that were not already budgeted for purchase, lease or license at such
time, then such change shall require the consent of Exelixis unless the LLC
agrees (i) to purchase such additional capital equipment and/or to acquire such
additional licenses, as assets of the LLC, or (ii) to pay for such purchase or
lease expenses in excess of [ * ], which agreement in either case will require
that Bayer also agree with the LLC in writing to fund such amounts as an
increase in LLC operating expenses.

     2.3     Target Identification Project. The goal of the Target
Identification Project is to discover, isolate and validate Cognate Targets and
Non-Cognate Targets and to develop appropriate LLC Assays directed at such
Cognate Targets and Non-Cognate Targets and useful for the identification of
novel insecticides and nematicides. The research carried out by the LLC under
the Target Identification Project and each Party's rights with respect to the
data, Targets and LLC Assays that arise from the Target Identification Project
are set forth below and in Articles 3, 4 and 5 .

             (a) Research Performed Prior to the Effective Date. Exelixis has
already performed substantial Research in the Target Identification Project
under the Original Agreement. Commencing on the Effective Date, the LLC shall
assume responsibility for all

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       12
<PAGE>

Research then in progress and shall begin new Research in accordance with the
Research Plan. The rights and obligations with respects to all data, Targets and
LLC Assays arising in the course of the Research shall be the same regardless of
whether the underlying work was performed by Exelixis or Bayer A.G. under the
Original Agreement, by the Parties under this Agreement, or a combination of
both. In this regard:

        (i) The LLC shall have the right to decide, pursuant to Section 3.1,
whether the LLC will develop an LLC Assay for any Candidate Target for which
Exelixis provided to Bayer A.G. the information set forth in Section 3.1 prior
to the Effective Date and for which Bayer A.G. did not, prior to the Effective
Date, select such Candidate Target as a Selected Target.  For any such Candidate
Target which was provided prior to the Effective Date, the rights of Bayer set
forth in Section 3.2 shall come into effect on [ * ], and the rights of the
Parties set forth in Sections 4.3 and 5.3 shall come into effect on [ * ] if
Bayer fails to select such Candidate Target or designate such Candidate Target
as a Putative Related Family Member by such date.

        (ii) Any assays in development as of the Effective Date which are
delivered to Bayer pursuant to this Agreement after the Effective Date shall be
deemed to be LLC Assays, subject to the rights of the LLC and Exelixis set forth
in Sections 4.6 and 5.5.

     (b) Target Identification.  In the event that the Research Plan calls for
the LLC to perform target identification research upon a Bayer Pesticide other
than those Bayer Pesticides upon which research was conducted by Exelixis prior
to the Effective Date, the LLC shall request and Bayer shall provide to the LLC
within sixty (60) days after of such request, a reasonable amount of each such
Bayer Pesticide.  The LLC will study the feasibility of isolating [ * ] that are
resistant to the Bayer Pesticides, or using other research capabilities of
Exelixis to identify Targets.  Based on these feasibility studies Bayer shall
prioritize those Bayer Pesticides upon which the LLC shall perform further work
under the Research to identify Candidate Targets (as defined below).  For each
of these selected Bayer Pesticides, the LLC will endeavor to: (i) isolate [ * ],
as appropriate, that are resistant to the Bayer Pesticide, or apply other
Exelixis discovery capabilities as appropriate; (ii) map and clone the genes
responsible for the resistance in such [ * ]; and (iii) identify and validate
genes encoding Targets that may be useful for the identification of
Collaboration Compounds.  Each Target for which the LLC has successfully
completed steps (i), (ii), and (iii) above shall be deemed a "Candidate Target."
The JSC shall recommend to the LLC and the LLC shall decide whether each
Candidate Target identified is a Cognate Target or Non-Cognate Target.

  2.4     Sequencing Project.  Under the Original Agreement, Exelixis and Bayer
AG commenced a Sequencing Project (formerly known as an "EST Library Project")
intended to create an expressed sequence tag ("EST") library for an [ * ]
species of interest and a database comprising sequenced ESTs from said species.
During the Research Term, the LLC shall continue the Sequencing Project in
accordance with the Research Plan and this Section 2.4.  The Research Plan may
be amended by the written agreement of the LLC and Exelixis, to expand the
Sequencing Project to include one or more additional sequencing projects to be
performed by Shared FTEs, including but not limited to genomic sequencing
projects.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       13
<PAGE>

     (a) For each project in the Sequencing Project, Bayer AG has selected or
Bayer will select an [ * ] species with relevance to Bayer's crop protection
business.  For each species that Bayer AG did not provide Exelixis with whole
organism and tissue samples from such species, Bayer shall provide such
materials to the LLC.  Using these whole organism and tissue samples, Shared
FTEs will create a Sequence Library.  Shared FTEs will perform [ * ] sequencing
upon the number of clones from the Sequence Library specified in the Research
Plan and approved by Exelixis and compile the readable sequence data from such
Sequence Library (approximately [ * ] of the sequencing lanes are expected by
the Parties to be readable, but such expectation is not binding) into a Sequence
Database specifically arising from the Research.

     (b) Shared FTEs or Dedicated FTEs will perform cross-species comparisons
between the Sequence Database and proprietary Exelixis sequence banks and
between the Sequence Database and publicly available databases, with the
intention of identifying gene fragments or Targets with potential utility in the
Research Field.  The LLC will provide Bayer and Exelixis access to the Sequence
Database and any information relating to the such targets or otherwise derived
from such comparisons.  The Sequence Database and sequence-derived information
will be supplied to Bayer and Exelixis in the computer-readable format agreed
upon under the Original Agreement.

     (c) Bayer may identify and validate Sequence-Based Targets without
selecting such Targets.  Bayer shall select a Sequence-Based Target prior to
conducting further Research and Development work using such a Sequence-Based
Target.  Upon selection, a Sequence-Based Target shall become a Selected Non-
Cognate Target and any compounds identified by use of such Target or LLC Assays
or Bayer Assays based on such Target will be Collaboration Compounds subject to
all milestone and premium fee obligations outlined in Sections 9.3 and 9.4
[ * ].

     (d) The LLC will allocate from the Research commitment set forth in Section
2.5 sufficient FTEs to perform the sequencing dictated by the Research Plan and
not exceeding Exelixis' uncommitted sequencing capacities.  The JSC will attempt
in good faith to project sequencing needs [ * ] in advance.

     (e) The LLC may, upon the allocation of sufficient FTEs from the Research
commitment set forth in Section 2.5, expand the Sequencing Project to include
more than one [ * ] species (not exceeding Exelixis' uncommitted sequencing
capacities).  Bayer shall retain the right to select any additional species and
the Parties' rights and obligations with respect to the additional Sequence
Libraries and Sequence Databases shall be the same as for the initial Sequence
Library and Sequence Database.

 2.5 Research Commitment; FTEs.

     (a) In the first Contract Year, the LLC shall provide Exelixis with [ * ]
in Research funding and shall carry forward [ * ] for Research funding for the
subsequent Contract Year.  At least [ * ] in advance of the commencement of each
Contract Year after the first Contract Year, Exelixis shall provide the LLC with
a written calculation of the Annual FTE Rate for the following Contract Year in
accordance with Section 1.3.  If such Annual FTE Rate exceeds [ * ], the LLC
shall provide Exelixis, at least [ * ] in advance of the commencement of

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       14
<PAGE>

such Contract Year, written notice of whether the LLC commits to provide
sufficient Research funding (which shall include any carry-forward described in
this Section 2.5(a)) in the subsequent Contract Year to support [ * ] FTEs at
such Annual FTE Rate. If the LLC does not provide such commitment, then the LLC
shall specify such lesser amount of research funding which it commits to provide
in the forthcoming Contract Year, which amount shall not be less than [ * ] plus
any carry-forward described in this Section 2.5(a). The number of FTEs which are
funded during any given Calendar Year, which shall equal the sum of such level
of funding specified by the LLC plus any carry-forward described in Section
2.5(b) divided by the Annual FTE Rate in effect for such Calendar Year (with any
partial number being rounded down), is referred to in this Section 2.5 and
Section 9.2 as the "Specified FTEs." The amount of Research funding provided to
Exelixis by the LLC in each Contract Year after the first Contract Year shall
equal the result of the following calculation: multiply the number of Specified
FTEs by the Annual FTE Rate for such Calendar Year and deduct from the product
of such multiplication the amount of any Exelixis carry-forward described in
Section 2.5(b).

     (b) During each Contract Year in which the number of Specified FTEs (as
defined in Section 2.5(a)) equals [ * ], Exelixis shall provide [ * ] FTEs for
the Research, [ * ] of which shall be Dedicated FTEs and [ * ] of which shall be
Shared FTEs initially.  During any Contract Year in which the number of
Specified FTEs does not equal [ * ], Exelixis shall provide such number of
Specified FTEs, with any reduction in FTEs below [ * ] or increase above [ * ]
to be effected pro rata between Dedicated FTEs and Shared FTEs in the ratio
agreed upon in the Research Plan.  If Exelixis is unable to provide the number
of Specified FTEs for a particular Contract Year, then the excess of the level
of funding provided by the LLC during such Contract Year, divided by the product
the Annual FTE Rate for such Calendar Year times the number of FTEs actually
provided by Exelixis in such Contract Year, shall be carried forward by Exelixis
and used to pay for FTEs in the following Contract Year as provided in Section
2.5(a).

     (c) None of the Dedicated FTEs or Shared FTEs which the LLC is committed to
fund under Section 2.5(b) may be allocated by the LLC to (a) collaborations
between the LLC and Third Parties, (b) projects that involve the use of LLC
Assay(s) for screening purposes (except for implementation of LLC Assays at
Bayer's HTS facility) or (c) development of LLC Compounds.  Prior to any
amendment of the Research Plan to provide for the performance of such tasks by
the LLC, the LLC shall, with the written approval of Bayer, increase the number
of FTEs for which it provides research funding under this Agreement in order to
allocate sufficient new FTEs, funded by the LLC, to perform such tasks.  At any
time during the Research Term, the LLC, with the separate prior written consent
of Exelixis, may increase the number of Specified FTEs funded by the LLC under
this Agreement.

     (d) The Exelixis employees who provide FTE services to the LLC under this
Agreement shall remain employees of Exelixis, and Exelixis shall be solely
responsible for their recruiting, evaluation, compensation, management and
termination.  Exelixis shall indemnify Bayer and the LLC and their Affiliates
for any claims arising from such employment relationship, as set forth in
Article 13.

 2.6 Records.  The LLC shall maintain records of all work conducted under the
Research and all results, data and developments made pursuant to its efforts
under the Research. Exelixis shall cause all of its employees performing work on
behalf of the LLC to maintain

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       15
<PAGE>

records of such Research and of other activities in accordance with the
practices used by Exelixis in its independent research activities, with work on
behalf of the LLC to be maintained in independent laboratory notebooks. Such
records shall be complete and accurate and shall fully and properly reflect all
work done and results achieved in the performance of the Research and other
activities in sufficient detail and in good scientific manner appropriate for
patent and regulatory purposes. Exelixis and Bayer shall each have the right to
review and copy such records of the LLC at reasonable times to the extent
necessary for Bayer and Exelixis to each conduct its Research or perform other
obligations under this Agreement, subject to the confidentiality provisions set
forth in Article 18 of the Operating Agreement. Bayer or the LLC shall be
entitled to review at its expense the laboratory note books maintained by
Exelixis for the Shared FTEs, subject to appropriate confidentiality provisions,
for the purpose of determining ownership of intellectual property. If Exelixis
cites confidentiality concerns, Bayer or the LLC shall be entitled to hire an
independent auditor at its expense to review the laboratory note books
maintained by Exelixis for the Shared FTEs, subject to appropriate
confidentiality provisions, for the purpose of determining own ership of
intellectual property.

  2.7     Quarterly Reports.  Within [ * ] after the end of each calendar
quarter during the term of this Agreement, Exelixis and Bayer shall provide the
LLC with a written progress report summarizing the work performed in relation to
the goals of the Research projects and the Research Plan and provide such other
information required by the Research Plan or reasonably requested by another
Party.  The LLC shall produce an omnibus report that includes the Information
provided by Exelixis and Bayer as well as the corresponding Information
regarding the LLC's work.  The LLC's obligation under this Section 2.7 shall
commence on the Effective Date.  Bayer's obligation to provide quarterly reports
pursuant to this Section 2.7 will commence in the calendar quarter in which any
employee, agent or representative of Bayer first performs Research.  Exelixis'
obligation to provide quarterly reports pursuant to this Section 2.7 will
commence in the calendar quarter in which any employee, agent or representative
of Exelixis, other than a Dedicated FTE or an employee acting as a Shared FTE,
first performs Research.

  2.8     Additional Research Projects.  In addition to the Target
Identification Project and Sequencing Project, the LLC may, in its discretion,
identify and direct additional Research projects within the Research Field to
the extent resources are available, provided such Research projects are not
precluded by another agreement binding upon one of the Parties.  Such projects
shall be conducted under the guidance of the JSC and the LLC as provided in
Article 2.  The LLC shall allocate sufficient additional FTEs, as set forth in
Section 2.5, to perform such agreed additional Research projects.

  2.9     LLC Research Employees.  As of the Effective Date, it is not
contemplated that the LLC will employ its own research scientists.  In the event
the LLC determines that the LLC shall hire its own research employees, the
Parties shall review this Agreement for the purpose of agreeing on amendments,
if any, which may be necessary or appropriate to account for such hiring while
still preserving the originally contemplated allocation of rights as among the
Parties.

  2.10    Targets Supplied by Exelixis.  To the extent that it is able to do so,
Exelixis will make available to Bayer sequence information and database
annotation regarding Targets Exelixis has discovered independently or through
its other collaborations.  Bayer may pursue

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       16
<PAGE>

such Targets by selecting them as set forth in Section 2.11, in which case they
shall be deemed Selected Non-Cognate Targets.

  2.11    Targets Separately Selected by Bayer.

          (a) With the exception of Reserved Targets (which are addressed in
Article 6), this Section 2.11 sets forth Bayer's rights to pursue Targets not
identified in the Target Identification Project. Such Targets shall include (i)
Sequence-Based Targets, (ii) Targets obtained from sequences in any database
provided by Exelixis hereunder, and (iii) Targets provided by Exelixis pursuant
to Section 2.10. Upon selection by Bayer as set forth in Section 2.11(b) or
2.11(c), a Target described in this Section 2.11(a) shall become a Selected Non-
Cognate Target unless such Target is identical to a Cognate Target, in which
case such Target shall become a Selected Cognate Target.

          (b) Bayer may develop a Bayer Assay against a Target described in
Section 2.11(a) at its own expense at any time, provided that Bayer first
selects such Target as a Selected Non-Cognate Target by written notification to
the LLC and [ * ]. The LLC shall not receive any compensation under [ * ], but
the LLC shall receive all other compensation under Sections 9.3 and 9.4 which is
due with respect to any resulting Collaboration Compounds and/or Bayer Products.

          (c) In lieu of developing a Bayer Assay directed against a Target
described in Section 2.11(a), Bayer may select, by written notification to the
LLC, such Target as a Selected Non-Cognate Target for which the LLC will develop
an LLC Assay, provided that the LLC has sufficient resources to perform such
work. Bayer shall make all payments under Section 9.3 and 9.4 due with respect
to such Selected Non-Cognate Target and any resulting Collaboration Compounds
and/or Bayer Products.

3.   Target and Assay Selection

     3.1     Target Selection by the LLC. The LLC may select any Candidate
Target that the LLC identifies as a Selected Target and direct the LLC to
develop one or more appropriate LLC Assays. Any such selection by the LLC shall
be confirmed in writing delivered to each of the Parties (which may be in the
form of the minutes of a meeting of the Management Committee). If the LLC does
not select any particular Candidate Target as a Selected Target within [ * ]
following the date that the relevant LLC Know-How and Exelixis Know-How relating
to such Candidate Target is provided to the LLC, then Bayer shall have the
rights set forth in Section 3.2 to select such Candidate Target.

     3.2     Target Selection by Bayer. Bayer shall have [ * ] after the failure
of the LLC to timely select a Candidate Target as a Selected Target to select,
by written notification to the LLC, such Candidate Target as a Selected Target
and to commence development, at Bayer's expense, of a Bayer Assay directed at
such Candidate Target. The LLC shall not receive any compensation under [ * ],
but the LLC shall receive all other compensation under Sections 9.3 and 9.4
which is due with respect to any resulting Collaboration Compounds and/or Bayer
Products. If Bayer does not select such Candidate Target and commence such assay

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       17
<PAGE>

development within such [ * ] period, then the Parties shall have the rights set
forth in Sections 4.3 and 5.3.

  3.3     LLC Assay Development and Selection.  For each Selected Target
selected by LLC under Section 3.1 or selected by Bayer under Section 2.11(c) or
6.2(b) for development of an LLC Assay, the LLC will work to develop an LLC
Assay that is configured to screen Bayer Compounds in order to identify
Collaboration Compounds that inhibit or antagonize (or, if appropriate, agonize
or enhance) the function of such Selected Target.  The LLC may subcontract the
development of LLC Assay(s) for one or more Selected Targets.  Upon completion
of the LLC Assay development in a format configured for [ * ] and as further
specified in Exhibit A hereto or as otherwise specified by Bayer in writing, the
LLC shall present the LLC Assay and all data regarding the applicable Selected
Target to Bayer.  Bayer shall have [ * ] after the date of the LLC's
presentation in order to commence using such LLC Assay at Bayer's expense to
screen for Collaboration Compounds.  If Bayer does not commence such screening
activity within [ * ] and Bayer provides the JSC, prior to the end of the [ * ]
period, with a written request for a [ * ] extension of the period, the LLC
shall decide, on a case-by-case basis, whether to grant Bayer such extension.
If Bayer commences such screening activity within such [ * ] period or any such
extension thereof, then such LLC Assay shall then be deemed a "Selected Assay."
If Bayer does not commence such screening activity within such [ * ] period and
any extension thereof, then such LLC Assay shall be deemed an "Unselected Assay"
and so identified in the LLC's books and records, and the LLC and Exelixis shall
have the rights set forth in Sections 4.6 and 5.5 with respect to such
Unselected Assay.

  3.4     Selected Assays.  The LLC will deliver to Bayer the format for each
Selected Assay and will provide to Bayer [ * ] of any proprietary reagents
developed by the LLC for the Selected Assay for Bayer's use to conduct screening
of Bayer Compounds in the Selected Assay.  The LLC may allocate FTEs, out of the
resources available to conduct Research, to conduct work under the Research Plan
to prepare such [ * ] of reagents to be provided to Bayer, and to the extent
that the LLC must expend additional effort or cost beyond such allocation of
FTEs in order to provide Bayer with such proprietary reagents, Bayer shall pay
the LLC such actual costs and expenses of the LLC to complete such efforts.

  3.5     Screening by Bayer.  For each Selected Assay or Bayer Assay, Bayer
will screen Bayer Compounds at Bayer's sole discretion and expense in the
Selected Assay or Bayer Assay for the purpose of identifying Collaboration
Compounds active in such Selected Assay or Bayer Assay.  For each Collaboration
Compound identified in such initial screening, Bayer will then conduct such
further work at its expense as it considers advisable in order to identify
additional Collaboration Compounds that may have higher activity or superior
quality, e. g. selectivity or stability.

  3.6     Retained Rights of Exelixis.  Except for the options granted in
Section 8.9 to Bayer, Exelixis shall retain the exclusive right to use all Non-
Cognate Targets, Cognate Targets and A List Reserved Targets outside of the
Field of Use. When Exelixis makes a Non-Cognate Target, Cognate Target or
Reserved Target available to a Third Party as permitted above, Exelixis shall
not disclose to such Third Party any [ * ], except as otherwise permitted
elsewhere in this Agreement.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       18
<PAGE>

4.   Non-Cognate Targets

     4.1     The Parties' Rights Regarding Non-Cognate Targets Selected by the
LLC. Bayer and the LLC shall have co-exclusive rights to pursue each Selected
Non-Cognate Target in the Research Field. Such co-exclusive right shall not
include any sublicensing rights for the LLC (except for LLC Assay development
purposes). Subject to Section 8.10(c), Bayer shall have the exclusive right to
pursue each Selected Non-Cognate Target in the Field of Use outside the Research
Field. Subject to Bayer's option set forth in Section 8.9(b), Exelixis shall
have the exclusive right to pursue each Selected Non-Cognate Target outside the
Field of Use and may develop an Exelixis Assay directed at a Selected Non-
Cognate Target for such purpose.

     4.2     The Parties' Rights Regarding Non-Cognate Targets Selected by
Bayer. Subject to Section 8.10(c), Bayer shall have exclusive rights to pursue
in the Field of Use each Non-Cognate Target it selects. Subject to Bayer's
option set forth in Section 8.9(b), Exelixis shall have the exclusive right to
pursue each such Selected Non-Cognate Target outside the Field of Use and may
develop an Exelixis Assay directed at a Selected Non-Cognate Target for such
purpose.

     4.3     Unselected Non-Cognate Targets.

             (a) After the failure of Bayer to timely select a Non-Cognate
Target as a Selected Non-Cognate Target pursuant to Section 3.2, any Party may
submit a written request to the LLC for the right to pursue such Unselected Non-
Cognate Target in the Field of Use. The LLC shall grant such request unless the
LLC has already granted such a request to another Party or licensed such Target
to a Third Party for use in the Research Field or, in response to such a request
by Exelixis, Bayer commits to promptly commence development of a Bayer Assay
directed at such Unselected Non-Cognate Target (in which case such Target shall
then be a Selected Non-Cognate Target). After the granting of such a request,
the requesting Party may pursue such Unselected Non-Cognate Target within the
Field of Use internally or in collaboration with a Third Party. In the event
that Exelixis is the requesting Party, Exelixis shall obtain Bayer's written
consent prior to the establishment of any collaboration in the Research Field
involving such Unselected Non-Cognate Target and any collaboration in the Field
of Use involving such Unselected Non-Cognate Target wherein [ * ]. Exelixis may
enter into collaborations in the Field of Use involving such Unselected Non-
Cognate Target without the prior approval of Bayer, provided that [ * ].
Exelixis shall not have the right to grant a Third Party a license to pursue any
Unselected Non-Cognate Target in the Research Field except as part of a
collaboration with Exelixis permitted in this Section 4.3 and Section 8.10(a).
Exelixis shall have the right to grant licenses to compounds identified with
apparent activity against such Unselected Non-Cognate Targets, provided,
however, that any such compounds that are Exelixis Agrochemical Compounds shall
be subject to the rights of Bayer set forth in Section 8.3.

     (b) The LLC shall have the right to pursue each Unselected Non-Cognate
Target within the Field of Use (unless such right is granted to Exelixis
pursuant to this Section 4.3).  Exelixis shall have the exclusive right to
pursue each Unselected Non-Cognate Target outside the Field of Use.  Bayer and
Exelixis shall have co-exclusive rights to pursue each Unselected Non-Cognate
Target in the field of animal health [ * ].  Exelixis may develop an Exelixis
Assay directed at an Unselected Non-Cognate Target.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       19
<PAGE>

  4.4     Related Family Members.

          (a) If Exelixis wishes to select an Unselected Non-Cognate Target, it
shall discuss with the JSC whether such Unselected Non-Cognate Target [ * ]. If
[ * ] exists the Unselected Non-Cognate Target shall be deemed a "Putative
Related Family Member." Neither the LLC nor Exelixis may pursue within the Field
of Use any Putative Related Family Member.

          (b) The Parties will work together to determine [ * ] of the Putative
Family Related Member and such Selected Target, and in the course of such work,
Exelixis or Bayer will supply to the other, within [ * ] after the other Party's
reasonable request, the relevant requested biological material for testing.
Bayer will [ * ], determine whether [ * ], and measure the [ * ].  If the
Putative Related Family Member is [ * ] to such Selected Target and [ * ], then
the Putative Related Family Member is a Related Family Member and Exelixis shall
be prohibited from working upon it within the Field of Use.  If Bayer
subsequently has an HTS assay formatted with respect to such Related Family
Member, then Bayer shall retroactively pay [ * ] for such Related Family Member
and all future milestones and royalties shall be due for such Related Family
Member, which shall be deemed a separate Selected Target.  All Putative Related
Family Members that do not become Related Family Members within [ * ] of
designation as a Putative Related Family Members will cease to be Putative
Related Family Members and the rights of the Parties set forth in Section 4.3
shall apply to such Targets.

  4.5     The Parties' Rights Regarding Selected Assays. Subject to the
exceptions set forth in this Section 4.5, Bayer shall have exclusive rights to
pursue in the Field of Use each Selected Non-Cognate Target that is the basis
for a Selected Assay, such Selected Assay and all Research Orthologues of such
Selected Non-Cognate Target.  Bayer may approve, in its sole discretion, a
request by the LLC to grant it co-exclusive rights in the Field of Use outside
the Research Field to pursue a Selected Non-Cognate Target that is the basis for
a Selected Assay, such Selected Assay and all Research Orthologues of such
Selected Non-Cognate Target.  Exelixis shall have the exclusive right to pursue
outside the Field of Use each Selected Non-Cognate Target that is the basis for
a Selected Assay, such Selected Assay and all Research Orthologues of such
Selected Non-Cognate Target.  Exelixis may develop an Exelixis Assay directed at
a Selected Non-Cognate Target for such purpose.   Bayer's rights shall be
exclusive within the Research Field and within the Field of Use until the later
of (a) [ * ], or (b) [ * ].  Bayer may obtain a single [ * ] extension of the
period of exclusivity for a particular Selected Assay by, within [ * ] prior to
the expiration of the initial exclusivity period, submitting a written extension
request to the LLC and making a payment of [ * ] to the LLC within thirty (30)
days after the LLC grants such request in writing.  The LLC shall grant such
request if Bayer provides the LLC with (i) [ * ] and (ii) [ * ].

  4.6     Unselected Assays.

          (a) If Bayer fails to commence using an LLC Assay directed to a
Selected Non-Cognate Target to screen for Collaboration Compounds within the
period set forth in Section 3.3, then any Party may submit a written request to
the LLC for the right to screen such LLC Assay in the Field of Use. The LLC
shall grant such request unless the LLC has already (a) commenced use of such
LLC Assay for screening purposes in the Research Field (in which case the LLC
must have allocated additional FTEs pursuant to Section 2.5 to perform such
work), (b)

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       20
<PAGE>

granted a license to perform such screening available to a Third Party (subject
to Bayer approval), (c) granted such a request to another Party or (d) in
response to such a request by Exelixis, Bayer commits to promptly use the LLC
Assay to screen Bayer Compounds (in which case such assay shall then be a
Selected Assay).  After the granting of such a request, the requesting Party may
perform such screening within the Field of Use internally or in collaboration
with a Third Party.  In the event that Exelixis is the requesting Party,
Exelixis shall obtain Bayer's written consent prior to the establishment of any
collaboration in the Research Field involving such LLC Assay.  Exelixis may
enter into collaborations in the Field of Use outside the Research Field
involving such LLC Assay without the prior approval of Bayer.  Exelixis shall
not have the right to grant a Third Party a license to perform such screening
except on behalf of Exelixis, but shall have the right to grant licenses to
compounds identified through screening performed by or on behalf of Exelixis,
subject to the rights of Bayer set forth in Section 8.3.  Compounds discovered
through Exelixis' permitted use of an LLC Assay in the Field of Use may be
Exelixis Agrochemical Compounds.

          (b) The LLC shall have the right to use each LLC Assay that is not a
Selected Assay to screen for compounds with apparent activity inside the
Research Field (unless such right is granted to Exelixis pursuant to this
Section 4.6) and all such compounds shall be LLC Compounds.  Exelixis shall have
the exclusive right to use each such LLC Assay to screen for compounds with
apparent activity outside the Field of Use.

5.   Cognate Targets

     5.1     The Parties' Rights Regarding Cognate Targets Selected by the LLC .
Bayer and the LLC shall have co-exclusive rights to pursue each Selected Cognate
Target in the Research Field (in the case of the LLC, excluding the right to
sublicense except for LLC Assay development purposes).  Bayer shall have the
exclusive right to pursue each Selected Cognate Target in the Field of Use
outside the Research Field. Subject to Bayer's option set forth in Section
8.9(b), Exelixis shall have the exclusive right to pursue each Selected Cognate
Target outside the Field of Use and may develop an Exelixis Assay directed at a
Selected Cognate Target for such purpose.

     5.2     The Parties' Rights Regarding Cognate Targets Selected by Bayer.
Bayer shall have exclusive rights to pursue in the Field of Use each Cognate
Target it selects. Subject to Bayer's option set forth in Section 8.9(b),
Exelixis shall have the exclusive right to pursue each such Selected Cognate
Target outside the Field of Use and may develop an Exelixis Assay directed at a
Selected Cognate Target for such purpose.

     5.3     Unselected Cognate Targets.  After the failure of Bayer to timely
select a Cognate Target as a Selected Cognate Target pursuant to Section 3.2,
either Bayer or the LLC may select such Cognate Target as a Selected Cognate
Target at any time, provided that such Cognate Target has not already been
selected by either Bayer or the LLC and that the LLC has not already licensed,
with the prior approval of Bayer, such Target to a Third Party for use in the
Research Field.  Exelixis shall have the exclusive right to pursue each such
Unselected Cognate Target outside the Field of Use. Exelixis may develop an
Exelixis Assay directed at such a Target.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       21
<PAGE>

  5.4     The Parties' Rights Regarding Selected Assays. Subject to the
exceptions set forth in this Section 5.4, Bayer shall have exclusive rights to
pursue in the Field of Use each Selected Cognate Target that is the basis for a
Selected Assay, such Selected Assay and all Research Orthologues of such
Selected Cognate Target.  Bayer may approve, in its sole discretion, a request
by the LLC to grant it co-exclusive rights in the Field of Use outside the
Research Field to pursue a Selected Cognate Target that is the basis for a
Selected Assay, such Selected Assay and all Research Orthologues of such
Selected Cognate Target.  Exelixis shall have the exclusive right to pursue
outside the Field of Use each Selected Cognate Target that is the basis for a
Selected Assay, such Selected Assay and all Research Orthologues of such
Selected Cognate Target.  Exelixis may develop an Exelixis Assay directed at a
Selected Cognate Target for such purpose.

  5.5     Unselected Assays.

          (a) If Bayer fails to commence using such LLC Assay to screen for
Collaboration Compounds within the period set forth in Section 3.3, then either
Bayer may select such LLC Assay as a Selected Assay at any time, provided that
the LLC has not already commenced screening of such LLC Assay in the Research
Field (in which case the LLC must have allocated additional FTEs pursuant to
Section 2.5 to perform such work) or already licensed to a Third Party the right
to screen such LLC Assay in the Research Field, subject to Bayer approval.
Exelixis shall have the exclusive right to use each such LLC Assay to screen for
compounds with apparent activity outside the Field of Use.

          (b) The LLC shall have the right to use each LLC Assay that is not a
Selected Assay to screen for compounds with apparent activity inside the
Research Field (unless such right is granted to Exelixis pursuant to this
Section 5.5) or within the Field of Use (and all such compounds shall be LLC
Compounds), Exelixis shall have the right to use each such LLC Assay to screen
for compounds with apparent activity outside the Field of Use.

6.   Reserved Targets

     6.1     Designation of Reserved Targets.

             (a) During the Research Term, Bayer may designate as a Reserved
Target any [ * ], provided that the number of Reserved Targets at any one time
never exceeds [ * ] and the cumulative number of Reserved Targets never exceeds
[ * ]. A Reserved Target will be classified as an A List Reserved Target if it
is present in (i) [ * ] or (ii) [ * ] and such target was either (A) [ * ] or
(B) [ * ]. All Reserved Targets that do not qualify as A List Reserved Targets
shall be classified as B List Reserved Targets. The Parties understand and agree
that Exelixis does not want to know the identities of the B List Reserved
Targets. Thus, Bayer will not reveal the identity of any B List Reserved Target
to Exelixis or any member of the LLC other than the CEO, and the CEO shall be
contractually prohibited from disclosing such Information to Exelixis or any
Dedicated FTE or Shared FTE.

             (b) Within [ * ], Bayer will submit to Exelixis and the LLC a
written list which identifies each A List Reserved Target and which indicates
the number of B List Reserved

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       22
<PAGE>

Targets but does not disclose their identities. Bayer shall simultaneously
provide to the CEO a separate written list that identifies each B List Reserved
Target.

        (c) During the Research Term, Bayer may designate new Reserved Targets
by written notification to Exelixis and the LLC, provided that the limitations
set forth in Section 6.1(a) regarding the number of Reserved Targets are not
exceeded. Bayer shall disclose the identity of each new A List Reserved Target
and the number of new B List Reserved Targets in such notification and shall
simultaneously submit to the CEO a written list that identifies each new B List
Reserved Target.

        (d) During the Research Term, Bayer may remove particular Reserved
Targets from the list by notifying the LLC and the CEO in writing of such
intent. Upon receipt of such notification, each such Reserved Target shall cease
to be a Reserved Target.

  6.2   A List Reserved Targets.

        (a) Bayer may perform preliminary research in the Field of Use upon A
List Reserved Targets but may not screen assays based on such Targets or
identify compounds with activity against such Targets prior to selecting the
relevant A List Reserved Target as a Selected A List Reserved Target. Prior to
Bayer's selection of an A List Reserved Target as a Selected A List Reserved
Target, the LLC shall, at the request of Bayer and the allocation of sufficient
resources, perform research upon one or more such A List Reserved Targets,
provided such research is limited to the collection of data for the support of
patent claims directed at such A List Reserved Targets. During the period after
the designation of a target as an A List Reserved Target and before Bayer's
selection of such Target as a Selected A List Reserved Target, Bayer shall have
exclusive rights (subject to the LLC's right to perform the aforementioned work
at the request of Bayer) to pursue such Targets in the Field of Use and Exelixis
has exclusive rights (subject to the option set forth in Section 8.9(b)) to
pursue such Targets outside the Field of Use.

        (b) Within [ * ] after its designation of a target as an A List Reserved
Target, Bayer may select any such Target as a Selected A List Reserved Target
upon written notification to the LLC.  Such notification shall specify whether
an assay based on such Selected A List Reserved Target shall be developed by the
LLC (in which case it will be an LLC Assay) or by Bayer (in which case it will
be a Bayer Assay).  Within [ * ] after the selection of an A List Reserved
Target, Bayer shall [ * ].

        (c) The Parties' rights and obligations with respect to Selected A List
Reserved Targets are the same as for Selected Cognate Targets:  if the LLC is
developing an LLC Assay based on a particular Selected A List Reserved Target,
then Section 5.1 shall apply to such Selected A List Reserved Target; if Bayer
is developing a Bayer Assay based on a particular Selected A List Reserved
Target, then Section 5.2 shall apply.  All milestone and premium fee obligations
set forth in Section 9.3 and 9.4 shall apply to such Targets and their related
assays and compounds ([ * ]).

        (d) The Parties' rights and obligations with respect to A List Reserved
Targets that have not been selected [ * ] after designation are the same as for
Unselected Cognate Targets.  If Bayer removes an A List Reserved Target from the
list of Reserved Targets, then the

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       23
<PAGE>

Parties' rights and obligations with respect to such Target shall be the same as
for an Unselected Non-Cognate Target. In addition, Bayer shall have the option
set forth in Section 8.9(b) with respect to such Targets.

     6.3     B List Reserved Targets. Bayer may work upon B List Reserved
Targets independently, with Third Parties, or with Exelixis or the LLC under a
separate agreement. In the event that a B List Reserved Target is identified in
the course of the Target Identification Program, the CEO shall promptly instruct
the LLC to stop work on such B List Reserved Target. If Bayer subsequently
removes a B List Reserved Target from the list of Reserved Targets, then the CEO
shall inform the LLC that it may, if it so desires, resume work on such Target.

7.   Product Development

     7.1     Development of Collaboration Compounds.  Bayer shall have the sole
right and responsibility to conduct Development of Collaboration Compounds,
either itself or through its Affiliates or licensees on its behalf and at its
expense, with the right to file Approval Applications for obtaining and
maintaining Regulatory Approval of Products as soon as reasonably practicable.
Upon deciding to commence Development on a Collaboration Compound, Bayer shall
notify the LLC in writing of such decision.  If requested by Bayer in writing,
the LLC shall provide Bayer reasonable assistance, at Bayer's expense, in
conducting such Development efforts.

     7.2     Development Expenses.  Bayer shall bear all the costs and expenses
incurred by Bayer or its Affiliates relating to the Development of Collaboration
Compounds undertaken under this Agreement and to the procurement of such
Regulatory Approval of Products.

     7.3     Reports. Bayer shall maintain records of all Development activities
and all results of any trials, studies and other investigations conducted by or
on behalf of Bayer under this Agreement. At least twice a year, Bayer shall
provide the LLC written reports summarizing the Development status or otherwise
respond informally and reasonably promptly upon the LLC's reasonable written
request.

     7.4     Development of LLC Compounds. The LLC may develop LLC Compounds in
the Research Field and pursue Regulatory Approval for products containing such
LLC Compounds, provided the LLC allocates FTEs in addition to the original [ * ]
FTEs, and/or funds for Third Party services, to perform such work. Bayer shall
have the option set forth in Section 8.4 with respect to such LLC Compounds.

     7.5     Development of Exelixis Compounds And Products. Exelixis shall bear
all costs and expenses incurred by it in connection with the discovery and
development of compounds and products arising from its use of LLC Know-How and
LLC Patents to discover compounds and develop products outside of its activities
on behalf of the LLC. Bayer shall have the option set forth in Section 8.3 with
respect to those compounds that are Exelixis Agrochemical Compounds.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       24
<PAGE>

8.   Exclusivity; Further Bayer and Exelixis Rights

     8.1     Exelixis Exclusivity. [ * ], Exelixis shall not knowingly [ * ].
The Parties recognize that the nature of the Exelixis technology may make it
difficult for Exelixis, acting in good faith, to know whether the results of its
activities undertaken on behalf of Third Parties may be [ * ]. However, if in
the course of performing work for any Third Party, Exelixis determines in good
faith that its activities appear to be [ * ], Exelixis shall refrain from any
further work which appears to be [ * ]. The foregoing restriction on work [ * ]
includes that prohibition that Exelixis shall not knowingly engage in [ * ].

     8.2     Exelixis Independent Research Directed At [ * ]. [ * ] Exelixis may
desire to initiate, on its own and not with a Third Party, a research project
involving [ * ]. In such case it shall disclose to the LLC its planned
activities and its reasons for believing that such work is worthwhile. If within
[ * ] after the submission of a written proposal for such independent project to
the LLC by Exelixis, the LLC does not elect in writing to Exelixis to include
such project within the Research, then Exelixis may pursue such work on its own
behalf, at its own expense and without collaboration with Third Parties (other
than Exelixis consultants under customary consulting arrangements). Exelixis
shall report to the LLC on a quarterly basis regarding its work under any such
independent project. At [ * ], Exelixis may submit to the LLC a written report
of its results to that point and request a determination as to whether the LLC
desires to bring such project into the Research. If the LLC elects by written
notice to Exelixis to bring such project within the Research, then the Parties
shall negotiate at arm's length mutually acceptable terms and conditions for
such project to be brought into the Research, the LLC shall allocate a
sufficient number of FTEs in addition to those previously allocated to the
Collaboration to continue the project with reasonable diligence, and the work
shall thereafter be conducted as part of the Research. If the LLC does not elect
to include such work within the Research, then Exelixis shall be free to pursue
it thereafter, alone or with Third Parties.

     8.3     Exelixis Agrochemical Compounds.  Prior to offering any Third Party
the opportunity to acquire a license to research and develop an Exelixis
Agrochemical Compound and/or commercialize an Exelixis Agrochemical Product,
Exelixis shall provide Bayer with the opportunity to consider whether Bayer or
an Affiliate of Bayer wishes to acquire a license in the Research Field or the
Field of Use to the Exelixis Agrochemical Compound and any current or future
Exelixis Agrochemical Products incorporating such Compound (except for those
Exelixis Agrochemical Products for which Bayer has been offered but failed to
exercise its option to license under this Section 8.3). When presenting Bayer
the opportunity for any such license, Exelixis will provide Bayer in writing
with information regarding [ * ].  The first time that Exelixis offers Bayer the
opportunity to license in the Research Field or Field of Use an Exelixis
Agrochemical Compound active against a particular Target, Exelixis shall also
offer Bayer the opportunity to [ * ].  Subsequent offers to Bayer shall include
those rights set forth in the previous sentence that, at the time of such
offers, have not been exclusively licensed to a Third Party.  Bayer shall have [
* ] after such offer in which to inform Exelixis in writing that Bayer or an
Affiliate of Bayer is interested in acquiring such a license.  If Bayer
indicates such interest within the [ * ] period, then Exelixis and Bayer or
Bayer's relevant Affiliate shall negotiate in good faith for up to [ * ] to
reach agreement on the terms of a license agreement which shall be set forth in
an executed license agreement.  If Bayer fails to notify Exelixis of its
interest or Exelixis and Bayer fail to execute a license agreement within the
applicable period, then Bayer

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       25
<PAGE>

or its relevant Affiliate shall provide to Exelixis all information and data
collected or generated by Bayer or its relevant Affiliate with respect to such
Exelixis Agrochemical Compound and Bayer shall have no rights with respect to
such Exelixis Agrochemical Compound or Exelixis Agrochemical Product and
Exelixis shall have unrestricted rights to develop said Exelixis Agrochemical
Compound and commercialize such Exelixis Agrochemical Product, without
compensation to Bayer or the LLC other than that set forth in Section 9.4(b),
either independently or in collaboration with one or more Third Parties, [ * ].
This Section 8.3 shall expire [ * ].

     8.4     LLC Compounds. Prior to offering any Third Party the opportunity to
acquire a license to develop an LLC Compound in the Research Field and/or
commercialize a product containing such LLC Compound in the Field of Use, the
LLC shall provide Bayer with written notice of its intention to do so and all of
the information then available to the LLC with respect to such LLC Compounds.
When presenting Bayer the opportunity for any such license, the LLC will provide
Bayer in writing with information regarding [ * ].  The first time that the LLC
offers Bayer the opportunity to license within the Field of Use any LLC Compound
active against a particular Target, the LLC shall also offer Bayer the
opportunity to [ * ].  Subsequent offers to Bayer shall include those rights set
forth in the previous sentence that, at the time of such offers, have not been
exclusively licensed to a Third Party.  Bayer shall have [ * ] after such offer
in which to inform the LLC  in writing that Bayer or an Affiliate of Bayer is
interested in acquiring such a license.  Thereafter, the LLC and Bayer (or such
Bayer Affiliate) shall negotiate in good faith for up to [ * ] to reach
agreement on the terms of a license agreement which shall be set forth in either
an executed license agreement or an executed legally binding heads of agreement.
If Bayer fails to notify the LLC of its interest or the LLC and Bayer (or such
Bayer Affiliate) fail to execute a license agreement within the applicable
period, then Bayer (or such Bayer Affiliate) shall have no rights with respect
to such LLC Compound or product containing such LLC Compound and the LLC shall
have unrestricted rights to develop such LLC Compound in the Research Field and
commercialize such product containing such LLC Compound in the Field of Use
either independently or in collaboration with one or more Third Parties.  This
Section 8.4 shall expire [ * ].

     8.5     Exelixis Independent Research Collaborations [ * ].  Except as
provided in the penultimate sentence of this Section 8.5, before Exelixis [ * ]
whereby Exelixis would collaborate exclusively with such Third Party during the
Research Term in an area that is [ * ], Exelixis shall notify Bayer and the LLC
in writing in reasonable detail of any such opportunity and provide Bayer and
the LLC with the same type and quality of information it would make available to
such Third Party with respect to such opportunity.  Bayer and the LLC shall
thereafter have a [ * ] period in which to notify Exelixis in writing that Bayer
or the LLC wishes to pursue such opportunity.  The first such Party, if any, as
between Bayer and the LLC, to provide Exelixis with timely notification of its
interest in the opportunity shall have an additional [ * ] period in which to
negotiate with Exelixis for and execute a binding agreement with Exelixis
setting forth the terms of a collaboration encompassing the subject matter
described by Exelixis in the information provided to Bayer and the LLC prior to
the start of the [ * ] notice period.  During the periods set forth above in
this Section 8.5, Exelixis may [ * ] but may not [ * ], and may not [ * ].  If
both Bayer and the LLC fail to notify Exelixis of its interest within the [ * ]
period or Exelixis or any notifying Party fails to execute a license agreement
within the [ * ]

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       26
<PAGE>

period, then neither Bayer nor the LLC shall have any rights with respect to
such opportunity and Exelixis shall have unrestricted rights (except as set
forth in Section 8.6) to pursue such collaborations with one or more Third
Parties, without compensation to Bayer or the LLC, except as set forth in
Sections 9.4(b) and (c). The option set forth in this Section 8.5 does not
pertain to [ * ]. This Section 8.5 does not obligate Exelixis to enter into a
collaboration with Bayer or the LLC that, in the sole discretion of Exelixis,
Exelixis decides is not in its best interests.

  8.6     Exelixis Negative Covenant.  Exelixis hereby covenants that it shall
not commercialize in the Research Field an Exelixis Agrochemical Product for
which it has an obligation under Section 8.3 to provide Bayer an opportunity to
consider acquiring a license, unless it has fulfilled its obligations under
Section 8.3.  In addition, Exelixis shall [ * ].

  8.7     Bayer Undertaking Regarding [ * ].  [ * ], if Bayer elects to conduct
or finance any work at a for-profit organization that is [ * ], then Bayer shall
first offer to the LLC in writing the opportunity to perform such work. If (i)
the LLC fails to notify Bayer within [ * ] following such offer that the LLC is
interested in performing such work,  (ii) the LLC fails, after timely notice, to
[ * ]  or (iii) Bayer and the LLC fail to execute within [ * ] after the LLC's
timely notice  a written agreement for the LLC to perform such work, then Bayer
may conduct or finance such work at a Third Party for-profit organization.
Except as provided in this Section 8.7, Bayer shall retain complete freedom of
operation to conduct research and development activities [ * ].

  8.8     Collaboration Compounds. Prior to offering any Third Party the
opportunity to acquire a license to develop a Collaboration Compound upon which
Bayer has ceased Development, Bayer shall provide Exelixis with the opportunity
in writing to consider whether Exelixis wishes to acquire a license to such
Collaboration Compound.  Bayer shall [ * ].  Exelixis shall have [ * ] following
its receipt of such writing in which to inform Bayer in writing that it is
interested in acquiring a license to such Collaboration Compound.  Thereafter,
Exelixis and Bayer shall have [ * ] in which to negotiate and execute a license
agreement enabling Exelixis to further develop such Collaboration Compound and
to make, have made, import, sell and offer to sell products incorporating such
Collaboration Compound.  This Section 8.8 does not obligate Bayer to enter into
a license agreement with Exelixis that, in the sole discretion of Bayer, Bayer
decides is not in its best interests.  This Section 8.8 shall expire [ * ].

  8.9     Options for Pharmaceutical Collaborations

          (a) Exelixis hereby grants Bayer a royalty-free option to collaborate
with Exelixis regarding the use of Cognate Targets, Non-Cognate Targets, and A
List Reserved Targets that have human orthologues and LLC Assays based on such
Targets for pharmacological research and development under still to be
negotiated and agreed upon terms and provisions, provided that Bayer has a
pharmaceutical division or Affiliate at the time of exercise of the option and
further provided that Exelixis does not then have a pre-existing obligation that
would prevent it from collaborating with Bayer with respect to such Target and
such disease area.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       27
<PAGE>

        (b) Exelixis hereby grants Bayer a royalty-free option to establish a
pharmaceutical collaboration with Exelixis regarding a Selected Cognate Target,
Selected Non-Cognate Target, or A List Reserved Target that has a human
orthologue, provided that Bayer has a pharmaceutical division or Affiliate at
the time of exercise of the option.  If Bayer wishes to exercise this option, it
shall notify Exelixis in writing within (i) [ * ], (ii) [ * ], or (iii) [ * ].
Such notification shall identify the Selected Cognate Target, Selected Non-
Cognate Target or A List Reserved Target and the disease area in which it is
interested in collaborating with Exelixis.  Provided Exelixis does not then have
a pre-existing obligation that would prevent it from collaborating with Bayer
with respect to such Target and such disease area, Exelixis and Bayer shall have
[ * ] (or longer upon mutual agreement) following receipt of such notification
to negotiate and enter into a collaboration agreement regarding such Target and
such disease area.  During the [ * ] period Exelixis will not [ * ].

  8.10  Use of Targets in the Field of Animal Health.

        (a) Exelixis and Bayer shall have co-exclusive rights with the right to
sublicense as permitted under Section 4.3 to pursue Unselected Non-Cognate
Targets in the field of animal health (which is part of the Field of Use).
Exelixis and Bayer may also perform Independent Research upon such Targets.

        (b) Bayer shall have exclusive rights (with the right to sublicense) to
pursue Cognate Targets, and A List Reserved Targets, in the field of animal
health (which is part of Field of Use).  Exelixis may perform research in the
field of animal health upon such Targets as follows:  Exelixis shall not begin
work on any genetic entry point that, at such time, is a Cognate Target, or an A
List Reserved Target.  If Exelixis discovers a Target during research that is at
such time a Cognate Target or an A List Reserved Target, it can reveal the
identity of such Target to its Third Party collaborator but cannot perform
further work upon such Target in the field of animal health.

        (c) Commencing [ * ] after the delivery of an LLC Assay directed at a
Selected Non-Cognate Target, Exelixis shall have the right (with the right to
sublicense as permitted under Section 4.3) to pursue such Selected Non-Cognate
Target in the field of animal health (which is part of the Field of Use),
provided that Bayer is not then developing an animal health product based on
such Target and further provided that any Exelixis collaboration with a Third
Party regarding such Selected Non-Cognate Target is subject to approval by Bayer
if [ * ], and [ * ].  Exelixis and Bayer may also perform Independent Research
upon such Targets.

   8.11 Independent Research. Subject to Sections 8.1, 8.2, 8.5, 8.7 or as
otherwise set out in this Agreement, Bayer, Exelixis and the LLC may each
perform Independent Research during the Research Term.

9. Payments

   9.1  License Fee And Research Commitment Fee.  The LLC shall pay Exelixis a
license fee of $10,000,000 and a separate research commitment fee of $10,000,000
(for aggregate payments under this Section 9.1 of $20,000,000). Exelixis shall
invoice the LLC (and send a copy of the first such invoice to Bayer) for one-
half of each amount on the Effective Date

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       28
<PAGE>

and the first anniversary of the Effective Date, and the LLC shall make such
payment within [ * ] thereafter.

  9.2     Research Funding. From the Effective Date until the end of the
Research Term, Exelixis will invoice the LLC (and send a copy of the first such
invoice to Bayer) for and the LLC will make within [ * ] thereafter quarterly
advance payments to Exelixis sufficient to pay for the number of Specified FTEs
(as defined in Section 2.5(a)) then performing Research under this Agreement
multiplied by the then current Annual FTE Rate.  In any event, for each calendar
quarter, the amount of research funding provided by the LLC to Exelixis shall be
not less than one-quarter of the amount calculated in Section 2.5(a) and shall
only exceed [ * ] in the event that the LLC commits to provide more than [ * ]
in Research funding in the applicable Contract Year as set forth in Section
2.5(a).

  9.3     Milestone Payments.  Commencing on the Effective Date, Bayer shall pay
the LLC the following amounts within [ * ] after the LLC's invoice following the
occurrence of each of the events specified below:

          (a) [ * ] upon (i) [ * ], (ii) [ * ] or (iii) [ * ];

          (b)       [ * ] upon [ * ];

          (c)       [ * ] upon [ * ]; and

          (d)       [ * ] upon [ * ].

  9.4     Premium Fee Payments.

          (a) Bayer Products. Bayer shall pay the LLC a running premium fee of
[ * ] on the aggregate Net Sales of Bayer Products in addition to amounts
payable above. For each Bayer Product, Bayer's obligations to pay premium fees
will expire on a country-by-country basis on the later of: (i) [ * ] or (ii)
[ * ]. After the expiration of Bayer's premium fee obligation hereunder on a
Bayer Product in a particular country, the license set forth in Section 11.5
with respect to such Bayer Product in such country shall continue in force
perpetually with no further premium fee or other payment obligations.

          (b) Exelixis Agrochemical Products. Exelixis shall pay the LLC a
running premium fee of: [ * ] from such Exelixis Agrochemical Product. Exelixis'
obligations to pay premium fees will expire on a country-by-country basis on the
later of: (A) [ * ] or (B) [ * ]. After the expiration of Exelixis' premium fee
obligation hereunder on an Exelixis Agrochemical Product in a particular
country, the license set forth in Section 11.3 with respect to such Exelixis
Agrochemical Product in such country shall continue in force perpetually, with
no further premium fee or other payment obligations.

          (c) Exelixis Human Health Products. Exelixis shall pay the LLC a
running premium fee of the lesser of [ * ] on the aggregate Net Sales of each
Exelixis Human Health Product or [ * ] of Exelixis' sublicensing income from
such Exelixis Human Health Product. Exelixis' obligations to pay premium fees
will expire, on a country-by-country basis on the later

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       29
<PAGE>

of: (i) [ * ] or (ii) [ * ]. After the expiration of Exelixis' premium fee
obligation on an Exelixis Human Health Product in a particular country, the
license set forth in Section 11.3 with respect to such Exelixis Human Health
Product in such country shall continue in force perpetually, with no further
premium fee or other payment obligations.

     (d) Combination Products.  If a Product contains a Collaboration Compound,
an Exelixis Human Health Compound or Exelixis Agrochemical Compound combined as
a single product with one or more other active ingredients (a "Combination
Product"), then Net Sales of such Combination Product for premium fee purposes
under Section 9.4 shall be calculated as follows:  the Net Sales of the
Combination Product shall be calculated in accordance with the definition of Net
Sales under Section 1.47, and then such Net Sales shall be adjusted on a
country-by-country basis as follows:

        (i)   The Net Sales of such Combination Product shall be multiplied by
the fraction A/(A+B), where A is [ * ]; or

        (ii)  If the [ * ] is not available on an independent basis, the Net
Sales of such Combination Product shall be multiplied by a percentage,
determined by mutual agreement of the Parties, which represents [ * ].

        (iii) In the case a synergistic effect of at least [ * ] times
results from the combination of active ingredients in the sold Combination
Products based on evidence on the active ingredients, the Party paying premium
fees for such Product shall give the Party or Parties to whom premium fees are
due notice thereof.  The relevant Parties shall promptly after such notice meet
to negotiate and agree in good faith upon a commercially reasonable adjustment
of Net Sales for such Combination Product.  Such adjustment shall be based on a
reasonable measure, as agreed by the relevant Parties in good faith, of the
economic value of the contribution of the Collaboration Compound, Exelixis Human
Health Compound or Exelixis Agrochemical Compound as compared to the economic
value of the contribution of the other active ingredient(s) in such Combination
Product.

  9.5     Reports on Payments.  After the first commercial sale of a Product on
which payments are to be made by Bayer or Exelixis hereunder, the Party with a
payment obligation shall make quarterly written reports to the other Parties
within [ * ] after the end of each calendar quarter, stating in each such
report, separately for each selling Party and each of its Affiliates and
sublicensees, the number, description, and aggregate Net Sales, by country, of
each Product sold during the calendar quarter upon which a payment is to be made
under Section 9.4 above.  Subject to any reductions permitted pursuant to the
express terms of this Agreement, concurrently with the making of such reports,
the Party with the payment obligation shall deliver such payment to the Party or
Parties entitled to such payment.

  9.6     Payment Method.  All payments due under this Agreement shall be
noncreditable and nonrefundable, except as to errors, and as to any amounts
disputed in good faith and determined not to have been due or agreed by the
relevant Parties not to be due, and shall be made by bank wire transfer in
immediately available funds to an account designated by the LLC.  All payments
hereunder shall be made in United States dollars.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       30
<PAGE>

  9.7     Place of Payments and Currency Conversions.  If any currency
conversion is required in connection with the calculation of payments hereunder,
such conversion shall be made using the selling exchange rate for conversion of
the Wall Street Journal for the last business day of the calendar quarter to
which such payment pertains.  If at any time legal restrictions prevent the
prompt remittance of any payments owed on Net Sales in any jurisdiction, Bayer
or Exelixis may make such payments by depositing the amount thereof on local
currency in a bank account or other depository in such country in the name of
the LLC.  Bayer or Exelixis shall promptly notify the LLC in writing, of the
circumstances leading to such deposit and, at the LLC's request, cooperate with
the LLC to repatriate such amounts.

  9.8     Records; Inspection.

         (a) Bayer and Exelixis and their Affiliates and sublicensees shall keep
complete, true and accurate books of account and records for the purpose of
determining the payments to be made under this Agreement.  Such books and
records shall be kept at the principal place of business of such Party, as the
case may be, for at least [ * ] years following the end of the calendar quarter
to which they pertain.

         (b) Such records will be open for inspection during such [ * ] year
period by a public accounting firm to whom Bayer or Exelixis, as applicable, has
no reasonable objection, solely for the purpose of verifying payment statements
hereunder. Such inspections may be made not more than once each calendar year,
at reasonable times and on reasonable prior written notice. Inspections
conducted under this Section 9.8 shall be at the expense of the requesting
Party, unless a variation or error producing an increase exceeding five percent
(5%) of the amount stated for any period covered by the inspection is
established in the course of any such inspection, whereupon all costs relating
to the inspection for such period and the full amount of any unpaid amounts that
are so discovered will be paid promptly by Bayer or Exelixis, as applicable.

         (c) All information concerning payments and reports, and all
information learned by a Party in the course of any audit or inspection shall be
subject to the confidentiality provisions set forth in Article 18 of the
Operating Agreement. The public accounting firm employees shall sign customary
confidentiality agreement as a condition precedent to their inspection and shall
report to the LLC only that information which would be contained in a properly
prepared payment report by Bayer or Exelixis, as applicable.

         (d) Upon request and subject to confidentiality, any Party shall
provide a written explanation of the discovery and development of any compound
that the requesting Party reasonably suspects may be a Collaboration Compound,
Exelixis Agrochemical Compound or Exelixis Human Health Compound. If the Parties
cannot agree within [ * ], the requesting Party shall: (i) engage an
independent, mutually acceptable technical consultant within [ * ] who is bound
by an appropriate confidentiality agreement to review the source documents for
such discovery and development and determine whether the compound is royalty-
bearing to the LLC, (ii) in the event that no mutually agreeable technical
consultant is found, each Party may engage its own technical consultant within
such [ * ] period and those two consultants shall pick within [ * ] days
thereafter a third consultant to perform the review and make such determination,
or (iii)

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       31
<PAGE>

be deemed to have agreed that the compound in question is not royalty-bearing to
the LLC. The Party whose view is contrary to the decision of the consultant
shall bear the cost of such review.

  9.9     Withholding Taxes.

          (a) Any Party with a premium fee payment obligation under this
Agreement shall have the right to deduct from the premium fee payments the tax
which a receiving Party is liable to pay thereon under the tax law of the
country from which such payment is being made. The party receiving such payment
shall immediately be sent a tax receipt certifying the payments of the tax, so
that such receiving Party may use it for claiming a credit on the tax payable by
it in its own country. No deduction shall be made if the receiving Party
furnishes a document from the tax authorities of the country from which such
payment is being made by the time of the payment of the premium fees certifying
that the premium fees are exempt from withholding.

          (b) German value added tax (VAT) will be administered by Bayer for the
LLC. The LLC will not invoice any VAT to Bayer.

          (c) Each Party undertakes to cooperate with the other Parties to
achieve lawful tax arrangements which are most favorable for all Parties,
without prejudice to the rights or treatment of any one Party.

  9.10    Subscription Fees. Commencing on the Effective Date, LLC may license
the Sequence Database to Third Parties.

  9.11    Relationship To Licenses.  The premium fee payments provided for
herein are in consideration of the various services, covenants, allocations of
rights, and grants of licenses set forth in this Agreement.  Such premium fees
shall be paid regardless of whether the recipient of such payment then possesses
intellectual property which covers the Product which is the subject of the
premium fee payment, and similarly, such payments shall expire at the end of the
term set forth in Section 9.4(a), 9.4(b), or 9.4(c), respectively, even if the
Party previously receiving such payments continues to hold intellectual property
which covers such Product.

  9.12    Late Payment Penalty.  Any payment due under this Article 9 that is
not paid by [ * ] after the payment's due date shall accrue interest, which must
be paid by the Party with the payment obligation to the recipient Party, on a
daily basis at a rate equal to [ * ] (or the maximum amount permitted by law, if
less), from the date first owed until paid.

10.  Inventions and Patents

     10.1    Ownership of Research Intellectual Property.

             (a) Bayer shall own the entire right, title and interest in and to
any and all inventions, developments, results, know-how and other Information,
and all intellectual property relating thereto, made solely by Bayer and its
employees or agents and arising from work performed pursuant to this Agreement
after the Effective Date, and Patents covering such intellectual property.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       32
<PAGE>

      (b) The LLC shall own the entire right, title and interest in and to any
and all inventions, developments, results, know-how and other Information (other
than Core Improvements), and all intellectual property relating thereto, made
solely by the Dedicated FTEs and Shared FTEs and arising from work performed
pursuant to this Agreement after the Effective Date, and Patents covering such
intellectual property.

      (c) Exelixis shall own the entire right, title and interest in and to any
and all inventions, developments, results, know-how and other Information, and
all intellectual property (including Patents) relating thereto, and made solely
by employees or agents of Exelixis other than Dedicated and Shared FTEs and
arising from work performed pursuant to this Agreement after the Effective Date,
and Patents covering such intellectual property.

      (d) Exelixis shall own the entire right, title and interest in and to any
and all inventions, developments, results, know-how and other Information
relating to Core Improvements, and all intellectual property relating thereto,
and Patents covering such intellectual property.

      (e) Subject to the provisions of Section 10.3(d), the Joint Inventions and
Joint Patents shall be jointly owned by the Parties that made, whether directly
or through their employees or agents (which, in the case of the LLC, shall be
the Dedicated FTEs and the Shared FTEs), such Joint Inventions and Joint
Patents.  Each inventing Party shall each own an undivided one-half or one-third
(if the number of inventing Parties is two or three, respectively) interest in
and to such Joint Inventions or Joint Patents.  Each joint owner shall have the
right to grant licenses under or to assign its interest in, such Joint Patents,
only to the extent as provided for in this Agreement or as otherwise agreed in
writing by the other joint owner(s).  Each Party shall have the right to grant
licenses under its interest in any Joint Patent to the other Parties and their
Affiliates.  Bayer may freely grant a license to Bayer AG or an Affiliate of
Bayer under or assign to Bayer AG or an Affiliate of Bayer, Bayer's ownership
interest in any Joint Patent.  All questions concerning inventions and/or
inventorship and/or the construction of or effect of Patents shall be decided in
accordance with the laws relating to inventorship and other relevant laws of the
country in which the particular Patent has been filed or granted, as the case
may be.

      (f) The Sequence Library and the Sequence Database will be owned
exclusively by the LLC, subject to the licenses granted herein to Exelixis and
Bayer.

 10.2 Disclosure of Patentable Inventions.  In addition to the disclosures
required under Sections 2.6 and 7.3, each Party shall submit a written report to
the other Parties within [ * ] after the end of each quarter describing any
invention arising during the prior quarter in the course of the Research done
during the Research Term which it believes may be patentable.  The LLC and
Exelixis shall provide Bayer with drafts of any patent application which
discloses an LLC Assay or Target prior to filing, allowing adequate time for
review and comment by Bayer if possible; provided, however, that the LLC and/or
Exelixis shall not delay the filing of any patent application pursuant to
Section 10.3 below.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       33
<PAGE>

  10.3    Patent Prosecution and Maintenance; Abandonment.

          (a)       Exelixis Patents.

                    (i)  Exelixis shall retain control over, and shall bear all
expenses related to, the filing, prosecution, and maintenance of all Exelixis
Patents; except as set forth in Section 10.3(a)(ii).

                    (ii) If Exelixis elects to cease prosecution of or not
maintain any Exelixis Patent that [ * ], Exelixis shall notify [ * ] in writing
not less than [ * ] before any relevant deadline. [ * ] shall have the right to
assume control over the prosecution or maintenance of such Exelixis Patent,
provided that [ * ] shall bear all expenses related thereto; but title to any
such Exelixis Patent shall remain in Exelixis.

          (b)       LLC Patents.

                    (i) The LLC shall retain control over, and shall bear all
expenses related to, the filing, prosecution, and maintenance of all LLC
Patents, except as set forth in Section 10.3(b)(ii).

                    (ii) If the LLC elects to cease prosecution of or not
maintain any LLC Patent, the LLC shall notify Bayer and Exelixis in writing not
less than [ * ] before any relevant deadline. If Bayer gives notice to Exelixis
within [ * ] of notification from the LLC, Bayer shall have the right to assume
control over the prosecution or maintenance of such LLC Patent, provided that
Bayer shall bear all expenses related thereto; but title to any such LLC Patent
shall remain in the LLC. If Bayer does not give such notice, Exelixis shall have
the right to assume control over the prosecution or maintenance of such LLC
Patent, provided that Exelixis shall bear all expenses related thereto; but
title to any such application or patent shall remain in the LLC.

          (c) Bayer Patents. Bayer shall retain control over, and shall bear all
expenses related to, the filing, prosecution and maintenance of all Bayer
Patents.

          (d) Joint Patents.

              (i)  Control. The Parties or Party at the time owning any Joint
Patent shall jointly or solely, as applicable, control the filing, prosecution,
and maintenance of such Joint Patent.

              (ii) Expenses and Relinquishment of Ownership.

                   (1) [ * ] shall bear all expenses related to the filing,
prosecution, and maintenance of all Joint Patents at the time jointly owned by [
* ]. If [ * ] elects to not pay any expense related to such Joint Patent, [ * ]
shall notify the other joint owner(s) of such Joint Patent in writing not less
than two (2) months before any relevant deadline, and such notification shall
constitute a relinquishment by [ * ] of its ownership interest in such Joint
Patent, which shall thereafter be jointly or solely owned by the remaining joint
owner(s).

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       34
<PAGE>

                   (2) [ * ] shall bear all expenses related to the filing,
prosecution, and maintenance of all Joint Patents at the time jointly owned by [
* ] and not jointly owned by [ * ]. If [ * ] elects to not pay any expense
related to such Joint Patent, [ * ] shall notify [ * ] in writing not less than
one (1) month before any relevant deadline, and such notification shall
constitute a relinquishment by [ * ] of its ownership interest in such Joint
Patent, which shall thereafter be solely owned by [ * ].

                   (3) Each of [ * ] and [ * ] shall bear all expenses related
to the filing, prosecution, and maintenance of all Joint Patents of which it is
then a sole owner.

     10.4    Confidential Treatment. All information disclosed under Sections
10.2 and 10.3 shall be treated as confidential and subject to the terms set
forth in Article 18 of the Operating Agreement.

11.  Licenses

     11.1    LLC Research License.

             (a) Bayer hereby grants the LLC a fully paid-up, nonexclusive,
worldwide license, with the right to sublicense only for LLC Assay development
purposes, under all relevant Bayer Know-How and Bayer Patents to conduct its
Research activities within the Research Field under this Agreement, including
without limitation making and using making and using the Bayer Pesticides and
the LLC Assays for Research purposes and making the Sequence Library. Such
license shall expire at the end of the Research Term unless it is continued
pursuant to Section 14.5. This license does not grant the LLC any
commercialization rights, i.e. to make or use Bayer Compounds or Collaboration
Compounds.

             (b) Exelixis hereby grants the LLC a fully paid-up, worldwide
license, with the right to sublicense only for LLC Assay development purposes,
under all relevant Exelixis Patents and Exelixis Know-How to perform Research
activities within the Research Field under this Agreement. Such license shall be
exclusive, but shall expire at the end of the Research Term unless such license
is continued thereafter on a non-exclusive basis pursuant to Section 14.4.

     11.2    Bayer Research License.

             (a) Exelixis hereby grants the LLC a non-exclusive, fully paid-up,
worldwide license (with the right to sublicense only to Bayer) under all
relevant Exelixis Know-How and Exelixis Patents that are necessary to enable
Bayer to conduct Bayer's permitted Research and Development activities hereunder
in the Field of Use to identify and select Collaboration Compounds, including
the right to make and use the Selected Assays within the Field of Use for the
sole purpose of identifying Collaboration Compounds. Subject to Section 4.5, the
LLC may not sublicense to Bayer the right: (i) to make or use Targets pursued by
the LLC or Exelixis or a licensee of either of them, pursuant to Section 4.3 or
5.3, (ii) to make or use an LLC Assay that is not a Selected Assay, (iii) to use
a Selected Assay outside of the Field of Use, or (iv) except with the written
consent of Exelixis, any right to practice Third Party technology which has been
licensed to Exelixis.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       35
<PAGE>

     (b) Except to the extent of the limitations set forth in the final sentence
of Section 11.2(a), the LLC hereby grants Bayer a fully paid-up, worldwide
sublicense under the license set forth in Section 11.2(a).

     (c) The LLC hereby grants Bayer a non-exclusive, fully paid-up, worldwide
license under all relevant LLC Know-How and LLC Patents to enable Bayer to
conduct Bayer's Research and Development activities hereunder in the Field of
Use to identify and select Collaboration Compounds, including the right to make
and use the Selected Assays for the sole purpose of identifying Collaboration
Compounds.  Subject to Section 4.5, this license does not grant Bayer the right:
(i) to make or use Targets pursued by the LLC or Exelixis or a licensee of
either of them, pursuant to the Section 4.3 or 5.3, (ii) to make or use an LLC
Assay that is not a Selected Assay, or (iii) to use a Selected Assay outside of
the Field of Use.  Bayer may use the following Confidential Information of the
LLC use in its Independent Research in any field, provided that Bayer does not
[*] using such Confidential Information: [ * ]. Bayer may petition the LLC at
any time during the term of this Agreement to add certain Confidential
Information of the LLC to the foregoing list. Such addition shall only be made
upon the mutual written agreement of all of the Parties.

     (d) Bayer may not sublicense its rights under the license and sublicense
granted in this Section 11.2, except to Affiliates or Third Party contractors
performing such Research and Development activities solely on Bayer's behalf.

11.3 Licenses to Exelixis.

     (a) Bayer hereby grants to the LLC a fully paid-up, worldwide non-exclusive
license, with the right to sublicense only to Exelixis, under all relevant Bayer
Know-How and Bayer Patents that arise from work performed under this Agreement
solely for Exelixis to conduct its permitted activities in research, development
and commercialization (other than Independent Research) in the Field of Use and
outside the Field of Use under this Agreement.  This license does not grant
Exelixis any rights to make or use Bayer Pesticides, Bayer Compounds,
Collaboration Compounds or LLC Compounds.

     (b) The LLC hereby grants Exelixis a fully paid-up, worldwide exclusive
sublicense under the license granted in Section 11.3(a), solely for Exelixis to
conduct its permitted activities in research, development and commercialization
(other than Independent Research) in the Field of Use and outside the Field of
Use under this Agreement.  Exelixis may grant sublicenses under this sublicense
only to permitted Third Party collaborators of Exelixis and only for the
purposes of collaboratively pursuing Exelixis' permitted research, development
and commercialization activities in the Field of Use and outside the Field of
Use under this Agreement.  This license does not grant Exelixis any rights to
make or use Bayer Pesticides, Bayer Compounds, Collaboration Compounds or LLC
Compounds.

     (c) Except to the extent of the of the exclusivity specified in this
Agreement, the LLC hereby grants Exelixis a fully paid-up, worldwide license,
with the right to sublicense, under all relevant LLC Patents and the LLC Know-
How to perform research, development and commercialization activities outside
the Research Field.  Such license shall be exclusive except as to Bayer's and
the LLC's permitted uses of Selected Assays, Bayer Assays and LLC Assays

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       36
<PAGE>

under this Agreement. Such license shall not convey any rights to make, use or
sell Bayer Pesticides, Bayer Compounds, Collaboration Compounds or LLC
Compounds. Exelixis may use the following Confidential Information of the
LLC in Exelixis' Independent Research in any field, provided that Exelixis
does not [ * ] using any of the following LLC Confidential Information: [ * ].
Exelixis may petition the LLC at any time during the term of this Agreement
to add certain Confidential Information of the LLC to the foregoing list.
Such addition shall only be made upon the mutual written agreement of all of
the Parties.

       (d) The LLC hereby grants Exelixis an exclusive, fully worldwide license,
with the right to sublicense, under all relevant LLC Patents and LLC Know-How to
perform Research, Development and commercialization activities in the Research
Field as permitted under Sections 4.3 and 4.6.

  11.4 Development License.

       (a) Exelixis hereby grants the LLC a worldwide, exclusive license (with
the right to sublicense only to Bayer) under all relevant Exelixis Know-How and
Exelixis Patents for Bayer to conduct Development of Collaboration Compounds.

       (b) The LLC hereby grants Bayer a worldwide, exclusive sublicense under
the license set forth in Section 11.4(a) (with the right for Bayer further to
sublicense) for Bayer to conduct Development of Collaboration Compounds.

       (c) The LLC hereby grants to Bayer a worldwide, exclusive license (with
the right to sublicense) under all relevant LLC Know-How and LLC Patents to
conduct Development of Collaboration Compounds.

       (d) Bayer may not sublicense its rights under the license and sublicense
granted in Section 11.4(b) except to Affiliates or Third Party contractors
performing such Development activities solely on Bayer's behalf.

  11.5 Commercialization License.

       (a) The LLC hereby grants Bayer and its Affiliates a worldwide, exclusive
license (with the right to sublicense) under all relevant LLC Know-How and LLC
Patents, to the extent required for Bayer, its Affiliates and sublicensees to
make, have made, use, have used, import, have imported, offer to sell, sell and
have sold Bayer Products in the Field of Use.

       (b) Exelixis hereby grants Bayer and its Affiliates a worldwide,
exclusive license (with the right to sublicense) under all relevant Exelixis
Know-How and Exelixis Patents, to the extent required for Bayer, its Affiliates
and sublicensees to make, have made, use, have used, import, have imported,
offer to sell, sell and have sold Bayer Products in the Field of Use.

  11.6 Joint Patents.  Each Party shall have a worldwide, co-exclusive right
to practice the Joint Patents in which it has an ownership interest arising from
the work under this Agreement without any duty to account.  Except for licensing
rights and assignment rights expressly granted herein, such right shall not
include a right to grant sublicenses or assignments

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       37
<PAGE>

of ownership interest (other than from Bayer to Bayer AG or a Bayer Affiliate),
except with the mutual consent of all of the owners.

  11.7    Sublicenses of Third Party Technology.  To the extent that any of the
licenses granted herein include sublicenses of technology licensed from a Third
Party to a Party, each such sublicense is subject to the terms of the license
agreement between such Party and such Third Party.

  11.8    Negative Covenant.  Each Party agrees that it will not practice
technology licensed to it under this Agreement outside the scope of the licenses
granted herein.  Except as specifically provided herein, no Party grants to the
other Parties any license, express or implied, to any technology, know-how,
inventions, improvements, trade secrets or materials that it possesses. Upon the
termination of the Research, neither party shall have any implied license to any
technology, know-how, inventions, improvements, trade secrets or materials of
the other Party except as specifically provided herein.

  11.9    Certain Commitments As To Licenses.  Each Party will use its
respective commercially reasonable diligent efforts during the Research Term
(which efforts will not, absent express prior written agreement of the relevant
Party hereto, require any Party to pay additional money, whether by increased
royalty rates or other payments, or grant additional rights, to any Third Party)
as follows:

          (a) Bayer Commitments. On the part of Bayer, to provide, with respect
to licenses as to which Bayer or its Affiliates become licensees after the
Effective Date within the Research Field, and/or within such areas outside of
the Research Field in which the LLC has, pursuant to Section 2.4 of the
Operating Agreement, designated to be of interest to the LLC, for such license
rights to be sublicensed to the LLC, with or without a further right of the LLC
to sublicense them to Exelixis; and

          (b) Exelixis Commitments. On the part of Exelixis, to provide, with
respect to licenses as to which Exelixis or its Affiliates become licensees
after the Effective Date within the Research Field, and/or within such areas
outside of the Research Field in which the LLC has, pursuant to Section 2.4 of
the Operating Agreement, designated to be of interest to the LLC, for such
license rights to be sublicensed to the LLC, with or without a further right of
the LLC to sublicense them to the Bayer; and

          (c) LLC Commitments. On the part of the LLC, provide, with respect to
licenses, other than from Bayer or Exelixis, as to which the LLC becomes a
licensee after the Effective Date within the Research Field, and/or within such
areas outside of the Research Field in which the LLC has, pursuant to Section
2.4 of the Operating Agreement, designated to be of interest to the LLC, for
such license rights to be sublicensed by the LLC to Bayer and Exelixis.

12.  Enforcement of Patent Rights

     12.1 General. Each Party will provide notice to the other Parties of any
infringement of an Exelixis Patent, LLC Patent, Bayer Patent, or Joint Patent.
In any action to enforce any of such Patents against alleged infringement, the
Party or Parties prosecuting such action shall bear

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       38
<PAGE>

all costs and expenses thereof, and the other Parties will provide reasonable
assistance, if requested, in such action at the expense of the Party or Parties
prosecuting such action.

  12.2    Exelixis Patents.  Exelixis shall have the first right, but not the
obligation, to enforce the Exelixis Patents (other than the Joint Patents)
against any infringer.  Any amounts recovered by Exelixis from an infringer of
such Patents shall be retained by Exelixis.  If Exelixis does not exercise such
right within [ * ] after notice of infringement of an Exelixis Patent (other
than a Joint Patent) [ * ], then [ * ] has the right to enforce such Exelixis
Patent in the name of Exelixis.  Any amounts recovered by [ * ] from an
infringer of such Exelixis Patent shall first be applied to reimburse [ * ]
costs and expenses of the action, and any remaining amounts shall be treated as
revenue of [ * ].

  12.3    LLC Patents.  The LLC shall have the first right, but not the
obligation, to enforce the LLC Patents (other than the Joint Patents) against
any infringer.  If the LLC does not exercise such right within [ * ] after
notice of infringement of an LLC Patent, then Exelixis and Bayer shall each have
the right, but not the obligation, to enforce such LLC Patent in the name of the
LLC, and shall agree on which of them shall enforce such LLC Patent.  Any
amounts recovered by an enforcing Party from an infringer of such LLC Patent
shall first be applied to reimburse such enforcing Party's costs and expenses of
the action, and any remaining amounts shall be treated as revenue of [ * ].

  12.4    Bayer Patents.  Bayer shall have the sole right, but not the
obligation, to enforce the Bayer Patents (other than the Joint Patents) against
any infringer.  Any amounts recovered by Bayer from an infringer of such Patents
shall be retained by Bayer.

  12.5    Joint Patents.

          (a) In the case of a Joint Patent that is at the time jointly owned by
two or more Parties, each then jointly owning Party shall have the right, but
not the obligation, to enforce such Joint Patent in the name of the then joint
owners, and the then jointly owning Parties shall agree on which of them shall
enforce such Joint Patent. Any amounts recovered by an enforcing Party from an
infringer of such Joint Patent shall first be applied to reimburse such
enforcing Party's costs and expenses of the action, and any remaining amounts
shall be divided equally among those Parties that had agreed to accept the
obligation of enforcement.

          (b) In the case of a Joint Patent that has become solely owned by a
Party, that Party shall have the right, but not the obligation, to enforce such
Patent against any infringer. Any amounts recovered by such Party from an
infringer of such Patent shall be retained by such Party.

13.  Indemnification

     13.1    Collaboration Compounds and Products.  Subject to compliance with
Section 13.3, Bayer shall indemnify, defend and hold harmless Exelixis, its
Affiliates, the LLC and their respective agents and employees, from and against
any and all losses, liabilities, damages, costs, fees and expenses, including
reasonable legal costs and attorneys' fees ("Losses") resulting from a Third
Party claim, suit or action concerning and to the extent attributable to a
Collaboration

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       39
<PAGE>

Compound, a Bayer Product or the permitted use of a Bayer Pesticide, but
excluding any Losses resulting from the gross negligence or intentionally
wrongful act or omission of the LLC, Exelixis, its Affiliates or sublicensees or
any of their employees or agents.

     13.2 Exelixis Products and Personnel.  Subject to compliance with Section
13.3, Exelixis shall indemnify, defend and hold harmless Bayer, its Affiliates,
the LLC and their respective agents and employees, from and against any and all
losses, liabilities, damages, costs, fees and expenses, including reasonable
legal costs and attorneys' fees ("Losses") resulting from (a) a Third Party
claim, suit or action concerning and to the extent attributable to an Exelixis
Agrochemical Compound, Exelixis Human Health Compound or a Product containing
such a Compound, and (b) a Third Party claim, suit or action arising from
Exelixis' employment relationship with personnel providing FTE services under
this Agreement (including without limitation claims based on personal injury or
unlawful discharge), but in each case excluding any Losses resulting from the
gross negligence or intentionally wrongful act or omission of the LLC, Bayer,
its Affiliates or sublicensees or any of their employees or agents.

     13.3 Indemnity Procedure.  In the event a Party is seeking indemnification
under Section 13.1 or 13.2, the Party seeking indemnification shall inform the
indemnifying Party in writing of a claim as soon as reasonably practicable after
it receives notice of the claim, shall permit the indemnifying Party to assume
direction and control of the defense of the claim (including the right to settle
the claim solely for monetary consideration), and, at the expense of the
indemnifying Party, shall cooperate as reasonably requested in the defense of
the claim.  Each indemnified Party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying Party if
representation of the indemnified Party by the counsel retained by the
indemnifying Party would be inappropriate due to actual or potential differing
interests among the Parties.  The indemnifying Party may not settle such action
or claim, or otherwise consent to an adverse judgment in such action or claim,
that diminishes the rights or interests of an indemnified Party without the
express written consent of such indemnified Party.

14.  Term of Agreement And Termination

     14.1 Term.  This Agreement shall expire upon the latest of: (a) the end of
Research Term, (b) the expiration of all payment obligations of Bayer and
Exelixis hereunder, and (c) the expiration of all LLC Patents.  Sections 10.1
and 11.6, Articles 13, 14, 15 and 16, and the commercialization licenses set
forth in Sections 11.3 and 11.5 shall survive such expiration.

     14.2 Termination of Research Term. Upon [ * ], the licenses granted to the
LLC under Section 11.1 shall terminate.  If such termination of the Research
Term was due to dissolution of the LLC, then Exelixis shall use all unspent
research payments as of the effective date of such termination to wind down the
LLC's Research efforts in an orderly manner with Bayer deemed to have granted an
appropriate license to allow Exelixis to perform such wind down activities.  If
such termination of the Research Term was not due to dissolution of the LLC,
then Bayer and the LLC shall have the right to cause Exelixis to perform
continuing research (i.e. Target identification and LLC Assay development)
pursuant to a Research Plan mutually agreed by Bayer and Exelixis for a period
of [ * ] beyond the end of the Research Term to complete the development of LLC
programs under way at the end of the Research Term.  If Bayer and the LLC
exercise the aforementioned right, they shall be deemed to have granted
appropriate

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       40
<PAGE>

licenses to Exelixis under the Bayer Know-How, Bayer Patents, LLC Know-How and
LLC Patents to enable Exelixis to perform such continuing research; such
licenses shall expire at the end of such [ * ] period. The number of FTEs to be
supported during such [ * ] period shall be mutually agreed by Bayer and
Exelixis, and Bayer shall pay Exelixis for such work at the Annual FTE Rate then
in effect. Thereafter, such research shall cease, Bayer's payment obligations
under Section 9.2 shall cease, provided that Bayer shall make all such payments
which had accrued prior to the date of such termination, and each Party's rights
and obligations under this Agreement (other than those limited to the Research
Term) with respect to Targets, LLC Assays, Bayer Assays, LLC Compounds,
Collaboration Compounds, Exelixis Agrochemical Compounds, Exelixis Human Health
Compounds, Products and Exelixis' rights outside the Research Field shall
continue as specified in this Agreement. This Agreement shall continue in effect
until the date set forth in Section 14.1 or until terminated pursuant to Section
14.3.

  14.3    Material Breach.

          (a) If any Party believes that another Party is in material breach of
this Agreement, such Party (the "Non-Breaching Party") shall give notice of such
alleged breach to each Party which it believes to be in material breach (the
"Breaching Party"), with a concurrent notice to the other Party. Such notice
shall state with specificity the nature of the breach. If the Breaching Party
either cures such breach within [ * ] of such notice or, if it is not possible
to cure such breach within such [ * ] period, the Breaching Party commences
diligent, good faith efforts to cure such breach during such [ * ] period and
continues using such efforts for a prompt and successful cure of the breach,
then the Non-Breaching Party shall have no further remedy except the right to
recover money damages, if any, through arbitration pursuant to Article 17 of the
Operating Agreement and to protect its rights in Confidential Information and
intellectual property, either through arbitration or judicial relief.

          (b) If the Breaching Party does not cure the alleged breach as
provided in Section 14.3(a), the Non-Breaching Party shall have the right to
commence an arbitration pursuant to Article 17 of the Operating Agreement to
either (i) seek specific performance of this Agreement and/or recover money
damages, or (ii) seek to terminate this Agreement and exercise the rights of a
non-defaulting Party set forth in Section 14.2(c) or 14.2(d) of the Operating
Agreement (termination and dissolution of the LLC or purchase of the interest of
the Defaulting Party). If the arbitrator determines that a material breach of
this Agreement has occurred, the arbitrator shall order specific performance
and/or the payment of money damages, unless the arbitrator determines either
that such relief would be inadequate to compensate the Non-Breaching Party for
the harm resulting from the breach or that in view of the circumstances then
prevailing, the Breaching Party cannot provide adequate assurances that if this
Agreement and the LLC were to continue, the Non-Breaching Party would in the
future receive the benefits of its bargain set forth herein and therein. If the
arbitrator makes a determination that specific performance and/or money damages
would be inadequate or that the Breaching Party cannot provide such adequate
assurances, then the Non-Breaching Party may terminate this Agreement and make
either of the elections set forth in Section 14.2(c) or 14.2(d) of the Operating
Agreement.

  14.4    Acquisition Of The LLC By Bayer.  Under certain circumstances set
forth in Article 13 of the Operating Agreement, Bayer has the right to purchase
Exelixis' ownership

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       41
<PAGE>

interest in the LLC. In the event Bayer concludes such a transaction, the
following terms and conditions shall apply. In any appraisal of the value of the
LLC for purposes of establishing the price of any such transaction, the
appraiser shall value the LLC on the basis that the terms and conditions set
forth in this Section 14.4 shall be in effect as of the closing of such
acquisition.

     (a) Bayer's acquisition of Exelixis' ownership interest in the LLC shall
terminate any right of Exelixis to receive a portion of the premium fees payable
by Bayer under Section 9.4(a).  However, the premium fee obligations of Exelixis
set forth in Sections 9.4(b) and 9.4(c) shall continue in effect.

     (b) Exelixis shall provide continuing Research services to the LLC for a
period of [ * ] following the closing of Bayer's acquisition of Exelixis'
interest in the LLC, provided that (i) such work is limited to a continuation of
projects underway at the time of such closing, or related work agreed to by
Exelixis, (ii) Bayer or the LLC pays Exelixis for its FTEs engaged in such
transitional work at the Annual FTE Rate then in effect, and (iii) the level of
FTE effort devoted by Exelixis to the LLC research shall wind down in an orderly
manner mutually agreed in writing by Bayer and Exelixis.

     (c) The ownership and license rights applicable to all Assays, Compounds,
Products, and Targets in existence immediately prior to the closing of such
transaction shall continue without modification, except that the license granted
to the LLC in Section 11.1(b):  (i) shall continue on an exclusive basis for
[ * ] following the closing of such transaction, following which it shall
continue perpetually on a nonexclusive basis, subject to the modification set
forth in the following sentence, and (ii) may be sublicensed by the LLC to Bayer
and its Affiliates (but not to any Third Party). At the end of the exclusive
period described in the preceding clause (i), the license from Exelixis to the
LLC shall be modified to exclude any license under Third Party technology
licensed to Exelixis and sublicensed to the LLC pursuant to Section 11.1(b).
Rights with respect to Targets, assays, compounds and products arising from the
activities of the Parties under this Agreement shall not be affected by reason
of the acquisition by Bayer, except to the extent that the Research Term shall
then be deemed to have ended as of such closing and, accordingly, the duration
of certain provisions of this Agreement will be affected.

     (d) Exelixis shall cooperate reasonably in enabling Bayer and the LLC to
replicate the ability to use the Exelixis technology which was used by the
Dedicated FTEs and Shared FTEs in the performance of Research on behalf of the
LLC in the [ * ] prior to the closing of the acquisition by Bayer. Bayer or the
LLC shall bear all costs associated with such replication of technology and
shall reimburse Exelixis for any costs incurred by Exelixis in that regard (with
internal resources to be reimbursed at the Annual FTE Rate then in effect and
out-of-pocket costs which exceed the customary inclusions within the Annual FTE
Rate to be reimbursed at cost). This Section 14.4(d) shall not require Exelixis
to transfer or sublicense to the LLC any licenses to practice Third Party
technology, but Exelixis shall (i) cooperate with the LLC in approaching any
such Third Parties from which Exelixis has licensed technology used in the
Research to seek licenses directly from such Third Party to the LLC, and (ii) in
those cases, if any, where Exelixis holds an exclusive license with a right of
sublicense, Exelixis shall negotiate in good faith to grant such a sublicense to
the LLC on a basis which generates no net profit to Exelixis and imposes no net
cost on Exelixis by reason of such sublicense or as a result of the LLC's use of
such sublicensed technology. By way of example, under this Section 14.4(d),

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       42
<PAGE>

Exelixis shall cooperate with the LLC in enabling the LLC to purchase equipment
and supplies from Exelixis' vendors, shall share with Exelixis reasonable
quantities of specialty chemicals not readily available from vendors (with
reimbursement of the manufacturing cost of such chemicals), and shall
demonstrate to LLC personnel the use of Exelixis technology.

  14.5    Acquisition Of The LLC By Exelixis.  Under certain circumstances set
forth in Article 13 of the Operating Agreement, Exelixis has the right to
purchase Bayer's ownership interest in the LLC.  In the event Exelixis concludes
such a transaction, the following terms and conditions shall apply.  In any
appraisal of the value of the LLC for purposes of establishing the price of any
such transaction, the appraiser shall value the LLC on the basis that the terms
and conditions set forth in this Section 14.5 shall be in effect as of the
closing of such acquisition.

          (a) Exelixis' acquisition of Bayer's ownership interest in the LLC
shall terminate any right of Bayer to receive a portion of the premium fees
payable by Exelixis under Sections 9.4(b) and 9.4(c). The premium fee
obligations of Bayer set forth in Section 9.4(a) shall continue in effect but
shall be reduced to a rate of [ * ].

          (b) Exelixis shall provide continuing Research services to the LLC for
the benefit of Bayer for a period of up to [ * ] following the closing of
Exelixis' acquisition of Bayer's interest in the LLC, provided that (i) such
work is limited to a completion of any LLC Assays already under development at
the time of such closing, (ii) Bayer or the LLC pays Exelixis for its FTEs
engaged in such transitional work at the Annual FTE Rate then in effect, and
(iii) the level of FTE efforts devoted by Exelixis to the LLC research shall
wind down in orderly manner mutually agreed in writing by Bayer and Exelixis.

          (c) The ownership and license rights applicable to all Assays,
Compounds, Products, and Targets in existence immediately prior to the closing
of such transaction shall continue without modification, except that the license
granted to the LLC in Section 11.1(a): (i) shall continue perpetually on a
nonexclusive basis, subject to the modification set forth in the following
sentence, and (ii) may be sublicensed by the LLC to Exelixis and its Affiliates
(but not to any Third Party). The license from Bayer to the LLC shall be
modified to exclude any license under Third Party technology licensed to Bayer
and sublicensed to the LLC pursuant to Section 11.1(a) and the right to use the
Bayer Pesticides. Rights with respect to Targets, assays, compounds and products
arising from the activities of the Parties under this Agreement shall not be
affected by reason of the acquisition by Exelixis, except to the extent that the
Research Term shall then be deemed to have ended as of such closing and,
accordingly, the duration of certain provisions of this Agreement will be
affected.

  14.6    Acquisition Of The LLC By A Third Party.  The Operating Agreement
requires the approval of Exelixis and Bayer prior to the merger or acquisition
of the LLC by a Third Party.  In the event of such a merger or acquisition,
Exelixis, Bayer and the acquiring Third Party may mutually agree to amend this
Agreement.  If no such mutual agreement is reached, the Research Term will
terminate upon the closing of such merger or acquisition.

  14.7    Termination and Dissolution of the LLC. Under certain circumstances
set forth in Section 12.1 of the Operating Agreement, Exelixis or Bayer has the
right to terminate and dissolve the LLC.  In the event that such termination and
dissolution occurs, the Research Term

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       43
<PAGE>

shall terminate and the terms set forth in Section 14.2 of this Agreement and
12.5 of the Operating Agreement shall apply.

15.  Representations & Warranties

     15.1    Representations and Warranties of Exelixis.

             (a) Exelixis is duly organized and validly existing and in good
standing under the laws of Delaware and has full corporate power and authority
to enter into this Agreement and to carry out the provisions hereof.

             (b) Exelixis is duly authorized to execute and deliver this
Agreement and to perform its obligations hereunder.

             (c) As of the Effective Date, Exelixis [ * ].

             (d) Subsequent to the Effective Date, [ * ].

             (e) Exelixis [ * ].  Exelixis has the rights necessary to grant the
licenses from Exelixis to LLC which are set forth in this agreement.

             (f) Exelixis has determined that as of the Effective Date the value
of the exclusive licenses acquired by Exelixis under this Agreement and the
Operating Agreement does not exceed [ * ].

     15.2    Representations and Warranties of Bayer.

             (a) Bayer is duly organized, validly existing and in good standing
under the laws of Indiana and has full corporate power and authority to enter
into this Agreement and to carry out the provisions hereof.

             (b) Bayer is duly authorized to execute and deliver this Agreement
and to perform its obligations hereunder.

             (c) Bayer has the rights necessary to grant the licenses from Bayer
to LLC which are set forth in this agreement.

             (d) Bayer ha s the rights necessary to grant the licenses set forth
herein to (i) [ * ] and (ii) [ * ].

             (e) Bayer has [ * ].

             (f) Bayer has determined that as of the Effective Date the value of
the exclusive licenses acquired by Bayer under this Agreement and the Operating
Agreement does not exceed [ * ].

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       44
<PAGE>

16.  Miscellaneous

     16.1    Dispute Resolution. The dispute resolution procedures set forth in
Article 17 of the Operating Agreement shall apply to all disputes between the
Parties under this Agreement.

     16.2    Confidentiality. The confidentiality provisions set forth in
Article 18 of the Operating Agreement shall apply to all Confidential
Information disclosed by one Party to another Party under this Agreement.

     16.3    Performance By Affiliates. The Parties recognize that portion of
this Agreement may be performed by Affiliates of Bayer or Exelixis, and that
Products may be commercialized by such Affiliates under appropriate agreements.
Each of Bayer and Exelixis hereby guarantees that any of its Affiliates which
participates in the performance of this Agreement or the commercialization of
Products will comply with the terms and conditions of this Agreement. In the
event of any dispute between Bayer or Exelixis and an Affiliate of such other
Party arising from or related to this Agreement, such dispute may be brought
directly against such other Party under this Agreement without any obligation to
first seek to resolve such dispute or exhaust remedies with respect to such
Affiliate.

     16.4    Limitation of Liability. EXCEPT AS SPECIFICALLY PROVIDED IN ARTICLE
13, 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, including without
limitation Article 12.

     16.5    Entire Agreement; Amendment. This Agreement, together with Exhibit
A (which the Parties shall agree upon [ * ] and shall append to this Agreement),
sets forth the agreement among the Parties with respect to the specific subject
matter hereof, and, except as otherwise set forth herein, supersedes and
terminates all prior representations, agreements and understandings among the
Parties regarding the subject matter hereof. No alteration, amendment, change or
addition to this Agreement will be binding upon the Parties unless in writing
and signed by an authorized signatory of each Party.

     16.6    Assignment. Subject to the terms of the Operating Agreement, no
Party may assign or transfer this Agreement or any rights or obligations
hereunder without the prior written consent of the other Parties, except that
(a) a Party may make such an assignment without the other Parties' consent to an
Affiliate or to a successor to all or substantially all of the related business
assets of such Party relating to this Agreement, whether by way of a merger,
sale of stock, sale of assets or other similar transaction; and (b) each of
Bayer and Exelixis may contract to Third Parties any of its marketing and sales
rights with respect to Products, and such contracts shall not be considered
assignment of rights and obligations as provided above.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       45
<PAGE>

  16.7    Notices. All notices, requests, consents and other communications
hereunder to any Party will be deemed to be sufficient if contained in a written
instrument delivered in person, including delivery by recognized express
courier, fees prepaid, or sent by facsimile transmission or duly sent by first
class registered or certified mail, return receipt requested, postage prepaid,
in each case addressed as set forth below, or to such other address as may
hereinafter be designated in writing by the recipient to the sender pursuant to
this Section 16.7.  All such notices, requests, consents and other
communications will be deemed to have been received in the case of personal
delivery, including delivery by express courier, on the date of such delivery;
in the case of facsimile transmission, on the date of transmission; and in the
case of mailing, on the third day after deposit in the U.S. mail, proper postage
prepaid.

If to Exelixis:     Exelixis Pharmaceuticals, Inc.
                    260 Littlefield Avenue
                    South San Francisco, CA 94080
                    Attention: Chief Executive Officer
                    Facsimile: 650-825-2205

With a copy to:     Cooley Godward LLP
                    Five Palo Alto Square
                    3000 El Camino Real
                    Palo Alto, CA 94306
                    Attention: Robert L. Jones
                    Facsimile: 650-857-0663

If to Bayer:        Bayer Corporation
                    8400 Hawthorne Road
                    Kansas City, MO 64120-0013
                    Attention: William G. Ferguson, Vice President and
                    Assistant General Counsel
                    Facsimile:  816-242-2739

With a copy to:     Heller Ehrman White & McAuliffe
                    525 University Avenue
                    Palo Alto, CA 94301
                    Attention: Bruce W. Jenett
                    Facsimile: 650-324-0638

If to the LLC:      GenOptera LLC
                    c/o Exelixis Pharmaceuticals, Inc.
                    260 Littlefield Avenue
                    South San Francisco, CA 94080
                    Attention: Chief Executive Officer of GenOptera LLC
                    Facsimile: 650-825-2205

  16.8    Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, then such provisions will be enforced to
the maximum extent possible under applicable law and the remainder of such
provisions will be excluded from

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       46
<PAGE>

this Agreement, and the balance of this Agreement will be interpreted as if such
provisions or portion(s) thereof were so excluded and will continue to be
enforceable in accordance with its terms.

  16.9    Force Majeure Events. Except as otherwise provided herein, no Party
will be in breach of this Agreement, or liable to the other Parties, for any
loss, damage, detention, delay or failure of performance to the extent such
loss, damage, detention, delay or failure is caused by a Force Majeure Event
provided that the Party claiming excuse uses its commercially reasonable efforts
to overcome the same.  In the event of a Force Majeure Event, the obligations of
the affected Party will be suspended as long as such Force Majeure Event
continues.

  16.10   Hardship. If, during the period of this Agreement, performance of this
Agreement should lead to unreasonable hardship for one Party taking the
interests of all Parties into account, the Parties will endeavor to agree in
good faith to amend this Agreement in view of such circumstance.

  16.11   Electronic Data Interchange. If the Parties elect to facilitate their
activities hereunder by electronically sending and receiving data in agreed
formats (also referred to in general usage as Electronic Data Interchange or
EDI) in substitution for conventional paper-based documents, the terms and
conditions of this Agreement will apply to such EDI activities and
communications as if such EDI communication, and as if such communication were
sent by facsimile.

  16.12   Counting Of Time.  Whenever days are to be counted under this
Agreement, the first day will not be counted and the last day will be counted,
such that if a notice is delivered on a Monday to one Party, for example, with a
five (5) day reply period hereunder, the reply must be sent to the sending Party
(not received by such sending Party) by such recipient member no later than
11:59 a.m. local time for the sender, on the Saturday next following such
Monday.

  16.13   Certain Third Parties.  Except with respect to the rights of certain
Persons to be indemnified pursuant to Article 13 of this Agreement, which
Persons are intended as third party beneficiaries of their respective rights be
indemnified as set forth therein, able to enforce their respective rights to
such indemnification as if they were a party hereto, nothing in this Agreement,
express or implied, is intended to confer upon any person, other than the
Parties hereto and their successors and assigns, any rights or remedies under or
by reason of this Agreement.

  16.14   No Grant Of Rights.  Except as specifically stated herein, no Party
grants to any other Party hereto any rights or license to any intellectual
property rights or other rights of the first Party.

  16.15   Captions.  The captions to Sections of this Agreement have been
inserted for identification and reference purposes only and will not be used to
construe or interpret this Agreement.

  16.16   Costs And Attorneys' Fees.  Except as otherwise provided in Article 11
of the Operating Agreement, including the definition of "Damages" under Section
1.21 of the

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       47
<PAGE>

Operating Agreement, if any action, suit or other proceeding is instituted
concerning or arising out of this Agreement or any transaction contemplated
hereunder, the prevailing Party will recover all of such Party's reasonable fees
and costs of attorneys incurred in each such action, suit or other proceeding,
including any and all appeals or petitions therefrom.

  16.17   Expenses. Except as otherwise provided in this Agreement (a) all
expenses incurred by a Party in connection with its obligations under this
Agreement will be borne solely by such Party, and (b) each Party will be
responsible for appointing its own employees, agents and representatives, who
will be compensated by such Party.

  16.18   Non-Waiver. The failure of a Party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement will not be construed as a waiver or relinquishment, to any extent, of
the right to assert or rely upon any such terms or conditions on any future
occasion.

  16.19   Disclaimer of Agency. This Agreement will not render any Party the
legal representative or agent of another, nor will any Party have the right or
authority to assume, create, or incur any Third Party liability or obligation of
any kind, express or implied, against or in the name of or on behalf of another
except as expressly set forth in this Agreement or except as may be expressly
agreed in advance in writing by the Party to be bound.

  16.20   Further Assurances.  The Parties will execute and deliver any further
instruments or documents and perform any additional acts that are or may become
necessary to carry out the purposes and intent of this Agreement.

  16.21   Binding Effect. This Agreement will be binding on and inures to the
benefit of each Party and its respective transferees, successors, assigns and
legal representatives.

  16.22   Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be an original and all of which will constitute
together the same document.  This Agreement, which Bayer and Exelixis executed
on December 15, 1999, shall become effective upon execution by the LLC.

  16.23   Governing Law. The law of the State of California, excluding that body
of law known as conflict of laws, will be the applicable substantive law for all
matters involving this Agreement, except those governed by federal law, which
will apply to such other matters.

  16.24   Official Language. The official text of this Agreement and any
appendices, Exhibits hereto, will be made, written and interpreted in English.
Any notices, accounts, reports, documents, disclosures of information or
statements required by or made under this Agreement, whether during its term or
upon expiration or termination thereof, will be in English.  In the event of any
dispute concerning the construction or meaning of this Agreement, reference will
be made only to this Agreement as written in English and not to any other
translation into any other language.

  16.25   Internal Section References.  All references in this document to
Sections are to Sections hereof except as otherwise indicated.

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       48
<PAGE>

                    [REST OF PAGE INTENTIONALLY LEFT BLANK]

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       49
<PAGE>

     In Witness Whereof, the Parties hereto have duly executed this Agreement as
of the date first above written.

Exelixis Pharmaceuticals, Inc.              Bayer Corporation

By:  /s/ George Scangos                     By:  /s/ Emil E. Lansu
     -------------------------------             ------------------------------

Name:  George Scangos                       Name:  Emil E. Lansu
     -------------------------------             ------------------------------
Title:  President & CEO                     Title:  Executive Vice President
      ------------------------------              -----------------------------

GenOptera LLC

By:  /s/ Frank F. Reuscher
   ---------------------------------

Name:  Frank F. Reuscher
     -------------------------------

Title:  Chief Executive Officer
      ------------------------------

[*]=CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       50
<PAGE>

                            COLLABORATION AGREEMENT
                                     AMONG

                        EXELIXIS PHARMACEUTICALS, INC.,

                            BAYER CORPORATION, AND

                                 GENOPTERA LLC

                          DATED AS OF JANUARY 1, 2000

[*]=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 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.

                                       1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00001-of-00352.parquet"}]]