Document:

<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 10.8
                            LLC OPERATING AGREEMENT
                            -----------------------

                                 GENOPTERA LLC
                                 -------------

     This Operating Agreement (the "Agreement"), is entered into as of December
                                    ---------
__, 15, 1999 (the "Effective Date"), by and among Bayer Corporation, an Indiana
                   --------------
corporation ("Bayer") and Exelixis Pharmaceuticals, Inc., a Delaware corporation
              -----
("Exelixis"), as the initial members (the "Members") of OpteraGenOptera LLC, a
  --------                                 -------
Delaware limited liability company (the "LLC") to be formed by Bayer and
                                         ---
Exelixis on or before January 1, 2000; immediately upon its formation, the LLC
will execute and deliver a counterpart copy hereof and thereupon will become a
party hereto.  Terms not otherwise defined in this Agreement will have the
meanings set forth for such terms in Article I hereof.

                                   RECITALS
                                   --------

     WHEREAS, the Members will have formed the LLC, on or before January 1,
2000, as provided in Section 2.1 hereof, to identify and validate biochemical
targets useful within the Field of Use, and to format high throughput screening
assays based upon such targets, in each case within the Field of Use, and in
each case based initially upon certain technology of Exelixis and Bayer AG which
was used in connection with, and certain technology developed under, the
Original Collaboration Agreement, and such other matters as the Members may
agree in writing with each other from time to time, as an amendment hereto; and

     WHEREAS, simultaneously with their execution and delivery hereof, Bayer and
Exelixis also have executed and delivered the LLC Collaboration Agreement, which
also will be effective as of January 1, 2000; and

     WHEREAS, the Members and the LLC desire to enter into this Agreement, to
set forth the respective ownership interests of the Members in the LLC and the
principles by which the LLC will be operated and governed;

     NOW, THEREFORE, in consideration of mutual covenants and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

     The following terms will have the meanings set forth below for purposes of
this Agreement:

     1.1  Accounting Period" means, for each Fiscal Year, the period beginning
          -----------------
on January 1 and ending on December 31, provided that (a) the first Accounting
Period will commence on the date of formation of the LLC and if the LLC is
formed in 1999 will end on December 31,
<PAGE>

1999, and if the LLC is formed in 2000 will end on December 31, 2000, and (b) a
new Accounting Period will commence on any date on which a Substitute Member is
admitted to the LLC.

     1.2  "Act" means the Delaware Limited Liability Company Act.
           ---

     1.3  "Adjusted Capital Account" means, with respect to any Member, the
           ------------------------
balance in the capital account of such Member, increased by the amount of such
Member's share, determined in accordance with Treasury Regulations Section
1.704-2(g), of "partnership minimum gain," within the meaning of Treasury
Regulations Section 1.704-2(d), and such Member's share, determined in
accordance with Treasury Regulations Section 1.704-2(i), of "partner nonrecourse
debt minimum gain," within the meaning of Treasury Regulations Section 1.704-
2(i).

     1.4  "Affiliate" means a Person who controls, is controlled by or is under
           ---------
common control with (a) the referenced Member 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
aggregate stock or voting power of all classes of stock and/or other voting
securities of such Person if it is a legal entity, and (2) Bayer and Bayer AG
are Affiliates of each other, and (3) for purposes of this Agreement, the LLC is
not an Affiliate of Bayer or of Exelixis, nor is either of Bayer or Exelixis an
Affiliate of the LLC, and (4) Bayer and Bayer AG, on the one hand, and Exelixis,
on the other hand, are not, merely by virtue of this Agreement or the LLC
Collaboration Agreement, deemed to be Affiliates of each other.

     1.5   "Agreement" means this Operating Agreement as it may be amended from
            ---------
time to time.

     1.6  "Appraiser" means an independent investment bank, accounting firm or
           ---------
other entity which has no material relationship with either Member or any of
their Affiliates or the LLC, and who is experienced in appraising and
determining the fair market value of agriculture-based, genetic screening-based
or other technology-based companies.  For purposes of this Agreement, a
"material relationship" is defined as any relationship, including holding more
than one percent (1%) of the stock of the relevant Person, or having a senior
executive (any LLC officer or similar position) of such bank, firm or other
entity, who is also serving or has served, during the two (2) years immediately
preceding such Appraiser's selection, as an employee, LLC officer or Director,
or similar position, of such relevant Person, or which bank, firm, entity or
senior executive is consulting with or for such relevant Person on any ongoing
retained basis, or in a non-ongoing retention or engagement during the two (2)
years immediately preceding such Appraiser's selection.

     1.7  "Auction" and "Auctioneer" will have the meanings set forth for such
           -------       ----------
terms in Section 13.5 hereof.

[*] = 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>

     1.8  "Bayer AG" means a corporation organized under the laws of Germany,
           --------
which is the parent corporation of Bayer.

     1.9  "Bankruptcy" means, with respect to any Person, that a petition has
           ----------
been filed by or against such Person as a "debtor" and the adjudication of such
Person as a bankrupt under the provisions of the bankruptcy laws of the United
States have commenced, or that such Person has made an assignment for the
benefit of its creditors generally or a receiver has been appointed for
substantially all of the property and assets of such Person, unless the same has
been vacated, set aside or stayed within sixty (60) days after such filing.

     1.10 "Buyout" means the purchase by one Member of all of the Membership
           ------
Interest of the other Member pursuant to the provisions of Article XIII hereof.

     1.11 "Capital Account" means, for each Member, a separate account
           ---------------
maintained by the LLC in accordance with the following provisions:

          (a) Increases.  The Capital Account of each Member will be increased
              ---------
by:
              (i)    Money and Property Contributed. The amount of money and the
                     ------------------------------
agreed fair market value of any property contributed to the LLC by such Member,
or paid by such Member for the benefit of the LLC pursuant to this Agreement
(net of any liabilities secured by such property that the LLC is considered to
assume or hold subject to for purposes of Section 752 of the Code), in each case
as a Capital Contribution by such Member,

              (ii)    Share of Net Income, Etc.  Such Member's share of Net
                      ------------------------
Income (or items thereof) and other items of LLC income and gain allocated to it
pursuant to this Agreement, and

              (iii)   Certain Assumption of Liabilities.  The amount of
                      ---------------------------------
liabilities of the LLC assumed by such Member, to the extent not taken into
account under Section 1.11(a)(i) hereof, and any other amounts required by
Treasury Regulations Section 1.704-1(b), if the Management Committee determines
that such increase is consistent with the economic arrangement among such
Members as expressed in this Agreement; and

          (b) Decreases.  The Capital Account of each Member will be decreased
              ---------
by:

              (i)     Money And Property Distributed. The amount of money and
                      ------------------------------
the agreed fair market value of any property distributed by the LLC to such
Member pursuant to the provisions of this Agreement (net of any liabilities
secured by such property that such Member is considered to assume or hold
subject to for purposes of Section 752 of the Code),

              (ii)    Share of Net Loss, Etc. Such Member's share of Net Loss
                      ----------------------
(or items thereof) and other items of LLC loss and deduction allocated to it
pursuant to this Agreement, and

              (iii)   Certain Assumption of Liabilities.  The amount of
                      ---------------------------------
liabilities of such Member assumed by the LLC (to the extent not taken into
account under Section 1.11(a)(i)

[*] = 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>

hereof) and any other amounts required by Treasury Regulations Section 1.704-
1(b), if the Management Committee determines that such decrease is consistent
with the economic arrangement among such Members as expressed in this Agreement.

     1.12 "Capital Contribution" of a Member means the contribution by such
           --------------------
Member to the LLC pursuant to Article IV hereof.

     1.13 "Carrying Value" means, with respect to any LLC asset, such asset's
           --------------
adjusted basis for federal income tax purposes, except as follows:

          (a) Initial Carrying Value of Contributed Asset.  The initial Carrying
              -------------------------------------------
Value of any asset contributed by a Member to the LLC will be the fair market
value of the asset upon contribution, as agreed upon in writing by the
contributing Member and the LLC.

          (b) Adjustments Upon Certain Acquisitions And Distributions.  In the
              -------------------------------------------------------
discretion of the Management Committee, or upon the written request of either
Member to the Management Committee, with a copy to the other Member, the
Carrying Values of all LLC assets may be adjusted to equal their respective fair
market values, as determined by the Management Committee, and the resulting
unrecognized gain or loss allocated to the Capital Accounts of the Members as
though such assets had been sold for their respective fair market values as of
the following times: (i) the acquisition of an additional interest in the LLC by
any Member in exchange for more than a de minimis Capital Contribution; and (ii)
                                       -- -------
the distribution by the LLC to a Member of more than a de minimis amount of LLC
                                                       -- -------
assets, unless all Members receive simultaneous distributions of either
undivided interests in the distributed property or identical LLC assets in
proportion to their interests in the LLC.

          (c) Certain Adjustments to Equal Fair Market Value On Liquidation or
              ----------------------------------------------------------------
Termination of LLC.  The Carrying Values of all LLC assets will be adjusted to
------------------
equal their respective fair market values, as determined by the Management
Committee, and the resulting unrecognized gain or loss allocated to the Capital
Accounts of such Members as though such assets had been sold for their
respective fair market values as of the following times: (i) the date the LLC is
liquidated within the meaning of Treasury Regulations Section 1.704-1
(b)(2)(ii)(g); and (ii) the termination of the LLC pursuant to the provisions of
this Agreement.

          (d) Certain Increases or Decreases.  The Carrying Values of LLC assets
              ------------------------------
will be increased or decreased to the extent required under Treasury Regulations
Section 1.704-1(b)(2)(iv)(m) if the adjusted tax basis of such LLC assets is
adjusted pursuant to Code Sections 732, 734 or 743.

          (e) Adjustment To Equal Fair Market Value On Distribution.  The
              -----------------------------------------------------
Carrying Value of an LLC asset that is distributed (whether in liquidation of
the LLC or otherwise) to one or more Members will be adjusted to equal its fair
market value, as determined by the Management Committee, and the resulting
unrecognized gain or loss allocated to the Capital Accounts of such Members as
though such asset had been sold for such fair market value.

[*] = 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>

          (f) Adjustment For Depreciation, Etc.  The Carrying Value of an LLC
              --------------------------------
asset will be adjusted by the depreciation, amortization or other cost recovery
deductions, if any, taken into account by the LLC with respect to such asset in
computing Net Profit or Net Loss.

     1.14 "Certificate of Formation" means the Certificate of formation of the
           ------------------------
LLC.

     1.15 "Changed Circumstance" means any of the following:
           --------------------

          (a) Continuing Force Majeure Event.  A Continuing Force Majeure Event
              ------------------------------
occurs with respect to a Member.

          (b) Exelixis-Specific Matters.  Any or all of the following will be a
              -------------------------
Changed Circumstance with respect only to Exelixis:

              (i)   Certain Sales of Assets.  Subject to the last sentence of
                    -----------------------
this Section 1.15(b)(i), the sale, lease, conveyance or other disposition of
eighty percent (80%) or more of the net value, as determined using United
States generally accepted accounting principles, of the assets of Exelixis, as
an entirety or substantially as an entirety, to any other Person or to any
"group," within the meaning of Section 10(d)(3) of the Exchange Act, that
includes such Person, and in each case other than Bayer or Bayer AG, in one or a
series of transactions. For purposes of this Section 1.15(b)(i), any transaction
as a result of which the holders of all classes of stock and/or other voting
securities of Exelixis immediately prior to such transaction own, directly or
indirectly, at least fifty percent (50%) of the aggregate voting stock or voting
power of all classes of stock and/or other voting securities of the transferee
Person immediately after such transaction, will not constitute a Changed
Circumstance as to Exelixis, unless, and until the date upon which, Bayer gives
Exelixis written notice, which notice Bayer must give within thirty (30) days
after Bayer has received from Exelixis, under Section 13.2(a)(i) hereof, a
Proposed Changed Circumstances Notice of such event, or has received from
Exelixis, under Section 13.2(a)(ii) hereof, a Final Notice of such proposed
event, that one or more of the transferee or proposed transferee Person(s)
and/or the Affiliate(s) of such Person(s), as relevant, is (or are), in the good
faith judgment of Bayer, a party objectionable to Bayer.

              (ii)  Certain Changes of Control.  Subject to the provisions of
                    --------------------------
Section 1.15(b)(ii)(A) and (B) hereof, any transaction or series of transactions
(as a result of a tender offer, merger, consolidation or otherwise) that
involves a transfer of securities of Exelixis, if as a result of such transfer
any Person, including a "group," within the meaning of Section 10(d)(3) of the
Exchange Act, that includes such Person, and in each case other than Bayer or
Bayer AG, acquires "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of fifty percent (50%) or more of the aggregate stock and/or
other voting securities of Exelixis, and such Person or "group" did not,
immediately before such transaction, hold directly or indirectly, fifty percent
(50%) or more of the aggregate stock or voting power of all classes of stock
and/or other voting securities of Exelixis. For purposes of this Section
1.15(b)(ii):

                    (A) Requirement Of Certain Notice By Bayer.  Such event will
                        --------------------------------------
not constitute a Changed Circumstance as to Exelixis unless, and until the date
upon which, Bayer gives written notice to the Management Committee and to
Exelixis, which notice Bayer must give within thirty (30) days after Bayer has
received from Exelixis, under Section 13.2(a)(i) hereof, 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.

                                      -5-
<PAGE>

Proposed Changed Circumstances Notice of such event, or has received from
Exelixis, under Section 13.2(a)(ii) hereof, a Final Notice of such proposed
event, that, in the good faith judgment of Bayer, such event does or would
materially adversely impact the business, operations and/or financial potential
of the LLC, and/or that one or more of the Persons, including their Affiliates,
as relevant, to whom such equity is transferred, or to whom such equity is
proposed to be transferred, is (or are), in the good faith judgment of Bayer,
a party objectionable to Bayer; and

                    (B) Certain Equity Financings By Exelixis.  The closing of
                        -------------------------------------
any equity financing of Exelixis after the Effective Date, by the issuance by
Exelixis of its own securities (including without limitation stock of Exelixis
and/or securities, such as options, warrants or convertible promissory notes,
exercisable for or convertible by their terms into stock of Exelixis), will not
constitute a Changed Circumstance as to Exelixis unless, and until the date upon
which, Bayer gives Exelixis written notice, which notice Bayer must give within
thirty (30) days after Bayer has received from Exelixis, under Section 13.2(a)
(i) hereof, a Proposed Changed Circumstances Notice of such event, or has
received from Exelixis, under Section 13.2(a)(ii) hereof, a Final Notice of such
proposed event, that the Person(s), including a "group," within the meaning of
Section 10(d)(3) of the Exchange Act, that includes such Person(s), and in each
case other than Bayer or Bayer AG, , to whom such equity is issued is (or are),
in the good faith judgment of Bayer, a party objectionable to Bayer.

              (iii) Certain Resignations or Terminations, Etc.  Subject to the
                    -----------------------------------------
provisions of Section 1.15(b)(iii)(D) hereof, the resignation, termination,
demotion, death or disability of, cumulatively, two (2) or more Key Exelixis
Individuals, as follows:

                    (A) Resignation.  The resignation, at any time prior to
                        -----------
the third anniversary of the Effective Date, by a Key Exelixis Individual
from all employment and consultancy relationships with Exelixis and all of its
Affiliates. For purposes of this Agreement, a Key Exelixis Individual will be
deemed to have resigned from all employment and consultancy relationships with
Exelixis and all of its Affiliates on the date after which such individual is
neither an employee nor serving as a consultant under a written agreement with
Exelixis or such Affiliate which requires that such individual render services
actively, and not merely be available on a standby-by or retained on-call basis,
for at least one-half of such individual's full working time.

                    (B) Termination.  The termination, with or without cause, at
                        -----------
any time prior to the third anniversary of the Effective Date, by a Key
Exelixis Individual, from all employment and consultancy relationships with
Exelixis and all of its Affiliates, whether by death, disability or otherwise.

                    (C) Disability or Demotion Without Resignation or
                        ---------------------------------------------
Termination. At any time prior to the third anniversary of the Effective Date,
-----------
the disability of a Key Exelixis Individual (if there is no termination or
resignation by such individual nor by Exelixis as a result of such disability),
to the extent that, or any demotion of such Key Exelixis Individual to a
position of authority and/or title with Exelixis and/or its Affiliates that, in
either case, in the good faith judgment of Bayer after consultation with
Exelixis, and as so notified in writing by Bayer to the Management Committee,
does or would materially adversely impact the business, operations and/or
financial potential of the LLC.

[*] = 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>

                    (D) Exclusions; Consultation With Bayer, Bayer Approval of
                        ------------------------------------------------------
Certain Replacements. This Section 1.15(b)(iii) will not apply as to any Key
--------------------
Exelixis Individual who, immediately upon such termination or resignation with
Exelixis and all of its Affiliates, commences full-time employment or full-time
consultancy with Bayer, or Bayer AG, or with the LLC with Bayer's prior written
consent thereto. This Section 1.15(b)(iii) also will not apply with respect to
the termination, resignation, death, disability or demotion of any Key Exelixis
Individual, whether or not an FTE, until the sixth-month anniversary of the date
of such event, if the position held by such individual is filled by Exelixis
within such six-month period, provided that:

                        (1) Consultation With Bayer.  Exelixis will consult in
                            -----------------------
good faith with Bayer as to the replacement for such individual.

                        (2) Bayer Approval of Certain Replacements. Bayer's
                            --------------------------------------
approval, which approval Bayer will not unreasonably or untimely withhold, will
in each case be required for the individual replacement selected by Exelixis for
each of the positions of Agricultural Biotechnology Program Leader (or
equivalent position) of Exelixis (occupied by John Margolis at the Effective
Date), and Chief Information Officer (or equivalent position) of Exelixis
(occupied by Christian Burks at the Effective Date). Furthermore, if any two (2)
of the following positions becomes vacant within six (6) months of each other by
the termination, resignation, death, disability or demotion of any Key Exelixis
Individual, Bayer's approval, which approval Bayer will not unreasonably or
untimely withhold, will be required for the individual replacement selected by
Exelixis for each of such two (2) positions: (a) Chief Executive Officer of
Exelixis (or President if there is then no Chief Executive Officer (occupied by
George Scangos, as Chief Executive Officer, there being no President, at the
Effective Date), (b) Chief Scientific Officer (or equivalent position) of
Exelixis (occupied by Geoffrey Duyk at the Effective Date), (c) Agricultural
Biotechnology Program Leader (or equivalent position) of Exelixis, and (d) Chief
Information Officer (or equivalent position) of Exelixis. The six-month period
referred to in this Section 1.15(b)(iii)(D)(2) will commence on the date of, as
relevant, the termination, resignation, death, disability or demotion of the
first of the two (2) Key Exelixis Individuals in question.

          (c) Bayer Specific Matters.  Either or both of the following will be a
              ----------------------
Changed Circumstance with respect only to Bayer, provided that, for purposes of
this Section 1.15(c), the term "insecticide" means chemical and/or biological
agents and/or compounds intended for use against invertebrate animals:
                                -----------

              (i)   Certain Sales Of Assets.  Subject to the last sentence of
                    -----------------------
this Section 1.15(c)(i), the sale, lease, conveyance or other disposition, in
one or a series of transactions to any other Person or "group," within the
meaning of Section 10(d)(3) of the Exchange Act, that includes such Person, and
in each case other than Exelixis or Bayer AG, of eighty percent (80%) or more of
the net value, as determined under United States generally accepted accounting
principles, of those assets of Bayer constituting at the time in question
Bayer's insecticide business (as the term "insecticide" is defined in the first
paragraph of Section 1.15(c) hereof), or of eighty percent (80%) or more of the
net value, as determined under United States generally accepted accounting
principles, of the overall assets of Bayer if Bayer has not previously sold,
leased, conveyed or otherwise disposed of eighty percent (80%) or more of the
net value of its insecticide business. For purposes of this Section 1.15(c)(i),
any transaction as a result of which the holders of all classes of stock and/or
other voting securities of Bayer immediately prior to such transaction own,
directly or indirectly, at least fifty percent (50%) of the aggregate voting
stock or voting power of all classes of stock and/or other voting securities of
the transferee Person immediately after such transaction, will not constitute a
Changed Circumstance as to 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.

                                      -7-
<PAGE>

              (ii)  Certain Changes Of Control.  Subject to the provisions of
                    --------------------------
Section 1.15(c)(ii)(A) and (B) hereof, any transaction or series of transactions
(as a result of a tender offer, merger, consolidation or otherwise) that
involves a transfer of securities of Bayer (or, if Bayer's insecticide business
then is being conducted in a separate legal entity that is at the time an
Affiliate of Bayer, then involving a transfer of securities of such entity), if
as a result of such transfer any Person, including a "group," within the meaning
of Section 10(d)(3) of the Exchange Act, that includes such Person, and in each
case other than Exelixis or Bayer AG, acquires "beneficial ownership" (as
defined in Rule 13d-3 under the Exchange Act) of fifty percent (50%) or more of
the aggregate stock and/or other voting securities of Bayer or of such separate
legal entity, and such Person or "group" did not, immediately before such
transaction, hold directly or indirectly, fifty percent (50%) or more of the
aggregate stock or voting power of all classes of stock and/or other voting
securities of Bayer or of such separate legal entity, as relevant. For purposes
of this Section 1.15(b)(ii):

                    (A) Requirement Of Certain Notice By Exelixis. Such event
                        -----------------------------------------
will not constitute a Changed Circumstance as to Bayer unless, and until the
date upon which, Exelixis gives written notice to the Management Committee and
to Bayer that, in the good faith judgment of Exelixis, such event does or would
materially adversely impact the business, operations and/or financial potential
of the LLC, which notice Exelixis must give within thirty (30) days after
Exelixis has received from Bayer, under Section 13.2(a)(i) hereof, a Proposed
Changed Circumstances Notice of such event, or has received from Bayer, under
Section 13.2(a)(ii) hereof, a Final Notice of such proposed event.

                    (B) Certain Conditions.  Such event will constitute a
                        ------------------
Changed Circumstance as to Bayer only (1) if at the time in question Bayer's
insecticide business is being conducted in whole or in material part by or
within a separate legal entity other than Bayer or Bayer AG, and at least fifty
percent (50%) of the aggregate stock or voting power of all classes of stock
and/or other voting securities of such entity is held by Bayer or by Bayer AG
immediately before the consummation of such transaction, or (2) if at the time
Bayer's insecticide business is being conducted by Bayer, and if Bayer AG,
immediately before the consummation of such transaction (a) does not own,
directly or indirectly, at least fifty percent (50%) of the aggregate voting
stock or voting power of all classes of stock and/or other voting securities of
Bayer and (b) does not otherwise have the power to direct or cause the direction
of the management and policies of the insecticide business of Bayer.

          (d) LLC Lack Of Freedom To Operate.  Subject to the last sentence of
              ------------------------------
this Section 1.15(d), the sixth (6th) month anniversary of the delivery by Bayer
to Exelixis of a "Lack Of Freedom To Operate Notice". A "Lack Of Freedom To
   ------------------------------------------------
Operate Notice" means Bayer's written notice that, in the good faith judgment of
Bayer, after Bayer has consulted with Bayer's patent counsel and with Exelixis,
and after Bayer's patent counsel has consulted with Exelixis' patent counsel,
with respect thereto, there exist sufficient dominant patents, or other
intellectual property rights, of any third party (other than an Affiliate of
Bayer or an Affiliate of Exelixis), with respect to the subject and focus of the
LLC Collaboration Agreement, and/or of the LLC, as to create a material risk of
exposure of the LLC and/or of Bayer or its Affiliates to an action for
infringement by such third party by reason of any intellectual property licensed
to the LLC by Exelixis and/or by any intellectual property belonging to the LLC
(apart from any such

[*] = 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>

intellectual property licensed to the LLC by Bayer or by any Bayer Affiliate),
and to create a failure of the essential purpose of the LLC and of the LLC
Collaboration Agreement if the LLC and the LLC Collaboration Agreement were to
continue. Such event will not constitute a Changed Circumstance if, prior to
such sixth (6th) month anniversary, Exelixis and/or the LLC have executed with
such third party a license, or an agreement not to bring an action for
infringement as to the relevant intellectual property, in either case in favor
of the LLC, and in favor of Bayer and Exelixis and their respective Affiliates,
with respect to the intellectual property rights or alleged intellectual
property rights of such third party in question, meeting the criteria set forth
in the next sentence. Such license (i) must be approved by the Management
Committee, and by Exelixis if Exelixis is to be a party to the license, or is to
be responsible for any payments thereunder, as is described in clause (ii) of
this Section 1.15(d) immediately following, and (ii) may contain provision for
the payment to the licensor of commercially reasonable license commitment or
upfront fees, royalties or premium fees, provided that (A) if the potential
infringement of such third party's right is determined by Bayer, after the
consultation described in the first sentence of this Section 1.15(d), to derive
primarily from intellectual property rights of Exelixis licensed to the LLC,
then Exelixis alone will be responsible for payment of any such license or
commitment fees, royalties or premium fees thereunder, and (B) if the potential
infringement of such third party's right is determined by Bayer, after the
consultation described in the first sentence hereof, to derive primarily from
intellectual property rights of the LLC licensed in to the LLC, then the LLC
will be responsible for payment of any such license or commitment fees,
royalties or premium fees thereunder.

     1.16 "Code" means the Internal Revenue Code of 1986, as amended.
           ----

     1.17 "Collateral Agreements" means any license or other agreement to which
           ---------------------
the LLC is a party or by which it is bound, and any license or other agreement
to which either or both Members are a party or by which either or both Members
are bound and that relate to the LLC, other than (a) the LLC Collaboration
Agreement, (b) this Agreement, and (c) any agreements between Bayer and Bayer
AG.

     1.18 "Commencement Date" means January 1, 2000, or such other date as the
           -----------------
Members agree in writing as an amendment hereto

     1.19 "Confidential Information" means, with respect to a party hereto,
           ------------------------
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 hereto, to 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:

[*] = 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>

          (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;

          (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 hereof; or

          (f) Independently Developed.  The receiving party can document was
              -----------------------
subsequently and independently developed by employees or others on behalf of the
receiving party without use of any Confidential Information disclosed to the
receiving party or such others by the disclosing party.

     1.20 "Continuing Force Majeure Event" means a Force Majeure Event as to the
           ------------------------------
Affected Member, which continues for at least [ * ], on a [ * ] anniversary
calculation, after delivery of written notice to the Affected Member by the Non-
Affected Member, with a copy to the Management Committee, reciting facts therein
in reasonable detail regarding (a) the date upon which, in the good faith
judgment and knowledge of the Non-Affected Member, such Force Majeure Event
commenced for the Affected Member, (b) the general nature of such Force Majeure
Event, and (c) that the Force Majeure Event (i) is having or would have, in the
good faith judgment of the Non-Affected Member, a material adverse effect upon
the Affected Member's ability to perform such Affected Member's obligations
under this Agreement, the LLC Agreement, and/or the relevant Collateral
Agreements, and (ii) does have or would have, in the good faith judgment of the
Non-Affected Member, a material adverse effect on the business or operations of
the LLC.

     1.21 "Damages" means, subject to the provisions of Article XI hereof, all
           -------
costs, liabilities, obligations, damages, fines, penalties, deficiencies, losses
and judgments, including reasonable fees and costs of attorneys, accountants,
and other customary and commercially reasonable advisors, in each case after the
application of any amounts recoverable under insurance contracts or similar
arrangements and from other third parties, by the Person claiming indemnity
under 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.

                                      -10-
<PAGE>

     1.22 "Deadlock" means the inability of the Members to resolve a dispute in
           --------
accordance with the provisions of Section 17.1 hereof before arbitration under
Section 17.2 hereof, including without limitation the failure of the Management
Committee to timely agree on a budget and/or Strategic Plan for the LLC as
provided in Section 8.8 hereof.

     1.23 "Dissociated Member" means a Member who has suffered a Bankruptcy or
           ------------------
Dissolution.

     1.24 "Dissolution" of a Member means that such Member has terminated its
           -----------
existence, whether partnership or corporate, wound up its affairs and dissolved,
provided that a change in the membership constitution of any Member that is a
general partnership will not constitute "Dissolution" hereunder, whether or not
such Member is deemed technically dissolved for partnership law purposes, for so
long as the business of such Member is continued.

     1.25 "Dissolution Event" as to a Member means:
           -----------------

          (a) Attachment, Etc.  Attachment, execution or other judicial seizure
              ---------------
of all or any substantial part of a Member's assets, or of a Member's interest
in the LLC, or any part thereof, and in each case remaining undismissed or
undischarged for a period of [ * ] after the levy thereof, if the occurrence of
such attachment, execution or other judicial seizure has, in the good faith
judgment of the Non-Affected Member, communicated in writing by the Non-Affected
Member to the Affected Member and to the Management Committee, a materially
adverse effect upon the performance by such Affected Member of its obligations
under this Agreement, the LLC Collaboration Agreement, and/or the relevant
Collateral Agreements, provided that such attachment, execution or seizure will
not constitute a Dissolution Event if the Affected Member posts a bond
sufficient to fully satisfy the amount of such claim or judgment within [ * ]
after the levy thereof and the LLC's assets, and/or, as relevant, such Affected
Member's interest in the LLC, are thereby released from the lien of such
attachment; and/or

          (b) Bankruptcy or Dissolution Of A Member.  The Bankruptcy or
              -------------------------------------
Dissolution of a Member.

     1.26 "Event of Default" and "Affected Member" and "Non-Affected Member" and
           ----------------       ---------------       -------------------
"Default Notice" will have the meanings set forth for such terms in Article XIV
 --------------
hereof.

     1.27 "Excess Negative Balance" for purposes of Section 9.2 hereof, means
           -----------------------
the excess of the negative balance in a Member's Adjusted Capital Account
(computed with any adjustments which are required by Treasury Regulations
Section 1.704-1(b)(2)(ii)(d)) over the amount such Member is obligated to
restore to the LLC, computed under the principles of Treasury Regulations
Section 1.704-1(b)(2)(ii)(c), inclusive of any addition to such restoration
obligation pursuant to application of the provisions of Treasury Regulations
Section 1.704-2.

     1.28 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
           ------------

     1.29 "Fair Market Value" means the fair market value of a Membership
           -----------------
Interest as determined under Section 13.1 hereof.

[*] = 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>

     1.30 "Field of Use" will have the same meaning, at the time in question
           ------------
under this Agreement, as is given for such term at the time in question under
the LLC Collaboration Agreement.

     1.31 "Fiscal Year" means the period from January 1 to December 31 of each
           -----------
year, or as otherwise required by law or as otherwise determined by the
Management Committee.

     1.32 "Force Majeure Event" means, as to a Member, an event or condition
           -------------------
having a material adverse effect upon such Member due to circumstances beyond
such Member'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 Member 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.

     1.33 "FTE" means a full-time equivalent employee or consultant, as the case
           ---
may be.

     1.34 "FTE Amount" means the amount required to be paid by the LLC to
           ----------
Exelixis under the LLC Collaboration Agreement for the FTE's.

     1.35 "JSC" means the Joint Scientific Committee, or its successor
           ---
committee, established by the Members as provided in the Section 6.13(a) of this
Agreement.

     1.36 "Key Exelixis Individual" means, as relevant, the individual who at
           -----------------------
the time in question is filling the position of Chief Executive Officer (or
President, if there is no Chief Executive Officer) of Exelixis (occupied by
George Scangos as the Chief Executive Officer, there being no President, at the
Effective Date), or of Chief Scientific Officer (or equivalent position) of
Exelixis (occupied by Geoffrey Duyk at the Effective Date), or of Agricultural
Biotechnology Program Leader (or equivalent position) of Exelixis (occupied by
John Margolis at the Effective Date), or of Chief Information Officer (or
equivalent position) of Exelixis (occupied by Christian Burks at the Effective
Date).

     1.37 "LLC Collaboration Agreement" means that certain LLC Collaboration
           ---------------------------
Agreement of even date herewith among Bayer, Exelixis and the LLC, as it may be
amended after the Effective Date in accordance with its terms.

     1.38 "LLC Operating Expense Amounts" means (a) professionals' fees and
           -----------------------------
costs incurred by the LLC (or, as to patent matters referred to in clause (i)
immediately following, if so requested by the Management Committee in writing of
Bayer, then professionals' fees and costs incurred by Bayer on behalf of the
LLC) in the conduct of its business for (i) preparing, applying for, maintaining
and defending and prosecuting alleged infringement of, LLC patents throughout
the world as determined by the Management Committee, including FTE expenses
(other than the FTE Amount) and out of pocket costs incurred by Exelixis in
connection with such activities that in each case have been mutually agreed to
by the LLC and Exelixis in writing, and (ii) the salary and benefits of any LLC
officer or LLC employee (FTE's not being employees of the LLC)to the extent not
paid directly by Bayer or by Exelixis, as relevant, to such individual, and
(iii) amounts that are paid by Bayer pursuant to Section 2.10 hereof for
insurance; and (b) amounts determined by the Management Committee as needed for
the operations of the LLC, which have been (i) identified in any annual budget
for the LLC, as it may have been amended, which has been

[*] = 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>

approved by the Management Committee as provided herein, or (ii) otherwise
approved by the Management Committee as being required for the operations of the
LLC, which will include all amounts, if any, determined by the Management
Committee to be needed by the LLC for Research (as defined in the LLC
Collaboration Agreement) funding beyond the minimum ten million dollars
($10,000,000.00) (or such then-current amount as may be provided in any
amendment hereto) per calendar year required to be paid by the LLC to Exelixis
under the LLC Collaboration Agreement for Research funding, to the extent that
sufficient third-party funds described in Section 4.3(a) hereof (excluding
premium fees from the Members and milestone payments from Bayer under the LLC
Collaboration Agreement) are not available for such Research funding. In each
case, LLC Operating Expense Amounts will not include (1) the minimum ten million
dollars ($10,000,000.00) (or such then-current amount as may be provided in any
amendment hereto), in the calendar year in question, of the additional Capital
Contributions of Bayer called for under Section 4.2 hereof to be expended by the
LLC under the LLC Collaboration Agreement to fund Research funding , nor (2) any
premium fee payments to the LLC by Bayer or by Exelixis, nor (3) any milestone
payments by Bayer to the LLC under the LLC Collaboration Agreement.

     1.39 "Management Committee" means the Management Committee of the LLC.
           --------------------

     1.40 "Member" means Bayer, or Exelixis, or any other Person who holds a
           ------
Membership Interest in the LLC and who is admitted to the LLC as a Member in
accordance with the provisions of this Agreement.

     1.41 "Members" means both Members, or, when there are more than two, all
           -------
Members.

     1.42 "Member Representative" means each employee of or consultant to Bayer
           ---------------------
and each employee of or consultant to Exelixis selected to serve on the
Management Committee as provided herein.

     1.43 "Membership Interest" means the interest of a Member in the LLC.
           -------------------

     1.44 "Net Income" or "Net Loss" means, respectively, the net book income or
           ----------      --------
loss of the LLC for any relevant period.  The net book income or loss of the LLC
will be computed in accordance with federal income tax principles under the
method of accounting elected by the LLC for federal income tax purposes,
adjusted by:

          (a) Tax-Exempt Income, Etc.  Including as income or deductions, as
              ----------------------
appropriate, any tax-exempt income and related expenses that are neither
properly included in the computation of taxable income nor capitalized for
federal income tax purposes;

          (b) LLC Organizational Expenses.  Including as a deduction when paid
              ---------------------------
or incurred (depending on the LLC's method of accounting) any amounts paid to
organize the LLC except that amounts for which an election is properly made by
the LLC under Code Section 709(b) will be accounted for as provided therein;

          (c) Certain Losses On Sale Or Exchange Of Property.  Including as a
              ----------------------------------------------
deduction any losses incurred by the LLC in connection with the sale or exchange
of 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.

                                      -13-
<PAGE>

notwithstanding that such losses may be disallowed to the LLC for federal income
tax purposes under the related party rules of the Code, including Code Sections
267(a)(1) or 707(b);

          (d) Certain Gain Or Loss On Certain Dispositions.  Calculating the
              --------------------------------------------
gain or loss on disposition of LLC assets and the depreciation, amortization or
other cost- recovery deductions, if any, with respect to LLC assets by reference
to their Carrying Value rather than their adjusted tax basis; and

          (e) Certain Exclusions.  Excluding as an item of income, gain, loss or
              ------------------
deduction any items allocated pursuant to Section 9.2 hereof or any gross income
allocated under Section 9.1(b) hereof.

     1.45 "Percentage Interest" means, as to the relevant Member, the interest
           -------------------
of such Member in the LLC, which initially will be sixty percent (60%) for Bayer
and forty percent (40%) for Exelixis, as such Percentage Interest may be
automatically adjusted by application of Article XVI hereof.

     1.46 "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.

     1.47 "Original Collaboration Agreement" means that certain Collaboration
           --------------------------------
Agreement dated as of May 1, 1998, as amended, by and between Exelixis and Bayer
AG.

     1.48 "Pro Rata Share" as to a Member's right of first offer under Article
           --------------
XVI hereof, means the Percentage Interest of such Member in the LLC, calculated
without giving effect to the relevant offer by the LLC, multiplied times the
percentage of interest, or units, or other securities, offered by the LLC.

     1.49 "Regulatory Allocations" will have the meaning set forth for such term
           ----------------------
in Section 9.2(h) hereof.

     1.50 "Research Field" will have the same meaning, at the time in question
           --------------
under this Agreement, as is given for such term at the time in question under
the LLC Collaboration Agreement.

     1.51 "SEC" means the Securities and Exchange Commission.
           ---

     1.52 "Securities Act" means the Securities Act of 1933, as amended.
           --------------

     1.53 "Subscribing Members" will have the meaning for such term set forth in
           -------------------
Section 16.1 hereof.

     1.54 "Substantial Disagreement" means the failure of the Management
           ------------------------
Committee, and/or of the Members, if the Members' approval is required under
this Agreement in addition to

[*] = 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>

Management Committee approval, to reach agreement, within the relevant time
period required under this Agreement, on the operations of the LLC, including
(a) the budget for the LLC, and/or the Strategic Plan for the LLC, and any
respective amendment thereto, and/or (b) any other issue which has, or is likely
to have, in either case in the good faith view of either Member as so
communicated in writing to the Management Committee and to the other Member, a
material adverse impact on the business or operations or financial potential of
the LLC or of the notifying Member, including without limitation selection and
commercialization of assays, targets, or the like, in each case involving, and
only with respect to, the LLC. Any failure of the Management Committee or the
Members to (1) approve a proposed modification of the Research Field or Field of
Use, or (2) agree upon raising additional capital for the LLC, or (3) agree as
to issuance of additional Membership Interests, or (4) agree as to admitting
Substitute Members will not be a "Substantial Disagreement" nor subject to the
provisions of Section 17.1 or 17.2 hereof. For purposes of Section 13.5 hereof,
any dispute over the existence of a Force Majeure Event, or with respect to any
written agreement to which the LLC is a party or by which it is bound, will not
be a "Substantial Disagreement," the resolution of such disputes being governed
solely by Sections 17.1 and 17.2 hereof.

     1.55 "Substitute Member" means a Person who has, pursuant to this
           -----------------
Agreement, been admitted to all the rights of membership in the LLC as a Member.

     1.56 "Treasury Regulations" means regulations issued pursuant to the Code.
           --------------------

     1.57 "Tax Matters Member" means Bayer.
           ------------------

     1.58 "Unadjusted Excess Negative Balance," for purposes of Section 9.2
           ----------------------------------
hereof, will have the same meaning as Excess Negative Balance, except that the
Unadjusted Excess Negative Balance of a Member will be computed without
effecting the reductions to such Member's Capital Account that are described in
Treasury Regulations Section 1.704-1(b)(2)(ii)(d).

                                  ARTICLE II
                   FORMATION OF THE LLC AND RELATED MATTERS

     2.1  Formation Of The LLC.  The Members will have formed the LLC pursuant
          --------------------
to the Act on or before January 1, 2000, to be in legal existence on January 1,
2000,  by causing the Certificate of Formation to be filed in the Office of the
Secretary of the LLC of State of Delaware, and by this Agreement intend to
establish rules and regulations governing the LLC's ownership and control upon
and after its creation.  The LLC will not commence business prior to January 1,
2000 without the prior written consent of both Bayer and Exelixis.

     2.2  Name And Principal Place Of Business Of The LLC.  Unless and until
          -----------------------------------------------
amended in accordance with this Agreement and the Act, the name of the LLC will
be OpteraGenOptera LLC.  The principal place of business of the LLC will be
located at the premises of Exelixis, at 260 Littlefield Avenue, South San
Francisco, CA 94080, or such other place as the Management Committee from time
to time determines.

     2.3  Delaware Registered Office And Agent For Services Of Process.  The LLC
          ------------------------------------------------------------
will maintain a Delaware registered office and agent for service of process as
required by Section 104

[*] = 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>

of the Act. The Delaware registered office and agent for service of process will
be The Prentice-Hall Corporation System, Inc., 32 Loockerman Square, Suite L100,
Dover, Delaware 19904, or such other place and person as the Management
Committee may designate.

     2.4  Purpose.  The purpose of the LLC is to engage, subject to the other
          -------
provisions of this Agreement, in any lawful act or activity for which a limited
liability company may be organized under the Act, including without limitation,
and to the extent permitted hereunder and thereunder, the entry by the LLC into
and performance of its obligations under the LLC Collaboration Agreement and
agreements with third parties and other documents and instruments, including
without limitation those connected with collaborative and/or licensing
relationships, for research and development within or outside of the Research
Field, and/or commercialization, within or outside of the Field of Use, of
intellectual property licensed to or to which the LLC otherwise has relevant
rights, in each case relevant to the purpose, from time to time during the term
hereof, of the LLC.

     2.5  Term.  The term of the LLC will commence upon the later to occur of
          ----
(a) the filing of a Certificate of Formation for the LLC in the office of the
Secretary of State of Delaware or (b) the execution of this Agreement by the two
initial Members, and will continue in perpetuity unless terminated earlier as
provided herein.

     2.6  Review At End Of Research Term.  The Members will meet to discuss in
          ------------------------------
good faith the future of the LLC and their involvement therein no later than [ *
] prior to the end of the Research Term, as defined in and as determined under
the LLC Collaboration Agreement.

     2.7  Approval And Ratification Of LLC Collaboration Agreement and
          ------------------------------------------------------------
Collateral Agreements; Commitment To Perform Obligations.  Bayer and Exelixis,
--------------------------------------------------------
as the intended initial Members, hereby approve and ratify, on behalf of the
LLC, prospectively as of the Commencement Date, the execution and delivery by
the Chief Executive Officer of the LLC, on behalf of the LLC, of, and the LLC's
performance of its obligations under, the LLC Collaboration Agreement and such
Collateral Agreements as are listed on Exhibit A attached hereto as existing at
                                       ---------
the Commencement Date, and as they may exist from time to time during the term
of the LLC.  The Members and the LLC hereby agree and commit to performing their
respective obligations under those of the LLC Collaboration Agreement and such
Collateral Agreements as they may exist at the Effective Date, or the
Commencement Date, or may thereafter exist, in each case to which the Member(s)
and/or the LLC is a party or by which it is or they are bound.

     2.8  Management To Budget And Strategic Plan.  Upon approval by the
          ---------------------------------------
Management Committee of each of the LLC's annual budgets and Strategic Plans as
provided in Section 8.8 hereof, the LLC will implement and will conduct its
affairs in accordance with such relevant budget and Strategic Plan.

     2.9  Bank Accounts.  The LLC will, subject to the provisions of Section 4.5
          -------------
hereof, maintain bank accounts in such banks as the Management Committee may
designate exclusively for the deposit and disbursement of funds of the LLC.  All
funds received by the LLC will, subject to the provisions of Section 4.5 hereof,
be promptly deposited in such accounts.  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.

                                      -16-
<PAGE>

signatories on such account(s) will be determined from time to time by the
Management Committee.

     2.10 Insurance.  The LLC will be insured on its own behalf with insurers
          ---------
who maintain an A.M. Best rating of "A" or better for all property, liability
and workers' compensation insurance and such other insurance as is required
under applicable mortgages, leases, agreements and other instruments and
statutes, or as determined by the Management Committee and, as provided under
Section 11.1(e) hereof, such insurance covering the Member Representatives,
officers, employees, consultants and agents of the LLC, as the Management
Committee determines to be appropriate or necessary.  Bayer will use its good
faith efforts to include the LLC, the Member Representatives, the members of the
JSC, the officers of the LLC, and the employees of the LLC (if any), under
Bayer's insurance programs if the coverage thereunder and premiums therefor
would be less expensive than if the LLC obtained such insurance on its own,
provided that if such inclusion results in any additional cost for premiums to
Bayer from its insurers, the LLC will reimburse such excess as an expenses to
Bayer as LLC Operating Expense Amounts pursuant to Section 10.1(b)(ii) hereof.

                                  ARTICLE III
                                  MEMBERSHIP

     3.1  Members.  The initial Members of the LLC will be Bayer and Exelixis.
          -------
Additional Persons may be admitted to the LLC as a Member only upon the prior
written consent of both Members and upon such terms and conditions as both of
(or all of, if there are then more than two Members) Members and the LLC agree
in writing with such additional Person as an amendment hereto.

     3.2  Representations And Warranties.  Each Member hereby severally
          ------------------------------
represents and warrants to the LLC (with future Members so representing as of
the date upon which they become a Member by execution and delivery of a
counterpart copy hereof) and to the other Member (or other Members, if then more
than two), as follows:

          (a) Authorization.  Such Member is a corporation, duly organized,
              -------------
validly existing, and in good standing under the law of its state of
organization, and it has full power and authority to execute and enter into this
Agreement and to perform its obligations hereunder, and all actions necessary
for the due authorization, execution, delivery and performance by such Member of
this Agreement have been duly taken;

          (b) Compliance With Other Instruments.  Such Member's authorization,
              ---------------------------------
execution, delivery, and performance of this Agreement do not conflict with any
other agreement or arrangement to which such Member is a party or by which it is
bound;

          (c) Purchase Entirely For Own Account.  Such Member is acquiring its
              ---------------------------------
Membership Interest in the LLC for such Member's own account for investment
purposes only and not with a view to or for the resale, distribution,
subdivision or fractionalization thereof and has no contract understanding,
undertaking, agreement or arrangement of any kind with any

[*] = 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>

Person to sell, transfer or pledge to any Person such Membership Interest or any
part thereof nor does such Member have any plans to enter into any such
agreement;

          (d) Investment Experience.  By reason of its business or financial
              ---------------------
experience, such Member has the capacity to protect its own interests in
connection with the transactions contemplated hereunder, is able to bear the
risks of an investment in the LLC, and at the present time could afford a
complete loss of such investment;

          (e) Disclosure Of Information.  Such Member is aware of the LLC's
              -------------------------
business affairs and financial condition and has acquired sufficient information
about the LLC to reach an informed and knowledgeable decision to acquire an
interest in the LLC;

          (f) Federal And State Securities Laws.  If federal and state
              ---------------------------------
securities laws apply to the Membership Interests, such Member acknowledges that
the Membership Interests have not been registered under the Securities Act or
any state securities laws, inasmuch as they are being acquired in a transaction
not involving a public offering, and under such laws, may not be resold or
transferred by such Member without appropriate registration or the availability
of an exemption from such requirements.  In this connection, such Member
represents that it is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.

     3.3  Resignation Or Withdrawal Of A Member.  Except as specifically
          -------------------------------------
provided herein, neither Member may withdraw from membership in the LLC or
withdraw such Member's interest in the capital of the LLC.  A Dissociated Member
or its legal representative will be entitled to participate in the winding up of
the LLC to the same extent as the other Member.

     3.4  Transfer Or Assignment Of Membership Interest; Admission Of Substitute
          ----------------------------------------------------------------------
Members.  Neither Member may transfer, sell, encumber, mortgage, assign or
-------
otherwise dispose of any portion of its Membership Interest except on such
terms, including any amendment hereto, as the other Member may agree in writing.
Any purported transfer, sale, encumbrance, mortgage, assignment, or disposition
of a Membership Interest in contravention of this Section 3.4 will be void and
of no effect to, on or against the LLC, any Member, any creditor of the LLC or
any claimant against the LLC.  Notwithstanding any other provision of this
Agreement, no Person will be admitted as a Substitute Member and admitted to all
the rights of the Member that assigned its respective Membership Interest,
without the prior written approval of both Members.  If so admitted, the
Substitute Member will have all the rights and powers of, and will be subject to
all the restrictions and liabilities of, such Member who originally assigned the
Membership Interest.  The admission of a Substitute Member will not release
either Member who previously assigned its Membership Interest from any liability
of such assigning Member to the LLC that may have existed before such
substitution.  Consents required hereunder may be given in advance of any
transfer by any writing signed by a Member.  A Substitute Member, upon admission
to the LLC, will be, and be deemed referred to herein as, a Member for all
purposes thereafter.

[*] = 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>

                                  ARTICLE IV
                           CONTRIBUTIONS TO CAPITAL;
                     OUTSOURCED TREASURY OPERATIONS OF LLC

     4.1  Initial Cash Contribution By Bayer.  On the Commencement Date, Bayer
          ----------------------------------
will contribute to the LLC, as Bayer's initial Capital Contribution to the LLC
to its Capital Account, a total of ten million dollars ($10,000,000.00) in cash
on the Commencement Date.

     4.2  Additional Cash Contributions.
          -----------------------------

          (a) First Anniversary Cash Contribution By Bayer.  If at the first
              --------------------------------------------
anniversary of the Commencement Date (i) the LLC is still in existence, and (ii)
neither Bayer nor Exelixis has terminated its participation as a Member in the
LLC, then, on the first anniversary of the Commencement Date, Bayer will
contribute an additional ten million dollars ($10,000,000.00) in cash to the
LLC, as an additional Capital Contribution by Bayer to its Capital Account.

          (b) FTE Amount Contribution By Bayer.  Bayer will contribute to the
              --------------------------------
LLC, in cash, in each case as a Capital Contribution by Bayer to its Capital
Account additional to Bayer's Capital Contributions under Sections 4.1 and
4.2(a) hereof, at the times and in the amounts specified in the LLC
Collaboration Agreement as in effect at the time in question, the FTE Amount, up
to a maximum FTE Amount of ten million dollars ($10,000,000.00), (or such other
amount as may then be required under this Agreement if amended after the
Effective Date to so provide), for each successive twelve (12) month period from
and after the Commencement Date.

          (c) LLC Operating Expense Amounts.  In addition, subject to the
              -----------------------------
limitations set forth in Section 4.3 hereof, Bayer will pay in cash to the LLC,
or to such third parties as the Chief Executive Officer of the LLC and/or Chief
Financial Officer of the LLC of the LLC directs Bayer in writing, with each such
payment by Bayer to the LLC or to such third party being a Capital Contribution
by Bayer to its Capital Account under Sections 4.1 and 4.2(a) and (b) hereof,
(i) upon at least ten (10) days' prior written notice by the Chief Executive
Officer of the LLC and/or Chief Financial Officer of the LLC of the LLC to
Bayer, with a copy to the Management Committee, [ * ] LLC Operating Expense
Amounts set forth in the LLC's then-approved budget for such quarter, and (ii)
upon at least thirty (30) days' prior written notice from the Chief Executive
Officer of the LLC and/or Chief Financial Officer of the LLC of the LLC to
Bayer, with a copy to the Management Committee, such other LLC Operating Expense
Amounts as the Management Committee has determined are necessary to the
operations of the LLC beyond such budget, either by amendment to a previously-
approved budget as provided herein, or on an urgent need basis, as will be set
forth in the relevant notice to Bayer. Any payments by Bayer directly of the
salary or consulting fees, bonus (as provided within the LLC budget), expenses
and benefits for any individual furnished by Bayer and serving as an LLC officer
or other employee of the LLC, as provided under Section 7.4 hereof, whether paid
directly by Bayer to such individual or paid by Bayer to the LLC as part of LLC
Operating Expenses, will be considered as an additional Capital Contribution in
cash by Bayer to its Capital Account, as part of the LLC Operating Expenses for
purposes of distributions under Section 10.1(b)(iv)(A) hereof. Any payments by
Exelixis directly (as provided within the LLC budget or otherwise as provided
for in Section 7.4 hereof) of the salary or consulting fees,

[*] = 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>

bonus, expenses and benefits for any individual furnished by Exelixis and
serving as an LLC officer or other employee of the LLC, will be considered as a
Capital Contribution in cash by Exelixis to its Capital Account, as will be
considered as part of the LLC Operating Expenses for purposes of distributions
under Section 10.1(b)(iv)(B) hereof.

     4.3  Use Of Certain Funds For LLC Operating Expenses; Limitations On
          ---------------------------------------------------------------
Bayer's Obligation To Make Capital Contributions To The LLC; Limitation On
--------------------------------------------------------------------------
Capital Contributions By Exelixis.  Notwithstanding the provisions of Section
---------------------------------
4.2 hereof:

          (a) Use Of Certain Funds For Operating Expenses.  Except as may be
              -------------------------------------------
otherwise determined from time to time by the Management Committee, the LLC may
use, for payment of LLC Operating Expenses, prior to the LLC demanding funds
from Bayer for LLC Operating Expenses under the provisions of Section 4.2(c)
hereof, all amounts received by the LLC from third parties, including without
limitation interest, license fees or other payments, that are not required, by
their terms as received by the LLC from such third party or by law, to be held
in escrow, as a creditable or refundable deposit, or otherwise required to be
held against a future event.  To the extent that such funds are so used, then
the demand by the LLC to Bayer for LLC Operating Expense amounts occurring next
after such use will be only for the amount then needed for LLC Operating
Expenses after taking into account such use of such other funds.

          (b) Limitations As To Bayer Payment To LLC Of LLC Operating Expense
              ---------------------------------------------------------------
Amounts Arising From Existence Of Sufficient Other LLC Operating Funds.  Bayer's
----------------------------------------------------------------------
obligation to pay any LLC Operating Expense Amounts to the LLC, as a Capital
Contribution or otherwise, will be, at Bayer's sole election communicated in
writing to Exelixis and to the Management Committee, suspended for so long as,
and to the extent that, the FTE Amount equals or exceeds ten million dollars
($10,000,000.00) (or equals or exceeds such other minimum payment of the FTE
Amount as is provided hereunder if this Agreement is amended to provide for such
other minimum amount), and the LLC has, in the view of the Management Committee,
sufficient cash, net of distributions required by this Agreement to be made,
from third-party funds described in Section 4.3(a) hereof, to fund LLC Operating
Expense Amounts. The Management Committee will review such funds-available issue
on a regular basis at its meetings. The Management Committee will promptly
communicate in writing to both Members the Management Committee's sufficient-
funds conclusion, and the amounts expected to be needed from Bayer, if any,
beyond such funds, for LLC Operating Expenses, during the eighteen (18) month
period following such determination by the Management Committee.

          (c) Certain Suspension Or Termination Of Bayer's Obligation To Pay LLC
              ------------------------------------------------------------------
Operating Expense Amounts And FTE Amount To The LLC.  Bayer's obligation to pay
---------------------------------------------------
to the LLC any LLC Operating Expense Amounts and any FTE Amount will be, at
Bayer's sole election communicated in writing to the Management Committee and to
Exelixis, suspended for so long as Exelixis is a Affected Member hereunder,
and/or if Exelixis has suffered a Dissolution Event, and/or for so long as there
exists with respect to Exelixis a Continuing Force Majeure Event.  Bayer's
obligation to pay to the LLC any LLC Operating Expense Amounts and any FTE
Amount will automatically terminate  effective upon (i) the end of the Research
Term under the LLC Collaboration Agreement if the Research Term is not renewed
or otherwise extended by 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.

                                      -20-
<PAGE>

writing signed by the LLC and Exelixis, or (ii) any termination, for whatever
reason, of the LLC Collaboration Agreement.

          (d) Limitations On Capital Contributions By Exelixis.  Exelixis will
              ------------------------------------------------
not be required to make any cash or other Capital Contributions to the LLC,
including without limitation any LLC Operating Expenses, without the prior
written approval of both Members, provided that any payments by Exelixis of the
salary or consulting fees, expenses, bonus and benefits for any individual
furnished by Exelixis and serving as an LLC officer or other employee of the
LLC, as provided under Section 7.4 hereof, whether paid directly by Exelixis to
such individual or contributed by Exelixis to the LLC, will be considered as a
Capital Contribution by Exelixis in cash to its Capital Account.

     4.4  Nature Of Licenses, Milestone Payments And Premium Fees, And Of
          ---------------------------------------------------------------
Certain Other Assets Assigned To The LLC.  Licenses granted by Bayer and
----------------------------------------
Exelixis to the LLC under the LLC Collaboration Agreement or otherwise are
licenses only and are not, and are not intended by the parties to be, Capital
Contributions by the licensor to the LLC.  Milestone payments and premium fee
payments made to the LLC pursuant to the LLC Collaboration Agreement will be
income to the LLC and will not be, and are not intended by the paying party to
be, Capital Contributions to the LLC by the paying party.  The following are not
intended to be and will not be, when so assigned, a Capital Contribution to the
LLC by the assigning Member: (a) the rights of each Member in and to the EST
Library and EST Database as defined in the LLC Collaboration Agreement, which
have been generated under the Original Agreement and which are jointly owned by
Bayer AG and Exelixis at the Effective Date (the interest of Bayer AG to be
licensed or assigned to Bayer upon the Commencement Date), which rights
automatically, and without further action by any party hereto, will be assigned
to the LLC upon the Commencement Date (Bayer assigning its license interest
received from Bayer AG), simultaneously upon termination of the Original
Collaboration Agreement, pursuant to a certain Termination Agreement between
Exelixis and Bayer AG, and (b) all intellectual property assigned by Bayer to
the LLC under Section 10.1(g) of the LLC Collaboration Agreement relating to or
arising from work performed on A List Reserved Targets, as specified in such
Section 10.1(g).

     4.5  Outsourced Treasury Operations Of LLC.  Subject to the last sentence
          -------------------------------------
of this Section 4.5, financial management treasury functions of the LLC will be
provided to the LLC by Bayer [ * ].  Cash of the LLC determined by the Chief
Financial Officer of the LLC of the LLC not to be needed on a daily basis can be
loaned by the LLC to Bayer as the Chief Financial Officer of the LLC believes
appropriate, subject to such further direction, procedures or limitations upon
the Chief Financial Officer of the LLC's powers and discretion as the Management
Committee may communicate to the Chief Financial Officer of the LLC in writing
from time to time.  Bayer will pay interest to the LLC on all such amounts
loaned to Bayer, on a daily basis at a rate equal to [ * ].  Monthly financial
statements of the LLC as to such financial management functions will be prepared
and distributed by Bayer, for and on behalf of the LLC, to the Management
Committee, within fifteen (15) days after the end of each calendar month during
the time Bayer is providing such operations to the LLC.  Such financial
statements and the records of such accounts, insofar as they relate to cash of
the LLC so loaned to Bayer, will be subject to inspection and audit by the LLC,
at its expense, or by Exelixis, at its expense, subject to such customary
confidentiality agreements as Bayer may in good faith request 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.

                                      -21-
<PAGE>

inspecting Person. Bayer may withdraw from performing such financial management
functions at any time upon at least [ * ] prior written notice to the Management
Committee, with a copy of such notice to Exelixis.

                                   ARTICLE V
                               ACTION BY MEMBERS

     5.1  Meetings Of Members.  All meetings of Members for the election of the
          -------------------
Management Committee will be held at such place as may be fixed from time to
time in writing by the Management Committee in the notice to the Members of such
meeting.  Meetings of Members for any other purpose may be held at such time and
place, within or without the State of California, as will be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.  Members
may participate in a meeting of Members by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting will
constitute presence in person at the meeting.  The

     5.2  Annual Meetings.
          ---------------

          (a) Date And Time.  Annual meetings of Members, commencing with the
              -------------
year 1999, will be held on such date and at such time as will be designated from
time to time by the Management Committee and stated in the notice of the
meeting, at which the Members will elect the Management Committee, and transact
such other business as may properly be brought before the meeting.

          (b) Notice Of Annual Meetings.  Written notice of the annual meeting
              -------------------------
stating the place, date and hour of the meeting will be given to each Member at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.

     5.3  Special Meetings.
          ----------------

          (a) Call Of Special Meetings.  Special meetings of the Members, for
              ------------------------
any purpose, may be called by the Chief Executive Officer of the LLC, and will
be called by the Chief Executive Officer of the LLC or Secretary of the LLC of
the LLC at the request in writing of at least a majority of the then-authorized
number of members of the Management Committee, or at the request in writing of
either Member, and in each case a copy of such request will be given to the
other Member.  A request for a meeting of the Management Committee initiated by
such majority of the Management Committee or by either Member will state the
purpose of the proposed meeting.  A special meeting of the Members for the
election of a new Management Committee may be called by either Member, upon at
least ninety (90) days prior written notice to the other Member and to the
Management Committee.

          (b) Notice Of Special Meetings.  Written notice of a special meeting
              --------------------------
stating the place, date and hour of the meeting, and the purpose for which the
meeting is called, will be given to each Member not less than ten (10) nor more
than sixty (60) days before the date of the meeting.

[*] = 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>

          (c) Business To Be Conducted At Special Meeting.  Business transacted
          --- -------------------------------------------
at any special meeting of Members will be limited to the purposes stated in the
notice of such meeting.

     5.4  Member List.  At the written request of either Member, the Secretary
          -----------
of the LLC will prepare and make, at least ten (10) days before each meeting of
Members, a complete list of such Members at the meeting, showing the address of
each Member and the Membership Interest registered in the name of each Member.
The list may be examined by either Member, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
before the meeting.  The list will also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
Member who is present.

     5.5  Quorum.
          ------

          (a) Quorum.  The presence of a majority of all of the Members, if
              ------
there are more than two Members at the time in question, or the presence of both
Members if there are only two Members at the time in question, or the presence
of their proxies, as relevant, at a meeting of the Members, will constitute a
quorum at all meetings of Members for the transaction of business except as
otherwise provided by the Act.

          (b) Lack Of Quorum; Adjournment.  If a quorum is not present or
              ---------------------------
represented at any meeting of Members, the Member present in person, or
represented by proxy, may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented.  Upon resumption of an adjourned meeting, any business may be
transacted that might have been transacted before the meeting was adjourned.  If
the adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, written notice of the
adjourned meeting will be given to each Member.

     5.6  Validity Of Proxies.  No proxy will be voted after [ * ] after its
          -------------------
date, unless such proxy expressly provides for a longer period.  Except to the
extent otherwise required by the Act, Members will vote as a single class.

     5.7  Action Without Meeting.  Except to the extent otherwise required by
          ----------------------
the Act, any action which may be taken by the Members at a meeting may be taken
by unanimous written consent signed by both Members.

     5.8  Member Vote Required.  Except to the extent otherwise required by the
          --------------------
Act or as otherwise set forth in this Agreement, any action or item requiring
the approval of such Members, the consent of such Members, the affirmative vote
of the Members or the like, will require the unanimous approval, consent, vote
or the like of both Members.

                                   ARTICLE VI
                          MANAGEMENT COMMITTEE AND JSC

     6.1  Management By Management Committee.  Except for matters for which the
          ----------------------------------
approval of the Members is required by the Act or this Agreement, and except to
the extent

[*] = 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>

managed by the officers of the LLC under the supervision of the Management
Committee, the LLC will be managed and controlled by the Management Committee in
accordance with the Act and with the terms of this Agreement. The Management
Committee may exercise all powers of the LLC and may do all such lawful acts and
things as are not by the Act, the Certificate of Formation, or this Agreement,
directed or required to be exercised or done by the Members themselves. It is
intended by the parties hereto that the powers and authority of the Management
Committee will be substantially the same as the powers and authority of a Board
of Directors of a corporation formed under the laws of the State of Delaware,
provided that approval of the Management Committee or any committee thereof is
subject to the sole discretion and judgment of the Member Representatives,
acting in the interests of their respective appointing Members and not as
fiduciaries of the LLC or of any Member.

     6.2  Management Committee Number, Nominees, Vacancies.
          ------------------------------------------------

          (a) Number And Composition Of Management Committee.  Unless otherwise
              ----------------------------------------------
agreed in writing by the Members as an amendment hereto, (a) the Management
Committee will consist of five (5) Member Representatives, and (b) Bayer will
appoint three (3) Member Representatives, one of whom, if Bayer so desires, may
be the Chief Executive Officer of the LLC of the LLC, and Exelixis will appoint
two (2) Member Representatives, one of whom initially, and for so long as the
relevant individual is employed by or is a consultant to, Exelixis or its
Affiliates, will be George Scangos or Geoffrey Duyk. Each Member Representative
will be a senior LLC officer or senior representative of the relevant Member
authorized to make decisions with respect to matters within the scope of the
Management Committee's authority. The initial Member Representatives each will
be selected and notified to the other Member in writing within thirty (30) days
after the Commencement Date, as the initial Management Committee.

          (b) Appointment, Removal And Replacement Of Member Representatives.
              --------------------------------------------------------------
Each Member will appoint, may remove (with or without cause), and may replace
its Member Representatives during the existence of the LLC, at such Member's
sole discretion, and any such appointments, removals and replacements will be
notified in writing by the appointing, or removing or replacing, Member, to the
other Member and to the Management Committee.  No Member will have any authority
to appoint, remove or replace Member Representatives for the other Member.  If a
Member Representative for any reason no longer is serving as any of an employee,
LLC officer or Director or correlative position (as applicable) of, nor as a
consultant to, the relevant Member or at least one of its Affiliates (the LLC
not being deemed to be an Affiliate of either Member for this purpose) the
relevant Member will promptly notify the other Member in writing, and such
individual will be deemed to have resigned as a Member Representative as of the
date of such complete cessation, and the relevant Member will as soon thereafter
as possible appoint a new Member Representative to replace such departing
individual.

          (c) Alternates; Service Term.  An alternate Member Representative,
              ------------------------
designated by a Member in writing to the other Member, may serve temporarily,
for no longer than [ * ] from the date of appointment by such Member, in the
absence of a permanent Member Representative previously designated by such
Member.  Individuals serving on the Management Committee will hold office until
the next meeting, whether annual or special, of Members, at which the Management
Committee is elected and such duly elected Member Representatives are

[*] = 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>

qualified. Any Member Representative may resign at any time by giving written
notice thereof to each Member and to the remaining Member Representatives.

     6.3  Meetings Of The Management Committee; Quorum And Vote Required For
          ------------------------------------------------------------------
Decisions; Observer Rights.
--------------------------

          (a) Meetings of The Management Committee.
              ------------------------------------

              (i)   Location.  The Management Committee may hold meetings, both
                    --------
regular and special, either within or without the State of California.

              (ii)  Regular Meetings. Regular meetings of the Management
                    ----------------
Committee will be held upon at least thirty (30) days' written notice at times
and places determined by the Management Committee, provided that the Management
Committee will meet at least every six (6) months during the existence of the
LLC, with at least one (1) of such meetings during the relevant twelve (12)
month period being held in the San Francisco, California Bay Area for so long as
(i) Exelixis is a Member and (ii) Exelixis' principal offices are located in the
San Francisco, California Bay Area.

              (iii) Special Meetings.  Special meetings of the Management
                    ----------------
Committee may be called by the Chief Executive Officer of the LLC on at least
four (4) days' prior written notice to each Member Representative by mail or at
least forty-eight (48) hours' prior notice to each Member Representative,
delivered either personally or by facsimile transmission.  Special meetings of
the Management Committee will be called by the Chief Executive Officer of the
LLC if so requested in writing by either Member, which requesting Member will
send a copy thereof to the other Member and to the Management Committee.

              (iv) Waiver Of Or Consent To Notice.  Notice of any meeting of the
                   ------------------------------
Management Committee or of any committee thereof need not be given to any Member
Representative who, before or after the relevant meeting, signs a waiver of such
notice or consents in writing to the holding of such meeting, or who attends
such meeting without protest, prior to the commencement of such meeting, of lack
of such notice.

          (b) Quorum and Vote Required For Decisions.
              --------------------------------------

              (i)   Quorum. At all meetings of the Management Committee, three
                    ------
(3) Member Representatives, one of whom must be a Member Representative
appointed by Exelixis, will constitute a quorum for the transaction of business
by the Management Committee. If a quorum is not present at any meeting of the
Management Committee, the members of the Management Committee present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present.

              (ii)  Vote Required.  Except as the Members may otherwise agree in
                    -------------
writing as an amendment hereto, and except as may be otherwise required by law,
all decisions required by law to be made, or chosen to be made, by the
Management Committee will require the consent, whether at a duly called and held
meeting or in writing, of at least a majority of the Member

[*] = 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>

Representatives, or, if only a quorum is present, then of all such Member
Representatives present; provided, however, that the consent, whether at a duly
called and held meeting or in writing, of four (4) Member Representatives, or,
if only a quorum is present, then of all such Member Representatives present,
one (1) of whom in each case must be a Member Representative appointed by
Exelixis, will be required for any decision under any of Sections 6.7(a)-(d),
(f)-(l), (p), and (r) hereof.

          (c) Observer Rights; Guests.  Each Member may have one or more
              -----------------------
observers present as guests at any meeting of the Management Committee or
committee thereof.  Guests may be present, by invitation of the Management
Committee, during all or any portion of any meeting of the Management Committee.
The number of such observers and/or guests at a given meeting for a given Member
will be determined in good faith by the Chief Executive Officer of the LLC.  The
Management Committee or the Chief Executive Officer of the LLC may require, as a
condition of such observer's or guest's attendance at such meeting, the
execution and delivery by such observer or guest of a customary confidentiality
agreement with and in favor of the LLC.  The Management Committee may exclude
any observer or guest from any portion of the meeting deemed, by a majority of
the Member Representatives present at the meeting, to be privileged, or
otherwise inappropriate for discussion with such observer or guest present.  The
LLC's obligations under this Section 6.3(c) will terminate upon the earliest of
the date of termination of the LLC or the date upon which there is only one (1)
Member.

     6.4  Committees Of The Management Committee.
          --------------------------------------

          (a) Creation Of And Membership On Committees. The Management Committee
              ----------------------------------------
may designate one or more committees, which will have such name(s) as may be
determined from time to time by the Management Committee.  Each such committee
will keep regular minutes of its meetings.  Each such committees will have at
least one (1) Member Representative of Bayer approved by Bayer and at least one
(1) Member Representative of Exelixis approved by Exelixis except as the Members
may otherwise agree in writing with each other as an amendment hereto.  Subject
to the representation of Bayer and Exelixis on any such committee as provided in
the immediately preceding sentence, the Management Committee may designate
members of the Management Committee as alternate members of any committee, who
may replace any absent or disqualified members of the Committee at any meeting
of such committee.  Upon disqualification for any reason, removal, or
resignation of a member of a committee, the Member whose Member Representative
was so disqualified, removed, or who resigned, will promptly appoint another
Member Representative to such committee as a replacement.

          (b) Powers Of Committees; Decisions Of Committees.  Any such
              ---------------------------------------------
committee, to the extent provided in the relevant resolution of the Management
Committee, will have and may exercise all the powers and authority of the
Management Committee in the management of the business and affairs of the LLC,
provided that (i) all decisions of such committee will require the vote of at
least a majority of the authorized number of Member Representatives on such
committee, or, if Member Representatives appointed by Exelixis are not a
majority of such Committee, then such greater number of committee member as will
require the vote of at least one (1) Member Representative serving thereon who
was appointed by Exelixis, in order for approval to be valid, and (ii) no such
committee will have the power or authority to amend 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>

Certificate of Formation, adopt an agreement of merger or consolidation, or of
the sale, lease or exchange of all or substantially all of the LLC's property
and assets, dissolve the LLC or revoke a dissolution previously approved as
provided in this Agreement, or amend this Agreement; and (iii) with respect to
matters other than those described in clause (ii) of this Section 6.4(b), unless
the relevant resolution of the Management Committee expressly so provides, such
committee will not have the power or authority to do any other act which
requires the consent of the Management Committee hereunder or by law.

     6.5  Action Without Meeting; Conference Call Participation.  Any action
          -----------------------------------------------------
required or permitted to be taken at any meeting of the Management Committee or
of any committee thereof may be taken without a meeting, if the number of Member
Representatives required under hereunder for action by the Management Committee
or by such committee, as the case may be, consent thereto in writing, and such
writing is filed with the minutes of proceedings of the Management Committee or
of such committee.  Member Representatives serving on the Management Committee,
or on any committee designated by the Management Committee, may participate in a
meeting of the Management Committee or any such committee, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
in a meeting will constitute presence in person at the meeting.

     6.6  Meeting Materials And Minutes.  Materials to be considered at any
          -----------------------------
meeting of the Management Committee or committee thereof will be distributed to
the relevant Member Representatives at least five (5) days prior to the meeting,
and draft minutes of each such meeting, and any written consents as to action by
the Management Committee, will be distributed to the Members and to all Member
Representatives within thirty (30) days after the date of the relevant meeting
or the date of obtaining the required signatures on such consent, as applicable.

     6.7  Matters Requiring Management Committee Approval.  In addition to any
          -----------------------------------------------
approval that may be required by the Act or otherwise by law, and in addition to
any approval thereof by the Members or the Chief Executive Officer of the LLC,
the following will require approval by the Management Committee, subject to the
voting requirements provided in Section 6.3(b) hereof as to Management Committee
decisions:

          (a) Amendment.  Any amendment of the Certificate of Formation of the
              ---------
LLC or of this Agreement;

          (b) Admission.  Admission of an additional Member or a Substitute
              ---------
Member;

          (c) Raising Additional Capital; Issuances Of Additional Membership
              --------------------------------------------------------------
Interests.  Raising by the LLC of capital additional to that provided for under
---------
Article IV hereof, or the issuance by the LLC of additional Membership
Interests;

          (d) Certain Approvals As To Budget, Strategic Plan, Alteration of
              -------------------------------------------------------------
Primary Purpose Or Business Of the LLC Or Definition Of Field Of Use.  Approval
--------------------------------------------------------------------
of (i) the LLC's budget on an annual basis, including without limitation, as
will be set forth in such budget, 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.

                                      -27-
<PAGE>

salaries or consulting fees, as relevant, bonus criteria and limits, if any,
expenses policy, and benefits to be paid by the LLC (or by the relevant Member
directly to its relevant then-serving personnel) to LLC officers and to any LLC
employees (FTE's not being considered, for purposes of this Agreement or
otherwise, LLC employees), and any material modification to such budget (any
change in such relevant salary or consulting fees, bonus criteria and limits,
expenses policy and/or benefits being considered to be a material modification),
and (ii) the LLC's Strategic Plan and any material modification thereto, and
(iii) any alteration of the primary purpose or business of the LLC, and (iv) any
amendment to the LLC Collaboration Agreement, including without limitation any
change therein of the definition of the Research Field or of the Field of Use,
or (v) any amendment to any Collateral Agreement to which the LLC is a party;
and which initially was required to be approved under this Section 6.7. The
approval by the Management Committee of the Strategic Plan and/or or any budget
or modification thereto will not be deemed to include therein an approval of any
other matter, such as raising additional capital or the issuance of additional
Membership Interests, which requires Management Committee approval under this
Section 6.7, unless such matter is specifically and separately approved by the
Management Committee as provided in this Section 6.7(d) and is subject to
further approval by the Members as required under this Agreement.

          (e) Appointment Of The Chief Executive Officer of the LLC, Chief
              ------------------------------------------------------------
Financial Officer of the LLC, Secretary of the LLC And Other Officers Of The
----------------------------------------------------------------------------
LLC; Approval of Certain Salary And Related Matters.  Appointment of the Chief
---------------------------------------------------
Executive Officer of the LLC and Chief Financial Officer of the LLC, Secretary
of the LLC, and of any other officers of the LLC desired by the Management
Committee, and their respective replacements from time to time, and confirmation
of the salaries or consulting fees, bonus limits and bonus amounts payable
within such limits, expenses policy and benefits, in each case as represented in
the then current-budget, for LLC officers and any LLC employees, to the extent
not set by the Chief Executive Officer of the LLC, as provided under Section 7.4
hereof, under such budget.

          (f) Certain Agreements.  Any agreement committing the LLC to an
              ------------------
obligation in excess of, or any single expenditure or related expenditures by
the LLC in excess of, in each case, [ * ], or any group of unrelated
expenditures in excess, in the aggregate, of [ * ], in each case that is not
already identified in reasonable detail in an LLC budget as approved by the
Management Committee, and any license from a third party described in Section
1.15(d) hereof.

          (g) Certain Liens And Encumbrances.  Creation of any lien or
              ------------------------------
encumbrance on the assets of the LLC which lien or encumbrance is not specified
in or referred to in reasonable detail in an approved LLC budget or approved
amendment thereto.

          (h) Dissolution Vote.  A vote to dissolve the LLC.
              ----------------

          (i) Sale of LLC Assets.  The transfer, sale, exchange or other
              ------------------
disposition of all, or substantially all, of the LLC's assets as part of a
single transaction or plan.

[*] = 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>

          (j) Merger.  The merger of the LLC with any other Person or any
              ------
recapitalization of the LLC, including any reincorporation of the LLC into a
jurisdiction other than Delaware.

          (k) Certain Transactions.  A transaction between the LLC and either
              --------------------
Member, or with any Affiliate of either Member, including the execution or
delivery of any binding agreement (i) between the LLC and either Member or any
Affiliate of either Member for the provision of goods or services to the LLC, or
(ii) between the LLC and any third party, including either Member or any
Affiliate of either Member, with respect to research and/or development and/or
commercialization, including any sales or marketing arrangements, relating to
any intellectual property and/or technology of the LLC outside of the Research
Field, including without limitation any license to or other grant of rights to,
and any license or other grant of rights by, the LLC, other than under the LLC
Collaboration Agreement.

          (l) Certain Research And Development By LLC Outside Of The Research
              ---------------------------------------------------------------
Field.  Any research and/or development outside of the Research Field by the
-----
LLC, whether within the LLC or by a third party, other than Exelixis, for the
benefit of the LLC, other than under the LLC Collaboration Agreement.

          (m) Withholding Of Cash Available For Distribution.  The withholding
              ----------------------------------------------
by the LLC of any cash that is available for distribution as such availability
is determined by the Management Committee pursuant to Section 10.1(b) hereof,
provided that such withholding will be subject to the provisions of Section
10.1(b) as to distributions that must be made by the LLC under certain
circumstances.

          (n) Compromise Or Return.  A decision by the Management Committee to
              --------------------
compromise the obligation of a Member to return money or property paid or
distributed unlawfully from the LLC, or to compromise the obligation of a Member
with respect to a Capital Contribution to the LLC as otherwise provided herein.

          (o) Appointment of Independent Auditors.  Appointment of a nationally-
              -----------------------------------
recognized firm of certified public accountants to serve as the LLC's
independent auditors.

          (p) Changes In The Duties Of LLC Officers.  Any changes in the duties
              -------------------------------------
of any LLC officer other than any such change required by law as the LLC is so
advised by its legal counsel.

          (q) Research Plan.  Approval of the Research Plan under the LLC
              -------------
Collaboration Agreement, and of any changes thereto in accordance with the
provisions of the LLC Collaboration Agreement.

          (r) Core Improvements and Exelixis Core Technology.  Determinations by
              ----------------------------------------------
the LLC with respect to Core Improvements and Exelixis Core Technology pursuant
to the LLC Collaboration Agreement, including Sections 1.20 and 1.28 thereof.

          6.8  Delivery And Approval Of Annual Operating Plan And Budget And
               -------------------------------------------------------------
Three Year Strategic Plan. The Management Committee will prepare and deliver to
-------------------------
each Member as

[*] = 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>

soon as practicable after its preparation, and in any event no later than [ * ]
before the close of each Fiscal Year of the LLC: (a) an annual operating plan,
including a Research Plan, and budget for the LLC, prepared on a monthly basis,
for the next Fiscal Year, and (b) a three (3) year strategic plan (the
"Strategic Plan") for the LLC for next [ * ] Fiscal Years of the LLC, provided
 --------------
that the LLC's initial budget and Strategic Plan will be approved by the
Management Committee and delivered to the Members no later than [ * ] after the
Commencement Date. The Management Committee will also promptly furnish to each
Member all amendments to the annual operating plan and budget and Strategic
Plan, if any. Except for the initial operating plan and budget and Strategic
Plan, to be delivered as provided in the first sentence of this Section 6.8, the
Management Committee and the Members will agree upon each prospective operating
plan and budget and Strategic Plan no later than [ * ] before the end of the
relevant Fiscal Year in which they are delivered to the Members. Failure to so
timely agree will be considered to be a "Substantial Disagreement" to be
resolved as provided under Article XVII hereof, provided that approval of
raising additional capital or issuing additional Membership Interests will be
subject to the approval of the Members pursuant to Article III hereof.

     6.9  Compensation And Reimbursement Of Member Representatives And Members
          --------------------------------------------------------------------
Of The JSC.  Each Member will pay all salary, and all consulting fees (as
----------
applicable), and all expenses, of its Member Representatives and of its members
of the JSC, which payments will not, except as the Members may agree with each
other in writing, be deemed to be a Capital Contribution to the LLC by the
relevant Member.

     6.10 No Exclusive Duty To LLC; No Rights To Participation Or Income.
          --------------------------------------------------------------
Neither the Management Committee nor any Member Representative, nor any LLC
officer, will be required to manage the LLC as such individual's sole and
exclusive function, and such individual, and either Member, may have other
business interests and may engage in other activities in addition to those
relating to the LLC, subject to the confidentiality obligations hereof, and not
in violation of the obligations of the Members to each other under the LLC
Collaboration Agreement and under applicable Collateral Agreements as they may
then exist.  Neither the LLC, nor the Management Committee, nor any Member
Representative, nor any LLC officer, employee or agent of, or consultant to, the
LLC, will have any right, by virtue of this Agreement, to share or participate
in investments or activities of the LLC or of any Member or to any income or
proceeds derived therefrom.

     6.11 Amendment Of Certificate of Formation Or Agreement.  The Management
          --------------------------------------------------
Committee will have the duty and authority to amend the Certificate of Formation
or this Agreement as and to the extent necessary to reflect any and all changes
or corrections necessary or appropriate as a result of any action taken in
accordance with the terms of this Agreement by the Members or by the Management
Committee.

     6.12 Member Assistance To the Management Committee And Officers.  Each
          ----------------------------------------------------------
Member will cooperate to a commercially reasonable extent with the Management
Committee, and its committees, and the Management Committee's and such
committees' authorized representatives, including without limitation the
officers of the LLC, during regular business hours of the relevant Member, or
such committee thereof, with respect to performance of the Management
Committee's or such committees' or such LLC officer's obligations hereunder,
subject to 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.

                                      -30-
<PAGE>

confidentiality provisions of Article XVIII hereof, and to such other customary
confidentiality agreements as the relevant Member may request.

     6.13 Matters Involving The JSC.
          -------------------------

          (a)  Composition Of The JSC.
               ----------------------

               (i)   Number Of Member And Composition Of The JSC. The JSC will
                     -------------------------------------------
consist of six (6) members, three (3) appointed by Exelixis and three (3)
appointed by Bayer. Each member of the JSC will be a senior LLC officer or
senior representative of the relevant Member or one of its Affiliates,
authorized to review and make recommendations to the Chief Executive LLC officer
and to the Management Committee with respect to matters within the scope of the
JSC's authority. The initial members of the JSC each will be selected and
notified by each Member to the Management Committee, within thirty (30) days
after the Commencement Date, as the initial JSC.

               (ii)  Appointment, Removal And Replacement Of Members Of The JSC.
                     ----------------------------------------------------------
Each Member will appoint, may remove (with or without cause), and may replace
its members of the JSC during the existence of the JSC, at such Member's sole
discretion, and any such appointments, removals and replacements will be
notified in writing by the appointing, or removing or replacing, Member, to the
other members of the JSC and to the Management Committee. No Member will have
any authority to appoint, remove or replace JSC members for the other Member. If
a member of the JSC for any reason no longer is serving as any of an employee,
LLC officer or Director or correlative position (as applicable) of, nor as a
consultant to, the relevant Member or at least one of its Affiliates (the LLC
not being deemed to be an Affiliate of either Member for this purpose), the
relevant Member will promptly notify the other members of the JSC and the
Management Committee in writing, and such individual will be deemed to have
resigned as a member of the JSC as of the date of such complete cessation, and
the relevant Member will as soon thereafter as possible appoint a new JSC member
to replace such departing individual.

               (iii) Alternates; Service Term.  An alternate member of the JSC,
                     ------------------------
designated by a Member in writing to the other members of the JSC and the
Management Committee, may serve temporarily in the absence of a permanent member
of the JSC previously designated by such Member.  Individuals serving on the JSC
will hold such position until the earliest of the date of their resignation or
removal from the JSC, or their death.  Any member of the JSC may resign at any
time by giving written notice thereof to the Management Committee and to the
remaining members of the JSC.

          (b)  Function Of The JSC; Meetings.  The JSC will have solely an
               -----------------------------
advisory role to the Chief Executive Officer of the LLC and to the Management
Committee, and will provide such guidance as to scientific and technical matters
involving the business of the LLC, including without limitation the Research
Plan as defined under the LLC Collaboration Agreement, as the Chief Executive
Officer of the LLC and/or the Management Committee may in good faith request
orally or in writing, in reasonable detail, and upon reasonable notice.  Neither
the JSC nor any member thereof, acting as a member of the JSC, will have any
authority

[*] = 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>

on behalf of the LLC or either Member to execute any document or instrument, or
take any other action, that would bind the LLC or either Member. The JSC will
report to the Chief Executive Officer of the LLC and to the Management
Committee, but will have no duty to report to, or to provide guidance or
information to, either Member. The JSC will meet at such times and places, in
person and/or by conference telephone call, as the members of the JSC agree,
provided that the JSC will meet at least once during each calendar quarter
during the Research Term, as defined in and as determined under the LLC
Collaboration Agreement.

          (c) Compensation And Reimbursement Of Members Of JSC.  Each Member
              ------------------------------------------------
will pay all salary and all consulting fees (as applicable), expenses and
benefits, of its members of the JSC.

          (d) No Exclusive Duty To LLC; No Rights To Participation Or Income.
              --------------------------------------------------------------
No member of the JSC will be required to serve in such capacity as such
individual's sole and exclusive function, and such individual may have other
business interests and may engage in other activities in addition to those
relating to the LLC, subject to the confidentiality obligations hereof, and
under any separate written customary confidentiality agreements which the Chief
Executive Officer of the LLC believes necessary or appropriate for such JSC
member to sign.  No member of the JSC will have any right, by virtue of this
Agreement, to share or participate in investments or activities of the LLC or of
any Member or to any income or proceeds derived therefrom.

          (e) Changes in Size, Function And Powers; Termination, Of The JSC.
              -------------------------------------------------------------
Upon mutual written agreement of the Members from time to time during the
existence of the JSC, the number of members of the JSC can be increased or
decreased, the function and powers of the JSC may be amended, and the JSC may be
terminated in its entirety.  The JSC will terminate automatically (i) when the
Research Term (as defined in the LLC Collaboration Agreement) ends unless the
Members agree in writing to extend the existence of the JSC, or (ii) if Exelixis
ceases to be a Member or its Membership Interest is purchased by Bayer as
provided herein, unless Bayer and Exelixis then otherwise agree in writing.

                                  ARTICLE VII
                    LLC OFFICERS, EMPLOYEES AND CONSULTANTS

     7.1  Election Of Officers; Required Officers; Initial Officers.  The
          ---------------------------------------------------------
officers of the LLC will be elected by the Management Committee and will include
a Chief Executive Officer of the LLC and a Chief Financial Officer of the LLC
(each of whom will be an individual nominated by Bayer and approved by the
Management Committee), and a Secretary of the LLC. The Management Committee may
create such other offices and elect such other officers therefor as they deem
appropriate.  Any number of offices may be held by one person, except that the
Chief Executive Officer of the LLC and Chief Financial Officer of the LLC
positions must be held by two separate individuals.  Each individual who will
serve as the initial Chief Executive Officer of the LLC, Chief Financial Officer
of the LLC and Secretary of the LLC will be designated and appointed to serve as
such no later than the Commencement Date, in writing by the Members to each
other and to the Management Committee.

[*] = 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>

     7.2  Term Of Office; Duties.  Each LLC officer will hold office for such
          ----------------------
term as will be determined from time to time by the Management Committee.  The
duties of any LLC officers other than the Chief Executive Officer of the LLC,
Chief Financial Officer of the LLC and Secretary of the LLC, which are set forth
herein, and any lawful duties of such three (3) officers beyond those specified
herein, will be established from time to time by the Management Committee, or as
to such officers, other than the Chief Executive Officer of the LLC, by the
Chief Executive Officer of the LLC acting under specific authority granted by
the Management Committee.

     7.3  Reporting; Employee And Consultant Invention Assignment And
          -----------------------------------------------------------
Confidentiality Agreements.
--------------------------

          (a) Reporting.  The Chief Executive Officer of the LLC will report to
              ---------
the Management Committee.  All other officers and employees of the LLC will
report to the Chief Executive Officer of the LLC and to the Management
Committee.

          (b) Employee And Consultant Invention Assignment And Confidentiality
              ----------------------------------------------------------------
Agreements.  Each LLC officer and each LLC employee will, upon assuming office
----------
or beginning employment (whether full-time or part-time) with the LLC, execute
and deliver a customary invention assignment and confidentiality agreement with
the LLC, with provisions substantially similar to those contained in Article
XVIII hereof, which agreements in each case will name Bayer and Exelixis and
their respective Affiliates as intended third party beneficiaries thereof.  Each
consultant retained by the LLC (including any officer of the LLC who serves in
such capacity as a consultant) also will execute and deliver to the LLC such
customary consulting agreement as the Chief Executive Officer of the LLC (or the
Management Committee, with respect to any service of the Chief Executive Officer
of the LLC as a consultant to the LLC) requests, containing provisions
substantially similar to those contained in Article XVIII hereof, which
agreements in each case will name Bayer and Exelixis and their respective
Affiliates as intended third party beneficiaries thereof.  The confidentiality
provisions of each such agreement between the LLC and any LLC officer, LLC
employee or LLC consultant, also will provide that any Confidential Information
of Exelixis or of any third-party collaborator with, or potential collaborator
with, Exelixis, that is not specific to and intended by Exelixis to be used,
lawfully, in the Research (as defined under the LLC Collaboration Agreement) or
in the performance by Exelixis of its obligations under the LLC Collaboration
Agreement, and that becomes known to such individual in the course of such
individual's involvement with the LLC, will be subject to such confidentiality
provisions of such agreement with the LLC and further will provide that such
Confidential Information will not be disclosed by such individual to either
Bayer or the LLC without the express prior written permission of the relevant
third party.

     7.4  Compensation Of LLC Officers And LLC Employees; Reimbursement.  The
          -------------------------------------------------------------
salaries, bonuses and benefits, if any, and reimbursement of all LLC officers
and agents of the LLC employees will be fixed by the Management Committee, or by
the Chief Executive Officer of the LLC, if so authorized by the Management
Committee, as to officers other than himself or herself, and will be as
reflected in the LLC's then-current approved budget.  The LLC will pay the
salary or consulting fees of, and will furnish itself or through a third party
or parties all benefits for, those

[*] = 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>

officers of the LLC who are employees of or consultants to the LLC while they
are so employed by the LLC, and of all other employees of and consultants to the
LLC, who are not in each case otherwise furnished by Bayer or Exelixis. Each of
Bayer and/or Exelixis, as the case may be, will pay the salary or consulting fee
of, and any bonus amounts determined by the Management Committee to be payable
to, and will reimburse the expense of, and will furnish itself or through a
third party or parties all relevant benefits for, any employee of or consultant
to such Member if and so long as such employee is so employed by, or serving as
a consultant to, such Member and also then is serving as an LLC officer or
otherwise as an employee of or consultant to the LLC, provided that all such
salary or consulting fees, bonus amounts, expenses and benefits so paid by the
relevant Member will be not greater than the relevant amounts therefor as
reflected in the LLC budget as in effect most recently before such payment is
made by the relevant Member.

     7.5  Duties Of The Chief Executive Officer of the LLC.  Unless the
          ------------------------------------------------
Management Committee determines otherwise, and so communicates in writing to the
Chief Executive Officer of the LLC, the Chief Executive Officer of the LLC will
be the principal officer of the LLC, and will preside as Chairperson at all
meetings of the Members, and will be responsible for the following:

          (a) Hiring And Termination Of Employees Of And Consultants To The LLC.
              -----------------------------------------------------------------
The hiring and termination by the LLC of any employees of or consultants to the
LLC (which will not include any FTE unless and until such FTE becomes an
employee of or consultant to the LLC as provided in this Agreement), and the
establishment of salaries and benefits therefor pursuant to an approved LLC
budget.

          (b) Oversight And Supervision Of LLC Collaboration Agreement,
              ---------------------------------------------------------
Implementation of Research Plan, And Approval Of Certain Changes In the Research
--------------------------------------------------------------------------------
Plan.  General oversight and supervision of the LLC Collaboration Agreement, and
----
implementation of the Research Plan (as defined in the LLC Collaboration
Agreement), and approval of certain changes to the Research Plan that do not
change or extend beyond the Research Field and do not materially adversely
impact the budget for or progress of any Research Plan.  Each such change when
approved by the Chief Executive Officer of the LLC will be promptly communicated
by the Chief Executive Officer of the LLC in writing to the JSC and to the
Management Committee.  Any increases in overall expenditures remaining under
such Research Plan must be approved in accordance with Article VI hereof.

          (c) Execution And Delivery Of Agreements, Etc.  Execution and delivery
              -----------------------------------------
of documents for, contracting for, negotiating on behalf of and binding, and
otherwise representing, the interests of the LLC as authorized by the Management
Committee in any job description created by, or any resolution passed by, the
Management Committee, except where required or permitted by this Agreement or by
law to be otherwise signed and executed by other or additional parties, and
except where the signing and execution thereof has been expressly delegated by
the Management Committee to some other LLC officer or agent of the LLC.

[*] = 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>

          (d) Other Specific Matters.  Such other matters and actions as are
              ----------------------
specifically authorized in writing by the Management Committee prior to the
taking of such action or as ratified by the Management Committee after the
taking of such action.

     7.6  Duties Of The Secretary of the LLC.  The Secretary of the LLC will
          ----------------------------------
attend all meetings of the Members and will record all the proceedings of the
meetings of such Members in a book to be kept for that purpose.  The Secretary
of the LLC will give, or cause to be given, on behalf of the LLC, written notice
of all meetings of the Members and of the Management Committee and of committees
thereof, and will perform such other duties as may be prescribed by the
Management Committee or Chief Executive Officer of the LLC.

     7.7  Duties Of The Chief Financial Officer of the LLC.  The Chief Financial
          ------------------------------------------------
Officer of the LLC will perform or will supervise such functions with respect to
financial and cash management for the LLC as are customary and as may be
specified by the Chief Executive Officer of the LLC or the Management Committee
to the Chief Financial Officer of the LLC.

     7.8  Certain Standards Of Care.  In discharging their respective duties,
          -------------------------
the Management Committee and each LLC officer will be fully protected in relying
in good faith upon any such records and upon such information, opinions, reports
or statements by any other person, as to matters the Management Committee or LLC
officer reasonably believes are within such other person's professional or
expert competence and who has been selected with reasonable care by or on behalf
of the LLC, including information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits or losses of the LLC or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.  Neither a Member, nor any
Member Representative, nor any LLC officer, will be liable or obligated to the
Members for any act or omission performed or omitted to be performed by such
Member or such individual in good faith pursuant to authority granted to such
Member or individual by this Agreement or the Act, which causes or results in
any loss or damage to the LLC or the Members.  Neither the Management Committee
nor any LLC officer, in any way guarantee the return of a Member's capital or a
profit for either Member from the operations of the LLC.

     7.9  Resignation Of Officers; Removal.  Any LLC officer may resign at any
          --------------------------------
time by giving written notice thereof to each Member and to the Management
Committee.  Any LLC officer other than the Chief Executive Officer of the LLC
may be removed and replaced, with or without cause, upon the decision of the
Chief Executive Officer of the LLC or of at least a majority of the Member
Representatives, provided that, so long as Bayer is providing financial
management and treasury functions to the LLC under Section 4.5 hereof, the Chief
Executive Officer of the LLC, and the Chief Financial Officer of the LLC, may
only be removed or replaced by the Management Committee with Bayer's prior
written approval.

     7.10 Employees And Consultants; Certain Matters Relating To FTE'S.
          ------------------------------------------------------------

          (a) Employees And Consultants of LLC.  The LLC may employ such
              --------------------------------
employees and consultants as the Management Committee or the Chief Executive
Officer of the LLC believes are necessary or appropriate in order for the LLC to
conduct its business.  Any

[*] = 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>

employees of or consultants to the LLC will be paid directly by the LLC and
furnished such benefits and other terms of employment or consultancy as the LLC,
by the Chief Executive Officer of the LLC and Management Committee, believe
necessary and appropriate as in the best interests of the LLC and the Members'
interests therein.

          (b) Certain Matters As To FTE's And Other Personnel.  Any FTE's
              -----------------------------------------------
seconded full-time to the LLC by Exelixis (referred to in the LLC Collaboration
Agreement as "Dedicated FTE's"), and any FTE's within Exelixis working part-time
on behalf of the LLC (referred to in the LLC Collaboration Agreement as "Shared
FTE's"), will, during the term of the LLC Collaboration Agreement, be and remain
employees of Exelixis, and Exelixis will remain liable for salaries, benefits,
including without limitation stock options and other equity awards as determined
by Exelixis, and other matters and liabilities with respect thereto, and for
termination or alteration of the terms of, their employment by Exelixis,
provided that:

              (i)   Hiring Upon Certain Termination of LLC Collaboration
                    ----------------------------------------------------
Agreement or Buyout By Bayer of Exelixis' Membership Interest. If the LLC
-------------------------------------------------------------
Collaboration Agreement is terminated by Bayer or by Exelixis, or if Bayer buys
out the Membership Interest of Exelixis pursuant to the provisions of Article
XIII of this Agreement, then the LLC and/or Bayer, as Bayer deems appropriate in
its sole discretion, may offer employment or consultancy to, and may hire, any
Dedicated FTE directly as an employees of or as a consultant to the LLC and/or
Bayer, and

              (ii)  Hiring Of Non-Solicited Individuals Who Leave Exelixis.
                    ------------------------------------------------------
Subject to the provisions of Section 7.10(c) hereof, and to any lawful
restraints, including those by contract, against such hiring, and to
confidentiality obligations of the relevant individual, the LLC or Bayer may,
during the term of this Agreement or thereafter, make offers to and hire as an
employee or consultant, to work on Bayer or LLC matters, or both, any person who
has voluntarily terminated such person's employment or consultancy with
Exelixis, or whose employment has been terminated by Exelixis, and

              (iii) Exelixis Rights To Hire.  Subject to the provisions of
                    -----------------------
Section 7.10(c) hereof, and to any lawful restraints, including those by
contract, against such hiring, and to confidentiality obligations of the
relevant individual, Exelixis may, during the term of this Agreement or
thereafter, make offers to and hire as an employee or consultant, to work on
Exelixis or LLC matters or both, any person who has voluntarily terminated such
person's employment or consultancy with the LLC or Bayer or whose employment has
been terminated by the LLC or Bayer.

              (iv)  Certain Information About FTE's; Bayer Right To Request
                    -------------------------------------------------------
Replacement of FTE's.
--------------------

                    (A)  Certain Information About FTE's. During the term of the
                         -------------------------------
LLC Collaboration Agreement, Exelixis will provide the LLC and Bayer in writing:
(1) within fifteen (15) days after the end of each calendar quarter, (a) the
names of the then-current FTE's as at the end of such quarter, broken out by
Dedicated FTE's and Shared FTE's, and (b) a detailed statement of account that
shows the time spent by the Shared FTE's and LLC project on

[*] = 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>

which such time was spent during such preceding quarter, and (2) within five (5)
days after cessation, for any reason, by any individual of such individual's
service to the LLC as an a Dedicated FTE, notice of such cessation and a general
description of the reason therefor. Exelixis will consult with the LLC and Bayer
prior to Exelixis terminating an a Dedicated FTE as an employee of or consultant
to Exelixis, as to reassigning an a Dedicated FTE to tasks other than under the
LLC Collaboration Agreement, and as to hiring a replacement for a Dedicated
FTE.

                     (B) Bayer Right To Request Replacement of FTE's. Bayer may,
                         -------------------------------------------
a reasonable number of times during the term of the LLC Collaboration Agreement,
request in writing to Exelixis that Exelixis replace a Dedicated FTE, or a
Shared FTE (but not request that Exelixis terminate the employment by Exelixis
of any Dedicated FTE or Shared FTE), if in the good faith judgment of Bayer, as
so stated in such request, the continued involvement of such Dedicated FTE or
Shared FTE the LLC or with work under the LLC Collaboration Agreement, is or
would be detrimental to the best interests of the LLC or of Bayer. Upon such
request, Exelixis will promptly take such corrective measures as Exelixis deems
appropriate in its good faith judgment. If, after such corrective measures have
been completed, Bayer still desires replacement of such individual, Bayer may
repeat its request. Upon such repeated request, Exelixis will promptly replace
such individual as an FTE with another person as a Dedicated FTE or Shared FTE,
as the case may be, provided that Exelixis will determine, after consultation
with Bayer and giving due regard to the business of the LLC, who the replacement
will be. Exelixis will promptly hire a qualified new employee or retain a
qualified new consultant to fulfill such replacement obligation if Exelixis
cannot supply a suitable replacement from Exelixis' then-existing employees or
consultants.

                 (v) Certain Information About Technical Personnel FTE's.
                     -------------------------
Exelixis will provide the LLC and Bayer in writing, within fifteen (15) days
after the close of each calendar quarter during the term hereof, with the total
number of FTE's serving as employees of or as consultants to Exelixis during
such preceding quarter, who have technical qualifications at least to the level
of a Shared FTE ("Technical Personnel FTE's"), but excluding all Dedicated FTE's
                  -------------------------
and excluding the portion, out of total time spent by Shared FTE's during such
quarter, that was spent on LLC matters during such quarter by Shared FTE's then
working with the LLC.

             (c) Nonsolicitation. During the term hereof and for a period of
                 ---------------
[ * ] thereafter, neither the LLC, nor any of its officers, nor either of the
Members, nor any Member Representative or member of the JSC appointed by such
Member, will solicit any employee of or consultant to either of the other
parties hereto to terminate such employee's or consultant's relationship with
such other party.

                                  ARTICLE VIII
                             ACCOUNTING AND RECORDS

        8.1  Financial And Tax Reporting.  The LLC will prepare its financial
             ---------------------------
statements in accordance with United States generally accepted accounting
principles as from time to time in effect and will prepare its income tax
information returns using such methods of accounting and

[*] = 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>

tax year as the Tax Matters Member deems necessary or appropriate under the Code
and Treasury Regulations.

     8.2  Supervision; Inspection Of Books And Records.  Proper and complete
          --------------------------------------------
books of account and records of the business of the LLC (including those books
and records identified in Section 18-305 of the Act) will be kept under the
supervision of the Management Committee at the LLC's principal office and at
such other place as designated by the Management Committee.  The Management
Committee will give written notice to each Member of any change in the location
of the books and records.  The books and records of the LLC will be open to
inspection, audit and copying by any Member or its authorized representative,
upon reasonable or prior written notice at any time during business hours for
any purpose reasonably related to such Member's interest in the LLC.  Any
information so obtained or copied will be Confidential Information.  Any such
inspection and copying will be at the expense of the inspecting Member.

     8.3  Reliance On Records And Books Of Account.  Any Member or Member
          ----------------------------------------
Representative or LLC officer, to the extent such LLC officer was acting in good
faith in preparation thereof, will be fully protected in relying in good faith
upon the records and books of account of the LLC and upon such information,
opinions, reports or statements presented to the LLC by its Tax Matters Member,
any of its Members, officers, employees or committees, or by any other person,
as to matters the Tax Matters Member or other Member reasonably believes are
within such other person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the LLC, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits or losses of the LLC or any other facts pertinent to the
existence and amount of assets from which distributions to either or both
Members from the LLC might properly be paid.

     8.4  Tax Matters Member.  Bayer will serve as the Tax Matters Member, which
          ------------------
will be the "tax matters partner" within the meaning of Code Section 6231.  The
Tax Matters Member (or the other Member if it receives such notification) will
provide notice to the other Member, as provided in Code Section 6223(g), of any
administrative or judicial proceeding for the adjustment of LLC items and will
keep the other Member reasonably and timely informed as to all material facts
and developments about tax matters involving the LLC.  The Tax Matters Member
will ensure that the other Member is a notice partner as provided in Code
Section 6223(b).  The Tax Matters Member may hire tax counsel and accountants,
at the expense of the LLC, in connection with any representation of the LLC.

     8.5  Tax Returns.
          -----------

          (a) Filing.  The Tax Matters Member will, as soon as practicable, but
              ------
in no event later than seventy-five (75) days after the end of each Fiscal Year,
cause the LLC to file a federal income tax information return and to transmit to
each Member a schedule showing such Member's distributive share of the LLC's
income, deductions and credits, and all other information necessary for such
Members to timely file their federal income tax returns.  The Tax Matters Member
similarly will cause the LLC to file, and to provide information to such Members
regarding, all appropriate state and local income tax returns.

[*] = 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>

          (b) Drafts And Certain Disputes.  The Tax Matters Member will prepare
              ---------------------------
or cause to be prepared, and will submit to the Members and to the Chief
Executive Officer of the LLC, drafts of all LLC tax returns as soon as
reasonably practical, and in any event no later than forty-five ( 45) days, in
advance of the filing due date thereof to permit review by the Members and the
LLC prior to filing.  If either of the Members or the LLC disagrees with the
proposed treatment of an item on the return prepared by or for the Tax Matters
Member, the dispute will be resolved as provided in Section 17.3 hereof.  If the
dispute has not been resolved by the due date of the particular return, the Tax
Matters Member will timely file the particular return and the content of the
return as filed will be determined by the Tax Matters Member in its sole
discretion.  Upon resolution of the relevant dispute between the Members and the
LLC, if such resolution provides for the reporting of any item which is
inconsistent with the manner in which such item was reported on the return as
filed by the Tax Matters Member, the Tax Matters Member will prepare and file an
amended return using the agreed basis of reporting.  The Tax Matters Member may
file such requests for extensions of time to file any returns as it deems
appropriate.

          (c) Cooperation.  Each Member and the LLC will maintain and provide to
              -----------
the Tax Matters Member all information necessary for the preparation and support
of all LLC tax returns.  Such information will be provided to the Tax Matters
Member within a reasonable time after it is requested by the Tax Matters
Partner, and in a commercially reasonable manner, by each Member and the LLC at
their respective expense.

     8.6  Annual Reports.  The LLC will deliver to each Person (or such Person's
          --------------
legal representative) who was a Member during any part of the Fiscal Year in
question, within ninety (90) days after the end of each Fiscal Year of the LLC:
(a) a balance sheet for the LLC as of the close of the Fiscal Year and a profit
and loss statement for the Fiscal Year then ended, all in reasonable detail, and
(b) a report setting forth the Capital Accounts of each Member and a description
of the manner of their calculation.  The annual financial statements of the LLC
will be audited and reported on as of the end of each Fiscal Year by a firm of
independent certified public accountants selected by the Management Committee.
The Chief Executive Officer of the LLC will be responsible for preparing or
having prepared such reports, at the expense of the LLC, as may be reasonably
requested by either Member.

     8.7  Other Financial And Accounting Reports.  In addition to the annual
          --------------------------------------
report described in Section 8.6 hereof, the LLC will prepare or cause to be
prepared and delivered to the Members such other financial and accounting
reports, within [ * ] after the end of each calendar quarter during the
existence of the LLC, as the Management Committee deems appropriate or
necessary, or as either Member requests in good faith in writing to the
Management Committee, with a copy to the other Members.

     8.8  Confidentiality.  All information received pursuant to this Section 8
          ---------------
will be Confidential Information, subject to the exceptions therefor set forth
in Section 1.20 hereof.

[*] = 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>

                                  ARTICLE IX
                                  ALLOCATIONS

     9.1  Allocation Of Net Income And Net Loss.  For each Accounting Period:
          -------------------------------------

          (a) Deductions.  All deductions of the LLC will be allocated to Bayer
              ----------
until the earlier of the time at which (x) Bayer has been allocated deductions
and Net Loss equal to Bayer's cumulative Capital Contributions through the date
of allocation or (y) taking into account planned distributions following the
relevant year-end, the balances in Bayer's Capital Account and Exelixis' Capital
Account are in proportion to their Percentage Interests.

          (b) Allocations Of Net Income And Net Loss.  Following the allocations
              --------------------------------------
provided in Section 9.1(a) hereof, Net Income and Net Loss will be allocated
between Bayer and Exelixis in proportion to their Percentage Interests, except
that the Members will first be allocated gross income until cumulative
allocations of gross income equal cumulative periodic distributions made or
planned to be made to them following the relevant year-end pursuant to Section
10(b)(i) hereof.

          (c) Certain Allocations.  It is agreed between the Members that Bayer
              -------------------
is funding, to the extent of Bayer's Capital Contributions under Section 4.2
hereof and to the extent of its milestone payments under the LLC Collaboration
Agreement, all expenditures for research and experimentation of the LLC, whether
directly or as paid by the LLC to Exelixis under the LLC Collaboration
Agreement, and that Bayer will be allocated all deductions for expenditures
under Code Section 174 (and all associated credits under Section 41 of the Code)
to the extent of the deductions funded through such Capital Contributions and
milestone payments.  All other expenditures under Code Section 174 (and
associated credits) will be allocated in proportion to Percentage Interests of
the Members.

     9.2  Other Allocations; Qualified Income Offset; Minimum Gain Chargeback.
          -------------------------------------------------------------------
Notwithstanding the provisions of Section 9.1 hereof, the following special
allocations will be made in the order set forth herein.  Terms appearing in
quotation marks in this Section 9.2 have the meanings set forth in Treasury
Regulations Section 1.704-2, and this Section 9.2 is intended to comply with
such Treasury Regulations.

          (a) Nonrecourse Deductions.  All "nonrecourse deductions" will be
              ----------------------
allocated in proportion to the Member Percentage Interests from time to time.

          (b) Partner Nonrecourse Deductions.  All "partner nonrecourse
              ------------------------------
deductions" will be specially allocated to those Members who bear the economic
risk of loss with respect to the "partner nonrecourse debt" to which such
"partner nonrecourse deductions" are attributable.

          (c) Partnership Minimum Gain.  Except as otherwise provided in
              ------------------------
Treasury Regulations Section 1.704-2(f), if there is a net decrease in
"partnership minimum gain" during any Fiscal Year, each Member will be specially
allocated items of LLC net income and net loss for such Fiscal Year (and, if
necessary, future Fiscal Years) in an amount equal to such Member's share of the
net decrease.  This Section 9.2(c) is intended to comply with 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.

                                      -40-
<PAGE>

"minimum gain chargeback" requirement in Treasury Regulations Section 1.704-2
and will be interpreted accordingly.

          (d) Partner Nonrecourse Debt Minimum Gain.  Except as otherwise
              -------------------------------------
provided in Treasury Regulations Section 1.704-2(i)(4), if there is a net
decrease in "partner nonrecourse debt minimum gain" attributable to a "partner
nonrecourse debt" during any Fiscal Year, each Member who has a share of such
"partner nonrecourse debt minimum gain" will be specially allocated items of
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to that share.  This Section 9.2(d) is intended to
comply with the "minimum gain chargeback" requirements of Treasury Regulations
Section 1.704-2 and will be interpreted accordingly.

          (e) Certain Reallocations.  If a Member's Adjusted Capital Account has
              ---------------------
an Unadjusted Excess Negative Balance at the end of any Fiscal Year, such Member
will be reallocated items of income and gain for such Fiscal Year (and, if
necessary, future Fiscal Years) in the amount necessary to eliminate such
Unadjusted Excess Negative Balance as quickly as possible.

          (f) Qualified Income Offset.  If a Member unexpectedly receives any
              -----------------------
adjustments, allocations or distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4) through (d)(6), items of LLC income and gain
will be specially allocated to such Member any Excess Negative Balance in such
Member's Capital Account created thereby as quickly as possible.  This Section
9.2(f) is intended to constitute a "qualified income offset" within the meaning
of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and will be interpreted
accordingly.

          (g) Certain Limitations.  A Member will not be allocated any item of
              -------------------
LLC loss or deduction to the extent such allocation would cause such Member's
Adjusted Capital Account to have an Excess Negative Balance.

          (h) Certain Powers Of Tax Matters Partner.  The allocations set forth
              -------------------------------------
in the preceding provisions of this Section 9.2 (the "Regulatory Allocations")
                                                      ----------------------
are intended to comply with certain requirements of the Treasury Regulations.
It is the intent of the Members that, to the extent possible, all Regulatory
Allocations will be offset with other Regulatory Allocations or with special
allocations of other items of income, gain, loss or deduction pursuant to this
Section 9.2(h). Therefore, notwithstanding any other provision of this Agreement
(other than the provisions governing the Regulatory Allocations) the Tax Matters
Member will make such offsetting special allocations of LLC income, gain, loss
or deduction in whatever manner it determines appropriate, to the end that each
Member's Adjusted Capital Account balance should equal the balance such Member
would have had if the Regulatory Allocations were not part of this Agreement and
all LLC items were allocated pursuant to Section 9.1 hereof.  In exercising its
discretion under this Section 9.2(h), the Tax Matters Member will take into
account future Regulatory Allocations under Sections 9.2(c) and (d) hereof that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 9.2(a) and (b) hereof.

[*] = 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>

     9.3  Special Tax Provisions.
          ----------------------

          (a) Membership Status.  The Members intend that the LLC will be
              -----------------
treated as a partnership for all federal income tax purposes and each Member
agrees that it will not, on any federal, state, local or other tax return, take
a position inconsistent with such intent.

          (b) Tax Allocations.  Except as otherwise provided in this Article
              ---------------
VIII or required by the Code and Treasury Regulations, items of income, gain,
loss or deduction recognized for income tax purposes will be allocated in the
same manner that the corresponding items entering into the calculation of Net
Income and Net Loss are allocated pursuant to this Agreement.

          (c) Section 704(c) Adjustments.  In accordance with Code Section
              --------------------------
704(c) and the Treasury Regulations thereunder, items of income, gain, loss and
deduction with respect to an asset, if any, contributed to the capital of the
LLC will, solely for tax purposes, be allocated between the Members so as to
take account of any variation between the adjusted basis of such property to the
LLC for federal income tax purposes and its fair market value upon contribution
to the LLC, in the manner determined by the Tax Matters Member.  If the Carrying
Value of any asset is adjusted pursuant to the terms of this Agreement,
subsequent allocations of income, gain, loss and deduction with respect to such
asset will take account of any variation between the adjusted basis of such
asset to the LLC for federal income tax purposes and its Carrying Value in the
same manner as under Code Section 704(c) and the Treasury Regulations
thereunder, in the manner determined by the Tax Matters Member.

          (d) Section 754 Election.  An election under Code Section 754 election
              --------------------
may be made for the LLC at the written request of either Member, a copy of which
the requesting Member will deliver to the Management Committee.  In the event of
an adjustment to the adjusted tax basis of any LLC asset under Code Section
734(b) or Code Section 743(b) pursuant to a Section 754 election, subsequent
allocations of tax items will reflect such adjustment consistent with the
Treasury Regulations promulgated under Code Sections 704, 734 and 743.

          (e) Allocations Upon Transfers Of LLC Interests.  If during an
              -------------------------------------------
Accounting Period, a Member assigns or transfers its Membership Interest to
another Person properly in accordance with the provisions of Section 3.4 hereof,
items of Net Income and Net Loss, together with corresponding tax items, that
otherwise would have been allocated to the transferring or assigning member with
regard to such Accounting Period will be allocated between the transferring or
assigning member and the transferee in accordance with their respective
Membership Interest during the Accounting Period using any method permitted by
Code Section 706 and selected by the Tax Matters Member.

[*] = 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>

                                   ARTICLE X
                        DISTRIBUTIONS; WITHHOLDING TAXES

     10.1 Distributions To Members.
          ------------------------

          (a) General.  Except as otherwise provided in this Article X, Members
              -------
will share ratably all nonliquidating distributions from the LLC in proportion
to their Percentage Interests

          (b) Management Of LLC On Budget; Specific Required Distributions.  The
              ------------------------------------------------------------
Management Committee will operate the LLC on a budget that will permit
distribution in full of all premium fees the LLC receives from the Members and
of the milestone payments received by the LLC from Bayer.  Subject to the
provisions set forth in Sections 10.1(b)(i) and 10.2 hereof, cash of the LLC
will be distributed in the manner and order set forth below, within [ * ] after
the end of the preceding fiscal year of the LLC, or promptly after the delivery
to the LLC by its independent accounts of audited LLC financial statements for
such immediately preceding year if such audited statements are delivered to the
LLC by such accountants after such sixty day period has expired:

              (i)   Distributions To Members Of Premium Fee Income And Milestone
                    ------------------------------------------------------------
Payment Income Of The LLC; Reserve.  Nonliquidating distributions will first be
----------------------------------
made in cash promptly, and in any event within thirty (30) days, after the close
of each calendar quarter during the term of the LLC: (A) to the Members, in
accordance with their Percentage Interests, of all income of the LLC from
premium fees received by the LLC during such preceding quarter from either
Member under the LLC Collaboration Agreement or under any Collateral Agreements
as they may then exist, provided that, if Exelixis does not, at the time of such
distribution, hold exactly forty percent (40%) of the total Percentage Interests
of the LLC then outstanding, Exelixis nevertheless will have distributed to it
under this Section 10.1(b)(i), provided it still is a Member at the time of such
distribution, an amount of such premium fee income of the LLC equal to that
which would have been distributed to Exelixis had it held, at the time of such
distribution, forty percent (40%) of the total Percentage Interests of the LLC
then outstanding, and then (B) to Exelixis only, provided it still is a Member
at the time of such distribution, all income received by the LLC during such
preceding quarter as milestone payments from Bayer under the LLC Collaboration
Agreement.   The LLC will, after making such distribution of premium fee
payments from the Members and of milestone payments from Bayer, make an adequate
reserve for the anticipated payment by the LLC of the full FTE Amounts, and of
other budgeted, and other then-anticipated but not budgeted, operating expenses
and payments expected by the Management Committee to be required to be made by
the LLC during the then-prospective [ * ] period (the "Reserve").

              (ii)  Certain Distributions To Bayer For Patent And Insurance
                    -------------------------------------------------------
Expenses. Commencing as to, and after the close of, the first fiscal year of the
--------
LLC (or as to fiscal year 2000, ending on December 31, 2000, if the LLC is
created prior to January 1, 2000), to the extent that after making the
distributions required to be made under Section 10.1(b)(i) hereof to the Members
during the immediately preceding fiscal year, and if there is then still cash of
the LLC available for distribution to the Members after making the Reserve
required to

[*] = 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>

be made under Section 10.1(b)(i) hereof, there will next be distributed to Bayer
in cash, to the extent not then already distributed by the LLC to Bayer, an
amount equal to all LLC Operating Expense Amounts actually paid by Bayer to or
on behalf of the LLC during such immediately preceding fiscal year, as an
additional Capital Contribution by Bayer, for expenditure by the LLC for patent
prosecution, insurance and related matters for the LLC, provided that no
distribution will be made to Bayer under this Section 10(b)(ii) with respect to
such fiscal year unless the total amount of Capital Contribution to the LLC by
Bayer during such fiscal year equaled or exceeded $10,000,000.00 (or such then-
current amount as may be provided in any amendment hereto). The distribution to
Bayer provided for under this Section 10(b)(ii) will be made within [ * ] after
the end of each fiscal year of the LLC (commencing after the close of the
relevant first fiscal year of the LLC as provided above in this Section
10(b)(i)), or promptly after the delivery to the LLC by its independent accounts
of audited LLC financial statements for such fiscal year if such audited
statements are delivered to the LLC by such accountants after such [ * ] period
has expired.

              (iii)  Distributions To Members For Taxes. At the same time as the
                     ----------------------------------
distribution to Bayer, if any, is made pursuant to Section 10.1(b)(ii) hereof,
then to the extent that there is then still cash of the LLC available for
distribution to the Members, after making the distributions described in
Sections 10.1(b)(i) and (ii) hereof, and after making the Reserve required to be
made under Section 10.1(b)(i) hereof, there will next be distributed to the
Members in cash, if requested in writing by either Member, an amount, to each
Member in proportion to its Percentage Interest, as is necessary, as determined
by the Management Committee in good faith after consultation with each Member,
to pay taxes owed by such Member on income (but not sales, VAT or ad valorem
                                                                  ----------
taxes) required to be paid by the Members solely by reason of being a Member of
the LLC, to the extent that the amount of taxes owed by either Member is greater
than the amount of cash already distributed to such Member by the LLC with
respect to the period for which such tax is due.

              (iv)   Certain Distributions To Member(s) For Salary, Expenses,
                     -------------------------------------------------------
Bonuses And Benefits Of LLC Officers And LLC Employees. At the same time as the
------------------------------------------------------
distributions, if any, are made to the Members pursuant to Sections 10.1(b)(ii)
and (iii) hereof, then to the extent that there is still cash of the LLC
available for distribution to the Members, after making such distributions, and
after making the Reserve required to be made under Section 10.1(b)(i) hereof,
then there will next be distributed in cash to Bayer (and to Exelixis on an
equal ranking basis with Bayer, prorated between Bayer and Exelixis as to the
respective amounts of salary or consulting fee amounts and expenses paid and
reimbursed, and benefits paid, if during the fiscal year immediately preceding
such distribution any employee of or consultant to Exelixis was serving as an
LLC officer), provided that no distribution will be made to Bayer under this
Section 10(b)(iii) with respect to any year unless the total amount of Capital
Contribution to the LLC by Bayer during such fiscal year equaled or exceeded
ten million dollars ($10,000,000.00) (or such then-current amount as may be
provided in any amendment hereto):

                     (A) LLC Employee Salary And Consulting Fees And Related
                         ---------------------------------------------------
Amounts Paid By Bayer. All amounts of salary or consulting fee, as applicable,
---------------------
bonuses paid from the LLC (if any, and in each case as determined by the
Management Committee pursuant to the then-current LLC budget), expenses and
benefits, as applicable, actually paid by 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.

                                      -44-
<PAGE>

directly to those of its employees and consultants serving as officers or
employees of or as consultants to the LLC, or paid by Bayer to the LLC during
the immediately preceding year as an additional Capital Contribution, as part of
the LLC Operating Expense Amounts for expenditure by the LLC for such payments
of salary or consulting fee and benefits to such employees and consultants,
prorated according to the amount of time, out of total work time, such
individual spent during such year in service as LLC officer or employee of or
consultant to the LLC, and

                     (B) LLC Employee Salary And Consulting Fees And Related
                         ---------------------------------------------------
Amounts Paid By Exelixis. As to Exelixis as relevant, the amounts actually paid
------------------------
by Exelixis during the immediately preceding year directly to such of its
employees and consultants serving as officers of or employees of or consultants
to the LLCLLC officer(s), of salary or consulting fee, as applicable, bonuses
paid from the LLC (if any, and in each case as determined by the Management
Committee pursuant to the then-current LLC budget), expenses, and benefits for
such individual, prorated according to the amount of time, out of total work
time, such individual spent during such year in service as LLC officer or
employee of or consultant to the LLC.

                 (v) Distributions To Both Members.  At the same time as the
                     -----------------------------
distributions, if any, are made to the Members pursuant to Sections 10.1(b)(ii)-
(iv) hereof, then to the extent that there is still cash of the LLC available
for distribution to the Members, after making such distributions, and after
making the Reserve required to be made under Section 10.1(b)(i) hereof, then
such cash will be distributed to the Members in accordance with their Percentage
Interests.

     10.2   Restriction On Distributions And Withdrawals.
            --------------------------------------------

            (a)  Limitations. The LLC will not make any distribution, other than
                 -----------
of premium payment and milestone payment amounts as provided under Section
10.1(b)(i) hereof, unless immediately after giving effect to the distribution,
all liabilities of the LLC, other than liabilities to Members on account of
their interest in the LLC and liabilities as to which recourse of creditors is
limited to specified property of the LLC, do not exceed the fair value of the
LLC's assets; provided that (i) the fair value of any property that is subject
to a liability as to which recourse of creditors is so limited will be included
in the LLC assets only to the extent that the fair value of the property exceeds
such liability, and (ii) if after making the distribution of premium payment and
milestone payment amounts as provided under Section 10.1(b)(i) hereof, the
amount of cash remaining in the LLC does not equal or exceed the required
Reserve as determined by the Management Committee under Section 10.1(b)(i)
hereof, then upon the written request of the Management Committee, Bayer will
promptly make an additional Capital Contribution to the LLC in cash of an
amount, as an LLC Operating Expense, that is so requested by the Management
Committee, which amount will not be greater than the difference between the
amount of cash then in the LLC and the amount of the Reserve.

            (b)  Liability For Certain Distributions. Except as otherwise
                 -----------------------------------
required by law, no Member will be liable to the LLC for the amount of a
distribution received provided that, at the time of the distribution, such
Member did not know that the distribution was in violation of Section 10.2(a)
hereof. A Member who receives a distribution in violation of Section 10.2(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.

                                      -45-
<PAGE>

hereof, and who knows at the time of the distribution that the distribution
violated such condition, will be liable to the LLC for the amount of such
distribution.

     10.3 Withholding Taxes.  The LLC will at all times be entitled to make
          -----------------
payments with respect to any Member in amounts required to discharge any
obligation of the LLC to withhold or make payments to any governmental authority
with respect to any federal, state, local or other jurisdictional tax liability
of such Member arising as a result of such Member's Membership Interest in the
LLC.  To the extent each such payment satisfies an obligation of the LLC to
withhold with respect to any distribution to a Member on which the LLC did not
withhold or with respect to any Member's allocable share of the income of the
LLC, each such payment will be deemed to be a loan by the LLC to such Member
(which loan will be deemed to be immediately due and payable) and will not be
deemed a distribution to such Member.  The amount of such payments made with
respect to such Member, plus interest, on each such amount from the date of each
such payment until such amount is repaid to the LLC at an interest rate per
annum equal to the reference rate, from time to time in effect, of CitiBank
N.A., San Francisco, California, will be repaid to the LLC by (a) deduction from
any cash distributions made to such Member pursuant to this Agreement; (b)
deduction from any non-cash distributions made to such Member or (c) earlier
payment by such Member to the LLC, in each case as determined by the Management
Committee in its sole discretion. The Management Committee may, in its sole
discretion, defer making distributions to any Member owing amounts to the LLC
pursuant to this Section 10.3 until such amounts are paid to the LLC and the LLC
may in addition exercise against such Member any other rights of a creditor with
respect to such amounts due.

                                   ARTICLE XI
                  INDEMNIFICATION AND LIMITATION OF LIABILITY

     11.1 Indemnification.
          ---------------

          (a) Indemnification By LLC Of Certain Indemnitees.  To the fullest
              ---------------------------------------------
extent permitted by the Act and by law, the LLC, in accordance with this Section
11.1, will indemnify and hold harmless the Management Committee, the Member
Representatives, each LLC officer, employee, consultant or agent of the LLC, and
each Member and its Affiliates, and the partners, members, stockholders, as
relevant, of each Member and its Affiliates, and the controlling persons,
officers, Directors or equivalents, and employees and agents of each Member or
Affiliate, as applicable, (collectively, the "Indemnitees"), any and all Damages
                                              -----------
arising from any and all claims, demands, actions, suits or proceedings (civil,
criminal, administrative or investigative) in which the Indemnitee may be
involved, as a party or otherwise, by reason of the Indemnitee's management of,
or involvement in, the affairs of the LLC, or rendering of advice or
consultation with respect thereto, or which otherwise relate to the LLC, its
properties, business or affairs, if such Indemnitee acted in good faith and in a
manner such Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the LLC, and, with respect to any criminal proceeding, had no
reasonable cause to believe the conduct of such Indemnitee was unlawful.  The
termination of a proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere, or its equivalent, will not, of itself, create a
        ---- ----------
presumption that such Indemnitee did not act in good faith and in a manner which
such Indemnitee reasonably believed to be in, or not opposed to, the best
interests of the LLC or that such Indemnitee had

[*] = 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>

reasonable cause to believe that such Indemnitee's conduct was unlawful (unless
there has been a final adjudication in the proceeding that such Indemnitee did
not act in good faith and in a manner which such Indemnitee reasonably believed
to be in or not opposed to the best interests of the LLC; or that such
Indemnitee did have reasonable cause to believe that such Indemnitee's conduct
was unlawful).

          (b) Certain Other Indemnification By LLC.  The LLC may also indemnify
              ------------------------------------
and hold harmless, as an Indemnitee hereunder, any individual who was or is a
party or is threatened to be made a party to any threatened, pending, or
completed action by or in the right of the LLC to procure a judgment in its
favor by reason of the fact that such individual is or was a Member
Representative, or an LLC officer, employee, consultant or agent of the LLC,
against expenses actually or reasonably incurred by such individual in
connection with the defense or settlement of such action, if such individual
acted in good faith and in a manner such individual reasonably believed to be
in, or not opposed to, the best interests of the LLC, except that
indemnification will be made in respect of any claim, issue or matter as to
which such individual will have been adjudged to be liable for misconduct in the
performance of the Individual's duty to the LLC only to the extent that the
court in which such action or suit was brought, or another court of appropriate
jurisdiction, determines upon application that, despite the adjudication of
liability, but in view of all circumstance of the case, such individual is
fairly and reasonably entitled to indemnity for such expenses which such court
will deem proper.  To the extent that such individual has been successful on the
merits or otherwise in defense of any proceedings referred to herein, or in
defense of any claim, issue or matter therein, such individual will be
indemnified by the LLC against expenses actually and reasonably incurred by such
individual in connection therewith.  Notwithstanding the foregoing, no
individual will be entitled to indemnification hereunder for any conduct arising
from the gross negligence or willful misconduct of such individual or reckless
disregard in the performance by such individual of such individual's duties
under this Agreement.

          (c) Payment Or Advancement Of Certain Expenses.  Expenses (including
              ------------------------------------------
reasonable fees and costs of attorneys) incurred in defending any proceeding
under Sections 11.1(a) or (b) hereof may be paid by the LLC in advance of the
final disposition of such proceeding upon receipt of an undertaking by or on
behalf of the Indemnitee or Person to repay such amount if it will ultimately be
determined that the Indemnitee or Person is not entitled to be indemnified by
the LLC as authorized hereunder.

          (d) No Exclusivity.  The indemnification provided by this Section 11.1
              --------------
will not be deemed to be exclusive of any other rights to which any Person may
be entitled under any agreement, or as a matter of law, or otherwise, both as to
action in a Person's official capacity and to action in any other capacity.

          (e) Certain Insurance.  Subject to the provisions of Section 2.10
              -----------------
hereof, the Management Committee will have power to purchase and maintain
insurance on behalf of the LLC and at the expense of the LLC, against any
liability asserted against or incurred by any Person entitled under this Section
11.1 to be indemnified in any such capacity whether or not the LLC would have
the power to indemnify such Person against such liability under the provisions
of 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.

                                      -47-
<PAGE>

     11.2 Liability For Finder's Or Broker's Fees.  Each Member will be
          ---------------------------------------
responsible for paying any finder's or broker's fee and any other Damages owed
any third party that such Member incurs or which is claimed by such third party
against the other Member and/or LLC, based directly or indirectly on the
negotiation of, or the entry by the parties hereto into, this Agreement, and
will indemnify the LLC and the other Member, and the other Indemnitees, against
any obligation to pay any such fee.

     11.3 Liability In Event Of Default.  The Affected Member will be liable to
          -----------------------------
the LLC and to the Non-Affected Member, and to such other Indemnitees as are
relevant, for any and all Damages suffered or incurred by the LLC or the Non-
Affected Member or such other Indemnitee(s) as a result of such Event of
Default.

     11.4 Limitation Of Liability.  Each Member's liability under this Article
          -----------------------
XI will be limited as set forth in the Act and other applicable law.
Notwithstanding anything to the contrary herein contained (a) the debts,
obligations and liabilities of the LLC will be solely the debts, obligations and
liabilities of the LLC; and no Member or Member Representative or LLC officer or
any other Indemnitee will be obligated personally for any such debt, obligation
or liability of the LLC solely by reason of such Person, or such Person's
related Indemnitee, being a Member or Member Representative or LLC officer, and
the LLC will hold such Person, or such Person's related Indemnitee, harmless
from any such debt, obligation or liability, and (b) as to any Member who has
made a Capital Contribution to the LLC, such Member will not be liable, absent
fraud, for any debts or losses of the LLC beyond the total amount of such
Member's Capital Contribution.

                                  ARTICLE XII
                                  TERMINATION

     12.1 Termination.
          -----------

          (a) Certain Events Not Leading To Termination.  Except as provided
              -----------------------------------------
under Section 14.3 of the LLC Collaboration Agreement, the LLC will not
terminate solely due to any termination or expiration of the LLC Collaboration
Agreement or of any Collateral Agreements unless both Members otherwise agree in
writing.

          (b) Termination By Mutual Agreement Or Ordered Dissolution Of LLC.
              -------------------------------------------------------------
The LLC will be terminated and dissolved, its assets disposed of and its affairs
wound up upon the first to occur of the following:

              (i)  Affirmative Vote Of Members.  The affirmative vote in writing
                   ---------------------------
of both Members to terminate and dissolve the LLC; or

              (ii) Dissolution Of LLC By Court Order Or Authority. Any
                   ----------------------------------------------
dissolution of the LLC ordered by a final binding judgment or order by a court
of competent jurisdiction or by a regulatory authority, when such judgment or
order is not voluntarily initiated by either Member (other than a voluntary
initiation by such Member acting upon the advice of its outside legal counsel
that the continuation of the LLC, or of such Member as a member of the LLC,
would be unlawful), if there is no Buyout as provided in Section 13.5 hereof.

[*] = 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>

          (c) Termination of LLC By Notice From Non-Affected Member For
              ---------------------------------------------------------
Dissolution Event, Changed Circumstance, And/Or Event Of Default Affecting Other
--------------------------------------------------------------------------------
Member.
------

              (i)   Notice by the Affected Member of Certain Events. If any of
                    -----------------------------------------------
the following events occurs as to a Member, the Affected Member will give
written notice thereof to the Non-Affected Member, with a copy to the Management
Committee, as promptly as possible after the coming into being of such event,
specifying therein in reasonable detail the nature of such event and the date of
its commencement; the Affected Member also will give written notice to the Non-
Affected Member, with a copy to the Management Committee, as promptly as
possible after the cure or cessation of such event, specifying the date upon
which such cure or cessation occurred, the provisions of Section 13.2 hereof
being applicable in the event of a notice by the Non-Affected Member as to a
sale of assets of change of control Changed Circumstance:

                    (A) Dissolution Event.  The occurrence of a Dissolution
                        -----------------
Event as to the Affected Member; or

                    (B) Event of Default. The existence of any uncured Event of
                        ----------------
Default by the Affected Member; or

                    (C) Changed Circumstance. The existence of a Changed
                        --------------------
Circumstance for such Affected Member.

              (ii)  Termination.  Unless the Non-Affected Member has elected,
                    -----------
pursuant to the provisions of Section 13.2(b) hereof to exercise its Buyout
right, The the LLC will be terminated and dissolved if after receiving notice of
an event under Section 12.1(c)(i) hereof from the Affected Member, the Non-
Affected Member gives written notice of its election, based upon the occurrence
or existence of such event, to terminate and dissolve the LLC (the Non-Affected
Member's "Termination Notice").  Such Termination Notice (A) must be given no
          ------------------
later than [ * ] after the date the Non-Affected Member receives the initial
written notice from the Affected Member (or its trustee or relevant similar
party) as to the occurrence of the relevant event if it is a Dissolution Event
or an Event of Default or a Changed Circumstance other than a sale of assets or
change of control Changed Circumstance (for which reference is made to Section
13.2 hereof), or, as applicable, (2) within the time period specified in Section
13.2(b) hereof if it is a sale of assets of change of control Changed
Circumstance), and (or within such shorter period as set forth in Section
13.2(a)(2) hereof), (B) must be given to the Affected Member (and/or such
Affected Member's trustee or similar third party in the event of Dissolution or
Bankruptcy of the Affected Member), with a copy to the Management Committee, and
(C) if such event is a Continuing Force Majeure Event, such notice must so state
and must contain the other statements required under Section 1.20 hereof, and
the [ * ] period provided in clause (A) of this Section 12.1(c)(ii) will
commence after expiration of the [ * ] period set forth in Section 1.19 hereof,
and. (D)Such Termination Notice must have been given by the Non-Affected Member
to the Affected Member and the Management Committee before the Affected Member
has delivered any written notice to the Non-Affected Member and the Management
Committee that the relevant event has ceased to exist or has been fully cured.

[*] = 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>

          (d) Nature Of Rights Of Non-Affected Member.  The right of the
              ---------------------------------------

Non-Affected Member under this Section 12.1 to give notice of its election to
terminate and dissolve the LLC is independent of such Non-Affected Member's
right to, in lieu of such election, exercise its Buyout rights under Article
XIII hereof with respect to the Membership Interest of the Affected Member.

     12.2 Authority To Wind Up.  The Management Committee will have all
          --------------------
necessary power and authority required to marshal the assets of the LLC, to pay
its creditors, to distribute assets and otherwise wind up the business and
affairs of the LLC, including without limitation the authority to continue to
conduct the business and affairs of the LLC insofar as such continued operation
remains consistent, in the judgment of the Management Committee, with the
orderly winding up of the LLC.

     12.3 Winding Up And Certificate Of Cancellation.  The winding up of the LLC
          ------------------------------------------
will be completed when all debts, liabilities and obligations of the LLC have
been paid and discharged or reasonably adequate provision therefor has been
made, and all of the remaining property and assets of the LLC have been
distributed to such Members.  Upon the completion of winding up of the LLC, a
Certificate of Cancellation will be filed by the Chief Executive Officer of the
LLC with the Secretary of State of Delaware.

     12.4 Refund Of Certain Amounts To Bayer; Distribution Of Assets.
          ----------------------------------------------------------

          (a) Refund Of Certain Amounts To Bayer.  Upon dissolution and winding
              ----------------------------------
up of the LLC, after all debts, liabilities and obligations of the LLC have been
paid and discharged or reasonably adequate provision therefor has been made, any
amounts of unexpended funds received by the LLC from Bayer as a Capital
Contribution of Bayer that then remain as an asset of the LLC will be refunded
to Bayer by the LLC prior to any distribution of assets of the LLC to either
Member.  Such refund will not be deemed to be a distribution to Bayer by the
LLC, but upon such refund, Bayer's Capital Account will be reduced by the amount
so refunded.

          (b)  Distribution Of Assets.
               ----------------------

               (i) General.  Upon dissolution and winding up of the LLC, the
                   -------
affairs of the LLC will be wound up by the Chief Executive Officer of the LLC
and the LLC will be liquidated by the Management Committee. Unless the Members
consent in writing to a distribution in kind of the assets of the LLC, and
except as provided in Section 12.5 hereof, the assets of the LLC will be sold
pursuant to such liquidation.. If both Members do not consent in writing to a
distribution of LLC assets in kind, but the Management Committee determines that
an immediate sale of all or certain of the LLC assets would be financially
inadvisable for the LLC and the Members, the Management Committee may defer sale
of the relevant LLC assets for a reasonable time; provided that the liquidation
of the LLC will be completed within the time required by Treasury Regulations
Section 1.704-1(b)(ii)(b)(2). Subject to the provisions of Section 12.5 hereof,
(A) if any LLC assets are distributed in kind, they will be distributed on the
basis of the fair market value thereof as determined by appraisal, as may be
ordered by the Management Committee, the costs of which appraisal will be paid
by the LLC, and will be deemed to have been sold at such fair market value for
purposes of the allocations under Article

[*] = 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>

IX hereof, and (B) unless both Members otherwise agree in writing, if any LLC
assets are to be distributed in kind, they will be distributed to such Members,
as joint tenants, in undivided interests in proportion to distributions to which
such Members are entitled under this Section 12.4. The LLC will terminate when
all of its assets have been sold and/or distributed and all of its affairs have
been wound up.

          (ii) Order Of Distribution.  Subject to the provisions of Section 12.5
               ---------------------
hereof, the assets of the LLC, whether cash or in kind, will be distributed in
accordance with the Act, A) first, in the amount of premium payments and
milestone payments received by the LLC, but not previously distributed to the
Members, to the Members, provided that the provisions of Section 10.1(b)(i)
hereof with respect to calculation of the amount to be distributed to Exelixis
will apply pursuant to the provisions of Section 12.5 hereof, (B) then to the
creditors of the LLC in the order of priority provided by law, (C) then to the
Members in accordance with the provisions of Section 12.5 hereof in the amount
of third party revenue of the LLC not previously distributed to the Members by
the LLC, and then (D) (A) first to creditors of the LLC in the order of priority
provided by law, then (B) premium payments, milestone payments and third party
revenue of the LLC not previously distributed to the Members will be distributed
to the Members provided that the provisions of Section 10.1(b)(i) hereof with
respect to calculation of the amount to be distributed to Exelixis will apply
pursuant to the provisions of Section 12.5 hereof, and then (C) to the Members
in proportion to their remaining Capital Accounts.  Except as specifically
provided otherwise herein, no Member will have any obligation at any time to
repay or restore to the LLC all or any part of any distribution made to such
Member from the LLC in accordance with this Section 12.4, nor to make any
additional contribution of capital to the LLC.

     12.5 Certain Matters With Respect To Intellectual Property Rights Of the
          -------------------------------------------------------------------
LLC.
---

          (a) Distribution In Kind To Members As Joint Owners.  Except as may be
              -----------------------------------------------
otherwise provided in the LLC Collaboration Agreement or any Collateral
Agreements as they may then exist, the intellectual property rights of the LLC
(exclusive of intellectual property rights of any other Person licensed to the
LLC and not assignable without the consent of such Person) developed or obtained
by the LLC and existing on the date of termination of the LLC, will not be
liquidated (other than the LLC's trade names, trademarks, service marks,
emblems, logos, symbols and insignia and rights with respect thereto, including
registrations and registration rights, all of which will be liquidated) but will
instead be distributed in kind to the Members as joint owners who will each own
an undivided joint interest therein with the rights described in Section 12.5(b)
hereof.

          (b) Respective Rights of Members In LLC Assets Distributed In Kind.
              --------------------------------------------------------------
Upon and after such distribution in kind, unless the Members agree otherwise in
writing, or until one Member, if ever, upon or after such distribution purchases
all of the other Member's jointly-owned rights therein, each Member, as a joint
owner of such distributed intellectual property rights in accordance with
Section 12.5(a) hereof, will have such rights with respect thereto as such
Member had under the LLC Collaboration Agreement as in effect most recently
before the date of such distribution in kind, and the right to grant licenses to
third parties and to use and practice such rights without accounting to the
other Member, subject in all cases to the first-referenced Member's compliance
with the terms thereof.

          (c) Adjustment Of Capital Accounts.  The Capital Accounts of the
              ------------------------------
Members will be adjusted in the manner required by Section 1.704-
1(b)(2)(iv)(e)(1) of the Treasury Regulations to reflect the unrealized income,
gain, loss and deduction inherent in such

[*] = 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.

                                      -51-
<PAGE>

distributed intellectual property rights. After such adjustment to the Capital
Accounts of the Members have been made, all future distributions on liquidation
of the LLC will take into account such distribution-in-kind of intellectual
property to the Members.

          (d) Payment Of Premium Fee Or Royalty Obligations, Or Milestone
              -----------------------------------------------------------
Payment Obligations.  Except as may be otherwise provided under the LLC
-------------------
Collaboration Agreement or as otherwise agreed in writing by the Members, any
premium fee or royalty obligations, and any milestone payment obligations, by
either Member to the LLC will be paid thereafter directly by such Member to the
other Member to the extent permitted by law.  No distribution of intellectual
property rights of the LLC as provided in this Section 12.5 will relieve either
Member from its obligations hereunder, or under any other binding agreement to
which such Member is a party or to which it is subject, to continue to pay
premium fees, royalty payments, milestone payments or other running or periodic
amounts, however denominated, thereunder according to the relevant terms of this
Agreement or of such other agreements.

          (e) Certain Assistance.  If one Member seeks to sell or assign all or
              ------------------
part of its jointly-owned interest in such distributed intellectual property to
a third party or parties, in a jurisdiction in which such sale or assignment
requires by law, as advised by the requesting Member's intellectual property
counsel the consent or acknowledgment of the other Member as joint owner of such
intellectual property, such other Member will execute and delivery such
customary documents, at its own expense, to assist the selling or assigning
Member to complete such sale or assignment, as the selling or assigning Member
requests in good faith of such other Member.

          (f) Effect On Licenses To Bayer Patents And Bayer Know-How, And On
              --------------------------------------------------------------
Exelixis Patents And Exelixis Know-How, In The Event Of Termination.  In the
-------------------------------------------------------------------
event of termination pursuant to this Article XII, if the LLC Collaboration
Agreement then is still in effect, the conditions, if any, relevant to such
termination as may be specified in the LLC Collaboration Agreement, including
Article XIV thereof, will apply.

                                 ARTICLE XIII
                           BUYOUT BY A MEMBER OF THE
                    MEMBERSHIP INTEREST OF THE OTHER MEMBER

     13.1 Determination Of Fair Market Value.  For purposes of this Agreement
          ----------------------------------
the "Affected Member" is the Member who suffers, or proposes to suffer (with
     ---------------
respect to a Proposed Changed Circumstance Notice, as defined in Section
13.2(a)(i) hereof), a Changed Circumstance, or who suffers an Event of Default
or Dissolution or Bankruptcy, as applicable, and the other Member is the "Non-
                                                                          ---
Affected Member".  For purposes of this Article XIII, Fair Market Value will be
---------------
whatever it is agreed to be in writing between the Members no later than the
earlier of (a) [ * ] after the date the Proposed Changed Circumstance Notice is
given under Section 13.2(a)(i) hereof by the Affected Member to the Non-Affected
Member, if such Proposed Changed Circumstance Notice contains the names of the
relevant Person(s) therein which cause it to be deemed, under the provisions of
Section 13.2(a)(i) hereof, to be a Final Notice or (b) [ * ] after the date the
Final Notice is given, as required under Section 13.2(a)(ii) hereof, by the
Affected Member to the Non-Affected Member as to the event relevant to such
Affected Member.;

[*] = 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.

                                      -52-
<PAGE>

provided that if the Members independently cannot agree on the Fair Market Value
of the Affected Member's Membership Interest within such relevant [ * ] period,
then the procedures set forth in Sections 13.1(a)-(h) hereof will apply to
determine such Fair Market Value:

          (a) Member Statements Of Fair Market Value.  Each of the Affected
              --------------------------------------
Member and the Non-Affected Member will deliver to the other in writing, within
[ * ] after the close of such initial [ * ] period, the delivering Member's
statement as to the Fair Market Value of the Affected Member's Membership
Interest.

          (b) Procedure If Both Statements Are The Same.  If the Fair Market
              -----------------------------------------
Value stated in both Members' statements is the same, then such amount will be
the Fair Market Value of the Affected Member's Membership Interest.

          (c) Procedure If Statements Within [ * ] Range. If the Fair Market
              ------------------------------------------
Value stated in one Member's written statement is higher than the Fair Market
Value stated in the other Member's written statement, but is not greater than
[ * ] of the lower statement, then Fair Market Value will be the average of the
two statements.

          (d) Procedure If Statements Outside Of [ * ] Range.  If the Fair
              ----------------------------------------------
Market Value stated in one Member's written statement is  greater than [ * ] of
the Fair Market Value stated in the other Member's written statement, then Fair
Market Value will be determined by an Appraiser selected by the mutual written
agreement of the Members within [ * ] after the delivery by each Member to the
other of their statements, provided that if the Members cannot agree on an
Appraiser within such [ * ] period, then:

              (i)   Selection Of An Appraiser By Each Member.  Each Member will,
                    ----------------------------------------
within [ * ] after the earlier of the date upon which the Members agree in
writing that they cannot agree on such Appraiser, or such initial thirty days
have expired, select an Appraiser;

              (ii)  Selection By Two Appraisers Of Third Appraiser.  The
                    ----------------------------------------------
Appraisers selected pursuant to Section 13.1(d)(i) hereof mutually will select a
third Appraiser within [ * ] after their selection; and

              (iii) Determination By Single Appraiser Of Fair Market Value.  The
                    ------------------------------------------------------
third Appraiser so chosen will singly determine Fair Market Value by delivering
his or her determination of Fair Market Value in writing to each Member as soon
as possible after his or her selection, setting forth in such writing such bases
and conclusions as such Appraiser deems appropriate and customary therefor.  If
the Fair Market Value as determined by such Appraiser is the average of the two
Members' statements, then such average will be Fair Market Value.  If the Fair
Market Value as determined by such Appraiser is above the average of the two
Members' statements, but not greater than the higher of the two Members'
statements, then Fair Market value will be the average between such Appraiser's
determination and such higher Member statement.  If the Fair Market Value as
determined by such Appraiser is below the average of the two Members'
statements, but not less than the lower of the two Members' statements, then
Fair Market value will be the average between such Appraiser's determination and
such lower Member statement.  If the Fair Market Value as determined by such
Appraiser is

[*] = 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.

                                      -53-
<PAGE>

greater than the higher of the two Members' statements, then Fair Market value
will be such higher Member statement. If the Fair Market Value as determined by
such Appraiser is lower than the lower of the two Members' statements, then Fair
Market value will be such lower Member statement.

          (e) Appraiser's Determination Binding Absent Demonstrable Factual Or
              ----------------------------------------------------------------
Mathematical Error Or Fraud.  Any determination by an Appraiser of Fair Market
---------------------------
value as provided herein will be binding upon the Members and the LLC absent
demonstrable mathematical or factual error, or fraud .

          (f) Certain Governing Principles For Determination of Fair Market
              -------------------------------------------------------------
Value.  Any determination of Fair Market Value pursuant to this Section 13.1
-----
will take into consideration all relevant factors, including the conditions
referred to in Section 13.6 hereof and any Event of Default if such purchase is
being made by the Non-Affected Member under Section 13.3 hereof, and any
Bankruptcy of a Member if such purchase is being made by the other Member under
Section 13.4 hereof, but only in each case to the extent that such Event of
Default or Bankruptcy reduces the value of the relevant Membership Interest, and
will be calculated by multiplying (x) the price that a willing buyer will pay
and a willing seller will accept for the purchase of all of the assets and
business of the LLC as a going concern immediately prior to the transaction
giving rise to the determination of Fair Market Value and without any discount
for lack of liquidity or control and assuming that all agreements between the
LLC and the Members that were in effect prior to such transaction would have
continued in effect by (y) the Percentage Interest in the LLC being acquired.

          (g) Fees And Costs Of Appraisers.  Each Member will bear the fees and
              ----------------------------
costs of any Appraiser that such Member selects as one of the two Appraisers
selected to determine the third.  The fees and costs of any third Appraiser
selected pursuant to Section 13.1(d)(i)(B) hereof, will be borne one-half (1/2)
by each Member.  Each Member will bear its respective internal costs connected
with any such appraisal, including those associated of its own determination for
its statement of Fair Market Value.

          (h) Cooperation.  Each Member will cooperate in all commercially
              -----------
reasonable respects and in good faith in the appraisal process, including
without limitation providing such information as is reasonably requested by the
Appraiser(s), but provided that the furnishing of such information may, in the
good faith judgment of the furnishing Member, be conditioned on such
Appraiser(s) executing and delivering a customary confidentiality agreement with
the furnishing Member with respect thereto.

     13.2 Changed Circumstance Buyout And Notices With Respect Thereto.
          ------------------------------------------------------------

          (a) Proposed Changed Circumstances Notice By Affected Member; Final
              ---------------------------------------------------------------
Notice By Affected Member Of Changed Circumstance; Non-Affected Member's Notice
-------------------------------------------------------------------------------
of Intention As To Buyout Rights And Termination Rights; Waiver.
---------------------------------------------------------------

              (i)   Proposed Changed Circumstances Notice By Affected Member.
                    --------------------------------------------------------
If either Exelixis or Bayer proposes to enter into a transaction that would, if
consummated, be 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.

                                      -54-
<PAGE>

sale of assets or proposed change of control as described in Section 1.15(b)(i)
or (ii) hereof as to Exelixis, or Section 1.15(c) hereof as to Bayer, then,
within [ * ] after such Affected Member [ * ] with respect to such proposed
event with any Person other than Bayer or its Affiliates, or the LLC, as to
Exelixis, and other than Exelixis, or the LLC, or each other, with respect to
Bayer and Bayer AG, the Affected Member will give the Non-Affected Member
written notice (a "Proposed Changed Circumstances Notice") as to the general
                   -------------------------------------
nature of the proposed event. The fact of the giving of which Proposed Changed
Circumstances Notice and the contents thereof will be Confidential Information
of the Affected Member. Such Proposed Changed Circumstances Notice need not
specify the name of the other party or parties to such proposed transaction,
and/or certain details related thereto, if such information is prohibited from
disclosure under an executed written nondisclosure agreement between the
Affected Member and such other party or parties. In addition, with respect to
any matter relating to a Changed Circumstance described in, respectively,
Sections 1.15(b)(i) or (ii) hereof, as to Exelixis, or Sections 1.15(c) hereof,
as to Bayer, the Affected Member will promptly give written notice (which will
be considered to be an amendment to the initially-given Proposed Changed
Circumstances Notice) to the Non-Affected Member, with a copy to the Management
Committee, of any material change, adverse or beneficial, with respect to such
proposed Changed Circumstance, including without limitation (if terms were
disclosed in a previously-delivered Proposed Changed Circumstances Notice) any
change in the terms proposed with respect to such Changed Circumstance, and/or
(if the names of other party or parties to the relevant proposed Changed
Circumstance were disclosed in a previously-delivered Proposed Changed
Circumstances Notice), any change in the name(s) of the other party or parties
to such proposed Changed Circumstance. Such Proposed Changed Circumstances
Notice will be deemed to be the Final Notice given for purposes of Section 13.1
hereof, and Section 13.2(a)(ii), (iii) or (iv) hereof, only if, (1) it is given
with respect to the signing by the Affected Party of a binding agreement,
including without limitation a letter of intent or heads of agreement which
contains any binding provision apart from a binding obligation of
confidentiality, and when,(2) it contains the name(s) of the other party or
parties to such proposed transaction.

          (ii) Final Notice By Affected Member Of Changed Circumstance.  In
               -------------------------------------------------------
addition to giving the Non-Affected Member a Proposed Changed Circumstances
Notice , at any time, but no later than [ * ] after the occurrence or
consummation of the relevant Changed Circumstance  as to the Affected Member,
such Affected Member will give written notice of such occurrence or consummation
to the Non-Affected Member and the Management Committee, specifying in
reasonable detail the nature of such Changed Circumstance (a "Final Notice"),
                                                              ------------
and will specify therein the name(s) of the other party or parties to such
proposed Changed Circumstance if such Changed Circumstance is a sale of assets
or proposed change of control as described in Section 1.15(b)(i) or (ii) hereof
as to Exelixis, or Section 1.15(c) hereof as to Bayer.  In addition, the
Affected Member will promptly give written notice (which will be considered to
be an amendment to the initially-given Final Notice) to the Non-Affected Member,
with a copy to the Management Committee, of any material change, adverse or
beneficial, in such Changed Circumstance, including without limitation any
change in the terms proposed for, and/or in the name(s) of the other party or
parties to such proposed transaction, as to any matter relating to a Changed
Circumstance described in, respectively, Sections 1.15(b)(i) or (ii) hereof, as
to Exelixis, or Sections 1.15(c) hereof, as to Bayer.  The giving of such Final

[*] = 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.

                                      -55-
<PAGE>

Notice (including any updates as to subsequent developments), and the contents
thereof, or portions thereof, will be Confidential Information of such Affected
Member hereunder if the Affected Member so declares in such Final Notice, and/or
may be subject to such confidentiality as to certain details thereof as may be
required under any confidentiality agreement, with any other Person, other than
Bayer or Bayer's Affiliates or the LLC, to which such Affected Member is a party
or by which it is bound, or as otherwise may be required by law.

          (iii)   Non-Affected Member's Notice of Intention As To Buyout Rights
                  -------------------------------------------------------------
And Termination Rights. Within [ * ] after the Non-Affected Member's receipt of
----------------------
a Proposed Changed Circumstances Notice from the Affected Member given under
Section 13.2(a)(i) hereof which states the name(s) of the other party or parties
to such proposed transaction as relevant (thus causing such Proposed Changed
Circumstances Notice to be deemed to be a Final Notice), or, as relevant, within
[ * ] after the Non-Affected Member's receipt of the Final Notice in the event
of the consummation of the relevant sale of assets or change of control
constituting the Changed Circumstance, the Non-Affected Member may, but is not
required to, give written notice to the Affected Member, with a copy to the
Management Committee, (a "Non-Affected Member's Notice of Intention") of such
                          -----------------------------------------
Non-Affected Member's intention to (A) exercise or to waive (specifying which it
elects) such Non-Affected Member's Buyout rights under Section 13.2(b) hereof,
or to (B) exercise or to waive (specifying which it elects) its termination
rights under Section 12.1(c) hereof (in which case such Non-Affected Member's
Notice of Intention will constitute its written notice of termination election
under Section 12.1(c) hereof if the Non-Affected Member states therein its
election to so terminate). Any such Non-Affected Member's Notice of Intention,
if given, may be, by its terms, made contingent upon the actual consummation of
the relevant Changed Circumstance, such that if such consummation does not
occur, then such Non-Affected Member's Notice of Intention may be withdrawn and
rescinded by the Non-Affected Member, without penalty, by written notice to the
Affected Member, with a copy to the Management Committee, of such withdrawal and
rescission. Such notice of withdrawal and rescission may be given at any time
after the proposed consummation date if by the date of giving of such notice of
withdrawal and rescission the Non-Affected Member has not consummated its Buyout
rights or if by such date the LLC has not commenced liquidation and dissolution
by reason of such termination election. The fact of the giving of any Non-
Affected Member's Notice of Intention, and the contents thereof, will be
Confidential Information of the Non-Affected Member.

          (iv)    Waiver By Affected Member Of Buyout Or Termination Right As To
                  --------------------------------------------------------------
Certain Changed Circumstances.  Subject to the last sentence of this Section
-----------------------------
13.2(a)(iv), the right of the Non-Affected Member to exercise its Buyout rights
under Section 13.2(b) hereof, or to terminate the LLC under Section 12.1(c)
hereof, will be deemed to be irrevocably waived by the Non-Affected Member as to
the matter(s) described in the relevant Final Notice under Section 13.2(a)(ii)
hereof (or deemed Final Notice under Section 13.2(a)(i) hereof) from the
Affected Member as to the relevant Changed Circumstance if, the Non-Affected
Member either (A) affirmatively and specifically waives its Buyout or
termination right hereunder, in writing to the Affected Member, with a copy to
the Management Committee, or (B) fails, within the relevant [ * ] period
specified under Section 13.2(a)(i) or (ii) hereof, to give written notice to the
Affected Member, with a copy to the Management Committee, as to such Non-
Affected Member's intention to exercise its Buyout or termination rights
hereunder.  The Non-Affected

[*] = 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.

                                      -56-
<PAGE>

Member will not be deemed to have waived its Buyout rights or termination rights
hereunder if with the [ * ] period provided for giving by such Non-Affected
Member of its Non-Affected Member's Notice of Intention under Section
13.2(a)(iii) hereof, or within twenty (20) days after it has given any such Non-
Affected Member's Notice of Intention, the Affected Member, as required by
Section 13.2(a)(i) or (ii) hereof, as relevant, gives the Non-Affected Member
written notice of any material change in a Changed Circumstance, (in which case
the notice election and waiver provisions of this Article XIII applicable to the
Non-Affected Member will again apply, and will run from the date of such written
notice by the Affected Member of such material change in the relevant Changed
Circumstance).

          (b) Purchase Right Of Non-Affected Member.  Upon the occurrence of a
              -------------------------------------
Changed Circumstance, provided the Non-Affected Member receiving the Proposed
Changed Circumstance Notice or Final Notice, as the case may be, relating
thereto has not previously given the Affected Member a Non-Affected Member's
Notice of Intention demanding dissolution of the LLC or has not waived or been
deemed to waive, under Section 13.2(a)(iv) hereof, such Changed Circumstance,
the Non-Affected Member may, as hereinafter provided, purchase all but not
less than all of the Membership Interest of the Affected Member for Fair
Market Value. Within [ * ] after the determination of Fair Market Value
pursuant to Section 13.1 hereof, the Non-Affected Member will either submit an
irrevocable written offer to the Affected Member with a copy to the Management
Committee, to purchase such Affected Member's Membership Interest for Fair
Market Value for cash or such other consideration as the Members agree in
writing, or will notify the Affected Member in writing, with a copy to the
Management Committee, that no offer will be made. If an offer is made, the
closing of the transaction will occur within [ * ] after the date of such
written offer, but such period will automatically be extended as necessary to
give effect to any delay days caused by obtaining any required regulatory
approvals. The purchase price for such Affected Member's Membership Interest
will be paid by the Affected Member in cash or such other consideration as the
selling Member and the purchasing Member may agree in writing. If no offer is
timely made by the Non-Affected Member under this Section 13.2(b), then the
provisions of this Agreement, including those of Articles XII and XV hereof,
will apply.

          (c) Effect On Licenses In The Event Of Changed Circumstances Buyout.
              ---------------------------------------------------------------
In the event of a Changed Circumstances Buyout pursuant to Section 12.2(b)
hereof, the conditions, if any, relevant thereto as may be specified in the LLC
Collaboration Agreement, will apply, and are incorporated herein by reference
only to the extent necessary for each application.

     13.3 Default Buyout.  In the event of an uncured Event of Default, provided
          --------------
the Non-Affected Member has not previously given to the Affected Member written
notice demanding dissolution of the LLC, the Non-Affected Member may, as
hereinafter provided, purchase all but not less than all of the Affected
Member's Membership Interest for Fair Market Value.  Within [ * ] after the
determination of Fair Market Value, the Non-Affected Member will either submit
an irrevocable written offer to the Affected Member, with a copy to the
Management Committee, or will notify the Affected Member in writing, with a copy
to the Management Committee, that no offer will be made.  If an offer is made,
the closing of the transaction will occur within [ * ] after the date of such
written offer, but giving effect to any delay days caused by obtaining
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.

                                      -57-
<PAGE>

regulatory approvals. The purchase price for such Membership Interest will be
paid in cash or such other consideration as the selling Member and the
purchasing Member may agree in writing. If no offer is timely made by the Non-
Affected Member under this Section 13.3, then the provisions of this Agreement,
including those of Articles XII and XV hereof, will apply.

     13.4 Buyout Upon Bankruptcy Or Dissolution Of A Member.  Upon obtaining
          -------------------------------------------------
actual knowledge of the Bankruptcy or Dissolution of a Member, the other Member
will have the right, by giving written notice thereof to the bankrupt Member, or
trustee therefor , and to the Management Committee, to purchase or cause its
designee to purchase the Membership Interest of such Affected Member for Fair
Market Value.  Within [ * ] after the determination of Fair Market Value, the
Non-Affected Member will either submit an irrevocable written offer to the
Affected Member, or such Affected Member's trustee, with a copy to the
Management Committee, to purchase such Affected Member's Membership Interest for
Fair Market Value, or will notify the Affected Member in writing, with a copy to
the Management Committee, that no offer will be made.  If an offer is made, the
closing of the transaction will occur within [ * ] after the date of such
written offer, but giving effect to any delay days caused by obtaining
appropriate regulatory approvals.  The purchase price for such Membership
Interest will be paid in cash or such other consideration as the selling Member
(or the trustee of the selling Member) and the purchasing Member may agree in
writing.  If no offer is timely made by the Non-Affected Member under this
Section 13.4 then the provisions of this Agreement, including those under
Articles XII and XV hereof, will apply.

     13.5 Auction Buyout Upon Deadlock On Substantial Disagreement After Fourth
          ---------------------------------------------------------------------
Anniversary Of Commencement Date, Or Upon Dissolution Of LLC Due To Judicial Or
-------------------------------------------------------------------------------
Regulatory Decision, Or Upon Delivery Of Lack Of Freedom To Operate Notice.  If
--------------------------------------------------------------------------
(1) the Members reach Deadlock on a Substantial Disagreement (but not as to
Deadlock as to any other dispute), at any time after the fourth (4th)
anniversary of the Commencement Date, or (2) dissolution of the LLC is ordered
by a final judgment by a court of competent jurisdiction or by the nonappealable
order or decision of a regulatory authority, which dissolution does not arise by
reason of action taken by either Member, or (3) on the sixth (6th) month
anniversary of the delivery by Bayer to Exelixis of a Lack Of Freedom To Operate
Notice under Section 1.15(d) hereof, the license(s) described in Section 1.15(d)
hereof have not the come into being and if Bayer and Exelixis have not agreed
otherwise in writing that such state of matters does not constitute a Changed
Circumstance as described in such Section 1.15(d) hereof, or (4) if Exelixis
does not increase the number of its Technical Personnel FTE's within the time
period set forth in Section 1.15(e) hereof, and if both Members wish to purchase
the Membership Interest of the other Member, then either Member may purchase the
Membership Interest from the other, in either case in accordance with the
following procedures:

          (a) Appraisal Of Fair Market Value.  The Fair Market Value of each
              ------------------------------
Member's Membership Interest (which together will constitute one hundred percent
(100%) of the Fair Market Value of the LLC) will be determined and reported to
the Members in writing by an Appraiser selected using the procedure set forth in
Section 13.1(d) hereof, and provided that the provisions of Sections 13.1(e)-(g)
hereof also will apply to the actions and results of such Appraiser's
determination.

[*] = 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.

                                      -58-
<PAGE>

          (b) Purchase By One Member Or The Other's Membership Interest
              ---------------------------------------------------------
Voluntarily If Fair Market Value Is Agreed.  If, upon receiving the Appraiser's
------------------------------------------
determination of the Fair Market Value of each other's Membership Interest, one
Member wishes to sell and the other to buy at such Fair Market Value, such
Member will so notify the other Member in writing and within sixty (60) days
after its receipt of such determination, and they will consummate such
transaction as soon as possible on such terms as they agree in writing.

          (c) Auctioneer.  If the Members do not agree on the Fair Market Value
              ----------
of each other's Membership Interest within such 60-day period, then the
"Auctioneer" will be the Appraiser selected pursuant to Section 13.1 hereof,
whether by mutual written agreement of the Members or as selected by their two
independent third party Appraisers.

          (d) Fees And Expenses Of Auctioneer.  The fees and expenses of the
              -------------------------------
Auctioneer, for acting as such, will be paid one-half (1/2) each by the Members.

          (e) Auction and Auction Process; Conduct of Auction; Closing of
              -----------------------------------------------------------
Purchase Of Relevant Membership Interest.
----------------------------------------

              (i)  Auction And Auction Process.  The Auctioneer will conduct an
                   ---------------------------
auction (the "Auction"), under the procedure as hereinafter provided, commencing
              -------
on the fourth (4th) day following the date of the Auctioneer's selection, to
determine, as hereinafter provided, which Member will, as will be determined by
the Auctioneer as provided herein, purchase the other Member's Membership
Interest. The Auction will be conducted by the Auctioneer in an even-handed,
equitable and impartial manner in accordance with the provisions of this Section
13.5 and in accordance with any further provisions specified in writing to the
Members by the Auctioneer (subject to the last clause of this sentence as to
agreement by the Members), which in each case which are consistent with and do
not contravene the provisions of this Section 13.5, provided that the Members
may mutually agree in writing to any lawful procedures with respect to the
Auction, which writing will be binding on the Auctioneer and the Members, will
constitute an amendment hereto, and will be controlling over any procedures
specified by the Auctioneer.

              (ii) Bid Process; Bids Based Upon Percentage Interest To Which Bid
                   -------------------------------------------------------------
Relates; Non-Accepted Bids; Determination of Winning Bid; Purchase and Closing.
------------------------------------------------------------------------------

                   (A) Bid Process.  Bayer will make the first bid in the
                       -----------
Auction by submitting its bid for Exelixis' Membership Interest in writing to
the Auctioneer, which first bid must be made within five (5) days after the
Auctioneer's selection, and must be at least equal to the Fair Market Value of
Exelixis' Membership Interest as determined by the Appraiser, after which the
Members will alternate in submitting bids in writing to the Auctioneer for each
other's Membership Interest. The Auctioneer will promptly notify each Member in
writing of the Auctioneer's receipt of a bid and the amount of such bid, after
which the Member who had not made the previous bid will have five (5) days to
submit its bid to the Auctioneer.

                   (B) Bids Based Upon Percentage Interest To Which Bid Relates.
                       --------------------------------------------------------
Each bid by the relevant Member will be based upon the relative Percentage
Interest

[*] = 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.

                                      -59-
<PAGE>

that is held by the other Member, such that, if the Percentage Interests of
Bayer and Exelixis were the same at the time of the Auction as they are at the
Commencement Date, then any bid by Bayer for Exelixis' interest will be based
upon Exelixis' forty percent (40%) interest in the LLC, and any bid by Exelixis
will be based upon Bayer's sixty percent (60%) interest in the LLC.

                   (C) Non-Accepted (Invalid) Bids.  Any bid submitted to the
                       ---------------------------
Auctioneer (other than with respect to the first bid by Bayer in the Auction
process) that does not exceed the immediately preceding bid of the same bidding
Member by at least five percent (5%) of such bidder's last bid for the other
Member's Membership Interest will be considered an invalid bid and will not be
accepted by the Auctioneer.

                   (D) Determination By Auctioneer of Winning Bid; Notification.
                       --------------------------------------------------------
If a Member does not submit a bid (or an invalid bid is submitted as specified
in Section 13.5(c)(ii)(C) hereof, and no subsequent valid bid is submitted) in
such five-day period or at such time as a Member states in writing to the
Auctioneer that such Member is unwilling to submit any further bids, the
Auctioneer will declare the Auction completed and will notify the Members and
the Management Committee promptly in writing that it is completed. Upon such
completion of the Auction process, the Auctioneer will determine, in such
Auctioneer's sole good faith discretion, which determination will be binding
upon the Members absent demonstrable mathematical or factual error, or fraud,
which Member's final bid in the Auction process is more fair to the other
Member, taking into account the relative Percentage Interests of the Members,
than the other Member's bid. The Auctioneer will notify the Members in writing
as to the Auctioneer's decision, within three (3) days after the Auctioneer's
decision, specifying the winning bidder Member and the amount of the winning bid
as so determined by the Auctioneer.

          (iii)    Purchase By Winning Bidding Member Of Other Member's
                   ----------------------------------------------------
Membership Interest.  The winning bidding Member will purchase the other
-------------------
Member's Membership Interest at the price submitted by such winning bidding
Member in its winning bid.

          (iv)     Closing.  The purchase by the winning bid Member from the
                   -------
other Member, at the price specified in such high bid, and for cash or such
other consideration as the Members agree in writing, will occur within ninety
(90) days after the date the winning bid is declared by the Auctioneer, but
giving effect to any delay days caused by obtaining appropriate regulatory
approvals.

     13.6 Arbitration Upon Deadlock On Substantial Disagreement Prior To Fourth
          ---------------------------------------------------------------------
Anniversary Of Commencement Date.  If there exists Deadlock on a Substantial
--------------
Disagreement prior to the [ * ] anniversary of the Commencement Date, the
Deadlock will be resolved by arbitration pursuant to the provisions of Section
17.2 hereof, and neither Member will have the right under this Article XIII to
buy out the other Member's Membership Interest solely by reason of such Deadlock
on Substantial Disagreement.

[*] = 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.

                                      -60-
<PAGE>

                                  ARTICLE XIV
                                    DEFAULT

     14.1 Events Of Default.  An "Event of Default" will be considered to have
          -----------------       ----------------
occurred with respect to a Member (which Member will be considered for purposes
of this Agreement as the Affected Member with respect to such Event of Default)
if:

          (a) Failure To Make Capital Contribution.  Such Affected Member fails
              ------------------------------------
to make a Capital Contribution required of it pursuant to Article IV hereof and
such failure continues for [ * ] after such Affected Member has been given
written notice thereof by the Non-Affected Member or by the Management
Committee; and/or

          (b) Insufficient Technical Personnel FTE's Of Exelixis.  If at the
              --------------------------------------------------
close of any calendar quarter during the term hereof, (i) Exelixis had serving
as full-time employees or as full-time consultants to Exelixis during such
quarter a total of less than [ * ] Technical Personnel FTE's (as defined in
Section 7.10(b)(v) hereof), and (ii) if within [ * ] after delivery to Bayer by
the LLC of the report as to Technical Personnel FTE's for such quarter required
under Section 7.10(b)(v) hereof, Bayer gives written notice to Exelixis that, in
the good faith judgment of Bayer, Exelixis has insufficient Technical Personnel
FTE's to warrant continuing the LLC, and (iii) Exelixis does not increase the
number of Technical Personnel FTE's to at least [ * ] within [ * ] after
delivery of such notice by Bayer; and/or

          (c) Certain Other Failures.  Such Affected Member fails to perform or
              ----------------------
violates any other material term or condition of this Agreement and such failure
or violation continues for [ * ] or more days after such Affected Member has
been given written notice thereof by the Non-Affected Member or by the
Management Committee; provided that nothing herein will limit the Affected
Member's obligation to pay damages for such breach during such cure period;
and/or

          (d) Certain Actions.  Such Affected Member otherwise causes the
              ---------------
dissolution of the LLC in contravention of the terms of this Agreement; and/or

          (e) Material Breach of Collaboration Agreement.  Such Affected Member
              ------------------------------------------
fails to cure a breach of the LLC Collaboration Agreement (as defined in Section
14.3 thereof) and the Non-Affected Member exercises its rights pursuant to
Section 14.2(c) or (d) of this Agreement; and

          (f) Notice By Non-Affected Member.  Written notice
              -----------------------------
has been given to the Affected Member by the Non-Affected Member, with a copy of
the Management Committee, reciting facts therein in reasonable detail regarding
(i) the date upon which, in the good faith judgment and knowledge of the Non-
Affected Member, such Event of Default occurred for the Affected Member, (ii)
the general nature of such Event of Default and (iii) that the Event of Default
(A) is having or would have, in the good faith judgment of the Non-Affected
Member, a material adverse effect upon the Affected Member's ability to perform
such Affected Member's obligations under this Agreement, the LLC Collaboration
Agreement, and/or the relevant

[*] = 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.

                                      -61-
<PAGE>

Collateral Agreements, and (B) which does have or would have, in the good faith
judgment of the Non-Affected Member, a material adverse effect on the business
or operations of the LLC.

     14.2 Remedies of Default.  Except as limited by Section 14.1(c) of this
          -------------------
Agreement and by Section 14.3(b) of the LLC Collaboration Agreement, upon the
occurrence of, and during the continuance of, an Event of Default, the Non-
Affected Member may elect any or all of the following remedies:

          (a) Injunctive Relief.  The Non-Affected Member may seek to enjoin
              -----------------
such default or to obtain specific performance of the Affected Member's
obligations; or

          (b) Withhold Payments To The LLC.  The Non-Affected Member then may
              ----------------------------
withhold payments otherwise required hereunder to be made to the LLC; or

          (c) Termination And Dissolution Of LLC.  The Non-Affected Member may
              ----------------------------------
elect to terminate and dissolve the LLC as provided in Section 12.1(b)(iii)(C)
hereof, in which event the affairs of the LLC will be wound up as provided in
Article XII hereof; or

          (d) Purchase Of Membership Interest.  The Non-Affected Member may
              -------------------------------
elect to purchase the Affected Member's entire Membership Interest pursuant to
Section 13.3 hereof.

     14.3 Election Of Remedies.  The election of a remedy specified under
          --------------------
Section 14.2(a) hereof by the Non-Affected Member will be made by giving written
notice (a "Default Notice") to the Affected Member, with a copy to the
           --------------
Management Committee, at any time that the Event of Default has occurred and is
continuing.  If an election by the Non-Affected Member is made pursuant to
Section 14.2(a) hereof to seek an injunction, specific performance or other
equitable relief, and a final judgment in such action is rendered denying such
equitable remedy, then the Non-Affected Member may elect to pursue the remedy
specified in Section 14.2(a) hereof to the extent such remedy is available
unless, prior to the giving of such notice, the Affected Member has cured the
relevant Event of Default in full or the final judgment denying equitable relief
specifically held that there was no Event of Default by the Affected Member.
The election of any remedy by the Non-Affected Member pursuant to Section 14.2
hereof and to this Section 14.3 will not for any purpose be deemed to be a
waiver by the Non-Affected Member of any other remedy available to the Non-
Affected Member under applicable law.

                                  ARTICLE XV
                           EFFECT OF CERTAIN EVENTS

     15.1 Certain Changed Circumstance Applicable To Either Member.  If a
          --------------------------------------------------------
Changed Circumstance occurs with respect to either Member during the term of the
LLC, then unless otherwise agreed in writing by the Members, LLC Collaboration
Agreement and the Collateral Agreements as they may then exist will, unless and
to the extent that they otherwise so provide, remain in full force and effect.

     15.2 Certain Changed Circumstance Applicable To Exelixis.  If a Changed
          ---------------------------------------------------
Circumstance occurs with respect to Exelixis, and if Bayer, in its sole
discretion, does not timely elect to terminate the LLC under Section 12.1
hereof, then:

[*] = 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.

                                      -62-
<PAGE>

          (a) Continuation Of LLC.  The LLC will continue in existence; and
              -------------------

          (b) Continuation Of Certain Agreements.  The LLC Collaboration
              ----------------------------------
Agreement and the Collateral Agreements as they may then exist will, to the
extent they so provide, remain in full force and effect; and

          (c) Continuation Of Assay Development Within LLC.  Assay development
              --------------------------------------------
within the LLC will continue until the end of the Research Term, as defined in
the LLC Collaboration Agreement; and

          (d) Updates Of HelioTag.  Bayer and the LLC will continue to get
              -------------------
updates of HelioTag (as it may be renamed after the Commencement Date) from
Exelixis in the manner delivered prior to such event; and

          (e) Continuation Of LLC And Of Percentage Interests.  If Bayer does
              -----------------------------------------------
not purchase Exelixis' Membership Interest as provided under Article XIII
hereof, the Members will retain their respective Membership Interests and
Percentage Interests; and

          (f) Certain Conditions Applicable To Exelixis During Interim Period.
              ---------------------------------------------------------------
If pursuant to Section 13.2(a)(iii) hereof Bayer not has waived, or been deemed
to have waived, its Buyout right, then for the period between the date of such
notice from Exelixis to Bayer as to such Changed Circumstance and the earliest
of (1) the date of the Buyout by Bayer of Exelixis' Membership Interest, (2) the
termination of the LLC pursuant to the terms hereof, or (3) the closing of the
transaction involving Exelixis which gave rise to the Changed Circumstance, as
relevant:

              (i)   Independent Member Representatives And Members Of The JSC.
                    ---------------------------------------------------------
Exelixis must immediately appoint and have serving during such period as its
Member Representatives and as its members of the JSC individuals who are
independent of Exelixis, and

              (ii)   Exelixis Access To Certain Information.  Exelixis will have
                     --------------------------------------
access to data and intellectual property that is generated by the LLC with
respect to research and development upon such terms as the Management Committee
determines in good faith, but will continue to get such financial information as
is provided under Section 8.6 hereof.

              (iii) Certain Resumption Of Rights Of Exelixis.  If pursuant to
                    ----------------------------------------
Section 13.2(a)(iii) hereof Bayer does not waive, or is not deemed thereunder to
waive, its Buyout right, but does not thereafter timely exercise its Buyout
right, or if before Bayer exercises such Buyout right such Changed Circumstance
ceases to exist, the cessation of which Exelixis will immediately notify Bayer
in writing, with a copy to the Management Committee, then Exelixis' rights as to
whom it may appoint as Member Representatives and members of the JSC, and its
other rights hereunder, including its rights to any information of the LLC, will
resume as in effect immediately prior to such Changed Circumstance coming into
being.

     15.3 Certain Changed Circumstance Applicable To Bayer.  If a Changed
          ------------------------------------------------
Circumstance occurs with respect to Bayer, and if Exelixis, in its sole
discretion, does not timely elect to terminate the LLC as provided in Section
12.1 hereof, then:

[*] = 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.

                                      -63-
<PAGE>

          (a) Continuation Of LLC.  The LLC will continue in existence; and
              -------------------

          (b) Continuation Of Certain Agreements.  The LLC Collaboration
              ----------------------------------
Agreement and the Collateral Agreements as they may then exist will, to the
extent they so provide, remain in full force and effect; and

          (c) Continuation Of Assay Development Within LLC.  Assay development
              --------------------------------------------
within the LLC will continue until the end of the Research Term, as defined in
the LLC Collaboration Agreement; and

          (d) Updates Of HelioTag.  The LLC will continue to get updates of
              -------------------
HelioTag (as it may be renamed after the Commencement Date) from Exelixis in the
manner delivered prior to such event; and

          (e) Continuation Of LLC And Of Percentage Interests.  If Exelixis does
              -----------------------------------------------
not purchase Bayer's Membership Interest as provided under Article XIII hereof,
the Members will retain their respective Membership Interests and Percentage
Interests; and

          (f) Certain Conditions Applicable To Bayer During Interim Period.  If
              ------------------------------------------------------------
pursuant to Section 13.2(a)(iii) hereof Exelixis not has waived, or been deemed
to have waived, its Buyout right, then for the period between the date of such
notice from Bayer to Exelixis as to such Changed Circumstance and the earliest
of (1) the date of the Buyout by Exelixis of Bayer's Membership Interest, or (2)
the termination of the LLC pursuant to the terms hereof, or (3) the closing of
the transaction involving Bayer which gave rise to the Changed Circumstance, as
relevant:

              (i)   Independent Member Representatives And Members Of The JSC.
                    ---------------------------------------------------------
Bayer must immediately appoint and have serving during such period as its Member
Representatives and as its members of the JSC individuals who are independent of
Bayer, and

              (ii)  Bayer Access To Certain Information.  Bayer will have
                    -----------------------------------
access to data and intellectual property that is generated by the LLC with
respect to research and development upon such terms as the Management Committee
determines in good faith, but will continue to get such financial information as
is provided under Section 8.6 hereof.

              (iii) Certain Resumption Of Rights Of Bayer.  If pursuant to
                    -------------------------------------
Section 13.2(a)(iii) hereof Exelixis does not waive, or is not deemed thereunder
to waive, its Buyout right, but does not thereafter timely exercise its Buyout
right, or if before Exelixis exercises such Buyout right such Changed
Circumstance ceases to exist, the cessation of which Bayer will immediately
notify Exelixis in writing, with a copy to the Management Committee, then
Bayer's rights as to whom it may appoint as Member Representatives and members
of the JSC, and its other rights hereunder, including its rights to any
information of the LLC, will resume as in effect immediately prior to such
Changed Circumstance coming into being.

[*] = 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.

                                      -64-
<PAGE>

                                  ARTICLE XVI
                             RIGHT OF FIRST OFFER

     16.1 Exercise Of Rights; Adjustment Of Percentage Interests.
          ------------------------------------------------------

          (a) Notice Of Proposed Issuance of Additional Membership Interests Or
              -----------------------------------------------------------------
Other Interests.  If the LLC proposes to issue any additional Membership
---------------
Interests or any other interests in the LLC, including without limitation any
equity security of the LLC, and including therein without limitation convertible
promissory notes, warrants or options to purchase an interest in the LLC, and
such proposal has been approved by the Management Committee, the LLC will give
each Member prior written notice of the LLC's intention, describing the
additional Membership Interests or other interests in the LLC, the price and the
general terms and conditions upon which the LLC proposes to issue such
additional Membership Interests or other interests in the LLC and the
anticipated effect on such Member's Percentage Interest.

          (b) Exercise Of Right By Members.  Each Member will have [ * ] after
              ----------------------------
the giving of such notice, and [ * ] after the giving of any notice of a
material change in such offering (which change notice the LLC promptly will
deliver to each Member), to elect by giving written notice thereof to the
Management Committee, to purchase, for the price and upon the terms and
conditions specified in the LLC's notice, up to the total of additional
Membership Interests or other interests in the LLC offered, in each case with a
right of oversubscription for each Member, the amount of which oversubscription
to be specified in such written notice to the LLC.

          (c) Procedure In The Event Of Oversubscription By Members.  If both
              -----------------------------------------------------
Members subscribe (the "Subscribing Members") for more than the total of
                        -------------------
additional Membership Interests or other interests in the LLC Offered (whether
such total is all of such additional Membership Interests or other interests in
the LLC, then the Subscribing Members, together, will be entitled to purchase
only their respective Pro Rata Share, up to the total of additional Membership
Interests or other interests in the LLC offered.

          (d) Automatic Adjustment Of Percentage Interests.  The Percentage
              --------------------------------------------
Interests of the Members will automatically, without any executed amendment
hereto being requested, be adjusted, from and after the issuance of such
additional Membership Interests, to reflect the result of such issuance.

     16.2 Issuance Of New Securities To Other Persons.  If the Members do not
          -------------------------------------------
together or singly purchase all of the Membership Interests or other interests
in the LLC so offered, then the LLC will, if both Members have so agreed in
writing, have [ * ] following exercise by the Members of their rights of first
offer hereunder to sell to other Persons the additional Membership Interests or
other interests in the LLC in respect of which the rights of purchase of the
Members were not exercised, at a price and upon general terms and conditions no
more favorable to the purchasers thereof than specified in the LLC's notice to
the Members pursuant to Section 16.1 hereof.  If the LLC has not sold the
additional Membership Interests or other interests in the LLC within such [ * ],
the LLC will not thereafter issue or sell any additional

[*] = 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.

                                      -65-
<PAGE>

Membership Interests or other interests in the LLC without first offering such
securities to the Members, in the manner provided in this Section 16.2.

     16.3 Termination Of Rights Of First Offer.  The rights of first offer
          ------------------------------------
established by this Section 16 will terminate as to all Members upon the
termination of the LLC.

                                 ARTICLE XVII
                              DISPUTE RESOLUTION

     17.1 Procedure Before Arbitration.  Any dispute between the Members other
          ----------------------------
than a dispute over a tax reporting matter, which will be resolved as provided
in Section 17.3 hereof, and other than a dispute involving intellectual property
of either Member or of the LLC, for which judicial resolution will be available
to any party, but otherwise including without limitation a Substantial
Disagreement and in each case involving, and only with respect to, the LLC, will
be attempted to be resolved by the Members in accordance with the following
procedure before the provisions of Section 17.2 hereof will apply:

          (a) Notice.  One Member will notify the other Member in writing of the
              ------
nature of the dispute in reasonable detail, with a copy to the Management
Committee.  If the Members cannot resolve such dispute within [ * ] after such
notice is given, they will, by the end of such [ * ], agree on the issues giving
rise to the dispute and will submit the matter, and such agreed issues, in
writing to their respective Chief Executive Officer or equivalent.

          (b) Appointment Of Senior Executives.  Within [ * ] after their
              --------------------------------
receipt of such notice of the dispute, the respective Chief Executive Officer of
each Member (or a senior executive of the relevant Member (or, as to Bayer, at
its election, a senior executive of Bayer AG) notified as such in writing
promptly by such Member to the other Member), each will appoint a single
delegate from among their respective senior executives who will have full power
and authority to resolve the dispute.  The respective delegates will then have a
period of an additional [ * ] after the expiration of such initial [ * ] period
within which to meet and attempt to resolve the dispute.  If the senior
executives cannot resolve the dispute within such time period, then the Chief
Executive Officers of the Members (or their respective pre-specified senior
executives, as relevant), will meet to attempt to resolve the dispute.

          (c) Deadlock.  If the dispute has not been resolved within [ * ] after
              --------
the date of the original notice from one Member to the other of the dispute
given as provided in Section 17.1(a) hereof, then either Member may certify to
the other in writing, with a copy to the Management Committee, at any time
within [ * ] after the expiration of such [ * ] period that the Members have
reached Deadlock.

          (d) Purchase Of Membership Interest Upon Deadlock After Fourth
              ----------------------------------------------------------
Anniversary Of Commencement Date.  If either Member certifies to the other in
--------------
writing that Deadlock has been reached with respect to a Substantial
Disagreement after the fourth anniversary of the Commencement Date, then the LLC
Collaboration Agreement will continue, but either Member may then offer to
purchase the Membership Interest of the other in accordance with the provisions
of Section 13.5 hereof.  If the relevant Member declines in

[*] = 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.

                                      -66-
<PAGE>

writing to, or does not timely, pursue such purchase process, then the matter
will be resolved by arbitration as provided in Section 17.2 hereof.

          (e) Procedure For Resolution If Deadlock For Other Than Substantial
              ---------------------------------------------------------------
Disagreement, Or Deadlock On Substantial Disagreement Prior To [ * ]
--------------------------------------------------------------------
Anniversary.  If either Member certifies to the other in writing that Deadlock
-----------
has been reached with respect to a dispute other than one involving a
Substantial Disagreement, or that Deadlock has been reached, prior to the [ * ]
anniversary of the Commencement Date, with respect to a Substantial Disagreement
then the parties agree that the LLC Collaboration Agreement will continue, but
the matter will be resolved by arbitration as provided in Section 17.2 hereof.

     17.2 Resolution By Arbitration.
          -------------------------

          (a) General.  Except with respect to any dispute involving the
              -------
Confidential Information or intellectual property of either party, for which the
parties hereto may seek judicial relief, any dispute between or among any of the
parties to this Agreement that arises out of or relates to this Agreement,
including a Substantial Disagreement, will, after the procedures described in
Section 17.1 have been followed to their conclusion, be finally settled by
binding arbitration in accordance with the Rules of the International Chamber of
Commerce (the "ICC").  Any disputes between the parties with respect to
               ---
arbitration procedures will be resolved by arbitration under this Section 17.2.
The arbitration will take place in New York, New York.  The parties will, before
the hearing of any dispute by such arbitrators, make discovery and disclosure of
all materials relevant to the subject matter of such dispute, including the
taking of depositions at times and places mutually agreeable to the parties,
subject to such reasonable and customary further nondisclosure agreements or
agreements relating to attorney-client privilege as either party may reasonably
and in good faith request of the other in connection with such discovery and
disclosure. Subject to such protective measures, the parties will make available
to the arbitrators and to each other and their relevant professional advisors,
access to materials in written, electronically stored, or other form, including
access by computer over secured links, as the requesting arbitrator or party
reasonably and in good faith requests.  Neither party will be required to
furnish such access in any medium other than that in which the relevant material
is stored at the time of such request.  The parties hereby agree to exclude any
application or appeal to the courts in connection with any question of law
arising in the course of the referral to arbitration or out of the award.  Each
of the parties will appoint one arbitrator and the two so nominated will, in
turn, choose a third arbitrator. if the arbitrators chosen by the parties cannot
agree on the choice of the third arbitrator within a period of thirty (30) days
after their nomination, then the third arbitrator will be appointed by the ICC.
The language of the arbitration will be English.

          (b) Applicable 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 except those governed by the Act and by federal law, which
will apply to such other matters.  The applicable procedural law will be the law
of the place of arbitration.

[*] = 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.

                                      -67-
<PAGE>

          (c) Arbitrator Decisions.  The arbitrators will decide in accordance
              --------------------
with the terms of this Agreement and will take into account any appropriate
trade usages applicable to the transaction.  The arbitrators will state in
writing the reasons upon which the award is based.

          (d) Award Of Arbitrators.  The award of the arbitrators will be final
              --------------------
and binding upon the parties, and may, at the arbitrators' discretion, include
costs of the arbitration, reasonable fees and costs of attorneys, experts and
other witnesses.  Judgment upon the award may be entered in any court having
jurisdiction.  An application may be made to any such court for judicial
acceptance of the award and an order of enforcement.

     17.3 Resolution Of Certain Disputes Over Tax Matters.  If either of the
          -----------------------------------------------
Members or the LLC disagrees with the proposed treatment of an item on the
return prepared by or for the Tax Matters Member, the Members and the LLC will
promptly seek to resolve the disagreement through good faith discussions.  If
the dispute cannot be so resolved, the Members and the LLC will engage the
services of a mutually agreed nationally recognized law firm or accounting firm
(which may be any law firm or accounting firm then retained by the LLC, or by
either Member, otherwise for general or specific matters) to resolve the matter.
The decision of such law firm or accounting firm on such matter, absent
demonstrable factual error or mathematical error, or fraud, will be binding on
the Members and the LLC.  Such firm's fees and costs will be borne one-third by
each Member and one-third by the LLC.

                                 ARTICLE XVIII
                                CONFIDENTIALITY

     18.1 Obligations Of Confidentiality.  The provisions of this Article XVIII
          ------------------------------
will apply to all Confidential Information disclosed by one party hereto to one
or more of the other parties hereto, whether prior to or after the Commencement
Date, and which is not otherwise the subject of a written nondisclosure
agreement between the relevant parties.  Each party hereto (a) will hold the
other parties' Confidential Information in strict confidence, (b) will not
disclose such Confidential Information to any third parties and will take all
reasonable steps to prevent such disclosure, which steps will include at least
those taken by such relevant other party to protect such other party's own
confidential information of like kind, and (c) will not use any Confidential
Information of the other party for any purpose except for the business of the
LLC or as specifically permitted by the LLC Collaboration Agreement.  Each
receiving party may disclose the disclosing party's Confidential Information to
the receiving party's responsible employees and consultants who have a bona fide
need to know, but only to the extent necessary to carry out the purposes of the
LLC.  Each receiving party will instruct all such employees and consultants not
to disclose such Confidential Information to third parties, including other
consultants, without the prior written permission of the disclosing party.

     18.2 Certain Confidential Information.  The existence of this Agreement and
          --------------------------------
its terms, and the existence and terms of the LLC Collaboration Agreement and
the Collateral Agreements as they may then exist are Confidential Information of
each party hereto.

[*] = 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.

                                      -68-
<PAGE>

     18.3 Return Of Confidential Information.  Upon the disclosing party's
          ----------------------------------
request, the receiving party will promptly return to the disclosing party all
tangible items containing or consisting of the disclosing party's Confidential
Information and all copies thereof

     18.4 No Other Rights.  Nothing contained in this Agreement will be
          ---------------
construed as granting any rights to the receiving party, by license or
otherwise, to any of the disclosing party's Confidential Information except as
specified in this Agreement

     18.5 Acknowledgment.  Each Member and the LLC acknowledge that the
          --------------
unauthorized disclosure or use of the disclosing party's Confidential
Information would cause irreparable harm and significant injury to the
disclosing party, the degree of which may be difficult to ascertain.
Accordingly, each Member agrees that the disclosing party will have the right to
seek an immediate injunction enjoining any breach of this Agreement by the
receiving party or its employees or consultants, as well as the right to pursue
any and all other rights and remedies available at law or in equity for such
breach.

     18.6 Disclosure Required By Law.  If the receiving party (or its
          --------------------------
Affiliates) is required, whether by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand or similar
process, by any competent government authority, including pursuant to any
applicable rule of any stock exchange, self-regulatory organization or other
government agency, including without limitation such disclosure in connection
with any public offering of securities by either Member or their relevant
Affiliates, to disclose any Confidential Information of the disclosing party,
the receiving party will promptly notify the disclosing party in writing, in
reasonable detail, of such request or requirement and will cooperate with the
disclosing party in seeking appropriate protective arrangements requested by the
disclosing party.  If, in the absence of a protective order or the receipt of a
waiver in writing by the disclosing party of such protective order, the
receiving party (or any of its Affiliates) is in the written opinion of the
receiving party's counsel compelled to disclose the Confidential Information,
the receiving party (or its Affiliates) may disclose only so much of the
Confidential Information to the party compelling disclosure as is required by
law.  The receiving party will exercise (and will cause its Affiliates to
exercise) commercially reasonable best efforts to obtain appropriate protective
arrangements or other reliable assurance that confidential treatment will be
accorded to Confidential Information of the disclosing party in the event of
such required disclosure.

     18.7 Public Announcements.  During the term of this Agreement, neither the
          --------------------
LLC nor either Member will (except as may otherwise be required by law as
described in, and subject to the provisions of, Section 18.6 hereof) issue any
press release or other public announcement or disclosure, with respect to this
Agreement or any of the Collateral Agreements as they may then exist, or any of
the transactions contemplated hereby or thereby, nor any material development
relating to any of the foregoing, without the prior written consent of both
Members.

     18.8 Survival Of Confidentiality Obligations.  The provisions set forth in
          ---------------------------------------
this Article XVIII will survive any expiration or termination of this Agreement,
for a period of [ * ] after the effective date of such expiration or
termination.

[*] = 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.

                                      -69-
<PAGE>

                                  ARTICLE XIX
                                 MISCELLANEOUS

     19.1 Further Assurances.  The parties hereto will execute and deliver any
          ------------------
further instruments or documents and perform any additional acts that are or may
become necessary to effectuate and carry on the LLC created by this Agreement
and to carry out the purposes and intent of this Agreement.

     19.2 Binding Effect.  Subject to the restrictions on transfer set forth in
          --------------
Section 3.4 hereof, this Agreement will be binding on and inures to the benefit
of the Members and their respective transferees, successors, assigns and legal
representatives.

     19.3 Entire Agreement; Amendment; Incorporation Of Exhibits By Reference.
          -------------------------------------------------------------------
This Agreement sets forth the agreement between the Members (or among the
Members if there are more than two (2) Members) with respect to the specific
subject matter hereof, and, except as otherwise set forth herein, supersedes and
terminates all prior representations, agreements and understandings between the
Members (or among the Members if there are more than two (2) Members) regarding
the subject matter hereof.  No alteration, amendment, change or addition to this
Agreement will be binding upon the Members or the LLC unless in writing and
signed by an authorized signatory of each Member, in which case such amendment
also will be binding upon the LLC.  Each Exhibit hereto is incorporated herein
by reference.

     19.4 Assignment.  Neither Member (nor any Member if there are more than two
          ----------
(2) Members) may assign or transfer this Agreement or any of such Member's
rights or obligations hereunder without the prior written consent of the other
Member.

     19.5 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 19.5.  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.  All notices to the Management Committee will be given to each Member
Representative then serving, at such address for such Member Representative as
is shown at the relevant time in the records of the LLC.

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

[*] = 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.

                                      -70-
<PAGE>

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

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

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

     19.6 Electronic Data Interchange.  If both Members and/or the LLC 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.

     19.7 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 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.

     19.8 Counting Of Time.  Whenever days are to be counted under this
          ----------------
Agreement, the first day will not be counted and the day will be counted, such
that if a notice is delivered on a Monday to one Member, for example, with a
five (5) day reply period hereunder, the reply must

[*] = 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.

                                      -71-
<PAGE>

be given to the sending Member (not received by such sending Member) by such
recipient member no later than 11:59 a.m. local time for the sender, on the
Saturday next following such Monday.

     19.9  Force Majeure Events.  Except as otherwise provided herein, no Member
           --------------------
will be in breach of this Agreement, or liable to the other Member, or to the
LLC, 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 Member will be suspended as long as such Force
Majeure Event continues, but such suspension will have no effect upon the rights
of the Members to terminate the LLC, as provided in Section 12.1(c)(iii) hereof,
or of one Member to purchase the Membership Interest of the other Member as
provided in Section 13.2 hereof, in the event of a Continuing Force Majeure
Event.

     19.10  Hardship  If, during the period of this Agreement, performance of
            --------
this Agreement should lead to unreasonable hardship for one or other Member
taking the interests of both Members into account, both Members will endeavor to
agree in good faith to amend this Agreement in view of such circumstance.

     19.11  Non-Waiver.  The failure of a Member 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.

     19.12  Disclaimer Of Agency; No Right Of Members To Commit Or Bind LLC.
            ---------------------------------------------------------------
This Agreement will not render either Member the legal representative or agent
of another, nor will either Member 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 Member to be bound.  Except as expressly provided herein, or
except as expressly consented to in writing by the other Member in advance of
such commitment, no Member will have the right to commit or bind the LLC.

     19.13  Certain Third Parties.  Except with respect to the rights of certain
            ---------------------
Persons to be indemnified pursuant to Article XI 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.

     19.14  No Grant Of Rights.  Except as specifically stated herein, neither
            ------------------
Member, nor the LLC, grants to any other party hereto and rights or license to
any intellectual property rights or other rights of the first party.

[*] = 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.

                                      -72-
<PAGE>

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

     19.16  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.

     19.17  Costs And Attorneys' Fees.  Except as otherwise provided in Article
            -------------------------
XI hereof, including therein the definition of "Damages" under Section 1.21
hereof, 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.

     19.18  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 the Act and
by federal law, which will apply to such other matters.

     19.19  Waiver Of Action For Partition.  Each Member hereby irrevocably
            ------------------------------
waives during the term of the LLC any right that such Member may have to
maintain any action for partition with respect to the property of the LLC.

     19.20  Counterparts.  This Agreement may be executed in one or more
            ------------
counterparts, each of which will be an original and both of which will
constitute together the same document.

     19.21  Official Language.  The official text of this Agreement and any
            -----------------
appendices, Exhibits and Schedules 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.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.

BAYER CORPORATION                       EXELIXIS PHARMACEUTICALS, INC.

By: /s/ Emil E. Lansu                   By: /s/ George Scangos
    ----------------------------              -----------------------------
Name: Emil E. Lansu                     Name: George Scangos
     ---------------------------                ---------------------------
Title: Executive Vice President         Title: President & CEO
       -------------------------                 --------------------------
Date signed: December 16, 1999          Date signed: December 16, 1999
             -------------------                     ----------------------

[*] = 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.

                                      -73-
<PAGE>

GENOPTERA LLC
By: /s/ Frank F. Reuscher
    ----------------------------
Name: Frank F. Reuscher
Title:  Chief Executive Officer
Date signed: December 15, 1999

[*] = 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.

                                      -74-
<PAGE>

                                   EXHIBIT A
                                   ---------
                         LIST OF COLLATERAL AGREEMENTS
                         -----------------------------

                          [NONE AT 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.

                                      -i-<PAGE>

                                                                   EXHIBIT 10.13

                          RESEARCH COLLABORATION AND

                         TECHNOLOGY TRANSFER AGREEMENT

                                    BETWEEN

                        EXELIXIS PHARMACEUTICALS, INC.

                                      AND

                         BRISTOL-MYERS SQUIBB COMPANY

[ * ] = 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.
<PAGE>

                               Table Of Contents

<TABLE>
<CAPTION>
                                                                                        Page
<S>                                                                                     <C>
1.  Definitions........................................................................    1

    1.1   "Abandoned Target"...........................................................    1

    1.2   "Affiliate"..................................................................    1

    1.3   "Analogue"...................................................................    2

    1.4   "Annual FTE Rate"............................................................    2

    1.5   "Back-Up Compound"...........................................................    2

    1.6   "Biotherapeutic Product".....................................................    2

    1.7   "BMS Compound"...............................................................    2

    1.8   "BMS Core Technology"........................................................    3

    1.9   "BMS Product"................................................................    3

    1.10  "Candidate Target"...........................................................    3

    1.11  "Collaboration"..............................................................    3

    1.12  "Collaboration Compound".....................................................    3

    1.13  "Compound Class".............................................................    3

    1.14  "Compound Product"...........................................................    4

    1.15  "Conceptual Target"..........................................................    4

    1.16  "Confirmed Target"...........................................................    4

    1.17  "Controlled".................................................................    4

    1.18  "Core Technology Patents"....................................................    5

    1.19  "Diagnostic Product".........................................................    5

    1.20  "Diligent Efforts"...........................................................    5

    1.21  "Disclosed Target"...........................................................    5

    1.22  "Exelixis Core Technology"...................................................    5

    1.23  "Field"......................................................................    5

    1.24  "FlyTag Database"............................................................    5

    1.25  "FTE"........................................................................    5

    1.26  "Gene Product"...............................................................    5

    1.27  "Improvement Inventions".....................................................    6

    1.28  "IND"........................................................................    6

    1.29  "Independent Research".......................................................    6
</TABLE>

[*] = 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.

                                      i.

<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                         Page
<S>                                                                                      <C>

     1.30  "Information"................................................................    6

     1.31  "Joint Inventions"...........................................................    6

     1.32  "Joint Management Team" or "JMT".............................................    6

     1.33  "Joint Patents"..............................................................    6

     1.34  "Joint Scientific Committee" or "JSC"........................................    6

     1.35  "Known"......................................................................    6

     1.36  "Known Target"...............................................................    7

     1.37  "Licensed Product"...........................................................    7

     1.38  "Major Market"...............................................................    7

     1.39  "Mammalian Disclosed Target".................................................    7

     1.40  "Mammalian Target"...........................................................    7

     1.41  "Mode of Action Program".....................................................    7

     1.42  "NDA"........................................................................    7

     1.43  "Net Sales"..................................................................    7

     1.44  "New Indication".............................................................    9

     1.45  "Novel Target"...............................................................    9

     1.46  "Novel Target Patent"........................................................   10

     1.47  "Patent".....................................................................   10

     1.48  "Person".....................................................................   10

     1.49  "Pharmacogenomic Product"....................................................   10

     1.50  "Phase III Clinical Trials"..................................................   10

     1.51  "Pre-Associated Target"......................................................   11

     1.52  "Preclinical Lead Profile" or "PLP"..........................................   11

     1.53  "Pre-existing Inventions"....................................................   11

     1.54  "Product"....................................................................   11

     1.55  "Product Target".............................................................   11

     1.56  "Pursued Disclosed Target"...................................................   12

     1.57  "Quality Target".............................................................   12

     1.58  "Regulatory Approval"........................................................   12

     1.59  "Related Pathway"............................................................   12
</TABLE>

[*] = 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.

                                      ii.
<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>

     1.60  "Related Target".............................................................    12

     1.61  "Remain(s) Confidential".....................................................    13

     1.62  "Research Plan"..............................................................    13

     1.63  "Research Results"...........................................................    13

     1.64  "Research Term"..............................................................    13

     1.65  "Safety Compound"............................................................    13

     1.66  "Safety Product".............................................................    13

     1.67  "Safety Target"..............................................................    13

     1.68  "Second Generation Product"..................................................    14

     1.69  "Selected Target"............................................................    14

     1.70  "Sole Inventions"............................................................    14

     1.71  "Target".....................................................................    14

     1.72  "Technology Sharing Program".................................................    14

     1.73  "Third Party"................................................................    14

     1.74  "Transition Target"..........................................................    14

     1.75  "Unlinked Related Target"....................................................    15

     1.76  "Valid Claim"................................................................    16

2.   Management of the Collaboration....................................................    16

     2.1  Overall Management Structure..................................................    16

     2.2  Joint Management Team.........................................................    16

          (a)    Membership.............................................................    16

          (b)    Responsibilities.......................................................    16

          (c)    Determination of Certain Matters.......................................    17

     2.3  Joint Scientific Committee....................................................    17

          (a)    Membership.............................................................    17

          (b)    Responsibilities.......................................................    18

     2.4  Meetings......................................................................    18

     2.5  Collaboration Guidelines......................................................    18

3.  Overview of the Mode of Action Program..............................................    18

     3.1  Goals.........................................................................    18
</TABLE>

[*] = 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.

                                     iii.
<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>

     3.2  Research Term................................................................     18

     3.3  Research Plans...............................................................     19

     3.4  FTE Commitments..............................................................     19

     3.5  Conduct of Research..........................................................     20

     3.6  Records......................................................................     20

     3.7  Reports and Disclosure of Research Results...................................     20

     3.8  Preserving Confidentiality of Certain Research Results.......................     21

4.   Mode of Action Program............................................................     21

     4.1  Provision of BMS Compounds...................................................     21

     4.2  Stage I - Feasibility Evaluation.............................................     22

     4.3  Provision and Testing of Analogues...........................................     22

     4.4  Stage II - Target Identification.............................................     22

     4.5  Stage III - Identification of Candidate Targets..............................     22

     4.6  Collaborative Work...........................................................     23

     4.7  Limitation on Exelixis Collaborative Work....................................     23

     4.8  Selection of Targets.........................................................     23

          (a)    Candidate Targets.....................................................     23

          (b)    Disclosed Targets.....................................................     25

     4.9  Selected Target Diligence....................................................     27

     4.10 Other Diligence Obligations..................................................     28

     4.11 Target Abandonment...........................................................     28

     4.12 Failure of Diligence.........................................................     28

     4.13 Pursuit of New Indications for BMS Products..................................     29

     4.14 Exclusion Based on Use of Mammalian Targets that [*].........................     30

     4.15 Exelixis Exclusivity Obligations.............................................     31

     4.16 Records......................................................................     32

     4.17 Reports......................................................................     32

5.   Technology Sharing Program........................................................     32

     5.1  Transfer of Exelixis Core Technology.........................................     32
</TABLE>

[*] = 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.

                                      iv.
<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>

     5.2  Transfer of BMS Core Technology; Transfer of Source Code; Error Corrections...    33

     5.3  Technology Licenses To BMS....................................................    37

     5.4  Limitations on BMS License....................................................    38

     5.5  Technology Licenses To Exelixis...............................................    39

     5.6  Limitations on Exelixis License...............................................    41

     5.7  Provision of Training; Disclaimers............................................    42

     5.8  Non-Solicitation..............................................................    43

6.   Licenses and Related Rights........................................................    43

     6.1  Licenses to BMS...............................................................    43

          (a)    Research Results.......................................................    43

          (b)    Target Patents.........................................................    43

          (c)    Novel Target Patents...................................................    44

     6.2  License Limitations and Retained Rights; Retained Rights Restrictions.........    44

          (a)    License Limitations and Retained Rights................................    44

          (b)    Retained Rights Restrictions...........................................    44

     6.3  Licenses to Exelixis..........................................................    44

          (a)    Outside of Field.......................................................    44

          (b)    Abandoned Targets......................................................    45

          (c)    Breach of Diligence Obligations........................................    46

     6.4  Right of First Negotiation....................................................    46

7.   Exclusivity........................................................................    47

     7.1  BMS...........................................................................    47

     7.2  Exelixis......................................................................    47

     7.3  BMS License to [*]............................................................    48

8.   Compensation.......................................................................    49

     8.1  Technology Access Fee.........................................................    49

     8.2  Research Support..............................................................    49

     8.3  Milestone Payments for Selected Targets and Pursued Disclosed Targets.........    49

     8.4  Milestone Payments for Compound Products......................................    49
</TABLE>

[*] = 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.

                                     v.
<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                            Page
<S>                                                                                         <C>
          (a)    Novel Target.............................................................    49

          (b)    Unlinked Related Target..................................................    50

          (c)    Known Target.............................................................    50

     8.5  Milestone Payments for Safety Products..........................................    51

     8.6  Milestone Payments for New Indications for BMS Products.........................    51

     8.7  Milestone Payments for Gene Products............................................    51

          (a)    Novel Target.............................................................    51

          (b)    Unlinked Related Target..................................................    51

     8.8  Milestone Payments for Biotherapeutic Products..................................    52

          (a)    Novel Target.............................................................    52

          (b)    Unlinked Related Target..................................................    52

     8.9  Milestone Payments for Diagnostic Products and Pharmacogenomic..................    53

          (a)    Novel Target.............................................................    53

          (b)    Unlinked Related Target..................................................    53

     8.10 Milestone Payments for Back-Up Compounds........................................    53

     8.11 Milestone Payments for [*] Products.............................................    54

     8.12 Royalty Payments for Compound Products..........................................    54

          (a)    Novel Target.............................................................    54

          (b)    Unlinked Related Target..................................................    54

          (c)    Known Target.............................................................    54

          (d)    Transition Target........................................................    55

     8.13 Royalty Payments for Safety Products............................................    55

     8.14 Royalty Payments for Gene Products..............................................    55

          (a)    Novel Target.............................................................    55

          (b)    Related Target...........................................................    55

     8.15 Royalty Payments for Biotherapeutic Products....................................    55

          (a)    Novel Target.............................................................    55

          (b)    Unlinked Related Target..................................................    56

          (c)    Known Target.............................................................    56

     8.16 Royalty Payments for Diagnostic Products........................................    56
</TABLE>

[*] = 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.

                                      vi.
<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>
          (a)    Novel Target...........................................................    56

          (b)    Unlinked Related Target................................................    56

     8.17 Royalty Payments for Pharmacogenomic Products.................................    56

          (a)    Novel Target...........................................................    56

          (b)    Unlinked Related Target................................................    56

     8.18 Fixed Royalty Rates and Final Royalty Payments................................    57

     8.19 Term of Royalties.............................................................    57

     8.20 Quarterly Royalty Payment and Reports.........................................    57

     8.21 Payment Method................................................................    58

     8.22 Taxes.........................................................................    58

     8.23 Blocked Currency..............................................................    58

     8.24 Sublicenses...................................................................    58

     8.25 Foreign Exchange..............................................................    58

     8.26 Records; Inspection...........................................................    58

9.  Intellectual Property...............................................................    59

     9.1  Ownership.....................................................................    59

     9.2  Disclosure....................................................................    59

     9.3  Patent Prosecution and Maintenance; Abandonment...............................    59

          (a)    Pre-existing, Sole and Improvement Inventions..........................    59

          (b)    Joint Inventions.......................................................    60

          (c)    Selected and Product Target Exelixis Sole Inventions...................    60

          (d)    Pursued Disclosed Target Exelixis Sole Inventions......................    62

          (e)    Novel Target Exelixis Sole Inventions..................................    62

          (f)    BMS Patents Licensed to Exelixis.......................................    63

          (g)    Cooperation............................................................    64

     9.4  Enforcement of Patent Rights..................................................    64

     9.5  Copyright Registrations.......................................................    66

10.  Confidentiality....................................................................    66

     10.1 Nondisclosure of Confidential Information.....................................    66

     10.2 Exceptions....................................................................    67
</TABLE>

[*] = 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.

                                     vii.
<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>

     10.3  Authorized Disclosure........................................................    67

     10.4  Termination of Prior Agreements..............................................    68

     10.5  Publicity....................................................................    68

     10.6  Publications.................................................................    68

11.  Term and Termination...............................................................    69

     11.1  Term.........................................................................    69

     11.2  Termination for Material Breach..............................................    69

     11.3  Change in Control............................................................    70

     11.4  Effect of Termination; Survival..............................................    71

12.  Representations and Covenants......................................................    73

     12.1  Mutual Authority.............................................................    73

     12.2  Rights in Technology.........................................................    73

     12.3  Performance by Affiliates....................................................    73

     12.4  Exelixis Representations and Warranties......................................    74

     12.5  BMS Representations and Warranties...........................................    74

     13.1  Mutual Indemnification.......................................................    75

     13.2  Indemnification by BMS.......................................................    76

     13.3  Indemnification by Exelixis..................................................    76

     13.4  Conditions to Indemnification................................................    77

     13.5  Limitation of Liability......................................................    78

     13.6  Core Technology Disclaimer...................................................    78

     13.7  Collaboration Disclaimer.....................................................    78

14.  Miscellaneous......................................................................    79

     14.1  Dispute Resolution...........................................................    79

     14.2  Governing Law................................................................    80

     14.3  Certain Disputes.............................................................    80

     14.4  Entire Agreement; Amendment..................................................    80

     14.5  Export Control...............................................................    80

     14.6  Bankruptcy...................................................................    81

     14.7  Force Majeure................................................................    82
</TABLE>

[*] = 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.

                                     viii.
<PAGE>

                               Table Of Contents
                                  (continued)

<TABLE>
<CAPTION>
                                                                                          Page
<S>                                                                                       <C>
     14.8   Notices.....................................................................    82

     14.9   Consents Not Unreasonably Withheld or Delayed...............................    82

     14.10  Maintenance of Records......................................................    83

     14.11  United States Dollars.......................................................    83

     14.12  No Strict Construction......................................................    83

     14.13  Assignment..................................................................    83

     14.14  Electronic Data Interchange.................................................    83

     14.15  Counterparts................................................................    83

     14.16  Further Actions.............................................................    83

     14.17  Severability................................................................    83

     14.18  Ambiguities.................................................................    83

     14.19  Headings....................................................................    84

     14.20  No Waiver...................................................................    84
</TABLE>

[*] = 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.

                                      ix.
<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.

                          RESEARCH COLLABORATION AND
                         TECHNOLOGY TRANSFER AGREEMENT

     This Research Collaboration and Technology Transfer Agreement (the
"Agreement") is made and entered into as of September 14, 1999 (the "Effective
Date") by and between Exelixis Pharmaceuticals, Inc., a Delaware corporation
having its principal place of business at 260 Littlefield Avenue, South San
Francisco, California, USA 94080 ("Exelixis"), and Bristol-Myers Squibb Company,
a Delaware corporation having its principal place of business at Route 206 and
Province Line Road, Princeton, NJ 08543 ("BMS"). Exelixis and BMS are sometimes
referred to herein individually as a "Party" and collectively as the "Parties."

                                   Recitals

     A.   BMS is a multinational health care company that has expertise and
capability in developing and marketing human pharmaceuticals and has research
and development programs in the area of medicinal chemistry.

     B.   Exelixis is a biotechnology company that has expertise and proprietary
technology relating to genetic model systems, genomics and computational biology
and is applying such technology to discover and validate targets for drug
discovery in a variety of disease areas.

     C.   BMS and Exelixis desire to establish a research collaboration to apply
such Exelixis technology and expertise to the identification and
characterization of targets that mediate the effect of test compounds in model
organisms, and to provide for the development and commercialization, based on
such research, of novel prophylactic, therapeutic and diagnostic products or new
indications or expanded labeling for existing products.

     D.   BMS and Exelixis desire to establish a technology sharing program in
which BMS will transfer to Exelixis its proprietary technology that relates to
its high throughput lead optimization technology, and Exelixis will transfer to
BMS its proprietary technology that relates to genetics and molecular biology in
C. elegans and Drosophila, as more fully set forth below.

     Now, Therefore, the Parties agree as follows:

1.   Definitions

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

     1.1  "Abandoned Target" means (a) any Candidate Target or Disclosed Target
that is not selected by BMS as a Selected Target, Pursued Disclosed Target or
Product Target within the applicable time period set forth in Section 4.8,
except as otherwise provided in Section 4.8(a)(v)

                                      1.
<PAGE>

or (b)(v), or (b) any Selected Target or Pursued Disclosed Target that is
abandoned by BMS pursuant to Section 4.11.

     1.2  "Affiliate" means, with respect to a particular Party, another Person
that controls, is controlled by or is under common control with such Party. For
the purposes of the definition in this Section 1.2, the word "control"
(including, with correlative meaning, the terms "controlled by" or "under the
common control with") means the actual power, either directly or indirectly
through one or more intermediaries, to direct or cause the direction of the
management and policies of such entity, whether by the ownership of at least
fifty percent (50%) of the voting stock of such entity, or by contract or
otherwise.

     1.3  "Analogue" means a BMS Compound that is structurally and functionally
similar to a particular BMS Compound and is provided to Exelixis by BMS pursuant
to Section 4.3 as a substitute for such BMS Compound.

     1.4  "Annual FTE Rate" means the amount to be paid over one (1) year by BMS
to Exelixis to support one (1) FTE. The Annual FTE Rate will be [ * ] per year
until the second anniversary of the Effective Date. Starting on the second
anniversary of the Effective Date and continuing on each subsequent anniversary
(if any) during the Research Term, this rate will be adjusted for Research
support provided by BMS hereunder after such date by the percentage change, if
any, in the Consumer Price Index described below as of the first day of the
calendar month on or immediately preceding such adjustment date as compared to
the index applicable to the most recent adjustment prior adjustment date (August
1, 1999 shall be the reference date for the first adjustment). The index source
will be the Consumer Price Index for All Urban Consumers - San Francisco Area,
published by the Bureau of Labor Statistics of the United States Department of
Labor (or successor agency). Should an index covering the San Francisco area not
then be available, then the national index will be used as the reference.

     1.5  "Back-Up Compound" means, with respect to a particular Collaboration
Compound or Licensed Product (the "Parent"), any other Collaboration Compound or
Licensed Product that is intended to directly inhibit, directly activate or
otherwise directly modulate the same Mammalian Target as such Parent, and that
is developed by or on behalf of BMS or its Affiliate or sublicensee as a
potential replacement for the Parent in the event that development of the Parent
does not result in Regulatory Approval for the Parent or, in the case of a
Collaboration Compound, Regulatory Approval for a Compound Product comprising or
incorporating such Collaboration Compound. For clarity, it is understood that
the term "Back-Up Compound" shall not include new formulations, presentations,
salts, or modes of delivery of the Collaboration Compound or other active
ingredient contained in the Parent.

     1.6  "Biotherapeutic Product" means (a) any therapeutic or prophylactic
product for treatment or prevention of diseases or conditions in humans that
comprises or incorporates (i) an antibody against a Mammalian Target, or (ii) an
antisense compound based upon a Mammalian Target sequence, or (b) a gene therapy
product based upon the sequence of a Mammalian Target.

     1.7  "BMS Compound" is a molecule that is provided to Exelixis by BMS under
a code name pursuant to Section 4.1 or 4.3, such that BMS does not disclose the
identity or structure of such molecule to Exelixis. It is understood that "BMS
Compounds" may include

[ * ] = 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>

compounds in the public domain or which are proprietary to third parties, in
addition to BMS proprietary compounds.

     1.8  "BMS Core Technology" means the proprietary BMS know-how, Patents, BMS
Software, drawings, blueprints, materials and Information described on Exhibit B
hereto (and any copyrights covering any of the foregoing know-how, software or
other works included on Exhibit B) and including all Improvement Inventions to
the foregoing that are Controlled by BMS or its Affiliate, the Bristol-Myers
Squibb Pharmaceutical Research Institute, during the Research Term. "BMS
Software" shall mean all software in any stage of development, whether in object
or source code, and all documentation relating thereto provided by BMS, and
including all copies, compilations, adaptations, translations, and derivative
works thereof made by or on behalf of BMS or its Affiliate, the Bristol-Myers
Squibb Pharmaceutical Research Institute. For purposes of the foregoing,
"derivative works" means any computer program that may be developed containing
any part of the software, regardless of the form of the resulting code, the
media it is carried on, or its intended use. For sake of clarity, "BMS Core
Technology" excludes all trademarks.

     1.9  "BMS Product" means a product, other than a Licensed Product, that
contains a BMS Compound that is Controlled by BMS or its Affiliates and is
subject to development or has already received Regulatory Approval at the time
BMS provides such BMS Compound to Exelixis.

     1.10 "Candidate Target" means any Target (other than a Disclosed Target)
for which (a) there is sufficient (as determined by the JSC) [ * ], and (b)
Exelixis has conducted a [ * ] mammalian orthologues.

     1.11 "Collaboration" means all the research- or development-related
activities either (a) performed by or on behalf of Exelixis or BMS pursuant to
the Mode of Action Program under this Agreement, or (b) conducted by or on
behalf of BMS or its Affiliate during the Research Term based in material part
upon Exelixis-generated Research Results disclosed to BMS hereunder.

     1.12 "Collaboration Compound" means any molecule that (a) has a molecular
weight less than or equal to [ * ]; (b) has the ability to inhibit, activate or
otherwise modulate the activity of a Mammalian Target (other than a Confirmed
Target) or its encoded protein; and (c) such ability is identified by or on
behalf of BMS or its Affiliate or sublicensee through the use to any material
extent of a Mammalian Target (other than a Confirmed Target) or any information
relating to a Mammalian Target (other than a Confirmed Target) developed by or
on behalf of BMS or its Affiliate or sublicensee by material use of such
Mammalian Target, the DNA sequence relating thereto, or any other Research
Results disclosed to BMS hereunder that (i) directly relate to such Mammalian
Target (other than a Confirmed Target) or the Target to which such Mammalian
Target is related, and (ii) Remain Confidential at the time of such use,
provided that the foregoing definition is subject to the limitations in Section
4.15.

     1.13 "Compound Class" means any compound having the same active
substructure (or active substructures, if more than one exist) of the BMS
Compound used in identifying a giving 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.

                                      3.
<PAGE>

     1.14 "Compound Product" means any therapeutic or prophylactic product for
treatment of humans that comprises or incorporates a Collaboration Compound,
including any formulation or mode of delivery thereof.

     1.15 "Conceptual Target" means:

          (a)  a mammalian orthologue of a Selected Target, which orthologue (i)
is identified by or on behalf of Exelixis pursuant to its work under the Mode of
Action Program or by or on behalf of BMS or its Affiliate or sublicensee through
the material use of such Selected Target or DNA sequence information relating
thereto, or any other Research Results that Remain Confidential at the time of
such use by BMS, and (ii) is, at the time of identification by BMS or at the
time of communication of same by Exelixis to BMS (if identified by Exelixis),
[*] BMS Compound [*]; or

          (b)  a Related Target that, at the time of identification of such
Related Target by BMS, is [*] BMS Compound [*] Selected Target or Pursued
Disclosed Target [*] Related Target [*] Related Target [*].

          Examples of "Conceptual Targets" are set forth in Exhibit A attached
to this Agreement.

     1.16 "Confirmed Target" means a mammalian orthologue of a Selected Target,
which orthologue (a) is identified by or on behalf of Exelixis pursuant to its
work under the Mode of Action Program [*] Candidate Target [*] BMS Compound [*]
BMS Compound [*].

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

     1.18 "Core Technology Patents" means, with respect to a particular Party,
those Patents covering the composition of matter or use of such Party's Core
Technology, or any part or aspect thereof.

     1.19 "Diagnostic Product" means a product that facilitates identification
of patients having a particular disease or having a predisposition to a
particular disease, and/or monitors the prognosis or progression of a disease in
a patient, by the detection of either (i) sequence differences in different
alleles of a Mammalian Target, or (ii) the presence or absence of a certain
Mammalian Target, or (iii) the presence or absence of the protein product of a
certain Mammalian Target.

     1.20 "Diligent Efforts" means the carrying out of obligations or tasks in a
manner consistent with the efforts a Party devotes to a product or a research,
development or marketing project of similar market potential, profit potential
or strategic value resulting from its own research efforts, based on conditions
then prevailing.

     1.21 "Disclosed Target" means any [ * ] to BMS.

[ * ] = 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>

     1.22 "Exelixis Core Technology" means the proprietary Exelixis know-how,
Patents, software, the FlyTag Database, materials and Information described on
Exhibit C hereto (and any copyrights covering any of the foregoing know-how,
software or other works included on Exhibit C) and including all Improvement
Inventions to the foregoing owned or Controlled by Exelixis and its Affiliates
during the Research Term (but excluding any improvements or additions to the
FlyTag Database made after the Effective Date other than corrections of errors
in the sequence information that are made or determined by Exelixis). For sake
of clarity, "Exelixis Core Technology" excludes all trademarks.

     1.23 "Field" means the treatment, prophylaxis and diagnosis of disease in
humans.

     1.24 "FlyTag Database" means the sequence data within the database
maintained by Exelixis under the name "FlyTag" as of the Effective Date in the
form previously released by Exelixis to a contractual partner, as further
described in Exhibit C.

     1.25 "FTE" means the equivalent of one researcher working full time (but
including standard vacation) for or on behalf of Exelixis (or BMS, as
applicable) for a twelve (12)-month period.

     1.26 "Gene Product" means any therapeutic or prophylactic product for
treatment of humans that comprises or incorporates the gene product of a
Mammalian Target or a mutein or fusion protein based thereon.

     1.27 "Improvement Inventions" means any and all inventions, developments,
results, know-how and other Information, and all intellectual property relating
thereto, that are made or authored during the Research Term solely by employees
or agents of a Party or jointly by employees or agents of both Parties, are
improvements to or modifications of the Exelixis Core Technology or the BMS Core
Technology, and are Controlled by the applicable Party.

     1.28 "IND" means an Investigational New Drug Application filed with the
United States Food and Drug Administration, or its foreign equivalent in any
country.

     1.29 "Independent Research" means any and all research that is conducted by
Exelixis outside the scope of this Agreement either independently or pursuant to
an agreement with a Third Party, but provided that such research: (a) is not in
conflict with Articles 6 and 7, (unless otherwise permitted by Sections 6.3 and
6.4), and (b) does not use any Confidential Information of BMS or, except where
expressly permitted hereunder, any Research Results relating directly to
Selected Targets, Pursued Disclosed Targets, or Mammalian Targets. For clarity,
it is understood that research using any Information that Exelixis generates
without reliance on the Research Results or BMS Confidential Information
(including Information licensed to Exelixis by a Third Party or that is publicly
available), even if such Information is similar or identical to the Research
Results, shall be deemed Independent Research.

     1.30 "Information" means inventions, information, results and data of any
type whatsoever, in any tangible or intangible form whatsoever, including
without limitation, databases, inventions, practices, methods, techniques,
specifications, formulations, formulae, knowledge, know-how, skill, experience,
test data including pharmacological, biological,

[ * ] = 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>

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.

     1.31 "Joint Inventions" means any and all inventions, developments,
results, know-how and other Information, and all intellectual property relating
thereto, that are made jointly by employees or agents of both Parties pursuant
to work conducted in the Collaboration.

     1.32 "Joint Management Team" or "JMT" means the committee described in
Section 2.2.

     1.33 "Joint Patents" means all Patents and other intellectual property
rights claiming or covering or appurtenant to Joint Inventions.

     1.34 "Joint Scientific Committee" or "JSC" means the committee described in
Section 2.3.

     1.35 "Known" means, as used in the phrase "Known to be a target for drug
discovery for the disease area of interest," that BMS can demonstrate that, at
the applicable time:

          (a)  [ * ], or

          (b)  based on information that was publicly available at such
applicable time, [ * ].

     1.36 "Known Target" means: (a) a Pre-Associated Target; (b) a Conceptual
Target; (c) a Mammalian Disclosed Target; or (d) a Transition Target
[*] Confirmed Targets are excluded from the definition of "Known Target."

     1.37 "Licensed Product" means any Compound Product, Safety Product, Gene
Product, Biotherapeutic Product, Diagnostic Product or Pharmacogenomics Product.

     1.38 "Major Market" means the United States, Canada, the United Kingdom,
Japan, France, Germany, Italy or Spain.

     1.39 "Mammalian Disclosed Target" is a mammalian orthologue of a Pursued
Disclosed Target, which orthologue is identified by or on behalf of Exelixis
pursuant to work under the Mode of Action Program or [*] Pursued Disclosed
Target [*] at the time of such use by BMS .

     1.40 "Mammalian Target" means any Novel Target, Unlinked Related Target,
Known Target, Safety Target, Mammalian Disclosed Target or Transition Target (at
any time).

     1.41 "Mode of Action Program" means that collaborative research program
undertaken by the Parties pursuant to Articles 3 and 4.

     1.42 "NDA" means a New Drug Application, Biologics License Application or
Product License Application filed with the United States Food and Drug
Administration in conformance with applicable laws and regulations, or the
foreign equivalent of any such application in any other country.

[ * ] = 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>

     1.43 "Net Sales" means the amount invoiced or otherwise billed by BMS or
its Affiliate or licensee for sales or other commercial disposition of a
Licensed Product to a Third Party purchaser, less the following to the extent
included in such billing or otherwise actually allowed or incurred with respect
to such sales: (i) discounts, including cash, trade and quantity discounts,
price reduction programs, retroactive price adjustments with respect to sales of
a product, charge-back payments and rebates granted to managed health care
organizations or to federal, state and local governments (or their respective
agencies, purchasers and reimbursers) or to trade customers, including but not
limited to, wholesalers and chain and pharmacy buying groups; (ii) credits or
allowances actually granted upon rejections or returns of Licensed Products,
including for recalls or damaged goods; (iii) freight, postage, shipping and
insurance charges actually allowed or paid for delivery of Licensed Products, to
the extent billed; (iv) customs duties, surcharges and other governmental
charges incurred in connection with the exportation or importation of a Licensed
Product; (v) bad debts relating to sales of Licensed Products that are actually
written off by BMS in accordance with generally accepted accounting principles,
consistently applied, during the applicable royalty calculation period, and (vi)
taxes, duties or other governmental charges levied on, absorbed or otherwise
imposed on sale of Licensed Products, including without limitation value-added
taxes, or other governmental charges otherwise measured by the billing amount,
when included in billing, as adjusted for rebates and refunds, but specifically
excluding taxes based on net income of the seller; provided that all of the
foregoing deductions are calculated in accordance with generally accepted
accounting principles consistently applied throughout the party's organization.

     Notwithstanding the foregoing, if any Licensed Product is sold under a
bundled or capitated arrangement with other BMS products, then, solely for the
purpose of calculating Net Sales for royalty purposes hereunder, any [ * ]
products sold within such bundled arrangement for the applicable accounting
period. In case of any dispute as to the [ * ], the determination of same shall
be calculated and certified by BMS' independent public accountants, whose
decision shall be binding.

     A sale of a Licensed Product is deemed to occur upon the earliest of
invoicing or transfer of title in the Licensed Product to the Third Party
purchaser. In the event that BMS, after reasonable efforts, cannot calculate
accurately the Net Sales of a sublicensee in a particular country, the Parties
will meet and negotiate in good faith an appropriate means for calculating "Net
Sales" in such a situation.

     For sake of clarity and avoidance of doubt, sales by BMS, its Affiliates or
sublicensees of a Licensed Product to a Third Party distributor of such Licensed
Product in a given country shall be considered a sale to a Third Party customer.
Any Licensed Products used (but not sold for consideration) for promotional or
advertising purposes or used for clinical or other research purposes shall not
be considered in determining Net Sales hereunder.

     In the event a Licensed Product is sold as an end-user product consisting
of a combination of active functional elements or as a combined product and/or
service, Net Sales, for purposes of determining royalty payments on such
Licensed Product, shall be calculated by multiplying the Net Sales of the end-
user product and/or service by the fraction A over A+B, in which A is the gross
selling price of the Licensed Product portion of the end-user product and/or
service when such Licensed Product is sold separately during the applicable
accounting period in

[ * ] = 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>

which the sales of the end-user product were made, and B is the gross selling
price of the other active elements and/or service, as the case may be, of the
end-user product and/or service sold separately during the accounting period in
question. All gross selling prices of the elements of such end-user product
and/or service shall be calculated as the average gross selling price of the
said elements during the applicable accounting period for which the Net Sales
are being calculated. In the event that, in any country or countries, no
separate sale of either such above-designated Licensed Product or such above
designated elements of the end-user product and/or service are made during the
accounting period in which the sale was made or if gross retail selling price
for an active functional element, component or service, as the case may be,
cannot be determined for an accounting period, Net Sales allocable to the
Licensed Product in each such country shall be determined by mutual agreement
reached in good faith by the Parties prior to the end of the accounting period
in question based on an equitable method of determining same that takes into
account, on a country by country basis, variations in potency, the relative
contribution of each active agent, component or service, as the case may be, in
the combination, and relative value to the end user of each active agent,
component or service, as the case may be.

     Notwithstanding the foregoing, it is agreed that drug delivery vehicles,
adjuvants, and excipients shall not be deemed to be "active ingredients" or
"active functional elements," the presence of which in a Licensed Product would
be deemed to create a combination product subject to the terms of the preceding
paragraph.

     1.44 "New Indication" means, with respect to a particular drug product that
is Controlled by BMS or its Affiliates and is in development or has already
received Regulatory Approval, any indication that:

          (a)  is not an indication that, at the time BMS provided to Exelixis
the BMS Compound, pursuant to Section 4.1 or 4.3, was used to identify the
particular Target referred to in subsection (b) below, either (i) BMS or its
Affiliate or licensee was in the process of conducting development or had
received Regulatory Approval for such BMS product, or (ii) is reasonably
related, based on the known or believed mechanism of action of such BMS product,
to the indication(s) for which such BMS product is then being tested in
development or being marketed pursuant to Regulatory Approvals or that is
contained in BMS' development plans for such BMS product or that would
reasonably be anticipated for such BMS product based on publicly available
information or information then known to BMS with respect to the known or
believed mechanism of action of such product (or the active compound therein);
and

          (b)  is discovered or identified by or on behalf of BMS or its
Affiliate or sublicensee during research performed through the material use to
any extent of either:

               (i)  a Product Target, or a mammalian orthologue thereof, or any
DNA sequence information relating to such Target or mammalian orthologue, or any
other Research Results that Remain Confidential at the time of such use; or

               (ii) Information developed by BMS or its Affiliate or sublicensee
by material use of a Product Target, or a mammalian orthologue thereof, or any
DNA sequence information relating to such Target or mammalian orthologue, or any
other Research Results that Remain Confidential at the time of such use.

[ * ] = 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>

     1.45 "Novel Target" means a mammalian orthologue of a Selected Target,
which orthologue (a) was identified by or on behalf of Exelixis pursuant to work
conducted under the Mode of Action Program [*] BMS Compound [*] Selected Target
[*] Novel Targets [*] Unlinked Related [*], Known Targets [*] Confirmed
Targets.

     1.46 "Novel Target Patent" means a Patent Controlled by Exelixis that
claims at least one Novel Target (or its use) first discovered by Exelixis
during the Research Term under the Mode of Action Program, or that claims a Gene
Product or other Biotherapeutic Product based upon or containing such a Novel
Target (or its manufacture or use), but excluding inventions of Exelixis made
during any Independent Research.

     1.47 "Patent" means (i) unexpired letters patent (including inventor's
certificates) which have not been held invalid or unenforceable by a court of
competent jurisdiction from which no appeal can be taken or has been taken
within the required time period (and which has not been admitted to be invalid
or unenforceable through reissue, disclaimer or otherwise, or been abandoned in
accordance with or as permitted by the terms of this Agreement or by mutual
written agreement), including without limitation any substitution, extension,
registration, confirmation, reissue, re-examination, supplementary protection
certificates, confirmation patents, patent of additions, renewal or any like
filing thereof and (ii) pending applications for letters patent that are being
actively prosecuted (but not in any event for more than five (5) years from the
date of filing) and which have not been canceled, withdrawn from consideration,
finally determined to be unallowable by the applicable governmental authority
for whatever reason (and from which no appeal is or can be taken), and/or
abandoned in accordance with or as permitted by the terms of this Agreement or
by mutual written consent, including without limitation any continuation,
division or continuation-in-part thereof and any provisional applications.

     1.48 "Person" means an individual, corporation, partnership, limited
liability company, trust, business trust, association, joint stock company,
joint venture, pool, syndicate, sole proprietorship, unincorporated
organization, governmental authority, or any other form of entity not
specifically listed herein.

     1.49 "Pharmacogenomic Product" means a product that is primarily used to
select between two or more therapeutic or prophylactic regimens for a human,
wherein at least one such therapeutic or prophylactic regimen involves a
compound that could be used to treat and/or prevent a disease, and where the
selected regimen is judged based on the use of the pharmacogenomic product to be
of most likely benefit and/or to do the least harm to a patient, and provided
that such selection is made based on the genotype of such human at certain
genetic loci (including by detection of certain protein products indicative of
the necessary genotype) as determined by use of such product to detect either
(i) sequence differences in different alleles of a Mammalian Target, or (ii) the
presence or absence of a certain Mammalian Target, or (iii) the presence or
absence of the protein product of a certain Mammalian Target.

     1.50 "Phase III Clinical Trials" means those trials on sufficient numbers
of patients that are designed to establish that a drug is safe and efficacious
for its intended use, and to define warnings, precautions and adverse reactions
that are associated with the drug or label expansion of such drug.

     1.51 "Pre-Associated Target" means:

[ * ] = 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>

          (a)  a mammalian orthologue of a Selected Target, which orthologue (i)
was identified by or on behalf of Exelixis pursuant to work under the Mode of
Action Program [*] Selected Target [*] Selected Target as a Candidate Target,
[*] BMS Compound [*] Selected Target, [*] BMS Compound [*]; or

          (b)  a Related Target that, at the time of identification of such
Related Target by BMS, is [*]BMS Compound[*]Selected Target[*]Pursued Disclosed
[*]Related Target,[*]BMS Compound[*]Related Target.

     1.52 "Preclinical Lead Profile" or "PLP" [ * ].

     1.53 "Pre-existing Inventions" means any and all inventions, developments,
results, know-how and other Information, and all intellectual property relating
thereto, made, created or invented by a Party, its employees or its agents, or
otherwise Controlled by the Party, prior to the Effective Date.

     1.54 "Product" means a Licensed Product or a BMS Product.

     1.55 "Product Target" means a Selected Target [*] Pursued Disclosed Target
[*].

     1.56 "Pursued Disclosed Target" means a Disclosed Target that has been
selected as set forth in Section 4.8(b), or that is deemed to be a Pursued
Disclosed Target pursuant to Section 4.8(b)(v)(2).

     1.57 "Quality Target" means a Candidate Target (a) that was identified by
or on behalf of Exelixis pursuant to work under the Mode of Action Program; (b)
[*] Candidate Target [*] BMS Compound [*] such Candidate Target; [*] mammalian
orthologue.

     1.58 "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.

     1.59 "Related Pathway" means a biochemical pathway that interacts
biochemically with a given pathway which interaction is identified by Exelixis
pursuant to work conducted under the Mode of Action Program or by or on behalf
of BMS or its Affiliate or sublicensee through the use to any material extent of
any Target disclosed hereunder or any mammalian orthologue identified by the
material use of such Target or DNA sequence information relating thereto, or any
other Research Results that Remain Confidential at the time of such use.

     1.60 "Related Target" means:

          (a)  [*] mammalian orthologue [*] Selected Target [*] Disclosed
Target, which orthologue was identified by or on behalf of Exelixis pursuant to
work under the Mode of Action Program [*] Disclosed Target [*] Disclosed Target,
[*]; or

          (b)  a mammalian orthologue [*] Selected Target [*] Disclosed
Target, [*] Selected Target [*] Disclosed Target [*] mammalian orthologue [*].

          [*] "Related Target" [*] mammalian orthologue [*] Selected Target
[*] Disclosed Target, [*] BMS Compound [*] Selected Target [*] Disclosed
Target, [*] mammalian target [*].

     1.61 "Remain(s) Confidential" means, with respect to particular Research
Results used by or on behalf of BMS or its Affiliate or sublicensee, that such
Research Results, at 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.

                                      10.
<PAGE>

time of such use, were not then in the public domain and were not then known to
BMS or any of its Affiliates or licensees as a result of (1) knowledge possessed
by BMS or any of its Affiliates prior to disclosure of the Research Results to
BMS by Exelixis, (2) disclosure by a Third Party entitled to disclose same
without restriction as to confidentiality, or (3) independent development by
employees or contractors of BMS or any of its Affiliates who did not have access
to any Research Results.

  1.62    "Research Plan" means the plan that sets forth the research work to be
performed by Exelixis and BMS in conducting the Mode of Action Program.

  1.63    "Research Results" means the data and other results generated by
Exelixis under the Mode of Action Program.

  1.64    "Research Term" means the period during which research activities of
Exelixis under the Mode of Action Program shall be conducted, as set forth in
Section 3.2.

  1.65    "Safety Compound" means any compound that (a) has a molecular weight
less than or equal to [ * ], and (b) was discovered by or on behalf of BMS or
its Affiliate or sublicensee through the material use of a Safety Target, any
DNA sequence information relating thereto, or any other Information developed
through the material use of such Safety Target.

  1.66    "Safety Product" means any therapeutic or prophylactic product for
treatment of humans that comprises or incorporates a Safety Compound, including
any formulation or mode of delivery thereof.

  1.67    "Safety Target" means a mammalian orthologue of a Candidate
Target or Pursued Disclosed Target [ * ] BMS Compound [ * ] (a) was
identified by or on behalf Exelixis pursuant to work under the Mode of Action
Program [ * ] Candidate Target or Pursued Disclosed Target [ * ].

  1.68    "Second Generation Product" means, with respect to a particular
Licensed Product that has achieved Regulatory Approval in a Major Market (the
"Original Licensed Product"), any Licensed Product that contains a different
active ingredient from that in the Original Licensed Product and that is
directed against the same Mammalian Target as the Original Licensed Product,
which is developed by or on behalf of BMS or its Affiliate or sublicensee as an
improvement upon or potential successor to the Original Licensed Product.  For
clarity, it is understood that "Second Generation Product" shall not include new
formulations, presentations, salts, or modes of delivery of the active
ingredient contained in the Original Licensed Product.

  1.69    "Selected Target" means a Candidate Target that has been selected as
set forth in Section 4.6(a), or that is deemed to be a Selected Target as
provided in Section 4.8(a)(v)(2).

  1.70    "Sole Inventions" means any and all inventions, developments, results,
know-how and other Information, and all intellectual property relating thereto,
that are made, discovered or developed solely by a Party and its employees or
agents pursuant to work performed in the 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.

                                      11.
<PAGE>

     1.71  "Target" is any invertebrate target identified by Exelixis during the
Research Term under the Mode of Action Program based on analysis of a BMS
Compound in Exelixis' model genetic systems.  A Target may include, without
limitation, a Candidate Target, Disclosed Target, Selected Target, Pursued
Disclosed Target, Product Target or Abandoned Target.

     1.72  "Technology Sharing Program" means the program described in Article
5.

     1.73  "Third Party" means any entity other than (i) Exelixis, (ii) BMS or
(iii) an Affiliate of either of them.

     1.74  "Transition Target" means, with respect to [*] Mammalian Target
[ * ] "Novel Target" [ * ] "Unlinked Related Target", [ * ] Known Target for the
purposes of the economics and other rights and obligations under the Agreement,
under one of the circumstances set forth below:

           (a) if, prior to the date that is [ * ] Novel Target or Unlinked
Related Target [ * ] Novel Target or Unlinked Related Target [ * ] Novel Target
or Unlinked Related Target, [ * ] Novel Target or Unlinked Related Target [ * ]
Known Target; or

           (b) if, after the date that is [ * ] after the date that such Novel
Target or Unlinked Related Target was initially identified under the Agreement,
[ * ] Novel Target or Unlinked Related Target [*] with respect to such Novel
Target or Unlinked Related Target, then the following shall apply:

     [ * ] Novel Target or Unlinked Related Target [ * ] Novel Target or
Unlinked Related Target [ * ] Novel Target or Unlinked Related Target [*];

               (i)    [ * ] Collaboration Compound, [ * ] Novel Target or
                      Unlinked Related Target [ * ] Novel Target or Unlinked
                      Related Target [ * ] Collaboration Compound [ * ] Novel
                      Target or Unlinked Related Target [ * ];

               (ii)   [ * ] Collaboration Compound, [ * ] Novel Target or
                      Unlinked Related Target [ * ] Novel Target or Unlinked
                      Related Target [ * ] Collaboration Compound [ * ] Known
                      Target; and

               (iii)  [ * ] Collaboration Compound, [ * ] Novel Target or
                      Unlinked Related Target [ * ] Novel Target or Unlinked
                      Related Target [ * ] Collaboration Compound [ * ]
                      Confirmed Target.

     As used herein, a [ * ] Collaboration Compound [ * ] Novel Target or
Unlinked Related Target [ * ].

     1.75  "Unlinked Related Target" means a Related Target [ * ] BMS Compound
[ * ] a Pursued Disclosed Target [*].

     1.76  "Valid Claim" means an issued claim under an issued patent within the
Patent Rights, which has not (i) expired or been canceled, (ii) been declared
invalid by an unreversed and unappealable decision of a court or other
appropriate body of competent jurisdiction, (iii) been admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise, and/or (iv) been
abandoned in accordance with or as permitted by the terms of this Agreement or
by mutual written agreement.

2.   Management of the Collaboration

     2.1   Overall Management Structure. The Parties agree to establish a multi-
level committee structure to manage and direct the Collaboration and the
relationship of the Parties in pursuing the research and development goals of
this Agreement. The committee structure is intended to facilitate decision
making and management of the various Collaboration activities of the Parties,
and each Party agrees to use good faith, cooperative efforts to facilitate and
assist the efforts of such committees. The overall management of the
Collaboration with respect to work performed by Exelixis under the Mode of
Action Program shall be vested in the Joint Management Team (the "JMT"), with
responsibility, as further discussed in Section 2.2, for

[ * ] = 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>

establishing the strategic direction of the Collaboration and for managing and
directing the research efforts of the Parties under the Collaboration. The
Technology Sharing Program shall be managed by two individuals, one each
designated by BMS and Exelixis, which individuals shall report to the JMT. The
day-to-day management and direction of the Mode of Action Program conducted at
Exelixis shall be managed by the Joint Scientific Committee (the "JSC"), which
shall report to and be managed by the JMT. The JSC shall cease to exist after
its second meeting after the termination of the Research Term (unless otherwise
extended by unanimous consent of all members of the JSC). Any dispute that
cannot be resolved by the JSC for matters that come before it shall be resolved
by the JMT.

     2.2  Joint Management Team.

          (a) Membership.  The Joint Management Team (the "JMT") shall be
composed of four members, two members appointed by each Party. Within thirty
(30) days after the Effective Date, each Party shall appoint two representatives
from its senior management team to the JMT. At least one representative from
Exelixis shall be Head of Research or a mutually agreeable designate; at least
one representative from BMS shall be its Vice President for Applied Genomic
Research or a mutually agreeable designate. With the exception of the Party's
Head of Research, each Party may replace its JMT representatives at any time
upon written notice to the other Party. BMS will designate one of its
representatives as Chairperson of the JMT. The Chairperson shall be responsible
for scheduling meetings, preparing and circulating an agenda in advance of each
meeting, and preparing and issuing minutes of each meeting within thirty (30)
days thereafter.

          (b) Responsibilities.  During the Research Term of this Agreement, the
JMT shall meet a minimum of two times per year as provided in Section 2.4;
thereafter, the JMT shall meet at the request of either party, which request may
be made by each party not more once in each twelve-month period following the
termination of the Research Program, unless otherwise agreed to by unanimous
consent of all members of the JMT. Except as provided in subsection (c) below,
the JMT shall operate by consensus and in accordance with the principles set
forth in this Article 2. It shall determine the overall strategy for the
Collaboration and shall be make all major business and strategic decisions. The
JMT shall supervise and direct the JSC, evaluate the progress of the Research
Plan and monitor compliance with the diligence provisions set forth in Sections
4.9 and 4.10, and it will make the final decisions regarding: (i) allocation of
FTEs for the Collaboration, (ii) significant modifications of the Research Plan,
(iii) transfer of technology under the Technology Sharing Program; (iv) the
strategy for the protection of intellectual property arising from the
Collaboration; and (v) determination of whether particular Candidate Targets are
Quality Targets. The JMT will also serve as the initial forum for dispute
resolution as set forth in Section 14.1. To the extent necessary to carry out
its responsibilities under the Research Plan, a Party's JMT members shall be
granted access to the other Party's relevant Confidential Information relevant
to the Collaboration. Thus, it may be that members of the JMT, in assessing
modifications to the Research Program, assessing the Research Results, or making
determinations as required in this Section 2.2, may need to be granted access to
higher levels of the proprietary or Confidential Information of the other Party
than is provided to the JSC or to the employees of such Party working on the
Collaboration. The JMT shall discuss in good faith and agree on the level of
such access that is needed to achieve the goals and intent of the Parties.

[ * ] = 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>

          (c) Determination of Certain Matters. BMS shall have the tie-breaking
vote in all matters that come before the JMT (including without limitation
whether a Candidate Target is a Quality Target); provided, however, that: (1)
the Parties agree to refer the any such matter, for which the JMT is unable to
agree, to the senior officers referred to in Section 14.1(a) and to follow the
informal dispute resolution procedure in Section 14.1(a) (but without the
requirement in said section of submitting the matter to arbitration if said
senior officers cannot reach mutual agreement within the time frame set forth
therein) before BMS may exercise its tie-breaking vote, and (2) the unanimous
consent of all members of the JMT shall be required for any dispute or
disagreement the resolution of which would require the use by Exelixis of more
FTEs than BMS is then supporting hereunder or which would materially conflict
with Exelixis' obligations hereunder.

     2.3  Joint Scientific Committee.

          (a) Membership.  The Joint Scientific Committee (the "JSC") shall be
composed of four members. Within thirty (30) days after the Effective Date, each
Party shall appoint two representatives to the JSC, one such representative
being the individual at the Party with primary responsibility for the day-to-day
management and execution of the Research Plan. Exelixis' other representative
shall be its Head of Research or such person's designee. The JSC will report
directly to the JMT and shall take its direction from the JMT. Each Party may
replace its appointed JSC representatives at any time upon written notice to the
other Party. Exelixis shall designate one of its representatives as Chairperson
of the JSC. The Chairperson shall be responsible for scheduling meetings,
preparing and circulating an agenda in advance of each meeting, and preparing
and issuing minutes of each meeting within thirty (30) days thereafter.

          (b) Responsibilities.  During the Research Term and for two quarters
thereafter, the JSC shall meet on a quarterly basis as provided in Section 2.4.
The JSC shall operate by consensus and in accordance with the principles set
forth in this Article 2. It shall be responsible for the planning and execution
of the Research Plan. At its meetings, the JSC shall review the progress of the
Research Plan and consider modifying the Research Plan. At the next JMT meeting,
the JSC shall summarize for the JMT the progress of the Research Plan since the
last JMT meeting, bring to the attention of the JMT any overarching issues or
significant changes in a Research Plan, and address any issues raised by the JMT
at its previous meeting. The JSC shall also prioritize projects within the
Research Plan as set forth in Article 4.

     2.4  Meetings.  The Parties shall endeavor to schedule meetings of the JMT
and the JSC at least one year in advance. Meetings for the JSC shall be held on
an alternating basis in New Jersey and in San Francisco. When possible, the
meeting of the JMT should occur at the same location as the JSC meeting, with
the JMT meeting occurring after the meeting of the JSC. With the consent of the
representatives of each Party serving on a particular committee, other
representatives of each Party may attend meetings of that committee as nonvoting
observers. A meeting of a committee may be held by audio or video teleconference
with the consent of each Party, provided that at least half of the minimum
number of meetings for that committee shall be held in person. Meetings of a
committee shall be effective only if at least one representative of each Party
is present or participating. Each Party shall be responsible for all of its own
expenses of participating in the committee meetings.

[ * ] = 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>

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

3.   Overview of the Mode of Action Program

     3.1  Goals. The general goals and intent of the Mode of Action Program are
to apply the Exelixis technology to: (a) the identification of the molecular
targets and/or biochemical pathways modulated by BMS Compounds, (b) the
discovery of Candidate Targets that may be useful as tools for the development
of drugs useful in the prevention, treatment or cure of human disease, and (c)
the discovery, development and commercialization of Licensed Products and/or
additional indications for BMS Products.

     3.2  Research Term. The Research Term shall commence on the Effective Date
and shall continue until the date three (3) years after the Effective Date, or
such other date on which the Research Term terminates pursuant to an early
termination under Section 3.2(a) or (b), or expires after an extension under
Section 3.2(c). Any termination of the Agreement pursuant to Section 11.2 shall
terminate the Research Term as of the date of such termination. The FTE funding
commitments of BMS and Exelixis set forth in Section 3.4 and the payment
obligations of BMS set forth in Section 8.2 shall remain in force until the
termination of the Research Term.

          (a) If Exelixis has not provided BMS with at least [ * ] Quality
Targets by the date that is thirty (30) days prior to first anniversary of the
Effective Date, BMS may, in its sole and absolute discretion, either (i)
terminate this Agreement as provided below in this Section 3.2(a), or (ii) if
BMS does not elect to terminate per clause (i) above, extend the Research Term
by ninety (90) days by written notification to Exelixis in order to allow
Exelixis additional time to provide [ * ] Quality Targets by the date that is
sixty (60) days after the first anniversary of the Effective Date. If BMS so
decides to terminate the Research Term, such termination shall be effective
fifteen (15) days after the date of BMS' written notification thereof, and BMS
shall have no obligation to make any Research funding payment that would
otherwise have become due after the date that notice of termination is given. If
BMS elects not to terminate the Research Term as provided in subsection (a)(i),
such Research Term shall continue for an additional ninety (90) days as provided
in Section 3.2(b).

          (b) If BMS has the right to an election under Section 3.2(a), and
elected under Section 3.2(a)(ii) to extend the Research Term until the date that
is sixty (60) days after the first anniversary of the Effective Date, and if
Exelixis has not provided BMS with at least [ * ] Quality Targets by the date
that is sixty (60) days after the first anniversary of the Effective Date, BMS
may, in its sole and absolute discretion, either (i) terminate this Agreement,
or (ii) continue to fund the Mode of Action Program hereunder for the remainder
of the Research Term at the rate of [ * ]. If BMS decides to terminate the
Research Term, it shall give written notice by no later than the seventy-fifth
(75th) day after the first anniversary date, and such notice of termination
shall be effective fifteen (15) days after the date of BMS' written notification
thereof. In the event of termination, BMS shall have no obligation to make any
Research funding payment that would otherwise have become due after the date
that notice of termination is given. If BMS does not elect to terminate as
permitted under subclause (b)(i) above, then the Research Term shall continue,
subject to Article 11 hereof, for the full three years, at a funded rate of [ *
] at 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.

                                      15.
<PAGE>

          (c)  If BMS has not terminated the Research Term as permitted in
Sections 3.2(a) or (b), the Parties may mutually agree in writing, no later than
sixty (60) days prior to the date that the Research Term, as set forth in this
Section 3.2, would otherwise expire, to extend the Research Term for one (1)
additional year beyond such initial three (3) year term. The Parties may agree
to multiple such one (1)-year extensions of the Research Term. Each such
extension shall be under the terms of this Agreement, subject to any adjustment
agreed to in writing by the Parties of the FTE funding commitments of BMS and
Exelixis set forth in Section 3.4.

     3.3  Research Plans. The initial Research Plan for the Mode of Action
Program has been approved by the Parties concurrent with the execution of this
Agreement. During the Research Term, the JSC may propose amendments to the
Research Plan, based upon the results achieved in the Mode of Action Program.
Any such proposed amendments shall be reviewed and approved by the JMT, and the
amended Research Plan, as approved by the JMT, shall thereafter be in effect and
control the Parties' activities under the Mode of Action Program.

     3.4  FTE Commitments.

          (a)  Subject to Section 3.4(d), for the first year of the Research
Term, BMS shall fund research under the Mode of Action Program for [ * ].

          (b)  Subject to Section 3.4(d), if Exelixis provides BMS with
[ * ] Quality Targets by the date [ * ] of the Effective Date, then, subject to
Article 11, from such first anniversary until the termination of the Research
Term, BMS shall fund research under the Mode of Action Program for [ * ].

          (c)  Subject to Section 3.4(d), if Exelixis does not provide BMS with
[ * ] Quality Targets by the date [ * ] of the Effective Date and if BMS elects
pursuant to Section 3.2(b) to extend for [ * ] the date by which BMS could
terminate the Research Term under Section 3.2(a), then after such [ * ], BMS'
research funding obligations under the Mode of Action Program shall be as
follows:

               (i)    BMS shall fund a minimum of [ * ] until the date that is
[ * ] of the Effective Date; and

               (ii)   In the event that Exelixis provides BMS with [ * ] Quality
Targets by the date that is [ * ] the [ * ] the Effective Date, BMS shall fund
[ * ] from such date until the termination of the Research Term; and

               (iii)  In the event that Exelixis does not provide BMS with
[ * ] Quality Targets by the date that is [ * ] the [ * ] the Effective Date,
BMS may elect to continue the Mode of Action Program through the end of the
Research Term but in such event shall fund [ * ] from such date until the
termination of the Research Term.

          (d)  At any time during the Research Term, the JMT may adjust the
number of FTEs dedicated to the Mode of Action Program for a minimum period of
one (1) year. The resulting number of FTEs shall not exceed [ * ] nor fall below
the [ * ], as applicable, without the written consent of Exelixis. BMS shall
fund all FTEs allocated by the JMT. Exelixis shall have

[ * ] = 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>

a reasonable time in which to locate resources to fill any additional FTE
positions created by the JMT.

     3.5  Conduct of Research. The Parties shall use Diligent Efforts to conduct
their respective tasks, as assigned under the Research Plan, throughout the Mode
of Action Program and shall conduct the Mode of Action Program in good
scientific manner, and in compliance in all material respects with the
requirements of applicable laws, rules and regulations and all applicable good
laboratory practices to attempt to achieve their objectives efficiently and
expeditiously.

     3.6  Records. Each Party shall maintain complete and accurate records of
all work conducted under the Collaboration and all results, data and
developments made pursuant to its efforts under the Collaboration. Such records
shall be complete and accurate and shall fully and properly reflect all work
done and results achieved in the performance of the Collaboration in sufficient
detail and in good scientific manner appropriate for patent and regulatory
purposes.

     3.7  Reports and Disclosure of Research Results. During the Research Term,
each Party shall, no less than once per quarter, submit to the other Party and
the JSC a written progress report summarizing the work performed under the
Collaboration in relation to the Research Plan and the goals of the Mode of
Action Program and the Research Results obtained therefrom. In particular, but
without limiting the generality of the foregoing, BMS shall provide in such
reports the identity, and Information relating to, of each Mammalian Target
identified hereunder, excluding all Related Targets, and shall indicate the
identification (e.g., by the BMS compound control number) of Collaboration
Compounds with sufficient activity to justify further research or development
work on such compound (and BMS shall also disclose the Mammalian Target that
such compound directly modulates, excluding Related Targets, but shall not be
obligated to disclose compound structures or information that would assist in
structural identification). If reasonably necessary for a Party to perform its
work under the Collaboration or to exercise its rights under the Agreement, such
Party may request that the other Party provide more detailed information and
data regarding such results reported by such other Party, and such other Party
shall promptly provide the requesting Party with information and data as is
reasonably related to such request. All such reports shall be considered
Confidential Information of the Party providing same.

     3.8  Preserving Confidentiality of Certain Research Results. Exelixis
agrees that it shall use commercially reasonable efforts (including not less
than those efforts that it uses to protect its own confidential information of
the same importance) not to disclose to any Third Party any Research Results of
Exelixis that relate directly to any Selected Target or Pursued Disclosed Target
(or any Mammalian Target related to any such Selected Target or Pursued
Disclosed Target), provided that the foregoing shall not prevent Exelixis from
disclosing any such information in confidence (on terms consistent with those
set forth in Article 10 herein but for a period of not less than [ * ]) to any
other licensee solely for use outside the Field, but subject to the limitations
in Section 6.3(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.

                                      17.
<PAGE>

4.   Mode of Action Program

     4.1  Provision of BMS Compounds. BMS will provide Exelixis with [ * ] BMS
Compounds within [ * ] after the Effective Date, for use by Exelixis in the Mode
of Action Program. BMS shall make known to Exelixis all BMS Compounds that are
part of BMS Products. BMS shall not reveal the identity or structure of any BMS
Compound to Exelixis, but it may provide Exelixis with information concerning
the putative function of an BMS Compound or other such information as may help
Exelixis perform its duties under the Mode of Action Program (which information
shall be treated as BMS Confidential Information). Following approval and
allocation of sufficient FTE resources by the JMT, BMS may provide additional
BMS Compound sets to Exelixis from time-to-time during the Research Term for use
by Exelixis in the Mode of Action Program.

          (a) In the event that, subsequent to providing a BMS Compound to
Exelixis, but prior to the identification by Exelixis under the Mode of Action
Program of any Target modulated by such BMS Compound, BMS learns that such BMS
Compound modulates a particular invertebrate or vertebrate target either: (i)
from public disclosures; or (b) from internal BMS research in an area other than
mode of action research using C. elegans or Drosophila, then BMS may, by
providing written notice to Exelixis substantiating the basis of BMS' learning
of such target, withdraw such BMS Compound from the Mode of Action Program, and
Exelixis shall cease work thereon. BMS shall not use any Research Results
relating to such BMS Compound, but shall have no obligation to Exelixis based on
the use of any Information learned by BMS independently.

     4.2  Stage I - Feasibility Evaluation. Within [ * ] of receiving a
particular BMS Compound from BMS, Exelixis shall evaluate the feasibility of
identifying Target(s) for such BMS Compound. Such Stage I research shall include
optimization of the delivery of such BMS Compound to a model system organism and
analysis of any phenotype arising in said model system organism as a result of
BMS Compound delivery. Exelixis shall report the data arising from such Stage I
research to the JSC.

     4.3  Provision and Testing of Analogues. In the event that the Stage I data
for a particular BMS Compound indicates that it will not be feasible for
Exelixis to identify Target(s) of such BMS Compound, the JSC may approve and
allocate sufficient resources for Exelixis from the pool of funded FTEs to
perform Stage I research on one or more Analogues of such BMS Compound that may
be provided by BMS for such purpose. Within [ * ] of receiving a particular
Analogue from BMS, Exelixis shall evaluate the feasibility of identifying
Target(s) for such Analogue. Such Stage I research shall include optimization of
the delivery of such Analogue to a model system organism and analysis of any
phenotype arising in said model system organism as a result of Analogue
delivery. Exelixis shall report the data arising from such Stage I research to
the JSC.

     4.4  Stage II - Target Identification.  The JSC shall review the Stage I
data for each BMS Compound, decide whether Exelixis should perform Stage II
research on such BMS Compound, and prioritize any such Stage II research
relative to the other work to be performed by Exelixis under the Mode of Action
Program. Exelixis shall proceed in an orderly fashion, based on such
prioritization and the number of FTEs then committed to the Mode of Action

[ * ] = 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>

Program, to perform research to identify Target(s) of each such BMS Compound
selected by the JSC for Stage II work. Such research may include: (i)
experiments in which existing [*] BMS Compound [*]; (ii) experiments in which
[*] BMS Compound [*]; and (iii) performance of [*] BMS Compound [*]. Exelixis
shall report to the JSC the data arising from such Stage II research and the
identity of any Target then known by Exelixis to be a Disclosed Target.

     4.5  Stage III - Identification of Candidate Targets. The JSC shall review
all Stage II data for each BMS Compound, select no more than [ * ] Targets
(excluding any Targets for which Exelixis determines that, as of the Effective
Date, it had an exclusivity obligation to another party that prevents disclosure
of such Target [ * ] to BMS hereunder) per BMS Compound for molecular analysis
by Exelixis, and prioritize any such Stage III research relative to the other
work to be performed by Exelixis under the Mode of Action Program. Subject to
Section 4.7, Exelixis shall proceed in an orderly fashion, based on the JSC's
prioritization and the number of FTEs then committed to the Mode of Action
Program, to identify the [ * ]. Exelixis will also undertake a good faith [ * ]
mammalian orthologue(s) of such Targets. Exelixis will submit all such data
generated under the previous two (2) sentences to the JSC along with a statement
setting forth whether each such Target is a Disclosed Target or if Exelixis
believes that such Target qualifies as a Candidate Target (with the JSC to
determine which Targets are Candidate Targets). Exelixis shall retain all rights
Controlled by it relating to a Target that is not a Disclosed Target and does
not fulfill the criteria for a Candidate Target, and such Targets shall not be
subject to any terms of this Agreement.

     4.6  Collaborative Work. Upon mutual agreement between the Parties, BMS may
collaborate with Exelixis on Stage I, Stage II and Stage III activities with
respect to a particular BMS Compound, wherein BMS may perform some of the Mode
of Action Program work on such BMS Compound. In such an event, any research
results generated by BMS pursuant to such collaborative work shall be deemed the
confidential Research Results of Exelixis for purposes of Candidate Target
identification and identification mammalian orthologues thereof.

     4.7  Limitation on Exelixis Collaborative Work. If Exelixis determines
that, with respect to a particular Target Exelixis identifies under the Mode of
Action Program, Exelixis is unable to conduct further work on such Target
hereunder due to then-existing obligations to a Third Party, Exelixis shall not
be obligated, notwithstanding the terms of Sections 4.4 and/or 4.5, to perform
any further work on such Target that would violate such obligations, but will
disclose such Target to BMS and all Research Results relating thereto obtained
by Exelixis prior to the date that it ceases further work on such Target
hereunder.

     4.8  Selection of Targets.

          (a)  Candidate Targets.

               (i) During the [ * ] period following Exelixis' submission of
data regarding a particular Candidate Target to the JSC pursuant to Section 4.5,
BMS shall use Diligent Efforts to seek to identify at least [ * ] mammalian
orthologue of such Candidate Target, and BMS may perform other research to help
it evaluate whether to select such Candidate Target as a Selected Target. Any
results of such research work with respect to such Candidate Target (and
mammalian orthologues thereof) may be used by BMS only for evaluation, unless
and until BMS selects the Candidate Target as 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.

                                      19.
<PAGE>

Selected Target. If BMS identifies at least [ * ] mammalian orthologue of such
Candidate Target during such [ * ] period, then BMS must provide Exelixis with
written notification, prior to the end of such [ * ] period, of its decision to
select such Candidate Target as a Selected Target before BMS or its sublicensees
may perform any other work on the Candidate Target following the end of such
[ * ] period.

          (ii)   If, despite its good faith, Diligent Efforts during the [ * ]
period following Exelixis' submission of data regarding a particular Candidate
Target to the JSC pursuant to Section 4.5, BMS has been unable to find at least
[ * ] mammalian orthologue of such Candidate Target, then BMS shall have an
additional [ * ] in which to use good faith, Diligent Efforts to seek to
identify at least [ * ] mammalian orthologue of such Candidate Target and, if it
so elects, to select such Candidate Target as a Selected Target by providing
written notice thereof to Exelixis.

          (iii)  If BMS fails to select such Candidate Target as a Selected
Target, within the [ * ] period set forth in subsection (i) above and, if
applicable, the additional [ * ] period set forth in subsection (ii) above, then
such Candidate Target shall thereafter be deemed an "Abandoned Target," and
Exelixis shall have the rights and obligations set forth in Sections 6.3(a) and
6.4.  BMS covenants that it shall not perform any further research on such
Target or [ * ] mammalian orthologue [ * ] identified by either Party under the
Collaboration, and shall not use any such Target or any Research Results
relating to such Target [ * ] mammalian orthologue [ * ], except as permitted in
clauses (iv) or (v) below.

          (iv)   If, after BMS has abandoned a particular Abandoned Target
pursuant to clause (a)(iii) above:

                 (1) BMS or any of its Affiliates learns, [ * ] under the
Collaboration, that such Abandoned Target [ * ] mammalian orthologue [ * ] is
directly inhibited, agonized or otherwise modulated by a compound in the same
class of compounds as the BMS Compound that Exelixis tested in the Mode of
Action Program to identify the Candidate Target that became such Abandoned
Target; and

                 (2) BMS or such Affiliate [ * ] any material use of any of the
Research Results that Remain Confidential at such time [ * ] mammalian
orthologues by BMS or its Affiliates that Remain Confidential;

     then BMS shall thereafter [ * ] such Abandoned Target and/or mammalian
orthologues thereof for [ * ] to Exelixis under this Agreement, provided that
BMS (or its Affiliate or licensee) does not [ * ] to such Abandoned Target [ * ]
that Remain Confidential at the time of such use, or any [ * ] mammalian
orthologues by BMS or its Affiliates (unless and until such [ * ] by BMS or its
Affiliate).

          (v)    With respect to any particular Abandoned Target that BMS
abandoned pursuant to clause (a)(iii) above, BMS may thereafter [ * ] under the
Agreement on such target and mammalian orthologues thereof.

                 (1)   Promptly after such [ * ] with respect to a particular
Abandoned Target, Exelixis shall inform BMS which of the following circumstances
applies: (A) Exelixis has already exclusively licensed such Abandoned Target
[ * ] mammalian orthologue [ * ] to a third party; or (B) Exelixis is in actual
license negotiations (i.e., after preparation of a term sheet) with regard to

[ * ] = 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>

granting a third party exclusive rights to such Abandoned Target [ * ] mammalian
orthologue [ * ] (provided that if such negotiations terminate without entering
into such a license, then Exelixis shall inform BMS that such Abandoned Target
is again available); or (C) Exelixis has not licensed such Abandoned Target
(and/or [ * ] mammalian orthologue [ * ]) to a third party, or has only granted
non-exclusive license rights with respect thereto, or is using such Target in an
ongoing internal research program.

                (2)  If subclause (C) in subsection (v)(1) above obtains, BMS
shall inform Exelixis within [ * ] whether BMS still desires to recommence work
on such target. If BMS does desire to recommence work, then such target shall
thereafter no longer be an Abandoned Target and the applicable subclause of the
following shall apply: (A) if such target [ * ] mammalian orthologue [ * ] was
not licensed by Exelixis to a third party, and not pursued internally by
Exelixis, then such target shall be treated as a Selected Target for all
purposes hereunder, with all rights and obligations of BMS and Exelixis that
apply to a Selected Target; (B) if such target [ * ] mammalian orthologue [ * ]
was non-exclusively licensed by Exelixis to a third party, or is the subject of
ongoing internal research by Exelixis, then such target shall be treated as a
Pursued Disclosed Target for all purposes hereunder, with all rights and
obligations of BMS and Exelixis that apply to a Pursued Disclosed Target, and
with the additional limitation that Exelixis shall not further disclose to Third
Parties any Research Results relating to such target.

          (vi)  With respect to each Selected Target, BMS shall have the rights
set forth in Section 6.1 and the obligations set forth in Section 4.8, and
Exelixis shall have the rights and obligations set forth in Sections 6.3(a) and
6.4.

      (b) Disclosed Targets.

          (i)   During the [ * ] period following Exelixis' submission of data
regarding a particular Disclosed Target to the JSC pursuant to Section 4.5, BMS
shall use Disclosed Efforts to seek to identify at least [ * ] mammalian
orthologue of such Disclosed Target, and BMS may perform other research to help
it evaluate whether to select such Disclosed Target as a Pursued Disclosed
Target. Any results of such research work with respect to such Disclosed Target
[ * ] mammalian orthologue [ * ] may be used by BMS only for evaluation, unless
and until BMS selects the Disclosed Target as a Pursued Disclosed Target. If BMS
identifies at least [ * ] mammalian orthologue of such Disclosed Target during
such [ * ] period, then BMS must provide Exelixis with written notification,
prior to the end of such [ * ] period, of its decision to select such Disclosed
Target as a Pursued Disclosed Target before BMS or its sublicensees may perform
any other work on the Disclosed Target following the end of such [ * ] period.

          (ii)  If, despite its good faith, Diligent Efforts during the [ * ]
period following Exelixis' submission of data regarding a particular Disclosed
Target to the JSC pursuant to Section 4.5, BMS has been unable to find at least
[ * ] mammalian orthologue of such Disclosed Target, then BMS shall have an
additional [ * ] in which to use good faith, Diligent Efforts to seek to
identify at least [ * ] mammalian orthologue of such Disclosed Target and, if it
so elects, to select such Disclosed Target as a Pursued Disclosed Target by
providing written notice thereof to Exelixis.

          (iii) If BMS fails to select such Disclosed Target as a Pursued
Disclosed Target (or, if applicable, a Product Target), within the [ * ] set
forth in subsection (i) above and, if applicable, the additional [ * ] set forth
in subsection (ii) above, then such

[ * ] = 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>

Disclosed Target shall thereafter be deemed an "Abandoned Target," and Exelixis
shall have the rights and obligations set forth in Sections 6.3(a) and 6.4. BMS
covenants that it shall not perform any further research on such Target [ * ]
mammalian orthologue [ * ] identified under the Collaboration, and shall not use
any such Disclosed Target, or any Research Results relating to such Disclosed
Target, to [ * ] mammalian orthologue [ * ], except as permitted in clause (iv)
or (v) below.

          (iv)  If, after BMS has abandoned a particular Abandoned Target
pursuant to clause (b)(iii) above:

                (1) BMS or any of its Affiliates learns, [ * ] under the
Collaboration, that such Abandoned Target [ * ] mammalian orthologue [ * ] is
directly inhibited, agonized or otherwise modulated by a compound in the same
class of compounds as the BMS Compound that Exelixis tested in the Mode of
Action Program to identify the Disclosed Target that became such Abandoned
Target; and

                (2) BMS or its Affiliate [ * ] any material use of any of the
Research Results that Remain Confidential at such time or any Information that
was developed by use of such Research Results by BMS or its Affiliates that
Remain Confidential at such time;

     then BMS shall thereafter [ * ] such Abandoned Target [ * ] for [ * ] to
Exelixis under this Agreement, provided that BMS (or its Affiliate or licensee)
does not [ * ] to such Abandoned Target or [ * ] mammalian orthologue [ * ] that
Remain Confidential at the time of such use, or any [ * ] or mammalian
orthologues by BMS or its Affiliates (unless and until such [ * ] by BMS or its
Affiliate).

          (v)   With respect to any particular Abandoned Target that BMS
abandoned pursuant to clause (b)(iii) above, BMS may thereafter [ * ] under the
Agreement on such target and mammalian orthologues thereof.

                (1) Promptly after such written request with respect to a
particular Abandoned Target, Exelixis shall inform BMS which of the following
circumstances applies: (A) Exelixis has already exclusively licensed such
Abandoned Target [ * ] mammalian orthologue [ * ] to a third party; or (B)
Exelixis is in actual license negotiations (i.e., after preparation of a term
sheet) with regard to granting a third party exclusive rights to such Abandoned
Target and/or mammalian orthologues thereof (provided that if such negotiations
terminate without entering into such a license, then Exelixis shall inform BMS
that such Abandoned Target is again available hereunder); or (C) Exelixis has
only granted non-exclusive license rights with respect thereto, or is using such
Target in an ongoing internal research program.

                (2) If subclause (C) in subsection (v)(1) above obtains, then
such target shall thereafter no longer be an  Abandoned Target [ * ] a Pursued
Disclosed Target for all purposes hereunder, with all rights and obligations of
BMS and Exelixis that apply to a Pursued Disclosed Target, and with the
additional limitation that Exelixis shall not further disclose to Third Parties
any Research Results relating to such target.

          (vi)  With respect to each Pursued Disclosed Target, BMS shall have
the rights set forth in Section 6.1 and the obligations set forth in Section
4.8, and Exelixis shall have the rights and obligations set forth in Sections
6.3(a) and 6.4.

[ * ] = 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>

     4.9  Selected Target Diligence.

          (a)   For each Selected Target, BMS shall use good faith, Diligent
Efforts as follows:

                (i)   to develop assays to assess the activity of compounds
against at least one (or more) of the following: any Novel Target, Unlinked
Related Target, Safety Target, Conceptual Target or Pre-Associated Target,
relating to such Selected Target;

                (ii)  to use such assays to discover Collaboration Compounds
directed at any of the Mammalian Targets referred to in subsection (a) above;
and

                (iii) if BMS discovers a Collaboration Compound as provided in
subsection (b) above and approves such Collaboration Compound as a Preclinical
Lead Profile to use Diligent Efforts to develop and commercialize (which may
include sublicensing) such Collaboration Compound as a Licensed Product.

          (b)   The Parties agree that BMS shall have fulfilled its Diligent
Efforts under such subsection 4.9(a), as to a particular Selected Target, if:
(1) [ * ] in an assay, within [ * ] after selection of such Selected Target,
with respect to any Novel Target, Unlinked Related Target, Safety Target,
Conceptual Target, or Pre-Associated Target that is related to such Selected
Target; and (2) BMS shall have [ * ] of such Mammalian Targets described in
subclause (1) above, within [ * ] after initiation of such [ * ], and shall have
[ * ] Collaboration Compound [ * ] within [ * ] after the initiation of such
[ * ]. The preceding sentence shall constitute a safe harbor as to the
demonstration of Diligent Efforts by BMS, and shall not be construed to limit or
preclude any other showing of Diligent Efforts by BMS based on actual facts and
circumstances.

     4.10 Other Diligence Obligations.

          (a)   Where a Gene Product exists, or reasonably may be pursued, with
respect to a Selected Target (i.e., is based upon a mammalian orthologue of such
Selected Target), then, separate from the diligence obligations set forth in
Section 4.9, BMS must use good faith, Diligent Efforts to [ * ] Gene Product.

          (b)   Where a Biotherapeutic Product can be developed with respect to
a Selected Target (i.e., is based upon a mammalian orthologue of such Selected
Target), then, separate from the diligence obligations set forth in Section
4.10(a), BMS must use good faith, Diligent Efforts to [ * ] Biotherapeutic
Product [ * ] Selected Target.

     4.11 Target Abandonment. BMS may [ * ] at any time during the term of the
Agreement notify Exelixis in writing that it has [ * ] Selected Target [ * ]
Pursued Disclosed Target [ * ] Mammalian Targets [ * ] Selected Target [ * ]
Pursued Disclosed Target [ * ]. Such notification shall have the following
effects: (a) such [ * ] Selected Target [ * ] Pursued Target [ * ] an Abandoned
Target, (b) BMS shall [ * ] with respect to such Target, (c) the licenses set
forth in Section 6.1 [ * ] Collaboration Compounds [ * ] Pursued Disclosed
Target, (d) all rights granted by Exelixis in the Exelixis-generated Research
Results [ * ], (e) the license set forth in Section 6.3(b) [ * ], and (f) any
Collaboration Compounds identified prior to the date BMS gives notice of its
election under this Section 4.11 [ * ] Selected Target [ * ] Collaboration
Compounds [ * ] Selected Target [ * ] Mammalian Target [ * ]. Subsequently, if [
* ] Selected Target [ * ] Pursued Disclosed Target [ * ] Mammalian Targets [ * ]
based on such Selected Target or Pursued Disclosed Target (ii) or makes any [ *
] Mammalian Targets [ * ] Pursued Disclosed Target Compound [ * ] Selected
Target [ * ] Pursued Disclosed Target [ * ] an Abandoned Target for the purposes
set forth 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.

                                      23.
<PAGE>

  4.12    Failure of Diligence.

          (a)  If BMS fails to fulfill its obligations set forth in Section
4.9(a) with respect to a particular Selected Target, it [ * ] Selected Target
[ * ] Selected Target [ * ] Mammalian Targets [ * ] that is in the process of
being resolved under the dispute resolution procedures set forth in Section
14.1, become [ * ] Selected Target [ * ] Pursued Disclosed Target [ * ].

          (b)  If BMS fails to fulfill its obligations set forth in Section
4.10(a) with respect to a particular Selected Target, it [ * ] Selected Target
[ * ] Selected Target [ * ] that is in the process of being resolved under the
dispute resolution procedures set forth in Section 14.1, [ * ] Selected Target
[ * ] Products relating to such Selected Target.

          (c)  If BMS fails to fulfill its obligations set forth in Section
4.10(b) with respect to a particular Selected Target, it [ * ] Selected Target
[ * ] Selected Target [ * ] that is in the process of being resolved under the
dispute resolution procedures set forth in Section 14.1, become [ * ]
Biotherapeutic Products [ * ] Selected Target [ * ] Biotherapeutic Products
[ * ] Selected Target [ * ] .

          (d)  [ * ], and BMS shall not be liable for any damages of any type
with respect to any such breach or abandonment.

     4.13 Pursuit of New Indications for BMS Products. BMS may pursue New
Indications for a BMS drug product by selecting, as a "Product Target" for such
use, a Selected Target or Pursued Disclosed Target, and using one or more of the
mammalian orthologues of such Selected Target or Pursued Disclosed Target, which
is or has been identified by or on behalf of BMS (or its Affiliate or
sublicensee) through the material use of such Target or its DNA sequence, or any
other Research Results relating thereto that Remain Confidential, to search for
such different uses of or indications for such BMS product. With respect to each
Product Target, BMS shall have the rights set forth in Section 6.1 and the
obligations set forth in Section 8.6. If BMS uses a Selected Target or Pursued
Disclosed Target in this manner to seek to identify New Indications, such Target
shall be referred to as a "Product Target" for such purposes (but shall remain a
Selected Target or Pursued Disclosed Target, as applicable, for any use in
screening for active compounds).

     4.14 Exclusion Based on Use of Mammalian Targets that [ * ]. The following
provisions shall apply to use by BMS or its Affiliates or sublicensees of
certain Known Targets, and/or Information developed based on use of such
Targets, in order to identify compounds that activate, inhibit or otherwise
modulate such targets:

          (a)  With respect to a particular Pre-Associated Target, if there is [
* ] BMS Compound [ * ] BMS Compound [ * ] in the disease area of interest to BMS
with respect to its identification of such Pre-Associated Target, then
commencing on the date that is [ * ] Pre-Associated Target [ * ] Pre-Associated
Target [ * ] Collaboration Compounds [ * ] be subject to the terms of this
Agreement, but provided, however, that (1) any [ * ] Pre-Associated Target [ * ]
Collaboration Compounds [ * ] Collaboration Compounds [ * ] Pre-Associated
Target [ * ] Collaboration Compounds [ * ] Collaboration Compounds [ * ] be
subject to milestone and royalty payments applicable to Pre-Associated Targets;

          (b)  With respect to a particular Conceptual Target, if there is [ * ]
BMS Compound [ * ] Conceptual Target) has activity against such Conceptual
Target [ * ] in the disease area of interest to BMS with respect to its
identification of such Conceptual Target, then commencing on the date that is
[ * ] Conceptual Target, or based upon the use to any material extent of
Information derived from use of such Conceptual Target (or its DNA sequence)
[ * ] Collaboration Compounds [ * ] be subject to the terms of this Agreement,
but provided, however, that (1) any [ * ] to such Conceptual Target [ * ]
Collaboration Compounds [ * ] Collaboration Compounds [ * ] Collaboration
Compounds [ * ] be subject to milestone and royalty payments applicable to
Conceptual Targets;

[ * ] = 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>

           (c) With respect to a particular Mammalian Disclosed Target, if there
is [ * ] BMS Compounds [ * ] Mammalian Disclosed Target [ * ] Mammalian
Disclosed Target [ * ] in the disease area of interest to BMS with respect to
its identification of such Mammalian Disclosed Target, then commencing on the
date that is [ * ] Mammalian Disclosed Target [ * ] Mammalian Disclosed Target [
* ] Collaboration Compounds [ * ] be subject to the terms of this Agreement, but
provided, however, that (1) any [ * ] Mammalian Disclosed Target [ * ]
Collaboration Compounds [ * ] Collaboration Compounds [ * ] Mammalian Disclosed
Target [ * ] Collaboration Compounds [ * ] Collaboration Compounds [ * ] be
subject to milestone and royalty payments applicable to Mammalian Disclosed
Targets; and

           (d)  With respect to a particular Safety Target, if there is [ * ]
BMS Compound [ * ] Safety Target [ * ] Safety Target [ * ] in the disease area
of interest to BMS with respect to Safety Target, then commencing on the date
that is [ * ] Safety Target [ * ] Collaboration Compounds [ * ] subject to the
terms of this Agreement, but provided, however, that (1) any [ * ] Collaboration
Compounds [ * ] Collaboration Compounds [ * ] Safety Target [ * ] Collaboration
Compounds [ * ] Collaboration Compounds [ * ] be subject to milestone and
royalty payments applicable to Safety Targets.

           (e)  For purposes of this Section 4.14, a "Derivative" shall mean a
compound that has the same, or a substantially similar, Active Substructure as a
particular Collaboration Compound, where an "Active Substructure" means those
portions of such Collaboration Compound that contribute materially to the
activity of such compound against the applicable Mammalian Target.

     4.15  Exelixis Exclusivity Obligations. If at any time during the Research
Term, Exelixis discovers that a particular Target is identical to a molecule for
which it has an exclusivity obligation pursuant to a written agreement between
Exelixis and a Third Party, Exelixis shall thereafter only perform work on such
Target under the Mode of Action Program to the extent such work is not
prohibited by such agreement, but subject to the following provisions in this
Section 4.14 and provided, that, with respect to the identification of any
particular Target, the foregoing shall not prevent Exelixis from disclosing the
Target to BMS or any Research Results obtained by Exelixis with respect thereto.
Exelixis covenants that in any future "mode of action" agreement that Exelixis
enters into with a Third Party, such Third Party agreement shall not prevent
Exelixis from disclosing to BMS any particular Target identified under the Mode
of Action Program for use in the Field and to perform any of the work
contemplated hereunder with respect to such Target. With respect to any other
written collaborative research agreement Exelixis enters into with a Third
Party, such agreement shall [ * ] Selected Target, Pursued Disclosed Target or
Product Target) any particular Target (or its nucleic acid sequence) identified
under the Mode of Action Program for use in the Field, [ * ] from doing further
work on such Target.

     4.16  Records. Each Party shall maintain complete and accurate records of
all scientific and development work conducted on Selected Targets, Pursued
Disclosed Targets, Product Targets, Collaboration Compounds, Licensed Products,
and New Indications for BMS Products, and of all results, data and developments
made pursuant to its research and development efforts under this Agreement. Such
records shall be complete and accurate and shall fully and properly reflect all
work done and results achieved in sufficient detail and in good scientific
manner appropriate for patent and regulatory purposes.

     4.17  Reports. Separate from the reports to be provided under Section 3.7,
every [ * ] during the term of the Agreement, BMS will submit to Exelixis and
the JSC a written progress report summarizing the research and development work
performed on (a) each Selected Target, Pursued Disclosed Target, Product Target
and Mammalian Target and (b) on each New Indication, it being understood that
the purpose of such reports shall be to enable Exelixis to

[ * ] = 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>

determine if BMS is fulfilling its diligence and payment obligations under this
Agreement. Such reports shall include (without limitation) the identity of all
Mammalian Targets identified (excluding Related Targets), the identification of
Related Targets (without disclosing the actual identity thereof), and the
identification (without disclosing the structure) of Collaboration Compounds
that have sufficient activity to justify further research and development work
with respect thereto (and BMS shall identify the Mammalian Target against which
such Collaboration Compound has activity), and summaries of the work conducted
with respect thereto. The foregoing shall not require that BMS disclose any
Confidential Information of BMS regarding the identity of (or any information
that would lead to the identification by Exelixis of) any specific Related
Target or Collaboration Compound identified by BMS, materials or processes used
in any assays, structures of any compounds, and research or development plans.
All such reports provided by BMS shall be treated as Confidential Information of
BMS.

5.   Technology Sharing Program

     5.1  Transfer of Exelixis Core Technology.

          (a)  Exelixis shall transfer to BMS, on an orderly basis, the Exelixis
Core Technology (including the Exelixis know-how directly relating thereto) and
copies of the Exelixis Core Technology Patents. The timing of transfer of
Exelixis Core Technology shall be in accordance with the schedule set forth in
Exhibit C attached hereto, which exhibit may be modified as appropriate by the
JMT. All Exelixis Core Technology (including any Improvement Inventions thereto
that Exelixis, in its sole discretion, makes) shall be deemed to have been
accepted by BMS upon receipt, and BMS hereby waives all rights of revocation.

          (b)  In accordance with the delivery schedule set forth in Exhibit C
attached hereto and any modifications thereof, Exelixis will deliver to BMS the
FlyTag Database at Exelixis' expense. The FlyTag Database shall be delivered in
electronic format, or in such other suitable format as selected by Exelixis and
reasonably acceptable to BMS. The FlyTag Database shall be deemed to have been
accepted by BMS upon receipt, and BMS hereby waives all rights of revocation.

          (c)  Nothing herein shall be construed to require Exelixis to make any
Improvement Inventions to the Exelixis Core Technology, or, except as provided
in Section 5.7(a), to provide training, maintenance, installation, advice,
debugging or other support with regard to the use of, or the correction of any
problems associated with, the Exelixis Core Technology or any Exelixis
Improvement Inventions. If BMS elects to [ * ] provided by Exelixis, such items
shall be deemed to have been accepted by BMS upon the same terms and conditions
as apply to its use of the Exelixis Core Technology hereunder.

     5.2  Transfer of BMS Core Technology; Transfer of Source Code; Error
Corrections.

          (a)  BMS shall transfer to Exelixis, on an orderly basis, the BMS Core
Technology (including the BMS know-how directly relating thereto) and copies of
the BMS Core Technology Patents. The timing of transfer of BMS Core Technology
shall be in accordance with the schedule set forth in Exhibit B attached hereto,
which exhibit may be modified as appropriate by the JMT. All BMS Core Technology
(including any Improvement

[ * ] = 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>

Inventions thereto) shall be deemed to have been accepted by Exelixis upon
receipt, and Exelixis hereby waives all rights of revocation.

          (b)  In accordance with the delivery schedule set forth in Exhibit B
attached hereto and any modifications thereof, BMS will deliver to Exelixis the
BMS Software at BMS' expense. The software included in the BMS Core Technology
(the "BMS Software") shall be delivered in electronic format, or in such other
suitable format as selected by BMS and reasonably acceptable to Exelixis. All
BMS Software (including any Improvement Inventions relating thereto except as
otherwise provided in subclause (i) below) shall be deemed to have been accepted
by Exelixis upon receipt, and Exelixis hereby waives all rights of revocation.

               (i)  In the event that BMS develops internally, in its sole
discretion, any Improvement Inventions comprising updates, new versions, or
enhancements that directly relate to the BMS Core Technology (including without
limitation the BMS Software) during the Research Term and that are owned or
Controlled by BMS, it shall provide each such update, new version or enhancement
to Exelixis within thirty (30) days after such enhancement, update or new
version is made available to all BMS scientists generally. Exelixis shall have
the right to review any such Improvement Invention prior to incorporation into
Exelixis' internal chemistry technology, and Exelixis may, after a reasonable
period of such internal review, determine that it does not wish to have a
license to any particular Improvement Invention to the BMS Core Technology
(including to the BMS Software) provided by BMS hereunder, in which case
Exelixis shall return to BMS or destroy all copies of such Improvement
Invention, and such Improvement Invention shall not be licensed to Exelixis and
shall be excluded from the definition of "BMS Core Technology" for all purposes
hereunder. As to any such Improvement Invention that Exelixis decides to
incorporate, Exelixis shall be responsible for incorporating such update, new
version, or enhancement into its own software environment and BMS shall have no
obligation, express or implied, to perform any services to assist Exelixis in
incorporating same.

               (ii) If BMS acquires software from a Third Party during the
Research Term that is directly related to the BMS Software or is otherwise used
in the BMS Core Technology, BMS will, subject to any confidentiality obligations
it may have to such Third Party, inform Exelixis through the JMT of the
availability of same, but shall have no obligation to provide such new software
program to Exelixis hereunder as part of the BMS Core Technology or as any
Improvement Invention thereto, but BMS agrees to cooperate with Exelixis and
provide reasonable assistance, [ * ], in Exelixis' efforts to obtain a license
to such software, if Exelixis requests. Nothing herein shall be construed to
require BMS to make any enhancements, updates or new versions of the BMS
Software or, except as provided in Sections 5.2(e) and 5.7(b), to provide
training, maintenance, installation, advice, debugging or other support with
regard to the use of, or the correction of any problems associated with, the BMS
Software or any BMS Improvement Inventions relating to the BMS Software. Each
Party shall be solely responsible for providing its own maintenance and support
for the BMS Software, except as otherwise provided in this Section 5.2. If
Exelixis elects to use any updates, enhancements, new versions, bug fixes or
error corrections provided by BMS, such items shall be deemed to have been
accepted by Exelixis upon the same terms and conditions as apply to its use of
the BMS Software hereunder.

[ * ] = 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>

          (c)  Exelixis understands and agrees that certain software and
equipment comprising the BMS Core Technology as of the Effective Date are
licensed or obtained from Third Parties and that BMS shall have no obligation to
acquire, sublicense, or obtain same to, for or on behalf of Exelixis, except for
such sublicense rights as can be granted without additional cost to BMS or its
Affiliates and without violating the terms of any license agreement that BMS or
any of its Affiliates may have with a Third Party, but BMS agrees to disclose to
Exelixis the names and suppliers or licensors of such software and equipment and
to cooperate with Exelixis and provide reasonable assistance, at Exelixis'
expense, in Exelixis' efforts to obtain a license to such software or equipment,
if Exelixis so requests.

          (d)  During the Research Term, BMS will provide to Exelixis, in object
code form and, after the time that BMS has provided to Exelixis under subsection
(e) the source code for the BMS Software, in source code form, any error
corrections or bug fixes to the BMS Software that BMS Controls and makes and
distributes internally to its users for its own use of the BMS Software (or any
part thereof). In addition, BMS will endeavor to provide to Exelixis during the
Research Term, [ * ], error corrections and bug fixes to any applications
software provided by BMS as part of the BMS Core Technology or any BMS
Improvement Invention, but only if, and to the extent that: (1) the source code
for such software is available to BMS and is owned by or licensed to BMS in a
manner such that BMS can make and distribute such corrections and fixes; (2) the
error detected in the software is attributable solely to the application
software itself and not in any way to any software not supplied by BMS
(including without limitation operating system or database engine) or any
equipment used or purchased by Exelixis; (3) the error is not attributable to
operator error, misuse or negligence by Exelixis, failure by Exelixis to install
software or equipment in accordance with applicable specifications, or failure
to comply with applicable and appropriate instructions provided by BMS; (4)
Exelixis fully cooperates with BMS in reporting all necessary information and
data so that BMS may reproduce the error at BMS' facilities; (5) is not software
for which Exelixis has received source code pursuant to subparagraph (e) below;
and (6) BMS also provides the error correction or bug fix generally to its own
internal users. BMS will be reimbursed for its fully-burdened costs to conduct
or provide, at Exelixis' request, error corrections or bug fixes with respect to
any such applications software where it is subsequently discovered that the
request does not meet the standards of the preceding sentence. BMS DOES NOT
GUARANTEE OR PROMISE IN ANY WAY THAT BMS WILL BE SUCCESSFUL IN MAKING AN ERROR
CORRECTION OR BUG FIX OR THAT ANY CORRECTION OR BUG FIX WILL MEET EXELIXIS'
RESEARCH OR BUSINESS NEEDS, AND DISCLAIMS ALL REPRESENTATIONS AND WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A GIVEN PURPOSE OR USE WITH RESPECT TO ANY SUCH
ERROR CORRECTION OR BUG FIX OR THAT BMS WILL BE SUCCESSFUL IN MAKING AN ERROR
CORRECTION OR BUG FIX OR THAT ANY ERROR CORRECTION OR BUG FIX WILL MEET
EXELIXIS' RESEARCH OR BUSINESS NEEDS.

          (e)  BMS shall make the source code that it Controls for any software
included in the BMS Core Technology or BMS Improvement Inventions available to
Exelixis promptly upon Exelixis' request. Upon such request (which may not be
made unless Exelixis has accepted the software), BMS shall provide to Exelixis,
in electronic or other mutually agreed format, 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.

                                      28.
<PAGE>

requested source code as BMS then Controls that relates to any software included
in the BMS Core Technology or, where accepted by Exelixis, the BMS Improvement
Inventions, and shall also provide and all documentation related to such source
code. It is understood and agreed that, after providing particular source code
to Exelixis, BMS shall not be responsible for providing Exelixis bug fixes and
error corrections to such software that are requested by Exelixis (but shall
still provide any such bug fixes and error corrections made by BMS
independently, as provided in subsection (d)), and that any other Improvement
Inventions made by BMS to such software for which Exelixis previously received
the source code shall, if accepted by Exelixis, also be provided to Exelixis in
both object code and source code. Prior to an Exelixis request for source code,
BMS need not provide such source code, except where BMS deems it necessary to
provide source code and compiles it in situ, rather than making stand alone
installers for compiled code, in which event BMS may install the source code,
compile it in situ, and then delete the source code.

     (f)  Exelixis understands and agrees that its confidentiality obligations
with respect to the BMS Core Technology, including software and documentation
provided by BMS, that comprises BMS Confidential Information shall continue
[ * ].

     (g)  Exelixis understands and agrees that certain drawings (e.g., CAD
drawings and assembly drawings for fabricated parts) and blueprints contained in
the BMS Core Technology relating to equipment design will, where Controlled by
BMS, be provided "AS IS", and that Exelixis will receive copies of same. If BMS
creates and Controls improved drawings or blueprints during the Research Term,
copies of these will be provided to Exelixis. Exelixis further understands that
BMS has fabricated for itself certain parts where BMS has not prepared the
assembly drawings for Third Party fabrication. During the Research Term, BMS
will make these parts for Exelixis at Exelixis' expense [ * ] until such time as
BMS prepares the assembly drawings and Exelixis is able to have these parts
fabricated by Third Parties.

     (h)  Exelixis acknowledges that BMS has provided it with a list of
equipment and software supplies that Exelixis will need to purchase or license
in order to use the BMS/HTC System (as set forth on Exhibit B), and that
Exelixis has had opportunity to inquire of BMS as to what its specific needs
will be and has received satisfactory answers to same. Exelixis acknowledges
that it has had adequate opportunity to review the BMS Core Technology with BMS.
Exelixis understands that certain of the equipment used by BMS within the BMS
Core Technology is manufactured for BMS by machine shops based on
specifications, drawing and blueprints provided by BMS or developed by such
machine shops. BMS will reasonably cooperate during the Research Term and at
Exelixis' expense with any efforts of Exelixis to use such machine shops for the
manufacture of the same equipment for Exelixis and will reasonable efforts to
persuade such machine shops to make any drawings possessed by them available for
use by Exelixis on the same terms as the same may be made available for use by
BMS.

     (i)  Nothing herein shall be construed to require BMS to make any
Improvement Inventions to the BMS Core Technology, or, except as provided in
Sections 5.2(e) and 5.7(b), to provide training, maintenance, installation,
advice, debugging or other support with regard to the use of, or the correction
of any problems associated with, the BMS Core Technology or any BMS Improvement
Inventions. If Exelixis elects to use any BMS Improvement Inventions provided by
BMS, such items shall be deemed to have been accepted

[ * ] = 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>

by Exelixis upon the same terms and conditions as apply to its use of the BMS
Core Technology hereunder.

          (j)  Notwithstanding the other provisions of this Section 5.2, if
Exelixis undergoes a Major Control Change (as defined below) prior to the end of
the Research Term, then BMS shall have no further obligation to disclose,
provide, transfer or license to Exelixis any new Improvement Inventions to the
BMS Core Technology that BMS may make, including without limitation any updates
or error corrections or improvements to the BMS Software.

               (i)  As used in this Agreement, "Major Control Change" shall mean
a completed transaction (or related series of transactions) pursuant to which
Exelixis merges or consolidates with Qualifying Pharmaceutical Entity (or
Affiliate of such entity), or voting stock of Exelixis is acquired by a
Qualifying Pharmaceutical Entity (or an Affiliate of such entity) such that
Exelixis becomes an Affiliate of such Qualifying Pharmaceutical Entity, or all
or substantially all of the assets of Exelixis' business relating to the BMS
Core Technology are acquired by a Qualifying Pharmaceutical Entity, or an
Affiliate of such entity. A "Qualifying Pharmaceutical Entity" means a company
with annual consolidated worldwide net sales from the sale of prescription drugs
in excess of One Billion Dollars (US$1,000,000,000).

     5.3  Technology Licenses To BMS.

          (a)  Subject to the terms of this Agreement, Exelixis hereby grants
BMS a limited, non-exclusive, non-transferable, worldwide, perpetual (subject to
termination under Section 3.2(a) or Article 11) license to use and practice the
Exelixis Core Technology, Exelixis Core Technology Patents, and any Improvement
Inventions made solely by Exelixis to the BMS Core Technology solely for its own
internal research and discovery efforts in the Field, and subject to the
limitations in this Section 5.3 and Section 5.4(a) of this Agreement. BMS may
use the results and products of its permitted practice of the Exelixis Core
Technology, the Exelixis Core Technology Patents, and any Improvement Inventions
made solely by Exelixis to the BMS Core Technology for all commercial purposes.
BMS' use of Exelixis' Drosophila technology under the foregoing license is
subject to the following limitations: (i) no more than [ * ] may utilize such
technology during the "Research Term" (as defined in the agreement between
Exelixis and a certain partner) in the U.S. [ * ]; (ii) no work may be performed
on certain genes or proteins that, as of the Effective Date, are the focus of
research being pursued under a collaboration between Exelixis and a certain
partner for the duration of such "Research Term" with such certain partner; and
(iii) BMS may not commence research utilizing such technology in the fields of [
* ] before [ * ]. Exelixis covenants that it shall inform BMS upon expiration or
termination of the "Research Term" referred to in subclause (i) above.

          (b)  Subject to the terms of this Agreement, Exelixis hereby grants to
BMS a limited, non-exclusive, non-transferable, world-wide, perpetual (subject
to termination under Section 3.2(a) or Article 11) license to use, adapt,
reproduce, modify, localize, and create derivative works of the FlyTag Database,
provided that (i) all such uses of the FlyTag Database are solely for BMS'
internal or collaborative research purposes, (ii) are used in the same manner,
and subject to the same terms and conditions, as apply to the FlyTag Database,
and (iii) are subject to the limitations in this Section 5.3 and Section 5.4(b)
of this Agreement. The foregoing license includes the right to make copies of
the FlyTag Database for the purposes of the exercise of such license, including
without limitation appropriate numbers of copies for BMS' internal back-up and
archival purposes, provided that all such copies shall bear the original and
unmodified copyright, patent and other intellectual property markings as when
originally delivered by Exelixis. The FlyTag Database may only be used by
authorized employees or contractors of BMS at the facilities owned or leased by
BMS (except that authorized employees and contractors of BMS and its
Affiliates shall be entitled to access the FlyTag Database over BMS' Intranet or
remotely from outside such facilities), and such use shall be limited to the
uses licensed to BMS under the first sentence of this Section 5.3(b). All
rights, title and interests in and to the FlyTag Database licensed hereunder,
and any copies, translations or compilations thereof which may be made or
permitted to be made hereunder by BMS are and shall remain the exclusive
property of Exelixis, except for such data as BMS may have entered into the
database following receipt of the FlyTag Database from Exelixis and derivative
works of the Fly Tag Database, which data and derivative works, (excluding any
Exelixis information or code therein) shall remain the exclusive property of BMS
(and in which BMS shall retain all rights, title and interests), and BMS shall
not be obligated to provide or disclose such data to Exelixis during or
following the termination of this Agreement. For purposes of the foregoing,
"derivative works" means any computer program that may be developed containing
any part of the software database, regardless of the form of the resulting code,
the media it is carried on, or its intended use. For clarity, it is understood
that Exelixis grants to BMS hereunder no right or license under or to any
improvements or additions to the FlyTag Database made after the Effective Date,
other than corrections of sequence errors that Exelixis may identify or become
aware of.

                                      30.
<PAGE>

          (c) The licenses granted in subsections (a) and (b) above will,
subject to the applicable provisions of Article 11, continue beyond the
expiration or termination of the Research Term.

          (d) The license rights granted in subsections (a) and (b) above may
not be sublicensed to a Third Party without the prior written consent of
Exelixis. BMS covenants that it will not transfer or disclose any such Exelixis
Core Technology, Exelixis Core Technology Patents or FlyTag Database to any
Third Party except as part of such permitted sublicenses and only subject to
limitations consistent with the above restrictions and those in Section 5.4.
BMS may transfer or disclose any such Exelixis Core Technology, Exelixis Core
Technology Patents or FlyTag Database to any of its Affiliates without the prior
consent of Exelixis provided that such transfer or disclosure occurs pursuant to
an agreement that subjects such Affiliate to all relevant limitations in this
Agreement, including without limitation, the restrictions set forth in this
Section 5.3 and Section 5.4. BMS hereby guarantees the compliance of each of its
Affiliates with all such restrictions and limitations on the use of such
Exelixis Core Technology (including know-how relating thereto), Exelixis core
Technology Patents or FlyTag Database transferred or disclosed to such
Affiliate, and any such failure to comply with such restrictions and limitations
shall be deemed a breach by BMS of such obligations.

     5.4  Limitations on BMS License.

          (a) BMS understands and agrees that Exelixis retains all its rights to
use all technology, Information and intellectual property rights related to
Exelixis Core Technology for its own purposes and to license or disclose such
technology, Information and intellectual property rights to Third Parties
without restriction, subject only to the right and the licenses granted to BMS
in Section 5.3 of this Agreement. BMS covenants that it and its Affiliates shall
not use or practice the Exelixis Core Technology, Exelixis Core Technology
Patents or FlyTag Database for any use or purpose except as expressly permitted
in Section 5.3. BMS further covenants that BMS and its Affiliates will not sell
or otherwise transfer to a Third Party or commercialize any Exelixis Core
Technology or any technology incorporating Exelixis Core Technology, except as
permitted in Section 5.3, but excluding from the foregoing limitation any
technology that both (i) is discovered or synthesized by BMS or its Affiliates
without material reliance on or material use of any Confidential Information of
Exelixis disclosed to BMS pertaining to Exelixis' Core Technology, and (ii) that
does not infringe a Valid Claim of any Exelixis Core Technology Patents licensed
to BMS hereunder.

          (b) BMS may not: (i) distribute in any manner the FlyTag Database or
any derivative work of any portion of the FlyTag Database, except as expressly
permitted in this Agreement; (ii) publicly disclose, publicly perform or
publicly display the FlyTag Database; (iii) use, copy, compile, adapt, translate
the FlyTag Database except as expressly permitted in this Agreement; (iv) sell,
lease, loan, trade, transfer (including over a network including the Internet,
but excluding the Intranet used by BMS and its Affiliates solely to the extent
permitted in Section 5.3(b)), sublicense, market or publish the FlyTag Database
except as expressly permitted in this Agreement; or (v) copy the documentation,
except as expressly permitted in this Agreement. BMS acknowledges and agrees
that the FlyTag Database is highly confidential and warrants the imposition of
appropriate security precautions at least as strict as those implemented for its
own similar proprietary or confidential information.

[*] = 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>

  5.5  Technology Licenses To Exelixis.

       (a) Subject to the terms of this Agreement, BMS hereby grants Exelixis a
limited, non-exclusive, non-transferable, worldwide, perpetual (subject to
termination under Section 3.2(a) or Article 11) license to use and practice the
BMS Core Technology, BMS Core Technology Patents, and any Improvement Inventions
made solely by BMS to the Exelixis Core Technology (but excluding any
improvements or additions to the FlyTag Database made after the Effective Date
other than corrections of errors in the sequence information that are made or
determined by BMS or its Affiliate) solely for its own internal research and
discovery efforts, and subject to the limitations in this Section 5.5 and
Section 5.6 of this Agreement.  Exelixis may use the results and products of its
permitted practice of the BMS Core Technology, the BMS Core Technology Patents,
and any Improvement Inventions made solely by BMS to the Exelixis Core
Technology for all commercial purposes.  Exelixis acknowledges that the Bohdan
mini-reactors must be purchased from Bohdan and cannot be manufactured by or for
Exelixis.

       (b) Subject to the terms of this Agreement, BMS hereby grants to Exelixis
a limited, non-exclusive, non-transferable, world-wide, perpetual (subject to
termination under Section 3.2(a) or Article 11) license, solely within Exelixis'
organization and facilities: to use, adapt, reproduce, modify, localize, and
create derivative works of the BMS Software, and to compile the source code into
object code form of the BMS Software, provided (i) that all such uses of the BMS
Software are solely for Exelixis' internal or collaborative research purposes
(and provided that no such collaborators have access to the BMS Software), (ii)
are used in the same manner, and subject to the same terms and conditions, as
apply to the BMS Software, and (iii) are subject to the limitations in this
Section 5.5 and Sections 5.2 and 5.6(b) of this Agreement. The foregoing license
includes the right to make copies of the BMS Software for the purposes of the
exercise of such license, including without limitation appropriate numbers of
copies for Exelixis' internal back-up and archival purposes, provided that all
such copies shall bear the original and unmodified copyright, patent and other
intellectual property markings as when originally delivered by BMS. All rights,
title and interests in and to the BMS Software licensed hereunder, and any
copies, translations or compilations thereof which may be made or permitted to
be made hereunder by Exelixis are and shall remain the exclusive property of
BMS. [ * ] any derivative works of the BMS Software made by or on behalf of
Exelixis (but excluding any of the actual BMS Software code in such derivative
works). Further Exelixis shall not have the right to license the BMS Source Code
contained in any such derivative works made by or on behalf of Exelixis. For
purposes of the foregoing, "derivative works" means any computer program that
may be developed containing any part of the software, regardless of the form of
the resulting code, the media it is carried on, or its intended use.

       (c) The licenses granted in subsections (a) and (b) above will, subject
to the applicable provisions of Article 11, continue beyond the expiration or
termination of the Research Term.

       (d) The license rights granted in subsections (a) and (b) above may not
be sublicensed to a Third Party without the prior written consent of BMS.
Exelixis covenants that it will not transfer or disclose any such BMS Core
Technology (including know-how relating thereto), BMS Core Technology Patents or
BMS Software to any Third Party except as part of such permitted sublicenses and
only subject to limitations consistent with the above restrictions

[*] = 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>

and those in this Sections 5.5 and Section 5.6. Exelixis may transfer or
disclose any BMS Know-How, BMS Patents or BMS Software to any of its Affiliates
provided that such transfer or disclosure occurs pursuant to an agreement that
subjects such Affiliate to all relevant limitations in this Agreement, including
without limitation, the restrictions set forth in this Section 5.5 and Section
5.6. Exelixis hereby guarantees the compliance of each of its Affiliates with
all such restrictions and limitations on the use of the BMS Core Technology
(including without limitation the BMS know-how relating thereto), BMS Core
Technology Patents or BMS Software transferred or disclosed to such Affiliate,
and any such failure to comply with such restrictions and limitations shall be
deemed a breach by Exelixis of such obligations.

          (e)  If, at any time prior to the date (the "End Date") that is [ * ]
Exelixis receives from BMS the last BMS Improvement Invention to the BMS
Software that is provided by BMS under Section 5.2(b) (but excluding from the
foregoing any such BMS Improvement Invention that Exelixis determines not to
accept, under the terms of Section 5.2(b)(i), and which is thereby excluded from
the definition of BMS Core Technology), Exelixis undergoes a Major Control
Change (as defined in Section 5.2(i)), then:

               (i)   Exelixis shall ensure, and shall demonstrate same to BMS'
reasonable satisfaction upon BMS' reasonable request from time to time
thereafter until the End Date, that prior to the End Date: (A) employees of [ *
] (or intellectual property relating thereto) that, at the particular time,
comprises Restricted BMS Core Technology (as defined below); (B) [ * ] (or
intellectual property relating thereto) that, at the particular time, qualifies
as Restricted BMS Core Technology; and (C) [ * ] in excess of [ * ] of the FTEs
that were utilizing such BMS Core Technology just prior to such transaction,
without the prior written consent of BMS;

               (ii)  If Exelixis materially fails to comply with the
requirements of subclause (i) above at any time prior to the End Date, then,
subject to the dispute resolution provisions of Section 14.1, BMS may terminate
all of the rights and licenses granted to Exelixis under this Article 5. The
obligations of Exelixis, and rights of BMS to terminate the rights and licenses
of Exelixis, under this Section 5.5(e) with respect to the obligations under
subclause (i) above shall terminate and be of no further effect as of the
End Date.

               (iii) For purposes of this Section 5.5(e), a particular item of
Information or intellectual property right within the BMS Core Technology (which
includes the Improvement Inventions thereto made by BMS and transferred to
Exelixis (without rejection) under Section 5.2) shall be "Restricted BMS Core
Technology" from the date such item of Information (or intellectual property
right) is actually received by Exelixis until the third anniversary of such
date; after such third anniversary, such item of Information shall [ * ] shall,
however, remain governed by the terms and conditions of this Agreement as would
apply to any other Exelixis Affiliate, including without limitation, Sections
5.2 and 5.6 hereof.

     5.6  Limitations on Exelixis License.

          (a) Exelixis understands and agrees that BMS retains all its rights to
use all technology, Information and intellectual property rights for its own
purposes related to BMS Core Technology and to license or disclose such
technology, Information and intellectual property rights to Third Parties
without restriction, subject only to the right and the licenses granted to
Exelixis in Section 5.5 of this Agreement. Exelixis covenants that it and its
Affiliates shall not use or practice the BMS Know-How, BMS Patents or BMS
Software for any use or purpose except as expressly permitted in Section 5.5.
Exelixis further covenants that 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.

                                    33.(1)
<PAGE>

and its Affiliates will not sell or otherwise transfer to a Third Party or
commercialize any BMS Core Technology or any technology derived from BMS Core
Technology, except as permitted in Section 5.5, but excluding from the foregoing
limitation any technology that is discovered or synthesized by Exelixis or its
Affiliates completely independent of any activity permitted under this Agreement
and without reliance on any Confidential Information of BMS disclosed to
Exelixis.

          (b) Exelixis may not: (i) distribute in any manner any of the BMS
Software or any derivative work of any portion of the BMS Software, except as
expressly permitted in this Agreement; (ii) publicly disclose, publicly perform
or publicly display the BMS Software; (iii) use, copy, compile, adapt, translate
the BMS Software except as expressly permitted in this Agreement; (iv) sell,
lease, loan, trade, transfer (including over a network including the Internet),
sublicense, market or publish the BMS Software except as expressly permitted in
this Agreement; or (v) copy the documentation, except as expressly permitted in
this Agreement. Exelixis acknowledges and agrees that the source code of the BMS
Software is highly confidential and warrants the imposition of appropriate
security precautions at least as strict as those implemented for its own similar
proprietary or confidential information.

     5.7  Provision of Training; Disclaimers.

          (a) Exelixis hereby agrees to provide specified BMS employees with
training regarding the use of the Exelixis Core Technology at no charge other
than that set forth in Section 8.1. Such training shall be provided at Exelixis'
facilities, unless otherwise agreed by the Parties, by reasonably qualified
employees or consultants hired and provided at the discretion of Exelixis. All
salary, benefits, costs and expenses of any BMS employees who participate in
such training program shall be paid for by BMS. All BMS employees who attend
Exelixis' facilities shall be restricted from access to any Exelixis facilities
or locations other than those necessary for completing the technology transfer
and shall be subject to appropriate and reasonable limitations and restrictions
to protect access to any Exelixis' proprietary or confidential information not
related to this Agreement. Such training will be limited to a reasonable amount
necessary to enable a person reasonably skilled in the area to assimilate the
technology being provided.

          (b) BMS hereby agrees to provide specified Exelixis employees with
training regarding the use of the BMS Core Technology at no charge. Such
training shall be provided at BMS' facilities, unless otherwise agreed by the
Parties, by reasonably qualified employees or consultants hired and provided at
the discretion of BMS. All salary, benefits, costs and expenses of any Exelixis
employees who participate in such training program shall be paid for by
Exelixis. All Exelixis employees who attend BMS' facilities shall be restricted
from access to any BMS facilities or locations other than those necessary for
completing the technology transfer and training and shall be subject to
appropriate and reasonable limitations and restrictions to protect access to any
BMS' proprietary or confidential information not related to this Agreement. Such
training will be limited to a reasonable amount necessary to enable a person
reasonably skilled in the area to assimilate the technology being provided.

          (c) EACH PARTY REPRESENTS AND WARRANTS TO THE OTHER THAT IT HAS THE
RIGHT TO SUPPLY THE CORE TECHNOLOGY SUPPLIED BY IT

[*] = 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>

FOR USE BY THE OTHER PARTY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT. EACH
PARTY ACKNOWLEDGES THAT THE CORE TECHNOLOGY AND IMPROVEMENT INVENTIONS LICENSED
TO IT BY THE OTHER PARTY ARE BEING SUPPLIED "AS IS" AND "WITH ALL FAULTS".
EXCEPT FOR THE FIRST SENTENCE OF THIS PARAGRAPH AND AS MAY BE EXPRESSLY SET
FORTH ELSEWHERE IN THIS AGREEMENT, THE LICENSING PARTY MAKES AND EXTENDS NO, AND
THE PARTY RECEIVING THE OTHER PARTY'S CORE TECHNOLOGY WAIVES ANY AND ALL,
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED WITH RESPECT TO THE LICENSING
PARTY'S CORE TECHNOLOGY AND ANY IMPROVEMENT INVENTIONS PROVIDED BY THE LICENSING
PARTY, INCLUDING WITHOUT LIMITATION (1) IMPLIED WARRANTIES OF MERCHANTABILITY OR
OF FITNESS FOR A PARTICULAR PURPOSE OR USE, (2) ANY WARRANTIES PERTAINING TO
ABSENCE OF INFRINGEMENT OF THIRD PARTY PATENTS, COPYRIGHTS, TRADEMARKS, OR OTHER
INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY, AND (3) ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, THAT THE OPERATION OF ANY SOFTWARE PROVIDED
WILL BE UNINTERRUPTED OR ERROR-FREE AND WILL NOT CORRUPT ANY DATA, OR THAT ANY
DEFECTS IN SOFTWARE PROVIDED ARE CORRECTABLE OR WILL BE CORRECTED.

          NO SOFTWARE LICENSOR HEREUNDER SHALL BE LIABLE TO THE LICENSEE FOR ANY
CLAIM, CAUSE OF ACTION, LOSS, EXPENSE, COST, LIABILITY OR DAMAGES OF ANY KIND OR
NATURE WHATSOEVER, INCLUDING WITHOUT LIMITATION ARISING OUT OF, INVOLVING OR
CONNECTED WITH (1) THE DEFICIENCY OR INADEQUACY OF THE LICENSED SOFTWARE FOR ANY
PURPOSE, WHETHER OR NOT KNOWN OR DISCLOSED TO ANY SOFTWARE LICENSOR; (2) THE USE
OR PERFORMANCE OF THE LICENSED SOFTWARE OR ANY FILES, DATA OR COMPUTER SYSTEMS
RELATED THERETO OR USED IN CONNECTION THEREWITH; (3) ANY INTERRUPTION, DAMAGE
TO, OR LOSS OF SERVICE OR USE OF THE LICENSED SOFTWARE OR ANY DATA, FILES,
SOFTWARE, HARDWARE OR OTHER EQUIPMENT USED IN CONNECTION THEREWITH; (4) ANY
FAILURE OF THE LICENSED MATERIAL; (5) ANY INFRINGEMENT OR VIOLATION OF THE
PATENT RIGHTS, COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES; OR (6) ANY DIRECT, INDIRECT, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR OTHER LOSS OR DAMAGE OF ANY KIND OR NATURE (INCLUDING WITHOUT
LIMITATION LOST PROFITS, SALES OR BUSINESS) ARISING OUT OF THE USE OF THE
SOFTWARE OR DATA OBTAINED FROM SUCH USE, NOTWITHSTANDING ANY FAILURE OF ANY
ESSENTIAL OR LIMITED REMEDY AND WHETHER OR NOT ANY SOFTWARE OWNER MAY HAVE BEEN
ADVISED OF THE POSSIBILITY OF DAMAGES.

  5.8  Non-Solicitation. During the Research Term and for [ * ] thereafter,
neither party will solicit or hire any employees of the other party or its
Affiliates involved, in the case of BMS, in its combinatorial chemistry
(including software development) or drug discovery programs (including
bioinformatics), and in the case of Exelixis, in its mode of action discovery
programs.

[*] = 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>

6.   Licenses and Related Rights

     6.1  Licenses to BMS.

          (a) Research Results.  Subject to the terms of this Agreement,
Exelixis hereby grants BMS an exclusive (subject to Sections 4.12 and 7.2),
worldwide, royalty-bearing license (with the right to sublicense) to use
Research Results pertaining to Selected Targets, Product Targets, Mammalian
Targets and Pursued Disclosed Targets for research and drug discovery and
development in the Field, and to research, develop, import, use, sell, offer for
sell, and commercialize Collaboration Compounds, Licensed Products and New
Indications in the Field.

          (b) Target Patents.  Subject to the terms of this Agreement, Exelixis
hereby grants BMS a non-exclusive, worldwide, royalty-bearing license (with the
right to sublicense) under any Patents that are Controlled by Exelixis or its
Affiliates and claim any of the Research Results and/or any Selected Targets,
Pursued Disclosed Targets or Mammalian Targets, solely to discover, research and
develop Collaboration Compounds, Licensed Products, and New Indications in the
Field, and to research, develop, import, use, sell, offer for sell, and
commercialize Licensed Products and New Indications in the Field.

          (c) Novel Target Patents. Subject to the terms of this Agreement,
Exelixis hereby grants BMS an exclusive (subject to Sections 4.12 and 7.2),
worldwide, royalty-bearing license (with the right to sublicense) under any and
all Novel Target Patents that, but for the license granted hereunder, would be
infringed by the manufacture, use or sale of Gene Products and other
Biotherapeutics, solely to discover, research, develop, import, use, sell, offer
for sell, and commercialize Gene Products and Biotherapeutic Products.

     6.2  License Limitations and Retained Rights; Retained Rights Restrictions.

          (a) License Limitations and Retained Rights. Notwithstanding the
license granted in Section 6.1(a), Exelixis retains [ * ] Selected Targets,
Products, and Pursued Disclosed Targets [ * } and to use the Research Results
generated by Exelixis pertaining to Abandoned Targets both within and outside
the Field. BMS hereby covenants that, except in furtherance of its internal
research in the Field, BMS and its Affiliates will not use the [ * ] Selected
Targets, Product Targets, and Pursued Disclosed Targets [ * ], and that
BMS and its Affiliates will not practice any Exelixis Patents licensed to BMS
under Section 6.1 except as expressly permitted under the terms of such Section.

          (b) Retained Rights Restrictions. Notwithstanding that the license
rights granted to BMS under Section 6.1(b) are non-exclusive and any provision
that might imply to the contrary hereunder, Exelixis shall not be entitled:
(1) [ * ] Selected Target, Pursued Disclosed Target or Mammalian Target [ * ],
and (2) [ * ] Mammalian Target [ * ] mammalian orthologues of a Selected Target
or Pursued Disclosed Target [ * ] mammalian orthologues [ * ] mammalian
orthologues [ * ].

     6.3  Licenses to Exelixis.

          (a) Outside of Field.  Subject to the terms of the Agreement, BMS
hereby grants to Exelixis an exclusive, worldwide, royalty-free license (with
the right to sublicense) under the [ * ] (and the intellectual property rights
appurtenant thereto) that are made [ * ] and that relate solely to the
composition of matter or utility of a Selected Target, Pursued Disclosed Target,
and Product Target [ * ] Mammalian Targets [ * ] Related Targets, solely to
discover, identify and research [ * ] solely for use outside the Field and
solely to develop, make, have made, use, sell, offer to sell, have sold and
import products comprising or incorporating [ * ] for any use or purpose outside
the Field. For clarity it is understood that BMS and its Affiliates shall retain
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.

                                    36.(1)
<PAGE>

right to use [ * ] (and the intellectual property rights appurtenant thereto)
outside the Field, solely for its internal research purposes. Exelixis will not
sublicense BMS' rights to Third Parties under such Inventions that relate to the
composition or utility of a particular Selected Target, Pursued Disclosed
Target, Product Target [ * ] mammalian orthologue [ * ], for non-pesticide
applications (but not other applications outside the Field), until [ * ] after
selection by BMS of [ * ] by BMS or becomes known to Third Parties to be [ * ]
of interest. Exelixis will not sublicense to any Third Parties BMS' rights under
any Invention made by BMS covering the [ * ] Mammalian Target [ * ] Selected
Target, Pursued Disclosed Target, or Product Target for any purpose outside the
Field until the earlier of the date (1) that [ * ] after disclosure of the
Invention to Exelixis. For sake of clarity, the preceding sentence does not,
without limitation, cover or include rights under any Inventions or patents
owned or controlled by BMS pertaining to any [ * ] mammalian orthologues
thereof, compounds or their uses, screening assays and their uses, biomaterials
used to conduct screening (other than the Selected Target, Pursued Disclosed
Target, [ * ] Product Target [ * ] Mammalian Targets [ * ] Related Targets
relating thereto, as the case may be), know-how or techniques (including without
limitation screening techniques and know-how), and processes (including without
limitation manufacturing techniques or processes). Exelixis hereby covenants
that it and its Affiliates will not practice any of the BMS Patent rights
licensed to it under this Section 6.3(a) except as expressly permitted by the
terms hereof.

          (b) Abandoned Targets. Subject to the terms of the Agreement, BMS
hereby grants to Exelixis a semi-exclusive, worldwide, royalty-free license
(with the right to sublicense) under the Sole Inventions of BMS and under BMS'
interest in the Joint Inventions (and the intellectual property rights
appurtenant thereto) that are made by BMS during the Research Term and [ * ] an
Abandoned Target [ * ] Abandoned Target [ * ] Mammalian Targets [ * ] Related
Targets [ * ] Abandoned Target [ * ] Abandoned Target [ * ] Mammalian Target:
(i) to discover, identify and research [ * ] Abandoned Target [ * ]; (ii) to
develop, make, have made, use, sell, offer to sell, have sold and import [ * ]
Abandoned Target [ * ]; and (iii) to develop, make, have made, use, sell, offer
to sell, have sold and import, [ * ] Abandoned Target. For sake of clarity, the
preceding sentence does not cover or include rights under any [ * ] Related
Targets [ * ] Abandoned Targets or Mammalian Targets [ * ] Related Targets [ * ]
Abandoned Target [ * ] Mammalian Targets [ * ]. Exelixis hereby covenants that
it and its Affiliates will not practice any of the BMS Patent rights licensed to
it under this Section 6.3(b) except as expressly permitted by the terms hereof.

          (c) Breach of Diligence Obligations.  Effective upon the date that BMS
fails to fulfill its diligence obligations set forth in Section 4.9 or 4.10, as
the case may be (or, if BMS disputes such failure, if and upon the date that
such matter is finally resolved pursuant to Section 14.1 in Exelixis' favor),
with respect to a particular Selected Target, BMS hereby grants Exelixis a non-
exclusive, worldwide, royalty-free license (with the right to sublicense), under
the Sole Inventions (and the intellectual property rights appurtenant thereto)
of BMS created by BMS using such Selected Target and/or a Mammalian Target
(excluding Related Targets) of such Selected Target that are made by BMS during
the Research Term and that relate solely to the composition of matter (both
nucleic acid and protein products thereof) or utility of [ * ] Selected Target [
* ] Mammalian Target [ * ] Related Targets, solely to discover, develop, make,
have made, use, sell, offer to sell and have sold compounds active against [ * ]
Gene Products [ * ] Biotherapeutic Products [ * ] Selected Target [ * ]
Mammalian Target [ * ] Related Targets (in the case of breach of Section 4.10).
For sake of clarity, the preceding sentence does not cover or include rights
under any Inventions or patents owned or controlled by BMS pertaining to any
Collaboration Compounds, Biotherapeutic Products discovered by BMS, know-how or
techniques (including without limitation screening techniques and know-how), and
processes (including without limitation manufacturing techniques or processes).
Exelixis hereby covenants that it and its Affiliates will not practice any of
the BMS Patent rights licensed to it under this Section 6.3(c) except as
expressly permitted by the terms hereof.

     6.4  Right of First Negotiation.  Upon the earlier of the conclusion of
Phase II clinical trials on, or Exelixis' decision to invite a Third Party to
submit a written offer to acquire a license to develop and commercialize, any
Gene Product or other Biotherapeutic Product developed by Exelixis pursuant to
exercise of its license rights under Section 6.3(c) or 6.3(b)(iii), Exelixis
shall inform BMS in writing of same, and BMS shall have the opportunity to
negotiate

[*] = 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.(2)
<PAGE>

with Exelixis to acquire a license to develop and commercialize such Gene
Product or other Biotherapeutic Product. BMS shall have [ * ] following receipt
of such written notice in which to inform Exelixis in writing that it is
interested in acquiring such a license. Thereafter, the Parties shall negotiate
in good faith for [ * ] 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, which terms shall include, upon execution of
the definitive written agreement, the payment by BMS to Exelixis equal to [ * ]
costs incurred by Exelixis after the effective date of the license set forth in
Section 6.3(c) or 6.3(b)(iii) with respect to such Gene Product or other
Biotherapeutic Product. If BMS fails to notify Exelixis of its interest or the
Parties fail to execute a license agreement within the applicable period, then
BMS shall have no rights with respect to such product and Exelixis shall have
unrestricted rights to pursue [ * ] such Gene Product or other Biotherapeutic
Product or to license such rights to such Gene Product or other Biotherapeutic
Product to a Third Party.

7.   Exclusivity

     7.1  BMS.

          (a)   BMS agrees that, during the Research Term, the Pharmaceutical
Research Institute of BMS will, if it wishes to collaborate with any commercial
Third Party for the [ * ], give Exelixis the first right to negotiate for the
right to perform the collaborative work that BMS would require of such Third
Party. Exelixis shall have [ * ] following receipt of notice from BMS in writing
as to same (and describing the work to be required of Exelixis) in which to
inform BMS in writing that it is interested in performing such work. Thereafter,
Exelixis and BMS shall negotiate in good faith for [ * ] to reach agreement on
the terms of a collaboration which shall be set forth in either an executed
collaboration agreement or an executed legally binding heads of agreement. If
Exelixis fails to notify BMS of its interest or Exelixis and BMS fail to execute
a collaboration agreement within the applicable period, then BMS may freely
engage a Third Party to perform such work, provided that the foregoing does not
give BMS any right to sublicense any such Third Party to use any Exelixis Core
Technology. The foregoing shall not preclude BMS in any way during or following
the Research Term from (i) performing internal research of any type in [ * ],
(ii) from engaging consultants, or (iii) from sponsoring or collaborating with
academic Third Parties with respect to research of any type in [ * ]; provided
that such research and activities under (i)-(iii) comply with the limitations of
the license set forth in Section 5.2.

          (b)   During the Research Term, if BMS intends to engage any Third
Party to perform [ * ], BMS shall give good faith consideration as to whether
Exelixis [ * ] would be an appropriate party to perform such work. To keep BMS
informed of their respective genomic research capabilities, each of Exelixis and
Artemis shall be permitted, if they so choose, to make a presentation at JSC
meetings, no more frequently than semi-annually, of such current research
capabilities.

     7.2  Exelixis.  Except as otherwise provided in Section 6.3, Exelixis will
not knowingly grant a Third Party access to the Research Results relating to a
Selected Target, Product Target or Disclosed Target.  Notwithstanding the
previous sentence, although Exelixis shall use Diligent Efforts to maintain
exclusivity, in view of the nature of the Exelixis technology, it is impossible
for Exelixis to assure exclusivity with respect to the individual

[*] = 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>

elements of that Exelixis generates, delivers and licenses to BMS under this
Agreement in the following two situations:

          (a)  Exelixis may be engaged by a Third Party to identify the target
of a compound under an arrangement whereby the identity of the compound is
unknown to Exelixis. Provided that Exelixis does not use any Confidential
Information of BMS or Research Results in such research, Exelixis may reveal to
the Third Party and the Third Party shall be entitled to use, for any purpose,
all information generated by Exelixis with respect to the target. Exelixis will
promptly notify BMS in writing each time that a Target is disclosed to the Third
Party pursuant to such work.

          (b)  Exelixis may perform Independent Research upon molecules that are
Selected Targets, Pursued Disclosed Targets or Product Targets, provided that
such Targets had been identified by Exelixis in Independent Research and
provided further that Exelixis does not use Confidential Information of BMS or
Research Results in identifying such Targets or in the subsequent Independent
Research on such Target.  If such Independent Research is funded by a Third
Party, separate experiments would be performed for the Mode of Action Program
and said Independent Research, and Exelixis would not share the Research Results
of or other Information (whether generated by BMS or Exelixis) generated under
the Mode of Action Program with any Third Party involved in the Independent
Research nor would Exelixis share the results of or other information concerning
the Independent Research with BMS or the JSC.  In such case, Exelixis would be
free to disclose and license the results of such Independent Research to such
Third Party.

          (c)  The exclusivity of the license rights granted to BMS in Section
6.1(b) shall be subject to the grant of licenses to Third Parties consistent
with paragraphs (a) and (b) of this Section 7.2. Upon request of the JMT,
Exelixis shall consult with the JMT from time to time regarding its procedures
for seeking to avoid overlapping research activities on behalf of multiple Third
Parties.

  7.3     BMS License to [ * ].  In the event that BMS receives a license to
either or both of the [ * ] (or their foreign counterparts) that BMS is able to
sublicense to Exelixis, BMS shall promptly notify Exelixis of same and shall
describe the terms and conditions that Exelixis will need to comply with in
order to obtain a sublicense under [ * ].  Such terms and conditions may require
the payment of fees and other compensation [ * ] (or reimbursement to BMS for
fees and other compensation required by it to be paid [ * ]) for the grant of a
sublicense, but otherwise any grant of such a sublicense shall be structured so
as [ * ].  If BMS seeks a license to the above patents, it agrees to request the
right from [ * ] to such patents on reasonable terms; provided, that it is
understood and agreed that nothing in the foregoing shall require BMS, expressly
or impliedly: (A) [ * ] under any of the foregoing patents as a condition of any
license sought or obtained by it; or (B) in order to obtain sublicensable rights
or to grant a sublicense thereunder to Exelixis (if sublicensable rights can be
obtained), to limit BMS' own rights, or assume any obligations or burdens
(including without limitation making any payments) that it cannot pass through
upon grant of a sublicense to Exelixis, in addition to or different from those
that BMS would otherwise have made, granted or assumed if it had obtained a non-
sublicensable license to the foregoing patent(s).   If Exelixis indicates to
BMS, within thirty (30) days after BMS has notified Exelixis of the terms and
conditions required for a sublicense to the [ * ], that 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.

                                      39.
<PAGE>

would like to take a sublicense, then the Parties will use diligent, good faith
efforts to finalize and execute a written sublicense as promptly as practicable
thereafter incorporating such terms. If Exelixis indicates that it does not wish
to take a sublicense on such terms, then BMS shall have no further obligation to
Exelixis with respect to the grant of a sublicense to [ * ]. BMS agrees that, if
it receives an exclusive license to any of the above-referenced ArQule patents,
it will take such exclusive license only if [ * ].

8.   Compensation

     8.1  Technology Access Fee.  In partial consideration for the rights and
licenses granted to BMS by Exelixis in Article 5, BMS to pay Exelixis [ * ] upon
the Effective Date and  [ * ] on the first anniversary of the Effective Date.
[ * ].

     8.2  Research Support.  During the Research Term, BMS will make quarterly
advance payments to Exelixis equal to [ * ] for that quarter as set forth in
Section 3.4.  Any research support payments made by BMS to Exelixis hereunder
shall be noncreditable and nonrefundable.

     8.3  Milestone Payments for Selected Targets and Pursued Disclosed Targets.

          (a)  For each Selected Target, BMS shall pay Exelixis [ * ] on the
date that BMS commences screening of any Mammalian Target related to such
Selected Target.

          (b)  For each Pursued Disclosed Target, BMS shall pay Exelixis [ * ]
on the date that BMS commences screening of any Mammalian Target related to such
Pursued Disclosed Target.

     8.4  Milestone Payments for Compound Products.  BMS shall make to Exelixis
the following milestone payments for Compound Products:

          (a) Novel Target.  For each Compound Product comprising or
incorporating a Collaboration Compound that directly and selectively inhibits,
activates or otherwise modulates the activity of a Novel Target or its encoded
protein, BMS shall make to Exelixis the milestone payments set forth below
within [ * ] of the achievement of each of the following events:

              (i)   [ * ] upon approval of the first Preclinical Lead Profile
for any Collaboration Compound having activity with respect to a particular
Novel Target;

              (ii)  [ * ] upon filing of an IND for such a Compound Product;

              (iii) [ * ] upon initiation of Phase III Clinical Trials for such
a Compound Product;

              (iv)  [ * ] upon filing of an NDA for such a Compound Product; and

              (v)   [ * ] upon the first Regulatory Approval in any Major Market
for such a Compound Product.

[*] = 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>

          (b)  Unlinked Related Target. For each Compound Product comprising or
incorporating a Collaboration Compound that directly and selectively inhibits,
activates or otherwise modulates the activity of an Unlinked Related Target or
its encoded protein, BMS shall make to Exelixis the milestone payments set forth
below within [ * ] of the achievement of each of the following events:

               (i)   [ * ] upon approval of the first Preclinical Lead Profile
for any Collaboration Compound having activity with respect to a particular
Unlinked Related Target;

               (ii)  [ * ] upon filing of an IND for such a Compound Product;

               (iii) [ * ] upon initiation of Phase III Clinical Trials for such
a Compound Product;

               (iv)  [ * ] upon filing of an NDA for such a Compound Product;
and

               (v)   [ * ] upon the first Regulatory Approval in any Major
Market for such a Compound Product.

          (c)  Known Target. For each Compound Product comprising or
incorporating a Collaboration Compound that directly or selectively inhibits,
activates or otherwise modulates the activity of a Known Target or its encoded
protein, BMS shall make to Exelixis the milestone payments set forth below
within [ * ] of the achievement of each of the following events:

               (i)   [ * ] upon approval of the first Preclinical Lead Profile
for any Collaboration Compound having activity with respect to a particular
Known Target;

               (ii)  [ * ] upon filing of an IND for such a Compound Product;

               (iii) [ * ] upon initiation of Phase III Clinical Trials for such
a Compound Product;

               (iv)  [ * ] upon filing of an NDA for such a Compound Product;

               (v)   [ * ] upon the first Regulatory Approval in any Major
Market for such a Compound Product; and

               (vi)  [ * ] upon the first achievement of [ * ] in Net Sales in
any one calendar year for such a Compound Product.

     For clarity, it is understood that, with respect to a Compound Product that
is active against a Known Target that is Pre-Associated Target, BMS owes
milestones under this subsection 8.4(c) only on Compound Products that contain
compounds [ * ] BMS Compound that was used to identify the Target from which
such Pre-Associated Target was identified. For purposes of the foregoing, [ * ]
BMS Compound [ * ] as such BMS Compound.

     8.5  Milestone Payments for Safety Products. For each Safety Product, BMS
shall make to Exelixis the milestone payments set forth below within [ * ]
events: (a) [ * ] upon

[ * ] = 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>

approval of the first Preclinical Lead Profile for any Safety Compound
developed by use of a particular Safety Target; (b) [ * ] upon filing of an IND
for a Safety Product; (c) [ * ] upon initiation of Phase III Clinical Trials for
a Safety Product; (d) [ * ] upon filing of an NDA for a Safety Product; and (e)
[ * ] upon the first Regulatory Approval in any Major Market for a Safety
Product.

     8.6  Milestone Payments for New Indications for BMS Products. For each BMS
Product, BMS shall make to Exelixis the following milestone payments set forth
below within [ * ] of the achievement of each of the following events: (a) [ * ]
upon filing the first NDA in a Major Market for any New Indication for a BMS
Product; and (b) [ * ] upon approval of such NDA in a Major Market.

     8.7  Milestone Payments for Gene Products. BMS shall make to Exelixis the
following milestone payments for Gene Products:

          (a)  Novel Target. For each Gene Product comprising or incorporating
the gene product of a Novel Target [ * ], BMS shall make to Exelixis the
milestone payments set forth below within [ * ] of the achievement of each of
the following events:

               (i)   [ * ] upon approval of the first Preclinical Lead Profile
for a Gene Product comprising or incorporating a particular Novel Target;

               (ii)  [ * ] upon filing of an IND for such a Gene Product;

               (iii) [ * ] upon initiation of Phase III Clinical Trials for such
a Gene Product;

               (iv)  [ * ] upon filing of an NDA for such a Gene Product; and

               (v)   [ * ] upon the first Regulatory Approval in any Major
Market for such a Gene Product.

          (b)  Unlinked Related Target. For each Gene Product comprising or
incorporating the gene product of a Unlinked Related Target [ * ], BMS shall
make to Exelixis the milestone payments set forth below within [ * ] of the
achievement of each of the following events:

               (i)   [ * ] upon approval of the first Preclinical Lead Profile
for a Gene Product comprising or incorporating a particular Unlinked Related
Target;

               (ii)  [ * ] upon filing of an IND for such a Gene Product;

               (iii) [ * ] upon initiation of Phase III Clinical Trials for
such a Gene Product;

               (iv)  [ * ] upon filing of an NDA for such a Gene Product; and

[ * ] = 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>

               (v)   [ * ] upon the first Regulatory Approval in any Major
Market for such a Gene Product.

     8.8  Milestone Payments for Biotherapeutic Products. BMS shall make to
Exelixis the following milestone payments for Biotherapeutic Products:

          (a)  Novel Target.  For each Biotherapeutic Product comprising or
incorporating an antibody against a Novel Target or an antisense compound based
upon a Novel Target sequence, or based upon the sequence of a Novel Target, BMS
shall make to Exelixis the milestone payments set forth below within [ * ] of
the achievement of each of the following events:

               (i)   [ * ] upon approval of the first Preclinical Lead
Profile for a Biotherapeutic Product related a particular Novel Target;

               (ii)  [ * ] upon filing of an IND for such a Biotherapeutic
Product;

               (iii) [ * ] upon initiation of Phase III Clinical Trials for such
a Biotherapeutic Product;

               (iv)  [ * ] upon filing of an NDA for such a Biotherapeutic
Product; and

               (v)   [ * ] upon the first Regulatory Approval in any Major
Market for such a Biotherapeutic Product.

          (b)  Unlinked Related Target. For each Biotherapeutic Product
comprising or incorporating an antibody against an Unlinked Related Target or an
antisense compound based upon an Unlinked Related Target sequence, or based upon
the sequence of an Unlinked Related Target, BMS shall make to Exelixis the
milestone payments set forth below within [ * ] of the achievement of each of
the following events:

               (i)   [ * ] upon approval of the first Preclinical Lead Profile
for a Biotherapeutic Product related a particular Unlinked Related Target;

               (ii)  [ * ] upon filing of an IND for such a Biotherapeutic
Product;

               (iii) [ * ] upon initiation of Phase III Clinical Trials for such
a Biotherapeutic Product;

               (iv)  [ * ] upon filing of an NDA for such a Biotherapeutic
Product; and

               (v)   [ * ] upon the first Regulatory Approval in any Major
Market for such a Biotherapeutic Product.

     8.9  Milestone Payments for Diagnostic Products and Pharmacogenomic. BMS
shall make to Exelixis the following milestone payments for Diagnostic Products
and Pharmacogenomic Products:

[ * ] = 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>

          (a)  Novel Target. For each Diagnostic Product or Pharmacogenomic
Product that is based upon the detection of the presence or absence of, or
sequence differences in different alleles of, a Novel Target, BMS shall make to
Exelixis the milestone payments set forth below within [ * ] of the achievement
of each of the following events:

               (i)   [ * ] upon initiation of first clinical trial for such a
Diagnostic Product or Pharmacogenomic Product;

               (ii)  [ * ] upon filing of an Product License Application (or
related regulatory approval application) for such a Diagnostic Product or
Pharmacogenomic Product; and

               (iii) [ * ] upon the first Regulatory Approval of such a
Diagnostic Product or Pharmacogenomic Product in any Major Market.)

          (b)  Unlinked Related Target. For each Diagnostic Product or
Pharmacogenomic Product that is based upon the detection of the presence or
absence of, or sequence differences in different alleles of, an Unlinked Related
Target, BMS shall make to Exelixis the milestone payments set forth below within
[ * ] of the achievement of each of the following events:

               (i)   [ * ] upon initiation of first clinical trial for such a
Diagnostic Product or Pharmacogenomic Product;

               (ii)  [ * ] upon filing of an Product License Application (or
related regulatory approval application) for such a Diagnostic Product or
Pharmacogenomic Product; and

               (iii) [ * ] upon the first Regulatory Approval of such a
Diagnostic Product or Pharmacogenomic Product in any Major Market.

     8.10 Milestone Payments for Back-Up Compounds.  For each Backup Compound
that is in development by BMS (or its Affiliate or sublicensee), BMS shall only
be obliged to make to Exelixis any applicable milestone payments set forth in
Sections 8.3-8.9 that were not made to Exelixis with respect to [ * ] such
Backup Compound. However, if [ * ], achieves Regulatory Approval, and BMS (or
its Affiliate or sublicensee) continues thereafter to conduct development of the
such Backup Compound, then [ * ].

     8.11 Milestone Payments for [ * ] Products. For each [ * ] Product that is
developed by BMS (or its Affiliate or sublicensee), BMS shall not be obliged to
make any milestone payments to Exelixis under Sections 8.3 through 8.9 unless
and until the first Regulatory Approval of [ * ] in any Major Market. Upon any
such Regulatory Approval of [ * ], BMS shall pay to Exelixis the sum of all
milestone payments owed under Sections 8.3 through 8.9 for milestone events
achieved by [ * ], within [ * ] of such Regulatory Approval, that, in the
absence of this Section 8.11, BMS would have been obliged to make to Exelixis
prior to such first Regulatory Approval of [ * ]; provided, however, that if the
[ * ] that received Regulatory Approval in any such Major Market has [ * ]
receives such Regulatory Approval in any such

[ * ] = 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>

Major Market [ * ]. Thereafter any applicable milestone payments for such
additional [ * ] shall be paid by BMS during the time frame specified in
Sections 8.3-8.9, as applicable.

     8.12 Royalty Payments for Compound Products.  BMS shall pay Exelixis
certain royalty payments for Compound Products as set forth below.

          (a)  Novel Target. For each Compound Product comprising or
incorporating a Collaboration Compound that, directly and selectively, inhibits,
activates or otherwise modulates the activity of a Novel Target or its encoded
protein, BMS shall pay Exelixis a royalty equal to [ * ] of the Net Sales of
such Compound Product.

          (b)  Unlinked Related Target. For each Compound Product comprising or
incorporating a Collaboration Compound that, directly and selectively, inhibits,
activates or otherwise modulates the activity of an Unlinked Related Target or
its encoded protein, BMS shall pay Exelixis a royalty equal to [ * ] of the Net
Sales of such Compound Product.

          (c)  Known Target. For each Compound Product comprising or
incorporating a Collaboration Compound that, directly and selectively, inhibits,
activates or otherwise modulates the activity of a Known Target or its encoded
protein, BMS shall pay Exelixis royalties as a percentage of the Net Sales of
such Compound Product, where the percentage applied depends on amount of annual
Net Sales of the Compound Product as follows:

          Amount of Net Sales from [ * ]                 [ * ]

          Amount of Net Sales that is greater than [ * ] [ * ]

     For clarity, it is understood that, for Compound Products that are active
against Known Targets that are Pre-Associated Targets, BMS owes royalties only
on such Compound Products that contain compounds [ * ] BMS Compound [ * ] from
which such Pre-Associated Target was identified. For purposes of the foregoing,
[ * ] BMS Compound [ * ] as such BMS Compound.

          (d)  Transition Target.  For each Compound Product comprising or
incorporating a Collaboration Compound that, directly and selectively, inhibits,
activates or otherwise modulates the activity of a Transition Target or its
encoded protein, BMS shall pay Exelixis a royalty at the applicable royalty rate
set forth below:

               (i) For each Compound Product comprising or incorporating a
Collaboration Compound the activity of which with respect to a Transition Target
or its encoded protein was discovered using a Known Target that had been a Novel
Target, the royalty shall be [ * ] of the first [ * ] in Net Sales in a year,
and [ * ] of any Net Sales in such year in excess of [ * ]; and

               (ii) For each Compound Product comprising or incorporating a
Collaboration Compound the activity of which with respect to a Transition Target
or its encoded protein was discovered using a Known Target that had been an
Unlinked Related Target, the royalty shall be [ * ] of the first [ * ] in Net
Sales in a year, and [ * ] of any Net Sales in such year in excess 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.

                                      45.
<PAGE>

     8.13 Royalty Payments for Safety Products.  For each Safety Product, BMS
shall pay Exelixis a royalty equal to [ * ] of the Net Sales of such Safety
Product.

     8.14 Royalty Payments for Gene Products.  BMS shall pay Exelixis certain
royalty payments for Gene Products as set forth below.

          (a)  Novel Target. For each Gene Product comprising or incorporating
the gene product of a Novel Target or a mutein or fusion protein based thereon,
BMS shall pay Exelixis a royalty equal to [ * ] of the Net Sales of such Gene
Product.

          (b)  Related Target. For each Gene Product comprising or incorporating
the gene product of a Related Target [ * ], BMS shall pay Exelixis a royalty
equal to [ * ] of the Net Sales of such Gene Product.

     8.15 Royalty Payments for Biotherapeutic Products. BMS shall pay Exelixis
certain royalty payments for Biotherapeutic Products as set forth below.

          (a)  Novel Target. For each Biotherapeutic Product comprising or
incorporating an antibody against a Novel Target or an antisense compound based
upon a Novel Target sequence, or based upon the sequence of a Novel Target, BMS
shall pay Exelixis a royalty equal to [ * ] of the Net Sales of such
Biotherapeutic Product, but subject to reduction by [ * ] of royalties actually
paid by BMS to a Third Party for license rights required to sell such
Biotherapeutic Product, but in no event shall the royalty paid to Exelixis be
less than [ * ] of the Net Sales of such Biotherapeutic Product.

          (b)  Unlinked Related Target. For each Biotherapeutic Product
comprising or incorporating an antibody against an Unlinked Related Target or an
antisense compound based upon an Unlinked Related Target sequence, or based upon
the sequence of an Unlinked Related Target, BMS shall pay Exelixis a royalty
equal to [ * ] of the Net Sales of such Biotherapeutic Product, but subject to
reduction by [ * ] of royalties actually paid by BMS to a Third Party for
license rights required to sell such Biotherapeutic Product, but in no event
shall the royalty paid to Exelixis be less than [ * ] of the Net Sales of such
Biotherapeutic Product.

          (c)  Known Target. For each Biotherapeutic Product comprising or
incorporating an antibody against a Known Target or an antisense compound based
upon a Known Target sequence, or based upon the sequence of a Known Target, BMS
shall pay Exelixis royalties as a percentage of the Net Sales of such
Biotherapeutic Product, where the percentage applied depends on amount of annual
Net Sales of the Biotherapeutic Product as follows:

          Amount of Net Sales from [ * ]                  [ * ]

          Amount of Net Sales that is greater than [ * ]  [ * ]

     8.16 Royalty Payments for Diagnostic Products.  BMS shall pay Exelixis
certain royalty payments for Diagnostic Products as set forth 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.

                                      46.
<PAGE>

          (a)  Novel Target.  For each Diagnostic Product that is based upon the
detection of [ * ] of, a Novel Target, BMS shall pay Exelixis a royalty equal to
[ * ] of the Net Sales of each such Diagnostic Product.

          (b)  Unlinked Related Target. For each Diagnostic Product that is
based upon the detection of [ * ] of, an Unlinked Related Target, BMS shall pay
Exelixis a royalty equal to [ * ] of the Net Sales of each such Diagnostic
Product.

     8.17 Royalty Payments for Pharmacogenomic Products.  BMS shall pay Exelixis
certain royalty payments for Diagnostic Products as set forth below.

          (a)  Novel Target. For each Pharmacogenomic Product that is based upon
the detection of [ * ] of, a Novel Target, BMS shall pay Exelixis a royalty
equal to [ * ] of the Net Sales of each such Pharmacogenomic Product.

          (b)  Unlinked Related Target. For each Diagnostic Product that is
based upon the detection of [ * ] of, an Unlinked Related Target, BMS shall pay
Exelixis a royalty equal to [ * ] of the Net Sales of each such Pharmacogenomic
Product.

     8.18 Fixed Royalty Rates and Final Royalty Payments.

          (a)  Except as provided in the subsection 8.18(b) below, the royalty
rates set forth in Sections 8.12-8.17 shall not be subject to adjustment or
reduction for any reason.

          (b)  If a particular Diagnostic Product or Pharmacogenomic Product is
based upon the [ * ] Novel Targets and/or Unlinked Related Targets (or their
expressed proteins or antigens thereto), as well as of mammalian targets that
are not discovered as part of this Agreement (such product being referred to
herein as a "Multiple Marker Product"), then the royalty payable to Exelixis for
such Multiple Marker Product under this Agreement shall be determined by first
calculating the royalty owed under Section 8.16 or 8.17 (as applicable) for such
Multiple Marker Product, and then multiplying that amount by [ * ] Novel
Targets [ * ] Unlinked Related Targets [ * ] Novel Targets, Unlinked Related
Targets [ * ]. For clarity, it is understood and agreed that the Net Sales of a
particular Diagnostic Product or Pharmacogenomic Product that is a Multiple
Marker Product shall not be adjusted by the adjustment mechanism set forth in
Section 1.43 for "combined products".

          (c)  For sake of clarity and avoidance of doubt, it is understood and
agreed that no milestones and royalties are payable under this Agreement upon:
(1) any BMS product wherein the active ingredient is a compound that directly
and selectively inhibits, activates or otherwise modulates a Confirmed Target;
or (2) any Compound Product comprising or incorporating a Collaboration Compound
that, although it may, by an indirect mechanism, have the effect of inhibiting,
activating or otherwise modulating [ * ] Mammalian Target [ * ] Mammalian
Target [ * ]; and (3) any BMS product that contains a Collaboration Compound
that inhibits, activates or otherwise modulates [ * ] Related Target [ * ]
Unlinked Related Target, a Pre-Associated Target, Conceptual Target, or
Mammalian Disclosed Target [ * ].

     8.19 Term of Royalties. Exelixis' right to receive royalties under
Sections 8.12-8.17 shall commence on a country-by-country basis upon the first
commercial sale of such Licensed Product in a particular country and shall
expire on a country-by-country basis at the later of (1) the date that is ten
(10) years after First Commercial Sale in such country, or (2) the date that 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.

                                    47.(1)
<PAGE>

composition of matter patents on such Licensed Product expire, become
unenforceable or are declared invalid by a court or tribunal of competent
jurisdiction from which no appeal is or can be taken. Upon expiration of the
royalty obligation with respect to a Licensed Product in a country, BMS shall
retain the right to make, use and sell such Licensed Product in such country
thereafter, without further compensation to Exelixis with respect to sales
thereof in such country.

     8.20  Quarterly Royalty Payment and Reports. Royalties under Sections 8.12-
8.17 shall accrue at the time of invoice or, if earlier, transfer of title of
the applicable Licensed Products. All royalty amounts that accrue during a
particular calendar quarter shall be paid quarterly within [ * ] of the end of
the relevant calendar quarter. Each royalty payment shall be accompanied by a
statement stating the number, description, and aggregate gross invoiced price
and the calculation of Net Sales, by country, of each Licensed Product sold
during the relevant calendar quarter.

     8.21  Payment Method. All payments due under this Agreement to Exelixis
shall be made by bank wire transfer in immediately available funds to an account
designated by Exelixis, in U.S. dollars. All payments made by BMS under this
Article 8 shall be nonrefundable and, unless expressly provided otherwise,
noncreditable.

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

     8.23  Blocked Currency. In each country where the local currency is blocked
and cannot be removed from the country, royalties accrued in that country shall
be paid to Exelixis in the country in local currency by deposit in a local bank
designated by Exelixis, unless the Parties otherwise agree.

     8.24  Sublicenses. In the event BMS grants licenses or sublicenses to
others to sell Licensed Products which are subject to royalties under any of
Sections 8.12-8.16, such licenses or sublicenses shall include an obligation for
the licensee or sublicensee to account for and report its sales of Licensed
Products on the same basis as if such sales were Net Sales by BMS, and BMS shall
pay to Exelixis, with respect to such sales, royalties as if such sales of the
licensee or sublicensee were Net Sales of BMS.

     8.25  Foreign Exchange. The rate of exchange to be used in computing Net
Sales and the amount of currency equivalent in United States dollars due
Exelixis shall be made at the rate of exchange quoted as of the end of the day
on the last business day of the applicable royalty period (calendar quarter
period) in the Wall Street Journal.

     8.26  Records; Inspection.  BMS shall keep complete and accurate records
pertaining to the sale or other disposition of the Licensed Products
commercialized hereunder by BMS and its Affiliates, in sufficient detail to
permit Exelixis to confirm the accuracy of all payments due hereunder.  For a
period of [ * ] after the royalty period to which the records relate, Exelixis
shall have the right to cause an independent, certified public accountant
reasonably acceptable to BMS

[ * ] = 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>

(and who has executed a confidentiality agreement with BMS reasonably acceptable
to BMS) to audit such records to confirm the Net Sales and royalty payments;
provided, however, that such auditor shall not disclose BMS' confidential
information to Exelixis, except to the extent such disclosure is necessary to
verify the amount of royalties and other payments due under this Agreement. In
no event may such accountant disclose the names of specific customers, price
lists, or the prices charged by BMS to specific customers. A copy of any report
provided by such accountant shall be provided to BMS at the time that it is
provided to Exelixis. Such audits may be exercised no more than once a year,
within [ * ] after the royalty period to which such records relate, upon a
mutually acceptable date(s) and upon not less than [ * ] advance notice to BMS,
and shall be conducted during normal business hours. Any amounts shown to be
owing by such audits shall be paid immediately with interest in the amount of
[ * ] per month (or the maximum amount permitted by law, if less) from the date
first owed until paid. Exelixis shall bear the full cost of such audit unless
such audit discloses a variance in the amounts paid by BMS of more than [ * ]
from the amount of royalties and/or other payments actually owed. In such case,
BMS shall reimburse Exelixis for its out-of-pocket costs to such Third Party for
conducting such audit. The terms of this Section 7.4 shall survive any
termination or expiration of this Agreement for a period of [ * ]. Nothing in
this Section shall be construed to allow such accountant to review research
records of BMS and its Affiliates.

9.   Intellectual Property

     9.1  Ownership.

          (a)  Each Party shall own the entire right, title and interest in and
to any and all of its Pre-existing Inventions, and Patents covering such Pre-
existing Inventions.

          (b)  Each Party shall own the entire right, title and interest in and
to any and all of its Sole Inventions, and Patents covering such Sole
Inventions. BMS and Exelixis shall each own an undivided one-half interest in
and to any and all Joint Inventions and Joint Patents, with inventorship to be
determined under the patent laws of the United States. BMS and Exelixis as joint
owners each shall have the right to grant licenses under Joint Patents, but
subject to the exclusive license rights granted by one Party to another
hereunder.

          (c)  Exelixis shall own the entire right, title and interest in and to
any and all Improvement Inventions made by Exelixis, either to the Exelixis Core
Technology or the BMS Core Technology, and Patents covering such Improvement
Inventions. BMS shall own the entire right, title and interest in and to any and
all Improvement Inventions made by BMS, either to the BMS Core Technology or the
Exelixis Core Technology, and Patents covering such Improvement Inventions.

     9.2  Disclosure. Each Party shall submit a written report to the JMT within
sixty (60) days of the end of each quarter describing any Sole Invention, Joint
Invention or Improvement Invention arising during the prior quarter during the
Research Term in the course of the Collaboration which it believes may be
patentable and to which the other Party is granted an exclusive or non-exclusive
license under this Agreement. The JMT shall decide whether to file a patent
application for a Joint Invention as discussed in Section 9.3(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.

                                      49.
<PAGE>

     9.3  Patent Prosecution and Maintenance; Abandonment.

          (a)  Pre-existing, Sole and Improvement Inventions. Except as
otherwise provided below in this Section 9.3, each Party shall retain control
over and bear all expenses associated with the filing, prosecution (including
any interferences, reissue proceedings and reexaminations) and maintenance of
all Patents claiming its Pre-existing Inventions, its Sole Inventions and those
Improvement Inventions that it solely owns and shall have the sole right and
absolute discretion to abandon same and to take all decisions with respect to
filing, prosecution, maintenance and abandonment of same.

          (b)  Joint Inventions. The JMT shall establish the patent strategy for
all Joint Inventions and supervise and direct the filing, prosecution (including
any interferences, reissue proceedings and reexaminations) and maintenance of
all Patents covering Joint Inventions. The JMT shall provide each Party with (i)
drafts of any new patent application that covers a Joint Invention prior to
filing that application, allowing adequate time for review and comment by the
Party if possible; provided, however, the JMT shall not be obligated to delay
the filing of any patent application; and (ii) copies of all correspondence from
any and all patent offices concerning patent applications covering Joint
Inventions and an opportunity to comment on any proposed responses, voluntary
amendments and submissions of any kind to be made to any and all such patent
offices. BMS shall have the first right, but not the obligation, to file,
prosecute and maintain Joint Patents claiming particular Joint Inventions that
constitute Improvement Inventions to the BMS Core Technology or that are
licensed to BMS under Section 6.1 hereof in such countries as selected by BMS.
BMS shall reasonably consider any recommendations provided by Exelixis regarding
patent filing, prosecution, and/or maintenance of any such patents pertaining
thereto, but the final decision as to filing, prosecution, maintenance and
abandonment matters shall rest with BMS. In the event that Exelixis desires that
BMS file and prosecute a patent application claiming such a Joint Invention, and
BMS does not file such a patent application within [ * ] of such request, or
decides to abandon prosecution of such a filed application or maintenance of an
issued Joint Patent, then Exelixis may thereafter file, prosecute (including any
interferences, reissue proceedings and reexaminations) and/or maintain at
Exelixis' expense and in the name of Exelixis and BMS the patent(s) claiming
such particular Joint Inventions, and BMS agrees to cooperate reasonably with
Exelixis in such efforts. Exelixis shall have the first right, but not the
obligation, to file, prosecute and maintain Joint Patents claiming particular
Joint Inventions that constitute Improvement Inventions to the Exelixis Core
Technology in such countries as selected by Exelixis. Exelixis shall reasonably
consider any recommendations provided by BMS regarding patent filing,
prosecution, and/or maintenance of any such patents pertaining thereto, but the
final decision as to filing, prosecution (including any interferences, reissue
proceedings and reexaminations) maintenance and abandonment matters shall rest
with Exelixis. In the event that BMS desires that Exelixis file and prosecute a
patent application claiming such a Joint Invention, and Exelixis does not file
such a patent application within [ * ] of such request, or decides to abandon
prosecution of such a filed application or maintenance of an issued Joint
Patent, then BMS may thereafter file, prosecute (including any interferences,
reissue proceedings and reexaminations) and/or maintain [ * ] and in the name of
Exelixis and BMS the patent(s) claiming such particular Joint Inventions, and
Exelixis agrees to cooperate reasonably with BMS in such efforts.

[ * ] = 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>

     (c)  Selected and Product Target Exelixis Sole Inventions. For Sole
Inventions made by Exelixis relating to the composition or use of any Selected
Targets or Product Targets that, although non-exclusively licensed to BMS under
Article 6, have not yet become Pursued Disclosed Targets or upon which Exelixis
has commenced Independent Research within the Field as permitted under  the
Agreement, the following shall apply:

          (i)   Exelixis shall have the first right, but not the obligation, to
file, prosecute and maintain the Patents claiming such Inventions. Exelixis
shall reasonably consider any recommendations provided by BMS regarding patent
filing, prosecution (including any interferences, reissue proceedings and
reexaminations), and/or maintenance of such Patents for uses within the Field,
but the final decision as to filing, prosecution, maintenance, and abandonment
matters shall rest with Exelixis; provided, however, that if Exelixis declines
to file, prosecute or maintain a Patent in a given country, BMS may elect to
become the controlling Party by taking over, in the name of Exelixis and,
subject to Section 9.3(b), at BMS' sole expense thereafter, the filing,
prosecution (including any interferences, reissue proceedings and
reexaminations), and maintenance of any such patent application or patent
covering such Invention in any country, in which event the final decision as to
filing and/or prosecution matters shall rest with BMS.

          (ii)   With respect to such Patents for which Exelixis remains the
controlling Party under this Section 9.3(c), Exelixis shall be responsible for
any out-of-pocket costs incurred by it, and BMS [ * ] after presentation of an
invoice and appropriate substantiation of the costs incurred, for all [ * ] of
such [ * ] by Exelixis to Third Parties after the Effective Date with respect to
the filing, prosecution and maintenance of such Patents [ * ] until such time as
BMS no longer has any de facto exclusive license rights under this Agreement to
a given Selected Target as a result of such Target becoming a Pursued Disclosed
Target or Exelixis having commenced Independent Research on such Target within
the Field as permitted in the Agreement or as a result of a conversion of such
rights to semi-exclusive or non-exclusive in accordance with the terms of
Sections 4.11, 4.12, 6.3(b), and/or 6.3(c) as the case may be, at which time, [
* ] after such date with respect to any Patents in any country covering the
composition or use of such Pursued Disclosed Target. With respect to those
Patents where BMS is the controlling Party under this Section 9.3(c), [ * ] and
Exelixis shall reimburse BMS, within sixty (60) days after presentation of an
invoice and appropriate substantiation of the costs incurred, for fifty percent
(50%) of such out-of-pocket costs incurred by BMS to Third Parties after the
Effective Date with respect to the filing, prosecution and maintenance of such
Patents ("Costs") until such time BMS no longer has any de facto exclusive
license rights within the Field under this Agreement to a given Selected Target
as a result of such Target becoming a Pursued Disclosed Target or Exelixis
having commenced Independent Research on such Target within the Field as
permitted in the Agreement or as a result of a conversion of such rights to
semi-exclusive or non-exclusive in accordance with the terms of Sections 4.11,
4.12, 6.3(b), and/or 6.3(c) as the case may be, at which time, BMS shall no
longer be the controlling Party and shall transfer responsibility for the
filing, prosecution, and maintenance of such Patents to Exelixis, and after such
transfer Exelixis shall be responsible for one hundred percent (100%) of the
Costs incurred thereafter with respect to any Patents in any country covering
the composition or use of such Pursued Disclosed Target.

          (iii)  Notwithstanding the foregoing, BMS may [ * ], as provided
above, with respect to any particular patent application or issued patent within
the Exelixis Patents that claims a given Invention, on a country-by-country
basis, in which case such patent application 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.
                                      51. (1)
<PAGE>

patent in such country(ies) shall thereafter be excluded from the Exelixis
Patents licensed to BMS hereunder for all purposes under this Agreement.

          (d)  Pursued Disclosed Target Exelixis Sole Inventions. For Sole
Inventions made by Exelixis relating to the composition or use of any Pursued
Disclosed Targets, the following shall apply:

               (i)  Exelixis shall have the first right, but not the obligation,
to file, prosecute and maintain the Patents claiming such Inventions. Exelixis
shall reasonably consider any recommendations provided by BMS regarding patent
filing, prosecution (including any interferences, reissue proceedings and
reexaminations), and/or maintenance of such Patents for uses within the Field,
but the final decision as to filing, prosecution, maintenance, and abandonment
matters shall rest with Exelixis; provided, however, that if Exelixis declines
to file, prosecute or maintain a Patent in a given country, BMS may elect to
become the controlling Party by taking over, in the name of Exelixis and [ * ]
thereafter, the filing, prosecution (including any interferences, reissue
proceedings and reexaminations), and maintenance of any such patent application
or patent covering such Invention in any country, in which event the final
decision as to filing and/or prosecution matters shall rest with BMS.

               (ii) Where Exelixis is the controlling Party, Exelixis shall be
responsible for any Costs incurred by it, without contribution by BMS. [ * ] and
Exelixis shall reimburse BMS, within sixty (60) days after presentation of an
invoice and appropriate substantiation of the costs incurred, for all one
hundred percent (100%) of such out-of-pocket costs [ * ] after the Effective
Date with respect to the filing, prosecution and maintenance of such Patents
("Costs").

          (e)  Novel Target Exelixis Sole Inventions. For Sole Inventions made
by Exelixis relating to the composition or use of any Novel Targets that are
exclusively licensed to BMS under Section 6.1(c), the following shall apply: BMS
shall have the first right, but not the obligation, to file, prosecute
(including any interferences, reissue proceedings and reexaminations) and
maintain Patents claiming such Inventions, [ * ] and in the name of Exelixis, in
such countries as selected by BMS. BMS shall reasonably consider any
recommendations provided by Exelixis regarding patent filing, prosecution,
and/or maintenance of any such patents pertaining thereto, but the final
decision as to filing, prosecution, maintenance and abandonment matters shall
rest with BMS. In the event that Exelixis desires that BMS file and prosecute a
patent application claiming a particular Invention in a given country, and BMS
does not file such a patent application within one hundred twenty (120) days of
such request, or decides to abandon prosecution of such a filed application or
maintenance of an issued Patent in a given country, then Exelixis may thereafter
file, prosecute (including any interferences, reissue proceedings and
reexaminations) and/or maintain, at Exelixis' expense and in the name of
Exelixis, the patent(s) claiming such particular Inventions in such country, in
which case such patent application or patent in such country(ies) shall
thereafter be excluded from the Exelixis Patents licensed to BMS hereunder for
all purposes under this Agreement.

The foregoing provisions of subsection (e) are subject to the following: If BMS'
rights under Section 6.1(c) have been terminated or converted to semi-exclusive
or non-exclusive in accordance with the terms of this Agreement, then,
regardless of which Party was previously the controlling Party, Exelixis shall
thereafter have the right, but not the obligation, to file, prosecute (including
any interferences, reissue proceedings and reexaminations), and/or maintain, at
Exelixis' expense and

[ * ] = 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.

                                      52.(1)
<PAGE>

in its name, such patent applications and patents relating to such converted
rights, without contribution or reimbursement from BMS.

     (f)  BMS Patents Licensed to Exelixis. For BMS Patents that are licensed to
Exelixis under Sections 6.3(a), 6.3(b) and/or 6.3(c) based on BMS' Sole
Inventions, the following shall apply:

          (i)   BMS shall retain the first right, but not the obligation, to
file, prosecute and maintain the Patents claiming such Inventions. BMS shall
reasonably consider any recommendations provided by Exelixis regarding patent
filing, prosecution (including any interferences, reissue proceedings and
reexaminations), and/or maintenance of such Patents for uses within the Field,
but the final decision as to filing, prosecution, maintenance, and abandonment
matters shall rest with BMS; provided, however, that if BMS declines, or fails
by any date that is sixty (60) days before an applicable due date or date where
rights would be lost, to file, prosecute or maintain a Patent in a given
country, Exelixis may elect to become the controlling Party by taking over, in
the name of BMS and at Exelixis' sole expense thereafter, the filing,
prosecution (including any interferences, reissue proceedings and
reexaminations), and maintenance of any such patent application or patent
covering such Invention in any country, in which event the final decision as to
filing and/or prosecution matters shall rest with Exelixis.

          (ii)  With respect to such Patents licensed to Exelixis under Sections
6.3(b) or 6.3(c) for which BMS remains the controlling Party, Exelixis shall
reimburse BMS within sixty (60) days after presentation of an invoice and
appropriate substantiation of the out-of-pocket costs, for seventy-five percent
(75%) of such out-of-pocket costs incurred by BMS to Third Parties prior to and
after the Effective Date that such Patent was licensed to Exelixis, until such
time, if any, as BMS may elect pursuant to Section 4.11 to continue to pursue or
recommences pursuit of an Abandoned Target or may elect to continue to pursue a
Novel Target (with respect to a Biotherapeutic Product only), at which time [ *]
Exelixis reimbursing BMS for fifty percent (50%) of the out-of-pocket costs
incurred by BMS thereafter). Where Exelixis is the controlling Party, Exelixis
shall be solely responsible for any out-pocket costs incurred by it, until
such time, if any, as [ * ] pursuant to Section 4.11 to continue to pursue, or
recommences pursuit of an Abandoned Target or as [ * ] to continue to pursue a
Novel Target (with respect to a Biotherapeutic Product only), at which time
[ * ] before and thereafter (unless BMS elects to reassume control of such
prosecution, in which case Exelixis shall reimburse BMS for twenty-five (25%) of
the out-of-pocket costs incurred by BMS thereafter.

        (iii) With respect to such Patents licensed to Exelixis under Section
6.3(a) for which BMS remains the controlling Party, Exelixis shall reimburse
BMS, within sixity (60) days after presentation of an invoice and appropriate
substantiation of the out-of-pocket costs, for fifty percent (50%) of such out-
of-pocket costs incurred by BMS to Third Parties prior to and after the
Effective Date that such Patent was licensed to Exelixis. Where Exelixis is the
controlling Party, Exelixis shall be solely responsible for any out-of-pocket
costs incurred by it, but, within [ * ].

          (iv) Notwithstanding the foregoing provisions of this Section 9.3(f),
Exelixis may decline to pay BMS for such costs for which Exelixis may be
responsible, as provided above, with respect to any particular patent
application or issued patent within the BMS Patents that claims a given Sole
Invention of BMS, on a country-by-country basis, in which case such patent
application or patent in such country(ies) shall thereafter be excluded from
[ * ] hereunder for all purposes under this Agreement.

     (g)  Cooperation. The controlling Party under Sections 9.3(b), (c), (d) (e)
and (f) as the case may be, shall provide the non-controlling Party with copies
of all documents, correspondence and referenced materials filed or received by
the controlling Party in prosecuting and maintaining the applicable patents and
Joint Patents controlled by it where (i) the controlling Party is obligated to
consult with or to consider recommendations by the non-controlling Party

[ * ] = 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.

                                      53.
<PAGE>

regarding such prosecution, (ii) rights under the applicable Patent are granted
to the non-controlling Party hereunder, or (iii) the non-controlling Party
potentially has the right to assume control of the filing or prosecution of such
Patent under the conditions set forth in such Section. Such copies shall be
provided promptly after receipt, with respect to communications to or from
applicable patent authorities, and sufficiently in advance of the controlling
Party's filing or otherwise communicating any such documents to allow the non-
controlling Party reasonable time to review such materials and comment thereon
prior to filing. The non-controlling Party will provide the controlling Party
all reasonable assistance, at the controlling Party's expense, in prosecuting
and maintaining such patents. All counsel used by the controlling Party for
filing, prosecuting and maintaining such applications shall be subject to the
approval of the non-controlling Party (not to be unreasonably withheld), and the
Parties will endeavor to select competent, cost-effective counsel for same.

     9.4  Enforcement of Patent Rights.

          (a)  Each Party shall have the sole right, but not the obligation, to
institute, prosecute or control any action or proceeding with respect to
infringement by a Third Party of one or more issued Patents covering such
Party's Pre-existing Inventions or those Improvement Inventions solely owned by
such Party pursuant to Section 9.1(c). Each Party shall have the sole right, but
not the obligation, to institute, prosecute or control any action or proceeding
with respect to infringement by a Third Party of one or more issued Patents
covering such Party's Pre-existing Inventions or those Improvement Inventions
solely owned by such Party pursuant to Section 9.1(c).

          (b)  Except as provided in Section 9.4(d), if any issued Patent
covering a Sole Invention of Exelixis is infringed by Third Party activity, and
if (1) such infringement will, or can reasonably be expected to, result in loss
of sales of an existing Licensed Product, or (2) is a Patent as to which BMS is
controlling the maintenance thereof under Section 9.3, then BMS shall have the
first right, but not the obligation, to institute, prosecute or control any
action or proceeding with respect to such infringement by counsel of its own
choice, and Exelixis shall have the right to participate in such action and to
be represented by counsel of its own choice. If BMS fails to bring an action or
proceeding within ninety (90) days after having received written notice of such
infringement from Exelixis, then Exelixis shall have the right, but not the
obligation, to bring and control any such action by counsel of its own choice,
and BMS shall have the right to participate in such action and to be represented
by counsel of its own choice.

          (c)  Except as provided in Section 9.4(d), if either Party becomes
aware of any Third Party activity that infringes an issued Patent covering a
Joint Invention, then that Party shall give prompt written notice to the other
Party within thirty (30) days after knowledge of such infringement comes to the
attention of, in the case of BMS, its in-house patent counsel and, in the case
of Exelixis, its senior management. If BMS is then controlling the maintenance
of such Patent, BMS shall have the first right, but not the obligation, to
institute, prosecute or control any action or proceeding with respect to such
infringement by counsel of its own choice, and Exelixis shall have the right to
participate in such action and to be represented by counsel of its own choice.
If BMS fails to bring an action or proceeding within a period of ninety (90)
days after receipt of such notice, then Exelixis shall have the right, but not
the obligation, to bring and control any such action by counsel of its own
choice, and BMS shall have the right to participate

[ * ] = 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.

                                      54.
<PAGE>

in such action and to be represented by counsel of its own choice. If Exelixis
is then controlling the maintenance of such Patent, then the parties rights and
obligations under the preceding two sentences shall be switched, mutatis
mutandis.

     (d)  BMS shall have the sole right, but not the obligation, to institute,
prosecute or control any action or proceeding with respect to infringement by a
Third Party of one or more issued patents owned or Controlled solely by BMS or
its Affiliates covering the manufacture, use, or sale of any BMS Product or
Licensed Product, and shall be entitled to prosecute and manage all proceedings
relating to same (including all decisions relative to litigation, appeal or
settlement) in its sole and absolute discretion [ * ].

     (e)  If either Party brings any such action or proceeding under Section
9.4(b) or 9.4(c), the other Party agrees (but only where, in the case of a
Patent covering an Exelixis Sole Invention, such Party, if not the controlling
Party, is the licensor of such Patent) to be joined as a party plaintiff and to
give the first Party reasonable assistance and authority to control, file and
prosecute the suit as necessary. Each Party shall bear its own costs and
expenses for any action or proceeding brought under this Section 9.4. Any
damages or other monetary awards recovered shall be applied first to reimburse
the reasonable costs and expenses of the Parties in connection with such
litigation, and the balance shall be [ * ], and (2) where Exelixis is the
controlling party, but BMS has reimbursed Exelixis for some portion of the Costs
of prosecution, filing or maintaining such Patent in a given country of
infringement, [ * ]. No settlement or consent judgment or other voluntary final
disposition of a suit under Section 9.4(b) or 9.4(c) may be entered into by a
Party that is controlling the action in a manner that materially adversely
affects the rights of the other Party or would require payment of any amounts by
such other Party to a Third Party, without the consent of such other Party.

     (f)  If either Party becomes aware of any Third Party activity that
infringes a BMS Patent licensed to Exelixis under Section 6.3, then that Party
shall give prompt written notice to the other Party within thirty (30) days
after knowledge of such infringement comes to the attention of, in the case of
BMS, its in-house patent counsel and, in the case of Exelixis, its senior
management. If Exelixis is then controlling the maintenance of such Patent,
Exelixis shall have the first right, but not the obligation, to institute,
prosecute or control any action or proceeding with respect to such infringement
by counsel of its own choice, and BMS shall have the right to participate in
such action and to be represented by counsel of its own choice. If Exelixis
fails to bring an action or proceeding within a period of ninety (90) days after
receipt of such notice, then BMS shall have the right, but not the obligation,
to bring and control any such action by counsel of its own choice, and Exelixis
shall have the right to participate in such action and to be represented by
counsel of its own choice. If BMS is then controlling the maintenance of such
Patent, then the parties rights and obligations under the preceding two
sentences shall be switched, mutatis mutandis. If either Party brings any such
action or proceeding, the other Party agrees to be joined as a party plaintiff
and to give the first Party reasonable assistance and authority to control, file
and prosecute the suit as necessary. Each Party shall bear its own costs and
expenses for any action or proceeding brought under this Section 9.4(f). Any
damages or other monetary awards recovered shall be applied first to reimburse
the reasonable costs and expenses of the Parties in connection with such
litigation, and the balance [ * ].

[ * ] = 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.

                                      55.
<PAGE>

     9.5  Copyright Registrations.  Copyrights and copyright registrations on
copyrightable subject matter shall be filed, prosecuted, defended, and
maintained, and the Parties shall have the right to pursue infringers of any
copyrights owned or Controlled by it, in substantially the same manner as the
Parties have allocated such responsibilities, and the expenses therefor, for
patent rights under this Article 9.

10.  Confidentiality

     10.1 Nondisclosure of Confidential Information. All Information disclosed
by one Party to the other Party pursuant to this Agreement shall be
"Confidential Information" for all purposes hereunder. The Parties agree that
during the term of this Agreement, and for a period of [ * ] after this
Agreement expires or terminates, a Party receiving Confidential Information of
the other Party will (i) use commercially reasonable efforts to maintain in
confidence such Confidential Information (but not less than those efforts as
such Party uses to maintain in confidence its own proprietary industrial
information of similar kind and value) and not to disclose such Confidential
Information to any Third Party without prior written consent of the other Party,
except for disclosures made in confidence to any Third Party under terms
consistent with this Agreement and made in furtherance of this Agreement or of
rights granted to a Party hereunder, and (ii) not use such other Party's
Confidential Information for any purpose except those permitted by this
Agreement.

     10.2 Exceptions.  The obligations in Section 10.1 shall not apply with
respect to any portion of the Confidential Information that the receiving Party
can show by competent proof:

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

          (b)  Was known to the receiving Party or any of its Affiliates,
without obligation to keep it confidential, prior to disclosure by the
disclosing Party; or

          (c)  Is subsequently disclosed to the receiving Party or any of its
Affiliates by a Third Party lawfully in possession thereof and without
obligation to keep it confidential; or

          (d)  Is published by a Third Party or otherwise becomes publicly
available or enters the public domain, either before or after it is disclosed to
the receiving Party; or

          (e)  Has been independently developed by employees or contractors of
the receiving Party or any of its Affiliates without the aid, application or use
of Confidential Information.

     10.3 Authorized Disclosure. A Party may disclose the Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary in the following instances:

          (a)  Filing or prosecuting Patents relating to Sole Inventions, Joint
Inventions or Licensed Products;

          (b)  Regulatory filings;

[ * ] = 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.

                                      56.
<PAGE>

          (c)  Prosecuting or defending litigation;

          (d)  Complying with applicable governmental regulations; and

          (e)  Disclosure, in connection with the performance of this Agreement
(including conducting preclinical or clinical trials of Licensed Products) and
where not prohibited by this Agreement, to Affiliates, sublicensees, research
collaborators, employees, contractors, consultants, or agents, each of whom
prior to disclosure must be bound by similar obligations of confidentiality and
non-use at least equivalent in scope to those set forth in this Article 10 (but
with the duration to be limited to not less than [ * ] from date of disclosure).

     The Parties acknowledge that the terms of this Agreement shall be treated
as Confidential Information of both Parties. Such terms may be disclosed by a
Party to investment bankers, investors, and potential investors, each of whom
prior to disclosure must be bound by similar obligations of confidentiality and
non-use at least equivalent in scope to those set forth in this Article 10. In
addition, a copy of this Agreement may be filed by Exelixis with the Securities
and Exchange Commission in connection with any public offering of Exelixis
securities. In connection with any such filing, Exelixis shall endeavor to
obtain confidential treatment of economic and trade secret information to the
maximum practical extent. Further, Exelixis agrees to consult with BMS on the
provisions of this Agreement to be redacted in any filings made by Exelixis with
the United States Securities and Exchange Commission or as otherwise required by
law.

     In any event, the Parties agree to take all reasonable action to avoid
disclosure of Confidential Information except as permitted hereunder.

     10.4 Termination of Prior Agreements.  This Agreement supersedes the Mutual
Confidential Disclosure Agreement between Exelixis and BMS dated November 24,
1998.  All Information exchanged between the Parties under those earlier
Agreements shall be deemed Confidential Information and shall be subject to the
terms of this Article 10 and shall, if patentable, be treated as a Pre-existing
Invention of the disclosing Party.

     10.5 Publicity.  The Parties agree to make a public announcement of the
execution of this Agreement promptly after its execution by both parties through
a release in the form attached as Exhibit D.  Any other publication, news
release or other public announcement relating to this Agreement or to the
performance hereunder, shall first be reviewed and approved by both Parties;
provided, however, that any disclosure which is required by law as advised by
the disclosing Party's counsel may be made without the prior consent of the
other Party, although the other Party shall be given prompt notice of any such
legally required disclosure and to the extent practicable shall provide the
other Party an opportunity to comment on the proposed disclosure.

     10.6 Publications. Neither Party shall publish or present the results of
studies carried out under this Agreement without the opportunity for prior
review by the other Party. Subject to Section 10.3, each Party agrees to provide
the other Party the opportunity to review any proposed abstracts, manuscripts or
presentations (including verbal presentations) which relate to any Selected
Target, Pursued Disclosed Target, Product Target and/or any Mammalian 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.

                                      57.
<PAGE>

directly relating thereto, or, until such Product is in Phase II development, a
Product at least thirty (30) days prior to its intended submission for
publication and agrees, upon request, not to submit any such abstract or
manuscript for publication until the other Party is given a reasonable period of
time (not to exceed sixty (60) days) to secure patent protection for any
material in such publication which it believes to be patentable; provided,
however, that Exelixis shall not have any right to review and approve any such
publications made by BMS and its academic collaborators/investigators to the
extent directly concerning post-clinical, clinical, or pre-clinical results
pertaining to a Collaboration Compound or Licensed Product, or to the extent
relating solely to any Unlinked Related Target. Both Parties understand that a
reasonable commercial strategy may require delay of publication of information
or filing of patent applications. The Parties agree to review and consider delay
of publication and filing of patent applications under certain circumstances.
The JMT will review such requests and recommend subsequent action. Neither Party
shall have the right to publish or present Confidential Information of the other
Party which is subject to Section 10.1. Nothing contained in this Section 10.6
shall prohibit the inclusion of Confidential Information of the other Party
generated by either Party during the Research Term as part of the Collaboration
that is necessary for a patent application to be filed by a Party, so long as
the nonfiling Party is given a reasonable opportunity to review the information
to be included prior to submission of such patent application; provided, that
neither party may use in such filings any Confidential Information of the other
Party generated prior to the Effective Date or, in the case of Exelixis, any BMS
Confidential Information disclosed to it that was not obtained through the
material use of Exelixis-generated Confidential Information (and that remained
confidential to Exelixis at the time of use by BMS). Any disputes between the
Parties regarding delaying a publication or presentation to permit the filing of
a patent application shall be referred to the JMT.

11.  Term and Termination

     11.1  Term. This Agreement shall become effective on the Effective Date and
shall remain in effect until terminated in accordance with the terms hereof or
by mutual written agreement. Termination of the Research Term shall not
constitute termination of this Agreement.

     11.2  Termination for Material Breach.

          (a)  If either Party believes that the other is in material breach of
this Agreement (including without limitation any material breach of a
representation or warranty made in this Agreement), then the non-breaching Party
may deliver notice of such breach to the other Party. In any such notice, the
non-breaching Party shall identify in detail the basis for breach and identify
the actions or conduct that such Party would consider to be an acceptable cure
of such breach. The allegedly breaching Party shall have ninety (90) days to
either cure such breach or, if cure cannot be reasonably effected within such
ninety (90) day period, to deliver to the other Party a plan for curing such
breach which is reasonably sufficient to effect a cure. Such a plan shall set
forth a program for achieving cure as rapidly as practicable. Following delivery
of such plan, the breaching Party shall use Diligent Efforts to carry out the
plan and cure the breach.

[ * ] = 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.

                                      58.
<PAGE>

          If the Party receiving notice of breach fails to cure such breach
within the  [ * ], or the Party providing the notice reasonably determines that
the proposed corrective plan or the actions being taken to carry it out is not
commercially practicable, the Party originally delivering the notice may declare
a breach hereunder upon [ * ] advance written notice; provided, that:

          (1)  Exelixis may not exercise termination under this Section 11.2,
with respect to matters covered by Sections 4.9 or 4.10 hereof;

          (2)  If such breach is specific as to a given Collaboration Compound
or Licensed Product, such termination shall not be as to the whole agreement,
but only as to such license rights as granted hereunder to BMS with respect to
such Collaboration Compound or Licensed Product;

          (3)  If such breach is specific to given Patent rights licensed by a
Party to the breaching Party under Article 6 hereof, then such termination shall
not be as to the whole agreement but only as to such licensed rights as pertain
to such Patent; and

          (4)  If such breach is specific to a right licensed to, or an
obligation assumed by, the breaching Party with respect to the licensing Party's
Core Technology under Article 5 hereof, then the licensing Party shall not have
the right to terminate, unless either (A) such breach is a willful and
intentional breach or grossly negligent breach of the non-disclosure obligations
or limitations on the scope of the licensee's license rights, or (B) in the case
of any other curable, material breach of a right licensed to, or an obligation
assumed by, the breaching Party with respect to the licensing Party's Core
Technology under Article 5 hereof, such breaching Party fails to take diligent
steps to cure such breach after notice thereof, in which case such termination
shall not be as to the whole agreement but only as to the rights licensed to the
other Party with respect to the licensing Party's Core Technology as to which
the licensee Party committed and (if applicable) failed to cure the breach; and

          (5)  If such breach involves an alleged failure to pay a milestone
payment or royalty amount believed by Exelixis to be owed by BMS, but BMS in
good faith disputes such payment obligations, and an arbitration was held to
resolve the dispute which arbitration ruled that such amount (or some other
amount) is owed by BMS, then this Agreement may not be terminated by Exelixis
unless BMS fails to pay such amount as determined to be owed under such
arbitration within thirty (30) days after the date of such arbitration ruling.

     (b)  If a Party gives notice of termination under this Section 11.2 and the
other Party disputes whether such notice was proper, then the issue of whether
this Agreement has been terminated shall be resolved in accordance with Section
14.1.  If as a result of such dispute resolution process it is determined that
the notice of termination was proper, then such termination shall be deemed to
have been effective thirty (30) days following the date of the notice of
termination.  If as a result of such dispute resolution process it is determined
that the notice of termination was improper, then no termination shall have
occurred and this Agreement shall have remained in effect.

[ * ] = 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.

                                      59.
<PAGE>

     11.3    Change in Control. If, during the Research Term, Exelixis or any
Exelixis Affiliate controlling Exelixis, experiences a "pharmaceutical change in
control" (as defined below), then BMS shall have the right to terminate the
Research Program at anytime thereafter, effective upon not less than six (6)
months' prior written notice to Exelixis (or its successor). Exelixis shall
continue to perform its duties under the Mode of Action Program and this
Agreement during such notice period. Other than such payments, BMS shall have
[ * ] payment obligations or liability to Exelixis with respect to the
termination of the Research Term, except for such milestone and royalty
obligations as BMS may otherwise have thereafter under this Agreement with
respect to the development and commercialization of Collaboration Compounds and
Licensed Products and New Indications.

             For purposes of this Agreement, the term "pharmaceutical change in
control" shall mean any sale of voting securities, any sale of assets, or any
merger, consolidation or similar transaction which, directly or indirectly, (i)
transfers over fifty percent (50%) of the assets of Exelixis which relate to the
subject matter of this Agreement to any "Qualifying Pharmaceutical Entity" (as
defined in Section 5.5(e) hereof) or any of its Affiliates, or (ii) results in
any Qualifying Pharmaceutical Entity or any of its Affilliates becoming the
beneficial owner, directly or indirectly, of more than fifty percent (50%) of
those securities of Exelixis entitled to vote for the election of the directors
of Exelixis.

     11.4    Effect of Termination; Survival.

             (a)     Upon any termination by Exelixis of this Agreement (or the
applicable aspect or portion thereof) pursuant to Section 11.2:

                     (i)   all rights and licenses granted by Exelixis to BMS
under Article 5 and 6 will terminate, except where termination of such licenses
and covenants is qualified and limited by sections 11.2(a)(1)-(5) hereof, in
which event BMS shall retain the rights and licenses not terminated; and

                     (ii)  BMS shall, within sixty (60) days of such
termination, return all Confidential Information of Exelixis pertaining to the
terminated rights and licenses, and Exelixis shall return all BMS Compounds
provided to it that relate to such terminated rights; and

                    (iii)  BMS shall cease to use any Research Results, Exelixis
Patents or other Confidential Information of Exelixis that comprise or relate to
such terminated rights, except to the extent reasonably required by BMS in order
to continue to develop and commercialize any Collaboration Compounds and
Licensed Products then in development subject to the payment by BMS of any
milestones and royalties that would otherwise be due on same; provided that,
notwithstanding the foregoing, in the event BMS has twice materially breached
its payment obligations with respect to milestones and/or royalties due on a
particular Collaboration Compound or Licensed Product and has failed to cure
same within the notice period set forth in Section 11.2, then effective
immediately upon the third such material breach not cured within such cure
period, all of BMS' rights to such Collaboration Compound or Licensed Product
shall terminate, and BMS shall immediately cease commercializing such
Collaboration Compound or Licensed Product and cease using the related Research
Results, Exelixis Patents and other Confidential Information of Exelixis with
respect to commercializing such Collaboration Compound or Licensed Product;

                    (iv)   Exelixis may continue to use the rights licensed to
it under Articles 5 and 6 hereof in accordance with, and subject to the terms
and conditions of, this Agreement; and

[ * ] = 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.

                                      60.(1)
<PAGE>

          (v)   Exelixis shall not be obligated to disclose or license to BMS
any Improvement Inventions made thereafter by it to the Exelixis Core Technology
or BMS Core Technology after such termination date.

     (b)  Upon any termination of this Agreement by BMS pursuant to Section
11.2:

          (i)   all licenses granted by BMS to Exelixis under Articles 5 and 6
will terminate, except where termination of such licenses and covenants is
qualified and limited by sections 11.2(a)(1)-(5) hereof, in which event Exelixis
shall retain the rights and licenses not terminated;

          (ii)  Exelixis shall, within sixty (60) days of such termination,
return all Confidential Information of BMS pertaining to the terminated rights
and licenses, and Exelixis shall return all BMS Compounds provided to it that
relate to such terminated rights;

          (iii) Exelixis and its (sub)licensees may continue to use outside the
Field any data and research results obtained by it from the use prior to
termination of the licensed rights that are terminated hereunder and may
continue to develop and commercialize any compounds (and products incorporating
same) thereafter outside the Field based on the exercise of such rights outside
the Field prior to termination, provided that Exelixis and its (sub)licensees do
not infringe any Valid Claims of any BMS Patents or use, except to the extent
relating to any unterminated rights and licenses and except as otherwise
permitted under this Agreement, any Confidential Information of BMS or Exelixis-
generated Research Results in doing so; and

          (iv)  BMS' rights under Articles 5 and 6 shall survive, and BMS may
continue to use such rights licensed to it in accordance with, and subject to
the terms and conditions of, this Agreement, and provided further that, with
respect to exercise of the rights granted under Article 6, BMS complies with the
payment terms and conditions of Article 8 of this Agreement; and

          (v)   BMS shall not be obligated to disclose or license to Exelixis
any Improvement Inventions made thereafter by it to the Exelixis Core Technology
or BMS Core Technology after such termination date.

     (c)  Upon termination of the Research Term as provided in Section 11.3:

          (i)   Exelixis shall return all BMS Compounds provided to it;

          (ii)  BMS' and Exelixis' rights under Articles 5 and 6 shall survive,
and BMS and Exelixis each may continue to use such rights licensed to it in
accordance with, and subject to the terms and conditions of, this Agreement; and

          (iii) Neither Party shall be obligated to disclose or license to the
other Party any Improvement Inventions made thereafter by it to its Core
Technology or the other Party's Core Technology after such termination date.

     (d)  Upon any termination of this Agreement by BMS pursuant to Section 3.2:

[ * ] = 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.

                                      61.
<PAGE>

          (i)   all licenses granted by each Party to the other Party under
Article 6 will terminate;

          (ii)  Each Party shall, within sixty (60) days of such termination,
return all Confidential Information of the other Party pertaining to the
terminated rights and licenses, and Exelixis shall return all BMS Compounds
provided to it;

          (iii) BMS shall cease all use of any Targets and other Research
Results disclosed by Exelixis and any mammalian orthologues of such Targets
identified by use of such Collaboration information, unless and until such
mammalian orthologues, and their relevance to the applicable BMS Compounds, are
disclosed publicly or to BMS by a Third Party or are independently discovered by
BMS employees without use of such Research Results; and

          (iv)  Neither Party shall be obligated to disclose or license to the
other Party any Improvement Inventions made thereafter by it to its Core
Technology or the other Party's Core Technology after such termination date.

     (e)  In the event of termination of this Agreement pursuant to Section
11.2, 11.3 or 3.2, the following provisions of this Agreement shall survive:
Articles 1, 9, 10, 13 and 14 and Sections 3.6, 3.7 (last sentence), 3.8, 4.15,
4.17 (last sentence), 5.7(c), 5.8, 11.4(f), 12.1, 12.3, 12.4 and 12.5, as well
as those other provisions of this Agreement as are necessary to give effect to
any surviving rights and licenses described in Section 11.4 hereof.

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

12.  Representations and Covenants

     12.1  Mutual Authority. Exelixis and BMS each represents and warrants to
the other that (i) it has the authority and right to enter into and perform this
Agreement, (ii) this Agreement is a legal and valid obligation binding upon it
and is enforceable in accordance with its terms, subject to applicable
limitations on such enforcement based on bankruptcy laws and other debtors'
rights, and (iii) its execution, delivery and performance of this Agreement will
not conflict in any material fashion with the terms of any other agreement or
instrument to which it is or becomes a party or by which it is or becomes bound,
nor violate any law or regulation of any court, governmental body or
administrative or other agency having authority over it.

     12.2  Rights in Technology. During the term of this Agreement, each Party
will use commercially reasonable efforts not to diminish the rights under its
Pre-existing Inventions, Sole Inventions or Joint Inventions granted to each
other herein, including without limitation by not committing or permitting any
acts or omissions which would cause the breach of any agreements between itself
and Third Parties which provide for intellectual property rights applicable to
the development, manufacture, use or sale of Licensed Products. Each Party
agrees to provide promptly the other Party with notice of any such alleged
breach. As of the Effective Date, each

[ * ] = 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.

                                      62.
<PAGE>

Party is in compliance in all material respects with any aforementioned
agreements with Third Parties.

     12.3 Performance by Affiliates. The Parties recognize that each may
perform some or all of its obligations under this Agreement through Affiliates,
provided, however, that each Party shall remain responsible and be guarantor of
the performance by its Affiliates and shall cause its Affiliates to comply with
the provisions of this Agreement in connection with such performance. In
particular, if any Affiliate of a Party participates in research under this
Agreement or with respect to Collaboration Compounds, (i) the restrictions of
this Agreement which apply to the activities of a Party with respect to Selected
Targets and Collaboration Compounds shall apply equally to the activities of
such Affiliate, and (ii) the Party affiliated with such Affiliate shall assure,
and hereby guarantees, that any intellectual property developed by such
Affiliate shall be governed by the provisions of this Agreement (and subject to
the licenses set forth in Article 6) as if such intellectual property had been
developed by the Party.

     12.4 Exelixis Representations and Warranties. Exelixis represents and
warrants to BMS that as of the Effective Date:

          (a)  Exelixis is the owner and/or licensee of the Exelixis Core
Technology and of those patents listed on Exhibit C, and that, to the knowledge
of the officers of Exelixis, Exelixis has not entered into any agreement that
prohibits Exelixis from using or licensing same as contemplated in this
Agreement.

          (b)  To the knowledge of the officers of Exelixis, (1) the performance
by Exelixis of the activities contemplated for it under this Agreement,
including without limitation the use of any of its technologies, software
developed by it, any compounds or biomaterials (other than the BMS Compounds),
any patents Controlled by it (including without limitation the patents listed on
Exhibit C), and any know-how in the conduct of the Mode of Action Program and
(2) the rights and licenses to be granted by it hereunder, will not infringe any
patents, and with respect to the FlyTag Database, any copyrights, owned by Third
Parties.

          (c)  There is no action, suit or proceeding pending or, to the
knowledge of the officers of Exelixis, that has been threatened in writing by
any Third Party against Exelixis which, if adversely determined, would have a
material adverse effect upon the ability of Exelixis to use, or license to BMS
as contemplated hereunder, any technologies, any software developed by it, any
compounds or biomaterials (other than the BMS Compounds), and any know-how,
including the without limitation the FlyTag Database and the patents listed on
Exhibit C, to perform its obligations under this Agreement.

          (d)  The Exelixis Core Technology has not been developed or obtained
by Exelixis in violation of any contractual or fiduciary obligation to which
Exelixis, any predecessor-in-interest or, to its knowledge, any of its or their
employees is or was a party or by misappropriation of the trade secrets of any
Third Party.

          (e)  To the knowledge of the officers of Exelixis, the issued claims
under the Patents listed on Exhibit C are not dominated, as of the Effective
Date, by any issued patents of any Third Party in the United States.

[ * ] = 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.

                                      63.
<PAGE>

          (f)  To the knowledge of the officers of Exelixis, with respect to any
Patent, copyright or know-how rights relating to C. elegans or Drosophila that
are contained within the Exelixis Core Technology listed on Exhibit C (including
without limitation any aspect of the FlyTag Database) that are licensed to
Exelixis, Exelixis is not restricted or prevented from licensing such rights to
BMS as contemplated in Article 5, except for the restrictions set forth
expressly in Section 5.3.

     12.5 BMS Representations and Warranties. BMS represents and warrants to
Exelixis that as of the Effective Date:

          (a)  BMS is the owner and/or licensee of the BMS Core Technology and
of those patents listed on Exhibit B-1, and that, to the knowledge of the
officers of BMS, BMS has not entered into any agreement that prohibits BMS from
using or licensing same as contemplated in this Agreement.

          (b)  Except as otherwise provided on Exhibit E, to the knowledge of
the officers of BMS: (1) the performance by BMS of the activities contemplated
for it under this Agreement, including without limitation the use of any of its
technologies, software developed by it, any compounds or biomaterials, any
patents Controlled by it (including without limitation the patents listed on
Exhibit B-1), and any know-how in the conduct of the Mode of Action Program and
(2) the rights and licenses to be granted by it hereunder, will not infringe any
patents, and with respect to the BMS Software, any copyrights, owned by Third
Parties.

          (c)  There is no action, suit or proceeding pending or, to the
knowledge of the officers of BMS, that has been threatened in writing by any
Third Party against BMS which, if adversely determined, would have a material
adverse effect upon the ability of BMS to use, or license to Exelixis as
contemplated hereunder, any technologies, any software developed by it, any
compounds or biomaterials, and any know-how, including the without limitation
the BMS Software and the patents listed on Exhibit B-1 to perform its
obligations under this Agreement.

          (d)  The BMS Core Technology has not been developed or obtained by BMS
in violation of any contractual or fiduciary obligation to which BMS, any
predecessor-in-interest or, to its knowledge, any of its or their employees is
or was a party or by misappropriation of the trade secrets of any Third Party.

          (e)  Except as otherwise provided on Exhibit E, to the knowledge of
the officers of BMS, the issued claims under the Patents listed on Exhibit B-1
are not dominated, as of the Effective Date, by any issued patents of any Third
Party in the United States.

13.  Indemnification and Limitation of Liability

     13.1 Mutual Indemnification. Subject to Sections 13.2, 13.3 and 13.4, each
Party hereby agrees to indemnify, defend and hold the other Party, its
Affiliates, its licensees, and its and their officers, directors, employees,
consultants, contractors, sublicensees and agents (collectively, the
"Indemnitees") harmless from and against any and all damages or other amounts
payable to a Third Party claimant, as well as any reasonable attorneys' fees and
costs of litigation incurred by such Indemnitee as to any such Claim (as defined
in this Section 13.1) until

[ * ] = 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.

                                      64.
<PAGE>

the indemnifying Party has acknowledged that it will provide indemnification
hereunder with respect to such Claim as provided below, (collectively,
"Damages") resulting from claims, suits, proceedings or causes of action
("Claims") brought by such Third Party against such Indemnitee based on: (a) a
breach of warranty by the indemnifying Party contained in this Agreement; (b)
breach of this Agreement or applicable law by such indemnifying Party; (c)
negligence or willful misconduct of a Party, its Affiliates or (sub)licensees,
or their respective employees, contractors or agents in the performance of this
Agreement; and/or (d) breach of a contractual or fiduciary obligation owed by it
to a Third Party (including without limitation misappropriation of trade
secrets).

     13.2 Indemnification by BMS. BMS agrees to indemnify, defend and hold
Exelixis, its Affiliates, and its and their officers, directors, employees,
consultants, contractors, and agents (collectively, the "Exelixis Indemnitees")
harmless from and against any and all damages, losses, liabilities or other
amounts payable by any of them to a Third Party claimant, as well as any
reasonable attorneys' fees and costs of litigation incurred by such Exelixis
Indemnitee as to any such Claim (as defined in this Section 13.2) until BMS has
acknowledged that it will provide indemnification hereunder with respect to such
Claim as provided below, (collectively, "Damages") resulting from claims, suits,
proceedings or causes of action ("Claims") brought by such Third Party based on:
(i) [ * ] in connection therewith, but excluding any claim relating to [ * ]
(except as provided in (iv) below); (ii) [ * ] Selected Target or Pursued
Disclosed Target, or any Mammalian Target [ * ]; (iii) personal injury or death
relating to or arising out of the [ * ] Selected Targets, Pursued Disclosed
Targets, Mammalian Targets, Collaboration Compounds, Licensed Products, BMS
Products, Gene Products; Biotherapeutic Products [ * ] by or on behalf of BMS or
its Affiliates, agents or sublicensees; (iv) [ * ] Collaboration Compounds,
Licensed Products, BMS Products, Gene Products, Biotherapeutic Products [*];
(v) [ * ] BMS Compounds [ * ]; and (vi) [ * ].

     13.3 Indemnification by Exelixis. Exelixis agrees to indemnify, defend and
hold BMS, its Affiliates, and its and their officers, directors, employees,
consultants, contractors, and agents (collectively, the "BMS Indemnitees")
harmless from and against any and all damages, losses, liabilities or other
amounts payable by any of them to a Third Party claimant, as well as any
reasonable attorneys' fees and costs of litigation incurred by such BMS
Indemnitee as to any such Claim (as defined in this Section 13.3) until Exelixis
has acknowledged that it will provide indemnification hereunder with respect to
such Claim as provided below, (collectively, "Damages") resulting from claims,
suits, proceedings or causes of action ("Claims") brought by any such Third
Party based on (i) [ * ] Selected Target, Pursued Disclosed Target, or Candidate
Target, or any any Mammalian Target [ * ], including without limitation, for
both subparagraphs (A) and (B), [ * ] BMS Compound [ * ]; (ii) [ * ]; (iii)
personal injury or death relating to or arising out of the [ * ] Selected
Targets; Pursued Disclosed Targets; Mammalian Targets; [ * ] Selected Targets,
Pursued Disclosed Targets, and Mammalian Targets; Gene Products; Biotherapeutic
Products; [ * ]; (iv) [ * ] Selected Targets; Pursued Disclosed Targets;
Mammalian Targets; [ * ] Selected Targets, Pursued Disclosed Targets, Product
Targets; and Mammalian Targets; Gene Products; Biotherapeutic Products; [ * ];
and (v) [ * ].

     13.4 Conditions to Indemnification. As used herein, "Indemnitee" shall mean
a party entitled to indemnification under the terms of Sections 13.1, 13.2 or
13.3, as applicable. It shall be a condition precedent to an Indemnitee's right
to seek indemnification under such Sections 13.1, 13.2 or 13.3:

          (i)  shall inform the indemnifying Party under such applicable Section
of a Claim as soon as reasonably practicable after it receives notice of the
Claim;

          (ii) shall, if the indemnifying Party acknowledges that such Claim
falls within the scope of its indemnification obligations hereunder, permit the
indemnifying Party to

[ * ] = 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.

                                      65.
<PAGE>

assume direction and control of the defense, litigation, settlement, appeal or
other disposition of the Claim (including the right to settle the claim solely
for monetary consideration); provided, that the indemnifying Party shall seek
the prior written consent (not to be unreasonably withheld or delayed) of any
such Indemnitee as to any settlement which would materially diminish or
materially adversely affect the scope, exclusivity or duration of any Exelixis
Patents licensed to BMS under this Agreement (except that BMS may sublicense
such rights if in accordance with this Agreement without the consent of
Exelixis), would require any payment by such Indemnitee, would require an
admission of legal wrongdoing in any way on the part of an Indemnitee, or would
effect an amendment of this Agreement; and

          (iii)    shall fully cooperate (including providing access to and
copies of pertinent records and making available for testimony relevant
individuals subject to its control) as reasonably requested by, and at the
expense of, the indemnifying Party in the defense of the Claim.

     Provided that an Indemnitee has complied with the foregoing, the
indemnifying Party shall provide attorneys reasonably acceptable to the
Indemnitee to defend against any such Claim. Subject to the foregoing, an
Indemnitee may participate in any proceedings involving such Claim using
attorneys of its/his/her choice and at its/his/her expense. In no event may an
Indemnitee settle or compromise any Claim for which it/he/she intends to seek
indemnification from the indemnifying Party hereunder without the prior written
consent of the indemnifying Party, or the indemnification provided under such
Sections 13.1, 13.2 or 13.3, as the case may be, as to such Claim shall be null
and void.

     13.5  Limitation of Liability. EXCEPT AS SPECIFICALLY PROVIDED IN SECTION
13.1, EXCEPT FOR BREACHES OF SECTIONS 3.8, 4.11 (AS TO THE USE OF LICENSES
GRANTED THEREIN TO EXELIXIS), 4.12, 6.1, 6.2, 6.3, 7.2, 12.1, AND 12.2, AND
ARTICLES 5, 9 AND 10 HEREOF, AND EXCEPT FOR ACTS OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, 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 THE PERFORMANCE OR NON-PERFORMANCE 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.

     13.6  Core Technology Disclaimer. EXCEPT AS PROVIDED IN ARTICLE 12 ABOVE,
THE BMS CORE TECHNOLOGY PROVIDED HEREUNDER IS PROVIDED "AS IS", AND BMS
EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL
PROPERTY RIGHTS OF THIRD PARTIES WITH RESPECT TO ITS CORE TECHNOLOGY. EXCEPT AS
PROVIDED IN ARTICLE 12 ABOVE, THE EXELIXIS CORE TECHNOLOGY PROVIDED HEREUNDER IS
PROVIDED "AS IS", AND EXELIXIS EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES
OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING

[ * ] = 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.

                                      66.
<PAGE>

WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF
THIRD PARTIES WITH RESPECT TO ITS CORE TECHNOLOGY.

     13.7    Collaboration Disclaimer. EXCEPT AS PROVIDED IN ARTICLE 12 ABOVE,
BMS EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY KIND, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN, MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE INTELLECTUAL
PROPERTY RIGHTS OF THIRD PARTIES WITH RESPECT TO ANY RESEARCH RESULTS, TARGETS,
DATA, OR INVENTIONS (AND ANY PATENT RIGHTS OBTAINED THEREON) IDENTIFIED, MADE OR
GENERATED BY BMS AS PART OF THE COLLABORATION OR OTHERWISE MADE AVAILABLE TO
EXELIXIS PURSUANT TO THE TERMS OF THIS AGREEMENT. EXCEPT AS PROVIDED IN ARTICLE
12 ABOVE, EXELIXIS EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTIES OF DESIGN,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT OF THE
INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES WITH RESPECT TO ANY RESEARCH
RESULTS, TARGETS, DATA, OR INVENTIONS (AND ANY PATENT RIGHTS OBTAINED THEREON)
IDENTIFIED, MADE OR GENERATED BY EXELIXIS AS PART OF THE COLLABORATION OR
OTHERWISE MADE AVAILABLE TO BMS PURSUANT TO THE TERMS OF THIS AGREEMENT.

14.  Miscellaneous

     14.1    Dispute Resolution.

             (a)    In the event of any controversy or claim arising out of,
relating to or in connection with any provision of this Agreement, other than a
dispute addressed in Section 14.3, the Parties shall try to settle their
differences amicably between themselves first, by referring the disputed matter
to the Joint Management Team, and, if not resolved by the JMT, by referring the
disputed matter to the respective Chief Executive Officer of Exelixis and the
Senior Vice President - Drug Discovery Research of BMS. Either Party may
initiate such informal dispute resolution by sending written notice of the
dispute to the other Party, and, within 20 days after such notice, such
representatives of the Parties shall meet for attempted resolution by good faith
negotiations. If such personnel are unable to resolve such dispute within thirty
(30) days of initiating such negotiations, such dispute shall be finally
resolved by binding arbitration under Section 14.1(b).

             (b)    Any such arbitration shall be held in San Francisco,
California, according to the Commercial Arbitration Rules (the "Rules") of the
American Arbitration Association. Any arbitration herewith shall be conducted in
the English language. The arbitration shall be conducted by one arbitrator who
is knowledgeable in the subject matter which is at issue in the dispute and who
is selected by mutual agreement of the Parties or, failing such agreement, shall
be selected according to the AAA rules. The Parties shall have such discovery
rights as 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.

                                      67.
<PAGE>

arbitrator may allow, consistent with the goal of limiting the cost and time
which the Parties must expend for discovery (and provided that the arbitrator
shall permit such discovery he/she deems necessary to permit an equitable
resolution of the dispute), but in no event broader than that discovery
permitted under the Federal Rules of Civil Procedure. In conducting the
arbitration, the arbitrator shall apply the California Rules of Evidence, and
shall be able to decree any and all relief of an equitable nature, including but
not limited to such relief as a temporary restraining order, a preliminary
injunction, a permanent injunction, or replevin of property, as well as specific
performance. The arbitrator shall also be able to award direct, indirect and,
where permitted by this Agreement, consequential damages, but shall not award
any other form of damage (e.g., punitive or exemplary damages). The reasonable
fees and expenses, of the arbitrators, along with the reasonable legal fees and
expenses of the prevailing Party (including all expert witness fees and
expenses), the fees and expenses of a court reporter, and any expenses for a
hearing room, shall be paid as follows: If the arbitrators rule in favor of one
Party on all disputed issues in the arbitration, the losing Party shall pay one
hundred percent (100%) of such fees and expenses; if the arbitrators rule in
favor of one Party on some issues and the other Party on other issues, the
arbitrators shall issue with the rulings a written determination as to how such
fees and expenses shall be allocated between the Parties. The arbitrators shall
allocate fees and expenses in a way that bears a reasonable relationship to the
outcome of the arbitration, with the Party prevailing on more issues, or on
issues of greater value or gravity, recovering a relatively larger share of its
legal fees and expenses. The decision of the arbitrators shall be final and may
be entered, sued on or enforced by the Party in whose favor it runs in any court
of competent jurisdiction at the option of such Party. Whether a claim, dispute
or other matter in question would be barred by the applicable statute of
limitations, which statute of limitations also shall apply to any claim or
disputes subject to arbitration under this Section, shall be determined by
binding arbitration pursuant to this Section.

     14.2    Governing Law. Resolution of all disputes arising out of or related
to this Agreement or the performance, enforcement, breach or termination of this
Agreement and any remedies relating thereto, shall be governed by and construed
under the substantive laws of the State of California, without regard to
conflicts of law rules.

     14.3    Certain Disputes. Notwithstanding anything to the contrary in
Section 14.1, either Party may seek immediate injunctive or other interim
relief, without resort to the procedures set forth in Section 14.1(a) or (b),
from any court of competent jurisdiction with respect any dispute, controversy
or claim relating to the scope, validity, enforceability or infringement of any
Patent rights, copyrights, trade secrets, or trademark rights owned or
Controlled by a party or its Affiliates or relating to any breach of Sections
hereof.

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

[ * ] = 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.

                                      68.
<PAGE>

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

     14.6    Bankruptcy.

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

             (b)    If a Title 11 case is commenced by or against the Bankrupt
Party and this Agreement is rejected as provided in Title 11 and the non-
Bankrupt Party elects to retain its rights hereunder as provided in Title 11,
then the Bankrupt Party (in any capacity, including debtor-in-possession) and
its successors and assigns (including, without limitations, a Title 11 Trustee)
shall provide to the non-Bankrupt Party all such intellectual property
(including all embodiments thereof) held by the Bankrupt Party and such
successors and assigns or otherwise available to them as to which the non-
Bankrupt Party has rights immediately upon the non-Bankrupt Party's written
request therefor. Whenever the Bankrupt Party or any of its successors or
assigns provides to the non-Bankrupt Party any of the intellectual property
licensed hereunder (or any embodiment thereof) pursuant to this Section 14.6,
the non-Bankrupt Party shall have the right to perform the obligations of the
Bankrupt Party hereunder with respect to such intellectual property, but neither
such provision nor such performance by the non-Bankrupt Party shall release the
Bankrupt Party from any such obligation or liability for failing to perform it.

             (c)    All rights, powers and remedies of the non-Bankrupt Party
provided herein are in addition to and not in substitution for any and all other
rights, powers and remedies

[ * ] = 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.

                                      69.
<PAGE>

now or hereafter existing at law or in equity (including, without limitation,
Title 11) in the event of the commencement of a Title 11 case by or against the
Bankrupt Party. The non-Bankrupt Party, in addition to the rights, power and
remedies expressly provided herein, shall be entitled to exercise all other such
rights and powers and resort to all other such remedies as may now or hereafter
exist at law or in equity (including, without limitation, under Title 11) in
such event. The Parties agree that they intend the foregoing non-Bankrupt Party
rights to extend to the maximum extent permitted by law and any provisions of
applicable contracts with Third Parties. Any intellectual property provided
pursuant to the provisions of this Section 14.6 shall be subject to the licenses
set forth elsewhere in this Agreement and the payment obligations of this
Agreement, which shall be deemed to be royalties for purposes of Title 11.

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

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

     For Exelixis:       Exelixis Pharmaceuticals, Inc.
                         260 Littlefield Avenue
                         South San Francisco, CA 94080
                         Attention: Chief Executive Officer

     With a copy to:     Cooley Godward LLP
                         Five Palo Alto Square
                         3000 El Camino Real
                         Palo Alto, CA 94306
                         Attention: Barclay James Kamb, Esq.

     For BMS:            Bristol-Myers Squibb Pharmaceutical Research Institute
                         Route 206 and Province Line Road
                         Princeton, NJ 08543-4000
                         Attention: Senior Vice President - Drug Discovery

[ * ] = 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.

                                      70.
<PAGE>

     With a copy to:  Bristol-Myers Squibb Pharmaceutical Research Institute
                      Route 206 and Province Line Road
                      Princeton, NJ 08543-4000
                      Attention:  Vice President and Senior Counsel - BMSPRI

     14.9  Consents Not Unreasonably Withheld or Delayed. Whenever provision is
made in this Agreement for either Party to secure the consent or approval of the
other, that consent or approval shall, except as otherwise expressly provided,
not unreasonably be withheld or delayed, and whenever in this Agreement
provisions are made for one Party to object to or disapprove a matter, such
objection or disapproval shall not unreasonably be exercised.

     14.10 Maintenance of Records. Each Party shall keep and maintain all
records required by law or regulation with respect to Licensed Products or BMS
Products.

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

     14.12 No Strict Construction.  This Agreement has been prepared jointly and
shall not be strictly construed against either Party.

     14.13 Assignment. Neither Party may assign or transfer this Agreement or
any rights or obligations hereunder without the prior written consent of the
other, except that a Party may make such an assignment of the Agreement without
the other Party's consent to an Affiliate or to a successor to all or
substantially all of the business of such Party, whether in a merger, sale of
stock, sale of assets or other similar transaction, provided that any such
permitted successor or assignee of rights and/or obligations hereunder shall
have first, either by operation of law or in a writing to the other Party,
expressly assumed performance of such rights and/or obligations. Any permitted
assignment shall be binding on the successors of the assigning Party. Any
assignment or attempted assignment by either Party in violation of the terms of
this Section 14.13 shall be null and void and of no legal effect.

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

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

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

     14.17 Severability. If any one or more of the provisions of this Agreement
is held to be invalid or unenforceable by any court of competent jurisdiction
from which no appeal can be or is taken, the provision shall be considered
severed from this Agreement and shall not serve to

[*] = 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.

                                      71.
<PAGE>

invalidate any remaining provisions hereof. The Parties shall make a good faith
effort to replace any invalid or unenforceable provision with a valid and
enforceable one such that the objectives contemplated by the Parties when
entering this Agreement may be realized.

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

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

     14.20 No Waiver.  Any delay in enforcing a Party's rights under this
Agreement or any waiver as to a particular default or other matter shall not
constitute a waiver of such Party's rights to the future enforcement of its
rights under this Agreement, excepting only as to an express written and signed
waiver as to a particular matter for a particular period of time.

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

Bristol-Myers Squibb Company                     Exelixis Pharmaceuticals, Inc.

By:  /s/ E. Sigal                                By: /s/ George Scangos
     -----------------------                         ---------------------------
       Elliot Sigal, M.D.

Title: Sr. Vice President                        Title: Chief Executive Officer
       ---------------------                            ------------------------
       Early Discovery & Applied Technology

Date:  September 14, 1999                        Date: September 14, 1999

[*] = 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.

                                      72.
<PAGE>

                                   EXHIBIT A

               EXAMPLES OF CONCEPTUAL AND PREASSOCIATED TARGETS

     The following is intended to illustrate how a Conceptual or Preassociated
Target might arise:

Conceptual Targets

          [ * ]

Preassociated Targets

          [ * ]

[*] = 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.

                                     A-1.
<PAGE>

                                   Exhibit B

                             BRISTOL-MYERS SQUIBB
                  COMBINATORIAL LEAD OPTIMIZATION TECHNOLOGY
                        TECHNOLOGY TRANSFER TO EXELIXIS

I.   OVERVIEW.

     BMS CDD shall transfer to Exelixis [ * ].

II.  SCOPE OF ENABLEMENT.

     [ * ]

     .    [ * ]

     An outline of the BMS/HTC software capabilities is appended below: In
     addition, BMS will provide Exelixis with generic descriptions of all [ * ]
     and use of same that are of interest to BMS (whether or not disclosed in
     BMS patents or publications).

III. MILESTONES

     The parties will use reasonable efforts to effect (in the case of Exelixis,
     this will include obtaining and installing in advance necessary equipment
     and licenses from Third Parties) following timetable for transfer of
     BMS/HTC (it being understood that, if Exelixis is ready to receive the
     items below more quickly, BMS will use reasonable efforts to accommodate
     such advances in the schedule):

     3 Months after signing:  [ * ]

     6 Months after signing:  [ * ]

     2 Months after signing:  [ * ]

IV.  BMS/HTC SOFTWARE CAPABILITIES

     a.   [ * ]

2.   [ * ]

     [ * ]

V.   PATENTS

     Patents filed with respect to the BMS Core Technology are described in
     Exhibit B-1 attached hereto.

VI.  OTHER MATTERS

[ * ]

[*] = 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.

                                     B-1.
<PAGE>

                                  Exhibit B-1

                        PATENTS ON BMS CORE TECHNOLOGY

Patent Status of BMS First Generation Combinatorial Reactor

--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]        [ * ]         [ * ]            [ * ]
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------

Patent Status of BMS Second Generation Combinatorial Reactor

--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]        [ * ]         [ * ]            [ * ]
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------
[ * ]         [ * ]          [ * ]
--------------------------------------------------------------------------------

[*] = 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.

                                    B-1-1.
<PAGE>

                                   Exhibit C

                           EXELIXIS CORE TECHNOLOGY

   (Hard copy of US Patent No. 4,670,388 and four Flytag Release slides also
                                   attached)

Technology transfer to BMS

[ * ]

[*] = 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.

                                     C-1.
<PAGE>

                                   Exhibit C

     EPI Model System Genetic Technology Proposed Technology Transfer to BMS

I.   OVERVIEW.

     [ * ].

II.  SCOPE OF ENABLEMENT.

     [ * ].

     Subject to the terms of any Agreements EPI may have with Third Parties
     (including without limitation confidentiality restrictions), which EPI will
     identify for BMS, EPI will provide to BMS the following components of the
     EPI genetics, genomics and computational biology platform:

     .    [ * ]

III. MILESTONES.

     The parties will use reasonable efforts to effect (in the case of BMS, this
     will include obtaining and installing in advance necessary equipment and
     licenses from Third Parties) the following timetable for transfer of
     developed technology (it being understood that, if BMS is ready to receive
     the items below more quickly, Exelixis will use reasonable efforts to
     accommodate such advances in the schedule):

     Upon Signing:                 [ * ].

     6 Months after Signing:       [ * ].

     9 Months after Signing:       [ * ].

     12 Months after Signing:      [ * ].

IV.  DEFINITION OF FLYTAG(TM) 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.

                                     C-1.
<PAGE>

Exelixis Pharmaceuticals, Inc.

FlyTag Release 5.0

Assembly Summary 26405-27073

[ * ]

Assembly: 27045

Tiling pattern

[ * ]

BLAST hits

[ * ]

Text search

[ * ]

U.S. Patent number 4,670,388, granted June 2, 1987, to Carnegie Institution of
Washington, Washington, D.C., inventors Gerald M. Rubin and Allan C. Spradling,
"Method of Incorporating DNA into Genome of Drosophila", is herein incorporated
by reference to the Internet full-text patent database at the United States
Patent and Trademark Office Internet website, www.uspto.gov.

[*] = 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.

                                     D-2.
<PAGE>

Exhibit D

                             FORM OF PRESS RELEASE

                              FOR IMMEDIATE RELEASE

                              CONTACT:   Sylvia D. Sharockman
                                         Bristol-Myers Squibb Company
                                         609-252-3390

                                         George Scangos, Ph.D.
                                         Chief Executive Officer
                                         Exelixis Pharmaceuticals, Inc.
                                         650-825-2201

                                         Tony Russo, Ph.D.
                                         Noonan/Russo Communications, Inc.
                                         212-696-4455

     BRISTOL MYERS SQUIBB COMPANY AND EXELIXIS PHARMACEUTICALS ANNOUNCE GENOMICS
RESEARCH ALLIANCE

      Collaboration to Focus on the Identification of Novel Targets for New
Medicines

     (PRINCETON, N.J. and SOUTH SAN FRANCISCO, C.A., September 15, 1999) -
Bristol-Myers Squibb Company (NYSE:BMY) and Exelixis Pharmaceuticals, Inc. today
announced they have entered into a three-year research collaboration to identify
novel targets for new medicines using model system genetics.  Exelixis will
utilize its proprietary technology to determine the molecular targets of
compounds provided by Bristol-Myers Squibb.  As part of the collaboration,
Bristol-Myers Squibb and Exelixis will share certain core technologies in
genomics and lead optimization.

     Under the terms of the agreement, Bristol-Myers Squibb will provide
Exelixis with research funding and additional payments subject to the
achievement of research and commercialization milestones. Exelixis, a leading
model systems genetics, genomics and informatics company, will contribute to the
work of Bristol-Myers Squibb's internal Department of Applied Genomics. Both
companies have programs in model system genetics, the study of organisms such as
yeast, worms (C.

[*] = 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.

                                     D-2.
<PAGE>

elegans) and fruit flies (Drosophila), to better understand disease genetics in
humans. Many genes and gene functions present in these model systems are
conserved in humans, but are much easier to study in these simpler genetic
systems.

     "Our strategy is to externally align and internally integrate, meaning that
we partner with companies, like Exelixis, that offer the most promising
technology and approaches in specialized areas, " said Elliott Sigal, M.D.,
Ph.D., senior vice president, Early Discovery and Applied Technology, Bristol-
Myers Squibb. "Then, our scientists can apply this knowledge across our pipeline
of new compounds so we can bring the most innovative medicines forward."

     Commenting on the partnership, Geoffrey Duyk, M.D., Ph.D., chief scientific
officer, Exelixis, said, "This collaboration with Bristol-Myers Squibb leverages
our ability to use our target-based model genetic systems to rapidly identify
pharmaceutical targets.  The Mechanism of Action (MOA) Program, the foundation
of which is based on employing our core expertise in genetics, was built upon
our successful work in agriculture.  However, we soon realized that the
pharmaceutical industry could also benefit from an efficient, rapid approach to
determine the mechanism of action of compounds.  We anticipate that this will be
the first in a series of collaborations focused on the research derived from our
MOA Program."

     As part of the collaboration, Bristol-Myers Squibb and Exelixis will
exchange certain core technologies in genomics and lead optimization.  Bristol-
Myers Squibb will acquire Exelixis technology including a sublicense to the
patented P-element technology, tools to manipulate genes in Drosophila and C.
elegans, and access to the company's Drosophila proprietary EST database,
FlyTag.  Exelixis will acquire proprietary BMS lead optimization technology.
Exelixis will utilize this technology together with other assets to further
develop their own internal discovery efforts.

     "The lead optimization technology obtained from BMS is a powerful
complement to the technology recently acquired from MetaXen. The acquisition of
this technology is an important step towards building a world-class drug
discovery capability at Exelixis.  The technology exchange with

[*] = 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.

                                     D-2.
<PAGE>

BMS is a very interesting aspect to our relationship that will have significant
benefits for both companies." stated George Scangos, Ph.D., president and chief
executive officer, Exelixis.

     Exelixis Pharmaceuticals, Inc., together through its alliance with Artemis
Pharmaceuticals, represent the premiere model system genetics organization
focused on the identification and validation of novel screening targets and
proteins for the pharmaceutical, diagnostic, agricultural, and animal health
industries.  Their PathFinder Technology utilizes a systematic genetics approach
in model organisms including Drosophila, C. elegans, zebrafish and mice to
identify critical genes in disease and physiological pathways, determine
functional relationships and select optimal targets for intervention.  Exelixis
research programs include the areas of CNS, inflammation, metabolic disease,
oncology, and agricultural biotechnology.

     Bristol-Myers Squibb is a diversified worldwide health and personal care
company whose principal businesses are pharmaceuticals, consumer medicines,
beauty care, nutritionals, and medical devices.  It is a leading maker of
innovative therapies for cardiovascular, metabolic and infectious diseases,
central nervous system and dermatological disorders, and cancer.  The company is
a leader in consumer medicines, orthopaedic devices, ostomy care, wound
management, nutritional supplements, infant formulas, and hair and skin care
products.
                                     # # #
        Visit Bristol-Myers Squibb on the World Wide Web at http://www.bms.com
                                                            ------------------

          Information about Exelixis including news releases is available on the
     Company's website at http://www.exelixis.com
                          -----------------------

[*] = 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.

                                     D-3.
<PAGE>

                                   Exhibit E

                             BMS Disclosed Patents

[ * ].

[*] = Certain confidential information contained in this document, marked by
brackets, has been omitted and filed separately with the Securities and Exchange
Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.

                                     E-1.

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