PDL BioPharma, Inc. Retention Bonus Letter Agreement with Richard Murray (July 11, 2008)

Exhibit 10.5

July 11, 2008

Richard Murray

[Address]

[City, State zip]

Dear Richard:

We view your contributions as an officer of PDL BioPharma, Inc. (“PDL”) as important to our efforts to transition to a streamlined biotech company and our long-term success.  Acknowledging this, the Compensation Committee of the Board of Directors of PDL recently approved additional retention bonuses for you.

Retention Bonuses

Subject to your continued employment in good standing with PDL through the applicable bonus dates (each, a “Bonus Date”) and the terms and conditions of this letter agreement (this “Letter Agreement”), you will earn, and PDL will pay you, the “Retention Bonuses” set forth below:

·      July 31, 2008 - $25,000

·      October 31, 2008 - $25,000

·      January 31, 2009 - $25,000

Subject to the terms and conditions of this Letter Agreement, each Retention Bonus would be paid with your first regular paycheck following the applicable Bonus Date.  These Retention Bonuses are in addition to the retention bonuses previously awarded to you by the Compensation Committee pursuant to the Letter Agreement between you and PDL dated May 2, 2008 (the “First Retention Agreement”).

Notwithstanding the foregoing or anything else in this Letter Agreement, if prior to a Bonus Date PDL terminates your employment without “Cause” (as that term is defined in PDL’s 2005 Equity Incentive Plan (the “2005 Plan”)), then on the date of such employment termination you would, subject to the last sentence in this paragraph, earn a prorated amount of the portion of the next Retention Bonus that you otherwise would have earned.  If such employment termination occurs before October 31, 2008, the

foregoing proration would be based on the number of months between June 19, 2008 and such termination date, rounded up to the nearest whole month.  Otherwise, such proration would be based on the number of months between the last Bonus Date and the date of such termination, rounded up to the nearest whole month.  Any portion of your Retention Bonuses that would be payable pursuant to this paragraph would be earned provided that you sign, and do not revoke, PDL’s form of release agreement (“Release Agreement”), and we would pay such portion of your Retention Bonus promptly after the effective date of your Release Agreement and in any event, provided that your Release Agreement has become effective, within 60 days after your termination date.

Notwithstanding the terms of PDL’s Executive Retention and Severance Plan (the “ERSP”) or the preceding paragraph, should your employment be terminated without Cause following a “Change in Control” (as that term is defined in and determined under PDL’s 2005 Equity Incentive Plan) and prior to December 31, 2009 and provided you sign, and do not revoke, the Release Agreement, we would pay you the full amount of your Retention Bonuses that you have not yet earned promptly after the effective date of your Release Agreement and, in any event, provided that your Release Agreement has become effective, within 60 days of the date of your employment termination.

Notwithstanding the foregoing or anything else in this Letter Agreement, you agree that you will not earn any portion of your Retention Bonuses pursuant to either of the two preceding paragraphs and this Letter Agreement will immediately terminate if PDL terminates your employment in connection with the transfer of PDL’s biotechnology-related assets to a wholly owned subsidiary of PDL (“NewBio”), provided, that NewBio offers you a comparable employment position and agrees to provide you a retention bonus (or retention bonuses if such employment termination occurs before June 30, 2009) on terms and conditions consistent with this Letter Agreement.

If PDL terminates your employment for Cause or you voluntarily terminate your employment, then you would not receive any portion of your Retention Bonuses that you have not earned.

You agree that, subject to the terms of the ERSP, none of your Retention Bonuses would be “grossed up” and will be subject to all applicable payroll withholdings and deductions.

Additional Provisions

Notwithstanding anything contained in this Letter Agreement to the contrary, no amount payable pursuant to this Letter Agreement on account of your termination of employment which constitutes a “deferral of compensation” within the meaning of the Treasury Regulations issued pursuant to Section 409A of the Internal Revenue Code (the “Section 409A Regulations”) will be paid unless and until you have incurred a “separation from service” within the meaning of the Section 409A Regulations.  Furthermore, if you are a “specified employee” within the meaning of the Section 409A Regulations as of the date

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of your separation from service, no amount that constitutes a deferral of compensation which is payable on account of your separation from service will paid to you before the date (the “Delayed Payment Date”) which is first day of the seventh month after the date of your separation from service or, if earlier, the date of your death following such separation from service.  All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date.

PDL intends that income provided to you pursuant to this Letter Agreement will not be subject to taxation under Section 409A of the Internal Revenue Code.  The provisions of this Letter Agreement shall be interpreted and construed in favor of satisfying any applicable requirements of Section 409A.  However, PDL does not guarantee any particular tax effect for income provided to you pursuant to this letter.  In any event, except for PDL’s responsibility to withhold applicable income and employment taxes from compensation paid or provided to you, PDL will not be responsible for the payment of any applicable taxes incurred by you on compensation paid or provided to you pursuant to this Letter Agreement.

Except as otherwise provided in this Letter Agreement, all of the other terms and conditions of your employment relationship with PDL will continue to apply.  This Letter Agreement is not intended change the “at will” nature of your employment with PDL.  You would continue to be free to resign at any time, just as PDL would be free to terminate your employment at any time, with or without cause.

The terms of this Letter Agreement, when accepted by you, supersede, with the exception of the ERSP and the First Retention Agreement, all prior arrangements, whether written or oral, and understandings regarding the subject matter of this Letter Agreement and, except as provided in the ERSP, shall be the exclusive agreement for the determination of any payments and benefits you are due upon the events described in this letter agreement.

On behalf of the Compensation Committee and the Board of Directors I would like to thank you for your many contributions and for your continued support and dedication to PDL.

To indicate your acceptance of the terms of this Letter Agreement, please sign and date this Letter Agreement in the space provided below and return it to Gwen Carscadden, Human Resources Department by June 30, 2008.

Sincerely,

Andrew Guggenhime

Senior Vice President and Chief Financial Officer

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AGREED AND ACKNOWLEDGED:

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