Dendreon (DNDN)

Compensation of Directors

Only non-employee directors are compensated for serving as directors of the Company. The Board of Directors adopted guidelines for the compensation of the Company’s non-employee directors. Under these guidelines, for each fiscal year of service non-employee directors receive a retainer of $35,000, payable ratably at the end of each quarter. In addition, the Chairman of the Board receives an additional $75,000 per annum. The chairs of the Audit, Compensation and Corporate Governance Committees receive an additional $10,000, $8,000, and $4,000, respectively, per annum for such service. These amounts are paid ratably at the end of each quarter. In 2005, the total compensation earned by non-employee directors was $284,333. The members of the Board of Directors are also eligible for reimbursement of their expenses incurred in connection with attendance at Board of Directors meetings in accordance with Company policy.

Upon first joining the Board of Directors, non-employee directors are also granted a stock option to acquire 22,500 shares of Common Stock under the Amended 2000 Equity Incentive Plan (the “2000 Equity Plan”), 7,500 options vest on the grant date and the remainder in equal annual installments over a two-year period and have an exercise price equal to the fair market value of the Common Stock on the date of grant. In addition, after the third anniversary of each director’s election to the Board of Directors, such director receives an annual grant to purchase 10,000 shares of the Company’s Common Stock, which vests in full upon the date of grant. All options granted to non-employee directors are granted at the fair market value of the Company’s Common Stock on the date of grant.

The table below sets forth, for each non-employee director, the amount of cash compensation paid and the number of stock options received for his or her service during 2005.

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Compensation of Directors

Cash Compensation.    Each non-employee director of the Company receives $25,000 per annum for his or her service on the Board of Directors, payable quarterly at the end of each quarter. In addition, the Chairman of the Board receives an additional $75,000 per annum. The chairs of the Audit and Compensation Committees receive an additional $8,000 per annum for such service, and the chair of the Corporate Governance Committee receives an additional $4,000 per annum. These amounts are paid quarterly at the end of each quarter. In the fiscal year ended December 31, 2004, the total compensation earned by non-employee directors was $250,332. The members of the Board of Directors are also eligible for reimbursement for their expenses incurred in connection with attendance at Board of Directors meetings in accordance with Company policy.

Non-Employee Director Stock Option Grants.    The Company’s Amended 2000 Equity Incentive Plan (the “2000 Equity Plan”) provides for automatic stock option grants to non-employee directors. Each person who is elected or appointed for the first time to be a non-employee director receives an initial grant, on the date of his or her election or appointment to the Board of Directors, to purchase 22,500 shares of the Company’s Common Stock, 7,500 shares of which vest on the date of grant and 7,500 shares of which vest on each of the first and second anniversaries of the date of grant. In June 2004, Mr. Brewer was granted an additional option to purchase 10,000 shares under the 2000 Equity Plan in connection with his election as Chairman of the Board. In addition, beginning on the third anniversary of each director’s election to the Board of Directors, such director automatically receives an annual grant to purchase 10,000 shares of the Company’s Common Stock, which vests in full upon the date of grant. All options granted to non-employee directors are granted at the fair market value of the Company’s Common Stock on the date of grant.

The non-employee director stock options have a maximum term of ten years for the initial and each annual grant. These options generally must be exercised prior to the earliest of (a) 18 months following the death of the non-employee director, (b) 12 months from the termination of service on the Board of Directors by the non-

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employee director due to a disability, (c) three months from the termination of the service of the non-employee director for any other reason or (d) the expiration of the original term of the stock option.