Can a ready Malzahar use his ability to kill an exhausted Gear or friendly unit?

Yes, a ready Malzahar can use his ability to kill an exhausted friendly unit or exhausted gear.

There is no restriction in Malzahar's ability text or the game rules that prevents you from targeting an exhausted permanent for a "Kill" cost. As long as the unit or gear is friendly and on the board, it is a valid target for the cost of Malzahar's ability.

Key points:

  • Exhaustion status: Being exhausted does not protect a unit or gear from being killed by a card effect or ability cost.
  • Ability Cost: Malzahar's ability requires you to "Kill a friendly unit or gear" and "exhaust [him]" as costs. Since these are non-standard costs, they can be paid in any order (as confirmed by the FAQ regarding Malzahar killing himself).
  • Targeting: Per the FAQ, Malzahar's ability can only target friendly units or friendly gear.