1
EXHIBIT 10.2
PROTEIN DESIGN LABS, INC.
OUTSIDE DIRECTORS STOCK OPTION PLAN
(As amended February 6, 1997)
1. Purpose. The Protein Design Labs, Inc. Outside Directors Stock
Option Plan (the "Plan") is established to create additional incentive for the
non-employee directors of Protein Design Labs, Inc. and any successor
corporation thereto (collectively referred to as the "Company"), to promote the
financial success and progress of the Company and any present or future parent
and/or subsidiary corporations of the Company (all of whom along with the
Company being individually referred to as a "Participating Company" and
collectively referred to as the "Participating Company Group"). The Plan shall
be effective as of the date it is approved by the stockholders of the Company
(the "Effective Date"). For purposes of the Plan, a parent corporation and a
subsidiary corporation shall be as defined in sections 424(e) and 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such committee
has been appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to terminate or amend
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. The Board shall have no authority, discretion, or
power to select which non-employee directors of the Company will receive options
under the Plan, to set the exercise price of the options granted under the Plan,
to determine the number of shares of common stock to be granted under an option
or the time at which any options are to be granted, to establish the duration of
option grants, or alter any other terms or conditions specified in the Plan,
except in the sense of administering or amending the Plan subject to the
provisions of the Plan. All questions of interpretation of the Plan or of any
options granted under the Plan (an "Option") shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan and/or any Option. The Chief Executive Officer, President
2
or General Counsel of the Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, or election which is
the responsibility of or which is allocated to the Company herein.
3. Eligibility and Type of Option. Options may be granted only to
directors of the Company who are not employees of the Company or any present
parent and/or subsidiary corporations of the Company ("Outside Directors").
Options granted to Outside Directors shall be nonqualified stock options; that
is, options which are not treated as having been granted under section 422(b) of
the Code.
4. Shares Subject to Option. Options shall be for the purchase of
shares of the authorized but unissued common stock or treasury shares of common
stock of the Company (the "Stock"), subject to adjustment as provided in
paragraph 8 below. The maximum number of shares of Stock which may be issued
under the Plan shall be two hundred thousand (200,000) shares. In the event that
any outstanding Option for any reason expires or is terminated and/or shares of
Stock subject to repurchase are repurchased by the Company, the shares allocable
to the unexercised portion of such Option, or such repurchased shares, may again
be subject to an Option grant.
5. Time for Granting Options. All Options shall be granted, if at all,
within ten (10) years from the Effective Date.
6. Terms, Conditions and Form of Options. Options granted pursuant to
the Plan shall be evidenced by written agreements specifying the number of
shares of Stock covered thereby, in substantially the form attached hereto as
Exhibit A (the "Option Agreement"), which written agreements may incorporate all
or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:
(a) Automatic Grant of Options. Subject to execution by each
Outside Director of an Option Agreement, options shall be granted automatically
and without further action of the Board, as follows:
(i) Each person who is newly appointed or elected as
an Outside Director after February 6, 1997 (a "Future Outside Director") shall
be granted an Option for thirty thousand (30,000) shares of Stock upon the date
such Outside Director is appointed or elected to the Board.
(ii) Each Outside Director shall be granted an Option
for thirty thousand (30,000) shares of Stock upon the fifth Anniversary Date (as
defined below) of such Outside Director.
(iii) The Anniversary Date of each Outside Director
shall be (1) if the Outside Director was granted an option under the Company's
1991 Stock Option Plan prior to the Effective Date,
3
the date of grant of such options, and (2) for all other Outside Directors, the
date upon which they were first granted an Option under the Plan.
(iv) Notwithstanding the foregoing, any Outside
Director may elect not to receive an Option granted pursuant to this paragraph
6(a) by delivering written notice of such election to the Board (1), in the case
of an initial Option grant, no later than the Effective Date or the date upon
which such Outside Director commences service on the Board, or (2), in the case
of an anniversary Option grant, no later than six (6) months prior to the
applicable Anniversary Date.
(v) Notwithstanding any other provision of the Plan,
no Option shall be granted to any individual on his or her Anniversary Date when
he or she is no longer serving as an Outside Director of the Company on such
Anniversary Date.
(b) Option Exercise Price. The Option exercise price per share
of Stock for an Option shall be the fair market value of a share of the common
stock of the Company on the date of the granting of the Option. Where there is a
public market for the common stock of the Company, the fair market value per
share of Stock shall be the mean of the bid and asked prices of the common stock
of the Company on the date of the granting of the Option, as reported in the
Wall Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event the common stock of the Company is listed on the NASDAQ
National Market System or a national or regional securities exchange, the fair
market value per share of Stock shall be the closing price on such National
Market System or exchange on the date of the granting of the Option, as reported
in the Wall Street Journal. If the date of the granting of an Option does not
fall on a day on which the common stock of the Company is trading on the NASDAQ
National Market System or other national or regional securities exchange, the
date on which the Option exercise price per share shall be established shall be
the last day on which the common stock of the Company was so traded prior to the
date of the granting of the Option.
(c) Exercise Period and Exercisability of Options. An Option
granted pursuant to the Plan shall be exercisable for a term of ten (10) years.
Options granted pursuant to the Plan shall become exercisable over a sixty (60)
month period commencing one (1) month after the date of grant as provided in the
form of Option Agreement.
(d) Payment of Option Exercise Price. Payment of the Option
exercise price for the number of shares of Stock being purchased pursuant to any
Option shall be made (i) in cash, by check, or in cash equivalent, (ii) by the
assignment of the proceeds of a sale of some or all of the shares being acquired
upon the exercise of an Option (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from time
to time by the Board of Governors of the Federal Reserve System), or (iii) by
any combination thereof. The Company reserves, at any and all times, the
4
right, in the Company's sole and absolute discretion, to establish, decline to
approve and/or terminate any program and/or procedure for the exercise of
Options by means of an assignment of the proceeds of a sale of some or all of
the shares of Stock to be acquired upon such exercise.
(e) Transfer of Control. A "Transfer of Control" shall be
deemed to have occurred in the event any of the following occurs with respect to
the Company:
(i) any acquisition of the Company's stock or any
reorganization as defined in section 368(a)(1) of the Code to which the Company
is a party as defined in section 368(b) of the Code and in which the Company is
not the surviving corporation or is not immediately after the reorganization
engaged in the active conduct of a trade or business or in which the
stockholders of the Company will own less than fifty percent (50%) of the voting
securities of the surviving corporation; or
(ii) any sale or conveyance of substantially all of
the net assets of the Company, unless immediately after such sale the Company is
engaged in the active conduct of a trade or business.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation, as the case may be (the "Acquiring
Corporation"), shall either assume the Company's rights and obligations under
outstanding stock option agreements or substitute options for the Acquiring
Corporation's stock for such outstanding Options unless the Company's Board
otherwise agrees. In the event that, with the Board's consent, the Acquiring
Corporation elects not to assume or substitute for such outstanding Options in
connection with a merger in which the Company is not the surviving corporation
or a reverse triangular merger in which the Company is the surviving corporation
where the stockholders of the Company before such merger do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such merger, the Board may, but shall not be
obligated to, provide that any unexercisable and/or unvested portion of the
outstanding Options shall be immediately exercisable and vested as of a date
prior to the Transfer of Control, as the Board so determines. The exercise
and/or vesting of any Option that was permissible solely by reason of this
paragraph 6(e) shall be conditioned upon the consummation of the Transfer of
Control. Any Options which are neither assumed or substituted for by the
Acquiring Corporation nor exercised as of the date of the Transfer of Control
shall terminate effective as of the date of the Transfer of Control.
7. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of the Option Agreement either in connection with
the grant of an individual Option or in connection with the authorization of a
new standard form or forms; provided, however, that the terms and conditions of
such revised or amended standard form or forms of Option Agreement shall be in
accordance with the terms of the Plan. Such authority shall include, but not by
way of limitation, the authority to grant Options which are immediately
exercisale subject to the Company's right to repurchase any unvested shares of
5
Stock acquired by the Optionee on exercise of an Option in the event such
Optionee's service as a director of the Company is terminated for any reason.
8. Effect of Change in Stock Subject to Plan. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the Option exercise price of any outstanding
Options in the event of a stock dividend, stock split, reverse stock split,
combination, reclassification, or like change in the capital structure of the
Company.
9. Options Non-Transferable. Except as may be permitted by the Board
and expressly provided in an Option agreement granted by the Board, Options may
not be assigned or transferred by an Optionee except by will or by the laws of
descent and distribution.
10. Termination or Amendment of Plan. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the stockholders of the Company,
there shall be (a) no increase in the total number of shares of Stock covered by
the Plan (except by operation of the provisions of paragraph 8 above), and (b)
no expansion in the class of persons eligible to receive Options. In any event,
no amendment may adversely affect any then outstanding Option, or any
unexercised portion thereof, without the consent of the Optionee.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Protein Design Labs, Inc. Outside Directors Stock Option Plan
was approved by the stockholders of the Company at the Annual Meeting of
Stockholders on the twentieth day of October, 1992, and subsequently amended by
the Board on October 17, 1996 and February 6, 1997, in accordance with
applicable laws and the terms of the Plan
Date:
-------------------------------
By:
-------------------------------
Douglas O. Ebersole
Secretary
6
EXHIBIT A
PROTEIN DESIGN LABS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
Protein Design Labs, Inc., a Delaware corporation (the "Company"),
hereby grants to ____________________________ (the "Optionee") an option to
purchase a total of thirty thousand (30,000) shares of the common stock of the
Company (the "Number of Option Shares") under the Protein Design Labs, Inc.
Outside Directors Stock Option Plan (the "Plan"), at an exercise price of
$________ per share and in the manner and subject to the provisions of this
Option Agreement (the "Option"). The grant, in all respects, is subject to the
terms and conditions of this Option Agreement and the Plan, the provisions of
which are incorporated by reference herein. Unless otherwise provided in this
Option Agreement, defined terms shall have the meaning given to such terms in
the Plan.
1. Grant of the Option. The Option is granted effective as of
______________________ (the "Date of Option Grant"). The Number of Option Shares
and the exercise price per share of the Option are subject to adjustment from
time to time as provided in the Plan.
2. Status of the Option. The Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in section 422 of the Internal Revenue Code of 1986, as amended.
3. Term of the Option. The Option shall terminate and may no longer be
exercised on the first to occur of (i) the date ten (10) years after the Date of
Option Grant (the "Option Term Date"), (ii) the last date for exercising the
Option following termination of the Optionee's service as a director of the
Company as described in paragraph 6 below, or (iii) upon a Transfer of Control
of the Company as described in the Plan.
4. Exercise of the Option.
(a) Right to Exercise. The Option shall first become
exercisable on the date occurring one (1) month after the Date of Option Grant
(the "Initial Exercise Date"). The Option shall be exercisable on and after the
Initial Exercise Date and prior to the termination of the Option in the amount
equal to the Number of Option Shares multiplied by the Vested Ratio as set forth
below less the number of shares previously acquired upon exercise of the Option:
7
Vested Ratio
------------
Prior to Initial Exercise Date 0
On Initial Exercise Date, provided 1/60
the Optionee has continuously served
as a director of Company from the
Date of Option Grant until the
Initial Exercise Date
Plus
For each full month of the Optionee's 1/60
continuous service as a director of
the Company from the Initial Exercise
Date
In no event shall the Vested Ratio exceed 1/1.
In no event shall the Option be exercisable for more shares than the Number of
Option Shares. Notwithstanding the foregoing, the Option may not be exercised
more frequently than twice in any continuous twelve (12) month period; provided,
however, that the foregoing restriction shall not apply so as to prevent an
exercise (i) following termination of the Optionee's service as a director of
the Company as described in paragraph 6 below or (ii) during the thirty (30) day
period immediately preceding a Transfer of Control of the Company as described
in the Plan.
(b) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares of stock for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement and the Plan. The written notice must be signed by the Optionee
and must be delivered in person, by facsimile or by certified or registered
mail, return receipt requested, to the President of the Company, or other
authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in paragraph 3 above, accompanied by full
payment of the exercise price for the number of shares of stock being purchased
in a form permitted under the terms of the Plan.
(c) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
shall make adequate provision for the foreign, federal and state tax withholding
obligations of the Company, if any, which arise in
8
connection with the Option including, without limitation, obligations arising
upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in
whole or in part, of any shares of stock acquired on exercise of the Option, or
(iii) the lapsing of any restriction with respect to any shares acquired on
exercise of the Option.
(d) Certificate Registration. The certificate or certificates
for the shares of stock as to which the Option shall be exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(e) Restriction on Grant of the Option and Issuance of Shares.
The grant of the Option and the issuance of shares of stock on exercise of the
Option shall be subject to compliance with all of the applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares of stock upon such exercise would constitute
a violation of any applicable federal or state securities laws or other law or
regulation. In addition, no Option may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
shall at the time of exercise of the Option be in effect with respect to the
shares of stock issuable upon exercise of the Option, or (ii) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
(f) Fractional Shares. The Company shall not be required to
issue fractional shares of stock upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be assigned
or transferred in any manner except by will or by the laws of descent and
distribution.
6. Termination of Service as a Director.
(a) Termination of Director Status. If the Optionee ceases to
be a director of the Company for any reason except death or disability within
the meaning of section 22(e)(3) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a director, may be exercised by the Optionee at any time prior to
the expiration of three (3) months from the date on which the Optionee's service
as a director of the Company terminated, but in any event no later than the
Option Term Date. If the Optionee ceases to be a director of the Company because
of the death or disability of the Optionee within the meaning of section
22(e)(3) of the Code, the Option, to the extent unexercised and exercisable by
the
9
Optionee on the date on which the Optionee ceased to be a director, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date on which the
Optionee's service as a director of the Company terminated, but in any event no
later than the Option Term Date. The Optionee's service as a director of the
Company shall be deemed to have terminated on account of death if the Optionee
dies within three (3) months after the Optionee's termination of service as a
director of the Company. Except as provided in this paragraph 6, an Option shall
terminate and may not be exercised after the Optionee ceases to be a director of
the Company.
(b) Extension of Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented because the issuance of shares of stock upon such
exercise would constitute a violation of any applicable federal or state
securities law or other law or regulation, the Option shall remain exercisable
until three (3) months after the date the Optionee is notified by the Company
that the Option is exercisable, but in any event no later than the Option Term
Date.
(c) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of service as a director
of the Company and (iii) the Option Term Date.
7. Rights as a Stockholder. The Optionee shall have no rights as a
stockholder with respect to any shares of stock covered by the Option until the
date of the issuance of a certificate or certificates for the shares for which
the Option has been exercised. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date
such stock certificate or certificates are issued, except as provided in the
Plan.
8. Legends. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares of stock acquired pursuant
to the Option in the possession of the Optionee in order to effectuate the
provisions of this paragraph.
9. Binding Effect. This Option Agreement shall inure to the benefit of
the successors and assigns of the Company and be binding upon the Company and
the Optionee and the Optionee's heirs, executors, administrators, successors and
assigns.
10
10. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time subject to any limitations described in the Plan; provided, however, that
no such termination or amendment may adversely affect the Option or any
unexercised portion hereof without the consent of the Optionee.
11. Integrated Agreement. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Company with
respect to the subject matter contained herein and therein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein or therein. To the extent contemplated herein and therein, the provisions
of this Option Agreement and the Plan shall survive any exercise of the Option
and shall remain in full force and effect.
12. Applicable Law. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
13. Arbitration. In the event a dispute between the parties to this
Option Agreement arises out of, in connection with, or with respect to this
Option Agreement, or any breach of this Option Agreement, such dispute will, on
the written request of one (1) party delivered to the other party, be submitted
and settled by arbitration in Palo Alto, California in accordance with the rules
of the American Arbitration Association then in effect and will comply with the
California Arbitration Act, except as otherwise specifically stated in this
paragraph 13. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction. The parties submit to the in personam
jurisdiction of the Supreme Court of the State of California for the purpose of
confirming any such award and entering judgment upon the award. Notwithstanding
anything to the contrary that may now or in the future be contained in the rules
of the American Arbitration Association, the parties agree as follows:
(a) Each party will appoint one person approved by the
American Arbitration Association to hear and determine the dispute within twenty
(20) days after receipt of notice of arbitration from the noticing party. The
two (2) persons so chosen will select a third impartial arbitrator. The majority
decision of the arbitrators will be final and conclusive upon the parties to the
arbitration. If either party fails to designate its arbitrator within twenty
(20) days after delivery of the notice provided for in this paragraph 13(a),
then the arbitrator designated by the one (1) party will act as the sole
arbitrator and will be considered the single, mutually approved arbitrator to
resolve the controversy. In the event the parties are unable to agree upon a
rate of compensation for the arbitrators, they will be compensated for their
services at a rate to be determined by the American Arbitration Association.
11
(b) The parties will enjoy, but are not limited to, the same
rights to discovery as they would have in the United States District Court for
the Northern District of California.
(c) The arbitrators will, upon the request of either party,
issue a written opinion of their findings of fact and conclusions of law.
(d) Upon receipt by the requesting party of said written
opinion, said party will have the right within ten (10) days to file with the
arbitrators a motion to reconsider, and upon receipt of a timely request the
arbitrators will reconsider the issues raised by said motion and either confirm
or change their majority decision which will then be final and conclusive upon
the parties to the arbitration.
12
(e) The arbitrators will award to the prevailing party in any
such arbitration reasonable expenses, including attorneys' fees and costs,
incurred in connection with the dispute.
PROTEIN DESIGN LABS, INC.
By:
------------------------------------
Title:
------------------------------------
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and the Plan and hereby accepts the
Option subject to all of the terms and provisions thereof.
The undersigned acknowledges receipt of a copy of the Plan.
Date:
-----------------------------------
Signature:
-----------------------------------