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Exhibit 10.1
 
SEVERANCE AGREEMENT

This Severance Agreement (the “Agreement”) is entered into as of [Date] (the
“Effective Date”), by and between PDL BioPharma, Inc. (the “Company”), and
[Name] (“you” or “Executive”).

WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continued employment of key management personnel and
has determined that it is appropriate to provide severance compensation to its
executives to promote the interests of the Company; and

WHEREAS, the Compensation Committee of the Company has approved the Company
entering into severance agreements with the executives of the Company.

NOW, THEREFORE, to assure the Company that it will have the continued dedication
of the Executive, and to induce the Executive to remain in the employ of the
Company, and for other good and valuable consideration, the Company and the
Executive agree as follows:

Article 1.  Term

This Agreement shall commence on the Effective Date and shall continue
indefinitely unless and until the Company delivers six (6) month written notice
of termination. However, in the event of a Change in Control, this Agreement
will remain in effect for not less than twenty-four (24) months beyond the month
in which such Change in Control occurs.

For purposes of this Agreement, “Change in Control” shall be deemed to have
occurred as of the first day after the Effective Date that any one or more of
the following conditions is satisfied:

 
(a)
any “person” (as such term is used to Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), other than a trustee or
other fiduciary holding securities of the Company under an employee benefit plan
of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of (i) the outstanding shares of common
stock of the Company or (ii) the combined voting power of the Company’s
then-outstanding securities entitled to vote generally in the election of
directors; or

 
(b)
the Company (i) is party to a merger, consolidation or exchange of securities
which results in the holders of voting securities of the Company outstanding
immediately prior thereto failing to continue to hold at least 50% of the
combined voting power of the voting securities of the Company, the surviving
entity or a parent of the surviving entity outstanding immediately after such
merger, consolidation or exchange, or (ii) sells or disposes of all or
substantially all of the Company’s assets (or any transaction or combination of
transactions having similar effect is consummated), or (iii) the individuals
constituting the Board of Directors immediately prior to such merger,
consolidation, exchange, sale or disposition shall cease to constitute at least
50% of the Board of Directors, unless the election of each director who was not
a director prior to such merger, consolidation, exchange, sale or disposition
was approved by a vote of at least two-thirds of the directors then in office
who were directors prior to such merger, consolidation, exchange, sale or
disposition.

Article 2.  Termination Benefits

If you are terminated without Cause or resign for Good Reason, within five (5)
days of the effective date of the Release (as defined below), (a) you will
receive a lump sum cash payment equal to (i) [xx] percent ([xx]%) of the sum of
your annual base salary in effect immediately prior to the time of separation,
(ii) [xx] percent ([xx]%) of the sum of your annual target bonus for the year in
which separation occurs and (iii) [yyyy (y)] months of COBRA Benefits and (b)(i)
any unvested cash payments and equity awards under any long-term incentive plan
in effect at the date of separation shall ratably accelerate, vest and pay in
proportion to the time lapsed during the vesting period, as increased by any
adjustments and milestones earned by the time of payment and (ii) any accrued
and unpaid dividends and interest on the then unvested equity awards shall vest
and pay; provided that such payment and other benefit shall be contingent upon
the Executive’s signing a release of all claims against PDL in a form acceptable
to the Company (the “Release”), which must become effective and irrevocable no
later than the sixtieth (60th) day following your “separation from service”
within the meaning of Section 409A of the Code (as defined below) (the “Release
Deadline”), and if not, you will forfeit any right to severance payments or
benefits under this Agreement. If your separation from service occurs at a time
during the calendar year where the Release Deadline could occur in the calendar
year following the calendar year in which such separation from service occurs,
then any severance payments or benefits under this Agreement that would be
considered “deferred compensation” under Code Section 409A will be paid on the
first payroll date to occur during the calendar year following the calendar year
in which such termination occurs, or such later time as required by (i) the date
the Release becomes effective, or (ii) Article 3 below; provided that the first
payment shall include all amounts that would have been paid to you if payment
had commenced on the date of your separation from service. Nothing in this
agreement shall limit the Executive’s ability to receive benefits or payment
from any other compensation plan or severance benefit.

 
 

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For purposes of this Agreement, “COBRA Benefits” shall refer to PDL’s payment of
the premiums for any continued group health insurance benefits under Sections
601-607 of the federal Employee Retirement Income Security Act of 1974, as
amended.

For purposes of this Agreement, “Cause” means the occurrence of any of the
following: (i) your intentional theft, dishonesty, willful misconduct, breach of
fiduciary duty for personal profit or falsification of any PDL documents or
records; (ii) your material failure to abide by the PDL’s code of conduct or
other written policies (including, without limitation, policies relating to
confidentiality and reasonable workplace conduct); (iii) your material and
intentional unauthorized use, misappropriation, destruction or diversion of any
tangible or intangible asset or corporate opportunity of PDL (including, without
limitation, your improper use or disclosure of PDL confidential or proprietary
information); (iv) any willful act by you that has a material detrimental effect
on PDL’s reputation or business; (v) your repeated failure or inability to
perform any reasonable assigned duties after written notice from the [Reporting
Person] of, and a reasonable opportunity to cure, such failure or inability;
(vi) any material breach by you of any employment, service, non-disclosure,
non-competition, non-solicitation or other similar agreement between you and
PDL, which breach is not cured pursuant to the terms of such agreement or within
twenty (20) days of receiving written notice of such breach; (vii) your
conviction (including any plea of guilty or nolo contendere) of any criminal act
involving fraud, dishonesty, misappropriation or moral turpitude, or which
impairs your ability to perform your duties with PDL. For purposes of the
foregoing, no act or omission will be deemed ‘willful’ unless done, or omitted
to be done, by you without a reasonable good faith belief that you were acting
in the best interest of PDL.  For purposes of clarity, a termination without
Cause does not include a termination that occurs as a result of your death or
disability.

For purposes of this Agreement, “Good Reason” means your voluntary resignation
in writing within ninety (90) days after the occurrence of any of the following
conditions without your informed written consent; provided that you give the
Company written notice of the conditions within thirty (30) days after the
condition comes into existence and the Company fails to remedy the condition
within thirty (30) days after first receiving your written notice: (i) a
material diminution in your authority, duties or responsibilities, causing your
position to be of materially lesser rank or responsibility within PDL; (ii) a
requirement that you report to a corporate officer or other employee rather than
directly to the [Reporting Person]; (iii) a material reduction in your annual
base salary, unless reductions comparable in amount and duration are
concurrently made for all other PDL officers; or (iv) any action or inaction by
a PDL that constitutes, with respect to the you, a material breach of your Offer
Letter, dated [Date] the (“Offer Letter”).

Article 3.  Tax Compliance

Notwithstanding the foregoing, if required by Section 409A of the United States
Internal Revenue Code of 1986, as amended (the “Code”), if any amounts payable
upon separation from service are considered “deferred compensation” under
Section 409A, payment of such amounts will be postponed as required by Section
409A, and the postponed amounts will be paid, with accrued interest as described
below, on the first monthly payroll date occurring after six (6) months
following the date of separation. If the Executive dies during the postponement
period, any amounts postponed on account of Section 409A of the Code, with
accrued interest as described below, shall be paid to the personal
representative of the Executive’s estate within sixty (60) days after the date
of the Executive’s death. If payment of any amounts under this Agreement is
required to be delayed pursuant to Section 409A, the Company shall pay interest
on the postponed payments from the date on which the amounts otherwise would
have been paid to the date on which such amounts are paid at a market rate of
interest, as determined by the Compensation Committee.

 
 

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This Agreement is intended to comply with the requirements of Section 409A of
the Code, and, specifically, the separation pay exemption and short term
deferral exemption of Section 409A, and shall in all respects be administered
and interpreted in accordance with Section 409A. If any payment or benefit
cannot be provided or made at the time specified herein without incurring
sanctions on the Executive under Section 409A of the Code, then such benefit or
payment shall be provided in full at the earliest time thereafter when such
sanctions will not be imposed. Notwithstanding anything in the Agreement to the
contrary, distributions may only be made under the Agreement upon an event and
in a manner permitted by Section 409A of the Code or an applicable exemption.
All payments to be made upon a termination of employment under this Agreement
may only be made upon a “separation from service” under Section 409A. For
purposes of Section 409A of the Code, the right to a series of installment
payments under this Agreement shall be treated as a right to a series of
separate payments, and each payment under this Agreement shall be treated as a
separate payment. In no event may the Executive, directly or indirectly,
designate the calendar year of any payment to be made under this Agreement.

The Company shall be entitled to withhold from any amounts payable under this
Agreement all taxes as legally shall be required to be withheld (including,
without limitation, any United States federal taxes and any other state, city or
local taxes).

Article 4.  Employment Status

In accordance with the Offer Letter, the employment of the Executive by the
Company is “at will,” and may be terminated by either the Executive or the
Company at any time, subject to applicable law.

Article 5.  Severability

In the event any provision of this Agreement shall be held illegal or invalid
for any reason, the illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed and enforced as if
the illegal or invalid provision had not been included. Further, the captions of
this Agreement are not part of the provisions hereof and shall have no force and
effect.

Article 6.  Modification

No provision of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is approved by the Compensation Committee and
agreed to in writing and signed by the Executive and by an authorized officer of
the Company, or by the respective parties’ legal representatives and successors.

Article 7.  Counterparts

This Agreement may be executed in any number of counterparts, each of which when
so executed and delivered shall be an original hereof

Article 8.  Applicable Law

To the extent not preempted by the laws of the United States, the laws of the
state of Nevada shall be the controlling law in all matters relating to this
Agreement.

[Signature Page Follows]

 
 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by their duly authorized officers, as of the day and year first
above written.

PDL BioPharma, Inc.
 
Executive
           
Name:
 
Name:
Title:
 
Title:

[Signature Page to Severance Agreement]
 
 

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