EXHIBIT 10.2

Grant No.                             

Notice of Grant of Stock Option

(2002 Outside Directors Stock Option Plan)

PDL BioPharma, Inc., a Delaware corporation (the “Company”), has granted
                             (the “Optionee”) an option (the “Option”) to
purchase shares of Stock pursuant to the Company’s 2002 Outside Directors Stock
Option Plan (the “Plan”), as follows:

 

Date of Option Grant:   

 

     Number of Option Shares:   

 

     Exercise Price:   

 

  per share    Vesting Start Date:   

 

     Option Expiration Date:    The date seven (7) years after the Date of
Option Grant. Type of Option:    Nonstatutory Stock Option Vested Shares:   
Except as otherwise provided by the Stock Option Agreement, One Thousand Two
Hundred Fifty (1,250) shares shall become Vested Shares for each full month of
the Optionee’s continuous Service from the Vesting Start Date, provided that the
number of Vested Shares shall not exceed the Number of Option Shares.

By their signatures below, the parties hereto agree that the Option is governed
by the terms and conditions of the Stock Option Agreement attached to and made a
part of this document. The Optionee acknowledges receipt of a copy of the Stock
Option Agreement, represents that the Optionee is familiar with its provisions,
and hereby accepts the Option subject to all of its terms and conditions.
Capitalized terms used without definition in this Notice have the meanings
ascribed to them in the Plan.

 

PDL BioPharma, Inc.     Optionee By:  

 

   

 

      Signature Name:  

 

         

 

Title:  

 

    Print Name

Address:   34801 Campus Drive       Address:  

 

  Fremont, CA 94555                  

 

ATTACHMENTS:

Stock Option Agreement (Outside Director)

Exercise Notice

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Grant No.                             

 

Stock Option Agreement (Outside Director)

PDL BioPharma, Inc., a Delaware corporation (the “Company”), has granted to the
individual (the “Optionee”) named in the Notice of Grant of Stock Option (the
“Notice”) to which this Stock Option Agreement (Outside Director) (this “Option
Agreement”) is attached an option (the “Option”) to purchase certain shares of
Stock upon the terms and conditions set forth in this Option Agreement and the
Notice. The Option has been granted pursuant to the Company’s 2002 Outside
Directors Stock Option Plan (the “Plan”). By signing the Notice, the Optionee
represents that the Optionee is familiar with the terms and provisions of this
Option Agreement and accepts the Option subject to all of the terms and
provisions hereof. The Optionee agrees to accept as final and binding all
decisions or interpretations of the Board upon any questions arising under the
Notice, this Option Agreement or the Plan.

1. Definitions and Construction.

1.1 Definitions. Whenever used herein, capitalized terms shall have the meanings
as set forth below:

(a) “Board” means the Board of Directors of the Company. If one or more
Committees have been appointed by the Board to administer the Plan, “Board” also
means such Committee(s).

(b) “Change in Control” means the occurrence of any of the following:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of 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 forty percent (40%) or
more of (i) the outstanding shares of common stock of the Company or (ii) the
total combined voting power of the Company’s then-outstanding securities
entitled to vote generally in the election of directors;

(ii) the Company is party to a merger or consolidation which results in the
holders of the voting securities of the Company outstanding immediately prior
thereto failing to retain immediately after such merger or consolidation direct
or indirect beneficial ownership of more than fifty percent (50%) of the total
combined voting power of the securities entitled to vote generally in the
election of directors of the Company or the surviving entity outstanding
immediately after such merger or consolidation; or

(iii) the sale or disposition of all or substantially all of the Company’s
assets or consummation of any transaction having similar effect (other than a
sale or disposition to one or more subsidiaries of the Company).

(c) “Code” means the Internal Revenue Code of 1986, as amended, and any
applicable regulations promulgated thereunder.

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Grant No.                             

 

(d) “Committee” means the committee of the Board, if any, duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
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 amend or terminate the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.

(e) “Company” means PDL BioPharma, Inc., a Delaware corporation, or any
successor corporation thereto.

(f) “Director” means a member of the Board.

(g) “Disability” means the permanent and total disability of the Optionee within
the meaning of Section 22(e)(3) of the Code.

(h) “Employee” means any person treated as an employee in the records of the
Company or any Parent Corporation or Subsidiary Corporation.

(i) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(j) “Fair Market Value” means, as of any date, the value of a share of Stock or
other property as determined by the Board, in its discretion, subject to the
following:

(i) If, on such date, the Stock is listed on a national or regional securities
exchange or market system, the Fair Market Value of a share of Stock shall be
the closing sale price of a share of Stock (or the mean of the closing bid and
asked prices of a share of Stock if the Stock is so quoted instead) as quoted on
the Nasdaq National Market, The Nasdaq SmallCap Market or such other national or
regional securities exchange or market system constituting the primary market
for the Stock, as reported in the Wall Street Journal or such other source as
the Board deems reliable. If the relevant date does not fall on a day on which
the Stock has traded on such securities exchange or market system, the date on
which the Fair Market Value shall be established shall be the last day on which
the Stock was so traded prior to the relevant date, or such other appropriate
day as shall be determined by the Board, in its discretion.

(ii) If, on such date, the Stock is not listed on a national or regional
securities exchange or market system, the Fair Market Value of a share of Stock
shall be as determined by the Board without regard to any restriction other than
a restriction which, by its terms, will never lapse.

(k) “Parent Corporation” means any present or future “parent corporation” of the
Company, as defined in Section 424(e) of the Code.

(l) “Securities Act” means the Securities Act of 1933, as amended.

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Grant No.                             

 

(m) “Service” means the Optionee’s service with the Company as a Director. The
Optionee’s Service shall be deemed to have terminated if the Optionee ceases to
be a Director, even if the Optionee continues or commences to render service to
the Company or to a Parent Corporation or Subsidiary Corporation in a capacity
other than as a Director. The Optionee’s Service with the Company shall not be
deemed to have terminated if the Optionee takes any bona fide leave of absence
approved by the Company. Notwithstanding the foregoing, unless otherwise
required by law, the Company may provide that an approved leave of absence shall
not be treated as Service for purposes of determining vesting under the Option
Agreement. Subject to the foregoing, the Company, in its discretion, shall
determine whether the Optionee’s Service has terminated and the effective date
of such termination.

(n) “Stock” means the common stock of the Company, as adjusted from time to time
in accordance with Section 9.

(o) “Subsidiary Corporation” means any present or future “subsidiary
corporation” of the Company, as defined in Section 424(f) of the Code.

1.2 Construction. Captions and titles contained herein are for convenience only
and shall not affect the meaning or interpretation of any provision of this
Option Agreement. Except when otherwise indicated by the context, the singular
shall include the plural and the plural shall include the singular. Use of the
term “or” is not intended to be exclusive, unless the context clearly requires
otherwise.

2. Tax Status of Option. This Option is intended to be a Nonstatutory Stock
Option and shall not be treated as an “incentive stock option” within the
meaning of Section 422(b) of the Code.

3. Administration. All questions of interpretation concerning this Option
Agreement shall be determined by the Board. All determinations by the Board
shall be final and binding upon all persons having an interest in the Option.
The Chief Executive Officer 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.

4. Exercise of the Option.

4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be
exercisable prior to the termination of the Option (as provided in Section 6) in
an amount not to exceed that portion of the Number of Option Shares (as adjusted
pursuant to Section 9) which have become Vested Shares less the number of shares
previously acquired upon exercise of the Option.

4.2 Method of Exercise. Exercise of the Option shall be by written notice to the
Company which must state the election to exercise the Option, the number of
whole 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. The written notice must be signed by the Optionee and

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Grant No.                             

 

must be delivered to the Chief Financial Officer, Controller or Stock
Administrator of the Company, or other authorized representative of the Company,
prior to the termination of the Option as set forth in Section 6, accompanied by
full payment of the aggregate Exercise Price (as set forth in the Notice) for
the number of shares of Stock being purchased and the tax withholding
obligations, if any, as provided in Section 4.4. The Option shall be deemed to
be exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and tax withholding obligations, if any.

4.3 Payment of Exercise Price.

(a) Forms of Consideration Authorized. Except as otherwise provided below,
payment of the aggregate Exercise Price for the number of shares of Stock for
which the Option is being exercised shall be made (i) in cash, by check or cash
equivalent, (ii) by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Optionee having a Fair Market Value not less than
the Exercise Price, (iii) by means of a Cashless Exercise, as defined in
Section 4.3(b)(ii), or (iv) by any combination of the foregoing.

(b) Limitation on Forms of Consideration.

(i) Tender of Stock. Notwithstanding the foregoing, the Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock to the extent such tender or attestation would constitute a violation
of the provisions of any law, regulation or agreement restricting the redemption
of shares of Stock. The Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months (and not used for
another option exercise by attestation during such period) or were not acquired,
directly or indirectly, from the Company.

(ii) Cashless Exercise. A “Cashless Exercise” means the assignment in a form
acceptable to the Company of the proceeds of a sale or loan with respect to some
or all of the shares of Stock acquired upon the exercise of the Option pursuant
to a program or procedure approved by the Company (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). The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to decline to approve or terminate any such
program or procedure.

4.4 Tax 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 hereby
authorizes withholding from any amounts payable to the Optionee, and otherwise
agrees to make adequate provision for (including by means of a Cashless Exercise
to the extent permitted by the Company), any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the Company, if
any, which arise in connection with the Option.

4.5 Certificate Registration. Except in the event the Exercise Price is paid by
means of a Cashless Exercise, the certificate for the shares of Stock as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.

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Grant No.                             

 

4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the
Option and the issuance of shares of Stock upon exercise of the Option shall be
subject to compliance with all applicable requirements of federal, state or
foreign law with respect to such securities. The Option may not be exercised if
the issuance of shares of Stock upon exercise would constitute a violation of
any applicable federal, state or foreign securities laws or other law or
regulations or the requirements of any stock exchange or market system upon
which the Stock may then be listed. In addition, the Option may not be exercised
unless (i) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (ii) in the opinion of legal counsel to the Company,
the shares of Stock 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. THE OPTIONEE IS CAUTIONED THAT THE OPTION
MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY,
THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE
OPTION IS VESTED. Questions concerning this restriction should be directed to
the Legal Department of the Company. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company’s legal counsel to be necessary to the lawful issuance and sale of any
shares of Stock subject to the Option shall relieve the Company of any liability
in respect of the failure to issue or sell such shares as to which such
requisite authority shall not have been obtained. 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.

4.7 Fractional Shares. The Company shall not be required to issue fractional
shares of Stock upon the exercise of the Option.

5. Nontransferability of the Option. The Option may be exercised during the
lifetime of the Optionee only by the Optionee or the Optionee’s guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee’s legal representative or by any person empowered to do so under
the deceased Optionee’s will or under the then applicable laws of descent and
distribution.

6. Termination of the Option. The Option shall terminate and may no longer be
exercised after the first to occur of (a) the Option Expiration Date (as set
forth in the Notice), (b) the last date for exercising the Option following
termination of the Optionee’s Service as described in Section 7, or (c) a Change
in Control to the extent provided in Section 8.

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Grant No.                             

 

7. Effect of Termination of Service.

7.1 Option Exercisability.

(a) Disability. If the Optionee’s Service with the Company is terminated because
of the Disability of the Optionee, the Option, to the extent unexercised and
exercisable on the date on which the Optionee’s Service terminated, may be
exercised by the Optionee (or the Optionee’s guardian or legal representative)
at any time prior to the expiration of twelve (12) months after the date on
which the Optionee’s Service terminated, but in any event no later than the
Option Expiration Date.

(b) Death. If the Optionee’s Service with the Company is terminated because of
the death of the Optionee, the Option, to the extent unexercised and exercisable
on the date on which the Optionee’s Service terminated, may be exercised by the
Optionee’s legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee’s death at any time prior to the
expiration of twelve (12) months after the date on which the Optionee’s Service
terminated, provided that such period shall be extended by the number of days
between the date on which the Optionee’s Service terminated and the date on
which the executor, personal representative or administrator of the Optionee’s
estate determines the person who acquired the right to exercise the Option by
reason of the Optionee’s death. Notwithstanding the foregoing, in no event shall
the option be exercisable following the Option Expiration Date. The Optionee’s
Service 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.

(c) Other Termination of Service. If the Optionee’s Service with the Company
terminates for any reason, except Disability or death, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee’s
Service terminated, may be exercised by the Optionee within one (1) year (or
such longer period of time as determined by the Board, in its discretion) after
the date on which the Optionee’s Service terminated, but in any event no later
than the Option Expiration Date.

7.2 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if
the exercise of the Option within the applicable time periods set forth in
Section 7.1 is prevented by the provisions of Section 4.6, the Option shall
remain exercisable until ninety (90) days after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

7.3 Extension if Optionee Subject to Section 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section 7.1
of shares acquired upon the exercise of the Option 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 thirtieth (30th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the two hundred tenth (210th) day after the
Optionee’s termination of Service, or (iii) the Option Expiration Date.

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Grant No.                             

 

8. Change in Control. In the event of a Change in Control, any unexercisable or
unvested portions of the Option and any shares acquired upon the exercise
thereof shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Change in Control. The exercise or vesting of
the Option and any shares acquired upon the exercise thereof that was
permissible solely by reason of this Section 8 shall be conditioned upon the
consummation of the Change in Control. In addition, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the “Acquiring Corporation”), may either assume the Company’s rights and
obligations under the Option or substitute for the Option a substantially
equivalent option for the Acquiring Corporation’s stock. The Option shall
terminate and cease to be outstanding effective as of the date of the Change in
Control to the extent that the Option is neither assumed or substituted for by
the Acquiring Corporation in connection with the Change in Control nor exercised
as of the date of the Change in Control. Notwithstanding the foregoing, if the
corporation the stock of which is subject to the Option immediately prior to a
Change in Control described in Section 1.1(b)(i) is the surviving or continuing
corporation and immediately after such Change in Control less than fifty percent
(50%) of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate unless
the Board otherwise provides in its sole discretion.

9. Adjustments for Changes in Capital Structure. In the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the “New Shares”), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares. In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded down to the nearest whole number, as determined by the Board, and in
no event may the Exercise Price be decreased to an amount less than the par
value, if any, of the stock subject to the Option. The adjustments determined by
the Board pursuant to this Section 9 shall be final and binding.

10. 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 for the shares of Stock for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). No adjustment shall be made
for dividends, distributions or other rights for which the record date is prior
to the date such certificate is issued, except as provided in Section 9.

11. Legends. The Company may at any time place legends referencing any
applicable federal, state or foreign 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
carry out the provisions of this Section 11.

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Grant No.                             

 

12. Arbitration. In the event any dispute between the parties to this Option
Agreement arises out of, or in connection with, this Option Agreement, the
parties to this Option Agreement agree that all such disputes shall, upon the
written request of one (1) party delivered to the other party, be submitted to
the American Arbitration Association in the county in which the Company’s
principal offices are located, to be fully, finally and exclusively resolved by
binding arbitration. The parties to this Option Agreement hereby waive their
respective rights to have any such disputes or claims tried to a judge or jury.
This arbitration provision shall not apply to any claims for injunctive relief
by the parties to this Option Agreement.

The arbitrator shall have the power to enter any award that could be entered by
a judge of the Superior Court of the State of California or the United States
District Court, and only such power, and shall follow the law. The arbitrator
shall issue the award in writing and state the essential findings and
conclusions on which the award is based. The parties to this Option Agreement
agree to abide by and perform any valid award rendered by the arbitrator and
judgment on the award may be entered in any court of competent jurisdiction. The
arbitrator shall award to the prevailing party in any such arbitration
reasonable expenses, including attorneys’ fees and costs, incurred in connection
with the dispute.

13. Miscellaneous Provisions.

13.1 Binding Effect. Subject to the restrictions on transfer set forth herein,
this Option Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and assigns.

13.2 Termination or Amendment. The Board may terminate or amend the Plan or the
Option at any time; provided, however, that except as provided in Section 8 in
connection with a Change in Control, no such termination or amendment may
adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation. No amendment or
addition to this Option Agreement shall be effective unless in writing.

13.3 Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address of such party as set forth in the Notice or at such
other address as such party may designate in writing from time to time to the
other party.

13.4 Integrated Agreement. This Option Agreement and the Notice 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 with respect to such subject matter other than those as set
forth or provided for herein or therein. To the extent contemplated herein, the
provisions of this Option Agreement shall survive any exercise of the Option and
shall remain in full force and effect.

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Grant No.                             

 

13.5 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.

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Grant No.                             

 

Optionee:                             

Date:                             

PDL BioPharma, Inc.

Stock Option (Outside Director)

Exercise Notice

PDL BioPharma, Inc.

Attention: Stock Administrator

34801 Campus Drive

Fremont, CA 94555

1. Option. I was granted a nonstatutory stock option (“Option”) to purchase
shares of common stock (“Shares”) of PDL BioPharma, Inc. (“Company”) pursuant to
the Company’s 2002 Outside Directors Stock Option Plan (the “Plan”) as follows:

 

Grant Number:

   ________________________                     

Date of Option Grant:

   ________________________                     

Number of Option Shares:

   ________________________                     

Exercise Price per Share:

   $_______________________                     

2. Exercise of Option. I hereby elect to exercise the Option to purchase the
following number of Shares, all of which have vested in accordance with my Stock
Option Agreement:

 

No. of Shares Purchased:

   ________________________                     

Total Exercise Price:

   $_______________________                     

3. Payment. I enclose payment in full of the total exercise price for the Shares
in the following form(s), as authorized by my Option Agreement:

 

         Cash:

   $_______________________                     

         Check:

   $_______________________                     

         Tender of Company Stock:

   Contact Stock Administrator for additional forms                     

         Cashless exercise (same-day sale):

   Contact Stock Administrator for additional forms                     

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Grant No.                             

 

4. Tax Withholding. I will make adequate provision for federal, state, local and
foreign tax withholding obligations of the Company, if any, in connection with
my exercise of the Option and my subsequent disposition of the Shares.

5. Optionee Information.

My address is:

 

   

 

My Social Security Number is:

   

I understand that I am purchasing the Shares pursuant to the terms of the Plan
and my Stock Option Agreement, a copy of which I have received and have
carefully read and understand.

 

Very truly yours,

 

(Signature)

 

(Optionee’s Name Printed)

Receipt of the above is hereby acknowledged:

 

PDL BioPharma, Inc.

By:

 

 

Name:

 

 

Title:

 

 

Dated: