Exhibit 10.3

 

SEATTLE GENETICS, INC.

 

CHANGE OF CONTROL AGREEMENT

 

This Change of Control Agreement (the “Agreement”) is made and entered into by
and between Eric L. Dobmeier (the “Employee”) and Seattle Genetics, Inc., a
Delaware corporation (the “Company”), effective as of March 29, 2002.

 

RECITALS

 

A. It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control. The
Board of Directors of the Company (the “Board”) recognizes that such
consideration can be a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has determined that it
is in the best interests of the Company and its stockholders to assure that the
Company will have the continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined in Section 5 below) of the Company.

 

B. The Board believes that it is in the best interests of the Company and its
stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.

 

C. The Board believes that it is imperative to provide the Employee with certain
benefits upon a Change of Control that provide the Employee with enhanced
financial security and incentive and encouragement to the Employee to remain
with the Company notwithstanding the possibility of a Change of Control.

 

D. Certain capitalized terms used in the Agreement are defined in Section 5
below.

 

The parties hereto agree as follows:

 

1. TERM OF AGREEMENT. This Agreement shall terminate upon the earlier of (a) the
termination of Employee’s employment for any reason prior to a Change of Control
and (b) the date that all obligations of the parties hereto with respect to this
Agreement have been satisfied.

 

2. AT-WILL EMPLOYMENT. The Company and the Employee acknowledge that the
Employee’s employment is and shall continue to be at-will, as defined under
applicable law. If the Employee’s employment terminates for any reason prior to
a Change of Control, the Employee shall not be entitled to the benefits provided
by this Agreement, or any other benefits unless otherwise available in
accordance with the Company’s established employee plans and practices or
pursuant to other agreements with the Company.

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3. ACCELERATED VESTING. In addition to any other right of acceleration that may
be provided pursuant to any stock option plan or agreement pursuant to which the
Employee has been granted options to purchase shares of Common Stock of the
Company, if, within twelve (12) months after a Change of Control, the Employee’s
employment with the Company is terminated without Cause or Constructively
Terminated, then the vesting of Employee’s option to purchase 150,000 shares of
Common Stock granted on March 29, 2002 (the “Option”) shall be accelerated such
that one hundred percent (100%) of the shares of Common Stock subject to the
Option are vested and exercisable. Capitalized terms used but not defined in
this Section 3 shall have the meanings assigned to them in Section 5.

 

4. LIMITATION ON PAYMENTS. In the event that the acceleration of vesting and
other benefits (the “Benefits”) provided for in this Agreement or otherwise
payable to the Employee (i) constitute “parachute payments” within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
and (ii) but for this Section 4, would be subject to the excise tax imposed by
Section 4999 of the Code (or any corresponding provisions of state income tax
law), then the Employee’s Benefits under Section 3 shall be either

 

(a) delivered in full, or

 

(b) delivered as to such lesser extent which would result in no portion of such
Benefits being subject to excise tax under Section 4999 of the Code, whichever
of the foregoing amounts, taking into account the applicable federal, state and
local income taxes and the excise tax imposed by Section 4999, results in the
receipt by the Employee on an after-tax-basis, of the greater amount of
Benefits, notwithstanding that all or some portion of such Benefits may be
taxable under Section 4999 of the Code. Unless the Company and the Employee
otherwise agree in writing, any determination required under this Section 4
shall be made in writing by the Company’s accountants, whose determination shall
be conclusive and binding upon the Employee and the Company for all purposes.
For purposes of making the calculations required by this Section 4, the
Company’s accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Employee shall furnish to the Company’s accountants
such information and documents as the Company’s accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Company’s accountants may reasonably incur in connection with
any calculations contemplated by this Section 4. In the event that subsection
(a) above applies, then Employee shall be responsible for any excise taxes
imposed with respect to such severance and other benefits. In the event that
subsection (b) above applies, then each benefit provided hereunder shall be
proportionately reduced to the extent necessary to avoid imposition of such
excise taxes.

 

5. DEFINITION OF TERMS.

 

(a) “Change of Control” shall mean a sale of all or substantially all of the
Company’s assets, or any merger, consolidation or other transaction of the
Company with or into another corporation, entity or person, other than a
transaction in which the holders of at least a majority of the voting securities
of the Company outstanding immediately prior to such

 

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transaction continue to hold (either by the voting securities remaining
outstanding or by their being converted into voting securities of the surviving
entity) a majority of the total voting power represented by the voting
securities of the Company, or such surviving entity, outstanding immediately
after such transaction.

 

(b) “Cause” for the Employee’s termination shall mean the good faith judgment of
the Company’s Board of Directors, subject to Employee’s right to arbitrate such
determination in accordance with the terms of this Agreement, that Employee has
engaged in or committed any of the following: (i) the Employee’s willful
misconduct or gross negligence in performance of his or her duties hereunder,
including the Employee’s refusal to comply in any material respect with the
legal directives of the Company’s Board of Directors, Chief Executive Officer or
President, so long as such directives are not inconsistent with the Employee’s
position and duties, and such refusal to comply is not remedied within ten (10)
working days after Employee’s written notice thereof, which written notice shall
state that failure to remedy such conduct may result in termination for Cause;
(ii) repeated unexplained or unjustified absence from the Company; (iii)
dishonest or fraudulent conduct that materially discredits the Company, a
deliberate attempt to do an injury to the Company, or conduct that materially
discredits the Company or is materially detrimental to the reputation of the
Company, including conviction of a felony; or (iv) the Employee’s incurable
material breach, or a breach that is not cured within the prescribed time
period, of any element of the Company’s Proprietary Information and Inventions
Agreement, including without limitation, the Employee’s theft or other
misappropriation of the Company’s proprietary information.

 

(c) “Constructive Termination” shall mean the Employee’s voluntary termination
of employment with the Company within ninety (90) days following: (i) a
reduction in the Employee’s job responsibilities that is substantially
inconsistent with the position, duties or responsibilities held by Employee
immediately before such reduction; provided that a mere change in title alone
following a Change of Control shall not constitute a material reduction in job
responsibilities; (ii) relocation of the Employee’s work site to a facility or
location more than twenty-five (25) miles from the Employee’s principal work
site for the Company prior to the Change of Control; or (iii) a reduction in the
Employee’s then-current base salary by at least twenty percent (20%), provided
that an across-the-board reduction in the salary level of all other employees in
positions similar to the Employee’s by the same percentage amount as part of a
general salary level reduction shall not constitute such a salary reduction.

 

6. SUCCESSORS.

 

(a) Company’s Successors. Any successor to the Company (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or
otherwise) to all or substantially all of the Company’s business and/or assets
(a “Successor Company”) shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term “Company” shall include any Successor Company.

 

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(b) Employee’s Successors. The terms of this Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

 

7. NOTICES. Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or three (3) days after being mailed by U.S. registered or certified
mail, return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him or her at the home address which he or
she most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
all notices shall be directed to the attention of its Chief Executive Officer.

 

8. MISCELLANEOUS PROVISIONS.

 

(a) Waiver. No provision of this Agreement shall be modified, waived or
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

 

(b) Entire Agreement. This Agreement represents the entire agreement between the
Employee and the Company with respect to the matters set forth herein. No
agreements, representations or understandings (whether oral or written and
whether express or implied) which are not expressly set forth in this Agreement
have been made or entered into by either party with respect to the subject
matter hereof.

 

(c) Choice of Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of Washington as
applied to agreements entered into and performed within Washington solely by
residents of that state.

 

(d) Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

 

(e) Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable income and employment taxes.

 

(f) Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together will constitute one and
the same instrument.

 

(g) Arbitration. Any dispute, claim or controversy arising out of or relating to
this Agreement may be settled at the option of either party by binding
arbitration in Seattle,

 

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Washington in accordance with the then-current rules of the American Arbitration
Association by one arbitrator appointed in accordance with such rules. Judgment
may be entered on the arbitrator’s award in any court having jurisdiction
thereof. Punitive damages shall not be awarded. The arbitrators shall apply
Washington law to the resolution of any dispute, without reference to rules of
conflicts of law or rules of statutory arbitration. Notwithstanding the
foregoing, the parties may apply to any court of competent jurisdiction for
preliminary or interim equitable relief, or to compel arbitration in accordance
with this paragraph.

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the date set forth above.

 

COMPANY:

 

SEATTLE GENETICS, INC.

   

By:

 

/s/ Clay B. Siegall

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Name: Clay B. Siegall, Ph.D.

   

Title: President and Chief Executive Officer

EMPLOYEE:

 

Signature:

 

/s/ Eric L. Dobmeier

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  Eric L. Dobmeier

 

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