Document:

Q2 2002 10-Q Exhibit 10.3

                                                Exhibit 10.3

PROTEIN DESIGN LABS, INC.

NOTICE OF GRANT OF STOCK OPTION

(1999 Nonstatutory Stock Option Plan)

________________________ (the "Optionee") has been
granted an option (the "Option") to purchase certain shares of
Stock of Protein Design Labs, Inc. pursuant to the Protein Design Labs, Inc.
1999 Nonstatutory Stock Option Plan (the "Plan"), as
follows:

	
Date of Option Grant:
	
_________________

	
Number of Option Shares:
	
_________________

	
Exercise Price:
	
_________________

	
Initial Vesting Date:
	
The date one (1) year after _________________

	
Option Expiration Date:
	
The date ten (10) years after the Date of Option
Grant.

	
Type of Option:
	
Nonstatutory Stock Option

 

	
Vested Shares:
	
Except as provided in the Stock Option Agreement, determined as
of any date by multiplying the Number of Option Shares by the "Vested
Ratio" as follows:

	
 
	
Vested Ratio

	
	

	
Prior to Initial Vesting Date
	
0

	
	

	
On Initial Vesting Date, provided the Optionee's Service as an
Employee has not terminated prior to such date
	
1/4

	
	

	
Plus:
	
 

	
	

	
For each full month of the Optionee's continuous Service as an
Employee from Initial Vesting Date until the Vested Ratio equals 1/1, an
additional
	
 

1/48

Adjustments to Vested Ratio: The
Company may adjust the Vested Ratio to account for any periods of part-time
Service as an Employee.

Termination of Unvested Option: Except as may otherwise be
provided by the Board, upon termination of the Optionee's Service as an
Employee, the Option shall terminate immediately with respect to shares that are
not Vested Shares. However, provided the Optionee's Service continues
uninterrupted in a capacity other than as an Employee, the Option shall continue
in accordance with the terms of the Stock Option Agreement with respect to any
Vested Shares. Upon termination of the Optionee's Service, the Option shall
terminate in accordance with the terms of the Stock Option Agreement.

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.

	
PROTEIN DESIGN LABS, INC.
	
OPTIONEE

	
By: ________________________
	
___________________________

	
 
	
Signature

	
Its: _______________________
	
___________________________

	
 
	
Date

	
34801 Campus Drive
	
___________________________

	
Fremont, California 94555
	
Address

	
 
	
___________________________Q2 2002 10-Q Exhibit 10.4

                                                Exhibit 10.4

[PDL LETTERHEAD]

May 1, 2002

 

Laurence Jay Korn

   34801 Campus Drive

   Fremont, CA 94555

Re:Special Compensation and Continued Employment Agreement

Dear Laurence:

As we have discussed, Protein Design Labs, Inc. (the "Company")
wishes to acknowledge your resignation as the Company's Chief Executive Officer
and memorialize the terms of your continued employment with the Company as its
Chairman of the Board of Directors ("Chairman") by entering into this
Special Compensation and Continued Employment Agreement (the
"Agreement") with you.

1.Resignation.  You hereby resign from your position as Chief
Executive Officer of the Company effective as of May 1, 2002, and accept
continued employment with the Company as its Chairman.

2.Services.  As the Company's Chairman, you shall have the
following duties:

(a)take the lead role in forming a Corporate Governance committee of the
Board of Directors (the "Board") and/or a Nominating Committee (to
review and evaluate potential nominees to the Board, and to make recommendations
to the Board regarding such potential nominees) of the Board, and make
recommendations to the Board as to the scope and charter of such
committee(s);

(b) participate in leading investor relations in coordination with the
Chief Executive Officer and Vice President, Business Development and Corporate
Communications (or the successor head of Corporate Communications); in this role
you will have access to the Chief Executive Officer's direct reports in
Corporate Communications on strategy and implementation;

(c) participate in leading business development activities for the
Company in coordination with the Chief Executive Officer and Vice President,
Business Development and Corporate Communications (or the successor head of
Business Development); in this role you will have access to the Chief Executive
Officer's direct reports in Business Development on strategy and
implementation;

(d)such other duties as the Company's Board may reasonably assign to you;
and

(e)serve as Chairman and as a member of the Board and preside at all
Board meetings and stockholder meetings.

You will be given access to all Company information necessary to perform your
duties hereunder, which information would be deemed material under the federal
securities laws.  With respect to your duties for the Company, including but not
limited to those set forth in subsections (b) - (d) above (but excluding your
activities as a member of the Board or of any Board committee), you shall
coordinate and consult with the Company's Chief Executive Officer and his/her
designees to carry out such duties.  In the event of any disagreement between
you and the Chief Executive Officer, the decision of the Chief Executive Officer
shall control.

3.Compensation.  During the remainder of your employment, you
will be compensated for your services to the Company as follows:

(a) Base Salary.  Until April 30, 2004, your base salary
shall be equal to your final base salary as the Company's Chief Executive
Officer ($515,000 per year).  Although it will be under no obligation to do so,
the Board may increase your base salary at any time, in its sole discretion.  If
you continue to be employed by the Company after April 30, 2004, your salary
shall be subject to negotiation.

(b) Stock Options.  All of your current unvested options
to purchase the Company's common stock shall continue to vest at the full time
vesting rate.  Notwithstanding anything to the contrary contained in the
applicable stock option agreements, such stock options shall continue to vest at
that rate for as long as you are an employee and/or director of the Company,
except that stock options granted under the 1991 Stock Option Plan will continue
to vest only as long as you remain an employee.  Although it will be under no
obligation to do so, the Board may grant you additional stock options at any
time in its sole discretion.

(c)Benefits.  The Company will continue to provide you
with the following employee fringe benefits that you were receiving as of the
effective date of your resignation as the Company's Chief Executive Officer:
group health insurance (including dependent coverage), short and long-term
disability insurance, life insurance, accidental death and dismemberment
insurance, business travel accident insurance, 401(k) matching, employee stock
purchase plan and tuition reimbursement.  You will also remain eligible to
participate in the Company's retiree medical insurance plan.  The Company will
increase, or may reduce, your fringe benefits under the plans identified in this
paragraph if such increase or reduction is similarly applicable to the Company's
Chief Executive Officer.  In addition, so long as you remain an employee of the
Company, the Company will continue to provide you with at least your current
level of vacation, sick leave, holiday leave and comp time and reimbursement of
travel expenses.

(d)Administrative Support/Office.  The Company will
continue to provide you, at the Company's sole expense, with the services of a
full-time administrative assistant, and with reasonable office facilities for
you and your administrative assistant in Palo Alto or Menlo Park, California (or
any other reasonable location in the San Francisco Bay Area), which shall be
your principal office and be equipped with standard office equipment, such as
telephone lines, desktop personal computers and office furniture.  To the extent
that she is agreeable to doing so, Jeanne Mager will serve as your
administrative assistant.  Ms. Mager will continue to be employed by the
Company while serving as your administrative assistant.  If Ms. Mager's
employment is terminated by the Company without "Cause" (as defined
below) or if Ms. Mager elects to resign from her employment with the
Company within 30 days following the termination of your employment with the
Company for any reason, and if Ms. Mager executes and delivers to the Company a
general release of all known and unknown claims in a form satisfactory to the
Company, the Company will pay Ms. Mager a lump sum severance payment equal
to the greater of (i) six months' base pay at Ms. Mager's final base pay
rate, or (ii) two weeks' base pay at Ms. Mager's final base pay rate for
each full year of her employment with the Company, and will accelerate her stock
options for the same period.

You will enter Company facilities (other than the office at a location other
than the Fremont facilities provided to you pursuant to this paragraph) only as
(i) reasonably necessary to perform your duties under paragraph 2(a) - (e),
or (ii) requested by the Chief Executive Officer.  The Company also will provide
an office at its Fremont facilities for your use during visits to such
facilities in carrying out your duties under paragraph 2(b), 2(c) and 2(d).

You will not be entitled to any other compensation or benefits from the
Company during the remainder of your employment, except as provided in paragraph
8 of this Agreement.

4.Term of Employment.  Your employment is for no specified
term, and may be terminated by you or the Company at any time, with or without
cause, in accordance with the terms and conditions of this Agreement.  

5.No Conflict.  During the remainder of your employment with
the Company, you agree to devote such business time, energy and skill to your
duties at the Company as is reasonably necessary to perform your duties
hereunder (which we anticipate will be less than full-time employment).
Notwithstanding the previous sentence, you may engage in such personal and other
business activities as you wish (including but not limited to service on other
Boards of Directors) so long as such activities do not violate your fiduciary
obligations to the Company.

          6.Benefits Upon Termination.  As noted above, you or the
Company can terminate our employment relationship at any time, with or without
cause.  If the Company terminates your employment for a reason other than (i)
"Cause" (as defined below), (ii) your death, or (iii) your inability
to perform the essential functions of your job due to disability even after
reasonable accommodation, such termination shall be an "Involuntary
Termination". In the event of an Involuntary Termination, and if you
execute and deliver to the Company within 60 days following your Involuntary
Termination a general release of all known and unknown claims against the
Company existing as of the date of execution of the release, in a form
reasonably satisfactory to the Company (which release shall also obligate you to
refrain from soliciting employees, other than Ms. Mager, or any other
administrative assistant provided to you pursuant to this Agreement,
contractors, vendors, strategic partners, and customers to terminate their
relationships with the Company, and to refrain from disparaging the Company, its
directors, employees, products or services), you shall receive continued payment
of your base salary at your final base salary rate, as well as any employee
fringe benefits identified in paragraph 3(c), above (to the extent such fringe
benefits can be made generally available to directors or former employees of the
Company pursuant to the terms of the applicable fringe benefit plan or
policy), for the Specified Period (as defined below) following your
Involuntary Termination, and you will immediately become vested in that portion
of any unvested stock options previously granted to you by the Company that
would have become vested during the Specified Period, including stock options
granted under the 1991 Stock Option Plan.  In addition, to the extent that you
are not eligible for continued group health insurance coverage under the
Company's group health insurance plan upon your Involuntary Termination or
resignation, the Company will pay the premiums necessary to continue equal or
greater coverage for you under COBRA until the earlier of (a) the end of the
Specified Period, (b) the end of your COBRA eligibility, or (c) the date on
which you first become covered under another group health insurance plan of
equal or greater coverage.

If your Involuntary Termination occurs more than 1year after the date of this
Agreement, the Specified Period will be 1 year.  If your Involuntary Termination
occurs less than 1year after the date of this Agreement, the Specified Period
will be 2 years less the amount of time that you were employed by the Company
following the date of this Agreement.  

For purposes of this Agreement, your resignation for "Good Reason"
(as defined below) shall also constitute an Involuntary Termination.  If you
resign for Good Reason pursuant to paragraph 7(b)(v) below, in addition to the
salary continuation payments that you will receive for the Specified Period, any
unvested stock options the Company has previously granted to you will become
immediately and fully vested.  

If the termination of your employment by the Company is for (i)
"Cause" (as defined in this paragraph 6), (ii) your death, or (iii)
your inability to perform the essential functions of your job due to disability
even after reasonable accommodation, or if you resign from your employment for
other than Good Reason, you will not be entitled to any payments or benefits
upon the termination of your employment other than the salary earned by you
through the date of your termination, except the retiree medical insurance plan.
Notwithstanding the foregoing, in the event that you resign from your employment
for other than Good Reason within 90 days following the first day of employment
of the Company's next, non-interim Chief Executive Officer, and you sign the
general release of claims described above, you shall receive a one-time payment
of your base salary at your final base salary rate (no less than $515,000); if
you also resign from your position as a member of the Board at the same time,
you will immediately become vested in the portion of any unvested stock options
previously granted to you by the Company that would have become vested during
the one year period following your resignation date.

If you do not execute and deliver to the Company the general release
described above within 60 days following; i) your Involuntary Termination, or
ii) your resignation within 90 days following the first day of employment of the
Company's next, non-interim Chief Executive Officer, you will not be entitled to
receive any severance or termination compensation or benefits from the Company,
including those described in this paragraph 6, except the retiree medical
insurance plan.  The Company agrees that after you cease being either an
employee or a director, it will instruct its officers and human resources
personnel to respond to any inquiries regarding your employment by only
confirming the fact and dates of your employment, except as otherwise required
by law.

7.Definitions.  

(a)For purposes of this Agreement, "Cause" shall exist
for termination of your employment if you:  (i) engage in a material act of
theft or dishonesty, intentional misrepresentations regarding the Company or
falsification of any employment or Company records; (ii) improperly use or
disclose the Company's confidential or proprietary information; or
(iii) are convicted of (including entering a plea of guilty or no contest
to) any criminal act, which conviction impairs your ability to perform your
services for the Company.  

(b) For purposes of this Agreement, "Good Reason" shall
mean the existence of any of the following conditions 10 days after the
Company's Chief Executive Officer or a majority of the Board actually receives a
written notice from you of such condition(s), provided that such notice is
provided to the Company's Chief Executive Officer or a majority of the Board
within 90 days of the date on which you become aware of the condition:

(i)a decrease in your base salary before April 30, 2004;

(ii) a material decrease in any of your employee fringe
benefits described in paragraph 3(c), above, which decrease is not similarly
applicable to the Chief Executive Officer of the Company;

(iii)a material, adverse change in your title or duties for
the Company, as measured against your title or duties immediately prior to such
change;

(iv)the Board's assignment to you of additional duties
pursuant to paragraph 2(d) which you choose not to perform;

(v)the failure of the Board to nominate you for re-election
to the Board at the conclusion of your current term and/or the Board's failure
to undertake the same efforts to secure your re-election to the Board as it
undertakes on behalf of the other Board nominees on the slate at that election;
or

(vi)any material breach of this Agreement by the Company.

8.Benefits Upon Termination Following a Change in Control.  In
the event that the Company is subject to a "Change in Control" (as
that phrase is defined in the Company's Executive Retention and Severance Plan
of October 10, 2001 (the "Plan")), you will be eligible to
receive all compensation and benefits in accordance with the terms of that Plan
as if you were the Company's Chief Executive Officer.  In the event that you
receive the severance compensation or benefits pursuant to Section 5 of the
Plan, you will not receive the severance compensation or benefits under
paragraph 6 of this Agreement.

9.Invention and Assignment Agreement.  You shall continue
to be bound by the terms and conditions of any agreements between you and the
Company related to the protection of the Company's confidential and proprietary
information and/or assignment of inventions.  At your request, the Company will
allow you to sign its current Invention and Assignment Agreement, provided that
it shall be made effective as of the first day of your employment with the
Company.

10.Assignment.  In view of the personal nature of the services
to be performed under this Agreement by you, you cannot assign or transfer any
of your rights or obligations under this Agreement.

11.Press Release.  The Company will promptly issue the press
release attached hereto as Exhibit A to announce your acceptance of the
Chairman position and your resignation from your position as Chief Executive
Officer.

12.Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of California.  In any
litigation arising out or in connection with or relating to the terms of this
Agreement or the breach or alleged breach thereof, the prevailing party shall be
entitled to recover its attorneys' fees.

13.Attorneys' Fees.  The Company will reimburse you for up to
$30,000 of reasonable, documented attorneys' fees incurred by you in the
negotiation and documentation of this Agreement.

14.Entire Agreement.  This Agreement, along with any
agreements described in Paragraphs 3, 8 and 9 above and any agreements
concerning your indemnification by the Company, constitutes the entire agreement
between you and the Company regarding the terms and conditions of your continued
employment with the Company, and it supersedes all prior negotiations,
representations, and agreements, whether written or oral, concerning your
employment with the Company and/or the termination of your employment.  (This
Agreement does not affect any stock option or restricted stock agreements
between you and the Company, which remain in full force and effect.)  This
Agreement may only be modified or amended by a supplemental written agreement
signed by you and the Chief Executive Officer or the General Counsel of the
Company.

Laurence, we look forward to your continued service with the Company.
Please sign and date this letter on the spaces provided below to acknowledge
your acceptance of the terms of this Special Compensation and Continued
Employment Agreement.

 

Sincerely,

Protein Design Labs, Inc.

 

By:___________________________

Douglas O. Ebersole,

   Senior Vice President,

   Legal and Licensing

 

I agree to and accept continued employment with Protein Design Labs, Inc.
on the terms and conditions set forth in this Special Compensation and Continued
Employment Agreement.

 

 

Date:  May 1, 2002           _________________________

                  
                  
 Laurence Jay Korn, Ph.D.

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