Document:

1999 Stock Option Plan, as Amended Through February 20, 2003

 Exhibit 10.3 
 PROTEIN DESIGN LABS, INC. 
 1999 NONSTATUTORY STOCK OPTION PLAN 
 (As Amended through February 20, 2003) 
 1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN. 
 1.1 Establishment. The Protein Design Labs, Inc. 1999 Nonstatutory Stock Option Plan (the “Plan”) is hereby
established effective as of August 19, 1999. 
 1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to attract, retain and reward Persons performing services for the Participating Company Group and by motivating such Persons to contribute to the goals of the Participating
Company Group. 
 1.3 Term of Plan. The Plan shall continue in effect until the earlier of its termination by the Board or the date on
which all of the shares of Stock available for issuance under the Plan have been issued and all restrictions on such shares under the terms of the Plan and the agreements evidencing Options granted under the Plan have lapsed. 
 2. DEFINITIONS AND CONSTRUCTION. 
 2.1 Definitions. Whenever used herein, the following terms shall have their respective meanings 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)
“Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated thereunder. 
 (c) “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. 
 (d) “Company” means Protein Design Labs, Inc., a Delaware corporation,
or any successor corporation thereto. 
 (e) “Consultant” means any Person, including an advisor,
engaged by a Participating Company to render services other than as an Employee or a member of the Board. 

 (f) “Disability” means the permanent
and total disability of the Optionee within the meaning of Section 22(e)(3) of the Code. 
 (g)
“Employee” means any Person treated as an employee in the records of a Participating Company. 
 (h)
“Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 (i) “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. 
 (j) “Nonstatutory Stock Option” means an Option not intended to be an incentive stock option within the meaning of
Section 422(b) of the Code. 
 (k) “Option” means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of the Plan. All Options shall be Nonstatutory Stock Options. 
 (l) “Option Agreement” means a written agreement between the Company and an Optionee setting forth the terms, conditions and restrictions of the Option granted to the Optionee and any shares of Stock acquired
upon the exercise thereof. 
 (m) “Optionee” means a Person who has been granted one or more Options.

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

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 (o) “Participating Company” means the Company or any
Parent Corporation or Subsidiary Corporation. 
 (p) “Participating Company Group” means, at any point
in time, all corporations collectively which are then Participating Companies. 
 (q) “Person” means a natural
person. 
 (r) “Securities Act” means the Securities Act of 1933, as amended. 
 (s) “Service” means an Optionee’s employment or service with the Participating Company Group, whether in the
capacity of an Employee or a Consultant. Unless otherwise provided by the Board, an Optionee’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Optionee renders Service to the Participating
Company Group or a change in the Participating Company for which the Optionee renders such Service, provided that there is no interruption or termination of the Optionee’s Service. Furthermore, an Optionee’s Service with the Participating
Company Group 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 Optionee’s Option Agreement. An Optionee’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether an Optionee’s Service has terminated and the effective date of such
termination. 
 (t) “Stock” means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2. 
 (u) “Subsidiary Corporation” means any present or future
“subsidiary corporation” of the Company, as defined in Section 424(f) of the Code. 
 2.2 Construction. Captions and
titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. 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. 
 3.
ADMINISTRATION. 
 3.1 Administration by the Board. The Plan shall be
administered by the Board. All questions of interpretation of the Plan or of any Option shall be determined by the Board, and such determinations shall be final and binding upon all Persons having an interest in the Plan or such Option. 

 

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 3.2 Authority of Officers. The Chief Executive Officer shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein. 
 3.3 Powers of the Board. In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Board shall have the full power and authority, in its discretion:

 (a) to determine the Persons to whom, and the time or times at which, Options shall be granted and the number of shares of Stock to be
subject to each Option; 
 (b) to determine the Fair Market Value of shares of Stock or other property in the event such property is
proposed as consideration for payment for the exercise of an Option; 
 (c) to determine the terms, conditions and restrictions applicable
to each Option (which need not be identical) and any shares of Stock acquired upon the exercise thereof, including, without limitation, (i) the exercise price of the Option, (ii) the method of payment for shares of Stock purchased upon the
exercise of the Option, (iii) the method for satisfaction of any tax withholding obligation arising in connection with the Option or such shares of Stock, including by the withholding or delivery of shares of Stock, (iv) the timing, terms
and conditions of the exercisability of the Option or the vesting of any shares of Stock acquired upon the exercise thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee’s termination of Service with
the Participating Company Group on any of the foregoing, and (vii) all other terms, conditions and restrictions applicable to the Option or such shares of Stock not inconsistent with the terms of the Plan; 
 (d) to approve one or more forms of Option Agreement; 
 (e) to amend, modify, extend, cancel, renew, or grant a new Option in substitution for, any Option or to waive any restrictions or conditions applicable to any Option or any shares acquired upon the exercise thereof;

 (f) to accelerate, continue, extend or defer the exercisability of any Option or the vesting of any shares acquired upon the exercise
thereof, including with respect to the period following an Optionee’s termination of Service with the Participating Company Group; 
 (g) to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt supplements to, or alternative versions of, the Plan, including, without limitation, as the Board deems necessary or desirable to comply
with the laws of, or to accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be granted Options; and 
  

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 (h) to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option
Agreement and to make all other determinations and take such other actions with respect to the Plan or any Option as the Board may deem advisable to the extent consistent with the Plan and applicable law. 
 4. SHARES SUBJECT TO PLAN. 
 4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares
of Stock that may be issued under the Plan shall be eleven million (11,000,000) and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or if unvested shares of Stock are acquired upon the exercise of an Option subject to a Company repurchase option and are repurchased by the Company, the shares of Stock allocable to the unexercised portion of such Option or
such unvested repurchased shares of Stock shall again be available for issuance under the Plan. 
 4.2 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 and
class of shares subject to the Plan and to any outstanding Options and in the exercise price per share of any outstanding Options. If a majority of the shares which are of the same class as the shares that are subject to outstanding Options are
exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event, as defined in Section 8.1) shares of another corporation (the “New Shares”), the Board may
unilaterally amend the outstanding Options to provide that such Options are exercisable for New Shares. In the event of any such amendment, the number of shares subject to, and the exercise price per share of, the outstanding Options shall be
adjusted in a fair and equitable manner as determined by the Board, in its discretion. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole
number, and in no event may the exercise price of any Option 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 4.2 shall be final and
binding. 
 5. ELIGIBILITY AND OPTION
LIMITATIONS. 
 5.1 Persons Eligible for Options. Options may be
granted only to Employees and Consultants. For purposes of the foregoing sentence, “Employees” and “Consultants” shall include prospective Employees and prospective Consultants to whom Options are granted in connection with
written offers of employment or other service relationship with the Participating Company Group. However, notwithstanding any other provision herein to the contrary, no Person shall be eligible to be granted an Option under the Plan whose
eligibility would require approval of the Plan by the Stockholders of the Company under any law or regulation or the rules of any stock exchange or market system upon which the Stock may then be listed. If not inconsistent with any such law,
regulation or rule, an Option may be granted to a Person, not previously employed by the Company, as an inducement essential to entering into an employment contract with the Company. Eligible Persons may be granted more than one (1) Option.

  

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 5.2 Options Authorized. Options granted under the Plan may only be Nonstatutory Stock Options.

 6. TERMS AND CONDITIONS OF
OPTIONS. 
 Options shall be evidenced by Option Agreements specifying the number of
shares of Stock covered thereby, in such form as the Board shall from time to time establish. No Option or purported Option shall be a valid and binding obligation of the Company unless evidenced by a fully executed Option Agreement. Option
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: 
 6.1 Exercise Price. The exercise price for each Option shall be established in the discretion of the Board. 
 6.2 Exercise Period. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria, and restrictions as shall be determined by the
Board and set forth in the Option Agreement evidencing such Option; provided, however, that no Option granted to a prospective Employee or prospective Consultant may become exercisable prior to the date on which such Person commences Service with a
Participating Company. Subject to the foregoing, unless otherwise specified by the Board in the grant of an Option, any Option granted hereunder shall have a term of ten (10) years from the effective date of grant of the Option. 
 6.3 Payment of Exercise Price. 
 (a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option 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 the assignment of the proceeds of a sale or
loan with respect to some or all of the shares being acquired upon the exercise of the 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) (a “Cashless Exercise”), (iv) by such other consideration as may be approved by the Board from time to time to the extent permitted by applicable law, or (v) by
any combination thereof. The Board may at any time or from time to time, by approval of or by amendment to the standard form of Option Agreement described in Section 7, or by other means, grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration. 
  

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 (b) Limitations on Forms of Consideration. 
 (i) Tender of Stock. Notwithstanding the foregoing, an 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 the shares of Stock. Unless otherwise provided by the Board, an 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 or were not acquired, directly or indirectly, from the Company.

 (ii) Cashless Exercise. The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion,
to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise. 
 6.4
Tax Withholding. The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable upon the exercise of an Option, or to accept from the Optionee the tender of, a number of whole shares of
Stock having a Fair Market Value equal to all or any part of the federal, state, local and foreign taxes, if any, required by law to be withheld by the Participating Company Group with respect to such Option or the shares of Stock acquired upon the
exercise thereof. Alternatively or in addition, in its discretion, the Company shall have the right to require the Optionee, through payroll withholding, cash payment or otherwise, including by means of a Cashless Exercise, to make adequate
provision for any such tax withholding obligations of the Participating Company Group arising in connection with the Option or the shares of Stock acquired upon the exercise thereof. The Company shall have no obligation to deliver shares of Stock
until the Participating Company Group’s tax withholding obligations have been satisfied by the Optionee. 
 6.5 Effect of Termination
of Service. 
 (a) Option Exercisability. Subject to earlier termination of the Option as otherwise provided herein
and unless otherwise provided by the Board in the grant of an Option and set forth in the Option Agreement, an Option shall be exercisable after an Optionee’s termination of Service as follows: 
 (i) Disability. If the Optionee’s Service with the Participating Company Group 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 date of expiration of the Option’s term as set forth in the Option Agreement evidencing such Option (the
“Option Expiration Date”). 
 (ii) Death. If the Optionee’s Service with the Participating
Company Group 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 
  

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 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, but in any event no later than 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. 
 (iii) Termination After Change in Control. If the Optionee’s Service
with the Participating Company Group ceases as a result of Termination After Change in Control (as defined below), then (1) the Option, to the extent unexercised 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 six (6) months after the date on which the Optionee’s Service terminated, but in any event no later than the Option Expiration
Date, and (2) the exercisability and vesting of the Option shall be accelerated effective as of the date on which the Optionee’s Service terminated to such extent, if any, as shall have been determined by the Board, in its discretion, and
set forth in the Option Agreement. Notwithstanding the foregoing, if it is determined that the provisions or operation of this Section 6.5(a)(iii) would preclude treatment of a Change in Control as a “pooling-of-interests” for
accounting purposes and provided further that in the absence of the preceding sentence such Change in Control would be treated as a “pooling-of-interests” for accounting purposes, then this Section 6.5(a)(iii) shall be void ab
initio, and the vesting and exercisability of the Option shall be determined under any other applicable provision of the Plan or the Option Agreement evidencing such Option. 
 (iv) Other Termination of Service. If the Optionee’s Service with the Participating Company Group terminates for any reason, except
Disability, death, or Termination After Change in Control, 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 three (3)
months (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. 
 (b) Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of an Option within the applicable time
periods set forth in Section 6.5(a) is prevented by the provisions of Section 11 below, 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. 
 (c) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set forth in Section 6.5(a) 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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 (d) Certain Definitions. The following terms shall have their respective meanings set
forth below: 
 (i) “Termination After Change in Control” shall mean either of the following events
occurring within twelve (12) months after a Change in Control: 
 (1) termination by the Participating Company Group of the
Optionee’s Service with the Participating Company Group for any reason other than for Cause (as defined below); or 
 (2) the
Optionee’s resignation from all capacities in which the Optionee is then rendering Service to the Participating Company Group within a reasonable period of time following an event constituting a Constructive Termination (as defined below).

 Notwithstanding any provision herein to the contrary, Termination After Change in Control shall not include any termination of the Optionee’s Service
with the Participating Company Group which (1) is for Cause (as defined below); (2) is a result of the Optionee’s death or disability; (3) is a result of the Optionee’s voluntary termination of Service other than upon a
Constructive Termination; or (4) occurs prior to the effectiveness of a Change in Control. 
 (ii)
“Cause” shall mean any of the following: (1) the Optionee’s theft, dishonesty, or falsification of any Participating Company documents or records; (2) the Optionee’s improper use or
disclosure of a Participating Company’s confidential or proprietary information; (3) any action by the Optionee which has a detrimental effect on a Participating Company’s reputation or business; (4) the Optionee’s failure
or inability to perform any reasonable assigned duties after written notice from the Participating Company Group of, and a reasonable opportunity to cure, such failure or inability; (5) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach is not cured pursuant to the terms of such agreement; or (6) the Optionee’s conviction (including any plea of guilty or nolo contendere) of any criminal act
which impairs the Optionee’s ability to perform his or her duties with the Participating Company Group. 
 (iii)
“Constructive Termination” shall mean any one or more of the following: 
 (1) without the
Optionee’s express written consent, any assignment to the Optionee of any duties, or any limitation of the Optionee’s responsibilities, substantially inconsistent with the Optionee’s positions, duties, responsibilities and status with
a Participating Company immediately prior to the date of the Change in Control; 
 (2) without the Optionee’s express written consent,
the relocation of the principal place of the Optionee’s Service to a location that is more than fifty (50) miles from the Optionee’s principal place of Service immediately prior to the date of the Change in Control, or the imposition
of travel requirements substantially more demanding of the Optionee than such travel requirements existing immediately prior to the date of the Change in Control; 
  

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 (3) any failure by a Participating Company to pay, or any material reduction by a Participating Company
of, (A) the Optionee’s base salary in effect immediately prior to the date of the Change in Control, or (B) the Optionee’s bonus compensation, if any, in effect immediately prior to the date of the Change in Control (subject to
applicable performance requirements with respect to the actual amount of bonus compensation earned by the Optionee); or 
 (4) any failure
by a Participating Company to (A) continue to provide the Optionee with the opportunity to participate, on terms not materially less favorable than those in effect for the benefit of any employee group which customarily includes a Person
holding the employment position or a comparable position with the Participating Company then held by the Optionee, in any benefit or compensation plans and programs, including, but not limited to, the Participating Company’s life, disability,
health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which the Optionee was participating immediately prior to the date of the Change in Control, or their equivalent, or (B) provide the Optionee with
all other fringe benefits (or their equivalent) from time to time in effect for the benefit of any employee group which customarily includes a Person holding the employment position or a comparable position with the Participating Company then held
by the Optionee. 
 7. STANDARD FORMS OF OPTION
AGREEMENT. 
 7.1 Nonstatutory Stock Option Agreement. Unless otherwise provided
by the Board at the time the Option is granted, each Option shall comply with and be subject to the terms and conditions set forth in the appropriate form of Nonstatutory Stock Option Agreement adopted by the Board concurrently with its adoption of
the Plan and as amended from time to time. 
 7.2 Authority to Vary Terms. The Board shall have the authority from time to time to
vary the terms of the standard form of Option Agreement described in this Section 7 either in connection with the grant or amendment 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 any such new, revised or amended standard form or forms of Option Agreement are not inconsistent with the terms of the Plan. 
 8. CHANGE IN CONTROL. 
 8.1
Definitions. The following terms shall have their respective meanings set forth below: 
 (a) An “Ownership Change
Event” shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company
of more 
  

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 than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company. 
 (b) A “Change in Control” shall mean an Ownership Change Event or a series of related Ownership Change Events
(collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not retain immediately after the Transaction, in substantially the same proportions as their
ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding voting stock of the
Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the case may be. For purposes of the preceding sentence, indirect
beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the Company or the Transferee Corporation(s), as the case may be,
either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or multiple Ownership Change Events are related, and its determination
shall be final, binding and conclusive. 
 8.2 Effect of Change in Control on Options. In the event of a Change in Control, 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
outstanding Options or substitute for outstanding Options substantially equivalent options for the Acquiring Corporation’s stock. In the event the Acquiring Corporation elects not to assume or substitute for outstanding Options in connection
with a Change in Control, the exercisability and vesting of each such outstanding Option held by an Optionee whose Service has not terminated prior to such date shall be accelerated effective as of the date ten (10) days prior to the date of
the Change in Control to such extent, if any, as shall have been determined by the Board, in its discretion, and set forth in the Option Agreement evidencing such Option. The exercise or vesting of any Option that was permissible solely by reason of
this Section 8.2 and the provisions of such Option Agreement shall be conditioned upon the consummation of the Change in Control. Any Options which are 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 shall terminate and cease to be outstanding effective as of the date of the Change in Control. Notwithstanding the foregoing, if the corporation the stock of which is subject to
the outstanding Options immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event 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 outstanding Options shall not terminate unless the Board otherwise provides in its discretion. 
  

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 9. PROVISION OF INFORMATION. 
 Each Optionee shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s
common stockholders. 
 10. TRANSFERABILITY OF OPTIONS. 

During the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee’s guardian or legal representative. No
Option shall be assignable or transferable by the Optionee, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, an Option shall be assignable or transferable to the extent permitted by the Board and set forth in
the Option Agreement evidencing such Option. 
 11. COMPLIANCE WITH SECURITIES
LAW. 
 The grant of Options and the issuance of shares of Stock upon exercise of Options shall be
subject to compliance with all applicable requirements of federal, state or foreign law with respect to such securities. Options 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, no Option may be exercised unless (a) a registration
statement under 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 (b) 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 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 hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares of
Stock as to which such requisite authority shall not have been obtained. As a condition to the exercise of any 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. 
 12. TERMINATION OR AMENDMENT OF PLAN. 
 The Board may terminate or amend the Plan at any time. However, no termination or amendment of the Plan shall affect any then outstanding Option unless expressly provided by the Board. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option without the consent of the Optionee, unless such termination or amendment is necessary to comply with any applicable law, regulation or rule. 
  

 12Form of Stock Option Agreement (incentive stock options)

 Exhibit 10.4 
 PDL BIOPHARMA, INC. 
 STOCK OPTION AGREEMENT (INCENTIVE) 
 PDL BioPharma, Inc. has granted to the individual (the “Optionee”) named in the Notice of Grant of Stock
Option (the “Notice”) to which this Stock Option Agreement (Incentive) is attached an option (the “Option”) to purchase certain shares of Stock upon the terms and
conditions set forth in this Option Agreement (the “Option Agreement”) and the Notice. The Option has been granted pursuant to the Company’s 1999 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 this Option Agreement or the Plan. 
 1. DEFINITIONS AND CONSTRUCTION. 
 1.1 Definitions. Whenever used herein, capitalized terms shall have the meanings assigned in the Notice or as set forth below:

 (a) “Board” means the Board of Directors of the Company. 
 (b) “Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations promulgated
thereunder. 
 (c) “Company” means PDL BioPharma, Inc., a Delaware corporation, or any successor
corporation thereto. 
 (d) “Consultant” means any Person, including an advisor, engaged by a
Participating Company to render services other than as an Employee or a Director. 
 (e) “Director”
means a member of the Board. 
 (f) “Disability” means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code. 
 (g) “Employee” means any Person
treated as an employee (including an officer or a Director who is also treated as an employee) in the records of a Participating Company and who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as
a Director nor payment of a director’s fee shall be sufficient to constitute employment for this purpose. 
  

 1 

 (h) “Exchange Act” means the Securities Exchange Act of 1934, as
amended. 
 (i) “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. 
 (j) “Parent Corporation” means any present or
future “parent corporation” of the Company, as defined in Section 424(e) of the Code. 
 (k) “Participating
Company” means the Company or any Parent Corporation or Subsidiary Corporation. 
 (l) “Participating
Company Group” means, at any point in time, all corporations collectively which are then Participating Companies. 
 (m)
“Person” means a natural person. 
 (n) “Securities Act” means the Securities
Act of 1933, as amended. 
 (o) “Service” means the Optionee’s employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director or a Consultant. Unless otherwise provided by the Board, the Optionee’s Service shall not be deemed to have terminated merely because of a change in the capacity in
which the Optionee renders Service to the Participating Company Group or a change in the Participating Company for which the Optionee renders such Service, provided that there is no interruption or termination of the Optionee’s Service.
Furthermore, the Optionee’s Service with the Participating Company Group shall not be deemed to have terminated if the Optionee takes any bona fide leave of absence approved by the Company; provided, however, that if any such leave exceeds
ninety (90) days, on the one hundred eighty-first (181st) day following the commencement of such leave the 
  

 2 

 Option shall cease to be treated as an incentive stock option and instead shall be treated thereafter as a nonstatutory
stock option unless the Optionee’s right to return to Service with the Participating Company Group is guaranteed by statute or contract. 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 the Vested Shares under the Option Agreement. The Optionee’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a Participating Company. 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. 
 (p) “Stock” means the common stock of the Company, as adjusted from time to time in
accordance with Section 9. 
 (q) “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. 
 2.1 Tax
Status of Option. This Option is intended to be an incentive stock option within the meaning of Section 422(b) of the Code, but the Company does not represent or warrant that this Option qualifies as such. The Optionee should consult with
the Optionee’s own tax advisor regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements.
(NOTE TO OPTIONEE: If the Option is exercised more than three (3) months after the date on which you cease to be an Employee (other than by reason of your death or permanent and total disability as defined in Section 22(e)(3) of the Code),
the Option will be treated as a nonstatutory stock option and not as an incentive stock option to the extent required by Section 422 of the Code.) 
 2.2 Fair Market Value Limitation. To the extent that the Option (together with all incentive stock options granted to the Optionee under all stock option plans of the Participating Company Group, including the
Plan) becomes exercisable for the first time during any calendar year for shares having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount will be treated as nonstatutory
stock options. For purposes of this Section 2.2, options designated as incentive stock options are taken into account in the order in which they were granted, and the Fair Market Value of stock is determined as of the time the option with
respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section 2.2, such 
  

 3 

 different limitation shall be deemed incorporated herein effective as of the date required or permitted by such amendment
to the Code. If the Option is treated as an incentive stock option in part and as a nonstatutory stock option in part by reason of the limitation set forth in this Section 2.2, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall be deemed to have exercised the incentive stock option portion of the Option first. Separate certificates representing each such portion shall be issued upon the exercise
of the Option. (NOTE TO OPTIONEE: If the aggregate Exercise Price of the Option (that is, the Exercise Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other incentive stock options you hold (whether granted
pursuant to the Plan or any other stock option plan of the Participating Company Group) is greater than $100,000, you should contact the Chief Financial Officer or Controller of the Company to ascertain whether the entire Option qualifies as an
incentive stock option.) 
 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 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 must be delivered to the Chief Financial Officer, Controller or Stock Administrator of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of the Option as set forth in Section 6, accompanied by full payment of the aggregate Exercise Price 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 
  

 4 

 which the Option is being exercised shall be made (i) in cash or cash equivalent, (ii) by tender to the
Company, or attestation to the ownership, of whole shares of Stock owned by the Optionee having a Fair Market Value (as determined by the Board without regard to any restrictions on transferability applicable to such stock by reason of federal or
state securities laws or agreements with an underwriter for the Company) not less than the aggregate 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) Limitations 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 the 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 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 payroll and any other 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 Participating Company Group, if any, which arise in 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 upon exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares of Stock acquired upon exercise of the Option. THE OPTIONEE IS CAUTIONED THAT THE OPTION IS NOT EXERCISABLE UNLESS THE TAX WITHHOLDING OBLIGATIONS OF THE PARTICIPATING
COMPANY GROUP ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED, AND THE COMPANY SHALL HAVE NO OBLIGATION TO ISSUE A CERTIFICATE FOR SUCH SHARES OF STOCK. 
  

 5 

 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. 
 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 

 6. TERMINATION OF THE
OPTION. 
 The Option shall terminate and may no longer be exercised on the first to occur of
(a) the Option Expiration Date, (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.

 7. EFFECT OF TERMINATION OF
SERVICE. 
 7.1 Option Exercisability.  
 (a) Disability. If the Optionee’s Service with the Participating Company Group 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 Participating Company Group 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, but in any event no later than 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) Termination After a Change In
Control. If the Optionee’s Service with the Participating Company Group ceases as a result of Termination After a Change in Control (as defined below), then (i) 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 six (6) months after the date on which the Optionee’s Service
terminated, but in any event no later than the Option Expiration Date, and (ii) the number of Vested Shares shall be increased by an amount equal to twenty-five percent (25%) of the Number of Option Shares (but in no event to a number in
excess of 100% of the Number of Option Shares) effective as of the date on which the Optionee’s Service terminated; provided, however, that if the Optionee is an Employee serving on a part-time basis, such percentage increase in the number of
Vested Shares shall be prorated on the basis of the relationship which the Optionee’s part-time Service bears to full-time Service in the same capacity. Notwithstanding the foregoing, if it is determined that the provisions or operation of this
Section 7.1(c) would preclude treatment of a Change in Control as a “pooling-of-interests” for accounting purposes and provided further that in the absence of the preceding sentence such Change in Control would be treated as a
“pooling-of-interests” for accounting purposes, then this Section 7.1(c) shall be void ab initio, and the vesting and exercisability of the Option shall be determined under any other applicable provision of the Option
Agreement. 
  

 7 

 (d) Other Termination of Service. If the Optionee’s Service with the
Participating Company Group terminates for any reason, except Disability, death or Termination After a Change in Control, 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 three (3) months (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. 
 7.4 Certain Definitions. 
 (a) “Termination After a Change in Control” shall mean
either of the following events occurring within twelve (12) months after a Change in Control: 
 (i) termination by the Participating
Company Group of the Optionee’s Service with the Participating Company Group for any reason other than for Cause (as defined below); or 
 (ii) the Optionee’s resignation from all capacities in which the Optionee is then rendering Service to the Participating Company Group within a reasonable period of time following the event constituting a Constructive Termination (as
defined below). 
 Notwithstanding any provision herein to the contrary, Termination After a Change in Control shall not include any termination of the
Optionee’s Service with the Participating Company Group which (1) is for Cause (as defined below); (2) is a result of the Optionee’s death or disability; (3) is a result of the Optionee’s voluntary termination of
Service other than upon a Constructive Termination; or (4) occurs prior to the effectiveness of a Change in Control. 
 (b)
“Cause” shall mean any of the following: (i) the Optionee’s theft, dishonesty, or falsification of any Participating Company documents or records; (ii) the Optionee’s improper use or
disclosure of a Participating Company’s confidential or proprietary information; (iii) any action by the Optionee which has a detrimental effect on a Participating 
  

 8 

 Company’s reputation or business; (iv) the Optionee’s failure or inability to perform any reasonable
assigned duties after written notice from the Participating Company Group of, and a reasonable opportunity to cure, such failure or inability; (v) any material breach by the Optionee of any employment agreement between the Optionee and the
Participating Company Group, which breach is not cured pursuant to the terms of such agreement; or (vi) the Optionee’s conviction (including any plea of guilty or nolo contendere) of any criminal act which impairs the Optionee’s
ability to perform his or her duties with the Participating Company Group. 
 (c) “Constructive
Termination” shall mean any one or more of the following: 
 (i) without the Optionee’s express written consent, the
assignment to the Optionee of any duties, or any limitation of the Optionee’s responsibilities, substantially inconsistent with the Optionee’s positions, duties, responsibilities and status with a Participating Company immediately prior to
the date of the Change in Control; 
 (ii) without the Optionee’s express written consent, the relocation of the principal place of the
Optionee’s Service to a location that is more than fifty (50) miles from the Optionee’s principal place of Service immediately prior to the date of the Change in Control, or the imposition of travel requirements substantially more
demanding of the Optionee than such travel requirements existing immediately prior to the date of the Change in Control; 
 (iii) any
failure by a Participating Company to pay, or any material reduction by a Participating Company of, (1) the Optionee’s base salary in effect immediately prior to the date of the Change in Control, or (2) the Optionee’s bonus
compensation, if any, in effect immediately prior to the date of the Change in Control (subject to applicable performance requirements with respect to the actual amount of bonus compensation earned by the Optionee); or 
 (iv) any failure by a Participating Company to (1) continue to provide the Optionee with the opportunity to participate, on terms no less favorable
than those in effect for the benefit of any employee group which customarily includes a Person holding the employment position or a comparable position with the Participating Company then held by the Optionee, in any benefit or compensation plans
and programs, including, but not limited to, the Participating Company’s life, disability, health, dental, medical, savings, profit sharing, stock purchase and retirement plans, if any, in which the Optionee was participating immediately prior
to the date of the Change in Control, or their equivalent, or (2) provide the Optionee with all other fringe benefits (or their equivalent) from time to time in effect for the benefit of any employee group which customarily includes a Person
holding the employment position or a comparable position with the Participating Company then held by the Optionee. 
  

 9 

 8. CHANGE IN CONTROL.

 8.1 Definitions. 
 (a) An “Ownership Change Event” shall be deemed to have occurred if any of the following occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or dissolution of the Company. 
 (b) A “Change in
Control” shall mean an Ownership Change Event or a series of related Ownership Change Events (collectively, the “Transaction”) wherein the stockholders of the Company immediately before the Transaction do not
retain immediately after the Transaction, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership of more than fifty percent
(50%) of the total combined voting power of the outstanding voting stock of the Company or the corporation or corporations to which the assets of the Company were transferred (the “Transferee Corporation(s)”), as the
case may be. For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting stock of one or more corporations which, as a result of the Transaction, own the
Company or the Transferee Corporation(s), as the case may be, either directly or through one or more subsidiary corporations. The Board shall have the right to determine whether multiple sales or exchanges of the voting stock of the Company or
multiple Ownership Change Events are related, and its determination shall be final and binding. 
 8.2 Effect of Change in Control on
Option. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or parent corporation thereof, as the case may be (the “Acquiring Corporation”),
shall 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. In the event the Acquiring Corporation elects not to assume the
Company’s rights and obligations under the Option or substitute for the Option in connection with the Change in Control, and provided that the Optionee’s Service has not terminated prior to such date, the number of Vested Shares shall be
increased by an amount equal to twenty-five percent (25%) (or, if the Optionee is an Employee serving on a part-time basis, such percentage shall be prorated on the basis of the relationship which the Optionee’s part-time Service bears to
full-time Service in the same capacity) of the Number of Option Shares (but in no event to a number in excess of 100% of the Number of Option Shares) effective as of the date ten (10) days prior to the date of the Change in Control. Any
exercise of the Option that was permissible solely by reason of this Section 8.2 shall be conditioned upon the consummation of the Change in Control. 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 
  

 10 

 which is subject to the Option immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation and immediately after such Ownership Change Event 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. 
 8.3 Fair Market Value Limitation. Should the exercisability of this Option be
accelerated in connection with a Change in Control in accordance with Section 7.1(d) or 8.2, then to the extent that the aggregate Fair Market Value of the shares of Stock with respect to which the Optionee may exercise the Option for the first
time during the calendar year of such acceleration, when added to the aggregate Fair Market Value of the shares of Stock subject to any other options designated as incentive stock options granted to the Optionee under all stock option plans of the
Participating Company Group prior to the Date of Option Grant with respect to which such options are exercisable for the first time during the same calendar year, exceeds One Hundred Thousand Dollars ($100,000) (or such other limit, if any, imposed
by Section 422 of the Code), the portion of the Option which exceeds such amount shall be treated as a nonstatutory stock option. For purposes of the preceding sentence, options designated as incentive stock options shall be taken into account
in the order in which they were granted, and the Fair Market Value of shares of stock shall be determined as of the time the option with respect to such shares is granted. 
 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, EMPLOYEE OR
CONSULTANT. 
 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 
  

 11 

 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. If the Optionee is an Employee, the Optionee understands and acknowledges that, except as otherwise
provided in a separate, written employment agreement between a Participating Company and the Optionee, the Optionee’s employment is “at will” and is for no specified term. Nothing in this Option Agreement shall confer upon the
Optionee, whether an Employee, Director or Consultant, any right to continue in the Service of a Participating Company or interfere in any way with any right of the Participating Company Group to terminate the Optionee’s Service as an Employee,
Director or Consultant, as the case may be, at any time. 
 11. NOTICE OF SALES
UPON DISQUALIFYING DISPOSITION. 
 The Optionee shall dispose of the
shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement. In addition, the Optionee shall promptly notify the Chief Financial Officer or Controller of the Company if the Optionee disposes of any of the
shares acquired pursuant to the Option within one (1) year after the date of the Optionee exercises all or part of the Option or within two (2) years after the Date of Option Grant. Until such time as the Optionee disposes of such shares
in a manner consistent with the provisions of this Option Agreement, unless otherwise expressly authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in the Optionee’s name (and not in the name of any
nominee) for the one-year period immediately after the exercise of the Option and the two-year period immediately after Date of Option Grant. At any time during the one-year or two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the transfer agent for the Company’s stock to notify the Company of any such transfers. The obligation of the Optionee to notify the Company of any such transfer shall
continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding sentence. 
 12.
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 12. 
 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 Fremont, California in accordance with the rules of the American Arbitration Association then in effect and will comply with the California Arbitration 
  

 12 

 Act, except as otherwise specifically stated in this Section 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: 
 13.1 Each party will appoint one individual 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) individuals so chosen will select a third impartial arbitrator. The majority decision of the arbitrators will be final and binding 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 Section 13.1, 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. 
 13.2 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. 
 13.3 The arbitrators will, upon the request of either party, issue a written opinion of their findings of fact and
conclusions of law. 
 13.4 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 binding upon the parties to the arbitration. 
 13.5 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. 
 14.
MISCELLANEOUS PROVISIONS. 
 14.1 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. 
 14.2 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 8.2 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 or is required to enable the Option to qualify as an incentive stock option. No amendment or addition to this Option Agreement shall be effective unless in writing. 
  

 13 

 14.3 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. 
 14.4 Integrated Agreement. This Option Agreement and the Notice constitute the entire understanding and agreement of the Optionee and the
Participating Company Group 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 Participating Company Group 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. 
 14.5 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. 
  

 14 

	
	 Optionee:
                                

	
	 Date:
                                

 PDL BIOPHARMA, INC. 
 STOCK OPTION (INCENTIVE) 
 EXERCISE NOTICE 
 PDL BioPharma, Inc. 
 Attention: Stock Administrator 
 34801 Campus Drive 
 Fremont, CA 94555 
 Ladies and Gentlemen: 
 1.
Option. I was granted an incentive stock option (“Option”) to purchase shares of the common stock (“Shares”) of PDL BioPharma, Inc.
(“Company”) pursuant to the Company’s 1999 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 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

  

 1 

 4. Tax Withholding. I authorize payroll withholding and otherwise 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. Notice of Disqualifying Disposition. I agree that I will promptly notify the Chief Financial Officer or Controller of the Company if I
transfer any of the Shares within one (1) year from the date I exercise all or part of the Option or within two (2) years of the Date of Option Grant. 
 6. 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 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:
	 	  

		
	 Title:
	 	  

		
	 Dated:
	 	  

  

 2

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