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Sample Business Contracts

Option Agreement - Seattle Genetics Inc.

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                                                                  EXECUTION COPY

                                        OPTION AGREEMENT, dated as of May 12,
                                2003 among SEATTLE GENETICS, INC., a Delaware
                                corporation (the "Company"), and the other
                                parties hereto (each an "Optionee").

        In order to induce the Optionees to agree to purchase from the Company,
on the terms and conditions set forth in the Securities Purchase Agreement dated
as of the date hereof (the "Purchase Agreement") among the Company and the
Purchasers named therein, shares of its Series A Convertible Preferred Stock,
$.001 par value per share, and warrants (the "Warrants") to purchase shares of
the Company's common stock, $.001 par value per share (the "Common Stock"), the
Company is granting the Optionees a right and option as more fully described
herein.

        ACCORDINGLY, in consideration of the foregoing and the covenants,
agreements, representations and warranties contained in this Agreement and the
Purchase Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged by the parties, the parties
hereto hereby agree as follows:

        1.      Definitions. Capitalized terms used but not otherwise defined
herein have the meanings given to such terms in the Purchase Agreement.

        2.      Grant of Option. The Company hereby grants to the JPMP Entities
and BBI an option (exercisable in each such Optionee's sole discretion) to
purchase up to an aggregate number of shares of Series A Preferred Stock and
Warrants (the "Option Shares") that are convertible into or exercisable for, as
the case may be, the lesser of (a) 19.99% of the Common Stock or voting power of
the Company outstanding immediately prior to the closing of the transactions
contemplated by this Agreement and (b) the maximum amount of Common Stock that
the Company is permitted to sell and issue, without stockholder approval, under
Applicable Laws, including without limitation those regulations promulgated by
the National Associate of Securities Dealers, Inc. and NASDAQ (such option, the
"Option") at a purchase price set forth in Section 2.2 and Section 2.3 of the
Purchase Agreement (the "Exercise Price"). The aggregate number of Warrant
Shares issuable upon exercise of the Warrants will represent 12.5% of the Common
Stock into which the shares of Series A Preferred Stock issued hereunder are
convertible.

        3.      Option Period. The Option may be exercised in whole or in part
at any time during the period beginning on the earlier to occur of (a) the date
that is 120 days after the date of this Agreement, if the Company has not
convened the Stockholders Meeting by such date, (b) the Business Day immediately
following the date of the Stockholders Meeting, if the Company does not obtain
the Stockholder Approval thereat, or (c) the date that the Company elects to
terminate the Purchase Agreement pursuant to Section 9.1(a)(vii) of the Purchase
Agreement (such earlier date, the "Initial Exercise Date") and ending on the
date that is 10 Business Days after the Initial Exercise Date (the "Expiration
Date").

        4.      Exercise of Option. At any time after the Initial Exercise Date
and before the Expiration Date, any Optionee may send a written notice to the
Company requesting confirmation of the actual number of Option Shares. Upon
receipt of such request, the Company

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will send to each Optionee written notice of the number of Option Shares. Any or
all of the Optionees may exercise this Option in whole or in part by delivering
to the Company a written notice stating the number of Option Shares that such
Optionee has elected to purchase, provided that any such notice must be
countersigned in acknowledgement by all of the Optionees (whether or not
participating in such exercise).

        5.      Closing of Option. If the Option is exercised, the closing of
the issuance and sale of such shares of Series A Preferred Stock will take place
as soon as reasonably practicable (but, subject to compliance with Applicable
Laws, in no event more than 15 Business Days) after the date upon which the
Option is exercised pursuant to the terms set forth in the Purchase Agreement.

        6.      Board of Directors; Observer Rights. If the Option is exercised,
the Optionees and the Company shall modify and amend the Documents such that the
Optionees shall have the right to designate one director to the Board (the
"Optionee Director") and one representative (the "Optionee Observer") to be
present at all meetings of the Board. The Optionee Director shall be designated
by the Optionees holding a majority of the Series A Preferred Stock acquired
pursuant to this Agreement. The Optionee Observer shall be appointed by the
Optionees that are not entitled to designate the Optionee Director.

        7.      Assignment. An Optionee shall have the right to assign all or
part of its rights hereunder to any of its Affiliates.

        8.      Severability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not be invalid, prohibited or unenforceable in such jurisdiction, it shall,
as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.

        9.      Entire Agreement. This document, together with the Securities
Purchase Agreement and any other documents referenced herein or therein,
embodies the complete agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.

        10.     Amendments and Waivers. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed, in the case of an amendment, by the parties hereto and, in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or

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privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

        11.     Termination. This Agreement shall terminate and be of no further
force or effect upon the earlier to occur of (i) the exercise by the Optionees
of this Option and delivery to the Optionees of the certificate evidencing the
Option Shares, (ii) the Expiration Date or (iii) the Closing Date.

        12.     Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together will constitute
one and the same agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.

        13.     Remedies.

                (a)     The Optionees shall have all rights and remedies
reserved for the Optionees pursuant to this Agreement and will be entitled to
enforce such rights specifically, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law
or equity.

                (b)     The parties hereto agree that if any parties seek to
resolve any dispute arising under this Agreement pursuant to a legal proceeding,
the prevailing parties to such proceeding shall be entitled to receive
reasonable fees and expenses (including reasonable attorneys' fees and expenses)
incurred in connection with such proceedings.

                (c)     It is acknowledged that it will be impossible to measure
in money the damages that would be suffered if the parties fail to comply with
any of the obligations herein imposed on them and that in the event of any such
failure, an aggrieved person will be irreparably damaged and will not have an
adequate remedy at law. Any such person shall, therefore, be entitled to seek
injunctive relief, including specific performance, to enforce such obligations,
and if any action should be brought in equity to enforce any of the provisions
of this Agreement, none of the parties hereto shall raise the defense that there
is an adequate remedy at law.

        14.     Notices. The terms and provisions of Section 10.6 of the
Purchase Agreement are expressly incorporated in this Agreement .

        15.     Governing Law; Waiver of Jury Trial. All questions concerning
the construction, interpretation and validity of the Documents shall be governed
by and construed and enforced in accordance with the domestic laws of the State
of New York, without giving effect to any choice or conflict of law provision or
rule (whether in the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York. In furtherance of the foregoing, the internal law of the State of New
York will control the interpretation and construction of the Documents, even if
under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily or necessarily
apply. Notwithstanding the foregoing provisions of this Section 15, those
provisions of this Agreement that relate to the internal governance of the
Company and are required by

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<PAGE>

Delaware corporate law to be governed by such, shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware.

        BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO
ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS
RELATED HERETO.

        16.     Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments, and
documents as any other party hereto reasonably may request in order to carry out
the provisions of this Agreement and the consummation of the transactions
contemplated hereby.

        17.     Jurisdiction; Venue; Process. Any legal action or proceeding
with respect to this Agreement or the other Documents may be brought in the
courts of the State of Delaware or New York and any United States federal court
sitting in the State of Delaware or the United States of America for the
Southern District of New York and, by execution and delivery of this Agreement,
the Company hereby accepts for itself and in respect of its property, generally
and unconditionally, the jurisdiction of the aforesaid courts. The Company
hereby irrevocably waives, in connection with any such action or proceeding, any
objection, including, without limitation, any objection to the venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any such action or proceeding in such respective jurisdictions. The
Company hereby irrevocably consents to the service of process of any of the
aforementioned courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at its address
as set forth herein. Nothing herein shall affect the right of the Optionees to
serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against the Company in any other jurisdiction.

        18.     Waiver. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.

                                    * * * * *

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<PAGE>

        IN WITNESS WHEREOF, the parties have executed this Option Agreement as
of the day and year first above written.

                                      COMPANY:

                                      SEATTLE GENETICS, INC.

                                      By:   /s/ Clay B. Siegall
                                            Name: Clay B. Siegall
                                            Title: President & CEO


                                      OPTIONEES:

                                      J.P. MORGAN PARTNERS (BHCA), L.P.

                                      By:   JPMP Master Fund Manager, L.P.,
                                            its general partner

                                      By:   JPMP Capital Corp.,
                                            its general partner


                                      By:   /s/ Rodney A. Ferguson
                                            Name: Rodney A. Ferguson
                                            Title: Managing Director


                                      J.P. MORGAN PARTNERS GLOBAL INVESTORS,
                                      L.P.

                                      By:   JPMP Global Investors, L.P.,
                                            its general partner

                                      By:   JPMP Capital Corp.,
                                            its general partner

                                      By:   /s/ Rodney A. Ferguson
                                            Name: Rodney A. Ferguson
                                            Title: Managing Director

<PAGE>

                                      J.P. MORGAN PARTNERS GLOBAL INVESTORS
                                      (CAYMAN), L.P.

                                      By:   JPMP Global Investors, L.P.,
                                            its general partner

                                      By:   JPMP Capital Corp.,
                                            its general partner

                                      By:   /s/ Rodney A. Ferguson
                                            Name: Rodney A. Ferguson
                                            Title: Managing Director


                                      J.P. MORGAN PARTNERS GLOBAL INVESTORS A,
                                      L.P.

                                      By:   JPMP Global Investors, L.P.,
                                            its general partner

                                      By:   JPMP Capital Corp.,
                                            its general partner

                                      By:   /s/ Rodney A. Ferguson
                                            Name: Rodney A. Ferguson
                                            Title: Managing Director


                                      J.P. MORGAN PARTNERS GLOBAL INVESTORS
                                      (CAYMAN) II, L.P.

                                      By:   JPMP Global Investors, L.P.,
                                            its general partner

                                      By:   JPMP Capital Corp.,
                                            its general partner

                                      By:   /s/ Rodney A. Ferguson
                                            Name: Rodney A. Ferguson
                                            Title: Managing Director

<PAGE>

                                      BAKER/TISCH INVESTMENTS, L.P.

                                      By:   Baker/Tisch Capital, L.P.,
                                            its general partner

                                      By:   Baker/Tisch Capital (GP), LLC,
                                            its general partner

                                      By:   /s/ Felix Baker
                                            Name: Felix Baker, Ph.D.
                                            Title: Managing Member

                                      BAKER BROS. INVESTMENTS, L.P.

                                      By:   Baker Bros. Capital, L.P.,
                                            its general partner

                                      By:   Baker Bros. Capital (GP), LLC,
                                            its general partner

                                      By: /s/ Felix Baker
                                            Name: Felix Baker, Ph.D.
                                            Title: Managing Member


                                      BAKER BROS. INVESTMENTS II, L.P.

                                      By:   Baker Bros. Capital, L.P.,
                                            its general partner

                                      By:   Baker Bros. Capital (GP), LLC,
                                            its general partner

                                      By:   /s/ Felix Baker
                                            Name: Felix Baker, Ph.D.
                                            Title: Managing Member

<PAGE>

                                      BAKER BIOTECH FUND I, L.P.

                                      By:   Baker Biotech Capital, L.P.,
                                            its general partner

                                      By:   Baker Biotech Capital (GP), LLC,
                                            its general partner

                                      By:   /s/ Felix Baker
                                            Name: Felix Baker, Ph.D.
                                            Title: Managing Member

                                      BAKER BIOTECH FUND II, L.P.

                                      By:   Baker Biotech Capital II, L.P.,
                                            its general partner

                                      By:   Baker Biotech Capital II (GP), LLC,
                                            is general partner

                                      By:   /s/ Felix Baker
                                            Name: Felix Baker, Ph.D.
                                            Title: Managing Member

                                      BAKER BIOTECH FUND II (Z), L.P.

                                      By:   Baker Biotech Capital II, L.P.,
                                            its general partner

                                      By:   Baker Biotech Capital II (GP), LLC,
                                            is general partner

                                      By:   /s/ Felix Baker
                                            Name: Felix Baker, Ph.D.
                                            Title: Managing Member