Exhibit 10.54
CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS (“[*]”),
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED.
February 13, 2004
VIA HAND DELIVERY
Donald Francis
VaxGen, Inc.
1000 Marina Blvd.
Brisbane, CA 94005-1835
Dear Don:
This letter sets forth the terms
of the transition and separation agreement (the
“Agreement”) that VaxGen, Inc. (the
“Company” or “VaxGen”) is offering to you
to aid in your employment transition.
1. Separation
Date. You and the
Company agree that your employment with the Company terminated
effective January 31, 2004 (the “Separation Date”),
which you agree is also the termination date of the Employment
Agreement between you and the Company signed as of October 2, 2001,
attached as Exhibit A (the “Employment Agreement”),
notwithstanding any term of employment or termination notice
requirement under the Employment Agreement.
2. Departure
Announcement. You
and the Company agree to make good faith efforts to develop a
mutually agreeable additional announcement, if any, concerning your
departure from the Company, consistent with the press release
previously issued by the Company on January 20, 2004.
3. Resignation
of Board Membership. You agree to tender your written
resignation as a member of the Board of Directors of the Company
and of any affiliated entities within ten (10) days of the
Separation Date, such resignation to be immediately
effective.
4. Accrued
Salary and PTO Pay. You acknowledge that the Company timely
paid you all accrued salary, and all accrued and unused Paid Time
Off, earned through the Separation Date, less standard payroll
deductions and withholdings. You are entitled to these
payments by law.
5. Severance
Benefits. The
termination of your employment shall be treated as a termination
without “Cause” for the purposes of the Employment
Agreement. If you enter into this Agreement, the Company will
provide you with the following severance benefits (the
“Severance Benefits”) as your sole severance benefits
in lieu of the less advantageous severance benefits under the
Employment Agreement:
- 1 -
(a)
Bonus Compensation. The Company will pay you a bonus
in the amount of $115,000, less required payroll deductions and
withholdings, in lieu of any other bonus or incentive compensation
from the Company, including but not limited to bonuses for 2003 or
any previous years of employment with the Company. The bonus
will be paid within thirty (30) days following the Effective Date
of this Agreement (as defined in Paragraph 18).
(b) Severance
Payments. The
Company will provide you severance payments during calendar year
2004 that will total, in the aggregate, twelve (12) months of your
base salary in effect as of the Separation Date, less required
payroll deductions and withholdings (the “Severance
Payments”). The Severance Payments will be made on the
Company’s standard payroll dates, beginning with the first
payroll date following the Effective Date of this Agreement.
All Severance Payments, with the exception of the Severance Payment
provided as of December 31, 2004, shall be in an amount equal to
your regular paycheck amount as of the Separation Date. The
Severance Payment provided as of December 31, 2004 shall be
calculated as an amount equal to the difference between the
following: (i) twelve (12) months of your base salary in
effect as of the Separation Date; and (ii) the total amount of
Severance Payments paid prior to December 31, 2004 plus the amount
of severance pay provided by the Company prior to the Effective
Date of this Agreement (if any).
(c) Health
Premium Payments.
To the extent provided by the federal and state COBRA law or, if
applicable, state insurance laws, and by the Company’s
current group health insurance policies, you will be eligible to
continue your group health insurance benefits at your own expense
after the Separation Date for a period of up to thirty-six (36)
months, regardless of whether you enter into this Agreement.
Later, you may be able to convert to an individual policy through
the provider of the Company’s health insurance, if you
wish. The Company will provide you a separate notice that
describes your rights and obligations under COBRA on or after the
Separation Date. If you timely elect continued coverage under
COBRA, and enter into this Agreement, the Company, as an additional
severance benefit, will pay your COBRA premiums sufficient to
continue your and your dependents’ (if any) health insurance
coverage at the level in effect as of the Separation Date through
the earlier of the following: (i) the date that you and
your dependents become eligible for group health insurance benefits
through a new employer; or (ii) January 31, 2005. You agree
to promptly notify the Company in writing if you become eligible
for group health insurance coverage through a new employer prior to
January 31, 2005.
(d) Stock
Option Grants. All
of your stock option grants (the “Options”) and any
other equity interests you may have with the Company will cease
vesting effective as of the Separation Date. As an additional
severance benefit, the Company agrees to accelerate the vesting of
all Options so that the Options are fully vested and immediately
exercisable effective as of the Separation Date. In addition,
the Options are hereby amended to provide that you will be able to
exercise the vested and unexercised shares subject to the Options
within the earlier of the following: (i) any time
within three (3) years following the Separation Date; or (ii) the
date that the Option term expires. The Options may cease
being incentive stock options under Section 422 of the Internal
Revenue Code three (3) months after the Separation Date, and you
are hereby advised to seek independent advice concerning the tax
implications of the Options. Your rights to exercise any
vested shares subject to the Options are set forth in the
Company’s stock option plan and your individual Options
agreements, except as modified herein. Attached, as Exhibit
B, is a spreadsheet providing detail regarding your Options, their
respective exercise prices, and expiration dates.
- 2 -
(e) Rent-Free
Office Space. The
Company agrees to make available rent-free furnished office space
for up to six (6) months after the Separation Date, which you may
be required to share with Carter Lee, Phillip Berman and VaxGen
employees or designees. If you inform the Company that you
intend to utilize such office space, the provided office space
shall be large enough to include separate, individual offices for
you, Carter Lee, and Phillip Berman (to the extent that each has
requested the office space), such offices to be similar in size to
the office that you occupied while employed by the Company, and
shall include shared use of a common area. VaxGen will also
allow you to use its conference rooms which are in the same general
area as the provided office space on an advance reservation basis,
on such dates and at such times as these rooms are not already
reserved for VaxGen use. You must inform the Company in
writing, within thirty (30) days after the Separation Date, if you
intend to utilize such office space. The Company shall select
the office space, which will be located in VaxGen’s corporate
headquarters or within a ten (10) mile radius of its corporate
headquarters. The Company will pay for the lease of this
office space, will pay the electrical bills, and will provide
office telephone service in this office space (up to a total
maximum monthly amount of $600 for telephone service). Other
than as stated herein, VaxGen will provide no other equipment or
materials. If you wish to vacate this office space before the
expiration of six (6) months after you begin using the office
space, you may do so by providing thirty (30) days written notice
to the Company.
6. Consulting
Agreement. Following the Separation Date, the Company
agrees to engage you, and you agree to make yourself available to
perform services, as a consultant under the terms specified
below.
(a) Consulting
Period. The
consulting relationship (“Consultancy”) shall commence
on the Effective Date of this Agreement, and will continue for six
(6) months thereafter, unless terminated earlier pursuant to
section 6(h) of this Agreement (the “Consulting
Period”). The Consulting Period can be extended by
mutual written agreement of the parties.
(b) Consulting
Services. During
the Consulting Period, you will be available to consult with the
Company in any areas within your expertise at the specific written
request of the Company’s Chief Executive Officer or his
Designee (as defined herein). As referenced in this
Agreement, the “Designee” shall mean an individual
provided written authorization by the Chief Executive Officer to
act as his designee for the purposes of this Agreement. You
agree to exercise the highest degree of professionalism and to
utilize your expertise and creative talent in performing these
services. During the Consulting Period, you shall make
yourself available to perform consulting services for a total of up
to two (2) days per month, although the Company is not obligated to
authorize any specific amount of consulting services during the
Consulting Period. The Company expects that the consulting
services will be performed outside of the Company’s premises
except when the Chief Executive Officer or his Designee informs you
such services may be provided on the Company’s
premises. The Company shall not require such services in such
a manner as to unreasonably interfere with your other professional
or non-profit activities. You agree that, during the
Consulting Period, you will not represent or purport to represent
the Company in any manner whatsoever to any third party, bind the
Company in any agreement, or direct the activities of Company
employees, unless authorized by the Company in writing to do
so. After the Separation Date, you will not be considered a
Company employee and you will not be entitled to any of the
benefits that the Company may make available to its employees, such
as group insurance, workers’ compensation insurance coverage,
profit sharing or retirement benefits, except as specifically
provided in this Agreement.
- 3 -
(c) Consulting
Fees. During the
Consulting Period, the Company will provide consulting fees for
authorized consulting services at the rate of $1,000 per day, or
pro-rata amount thereof (the “Consulting Fees”) as your
sole compensation for the consulting services. You must
provide monthly invoices to the Company for your consulting
services. Due to your status as an independent contractor,
the Consulting Fees will be paid without deductions and
withholdings of any kind. The Company will issue you an IRS
1099 Form with respect to your Consulting Fees. You
acknowledge that you will be entirely responsible for the payment
of all taxes due and owing as a result of your Consulting
Fees. You hereby indemnify the Company and hold it harmless
from any liability for any taxes, contributions, penalties, and
interest that may be assessed by any taxing or governmental
authority against the Company with respect to the Consulting
Fees.
(d) Expenses.
The Company will reimburse you for
reasonable, documented business expenses incurred by you during the
Consulting Period pursuant to its regular business practice,
provided that these expenses have been pre-approved by the Company
in writing.
(e) Protection
of Information. You
agree that, during the Consulting Period and thereafter, you will
not use or disclose any Confidential Proprietary Information (as
defined below) or materials of the Company that you obtain or
develop in the course of performing consulting services for the
Company, except with the advance written permission of the
Company’s Chief Executive Officer or his Designee. For
purposes of this Agreement, “Confidential Proprietary
Information” shall include all information that is not
already in the public domain by virtue of such information having
been disclosed outside of the Company, in the form of authorized
publication in journals, publicly-disseminated reports, and by
WebCast, or disclosed in written form made publicly available in
connection with professional conferences or seminars that are open
to the public, or in written form made publicly available in
connection with any other authorized public disclosure. In
the event of a dispute under this Paragraph 6(e) concerning
information that you used or disclosed, you will be required to
demonstrate, including by providing tangible proof, that such
information was in the public domain as of the date of your
disclosure or use. In all situations, it shall not be
considered a breach of this Agreement or the Employee’s
Proprietary Information and Inventions Agreement (attached hereto
as Exhibit C) if you provide any form of information when required
by legal process. Any and all work product you create in
connection with the consulting services will be the sole and
exclusive property of the Company. You hereby assign to the
Company all right, title, and interest in all inventions,
techniques, processes, materials, and other intellectual property
developed in the course of performing consulting services for the
Company.
(f) Other
Work Activities. Unless you obtain advance written authorization
from the Company’s Chief Executive Officer or his Designee,
during the Consulting Period, you will not carry on any business or
activity (whether directly or indirectly, as a partner,
stockholder, principal, agent, director, affiliate, employee or
consultant) that (i) relates to the Company’s projects
concerning AIDSVAX or other vaccines targeting HIV surface protein,
or relates to the Company’s projects concerning development
of vaccines against anthrax, smallpox, plague or Severe Acute
Respiratory Syndrome, which projects you were involved in during
your employment with VaxGen; or (ii) directly relates to or
that materially interferes with any services you are providing to
the Company at any time during the Consulting Period.
Notwithstanding the restriction in the preceding sentence, you
shall not be prohibited from being a passive shareholder of up to
one percent (1%) of the public stock of a competitive entity.
During the Consulting Period, you may engage in any form of
employment, consulting, or business activity not prohibited by this
paragraph, provided that it shall not materially interfere with
your ability to perform the consulting services for the
Company.
- 4 -
(g) Access
to HIV Information. The Company agrees to provide you with access,
during the Consulting Period, to its information and materials
(including but not limited to emails, electronic files, and
documents) concerning HIV for the sole purpose of your consulting
services to the Company or for any other purpose authorized in
writing by the Company’s Chief Executive Officer or his
Designee. For the avoidance of doubt, you understand and
agree that you will not be authorized to use or disclose such
Company information and materials other than as specified
herein.
(h) Termination.
The Company shall have the
right to terminate the Consultancy for any reason upon fifteen (15)
days advance written notice to you. In addition, the Company
may terminate the Consultancy immediately in the event of your
material breach of this Agreement or of your Employee’s
Proprietary Information and Inventions Agreement (attached hereto
as Exhibit C).
7. No
Other Compensation or Benefits. You acknowledge that, except as expressly
provided in this Agreement, you have not earned and will not
receive from the Company any additional compensation relating to or
arising from employment with the Company (including base salary,
bonus or incentive compensation), severance, or benefits before or
after the Separation Date, with the exception of any vested right
you may have under the express terms of a written ERISA-qualified
benefit plan (e.g., 401(k)
account).
8. Expense
Reimbursements.
You agree that, within sixty (60) days after the Separation Date,
you will submit your final documented expense reimbursement
statement reflecting all business expenses you incurred through the
Separation Date, if any, for which you seek reimbursement.
The Company will reimburse you for these expenses pursuant to its
regular business practices.
- 5 -
9. Return
of Company Property. You agree that, on the Effective Date of
this Agreement or earlier if requested by the Company, you will
return to the Company all Company documents (and all copies
thereof) and other Company property in your possession or control,
including, but not limited to, any Company equipment, files,
correspondence, memoranda, reports, lists, proposals, agreements,
drafts, notes, minutes, drawings, records, plans, forecasts,
purchase orders, research and development information, customer
information and contact lists, sales and marketing information,
personnel information, vendor information, promotional literature
and instructions, financial and operational information, technical
information, specifications, computer-recorded information,
electronic information (including email and correspondence), other
tangible property, credit cards, entry cards, identification badges
and keys; and, any materials of any kind that contain or embody any
proprietary or confidential information of the Company (and all
reproductions thereof in whole or in part). You agree to make
a diligent search to locate any such documents, property and
information on or before the Separation Date. In addition, if
you have used any personal computer, server, or e-mail system to
receive, store, review, prepare or transmit any Company
confidential or proprietary data, materials or information, you
agree to provide the Company with a computer-useable copy of such
information and then permanently delete and expunge such Company
confidential or proprietary information from those systems; and you
agree to provide the Company access to your system as requested to
verify that the necessary copying and/or deletion is done.
VaxGen has contractual obligations to third parties, including
Genentech, the National Institute of Health, and the Walter Reed
Institute, that could require VaxGen to provide certain
information, documents or other materials to such third parties in
the future. Therefore, your obligations set forth in this
paragraph include information, documents and other materials that
VaxGen may be required to provide to such third parties, including
information related to technology provided to VaxGen by Genentech
pursuant to their license agreements. Your timely return
of all Company property is a precondition of your receipt of the
Severance Benefits. Notwithstanding the above, you
will be allowed to retain any specific Company property for which
you have obtained written authorization from the Company’s
Chief Executive Officer or his Designee, and the Company’s
Chief Executive Officer and his Designee agree to use their best
efforts to respond, in writing, to your written requests to retain
specific Company property within thirty (30) days of the receipt of
your written request.
10. Proprietary
Information Obligations. You acknowledge your continuing
obligations under the Employee’s Proprietary Information and
Inventions Agreement between you and the Company signed as of June
16, 1997 (the “Proprietary Information
Agreement”). A copy of the Proprietary Information
Agreement is attached hereto as Exhibit C. The Company has
been informed that you desire to form a non-profit entity to
develop vaccines against HIV for distribution in third world
countries which potentially could include licenses and/or
sublicenses from VaxGen in compliance with VaxGen’s license
agreements with Genentech, and contingent upon separate written
agreements and completion of any required parallel agreements with
Genentech and any other necessary third parties. VaxGen
agrees that nothing in the Proprietary Information Agreement will
prohibit you from using or disclosing information that is in the
public domain as of the date of your use or disclosure, provided
that such information is not in the public domain as a result
of your breach of any written agreement with the
Company.
11. Confidentiality.
The provisions of this
Agreement will be held in strictest confidence by you and the
Company and will not be publicized or disclosed in any manner
whatsoever; provided, however, that: (a) you may
disclose this Agreement in confidence to your immediate family; (b)
the parties may disclose this Agreement in confidence to their
respective attorneys, accountants, auditors, tax preparers, and
financial advisors; (c) the Company may disclose this Agreement as
necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may
disclose this Agreement insofar as such disclosure may be necessary
to enforce its terms or as otherwise required by law. In
particular, and without limitation, you agree not to disclose the
terms of this Agreement to any current or former employee of the
Company.
- 6 -
12.
Nondisparagement. Both you and the Company (through its officers
and directors) agree not to disparage the other party, and the
other party’s officers, directors, employees, shareholders
and agents, in any manner likely to be materially harmful to them
or their business, business reputation or personal reputation;
provided that both you and the Company may at any time respond to
any question, inquiry or request for information when required by
legal process. In the event that you are concerned about
proposed statements you wish to make regarding scientific or other
matters, you may provide the proposed statement, in writing, to
VaxGen’s Chief Executive Officer or his Designee in order to
obtain VaxGen’s written authorization for the proposed
statement, and VaxGen agrees that such authorization will not be
unreasonably withheld, and provided within ten (10) business
days. Likewise, in the event that the Company is concerned
about proposed statements it wishes to make about you regarding
scientific or other matters, the Company may provide the proposed
statement, in writing, to you in order to obtain your written
authorization for the proposed statement, and you agree that such
authorization will not be unreasonably withheld, and provided
within ten (10) business days. Both you and VaxGen may submit
to the other up to two (2) such proposed statements each
week.
13. No
Voluntary Adverse Action. You agree that you will not voluntarily
assist any person in bringing or pursuing any litigation,
arbitration, administrative claim or other formal proceeding, or
any proposed litigation, arbitration, administrative claim, or
other formal proceeding, against the Company, its parents,
subsidiaries, affiliates, distributors, officers, directors,
employees or agents, unless pursuant to subpoena or other
compulsion of law. The restrictions set forth in this
Paragraph 13 do not apply to any actions you may bring to enforce
this Agreement or to any actions you may bring based on claims
arising after the date that you sign this
Agreement.
14. Cooperation.
Before and after the
Separation Date, you agree to cooperate fully with the Company in
connection with its actual or contemplated defense, prosecution, or
investigation of any claims, demands, or other matters arising from
events, acts, or failures to act that occurred during the time
period in which you were employed by the Company. Such
cooperation includes, without limitation, making yourself available
upon reasonable notice, without subpoena, for interviews,
depositions, and trial testimony and you shall be allowed to
provide truthful and accurate information or testimony in any
proceeding subject to this Paragraph 14 of this Agreement.
The Company will reimburse you for reasonable out-of-pocket
expenses you incur in connection with any such cooperation
(excluding forgone wages, salary, or other compensation), and will
make reasonable efforts to accommodate your scheduling needs.
For the avoidance of doubt, the Company will not pay Consulting
Fees or any other compensation for your cooperation under this
Paragraph 14. To the extent required by law or any
pre-existing agreements between the parties, you will have the
right to retain counsel of your own selection and the Company will
pay your reasonable attorneys’ fees within thirty (30) days
after VaxGen’s receipt of satisfactory documentation of your
attorneys’ fees; however, such documentation shall not
require you to waive the attorney-client
privilege.
15. Nonsolicitation.
You acknowledge your
continuing obligations under Paragraph 13 of the Employment
Agreement, which apply for twelve (12) months after the Separation
Date.
16. No
Admissions.
Nothing contained in this Agreement shall be construed as an
admission by you or the Company of any liability, obligation,
wrongdoing or violation of law.
- 7 -
17. Release
of Claims. Except
as otherwise set forth in this Agreement, in exchange for the
consideration under this Agreement to which you would not otherwise
be entitled, you hereby generally and completely release the
Company and its parents, subsidiaries, successors, predecessors and
affiliates, and its and their directors, officers, employees,
shareholders, agents, attorneys, insurers, affiliates and assigns,
from any and all claims, liabilities and obligations, both known
and unknown, that arise out of or are in any way related to events,
acts, conduct, or omissions occurring at any time prior to and
including the date you sign this Agreement. This general
release includes, but is not limited to: (a) all claims arising out
of or in any way related to your employment with the Company or the
termination of that employment; (b) all claims related to your
compensation or benefits, including salary, bonuses, commissions,
vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership or equity
interests in the Company; (c) all claims for breach of
contract, wrongful termination, and breach of the implied covenant
of good faith and fair dealing (including but not limited to claims
arising under or based on the Employment Agreement); (d) all
tort claims, including claims for fraud, defamation, emotional
distress, and discharge in violation of public policy; and (e) all
federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as
amended), the federal Americans with Disabilities Act of 1990 (as
amended), the federal Age Discrimination in Employment Act (as
amended) (“ADEA”), and the
