Exhibit 10.56
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
Carter Lee
VaxGen, Inc.
1000 Marina Blvd., Suite 200
Brisbane, CA 94014
Dear Carter:
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. Period
of Continued Employment. The Company will continue your employment in
your current position, through March 31, 2004, unless you resign
voluntarily before that date or your employment is terminated due
to a material breach of existing Company policies or of a written
agreement with the Company (such termination to occur after notice
and a reasonable opportunity to cure such breach, if
curable). As you requested, you will be on vacation,
utilizing accrued Paid Time Off, during the last two weeks of your
employment. The last date of your employment is referred to
herein as the “Separation Date,” which you agree is
also the termination date of the Employment Agreement between you
and the Company signed as of April 1, 1999, attached as Exhibit A
(the “Employment Agreement”), notwithstanding any term
of employment or termination notice requirement under the
Employment Agreement. Between now and your Separation Date,
you will continue to report to me and you will be paid your current
base salary.
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. Accrued
Salary and PTO Pay. On the Separation Date, the Company will
pay you all accrued salary, and all accrued and unused Paid Time
Off, earned through the Separation Date (if any), less standard
payroll deductions and withholdings. You are entitled to
these payments by law.
4. Bonus
Payment. If you
enter into this Agreement, the Company will pay you a bonus in the
amount of $75,000, 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 2004,
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). You understand and agree that you will not earn, and
will not receive, any bonus or other incentive compensation for
2004.
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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, satisfactorily
perform your job duties as required by Paragraph 1 above through
March 31, 2004, and, within forty-five (45) days after March 31,
2004, you sign, date and return to the Company (and not revoke) the
Separation Date Release attached hereto as Exhibit B, 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:
(a)
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 the Separation Date Release (as defined
therein). 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.
(b)
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, enter into this Agreement, and
timely sign, date and return the Separation Date Release to the
Company, 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 date of this Agreement 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) March 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 March 31,
2005.
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(c) 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) at 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
C, is a spreadsheet providing detail regarding your Options, their
respective exercise prices, and expiration dates.
(d) 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 Donald Francis, 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, Donald Francis, 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 April 2, 2004, and continue until October 2, 2004, 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.
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(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.
(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 D) 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.
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(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; 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.
(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 D).
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.
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9. Return
of Company Property. You agree that, on the Separation Date 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
December 9, 1998 (the “Proprietary Information
Agreement”). A copy of the Proprietary Information
Agreement is attached hereto as Exhibit D. 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.
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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.
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 legal process. 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
the Separation Date Release.
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.
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15. Nonsolicitation.
For a period of one (1) year
following the Separation Date, you agree that you will not, either
directly or indirectly, (a) attempt to recruit, solicit or take
away any of the employees of VaxGen who worked for VaxGen at any
time while you were employed by VaxGen, or make known to any
person, firm or corporation the names or addresses of, or any
information pertaining to, any current or former employees of
VaxGen; or (b) use any confidential or proprietary information to
attempt to call on, solicit or take away any clients of VaxGen or
any other persons, entities, or corporations with which VaxGen has
had or contemplated any business transaction or relationship during
your employment with VaxGen, including, but not limited to,
investments, licenses, joint ventures, and agreements for
development.
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.
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 California Fair Employment
and Housing Act (as amended). Notwithstanding the above, you
do not release the Company from any obligation to indemnify you
pursuant to contract, the Company’s articles or by-laws, or
applicable law. You represent that you have no lawsuits,
claims or actions pending in your name, or on behalf of any other
person or entity, against the Company or any other person or entity
subject to the release granted in this paragraph.
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18. ADEA
Waiver. You
acknowledge that you are knowingly and voluntarily waiving and
releasing any rights you may have under the ADEA, and that the
consideration given for the waiver and release in the preceding
paragraph hereof is in addition to anything of value to which you
are already entitled. You further acknowledge that you have
been advised, as required by the ADEA, that: (a) your
waiver and release do not apply to any rights or claims that may
ar
