<PAGE> 1
As filed with the Securities and Exchange Commission on August 17, 1999
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VAXGEN, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-3236309
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
1000 Marina Boulevard, Suite 200
Brisbane, California 94005
(650) 624-1000
(Address of Principal Executive Offices, Including Zip Code)
-------------------------
VAXGEN, INC. 1996 STOCK OPTION PLAN
VAXGEN, INC. 1998 DIRECTOR STOCK OPTION PLAN
AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN VAXGEN, INC.
AND ROBERT C. NOWINSKI
AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN VAXGEN, INC.
AND DONALD P. FRANCIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT BETWEEN VAXGEN, INC.
AND PHILLIP W. BERMAN
(Full Title of the Plan)
-------------------------
Robert C. Nowinski, Chairman and Chief Executive Officer
1000 Marina Boulevard, Suite 200
Brisbane, California 94005
(650) 624-1000
(Name, Address and Telephone Number of Agent for Service)
-------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Securities to Be Amount to be Proposed Maximum Aggregate Amount of
Registered Registered (1) Offering Price(2) Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, $.01 par value
per share 2,113,257 $25,358,278 $7,050
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes (i) 1,159,171 shares of Common Stock issuable pursuant to stock
options outstanding on July 13, 1999 under the 1996 Stock Option Plan and
the 1998 Director Stock Option Plan, (ii) 628,329 shares of Common Stock
issuable pursuant to options reserved for issuance under the 1996 Stock
Option Plan and the 1998 Director Stock Option Plan, and (iii) 325,757
shares of Common Stock reserved for issuance as bonus shares under
employment agreements between the Registrant and each of Robert C.
Nowinski, Donald P. Francis and Phillip W. Berman. Also includes an
indeterminate number of shares of Common Stock that may become issuable
under either stock option plan as a result of the adjustment provisions
therein, and, if any interests in either stock option plan constitute
separate securities required to be registered under the Securities
<PAGE> 2
Act of 1933, then, pursuant to Rule 416(c), an indeterminate amount of such
interests to be offered or sold pursuant to the Plan.
(2) Fee with respect to 1,159,171 of the shares calculated pursuant to Rule
457(h)(1) based upon the average exercise price of options granted and
outstanding as of August 11, 1999 under the 1996 Stock Option Plan and the
1998 Director Stock Option Plan, which equals the aggregate exercise price
for all outstanding options, which was $8.60 per share. The fee with
respect to the remaining 954,086 shares is estimated solely for purposes of
computing the registration fee pursuant to Rules 457(c) and 457(h) based on
the average of the high and low sales prices for the Common Stock reported
by the Nasdaq Stock Market on August 11, 1999 which was $16.13 per share.
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated in this Registration Statement
by reference:
(a) The Registrant's Prospectus dated June 29, 1999, filed by
the Registrant with the Securities and Exchange Commission pursuant to
Rule 424(b) under the Securities Act of 1933, as amended (the
"Securities Act") (File No. 333-78065);
(b) The Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999; and
(c) The description of the Registrant's Common Stock set forth
in the Registration Statement on Form 8-A filed by the Registrant with
the Securities and Exchange Commission on June 29, 1999, under Section
12(g) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") (File No. 0-26483).
All documents filed by the Registrant with the Securities and Exchange
Commission after the date of this Registration Statement pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, before the filing of a
post-effective amendment that indicates that all securities offered pursuant to
this Registration Statement have been sold or which deregisters all securities
then remaining unsold, shall also be deemed to be incorporated by reference in
this Registration Statement and to be part hereof from the respective dates of
filing of such documents.
Any statement incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Registration Statement to the extent
that a statement contained herein or in any other subsequently filed document
that also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not required.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The legality of the Shares is being passed upon for the Registrant by
Graham & James LLP/Riddell Williams, P.S., 1001 Fourth Avenue Plaza, Suite 4500,
Seattle, Washington 98154, which serves as the Registrant's outside general
counsel. Principals of Graham & James LLP/Riddell Williams, P.S. beneficially
own 22,000 shares of the Registrant's Common Stock.
II - 1
<PAGE> 4
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Amended and Restated Certificate of Incorporation (the
"Certificate") contains provisions entitling directors to be indemnified by the
Registrant against claims arising out of their actions in such capacities to the
fullest extent permitted by law, and the Registrant has entered into
Indemnification Agreements with two of its director nominees that contractually
entitle such persons to similar protection. The Certificate also contains
provisions limiting the personal liability of directors to the Registrant or its
shareholders to the fullest extent permitted by law. In addition, the
Registrant's Amended and Restated Bylaws contain provisions entitling directors
and officers to be indemnified by the Registrant against claims arising out of
their actions in such capacities. The Registrant has also secured insurance on
behalf of its executive officers and directors for certain liabilities arising
out of their actions in such capacities.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------------------------------------
<S> <C>
5.1 Opinion of Graham & James LLP/Riddell Williams P.S.
23.1 Consent of Graham & James LLP/Riddell Williams P.S. (included in Exhibit 5.1)
23.2 Consent of KPMG LLP
24.1 Powers of Attorney (included on signature page)
99.1 VaxGen, Inc. Amended and Restated 1996 Stock Option Plan
99.2 VaxGen, Inc. 1998 Director Stock Option Plan (Incorporated by reference to Exhibit No.
10.5 filed with the Securities and Exchange Commission in connection with the Company's
Registration Statement on Form S-1 (File No. 333-78065))
99.3 Amended and Restated Employment Agreement between VaxGen, Inc. and Donald P. Francis
99.4 Amended and Restated Employment Agreement between VaxGen, Inc. and Robert C. Nowinski
99.5 Amended and Restated Employment Agreement between VaxGen, Inc. and Phillip W. Berman
</TABLE>
ITEM 9. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
II - 2
<PAGE> 5
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) that, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by reference in
the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of the securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the termination of
the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. If a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless, in
the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II - 3
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on August 17, 1999.
VAXGEN, INC.
By /s/ Robert C. Nowinski
----------------------------------
Robert C. Nowinski
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Robert C. Nowinski and Carter A. Lee, and each of them severally, such
person's true and lawful attorneys-in-fact and agents, with full power to act
without the other and with full power of substitution and resubstitution, to
execute in the name and on behalf of such person, individually and in each
capacity stated below, any and all amendments and post-effective amendments to
this Registration Statement, any and all supplements hereto, and any and all
other instruments necessary or incidental in connection herewith, and to file
the same with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert C. Nowinski Chairman of the Board and August 17, 1999
- ------------------------------------- Chief Executive Officer
Robert C. Nowinski (Principal Executive Officer)
/s/ Donald P. Francis President and Director August 17, 1999
- -------------------------------------
Donald P. Francis
/s/ Carter A. Lee Senior Vice President, Finance August 17, 1999
- ------------------------------------- & Administration (Principal
Carter A. Lee Financial Officer)
/s/ Phillip W. Berman Senior Vice President, Research August 17, 1999
- ------------------------------------- & Development and Director
Phillip W. Berman
Director
- -------------------------------------
Stephen C. Francis
Director
- -------------------------------------
William D. Young
</TABLE>
II - 4
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- --------------------------------------------------------------------------------------
<S> <C>
5.1 Opinion of Graham & James LLP/Riddell Williams P.S.
23.1 Consent of Graham & James LLP/Riddell Williams P.S. (included in Exhibit 5.1)
23.2 Consent of KPMG LLP
24.1 Powers of Attorney (included on signature page)
99.1 VaxGen, Inc. Amended and Restated 1996 Stock Option Plan
99.2 VaxGen, Inc. 1998 Director Stock Option Plan (Incorporated by reference to Exhibit No.
10.5 filed with the Securities and Exchange Commission in connection with the Company's
Registration Statement on Form S-1 (File No. 333-78065))
99.3 Amended and Restated Employment Agreement between VaxGen, Inc. and Donald P. Francis
99.4 Amended and Restated Employment Agreement between VaxGen, Inc. and Robert C. Nowinski
99.5 Amended and Restated Employment Agreement between VaxGen, Inc. and Phillip W. Berman
</TABLE>
<PAGE> 1
Exhibit 5.1
August 17, 1999
VaxGen, Inc.
1000 Marina Boulevard, Suite 200
Brisbane, CA 94005
RE: FORM S-8 REGISTRATION STATEMENT
Ladies and Gentlemen:
We have acted as counsel to VaxGen, Inc. (the "Company") in connection with the
preparation of its Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), which the
Company will file with the Securities and Exchange Commission, with respect to
an aggregate of 2,113,257 shares of Common Stock of the Company (the "Shares")
issuable (a) upon exercise of options granted or to be granted under (1) the
Company's 1996 Stock Option Plan, as amended (the "1996 Plan") and (2) the
Company's 1998 Director Stock Option Plan (the "1998 Plan"), and (b) in
connection with (1) the Amended and Restated Employment Agreement between the
Company and Donald P. Francis (the "Francis Employment Agreement"), (2) the
Amended and Restated Employment Agreement between the Company and Robert C.
Nowinski (the "Nowinski Employment Agreement"), and (3) the Amended and Restated
Employment Agreement between the Company and Phillip W. Berman (the "Berman
Employment Agreement").
We have examined the Registration Statement and such other documents and records
as we have deemed relevant and necessary for the purpose of this opinion.
Based upon and subject to the foregoing, we are of the opinion that the
Shares issuable under the 1996 Plan, the 1998 Plan, the Francis Employment
Agreement, the Nowinski Employment Agreement and the Berman Employment Agreement
will, when issued pursuant to the terms of the foregoing documents and upon due
execution by the Company and the registration by its registrar of the
certificates for the Shares and issuance thereof by the Company and, in the case
of stock options issuable under the 1996 Plan and the 1998 Plan, receipt by the
Company of the consideration therefor in accordance with the terms of the 1996
Plan and the 1998 Plan, be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Benjamin F. Stephens
Benjamin F. Stephens
of
GRAHAM & JAMES LLP/RIDDELL WILLIAMS P.S.
<PAGE> 1
EXHIBIT 23.2
[KPMG LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
VaxGen, Inc.:
We consent to the use of our report incorporated herein by reference.
/S/ KPMG LLP
Seattle, Washington
August 13, 1999
<PAGE> 1
EXHIBIT 99.1
VAXGEN, INC.
AMENDED AND RESTATED
1996 STOCK OPTION PLAN
This Amended and Restated 1996 Stock Option Plan (the "Plan") provides
for the grant of options to acquire shares of common stock, $0.01 par value (the
"Common Stock"), of VaxGen, Inc., a Delaware corporation (the "Company"). Stock
options granted under this Plan that qualify as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), are
referred to in this Plan as "Incentive Stock Options." Incentive Stock Options
and stock options that do not qualify as such under Section 422 of the Code
("Non-Qualified Stock Options") granted under this Plan are referred to as
"Options."
The Plan was initially adopted on October 29, 1996.
1. PURPOSES.
The purposes of this Plan are to retain the services of non-employee
directors, valued key employees and consultants of the Company, to encourage
such persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the stockholders of
the Company, and to serve as an aid and inducement in the hiring of new
employees and to provide an equity incentive to directors, consultants and other
persons selected by the Board of Directors in accordance with Section 3 below.
2. ADMINISTRATION.
This Plan shall be administered by the full Board of Directors of the
Company (the "Board") or if the Board so desires, by a committee designated by
the Board and composed of two (2) or more "Non-Employee Directors" (as defined
below). The term "Non-Employee Directors" shall have the meaning assigned to it
under Rule 16b-3 (as amended from time to time) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). In the event that the Company is
or becomes subject to the provisions of Section 16 of the Exchange Act, the
Board shall attempt to provide for administration of the Plan, insofar as it
relates to the participation of officers, directors or stockholders of the
Company who at the time in question are subject to the reporting and liability
provisions of Section 16 of the Exchange Act (the "Insiders"), in a manner which
shall qualify the grant, exercise, expiration or surrender of options under this
Plan for the treatment afforded by Rule 16b-3 under the Exchange Act, as amended
from time to time, or any successor rule or regulatory requirement. The term
"Board" when used in any provision of this Plan other than Section 5(n) shall be
deemed to refer to the Board or any committee thereof appointed to administer
this Plan.
1
<PAGE> 2
Subject to the provisions of this Plan, and with a view to effecting
its purpose, the Board shall have sole authority, in its absolute discretion, to
(a) construe and interpret this Plan; (b) define the terms used in this Plan;
(c) prescribe, amend and rescind rules and regulations relating to this Plan;
(d) correct any defect, supply any omission or reconcile any inconsistency in
this Plan; (e) grant Options under this Plan; (f) determine the individuals to
whom Options shall be granted under this Plan and whether the Option is an
Incentive Stock Option or a Non-Qualified Stock Option; (g) determine the time
or times at which Options shall be granted under this Plan; (h) determine the
number of shares of Common Stock subject to each Option, the exercise price of
each Option, the duration of each Option and the times at which each Option
shall become exercisable; (i) determine all other terms and conditions of
Options; and (j) make all other determinations necessary or advisable for the
administration of this Plan. All decisions, determinations and interpretations
made by the Board shall be binding and conclusive on all participants in this
Plan and on their legal representatives, heirs and beneficiaries.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the
time the Option is granted, is an employee of the Company or any Related
Corporation (as defined below), including employees who are directors of the
Company ("Employees"). Non-Qualified Stock Options may be granted to Employees,
Non-Employee Directors and consultants. Options may be granted in substitution
for outstanding options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Company or any subsidiary of the Company. Options
also may be granted in exchange for outstanding Options. Any person to whom an
Option is granted under this Plan is referred to as an "Optionee." Any person
who is the owner of an Option is referred to as a "Holder."
As used in this Plan, the term "Related Corporation," shall mean any
corporation that is a "Parent Corporation" of the Company or "Subsidiary
Corporation" of the Company, as those terms are defined in Sections 424(e) and
424(f), respectively, of the Code (or any successor provisions), and the
regulations thereunder (as amended from time to time).
4. STOCK.
The Board is authorized to grant Options to acquire up to a total of
1,750,000 shares of the Company's authorized but unissued, or reacquired, Common
Stock. The number of shares with respect to which Options may be granted
hereunder is subject to adjustment as set forth in Section 5(m) hereof. In the
event that any outstanding Option expires or is terminated for any reason, the
shares of Common Stock allocable to the unexercised portion of such Option may
again be subject to an Option to the same Optionee (subject to the next
sentence) or to a different person eligible under Section 3 of this Plan. Any
canceled Options will be counted against the maximum number of
2
<PAGE> 3
shares with respect to which Options may be granted to the person previously
holding the canceled Options.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written
agreement approved by the Board (the "Agreement"). Agreements may contain such
provisions, not inconsistent with this Plan, as the Board in its discretion may
deem advisable. All Options also shall comply with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option. In the absence of action to the contrary
by the Board in connection with the grant of an Option, all Options shall be
Non-Qualified Stock Options. The aggregate fair market value (determined at the
Date of Grant, as defined below) of the stock with respect to which Incentive
Stock Options are exercisable for the first time by the Optionee during any
calendar year (granted under this Plan and all other Incentive Stock Option
plans of the Company, a Related Corporation or a predecessor corporation) shall
not exceed $100,000, or such other limit as may be prescribed by the Code as it
may be amended from time to time. Any portion of an Option which exceeds the
annual limit shall not be void but rather shall be a Non-Qualified Stock Option.
(b) Date of Grant.
Each Agreement shall state the date the Board has deemed to be the
effective date of the Option for purposes of this Plan (the "Date of Grant").
(c) Exercise Price.
Each Agreement shall state the price per share of Common Stock at which
it is exercisable. Options granted in substitution for outstanding options of
another corporation in connection with the merger, consolidation, acquisition of
property or stock or other reorganization involving such other corporation and
the Company or any subsidiary of the Company may be granted with an exercise
price equal to the exercise price for the substituted option of the other
corporation, subject to any adjustment consistent with the terms of the
transaction pursuant to which the substitution is to occur.
(i) The per share exercise price for an Incentive Stock
Option shall not be less than the fair market value per share of the Common
Stock at the Date of Grant as determined by the Board in good faith. With
respect to Incentive Stock Options granted to greater-than-ten percent (> 10%)
stockholders of the Company (as determined with reference to Section 424(d) of
the Code), the exercise price per share shall not be less than one hundred ten
percent (110%) of the fair market value per
3
<PAGE> 4
share of the Common Stock at the Date of Grant as determined by the Board in
good faith.
(ii) The per share exercise price for a Non-Qualified Stock
Option shall not be less than eighty-five percent (85%) of the fair market value
per share of the Common Stock at the Date of Grant as determined by the Board in
good faith. With respect to Non-Qualified Stock Options granted to any person
who owns stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, the exercise price per
share shall not be less than one hundred ten percent (110%) of the fair market
value per share of the Common Stock at the Date of Grant as determined by the
Board in good faith.
(d) Duration of Options.
At the time of the grant of the Option, the Board shall designate,
subject to paragraph 5(g) below, the expiration date of the Option. The
expiration date of any Incentive Stock Option granted to a greater-than-ten
percent (> 10%) stockholder of the Company (as determined with reference to
Section 424(d) of the Code) shall not be later than five years from the Date of
Grant. The expiration date of any other Incentive Stock Option shall not be
later than ten (10) years from the Date of Grant. With respect to all other
Options, in the absence of action to the contrary by the Board in connection
with the grant of a particular Option, all Options granted under this Section 5
shall expire ten (10) years from the Date of Grant.
(e) Vesting Schedule.
No Option shall be exercisable until it has vested. The vesting
schedule for each Option may be specified by the Board at the time of grant of
the Option prior to the provision of services with respect to which such Option
is granted, but in no event shall the Board specify a vesting schedule which
permits an Option to vest at a rate less than twenty percent (20%) per year. If
no vesting schedule is specified at the time of grant, the Option shall vest
according to the following schedule:
<TABLE>
<CAPTION>
NUMBER OF YEARS PERCENTAGE OF
FOLLOWING DATE OF GRANT TOTAL
OPTION VESTED
<S> <C>
One 25%
Two 50%
Three 75%
Four 100%
</TABLE>
The Board may specify a vesting schedule for all or any portion of an
Option based on the achievement of performance objectives established in advance
of the commencement by the Optionee of services related to the achievement of
the performance objectives. Performance objectives may be expressed in terms of
one or more of the following: return on equity, return on assets, share price,
market share, sales, earnings per share, costs, net earnings, net worth,
inventories, cash and cash
4
<PAGE> 5
equivalents, gross margin, the Company's performance relative to its internal
business plan or such other basis as determined by the Board. Performance
objectives may be in respect of the performance of the Company as a whole
(whether on a consolidated or unconsolidated basis), a Related Corporation, or a
subdivision, operating unit, product or such other basis. Performance objectives
may be absolute or relative and may be expressed in terms of a progression or a
range. An Option which is exercisable (in whole or in part) upon the achievement
of one or more performance objectives may be exercised only following written
notice to the Optionee from the Board that the performance objective has been
achieved.
(f) Acceleration of Vesting.
The vesting of one or more outstanding options may be accelerated by
the Board at such times and in such amounts as it shall determine in its sole
discretion. The vesting of Options also shall be accelerated under the
circumstances described in Sections 5(m) and 5(n) below.
(g) Term of Option.
Vested Options shall terminate, to the extent not previously exercised,
upon the first to occur of the following events: (i) the expiration of the
Option; (ii) the date of an Optionee's termination of employment or service as a
director or consultant with the Company or any Related Corporation for cause (as
determined in the sole discretion of the Board); (iii) the expiration of ninety
(90) days from the date of an Optionee's termination of employment or service as
a director or consultant with the Company or any Related Corporation for any
reason whatsoever other than cause, death or Disability (as defined below)
unless, the exercise period is extended by the Board until a date not later than
the expiration date of the Option; or (iv) the expiration of one year from (A)
the date of death of the Optionee or (B) cessation of an Optionee's employment
or contractual relationship by reason of Disability (as defined below) unless,
the exercise period is extended by the Board until a date not later than the
expiration date of the Option. If an Optionee's employment or contractual
relationship is terminated by death, any Option held by the Optionee shall be
exercisable only by the person or persons to whom such Optionee's rights under
such Option shall pass by the Optionee's will or by the laws of descent and
distribution of the state or county of the Optionee's domicile at the time of
death. For purposes of the Plan, unless otherwise defined in the Agreement,
"Disability" shall mean any physical, mental or other health condition which
substantially impairs the Optionee's ability to perform his or her assigned
duties for one hundred twenty (120) days or more in any two hundred forty (240)
day period or that can be expected to result in death. The Board shall determine
whether an Optionee has incurred a Disability on the basis of medical evidence
acceptable to the Board. Upon making a determination of Disability, the Board
shall, for purposes of the Plan, determine the date of an Optionee's termination
of employment or contractual relationship.
Unless accelerated in accordance with Section 5(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the
5
<PAGE> 6
Company for any reason whatsoever, including death or Disability. For purposes
of this Plan, transfer of employment between or among the Company and any
Related Corporation, or among Related Corporations shall not be deemed to
constitute a termination of employment with the Company or any Related
Corporation. For purposes of this subsection with respect to Incentive Stock
Options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Board). The foregoing notwithstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless the Optionee's
re-employment rights are guaranteed by statute or by contract.
(h) Exercise of Options.
Options shall be exercisable, either all or in part, at any time after
vesting, until termination. If less than all of the shares included in the
vested portion of any Option are purchased, the remainder may be purchased at
any subsequent time prior to the expiration of the Option term. If the vested
portion of any Option is less than one hundred (100) shares, it may be exercised
with respect to all shares for which it is vested. In all other cases, no
portion of any Option for less than one hundred (100) shares (as adjusted
pursuant to Section 5(m) below) may be exercised. Only whole shares may be
issued pursuant to an Option, and to the extent that an Option covers less than
one (1) share, it is unexercisable.
Options or portions thereof may be exercised by giving written notice
to the Company, which notice shall specify the number of shares to be purchased,
and be accompanied by payment in the amount of the aggregate exercise price for
the Common Stock so purchased, which payment shall be in the form specified in
Section 5(i) below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to the Holder of any Option, until
provision has been made by the Holder, to the satisfaction of the Company, for
the payment of the aggregate exercise price for all shares for which the Option
shall have been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime of an Optionee,
Options are exercisable only by the Optionee or a transferee who takes title to
the Option in the manner permitted by Section 5(l) hereof.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price shall be
paid to the Company in cash or by certified or cashier's check. In addition, the
Holder, at its or the Company's option, may pay for all or any portion of the
aggregate exercise price by complying with one or more of the following
alternatives:
(1) by delivering to the Company shares of Common Stock
previously held by such Holder which shares of Common Stock received shall have
a fair market value at the date of exercise (as determined by the Board) equal
to the aggregate exercise price to be paid by the Optionee upon such exercise;
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<PAGE> 7
(2) by delivering a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price;
(3) by delivering a full recourse promissory note for all
or part of the aggregate exercise price, payable on such terms and bearing such
interest rate as determined by the Board (but in no event less than the minimum
interest rate specified under the Code at which no additional interest would be
imputed and in no event more than the maximum interest rate allowed under
applicable usury laws), which promissory note may be either secured or unsecured
in such manner as the Board shall approve (including, without limitation, by a
security interest in the shares of the Company);
(4) by delivering a combination of (1), (2) and (3) above.
(j) Net Issue Exercise.
Notwithstanding the provisions of Paragraph (i), above, if, at the
date of making the calculation set forth below, the fair market value of one
share of Common Stock is greater than the exercise price of the Option, then in
lieu of exercising the Option for cash, the Holder may elect to convert the
Option and receive Common Stock equal to the value (as determined below) of the
Option (or the portion thereof being exercised) by surrender of the Option
together with a notice of the Holder's election to proceed pursuant to this
Paragraph (j). In such an event, the Company shall issue to the Holder that
number of shares of Common Stock derived utilizing the following formula:
Y (A-B)
X= -------
A
Where X = the number of shares of Common Stock to be issued to
the Holder pursuant to election under this Section 5(j)
Y = the number of shares of Common Stock
purchasable under the Option or, if only a
portion of the Option is being exercised, the
portion of the Option being converted and
canceled (at the date of such calculation)
A = the fair market value of one share of Common
Stock (at the date of such calculation)
B = the exercise price (as adjusted to the date
of such calculation).
For purposes of the above calculation, the "fair market value" of one share of
Common Stock shall equal:
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<PAGE> 8
(i) In the event the Option is exercised in connection with
the Company's initial public offering of Common Stock, the per share offering
price to the public in such public offering.
(ii) In other circumstances in which a public market exists
for the Common Stock at the time of such exercise, the average of the closing
bid and asked prices of the Common Stock quoted in the Over-The-Counter Market
Summary or the last quoted sale price of the Common Stock or the closing price
quoted on the Nasdaq National Market or on any exchange on which the Common
Stock is listed, whichever is applicable, as published in The Wall Street
Journal for the five (5) trading days prior to the date of determination of the
fair market value.
(iii) In all other circumstances, such value as is
established by the Board acting in good faith.
(k) Rights as a Stockholder.
A Holder shall have no rights as a stockholder with respect to any
shares covered by an Option until such Holder becomes a record holder of such
shares, irrespective of whether such Holder has given notice of exercise.
Subject to the provisions of Sections 5(m) and 5(n) hereof, no rights shall
accrue to a Holder and no adjustments shall be made on account of dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights declared on, or created in, the Common Stock for
which the record date is prior to the date the Holder becomes a record holder of
the shares of Common Stock covered by the Option, irrespective of whether such
Holder has given notice of exercise.
(l) Transfer of Option.
No Option granted under this Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of descent and
distribution. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of any Option or of any right or privilege conferred by this
Plan contrary to the provisions hereof, or upon the sale, levy or any attachment
or similar process upon the rights and privileges conferred by this Plan, such
Option shall thereupon terminate and become null and void. During the life of
the optionee, an Option shall be exercisable only by the optionee.
(m) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an Option
unless the exercise of such Option and the issuance and delivery of such shares
shall comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations hereunder and the requirements of
any stock exchange upon which such shares may then be listed, and such issuance
shall be further subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption from registration
for the issuance and sale of such shares.
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The inability of the Company to obtain from any regulatory body the authority
deemed by the Company to be necessary for the lawful issuance and sale of any
shares under this Plan, or the unavailability of an exemption from registration
for the issuance and sale of any shares under this Plan, shall relieve the
Company of any liability with respect to the non-issuance or sale of such
shares.
As a condition to the exercise of an Option, the Board may require the
Holder to represent and warrant in writing at the time of such exercise that the
shares are being purchased only for investment and without any then-present
intention to sell or distribute such shares. At the option of the Board, a
stop-transfer order against such shares may be placed on the stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
stating that such transfer is not in violation of any applicable law or
regulation, may be stamped on the certificates representing such shares in order
to assure an exemption from registration. The Board also may require such other
documentation as may from time to time be necessary to comply with federal and
state securities laws. THE COMPANY HAS NO OBLIGATION TO UNDERTAKE REGISTRATION
OF OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE EXERCISE OF OPTIONS.
(2) The Holder shall pay to the Company by certified or
cashier's check, promptly upon exercise of an Option or, if later, the date that
the amount of such obligations becomes determinable, all applicable federal,
state, local and foreign withholding taxes that the Board, in its discretion,
determines to result upon exercise of an Option or from a transfer or other
disposition of shares of Common Stock acquired upon exercise of an Option or
otherwise related to an Option or shares of Common Stock acquired in connection
with an Option. Upon approval of the Board, a Holder may satisfy such obligation
by complying with one or more of the following alternatives selected by the
Board:
(A) by delivering to the Company shares of Common
Stock previously held by such Holder or by the Company
withholding shares of Common Stock otherwise deliverable
pursuant to the exercise of the Option, which shares of Common
Stock received or withheld shall have a fair market value at
the date of exercise (as determined by the Board) equal to the
tax obligation to be paid by the Optionee upon such exercise;
provided that if the Holder is an Insider or if beneficial
ownership of the shares issuable upon exercise of the Option
is attributable to an Insider pursuant to the regulations
under Section 16 of the Exchange Act, the grant of such Option
to such Holder was specifically approved (or, in the case of
clause (b), ratified) (i) by the entire Board or a committee
of the Board composed solely of two or more Non-Employee
Directors (as defined in Rule 16b-3(b)(3)(i) of the Exchange
Act) or (ii) in compliance with Section 14 of the Exchange Act
by the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting
duly held in accordance with the
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<PAGE> 10
laws of the state of incorporation of the Company, or the
written consent of the holders of a majority of the securities
of the Company entitled to vote, so long as such ratification
occurred no later than the date of the next annual meeting of
stockholders; or
(B) by executing appropriate loan documents approved
by the Board by which the Holder borrows funds from the
Company to pay the withholding taxes due under this Paragraph
2, with such repayment terms as the Board shall select.
(3) The issuance, transfer or delivery of certificates of
Common Stock pursuant to the exercise of Options may be delayed, at the
discretion of the Board, until the Board is satisfied that the applicable
requirements of the federal and state securities laws and the withholding
provisions of the Code have been met.
(n) Stock Dividend, Reorganization or Liquidation.
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Board shall, with respect to each outstanding Option, proportionately
adjust the number of shares of Common Stock subject to such Option, the exercise
price per share or both so as to preserve the rights of the Holder substantially
proportionate to the rights of the Holder prior to such event, and to the extent
that such action shall include an increase or decrease in the number of shares
of Common Stock subject to outstanding Options, the number of shares available
under Section 4 of this Plan shall automatically be increased or decreased, as
the case may be, proportionately, without further action on the part of the
Board, the Company, the Company's stockholders, or any Holder.
(2) If the Company shall at any time declare an
extraordinary dividend with respect to the Common Stock, whether payable in cash
or other property, the Board may, in the exercise of its sole discretion and
with respect to each outstanding Option, proportionately adjust the number of
shares of Common Stock subject to such Option, the exercise price per share or
both so as to preserve the rights of the Holder substantially proportionate to
the rights of the Holder prior to such event, and to the extent that such action
shall include an increase or decrease in the number of shares of Common Stock
subject to outstanding Options, the number of shares available under Section 4
of this Plan shall automatically be increased or decreased, as the case may be,
proportionately, without further action on the part of the Board, the Company,
the Company's stockholders, or any Holder.
(3) If the Company is liquidated or dissolved, the Board
may allow the Holders of any outstanding Options to exercise all or any part of
the unvested portion of the Options held by them, provided they do so prior to
the effective date of such liquidation or dissolution. If the Holders do not
exercise their Options prior to such
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<PAGE> 11
effective date, each outstanding Option shall terminate as of the effective date
of the liquidation or dissolution.
(4) The foregoing adjustments in the shares subject to
Options shall be made by the Board, or by any successor administrator of this
Plan, or by the applicable terms of any assumption or substitution document.
(5) The grant of an Option shall not affect in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge,
consolidate or dissolve, to liquidate or to sell or transfer all or any part of
its business or assets.
(o) Change in Control.
(1) Any and all Options that are outstanding under the
Plan at the time of occurrence of any of the events described in Subparagraphs
(A), (B), (C) and (D) below (an "Eligible Option") shall become immediately
vested and fully exercisable for the periods indicated (each such exercise
period referred to as an "Acceleration Window"):
(A) For a period of forty-five (45) days
beginning on the day on which any Person together with
all Affiliates and Associates (as such terms are defined
below) of such Person shall become the Beneficial Owner
(as defined below) of fifty percent (50%) or more of the
shares of Common Stock then outstanding, but shall not
include the Company, any subsidiary of the Company, any
employee benefit plan of the Company or of any
subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for
or pursuant to the terms of any such employee benefit
plan;
(B) Beginning on the date that a tender or
exchange offer for Common Stock by any Person (other
than the Company, any subsidiary of the Company, any
employee benefit plan of the Company or of any
subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for
or pursuant to the terms of any such employee benefit
plan) is first published or sent or given within the
meaning of Rule 14d-2 under the Exchange Act and
continuing so long as such offer remains open (including
any extensions or renewals of such offer), unless by the
terms of such offer the offeror, upon consummation
thereof, would be the Beneficial Owner of less than
fifty percent (50%) of the shares of Common Stock then
outstanding;
(C) For a period of twenty (20) days beginning on
the day on which the stockholders of the Company (or, if
later, approval by the stockholders of any Person) duly
approve any merger,
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<PAGE> 12
consolidation, reorganization or other transaction
providing for the conversion or exchange of more than
fifty percent (50%) of the outstanding shares of Common
Stock into securities of any Person, or cash, or
property, or a combination of any of the foregoing,
unless the holders of the voting stock of the Company
immediately prior to such transaction hold not less than
fifty percent (50%) of the voting rights in the
surviving entity; or
(D) For a period of twenty (20) days beginning on
the day on which, at any meeting of the stockholders of
the Company involving a contest for the election of
directors, individuals constituting a majority of the
Board who were not the Board's nominees for election
immediately prior to the meeting are elected; provided,
however, that with respect to the events specified in
Subparagraphs (A), (B) and (C) above, such accelerated
vesting shall not occur if the event that would
otherwise trigger the accelerated vesting of Eligible
Options has received the prior approval of a majority of
all of the directors of the Company, excluding for such
purposes the votes of directors who are directors or
officers of, or have a material financial interest in
any Person (other than the Company) who is a party to
the event specified in Subparagraph (A), (B) or (C)
above which otherwise would trigger acceleration of
vesting and provided, further, that no Option which is
to be converted into an option to purchase shares of
Exchange Stock as stated at item (3) below shall be
accelerated pursuant to this Section 5(n).
(2) The exercisability of any Eligible Option which
remains unexercised following expiration of an Acceleration Window shall be
governed by the vesting schedule and other terms of the Agreement representing
such Option.
(3) If the stockholders of the Company receive shares
of capital stock of another Person ("Exchange Stock") in exchange for or in
place of shares of Common Stock in any transaction involving any merger,
consolidation, reorganization or other transaction providing for the conversion
or exchange of all or substantially all outstanding shares of Common Stock into
Exchange Stock, then at the closing of such transaction all Options granted
hereunder shall be converted into options to purchase shares of Exchange Stock
unless the Company (by the affirmative vote of a majority of all of the
directors of the Company, excluding for such purposes the votes of directors who
are directors or officers of, or have a material financial interest in the
Person issuing the Exchange Stock and any Affiliate of such Person), in its sole
discretion, determines that any or all such Options granted hereunder shall not
be so converted but instead shall terminate. The amount and price of converted
Options shall be determined by adjusting the amount and price of the Options
granted hereunder in the same proportion as used for determining the shares of
Exchange Stock the holders of the Common Stock received in such merger,
consolidation, reorganization or other
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<PAGE> 13
transaction. Unless altered by the Board, the vesting schedule set forth in the
Agreement shall continue to apply to the Options granted for Exchange Stock.
For the purposes of this Section 5(n): (i) "Person" shall include any
individual, firm, corporation, partnership or other entity; (ii) "Affiliate" and
"Associate" shall have the meanings assigned to them in Rule 12b-2 under the
Exchange Act; and (iii) "Beneficial Owner" shall have the meaning assigned to it
in Rule 16a-I under the Exchange Act.
6. EFFECTIVE DATE; TERM.
This Plan shall be effective as of September 1, 1996. Incentive Stock
Options may be granted by the Board from time to time thereafter until the tenth
anniversary of such date. Non-Qualified Stock Options may be granted until this
Plan is terminated by the Board in its sole discretion. Termination of this Plan
shall not terminate any Option granted prior to such termination. Any Options
granted by the Board prior to the approval of this Plan by the stockholders of
the Company shall be granted subject to ratification of this Plan by the
stockholders of the Company within twelve (12) months after this Plan is adopted
by the Board. The Board may require any stockholder approval that it considers
necessary for the Company to comply with or to avail the Company and/or the
Optionees of the benefits of any securities, tax, market listing or other
administrative or regulatory requirement. If such stockholder ratification is
sought within twelve (12) months after this Plan is adopted by the Board and
such stockholder ratification is not obtained, each and every Option granted
under this Plan shall be null and void and shall convey no rights to the Holder
thereof.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Board, and nothing contained in this
Plan shall be construed as giving any person any right to participate under this
Plan. The grant of an Option shall in no way constitute any form of agreement or
understanding binding on the Company or any Related Corporation, express or
implied, that the Company or any Related Corporation will employ or contract
with an Optionee for any length of time, nor shall it interfere in any way with
the Company's or, where applicable, a Related Corporation's right to terminate
Optionee's employment at any time, which right is hereby reserved.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock
issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.
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<PAGE> 14
10. INDEMNIFICATION OF BOARD.
In addition to all other rights of indemnification they may have as
members of the Board, directors shall be indemnified by the Company for all
reasonable expenses and liabilities of any type or nature, including attorneys'
fees, incurred in connection with any action, suit or proceeding to which they
or any of them are a party by reason of, or in connection with, this Plan or any
Option granted under this Plan, and against all amounts paid by them in
settlement thereof (provided that such settlement is approved by independent
legal counsel selected by the Company), except to the extent that such expenses
relate to matters for which it is adjudged that such director is liable for
willful misconduct; provided, that within fifteen (15) days after the
institution of any such action, suit or proceeding, the director involved
therein shall, in writing, notify the Company of such action, suit or
proceeding, so that the Company may have the opportunity to make appropriate
arrangements to prosecute or defend the same.
11. AMENDMENT OF PLAN.
The Board may, at any time, modify, amend or terminate this Plan or
modify or amend Options granted under this Plan, including, without limitation,
such modifications or amendments as are necessary to maintain compliance with
applicable statutes, rules or regulations; provided, however, no amendment with
respect to an outstanding Option which has the effect of reducing the benefits
afforded to the Holder thereof shall be made over the objection of such Holder;
provided further, that the events triggering acceleration of vesting of
outstanding Options may be modified, expanded or eliminated without the consent
of Holders. The Board may condition the effectiveness of any such amendment on
the receipt of stockholder approval at such time and in such manner as the Board
may consider necessary for the Company to comply with or to avail the Company,
the Optionees or both of the benefits of any securities, tax, market listing or
other administrative or regulatory requirement which the Board determines to be
desirable. Without limiting the generality of the foregoing, the Board may
modify grants to persons who are eligible to receive Options under this Plan who
are foreign nationals or employed outside the United States to recognize
differences in local law, tax policy or custom.
Date Approved by Board of Directors of Company:
Date Approved by Stockholders of Company:
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<PAGE> 1
Exhibit 99.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT amends and restates, as
of July 31, 1999, that Amended and Restated Employment Agreement made and
entered into as of January 1, 1998, by and between Donald P. Francis, a resident
of California ("Francis"), and VaxGen Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, the Company desires to continue to employ Francis as its
President and Francis desires to be so employed; and
WHEREAS, the Company and Francis desire to set forth in writing the
terms of their agreement with respect to Francis's continued employment; and
WHEREAS, the Company and Francis desire to amend and restate Section 16
of the Amended and Restated Employment Agreement executed by and between Francis
and the Company as of January 1, 1998 to clarify the terms therein contained;
and
WHEREAS, this Agreement replaces and supersedes the Amended and
Restated Employment Agreement executed by and between Francis and the Company as
of January 1, 1998:
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein, the parties agree as follows:
1. Employment. The Company hereby employs Francis as its President
and Francis hereby accepts such employment upon the terms and conditions set
forth in this Agreement.
2. Term. Francis's employment, which began on January 4, 1996, will
continue for a term ending December 31, 2002. Thereafter, Francis's employment
will be automatically renewed for successive one-year terms, unless notice of
termination is given by either party to the other at least thirty days before
the expiration of the then current term.
3. Business Plan. The Business Plan of the Company will be to
develop, test, and market a vaccine for human immune deficiency virus (HIV).
4. Duties. Francis will perform such executive and administrative
duties consistent with his position as President of the Company as are
reasonably assigned to him by the Board and will be given such executive and
administrative powers and authority as may be needed to carry out those duties,
and as are consistent with the office of the President as set forth in the
Charter and Bylaws of the Company. Francis will be responsible as President for
scientific strategy, clinical testing, regulatory
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<PAGE> 2
activities, and day-to-day management of the Company. Francis will also be
Chairman of the Scientific Advisory Board to the Company. The Company will
provide to Francis an office and staff in South San Francisco as are required
for the performance of his duties. Francis agrees to serve as Director of the
Company and the Company agrees to cause Francis to be elected to the Board of
Directors.
5. Compensation. The Company will pay Francis an annual base salary
of $250,000, commencing January 1, 1998. Francis's annual base salary will be
payable in equal installments not less frequently than monthly. Francis will
have the opportunity for an annual bonus of up to 30% of annual salary, such
bonus to be determined by the Board of Directors. Payment of the bonus will
occur within 30 days of the first Board meeting of each calendar year.
6. Expenses. The Company will reimburse Francis for travel,
entertainment and other expenses reasonably incurred by him in connection with
his employment under this Agreement upon presentation of appropriate vouchers or
receipts.
7. Benefits. During the terms of his employment, Francis will be
entitled to the fringe benefits that are generally made available to all
employees of the Company.
8. Early Termination of Employment. Employment under this Agreement
will terminate prior to expiration of the term upon any of the following:
(a) Death. Francis's employment hereunder shall terminate upon
his death.
(b) Disability. The Company may terminate Francis's employment
hereunder if he has been unable to perform his duties hereunder for a period of
six consecutive months and if he has not resumed on a full-time basis the
performance of such duties within thirty days after written notice from the
Company of its intent to terminate his employment due to disability.
(c) Cause. The Company may terminate Francis's employment
hereunder for Cause. For purposes of this Agreement, the term "Cause" means (i)
willful and repeated failure by Francis to perform his duties hereunder which is
not remedied within thirty days after written notice from the Company, (ii)
conviction of Francis for a felony, or (iii) Francis's dishonesty that is
demonstrably and materially injurious to the Company.
(d) Termination by Francis. Francis may terminate his employment
hereunder for Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean (i) the Company substantially reducing Francis's duties,
position, authority or responsibility hereunder and not reinstating the same
within thirty days after written notice from Francis, or (ii) breach by the
Company of its obligations under paragraphs 4 through 8 hereof if not remedied
within thirty days after written notice from Francis, (iii) reduction of
Francis's compensation, (iv) change of control of the Company (see Section 18),
(v) Francis's loss of board position.
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<PAGE> 3
(e) Termination without Cause. The Company shall be obligated, if
termination by the Company occurs without cause or if termination by Francis for
Good Reason occurs, to pay in full all compensation due for the remaining
duration of this contract within 10 days of the notice of termination.
9. Restrictive Covenants.
(a) Confidential Information. Francis acknowledges that, during
the course of his employment with the Company, he will have access to
confidential information and biological materials not generally known outside
the Company (whether conceived or developed by Francis or others) and
confidential information and biological materials entrusted to the Company by
third parties, including, without limitation, trade secrets, techniques,
formulae, biological materials, marketing and other business plans, data,
strategies and forecasts (collectively, "Confidential Information"). Any
Confidential Information conceived or developed by Francis during employment
will be the exclusive property of the Company. Except as may be necessary in
connection with the Company's business, Francis will not (during or after his
employment with the Company) disclose Confidential Information to any third
person, firm or entity or use Confidential Information for his own purposes or
for the benefit or any third person, firm or entity. In his work for the
Company, Francis will refrain from unauthorized use or disclosure of information
and biological materials owned by former employers or other third parties.
(b) Inventions. Francis will promptly disclose to the Company any
discoveries, inventions, formulae and techniques, whether or not patentable,
made, conceived or first reduced to practice by him, either alone or together
with others, during his employment with the Company (collectively, the
"Inventions"). Francis hereby assigns to the Company all of his right, title and
interest in and to any Inventions. Francis will execute such documents and take
such other actions as may be reasonably requested by the Company (at the
Company's expense) to enable the Company to apply for, obtain, maintain and
enforce patents on any of the Inventions or to facilitate the transfer or
assignment of any of the Company's rights with respect to the Inventions and
patents.
(c) Company Documents. Upon the termination of his employment,
Francis will deliver to the Company all documents and other tangible property
containing Confidential Information which are then in his possession or control.
(d) Covenant Not to Compete. Francis acknowledges that his duties
hereunder and the services he will provide to the Company are of a special,
unique, unusual and extraordinary character, which gives this Agreement
particular value to the Company, and that it would be difficult to employ any
individual or individuals to replace Francis in the performance of such duties
and services. Therefore, during employment and for a period of one year after
the termination of his employment with the Company, Francis will not, directly
or indirectly, enter into, organize, control, engage in, be employed by, serve
as a consultant to, be an officer or director of or have any direct or indirect
investment in any business, person, partnership, association, firm or
corporation
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<PAGE> 4
engaged in any business activity (including, but not limited to, research,
development, manufacturing, selling, leasing, licensing or providing services)
which is competitive with the business and/or scientific activities that the
Company is developing or exploiting during Francis's employment with the
Company. Nothing contained in this Agreement shall be construed to prevent
Francis from owning at any time, directly or indirectly, as much as 5% of any
class of equity securities issued by any corporation or other entity which are
publicly traded and registered under the Securities and Exchange Act of 1934, as
amended.
(e) Miscellaneous. The restrictive covenants set forth in the
preceding Section 9(d) will not be applicable or enforceable if Francis's
employment is terminated prior to the expiration of the term of this Agreement
either by the Company without Cause and for disability pursuant to subparagraph
8(b) or by Francis for Good Reason.
10. Indemnification. The Company will indemnify Francis to the
fullest extent permitted by law and will hold harmless from and against any
claim, liability or expense (including reasonable attorneys' fees) made against
or incurred by Francis in connection with his relationship with the Company.
This obligation will include, without limitation, prompt payment in advance of
any and all costs of defending the same, including attorney fees.
11. No Impediment to Agreement. Except as otherwise disclosed herein,
Francis hereby represents to the Company that he is not, as of the date hereof,
and will not be, during employment with the Company, employed under contract,
oral or written, by any other person, firm or entity and is not and will not be
bound by the provisions of any restrictive covenant or confidentiality agreement
which would constitute an impediment to, or restriction upon, his ability to
enter into this Agreement and to perform the duties of his employment.
12. Notices. Any notice under this Agreement must be in writing and
will be deemed to have been given when personally delivered or mailed by
first-class or express mail to the recipient at the following address (or such
other address as shall be specified by prior written notice):
To the Company: VaxGen, Inc.
1000 Marina Blvd., Suite 200
Brisbane, CA 94005
Copy to:
To Donald Francis: Dr. Donald Francis
VaxGen, Inc.
1000 Marina Blvd., Suite 200
Brisbane, CA 94005
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<PAGE> 5
13. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. If any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or the interpretation of this Agreement in any other jurisdiction.
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the law
of conflicts.
15. Successors and Assigns. The services and duties to be performed
by Francis hereunder are personal and may not be assigned. This Agreement shall
be binding upon and inure to the benefit of the Company, its successors and
assigns, and Francis, his heirs and representatives.
16. Success Bonus. In recognition of the success of the Company,
Francis shall receive a one-time success bonus. Success shall be considered to
have been achieved if either of the following tests is met (either of which
shall be an Event of Success): (i) the public market valuation of a share of the
Company's common stock, as computed on a 30 day trailing average based on the
average of the daily closing price of the Company's Common Stock over such
period as reported by the Nasdaq Stock Market, is equal to or greater than four
(4) times the valuation of the initial private placement ($7.00 per share, as
adjusted for the April 1999 reverse stock split); or (ii) there is an
acquisition of the Company through tender offer or otherwise in which all
shareholders have the opportunity to participate and realize a value equal to or
greater than four (4) times the valuation of the initial private placement
($7.00 per share, as adjusted for the April 1999 reverse stock split). The
Compensation Committee shall notify Francis when an Event of Success has
occurred. Upon the occurrence of an Event of Success, Francis shall be entitled
to receive a success bonus of 125,000 shares of common stock (as adjusted for
the April 1999 reverse stock split). All share and price figures set forth in
this provision shall be adjusted proportionately for stock splits, reverse stock
splits, dividends, combinations, consolidations or subdivisions of shares of the
Company's capital stock.
17. Change of Control. In the event following the closing of the
original public offering or private financing, the Company undergoes a change of
control by virtue of any person or entity, or affiliated group of persons or
entities, increasing its shareholding in the Company to a level of 50% or more
of the voting stock of the Company, this Agreement shall terminate and all
salary obligations to Francis outstanding in this Agreement shall be paid in
full.
18. Complete Agreement. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements between the parties concerning the subject
matter hereof.
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19. Waiver. Failure by either party to insist upon strict adherence
to any one or more of the provisions of this Agreement on one or more occasions
shall not be construed as a waiver, nor shall it deprive that party of the right
to require strict compliance thereafter.
20. Survival. The obligations set forth in paragraphs 10(a) and 11
shall survive termination of this Agreement.
21. Amendments. No amendment hereto, or waivers or releases of
obligations or liabilities hereunder, shall be effective unless agreed to in
writing by the parties hereto.
22. Withholding. The Company may deduct and withhold from the
payments to be made to Francis hereunder any amounts required to be deducted and
withheld by the Company under the provisions of any statute, law, regulation or
ordinance now or thereafter enacted.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
VaxGen, Inc.
By: /s/ ROBERT C. NOWINSKI
-----------------------------
Its: Chairman
-----------------------------
/s/ DONALD P. FRANCIS
- -----------------------------
Donald P. Francis
6
<PAGE> 1
Exhibit 99.4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT amends and restates, as
of July 31, 1999, that Amended and Restated Employment Agreement made and
entered into as of January 1, 1998, by and between Robert C. Nowinski, a
resident of Washington ("Nowinski"), and VaxGen Inc., a Delaware corporation
(the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to continue to employ Nowinski as its
Chairman of the Board of Directors and Nowinski desires to be so employed; and
WHEREAS, the Company and Nowinski desire to set forth in writing the
terms of their agreement with respect to Nowinski's continued employment; and
WHEREAS, the Company and Nowinski desire to amend and restate Section
16 of the Amended and Restated Employment Agreement executed by and between
Nowinski and the Company as of January 1, 1998 to clarify the terms therein
contained; and
WHEREAS, this Agreement replaces and supersedes the Amended and
Restated Employment Agreement executed by and between Nowinski and the Company
as of January 1, 1998:
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants contained herein, the parties agree as follows:
1. Employment. The Company hereby employs Nowinski as its Chairman
of the Board of Directors and Nowinski hereby accepts such employment upon the
terms and conditions set forth in this Agreement.
2. Term. Nowinski's employment, which began on November 22, 1995,
will continue for a term ending December 31, 2002. Thereafter, Nowinski's
employment will be automatically renewed for successive one-year terms, unless
notice of termination is given by either party to the other at least thirty days
before the expiration of the then-current term.
3. Business Plan. The Business Plan of the Company will be to
develop, test, and market a vaccine for human immune deficiency virus (HIV).
4. Duties. Nowinski will perform such executive and administrative
duties consistent with his position as Chairman of the Board of Directors of the
Company as are reasonably assigned to him by the Board and will be given such
executive and administrative powers and authority as may be needed to carry out
those duties, and as
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are consistent with the office of the Chairman of the Board of Directors as set
forth in the Charter and Bylaws of the Company. Nowinski will be responsible as
Chairman of the Board for corporate finance, supervision of all securities
related matters, including corporate finance and reporting requirements to
government agencies, and corporate shareholder and public relations. Nowinski
will also serve on the Scientific Advisory Board of the Company and shall be the
principal representative for VaxGen with its senior shareholder, Genentech. The
Company will provide to Nowinski an office and staff in Seattle as are required
for the performance of his duties. Nowinski agrees to serve as Director of the
Company and the Company agrees to cause Nowinski to be elected to the Board of
Directors and to be elected Chairman of the Board of Directors.
5. Compensation. The Company will pay Nowinski an annual base salary
of $250,000, commencing January 1, 1998. Nowinski's annual base salary will be
payable in equal installments not less frequently than monthly.
6. Expenses. The Company will reimburse Nowinski for travel,
entertainment and other expenses reasonably incurred by him in connection with
his employment under this Agreement upon presentation of appropriate vouchers or
receipts.
7. Benefits. During the terms of his employment, Nowinski will be
entitled to the fringe benefits that are generally made available to all
employees of the Company.
8. Early Termination of Employment. Employment under this Agreement
will terminate prior to expiration of the term upon any of the following:
(a) Death. Nowinski's employment hereunder shall terminate upon
his death.
(b) Disability. The Company may terminate Nowinski's employment
hereunder if he has been unable to perform his duties hereunder for a period of
six consecutive months and if he has not resumed on a full-time basis the
performance of such duties within thirty days after written notice from the
Company of its intent to terminate his employment due to disability.
(c) Cause. The Company may terminate Nowinski's employment
hereunder for Cause. For purposes of this Agreement, the term "Cause" means (i)
willful and repeated failure by Nowinski to perform his duties hereunder which
is not remedied within thirty days after written notice from the Company, (ii)
conviction of Nowinski for a felony, or (iii) Nowinski's dishonesty that is
demonstrably and materially injurious to the Company.
(d) Termination by Nowinski. Nowinski may terminate his
employment hereunder for Good Reason. For purposes of this Agreement, the term
"Good Reason" shall mean (i) the Company substantially reducing Nowinski's
duties, position, authority or responsibility hereunder and not reinstating the
same within thirty days after written notice from Nowinski, or (ii) breach by
the Company of its obligations under
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<PAGE> 3
paragraphs 4 through 8 hereof if not remedied within thirty days after written
notice from Nowinski, (iii) reduction of Nowinski's compensation, (iv) change of
control of the Company (see Section 18), (v) Nowinski's loss of board position.
(e) Termination without Cause. If termination by the Company
occurs without cause or with cause under Section 9(c)(i) (but not under Sections
9(c)(ii) or (iii)) or if termination by Nowinski for Good Reason occurs, the
Company shall be obligated to pay in full all compensation due for the remaining
duration of this contract within 10 days of the notice of termination.
9. Restrictive Covenants.
(a) Confidential Information. Nowinski acknowledges that, during
the course of his employment with the Company, he will have access to
confidential information and biological materials not generally known outside
the Company (whether conceived or developed by Nowinski or others) and
confidential information and biological materials entrusted to the Company by
third parties, including, without limitation, trade secrets, techniques,
formulae, biological materials, marketing and other business plans, data,
strategies and forecasts (collectively, "Confidential Information"). Any
Confidential Information conceived or developed by Nowinski during employment
will be the exclusive property of the Company. Except as may be necessary in
connection with the Company's business, Nowinski will not (during or after his
employment with the Company) disclose Confidential Information to any third
person, firm or entity or use Confidential Information for his own purposes or
for the benefit of any third person, firm or entity. In his work for the
Company, Nowinski will refrain from unauthorized use or disclosure of
information and biological materials owned by former employers or other third
parties.
(b) Inventions. Nowinski will promptly disclose to the Company
any discoveries, inventions, formulae and techniques, whether or not patentable,
made, conceived or first reduced to practice by him, either alone or together
with others, during his employment with the Company (collectively, the
"Inventions"). Nowinski hereby assigns to the Company all of his right, title
and interest in and to any Inventions. Nowinski will execute such documents and
take such other actions as may be reasonably requested by the Company (at the
Company's expense) to enable the Company to apply for, obtain, maintain and
enforce patents on any of the Inventions or to facilitate the transfer or
assignment of any of the Company's rights with respect to the Inventions and
patents.
NOTICE (REQUIRED BY WASHINGTON STATUTE): This subparagraph 9(b)
does not apply to an invention for which no equipment, supplies, facility or
trade secret information of the Company was used and which was developed
entirely on Nowinski's own time, unless (i) the invention relates (A) directly
to the business of the Company, or (B) to the Company's actual or demonstrably
anticipated research of development, or (ii) the invention results from any work
performed by Nowinski for the Company.
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(c) Company Documents. Upon the termination of his employment,
Nowinski will deliver to the Company all documents and other tangible property
containing Confidential Information which are then in his possession or control.
(d) Covenant Not to Compete. Nowinski acknowledges that his
duties hereunder and the services he will provide to the Company are of a
special, unique, unusual and extraordinary character, which gives this Agreement
particular value to the Company, and that it would be difficult to employ any
individual or individuals to replace Nowinski in the performance of such duties
and services. Therefore, during employment and for a period of one year after
the termination of his employment with the Company, Nowinski will not, directly
or indirectly, enter into, organize, control, engage in, be employed by, serve
as a consultant to, be an officer or director of or have any direct or indirect
investment in any business, person, partnership, association, firm or
corporation engaged in any business activity (including, but not limited to,
research, development, manufacturing, selling, leasing, licensing or providing
services) which is competitive with the business and/or scientific activities
that the Company is developing or exploiting during Nowinski's employment with
the Company. Nothing contained in this Agreement shall be construed to prevent
Nowinski from owning at any time, directly or indirectly, as much as 5% of any
class of equity securities issued by any corporation or other entity which are
publicly traded and registered under the Securities and Exchange Act of 1934, as
amended.
(e) Miscellaneous. The restrictive covenants set forth in the
preceding Section 9(d) will not be applicable or enforceable if Nowinski's
employment is terminated prior to the expiration of the term of this Agreement
either by the Company without Cause and for disability pursuant to subparagraph
8(b) or by Nowinski for Good Reason.
10. Indemnification. The Company will indemnify Nowinski to the
fullest extent permitted by law and will hold harmless from and against any
claim, liability or expense (including reasonable attorneys' fees) made against
or incurred by Nowinski in connection with his relationship with the Company.
This obligation will include, without limitation, prompt payment in advance of
any and all costs of defending the same, including attorney fees.
11. No Impediment to Agreement. Except as otherwise disclosed herein,
Nowinski hereby represents to the Company that he is not, as of the date hereof,
and will not be, during employment with the Company, employed under contract,
oral or written, by any other person, firm or entity and is not and will not be
bound by the provisions of any restrictive covenant or confidentiality agreement
which would constitute an impediment to, or restriction upon, his ability to
enter into this Agreement and to perform the duties of his employment.
12. Notices. Any notice under this Agreement must be in writing and
will be deemed to have been given when personally delivered or mailed by
first-class or
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<PAGE> 5
express mail to the recipient at the following address (or such other address as
shall be specified by prior written notice):
To the Company: VaxGen, Inc.
1000 Marina Blvd., Suite 200
Brisbane, CA 94005
Copy to:
To Dr. Robert C. Nowinski: 23210 Woodway Park Road
Edmonds, WA 98020
13. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. If any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or the interpretation of this Agreement in any other jurisdiction.
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the law
of conflicts.
15. Successors and Assigns. The services and duties to be performed
by Nowinski hereunder are personal and may not be assigned. This Agreement shall
be binding upon and inure to the benefit of the Company, its successors and
assigns, and Nowinski, his heirs and representatives.
16. Success Bonus. In recognition of the success of the Company,
Nowinski shall receive a one-time success bonus. Success shall be considered to
have been achieved if either of the following tests is met (either of which
shall be an Event of Success): (i) the public market valuation of a share of the
Company's common stock, as computed on a 30 day trailing average based on the
average of the daily closing price of the Company's Common Stock over such
period as reported by the Nasdaq Stock Market, is equal to or greater than four
(4) times the valuation of the initial private placement ($7.00 per share, as
adjusted for the April 1999 reverse stock split); or (ii) there is an
acquisition of the Company through tender offer or otherwise in which all
shareholders have the opportunity to participate and realize a value equal to or
greater than four (4) times the valuation of the initial private placement
($7.00 per share, as adjusted for the April 1999 reverse stock split). The
Compensation Committee shall notify Nowinski when an Event of Success has
occurred. Upon the occurrence of an Event of Success, Nowinski shall be entitled
to receive a success bonus of 125,000 shares of common stock (as adjusted for
the April 1999 reverse stock split). All share and price figures set forth in
this provision shall be adjusted proportionately for stock
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<PAGE> 6
splits, reverse stock splits, dividends, combinations, consolidations or
subdivisions of shares of the Company's capital stock.
17. Change of Control. In the event following the closing of the
original public offering or private financing, the Company undergoes a change of
control by virtue of any person or entity, or affiliated group of persons or
entities, increasing its shareholding in the Company to a level of 50% or more
of the voting stock of the Company, this Agreement shall terminate and all
salary obligations to Nowinski outstanding in this Agreement shall be paid in
full.
18. Complete Agreement. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements between the parties concerning the subject
matter hereof.
19. Waiver. Failure by either party to insist upon strict adherence
to any one or more of the provisions of this Agreement on one or more occasions
shall not be construed as a waiver, nor shall it deprive that party of the right
to require strict compliance thereafter.
20. Survival. The obligations set forth in paragraphs 10(a) and 11
shall survive termination of this Agreement.
21. Amendments. No amendment hereto, or waivers or releases of
obligations or liabilities hereunder, shall be effective unless agreed to in
writing by the parties hereto.
22. Withholding. The Company may deduct and withhold from the
payments to be made to Nowinski hereunder any amounts required to be deducted
and withheld by the Company under the provisions of any statute, law, regulation
or ordinance now or thereafter enacted.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
VaxGen, Inc.
By: /s/ CARTER LEE
------------------------------------------
Its: SVP, Finance and Administration
------------------------------------------
/s/ ROBERT C. NOWINSKI
- ---------------------------------------------
Robert C. Nowinski
6
<PAGE> 1
Exhibit 99.5
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made and entered into
as of July 31, 1999 by and between Phillip Berman, a resident of California
("Berman"), and VaxGen, Inc. a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Company desires to continue to employ Berman as its Senior
Vice President of Research and Development and Berman desires to be so employed;
and
WHEREAS, the Company and Berman desire to set forth in writing the
terms of their agreement with respect to Berman's continued employment; and
WHEREAS, the Company and Berman desire to amend and restate Section 5
of the Amended and Restated Employment Agreement executed by and between Berman
and the Company on June 28, 1999 to clarify the terms therein contained; and
WHEREAS, this Agreement replaces and supersedes the Amended and
Restated Employment Agreement executed by and between Berman and the Company on
June 28, 1999:
NOW, THEREFORE. in consideration of the promises and of the mutual
covenants contained herein, the parties agree as follows:
1. Term. Berman's employment, which began on November 15, 1997, will
continue in its initial term of three years, expiring on November 14, 2000.
Thereafter, Berman's employment will be automatically renewed for successive
one-year terms, unless notice of termination is given by either party to the
other at least thirty days before the expiration of the then current term.
2. Duties. Berman will perform such executive and administrative
duties consistent with his position as Senior Vice President of Research and
Development of the Company as are reasonably assigned to him by the Board and
will be given such executive and administrative powers and authority as may be
needed to carry out those duties. Berman shall report directly to the President
of VaxGen. Berman will be responsible as Senior Vice President of Research and
Development for all activities regarding research in the basic sciences and in
clinical research (including laboratory clinical support) required for the
Company's development of its HIV vaccine, as well as other products. The Company
will provide to Berman an office, laboratory space and staff in South San
Francisco as are required for the performance of his duties. Berman agrees to
serve as Director of the Company and the Company agrees to cause Berman to be
elected to the Board of Directors.
3. Compensation. The Company will pay Berman an annual base salary
of $200,000. Berman's annual base salary will be payable in equal installments
not less
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<PAGE> 2
frequently than monthly. Berman shall be entitled to an annual bonus of up to
30% of salary, such bonus to be determined solely by the Company's Board of
Directors. Berman's salary and bonus will be considered annually for potential
increase by the Compensation Committee of the Board of Directors.
4. Stock Options.
(a) Initial Stock Option Grant. Berman received incentive and
non-qualified options to purchase 200,000 (400,00 shares, pre-reverse split)
shares of Common Stock of VaxGen at $7.00 per share ($3.50 per share,
pre-reverse split) (with as many shares allocated to an incentive stock option
as is permissible under applicable laws). The stock options will continue to be
administered according to the VaxGen Stock Option Plan and shall vest over time
as indicated in the Stock Option Plan; provided, however, that the option
agreements shall provide that the vesting of the options shall accelerate in
full immediately upon occurrence of any of the following events: (i) Change of
Control (as defined below) of VaxGen; (ii) full enrollment of Phase III clinical
trials of VaxGen B/E and B/B vaccines or (iii) termination of Berman's
employment without cause or by Berman for Good Reason (as defined below). Upon
an occurrence of event described in (iii) above, the right to exercise all
nonqualified stock options shall be extended to one year from the date of
termination.
(b) Stock Option Bonus. Berman shall be entitled to an annual
stock option bonus of a grant of up to 15,000 additional stock options, such
bonus to be determined solely by the Company's Board of Directors.
5. Success Bonus. In recognition of the success of the Company,
Berman shall receive a one-time success bonus. Success shall be considered to
have been achieved if either of the following tests is met (either of which
shall be an Event of Success): (i) the public market valuation of a share of the
Company's common stock, as computed on a 30 day trailing average based on the
average of the daily closing price of the Company's Common Stock over such
period as reported by the Nasdaq Stock Market, is equal to or greater than four
(4) times the valuation of the initial private placement ($7.00 per share, as
adjusted for the April 1999 reverse stock split); or (ii) there is an
acquisition of the Company through tender offer or otherwise in which all
shareholders have the opportunity to participate and realize a value equal to or
greater than four (4) times the valuation of the initial private placement
($7.00 per share, as adjusted for the April 1999 reverse stock split). The
Compensation Committee shall notify Berman when an Event of Success has
occurred. Upon the occurrence of an Event of Success, Berman shall be entitled
to receive a success bonus of 75,757 shares of common stock (as adjusted for the
April 1999 reverse stock split). All share and price figures set forth in this
provision shall be adjusted proportionately for stock splits, reverse stock
splits, dividends, combinations, consolidations or subdivisions of shares of the
Company's capital stock.
6. Change of Control. In the event the Company undergoes a change of
control (a "Change of Control") by virtue of any person or entity, or affiliated
group, of persons or entities, increasing its shareholding in the Company to a
level of 50% or
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<PAGE> 3
more of the voting stock of the Company, this Agreement shall terminate and all
salary obligations to Berman outstanding in this Agreement shall be paid in
full.
7. Expenses. The Company will reimburse Berman for travel,
entertainment and other expenses reasonably incurred by him in connection with
his employment under this Agreement upon presentation of appropriate vouchers or
receipts.
8. Benefits. Berman shall have the right, on the same basis as other
members of senior management of VaxGen, to participate in and to receive
benefits under any of VaxGen's employee benefit plans, in effect from time to
time. In addition, Berman shall be entitled to the benefits afforded to other
members of senior management under VaxGen's vacation, holiday and business
expense reimbursement policies.
9. Early Termination of Employment. Employment under this Agreement
will terminate prior to expiration of the term upon any of the following:
(a) Death. Berman's employment hereunder shall terminate upon his
death.
(b) Disability. The Company may terminate Berman's employment
hereunder if he has been unable to perform his duties hereunder for a period of
six consecutive months and if he has not resumed on a full-time basis the
performance of such duties within thirty days after written notice from the
Company of its intent to terminate his employment due to disability.
(c) Cause. The Company may terminate Berman's employment
hereunder for Cause. For purposes of this Agreement, the term "Cause" means (i)
willful and repeated failure by Berman to perform his duties hereunder which is
not remedied within thirty days after written notice from the Company, (ii)
conviction of Berman for a felony, or (iii) Berman's dishonesty that is
demonstrably injurious to the Company.
(d) Termination by Berman. Berman may terminate his employment
hereunder for Good Reason. For purposes of this Agreement, the term "Good
Reason" shall mean (i) the Company substantially reducing Berman's duties,
position, authority or responsibility hereunder and not reinstating the same
within thirty days after written notice from Berman, or (ii) breach by the
Company of its obligations under this Agreement if not remedied within thirty
days after written notice from Berman.
10. Benefits Upon Termination.
(a) Voluntary Termination, Termination for Cause Due to Death or
Disability. In the event of Berman's voluntary termination from employment with
VaxGen or termination of Berman's employment as a result of his death or
disability or for Cause, Berman shall be entitled to no compensation or benefits
from VaxGen other than those earned under paragraph 3 above through the date of
his termination or in the case of any stock options, vested through the time of
his termination.
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<PAGE> 4
(b) Termination Without Cause or For Good Reason. If Berman's
employment is terminated by VaxGen for any reason other than for cause or by
Berman for Good Reason, Berman shall be entitled to the following separation
benefits:
(i) all accrued compensation (including pro-rated target
bonus) and benefits through the date of termination;
(ii) continued payment of Berman's salary at his Base Salary
rate, less applicable withholding, for twelve (12) months following his
termination; and
(iii) acceleration of vesting of his options as provided in
paragraph 4(a) above.
11. Restrictive Covenants.
(a) Confidential Information. Berman acknowledges that, during
the course of his employment with the Company, he will have access to
confidential information and biological materials not generally known outside
the Company (whether conceived or developed by Berman or others) and
confidential information and biological materials entrusted to the Company by
third parties, including, without limitations, trade secrets, techniques,
formulae, biological materials, marketing and other business plans, data,
strategies and forecasts (collectively, "Confidential Information"). Any
Confidential Information conceived or developed by Berman during employment will
be the exclusive property of the Company. Except as may be necessary in
connection with the Company's business, Berman will not (during or after his
employment with the Company) disclose Confidential Information to any third
person, firm or entity or use Confidential Information for his own purposes or
for the benefit of any third person, firm or entity. In his work for the
Company, Berman will refrain from unauthorized use or disclosure of information
and biological materials owned by former employers or other third parties.
(b) Inventions. Berman will promptly disclose to the Company any
discoveries, inventions, formulae and techniques, whether or not patentable,
made, conceived or first reduced to practice by him, either alone or together
with others, during his employment with the Company (collectively, the
"Inventions"). Berman hereby assigns to the Company all of his right, title and
interest in and to any Inventions. Berman will execute such documents and take
such other actions as may be reasonably requested by the Company (at the
Company's expense) to enable the Company to apply for, obtain, maintain and
enforce patents on any of the Inventions or to facilitate the transfer or
assignment of any of the Company's rights with respect to the Inventions and
patents.
(c) Company Documents. Upon the termination of his employment,
Berman will deliver to the Company all documents and other tangible property
containing Confidential Information which are then in his possession or control.
(d) Covenant Not to Compete. Berman acknowledges that his duties
hereunder and the services he will provide to the Company are of a special,
unique, unusual and extraordinary character, which gives this Agreement
particular value to the
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<PAGE> 5
Company, and that it would be difficult to employ any individual or individuals
to replace Berman in the performance of such duties and services. Therefore,
during employment with the Company, and for a one-year period following
termination of employment, Berman will not, directly or indirectly, enter into,
organize, control, engage in, be employed by, serve as a consultant to, be an
officer or director of or have any direct or indirect investment in any
business, person, partnership, association, firm or corporation engaged in any
business activity (including, but not limited to, research, development,
manufacturing, selling, leasing, licensing or providing services) which is
competitive with the business and/or scientific activity that the Company is
developing or exploiting during Berman's employment with the Company. Nothing
contained in this Agreement shall be construed to prevent Berman from owning at
any time, directly or indirectly, as much as 5% of any class of equity
securities issued by any corporation or other entity which are publicly traded
and registered under the Securities and Exchange Act of 1934, as amended.
12. Indemnification. The Company will indemnify Berman to the fullest
extent permitted by law and will hold him harmless from and against any claim,
liability or expense (including reasonable attorneys' fees) made against or
incurred by Berman in connection with his relationship with the Company. This
obligation will include, without limitation, prompt payment in advance of any
and all costs of defending the same, including attorney's fees.
13. No Impediment to Agreement. Except as otherwise disclosed herein,
Berman hereby represents to the Company that he is not, as of the date hereof,
and will not be, during employment with the Company, employed under contract,
oral or written, by any other person, firm or entity and is not and will not be
bound by the provisions of any restrictive covenant or confidentiality agreement
which would constitute an impediment to, or restriction upon, his ability to
enter into this Agreement and to perform the duties of his employment.
14. Notices. Any notice under this Agreement must be in writing and
will be deemed to have been given when personally delivered or mailed by
first-class or express mail to the recipient at the following address (or such
other address as shall be specified by prior written notice):
To the Company: VaxGen, Inc.
Attn: Donald P. Francis
1000 Marina Blvd., Suite 200
Brisbane, CA 94005
Copy to: Dr. Phillip Berman
95 Cheyenne Point
Portola Valley, CA 94028
15. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. If any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law in any jurisdiction, such
invalidity, illegality or unenforceability
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will not affect any other provision or the interpretation of this Agreement in
any other jurisdiction.
16. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the law
of conflicts.
17. Successors and Assigns. The services and duties to be performed
by Berman hereunder are personal and may not be assigned. This Agreement shall
be binding upon and inure to the benefit of the Company, its successors and
assigns, and Berman, his heirs and representatives.
18. Complete Agreement. This Agreement constitutes the entire
agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements between the parties concerning the subject
matter hereof.
19. Waiver. Failure by either party to insist upon strict adherence
to any one or more of the provisions of this Agreement on one or more occasions
shall not be construed as a waiver, nor shall it deprive that party of the right
to require strict compliance thereafter.
20. Survival. The obligations set forth in paragraphs 11(a) and 12
shall survive termination of this Agreement.
21. Amendments. No amendment hereto, or waivers or releases of
obligations or liabilities hereunder, shall be effective unless agreed to in
writing by the parties hereto.
22. Withholding. The Company may deduct and withhold from the
payments to be made to Berman hereunder any amounts required to be deducted and
withheld by the Company under the provisions of any statute, law, regulation or
ordinance now or hereafter enacted.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
VaxGen, Inc.
By: /s/ ROBERT C. NOWINSKI
-------------------------------
Its: Chairman
------------------------------
/s/ PHILLIP BERMAN
- ----------------------------------
Phillip Berman
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