EXHIBIT 10.7

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EMPLOYMENT TRANSITION AND SEPARATION RELEASE AGREEMENT

Nektar Therapeutics (“Nektar” or “Company”) hereby offers you a severance
package in connection with the future termination of your employment with the
Company. This Employee Transition and Separation Release Agreement (“Agreement”)
describes the severance benefits and other terms of your separation transition.

1. Separation Date and Transition Period.

(a) You will remain employed as an at-will employee of the Company until the
earliest of: (a) the date the Company terminates your employment for any reason;
or (b) November 2, 2007 (the earlier of which being referred to herein as the
“Separation Date”).

(b) Title and Duties. From the date of this letter through the Separation Date
(the “Transition Period”), you will remain employed by the Company in your
current position and you will continue to report to your current manager. Your
duties and responsibilities during the Transition Period will include, but are
not limited to, providing transition assistance and other support within your
area of expertise. During the Transition Period, you will have the same
authority to represent the Company to third parties as you did prior to the
Transition Period; provided however, that you may not executive binding
contracts on behalf of the Company. During the Transition Period, you shall
continue to abide by all of the Company’s general policies and procedures in
effect from time to time, and perform your job duties in good faith to the best
of your abilities.

(c) Salary and Benefits; Equity Award Vesting. During the Transition Period:
(i) you will continue to be paid your current base salary subject to required
withholdings and deductions; (ii) your salary will be paid on the Company’s
customary payroll dates; (iii) you will be eligible to receive incentive
compensation based on your current incentive compensation target under the
Company’s Discretionary Performance-Based Incentive Compensation Policy (“Bonus
Plan”) as provided in Section 3 below; (iv) you will continue to be eligible to
participate in all benefit plans the Company makes generally available to its
employees, and any other benefit plans in which you are enrolled as of the date
of this letter, to the extent permitted by the terms and conditions governing
those plans; and (v) subject to the terms of the stock option grants and
restricted stock unit grants, if any, provided to you in connection with your
employment, and the terms of the applicable equity incentive plans, your stock
options and restricted stock unites, if any, will continue to vest.

2. Accrued Salary and Paid Time Off.

(a) Accrued Salary. The Company will pay you on the Separation Date all accrued
and unpaid salary through the Separation Date, subject to applicable payroll
deduction and withholding.

(b) Accrued Paid Time Off. The Company will pay you any accrued and unused paid
time off earned by you through the Separation Date, subject to applicable
payroll deduction and withholding. In the event you have negative paid time off
balance, such amount will be deducted from your Severance (as defined below) as
provided in Section 5(a).

 

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3. Incentive Compensation. You will not be eligible for payments under the Bonus
Plan for the performance period commencing July 1 and ending December 31, 2007.

4. Stock Options and Restricted Stock Units.

(a) Stock Options. Pursuant to the applicable Equity Incentive Plan (“Plan”) and
the stock option notices and agreements issued to you thereunder if any
(collectively, the “Option Agreements”), vesting of your stock options will
cease on the Separation Date.

(b) Exercise Period. Notwithstanding anything in the Option Agreements to the
contrary, your right to exercise your stock options as to any vested shares
shall end on November 2, 2008; provided, however, in no event shall your
exercise period extend beyond the term of your Equity Awards or as otherwise
provided in the Plan, The stock options also continue to remain subject to all
other terms and conditions of the Option Agreements.

(c) Restricted Stock Units. Any vested shares under your restricted stock unit
awards (“RSUs”), if any, are owned by you and may be retained or sold by you
subject to the terms and conditions of the Plan and the notice and agreements
issued to you thereunder as applicable (the “RSU Agreements”). Any unvested
RSU’s as of the Separation Date will be forfeited as per the RSU Agreements.

5. Severance Benefits. Although the Company is not otherwise obligated to do so,
provided that (i) you sign this Agreement, return it to the Company, and allow
it to become effective as provided in Section 13; (ii) you do not resign from
the Company prior to the Separation Date, (iii) you abide by the terms set forth
herein, and (iv) after the Separation Date, you sign the Separation Date Release
attached hereto as Exhibit A within the time period specified therein, return it
to the Company and allow it to become effective, the Company will afford you the
following benefits:

(a) Lump Sum Severance. The Company will pay you, as severance, the aggregate
sum of $513,381.27 payable within fifteen (15) days after the effective date of
the Separation Date Release subject to applicable deductions and withholding and
any applicable deductions under Section 2(b) (“Severance”).

(b) Health Insurance. You will remain on the Company’s current health insurance
policy through the month in which your Separation Date occurs. Additionally, to
the extent provided by the federal COBRA law, and by the Company’s current group
health insurance policies, you will be eligible to continue your and your
covered dependents’ group health insurance benefits. If you elect continuation
coverage under COBRA and upon confirmation of your COBRA election by the Company
to its satisfaction, the Company will reimburse you for COBRA premiums for up to
twelve (12) months upon receipt of satisfactory substantiation of your payment
of such premiums; provided however, that the Company’s payment of COBRA premiums
may cease at any time you are deemed eligible for comparable group medical and
dental coverage from another employer. After the Company’s payment of COBRA
premiums ceases, you may continue COBRA coverage at your own expense for as long
as you remain eligible for COBRA under federal law.

 

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(c) Flexible Benefits. Your flexible benefits plan pre-tax contribution plan
will terminate on your Separation Date. You will be able to continue to submit
reimbursements to the plan administrator for eligible expenses for a period of
ninety (90) days following the Separation Date.

(d) Employee Stock Purchase Plan. If you are an Employee Stock Purchase Program
participant you will also receive a payout of your account balance.

(e) Attorney’s Fees. The Company will reimburse you up to $7,500 for the
attorney’s fees of Dorsey & Whitney LLP actually incurred by you in providing
you assistance in negotiating your separation from the Company. You will provide
the Company with invoices from Dorsey & Whitney to support the foregoing
reimbursement obligation.

(f) Other Compensation or Benefits. Except as expressly described in this
Agreement, you will not receive any additional compensation, severance or
benefits after the Separation Date.

6. Non-Disparagement. Both you and the Company (through its officers and
directors) agree not to disparage the other party, and the other party’s
officers, directors, employees, shareholders and agents, in any manner likely to
be harmful to them or their business, business reputation or personal
reputation; provided that both you and the Company shall respond accurately and
fully to any question, inquiry or request for information when required by legal
process.

7. Confidentiality. The provisions of this Agreement shall be held in strictest
confidence by you and the Company and shall not be publicized or disclosed in
any manner whatsoever; provided, however, that: (a) you may disclose this
Agreement to your immediate family; (b) the parties may disclose this Agreement
in confidence to their respective attorneys, accountants, auditors, tax
preparers, and financial advisors; (c) the Company may disclose this Agreement
as necessary to fulfill standard or legally required corporate reporting or
disclosure requirements; and (d) the parties may disclose this Agreement insofar
as such disclosure may be necessary to enforce its terms or as otherwise
required by law.

8. Expense Reimbursements. You agree that, within ten (10) business days
following the Separation Date, you will submit your final documented expense
reimbursement statement reflecting all business expenses you incurred through
the Separation Date, if any, for which you seek reimbursement. The Company will
reimburse you for these expenses pursuant to its regular business practice.

9. Return of Company Property. You agree that, on the Separation Date, you shall
return to the Company all Company documents (and all copies thereof) and other
Company property in your possession or control, including, but not limited to:
Company files, email, notes, memoranda, correspondence, agreements, draft
documents, notebooks, logs, drawings, records, plans, proposals, reports,
forecasts, financial information, sales and marketing information, research and
development information, personnel information, specifications,

 

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computer-recorded information, tangible property and equipment, credit cards,
entry cards, identification badges and keys; and any materials of any kind that
contain or embody any proprietary or confidential information of the Company
(and all reproductions thereof in whole or in part). If you have used any
personal computer, server, or e-mail system to receive, store, review, prepare
or transmit any Company confidential or proprietary data, materials or
information, you agree to provide the Company with a computer-useable copy of
such information and then permanently delete and expunge such Company
confidential or proprietary information from those systems; and you agree to
provide the Company access to your system as requested to verify that the
necessary copying and/or deletion is done. YOU AGREE NOT TO RETAIN ANY PAPER OR
ELECTRONIC COPIES OF ANY COMPANY DOCUMENTS OR DATA (INCLUDING BUT NOT LIMITED TO
EMAIL) OTHER THAN THIS AGREEMENT AND OTHER DOCUMENTS EVIDENCING YOUR EMPLOYMENT
RELATIONSHIP WITH THE COMPANY. YOU WILL NOT BE ENTITLED TO ANY SEVERANCE
BENEFITS UNLESS AND UNTIL YOU COMPLY FULLY WITH THE TERMS SET FORTH IN THIS
PARAGRAPH.

10. Employment Agreement Continues. Following the Separation Date, you have
continuing obligations under your Employee Agreement with the Company which
include, among other obligations, not to use or disclose any confidential or
proprietary information of the Company.

11. Non-Solicitation. You agree that, for twelve (12) months following the
Separation Date, you shall not, directly or indirectly (e.g. through directing a
recruiting firm to target Company employees), without prior written consent of
the Company, solicit or induce any employee of the Company to leave the employ
of the Company.

12. Continuation of Indemnification. Nektar shall, to the maximum extent
permitted by law, continue to indemnify and hold you harmless for any acts or
decisions made in good faith while performing services for the Company. To the
same extent, Nektar will pay all expenses, including reasonable attorney fees
and costs of court-approved settlements, actually and necessarily incurred by
you in connection with the defense of any action, suit or proceeding, and in
connection with any appeal, that has been brought against you by reason of your
service as an employee of the Company, including, without limitation, the matter
of Leznik v. Nektar Therapeutics, Inc. et al, United States Department of Labor
Case Number 2006-SOX-00093.

13. General Release. Except as otherwise stated in this Agreement, you hereby
generally and completely release the Company and its subsidiaries, successors,
predecessors and affiliates, and its and their respective partners, members,
directors, officers, employees, stockholders, shareholders, agents, attorneys,
predecessors, insurers, affiliates and assigns, from any and all claims,
liabilities and obligations, both known and unknown, that arise out of or are in
any way related to events, acts, conduct, or omissions occurring at any time
prior to and including the date you sign this Agreement. This general release
includes, but is not limited to:

(a) all claims arising out of or in any way related to your employment with the
Company or the termination of that employment;

 

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(b) all claims related to your compensation or benefits, including salary,
bonuses, commissions, vacation pay, expense reimbursements, severance pay,
fringe benefits, stock, stock options, restricted stock units, or any other
ownership interests in the Company;

(c) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing;

(d) all tort claims, including claims for fraud, defamation, emotional distress,
and discharge in violation of public policy; and

(e) all federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990 (as amended), the federal Age
Discrimination in Employment Act (as amended) (“ADEA”), the federal Employee
Retirement Income Security Act of 1974 (as amended), and the California Fair
Employment and Housing Act (as amended), and Labor Code Sections 132a 4553 and
4553.1 of the Workers’ Compensation Act, except that this release does not apply
to any claim for regular workers’ compensation benefits, including indemnity,
medical or vocational rehabilitation benefits under the California Workers’
Compensation Act.

You represent that you have no lawsuits, claims or actions pending in your name,
or on behalf of any other person or entity, against the Company or any other
person or entity subject to the release granted in this paragraph.

14. ADEA Waiver. You acknowledge that your waiver and release of any rights you
may have under ADEA is knowing and voluntary, and that the consideration given
under this Agreement (severance, COBRA payments, outplacement), in exchange for
your general waiver and release, is in addition to anything of value to which
you were already entitled. You are hereby advised that:

(a) your waiver and release do not apply to any rights or claims that may arise
after the date you sign this Agreement;

(b) prior to signing this Agreement you should consult with an attorney
(although you may choose voluntarily not to do so);

(c) you have twenty-one (21) days to consider this Agreement (although you may
choose voluntarily to sign it earlier);

(d) you have seven (7) days following the date you sign this Agreement to revoke
it by providing written notice to the Company’s Vice President, Human Resources;

(e) this Agreement shall not be effective until the revocation period expires
which will be the eighth day after you sign this Agreement.

15. Waiver of Unknown Claims. You hereby expressly waive and relinquish all
rights and benefits under Section 1542 of the California Civil Code which reads
as follows:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.

 

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You also hereby waive any statutory claims of similar effect.

16. Entire Agreement; Modification. This Agreement and your Employee Agreement
constitute the complete and only agreement between you and the Company on these
subjects. You are agreeing to it without reliance on any promise or
representation, written or oral, other than those expressly contained in this
Agreement, and it supersedes any other such promises, warranties or
representations. This Agreement may not be modified except in a writing signed
by both you and the Company’s Vice President, Human Resources. This Agreement
shall bind the heirs, personal representatives, successors and assigns of both
you and Nektar, and inure to the benefit of both you and Nektar, their heirs,
successors and assigns. Any determination that a provision of this Agreement is
invalid or unenforceable, in whole or in part, will not affect any other
provision of this Agreement, and the provision in question shall be modified by
the court so as to be rendered enforceable in accordance with the intent of the
parties to the extent possible.

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If this Agreement is acceptable to you, please sign below and return the
original to Human Resources on or before October 29, 2007. The offer of
severance benefits contained in this Agreement will automatically expire if we
do not receive the fully executed Agreement from you by the aforementioned date.

 

NEKTAR THERAPEUTICS

      By:  

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    Dated:   10-5-07   DORIAN RINELLA         VICE PRESIDENT, HUMAN RESOURCES  
      DAVID JOHNSTON        

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    Dated:   10-05-07

 

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Exhibit A

Separation Date Release

In exchange for the severance benefits and other consideration provided to me by
Nektar Therapeutics (the “Company”), and as required by the Employment
Transition and Separation Release Agreement between the Company and me dated
October     , 2007 (the “Agreement”), I hereby provide the following Separation
Date Release (the “Release”).

1. Except as otherwise stated in this Release, I hereby generally and completely
release the Company and its subsidiaries, successors, predecessors and
affiliates, and its and their respective partners, members, directors, officers,
employees, stockholders, shareholders, agents, attorneys, predecessors,
insurers, affiliates and assigns, from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related
to events, acts, conduct, or omissions occurring at any time prior to and
including the date you sign this Release. This Release includes, but is not
limited to:

(a) all claims arising out of or in any way related to my employment with the
Company or the termination of that employment;

(b) all claims related to my compensation or benefits, including salary,
bonuses, commissions, vacation pay, expense reimbursements, severance pay,
fringe benefits, stock, stock options, restricted stock units, or any other
ownership interests in the Company;

(c) all claims for breach of contract, wrongful termination, and breach of the
implied covenant of good faith and fair dealing;

(d) all tort claims, including claims for fraud, defamation, emotional distress,
and discharge in violation of public policy; and

(e) all federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990 (as amended), the federal Age
Discrimination in Employment Act (as amended) (“ADEA”), the federal Employee
Retirement Income Security Act of 1974 (as amended), and the California Fair
Employment and Housing Act (as amended), and Labor Code Sections 132a 4553 and
4553.1 of the Workers’ Compensation Act, except that this release does not apply
to any claim for regular workers’ compensation benefits, including indemnity,
medical or vocational rehabilitation benefits under the California Workers’
Compensation Act.

I represent that I have no lawsuits, claims or actions pending in my name, or on
behalf of any other person or entity, against the Company or any other person or
entity subject to the release granted in this paragraph.

2. ADEA Waiver. I acknowledge that my waiver and release of any rights I may
have under ADEA is knowing and voluntary, and that the consideration given under
this Agreement (severance, COBRA payments, outplacement), in exchange for my
general waiver and release, is in addition to anything of value to which I was
already entitled. I understand and acknowledge that the Company has advised me
that:

(f) my waiver and release do not apply to any rights or claims that may arise
after the date I sign this Release;

 

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(g) prior to signing this Release I should consult with an attorney (although I
may choose voluntarily not to do so);

(h) I have twenty-one (21) days to consider this Release (although I may choose
voluntarily to sign it earlier);

(i) 1 have seven (7) days following the date I sign this Release to revoke it by
providing written notice to the Company’s Vice President, Human Resources;

(j) this Release shall not be effective until the revocation period expires
which will be the eighth day after I sign this Release.

3. Waiver of Unknown Claims. I hereby expressly waive and relinquish all rights
and benefits under Section 1542 of the California Civil Code which reads as
follows:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.

I also hereby waive any statutory claims of similar effect.

 

DAVID JOHNSTON      

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    Dated:   10-05-07

 

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