VAXGEN INC
EMPLOYMENT AGREEMENT
<DOCUMENT>
<TYPE>EX-10.27
<SEQUENCE>8
<FILENAME>d50097_ex10-27.htm
<DESCRIPTION>EMPLOYMENT AGREEMENT
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2><I>EXHIBIT 10.27</I></FONT></H2>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>EMPLOYMENT
AGREEMENT</I></FONT></H1>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Employment Agreement (&#147;Agreement&#148;) by and between Donald P. Francis, M.D.,
D.Sc. (hereinafter &#147;Francis&#148;) and VaxGen, Inc. (hereinafter &#147;VaxGen&#148;)
is effective October 2, 2001. In consideration of the mutual promises made herein, VaxGen
and Francis agree as follows: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>1.</B>
<B>EMPLOYMENT</B>. VaxGen hereby employs Francis, and Francis hereby accepts
employment with VaxGen upon all of the terms and conditions described in this
Agreement. Except with respect to any stock options previously granted to
Francis, this Agreement supercedes, replaces and restates any and all prior
agreements between the parties hereto relating to the terms of Francis&#146;s
employment with VaxGen, including any prior agreements concerning
confidentiality, non-disclosure and inventions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>2.</B> <B>WORK
RESPONSIBILITIES</B>. Subject to the terms of this Agreement, Francis is hereby
employed in the position of President, and shall perform the functions and
responsibilities of that position. Francis shall devote the whole of Francis&#146;s
professional time, attention and energies to the performance of his work
responsibilities. VaxGen may assign additional or different duties. Francis&#146;s
position, job description, duties and responsibilities may be modified from time
to time in the sole discretion of VaxGen. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>3.</B> <B>COMPENSATION</B>. As
consideration for the services and covenants described in this Agreement, VaxGen agrees
to compensate Francis during the term of this Agreement in the following manner: </FONT></P>

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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A.</FONT></TD>
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<I>Salary/Wages</I>. VaxGen agrees to pay Francis a base salary of $325,000 per
year. Francis&#146;s salary, less required and authorized deductions, shall be paid
in equal, periodic installments no less frequently than semi-monthly in
accordance with VaxGen&#146;s then current payroll practices.</FONT></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.</FONT></TD>
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<I>Performance Bonus</I>. Francis is eligible to receive an annual
bonus of up to thirty percent (30%) of his annual base salary in cash, VaxGen
securities or a combination thereof as determined in the sole discretion of
VaxGen&#146;s Board of Directors. In addition, Francis will be eligible to
receive an annual award of stock options, which will be issued, if at all, in
accordance with the terms and conditions in effect under VaxGen&#146;s Stock Option
Plan at the time of the award, in an amount to be determined in the sole
discretion of the Board of Directors. Such bonuses and options shall be awarded,
if at all, at the sole discretion of the Board of Directors. Francis&#146;s salary,
bonus and options will be considered annually for potential adjustment by the
Compensation Committee of the Board of Directors.</FONT></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C.</FONT></TD>
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<I>Benefits</I>. Francis shall be entitled to employment benefits in accordance
with policies established by or at the direction of VaxGen&#146;s Board of
Directors with respect to senior officers of VaxGen, including holidays, leaves
of absence, health insurance, dental insurance, vacation and other benefits, if
any, in accordance with any eligibility requirements, policies, procedures, or
benefit plans adopted by VaxGen from time to time during the existence of this
Agreement. Francis&#146;s rights, or those of Francis&#146;s dependents under any such
benefits policies or plans, shall be governed solely by the terms of such
policies or plans. VaxGen&#146;s employment benefits, and policies related thereto,
are subject to termination, modification or limitation at VaxGen&#146;s sole
discretion.</FONT></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D. </FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Total
Compensation</I>. Francis agrees that the compensation stated above constitutes the full and
exclusive monetary consideration and compensation for all services rendered under this
Agreement and for all promises and obligations under this Agreement.</FONT></TD>
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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>E.</FONT></TD>
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<I>Business Expenses</I>. VaxGen shall pay Francis&#146;s reasonable business
expenses, including expenses incurred for travel on VaxGen business, in
accordance with the policies and procedures of VaxGen, as may be adopted or
amended from time to time at VaxGen&#146;s sole discretion. If Francis incurs
business expenses under this Agreement, he shall submit monthly to VaxGen a
request for reimbursement together with supporting documentation satisfactory to
VaxGen.</FONT></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>4. VAXGEN
POLICIES</B>. Francis agrees to abide by VaxGen&#146;s policies, practices and
procedures, written and unwritten, as they may from time to time be adopted or
modified by VaxGen in its sole discretion. VaxGen&#146;s written policies,
practices and procedures, including the Employee Handbook, shall be binding on
Francis unless superseded by, or in conflict with, this Agreement. Copies of
written policies and procedures are available to Francis in the offices of
VaxGen, and Francis shall be responsible at all times to review, and make
himself familiar with, these policies and procedures. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>5. WARRANTIES</B>.
Francis hereby represents and warrants that he has taken no confidential,
proprietary or trade secret information from Francis&#146;s prior employer or
employers, and will not knowingly disclose such information to VaxGen, or
improperly use any such information on behalf of VaxGen. Francis acknowledges
that VaxGen has specifically requested that, if Francis has any such
confidential, proprietary or trade secret knowledge or information, Francis not
use such information while employed by VaxGen for the benefit of VaxGen. Francis
further warrants that by entering into this Agreement with VaxGen he is not
violating any of the terms, agreements or covenants of any previous employment
or association. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>6. PRIOR
INVENTIONS</B>. Francis acknowledges that, except for the inventions disclosed
on Appendix A, Francis does not have any right or claim to any invention, idea,
process, formula, discovery, copyright, patent or other such item or matter. No
rights are hereby conveyed by Francis to VaxGen with respect to inventions, if
any, made by Francis prior to employment by VaxGen, which inventions are listed
in Schedule&nbsp;A, attached hereto. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>7. SUBSEQUENT
INVENTION DISCLOSURE</B>. Francis hereby agrees to promptly disclose to VaxGen
any and all inventions which he develops during the term of his employment.
Francis will also disclose to the Board of Directors of VaxGen all inventions
made, conceived, reduced to practice, or developed by Francis within six months
of the termination of his employment with VaxGen that resulted from his prior
work with VaxGen. Such disclosures shall be received by VaxGen in confidence and
do not extend the assignment of inventions disclosed beyond that required by
law. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>8. ASSIGNMENT OF
INVENTIONS</B>. Francis hereby assigns and agrees to assign to VaxGen or its
designee, Francis&#146;s entire right, title and interest in and to all inventions,
works of authorship, developments, concepts, discoveries, ideas, trademarks and
trade secrets, whether or not patentable or registrable under copyright or other
intellectual property laws (&#147;Inventions&#148;) which Francis may solely or
jointly develop, conceive or reduce to practice, during the period of
employment, except as provided in paragraph 10 below. Francis agrees that all
such Inventions are the sole property of VaxGen. Francis further agrees that all
such Inventions, including works of authorship, are &#147;works for hire&#148; for
purposes of VaxGen&#146;s rights under copyright laws. Francis agrees to keep and
maintain adequate and current written records of all Inventions made by him
(solely or jointly with others) during the term of his employment with VaxGen.
The records will be in the form of notes, sketches, drawings, and any other
format that may be specified by VaxGen. The records will be available to and
remain the sole property of VaxGen at all times. Francis understands and agrees
that the decision whether or not to commercialize or market any Invention
developed by him solely or jointly with others is within VaxGen&#146;s sole
discretion and for VaxGen&#146;s sole benefit and that no royalty will be due to
him as a result of VaxGen&#146;s efforts to commercialize or market any such
Invention. Francis further agrees to perform, during and after employment with
VaxGen, all acts deemed necessary or desirable by VaxGen to permit and assist
VaxGen, at VaxGen&#146;s expense, in obtaining and enforcing the full benefits,
enjoyment, rights and title, throughout the world, of and to the Inventions
hereby assigned by Francis to VaxGen as set forth above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>9. PATENT AND
COPYRIGHT REGISTRATIONS</B>. Francis agrees to assist VaxGen, or its designee,
at VaxGen&#146;s expense, in every proper way to secure VaxGen&#146;s rights in the
Inventions and any copyrights, patents, trademarks, and trade secret rights or
other intellectual property rights in connection with any such Inventions in any
and all countries, including the disclosure to VaxGen of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments or papers which
VaxGen shall deem necessary in order to apply for and obtain such rights and in
order to assign and convey to VaxGen, its successors, assigns, and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, trademark and other intellectual property rights relating
thereto. Francis further agrees that his obligation to execute or cause to be
executed, when it is in his power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If VaxGen is unable, because
of Francis&#146;s mental or physical incapacity or for any other reason, to secure
his signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original works
of authorship assigned to VaxGen as above, then Francis hereby irrevocably
designates and appoints VaxGen and its duly authorized officers and agents as
his agent and attorney in fact to act for and in his behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
Francis. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>10.</B> <B>INVENTIONS
NOT ASSIGNED</B>. The parties agree that the assignment of inventions under this
Agreement does not apply to an invention which qualifies fully for protection
under Section&nbsp;2870 of the California Labor Code, which states that &#147;Any
provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or
her employer shall not apply to an invention that the employee developed
entirely on his or her own time without using the employer&#146;s equipment,
supplies, facilities or trade secret information except for those inventions
that either: (1) relate at the time of conception or reduction to practice of
the invention to the employer&#146;s business, or actual or demonstrably
anticipated research or development of the employer; or (2) result from any work
performed by the employee for the employer.&#148; </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>11.</B> <B>CONFIDENTIAL,
PROPRIETARY AND TRADE SECRET INFORMATION</B>. During the course of his
employment, Francis will come into possession of or acquire knowledge of
confidential, proprietary and trade secret information of VaxGen. Francis hereby
covenants and agrees that he will not, either during his employment or at any
time thereafter, disclose any such confidential, proprietary or trade secret
information to any person, firm, corporation, association, partnership or other
entity (other than those in VaxGen&#146;s organization qualified and authorized to
receive such information) for any purpose or reason whatsoever. Such
confidential and proprietary information shall be deemed to include, but not be
limited to, manuals, discs, tapes, and summaries or originals of any papers,
documents, plans, specifications, client lists, contracts, licenses or licensing
agreements, data bases, or portions thereof, related to the research and
development, products or operations of VaxGen, provided that such information is
confidential, proprietary or falls within the definition of a &#147;trade
secret&#148; under the Uniform Trade Secrets Act. Francis specifically agrees
that he will not make use of any such confidential or proprietary information
for his own purpose, or for the benefit of any person, firm, corporation or
other entity except VaxGen. Francis will abide by VaxGen&#146;s policies and
procedures, as established from time to time for the protection of its trade
secrets and confidential information. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>12. RETURN OF
PROPERTY</B>. All confidential, proprietary and trade secret information, and
all other documents, records, apparatus, equipment and other physical property
which is furnished to or obtained by Francis in the course of employment with
VaxGen, shall be and remain the sole property of VaxGen. Francis agrees that
upon request by VaxGen or the termination of Francis&#146;s employment (whichever
occurs first), Francis shall return all such property, and agrees not to make or
retain copies, reproductions or summaries of any such property without the
express written consent of VaxGen. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>13.</B>
<B>NON-SOLICITATION, ANTI-RAIDING</B>. For a period of one (1) year immediately
following the termination of his employment, Francis agrees that he will not,
either directly or indirectly, (a) attempt to recruit, solicit or take away any
of the employees of VaxGen who worked for VaxGen at any time during the term of
this Agreement; make known to any person, firm or corporation the names or
addresses of, or any information pertaining to, any current or former employees
of VaxGen; (b) use any confidential or proprietary information to attempt to
call on, solicit or take away any clients of VaxGen or any other persons,
entities, or corporations with which VaxGen has had or contemplated any business
transaction or relationship during Francis&#146;s employment with VaxGen,
including, but not limited to, investments, licenses, joint ventures, and
agreements for development.. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>14. EQUITABLE
RELIEF</B>. Francis and VaxGen each agree that in the event of a breach or
threatened breach of paragraphs&nbsp;7 through&nbsp;13 of this Agreement each
party will not have an adequate remedy at law. Thus, in the event of such a
breach or threatened breach by one party, the other party will be entitled to
such equitable and injunctive relief in a court of law as may be available to
prevent and restrain a breach of the provisions of paragraphs&nbsp;7
through&nbsp;13. Said availability to obtain injunctive relief will not prevent
either party from pursuing any other equitable or legal relief, including the
recovery of damages from such breach or threatened breach. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>15.</B> <B>AT-WILL
EMPLOYMENT.</B> Francis understands and agrees that employment at VaxGen is
at-will. This means that, for any reason or no reason, Francis&#146;s employment
may be terminated, with or without cause, at any time by either Francis or by
VaxGen, subject to the severance and notice provisions contained in Section 16
below. Nothing in this or any other document or statement shall limit the right
of VaxGen to terminate Francis&#146;s employment at-will. Only the Board of
Directors of VaxGen has the authority to amend this Agreement, and then only in
a writing that is signed by both Francis and VaxGen pursuant to authority
expressly granted by VaxGen&#146;s Board of Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>16. TERMINATION OF EMPLOYMENT.</B> </FONT></P>

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<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A.</FONT></TD>
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Subject to the survivability provisions of Section 17 below, Francis&#146;s
employment under this Agreement and all compensation and benefits provided for
herein shall terminate upon the occurrence of any of the following events:</FONT></TD>
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<TD WIDTH=82%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)
<I>Death</I>: In the event of Francis&#146;s death, the termination shall be effective
upon the date thereof.</FONT></TD>
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<I>Disability</I>: In the event that Francis should become &#147;disabled.&#148; For
purposes of this paragraph &#147;disabled&#148; shall mean Francis&#146;s inability to
perform his duties hereunder for a period of four (4) consecutive months, and failure to
resume the performance of such duties on a full-time basis within thirty (30) days of
notice from VaxGen of intent to terminate this Agreement on such grounds). The
termination shall be effective upon the date specified in VaxGen&#146;s notice to Francis
as provided for herein. </FONT></TD>
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<I>Cause</I>: VaxGen may terminate this Agreement upon the occurrence of &#147;cause&#148; for
termination as herein defined. &#147;Cause&#148; shall mean (a) Francis&#146;s willful
commission of an act of fraud, misappropriation, embezzlement, misrepresentation or other
illegal or improper act that has the effect of injuring VaxGen or its reputation; (b)
Francis&#146;s commission of a material violation of VaxGen&#146;s policies, practices
and procedures, including its sexual harassment, discrimination and/or substance abuse
policy or commission of a breach of any provision of this Agreement, including the
confidential information and invention assignment provisions herein, and, if such
violation is curable, Francis&#146;s failure to cure such violation within 15 business
days of receiving notice of such violation by the Board of Directors; (c) Francis&#146;s
habitual failure to perform his job duties, as determined by the Board of Directors in
its reasonable judgment, and after notice of such failure has been given to Francis by
the Board of Directors and Francis has had a 15 business-day period within which to cure
such failure; and/or (d) any other reason deemed &#147;cause&#148; under applicable
California law. The Parties acknowledge that the reference to a &#147;for Cause&#148; termination
herein does not alter the employment at-will relationship, but merely sets forth
circumstances under which the Company has no obligation to pay severance to Francis. The
termination shall be effective upon the date specified in VaxGen&#146;s notice to
Francis. </FONT></TD>
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<TD WIDTH=82%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4)
<I>Without Cause</I>: Either VaxGen or Francis may terminate this Agreement without Cause
at any time upon thirty (30) days written notice to the other party. The termination
shall be effective upon the date specified in the notice given pursuant hereto. </FONT></TD>
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<TD WIDTH=82%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5)
<I>By Francis with Good Reason</I>: Francis may terminate his employment under this
Agreement in the event VaxGen breaches a material term hereof and, after receiving
written notice of the alleged breach from Francis does not remedy said breach within
thirty (30) days of receiving notice. The termination shall be effective on the date
specified in the notice given hereunder. </FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In the event that this Agreement is terminated by VaxGen under paragraphs
(A)(1), (A)(2) or (A)(3) above, or by Francis under paragraph (A)(4) above, no
severance pay will be due to Francis.</FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
In the event that this Agreement is terminated by VaxGen under paragraph (A)(4)
above or by Francis under paragraph (A)(5) above, Francis shall be entitled to
receive: (i) severance pay in the amount of six (6) months of his then-existing
annual base salary plus one additional month of base salary for each full year
of employment with VaxGen (such severance being limited strictly to annual base
salary and will not include any amount paid or payable as a bonus or stock
option grant) up to a maximum severance payment of twelve (12) months annual
base salary, less required and authorized deductions, payable on VaxGen&#146;s
ordinary payroll cycles until fully paid out; and (ii) accelerated vesting of
all his outstanding stock options to fully vested status as of the date of
termination.</FONT></TD>
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<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D.</FONT></TD>
<TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
<TD WIDTH=88%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Francis shall be entitled to the severance benefits provided for in Paragraph
16.C above if, within twelve (12) months following a Change in Control (as
defined below), VaxGen or its successor in interest terminates Francis&#146;s
employment for any reason other than for Cause (as defined above) or Francis
terminates his employment on account of any of the following: (i) there is a
material reduction in Francis&#146;s job duties or responsibilities, including,
without limitation, demotion from the position of President; or (ii) VaxGen or
its successor in interest moves Francis&#146;s principal place of business more
than thirty-five (35) miles from VaxGen&#146;s current principal place of
business at 1000 Marina Blvd, Brisbane, California; or (iii) there is a
reduction in Francis&#146;s then-current base salary and/or performance bonus
opportunity. For purposes of this Agreement, a &#147;Change in Control&#148; shall be
deemed to have occurred in the case of a sale of all or substantially all of
VaxGen&#146;s capital stock in a single transaction or series of related
transactions, sale of all or substantially all of VaxGen&#146;s assets, or
consolidation or merger of VaxGen with or into another corporation, entity or
person if, after giving effect to the consolidation or merger, the former
stockholders of VaxGen own less than 50% of the capital stock of the surviving
corporation.</FONT></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>17.</B>
<B>INDEMNIFICATION</B>. VaxGen shall maintain, for the benefit of Francis,
director and officer liability insurance in form at least as comprehensive as,
and in an amount that is at least equal to, that maintained by VaxGen as of the
Effective Date of this Agreement. In addition, Francis shall be indemnified by
VaxGen against liability as an officer and director of VaxGen or any subsidiary
or affiliate of VaxGen to the maximum extent permitted by applicable law.
Francis&#146;s rights under this Paragraph 17 shall continue so long as he may
be subject to such liability, whether or not his employment may have terminated
prior thereto. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>18.</B>
<B>SURVIVABILITY</B>. The respective rights and obligations of the Parties
hereunder, including, without limitation, Sections 7, 8, 9, 10, 11, 12, 13, 14,
16(C), 17, 19 and 28 of this Agreement, shall, to the extent necessary, survive
any termination of Francis&#146;s employment or this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>19. GOVERNING LAW.</B> This
Agreement shall be construed in accordance with and governed by the laws of the State of
California without regard to its conflict of law rules. This Agreement shall be
interpreted in accordance with the plain meaning of its terms and not strictly for or
against either party. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>20. ENTIRE
AGREEMENT.</B> This Agreement embodies the complete agreement and understanding
of the parties related to Francis&#146;s employment by VaxGen, superseding any and
all other prior or contemporaneous oral or written agreements between the
parties hereto with respect to the employment of Francis by VaxGen, and contains
all of the covenants and agreements of any kind whatsoever between the parties
with respect to such employment. Each party acknowledges that no
representations, inducements, promises or agreements, whether oral or written,
express or implied, have been made by either party or anyone acting on behalf of
a party, that are not incorporated herein and that no agreement or promise not
contained herein shall be valid or binding. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>21.WAIVER.</B> The failure of
either party to insist, in any one or more instances, upon performance of the terms or
conditions of this Agreement shall not be construed as a waiver or a relinquishment of
any right granted under this Agreement or of the future performance of any such term,
covenant or condition. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>22. </B>
<B>INVALIDITY.</B> Should any provision, portion or part of this Agreement be
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions, portions or parts shall be unaffected and shall
continue in full force and effect, and said invalid, void or unenforceable
provision(s), portion(s) or part(s) shall be deemed not to be part of this
Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>23.</B> <B>NO THIRD
PARTY BENEFICIARIES. </B>This Agreement is not intended by either party to
create any third-party beneficiaries, and shall not be so construed in any
proceeding. The sole parties to this Agreement are Francis and VaxGen, and it is
their mutual intent that they alone shall have standing to enforce the
provisions of this Agreement, subject to the provisions of Section 26 below. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>7</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>24.</B> <B>VOLUNTARY
AGREEMENT.</B> Francis and VaxGen represent and agree that each has reviewed all
aspects of this Agreement, has carefully read and fully understands all
provisions of this Agreement, and is voluntarily entering into this Agreement.
Each party represents and agrees that such party has had the opportunity to
review any and all aspects of this Agreement with the legal, tax or other
advisor or advisors of such party&#146;s choice before executing this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>25. CAPTIONS.</B> The captions of
the various paragraphs of this Agreement are placed herein for the convenience of the
parties and the reader, do not constitute a substantive term or terms of this Agreement,
and shall not be considered in any issue involving the interpretation or application of
this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>26.</B> <B>SUCCESSORS
AND ASSIGNS.</B> This Agreement shall be binding upon and inure to the benefit
of and shall be enforceable by and against Francis&#146;s heirs, beneficiaries and
legal representatives. It is agreed that the rights and obligations of Francis
may not be delegated or assigned except as specifically set forth in this
Agreement. In the event of a Change in Control (as defined above), VaxGen may
assign its rights and obligations under this Agreement to its
successor-in-interest, and in that event such successor-in-interest shall be
deemed to have acquired all rights and assumed all obligations of VaxGen under
this Agreement. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>27.</B> <B>NOTICES.
</B>Notices given under the terms of this Agreement shall be in writing and
shall be deemed delivered when personally delivered to the person identified
below, or three (3) days after deposited, proper first class postage prepaid, in
the U. S. Mail and addressed as set forth below, or one day after properly
consigned to a recognized national next-day delivery service (e.g., Federal
Express) prepaid and addressed as set forth below, or faxed to the number
provided below and confirmed by a delivery report from the sending fax
transmitter. The VaxGen officer, addresses and facsimile numbers below may be
changed by written notice given pursuant to this paragraph. Notices shall be
given </FONT></P>

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     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=LEFT WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If to VaxGen: </FONT></TD>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=78%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Chairman of the Board of Directors of VaxGen<BR>1000 Marina Blvd., Suite 200<BR>Brisbane, CA. 94005<BR>Fax number: 650-624-1001</FONT></TD>
</TR>
</TABLE>
<BR>

<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 BORDER=0>
<TR VALIGN=TOP>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=LEFT WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If to Francis</FONT></TD>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=78%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dr. Donald Francis<BR>1000 Marina Blvd., Suite 200<BR>Brisbane, CA. 94005<BR>Fax number: 650-624-1001</FONT></TD>
</TR>
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<TR VALIGN=TOP>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=LEFT WIDTH=13%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>///<BR>///<BR>///</FONT></TD>
     <TD WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=78%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>8</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>28.</B> <B>ALTERNATIVE
DISPUTE RESOLUTION PROGRAM.</B> Except as to efforts to seek injunctive relief
as specifically addressed in paragraphs 7 through 14, the parties understand and
agree that any dispute arising out of Francis&#146;s employment by VaxGen, the
termination of that employment, or arising out of or relating to this Agreement
shall be submitted to binding arbitration in accordance with the terms of the
Alternative Dispute Agreement set forth in Appendix&nbsp; B to this Agreement
and incorporated herein. </FONT></P>

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Dated:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Donald P. Francis, M.D., D.Sc.
</FONT></TD>
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Dated:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
VaxGen, Inc.<BR><BR>
By:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Title:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
</FONT></TD>
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<TD>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>9</FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>APPENDIX A</FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>Inventions</I>. Except
as set forth below, I hereby acknowledge that at this time I have no right,
title or other interest in any invention, patent, copyright or other such
material other than the following (if none, so state): </FONT></P>

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Dated:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Donald P. Francis, M.D., D.Sc.
</FONT></TD>
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<TD>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>10</FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>APPENDIX B</FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ALTERNATIVE
DISPUTE AGREEMENT</FONT></H1>

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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>I. Agreement To Arbitrate</FONT></H2>

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<TD WIDTH=6%>&nbsp;</TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event that any employment dispute arises between VaxGen, Inc. (&#147;VaxGen&#148;)
and Donald P. Francis, M.D., D.Sc. (&#147;Francis&#148;), the parties involved will make
all efforts to resolve any such dispute through informal means. If these informal
attempts at resolution fail <I>and</I>if the dispute arises out of or is related to
Francis&#146;s Employment Agreement, Francis&#146;s employment, the termination of Francis&#146;s
employment or alleged unlawful discrimination, including but not limited to sexual or
other unlawful harassment (an &#147;Arbitrable Dispute&#148;), VaxGen and Francis will
submit the dispute to final and binding arbitration, except as set forth in Paragraphs
7-14 of the Employment Agreement. </FONT></TD>
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<TD WIDTH=6%>&nbsp;</TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
parties expressly understand and agree that arbitration is the exclusive remedy for all
such Arbitrable Disputes; with respect to such disputes, no other action may be brought
in court or any other forum (except actions to compel arbitration or enforce an award
issued hereunder). THIS ALTERNATIVE DISPUTE RESOLUTION (&#147;ADR&#148;) AGREEMENT IS A
WAIVER OF THE PARTIES&#146; RIGHTS TO A CIVIL COURT ACTION FOR A DISPUTE RELATING TO
BREACH OF THE PARTIES&#146; EMPLOYMENT AGREEMENT, TERMINATION OF THAT EMPLOYMENT OR
ALLEGED UNLAWFUL DISCRIMINATION, WHICH INCLUDES RETALIATION OR SEXUAL OR OTHER UNLAWFUL
HARASSMENT; ONLY AN ARBITRATOR, NOT A JUDGE OR JURY, WILL DECIDE THE DISPUTE. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Arbitrable
Disputes arising out of or related to employment, or the termination of such employment
or alleged unlawful discrimination, including retaliation or sexual or other unlawful
harassment, shall include, but not be limited to, the following: alleged violations of
federal, state and/or local constitutions, statutes or regulations; claims based on any
purported breach of contractual obligation, including breach of the covenant of good
faith and fair dealing; and claims based on any purported breach of duty arising in tort,
including violations of public policy. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following types of employment disputes are not subject to this ADR Agreement: (1)
disputes related to workers&#146;compensation and unemployment insurance; (2) claims for
benefits covered by a separate benefit plan that provides for arbitration; and (3) claims
subject to Sections 7 through 14 of the Employment Agreement. Also, nothing in the
Employment Agreement or in the ADR Agreement shall be construed as precluding Francis
from filing a charge with the Equal Employment Opportunity Commission (&#147;EEOC&#148;),
the National Labor Relations Board (&#147;NLRB&#148;) or other federal, state or local
agencies, seeking administrative assistance in resolving claims. However, any claim that
cannot be resolved administratively through such an agency shall be subject to the
Employment Agreement and the ADR Agreement. </FONT></TD>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>11</FONT></P>

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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>II. Request For Arbitration</FONT></H2>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A.
Attempt At Informal Resolution Of Disputes</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to the submission of any Arbitrable Dispute to arbitration, Francis and VaxGen shall
attempt to resolve the dispute informally as set forth below. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Francis
and VaxGen will select a mediator from a list provided by the Federal Mediation and
Conciliation Service or other similar agency who will assist the parties in attempting to
reach a settlement of the dispute. The mediator may make settlement suggestions to the
Parties but shall not have the power to impose a settlement upon them. If the dispute is
resolved in mediation, the matter shall be deemed closed. If the dispute is not resolved
in mediation and goes to the next step (binding arbitration), any proposals or
compromises suggested by either of the parties or the mediator shall not be referred to
in or have any bearing on the arbitration procedure. The mediator cannot also serve as
the arbitrator in the subsequent proceeding unless all parties expressly agree in
writing. </FONT></TD>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B.
Arbitration Procedures</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
party desiring arbitration, whether Francis or VaxGen, must submit a &#147;Request For
Arbitration&#148; in writing to the other party within the time period required by the law
that applies to the claim under the applicable statute of limitations. If the &#147;Request
for Arbitration&#148; is not submitted in accordance with the aforementioned time
limitations, the party failing to do so will not be able to bring his claims to this or
any other forum. The requesting party may use a &#147;Request for Arbitration&#148; form
supplied by VaxGen (Appendix C). Alternatively, the requesting party may create a &#147;Request
For Arbitration&#148; form that, unless otherwise required by law, clearly states &#147;Request
For Arbitration&#148; at the beginning of the first page and includes the following
information: </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
A factual description of the dispute in sufficient detail to advise the other party of
the nature of the dispute;</FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
The date when the dispute first arose;</FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
The names, work locations and telephone numbers of any individuals, including employees
or supervisors, with knowledge of the dispute; and</FONT></TD>
</TR>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
The relief requested by requesting party.</FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
responding party may submit counterclaim(s) in accordance with applicable law. </FONT></TD>
</TR>
</TABLE>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C.
Selection Of The Arbitrator</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
disputes will be resolved by a single Arbitrator, the Arbitrator will be mutually
selected by VaxGen and Francis. If the parties cannot agree on an Arbitrator, then a list
of seven (7) arbitrators, experienced in employment matters, shall be provided by the
Judicial Arbitration Mediation Services (&#147;JAMS/Endispute&#148;). The Arbitrator will
be selected by the parties who will alternately strike names from the list. The last name
remaining on the list will be the Arbitrator selected to resolve the dispute. Upon
selection, the Arbitrator shall set an appropriate time, date and place for the
arbitration, after conferring with the parties to the dispute. </FONT></TD>
</TR>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>12</FONT></P>

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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>D.
The Arbitrator&#146;s Authority</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Arbitrator shall have the powers enumerated below:</FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
Ruling on motions regarding discovery, and ruling on procedural and evidentiary issues
arising during the arbitration.</FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
Ruling on motions to dismiss and/or motions for summary judgment applying the standards
governing such motions under the Federal Rules of Civil Procedure. </FONT></TD>
</TR>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
Issuing protective orders on the motion of any party or third party witness. Such
protective orders may include, but are not limited to, sealing the record of the
arbitration, in whole or in part (including discovery proceedings and motions,
transcripts, and the decision and award), to protect the privacy or other constitutional
or statutory rights of parties and/or witnesses. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
Determining only the issue(s) submitted to him/her. The issue(s) must be identifiable in
the &#147;Request For Arbitration&#148;or counterclaim(s). Except as required by law, any
issue(s) not identifiable in those documents is outside the scope of the Arbitrator&#146;s
jurisdiction and any award involving such issue(s), upon motion by a party, shall be
vacated.</FONT></TD>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>E.
Discovery</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
discovery process shall proceed and be governed by the standards of the California Code
of Civil Procedure and the Federal Arbitration Act. Each party may obtain discovery
necessary to adequately explore and arbitrate their respective claims. The Arbitrator
shall have the power to enforce the aforementioned discovery rights and obligations by
the imposition of the same terms, conditions, consequences, liabilities, sanctions and
penalties as can or may be imposed in like circumstances in a civil action under the
California Code of Civil Procedure, except the power to order the arrest or imprisonment
of a person. </FONT></TD>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>F.
Hearing Procedure</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
hearing shall be held at a location mutually agreed upon by the parties, or as determined
by the Arbitrator in the absence of an agreement, and shall proceed according to the
current version of the American Arbitration Association&#146;s &#147;National Rules for
the Resolution of Employment Disputes &#148;(the &#147;Rules&#148;) with the following
amendments: </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
The Arbitrator shall rule at the outset of the arbitration on procedural issues that bear
on whether the arbitration is allowed to proceed.</FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
Each party has the burden of proving each element of its claims or counterclaims, and
each party has the burden of proving any of its affirmative defenses.</FONT></TD>
</TR>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>13</FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
In addition to, or in lieu of closing argument, either party shall have the right to
present a post-hearing brief, and the due date for exchanging any post-hearing briefs
shall be mutually agreed on by the parties and the Arbitrator, or determined by the
Arbitrator in the absence of agreement. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
The Rules shall otherwise be modified to the extent necessary to be consistent with
applicable law.</FONT></TD>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>G.
Substantive Law</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
The parties agree that they will be afforded the identical legal, equitable, and
statutory remedies as would be afforded them were they to bring an action in a court of
competent jurisdiction. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
The applicable substantive law shall be the law of the State of California and/or federal
law. Choice of substantive law in no way affects the procedural aspects of the
arbitration, which are exclusively governed by the provisions of this ADR Agreement. </FONT></TD>
</TR>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>H.
Opinion And Award</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Arbitrator shall issue a written opinion and award, in conformance with the following
requirements: </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
The opinion and award must be signed and dated by the Arbitrator.</FONT></TD>
</TR>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
The Arbitrator&#146;s opinion and award shall decide all issues submitted.</FONT></TD>
</TR>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
The Arbitrator&#146;s opinion and award shall set forth the findings of fact and
conclusions of law supporting each part of the opinion.</FONT></TD>
</TR>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
The Arbitrator shall have the same authority to award remedies, damages and costs as
provided to a judge and/or jury under parallel circumstances. </FONT></TD>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I.
Enforcement Of Arbitrator&#146;s Award</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
the issuance of the Arbitrator&#146;s decision, any party may petition a court to
confirm, enforce, correct or vacate the Arbitrator&#146;s opinion and award under the
Federal Arbitration Act, and/or applicable State law. </FONT></TD>
</TR>
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<P><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>J.
Fees And Costs</B> </FONT></P>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
otherwise required by law, fees and costs shall be allocated in the following manner: </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.
Each party shall be responsible for its own attorneys&#146;fees, except as otherwise
provided by law for the particular claim(s) at issue.</FONT></TD>
</TR>
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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>14</FONT></P>

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<TD WIDTH=6%>&nbsp;</TD>
<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.
VaxGen shall pay the entire cost of the arbitrator&#146;s services, the facility in which
the arbitration is to be held, and any similar costs that Francis would not have
otherwise incurred if the dispute was adjudicated in a court of law rather than through
arbitration. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.
VaxGen shall pay the entire cost of a court reporter to transcribe the arbitration
proceedings. Each party shall advance the cost for said party&#146;s transcript of the
proceedings. Each party shall advance its own costs for witness fees, service and
subpoena charges, copying, or other incidental costs that each party would bear during
the course of a civil lawsuit. </FONT></TD>
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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.
Each party shall be responsible for its costs associated with discovery, except as
required by law or court order.</FONT></TD>
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<H2 ALIGN=LEFT><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>III.     Severability</FONT></H2>

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<TD WIDTH=94%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
term, clause and provision of this ADR Agreement is separate and independent, and should
any term, clause or provision of this ADR Agreement be found to be invalid or
unenforceable, the validity of the remaining terms, clauses, and provisions shall not be
affected. As to those terms, clauses and provisions found to be invalid or unenforceable,
they shall be replaced with valid and enforceable terms, clauses or provisions or shall
be modified, in order to achieve, to the fullest extent possible, the economic, business
and other purposes of the invalid or unenforceable terms, clauses or provisions. </FONT></TD>
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DATED:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Donald P. Francis, M.D., D.Sc.
</FONT></TD>
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DATED:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
VaxGen, Inc.<BR><BR>
By:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Title:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
</FONT></TD>
</TR>
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<TD>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>15</FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>APPENDIX C</FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>REQUEST FOR
ARBITRATION FORM</FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ALTERNATIVE DISPUTE
RESOLUTION AGREEMENT</FONT></H1>

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     <TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Submission <BR> Requirement </FONT></TD>
     <TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
This form (or, alternatively, a form that includes the information below) must be submitted
by the individual claimant to the CEO within the time period
required by the law that applies to the claim. If VaxGen requests arbitration, the form must also be served on
the individual within the appropriate time period.</FONT></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>State the nature of the
claim in detail: </FONT></P>

<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Continue on reverse and add pages if necessary)</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Enter the date of
termination or date(s) of alleged incident(s) (i.e., date of last instance of
unlawful discrimination, sexual or other unlawful harassment):<BR>
_______/________/_______<BR>
Month&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Day&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Year
</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Provide the names and work
locations of any individuals, including employees or supervisors, with knowledge
of the dispute: </FONT></P>

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     <TD WIDTH=30% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Name</FONT></TD>
     <TD WIDTH=35% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Job Title</FONT></TD>
     <TD WIDTH=35% ALIGN="LEFT"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Work Location</FONT></TD>
</TR>
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<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>

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<P ALIGN=CENTER><FONT FACE="TIMES NEW ROMAN, TIMES, SERIF" SIZE=2>16</FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Describe the relief requested (i.e., what you want done):</FONT></P>

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<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>
<HR SIZE=1 NOSHADE>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(Please attach any documents
relevant to the dispute.)  </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Signature of Party Requesting Arbitration:</FONT></P>

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DATED:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Donald P. Francis, M.D., D.Sc.
</FONT></TD>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151; or &#151;</FONT></P>

<BR>

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DATED:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;
</FONT></TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
VaxGen, Inc.<BR><BR>
By:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
Title:<BR>
&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;&#151;<BR>
</FONT></TD>
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