VAXGEN INC
LICENSE AGREEMENT
<DOCUMENT>
<TYPE>EX-10.41
<SEQUENCE>5
<FILENAME>d52464_ex10-41.txt
<DESCRIPTION>LICENSE AGREEMENT
<TEXT>
                                                                   Exhibit 10.41

                              EMPLOYMENT AGREEMENT

      This Employment Agreement ("Agreement") by and between Piers Whitehead
("Whitehead") and VaxGen, Inc. ("VaxGen"), is effective July 1, 2002 (the
"Effective Date"). In consideration of the mutual promises made herein, VaxGen
and Whitehead agree as follows:

EMPLOYMENT. VaxGen hereby employs Whitehead, and Whitehead hereby accepts
employment with VaxGen, upon all of the terms and conditions described in this
Agreement. This Agreement supersedes, replaces and restates any and all prior
agreements between the parties hereto relating to the terms of Whitehead's
employment with VaxGen, including any prior agreements concerning
confidentiality, non-disclosure and inventions.

WORK RESPONSIBILITIES. Subject to the terms of this Agreement, Whitehead is
hereby employed in the position of Vice President, Corporate & Business
Development and shall perform the functions and responsibilities of that
position. Whitehead shall devote substantially all of his professional time,
attention and energies to the performance of his work responsibilities.
Whitehead's position, job description, duties and responsibilities may be
modified from time to time in the sole discretion of VaxGen.

COMPENSATION. As consideration for the services and covenants described in this
Agreement, VaxGen agrees to compensate Whitehead during the term of this
Agreement in the following manner:

Salary/Wages. VaxGen agrees to pay Whitehead an annual base salary of $225,000
per year, paid in accordance with Company policy. Whitehead's salary, less
required and authorized deductions, shall be paid in equal, periodic
installments no less frequently than semi-monthly in accordance with VaxGen's
then current payroll practices. The Compensation Committee of the VaxGen Board
of Directors (the "Board") will consider Whitehead's salary annually for
potential increase.

Initial Option Grant and Subsequent Option Grants. On the Effective Date,
Whitehead shall be granted an option to purchase 100,000 shares of common stock
of VaxGen at a per share exercise price equal to the fair market value of the
common stock of VaxGen on the Effective Date in accordance with the form of
grant used by VaxGen for grants made to its senior executive officers (the
"Initial Option"). The Initial Option shall be Incentive Stock Options to the
maximum extent permitted by VaxGen's stock option plan. The Initial Option shall
vest and become exercisable in accordance with the following schedule:
twenty-five percent (25%) of the Initial Option shall vest on the first (1st)
anniversary of the Effective Date and an additional 1/48th of the Initial Option
shall vest on the last day of each of the next 36 months following such
anniversary; provided that, in each case, Whitehead has been continuously
employed with VaxGen from the Effective Date through the applicable vesting
date, except as otherwise provided herein or under the terms of VaxGen's stock
option plan. Except as otherwise provided herein, the Initial Option shall be
subject to such terms and conditions, including provisions regarding
post-termination exercisability, as generally apply to stock options granted to
other senior executive officers who participate in VaxGen's equity incentive
plans as such terms and

<PAGE>

conditions are in effect on the Effective Date. Whitehead 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 of this Agreement and VaxGen's stock
option plan as in effect at the time of the award, in an amount to be determined
in the sole discretion of the Board. In the event that Whitehead's employment is
terminated by the Company without Cause pursuant to paragraph 16(a)(iv) below or
by Whitehead with Good Reason pursuant to paragraph 16(a)(v) below or following
a Change in Control pursuant to paragraph 16(d) below, then Whitehead shall have
one (1) year from the date of termination to exercise all options which are then
vested or which vest as a result of this Agreement, provided however that in no
event will Whitehead be entitled to exercise such stock options after the
expiration of 10 years from the date of grant of such stock options.

Performance Bonus. Whitehead is eligible to receive an annual performance bonus
of up to thirty percent (30%) of his annual base salary in cash, VaxGen
securities or a combination thereof, provided that no more than 50% of the
performance bonus shall be paid in securities. The Chief Executive Officer
("CEO") and Whitehead will mutually cooperate to establish annual performance
objectives for Whitehead. Such performance bonus shall be awarded, if at all, in
the sole discretion of the Compensation Committee of the Board. The Compensation
Committee of the Board will consider Whitehead's bonus annually for potential
increase.

Benefits. Whitehead shall be entitled to employment benefits in accordance with
policies established by or at the direction of the Board 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. Whitehead's
rights, or those of Whitehead's dependents under any such benefits policies or
plans, shall be governed solely by the terms of such policies or plans. VaxGen's
employment benefits, and policies related thereto, are subject to termination,
modification or limitation at VaxGen's sole discretion.

Total Compensation. Whitehead 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.

Business Expenses. VaxGen shall pay Whitehead'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's sole discretion. If Whitehead incurs business expenses under
this Agreement, he shall submit monthly to VaxGen a request for reimbursement
together with supporting documentation satisfactory to VaxGen.

VAXGEN POLICIES. Whitehead agrees to abide by VaxGen's written policies, and
procedures that have been communicated or made available to him, as they may
from time to time be adopted or modified by VaxGen in its sole discretion.
VaxGen's written policies and procedures, including the Employee Handbook, shall
be binding on Whitehead unless superseded by, or in conflict with, this
Agreement. Copies of written policies and procedures are available to Whitehead
in the offices of VaxGen, and Whitehead shall be responsible at all times to
review, and make himself familiar with, these policies and procedures.


                                      -2-
<PAGE>

WARRANTIES. Whitehead hereby represents and warrants that he has not unlawfully
misappropriated any confidential, proprietary or trade secret information from
Whitehead's prior employer or employers and, except to the extent such
information has become publicly available, will not knowingly disclose such
information to VaxGen or improperly use any such information on behalf of
VaxGen. Whitehead acknowledges that VaxGen has specifically requested that, if
Whitehead has any such confidential, proprietary or trade secret knowledge or
information, Whitehead not use such information while employed by VaxGen for the
benefit of VaxGen. Whitehead 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.

PRIOR INVENTIONS. Whitehead acknowledges that, except for the inventions
disclosed on Appendix A, Whitehead 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 Whitehead to VaxGen with
respect to inventions, if any, made by Whitehead prior to employment by VaxGen,
which inventions are listed in Schedule A, attached hereto.

SUBSEQUENT INVENTION DISCLOSURE. Whitehead hereby agrees to promptly disclose to
VaxGen any and all inventions that he develops during the term of his
employment. Whitehead will also disclose to the CEO all inventions made,
conceived, reduced to practice, or developed by Whitehead 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.

ASSIGNMENT OF INVENTIONS. Whitehead hereby assigns and agrees to assign to
VaxGen or its designee, Whitehead'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 ("Inventions") which Whitehead may
solely or jointly develop, conceive or reduce to practice, during the period of
employment, except as provided in paragraph 10 below. Whitehead agrees that all
such Inventions are the sole property of VaxGen. Whitehead further agrees that
all such Inventions, including works of authorship, are "works for hire" for
purposes of VaxGen's rights under copyright laws. Whitehead 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. Whitehead 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's sole
discretion and for VaxGen's sole benefit and that no royalty will be due to him
as a result of VaxGen's efforts to commercialize or market any such Invention.
Whitehead 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's expense, in obtaining and enforcing the full benefits, enjoyment,
rights and title, throughout the world, of and to the Inventions hereby assigned
by Whitehead to VaxGen as set forth above.

PATENT AND COPYRIGHT REGISTRATIONS. Whitehead agrees to assist VaxGen, or its
designee, at VaxGen's expense, in every proper way to secure VaxGen's rights in
the Inventions


                                      -3-
<PAGE>

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. Whitehead 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 Whitehead'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 Whitehead 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
Whitehead.

INVENTIONS NOT ASSIGNED. The parties agree that the assignment of inventions
under this Agreement does not apply to an invention which qualifies fully for
protection under Section 2870 of the California Labor Code, which states that
"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'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'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[.]"

CONFIDENTIAL, PROPRIETARY AND TRADE SECRET INFORMATION. During the course of his
employment, will come into possession of or acquire knowledge of confidential,
proprietary and trade secret information of VaxGen. Whitehead 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'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 "trade secret"
under the Uniform Trade Secrets Act. Whitehead 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. Whitehead will abide by VaxGen's policies and procedures, as
established from time to time for the protection of its trade secrets and
confidential information.


                                      -4-
<PAGE>

RETURN OF PROPERTY. 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 Whitehead in the course of
employment with VaxGen, shall be and remain the sole property of VaxGen.
Whitehead agrees that upon request by VaxGen or the termination of Whitehead's
employment (whichever occurs first), Whitehead 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.

NON-SOLICITATION, ANTI-RAIDING. For a period of one (1) year immediately
following the termination of his employment, Whitehead 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 Whitehead's employment with VaxGen,
including, but not limited to, investments, licenses, joint ventures, and
agreements for development.

EQUITABLE RELIEF. Whitehead and VaxGen each agree that in the event of a breach
or threatened breach of paragraphs 7 through 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 7 through 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.

AT-WILL EMPLOYMENT. Whitehead understands and agrees that employment at VaxGen
is at-will. This means that, for any reason or no reason, Whitehead's employment
may be terminated, with or without cause, at any time by either Whitehead 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 Whitehead's employment at-will. Only the Board has the
authority to amend this Agreement on behalf of VaxGen, and then only in a
writing that is signed by both Whitehead and VaxGen pursuant to authority
expressly granted by the Board.

TERMINATION OF EMPLOYMENT.

Subject to the survivability provisions of Section 18 below, Whitehead's
employment under this Agreement and all compensation and benefits provided for
herein shall terminate upon the occurrence of any of the following events.


                                      -5-
<PAGE>

Death: In the event of Whitehead's death, the termination shall be effective
upon the date thereof.

Disability: In the event that Whitehead should become "disabled," VaxGen may
terminate Whitehead's employment under this Agreement. For purposes of this
paragraph, "disabled" shall mean Whitehead's inability, despite reasonable
accommodation, to perform the essential duties of his position for a period of
five (5) 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's notice to Whitehead as provided
for herein. Any base salary payable to Whitehead by VaxGen may be offset by any
benefits paid to Whitehead under any applicable short-term or long-term
disability plan.

Cause: VaxGen may terminate Whitehead's employment under this Agreement upon the
occurrence of "cause" for termination as herein defined. "Cause" shall mean (A)
Whitehead's fraud, misappropriation, embezzlement or other willful commission of
a dishonest or unlawful act that has the effect of materially injuring VaxGen or
its reputation, (B) Whitehead's conviction of a crime involving moral turpitude
or a felony, (C) Whitehead's willful or reckless violation of VaxGen's written
policies or procedures that has the effect of materially injuring VaxGen, or
Whitehead's breach of the confidential information and invention assignment
provisions of this Agreement, and, if any such violation or breach under this
Section 16(a)(iii)(C) is curable, Whitehead's failure to cure such violation or
breach within 15 business days of receiving notice of such violation or breach
from the Board, or (D) Whitehead's habitual failure to perform his job duties,
as determined by the Board in its reasonable judgment, and after notice of such
failure has been given to Whitehead by the Board and Whitehead has had a 15
business-day period within which to cure such failure. The Parties acknowledge
that the reference to a "for Cause" termination herein does not alter the
employment at-will relationship, but merely sets forth circumstances under which
VaxGen has no obligation to pay severance to Whitehead. The termination shall be
effective upon the date specified in VaxGen's notice to Whitehead.

Without Cause: Either VaxGen or Whitehead may terminate Whitehead's employment
under 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.

By Whitehead with Good Reason: Whitehead may terminate his employment under this
Agreement for Good Reason (A) in the event VaxGen breaches a material term
hereof and, after receiving written notice from Whitehead detailing the specific
provision allegedly breached, does not remedy said breach within thirty (30)
days of receiving notice, (B) there is a demotion of Whitehead from the position
of Senior Vice President, Manufacturing Operations or the assignment of job
duties or responsibilities materially inconsistent with such position, (C)
VaxGen moves Whitehead's principal place of


                                      -6-
<PAGE>

business more than thirty-five (35) miles from VaxGen's current principal place
of business at 1000 Marina Blvd, Brisbane, California, (D) there is a reduction
in Whitehead's then-current base salary and/or performance bonus opportunity, or
(E) there is a material and substantial reduction in the aggregate of
Whitehead's employee benefits. The termination shall be effective on the date
specified in the notice given hereunder, which date shall not be earlier than
the date such notice is given, nor more than 30 days after the date such notice
is given.

In the event that Whitehead's employment under this Agreement is terminated by
VaxGen under paragraphs 16(a)(i), 16(a)(ii) or 16(a)(iii) above, or by Whitehead
under paragraph 16(a)(iv) above, no severance pay will be due to Whitehead;
however Whitehead shall be entitled to payment for any earned but unpaid base
salary through the date of termination as well as payment for any accrued but
unused vacation time and any accrued employee benefits, subject to the terms of
the applicable employee benefit plans.

In the event that Whitehead's employment under this Agreement is terminated by
VaxGen under paragraph 16(a)(iv) above or by Whitehead under paragraph 16(a)(v)
above, Whitehead 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'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.

Whitehead shall be entitled to the severance benefits provided for in 16(c)
above if, within twelve (12) months following a Change in Control (as defined
below), VaxGen or its successor in interest terminates Whitehead's employment
for any reason other than for Cause (as defined above) or Whitehead terminates
his employment on account of any of the following: (i) in the event VaxGen
breaches a material term hereof and, after receiving written notice from
Whitehead detailing the specific provision allegedly breached, does not remedy
said breach within thirty (30) days of receiving notice; or (ii) there is a
material reduction in Whitehead's job duties or responsibilities, including,
without limitation, demotion from the position of Vice President; or (iii)
VaxGen or its successor in interest moves Whitehead's principal place of
business more than thirty-five (35) miles from VaxGen's current principal place
of business at 1000 Marina Blvd, Brisbane, California; or (iv) there is a
reduction in Whitehead's then-current base salary and/or performance bonus
opportunity; or (v) there is a material and substantial reduction in the
aggregate of Whitehead's employee benefits.

For purposes of this Agreement, a "Change in Control" shall be deemed to have
occurred if: (i) there is an acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (for the purposes of this Section,
a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of the voting power of the
then outstanding voting securities of VaxGen entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that for purposes of this subsection 16(e), any acquisition by any
employee benefit plan (or related trust) sponsored or


                                      -7-
<PAGE>

maintained by VaxGen or any corporation controlled by VaxGen shall not
constitute a Change in Control; or (ii) individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual (other
than an individual whose initial assumption of office occurs as a result of an
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board) who becomes a director subsequent to the date
hereof whose election or nomination for election by VaxGen's shareholders was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board; or (iii) there is a consummation of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of VaxGen (a "Business Combination") unless, following such
Business Combination, (A) individuals and entities who were the beneficial
owners of the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of
the voting power of the then Outstanding Company Voting Securities of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns VaxGen or
all or substantially all of VaxGen's assets either directly or through one or
more subsidiaries) and (B) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or (iv) approval by the shareholders of VaxGen of a complete
liquidation or dissolution of VaxGen.

INDEMNIFICATION. VaxGen shall maintain, for the benefit of Whitehead, 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 for its other officers and directors. In addition, VaxGen
shall indemnify Whitehead against liability as an officer and director of VaxGen
or any subsidiary or affiliate of VaxGen to the maximum extent permitted by
applicable law. Whitehead'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.

SURVIVABILITY. 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 Whitehead's employment or this Agreement.

GOVERNING LAW. 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.

ENTIRE AGREEMENT. This Agreement embodies the complete agreement and
understanding of the parties related to Whitehead'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
Whitehead 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


                                      -8-
<PAGE>

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.

WAIVER. 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.

INVALIDITY. 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.

NO THIRD PARTY BENEFICIARIES. 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 Whitehead 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.

VOLUNTARY AGREEMENT. Whitehead 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's choice before executing this
Agreement.

CAPTIONS. 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.

SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against Whitehead's heirs,
beneficiaries and legal representatives. It is agreed that the rights and
obligations of Whitehead 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.

NOTICES. 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 officer,


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<PAGE>

addresses and facsimile numbers below may be changed by written notice given
pursuant to this paragraph. Notices shall be given:

           If to VaxGen:                 Chief Executive Officer of VaxGen, Inc.
                                         1000 Marina Blvd., Suite 200
                                         Brisbane, California 94005
                                         Fax number:  650-624-1001

           If to Whitehead:              Piers Whitehead
                                         16 Toledo Court
                                         Lafayette, CA  94549


ALTERNATIVE DISPUTE RESOLUTION PROGRAM. 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 Whitehead'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 B to this
Agreement and incorporated herein.

Dated:
        -----------------------                           ----------------------
                                                          Piers Whitehead

Dated:                                                   VaxGen, Inc.
        -----------------------

                                                         ----------------------
                                                         Lance Gordon, Ph.D.
                                                         Chief Executive Officer


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<PAGE>

                                   APPENDIX A

Inventions. 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):

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Dated:
       --------------------------     ------------------------------
                                      Piers Whitehead
       --------------------------

<PAGE>

                                   APPENDIX B

ALTERNATIVE DISPUTE AGREEMENT

      AGREEMENT TO ARBITRATE

      In the event that any employment dispute arises between VaxGen, Inc.
("VaxGen") and Piers Whitehead ("Whitehead"), the parties involved will make all
efforts to resolve any such dispute through informal means. However, if within
thirty (30) days of the event giving rise to the dispute, these informal
attempts at resolution fail and if the dispute arises out of or is related to
Whitehead's Employment Agreement, Whitehead's employment, the termination of
Whitehead's employment or alleged unlawful discrimination, including but not
limited to sexual or other unlawful harassment (an "Arbitrable Dispute"), VaxGen
and Whitehead will submit the dispute to final and binding arbitration, except
as set forth in Paragraphs 7-14 of the Employment Agreement.

      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 ("ADR") AGREEMENT IS A WAIVER OF THE PARTIES'
RIGHTS TO A CIVIL COURT ACTION FOR A DISPUTE RELATING TO BREACH OF THE PARTIES'
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.

      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.

      The following types of employment disputes are not subject to this ADR
Agreement: (1) disputes related to workers' 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 Whitehead from filing a charge with
the Equal Employment Opportunity Commission ("EEOC"), the National Labor
Relations Board ("NLRB") 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.


<PAGE>

REQUEST FOR ARBITRATION

Attempt At Informal Resolution Of Disputes

      Prior to the submission of any Arbitrable Dispute to arbitration,
Whitehead and VaxGen shall attempt to resolve the dispute informally as set
forth below.

      Whitehead 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.

Arbitration Procedures

      The party desiring arbitration, whether Whitehead or VaxGen, must submit a
"Request For Arbitration" 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 "Request for Arbitration" 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 "Request for Arbitration" form supplied by VaxGen (Appendix C).
Alternatively, the requesting party may create a "Request For Arbitration" form
that, unless otherwise required by law, clearly states "Request For Arbitration"
at the beginning of the first page and includes the following information:

      1. A factual description of the dispute in sufficient detail to advise the
other party of the nature of the dispute;

      2. The date when the dispute first arose;

      3. The names, work locations and telephone numbers of any individuals,
including employees or supervisors, with knowledge of the dispute; and

      4. The relief requested by requesting party.

      The responding party may submit counterclaim(s) in accordance with
applicable law. Any dispute as to the sufficiency of the foregoing notice shall
be submitted to the Arbitrator for resolution and shall not be a basis for
avoiding arbitration.

Selection Of The Arbitrator

      All disputes will be resolved by a single Arbitrator, the Arbitrator will
be mutually selected by VaxGen and Whitehead. 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


                                      -ii-
<PAGE>

Arbitration Mediation Services ("JAMS/Endispute"). 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.

The Arbitrator's Authority

      The Arbitrator shall have the powers enumerated below:

      1. Ruling on motions regarding discovery, and ruling on procedural and
evidentiary issues arising during the arbitration.

      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.

      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.

      4. Determining only the issue(s) submitted to him/her. The issue(s) must
be identifiable in the "Request For Arbitration" or counterclaim(s). Except as
required by law, any issue(s) not identifiable in those documents is outside the
scope of the Arbitrator's jurisdiction and any award involving such issue(s),
upon motion by a party, shall be vacated.

Discovery

      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.

Hearing Procedure

      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's "National Rules for the Resolution of Employment Disputes" (the
"Rules") with the following amendments:

      1. The Arbitrator shall rule at the outset of the arbitration on
procedural issues that bear on whether the arbitration is allowed to proceed.


                                      -iii-
<PAGE>

      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.

      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.

      4. The Rules shall otherwise be modified to the extent necessary to be
consistent with applicable law.

Substantive Law

      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.

      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.

Opinion And Award

      The Arbitrator shall issue a written opinion and award, in conformance
with the following requirements:

      1. The opinion and award must be signed and dated by the Arbitrator.

      2. The Arbitrator's opinion and award shall decide all issues submitted.

      3. The Arbitrator's opinion and award shall set forth the findings of fact
and conclusions of law supporting each part of the opinion.

      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.

Enforcement Of Arbitrator's Award

      Following the issuance of the Arbitrator's decision, any party may
petition a court to confirm, enforce, correct or vacate the Arbitrator's opinion
and award under the Federal Arbitration Act, and/or applicable State law.

Fees And Costs

      Unless otherwise required by law, fees and costs shall be allocated in the
following manner:

      1. Each party shall be responsible for its own attorneys' fees, except as
otherwise provided by law for the particular claim(s) at issue.


                                      -iv-
<PAGE>

      2. VaxGen shall pay the entire cost of the arbitrator's services, the
facility in which the arbitration is to be held, and any similar costs that
Whitehead would not have otherwise incurred if the dispute were adjudicated in a
court of law rather than through arbitration.

      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'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.

      4. Each party shall be responsible for its costs associated with
discovery, except as required by law or court order.

Severability

      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.


Dated:
        -------------                                     ----------------------
                                                          Piers Whitehead



Dated:                                                  VaxGen, Inc.
        -------------

                                                        ----------------------
                                                        Lance Gordon, Ph.D.
                                                        Chief Executive Officer


                                      -v-
<PAGE>

                                   APPENDIX C

REQUEST FOR ARBITRATION FORM

ALTERNATIVE DISPUTE RESOLUTION AGREEMENT

--------------------------------------------------------------------------------

Submission        This form (or, alternatively, a form that includes the
Requirement       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.

--------------------------------------------------------------------------------

State the nature of the claim in detail:

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

(Continue on reverse and add pages if necessary)

Enter the date of termination or date(s) of alleged incident(s) (e.g., date of
last instance of unlawful discrimination, sexual or other unlawful harassment):

_______/________/_______
Month    Day      Year

Provide the names and work locations of any individuals, including employees or
supervisors, with knowledge of the dispute:

Name                        Job Title                             Work Location

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------


                                      -6-
<PAGE>

Describe the relief requested (i.e., what you want done):

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

(Please attach any documents relevant to the dispute.)

Signature of Party Requesting Arbitration:


Dated:
        -----------------------                          ----------------------
                                                         Piers P. Whitehead


Dated:                                                   VaxGen, Inc.
        -----------------------


                                                         ----------------------
                                                         Lance Gordon, Ph.D.
                                                         Chief Executive Officer


                                      -7-

</TEXT>
</DOCUMENT>
