Exhibit
10.55 [*] = CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS ([*]), HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. February 13, 2004 VIA FEDEX William Heyward
[*] Dear Bill: This letter sets forth
the terms of the transition and separation agreement (the Agreement) that
VaxGen, Inc. (the Company or
VaxGen) is offering to you to aid in your employment transition. 1.          Separation
Date.You and
the Company agree that your employment with the Company terminated effective January
31, 2004 (the Separation Date), which you agree is also the termination date
of the Employment Agreement between you and the Company signed as of January 3,
2000, attached as Exhibit A (the Employment Agreement), notwithstanding any
term of employment or termination notice requirement under the Employment
Agreement. 2.          Departure
Announcement.  You and
the Company agree to make good faith efforts to develop a mutually agreeable
additional announcement, if any, concerning your departure from the Company,
consistent with the press release previously issued by the Company on January
20, 2004. 3.          Accrued
Salary and PTO Pay. 
You acknowledge that the Company timely paid you all accrued salary, and
all accrued and unused Paid Time Off, earned through the Separation Date, less
standard payroll deductions and withholdings. 
You are entitled to these payments by law. 4.          Severance
Benefits.  The
termination of your employment shall be treated as a termination without
Cause for the purposes of the Employment Agreement.  If you enter into this Agreement, the Company will provide you
with the following severance benefits (the Severance Benefits) as your sole
severance benefits in lieu of the less advantageous severance benefits under
the Employment Agreement: (a)          Bonus
Compensation.  The
Company will pay you a bonus in the amount of $75,000, less required payroll
deductions and withholdings, in lieu of any other bonus or incentive
compensation from the Company, including but not limited to bonuses for 2003 or
any previous years of employment with the Company.  The bonus will be paid within thirty (30) days following the
Effective Date of this Agreement (as defined in Paragraph 17). - 1 -  (b)          Severance
Payments.  The Company
will provide you severance payments during calendar year 2004 that will total,
in the aggregate, twelve (12) months of your base salary in effect as of the
Separation Date, less required payroll deductions and withholdings (the
Severance Payments).  The Severance
Payments will be made on the Companys standard payroll dates, beginning with
the first payroll date following the Effective Date of this Agreement.  All Severance Payments, with the exception
of the Severance Payment provided as of December 31, 2004, shall be in an
amount equal to your regular paycheck amount as of the Separation Date.  The Severance Payment provided as of
December 31, 2004 shall be calculated as an amount equal to the difference between
the following:  (i) twelve (12) months
of your base salary in effect as of the Separation Date; and (ii) the total
amount of Severance Payments paid prior to December 31, 2004 plus the amount of
severance pay provided by the Company prior to the Effective Date of this
Agreement (if any).
(c)          Health
Premium Payments.  To the extent provided by the federal
and state COBRA law or, if applicable, state insurance laws, and by the
Companys current group health insurance policies, you will be eligible to continue
your group health insurance benefits at your own expense after the Separation
Date for a period of up to twenty-four (24) months, regardless of whether you
enter into this Agreement.  Later, you
may be able to convert to an individual policy through the provider of the
Companys health insurance, if you wish. 
The Company will provide you a separate notice that describes your
rights and obligations under COBRA on or after the Separation Date.  If you timely elect continued coverage under
COBRA, and enter into this Agreement, the Company, as an additional severance
benefit, will pay your COBRA premiums sufficient to continue your and your
dependents (if any) health insurance coverage at the level in effect as of the
Separation Date through the earlier of the following:  (i) the date that you and your dependents become eligible
for group health insurance benefits through a new employer; or (ii) January 31,
2005.  You agree to promptly notify the
Company in writing if you become eligible for group health insurance coverage
through a new employer prior to January 31, 2005.
(d)          Stock
Option Grants.  All of
your stock option grants (the Options) and any other equity interests you may
have with the Company will cease vesting effective as of the Separation
Date.  As an additional severance
benefit, the Company agrees to accelerate the vesting of all Options so that
the Options are fully vested and immediately exercisable effective as of the
Separation Date.  In addition, the Options
are hereby amended to provide that you will be able to exercise the vested and
unexercised shares subject to the Options within the earlierof the following: 
(i) any time within three (3) years following the Separation Date; or
(ii) the date that the Option term expires. 
The Options may cease being incentive stock options under Section 422 of
the Internal Revenue Code three (3) months after the Separation Date, and you
are hereby advised to seek independent advice concerning the tax implications
of the Options.  Your rights to exercise any vested shares subject to the Options are set
forth in the Companys stock option plan and your individual Options
agreements, except as modified herein. 
Attached, as Exhibit C, is a spreadsheet providing detail regarding your
Options, their respective exercise prices, and expiration dates.
5.          Consulting
Agreement.Following
the Separation Date, the Company agrees to engage you, and you agree to make
yourself available to perform services, as a consultant under the terms
specified below.
- 2 -

(a)          Consulting
Period.  The
consulting relationship (Consultancy) shall commence on the Effective Date of
this Agreement, and will continue for six (6) months thereafter, unless
terminated earlier pursuant to section 5(h) of this Agreement (the Consulting
Period).  The Consulting Period can be
extended by mutual written agreement of the parties.
(b)          Consulting
Services.During the
Consulting Period, you will be available to consult with the Company in any
areas within your expertise at the specific written request of the Companys
Chief Executive Officer or his Designee (as defined herein).  As referenced in this Agreement, the
Designee shall mean an individual provided written authorization by the Chief
Executive Officer to act as his designee for the purposes of this
Agreement.  You agree to exercise the
highest degree of professionalism and to utilize your expertise and creative
talent in performing these services. 
During the Consulting Period, you shall make yourself available to
perform consulting services for a total of up to two (2) days per month,
although the Company is not obligated to authorize any specific amount of
consulting services during the Consulting Period.  The Company expects that the consulting services will be
performed outside of the Companys premises except when the Chief Executive
Officer or his Designee informs you such services may be provided on the
Companys premises.  The Company shall
not require such services in such a manner as to unreasonably interfere with
your other professional or non-profit activities.  You agree that, during the Consulting Period, you will not
represent or purport to represent the Company in any manner whatsoever to any
third party, bind the Company in any agreement, or direct the activities of
Company employees, unless authorized by the Company in writing to do so.  After
the Separation Date, you will not be considered a Company employee and you will
not be entitled to any of the benefits that the Company may make available to
its employees, such as group insurance, workers compensation insurance
coverage, profit sharing or retirement benefits, except as specifically
provided in this Agreement.
(c)          Consulting
Fees.  During the
Consulting Period, the Company will provide consulting fees for authorized
consulting services at the rate of $1,000 per day, or pro-rata amount thereof
(the Consulting Fees) as your sole compensation for the consulting
services.  You must provide monthly
invoices to the Company for your consulting services.  Due to your status as an independent contractor, the Consulting
Fees will be paid without deductions and withholdings of any kind.  The Company will issue you an IRS 1099 Form
with respect to your Consulting Fees. 
You acknowledge that you will be entirely responsible for the payment of
all taxes due and owing as a result of your Consulting Fees.  You hereby indemnify the Company and hold it
harmless from any liability for any taxes, contributions, penalties, and
interest that may be assessed by any taxing or governmental authority against
the Company with respect to the Consulting Fees.
(d)          Expenses.The Company will reimburse
you for reasonable, documented business expenses incurred by you during the
Consulting Period pursuant to its regular business practice, provided that
these expenses have been pre-approved by the Company in writing.
- 3 -

(e)          Protection
of Information.You
agree that, during the Consulting Period and thereafter, you will not use or
disclose any Confidential Proprietary Information (as defined below) or
materials of the Company that you obtain or develop in the course of performing
consulting services for the Company, except with the advance written permission
of the Companys Chief Executive Officer or his Designee.  For purposes of this Agreement,
Confidential Proprietary Information shall include all information that is
not already in the public domain by virtue of such information having been
disclosed outside of the Company, in the form of authorized publication in
journals, publicly-disseminated reports, and by WebCast, or disclosed in
written form made publicly available in connection with professional
conferences or seminars that are open to the public, or in written form made
publicly available in connection with any other authorized public disclosure.  In the event of a dispute under this
Paragraph 5(e) concerning information that you used or disclosed, you will be
required to demonstrate, including by providing tangible proof, that such
information was in the public domain as of the date of your disclosure or use.  In all situations, it shall not be
considered a breach of this Agreement or the Employees Proprietary Information
and Inventions Agreement (attached hereto as Exhibit C) if you provide any form
of information when required by legal process. 
Any and all work product you create in connection with the consulting
services will be the sole and exclusive property of the Company.  You hereby assign to the Company all right,
title, and interest in all inventions, techniques, processes, materials, and
other intellectual property developed in the course of performing consulting
services for the Company.
(f)          Other
Work Activities.Unless
you obtain advance written authorization from the Companys Chief Executive
Officer or his Designee, during the Consulting Period, you will not carry on
any business or activity (whether directly or indirectly, as a partner,
stockholder, principal, agent, director, affiliate, employee or consultant)
that (i) relates to the Companys projects concerning AIDSVAX or other vaccines
targeting HIV surface protein, or relates to the Companys projects concerning
development of vaccines against anthrax, smallpox, plague or Severe Acute
Respiratory Syndrome, which projects you were involved in during your
employment with VaxGen; or (ii) directly relates to or that materially
interferes with any services you are providing to the Company at any time
during the Consulting Period. 
Notwithstanding the restriction in the preceding sentence, you shall not
be prohibited from being a passive shareholder of up to one percent (1%) of the
public stock of a competitive entity. 
During the Consulting Period, you may engage in any form of employment,
consulting, or business activity not prohibited by this paragraph, provided
that it shall not materially interfere with your ability to perform the
consulting services for the Company.
(g)          Access
to HIV Information.The
Company agrees to provide you with access, during the Consulting Period, to its
information and materials (including but not limited to emails, electronic
files, and documents) concerning HIV for the sole purpose of your consulting
services to the Company or for any other purpose authorized in writing by the
Companys Chief Executive Officer or his Designee.  For the avoidance of doubt, you understand and agree that you
will not be authorized to use or disclose such Company information and
materials other than as specified herein.
(h)          Termination.  The Company shall have the right to
terminate the Consultancy for any reason upon fifteen (15) days advance written
notice to you.  In addition, the Company
may terminate the Consultancy immediately in the event of your material breach
of this Agreement or of your Employees Proprietary Information and Inventions
Agreement (attached hereto as Exhibit C).
- 4 -

6.          No
Other Compensation or Benefits.  You acknowledge that, except as expressly provided in this
Agreement, you have not earned and will not receive from the Company any
additional compensation relating to or arising from employment with the Company
(including base salary, bonus or incentive compensation), severance, or
benefits before or after the Separation Date, with the exception of any vested
right you may have under the express terms of a written ERISA-qualified benefit
plan (e.g., 401(k) account).
7.          Expense
Reimbursements.  You
agree that, within sixty (60) days after the Separation Date, you will submit
your final documented expense reimbursement statement reflecting all business
expenses you incurred through the Separation Date, if any, for which you seek
reimbursement.  The Company will
reimburse you for these expenses pursuant to its regular business practices.
8.          Return
of Company Property. 
You agree that, on the Effective Date of this Agreement or earlier if
requested by the Company, you will return to the Company all Company documents
(and all copies thereof) and other Company property in your possession or
control, including, but not limited to, any Company equipment, files,
correspondence, memoranda, reports, lists, proposals, agreements, drafts,
notes, minutes, drawings, records, plans, forecasts, purchase orders, research
and development information, customer information and contact lists, sales and
marketing information, personnel information, vendor information, promotional
literature and instructions, financial and operational information, technical
information, specifications, computer-recorded information, electronic
information (including email and correspondence), other tangible property,
credit cards, entry cards, identification badges and keys; and, any materials
of any kind that contain or embody any proprietary or confidential information
of the Company (and all reproductions thereof in whole or in part).  You agree to make a diligent search to
locate any such documents, property and information on or before the Separation
Date.  In addition, if you have used any
personal computer, server, or e-mail system to receive, store, review, prepare
or transmit any Company confidential or proprietary data, materials or
information, you agree to provide the Company with a computer-useable copy of
such information and then permanently delete and expunge such Company
confidential or proprietary information from those systems; and you agree to
provide the Company access to your system as requested to verify that the
necessary copying and/or deletion is done. 
VaxGen has contractual obligations to third parties, including
Genentech, the National Institute of Health, and the Walter Reed Institute,
that could require VaxGen to provide certain information, documents or other
materials to such third parties in the future. 
Therefore, your obligations set forth in this paragraph include
information, documents and other materials that VaxGen may be required to
provide to such third parties, including information related to technology
provided to VaxGen by Genentech pursuant to their license agreements.  Your
timely return of all Company property is a precondition of your receipt of the
Severance Benefits.Notwithstanding the above, you will be allowed
to retain any specific Company property for which you have obtained written
authorization from the Companys Chief Executive Officer or his Designee, and
the Companys Chief Executive Officer and his Designee agree to use their best
efforts to respond, in writing, to your written requests to retain specific
Company property within thirty (30) days of the receipt of your written
request.
- 5 -

9.          Proprietary
Information Obligations. 
You acknowledge your continuing obligations under the Employees
Proprietary Information and Inventions Agreement between you and the Company
signed as of January 3, 2000 (the Proprietary Information Agreement).  A copy of the Proprietary Information
Agreement is attached hereto as Exhibit C. 
The Company has been informed that you desire to form a non-profit
entity to develop vaccines against HIV for distribution in third world
countries which potentially could include licenses and/or sublicenses from
VaxGen in compliance with VaxGens license agreements with Genentech, and
contingent upon separate written agreements and completion of any required
parallel agreements with Genentech and any other necessary third parties.  VaxGen agrees that nothing in the
Proprietary Information Agreement will prohibit you from using or disclosing
information that is in the public domain as of the date of your use or disclosure,
provided that such information is
not in the public domain as a result of your breach of any written agreement
with the Company.
10.        Confidentiality.  The provisions of this Agreement will be
held in strictest confidence by you and the Company and will not be publicized
or disclosed in any manner whatsoever; provided, however, that:  (a) you may disclose this Agreement in
confidence to your immediate family; (b) the parties may disclose this
Agreement in confidence to their respective attorneys, accountants, auditors,
tax preparers, and financial advisors; (c) the Company may disclose this
Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or
as otherwise required by law.  In
particular, and without limitation, you agree not to disclose the terms of this
Agreement to any current or former employee of the Company.
11.        Nondisparagement.Both you and the Company
(through its officers and directors) agree not to disparage the other party,
and the other partys officers, directors, employees, shareholders and agents,
in any manner likely to be materially harmful to them or their business,
business reputation or personal reputation; provided that both you and the
Company may respond at any time to any question, inquiry or request for
information when required by legal process. 
In the event that you are concerned about proposed statements you wish
to make regarding scientific or other matters, you may provide the proposed
statement, in writing, to VaxGens Chief Executive Officer or his Designee in
order to obtain VaxGens written authorization for the proposed statement, and
VaxGen agrees that such authorization will not be unreasonably withheld, and
provided within ten (10) business days. 
Likewise, in the event that the Company is concerned about proposed statements
it wishes to make about you regarding scientific or other matters, the Company
may provide the proposed statement, in writing, to you in order to obtain your
written authorization for the proposed statement, and you agree that such
authorization will not be unreasonably withheld, and provided within ten (10)
business days.  Both you and VaxGen may
submit to the other up to two (2) such proposed statements each week.
12.        No
Voluntary Adverse Action. 
You agree that you will not voluntarily assist any person in bringing or
pursuing any litigation, arbitration, administrative claim or other formal
proceeding, or any proposed litigation, arbitration, administrative claim, or
other formal proceeding, against the Company, its parents, subsidiaries,
affiliates, distributors, officers, directors, employees or agents, unless
pursuant to legal process.  The
restrictions set forth in this Paragraph 12 do not apply to any actions you may
bring to enforce this Agreement or to any actions you may bring based on claims
arising after the date that you sign this Agreement.
- 6 -

13.        Cooperation.  Before and after the Separation Date, you
agree to cooperate fully with the Company in connection with its actual or
contemplated defense, prosecution, or investigation of any claims, demands, or
other matters arising from events, acts, or failures to act that occurred
during the time period in which you were employed by the Company.  Such cooperation includes, without
limitation, making yourself available upon reasonable notice, without subpoena,
for interviews, depositions, and trial testimony and you shall be allowed to
provide truthful and accurate information or testimony in any proceeding
subject to this Paragraph 13 of this Agreement.  The Company will reimburse you for reasonable out-of-pocket
expenses you incur in connection with any such cooperation (excluding forgone
wages, salary, or other compensation), and will make reasonable efforts to
accommodate your scheduling needs.  For
the avoidance of doubt, the Company will not pay Consulting Fees or any other
compensation for your cooperation under this Paragraph 13.  To the extent required by law or any
pre-existing agreements between the parties, you will have the right to retain
counsel of your own selection and the Company will pay your reasonable
attorneys fees within thirty (30) days after VaxGens receipt of satisfactory
documentation of your attorneys fees; however, such documentation shall not
require you to waive the attorney-client privilege.
14.        Nonsolicitation.  For a period of one (1) year following the
Separation Date, you agree that you will not, either directly or indirectly,
(a) attempt to recruit, solicit or take away any of the employees of VaxGen who
worked for VaxGen at any time while you were employed by VaxGen, or make known
to any person, firm or corporation the names or addresses of, or any
information pertaining to, any current or former employees of VaxGen; or (b)
use any confidential or proprietary information to attempt to call on, solicit
or take away any clients of VaxGen or any other persons, entities, or
corporations with which VaxGen has had or contemplated any business transaction
or relationship during your employment with VaxGen, including, but not limited
to, investments, licenses, joint ventures, and agreements for development.
15.        No
Admissions.  Nothing
contained in this Agreement shall be construed as an admission by you or the
Company of any liability, obligation, wrongdoing or violation of law.
16.        Release
of Claims.  Except as
otherwise set forth in this Agreement, in exchange for the consideration under
this Agreement to which you would not otherwise be entitled, you hereby
generally and completely release the Company and its parents, subsidiaries,
successors, predecessors and affiliates, and its and their directors, officers,
employees, shareholders, agents, attorneys, insurers, affiliates and assigns,
from any and all claims, liabilities and obligations, both known and unknown, that
arise out of or are in any way related to events, acts, conduct, or omissions
occurring at any time prior to and including the date you sign this
Agreement.  This general release
includes, but is not limited to: (a) all claims arising out of or in any way
related to your employment with the Company or the termination of that
employment; (b) all claims related to your compensation or benefits,
including salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership or
equity interests in the Company; (c) all claims for breach of contract,
wrongful termination, and breach of the implied covenant of good faith and fair
dealing (including but not limited to claims arising under or based on the
Employment Agreement); (d) all tort claims, including claims for fraud,
defamation, emotional distress, and discharge in violation of public policy;
and (e) all federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990 (as amended), the federal Age
Discrimination in Employment Act (as amended) (ADEA), the Georgia Age
Discrimination Act, and the California Fair Employment and Housing Act (as
amended).  Notwithstanding the above,
you do not release the Company from any obligation to indemnify you pursuant to
contract, the Companys articles or by-laws, or applicable law.  You represent that you have no lawsuits,
claims or actions pending in your name, or on behalf of any other person or
entity, against the Company or any other person or entity subject to the
release granted in this paragraph.
- 7 -

17.        ADEA
Waiver.  You acknowledge that you are knowingly and
voluntarily waiving and releasing any rights you may have under the ADEA, and
that the consideration given for the waiver and release in the preceding
paragraph hereof is in addition to anything of value to which you are already
entitled.  You further acknowledge that
you have been advised, as required by the ADEA, that:  (a) your waiver and release do not apply to any rights or
claims that may arise after the date that you sign this Agreement; (b) you have
the right to consult with an attorney prior to signing this Agreement (although
you may choose voluntarily not to do so); (c) you have forty-five (45)
days to consider this Agreement (although you may choose voluntarily to sign it
earlier); (d) you have seven (7) days following the date you sign this
Agreement to revoke the Agreement by providing written notice of your
revocation to the Companys Chief Executive Officer; and (e) this Agreement
will not be effective until the date upon which the revocation period has
expired, which will be the eighth day after the date that this Agreement is
signed by you (the Effective Date). 
You hereby acknowledge that with this Agreement, the Company has
provided you with an ADEA Disclosure Notice Under Title 29 U.S. Code Section
626(f)(1)(H) which is attached hereto as Exhibit D.  Additionally, since you
asked for, and received, material changes in this Agreement in your favor, you
agree to waive the additional time for considering this offer to which you
would otherwise be entitled.  Thus, you
agree that the required forty-five (45) day consideration period for this
Agreement will be deemed to have started on January 29, 2004.
18.        Section
1542 Waiver.  In
giving the releases set forth in this Agreement, which includes claims which
may be unknown to you at present, you acknowledge that you have read and
understand Section 1542 of the California Civil Code which reads as
follows:  A general release does not extend to
claims which the creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have materially
affected his settlement with the debtor.  You hereby expressly waive and relinquish all rights and benefits
under that section and any law or legal principle of similar effect in any
jurisdiction with respect to your release of claims herein, including but not
limited to the release of unknown and unsuspected claims.
19.        Dispute
Resolution.  To ensure
rapid and economical resolution of any disputes which may arise under this
Agreement, you and the Company agree that any and all claims, disputes or
controversies of any nature whatsoever arising from or regarding the
interpretation, performance, negotiation, execution, enforcement or breach of
this Agreement shall be resolved by confidential, final and binding arbitration
conducted before a single arbitrator with Judicial Arbitration and Mediation
Services, Inc. (JAMS) in San Francisco, California, under the then-applicable
JAMS rules.  The parties acknowledge
that by agreeing to this arbitration procedure, they waive the right to resolve
any such dispute through a trial by jury, judge or administrative proceeding.  The Company shall bear JAMS arbitration
fees and administrative costs.  The
arbitrator shall:  (a) have the
authority to compel adequate discovery for the resolution of the dispute and to
award such relief as would otherwise be permitted by law; and (b) issue a
written arbitration decision including the arbitrators essential findings and
conclusions and a statement of the award. 
The arbitrator, and not a court, shall also be authorized to determine
whether the provisions of this paragraph apply to a dispute, controversy or
claim sought to be resolved in accordance with these arbitration
procedures.  Nothing in this Agreement
is intended to prevent either you or the Company from obtaining injunctive
relief in court to prevent irreparable harm pending the conclusion of any such
arbitration.
- 8 -

20.        Miscellaneous.  This Agreement, including all exhibits,
constitutes the complete, final and exclusive embodiment of the entire
agreement between you and the Company with regard to its subject matter.  It is entered into without reliance on any
promise or representation, written or oral, other than those expressly
contained herein, and it supersedes any other such promises, warranties or
representations.  This Agreement may not
be modified or amended except in a writing signed by both you and a duly
authorized officer of the Company.  This
Agreement will bind the heirs, personal representatives, successors and assigns
of both you and the Company, and inure to the benefit of both you and the
Company, their heirs, successors and assigns. 
If any provision of this Agreement is determined to be invalid or
unenforceable, in whole or in part, this determination will not affect any
other provision of this Agreement and the provision in question shall be
modified so as to be rendered enforceable in a manner consistent with the
intent of the parties insofar as possible under the applicable law.  This Agreement will be deemed to have been
entered into and will be construed and enforced in accordance with the laws of
the State of California as applied to contracts made and to be performed
entirely within California without regard to conflicts of law principles.  Any ambiguity in this Agreement shall not be
construed against either party as the drafter. 
Any waiver of a breach of this Agreement shall be in writing and shall
not be deemed to be a waiver of any successive breach.  This Agreement may be executed in
counterparts which shall be deemed to be part of one original, and facsimile
signatures shall be equivalent to original signatures.
21.        Forfeiture
Actions.  You
understand and agree that your entitlement to receive the Severance Benefits,
and the Companys obligation to provide Severance Payments, payment of COBRA
premiums, and rent-free office space hereunder, will cease immediately in the
event that you materially breach your Proprietary Information Agreement, or
materially breach Paragraphs 10, 11, 12, 13 or 14 of this Agreement, provided that, the Company first provides
you with written notice and an opportunity to cure such breach (which must be
cured as soon as practicable but in no event longer than thirty (30) days after
the breach) if the breach is susceptible to cure.
22.        Continuing
Indemnification Rights and Insurance Coverage.You and VaxGen agree that that certain Indemnity
Agreement between you and the Company, a copy of which is attached hereto as
Exhibit E, will continue in effect in accordance with its terms.
23.        Reimbursement
of Attorneys Fees. 
Within thirty (30) days following the Effective Date of this Agreement,
the Company agrees to reimburse you for the costs of your reasonable attorneys
fees and costs for the review and negotiation of this Agreement, up to a
maximum reimbursement of $2,000.  You
must provide satisfactory documentation of your attorneys fees and costs in
order to receive reimbursement; however, such documentation shall not require
you to waive the attorney-client privilege.
- 9 -

If this Agreement is
acceptable to you, please sign below and
return the original to me.
I wish you the best in
your future endeavors.
Sincerely,
VAXGEN, INC.
By:
  /s/
  Lance GordonLance GordonChief Executive OfficerExhibit A  Employment Agreement
Exhibit B  Stock Option Grant Spreadsheet
Exhibit C -- Proprietary Information Agreement
Exhibit D -- ADEA Disclosure Notice Under
Title 29 U.S. Code Section 626(f)(1)(H)
Exhibit E  Indemnity Agreement
UNDERSTOOD AND AGREED:
/s/  William L. HeywardWilliam HeywardDate: February 16,
2004
- 10 -

EXHIBIT A
EMPLOYMENT
AGREEMENT
Previously
filed as Exhibit 10.19 on Form 10-K filed March 30, 2001
- 11 -

EXHIBIT B
STOCK
OPTION GRANT SPREADSHEET
William L. Heyward
Termination Date - 1/31/2004
Exercisable Options
Number
  
  Grant
  Date
  
  Plan/
  Type
  
  Price
  
  Shares
  Granted
  
  Shares
  Exercised
  
  Shares
  Exercisable
  
  Vesting
  Stop Date
  
  Total
  Price
  
  Last Date
  To Exercise000167
  
  8/24/00
  
  96SO/NQ
  
  $
  21.250000
  
  25,000
  
  0
  
  25,000
  
  
  1/31/04
  
  $
  531,250.00
  
  1/31/07000269
  
  4/6/01
  
  96SO/NQ
  
  $
  19.440000
  
  8,000
  
  0
  
  8,000
  
  
  1/31/04
  
  $
  155,520.00
  
  1/31/07000475
  
  7/22/02
  
  96SO/NQ
  
  $
  5.740000
  
  15,500
  
  0
  
  15,500
  
  
  1/31/04
  
  $
  88,970.00
  
  1/31/07000476
  
  7/22/02
  
  96SO/NQ
  
  $
  5.740000
  
  8,500
  
  0
  
  8,500
  
  
  1/31/04
  
  $
  48,790.00
  
  1/31/07000657
  
  9/10/03
  
  96SO/NQ
  
  $
  5.500000
  
  15,000
  
  0
  
  15,000
  
  
  1/31/04
  
  $
  82,500.00
  
  1/31/07000135
  
  1/3/00
  
  96SO/NQ
  
  $
  20.880000
  
  50,000
  
  0
  
  50,000
  
  
  1/31/04
  
  $
  1,044,000.00
  
  1/31/07TOTALS
  
  122,000
  
  0
  
  122,000
  
  
  
  
  $
  1,951,030.00-
12 -

EXHIBIT C
EMPLOYEES
PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
I recognize that VaxGen,
Inc., a Delaware corporation, together with its subsidiaries (hereinafter
collectively called the Company) is engaged in a continuous program of
research, development, and production respecting its business, present and
future, including fields generally related to its business.  I understand that:
A.
  As part of my employment by the Company I am
  expected to make new contributions and inventions of value to the Company;B.
  My employment creates a relationship of confidence
  and trust between me and the Company with respect to any information:i.
  Applicable to the business of the Company; orii.
  Applicable to the business of any client or customer
  of the Company, which may be made known to me by the Company or by any client
  or customer of Company, or learned by me during the period of my employment.C.
  As used in this Agreement, the period of my
  employment by the Company includes any time during which I may be retained by
  the Company as a consultant or independent contractor.D.
  The Company possesses and will continue to possess
  information that has been created, discovered, developed, or otherwise become
  known to the Company (including, without limitation, information created,
  discovered, developed, or made known by me during the period of or arising
  out of my employment by the Company) and/or in which property rights have
  been assigned or otherwise conveyed to the Company, which information has
  commercial value in the business in which the Company is engaged.  All of the aforementioned information is
  hereinafter called VaxGen Proprietary Information.  By way of illustration, but not
  limitation, VaxGen Proprietary Information includes trade secrets, processes,
  formulas, data and know-how, improvements, inventions, techniques, marketing
  plans, strategies, forecasts, and customer lists.By virtue of a License Agreement between the Company
  and Genentech, Inc. (Genentech), a Services Agreement between the Company
  and Genentech, and other agreement(s) that may be entered into between the
  Company and Genentech (collectively, the Genentech Agreements), the Company
  and its employees have been and will continue to be afforded substantial
  access to proprietary technology and information of Genentech (collectively,
  Genentech Proprietary Information). 
  By way of illustration, but not limitation, Genentech Proprietary
  Information includes trade secrets, processes, formulas, data and know-how
  (including computer databases, improvements, inventions, techniques,
  marketing plans, strategies, forecasts, and customer lists.  VaxGen Proprietary Information and
  Genentech Proprietary Information are referred to collectively herein as the
  Proprietary Information.- 13 -

In consideration of my employment or continued
employment, as the case may be, and the compensation received by me from the
Company from time to time, I hereby agree as follows:
1.
  Subject to Paragraph 5 hereof, all VaxGen
  Proprietary Information shall be the sole property of the Company and its
  assigns, and the Company and its assigns shall be the sole owner of all
  patents and other rights in connection therewith, subject to the terms of the
  Genentech Agreements.  I hereby assign
  to the Company any rights I may have or acquire in such VaxGen Proprietary
  Information.  At all times, both
  during my employment by the Company and after termination of such employment,
  I will keep in confidence and trust all VaxGen Proprietary Information, and I
  will not use or disclose any VaxGen Proprietary Information or anything
  relating to it without the written consent of the Company, except as may be
  necessary in the ordinary course of performing my duties as an employee of
  the Company.All Genentech Proprietary Information shall be the
  sole property of Genentech and its assigns, and Genentech and its assigns
  shall be the sole owner of all patents and other rights in connection
  therewith, subject to the terms of the Genentech Agreements.  I do not have and shall not acquire any
  rights in such Genentech Proprietary Information.  At all times, both during my employment by the Company and
  after termination of such employment, I will keep in confidence and trust all
  Genentech Proprietary Information, and I will not use or disclose any
  Genentech Proprietary Information or anything relating to it without the
  written consent of the Company (to the extent authorized under the Genentech
  Agreements) or Genentech, except as may be necessary in the ordinary course
  of performing my duties as an employee of the Company.  I understand and acknowledge, and the
  Company understands and acknowledges, that Genentech is affording the Company
  and its employees substantial access to Genentech Proprietary Information in
  connection with the Genentech Agreements in reliance on the provisions set
  forth herein, and that breach of such provisions could result in immediate
  material, irreparable harm to Genentech. 
  Genentech is a third party beneficiary of this Agreement.2.
  I agree that during the period of my employment by
  the Company, I will not, without the Companys express written consent,
  engage in any employment or activity other than for the Company in any
  business in which the Company is now or may hereafter become engaged.  In the event of the termination of my
  employment by me or by the Company for any reason, I will deliver to the
  Company all documents and data of any nature pertaining to my work with the
  Company and I will not take with me any documents or data of any description,
  or any reproduction thereof, containing or pertaining to any Proprietary
  Information.- 14 -

3.
  I will promptly disclose to the Company, or any
  persons designated by it, all improvements, inventions, formulas, processes,
  techniques, know-how, and data, whether or not patentable, made or conceived
  or reduced to practice or learned by me, either alone or jointly with others,
  during the period of my employment which are related to or useful in the
  business of the Company, or result from tasks assigned me by the Company or
  result from use of premises owned, leased, or contracted for by the Company
  (all said improvements, inventions, formulas, process, techniques, know-how,
  and data shall be collectively hereinafter called Inventions).4.
  Subject to Paragraph 5 hereof, I agree that all
  Inventions shall be the sole property of the Company and its assigns, and the
  Company and its assigns shall be the sole owner of all patents and other
  rights in connection herewith, subject to the terms of the Genentech
  Agreements.  I hereby assign to the
  Company any rights I may have or acquire in such Inventions.  I further agree as to all Inventions to
  assist the Company and Genentech in every proper way (but at the Companys
  expense) to obtain and from time to time enforce patents on said Inventions
  in any and all countries, and to that end I will execute all documents for
  use in applying for and for obtaining such patents thereon and enforcing
  same, as the Company or Genentech may desire, together with any assignments
  thereof to the Company or Genentech, as the case may be.  My obligations to assist in obtaining and
  enforcing patents for such Inventions in any and all countries shall continue
  beyond the termination of my employment, but the Company shall compensate me
  at a reasonable rate after such termination for time actually spent by me at
  the Companys or Genentechs request on such assistance.5.
  I understand that the Companys right with regard to
  certain things invented or co-invented by me are subject to Sections
  2870-2872 of the California Labor Code, under which I have no obligation to
  assign rights in an invention for which no equipment, supplies, facilities or
  trade secret information of the Company was used and which was developed
  entirely on my own time, and (a) which does not relate (1) to the business of
  the Company or (2) to the Companys actual or demonstrably anticipated
  research of development, or (b) which does not result from any work performed
  by me for the Company.6.
  As a matter of record I attach hereto a complete
  list of all inventions or improvements relevant to the subject matter of my
  employment by the Company which have been made, conceived or reduced to
  practice by me alone or jointly with others prior to my employment by the
  Company, which I desire to remove from the operation of this Agreement; and I
  covenant that such list is complete. 
  If no such list is attached to this Agreement, I represent that I have
  no such inventions or improvements at the time of signing this Agreement.7.
  I represent that my performance of all the terms of
  this Agreement and as an employee of the Company does not and will not breach
  any agreement to keep in confidence proprietary information acquired by me in
  confidence or in trust prior to my employment by the Company and I have not
  entered into, nor will I enter into, any agreement (written or oral) in
  conflict herewith.- 15 -

8.
  I understand that, as part of the consideration of
  the offer of employment extended to me by the Company and of my employment by
  the Company, I will not bring with me to the Company or use in the
  performance of my responsibilities at the Company materials or documents of
  any former employer, unless I have obtained written authorization from the
  former employer for their possession and use.  I certify that:1.
  I have brought no proprietary or confidential
  materials or documents to the Company; or2.
  I have brought proprietary or confidential materials
  or documents to the Company and I have attached to this Agreement a list of
  such materials or documents, together with an authorization for their
  possession and use as shown in the attached letter; or3.
  I have brought proprietary or confidential materials
  or documents to the Company but I have not yet attached a list or obtained a
  written authorization for their possession and use.  I understand that a representative from Human Resources will
  contact me within the first week of my employment and request such list and
  authorization.  I further understand
  that in the event I am unable to obtain such authorization, I will NOT USE
  any proprietary or confidential materials or documents during the course of
  my employment with the Company AND I will return any such materials or
  documents to the former employer.I also understand that, in my employment with the
Company, I am not to breach any obligation of confidentiality that I have to
any former employer, and I agree that I shall fulfill all such obligations
during my employment with the Company.
9.
  This Agreement shall be effective as of the first
  day of my employment by the Company, which is January 03, 2000.10.
  This Agreement shall be binding upon me, my heirs,
  executors, assigns, and administrators and shall inure to the benefit of the Company,
  its successors and assigns.
DATED:  January 03, 2000
  
  BY:
  /s/  William L. HeywardACCEPTED
  AND AGREED TO:VAXGEN,
  INC.BY:
  /s/
  Don Francis
  
  DATED:
  January
  04, 2000Don
  FrancisPresident- 16 -

DateVaxGen, Inc.
1000 Marina Boulevard
Suite 200
Brisbane, CA 94005
I,
_____________________________, propose to bring to my VaxGen employment the
following tangible materials and previously unpublished documents, which materials
and documents may be used in my VaxGen employment:
Additional sheets attachedThe signature below by a representative of my current
or former employer confirms that my continued possession and use of these
materials is authorized.
AUTHORIZATION:SIGNATURETITLEEMPLOYERVery truly yours,Signature- 17 -

EXHIBIT D
ADEA
DISCLOSURE NOTICE UNDER TITLE 29 US CODE SECTION 626(f)(1)(H)
Confidentiality Provision:
  The
  information contained in this document is private and confidential.  You may not disclose this information to
  anyone except your professional advisors.1.
  VaxGen, Inc. employees in the positions of Vice
  President and above have been considered for the severance package program.2.
  Employees in the positions of Vice President and
  above whose employment will terminate on or about January 30, 2004 and March
  31, 2004 are eligible to participate in the severance package program.3.
  You and all others receiving this disclosure will
  have up to forty-five (45) days to review the terms and conditions of the
  severance package and to decide whether to accept the package.EMPLOYEES ELIGIBLE FOR THE SEVERANCE
PACKAGE PROGRAM
JOB TITLE
  
  AGEPresident
  
  61Sr. Vice President, Research and Development
  
  55Sr. Vice President, Finance and Administration
  
  51Vice President, International Clinical Research
  
  53- 18 -

EMPLOYEES
NOT ELIGIBLE FOR THE SEVERANCE PACKAGE PROGRAM
(RETAINED VICE PRESIDENTS AND ABOVE)
JOB TITLE
  
  AGEChief Executive Officer
  
  56Sr. Vice President, Regulatory and Quality Systems
  
  48Sr. Vice President, Medical Affairs
  
  64Sr. Vice President, Manufacturing
  
  50Vice President, Corporate Communications
  
  47Vice President, Corporate Development
  
  41- 19 -

EXHIBIT E
INDEMNITY
AGREEMENT
THIS AGREEMENT is
made and entered into this 2nd day of December, 2002 by and between VaxGen,
Inc.,  a Delaware corporation (the
Corporation), and William L. Heyward, M.D. (Agent).
Recitals
WHEREAS, Agent
performs a valuable service to the Corporation in his capacity as a director
and/or executive officer of the Corporation;
WHEREAS, the
stockholders of the Corporation have adopted bylaws (the Bylaws) providing
for the indemnification of the directors, officers, employees and other agents
of the Corporation, including persons serving at the request of the Corporation
in such capacities with other corporations or enterprises, as authorized by the
Delaware General Corporation Law, as amended (the Code);
WHEREAS, the
Bylaws and the Code, by their non-exclusive nature, permit contracts between
the Corporation and its agents, officers, employees and other agents with
respect to indemnification of such persons; and
WHEREAS, in order
to induce Agent to continue to serve as a director and/or executive officer of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in
consideration of Agents continued service as a director and/or executive
officer after the date hereof, the parties hereto agree as follows:
Agreement
1.          Services
to the Corporation. 
Agent will serve, at the will of the Corporation or under separate
contract, if any such contract exists, as a director and/or executive officer
of the Corporation or as a director, officer or other fiduciary of an affiliate
of the Corporation (including any employee benefit plan of the Corporation)
faithfully and to the best of his ability so long as he is duly elected and
qualified in accordance with the provisions of the Bylaws or other applicable
charter documents of the Corporation or such affiliate; provided, however, that
Agent may at any time and for any reason resign from such position (subject to
any contractual obligation that Agent may have assumed apart from this
Agreement) and that the Corporation or any affiliate shall have no obligation
under this Agreement to continue Agent in any such position.
2.          Indemnity
of Agent.  The
Corporation hereby agrees to hold harmless and indemnify Agent to the fullest
extent authorized or permitted by the provisions of the Bylaws and the Code, as
the same may be amended from time to time (but, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights
than the Bylaws or the Code permitted prior to adoption of such amendment).
- 20 -

3.          Additional
  Indemnity.  In
  addition to and not in limitation of the indemnification otherwise provided
  for herein, and subject only to the exclusions set forth in Section 4
  hereof, the Corporation hereby further agrees to hold harmless and indemnify
  Agent:(a)
  against any and all expenses (including attorneys
  fees), witness fees, damages, judgments, fines and amounts paid in settlement
  and any other amounts that Agent becomes legally obligated to pay because of
  any claim or claims made against or by him in connection with any threatened,
  pending or completed action, suit or proceeding, whether civil, criminal,
  arbitrational, administrative or investigative (including an action by or in
  the right of the Corporation) to which Agent is, was or at any time becomes a
  party, or is threatened to be made a party, by reason of the fact that Agent
  is, was or at any time becomes a director, officer, employee or other agent
  of Corporation, or is or was serving or at any time serves at the request of
  the Corporation as a director, officer, employee or other agent of another
  corporation, partnership, joint venture, trust, employee benefit plan or
  other enterprise; and(b)
  otherwise to the fullest extent as may be provided
  to Agent by the Corporation under the non-exclusivity provisions of the Code
  and Article 9 of the Bylaws.4.          Limitations
  on Additional Indemnity. 
  No indemnity pursuant to Section 3 hereof shall be paid by the
  Corporation:(a)
  on account of any claim against Agent solely for an
  accounting of profits made from the purchase or sale by Agent of securities
  of the Corporation pursuant to the provisions of Section 16(b) of the
  Securities Exchange Act of 1934 and amendments thereto or similar provisions
  of any federal, state or local statutory law;(b)
  on account of Agents conduct that is established by
  a final judgment as knowingly fraudulent or deliberately dishonest or that
  constituted willful misconduct;(c)
  on account of Agents conduct that is established by
  a final judgment as constituting a breach of Agents duty of loyalty to the
  Corporation or resulting in any personal profit or advantage to which Agent
  was not legally entitled;(d)
  for which payment is actually made to Agent under a
  valid and collectible insurance policy or under a valid and enforceable
  indemnity clause, bylaw or agreement, except in respect of any excess beyond
  payment under such insurance, clause, bylaw or agreement;- 21 -

(e)
  if indemnification is not lawful (and, in this
  respect, both the Corporation and Agent have been advised that the Securities
  and Exchange Commission believes that indemnification for liabilities arising
  under the federal securities laws is against public policy and is, therefore,
  unenforceable and that claims for indemnification should be submitted to appropriate
  courts for adjudication); or(f)
  in connection with any proceeding (or part thereof)
  initiated by Agent, or any proceeding by Agent against the Corporation or its
  directors, officers, employees or other agents, unless (i) such
  indemnification is expressly required to be made by law, (ii) the
  proceeding was authorized by the Board of Directors of the Corporation,
  (iii) such indemnification is provided by the Corporation, in its sole
  discretion, pursuant to the powers vested in the Corporation under the Code,
  or (iv) the proceeding is initiated pursuant to Section 9 hereof.5.          Continuation
  of Indemnity.  All
  agreements and obligations of the Corporation contained herein shall continue
  during the period Agent is a director, officer, employee or other agent of
  the Corporation (or is or was serving at the request of the Corporation as a
  director, officer, employee or other agent of another corporation,
  partnership, joint venture, trust, employee benefit plan or other enterprise)
  and shall continue thereafter so long as Agent shall be subject to any
  possible claim or threatened, pending or completed action, suit or
  proceeding, whether civil, criminal, arbitrational, administrative or
  investigative, by reason of the fact that Agent was serving in the capacity
  referred to herein.6.          Partial
  Indemnification. 
  Agent shall be entitled under this Agreement to indemnification by the
  Corporation for a portion of the expenses (including attorneys fees),
  witness fees, damages, judgments, fines and amounts paid in settlement and
  any other amounts that Agent becomes legally obligated to pay in connection
  with any action, suit or proceeding referred to in Section 3 hereof even
  if not entitled hereunder to indemnification for the total amount thereof,
  and the Corporation shall indemnify Agent for the portion thereof to which
  Agent is entitled.7.          Notification
  and Defense of Claim. 
  Not later than thirty (30) days after receipt by Agent of notice of the
  commencement of any action, suit or proceeding, Agent will, if a claim in
  respect thereof is to be made against the Corporation under this Agreement,
  notify the Corporation of the commencement thereof; but the omission so to
  notify the Corporation will not relieve it from any liability which it may
  have to Agent otherwise than under this Agreement.  With respect to any such action, suit or proceeding as to which
  Agent notifies the Corporation of the commencement thereof:(a)
  the Corporation will be entitled to participate
  therein at its own expense;- 22 -

(b)
  except as otherwise provided below, the Corporation
  may, at its option and jointly with any other indemnifying party similarly
  notified and electing to assume such defense, assume the defense thereof,
  with counsel reasonably satisfactory to Agent.  After notice from the Corporation to Agent of its election to
  assume the defense thereof, the Corporation will not be liable to Agent under
  this Agreement for any legal or other expenses subsequently incurred by Agent
  in connection with the defense thereof except for reasonable costs of
  investigation or otherwise as provided below.  Agent shall have the right to employ separate counsel in such
  action, suit or proceeding but the fees and expenses of such counsel incurred
  after notice from the Corporation of its assumption of the defense thereof
  shall be at the expense of Agent unless (i) the employment of counsel by
  Agent has been authorized by the Corporation, (ii) Agent shall have
  reasonably concluded, and so notified the Corporation, that there is an
  actual conflict of interest between the Corporation and Agent in the conduct
  of the defense of such action or (iii) the Corporation shall not in fact
  have employed counsel to assume the defense of such action, in each of which
  cases the fees and expenses of Agents separate counsel shall be at the
  expense of the Corporation.  The
  Corporation shall not be entitled to assume the defense of any action, suit
  or proceeding brought by or on behalf of the Corporation or as to which Agent
  shall have made the conclusion provided for in clause (ii) above; and(c)
  the Corporation shall not be liable to indemnify
  Agent under this Agreement for any amounts paid in settlement of any action
  or claim effected without its written consent, which shall not be
  unreasonably withheld.  The
  Corporation shall be permitted to settle any action except that it shall not
  settle any action or claim in any manner which would impose any penalty or
  limitation on Agent without Agents written consent, which may be given or
  withheld in Agents sole discretion.8.          Expenses.  The Corporation shall advance, prior to
  the final disposition of any proceeding, promptly following request therefor,
  all expenses incurred by Agent in connection with such proceeding upon
  receipt of an undertaking by or on behalf of Agent to repay said amounts if
  it shall be determined ultimately that Agent is not entitled to be
  indemnified under the provisions of this Agreement, the Bylaws, the Code or
  otherwise.9.          Enforcement.  Any right to indemnification or advances
  granted by this Agreement to Agent shall be enforceable by or on behalf of
  Agent in any court of competent jurisdiction if (i) the claim for
  indemnification or advances is denied, in whole or in part, or (ii) no
  disposition of such claim is made within ninety (90) days of request
  therefor.  Agent, in such enforcement
  action, if successful in whole or in part, shall be entitled to be paid also
  the expense of prosecuting his claim. 
  It shall be a defense to any action for which a claim for
  indemnification is made under Section 3 hereof (other than an action
  brought to enforce a claim for expenses pursuant to Section 8 hereof, provided
  that the required undertaking has been tendered to the
  Corporation) that Agent is not entitled to indemnification because of the
  limitations set forth in Section 4 hereof.  Neither the failure of the Corporation (including its Board of
  Directors or its stockholders) to have made a determination prior to the
  commencement of such enforcement action that indemnification of Agent is
  proper in the circumstances, nor an actual determination by the Corporation
  (including its Board of Directors or its stockholders) that such
  indemnification is improper shall be a defense to the action or create a
  presumption that Agent is not entitled to indemnification under this
  Agreement or otherwise.10.        Subrogation.  In the event of payment under this
  Agreement, the Corporation shall be subrogated to the extent of such payment
  to all of the rights of recovery of Agent, who shall execute all documents
  required and shall do all acts that may be necessary to secure such rights
  and to enable the Corporation effectively to bring suit to enforce such
  rights.- 23 -

11.        Non-Exclusivity
  of Rights.  The
  rights conferred on Agent by this Agreement shall not be exclusive of any
  other right which Agent may have or hereafter acquire under any statute,
  provision of the Corporations Certificate of Incorporation or Bylaws,
  agreement, vote of stockholders or directors, or otherwise, both as to action
  in his official capacity and as to action in another capacity while holding
  office.12.        Survival
  of Rights.(a)
  The rights conferred on Agent by this Agreement
  shall continue after Agent has ceased to be a director and executive officer,
  officer, employee or other agent of the Corporation or to serve at the
  request of the Corporation as a director, officer, employee or other agent of
  another corporation, partnership, joint venture, trust, employee benefit plan
  or other enterprise and shall inure to the benefit of Agents heirs,
  executors and administrators.(b)
  The Corporation shall require any successor (whether
  direct or indirect, by purchase, merger, consolidation or otherwise) to all
  or substantially all of the business or assets of the Corporation, expressly
  to assume and agree to perform this Agreement in the same manner and to the
  same extent that the Corporation would be required to perform if no such
  succession had taken place.13.        Separability.  Each of the provisions of this Agreement
  is a separate and distinct agreement and independent of the others, so that
  if any provision hereof shall be held to be invalid for any reason, such
  invalidity or unenforceability shall not affect the validity or
  enforceability of the other provisions hereof.  Furthermore, if this Agreement shall be invalidated in its
  entirety on any ground, then the Corporation shall nevertheless indemnify
  Agent to the fullest extent provided by the Bylaws, the Code or any other
  applicable law.14.        Governing
  Law.  This Agreement
  shall be interpreted and enforced in accordance with the laws of the State of
  Delaware.15.        Amendment
  and Termination.  No
  amendment, modification, termination or cancellation of this Agreement shall
  be effective unless in writing signed by both parties hereto.16.        Identical
  Counterparts.  This
  Agreement may be executed in one or more counterparts, each of which shall
  for all purposes be deemed to be an original but all of which together shall
  constitute but one and the same Agreement. 
  Only one such counterpart need be produced to evidence the existence
  of this Agreement.17.        Headings.  The headings of the sections of this
  Agreement are inserted for convenience only and shall not be deemed to
  constitute part of this Agreement or to affect the construction hereof.18.        Notices.  All notices, requests, demands and other
  communications hereunder shall be in writing and shall be deemed to have been
  duly given (i) upon delivery if delivered by hand to the party to whom
  such communication was directed or (ii) upon the third business day
  after the date on which such communication was mailed if mailed by certified
  or registered mail with postage prepaid:- 24 -

(a)
  If to Agent, at the address indicated on the
  signature page hereof.(b)
  If to the Corporation, to:VAXGEN , INC.1000 Marina Blvd., Suite 200Brisbane, California 94005Attn: Lance K. Gordonor to such other address as may have been furnished to
Agent by the Corporation.
- 25 -

IN
WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
VAXGEN, INC.By:
  /s/  Carter
  A. LeeTitle:
  Senior Vice President, Finance & AdministrationAGENT/s/  William
  L. HeywardName:
  William L. Heyward, M.D.Address:[*][*] = CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS ([*]), HAS BEEN OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

- 26 -