Exhibit
10.3 February 6, 2007 VIA HAND DELIVERY Lance K. Gordon, Ph.D.
VaxGen, Inc.
1000 Marina Blvd.
Brisbane, CA 94005-1841 Re:    Resignation Agreement Dear Lance: Pursuant to our discussions concerning the resignation
of your employment with VaxGen, Inc. (the Company), this letter sets forth
the terms of the resignation agreement (the Agreement) between you and the
Company. 1.          Resignation
Date. You acknowledge that,
effective as of January 5, 2007
(the Resignation Date), you resigned from your positions as President and
Chief Executive Officer (CEO) of the Company and from any other office,
position, or employment relationship with the Company or any of its affiliated
entities, with the sole exception of the consulting relationship that you are
entering into pursuant to Section 4 herein. You acknowledge that the Company
timely paid you all accrued salary and all accrued and unused vacation (if any)
earned by you through the Resignation Date, less standard payroll deductions
and withholdings. You are entitled to these payments by law. 2.          Resignation
of Board Seat.Contemporaneous
with your execution of this Agreement, you will sign and return to me the
resignation letter attached hereto as Exhibit A, in which you tender your
resignation as a member of the Companys Board of Directors (the Board),
effective as of the Resignation Date. 3.          Severance
Benefits. If you timely enter
into this Agreement and allow it to become effective, the Company hereby agrees
to provide you the following as your sole severance benefits (Severance
Benefits) notwithstanding your resignation of employment: (a)          Severance
Payments. The Company will
provide severance pay in the form of continuation of your base salary in effect
as of the Resignation Date, for twelve (12) months (the Severance Payments).
The Severance Payments will be subject to required deductions and withholdings,
and will be paid on the Companys normal payroll schedule, beginning with the
first regular payroll date following the termination of the Consulting Period
(as defined in Section 4(a)). In no event will the Severance Payments be paid
later than March 15, 2008. - 1 -   (b)          Health
Insurance Coverage. To the extent
provided by the federal COBRA law or, if applicable, state insurance laws
(COBRA), 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 following the Resignation Date. Later, you may be able to convert to an
individual policy through the provider of the Companys health insurance, if
you wish. On or after the Resignation Date, you will be provided with a
separate notice describing your rights and obligations under the applicable
state and/or federal insurance laws. If you timely elect such continued health
insurance coverage, the Company, as part of this Agreement and as an additional
severance benefit, will pay your health insurance premiums sufficient to
continue your group health insurance coverage at the same level in effect as of
the Resignation Date (including dependent coverage, if any) pursuant to COBRA
through December 31, 2007, to the extent such coverage remains available.

(c)          Stock
Option Vesting. All stock option
grants or other equity awards currently held by you shall be subject to
accelerated vesting such that all unvested shares will become fully vested and
immediately exercisable, effective as of the Resignation Date. Your rights to
exercise your vested shares are governed by the terms of your operative
agreements with the Company and the applicable stock option plan.

4.            Consulting
Relationship. If you timely
enter into this Agreement, allow it to become effective, and comply with its
terms, then the Company will engage you as a consultant under the terms and
conditions specified below.

(a)          Consulting
Period. The Company will engage
you as a consultant for the period (the Consulting Period) commencing on the
day immediately following the Resignation Date and continuing until the
earliest of: (i) two (2) months after the Resignation Date; (ii) the date your
consulting relationship is terminated by the Company due to material breach of
this Agreement or the Proprietary Information Agreement (defined in Section 8);
or (iii) the date that you and the Company mutually agree to terminate the
consulting relationship. The Consulting Period may be extended only in a mutual
written agreement executed by you and the Companys CEO.

(b)          Consulting
Duties. During the Consulting
Period, you agree to make yourself available to provide up to forty (40) hours
per week of consulting services (the Services) to the Company at the request
of the Companys CEO. The Services may include transition briefing and
assistance, and other services within your areas of expertise. You will not be
required to provide the Services from the Companys premises, unless
specifically requested by the CEO. You shall exercise the highest degree of
professionalism and utilize your expertise and creative talents in performing
the Services. Subject to the restrictions contained herein, you shall be free
to pursue employment or consulting with third parties during the Consulting
Period. The Company shall not require you to perform the Services in a manner
that would unreasonably interfere with your performance of your other professional
duties.

(c)          Consulting
Fees. During the Consulting Period, the Company will pay you a monthly
consulting fee of $35,000, prorated for any partial month during the Consulting
Period (the Consulting Fees). The Consulting Fees will be subject to payroll
deductions and

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withholdings, and will be paid on the Companys normal
payroll dates, beginning with the first payroll date following the Resignation
Date.

(d)          Protection
of Information. You agree that, during the Consulting Period
and thereafter, you will not use or disclose any confidential or proprietary
information or materials of the Company that you obtain or develop in the
course of performing the Services, except with permission of a duly-authorized
Company officer. Any and all work product you create in the course of
performing the 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 the Services.

(e)          Expenses.
The Company will reimburse you for reasonable, documented business expenses
incurred in performing the Services pursuant to its regular business practice,
provided that these expenses have been pre-approved by the CEO in writing.

(f)          Other
Work Activities. 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 is competitive in any manner with the business conducted by
the Company, nor engage in any other activities that conflict with your
obligations to the Company. Notwithstanding the above restrictions in this
Section 4(f), you shall not be prohibited from being a passive shareholder of
up to 1% of the public stock of a competitive entity.

5.          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,
severance, or benefits relating to or arising from your employment with the
Company, 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) or your
vested equity awards. By way of example, you represent and warrant that you
have not earned and are not owed any bonus (including any bonus for 2006),
incentive compensation, commissions or equity, except as may be expressly
provided herein. In addition, you hereby acknowledge and agree that your
resignation of employment is not covered under the federal Worker Adjustment
and Retraining Notification Act or California Labor Code Section 1400 et seq.
(collectively, the WARN Acts), and that you are not entitled to any
protections or benefits under the WARN Acts, including but not limited to
advance written notice of the termination of your employment, or pay or
benefits of any kind.

6.          Expense
Reimbursement. You agree that,
within forty-five (45) days after the Resignation Date, you will submit your
final documented expense reimbursement statement reflecting all business
expenses you incurred through the Resignation Date, if any, for which you seek
reimbursement. The Company will reimburse you for such expenses pursuant to its
regular business practice.

7.          Return
of Company Property. On the
Resignation Date, you shall return to the Company all documents (and all copies
thereof) and other property of the Company in your possession or control, with
the exception of any materials which the Company authorizes you in

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writing to retain for purposes of performing the
Services or otherwise. The documents and property to be returned by you
include, but are not limited to, Company files, notes, correspondence,
memoranda, notebooks, drawings, product specifications, records, reports,
lists, compilations of data, proposals, agreements, drafts, minutes, studies,
plans, forecasts, purchase orders, business cards and stationery, financial and
operational information, technical and training information, research and
development information, customer information and contact lists, sales and
marketing information, personnel information, vendor information, promotional
literature and instructions, product and manufacturing information,
computer-recorded information, electronic information (including e-mail and
correspondence), other tangible property and equipment (including, but not
limited to, computers, cellular phones and facsimile machines), 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 that you will
make a diligent search to locate any such documents, property and information.
In addition, if you have used any personally owned computer, server, or e-mail
system to receive, store, prepare or transmit any Company confidential or
proprietary data, materials or information, you agree to immediately provide
the Company with a computer-useable copy of all such information, and in any
event you agree to permanently delete and expunge all Company confidential or
proprietary information and data from those systems; and you agree to provide
the Company access to your system as reasonably requested to verify that the
necessary copying and/or deletion is completed. You acknowledge that 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 in your possession or
control 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.

8.          Proprietary
Information Obligations.Prior
to or contemporaneously with your signing of this Agreement, you agree to sign
the Employees Proprietary Information and Inventions Agreement attached hereto
as Exhibit B (the Proprietary Information Agreement), and you shall return a
signed copy of the Proprietary Information Agreement to the Company along with
a signed copy of this Agreement.

9.          Disclosure.
You hereby acknowledge and
agree that this Agreement and a description of the terms set forth herein will
be filed by the Company with the Securities and Exchange Commission pursuant to
its obligations as a reporting company under the Securities Exchange Act of
1934, as amended and the rules and regulations promulgated thereunder (the
Exchange Act), and consequently shall be publicly available.

10.        Nondisparagement.
You agree not to
disparage the Company and its affiliated entities, or their officers,
directors, employees, shareholders, agents, in any manner likely to be harmful
to them or their business, business reputations or personal reputations; and
the Company (through its officers and directors, and any communications by a
Company employee on behalf of the Company that is authorized by an officer or
director) agrees not to disparage you in any manner likely to be harmful to you
or your business, business reputation or personal reputation;

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provided that you and the Company may respond
accurately and fully to any inquiry or request for information if required by
legal process.

11.          No
Voluntary Adverse Action; Cooperation.
You agree that you will not voluntarily (except in response to legal
compulsion) assist any third party in bringing or pursuing any proposed or
pending litigation, arbitration, administrative claim or other formal
proceeding against the Company, its parent or subsidiary entities or
affiliates, or their officers, directors, employees or agents. In addition, you
agree to cooperate fully with the Company in connection with its actual or
contemplated defense, prosecution, or investigation of any claims, demands,
audits or investigations by or against third parties (including without
limitation the federal government or any federal agencies), or other matters
arising from events, acts, or failures to act that occurred during the period
of your employment by the Company. Such cooperation includes, without
limitation, making yourself available to the Company upon reasonable notice,
without subpoena, to provide complete, truthful and accurate information in
witness interviews, depositions, and trial testimony. The Company will: (a)
reimburse you for reasonable out-of-pocket expenses you incur in connection
with any such cooperation; (b) pay you at the hourly rate of $300 for any
cooperation you provide under this Section 11 if such cooperation (i) exceeds
more than forty (40) hours per week during the Consulting Period, or (ii) after
the Consulting Period, requires more than one (1) hour of your time in response
to any particular request for your cooperation by the Company (for example,
responding to a requested phone call that entails more than one (1) hour of
your time will be compensated, but responding to a requested phone call that
entails less than one (1) hour of your time will not be compensated); and (c)
make reasonable efforts to accommodate your scheduling needs. In addition, you
agree to execute all documents (if any) necessary to carry out the terms of
this Agreement.

12.          Release
of Claims. In exchange for the
consideration under this Agreement to which you would not otherwise be entitled,
including but not limited to the Severance Benefits, you hereby generally and
completely release, acquit and forever discharge the Company, and its parent,
subsidiary, and affiliated entities (along with their predecessors and
successors) and their directors, officers, employees, shareholders, partners,
agents, attorneys, insurers, affiliates and assigns, from any and all claims,
liabilities and obligations, both known and unknown, that arise from 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 from
the Company, including salary, bonuses, commissions, vacation pay and the
redemption thereof, expense reimbursements, severance payments, 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, any claims arising under or based on your Amended and
Restated Executive Employment Agreement with the Company effective as of
September 15, 2006); (d) all tort claims, including but not limited to
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (e) all federal, state, and local statutory claims,
including but not limited to 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 of 1967 (as
amended) (the ADEA), the federal Worker Adjustment and

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Retraining Notification Act, the California Labor Code
(including but not limited to California Labor Code Section 1400 et seq.), and
the California Fair Employment and Housing Act. Notwithstanding the foregoing,
you are not hereby releasing the Company from any obligation it has undertaken
in this Agreement; or any obligation the Company may otherwise have to
indemnify you for your acts within the course and scope of your employment with
the Company, pursuant to the articles and bylaws of the Company, the Indemnity
Agreement, 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.

13.          ADEA
Waiver. You hereby 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 is in addition to anything of value to which you were
already entitled. You further acknowledge that you have been advised by this
writing, as required by the ADEA, that: (a) your waiver and release do not
apply to any rights or claims that may arise after you sign this Agreement; (b)
you should consult with an attorney prior to signing this Agreement (although
you may decide voluntarily not to do so); (c) you had at least twenty-one (21)
days from January 5, 2007 within which to consider this Agreement (although you
may choose voluntarily to sign this Agreement earlier); (d) you have seven (7)
days from your signing of this Agreement to revoke this Agreement (in a written
notice sent to the Chairman of the Companys Board of Directors); and (e) this
Agreement will not be effective until the eighth day after this Agreement has
been signed both by you and by the Company (the Effective Date). You hereby
represent and warrant that any changes made to the Companys original severance
offer were at your request and to your benefit. Accordingly, you hereby waive a new twenty-one (21) day consideration
period to which you would otherwise be entitled, and expressly agree that you
will have until February 14, 2007 (which is more than twenty-one (21) days from
the date that you received the Companys original severance offer) to consider
this Agreement before the offer herein expires.

14.          Section
1542 Waiver. In giving the releases
set forth in this Agreement, which include 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 or her favor at the time of executing the
release, which if known by him or her must have materially affected his or her
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 the releases
granted herein, including but not limited to the release of unknown and
unsuspected claims granted in this Agreement.

15.          Representations.
You hereby represent that,
except as expressly provided in this Agreement, you have been paid all
compensation owed and for all hours worked, have received all the leave and
leave benefits and protections for which you are eligible, pursuant to the
Family and Medical Leave Act, the California Family Rights Act, or otherwise,
and have not suffered any on-the-job injury for which you have not already
filed a workers compensation claim.

16.          Reimbursement
of Attorneys Fees. Within
thirty (30) days following the Effective Date, the Company agrees to reimburse
you for the costs of your reasonable attorneys

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fees and costs for the review and negotiation of this
Agreement, up to a maximum reimbursement of $5,000. You must provide
satisfactory documentation of your payment of such attorneys fees and costs in
order to receive reimbursement; however, such documentation shall not require
you to waive the attorney-client privilege.

17.          Indemnity
Agreement and Insurance Coverage.The Company agrees to sign, prior to or on the Effective Date, the Indemnity
Agreement attached hereto as Exhibit C, and will provide you a fully signed
copy of the Indemnity Agreement. In addition, the Company agrees that you will
be covered, as a former executive officer and director, under the Companys
Directors & Officers liability insurance to the same extent that the
Company maintains such coverage for its other former executive officers and
directors.

18.          Dispute
Resolution. To aid in the 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, your
employment with the Company, or the termination of your employment, shall be
resolved by confidential, final and binding arbitration conducted before a
single arbitrator with JAMS, Inc. (JAMS) in San Francisco, California, under
JAMS then-applicable arbitration 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. You will have the right to be represented
by legal counsel at any arbitration proceeding. 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 available under applicable law
in a court proceeding; and (b) issue a written statement signed by the
arbitrator regarding the disposition of each claim and the relief, if any,
awarded as to each claim, the reasons for the award, and the arbitrators
essential findings and conclusions on which the award is based. The Company
shall bear the JAMS arbitration fees and administrative costs. Nothing in this
Agreement shall prevent either you or the Company from obtaining injunctive
relief in court to prevent irreparable harm pending the conclusion of any such
arbitration.

19.          No
Admissions. The promises and payments in
consideration of this Agreement shall not be construed to be an admission of
any liability or obligation by either party to the other party, and neither
party makes any such admission.

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 this 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 written agreement approved by the Board and
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 will be modified by the court so as to be rendered
enforceable to the furthest extent possible consistent with the intent of the

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parties under applicable law. Any ambiguity in this
Agreement shall not be construed against either party as the drafter. Any
waiver of a breach of this Agreement, or rights hereunder, shall be in writing
and shall not be deemed to be a waiver of any successive breach or rights
hereunder. 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
without regard to conflicts of law principles. This Agreement may be executed
in counterparts, each of which shall be deemed to part of one original, and
facsimile signatures shall be equivalent to original signatures.

If this Agreement is acceptable to you, please sign and date it below, and
return the
fully-signed Agreement to me, with the signed resignation letter, Proprietary
Information Agreement and Indemnity Agreement, by the close of business on
February 14, 2007. If these signed documents are not received from
you by such date, the offer reflected herein will expire.

We wish you the very best in your future endeavors.

Sincerely,

VAXGEN, INC.

By:
/s/ Randall L. W. CaudillRandall L. W. CaudillChairman of Board of DirectorsDate: February 22, 2007

Exhibit
A  Resignation of Board MembershipExhibit
B  Employees Proprietary Information and Inventions AgreementExhibit
C  Indemnity Agreement

UNDERSTOOD AND AGREED:

/s/ Lance K. Gordon,Lance K. Gordon, Ph.D.Date: February 12, 2007

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