Document:

Exhibit 10.28

	

Exhibit 10.28

EMPLOYMENT
AGREEMENT

	 	     This
Employment Agreement (“Agreement”) by and between Marc Gurwith, M.D. (“Gurwith”)
and VaxGen, Inc. (“VaxGen”), is effective October 28, 2001 (the “Effective
Date”). In consideration of the mutual promises made herein, VaxGen and Gurwith
agree as follows:

	 	     1.
EMPLOYMENT. VaxGen hereby employs Gurwith, and Gurwith 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 Gurwith’s employment with VaxGen, including
any prior agreements concerning confidentiality, non-disclosure and inventions. 

	 	     2.
WORK RESPONSIBILITIES. Subject to the terms of this Agreement, Gurwith is hereby
employed in the position of Senior Vice President, Medical Affairs and Chief Medical
Officer and shall perform the functions and responsibilities of that position. Gurwith
shall devote the whole of his professional time, attention and energies to the
performance of his work responsibilities. Gurwith’s position, job description,
duties and responsibilities may be modified from time to time in the sole discretion of
VaxGen. 

	 	     3.
COMPENSATION. As consideration for the services and covenants described in this
Agreement, VaxGen agrees to compensate Gurwith during the term of this Agreement in the
following manner:

	 	     (a)
Salary/Wages. VaxGen agrees to pay Gurwith a base salary of $235,000 per year. Gurwith’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 Gurwith’s salary annually for potential
increase. 

	 	     (b)
Starting Bonus. VaxGen agrees to pay Gurwith a one-time starting bonus in the
amount of $40,000, less required and authorized deductions. Gurwith’s starting bonus
shall be paid on the same date as his first base salary installment in accordance with
VaxGen’s current payroll practices; provided that, Gurwith is employed
by VaxGen on that date. 

	 	     (c)
Initial Option Grant and Subsequent Option Grants. On the Effective Date, Gurwith
shall be granted an option to purchase 125,000 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 1/48thof
the Initial Option shall vest on the last day of each of the next 36 months following
such anniversary; provided that, in each case, Gurwith 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 conditions are in
effect on the Effective Date. Gurwith 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 Gurwith’s employment is terminated by the Company without Cause pursuant
to paragraph 16(a)(iv) below or by Gurwith with Good Reason pursuant to paragraph
16(a)(v) below or following a Change in Control pursuant to paragraph 16(d) below, then
Gurwith 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 Gurwith be entitled to exercise such stock options after the expiration
of 10 years from the date of grant of such stock options. 

	

	 	     (d)
Performance Bonus. Gurwith 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
Gurwith will mutually cooperate to establish annual performance objectives for Gurwith.
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 Gurwith’s bonus annually for potential increase. 

	 	     (e)
Benefits. Gurwith 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. Gurwith’s rights, or those of Gurwith’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. 

	 	     (f)
Total Compensation. Gurwith 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. 

	 	     (g)
Business Expenses. VaxGen shall pay Gurwith’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 Gurwith incurs business expenses under this Agreement,
he shall submit monthly to VaxGen a request for reimbursement together with supporting
documentation satisfactory to VaxGen. 

	

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	 	     4.
VAXGEN POLICIES. Gurwith 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 Gurwith
unless superseded by, or in conflict with, this Agreement. Copies of written policies and
procedures are available to Gurwith in the offices of VaxGen, and Gurwith shall be
responsible at all times to review, and make himself familiar with, these policies and
procedures. 

	 	     5.
WARRANTIES. Gurwith hereby represents and warrants that he has not unlawfully
misappropriated any confidential, proprietary or trade secret information from Gurwith’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. Gurwith acknowledges that VaxGen has
specifically requested that, if Gurwith has any such confidential, proprietary or trade
secret knowledge or information, Gurwith not use such information while employed by
VaxGen for the benefit of VaxGen. Gurwith 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. 

	 	     6.
PRIOR INVENTIONS. Gurwith acknowledges that, except for the inventions disclosed
on Appendix A, Gurwith 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 Gurwith to VaxGen with respect to inventions, if any, made by Gurwith prior
to employment by VaxGen, which inventions are listed in Schedule A, attached hereto. 

	 	     7.
SUBSEQUENT INVENTION DISCLOSURE. Gurwith hereby agrees to promptly disclose to
VaxGen any and all inventions that he develops during the term of his employment. Gurwith
will also disclose to the CEO all inventions made, conceived, reduced to practice, or
developed by Gurwith 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. 

	 	     8.
ASSIGNMENT OF INVENTIONS. Gurwith hereby assigns and agrees to assign to VaxGen or
its designee, Gurwith’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 Gurwith may solely or jointly develop,
conceive or reduce to practice, during the period of employment, except as provided in
paragraph 10 below. Gurwith agrees that all such Inventions are the sole property of
VaxGen. Gurwith further agrees that all such Inventions, including works of authorship,
are “works for hire” for purposes of VaxGen’s rights under copyright laws.
Gurwith 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. Gurwith 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. Gurwith 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 Gurwith to VaxGen as set forth above. 

	

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	 	     9.
PATENT AND COPYRIGHT REGISTRATIONS. Gurwith agrees to assist VaxGen, or its
designee, at VaxGen’s expense, in every proper way to secure VaxGen’s rights in
the Inventions and any copyrights, patents, trademarks, and trade secret rights or other
intellectual property rights in connection with any such Inventions in any and all
countries, including the disclosure to VaxGen of all pertinent information and data with
respect thereto, the execution of all applications, specifications, oaths, assignments
and all other instruments or papers which VaxGen shall deem necessary in order to apply
for and obtain such rights and in order to assign and convey to VaxGen, its successors,
assigns, and nominees the sole and exclusive rights, title and interest in and to such
Inventions, and any copyrights, patents, trademark and other intellectual property rights
relating thereto. Gurwith 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 Gurwith’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 Gurwith 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 Gurwith. 

	 	     10.
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[.]”

	 	     11.
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. Gurwith 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. Gurwith 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. Gurwith will abide by VaxGen’s
policies and procedures, as established from time to time for the protection of its trade
secrets and confidential information. 

	

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	 	     12.
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 Gurwith in the course of employment with VaxGen, shall be
and remain the sole property of VaxGen. Gurwith agrees that upon request by VaxGen or the
termination of Gurwith’s employment (whichever occurs first), Gurwith 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. 

	 	     13.
NON-SOLICITATION, ANTI-RAIDING. For a period of one (1) year immediately following
the termination of his employment, Gurwith 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 Gurwith’s employment with VaxGen,
including, but not limited to, investments, licenses, joint ventures, and agreements for
development. 

	 	     14.
EQUITABLE RELIEF. Gurwith 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. 

	 	     15.
AT-WILL EMPLOYMENT. Gurwith understands and agrees that employment at VaxGen is
at-will. This means that, for any reason or no reason, Gurwith’s employment may be
terminated, with or without cause, at any time by either Gurwith 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 Gurwith’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 Gurwith and VaxGen pursuant to
authority expressly granted by the Board. 

	

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	 	     16.
TERMINATION OF EMPLOYMENT.

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

	 	     (i)
Death: In the event of Gurwith’s death, the termination shall be effective
upon the date thereof.

	 	     (ii)
Disability: In the event that Gurwith should become “disabled,” VaxGen
may terminate Gurwith’s employment under this Agreement. For purposes of this
paragraph, “disabled” shall mean Gurwith’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 Gurwith as provided for herein. Any base salary payable to Gurwith by VaxGen
may be offset by any benefits paid to Gurwith under any applicable short-term or
long-term disability plan. 

	 	     (iii)
Cause: VaxGen may terminate Gurwith’s employment under this Agreement upon
the occurrence of “cause” for termination as herein defined. “Cause” shall
mean (A) Gurwith’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) Gurwith’s conviction of a crime involving moral turpitude or a
felony, (C) Gurwith’s willful or reckless violation of VaxGen’s written
policies or procedures that has the effect of materially injuring VaxGen, or Gurwith’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, Gurwith’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) Gurwith’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 Gurwith by the Board and
Gurwith 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 Gurwith. The termination shall be
effective upon the date specified in VaxGen’s notice to Gurwith. 

	

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	 	     (iv)
Without Cause: Either VaxGen or Gurwith may terminate Gurwith’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. 

	 	     (v)
By Gurwith with Good Reason: Gurwith 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 Gurwith detailing the specific provision allegedly
breached, does not remedy said breach within thirty (30) days of receiving notice, (B)
there is a demotion of Gurwith from the position of Senior Vice President, Medical
Affairs and Chief Medical Officer or the assignment of job duties or responsibilities
materially inconsistent with such position, (C) VaxGen moves Gurwith’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, (D) there is a reduction in
Gurwith’s then-current base salary and/or performance bonus opportunity, or (E)
there is a material and substantial reduction in the aggregate of Gurwith’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. 

	 	     (b)
In the event that Gurwith’s employment under this Agreement is terminated by VaxGen
under paragraphs 16(a)(i), 16(a)(ii) or 16(a)(iii) above, or by Gurwith under paragraph
16(a)(iv) above, no severance pay will be due to Gurwith; however Gurwith 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. 

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

	 	     (d)
Gurwith 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 Gurwith’s employment for any reason other than for
Cause (as defined above) or Gurwith 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 Gurwith 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 Gurwith’s job duties or responsibilities, including, without
limitation, demotion from the position of Senior Vice President; or (iii) VaxGen or its
successor in interest moves Gurwith’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 Gurwith’s
then-current base salary and/or performance bonus opportunity; or (v) there is a material
and substantial reduction in the aggregate of Gurwith’s employee benefits. 

	

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	 	     (e)
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
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. 

	 	     (f)
In the event Gurwith’s employment with VaxGen is terminated, Gurwith agrees that he
will, unless otherwise requested by the Board, resign his position on the Board within
ten (10) days of the date his employment is terminated. 

	 	     17.
INDEMNIFICATION. VaxGen shall maintain, for the benefit of Gurwith, 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
Gurwith against liability as an officer and director of VaxGen or any subsidiary or
affiliate of VaxGen to the maximum extent permitted by applicable law. Gurwith’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. 

	

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	 	     18.
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 Gurwith’s
employment or this Agreement. 

	 	     19.
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.

	 	     20.
ENTIRE AGREEMENT. This Agreement embodies the complete agreement and understanding
of the parties related to Gurwith’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 Gurwith by VaxGen, and contains all of the covenants and
agreements of any kind whatsoever between the parties with respect to such employment.
Each party acknowledges that no representations, inducements, promises or agreements,
whether oral or written, express or implied, have been made by either party or anyone
acting on behalf of a party, that are not incorporated herein and that no agreement or
promise not contained herein shall be valid or binding. 

	 	     21.
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.

	 	     22.
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. 

	 	     23.
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 Gurwith 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. 

	 	     24.
VOLUNTARY AGREEMENT. Gurwith 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. 

	 	     25.
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.

	

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	 	     26.
SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against Gurwith’s heirs, beneficiaries
and legal representatives. It is agreed that the rights and obligations of Gurwith 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. 

	 	     27.
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, 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

			With a copy to:		Garrett Waltzer, Esq.

Skadden, Arps, Slate, Meagher & Flom LLP 

525 University Avenue, Suite 1100 

Palo Alto, California 94301 

Fax number: 650-470-4570

			If to Gurwith:		Marc Gurwith, M.D.

13157 La Paloma Road

Los Altos, California  94022

Fax number: ___________

	

-10-

	

	 	     28.
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 Gurwith’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:

                ————————————
	 	

——————————————

Marc Gurwith, M.D.

	
DATED:

                ————————————
	 	
VaxGen, Inc.

By:

——————————————

Title:

——————————————

	

-11-

	

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): 

	
DATED:

                ————————————
	 	

——————————————

Marc Gurwith, M.D.

	

	

APPENDIX B

ALTERNATIVE
DISPUTE AGREEMENT

I.       AGREEMENT TO ARBITRATE

	 	     In
the event that any employment dispute arises between VaxGen, Inc. (“VaxGen”)
and Marc Gurwith, M. D. (“Gurwith”), 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 Gurwith’s Employment Agreement, Gurwith’s
employment, the termination of Gurwith’s employment or alleged unlawful
discrimination, including but not limited to sexual or other unlawful harassment (an
“Arbitrable Dispute”), VaxGen and Gurwith 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 Gurwith
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. 

	

II. REQUEST FOR ARBITRATION

     A.
Attempt At Informal Resolution Of Disputes 

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

	 	     Gurwith
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. 

	

     B.
Arbitration Procedures 

	 	     The
party desiring arbitration, whether Gurwith 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. 

	

     C.
Selection Of The Arbitrator 

	 	     All
disputes will be resolved by a single Arbitrator, the Arbitrator will be mutually
selected by VaxGen and Gurwith. If the parties cannot agree on an Arbitrator, then a list
of seven (7) arbitrators, experienced in employment matters, shall be provided by the
Judicial Arbitration Mediation Services (“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. 

	

-ii-

	

     D.
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.

	

     E.
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. 

	

     F.
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-

	

	 	     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.

	

     G.
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. 

	

     H.
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. 

	

     I.
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. 

	

     J.
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-

	

	 	     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 Gurwith 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.

	

     K.
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:

                ————————————
	 	

——————————————

Marc Gurwith, M.D.

	
DATED:

                ————————————
	 	
VaxGen, Inc.

By:

——————————————

Title:

——————————————

	

-v-

	

APPENDIX C

REQUEST FOR
ARBITRATION FORM

ALTERNATIVE DISPUTE
RESOLUTION AGREEMENT

	Submission 
 Requirement 	 	
This form (or, alternatively, a form that includes the information below) must be submitted
by the individual claimant to the CEO within the time period
required by the law that applies to the claim. If
VaxGen requests arbitration, the form must also be served on the individual
within the appropriate time period.

	

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

	

(Please attach any
documents relevant to the dispute.) 

Signature of Party Requesting Arbitration:

	
DATED:

                ————————————
	 	

——————————————

Marc Gurwith, M.D.

	
DATED:

                ————————————
	 	
VaxGen, Inc.

By:

——————————————

Title:

——————————————Exhibit 10.29

	

Exhibit 10.29

SUBLEASE
AGREEMENT

     SUBLEASE
AGREEMENT dated as of September 21, 2001 between TSI COMMUNICATIONS, A
SUBSIDIARY OF GLOBALCOMM, INC., a New York corporation, having offices at 136
Madison Avenue, 14th Floor, New York, New York 10016 (hereinafter referred to as
“Tenant”) and VAXGEN, INC., a Delaware corporation, having
offices at 1000 Marina Boulevard, Brisbane, California 94005 (hereinafter
referred to as “Subtenant”). 

WITNESSETH 

     WHEREAS,
Technology Solutions, Inc. (“TSI”), the predecessor in interest
to Tenant, leased the entire rentable area of Suite 202, as more particularly
described on Exhibit “A” annexed hereto (the “Space”),
in the building known as 347 Oyster Point Boulevard, South San Francisco,
California 94080 (the “Building”), pursuant to a lease
agreement, dated February 9, 1999, between Oyster Point Tech Center, LLC, as
landlord (“Landlord”), and TSI, as tenant (the “Lease
Agreement”), as amended by agreement dated June 1, 1999 (the
“First Amendment”), for a term ending on March 31, 2004. A copy
of the Lease Agreement and the First Amendment have been delivered to Subtenant
simultaneously with the execution hereof, and are hereinafter collectively
referred to as the “Prime Lease”; and 

     WHEREAS,
Subtenant desires to sublease the Space from Tenant.  

     NOW,
THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows: 

     1.
The Sublease shall have no force and effect unless and until (i) fully executed
counterparts of the Sublease have been unconditiona1ly delivered to the parties
hereto and (ii) Landlord’s written consent to the Sublease has been
obtained. 

     2.
(i) Tenant hereby sublets the Space to Subtenant and Subtenant hereby hires the
same from Tenant for a term commencing on the “Commencement Date”
(as hereinafter defined), and ending on March 30, 2004 (the
“Expiration Date”) (unless sooner teI1Ilinated pursuant to
this Sublease or by law). The Commencement Date shall be the date Landlord has
consented to the Sublease in accordance with the teI1IlS of the Prime Lease. 

         (ii)
If the Commencement Date has not occurred by January 1, 2002 (the “Notice Date”),
either party may deliver to the other written notice, at any time after the Notice Date,
of its intent to cancel this Agreement (the “Cancel/atiol1 Notice”).
Provided that (i) the Commencement Date has not occurred on or before delivery of the
Cancellation Notice to the other party and (ii) the party delivering the Cancellation
Notice has not caused any delay in obtaining Landlord’s consent, this Agreement
shall be deemed null and void as of the date of the giving of the Cancellation Notice.  

         (iii)
The parties agree to execute a letter confirming the Commencement Date upon the written
request of either party; however, the failure of either party to execute such document
shall not affect the Commencement Date.  

	

     3. (i)
The Space will be sublet at an annual base rent, payable in advance in equal monthly
installments, as follows: 

			(a) 		For
the period beginning with the Commencement Date and ending on September 30, 2002 at the
rate of $209,263.20 per annum ($17,438.60 per month); 

			(b) 		For
the period beginning on October 1, 2002 and ending on September 30, 2003 at the rate of
$215,418.00 per annum ($17,951.50 per month); 

			(c) 		For
the period beginning on October 1, 2003 and ending on the Expiration Date at the rate of
$221,572.80 per annum ($18,464.40 per month). 

	

     Provided
that the Subtenant has fully complied with its obligations under the Sublease,
for the last four (4) months of the term of the Sublease, the monthly
installments of rent due, as provided in Article 4(ii) hereof, shall be deducted
from the monies deposited by Subtenant as security pursuant to Article 19 hereof
(the “Security Deposit”), but Subtenant shall remain liable
and shall pay to Tenant out of pocket for any outstanding amounts of Rental (as
defined in subdivision (ii) hereof) that exceed the Security Deposit. Subtenant
shall continue to be liable to replenish any amounts otherwise deducted by
Tenant from the Security Deposit, except for said rental payments. 

         (ii)
Subtenant shall pay to Tenant, as provided in Article 4(ii) hereof, 100% of a1l amounts
of Additional Rent (as defined in Article 6(C) of the Prime Lease) due under the Prime
Lease, including, but not limited to, charges attributable to “Basic Operating
Costs”(as defined in Article 7 of the Prime Lease). If the payment for fixed
rent or additional rent shall commence on other than the first day of any month, such
amount shall be appropriately pro-rated.  

     4.
(i) If any installment of Rental (as defined in subdivision (ii) hereof) is not
paid on the date when due, such amount shall be delinquent and shall thereafter
bear interest at the “Applicable Interest Rate” (as hereinafter
defined) from the date on which said payment became delinquent shall be due
until the date on which Tenant shall receive said payment. In addition,
Subtenant shall pay to Tenant a late charge equal to five (5%) percent of the
delinquency, to compensate Tenant for the loss of the use of the amount not paid
and the administrative costs caused by the delinquency, the parties agreeing
that Tenant’s damage by virtue of such delinquencies would be difficult to
compute and the amount stated herein represents a reasonable estimate thereof.
This provision shall not relieve Subtenant of Subtenant’s obligation to pay
Rental at the time and in the manner herein specified. For purposes of this
Article 4, the term “Applicable Interest Rate” shall mean the
lesser of (i) the then current interest rate publicly announced by Wells Fargo,
N.A. (San Francisco) or its successor, as its prime interest rate, from time to time, plus five (5)
percentage points and (ii) the maximum interest rate allowed by law.

-2-

	

         (ii)
All monthly installments of fixed rent, additional rent, and all other costs, charges and
sums payable by Subtenant hereunder, shall constitute rent under this Sublease
(col1ectively, “Rental”), and shall be paid to, and received by, Tenant
on or before the third (3rd) business day prior to the first day of each month during the
term hereof, at Tenant’s address as set forth in Article 15 hereof, unless Tenant
shall otherwise so direct in writing. Subtenant shal1 promptly pay the Rental as and when
the same shall become due and payable without set-off, offset or deduction of any kind
whatsoever, except as expressly set forth herein.  

         (iii)
Tenant’s failure during the term of this Sublease to prepare and deliver any
statements or bills required to be delivered to Subtenant hereunder, or Tenant’s
failure to make a demand under any other provision of this Sublease shall not in any way
be deemed to be a waiver of, or a forfeit or surrender of, its rights to col1ect any
Rental which may have become due. Subtenant’s liability for Rental during the term
hereof, and Tenant’s obligation to make adjustments to fixed rent or additional rent
paid to it by Subtenant, shall survive the expiration or earlier termination of this
Sublease.  

     5.
(i) Subject to provisions of Paragraphs 3(ii) and 9(ii) herein, the charge for
electricity will be the charge payable under the Prime Lease attributable to the
Space as measured by electric submeters for the Building (including electric
used in the operation of the air conditioning in the Space). The charge will be
increased if and to the extent charges to Tenant are at any time increased
because of increased use of electricity in the Space or increased electrical
costs pursuant to the provisions of the Prime Lease solely due to rate
increases. If Tenant claims the charge for electricity should be increased,
Tenant will submit to Subtenant the back-up material it has received from
Landlord. If Tenant is required to pay Landlord any portion of any tax imposed
upon receipts from the sale or resale of electric energy to Subtenant by any
Federal, State or Municipal authority, Subtenant covenants and agrees that,
where permitted by law, Subtenant shall pay to Tenant as additional rent the
amount of any such taxes that may be due by Tenant. Subtenant, at
Subtenant’s expense, shall purchase and install all lamps, tubes and bulbs
used in the Space. 

         (ii)
Tenant shall not in any way be liable or responsible to Subtenant for any loss or damage
or expense which Subtenant may sustain or incur, if either the quantity or character of
electric service is changed or is no longer available or suitable for Subtenant’s
requirements, unless caused by Tenant’s willful misconduct or gross negligence.
Subtenant shall make no alteration or additions to the electric equipment in the Space
without the prior written consent of Tenant and Landlord. Subtenant covenants and agrees
that at all times Subtenant’s use of electric current shall not exceed the capacity
of existing feeders to the Space or the risers or wiring instal1ations, pursuant to the
terms of the Prime Lease.  

     6.
Subtenant has conducted or been afforded the opportunity to inspect the space, and
Subtenant accepts the Space in its “as is” condition and Tenant is not required to make
any repairs or alterations to prepare the Space for occupancy by Subtenant. Subtenant
shall use and occupy the Space for general business office purposes only, in accordance
with the restrictions in the Prime Lease. Subtenant shall take good care of the Space and
the fixtures and appurtenances therein, and shall, at its own cost and expense, make all
repairs and replacements thereto (other than those provided in the Prime Lease to be made
by the Landlord thereof) as and when needed, to preserve the Space in good working order
and condition. At the expiration of the term hereof, Subtenant shall surrender the Space
to Tenant in vacant, broom-clean condition, and in good order and repair (normal wear and
tear and damage by fire or other unavoidable casualty excepted).  

-3-

	

     7.
(i) Subtenant shall not make any alterations, installations, improvements,
additions or other physical changes (other than decorative modifications) in or
about the Space ( “Subtenant Alterations”) without first
obtaining the consent of the Landlord and Tenant with respect thereto. Tenant
agrees to cooperate with Subtenant, at no cost to Tenant, in order to obtain
such consent. Any Subtenant Alterations shall be performed by Subtenant, at
Subtenant’s sole cost and expense, in accordance with the applicable
provisions of the Prime Lease. 

         (ii)
All alterations, installations and improvements made in the Space, including all
paneling, partitioning and the like, made by either Tenant or Subtenant, shall become the
property of Landlord, and shall remain upon, and be surrendered with, the Space as part
thereof at the end of the term hereof; provided however, that Landlord may, at Landlord’s
option, require the removal of Subtenant’s Alterations, in which event, Subtenant
shall be liable, at its sole cost and expense, for the removal of Subtenant’s
Alterations and the restoration of the Space to its condition immediately preceding
Subtenant’s Alterations. Trade fixtures, furnishings, decorations which are not an
integral part of the Space, movable partitions and similar items, which do not become
permanently affixed to the Space (“Subtenant’s Property”), shall
remain the property of Subtenant and must be removed by Subtenant upon the expiration or
earlier termination of the term hereof. Any repairs that may be necessitated by the
removal of Subtenant’s Property shall be promptly made by, and at the expense of,
Subtenant. The provisions of this Article 7 shall survive the expiration or earlier
termination of the term hereof.  

     8.
(i) Subtenant shall not assign, sell, transfer (whether by operation or law or
otherwise), pledge, mortgage or otherwise encumber this Sublease or any portion
of its interests in the Space, nor sublet all or any portion of the Space or
permit any other person or entity to use or occupy all or any portion of the
Space, without the prior written consent of the Tenant and the Landlord.
Provided that Subtenant shall comply with the provisions of the Prime Lease and
this Sublease with respect to subletting, Tenant agrees that it shall not
withhold or delay its consent to a subletting of all or any portion of the Space
(the “Proposed Subleased Space”) provided that the Landlord
shall consent to such subletting. Notwithstanding the foregoing, Tenant shall
have the right to recapture the Proposed Subleased Space by giving Subtenant
written notice of its intent to do so (the “Recapture Notice”).
In the event Tenant exercises its right to recapture the Proposed Subleased
Space, effective ten (10) days following delivery of the Recapture Notice to
Subtenant the Space and the Rental due hereunder shall be reduced accordingly.
If Tenant does not elect to recapture the Space, upon the request of the
Subtenant, Tenant, at Subtenant’s sole cost and expense, shall request the
consent of the Landlord and reasonably cooperate with Subtenant in obtaining any
consent. Pursuant to Article 21.B of the Prime Lease, in the event the Sublease
is assigned or the Space is sublet, any excess rent shall be allocated such that
Landlord shall receive 50% and Tenant and Subtenant shall each receive 25% of
such excess. For purposes of the foregoing, excess rents shall be calculated in
the manner set forth in the Prime Lease. There shall be no subleasing within the
last eighteen months of the Sublease term. 

-4-

	

         (ii)
If this Sublease be assigned, or if the Space or any part thereof be sublet (whether or
not Tenant and the Landlord shall have consented thereto), Tenant, after default by
Subtenant in its obligations hereunder, may collect rent from the assignee or subtenant
and apply the net amount collected to the Rental herein reserved, but no such assignment
or subletting shall be deemed a waiver of the covenant set forth in this Article 8, or
the acceptance of the assignee or subtenant as a tenant, or a release of Subtenant from
the further performance and observance by Subtenant of the covenants, obligations and
agreements on the part of Subtenant to be performed or observed herein. The consent by
Tenant or the Landlord to an assignment, sale, pledge, transfer, mortgage or subletting
shall not in any way be construed to relieve Subtenant from obtaining the express consent
in writing, to the extent required by the Sublease or the Prime Lease, of Tenant and
Landlord to any further assignment, sale, pledge, transfer, mortgage or subletting.  

         (iii)
Any proposed assignment of the Sublease or subletting of the Space by Subtenant shall be
subject to all of the tern1s, conditions, provisions, limitations and requirements of
Article 21 of the Prime Lease.  

     9.
(i) This Sublease is expressly made subject and subordinate to the terms and
conditions of the Prime Lease and to any and all mortgages and/or ground leases
to which the Prime Lease may be or become subject and subordinate. Subtenant
hereby assumes and agrees to perform all obligations of Tenant under the Prime
Lease and to comply with and abide by the terms and conditions thereof insofar
as the same relate to the Space and to Subtenant’s use and occupancy
thereof, except for the payment of Tenant’s Base Rent (as such term is
defined in the Prime Lease), except for obligations of Tenant arising as a
result of a default by Tenant under the Prime Lease or as a result of the
willful misconduct or gross negligence of Tenant, and except if the context
otherwise requires or as otherwise expressly provided herein. Tenant (a)
represents that it has delivered a true and complete copy of the Prime Lease to
Subtenant; Tenant is the holder of the interest of tenant under the Prime Lease;
the Prime Lease is in full force and effect and Tenant is not, and on the
Commencement Date will not be, in default under the Prime Lease, (b) agrees that
Subtenant, upon paying all Rental to be paid by it hereunder, and observing the
covenants and conditions hereof on its part to be performed, shall peaceably and
quietly enjoy the Space, subject, nevertheless, to the terms and conditions of
the Prime Lease, (c) undertakes to observe and perform all the covenants,
terms and conditions on the Tenant’s part to be observed and performed
under the Prime Lease which Subtenant has not hereby assumed and agreed to
perform; (d) agrees to deliver to Subtenant all notices received from Landlord
regarding the Space or Subtenant’s occupancy thereof, and (e) agrees not to amend or terminate the
Prime Lease (except as provided in Article 24.C of the Prime Lease) so as to
adversely affect the Subtenant’s use of the Space, or to materially
increase Subtenant’s obligations under the second sentence of this
Paragraph 9(i) or to materially limit or reduce the services under the Prime
Lease. Subtenant shall be entitled to and shall receive, and Tenant shall
reasonably cooperate with Subtenant at its request, and at Subtenant’s sole
cost and expense, in securing for Subtenant, all of the rights, privileges,
elections, benefits and services available to Tenant under the Prime Lease,
insofar as the same relate to the Space and Subtenant’s use and occupancy
thereof other than any renewal, expansion, termination or other similar rights
under the Prime Lease. However, Tenant will not be liable to Subtenant for any
failure of Landlord in providing such rights, privileges, elections, benefits
and services, but Subtenant shall be entitled to its appropriate share of any
rent abatement available to Tenant under the Prime Lease with respect to the
Space. Subtenant shall indemnify Tenant for, and shall hold it harmless from and
against, any and all losses, damages, penalties, liabilities, costs and
expenses, including, without limitation, reasonable attorneys’ fees and
disbursements, which may be sustained or incurred by Tenant by reason of
Subtenant’s failure to keep, observe or perform any of the terms,
provisions, covenants, conditions and obligations on Tenant’s part to be
kept, observed or performed under the Prime Lease to the extent same shall have
been incorporated herein, or otherwise arising out of or with respect to
Subtenant’s use and occupancy of the Space from and after the Commencement
Date. 

-5-

	

         (ii)
Notwithstanding anything to the contrary contained in this Sublease or in the Prime
Lease, Tenant shall not be required to provide any of the services that the Landlord has
agreed to provide, whether or not specified in the Prime Lease (or required by law), or
furnish electricity to the Space, or make any of the repairs or restorations that the
Landlord has agreed to make pursuant to the Prime Lease (or required by law), or comply
with any laws or requirements of any governmental authorities, or take any other action
that the Landlord has agreed to provide, furnish, make, comply with, or take, or cause to be
provided, furnished, made, complied with or taken under the Prime Lease, but Tenant
agrees to use all reasonable efforts, at Subtenant’s sole cost and expense, to
obtain the same from the Landlord (provided, however that Tenant shall not be obligated
to use such efforts or take any action which might give rise to a default under the Prime
Lease), and Subtenant shall rely upon, and look solely to, the Landlord for the
provision, furnishing or making thereof or compliance therewith. If the Landlord shall
default in the performance of any of its obligations under the Prime Lease, Tenant shall,
upon request and at the expense of Subtenant, timely institute and diligently prosecute
any action or proceeding which Subtenant, in its reasonable judgment, deems meritorious,
in order to have the Landlord make such repairs, furnish such electricity, provide such
services or comply with any other obligation of the Landlord under the Prime Lease or as
required by law. Subtenant shall indemnify and hold harmless Tenant from and against any
and all such claims arising from or in connection with such request, action or
proceeding. This indemnity and hold harmless agreement shall include indemnity from and
against any and all liability, fines, suits, demands, costs and expenses of any kind or
nature, including, without limitation, reasonable attorneys’ fees and disbursements,
incurred in connection with any such claim, action or proceeding brought thereon.
Subtenant shall not make any claim against Tenant for any damage which may arise, nor
shall Subtenant’s obligations hereunder be diminished, by reason of (a) the failure
of the Landlord to keep, observe or perform any of its obligations pursuant to the Prime
Lease, unless such failure is due to Tenant’s gross negligence or failure to observe
and perform Tenant’s covenants to Subtenant under Article 9(i) above, or (b) the
acts or omissions of the Landlord, its agents, contractors, servants, employees, invitees
or licensees. The provisions of this Article 9 shall survive the expiration or earlier
termination of the term hereof.  

-6-

	

     10.
Unless caused by Tenant’s gross negligence, Tenant shall not be liable for
any damage to persons or property sustained by Subtenant and others by reason of
Subtenant’s use and occupancy of the Space. Subtenant agrees to carry
liability insurance in the limits below specified for the benefit of Tenant,
which coverage shall remain in effect throughout the term of the Sublease. 

	Bodily Iniurv
	

	$5,000,000 per person
$5,000,000 per occurrence
	 
	Property Damage
	

	$2,000,000 per occurrence

	

     At
or before the Commencement Date, Subtenant will furnish Tenant with duplicate
written confirmation of such insurance coverage for the benefit of Subtenant and
Tenant, as their respective interests may appear. 

     11.
Notwithstanding any contrary provisions of this Sublease or the provisions of
the Prime Lease herein incorporated by reference, Subtenant shall not have the
right to terminate this Sublease as to all or any part of the Space, or be
entitled to an abatement of fixed rent, additional rent or any other item of
Rental, by reason of a casualty or condemnation affecting the Space unless
Tenant is entitled to terminate the Prime Lease or is entitled to a
corresponding abatement with respect to its corresponding obligation under the
Prime Lease. If Tenant is entitled to terminate the Prime Lease for all or any
portion of the Space by reason of casualty or condemnation, Subtenant may
terminate this Sublease as to any corresponding part of the Space by written
notice to Tenant given at least five (5) days prior to the date(s) Tenant is
required to give notice to the Landlord of such termination under the terms of
the Prime Lease; and Tenant shall not terminate the Prime Lease for all or any
portion of the Space so affected except upon receipt of notice from Subtenant in
a timely manner that Subtenant wishes to terminate this Sublease Agreement as to
all or a portion of the Space so affected. 

     12.
(i) Any material violation by Subtenant of any of the terms, provisions, covenants or
conditions of the Prime Lease or of any rules or regulations promulgated and enforced by
Landlord shall constitute a violation of this Sublease. In the event of any such
violation of the Prime Lease or of any default in the payment of Rental or any other
material violation of this Sublease, Tenant, after
giving Subtenant ten (10) days’ prior written notice (or such shorter
period provided under the Prime Lease), shall have and may exercise against
Subtenant all the rights and remedies available to the Landlord under the Prime
Lease, as though the same were expressly reiterated herein as the rights of
Tenant, unless within said ten-day period (or such shorter period provided under
the Prime Lease) Subtenant has cured the specified default or violation or if
the specified default or violation is of such a nature that it cannot be cured
within said ten ( 10) day period (or such shorter period provided under the
Prime Lease), Subtenant has diligently commenced the curing thereof within said
ten (10) day period (or such shorter period provided under the Prime Lease), but
in no event beyond the period provided in the Prime Lease. No waiver of any such
violation by either Tenant or its Landlord shall be deemed a waiver of the term,
provisions, covenant, condition, rule or regulation in question or any other
subsequent violation.

-7-

	

         (ii)
If the Prime Lease is terminated by the Landlord pursuant to the terms thereof with
respect to all or any portion of the Space prior to the Expiration Date for any reason
whatsoever, including, without limitation, by reason of casualty or condemnation, this
Sublease shall thereupon terminate with respect to any corresponding portion of the
Space, and (unless such termination of the Prime Lease shall be as a result of Tenant’s
default there under or a voluntary surrender of the Space, other than a surrender of the
Space permitted under the Prime Lease with respect to a termination of the Prime Lease by
reason of casualty to, or condemnation of, the Space or the Building), Tenant shall not
be liable to Subtenant by reason thereof. In the event of such termination, Tenant shall
return to Subtenant that portion of the Rental paid in advance by Subtenant with respect
to such portion of the Space, if any, prorated as of the date of such termination.  

     l3.
Subtenant shall not do or permit any act or thing to be done upon the Space
which may subject Tenant to any liability or responsibility for injury, damages
to persons or property or to any liability by reason of any violation of any
requirement of law, and shall exercise such control over the Space as to fully
protect Tenant against any such liability. Subtenant shall indemnify and save
harmless Tenant, its officers, directors, licensees, employees, agents and
contractors (collectively, the “Indemnitees”) from and against
(a) all claims of whatever nature against the Indemnitees arising from any act,
omission or negligence of Subtenant, its contractors, licensees, agents,
servants, employees, invitees, or visitors, (b) all claims against the
Indemnitees arising from any accident, injury or damage whatsoever caused to any
person or to the property of any person, and occurring during the term, in or
about the Space, and arising from any act, omission or negligence of Subtenant,
its contractors, licensees, agents, servants, employees, invitees or visitors,
and (c) all claims against the Indemnitees arising from any accident, injury or
damage occurring outside the Space but anywhere within or about the real
property, where such accident, injury or damage arises from an act, omission or
negligence of Subtenant or Subtenant’s contractors, licensees, agents,
servants, employees, invitees or visitors. This indemnity and hold harmless
agreement shall include indemnity from and against any and all liability, fines,
suits, demands, costs and expenses of any kind or nature (including, without
limitation, reasonable attorneys’ fees and disbursements) incurred in, or
in connection with, any such claim or proceeding brought thereon, and the defense thereof.

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     14.
(i) The time limits set forth in the Prime Lease for the giving of notices,
making demands, performance of any act, condition or covenant, or the exercise
of any right, remedy or option, are changed for the purpose of this Sublease, by
lengthening or shortening the same in each instance, as appropriate, so that
notices maybe given, demands made, or any act, condition or covenant performed,
or any right, remedy or option hereunder exercised, by Tenant or Subtenant, as
the case may be (and each party covenants that it will do so) within three (3)
days prior to the expiration of the time limit (unless otherwise expressly
provided in this Sublease), taking into account the maximum grace period, if
any, relating thereto contained in the Prime Lease. Each party shall promptly
deliver to the other party copies of all notices, requests or demands which
relate to the Space or the use of occupancy thereof, after receipt of same from
the Landlord. 

         (ii)
Tenant agrees that whenever its consent or approval is required hereunder, or where
something must be done to Tenant’s satisfaction, it shall not unreasonably withhold
or delay such consent or approval; provided, however, that whenever the consent or
approval of the Landlord, the lessor under a superior lease, or the mortgagee under a
mortgage, as the case may be, is also required pursuant to the terms of the Prime Lease,
if the Landlord, the lessor under a superior lease, or the mortgagee under a mortgage,
shall withhold its consent or approval for any reason whatsoever, Tenant shall not be
deemed to be acting unreasonably if it shall also withhold its consent or approval.
Subtenant shall reimburse Tenant for any costs imposed by Landlord by reason of the
requested sublease herein.  

     15.
All payments and notices made or given hereunder shall be deemed sufficiently
made or given (i) within three (3) business days, if sent by registered or
certified mail, (ii) on the next business day, if sent overnight delivery by
national overnight courier, and (iii) when delivered, if sent by hand delivery
and acknowledged by a written receipt, addressed as follows: 

     To
Tenant: 

	 	 	For Rental Payments
and Notices:		
TSI Communications, a subsidiary 

of GlobalComm, Inc. 

136 Madison Avenue, 14th Floor

New York, New York 10016

Attention: Director of Finance

	 	 	For Notices:		TSI Communications, a subsidiary

of GlobalComm, Inc.

136 Madison Avenue, 14th Floor

New York, New York 10016

Attention: President

	

-9-

	

	 	 	For Notices:		TSI Communications, a subsidiary

of GlobalComm, Inc.

136 Madison Avenue, 14th Floor

New York, New York 10016

Attention: General Counsel

	 	 	For Notices:		The Interpublic Group of Companies, Inc.

1271 Avenue of the Americas

New York, New York 10021

Attention: General Counsel

	     To Subtenant:		347 Oyster Point Boulevard

South San Francisco, California 94080

Attention:

	

or to such other address as
may be specified by either party hereto by written notice to the other party
hereto. 

     16.
(i) The term “Tenant” as used in this Sublease means only the person
who may be the tenant under the Prime Lease from time to time, so that, for
example, in the event of any assignment of the Prime Lease by Tenant, Tenant
shall be and hereby is freed and relieved of all terms, covenants, conditions,
provisions and agreements of the tenant thereafter accruing and it shall be
deemed and construed, without further agreement between the parties hereto, or
their successors in interest, or between the parties hereto and the assignee,
that the assignee has assumed and agreed to carry out any and all covenants and
obligations of Tenant thereafter accruing hereunder and under the Prime Lease,
including Tenant’s obligations hereunder with respect to the Security. 

         (ii)
Neither the shareholders, partners, directors or officers of Tenant or any of the
foregoing (collectively, the “Parties”) shall be liable for the
performance of Tenant’s obligations under this Sublease. Subtenant shall look solely
to Tenant to enforce Tenant’s obligations hereunder and shall not seek damages
against any of the Parties. No property or assets of the Parties shall be subject to
levy, execution or other enforcement procedure for the satisfaction of Subtenant’s
remedies under, or with respect to, this Sublease, the relationship of Tenant and
Subtenant hereunder, or Subtenant’s use of occupancy of the Space.  

     17.
Each of Tenant and Subtenant warrants and represents to the other that it has
not dealt with any brokers concerning the subletting of the Space, other than
Newmark & Company Real Estate, Inc. (“Newmark”), and that no other
brokers negotiated this Sublease or are entitled to any commissions in
connection therewith. Tenant and Subtenant each hereby agree to indemnify and hold the
other party harn1less in connection with any suits, claims, fees and expenses
(including reasonable attorneys’ fees) resulting from any breach by the
indemnifying party of the foregoing representations. Tenant acknowledges it has
previously entered into an agreement with Newmark regarding the payment of any
broker’s commission that may be due in connection with the Sublease. 

-10-

	

     18.
Except only as provided in Article 9 hereof, this Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
all prior negotiations, conversations, correspondence and agreements. There are
no representations or warranties not set forth herein. No waiver or modification
hereof shall be valid or effective unless in writing signed by the party or
parties thereby affected. This Sublease shall bind and inure to the benefit of
the parties hereto and their successors and assigns. This Sublease shall be
construed in accordance with the laws of the State of California. 

     19.
Subtenant shall deposit $73,857.60 (the “Security”) with Tenant
on the date hereof as security for the faithful performance and observance by
Subtenant of the terms, provisions, covenants and conditions of this Sublease.
It is agreed that if an event of default occurs, Tenant may use, apply or retain
the whole or any part of the Security to the extent required for the payment of
any Rental or any sum which Tenant may expend or may be required to expend by
reason of such event of default, including, but not limited to, any damages or
deficiency in the reletting of the Space. In the event that any such Security is
used or applied by Tenant as permitted hereby, Subtenant shall replenish such
amount within five (5) days of demand by Tenant. The Security shall be deposited
in a non-interest bearing account. The Security shal1 be returned to Subtenant
subject to the terms of Article 3(i) herein (less any amount applied as provided
in this Paragraph (19) within fifteen (15) days after the end of the term of
this Sublease. 

     20.
Intentionally Omitted. 

     21.
Subtenant shall have whatever rights Tenant has to the use of the non-designated
parking spaces appurtenant to the Building, without charge, during the term of
the Sublease, subject to the terms of the Prime Lease. 

     22.
Subject to the provisions of Article 13 of the Prime Lease, Subtenant, subject
to the reasonable consent of the Tenant, at Subtenant’s sole cost and
expense, shall be permitted to install building standard signage, provided that
at the expiration of the Sublease Subtenant removes same at its cost and expense
and restores the Space and Building to its condition prior to the installation
of the signage. 

     23.
Tenant and Subtenant agree that any use by Subtenant of the furniture presently
located in the Space shal1 be governed by the terms of a separate agreement to
be negotiated and entered into by the parties, and that Subtenant shall not have
any implied rights to the use of the furniture pursuant to this Agreement. 

-11-

	

     24.
Subtenant represents to Tenant that with the exception of this Sublease, neither
Subtenant nor any affiliate of Subtenant is a tenant under a lease or any other
tenancy arrangement (1) with (a) Riggs & Company, a division of Riggs Bank
N.A., a trustee of the Multi-Employer Property Trust; (b) Riggs Bank N.A., a
trustee of the Multi-Employer Property Trust; (c) the Multi-Employer Property
Trust; (d) the National Bank of Washington Multi-Employer Property Trust, the
previous name of the Multi-Employer Property trust; (e) The Riggs National Bank
of Washington, D.C., as trustee of the Multi-Employer Property Trust; (f) the
Hannan International Business Campus Joint Venture; (g) the Corporate Drive
Corporation as trustee of the Corporate Drive Nominee Realty Trust; (h) Goldbelt
Place Joint Venture; (i) Arboretum Lakes-l, L.L.C., a Delaware limited liability
company; 0) Vil1age Green of Rochester Hills Associates L.L.C., a Michigan
limited liability company; (k) Pine Street Development, L.L.C., a Washington
limited liability company; (I) MEPT Realty LLC, a New York limited liability
company; (m) MEPT, L.L.C., a Delaware limited liability company; (n) Cabrillo
Properties LLC, a Delaware limited liability company; (0) Valencia L.L.C., a
Delaware limited liability company; or (P) Mission Trails LLC, a Delaware
limited liability company; or (2) involving any property in which anyone or more
of the entities named in clauses (l)(a) through (P) are known by Subtenant to
have an ownership interest. 

     IN
WITNESS WHEREOF, the parties hereto have caused this Sublease to be duly
executed as of the day and year first above written. 

			
TSI COMMUNICATIONS, A SUBSIDIARY OF GLOBALCOMM, INC.

By:

     Name:

     Title:

VAXGEN, INC

By:

     Name:

     Title:

	

-12-

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